Good day, and welcome to the Kopin Corporation second quarter 2021 earnings call. Today's conference is being recorded. At this time, I would like to turn the conference over to Richard Sneider. Please go ahead, sir.
Thank you, operator. Good morning, and welcome everyone, and thank you for joining us this morning. John will begin today's call with a discussion of our strategy, technology, and markets. I will then go through the second quarter results at a high level. John will conclude our prepared remarks, and then we'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 products, operating results of 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. With that, I'll turn it over to John.
Thank you, Rich. Good morning, and thank you for joining us to discuss our second quarter results. I first want to start by expressing our hope that you and your families continue to stay safe. We continue to see growing demand for our products across our key business segments, including defense, industrial, and consumer. In our defense business, we remain on track on our many development programs. Two new programs entered low rate initial production during our second quarter, and the third is expected to enter low rate production in the fourth quarter. During this quarter, we announced an additional $1.6 million follow-up order for our high brightness liquid 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 FWS-I Thermal Weapons Sight program, at our customer request, we reduced 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 this 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. In fact, we expect soon to receive a significant follow-on order for this program that will continue delivery into 2022. Also, we are pleased with strong demand for 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. Our customer-funded R&D revenue increased approximately 60% year-over-year as a result of growing interest in our next-generation 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 a 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 Kopin, but for AR and VR applications across all sectors. Our new HDR green OLED microdisplays 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 Kopin, and it's believed to be the first all-plastic pancake optics in the world. While the pancake optics are much thinner than our conventional optics, it is important to note that previous pancake optics need at least one spherical glass lens to avoid image artifacts caused by birefringence of currently available plastic material. Our new patent-pending all-plastic pancake optics with aspherical lens is sufficiently lighter than pancake glass optics, while also providing better image quality at a much lower cost. For years, bulky and heavy headsets have hindered consumer adoption AR and VR glasses.
Our new plastic Pancake optics enable an entirely new avenue for the industry to design, manufacture stylish, super light, compact VR, AR, and MR high-performance smart glasses and headsets that we believe consumers will want to have. We have received strong interest from the market. As in Q2 also, we announced a multi-year development agreement with a leading global electronic company for full-color LED microdisplays on silicon and expect to demonstrate a 1 in diagonal full color, 2K by 2K LED microdisplay within 24 months. As a reminder, LED microdisplays 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 microdisplays.
It's also important to note that this collaboration will expand our microdisplay portfolio, making us the world's only provider of a complete suite of LCD, LCOS, OLED, and LED microdisplay on silicon. Our breadth of technology and product capability put Kopin 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 stress my recent participation in the three-part webinar series, AR/VR: The Paradigm Shift to Smart Glasses is Starting Now, which drew over 500 participants during the live event. Many of whom 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.
The future, which addressed the future of AR/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 Kopin's website at www.kopin.com. We are pleased and committed to our strategy. 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 product 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. 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 is already happening in defense and enterprise segments, and will soon arrive in the consumer sector. As we have stressed, the AR/VR hardware will come first. The technology advances and market conditions are very favorable, and Kopin is very well positioned to capitalize. Now I will turn the call over to Rich to discuss the financial detail of the quarter.
Thank you, John. Turning to our financial results, total revenues for the second quarter ended June 26, 2021, were $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, were $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, were $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 sight systems to a customer who was 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, it depends 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 products 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 the three months ended June 27, 2020, was primarily to lower manufacturing efficiencies driven by the lower FWS-I volumes. Regarding the global shortage of semiconductor components and production capacities affecting many industries, while we have, in some cases, had to find alternatives with 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 June 26, 2021 increased as compared to the 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 2021, 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 2021, 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 2021 was $3.6 million or, again, $0.04 per share, compared with non-GAAP net loss to controlling interest of $1 million, or $0.01 per share for the second quarter of 2020. Kopin'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 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 agreement. On June 28th, 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 in the Q2 press release.
The amounts discussed above are current estimates, and listeners should review our Form 10-Q for the second quarter 2021 for any possible changes and of course, additional disclosures. With that Operator, we'll take questions.
Thank you. If you would like to ask a question, please signal by pressing star one 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 Mattson of Ladenburg Thalmann. Please go ahead.
Yeah. Hi. Thanks for taking the questions. 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 what kind of changes your end customer had to make? I guess trying to get at 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 the degree of bounce back, whether or not you think you can make up a majority of the revenue lost or if there'll be some further push out to 2022.
Sure. 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. Keep in mind, a lot of the government contracts today are firm fixed price, to the extent that you can make yield improvements, drive costs down, that all falls to the bottom line. We share in that. 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. How fast we can make it up, we've talked to the customer. They are very eager to make it up themselves.
It affects their revenues too. Our interests and their interests are aligned. 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. Once that happens, we hopefully can turn this thing on, and then it 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.
Okay. Great. As far as the new programs that went into low-rate initial production, can you talk about any specifics about what exactly programs those are and just get a sense of how it will ramp in the back half and into next year?
Yeah. It's a weapon sight. It's an avionic product. As soon as we get clearance from the customer, maybe hopefully we can give you a little more color exactly who they are and what the programs are. We did recognize initial product revenues in the quarter, and hopefully it will just continue on. Again, this is initial low-rate production, so there is still engineering going on as these units are being shipped. It hasn't gone to full-rate production, which will happen next year.
Thanks, Rich. There's a gross margin was a little softer, and I guess that's a combination of those two factors. In the early stages, obviously the initial production doesn't have the same margin as something in full production. Obviously the downtick in the weapons sites. Being 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?
Yes.
Great. I just had a question about the new LED micro display. You talked about kind of a global leader there as the partner. Maybe, I don't know if Rich or John are the best person to talk about it, just love to get more insight into how big that could be down the road and just any other color on the upside that opportunity presents would be great.
Yeah. Glenn, this is John Fan. 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. 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, the brightness is so high, it can be so efficient, it can 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. This is it. This is the ultimate dream. This technology is very difficult. We actually pioneered and invented this process on silicon in 1991 with DARPA. DARPA 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. Now we're reactivating the whole process, and it's very well-funded from customer, and we have a very big company. We already disclosed it. It's from Japan. It's a global enterprise consumer, both type of company. We're very excited. I think in two years, we will have that 1 in, 2K by 2K full color. If we achieve that will be the world's leading display. There's no such ambitious program yet, and we'll be the first one. We will provide the back plane design. It's a very unique design that we are patenting right now. Yeah.
Great. That is helpful. Okay. That is it for me. Thanks, guys.
Our next question comes from Kevin Dede of H.C. Wainwright. Please go ahead.
Good morning, gentlemen. Thank you for taking my questions. John, just to go back onto the LED display Glenn brought up. 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?
It's a very good question, Kevin. Thank you for asking the question. For this particular project, it's a focus on just display, the full color, 1 in, 2K by 2K display. Not the end-user system. As you well know, it's a very good question because a lot of people thought just a display alone would solve the problem of the AR/VR consumer application. It is not true. Optics is just as important. You need very thick optics. You're going to magnify the image or display maybe 30,000 times by your optics and give you a very clear image. That's why the Pancake optics. Pancake optics now is actually our trademark. We actually used Pancake optics in the defense industry for quite a while because it does make a very thin, high-performance optics. 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. That's why these all plastic optics that go with our very high-performance display, together, we will provide a whole unit to people. Yeah, for the display only, we have individual separate programs on optics.
Okay. That was going to be my next question, John. Thanks for leading me in. This optics development, is the plastic cast, number one, is the development there sponsored by a consumer company, or was this something that Kopin endeavored to solve on its own? 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?
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 well-designed package assembly. 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 sight, 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? With those know-hows, Kopin has accumulated a lot. 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. Pancake optics, remember in the defense industry, we use very different type of optics.
We actually provide optics to our customers. We take pancake as the one for consumer. Then we also try to work with a vendor, material company, and we developed a special material that it has no birefringence effect. Therefore, the whole plastic optics is unique, and we're patterning like crazy. I think we have already filed three patents on it, and we're filing more. I think with this, a very lightweight-based, stylish, VR headset is very likely now. Very likely. It's safer.
Okay.
The amount of weight saving, as the way you mentioned, is significant. I think it's at least more than 10 g per eye. You have very significant savings. As well as it looks very good, and better, actually, better image quality to your eyes. It's just something that people dream about it. Nobody can crack the nut, except that we did.
John, was it really a drive in trying to shave weight, or is it also a safety factor?
Okay, we never mentioned safety factor. In fact, it is also a safety factor. Absolutely true. The glass, however, is pretty strong usually, unless you have some strange effect. It is really actually everything. Cost, size, weight, image quality, and now, of course, as I think Kevin mentioned it's certainly safer.
Okay, 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 of those things? Do you have a company that's helping you develop it and help sponsoring some of this development work?
The plastic optics is totally internally funded. We consider that plastic optics, either we license it, or we will become a Kopin product. Because our technology optic is so advanced, we decided to do that ourself. Now, of course, we have partners. We have partners to develop the material. We're certainly not a chemical company. We design it, we have our own software design lens, and we get people to build it, to mold it, and we deliver to our customer the final product.
Okay. 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 maybe plastic hasn't worked so well before?
That's a very good question. If I have to say, we have a lot of strong interest after we announced it. It range from enterprise all the way to consumer. I must say, the consumer interest are more extreme. Almost everybody who working on consumer-type headsets would like to try to this type of optics. It seems on paper it is the ultimate display. Ultimate optic. I'm sorry.
Okay. Yeah. Good.
Yeah.
That sort of gets me to another line of questioning, John. Help me understand how Kopin is looking at LED versus OLED. I just want to understand. 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. Maybe you could just help me make sure that I understand the way that you're thinking about it.
Yeah. I think in my webinar, I tried to outline, of course, nobody knows exactly what the future will hold. My feeling, our feeling is, for consumer VR applications, micro-OLED is good enough. Micro-OLED, it could give you the low cost, high brightness, enough brightness, and the resolution you need. We'll, of course, continuously try and improve the brightness of the micro-OLED. As you well know, our 35,000 nits micro-OLED is a world record. We're using two stack. That is one area. If we want to go anything over to about 100,000 nits, we feel that micro-OLED probably will not achieve, certainly not in the next 5-10 years. That's why micro-LED comes in. Now, if you 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. Right now, the next five years, micro-OLED for VR and some AR applications. We're making great progress there, too. In the end, our business model is very simple. We provide the optical solutions, the modules, the optics, 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. They oftentimes get equities in there. As you well know, we have made a few arrangements already, and we're going to continue to make arrangements licensing to people who make end user systems. We do not sell and market end user systems in Kopin.
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? Could you just sort of frame those two deals for us, please?
Yes. As you well know, we announced it several times. The initial work of LED on silicon actually was patented by myself and people in Kopin 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. However, we do have improved patents, and then what we have is we actually designed the back plane, 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. To drive the LED microdisplay, we need a different kind of architecture than micro-OLED.
We designed that, we patented that, and such architecture now used either for monochrome, which is the Jade Bird in China, is putting their LED array on our back plane. Our back plane is ours, okay? The display itself, when it come back to us, is Kopin's. Using similar type of back plane, we actually work with the Japanese global company to put LED array on that, and then voila, you will have a micro-LED display that ships out to us. We control the back plane, and we design it, especially with unique design. We actually have the end user product. We have it as a display product.
Okay. It's fair to assume.
Jade Bird's on monochrome. Not color.
Okay, monochrome. Right.
Japan is color.
The Japanese one's color.
Full color, yeah.
Okay. In working with both those companies, you'll preserve the IP and the design of the backplane, and that won't be shared.
Yeah. In many ways, display right now on silicon, the brain is in the silicon. Silicon is the brain. Now you put different materials and make it emit different colors. There are different case, LCD, OLED, or for that matter, LED. The brain is in the silicon, and we believe silicon is the driving force for all of those displays.
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.
You have it incorrectly. I said one of them is a scope and one is an avionics. Of the two that are in LRIP now.
Okay. The third that's going to LRIP expected in the December quarter, can you speak to that one, Richard, or no?
No, we'll discuss that in the fourth quarter.
In due course. Very well.
In due course.
Okay. Can you clarify how many customers are contributing to research and development revenue, with specific focus on AR and VR?
Well, almost all our applications are AR/ VR.
Yeah. I'm sorry. Let me clarify. With specific intention to address the consumer market?
Well, that's a hard question to answer, Kevin, because if you think about it, everything that we do, particularly in the military, we have an eye towards the consumer. That's the whole idea is that you develop it in the military, moves to industrial, and then ultimately ends up in the consumer.
No, I understand, Rich. I understand. As I try to interpret what you've been saying, you do have particular customers from the consumer side funding development. I was just wondering how many of those customers you had.
It's a very good question. Maybe we could step back. It's very difficult to answer, too, but I could answer it by answering this way. You want to know, there are companies who make Google Glass, and who, in fact, we are a supplier of Google Glass. It could be a consumer. In fact, it was a consumer. It turned to enterprise. It maybe go back to consumer again. In the case of Microsoft HoloLens, it was a consumer, it go to defense. It maybe go back to enterprise again. It's very hard. I think these three, if we reach this right, all our customers kind of moving from A to B to C back to B, to A again.
We are having quite a few customers supporting us for applications which eventually could be consumer, and maybe it is consumer again, but at the beginning, maybe they will go to the enterprise.
Okay.
We have a very active consumer support right now, and we're very glad that they support us.
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.
We're not really going to disclose our capital raising plans on the phone.
Okay. Thank you, gentlemen. I appreciate it.
Thank you, Kevin.
It comes from Jeff Bernstein of Cowen. Please go ahead.
Yeah. Hi, guys. Just a couple of quick questions. I know you guys have a JV with Lenovo. They've started to sort of pre-advertise something called their ThinkReality A3. I'm wondering if that's under that program or if that's something else with a different vendor.
That'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 the Lenovo parent.
Got you. Okay. There was strength in the industrial segment. Can you just differentiate for us, was that from the 3D machine vision side, the Forth Dimension, LCOS piece, or was that RealWear?
Both. Yeah.
Both.
Majority was the FDD.
The 3D metrology, which is, you're right, the FDD, that business, as well, we have been working with them for about the last four or five years, is really taking off right now. The industry now recognize, maybe because of pandemic or not, that many of the circuit boards, which are always 2D, now moving to 3D, much higher packaging densities and thinner. 3D metrology is perfect in the manufacturing sector for 3D analysis of circuit boards. 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.
That's great. Thank you.
Our next question comes from Craig Rose of Axiom Asset Management.
Hello, John.
Hi, Craig.
Well, we know RealWear and Solos aren't under your umbrella anymore, but could you explain how we benefit from their success? Maybe you could tell us your perception of RealWear's market share in the marketplace?
Okay. I will answer some of the content here. This is a very good question. I think we're going to outline our strategy. As you well know, in the early years, in order to promote our component, our component is display optics and assembly, the modules, the whole optical modules. In order to promote our optical module, we had to 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 whole assets. We decided to license those ideas and actually help those companies to make those assets. So RealWear is one of the cases. They licensed our headset, which is actually called an eye, we call it Golden-i, and we get equity on it, and they also buy components and they pay royalties.
There are three components there, royalties, equities, and buy components. RealWear is doing very well. As you well know, I would say they are really for enterprise wear, for headsets, I would say they are world's leading now. 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. We licensed technology to them. The second case with Solos is the same way. Solos, again, we licensed and transferred 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. The second round of the product coming out, in fact, in August this year. This month. Again, we have equity there. We have royalty there. It's very good.
We have third one, which we just announced about six months ago. We were designing and helping them do a headset for surgery. It's a company in San Diego, and 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 because 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. I think this is another segment of our business strategy, which is now well understood. I think this is going to be a very lucrative and successful strategy.
Thank you, John.
It appears we have no further questions at this time. I'd like to turn the call back to John Fan for any additional comments or closing remarks.
Thank you for joining us this quarter, and we look forward to seeing you the next quarter. Thank you.
This concludes today's call. Thank you for your participation. You may now disconnect.