Intrinsic value of Second Sight Medical Products - EYES

Previous Close

$2.00

  Intrinsic Value

$0.05

stock screener

  Rating & Target

str. sell

-98%

Previous close

$2.00

 
Intrinsic value

$0.05

 
Up/down potential

-98%

 
Rating

str. sell

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of EYES stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 0.1

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -55.56
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  4
  6
  10
  15
  21
  30
  42
  56
  73
  94
  119
  148
  181
  218
  260
  305
  355
  409
  467
  529
  595
  664
  737
  814
  894
  978
  1,066
  1,157
  1,252
  1,350
  1,453
Variable operating expenses, $m
 
  21
  32
  48
  70
  98
  135
  182
  238
  307
  387
  481
  588
  709
  844
  992
  1,154
  1,329
  1,517
  1,719
  1,932
  2,158
  2,396
  2,645
  2,906
  3,179
  3,464
  3,760
  4,068
  4,389
  4,722
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  37
  21
  32
  48
  70
  98
  135
  182
  238
  307
  387
  481
  588
  709
  844
  992
  1,154
  1,329
  1,517
  1,719
  1,932
  2,158
  2,396
  2,645
  2,906
  3,179
  3,464
  3,760
  4,068
  4,389
  4,722
Operating income, $m
  -33
  -14
  -22
  -33
  -48
  -68
  -94
  -126
  -165
  -212
  -268
  -333
  -407
  -491
  -584
  -687
  -799
  -920
  -1,051
  -1,190
  -1,338
  -1,494
  -1,659
  -1,831
  -2,012
  -2,201
  -2,398
  -2,603
  -2,817
  -3,038
  -3,269
EBITDA, $m
  -33
  -14
  -22
  -33
  -47
  -67
  -92
  -124
  -162
  -209
  -264
  -328
  -400
  -483
  -574
  -675
  -785
  -905
  -1,033
  -1,170
  -1,315
  -1,469
  -1,631
  -1,801
  -1,979
  -2,164
  -2,358
  -2,560
  -2,770
  -2,988
  -3,215
Interest expense (income), $m
  0
  0
  0
  0
  0
  1
  1
  2
  2
  3
  4
  5
  7
  8
  10
  12
  14
  17
  19
  22
  25
  28
  31
  35
  38
  42
  46
  50
  54
  59
  64
Earnings before tax, $m
  -33
  -14
  -22
  -34
  -49
  -69
  -95
  -127
  -167
  -216
  -272
  -338
  -414
  -499
  -594
  -699
  -813
  -937
  -1,070
  -1,212
  -1,362
  -1,522
  -1,690
  -1,866
  -2,050
  -2,243
  -2,444
  -2,653
  -2,871
  -3,097
  -3,333
Tax expense, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Net income, $m
  -33
  -14
  -22
  -34
  -49
  -69
  -95
  -127
  -167
  -216
  -272
  -338
  -414
  -499
  -594
  -699
  -813
  -937
  -1,070
  -1,212
  -1,362
  -1,522
  -1,690
  -1,866
  -2,050
  -2,243
  -2,444
  -2,653
  -2,871
  -3,097
  -3,333

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  11
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  17
  10
  15
  22
  32
  45
  62
  84
  110
  142
  179
  222
  271
  327
  389
  458
  532
  613
  700
  793
  891
  995
  1,105
  1,220
  1,341
  1,467
  1,598
  1,735
  1,877
  2,025
  2,178
Adjusted assets (=assets-cash), $m
  6
  10
  15
  22
  32
  45
  62
  84
  110
  142
  179
  222
  271
  327
  389
  458
  532
  613
  700
  793
  891
  995
  1,105
  1,220
  1,341
  1,467
  1,598
  1,735
  1,877
  2,025
  2,178
Revenue / Adjusted assets
  0.667
  0.600
  0.667
  0.682
  0.656
  0.667
  0.677
  0.667
  0.664
  0.662
  0.665
  0.667
  0.668
  0.667
  0.668
  0.666
  0.667
  0.667
  0.667
  0.667
  0.668
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667
  0.667
Average production assets, $m
  2
  2
  4
  6
  8
  11
  16
  21
  28
  35
  45
  56
  68
  82
  97
  114
  133
  153
  175
  198
  223
  249
  276
  305
  335
  367
  400
  434
  469
  506
  545
Working capital, $m
  9
  -3
  -5
  -7
  -11
  -15
  -21
  -28
  -37
  -47
  -60
  -74
  -90
  -109
  -130
  -153
  -178
  -204
  -233
  -264
  -297
  -332
  -369
  -407
  -447
  -489
  -533
  -578
  -626
  -675
  -726
Total debt, $m
  0
  3
  7
  14
  23
  35
  50
  69
  93
  121
  155
  194
  238
  288
  344
  406
  473
  546
  624
  708
  796
  890
  989
  1,092
  1,201
  1,314
  1,432
  1,555
  1,683
  1,816
  1,954
Total liabilities, $m
  6
  9
  13
  20
  29
  41
  56
  75
  99
  127
  161
  200
  244
  294
  350
  412
  479
  552
  630
  714
  802
  896
  995
  1,098
  1,207
  1,320
  1,438
  1,561
  1,689
  1,822
  1,960
Total equity, $m
  11
  1
  1
  2
  3
  5
  6
  8
  11
  14
  18
  22
  27
  33
  39
  46
  53
  61
  70
  79
  89
  100
  111
  122
  134
  147
  160
  173
  188
  202
  218
Total liabilities and equity, $m
  17
  10
  14
  22
  32
  46
  62
  83
  110
  141
  179
  222
  271
  327
  389
  458
  532
  613
  700
  793
  891
  996
  1,106
  1,220
  1,341
  1,467
  1,598
  1,734
  1,877
  2,024
  2,178
Debt-to-equity ratio
  0.000
  2.750
  4.950
  6.290
  7.130
  7.680
  8.040
  8.280
  8.450
  8.580
  8.660
  8.730
  8.780
  8.820
  8.850
  8.870
  8.890
  8.900
  8.910
  8.920
  8.930
  8.940
  8.950
  8.950
  8.960
  8.960
  8.960
  8.970
  8.970
  8.970
  8.970
Adjusted equity ratio
  0.000
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -33
  -14
  -22
  -34
  -49
  -69
  -95
  -127
  -167
  -216
  -272
  -338
  -414
  -499
  -594
  -699
  -813
  -937
  -1,070
  -1,212
  -1,362
  -1,522
  -1,690
  -1,866
  -2,050
  -2,243
  -2,444
  -2,653
  -2,871
  -3,097
  -3,333
Depreciation, amort., depletion, $m
  0
  0
  0
  1
  1
  1
  2
  2
  3
  4
  4
  6
  7
  8
  10
  11
  13
  15
  18
  20
  22
  25
  28
  31
  34
  37
  40
  43
  47
  51
  54
Funds from operations, $m
  -21
  -14
  -22
  -33
  -48
  -68
  -93
  -125
  -165
  -212
  -268
  -333
  -407
  -491
  -584
  -687
  -800
  -921
  -1,052
  -1,192
  -1,340
  -1,497
  -1,662
  -1,835
  -2,017
  -2,206
  -2,404
  -2,610
  -2,824
  -3,047
  -3,278
Change in working capital, $m
  4
  -1
  -2
  -2
  -3
  -4
  -6
  -7
  -9
  -11
  -12
  -14
  -16
  -19
  -21
  -23
  -25
  -27
  -29
  -31
  -33
  -35
  -37
  -38
  -40
  -42
  -44
  -46
  -47
  -49
  -51
Cash from operations, $m
  -25
  -13
  -20
  -31
  -45
  -63
  -88
  -118
  -156
  -202
  -256
  -319
  -391
  -472
  -564
  -664
  -775
  -894
  -1,023
  -1,161
  -1,307
  -1,462
  -1,626
  -1,797
  -1,977
  -2,164
  -2,360
  -2,564
  -2,777
  -2,997
  -3,227
Maintenance CAPEX, $m
  0
  0
  0
  0
  -1
  -1
  -1
  -2
  -2
  -3
  -4
  -4
  -6
  -7
  -8
  -10
  -11
  -13
  -15
  -18
  -20
  -22
  -25
  -28
  -31
  -34
  -37
  -40
  -43
  -47
  -51
New CAPEX, $m
  0
  -1
  -1
  -2
  -3
  -3
  -4
  -5
  -7
  -8
  -9
  -11
  -12
  -14
  -16
  -17
  -19
  -20
  -22
  -23
  -25
  -26
  -27
  -29
  -30
  -31
  -33
  -34
  -36
  -37
  -38
Cash from investing activities, $m
  5
  -1
  -1
  -2
  -4
  -4
  -5
  -7
  -9
  -11
  -13
  -15
  -18
  -21
  -24
  -27
  -30
  -33
  -37
  -41
  -45
  -48
  -52
  -57
  -61
  -65
  -70
  -74
  -79
  -84
  -89
Free cash flow, $m
  -20
  -14
  -22
  -33
  -48
  -67
  -93
  -125
  -165
  -212
  -268
  -334
  -409
  -493
  -587
  -691
  -805
  -928
  -1,060
  -1,202
  -1,352
  -1,511
  -1,678
  -1,853
  -2,037
  -2,229
  -2,430
  -2,638
  -2,856
  -3,081
  -3,316
Issuance/(repayment) of debt, $m
  0
  3
  5
  7
  9
  12
  15
  19
  24
  28
  34
  39
  44
  50
  56
  62
  67
  73
  78
  84
  89
  94
  99
  104
  108
  113
  118
  123
  128
  133
  138
Issuance/(repurchase) of shares, $m
  20
  15
  23
  34
  50
  70
  97
  130
  170
  219
  276
  343
  419
  505
  600
  706
  820
  945
  1,078
  1,221
  1,372
  1,532
  1,701
  1,877
  2,062
  2,256
  2,457
  2,667
  2,885
  3,112
  3,348
Cash from financing (excl. dividends), $m  
  20
  18
  28
  41
  59
  82
  112
  149
  194
  247
  310
  382
  463
  555
  656
  768
  887
  1,018
  1,156
  1,305
  1,461
  1,626
  1,800
  1,981
  2,170
  2,369
  2,575
  2,790
  3,013
  3,245
  3,486
Total cash flow (excl. dividends), $m
  0
  4
  6
  8
  11
  15
  19
  24
  29
  35
  41
  48
  55
  62
  69
  76
  83
  90
  96
  103
  109
  115
  122
  128
  134
  140
  145
  151
  158
  164
  170
Retained Cash Flow (-), $m
  9
  -15
  -23
  -34
  -50
  -70
  -97
  -130
  -170
  -219
  -276
  -343
  -419
  -505
  -600
  -706
  -820
  -945
  -1,078
  -1,221
  -1,372
  -1,532
  -1,701
  -1,877
  -2,062
  -2,256
  -2,457
  -2,667
  -2,885
  -3,112
  -3,348
Prev. year cash balance distribution, $m
 
  11
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  0
  -17
  -26
  -39
  -56
  -78
  -106
  -141
  -184
  -235
  -295
  -364
  -443
  -531
  -630
  -738
  -855
  -982
  -1,118
  -1,263
  -1,417
  -1,579
  -1,750
  -1,929
  -2,116
  -2,312
  -2,515
  -2,728
  -2,948
  -3,178
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  0
  -16
  -23
  -32
  -43
  -56
  -72
  -88
  -106
  -123
  -140
  -155
  -168
  -178
  -185
  -187
  -186
  -181
  -172
  -160
  -147
  -131
  -115
  -98
  -82
  -67
  -54
  -42
  -32
  -24
Current shareholders' claim on cash, %
  100
  50.0
  14.8
  4.5
  1.4
  0.4
  0.1
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0

Second Sight Medical Products, Inc. is engaged in developing, manufacturing and marketing prosthetic devices that restore vision to blind individuals. The Company's product, the Argus II System, treats outer retinal degenerations, such as retinitis pigmentosa (RP). The Argus II System provides an artificial form of vision that differs from the vision of people with normal sight. It does not restore normal vision and it does not slow or reverse the progression of the disease. The Company's Argus II System employs electrical stimulation to bypass degenerated photoreceptor cells and to stimulate remaining viable retinal cells thereby inducing visual perception in blind individuals. The Argus II System works by converting video images captured by a miniature camera housed in a patient's glasses into a series of small electrical pulses that are transmitted wirelessly to an array of electrodes that are implanted on the surface of the retina.

FINANCIAL RATIOS  of  Second Sight Medical Products (EYES)

Valuation Ratios
P/E Ratio -2.6
Price to Sales 21.4
Price to Book 7.8
Price to Tangible Book
Price to Cash Flow -3.4
Price to Free Cash Flow -3.4
Growth Rates
Sales Growth Rate -55.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -100%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets -146.7%
Ret/ On Assets - 3 Yr. Avg. -109.3%
Return On Total Capital -212.9%
Ret/ On T. Cap. - 3 Yr. Avg. -147.1%
Return On Equity -212.9%
Return On Equity - 3 Yr. Avg. -185%
Asset Turnover 0.2
Profitability Ratios
Gross Margin -150%
Gross Margin - 3 Yr. Avg. -35.2%
EBITDA Margin -825%
EBITDA Margin - 3 Yr. Avg. -738%
Operating Margin -825%
Oper. Margin - 3 Yr. Avg. -671.3%
Pre-Tax Margin -825%
Pre-Tax Margin - 3 Yr. Avg. -738%
Net Profit Margin -825%
Net Profit Margin - 3 Yr. Avg. -738%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

EYES stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the EYES stock intrinsic value calculation we used $4 million for the last fiscal year's total revenue generated by Second Sight Medical Products. The default revenue input number comes from 2016 income statement of Second Sight Medical Products. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our EYES stock valuation model: a) initial revenue growth rate of 60% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for EYES is calculated based on our internal credit rating of Second Sight Medical Products, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Second Sight Medical Products.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of EYES stock the variable cost ratio is equal to 325%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for EYES stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for Second Sight Medical Products.

Corporate tax rate of 27% is the nominal tax rate for Second Sight Medical Products. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the EYES stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for EYES are equal to 37.5%.

Life of production assets of 10 years is the average useful life of capital assets used in Second Sight Medical Products operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for EYES is equal to -50%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $11 million for Second Sight Medical Products - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 56.798 million for Second Sight Medical Products is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Second Sight Medical Products at the current share price and the inputted number of shares is $0.1 billion.

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COMPANY NEWS

▶ Second Sight Medical Products posts 3Q loss   [Nov-02-17 05:19PM  Associated Press]
▶ Second Sight Medical Products posts 2Q loss   [Aug-01-17 09:57PM  Associated Press]
▶ Second Sight Medical Products posts 1Q loss   [May-03-17 05:24PM  Associated Press]
▶ Second Sight Medical Products posts 4Q loss   [Mar-09-17 04:29PM  Associated Press]
Financial statements of EYES
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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