This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
Operator
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.
Richard Snyder
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.
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.
Rich
We have received strong interest from the market.
John
As in Q2 also, we announced a multi-year development agreement with a leading global electronic company for full-color LED micro-displays on silicon. And expect to demonstrate a one-inch diagonal, full color, 2K by 2K LED micro-display within 24 months. As a reminder, LED micro-displays have a potential for super high brightness, low power consumption, high contrast, and wide viewing angle, which are all important features for many applications, including see-through augmented reality and mixed reality applications. We're excited to collaborate with our partner, which already has achieved some important milestones in color LED micro-displays. It's also important to note that this collaboration will expand our micro-display portfolio, making us the world's only provider of a complete suite of LCD, L-COS, OLED, and LED micro-display on silicon. A breadth of technology and product capability for coping in the unique position of being able to provide our customers solutions that best fit their product and application needs. I would also like to address my recent participation in the three-part webinar series, ARVR, the paradigm shift to smart glasses start now, which drew over 500 participants. during the LIFE event. Many homes are actively involved in the next-generation smart glasses and headsets. During the three-part series, we discussed the past, covering the initial efforts to create AR-VR solutions. The present, addressing the current state of the art technologies. and the future, which address the future of AI VR smart glasses, offering a roadmap to successful product developments. All three segments have active and engaged participation from the attendees and are available on Coping's website at www.coping.com.
Rich
We are pleased and committed to our strategy.
John
In short, while we maintain our strong momentum in our growing revenue generating businesses in defense and enterprise sectors, we continue aggressively to innovate and advance our technology for what we see as a growing wave of consumer AR, VR, MR products and applications. Many of you may have followed the increasing discussion of the transformational arrival of the metaverse. Metaverse definition is still not too well defined. However, in my view, as we discussed in my webinar, It is composed of AR, VR hardware, smart glasses, and platform and application software, providing a unique, exciting user experience to consumers. This radical transformation will happen, and it's already happening in defense and enterprise sectors, and will soon arrive in the consumer sector. As with stress, have stress, the AI, VR, hardware will come first. The technology advances and market conditions are very favorable. And coping is very well positioned to capitalize. Now we'll turn the call over to Rich to discuss the financial detail of the quarter. Thank you, John.
Richard Snyder
Turning to our financial results, total revenues for the second quarter ended June 26, 2021, for $9.9 million, compared with $8.8 million for the second quarter of June 27, 2020, a 12% increase year over year. Product revenues for the second quarter ended June 26, 2021, for $6.9 million, compared with $6.7 million for the second quarter of June ended 27, 2020. Our defense product revenues for the second quarter ended June 26, 2021, with $3.8 million, compared with $4.5 million for the second quarter ended June 27, 2020. As John previously discussed, during the three months ended June 26, 2020, we reduced shipments of our thermal weapon-type systems to a customer who is making system and production enhancements. We expect the lower shipment rate to continue during the third fiscal quarter and then increase in the fourth quarter of 2021. Whether we can make up the revenues during the remainder of 2021 is dependent on how quickly the customer completes their process. Our industrial product revenues for the second quarter ended June 26, 2020 were $2.6 million compared with $1.4 million for the second quarter ended June 27, 2020, an approximate 86% increase on the strength of the sale of products used for 3D metrology and headsets used for applications in manufacturing distribution. partly offset by a decline in public safety wearable headsets. Project research, development, and other revenues were $3 million for the second quarter ended June 26, 2020, compared with $12.1 million for the second quarter ended June 27, 2020, primarily due to an increase in funding for U.S. defense programs. Cost of product sold for the second quarter ended June 26, 2020 were $6 million compared to $4.8 million for the second quarter ended June 27, 2020. The increase in product revenues as a percentage of net product revenues for the three months ended June 26, 2020 as compared to three months ended June 27, 2020 was primarily to lower manufacturing efficiencies driven by the lower FWFI volumes. Regarding the global shortage of semiconductor components and production capacities affecting many industries, while we have in some cases had to find alternatives of sources, we have not experienced any shortage issues during the first six months of 2021. In some cases, we have seen some price increases. The shortage of semiconductor components is a very dynamic situation, and we continue to work the issue it presents. Research and development expenses for the second quarter of 2021 were $3.9 million compared to $2.2 million for the second quarter of 2020, a 75% increase year-over-year. R&D expenses for the three months ended 26-21 increased as compared to three months ended June 27, 2020, primarily due to an increased spending on U.S.-funded development programs and internal R&D expenses for OLED development. Selling, general, and administrative expenses were $4 million for the second quarter of 21 compared with $2.9 million for the second quarter of 2020. Excluding the non-cash stock-based compensation costs, SG&A expenses were $3.7 million for the second quarter of 21 compared with $2.8 million for the second quarter of 2020, a 30% increase. The increase in SG&A excluding non-cash stock compensation costs was due to an increase in other compensation costs and bad debt expense. Other income expense was income of approximately $249,000 for the second quarter of 2021 compared with $6,000 of expense for the second quarter of 2020. During the three months ended June 26, 2021, we recorded $100,000 of foreign currency gains as compared to $10,000 of foreign currency gains for the three months ended June 27, 2020. Turning to the bottom line, our net loss attributable to the controlling interest for the second quarter of 2021 was $3.8 million, or $0.04 per share, compared with net loss to controlling interest of $1.1 million, or $0.01 per share, for the second quarter of 2020. Non-GAAP net loss attributable to controlling interest for the second quarter of 2021 was $3.6 million, or, again, $0.04 per share, compared with non-GAAP net loss to the controlling interest of $1 million, or $0.01 per share, for the second quarter of 2020. Copen's cash and marketable securities were approximately $30.7 million at June 26, 2021, as compared to $20.7 million at December 26, 2020. Net cash used in operating activities for the second quarter ended June 26, 2021, was approximately $5.4 million. During the three months ended June 26, 2020, we sold 92,335 shares of our stock under our ATM program, for gross proceeds of approximately $832,000 before deducting expenses of us, paid by us of $24,000. For the six months ended June 26, 2020, we sold 2,496,690 shares for gross proceeds of approximately $16.8 million before deducting broker expenses paid by us of approximately $500,000 pursuant to our existing ATM and previous ATM agreements. On June 28, 2021, the first day of our fiscal third quarter, we sold 600,000 shares of common stock for gross proceeds of $4.8 million before deducting broker expenses paid by us of approximately $145,000 pursuant to our existing ATM program. Second quarter amounts for depreciation and stock compensation expense are attached in the table into Q2 press release. The amounts discussed above are current estimates and listeners should review our Form 10Q for the second quarter 2021 for any possible changes and, of course, additional disclosures. And with that operating, we'll take questions.
Operator
Thank you. If you would like to ask a question, please signal by pressing star 1 on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, that's star one to ask a question. We'll now take our first question. It comes from Glenn Maxon of Ladenburg-Talman. Please go ahead.
Glenn Maxon
Yeah, hi, thanks for taking the questions. So just as far as the delays go for this quarter and I guess next, can you give us some sense just a little more color on kind of what kind of changes your end customer had to make. I guess trying to get at, you know, how confident you are or what gives you the confidence that there's going to be a bounce back in the fourth quarter on that and just some color on, you know, the degree of bounce back, whether or not, you know, you think you can make up a majority of the revenue lost or if you need to or if there'll be some further push out at 22.
Richard Snyder
Sure. So, you know, first of all, this is a very long-running program. This is going to go for multiple years. And this is not unusual that now they've made some number of full units and they're looking to improve yield. You keep in mind a lot of the government contracts today are firm fixed price. And so to the extent that you can make yield improvements, drive costs down, that all falls to the bottom line. And we share in that. And so they've come through with some ideas for yield improvement on the overall system. They slowed shipments down as they implemented those improvements. It requires us to do some engineering to work with them to make sure there's no downstream effects, and that's what we're doing. And so how fast we can make it up, you know, we've talked to the customer. They are very eager to make it up themselves. It affects their revenues, too. So our interests and their interests are aligned. So it's just a matter of going through and making sure all the testing gets done properly. and that there are, as we mentioned, no downstream effects. And then once that happens, we hopefully can turn this thing on. And that will just be a matter of how many weeks are left and how much volume we can get out of the facility over the rest of the quarter. We're optimistic we can put a pretty good dent in the fourth quarter if we can get this thing turned on soon.
Glenn Maxon
Okay, great. And as far as the new programs that went into low-rate initial production, can you talk about
Richard Snyder
uh any specifics about what exactly uh programs those are and uh and just get a sense of how it will ramp um in the back half and into next year yeah so it's a weapon site it's an avionic product um as soon as we get clearance from the customer you know maybe hopefully we can give you a little more color exactly who they are and what the programs are um so we we did recognize product revenues uh initial product revenues in the quarter um
Glenn Maxon
and hopefully it will just continue on again this is initial low rate production so there is still engineering going on as as these units are being shipped so it hasn't gone to full rate production which will happen next year thanks rich and so the uh you know there's a gross margin uh was a little softer and i guess that's a combination of those two factors you know in the in the early stages obviously the the uh initial production doesn't have the same margin as something in full production, and obviously the downtick in the weapons sites. So being that that will continue in Q3, should we expect kind of similar margins in Q3 and then perhaps starting to improve in Q4 and beyond? Is that a good way to think about the model?
Rich
Yes.
Glenn Maxon
Great. And then I just had a question about the new LED micro display, you talked about kind of a global leader there as the partner. You know, maybe I don't know if Rich John is the best person to talk about it, but just love to get more insight into how big that could be down the road and just, you know, any other color on the upside that opportunity presents would be great.
John
Yeah, Glenn, this is Jonathan. This is a very interesting program, a very exciting program. As you well know, we obviously have been working on LCDs and LCOs and recently really focused on micro-LED. But micro-LED has peculiar features. It can be very, very bright. In some way, people think it's the ultimate display. If you can do the micro-LED, then the brightness is so high, it can be so efficient that they'd be very, very good for see-through AR optics, optical systems. As you well know, the augmented reality optical see-through systems, in many ways, is the ultimate dream for everybody. So this is it. This is the ultimate dream. But technology is very difficult. We actually pioneered and invented this process on silicon in 1991. With Zappa, Zappa actually wanted it from day one. Just going back, 1991, they funded us to do that. We stopped it because we don't think it can do a color very well. And now we're reactivating the whole process. It's very well funded from customers. And we have a very big company. We already disclosed it. It's from Japan. It's a global company. consumer and consumer is enterprise, consumer both type of company. And we're very excited. I think in two years, we'll have that one-inch, 2K by 2K, full color. If we achieve that, that will be the world's leading display. There's no such ambitious program yet, and we'll be the first one. We provide the backplane design. It's a very unique design that we Right, that's helpful.
Rich
Okay, that's it for me. Thanks, guys.
Operator
Our next question is from Kevin Dede of HC Wainwright. Please go ahead.
Kevin Dede
Good morning, gentlemen. Thank you for taking my questions. John, just to go back on to the looking at the, you know, Glenn brought up the LED display. You mentioned a consumer company helping you develop that two-year program. What exactly are the design requirements? The full display, do you have to include optics in that? Can you give us a little more insight on what your deliverables are?
John
It's a very good question, Kevin. Thank you for asking the question. For this particular project, it's a focus on just display, full-color, one-inch, 2K by 2K display, not the end-user system. As you well know, it's a very good question because a lot of just a display alone will solve the problem of the AR, VR, consumer application. It is not true. Optics is just as important. You need very small optics. You're going to buy an image or display maybe 30,000 times by the optics and give you a very clear image. That's why the pancake optics. Pancake optics, that is actually our trademark. We actually use pancake optics in the defense industry for quite a while. because it does make it a very high-performance optics. But in those cases, they usually have glass in there, glass lens, which is heavy. It's okay for the soldiers, but it's not okay for consumers. So there's all plastic optics that go with our very high-performance display. Together, we will provide a whole unit to people. So, yeah, for the...
Kevin Dede
only we have individual separate programs optics okay so that was going to be my next question John thanks for leading me in so the this optics development is the plastic cast number one is the development they're sponsored by a consumer company or was this something that Copen endeavor to solve on its own. And could you give us a little insight on how you're pairing it with both this LED development and the OLED development in AR and VR?
John
Yes. Thank you for asking the question. I think for any AR, VR systems, you need a display, and you need optics, and you need a very, very well as a well-designed package assembly. And we learned this, and we have been doing this for defense and enterprise world. In fact, for defense world, for instance, if you're on a gun site, we have delivered hundreds of thousands of units now to the defense industry. It's not just display, but you need the optics, and you need the packaging. How do you package it so that you have dust-free and automatically sealed? And with those know-hows, coping is accumulating a lot. And therefore, when we start looking at the consumer world, we recognize not only at the very, very high-performance display, you need a very thin, very well-imaged optics. And pancake optics, remember, in the defense industry, we use very different types of optics. We actually provide optics to our customers. So we pick pancake as the one for consumers. And then we also try to work with a vendor, a material company, and we developed a special material that has no biofringency effect. And therefore, the whole plastic optics is unique. And we're patterning like crazy. I think we have already filed three patterns on it, and we're filing more. And I think with this, a very lightweight, very stylish, The amount of weight saving as you mentioned is significant. I think it's at least more than 10 grams per eye. So you have very significant savings as well as it could make a better image quality to your eyes. Something that people dream about, nobody can crack the nut except that we did.
Kevin Dede
John, was it really a drive in trying to shave weight, or is it also a safety factor?
John
We never mentioned safety factor. In fact, it is also a safety factor. That's absolutely true. The glass, however, is pretty strong, usually, unless you have some strange effect. But it is really actually everything, cost, size, weight, image quality, and now, of course, thank you, Kevin, you mentioned it, it's certainly safer.
Kevin Dede
Okay. So just getting back to sort of my thinking on this, John, was this something that you wanted to take your team to develop in addressing all those things? Or do you have a company that's helping you develop it and help sponsoring some of this development work?
John
The plastic optics is totally internally funded. We consider that plastic optics either we license it or we will be a coping product. So because our technology optics is so advanced, We decided to do that ourselves. Now, of course, we're partners. We're partners to develop the material. We're certainly not a chemical company. So we designed it. We have our own software design lens, and we get people to build it, to mold it, and we deliver to our customers the final product.
Kevin Dede
Okay. Do you see it... Do you see this development, John, transferring to some of the other programs that you have, like with the Scott Fire Helmet and those types of environments where, you know, maybe plastic hasn't worked so well before?
John
This is a very good question. We are so, if I have to say, we have a lot of strong interest after we announced it. And there's range from enterprise all the way to consumer. I must say, the consumer interest are more extreme. Most everybody who's working on consumer type of assets would like to try to drive this type of optics. Because it seems on paper, it is the ultimate display.
Rich
Okay, yeah, yeah, good.
Kevin Dede
Yeah. So that sort of gets me to another line of questioning, John. Help me understand how Copen is looking at LED versus OLED. I just want to understand where you see – I mean, obviously you've mentioned that LED becomes the ultimate – in solving see-through AR, but I'm wondering how you see OLED embracing VR, maybe nearer term. Or maybe you could just help me make sure that I understand the way that you're thinking about it.
John
Yeah, I think in my webinar, I tried to outline. Of course, nobody knows exactly how the future will hold. My feeling, our feeling is for VR applications, consumer VR applications, micro-OLED is good enough. Micro-OLED, it can give you the low-cost, high brightness, enough brightness, and the resolution you need. And we, of course, continue to try and improve the brightness of the micro-OLED. So as you well know, our 35,000 nits is a world record. We're using dual-stack. So that is one area. But if we want to go anything over to about 100,000 nits, we feel that micro-audit probably will not achieve, certainly not in the next 5 to 10 years. So that's why micro-LED comes in. Now, if you really need AR application where you need maybe anywhere between 50,000 to 100,000 nits or higher, I think micro-LED will come in. The technology is still quite immature right now. I think we're talking about three to five years away for micro-LED to begin to come into the market. So right now, the next five years, micro-LED for VR and some AR applications. And we're making great progress there, too. So at the end, our offices model is very simple. We provide the optical solutions, the modules, the optics, the displays, the packaging for AR, VR, MR. We do not make the end-user systems. We license it to people who make end-user systems. Oftentimes, the equity is in there. I mean, as you well know, we have made a few arrangement already, and we're going to continue to make arrangements licensing to people who make end-user systems. But we do not sell and market end-user systems in COVID.
Kevin Dede
Okay. Another question on LED, if you'll allow me, John, please. Can you categorize the IP that you're going to lend to the Japanese company? and what you'll be able to control versus the IP that I still believe you're working with a company in China in the development of micro-LED. So could you just sort of frame those two deals for us, please?
John
Yes. As you all know, we announced it several times, the initial work of LED on silicon actually was patented by myself and people in Coping many years ago. Unfortunately, the three patents that we filed and issued to us expired two years ago. Okay, the one, the fundamental patent expired two years ago. So, however, we do have improved patents and then what we have is we actually designed the backplane, the silicon. As you well know, displays are becoming display-on-chip. It's really an IC chip with LCD or OLED or maybe, in the case, LED on top of the silicon chip. So to drive the LED micro-display, it needs a different type of architecture than micro-OLED. So we designed that with Palindex, and such architecture is now used Either for monochrome, which is the J-Bird in China, is putting their LED array on our backplane. So our backplane is ours, okay? And then the display itself, when it comes back to us, is coping. Now using similar type of backplane, we actually work with the Japanese global company to put LED array on us, and they'll power up. You will have display, micro LED display, and ship it back to us. So we control the backlight. And we design it, especially with unique design. And we actually have a user product. We have a display product.
Kevin Dede
Okay. Okay. So it's fair to assume.
John
Deepers are monochromes. No, not color. Okay, monochrome.
Kevin Dede
Right. The Japanese one's color. Full color, yeah. Okay. Okay. And then you'll, in working with both those companies, you'll preserve the IP and the design of the backplane, and that won't be shared.
John
Yeah. In many ways, display right now, silicon, the brain is in the silicon. Silicon is the brain. and now you put different materials and make it emit different colors. There are different cases, LCD, OLED, or for that matter, LED. But the brain is in the silicon, and we believe silicon is the driving force for all of those displays.
Kevin Dede
Okay. Thank you. You gentlemen mentioned avionics as sort of the umbrella for the three programs going Well, I guess two are in LRIP now. I just want to clarify, are all three in avionics? Or help me make sure that I have that in my little brain correctly.
Richard Snyder
You have it incorrectly. So I said one of them is a scope and one is an avionics. Are the two that are in LRIP now?
Kevin Dede
Okay. Okay. And the third that's going to LRIP expected in the December quarter, can you speak to that one, Rich, or no?
spk05
No, we'll discuss that in the fourth quarter.
Rich
In due course. Very well. Okay.
Kevin Dede
Can you clarify how many – customers are contributing to research and development revenue with specific focus on AR and VR?
spk05
Well, almost all our applications are AR and VR.
Kevin Dede
Yeah, I'm sorry. Let me clarify. Was specific intention to address the consumer market?
Richard Snyder
Well, that's a hard question to answer, Kevin, because if you think about it, I mean, everything that we do, particularly in the military, we have an eye towards the consumer. You know, that's the whole idea, that you develop in the military, moves to industrial, and then ultimately ends up in the consumer.
Kevin Dede
No, I understand, Rich. I understand. But as I try to interpret what you've been saying, You do have particular customers from the consumer side funding development, and I was just wondering how many of those customers you had.
John
It's a very good question. Maybe we could step back. It's very difficult to answer, too, but I'm going to answer it by answering it this way. As you all know, there are companies who make Google Glass, and in fact, we are a supplier of Google Glass. It could be a consumer. In fact, it was a consumer. Then it turned to enterprise. Maybe it goes back to consumer again. In the case of Microsoft HoloLens, it was a consumer. Then it goes to defense. Maybe it goes back to enterprise again. So it's very hard. I think these three regions are right. All our customers kind of... kind of moving from A to B to C, C back to B, to A again. So we are having quite a few customers supporting us for applications which eventually could be consumer. Maybe it is consumer again, but at the beginning, maybe they will go to enterprise. So we have a lot of – we have very active consumer support right now, and we're very glad they support us.
Kevin Dede
Okay, one more question, I'll turn the floor over. I apologize, gentlemen, but thank you so much for indulging me. What's the view on the ATM? If I understand correctly, you did sell 600,000 shares already this quarter. I'm just wondering what's the cash balance you're targeting and how you think we should think about that?
Operator
uh we're not really going to disclose our our capital raising plans on the phone okay um thank you gentlemen i appreciate it thank you kevin once again if you would like to ask a question please signal by pressing star one We'll now take our next question. It comes from Jeff Bernstein of Cohen. Please go ahead.
kevin
Yeah. Hi, guys. Just a couple of quick questions. I know you guys have a JV with Lenovo. Not sure exactly what's come out of that, but they've started to sort of pre-advertise something called their Think Reality A3. And I'm wondering if that's under that program or if that's something else with a different vendor. Yeah.
John
There's a different program. We are working with Lenovo NV, which is a joint venture of Lenovo with several other companies in China. The one you mentioned actually came from a Lenovo parent.
kevin
Gotcha. Okay. And then there was strength in the industrial segment. Can you just differentiate for us, was that from the 3D machine vision side, the fourth dimension L-cost piece, or was that real wear?
spk05
Both. Yeah, the majority was the FDD.
John
Yeah, the 3D metrology, which is, you're right, the FDD, that business, as well, we have been working with it for the last four or five years, is really taking off right now. the industry now recognizes, maybe because of a pandemic or not, that many of the circuit boards, which are always 2D, now moving to 3D, much higher packaging densities and thinner. And 3D metrology is perfect in the manufacturing sector for 3D analysis of circuit boards. So that business is really taking off, and we're very excited about it. I think it's going to continue as all the factories start converting. We have about 40% market share. Our other competitors is TI. TI using DLP. They also own about 40% market share.
Rich
That's great. Thank you. Our next question comes from Craig Rose of Axiom Asset Management.
Craig Rose
Hello, John. Could you help us understand... Well, we know RealWear and Solos aren't under your umbrella anymore, but could you explain how we benefit from their success? And maybe you could tell us your perception of...
John
real where's market share maybe in the marketplace okay I will answer submit some of the some some of the current content here this is a good quote very good question I didn't look at our strategy as well now in the early years we are in order to promote our Our component is display optics and assembly, the modules, the whole optical modules. To promote our optical module, we actually create systems, reference systems, in some ways very close to product systems. During the process, we actually come out with a lot of technology and the whole assets. We decided to license those ideas and actually help those companies to make those headsets. So RealWear is one of the cases. They license our headset, which is actually GoldenEye. We call it GoldenEye. And we add equity on it, and they also buy components, and they pay royalties. So there are three components there, royalties, equities, and buy components. And RealWear is doing very well. As you will know, I would say there's really an enterprise world for headsets. I would say they're worth leading now. And we are growing with them. So we're very happy with that. We're going to have three ways to make our return of our technology with license technology to them. The second case was Solos, the same way. Solos, again, with license and their transfer of technology to them. The product is coming out. They came out once, version one last year during the pandemic, and they sold out the first round. So the second round of the product coming out, in fact, in August, this year, this month. So again, we have equity there. We have loyalty there. And so it's very good. And then we have a third one, which we just announced about six months ago. We were designing and helping them build a headset for surgery. It's a company in San Diego. That company is actually starting to do pretty well. They got funded by a very big medical device company. I think this particular strategy will continue. I think we will have more of those very interesting events. What people want is not just wanting our optical modules. They actually learned that we have so much know-how building headsets for them for special use, and that's what we do. We get equities, get products, get royalties, and I think this is another segment of our business strategy which is not well understood. I think this is going to be a very lucrative and successful strategy.
Rich
Thank you, John.
Operator
It appears we have no further questions at this time. I'd like to turn the call back to John Phan for any additional comments or closing remarks.
John
Thank you for joining us this quarter, and we look forward to seeing you in the next quarter. Thank you.
Operator
This concludes today's call. Thank you for your participation. You may now disconnect.
Disclaimer