Good day, and welcome to the eMagin Corporation First Quarter 2019 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Jeff Lucas, President and CFO. Please go ahead.

Good morning, everyone. We are glad to have you join us today for our first quarter 2019 earnings conference call. During today's call, we may make forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on the company's current expectations, projections and beliefs, and are subject to a number of risks and uncertainties. Such statements include references to projections of future revenues, plans for product development and production, the company's ability to ramp up production, future contracts and agreements, product benefits, operations, future financing, liquidity and capital resources, as well as statements containing words like believes, expect, plans, targets, et cetera. You should not place undue reliance on these forward-looking statements because they involve known and unknown risks, uncertainties and other factors that are, in some cases, beyond our control. Please refer to our earnings release for the first quarter 2019 and the company's filings with the Securities and Exchange Commission for information concerning factors that could cause actual results to differ materially from those expressed or implied by such statements. We undertake no obligation to update or revise any forward-looking statements to reflect future events or circumstances. With that, I'd like to turn the call over to Andrew Sculley, our CEO.

Thanks, Jeff. Good morning, everyone, and thank you for joining the call today. First quarter 2019 results were in line with our expectations, reflecting several positive demand developments as well as residual impact from the fourth quarter production issues that we discussed on our fourth quarter earnings call in March. Importantly, these production issues have been resolved and we believe the improvements we are putting in place will provide greater reliability while increasing production capacity and cost efficiencies. I'm pleased to report that along with these improvements, we are continuing to progress on our strategic initiatives. Demand for our products in the military, including aviation, is strong and our commercial activities are beginning to gain traction. We are working with our military and commercial customers to move beyond just component sales as we provide more comprehensive solutions, which include not only our displays, but also higher level assemblies. For example, during the quarter, we developed and shipped a prism optic for a military customer. We also developed a fiber optic taper that will enable our displays to be incorporated into products that are being retrofitted as well as those that are designed for a different sized microdisplay. Finally, we developed a new assembly process that allows additional optical elements to be attached to our microdisplays, thereby, providing customers a broader range of applications with less upfront engineering design work. On the consumer front, we have created our largest resolution display, a 4,000 x 4,000 color display. We are developing this display in collaboration with a tier 1 consumer company to incorporate into their headset. This display enables the headset to have a wide field of view without the screen door effect. We are making great progress on this program and expect during the third quarter to complete a full color prototype using our unique very high brightness direct patterning technology. Looking at the commercial market, we are growing our customer base including in the medical device market. We still believe that we have tremendous opportunity in the medical market. Our high resolution, high contrast and very high brightness displays are an excellent choice for this market. We are excited to have our displays in a new customer’s next generation diagnostic equipment. This customer, which we won during the quarter, is an innovative developer and manufacturer of diagnostic and ophthalmic surgery equipment. On the military and aviation front, we are continuing to win new orders, while forging a foundation for long-term growth. We are actively engaged in discussions with the government on microdisplay development for future defense programs and are positioning our displays as a key component of the future Soldier System 2030 technology suite. Some of our specific wins and accomplishments include our work with Collins Aerospace team to improve the displays for the F-35 Lightning II helmet. We have received terrific endorsements from test pilots as we prepare for low rate initial production in the 2020, 2021 timeframe. We have supported the Javelin Missile program since 2006. During 2018, we received $560,000 worth of new orders for this program. In April, we received $239,000 in support of the Javelin Missile program's Command Launch Unit. Finally as you know, we are very active with the US Army ENVG III program. We are also working with both of the prime contractors on pre-production units for the ENVG Binocular program, with expected production beginning at the end of this year or early next. The overall acquisition for this program is expected to be 190,000 systems through 2030. As we move ahead on the ENVG III and the ENVG Binocular programs, we are still supporting the longstanding ENVG II program, having received over $800,000 in orders over the past five months with the latest order totaling $238,000 in April. This demonstrates how even our mature programs provide sustainable revenue opportunities for us. We have been supporting this program since 2013. We also want to update you on our operational progress. Our fourth quarter production issues have largely been resolved. In the past, we have had a number of single points of failure, which create the risk of losing capacity, as we saw in the fourth quarter. We have gone to great lengths to minimize these, while improving our production yield. We have increased our production resources, hired key technical people and qualified new advanced production equipment. These efforts should give us greater production reliability and increased capacity, thereby lowering unit costs. This has been an incredibly important initiative for us, and we expect greater production success going forward. As the only US manufacturer of OLED microdisplays, the US military recognizes the essential role our displays perform for our national defense. In 2018, we were awarded by the US government $830,000 for yield and production improvement. In the first quarter of this year, we received another $150,000 to support the US Army, with another $900,000 in project funding under review. So demand is strong and we are well positioned as we advance our technology, while improving our manufacturing capabilities and further strengthening our customer value proposition. Finally, in the development area, we are improving the efficiency and lifetime of our direct patterned displays. We are making architectural improvements, upgrading our OLED materials and improving our direct patterning equipment, which we expect will increase throughput and further show the capability for mass production. With that, I'll turn the call over to Jeff.

Thanks, Andrew. I’ll now review our financial results in greater detail. In the first quarter 2019, we made progress on several fronts. Total revenues and product revenues, in particular, increased sequentially over the December quarter, due to the resolution of the equipment issue in the fourth quarter and also reflecting demand trends in our military and aviation business, as well as contributions from commercial markets. Importantly, our bookings are strong. Our backlog, which are orders scheduled to be shipped over the next 12 months, remains steadily above $10 million at $10.7 million, a slight increase over the backlog at December 31, 2018. We have made and are continuing to make production improvements that are driving yield efficiencies and higher throughput, which are reducing our unit cost and strengthening our margins. We continued to control our SG&A spend, which decreased both sequentially and year-over-year. And we added to our cash position to support our growth strategy by raising $4 million before fees and operating expenses from registered direct offerings following the close of the quarter. Revenues in the first quarter 2019 were $6.1 million, a decrease of $800,000 from revenues of $6.9 million reported a year ago, but up sequentially 6% compared to the fourth quarter 2018. The decrease in revenue year-over-year is due to the impact of certain fourth quarter production issues previously discussed, which as a result impacted the number of product shipments in the quarter, just as we had expected. As far as the components of revenue, product revenues were $5.5 million as compared to $5.9 million in the first quarter of 2018. On a sequential basis, product revenues grew 13% from the fourth quarter of 2018. The year-over-year decrease in product revenue was due to previously mentioned display production related issues from the fourth quarter 2018, which had a residual impact on the first quarter. R&D contract revenues totaled $0.6 million in the first quarter compared to $1 million in the same quarter of last year, reflecting a lower level of development work required at this stage of the consumer contract work to develop the 4K x 4K display, Andrew mentioned. Government contract revenues during the quarter were largely unchanged from the prior year period. The consolidated gross margin for the first quarter was 22% on gross profit of $1.3 million compared to gross margin of 29% on gross profit of $2 million in the prior year period. The decrease in gross margin year-over-year was primarily due to lower revenues in the quarter compared to the first quarter 2018. Moving to our expenses, operating expenses for the first quarter of 2019, including research and development expenses, were $3.5 million as compared to $4.5 million in the first quarter 2018. Our R&D expense was substantially unchanged year-over-year at $1.6 million. Selling, general and administrative expense, or SG&A, as a percentage of sales decreased to 32% in the first quarter compared to 42% a year ago. SG&A expense decreased from $2.9 million in the first quarter 2018 compared to $1.9 million this year. In the first quarter 2018, we had generally higher spending particularly for professional services, including legal for negotiations with prospective partners as well as $240,000 for transaction fees associated with the January 2018 equity offering. Operating loss for the first quarter was $2.2 million versus an operating loss of $2.6 million in the first quarter of last year. Net loss for the first quarter of 2019 was $1.4 million or $0.03 per diluted share compared to a net loss of $2.1 million or $0.05 per diluted share in the first quarter of 2018. The net loss included an income related to the change in the fair value of the warrant liability of $800,000 and $500,000, respectively, for the first quarters of 2019 and '18. Our non-GAAP EBITDA was negative $1.4 million for the first quarter 2019 compared to negative $1.8 million in the first quarter of 2018. The decrease year-over-year in EBITDA loss in the first quarter 2019 primarily reflected the lower net losses in that period. Turning to the balance sheet. As of March 31, 2019, the company had cash and cash equivalents of $3.5 million, working capital of $7.3 million, outstanding borrowings under the ABL facility of $2.5 million and additional borrowing availability of $0.8 million. And as noted, subsequent to the end of the quarter, we strengthened our balance sheet by completing a registered direct offerings, raising total proceeds to eMagin of $4 million, before fees and other operating expenses. In summary, we are making progress on several fronts. We continue to gain traction towards the goal of securing new US military programs, and broadening our presence in foreign military applications, and in industrial and medical markets. Overall, in the first quarter 2019, we sold to over 70 customers and supplied products for over 20 new programs. In particular, on the military side, many of the new programs we are supporting and new ones we are winning are long duration programs that we will be selling to for the lifetime of the program. We continue to work closely with the government to receive further funding for production enhancements and believe we are well positioned for future awards as the only OLED manufacturer of microdisplays in the United States. From an operations perspective, we have resolved our production issues from the fourth quarter and are making progress on our multi-year yield improvement and throughput initiatives. This should drive our unit costs down, expand our capacity and raise our gross margins. Finally, we are entering the second quarter with an order backlog of $10.7 million in products. With that, we'll turn it back to the operator for questions.

[Operator Instructions] Our first question comes from Mike Malouf with Craig-Hallum.

Hi. Just want to talk a little bit about the production issues that are largely behind you. Can you give us a sense of how much more work you have to do to sort of get to where you want to be? And then the gross margins, I think, are still well below where you hope them to be. Can you give us a little bit of commentary on how those gross margins perhaps are currently right now running and kind of where you expect them in the near term? Thanks.

Yes. Thanks, Mike. On the production issues, we have a long-term program here. And as you know that we do get funding from the government to do better on the yield, and also we are trying to replace single-use equipment. And if we can't replace them all at once, obviously, because that's capital, we actually are doing things to make sure that we can get them up and running more quickly than we have in the past, and that's going well. The particular issue this time was a piece of equipment that didn't go down for 10 years. So we are taking steps to make sure that we can get that up very quickly. So the program is going well. It's a long-term program to advance yield in addition to just the single-use equipment issues, and I think it's going very well. And, by the way, the government funding for this, we have to feed back to the government and they are very impressed with what we have accomplished.

So Mike, let me add to that just a little bit here to help also. One of the challenges that we have actually is that because of that production issue in the fourth quarter, the reason we had a residual impact in the first quarter is because in meeting customer demand and shipment requirements, we had to do, for example, smaller production runs that are not as efficient as doing longer runs and that has bearing on our margins and to a degree our yields. But we have made improvement. We're continuing to get back on track in the quarter we’re in now. We are working towards -- the margins that you saw -- that we saw in the second and third quarters of last year, and improvement from there, particularly under our yield improvement program. So in summary, we are getting back to the margins that we saw in the second and third quarters of last year, which we would argue a more normalized margins, and improving from there with our yield improvement initiatives.

Okay. So we should expect similar gross margins in the second and third quarter or perhaps even better this year than we saw in the June and September quarter of last year?

I'm sorry, ask that again. I couldn't quite hear you.

So, what you're saying is that the gross margins in the June and September quarters of this year might be at or better than the June and September quarter gross margins of last year?

Yes, I'm going to be a little careful here and say, on average, we anticipate to be comparable if not a little better. That's correct.

Okay, great. And then can you just add a little bit more color on the consumer side. It sounds like you're going to complete the validation of the headset in the second quarter and then do prototype production in the third quarter. Is that how I should read it? And how many prototypes do you think we should expect in the third quarter?

So, let me step back and view headset. Headset, we're really building the display. So this is a 4,000 x 4,000 approximately display. We put white OLED on it, just to test the backplane that we've designed. It has very many features, so the testing will take some time. As you might also recall, we have our direct patterning equipment, which we redesigned with a vendor, that has to come back and we have to get that up and running, and then we will put direct patterning OLED on the 4K display, and that will be in the third quarter, we'll be doing that. And then, obviously, we'll have to make enough prototype, so that the customer is satisfied, they have what they need to test for a headset. And that is not a huge number, but it's still an important thing for us.

Okay, great. And then what other consumer opportunities do you have going on at this point?

Well, we're talking to a number of other companies. We will in fact at -- you may know, next week is the Display Week for the Society for Information Display, or SID. And in that, we have a number of customers, potential customers, that we're talking to about display designs as well as perhaps using this 4K x 4K. And we're also meeting with them and our foundry partner. And here the interest is, can the foundry partner help us bring this to mass production as well. And there are a number of companies that you would know are very important to this AR/VR market, and it's very exciting time for us. Absolutely.

[Operator Instructions] Our next question comes from Kevin Dede with H.C. Wainwright.

Good morning. Kevin Dede. Thanks for taking the questions. I was curious, Andrew, on the four 4K development. You haven't been very forthcoming with regard to any sponsorship that you might be getting from this development partner. Could you give us some insight on the financial aspects of the transaction? Is there -- just that a promise or what can you tell us?

Well, clearly, they paid for the development of the display and that's significant. We've said before, somewhere between $3 million to $4 million is what they're paying us. It's not all done yet, of course, so that's great sponsorship. And they’re also interested in having that display be taken up by other companies, which is a very good thing and that's one of the things we're going to talk with a number of companies next week at the Display Week. We're going to take that display and talk to them about using that one. So the sponsorship, when you say that, what do you mean, for the future?

Well, no. I just wasn't -- I apologize, I wasn't aware of the 3 million to 4 million that you were receiving in development funding. And when did that start and when do you suppose it ends, at delivery of prototype?

Well, the delivery of prototype, there may be some tweets we have to do. So it will end sometime and also those samples that we make in the third quarter are also in that, so it will end -- let's say, it will end this year. And then the question is, do we go to the next generation. And when did it start? It started beginning of 2018, late 2017.

Correct. By the way, Kevin, just to add to that a little bit. Your question about sponsorship, this partner of ours had been very committed as we've been communicating and working and on discussions with other partners and other companies, they had been very involved with us in that. And so they are fairly sponsoring this from the standpoint of their commitment to our display here, we're definitely seeing that.

Yes. Good point, Jeff. And I'll add one other thing. It is we have a meeting with this company every week. We have a meeting with this company and our chip partner every other week, and we also have met with a number of times with the chip partner and the foundry partner. So, there is this group of companies that are pushing this to make it happen.

And that's, by the way, above and beyond our ongoing, almost daily, technical discussion that we get involved with them as well.

Okay. There is no commitment on volume, right? They kind of want to see how they will do on the technology side before they commit to a volume?

The idea is to test the displays, see what types of changes they need to have and then commit for the next generation. And this display has been very different in terms of what it's capable of, and here I'm talking about the backplane, very different, very advanced, so it's been a challenge for us to do this and it's a bigger display. So the other thing is direct patterning. It's very important because they absolutely need the high brightness and they need the pixels per inch that we can do. I might add that we are the only company that has demonstrated that high brightness and that pixel density and that's why this 4K x 4K display is so important. One other thing, when you put on company names, when you put on a headset that has a regular cell phone display in it and you have a wide field view, you see a screen door effect. This display eliminates that. And that's why this company -- that plus the brightness is why they're coming to us – they have come to us. And there is interest in this display from other companies.

And I've got a list of questions for you. So I'll try to rein in a little bit. But, Andrew, I think it would be really helpful if you could just refresh my memory on the commercial application for the 2K x 2K. I mean, you guys spent a ton of time on that and it still has relevant commercial value. I just was hoping you wouldn't mind refreshing my memory on that.

Well, there is certainly value in terms of, let's start with the military. There is value there, some of the next generation military devices are interested in a higher resolution. As you know, we have a WUXGA, which is 1920 x 1200. So there is interest in the military side for this display, significant interest. And, of course, everyone also is interested in higher resolution plus higher brightness, and we have given that to people. The other thing is, there is also interest in the AR space with regard to commercial application. So industrial medical, and again here things like medical are interested in higher resolution. So it's military, the commercial, industrial and medical, I mean, and the consumer application is if you need a display, that's reasonable resolution not enormous like the 4K and you don't need that wide field view and you can see some AR devices out there that have good resolution, but not huge field of view the 2K is fine.

So your new medical customer, are they leveraging a design that you have in your arsenal already or is that a development that you'll need?

No. It's a design that we already have and they're testing that.

Existing qualified product.

Are there any indications of what the volume could be for you with that?

Oh, of course, we have a feeling for it because we have multiple customers in this field, but we cannot say that.

Yes, we do, but we're not going to disclose at this point. But, I mean, we have a lot of opportunities, really, for the 2K, particularly its design in several military programs. So, just getting back to comment about the 2K earlier, there is still considered to be a wealth of opportunity, not just in the commercial side, but certainly in the military side, importantly, as well.

Okay. So one of the things that you mentioned, Andrew, I thought was particularly interesting was some of the work that you're doing on the assemblies that attach to displays. Could you add a little more color on that? You mentioned, one prism optic, but did you -- you also mentioned a fiber optic. I think you said, paper, but I was just hoping that you could just discuss that a little bit further?

Yes. So just so that everybody understands, when you use one of our displays, you will have an optic with the display, so that you can magnify the display and it looks like a large screen TV in front of your face, if you will. In that magnification, sometimes, there are multiple optics that go into that. It could even be a thing like polarizer in front of it and the taper simply takes the light from that display and changes its size. So the customers have asked us, and we have done this before like on one of the enhanced Night Vision goggle programs, we put an optic and/or display assembly, so that the customer could fit that in with additional optics to make the final headset. So that's the type of thing that we are doing. The prism optic, we do have one that fits our SVGA that we have sold for very long time now and that's a big seller, for example, and some of our customers, they buy the prism optic and the display, now this particular prism optic we've made for different resolution display, and so we expect that can be a very large seller as well. And it also permits the customer to buy the optic in display and not have to make their own optic, so this optic can go to multiple customers, and that's the type of thing we're doing.

Just a couple more. Bear with me please. Could you offer a little insight on the 2030 Soldier suite? It's not clear at all what that might be. And I'm wondering, how it goes above and beyond, say the ENVG system, where the helmet is coordinated to the rifle site, et cetera.

It's a pretty comprehensive program that we'll actually be talking more about, I think, in the future, as it begins to sort of crystallize, particularly the roll that we are going to have at it. But it's pretty promising. It speaks exactly to our sweet spot in terms of what our displays offer. So that in a sense is pretty exciting for us. But that thing is several years out and there's a lot of work has been done to date, it's still again getting formalizing and you'll be hearing a lot more about it from the military and general from us. So ask that question again, I request, in future calls, we'll be able to give a little more color each time.

You know me by now, Jeff, I keep asking the same questions every quarter?

Just a reminder, Kevin, when you think about the military, as we said on the conference calls earlier, 2013 was the start of ENVG II, it's still going on, but the military has ENVG III and then right after that ENVG Binocular. So the military -- and this is -- I'm talking about the US, but out -- actually outside the US as well, there's always a modernization, the next generation, next generation to give our soldiers the advantage.

Okay. There was a touch on this topic and I was hoping you might dive in just a little bit deeper on the DPA Title III OLED designation. You mentioned it a little bit at the end of March on the year-end call. And I was hoping you might offer a little bit more insight and how you see that development? And what milestones do you think we should look for?

So, a couple of things on the Title III here. First of all, there was, as we pointed out, a request for information that went out in March timeframe, we responded to that. We also pointed out that given that this is actually funded as part of the US defense overarching program, we are the only US manufacturer of microdisplays. And clearly the prime, if not the only, candidate for this funding. The goals that we have with the funding here and what we've communicated and it seems consistent what the program is offering is really threefold. One, it address the more than anything else, our single point of failure to make sure that we have a consistent source of production for the military, particularly given the demands that are going be increasing over the next several years. The second point here is, what we're doing with the yield improvement initiatives and the funding provided for that because not only is that going to obviously increase our margins and at some point lower the pricing for the government, it’s also going to increase the capacity as well. And then thirdly, of course, very importantly is another deposition tool for our direct patterning technology to help advance that. So those are the three elements of it. Now, one thing I want to be clear here that we're very excited about this, we feel it's very promising, has great potential. We cannot say exactly about the timing of how things work in Washington. And so that's why, at this point, again, we're pretty excited about this, but we're also a little guarded in terms of any communication we can make about expectations of timing.

Fair enough, Jeff. But you guys made a big point of indicating all the sponsorship and funding that you see from the various military arms as is. And what you're saying here is that this goes above and beyond that and have specific targets for improvement within your own development and manufacturing process.

Yes, but it's also capital as opposed to expense.

That's right. We do get a fair amount of funding, as Andrew spoke to in his highlights, to support our yield improvement efforts here, mostly helping defray some of the costs, some of the experimental and other costs that we incur in enhancing our yields. This would be driven -- and Title III largely towards capital expansion and addressing some of the capital needs that we have here.

And it's also important to say that the high brightness is very important -- high brightness color is very important for military programs and the aviation programs want to go from monochrome green, which they are today, to full color. They need absolutely high brightness and we would need a line to do that in reasonable volume. And I'll remind you all that we did have a ManTech program for which we were awarded an award and the award set with the -- we did a pilot line demo and it's ready for low rate initial production. And that's what the lines did by Title III would be. So, very exciting, it's just not here yet.

Right. But the ManTech LRIP, that's a color display and that's -- is that happening currently?

Sorry. ManTech we've completed that and won an award for it. The ManTech program was for the high brightness color displays, yes. And we performed very well on the program and won an award, which is unusual. Not only did we get the pilot line demo ready for low rate initial production designation on it, but we also won an award from the government for the performance.

Okay, gentlemen. Big sigh of relief. Last question, just on the F-35 Collins program. I was under the understanding that LRIP was a definite for next year. I got the impression in your commentary this morning that that might be 2020 to 2021, is that a change or am I just misinterpreting things?

We don't exactly know when it will be, but we are working on a next generation as well and that will take some time, so we can't predict.

I think, that hasn't changed. We did, as I mentioned in the last earnings call on March 28, that it was -- at some point, we said in the latter half of 2020 and that's still sort of expectations. There is always a chance of these things as inevitable in any major military program whether it's ground soldier or aviation that these get moved out by a little bit, but we're still comfortable the timeframe that we've established.

Our next question comes from [indiscernible]

Andrew, just curious on any thoughts you might be able to provide on the IVAS program. Do you think that at some point that competes for funding with the ENVG-B, which I know you've been excited about. I guess, should we view this IVAS as more of a threat or opportunity for eMagin going forward?

Well, always, we look at things like this as an opportunity. We would like our displays and everything that the government uses and we are right now still a very efficient high brightness display, full color and very compact. So we still are in the running for any future headset.

The government, obviously, simultaneously pursues a number of initiatives at the same time, including IVAS and all the other ones. And the folks you've heard about, Microsoft have been awarded this. And as you know, we are in discussions with these folks. We can't speak any further at this point as to what our role is going to be there. We don't want to do that at this point, but we know those folks very well. We've been working with them for quite some time. And our discussions with them do encompass future opportunities for IVAS as well.

Great. Just another quick one for you Jeff. As far as related to your credit facility, I believe it was set to expire at year end. Has that been extended? Or are you currently kind of negotiating an extension of that?

Well, we're in not negotiations yet. It does expire in December 21. We've had a 3-year agreement. We've enjoyed an excellent relationship with them. They've been very supportive of us. We communicate with them very, very regularly, so we are anticipating renewing that. They give every indication if they want to do that as well. And it's our goal here to do that or finding more competitive financing availability.

Okay. And then just one more here, I guess, for either of you. Just curious of any message for long-term investors who might be -- maybe losing a little confidence or faith in the company just based on the current stock price. Any comments that you can provide on that?

I'll just make a couple of statements and Jeff can take some as well. We have a very good picture on the military and that's a US statement, but also outside the US. We have a good roadmap there. And we're doing very well, capturing new programs. As we said, the funding that we're getting from the US military helping our yield, et cetera, just points to the fact that they know very much that we are very important. But also we're interested in our discussions with the AR/VR companies. They are very involved in commercial AR/VR for industrial applications. And our displays will fit there too in the longer term when we have the direct patterning capacity that we need and Title III will help us there as well. So I think the future looks very good for us.

Well, Mike, by that question, you kind of taking away some of my two final comments I was going to make, but I will finish here them right now. So, a couple of things to keep in mind. First of all, we are making solid progress in terms of our production and operational improvements. We had a hiccup, as you saw, in the fourth quarter, but the point is our trends and our efforts do continue here, in terms of both improving our yields and increasing our volume, and that's critical because of the strength of the orders that we're seeing now are primarily on the military side, but also the growth in the commercial, this will position us to have the capacity to certainly meet that demand, but also do sort of much higher margin. Part of the benefit of doing that is that with the -- to bring our unit cost down, it's going to open up a lot of other opportunities for us in lower price ranges where we hadn't been able to compete, particularly in the commercial side previously. That's pretty exciting for us. So on the one hand, we are making improvements operationally. Secondly, I will say our order book is strong. As a matter of fact, while we don't disclose this, generally our book to bill ratio is particularly strong as we are seeing in the second quarter to date, and that's certainly in our mind gives us a much higher level of confidence in terms of the expectations that we have set for ourselves, our targets, and have -- we made public in terms of the balance of this year and into next year. And the third point here, as Andrew has been speaking to is that this 4K x 4K is a major development, and it's not to be treated lightly. This has tremendous opportunity, I think, certainly for us. And in the environments that it can create in the consumer side. So I think that's pretty exciting for us as well. So those are really the three major points I would make to you and anyone else as we're moving forward here.

[Operator Instructions] At this time, there are no further questions in the audio queue. I would like to turn call back over to Andrew Sculley for any closing remarks.

Thank you, all. I want to stress again the progress we've made, the 4K x 4K display, as Jeff just mentioned, is an outstanding accomplishment for us and it is the only display that gives the field of view needed for a headset without the screen door effect and our progress on direct patterning, our equipment redesign that we've done and it's in the vendors hand right now, will give us much greater throughput and help us improve the displays that come out very well. So the demonstration of -- further demonstration of a step towards mass production capability this will give us. So we are making great progress here. And again, I'll just stress that there is only one company that can do 7,500 nits in full color at a pixel density of above 2,500 PPI and that's eMagin, and we have demonstrated that. Now one other thing, we have a path, a roadmap, over the next -- rest of this year and the next two years to get much higher brightness. And by the end of this year, we have a goal of 10,000 nits and that is an enormous accomplishment. And when you speak with all of the companies that we talk to on AR/VR, they all want very high brightness. And even if they don't want that high brightness, the advantage that gives you is that we have more headroom therefore much better performance in terms of efficiency of the OLED. So we are in a great position for that. Thank you very much.

Thank you, all.

Thank you for attending today's presentation. The conference has now concluded. And you may now disconnect.