Kopin Corporation

Good morning, everyone, and welcome to the Copin Corporation first quarter 2026 earnings conference call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions. This conference is being recorded today, and the earnings press release accompanying this conference call was issued earlier today. Before we get started, I'd like to remind everyone that during today's call, 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 cause actual results to differ materially from those forward-looking statements. Potential risks include, but are not limited to, demand for our products, operating conditions, Results of our subsidiaries, market conditions, and other factors discussed in our most recent annual report on Form 10-K 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. Copen Corporation's Chief Executive Officer, Michael Murray, will begin today's call with an overview of Copen's strategic progress and business developments during the first quarter and the period that has followed. Following Michael, Copen's CFO, Eric Manns, will review the company's first quarter 2026 financial results. I would now like to turn the conference over to Michael Murray. Michael, the floor is yours.

Thank you very much, operator, and good morning to everyone, and welcome to our first quarter 2026 earnings call. The first quarter and subsequent weeks marks one of the most exciting stretches in Copen's history. We continue to grow our defense order book across the United States and Europe. We also advanced our micro LED technology platforms and announced a strategic collaboration with Fabric AI, that we believe meaningfully expands the long-term opportunity set and sustainable acceleration of revenue growth for Copen. Today, I'll walk you through three areas. First, the Fabric AI collaboration and the launch of our jointly developed neural IO optical interconnect technology for AI infrastructure. Second, our continued momentum across all global defense markets. including new orders, our entry into first-person viewer drone technologies, and the major thermal imaging follow-on contract awarded subsequent to quarter end. And third, our strategic investments, including bringing OLED micro-display manufacturing in-house at our Westboro headquarter facility here in the United States. And how we're positioning the defense business for the long-term exponential and sustainable revenue growth at higher profit margins. First, let me start with the most consequential announcement we've made this year. Recently, we announced a strategic collaboration with Fabric AI, an AI infrastructure development company, building the advanced core capabilities for AI factories that power large-scale artificial intelligence workloads. Together, Copen and Fabric AI are joining development of a new product family we call Neural I.O. that is designed to dramatically increase bandwidth, speeds, decrease power consumption, and importantly lower overall operational costs of currently operating data centers and new data centers alike. Neural I.O. is built on Copen's proprietary micro LED technology and our patented bidirectional neural display architecture. What we have done is repurposed programmable micro LED pixels as ultra-high-speed optical transceivers, devices that move data at extremely high bandwidth using photons of light instead of electrons traveling through copper wires. This matters for one simple reason. Today, data center equipment and GPUs relies on dense copper interconnections to talk to each other. And those copper interconnections are now the binding constraint on AI data center performance and power consumption. AI factories are running into the limits of what copper can do, both in terms of bandwidth and in terms of the energy required to push data and cool the systems. Neural I.O. is designed to break through those limits. By using each micro LED pixel as a high speed optical transmitter, we are designing chip to chip, board to board, and rack to rack communications that target the same functional outcome as copper. while consuming a fraction of the power. To use the words of Matt Kimball, principal analyst at Moore Insights and Strategy, quote, the ability to enable connectivity that delivers the full throughput of an accelerator without taxing the power budget has been a persistent challenge in the industry. And Copen and Fabric AI's neural IO built on micro LED technology presents a unique and compelling value proposition. Moreover, this marks a completely new era in data transmission, bandwidth, and designing of electronic systems." End quote. Several recent articles estimate that the AI infrastructure optical transceiver market is expected to reach between $69 to $90 billion by 2030. Of that total spending, the United States Department of Defense and Government Systems is the second largest consumer of this technology behind the traditional hyperscaler markets. This is why Copen and Fabric AI decided to focus on each of these individual markets separately. This relationship was forged with a clear intent of relentless focus on addressing this massive market in the right ways, with the right people, to promote exponential and profitable growth with the proper resources required. Copen will support the absolute and clear requirements of the United States government and Department of War for U.S. production of AI chips and chipsets. With our U.S.-based micro-LED production line, we are installing as part of our Industrial-Based Analysis and Sustainment Act Award, or IBAS Award. This custom-designed production line will support the neural I.O. family of chipsets for the United States Department of War and government customers. Fabric AI chipsets and our new color micro-LED products for programs like Soldier Born Mission Command and many others will also be produced on this production line, and I will expand on that more later. Under our agreement with Fabric AI, and in addition to the $15 million initial purchase order to fund the demonstrable chipset, which we expect to be completed by the end of 2026, Copen owns 19.9% of Fabric AI, and Copen is their exclusive manufacturer of neural I.O. chipsets. The collaboration combines our deep expertise in micro-LED materials, process development, yield optimization, and manufacturing with Fabric AI's system-level design and go-to-market focus on hyperscaler AI infrastructure. We believe this is a true technology partnership. Copen brings the enabling hardware, and together, we are building an infrastructure layer that AI data centers will require to scale for years to come. In addition to our 19.9% equity stake in Fabric AI, Copen's shareholders have direct exposure to the upside of this opportunity beyond the manufacturing economics. Fabric AI has raised the required capital to fund this development and staff the business appropriately as Copen completes the neural IO prototypes. We will share more on the development roadmap and customer engagements as it advances in later calls. infrastructure is being deployed at an unprecedented pace and the bottlenecks created by traditional copper interconnects are precisely the kind of problem our technology is well suited to solving we believe this collaboration dramatically expands Copen's market opportunity and positions us as a strategic enabler in the next wave of AI acceleration and it fits very well within our core skill sets and capabilities of leading micro LED development and manufacturing here in the United States. While there are competitors attempting to develop their own solutions like Copen's, most are startups and have never produced this technology previously. Others are established firms in the copper or fiber optic transceiver markets which have not produced this technology previously either, which provides Copen a significant market advantage from a timing, yield, and quality perspective since we are actively producing this technology today. Now, turning to defense, our first quarter and the period since reflects continued strong order momentum across our core programs and meaningful expansion into new ones. Let me walk through the highlights chronologically. In January, our strategic partnership with Beyond International produced its first order on DarkWave platform. a $1 million development order to bring the 960P OLED DarkWave module to production readiness. This is a significant opportunity and milestone because DarkWave enables users of traditional monochrome night vision goggles to upgrade them as a retrofit with full-color augmented reality enabled symbology and full-motion digital interface and interlacing feeds, including drone imagery. Our DarkWave module is the foundation of Theon's upcoming DarkEye product. With more than 2 million estimated NVGs in use globally and a global NVG market projected to grow from 8.6 billion in 2025 to 12.9 billion in 2030, DarkWave targets a very large aftermarket opportunity. And because the system is ITAR-free, it opens up a new global market for both companies. In February, we announced two new European helmet-mounted display orders. First, a $2 million micro-display production order from a Tier 1 European defense contractor for a rotary wing helmet-mounted display system. And second, a $3.6 million purchase order from an advanced avionic helmet-mounted display system to be integrated into a rotary wing military aircraft from yet another European defense customer. Together, these awards bring our pilot helmet-mounted display order book above $10 million and underscore the strength of our display solutions across both U.S. and European defense aviation. Indeed, our European business plan and focus is starting to provide new customers and applications which will only increase our order book, provide more global business independence and stability, while increasing our European facility absorption rates. In March, we were awarded a phase one SBIR contract from the United States government to advance new full-color, yet smaller format micro-LED display technology, purpose designed for soldier-borne and weapons site applications. This is the second micro-LED focused U.S. Army award we've received in the past six months. and it builds directly on the existing $15.4 million IBAS contract awarded in September of 2025, which is focused on developing domestic production capabilities for our micro-LED displays. The micro-LED architecture under development is engineered to deliver the brightness, ruggedness, and power efficiency required for next-generation weapon sites, helmet-mounted visual information systems, and other precise targeting devices. the kind of capability that scales across multiple defense programs. In April, we announced our entry into the first person viewer drone market with the launch of our Sentinel FPV product. Drone pilots need high resolution headsets connected to the cameras on the drones to control it as if they were in, quote unquote, the pilot seat of the drone. We received an initial $3.2 million order with potential delivery of up to 40,000 goggles by the end of 2028. What makes Sentinel unique is something we call dual situational awareness or dual SA. Like traditional FPV goggles that fully block out the operator's peripheral view, Sentinel is engineered to deliver high definition drone imagery while preserving the user's peripheral awareness of their surroundings. No other FPV goggle on the market provides this level of hands-free integration awareness. In field trials, drone pilots love the demonstrated dramatic improvements in survivability, mission effectiveness, pilot dexterity, and safety that Sentinel provides. We believe this technology has potential to redefine what a tactical FPV system looks like. And we're actively engaged with additional drone and FPV companies to integrate Sentinel into their platforms. Further, this technology is built in the United States, which is mandated by the FTC and the Department of War. Also, subsequent to quarter end, we announced a $21.5 million follow-on production contract from a major U.S. prime to manufacture custom thermal imaging eyepieces and assemblies for a man-portable thermal weapon system. This award expands our growing backlog and reinforces COPEN's role as a trusted US-based supplier of mission-critical vision systems for the warfighter. With more than 400,000 mission-critical solutions delivered across multiple generations of defense programs, this contract is a strong vote of confidence in our manufacturing capability and our ability to deliver American-made technology that performs in the harshest of environments. Taken together, The orders we've announced over the last several months, Darkway with Theon, the European HMD Awards, the SBIR for Soldier Born Micro-LED, Sentinel FPV, and the 21 Million Thermal Imaging Follow-On Award reflect both the durability of recurring order rates of our existing defense business and the confidence of our government, North American and new European prime contractor customers have in the new product lines we're bringing to market. As a reminder, many of our defense programs have congressional budget demands through 2030, and several of our contracts are sole sourced, indefinite demand and indefinite delivery, or IDIQ, which provides additional upside flexibility above what is currently on order, recurring revenue and forecastability and sustainability for several years. Now, I want to spend a few minutes in the third area, as I mentioned at the top of the call, on our strategic investments and what they tell you about how we are deploying our cash. After quarter end, we announced the purchase of a state-of-the-art OLED deposition system and related equipment to establish full-scale OLED micro-display production at our Westboro headquartered facility. For the past several years, Copen has operated under a fab-less OLED production model, leveraging external partners. The reason we are bringing this capability in-house now is straightforward. We are experiencing a substantial, quantifiable, and qualified surge in customer demand for fully US-built OLED micro displays, particularly for FPV systems like Sentinel, thermal weapon sites, and other soldier-borne mission critical defense applications. Bringing OLED manufacturing capability in-house gives us greater speed, flexibility, and cost efficiency to respond to that demand. We will continue to leverage our established Asian manufacturing partners for consumer and medical applications that do not have a domestic production requirement, and we will continue to use our European OLED deposition partner for NATO-aligned defense programs as well. The US OLED capability is additive, designed specifically to support the U.S. defense market. I want to be very clear about the message this investment is intended to send, which is that we are comfortable with our cash position and our facility footprint to deliver this increased demand. The capital we raised in 2025 was raised with this level of growth and investment in mind. The OLED deposition decision is exactly the kind of investment that strengthens our defense business going forward. It expands sovereign supply chain options for our defense customers. It improves our control over quality, lead times, and pricing. And it complements our existing U.S. manufacturing capabilities for AM LCD, FL COS, micro LED, and now OLED. Copern remains the only company in the United States manufacturing four types of micro displays, optics, and soon photonics for the U.S. defense customers who are increasingly demanding and, in some cases, must, by law, purchase from trusted domestic producers for critical components. Clearly, Copen is answering that call. Turning to the operations side, our investments in automation continue to deliver meaningful improvements in throughput, quality, consistency, and cost efficiencies. Both phases of our optical automation program are now operational, and we expect these investments to deliver about $1 million in annual operating expense savings and add to overall production capacity as they reach full utilization. From an advanced technology perspective, our neural display technology continues to advance and, as noted earlier, has now extended beyond defense and industrial display applications into AI infrastructure, through our collaboration with Fabric AI and our neural IO initiatives. The neural display platform leverages advanced processing, an AI-enabled backplane, and offers display optimization to enhance image quality, reduce power consumption, and improves overall user experience across the markets we serve. This display technology has several of the largest consumer companies interested in it for AI-enabled smart glasses. and we are now working to create a partnership to deliver neural display as a micro-LED device rather than an OLED device, which is the current demonstrable device as it stands today. Furthermore, as I mentioned earlier, neural I.O. transceiver is not just a single chip strategy. It will be a family of devices focused on application-specific solutions within the AI GPU, CPU, and memory architecture of an existing data center and new data centers alike. These new chipsets will be developed with several of the largest semiconductor and AI infrastructure companies in the world, several of whom are actively engaged with COPEN to work on these solutions. And one of the only manufacturers in the world capable of producing four types of micro displays and now AI interconnection chipset solutions within the United States, COPEN maintains a unique competitive advantage that enables us to deliver the right technology for the customer-specific application in defense, industrial, medical, and now AI infrastructure applications. So to summarize the first quarter of 2026, together with the events we've announced subsequent to quarter end, represent a meaningful inflection point for COPEN. We extend our micro-LED and neural display platforms into AI infrastructure through our Fabric AI collaboration. We have launched several new products and received initial orders with Darkwave to bring full color to the enormous monochrome night vision goggle market and with Sentinel FPV for the massively expanding global drone goggle market as well. These new activities speak to the disciplined productivity of our internal research and development spending as these new technologies are attracting new customers in new market segments for Copen. These new platforms enable Copen to sell these products to multiple customers globally and are not just a custom product for just a single customer, making our forward-looking recurring revenue more balanced and forecastable. Within the quarter, we grew our defense backlog with a $21.5 million thermal imaging follow-on order, a $3.2 million initial Sentinel FPV order, over $5 million of new European HMD awards, a phase one SBIR for soldier-borne micro LEDs, and the first dark wave order from Theon. We invested in our strategic priorities by committing to bringing full-scale OLED micro display manufacturing in-house in Westboro, and we did all of this while maintaining a strong balance sheet. Consequently, we reiterate our 2026 revenue guidance range of 52 million to 60 million, which we believe remains appropriate and conservative giving the order momentum we're seeing across both our existing defense business and our newer growth programs. As more programs and awards are converted into shippable orders, and as our newer programs ramp, we expect to provide further updates throughout the year. I'll now turn the call over to our CFO, Eric Manns, to review our first quarter 2026 financial results in further detail. Eric?

Thank you, Michael. And good morning, everyone. As Michael outlined in the first quarter, subsequent events represent a meaningful shift in COPEN's trajectory. From my perspective as CFO, what is particularly compelling is how clearly we're seeing our strategic investments begin to translate into tangible commercial momentum across both our core defense programs and our emerging opportunities in AI infrastructure. The combination of expanding defense orders entry into new product categories like Sentinel FPV, and the strategic collaboration with Fabric AI gives us increasing confidence that we are building a more durable, diversified, and scalable revenue base. Just as importantly, we are doing so while maintaining a disciplined approach to capital deployment and a strong balance sheet. An important financial implication of this momentum is how it positions us to better utilize our existing manufacturing footprint. As volumes increase across multiple programs, we expect to more effectively absorb fixed costs with our facilities that have historically weighed on our cost structures. In other words, improved factory utilization and a broader mix of production programs should translate into better overhead absorption, margin expansion, and a more efficient operating model over time. The investments we've made, whether in micro LED innovation, automation, bringing OLED manufacturing in-house are not theoretical. They are directly aligned with identifiable demand signals from our customers and are designed to enhance throughput, improve cost efficiency, strengthen our control over both quality and delivery, and minimize risk. In short, we believe the progress you are seeing is new, not just incremental. It reflects a fundamental step forward in the company's growth profile, cost structure, and operating leverage. With that context, I'll now walk through the first quarter 2026 financial results in more detail. Total revenue for the first quarter ended March 28, 2026, where 10.6 million is compared to 10.5 million for the first quarter ended March 29, 2025. The slight year-over-year increase reflects new award and collaboration revenue contributions from the company's $15.4 million government micro-LED award and strategic AI-AR thermal clip-on partnership, which more than offset the decline in product revenues. Product revenues for the first quarter were $5.4 million, as compared to $9.2 million in a year-ago period. The year-over-year decrease was primarily due to lower period shipments of products for thermal weapons site applications, and liquid crystal displays. Non-product revenues were 5.1 million in the first quarter of 2026, as compared to 1.3 million in the first quarter of 2025. The increase was primarily driven by award revenue recognized in connection with the company's government award for the development of ultra-bright, full-color micro-LED displays optimized for ground soldier augmented reality applications. together with collaboration revenue from a strategic partnership to develop a next generation clip-on with augmented reality and thermal integration capabilities. Cost of product revenues for the first quarter of 2026 were 5.6 million or 103% of net product revenues as compared to 7.6 million or 83% of net product revenues for the first quarter of 2025. The increase as a percentage of net product revenues was primarily attributable to reduce production efficiency on a lower revenue base. Research and development expenses for the first quarter of 2026 were $4.9 million, as it compared to $2.1 million for the first quarter of 2025. The R&D expense increase was primarily due to the aforementioned government award for the development of ultra-bright, full-color micro-LED display optimized for ground soldier augmented reality applications, offset by increases in process improvements. Selling, general, and administrative expenses were $6 million for the first quarter of 2026 as compared to $4.7 million in the first quarter of 2025. The increase was primarily due to increases in professional fees and accrued performance-based compensation. As of March 28, 2026, the company had cash and cash equivalents of $34 million, total cash restricted in marketable securities of $59.5 million, million, inclusive of $25.3 million of restricted cash bonded against the Blue Radios litigation appeal. Following the deconsolidation of Copen Europe in October of 2025, the company's reported cash position is wholly domestic, and the company's analysis supports that its current liquidity is sufficient to fund operations through at least the end of the second quarter of 2027 and beyond. On a final note, there will be another filing of more administrative nature today, unrelated to earnings. This is to move from an S-1 registration to a form S-3 registration. To be clear to the investors, there is no offering with this. It's technically re-registering shares from the Pikes last fall. And with that, I'll turn the call back over to Michael for closing remarks.