Good morning, everybody, and welcome to poLight's first quarter presentation. My name is Øyvind Isaksen, I'm the CEO. Together with me today is also CFO Joakim Bredahl and Chair of the Board Grethe Viksaas . The agenda of today: key events, introduction to poLight, and also a short intro to the investment agreement signed post-quarter. Of course, market review, financial review by the CFO, an outlook statement, and Q&A in the end. Key events: existing machine vision barcode customer launched five new products. Repeat, or you can say repeat, customer, existing customer starting to using TLens in more products. It's, I would say, as the proof of the pudding is in the eating. When customers expand the use of TLens, that's a very, very good sign. It was backed by a mass production PO. This was announced March 24. TWedge, high interest.
During the quarter, we actually received NOK 1.3 million worth of samples, evaluation kits from major OEMs. One of our Mini2P customers, Transcend Vivoscope from China, ordered new samples which have a different AR coating, which expands the useful wavelength spectrum, worth EUR 32,000, and hopefully in the future will trigger new demand and a new revision of the product. Specifically, AR/ MR activity is continuing to be very positive. We kicked off a project to investigate the possibility of realizing a lead-free TLens. This is for some of the, I would say, big OEMs. They will try to force themselves to use components containing no lead. This is an initiative to kind of prepare for that, a very interesting project. Hopefully, we will have samples in the end of the year and potentially even sample new non-existing customers with that product.
Backing the high market activity, as you know, we participated in CES in Las Vegas and SPIE AR in San Francisco during January. Post-quarter, we announced a very, very important strategic news that we are entering into a strategic investment agreement with Q Tech, Q Technology Group. This is kind of backed by a tier one consumer electronic OEM in the U.S. I will come back to that. Yeah, why we did this? There is a perception in the market, particularly between the big guys, that poLight, being small, not being profitable, having a single source supply chain, represents kind of a risk seen by some of the big guys. There is one specific customer for which we have worked with for a long time, qualifying our technology, which shows a high degree of interest in deploying our products into their products.
They saw this as a risk, and they had seen those risks before with other companies and wanted to see that poLight was backed by a significant player in the ecosystem, which they also already had an existing relationship to. They also wanted to see that this partner could be capable of establishing an assembly test line of TLens. There will be kind of different sources for the same product. This has been ongoing as a discussion for a long time. Finally, due to this backing from this customer, we managed to agree on an investment agreement. This is an extremely important milestone for the company. Now we are helped by one of the major players in the camera module world to deploy our technology.
We have established trust between customers or among customers, both when it comes to our financial position and also our capability and robustness in the supply chain. Back to some of the details in the deal. They will become around 30%+ shareholder, issuing 63 million+ shares. They will be, if accepted by the Shareholder Meeting on the 21st of May, the biggest shareholder in poLight. They will also have the right to nominate two Board Members, but two of the Board Members also have to be independent. The Articles of Association will be updated with these aspects. There are many, I would say, regulations in the investment agreement. One of them is related to if there is a voluntary offer, there are certain rules which need to be followed.
The Independent Directors will be kind of controlling that process in the Board. Q Tech either have to do something similar, offer a similar deal, or sell their shares. As I said, this is up to the shareholder meeting to finally decide, and that will be held on the 21st of May in Tønsberg. It's important to say that both Investinor Direkte AS and LHH AS , which are the two biggest shareholders, have agreed already. We will also subject to the. To on the same terms. A statement from the Chairman, Roy Ho. With the backing from a top-tier U.S. consumer electronic customer, we are confident that this alliance will bring cutting-edge solutions to the market, addressing key industry challenges. I think it's important to stress that this is a company, a very innovative company, very well respected throughout, I would say, the whole ecosystem.
When they take such an investment and such a position in poLight, that is an extremely strong validation, an extremely strong validation. We have already seen the effect during the Easter, which is a new event in Asia. There was a lot of activity, joint activity, where we were able to kind of team up with the meetings, strategic meetings Q Tech have arranged in many different market segments. It shows again that this kind of fact is going to change the game for poLight. We will be more trusted in all aspects, both financially and from an operational perspective. Important to say that all the existing supply chain we have established with our key strategic partner in our supply chain will continue to be emphasized, and there will be activity in our existing supply chain for sure.
Okay, I'm coming a little bit back to it when it comes to when I'm talking about the different market segments. poLight is definitely a position for growth. As you know, we have different focus areas, consumer and enterprise, consumer being AR/ MR, wearables, any kind of smartphone, webcam, laptop activity. We have also an industrial activity, barcode, enterprise, AR/ MR, machine vision, and other things. Those are kind of the two main legs we have, consumer and enterprise. If you're going to say something quick about our technology, it's extremely fast, it's unique in that aspect, can realize very, very compact solutions, no breathing. It's basically replicating human eye, very smooth, nice autofocusing function, and super important for all wearables, extremely low power consumption. There is nothing close to what we can achieve on that. We have been around for quite some time.
Headquartered in Norway, offices and employees in Finland, France, U.K., U.S., China, Taiwan, Japan, and the Philippines. Focusing heavily and will continue to do so in growing our IP situation. Yeah, I already talked about this briefly, but for those who are new, basically poLight's technology platform has so far realized one product, and that is TLens, tunable lens, an AF actuator . What we do is replicating the function of the human eye. If you look at the left side, top left side, you see a membrane which is bending by putting voltage on it. That bending is shaping a lens material we call polymer underneath, changing the shape of that lens, changing the optical power in that lens. This is exactly what's happening in your human eye. This replaces moving lenses and VCM.
As I said, there are many advantages, among them speed, no moving lenses, power consumption because no moving lenses, et cetera. From a supply chain perspective, we are fabless, more or less. We do though produce the polymer at headquarter, which is the lens material. We use STMicro for wafer supply, which is the eye muscles or the activator, you can say. We ship those components to our partner in the Philippines today, and also later that will be the case for Q Tech . They assemble and test TLens either without package or with package, and then we deliver or sell to camera module partners, which then is selling their solutions to different OEMs.
As I mentioned in the beginning, I would say high momentum markets are the AR/ MR for sure, consumer in general, and industrial being kind of machine vision and more, should I say, barcode reading for supply chain purposes. We have some kind of emerging use cases which we are less focusing on but keeping in mind, which is related to the automotive and also healthcare. There is no doubt that the fact that we now have established design wins in all strategic market segments is helping us a lot. Of course, it is an element why Q Tech is signing this investment agreement because they see the potential in the technology. We have proven the potential in the technology. Let me just, there is some, here we are back. Sorry, there were some technical problems. That customer platform which we have developed is an important element.
We have proven that we can, we have proven that it works, we have proven that we get repeat orders. This is super important for, of course, Q Tech and for us and for our new customers. Let's go in a little bit into the details. On the consumer side, I think the most, I would say, exciting activity at the moment is the AR/ MR. There are extremely interesting and encouraging activity in the laptop and the webcam market. There seems to be, I mentioned it before, there seems to be a trend that they would step by step need an AF. Here we could be potentially very well placed. Part of the AR/ MR market may be some years in front of us. Laptop and webcams is a market today. As I said, the advanced AR glasses, they are still in the early days.
There are technologies which need to be developed before this will scale in high volumes in the consumer side. It will happen, but it is not there today, as we know. Smart glasses like the Ray-Bans, all the, when I was at the CES, all the Chinese major OEMs are now having plans for developing smart glasses. That is actually a market which has quite quickly become very interesting. Smart glasses meaning they typically do not have a very fancy display like an AR glass, but you do have a camera and they do have sound, a microphone. I think more and more people will start actually using these glasses. Also, the mixed reality headsets are already there, shipping in quite nice volumes.
In the AR/ MR space, even though the most advanced AR glasses are some years ahead of us, they are already starting to develop a very interesting market in, call it AI glasses or smart glasses and the MR headsets. As I said, at CES, it was very, very evident this year that this is a market which is in the process of being very, very visible. Yes, many of these products are using fixed focus. The way we understand the world through the communication with our partners and the ecosystem in general is that this will need an AF solution sooner or later for different reasons, from physics, from pure optics, but also for different driven by AI use cases. This is where we have put our boat, our kind of foot into that market.
This is poLight, this is the sweet spot of the poLight technology and claiming that space. That is what we've done and that is what we continue doing. Also, I'm sure a reason for why Q Tech would like to invest in poLight. I would say that many of the PoCs in the consumer side are progressing nicely. I would say we see now that more of the PoCs is about discussing real projects. Moving from evaluating our technology to say, yeah, it works, yes, we like it, and discussing product intersection. Where does it fit? Which release? When? Having Q Tech as a partner and investor, I would say is an extremely strong strength in positioning us in this market segment also, of course. I would also say, as I said, during the couple of quarters now, a laptop webcam is picking up.
It's early to say, I'm not saying that we are close to any design wins, but we are definitely close to many, many important PoCs. I also would like to emphasize after this announcement with the investment agreement with Q Tech , we have already seen, as I said, a lot of interaction, new, I would say, re-engagement with old friends where they want to re-look at our technology products due to the fact that they already have a business relationship to Q Tech and find it's more, what should I say, trustworthy and secure to really consider poLight. This also actually, the last week, has triggered re-engagement even with smartphone players. We know that poLight's TLens is a good fit for the selfie camera. We also know that the bright TLens is less of a good fit as of today on the back camera due to the size.
We also know that the cost of the selfie camera using TLens due to the add-in design is significantly higher than a camera module with VCM. Of course, until now, we have been working and selling our technology into that market together with any camera module player, and we will continue to do that. Very many of the camera module players have their own AF actuator . Of course, they would prefer as a company to use their own technology. Q Tech becoming an investor in poLight would like poLight to be successful. That is why they will take another look at that and how to price and how to communicate this solution to the market. Interesting days. Yeah, you can see the numbers. Here you see the consumer status, including the AR/ MR. You can see there are 18 PoCs, 16 is AR/ MR consumer.
There are 22 planning, 15 is AR/ MR consumer. You can see a lot of laptop camera, webcam application. AR/ MR, in now I'm taking AR/ MR as in general, which includes both the enterprise and the consumer, you can say. As I said, there's no doubt that we have become a, yeah, with the references we have and with the ongoing activity of the customer we have, we have built a very strong position. TLens is being tested by so many, as you can see from the consumer plot, but also on the AR/ MR side. The pipeline is growing every quarter. TWedge, yeah, it's a very interesting situation. Everybody we talk to, I would say, is in the end of the day showing high interest in TWedge. As you know, TWedge is early days for us. It is a technology platform which we have developed.
As an example, only this quarter or the first quarter, we had income of NOK 1.3 million in selling eval kit, and that's only two customers. It is a significant contribution to the development program. Also, we feel that we're starting to understand more and more the need and the specification. We're also starting to understand more and more that the TWedge, over and above the initial target to enhance the resolution, remember, vibration, pixel shifting, taking a low resolution display into a higher resolution display, which is the kind of the starting point of TWedge. There are other applications. As one example, motion blur, which we can compensate on system level. We're starting now to see that there is actually a possibility to define a product which we think will fit kind of say 80%-90% of the market need.
That means that we may be in a position to go to the Board and ask for a concrete product development program. We would still like to see kind of commitment from the market, from the customer before we trigger that button. If you look at the numbers, the AR/ MR PoC increased from 12 to 16. As I said, very, very solid activity in the AR/ MR space and including the TWedge. Here you can see again, this is AR/ MR including enterprise, including consumer. The icon with the C on is the consumer side, basically, illustrating the strong fundament we are building. Barcode industrial, as I said many, many, many times, it will take time to develop this market.
The five new products released by an existing customer, five of those, sorry, two of those five, sorry, three of those five will be new products. Two will kind of replace existing products. As I said, a new existing customer expanding the use of TLens is a very, very good sign, of course. An interesting activity we have kicked off the last couple of quarters is we have seen during our communication with the market, we have seen a need for a standardized product based on a certain image sensor and what they call M12 design, which we feel we can actually offer together with lens partner a standard solution and off-the-shelf solution, which minimize the pain of taking TLens into the cameras. We are now in the finalization of defining that program together with this lens partner.
We think we can be able to launch this together with lens partner as a standard product, not TLens, but actually a lens stack with a certain defined interface we call M12. We think that this can be a very, very interesting business case and actually significantly increase revenue in this market segment. We always said for many years, if we do things right in this market segment, it can be a significant contributor to the gross margin in the company. These kind of initiatives are something we do to accelerate that to happen. Here you can see the illustration, strong pipeline. We expect more to come in the barcode machine vision side before we close this year for sure.
Healthcare, not so many new things in the healthcare side, even though we, as I said, in the Mini2P , we did receive an NRE PO, which is developing a new coating, which may lead to a revision of the Mini2P scope. We do also engage in some commercial endoscope cases. As I've said before, due to the low resolution image sensor using, we don't see a strong need for the AF. We do believe that that will come one day. That is why we keep contact with this market segment. It may also be a trigger for a smaller TLens, not a bigger TLens, but a smaller TLens. That smaller TLens may also have application in future AR/ MR glasses where there will be many variants and where the kind of mechanical ID design will be extremely important.
Compactness, being small, the camera not being in a way visible will also maybe trigger a need for a smaller TLens over time, which will have synergy with other market segments such as endoscopes. Yeah, automotive, nothing new. As I said, the most important thing with automotive at the moment is that whatever we do on the technology platform side, we need to keep this market in mind because there likely will be a need. We feel that we are wanted due to no moving parts, as an example, for a terminalization aspects. The market is not there today. Also, we need to have a bigger TLens to fit that market, which is already in process. From a customer engagement, I would say it's on the monitoring stage. Yeah, we strongly feel that we have a very promising pipeline.
This is what is motivating us every day to nurse and to kind of mature these cases all the way into design win. Yes, it takes time. I think, again, I will come back to the investment agreement with Q Tech. There is a reason. That reason is in Roy's statement. We strongly believe that there are so many very good fit applications for TLens. This table shows exactly that. Step by step improving on inactivity, increasing activity, both on PoC, planning PoC, and completed PoC. Financial review by my great CFO, Joakim.
Thank you. Yes, we have, if we do start with the revenues, we have revenues in the quarter of NOK 3.8 million, which is an improvement from the previous quarter, is also an improvement from the first quarter of 2024, but still not any breakthrough numbers.
Of this revenue, about 50% is in the AR/ MR segment, and the remaining 50% is divided between industrial and medical, where industrial represents most of it. If we look at the EBITDA, we have a loss of NOK 25 million, which is a higher loss than in the corresponding quarter of 2024. This is mainly due to two reasons. If we want to look at what the discrepancy is there, we sort of have to look at the first quarter of 2024, when we had a large reverse of national insurance contribution from the employer's national insurance contribution, or NICs, that we pay on the share options. We have to reserve. That was NOK 5.8 million in Q1 2024, which was reversed, meaning if you go in and look at the administrative expenses on Q1 2024, you can see they were negative costs.
It was actually that reversal took over all the costs. In addition, we had an increased provision of inventory obsolescence of NOK 1.9 million, which follows our methodological approach to the inventory. Speaking of inventory, we can look over at the balance sheet. During the quarter, or at the end of the quarter, the inventory stood at NOK 59.9 million, so just south of NOK 60 million, compared to NOK 62 million at the year end, 2024. The decrease represents both the change in the provision of inventory obsolescence, but also COGS that relates back to the sales in the quarter. The cash position was at NOK 136 million, roughly, which compares to NOK 167 million at the year end. If we now then look at the cash burn for the quarter, we have a net decrease in cash of NOK 31 million in the quarter.
This compares to NOK 19.6 million in the corresponding quarter last year, but also NOK 13 million in Q4 2024. We thought it would be prudent to sort of bring up some of the things that influence this since this is a very bouncy number. Obviously, this is sort of a snapshot of where we are at the end of the quarter. If we look at the working capital increase that stood at the 31st of March, this is a mix of the receivables and the payables. We have an increase in receivables, which means that we had invoiced quite a lot that we had not converted into cash yet. Quite a lot of the revenue from Q1 was invoiced at the end of the quarter.
We had decreased payables of NOK 2.7 million, which relates to us basically having paid off lots of invoices in the quarter. This is a bit random when that date hits. We previously mentioned a reserve of legal expenses related to an infringement claim against two of our customers. This provision was used. We received the invoices, we paid them. That was NOK 3.8 million during Q1. There you have much of the difference in the quarter. Yes, that's the cash flow analysis. I'll refer back to you.
Thank you, Joakim. Okay, one slide and then a Q&A session. Given the market position, poLight is in, the efforts we carry out to strengthen our presence in other market segments, we mentioned automotive and healthcare, which we even have only been scratching on the surface.
Also keeping in mind all the initiatives we do to improve and the future proofing of our offering, our products, our solutions, and developing the organization in general, I should say a strategic investment with Q Tech, it is really for me evident that this company has a lot of opportunity in front of us. We feel that this is becoming more and more visible quarter by quarter. I think it's important also to say that one of the most important things, not the only important thing, but one of the most important things for this to capitalize and to be real is, of course, the development of the AR/ MR market. That's why it's extremely encouraging to see how the smart glass business is picking up significantly. Not only a few players, but all major OEMs, I'm sure, will enter this market.
Yes, the advanced AR glasses is not a consumer kind of big volumes today. That will also happen. There is actually an AI glasses or smart glasses, which is picking up significantly. Yes, they are using fixed focus today. We cannot understand that that will continue. We have for many years been working to strengthen our kind of ability to deploy our solution in different customers, different market segments. We have very actively for many, many years worked to kind of establish, try to establish a strategic, very close relationship with major players, both from the OEM side and the module integrator side. It is poLight, it's a small company in this huge ecosystem. We have limited resources. Having this strategic relationship, both on the OEM side and on the module integrator side, is super important.
We have said together with the Board, this has been the case for many years. That is why we are so thrilled and happy that we finally managed to find this, should I say, OEM / module integrator strategic partnership, which led to signing of the investment agreement with Q Tech. This is a start of a new era of poLight. I am really, really looking forward to see how this can build stronger shareholder values and a stronger company. Thank you. Joakim, do you want to join me?
Yes.
Is there some questions?
We have received some questions.
Okay.
We can try to categorize them a bit. There are some questions about the Q&A about the strategic investment agreement, which is available on our website. We have had some new questions now also.
First one, can you say something about Q Tech and what it really means that they are backed by a top-tier U.S. customer?
Yeah, I feel that we have answered to that during the presentation, but very quickly. That top-tier customer liked our technology. They have spent a lot of money and time to qualify our technology. They wanted to bring it into products, but saw a risk. Small company, not profitable, single source. That is why they said, if you two guys can team up, Øyvind and Roy, Q Tech and poLight, that will help us a lot to take the right decision. That is what we mean by backing. They are already showing willingness to move on with our products together with Q Tech .
Very good. I think you also mentioned this. You write that this transaction has the potential to significantly accelerate scaling. Could you explain more specifically what you put into that?
Yeah, but what I mean is that two things. One thing is that the market will, after this, feel more trust, feel more safe, meaning there will be more customers wanting to use us. Secondly, when we today we have one operational assembly line, and that can increase, we can increase capacity there, but we can also increase capacity, of course, at the Q Tech . There is a dual source capability being built. More customers want to use us, more power to scale production.
Also, production in two different countries, right, which can be quite important these days.
Correct.
Now, Q Tech is a very innovative and forward-looking camera module manufacturer, according to Chinese media. What does this mean for the collaboration with poLight? Could there be advantages or disadvantages?
I would say that my experience, my relationship to Q Tech is not new. That has been around for quite a few years, a handful of years. We even did an add-on, actually PoC with Q Tech. And I personally know the chairman and the main shareholder, Roy. I would say they are a little bit different compared to many others, very much focused on execution, supply. We could see in Q Tech there is a lot of willingness to be innovative, to be entrepreneur, to build new businesses. That is why they also would like to invest in poLight, because they see this as a strategic move and an important element in the ecosystem going forward. I think this innovation strength, which I feel, entrepreneurship mentality, which they show, I think is not typical, what I've seen with other camera module players.
I think that could be a very unique match with poLight. In addition to that, they are definitely in a hope to scale production. They are definitely having a lot of major customers, which they are actually today supplying components to or systems to. Good match.
How can it be that they, meaning Q Tech , are making a strategic investment in poLight, backed by a U.S. customer, when they still have many large customers at home in China?
Of course, it is a global company. Also today, the AR, AR/ MR space so far has been very much driven from the innovation side from the U.S. Yes, we see now that Chinese are coming, and they will come. So far, the innovation has been concentrated in the U.S. That is why it is important for Q Tech to be there.
poLight works with all major OEMs in AR. This is a statement and is a potential candidate for all those that can come up with autofocus. How can the collaboration with Q Tech affect poLight's role towards all the other major OEMs when Q Tech has backing from this one top-tier OEM?
Yeah, of course, after the investment announcement, we already have been in interaction with other OEMs. It's only positive feedback. It's only positive feedback. They see this as a big step in the direction of having more trust in what we can execute.
When will Q Tech's dedicated TLens assembly line be ready?
Yeah, they will do the first run in mid this year. Maybe in the end of Q3, there should be some qualification runs this year.
Is Q Tech working towards more verticals where TLens may be relevant?
Yeah, they're of course very heavy in the consumer side.
We already have a lot of joint meetings with their customers. Consumer as such, being drones, being smartphones, being wearables, yeah, consumer. Also automotive as an example. They definitely also show interest in healthcare. I think they would go for, they will follow the market where the market wants to see new technology and compact cameras and solutions.
When Q Tech plus poLight was announced, did you get attention from customers? What type of customers possibly might find this collaboration as a de-risk for using technology from poLight?
I think we answered that during the presentation.
Yeah, we did, actually. A couple of questions more related to the transaction and their shareholding. Q Tech will going forward likely have more than 1/3 of the votes present on general meetings and can block key decisions like capital raises.
Which steps have poLight done to identify and mitigate potential conflicts of interest between Q Tech, being a camera module maker, and the rest of the shareholders?
Yeah, as mentioned in the press release, and also mentioned during this presentation that there are mechanisms in the investment agreement, as an example of what I mentioned with this, if there's a voluntary offer, there are mechanisms through the independent directors that they will decide or recommend. Q Tech will need to approve, or they need to kind of come with a competing offer. I would say the investment agreement in that sense is well-written and trying to protect as good as possible all shareholders.
With Q Tech getting to appoint Board Members, will they then have access to trade secrets like the polymer recipe?
To be honest, only very few people inside poLight, and not even me, have access to that recipe.
A bit back to the production line. What will be the monthly capacity in the Q Tech production line?
At the moment, I would say, we replicate what we can do today at Tong Hsing. Of course, that can easily be scaled. Customer is asking us for a plan and how much it will take of time and cost to scale. That is, I would say, scalable.
With the capital injection from Q Tech and then subsequently current shareholders, will poLight have enough runway to become cash flow positive?
Good for you. Good for me. Obviously, given that the annual general meeting supports the investment agreement and that the subsequent offering is fully subscribed for, we will have significant cash, which means that we will also have increased our runway quite heavily. We can see no immediate need there for capital raises. There is a scenario where this could be sufficient. There might be other strategic events happening that could lead to capital raises in the future. That typically would be communicated very clearly to the market.
This is a final question about Q Tech , which maybe we can lead into. Can you say something about Q Tech being the camera module maker player that in the second half of 2024 was on the road to several smartphone customers with sales work to promote TLens? Regardless of whether it was Q Tech or another camera module maker, can you say something about how this work continues in the future?
Yeah. No, it was not. That was another camera module supplier. I think it's important to emphasize, we will continue to have cooperation with all the camera module supplier. Remember, it is basically very often the OEM who is deciding which camera module supplier they would like to have in their products. We will, of course, support all of them, continue as we have done so far. What is new now is that, as I said during my presentation, sometimes many camera module suppliers, they are starting to get more and more vertical integrated. What do I mean by that? Meaning that they don't only assemble a camera module, but they also actually own components, the lens stack, they own the VCM, the actuator. Being vertically integrated, they have a solution themselves. This is why this has happened, because the margin on only being a contract manufacturer assembly house is very squeezed.
They need to increase the value add. That is why they have moved like that. Most of the players in the system have that. That means that when they are in interaction with the OEMs, those camera modules, they will always try to, of course, have a solution which is taking as much as of the components they have. The OEM says, yeah, but I would like to use poLight. Yeah, okay, we can use poLight, but are you sure you do not want my inner focus VCM? Because that is also good. No, no, I would like to have poLight. There will always be this kind of dancing. Q Tech then having an invested interest in poLight and poLight being successful, of course, they will be more, of course, they also would like to, of course, use their own products, but they will be more kind of positive to make that happen in a way, if you understand what I mean. I think this is a very, very important dynamic.
A few more questions about CMMs. How is the progression to add-in modules from camera module makers? Do many have the modules ready and possibly for which verticals?
I would say that step by step, through the push from OEMs, more and more people will start this or camera module will start this activity. We talked about it before, say a small handful, maybe today. Q Tech, as an example, of course, they would like to have that offering. Others also, this is coming from push from the OEM.
A long question. I think you partly answered this in the presentation, but we'll go through it. The concept has been developed for a new small package where TLens in the package will be more similar in shape to a plastic lens. You mentioned that slide-in TLens is for simplified construction of camera modules. Can you explain why this is a simplification for camera module manufacturers and what this could potentially mean for time to market?
Yeah, it's a good and long question. Yeah. Do you remember we talked about the add-in designs in the beginning? We said that it is a cost penalty. Why is it a cost penalty? Because the process of making an add-in camera module with TLens is quite complex as of today. Why? Because there are two lens groups, one and two.
There is a TLens in between. This has to be very, very accurately aligned. Active alignment, somebody called it. That active alignment process is complex. Relatively few have it. They price it quite high. That triggered us with an initiative to try to make a design, a reference design, and with TLens, lens stack, where you did not need to use active alignment to reduce costs. That was kind of the basis for that activity. We did. We have solutions. We have already started some activity on that with some camera module guys. So far, we see that the slide-in or these kind of non-active alignment concepts will not fit all use cases where the optical design is extremely compact, high resolution, then active alignment is needed. For many other applications, a slide-in concept can be possible.
We have some questions about verticals. First, we have some more general questions. One from the Annual Report. poLight's Annual Report mentions that the useful lives for the original patents are deemed to be seven years from now. After this period, is poLight technology free for others to use? How easy is it for them to develop products using it?
Yeah, good question. We very actively try to protect our IP, of course. The original TLens patent has, whatever, one or two years left. There is a kind of patent which is supporting the TLens as we build it today. It could be related to the polymer, could be related to the back window, which if you do not have access to those elements or that IP, that TLens you build and copy after two years will not work.
It will be significantly less performance. We try all the time, as we innovate new things and improvements, we always add that to the IP. Should we do IP? Should we do patent? Should we publish to have freedom to operate? That is why we effectively are prolonging the lifetime of the protection.
How is it that high market activity is communicated several quarters, but a big PO or purchase order is still missing? How are poLight benefiting in terms of cash? That market in general, the market in general is maturing. Are you still expecting positive cash flow in 2026?
I think we have answered to this question many times. We have always said that the market we see and the big revenue jump is some years ahead of us. This has been communicated again and again and again. Of course, the relationship to Q Tech could change things. I would say that if you look at, say, the AR/MR market, I think it's a fair statement still to say what we said before.
There are a couple of questions related to the, I guess this is from the remuneration report. Given the 2024 reports, there's a 100% bonus linked to the sale of poLight. What was the strategic basis for this? Can you comment on any related sale process and potential buyer interest?
I would say, generally speaking, the Board defines a bonus program, which have different triggers for different people and for different events happening. This is an event which may happen. It regulates what will happen if that happens. What will be the bonus trigger?
The Board is defining bonus triggers, which is kind of supporting the important strategic development of the company and to create shareholder value. Those triggers are different from different events. Triggers like, say, if we achieve a design win in consumer AR/MR or smartphone, that will trigger some bonus for all the company's employees. Different value for different people. This is also an extremely important strategic event for the company and for the shareholders. That is why the bonus program is used by the Board to motivate an extraordinary effort from employees to achieve important strategic milestones.
We have another question about the bonus, which is another element of it, but I guess it's more or less the same answer to it. How is it that there is a bonus for capital raise for top employees?
There is, at the moment, one person, and that's me, who have that as a trigger. This is because if this company is not financed, we cannot realize shareholder values.
We can move on to a question about TWedge. How is the progress in finding partners for developing TWedge into a product?
Yeah. I would say so far, we are focusing on the customer side, the OEM side. We try to build appetite. Of course, we are also working on the supply chain. Say if we're going to start a kick-off, a real product development of TWedge, how would we do it? How would we manufacture a TLens? Sorry, a TWedge? There are core components in the TWedge. There are glasses, which we are used to use also in TLens. We have already kind of somehow established supply chain there.
There is bulk piezo , which is new. We do not use bulk piezo in TLens. There we have to develop the supply chain. We do that through our research program. The operation part of the company will step by step be more involved to kind of establish the commercial relationship with potential bulk piezo suppliers, as an example. TWedge will be polymer, already existing, basically the same polymer as in TLens. There is the assembly part. The MEMS wafer, as the current structure of TWedge today, no need. Okay? There will be more assembly steps. Assembly partner, we already have with Tong Hsing in the Philippines. They will see TWedge as a very interesting product because there are more assembly steps. They live off assembly steps. There is nothing ultra fancy or difficult in those assembly steps, over and above what we already do.
Of course, there will be other players, e.g., Q Tech, who also can do these things. I really don't see this as an issue. Yes, it has to be done. Yes, it has to be developed and qualified. I think the most important thing now is to nail the customers, to define the product and get the commitment. That is the important thing. I'm sure my team, which is super good, will manage to do the manufacturing.
Good. We have then a few questions about verticals. We're at 10:00 A.M. We might want to have some of them.
Okay.
How do you feel that the development and interest in TLens and AR/MR glasses is from China?
Yeah. We see more and more. We see more and more. I said it in the presentation. I had a meeting at CES with one of the big OEMs in China. He told me, you know, Øyvind, you will see that every major OEM in China will launch smart glasses.
A new design-in was added to AR in Q4.
Yeah.
What progression do you see in this project in the last quarter?
They seem to be very committed. It's an enterprise case, a very interesting one. That company doing the development is backed by a significant player. Very interesting case. As far as I know, it's progressing well.
One question about the smartphone vertical. I'm sure this can be answered pretty quickly. Can you say something about the smartphone customers who were interested in TLens a couple of years ago? Are any of them still thinking about poLight's TLens in autofocus, passive either normalization, or other areas of use?
Yeah. Yes, I would say so. Even though I have quarter by quarter now, I've been saying that we don't see any major activity in the smartphone side. We initiated some important activities to place us in a better position in the smartphone area. I would say, as I said in the presentation, after we announced this investment agreement, there are already players in that area, which is no one to restart interaction with us. I think that again just indicates the strategic importance of this agreement. I'm not saying that it's going to happen tomorrow, but I'm saying that the trust in our technology, the trust in our capability is significantly improved, increased throughout this investment, also in the smartphone side.
One for the medical vertical. How is it with the Mini2P players and assessment of TLens? Are any of them thinking about TLens in more applications?
There is one company which is talking about that, but there is nothing new to report. They are, and they have mentioned that they would like to use our technology in all their products, whatever that means. That is also related to the company who placed the PO on a new coating of TLens, as mentioned in key events.
We have a barcode question. You have projects in this vertical that are moving towards products that are closer to the customer, i.e., products with higher volume potential. Can you say something about what it takes to get into those products?
Yeah. If I only knew. I think that it seems like many of these high volume cases, you see them when you go to IKEA and Coop and shops like that. They like to use it to do try again and try again and try again instead of having decent equipment. There seems to be very much a fixed focus market for now. If you go one step kind of down the supply chain, these logistic hubs, there we will fight the VCM. There we will fight the VCM. I feel that when we are able to scale over production in the consumer side, we will be cost optimized and we can be a better competitor in that area. I think sometimes we are limited in optical power and aperture size. When we're working on this new technology, that also will help. It is definitely a part of something we're trying. As an example, we are trying to say, okay, yeah, but we can sell you two TLenses.
You can stack them to get more optical power, and we'll give you a nice price. We are trying actively to maneuver into that part of that section of the market, definitely. I think also it's all about also getting to know that market, getting the players to know us and to have trust on us. That's, of course, done by repeat orders in the more high-end space of that market segment.
Is there any news about the display solution?
No, not really. They have done what they've done. They have developed a near-form factor demo. They are demonstrating that. As far as I know, they haven't yet found any lead customer. So no.
I think we're down to maybe answer this question about Japan. Japan is an exciting area for poLight. There was recently an event in Japan where poLight participated. How would you describe the work in Japan? Are there any promising projects taking place within this geography and possibly in which verticals?
Yeah. For a long time, we were not at all focusing a lot on Japan. Relatively recently, or is it one year ago, we did employ one resource, a senior BizDev resource, which has helped a lot to open doors. Japan likes to speak Japanese. Which segments? I would say all segments. Definitely consumer. There are some big names there. Also industrial. There are some also big names there. I would say, generally speaking, I mean, we all know the laptop market I've been talking about. There are definitely laptop players there, which is of high interest. We feel that still early days for us in Japan.
I think we are step by step, we are putting our foot in the door and seeing new opportunities.
I think we've answered most of the questions. There are some quite specific ones. Honeywell EX30 is still in production with TLens. Can you say something about how long this product can last and if Honeywell has any thoughts on a sequel?
We don't know that. There are, of course, on and off discussions about the future. As far as we know, that product is still shipping. They hopefully will need more lenses throughout the year. It's still a very advanced product, a very, very competitive product, performance-wise also. I'm sure Honeywell has their roadmap, but of course, they don't show everything with us.
Also, in barcode, do you have customers in PoC who are proof of concept, who are showing test products to potential customers in this vertical?
We have many PoCs in that segment, very many of them actually in China. Absolutely.
We have one more question. This is from the medical vertical. How is the pipeline with Mini2P -related projects? Are there more in the process?
Yeah. I would say it has been a relatively quiet Mini2P quarter, I would say. As I remember Professor Winter from PhenoSys in a conversation I had with him, he said, you know, the Mini2P is still a very early stage of understanding how they can utilize it. There are many, many things that will happen there in the use and how it is deployed. Still early days there.
Yeah, the feedback we get is that they are very happy with the solution. There is one though, which we did announce, or we did not announce, but we got the PO this quarter. That is related to the new coating, which is from one of our existing customers, which may actually develop into a new revision of that product.
Great. That concludes our Q&A.
Wow. A super good Q&A again, at least the questions. Next event is Shareholder Meeting 21st of May in Tønsberg. The Q2 presentation when the sun tan is on, 14th of August, day after my birthday.
Wow.
Super good. Thanks all for your interest, for your good questions. As I have emphasized, and I would like to emphasize again, this is a start of a new era of poLight. I am super happy to see already the initial reaction after this announcement. Hopefully, our shareholders will support us in the future, exciting future. Thank you.