Bruce Davis - Chairman and CEO Charles Beck - Chief Financial Officer

Rob Stone - Cowen & Company Jim Ricchiuti - Needham & Company Josh Nichols - B. Riley Saliq Khan - Imperial Capital Kevin Hanrahan - KMH Capital Jeff Bernstein - Cowen Jeff Kessler - Imperial Capital

Good afternoon and thank you for participating in today's conference call. I will now turn the call over to Bruce Davis, Chairman and CEO of Digimarc. Mr. Davis, please proceed.

Thank you. Good afternoon, everyone. Welcome to our conference call. Charles Beck, our CFO is with me. On the call today, we'll review Q2 financial results, discuss significant business developments and market conditions, and provide an update on execution strategy. We will archive this webcast in the Investor Relations section of our website. Please note that during the course of this call, we will be making certain forward-looking statements, including those regarding revenue recognition matters, results of operations, investments initiatives, perspectives on business partners, customers' prospects, industry trends and growth strategies. We also will discuss from time-to-time information provided to us by channel partners and actual potential customers about their business activities. We are providing this information as we understand it was represented to us. We do not verify nor vouch for such information. Such forward-looking statements and statements of our partners and customers are subject to many assumptions, risks and uncertainties and changes in circumstances. Many assumptions we share about future performance represent a point of time estimate. Our actual results may vary materially from those expressed or implied by such statements. We expressly declaim any obligation to revise or update any assumptions, projections or other forward-looking statements to reflect events or circumstances that may arise after the date of this conference call. For more information about risk factors that may cause actual results to differ from expectations, please see the company's filings with the SEC including the Form 10-Q that we expect to file shortly. Charles will begin by commenting on our financial results, I’ll then discuss significant business developments, market conditions and execution strategy. Charles?

Thanks Bruce. Good afternoon, everyone. Revenue for the quarter was $5.6 million, up slightly from $5.5 million in the second quarter of last year. Digimarc Discover and Barcode bookings were $100,000 during the quarter, flat with Q2 last year. We continue to expect lumpiness in quarterly bookings in the early stage of the market development, due to timing and varying provisions effecting bookings. Gross margin was 62% in the second quarter, unchanged from Q2 last year. Operating expenses were $1.8 million or 21% higher than the second quarter of last year. The increase reflects previously noted increases in staffing for sales, marketing, engineering and operations to expand our capabilities, and selling and delivering the Digimarc Barcode to retailers and brands. We hired 17 employees during the second quarter. Net loss for the second quarter was $6.9 million or $0.68 per diluted share versus a net loss of $5.3 million or $0.62 per diluted share in the same quarter last year. During the quarter we raised $17.7 million of new capital through a registered direct offering. We sold 500,000 shares of our common stock in response to an unsolicited offer from high-quality long-term focused investor. Terms of the sale included a six month restriction on sale or lending of the shares. The $35.55 share price, a 19% premium over shares sold in the August 2016 financing was calculated using an average market price for 20 days preceding the closing. There was no discount. Total transaction costs were less than $40,000. We invested $6.1 million of working capital during Q2, including $5.2 million to fund operations and $500,000 for capital expenditures. Cash usage was higher than last quarter, reflecting higher headcount costs and the timing of customer receipts. Q1 included receipt of a large recurring annual license fee payment. We ended the quarter with $67 million in cash and marketable securities. We anticipate cash usage will be between $7 million and $7.5 million in the third quarter, reflecting the impact of increased staffing and roughly $700,000 higher CapEx than Q2 for facility build out costs to accommodate the additional staff. For further discussions of our financial results and risk and prospects for our business, please see our Form 10-Q that we expect to file shortly. Bruce will now provide his comments on significant business developments, market conditions and executional strategy.

Thanks, Charles. The retail industry is undergoing a major transformation. The market was rocked during the quarter by Amazon’s announcement of the acquisition of Whole Foods. The pace and scale of redefinition of the landscape appears to be accelerating. We believe these changes are positive for Digimarc. Our platform aims to mitigate the obvious tension between offering low prices on the one hand, and higher engagement and convenience on the other. The goal of all retail is to provide a pleasant and efficient shopping experience at the lowest possible cost. Reliable efficient auto identification permeates these goals. Wegmans exemplifies high engagement seeking more efficiency and [ph] all of the (05:11) represents high efficiency that would benefit from better consumer engagement. Amazon is extremely efficient and engaging nominating online retail. Walmart nominate physical retail desire to become more efficient and engaging. Amazon is moving in the physical retail while Walmart grows online. We believe that our platform can play an important role for all these companies. Amazon about its many of the ideals of the redefine marketplace, they are efficient, engaging and reliable. It’s easy to see how Whole Foods won’t have these competitive advantages. The rest of the industry must change its posture regarding technological innovation in the face of Amazon’s relentless advance soon encompass physical retail, as well as online. As I mentioned in prior calls, we have been successful in creating broad awareness and interest in Digimarc among leading retailers and brands in the U.S. Initial interest among European prospects has been encouraging. This has let us to open local office in Cologne, Germany in Q1 and to begin recruiting additional staff there. The Japan study group continues to expand both membership and activity levels. Our travel to Japan late May to meet with study group members and other potential customers and suppliers, while they are learning more details of pending pilot projects on the several new members joining the study group. I also learn that the leaders would like to begin marketing the platform later this year rather than in 2018 as had been previously planned. Please be mindful there are many variables can play that could still affect timing of the beginning of commercial sales. Scale of activities has reached the level that justifies the hiring of the Japan country manager as shown by employment listings on our website. Throughout our target markets there is a new sense of urgency and openness to innovation. This market development dovetail with the natural maturation of our market development activities and with increase resource requiring from certain key accounts in leading us to a significant shift to resources from demand generation to scale in the key accounts and supporting delivery of solutions that we and our partners have been developing. We have an abundance of interest in our platform now. It’s time to shift from demand generation to account based marketing, targeting certain early adopters and significant industry leaders with clearly defined and properly staffed onboarding and implementation teams. To do this we have stratified accounts according to readiness of market impact. We are focusing on early adopters and certain other highly engaged developing customers, and their suppliers to build case studies of successful implementation. We learned a great deal about the design and production of packaging in the first stage of execution. We have been adding relevant expertise to our staff. We will apply the experience and expertise that we have - acquire the scaling business with impactful accounts. The key to the next stage of execution of strategy is orchestration of effective global supply chain participation. Large global brands and even small private brands engage complex supplier relations to deliver their products. We had been mapping this relations and the impact of Digimarc Barcode on their business processes. The technical focus of our company now is on the tools, training and oversight that support delivery at scale, listening carefully to the advice of customers and their suppliers. Publicly acknowledge early adopters include Wegmans, New Seasons, McCormick and Walmart. Two of these early adopters made presentations in June at the GS1 Connect Event in Las Vegas. Wegmans reported the 2,100 of their 3,000 private brand products have been enhanced and approximately 1,400 are on shelf. The Wegmans representer had confirmed their ambition to enhance all private brand products. We share their ambition. We intend to get them there. As the pioneer Wegmans provides an opportunity to demonstrate scale and business process we engineering that recognizes Digimarc Barcode is an integral feature of packaged design. McCormick recently announced the $4 billion acquisition of French’s Mustard. Reported that connect on their successful pilot and disclose they are moving forward to the next phase of implementation, planning for enhancement of a significant number of products. Representing executive emphasized the importance of good process to create a platform like ours into the global supply chain. Walmart use of our software in the mobile app for smartphones became known during the quarter through disclose in the Terms and Conditions section of their mobile app. Digimarc has Walmart private brands and products, will also independently discover on the shelves in Walmart super stores. It’s now obvious that we are supplier. You may also have notice some recent job postings for Walmart account management. Although specifics remain subject to NDA, we believe that opportunities with the account want the additional more local resources. Walmart has been and continues to be a tent pole strategy. We plan to focus a lot of resources on this account. In regards, we are engaged with another very large retailer. The proof of concept has been going well. We are in the midst of a supply chain assessment to determine readiness for moving to production. Among CPGs we're focusing on a few global leaders in addition to McCormick to complement the retail leadership, demonstrating the benefits to CPGs in addition to the improvement of retailing. There are activities in many other retail and CPG accounts. We will continue to work to accelerate adoption in these accounts. But we will obsess about and maximize our investment in the accounts referred to above. The tenets of our market development strategy are well known. We hope to be in a position soon to test whether the maturing of Wegmans in conjunction with growing involvement by several of the world’s largest retailers is adequate to fuel the inflection point that the strategy anticipates. Our focus is on putting in place the processes and tools that will support scaling business with key customers. We must foster success among the early adopters and work through proof of concept and implementation planning with the next wave. Our experience with early adopters is informing optimization of our customer acquisition and service workloads. Now that we have our foot in the door with numerous leading retailers and CPGs, we need to build sustainable and scalable support for large scale global production. We will develop the good understanding of the significant complexities inherent in managing these enormous customers and educating, training, motivating and assuring quality in the global supply chain. Much of my focus lately has been enhancing our company's capabilities to address these opportunities and associated challenges. Thus operational excellence is at the forefront of execution strategy at this point, the company must continue to evolve to keep pace with progress and market development. I believe we've made excellent progress in this regard. At this stage of development we need to deliver with quality to those accounts we have, close on sales with prospects and grow our share of wallet with all these companies. Improve supply chain support, as well as our own internal business processes will foster more speed and scale in accomplishing these goals. Our work on these matters are defining the standard operating procedures for globalization of the next-generation of automatic identification pioneer about the original barcode. Amazon is really shaking things up at retail. It appears to be inspiring the rest of the industry to wake up to the need to innovate and embrace new technologies like ours. As engagement with certain global leading retailers and brands appears to be firming, it looks like our momentum theory of market development is well-founded. The near-term focus is on nurturing these early adopters as case studies and successful implementation, driving best practices from our experiences with them and applying these practices to scaling industry leaders. We believe this will pave the way for bright future for our company. The basic building blocks are in place to make progress in and make public relationships with leading brands and retailers. We have a strong balance sheet, effective working capital management, expanding institutional knowledge and are making progress and implementation of requisite software training and support services, which doing progress in key performance indicators of increasing bookings and providing other evidence of growing adoption to the industry and the financial markets. That’s it for our prepared remarks. Now we will open the floor to questions.

Thank you, sir. Our first question comes from the line of Rob Stone with Cowen & Company.

Hi, guys. Lots going on. Very encouraging. I just want to see if I connect the dots on a couple of things, I know you're constrained in details of what you can provide, Bruce. But in the past you talked about having two major retailers under master services agreement, would those be the same two major retailers you just mentioned on the -- in your prepared remarks?

Yes.

Okay. And with respect to the OpEx trend moving ahead in Japan, Bruce or Charles, if you could provide any comments on how we should think about headcount additions and the run rate of expenses in the second half?

Well, for the time being, Rob, we are focused on getting a country manager in place and part of the responsibilities of country manager will be building the business plan for Japan. What we have now is a significantly larger study group, so there are many companies that have now gotten involved, there are handful of pilots underway and the organization is being managed or the activities is being managed by that organization and we don't have booths on the ground as the saying goes. So we'll start with one and we will build the plan and then we will see where that takes us.

So you are going to start marketing in Japan later this year, what is that mean, like -- Japan is tackling this in a very different way than North America in terms of doing it as a team effort, so does that suggest sort of rapid or faster pace of implementation?

We think so, we are -- I was surprise it was actually during my visit in late May, when I was told that they thought let’s go in ‘17 instead of waiting to ’18, based on favourable reviews of the technology by the study group. There are various working groups looking at aspects of the platform, very different model than the U.S. and Europe. And so they felt that they ought to get going now rather than wait until next year. And so that actually is part of what provokes the desire to have the country manager to have regular participation by us in those discussions. At this point in time it's the leadership of the study group that believes they should move earlier instead later, and we are not able at this point in time to provide a lot of support because we don’t have local resources there. And we do have a local partner that is working us for long time, who has technical resources to apply, but we would like to have an on-site company representative in the market in order to coordinate our support.

Okay. I will try one more question on Walmart which you mentioned private branded -- the app plus private branded product in the stores. Can you comment at all on the scope of the intended rollout?

No. We are respectful of their desire for confidentiality. So my summary in the prepared remarks was intended to be consistent with the spirit of fair disclosure, okay. People who know those things that I just mentioned, I figure that I -- we will make them available to everyone on the equal basis here so they all understand what has been publicly disclosed. In the case of the mobile app by Walmart themselves, in the case of private branded products on the shelves by people who gone into the stores and found them, and based on our posting on our website of an Account Director for Walmart and on the support position there is pretty obvious that we are doing business with them.

Okay. That’s fair. I won’t press you on that. I am going to jump back in the queue. Thanks.

All right. Thank you, Rob.

Our next question comes from Jim Ricchiuti with Needham & Company.

Hi. Good afternoon. With respect to the two MSAs, I'm wondering if you can discuss at all what additional resources either have been or will be required over the next couple of quarters. I mean, you discussed these postings, but just in general based on your knowledge of what these customers are doing, is there anything you can share with us in terms of how we might think about additional resources that may be required?

Yeah. Yeah. I can give you a pretty solid answer to that, Jim. So, going back to the last quarterly call and my comments is actually even in the February call, post NRF we got surge of interest and then in the last quarter, of course, Amazon has been turning everything upside down in the market. And so the combination of growing awareness of us and an appreciation for what the platform can do and the disruptive effect of Amazons’ continuing relentless pursuit of all of retail, it seems. People are getting inspired, it appears to us. And so we've actually had more interest than we can address adequately with our current resources. And so we have made a shift in internal allocation of resources that I alluded to you in the prepared remarks and it’s a combination of three things. One, one is a natural maturation of market development where you begin by creating awareness and generate demand then you have to address the demand with quality performance. Second is the disruptive effect of Amazon. And third is that we have engagement with some large accounts and they want quite a lot of resource dedicated. And so what we've done internally is we've been executing a pivot in internal resource allocation away from demand generation and into service provision. And so the new hires that we made during the quarter are all oriented toward providing service, it’s client services and development kinds of roles. So rather than add resources in order to address that account development work we are shifting resources internally as much as possible rather than hiring to do it. And so this will be -- in effect the cyclical kind of development within the company and the market as we successfully delivered to these early clients, we expect that to generate more demand, but the demand will require less resources to foster than it had in the first phase of market development. So we are constantly looking at our staffing plans to try to optimize the use of working capital to not overstep or to staff inappropriately in relation to evolution of the execution strategy. So right now we're hoping that we can get much of the work done without additional hiring but by redeployment of existing resources.

And just a follow-up, first the fact that you are shifting resources as opposed to staffing up and really ramping, does that suggests perhaps a longer lead time before you'll see revenues from these initiatives?

It’s intended to have the opposite effect. It’s intended to accelerate the generation of revenues. And so, we've gotten to a point now where there are lots of interested targets in the marketplace. And the early development work with those accounts is inherently inefficient in early market development. So by focusing our resources on the more mature relationships in early adopters and those who are ready to move, we hope to have a positive impact on the timing and scale of revenue growth -- booking growth and revenue growth by making the change.

But as far as a timeline for that any sense you can give us?

No. No. We are pretty consistent and not wanting to get into projections of this phase of market developments, so I don’t want to start it now.

Okay. Understood. Thank you.

Yeah.

Our next question comes from Josh Nichols with B. Riley.

Yeah. Hi. Just wondering a little bit, so you have two MSAs in place and you mentioned on the previous call that there was a clear path to large scale production. Could you just broadly talk a little bit about some of the hurdles the company has already achieved in that process and how much is there that lies ahead of you and any hurdles or opportunities that you see as far as the progression of that timeline?

Well, the -- if you like the needs that we are satisfying relate to building tools, orchestrating the supply chain, meaning, training, incentivizing and supporting other ways the existing suppliers of packaging for the accounts. So there is nothing really new there. What we are trying to do though is with some large accounts is to put in place a comprehensive supply chain strategy. And by doing that we will basically inform the rest of the industry from our work we hope. And so, again if you look at this in sort of phased model, in the first few years of market development we are creating awareness and doing technical demonstration proof of concept work. We are now at a point where we want to scale the business with the early adopter accounts, and so in doing that we need to become a routine part of the design and the production of packaging and that means that we need to orchestrate the supply chain. And Wegmans is a relatively small brand and in terms of Wegmans private brand and some of the very large companies in the market have different complexions to the supply chain. But the needs that we have come to appreciate over the first few years of market development allow us to build tools and to suggest process engineering that works across we think wide spectrum of supply chain for the CPGs, as well as the retailers. But in order to prove this out to the marketplace we want to actually get some of the bigger players significantly further along, so that if you like the middle market between the smallest of our accounts and the largest, we will feel comfortable that we've got the supply chain management sufficiently mastered, so that they can adopt faster. Because a lot of what happens here, Josh, in the early development is we have to prove over and over again with each account because of the confidentiality notions that predominate the American economy. And that’s why in Japan it looks like it’s probably going to go faster, because they're sharing within that group, the kinds of information that we would generate for each account here in America.

Right. And then -- that's definitely helpful, Bruce. Appreciate that. And then just broadly speak, I know bookings, of course, going to be lumpy, but how should we think about bookings over the next six months to 12 months as far as like the general trend on average and any large opportunities you see that could have a sizable impact on that number?

I think bookings will be lumpy for a while and it depends on the approach of these various accounts. We are beginning discussions with another very large account. We have made proposal Jim at their request. We are in the beginning stage of putting and they want to have an enterprise agreement, so they don’t want to go piece meal. But I don't know until we get done exactly what that will look like economically. And so, as we've seen in the last few quarters, the booking are not consistent from quarter-to-quarter, which is what I expect and you should expect, until we get more scale and then that volatility will naturally reduce.

Sounds good. Appreciated guys.

Yeah.

Our next question comes from Saliq Khan with Imperial Capital.

Hi, Bruce. Hi, Charles. Guys few questions on our end, first one being is, could you gave us a bit more information about the office that you have in Germany and also the market opportunity that we could expect out of that area?

Sure. So we open an office in Cologne, a few kilometres from GS1 Germany headquarters. We sent one of our senior technical staff to head the office there. We are hiring an assistant for the office and we are planning to bring in at least one more technical resource in the near-term there. So it's a small office at this point in time. And my strong preference is to not get ahead of the curve on staffing in relation to the signing contracts and the solidifying of implementation plans with accounts there. So we will have adequate staff to get the deals in place and to map out the requirements for implementation and that will stop based on the business that we earn there.

Okay. And Bruce, earlier in the call you talked about Amazon and Walmart, and the types of things we are seeing out there. Certainly, the shift within retail and the shift within those companies itself speaks volumes about what it is that we are seeing in the broader retail industry? But if we think about the realistic opportunity for you guys over the next, say, three years given the longer sale cycle, how do we think about what they're doing, how they matriculates down to the impact directly to Digimarc?

Yeah. So the pace of development should accelerate as our activities mature. So if you think back to launching the platform and having no ops department and having one sales person and having people not know exactly what it was we're doing other than look like it a new twist on the Barcode. It’s much harder to sell than if we got some of the world leaders in retail and CPG moving to full production. And so, I do expect that the pace that you saw historically will not be the pace going forward. So it’s not natural for us to have a long sales cycle. It’s natural have a long sales cycle when we are introducing a radical new technology that addresses mission critical applications.

Okay. And…

So I am anticipating the pace of adoption will increase once we reach that tipping point that is fundamental tenet of our strategy, which is that the world leaders have adopted, the rest need to follow quickly.

And the lastly, Bruce, you talk about increasing amount of staffing that you have across sales, marketing, engineering and operations as well. If I think about each incremental hires you guys will be doing, how do I think about the ROI to you and your bottomline just to past that each individual person. Obviously it’s easy to understand it when you hire more sales people, as you are increasing the amount of types of R&D and marketing people you are hiring, how do I think by the return potential as a result of all those hires?

That’s a good question and the answer resides in the careful analysis of the proposed responsibilities for the new hires and effective management of them to yield a good return. But you spot on and that’s a kind of analysis that we are doing our best to do here. We don't hire willy-nilly. We are actually trying to be quite careful about what we do and the most of the hiring recently has been in client services and in product development.

Great. Thanks, Bruce.

You bet.

Our next question comes from Kevin Hanrahan with KMH Capital.

Hi, Bruce. Hi, Charles. Thanks for taking my questions. I had a question on GS1, but first I wanted to ask kind of off-the-wall question. I wonder if it's possible that digitally watermarked a Bitcoin or any other coin and if you know of any of those crypto coins that have enhanced their security by using digital watermarking?

There is a white paper I think linked on our website from someone in the music industry about the relationship between blockchain which is sort of general technology the foundation of Bitcoin and digital watermarking technology the foundation of Digimarc Barcode. So the actual sort of barcoding of blockchain wouldn't make sense for technical reasons that we shouldn’t go into with this broaden audience. But we believe that the reliable identification of the thing that is then recorded in the blockchain is a natural and expected attribute of future commerce. It's just the way things should be. And one of our business partners, company called Everything from the U.K. is promoting the notion of a digital twin for every object. And so those digital twins then can relate and each will be a blockchain. So I don't want to get too far down the road on technical discussion here on the Investor Relations call. But that's the basic way in which we adapt technology would really.

Okay. Thanks for the answer. And I wanted to ask about the conference, I think, you had in the later part of June out in Las Vegas with GS1 your partner. Can you give us some commentary about that conference and how it went?

Yeah. So I mentioned some in my prepared remarks at the McCormick and Wegmans presented their progress report. The -- there were some other folks. The WestRock was talking about us as well. We had lots of opportunity and quality time with our colleagues at just one U.S. There was a fair amount of discussion at the conference about the Amazon affect and about the crushing effect of being slow to innovate with technology. Many companies as you have seen across the financial markets, capital markets have been gotten just killed the lack of innovation and so roll back a couple of years and you were hearing me sort of lament of their unwillingness to innovate and to take some chances and to embrace new technology. I think all that is changing pretty radically this year because of the activities of Amazon and the effects in the capital markets on large retailers and brands are failing to embrace digital technology.

Okay. Thanks a lot Bruce.

Yeah.

Our next question comes from Jeff Bernstein with Cowen.

Hi, guys. Just a couple questions, I think, Bruce along those lines you would talked about the -- I don’t know if it was the fear, but the anticipation that once someone or someone's of importance in the industry went then everyone else would decide that, okay, now it's safe and we have to all get in the water and if that's how things are going to progress. Do you think that there's an opportunity here to bring in systems integrator type, consultant type partners to kind of help this stuff get done more quickly? That’s question number one.

Okay. Well, I think that that would be very helpful. We had conversations with a couple of such firms. And my sense, well, they wouldn't say what I'm about to say, my sense is that they're waiting for someone to offer them a multimillion dollar check to get involved. That -- they're not the kinds of firms that want to invest capital in new developments, so they want to respond to substantial demand for services associated with new technologies. And so, I think, we need to build some scale before they will get interested, but I believe that will be an important ingredient of the development of the market a little bit down the road.

And then just to follow-up on that, I think, you had originally anticipated that there would be third-party developers of applications based on Digimarc Barcode and Discover to do the myriad of things that people can imagine they would want to do with the technology and that in recent days you kind of thought that, well, we may have to do this ourselves and it may become a profit centre for Digimarc if that's right and is that changing or revolving or how you thinking about that now?

Yeah. I think it’s both, Jeff. We are -- I outlined previously the solutions that we've been developing. There are other solutions under development by third parties that were aware of and supporting. And so, in the early days here we’ll build some in the later stages, I hope that will be able to focus most of our resources on the platform development. But to the extent the solutions become good profitable activities, we are happy to do it. And so that was not part of the original thesis of the global market, when we launched we were figuring that that would be done by others, but as it turns out it appears best that we do some of them at least.

Okay. And that’s encompassed in sort of the incremental resource discussion that we have had already here today?

Yes.

Great. Terrific. Thank you.

Yeah.

Our next question comes from Jeff Kessler with Imperial Capital.

Thanks for taking the question. Beyond the CPGs, can you describe where you are in terms of having an ecosystem set up and ready to go, including the scanning companies and ancillary companies? In other words, you've got a number of companies that are in an early position with you on the retail side. You had -- how far along is the infrastructure that can hold -- that can take on the business with you when it ramps up?

Yeah. That’s part of the resource reallocation that I described earlier. We had been out of if you -- no matter globalism or beaten the bushes, getting demand generating, getting people interested and there are many suppliers globally of the many companies that would be good customers of ours. And so at some point you get to a scale of service requirement complexity that tends to dilute resources of the company of ours -- our size. And so, I made the decision short time ago that we would recognize the maturation of our efforts and begin actually to not foster additional demand, and focus more on key players in the global markets that we are targeting, and getting them to a larger scale. And so by doing that, that reduces the complexity of the supply chain support requirements for us. But the work that we do to build tools and to reengineer processes and provide training will then be generalizable to the rest of the market, so…

It is like a pulling function in which you have large retailers who will be -- who are ramping up with you, essentially pulling in the infrastructure around them and forcing the infrastructure to effectively build itself up without you having to do it?

Not exactly, I mean, I think, I would characterize a little bit differently that, if you take any large retailer or brand, they may have some suppliers in common with five other large retailers or brands, but they will also have some that are distinct. And so if you take on five of them you will have additional complexity over taking on one of them in the simplest model. And so, what we want to do now for the next phase of development here, is to focus on some key accounts and get their suppliers all settled with tools and process and so forth, and not trying to serve two larger number of constituents, because it dilutes our resources. And so we think that will have better impact in terms of financial performance and in terms of evidence of progress in the marketplace by shifting from a broad demand generation model into the account based marketing model of focusing large teams on key accounts. We can do both with our existing capital structure. It wouldn't be unreasonable to do both, but we are not going to. We are going to focusing on the key accounts and deliver scale and public acknowledgment of scale which will be informative for the product markets, first and foremost, but also the financial markets…

Okay. Great.

… with that.

Thank you very much, Bruce.

Yeah.

That will conclude our question-and-answer session for today’s program. I will now hand the program back over to Bruce Davis.

All right. Thank you very much everyone. This concludes our call and we will look forward to keeping you well informed of continued developments with the company. Good-bye for now.

Ladies and gentlemen, this will conclude today’s conference call. Thank you for joining us for our presentation. You may now disconnect.