Where We’re at Now:
Our manufacturing partner has estimated they’ll need an additional $1.2M from us for them to fulfill our orders. This is due to the proportion of good products coming off the line and the cost issues we covered in the last update. Over the last few months, we’ve been having conversations with potential investors to try to raise enough money to both complete production and grow the business. The yield concerns, the associated cost, and looking back at the slow pace of development up to this point, however, have made it difficult to impossible to raise the amount of money we need to both scale the business and fulfill orders. When we communicated these things to our manufacturer, they decided to stop the line until it was clear how they would get paid for the completed units, as well as how they would recoup the advances they gave us for this project.
There are 135 units ready for shipment at the moment and roughly 200 in process.
We’re doing whatever we can to get as many pieces shipped as possible. But, in order to ship the in-process and completed units, our manufacturer is requesting we sign an agreement that would prohibit us from talking openly about some of the challenges we’ve faced during our manufacturing journey. We’re trying to balance our desire to communicate openly and honestly with our backers and customers with trying anything we can to get even a few units shipped. If this proposed agreement moves forward, future updates will be challenging as we’ll be prohibited from sharing many of the facts surrounding the history of the project. We’re currently in conversations with the manufacturer about this agreement and we’ll continue to explore ways to satisfy the manufacturer’s request for additional funds required to continue production while maintaining our ability to keep you as informed as possible.
We never dreamed we’d encounter this many challenges for this long. We know we’ve let you all down and we continue to try and keep our chins up and make every effort to reward you for backing us.
We’ve been reading your comments and will be addressing some common themes and requests in this update. This is a summary of what we’re covering in this update:
Further Financial Information: We’ve put together a timeline from our bank account’s history. We’ve also gone through our photos to pull out images of parts. We hope this is the type of documentation some of you have requested.
Plans for Moving Forward: The goal of moving forward is to figure out a way to get rewards to as many people as possible. We’ve outlined our approach below.
FAQ: This is meant to cover other questions we’ve received since our last update.
Further Financial Information
Our bank account balance through time with call-outs during major events.
Here’s a little background info to help you interpret this graphic (so you don’t have to go back to previous updates). Our first major purchases were the batteries, the microcontroller (MCU), and the battery management IC. The batteries were long lead-time parts that needed to be ordered well in advance as they were built-to-order and the build process was a lengthy one. The battery management IC was a primary gating item, as it had to be custom processed from a silicon wafer. One wafer would only give us around 6,000 parts. We knew there’d be some yield and one wafer was not enough to build all the 7,900 rewards, so we had to get at least two. The wafers had long processing times (around 16 weeks) and were needed to make the E Ink display (another 8 weeks), so we stage released this and delivered them to E Ink to be placed on the circuits. Once we were fully engaged with our manufacturer, the manufacturer paid for the parts and we paid them in batches, which is why you see many items lumped into three major purchases. The original intent was to order more of these long lead-time parts than were necessary to satisfy Kickstarter backers, so we wouldn’t have six months of down time after fulfilling the original orders. We opened up pre-order sales to pay for the cost of the additional parts. Unfortunately, given the low yield that we’re currently experiencing, additional parts that we hoped would provide us with continued revenue would need to be used to fulfill existing orders. We’ve included images of parts we received further down in the post.
Plans for Moving Forward
Below are three different options for moving forward in order of preferable outcomes.
Exchange our intellectual property, techniques, and custom tooling / machinery with a buyer who would complete the rest of the production and fulfillment with our help.
The offer would include:
Ownership and ability to continue production of the CST-01 under the buyer's own brand. We’d be available to help the new owner transition into producing units.
Two patents: A design patent that specifically covers the design of the CST-01 and a utility patent that covers a thin, flexible wristwatch that’s flexible throughout its entire length.
Utility Patent 14/590,695: Flexible wristwatch with segmented E-Paper display (still in process).
Design Patent D722,894: Flexible wristwatch with segmented E-Paper display.
We’ve also developed an encapsulation technology/method for low-temperature and low-pressure molding of flexible elastomeric urethane over sensitive electronics. We needed to develop this process since an E Ink display and a battery wouldn’t be able to withstand the temperatures or pressures involved with a conventional, liquid-silicone rubber, injection-molding technique.
This process would be extremely useful for any type of ultra-thin, flexible electronics (wearables, smart cards, etc.). We had a custom CNC machine built to automate this process, which could be repurposed and iterated upon for a range of different devices.
We’ll also be available to consult with the buyer to integrate the encapsulation technology we developed into products of their own choosing. The buyer would have the option of patenting this technology and we’d assign the patent to the buyer or keep the process a trade secret.
Find buyers for all the above IP, equipment, and parts, liquidating everything we have and redistributing money as required by law.
In the event that there’s no traction with the above options, we’d essentially make all development “open source” to our backers. We’d share all CAD, schematics, drawings, and design-for-manufacture documentation down to a detailed bill of materials that have all part numbers and suppliers down to the last resistor.
We’d share everything we can on how to make the CST-01. We’ve had requests to do this and mail the parts to the backers. This is something we could do, but it’s at the bottom of our list of options because without the proper machinery—hot bar machines, ultrasonic welder, CNC encapsulation machine, specialty adhesives, screen printing, die cutting, etc.—backers simply won’t be able to assemble the watches by themselves. Parts not requested by backers would be liquidated and funds redistributed.
Why is all of this information coming now? Why didn’t you communicate these issues sooner?
While we were in the process of trying to get manufacturing going, we didn’t think it would be wise to communicate each and every frustration we encountered. We were concerned that this might negatively affect our working relationship with our manufacturer and our suppliers, leading to more difficulties down the line. What became apparent to us, however, is that designing around bleeding-edge components that are sourced from a single supplier is very risky, especially for a small company. One example is the issue we had with our E Ink displays. We were shipped an estimated 20% broken units that appeared to have been broken due to too much force applied to a component during assembly. This ended up being very costly for us, but what could we do? No one else makes the kind of quality E-Paper displays we needed aside from E Ink. Anything we pursued legally could damage our relationship and destroy our ability to continue production. We aren’t big enough that a supplier would care about cutting us off.
Why weren’t the issues you’ve encountered communicated at the onset of the project?
The short answer is that, in our opinion, we overestimated the capability of a manufacturing partner to transition a product we were able to make in our workshop to something that could be mass manufactured.
We had built working prototypes that were very close to the final form factor we needed. The primary parts that needed refinement were the lamination process, adding color (printing), and the metal band fabrication.
The manufacturing partner we chose has a history of making many of the popular wearable technology devices on the market today. We believed they could apply this industry knowledge to take our device that extra step and make it ready for manufacturing. What we learned, however, was that many of the questions we had about how to move forward with production were also echoed by the manufacturing team. CST and the manufacturing team worked on ways to refine the necessary areas, but these efforts ended up needing way more R&D and experimentation than we had anticipated at the start.
We also had issues with our suppliers. In addition to the E Ink issue mentioned above, another big issue was that our original battery manufacturer went out of business. One week, things seemed great, then the next, we heard we wouldn’t able to purchase the quantity of batteries we needed. We were able to find a replacement battery that had a similar chemistry and form factor, but, unfortunately, the mechanical properties and the production quality of these replacement batteries wasn’t as good as the original supplier. This, too, led to an unexpected R&D effort around bend testing. We had to come up with a cocktail of adhesives to hold the battery in place where it needed to stay put and let it move where it needed to move.
In summary, we were counting on the last pieces of the development process to go smoothly—and the process was anything but.
Can we contribute more money and keep manufacturing going?
At this point, we’ve concluded this isn’t a good option. If we continue to manufacture at the current yield, it would not only require additional funds that would be in the neighborhood of the original amount backers contributed, but we also don’t have confidence that the manufacturing issues will be ironed out even with additional investment. The last thing we want is to take more money from backers only to continue to run into more manufacturing difficulties going forward.
Can you supply pictures of parts?
Posted below are some pictures of parts we have. The bulk of the parts are in storage at the manufacturing site and are “kitted out” when a batch of watches is signed off to be assembled. This is why we mostly have photos of the kits sent out, or the boxes of parts when they arrived at the loading dock.
Where’s the FCC certification?
It was certified by Bay Area Compliance Laboratories Corp. A screenshot of the cover of the report and a photo of one of the tests is below. For further information, the associated update is update #15.