Kopin Corporation

Good morning, everyone, and welcome to the Copen Corporation Second Quarter 2025 Earnings Call. Please note this event is being recorded. At this time, I would like to turn the conference over to Brian Pranovo, Investor Relations for Copen.

Thank you. Good morning, everyone. Before we get started, I'd like to remind everyone that today's call taking place on August 12th 2025 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 products, operating results of our subsidiaries, market conditions, and other factors discussed in our most recent annual report on Form 10-K as amended and other documents filed with the Securities and Exchange Commission. Although the company believes that the assumptions underlying these statements are reasonable, any of them can be proven inaccurate and there can be no assurances that the results will be realized. The company undertakes no obligation to update the forward-looking statements made during today's call. In addition, references may be made to certain documents non-generally accepted accounting principles, or non-GAAP measures for which you should refer to the appropriate disclaimers and reconciliation in the company's SEC filings and press releases. Copen Corporation's Chief Executive Officer, Michael Murray, will begin today's call with an overview of Copen's progress within the company's strategy. Following Michael, Copen's CFO, Rich Snyder, will review the company's second quarter 2025 financial results. I would now like to turn the conference over to Michael Murray. Michael?

Thank you, Brian. Good morning to everyone and welcome to our second quarter earnings call. It's been quite a busy and transformational time at Copen, and we believe some of our best and most exciting opportunities still lay ahead of us. We recently announced the hiring of Eric Manns as our new CFO, who will officially start on September 2nd. Eric joins us from Allegro Microsystems, where he spent the last 27 years in various financial and accounting and leadership roles. We're excited to have Eric on board as we believe these are truly transformative times here at Copen. As I hope you all saw yesterday, we announced a $15 million strategic investment from Theon International, a global developer and manufacturer of advanced thermal imaging and night vision systems for global defense and thermal imaging markets. Due to ongoing military conflicts, rising uncertainty, and the approved increase in European defense spending, COPEN and Theon decided that this strategic partnership can drive increased revenue, market share, and technology developments in Europe, Southeast Asia, and with NATO allies specifically. Furthermore, there are large pursuits here in the United States that may make sense for both companies to pursue as well. With Theon's expertise in night vision sensors and systems, coupled with COPEN's capabilities in all four types of micro displays and optical assemblies, we collectively believe the combination will bring the most advanced technology to market sooner, at a lower price, and within sovereign content required to be successful together on much larger pursuits and contracts globally. It has been reported that the European nations and NATO allies will spend over a trillion in defense spending which makes this region critical for our growth and ambitions. FION is a market maker, a leading defense firm, and is one of the fastest growing companies in Europe for the second year in a row. FION, which is publicly traded on the Amsterdam Stock Exchange, focuses on developing and delivering mission-critical thermal weapon sites, night vision, and sensing systems to many countries in Europe, Southeast Asia, and NATO. Their growth has been astounding with over 50% compound annual growth rate in the last past six years, resulting in revenues of over $381 million last year. Now, as the only manufacturer in the United States of four types of micro displays, we feel we are in a very unique position to capitalize on macro trends across the globe and grow our business, and we believe the investment by Theon will further help us achieve this. Part of the investment will go towards our facility in Dalgety Bay, Scotland. This facility supports manufacturing and sales for Europe, Southeast Asia, and now NATO-specific countries, enabling collaborative innovations across key global regions. COPEN and Theon will have a non-exclusive licensing and development agreement for several of our technologies and products. The second part of the investment by Theon is in the form of preferred shares. These shares will have a fixed conversion price of $3 and a forced conversion price of $4.50 if the stock trades above that level for 10 days in a 30-day window. With this agreement, we expect sales with Theon to commence in the fourth quarter of this year. Copen and Theon have developed and agreed upon an aggressive three-year strategic plan for revenue, technology sharing, and growth. which makes both companies stronger, more profitable, and competitive together. Importantly, our firms will be able to partner together and compete on much larger projects and contracts higher up the value chain. Global defense contractors and integrators are looking for more than simple commodity products to plug into systems. They want application-specific solutions tailored to their individual needs and products. Now turning to the second quarter of 2025, specifically, we did not meet our expectations. This was largely the result of government budget uncertainty and subsequent customer confidence that was reduced, which created a sales vacuum in the second quarter. However, we are very pleased to report that the order book is recovering and many of those orders will be fulfilled in the third quarter. As an example, standard products for 3D AOI and training and simulation devices were delayed and will be recognized in third quarter as well as fourth quarter. Additionally, we had several millions of orders expected in second quarter, which we expect to announce shortly. And we expect to announce several significant research and development awards shortly as well. Although there were some roadblocks to recognizing revenue in the second quarter, We continue to make substantial progress for the long-term health and growth of the company. Within the quarter, we introduced our first phase of optical inspection, which is now up and running. We expect to introduce the second phase by the end of this year, which we believe will save the company significant operating expenses in the second half of 2025, while increasing our overall throughput and increasing our inspection quality as well. We are holding our quality rates at a much higher level, more consistent and more predictable levels as well. Recently, we received the best overall quality level from all three of our top customers since I joined Copen almost three years ago. On the technology front, Copen's latest AI enabled neural display hardware prototype built on an OLED technology with micro LED capability now enables eye image capture, gaze tracking and dynamic controls This breakthrough delivers valuable insights into the requirements of custom optics, and we continue to focus on future developments. Key discoveries address design challenges and optimize performance, propelling ongoing innovation. As Copen continues refining this design, the next steps will be to focus on enhancing silicon architectures to improve color accuracy, brightness, and sensor sensitivity. These upgrades will further bolster the neural displays capability and propel development toward the next generation of innovative display technology. We demonstrated the technology for the first time in a wearable headset live at the AWE show in Long Beach and during our very successful technology roadshow in June. During the second quarter, COPEN received a contract to illustrate what technical requirements a color micro-LED micro-display will be needed for the next-generation soldier vision systems, including head-mounted see-through displays, handheld devices, platform-mounted systems, and advanced weapon systems like the next-generation squad weapon fire. The soldier display trade study focuses on identifying ultra-bright micro-LED trade-offs, to optimize see-through XR applications, prioritizing daytime readable displays that are brighter, more efficient, and capable of delivering clear visibility across diverse lighting conditions from intense daylight to overcast starlight. Our research into monochrome and color micro-LED displays for aviation, automotive, and soldier systems continue and we expect to advance the monochrome display into full-rate production soon while we continue to advance our color micro-LED strategy for aviation, land, and soldier-worn systems as well. Through the U.S. Department of Defense, we are excited about several opportunities to supply our existing programs across the military. We continue to supply several types of advanced thermal weapon sites, and we are dedicating more focus on armored vehicles, as well as within the advancements of recently announced research and development into the next generation of electric armored vehicle programs. The largest of these opportunities is clearly IVAS, which is now referred to as Soldier-Born Mission Command, or SBMC. This $22 billion Army program was recently novated by Andrel. SBMC is an all-encompassing program that has software, hardware, and networking elements. As warfare evolves and increases in complexity, having tools that deliver the right information quickly and intuitively become increasingly urgent. We expect prime contractors to be selected soon for this technology upgrade to the existing IBAS platform, which we believe will continue until SBMC becomes available. Along with the prime contractor selections, we expect announcements and awards for critical technology acquisition areas where COPEN fits into to be announced shortly as well. Given the long-term nature of many of the existing programs and the contract wins so far for 2025, our current pipeline is very strong and growing. As a reminder, several of our programs have congressional budget demands through 2030. And several of the program contracts we have are indefinite demand and indefinite quantity, or IDIQs, which allow for even greater revenue demands than we currently have on order. Now, increasing geopolitical tensions mean defense spending is unlikely to decrease and the way wars are fought is evolving. Soldiers in the field are tasked with needing more information sooner to assess threat levels and how to make the best decisions for themselves and their teams. Our products and technology can help make our soldiers and the soldiers of our allies safer, meaning more men and women in uniform make it home safe. I am truly, we are truly excited about yesterday's announcement with Theon and what this means for the future of Copen as a player on the global scale. Furthermore, Theon has announced other key investments and acquisitions that will also help Copen and Theon be successful in our new ambitions and business plans. I'll now turn the call over to our CFO, Rich Snyder, to review our results from the second quarter and full year in further detail.