Kopin Corporation

Good day, and welcome to the Coppin Corporation's second quarter 2021 earnings call. Today's conference is being recorded. At this time, I would like to turn the conference over to Richard Snyder. Please go ahead, sir.

Thank you, operator. Good morning and welcome, everyone, and thank you for joining us this morning. John will begin today's call with a discussion of our strategy, technology, and markets. I will then go through the second quarter results at a high level. John will conclude our prepared remarks and they'll be happy to take your questions. I would like to remind everyone during today's call taking place on Tuesday, August 3rd, 2021, we will be making forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These statements are based on the company's current expectations, projections, beliefs, and estimates, and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those forward-looking statements. Potential risks include, but are not limited to, demand for our progress, operating results for our subsidiaries, market conditions, and other factors discussed in our most recent annual report, Form 10-K, and other documents filed with the Securities and Exchange Commission. The company undertakes no obligation to update the forward-looking statements during today's call. And with that, I'll turn it over to John.

Thank you, Rich. Good morning. And thank you for joining us to discuss our second quarter results. I first want to start by expressing our hope that you and your families continue to stay safe. We continue to see growing demand for our products across our key business segments, including defense, industrial, and consumer. In our defense business, we remain on track on many development programs. Two new programs entered low-rate initial production during our second quarter. And a third expected to enter low-rate production in the fourth quarter. During this quarter, We announced an additional $1.6 million follow-up order for a high-brightness digital crystal display for the F-35 Joint Strike Fighter program. With deliveries scheduled through the second quarter of 2022. Additional orders are expected throughout the lifetime of this program. For the FWSI thermal weapons site program, there are customer requests. We reduce shipments of our product during the quarter, while our customer is making system and production enhancements. We are working closely with our customer, but expect the lower shipment rate to continue during the third quarter. We expect to increase the rate and make up some of the shortfall in the fourth quarter. Despite the short-term slowdown, there's no change in the overall profile of the program, and demand remains very strong. I would like to stress that there is no change in the overall outlook and the profile of the program. And in fact, we expect soon to receive a significant follow-up order for this program. It will continue to deliver into 2022. Also, we are pleased with strong demand from our enterprise customers in Q2 and expect the momentum to continue. As discussed with our previous call, we have continued to increase our R&D activities as we see great opportunities in the coming augmented and virtual reality space. In fact, our customer fund R&D revenue increased approximately 60% year over year. as a result of growing interest in our next generation of displays and display technologies. We achieved several very important display technology advancements in the quarter, including the world's first 35,000-nit HDR green OLED microdisplay, This leading-edge display can incorporate our dual-stack OLED structure for ultra-high brightness and unique pending pixel structure backplane architecture for super high dynamic range operation. This is a big milestone, not just for coping, but for AR and VR applications across all sectors. Our new HDR green OLED micro-display is ideal for use in conditions ranging from very dark night to very bright daylight. In addition, we recently announced the successful development of all plastic pancake optics for VR, AR, and MR applications. This is another exciting achievement for Coping. It's believed to be the first all-plastic pancake optics in the world. While the pancake optics are much thinner than conventional optics, it is important to note that previous pancake optics need at least one spherical glass lens to avoid image artifacts caused by biofringes of currently available plastic material. A new pattern painting or plastic pancake optics with a spherical lens is sufficiently lighter than pancake glass optics while also providing a better image quality at a much lower cost. For years, bulky and heavy headset and hindered consumer adoption AR and VR glasses. Our new plastic pancake optics enable an entirely new avenue for the industry to design, manufacture, and manufacture stylish, super light, compact VR, AR, and MR high-performance smart glasses and Essex that we believe consumers will want to have.