Good day, and welcome to the Coppin Corporation's Second Quarter 2021 Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Richard Snyder. Please go ahead, sir.
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 2nd quarter results at a high level. John will conclude our prepared remarks and then we'll be happy to take your questions.
I'd like to remind everyone during today's call taking place on Tuesday, August 3, 2021, We will be making forward looking statements as defined in the Private Securities Litigation Reform Act of 1995. These statements are based on the company's current expectations, projections, beliefs and estimates and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those forward looking statements. Potential risks include, but are not limited to, demand for our progress, operating results of our subsidiaries, market conditions and other factors discussed in our most recent annual report on Form 10 ks and other documents filed with the Securities and Exchange Commission. The company undertakes no obligation to update the forward looking statements during today's call.
And with that, I'll turn it over to John. Thank you, Rich. Good morning, And thank you for joining us to discuss our 2nd 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. 2 new programs Enter low rate initial production during our 2nd quarter. And the 3rd expect to enter low rate production in the 4th quarter. During this quarter, We announced an additional $1,600,000 follow-up order for a high brightness thicker crystal display for the F-thirty 5 drone strike fighter program. With deliveries Scheduled through the Q2 of 2022.
Additional orders are expected throughout the lifetime of this program. For the SWSI Thermal Weapons Site Program, There are customer requests. We reduce shipments of our product during the quarter To our customers making system and production enhancements, we are working closely with our customer. We expect the lower shipment rate to continue during the Q3. We expect to increase the rate and make up some of the shortfall in the 4th quarter.
Despite the short term slowdown, there's no change in the overall profile of the program And demands remains very strong. I would like to stress that There is no change in the overall outlook and the profile of the program. And in fact, we expect soon to receive a significant follow-up order for this program. It will continue delivery into 2022. Also, We are pleased with strong demand from our enterprise customers in Q2 and expect the momentum to continue.
As discussed with our previous call, We have continued to increase our R and D activities as we see great opportunities in the coming augmented and virtual reality space. In fact, Our customer fund R and 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 net HDR Green OLED Micro Display. This leading edge display can incorporate our dual stack OLED structure For ultra high brightness and unique padding, pistol 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 It's believed to be the 1st all plastic pancake optics in the world. While the pancake optics are much thinner, Conventional optics, it is important to note that previous PANCA optics need at least 1 spherical glass lens To avoid image artifacts caused by bifringes of currently available plastic material, Our new patent pending or plasticpancake optics with aspherical lens It's sufficiently lighter than pancake glass optics, but also provide a better image quality At much lower cost. For years, bulky and heavy headset And hindered consumer adoption AR and VR glasses. Our new plastic pancake optics enable an entirely new avenue for the industry to design, Manufacturer and manufacturer's stylish, super light, compact VR, AR and MR High performance smart glasses and headsets.
We believe consumers will. We want to have. We have received strong interest from the market. As in Q2 also, we announced a multiyear development agreement And expect to demonstrate a 1 inches diagonal full color 2 ksx2 ksledmacrodisplay 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 This collaboration will expand our microdisplay portfolio, making us The world's only provider of a complete suite of LCD, LCOS, OLED and LED microdispione silicon, our breadth of technology and product capability We're coping in the unique position of being able to provide our customers solutions that best fit their product and application needs. I would also like to stress my recent participation In the 3 part webinar series ARVR, the paradigm shift to smart glasses start now, which drew over 500 participants during the live event. Many of homes are actively involved in the next generation smart glasses and assets. During the 3 part series, we discussed the past covering the initial efforts To create ARVR solutions, the present addressing the current state of the art technologies and the future, which address the future ARVR smart glasses offering a roadmap to successful product developments.
All three segments have active and engaged Participation are on the attendees and are available on Kopin's website atwww.copin.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 ARVR in our products and applications. Many of you may have followed the increasing discussion Of the transformational arrival of the metaverse, metaverse definition Still not too well defined. However, in my view, as we discussed in my webinar, It is composed of ARVR hardware, smart glasses and platform and application software providing a unique exciting user experience to consumers.
This radical transformation will happen and it's already happening in Defense Enterprise segment and will soon arrive in the consumer sector. As we stress have stressed, the ARVR hardware will come first. The technology advances and market conditions are very favorable And Kopin is very well positioned to capitalize. Now, I'll 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 Q2 ended June 26, 2021 were $9,900,000 compared with $8,800,000 for the Q2 of June 27, 2020, a 12% increase year over year. Product revenues for the Q2 ended June 26, 2021 were $6,900,000 compared with $6,700,000 for the Q2 of June ended 27, 2020. Our defense product revenues for the Q2 ended June 20 2021 was $3,800,000 compared with $4,500,000 for the Q2 ended June 27, 2020.
As John previously discussed, during the 3 months ended June 26, 2020, we reduced shipments of our thermal weapon type system to a customer Who's making system and production enhancements? We expect the lower shipment rate to continue during the 3rd fiscal quarter and then increase in the Q4 of 2021. Whether we can make up the revenues during the remainder of 2021 is dependent on how quickly the customer completes their process. Our industrial product revenues for the Q2 ended June 26, 2020 were $2,600,000 compared with $1,400,000 for the 2nd quarter Ended June 27, 2020, an approximate 86% increase on the strength of the sale of products used for 3 d 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 $3,000,000 for the 2nd quarter ended June 26, 2020, compared with $12,100,000 for the Q2 ended June 27, 2020, primarily due to an increase in funding for U.
S. Defense Program. Cost of products sold for the Q2 ended June 26, 2020 were $6,000,000 compared to 4,800,000 The Q2 ended June 27, 2020, the increase in product revenues as a percentage of net product revenues for the 3 months ended June 26, 2020 as compared to 3 months ended June 27, 2020 was primarily to lower manufacturing efficiency driven by the lower FWFI volumes. Regarding the global shortage of semiconductor components and production capacities affecting many industries, While we have in some cases had to find alternatives of forces, we have not experienced any shortage issues during the 1st 6 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 Q2 of 2021 were $3,900,000 compared to $2,200,000 for the Q2 of 2020, a 75% increase year over year. R and D expenses for the 3 months ended 2026, 2021 increased as compared to 3 months ended June 27, 2020, primarily due to an increased spending on U. S. Funded development programs and internal R and D expenses for OLED Development.
Selling, general and administrative expenses were $4,000,000 for the Q2 of 2021 compared with $2,900,000 for the Q2 of 2020. Excluding the non cash stock based compensation costs, SG and A expenses were $3,700,000 for the Q2 of 2021 compared with $2,800,000 for the Q2 of 2020, a 30% increase. The increase in SG and 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 Q2 of 2021 compared with $6,000 of expense in the Q2 of 2020. During the 3 months ended June 26, 2021, we recorded $100,000 of foreign currency gains as compared to $10,000 of foreign currency gains for the 3 months ended June 27, 2020.
Turning to the bottom line, Our net loss attributable to the controlling interest for the Q2 of 2021 was $3,800,000 or $0.04 per share compared with net loss to controlling interest of $1,100,000 or $0.01 per share for the Q2 of 2020. Non GAAP net loss attributable to controlling interest the Q2 of 2021 was $3,600,000 or again $0.04 per share compared with non GAAP net loss to controlling interest of 1,000,000 or $0.01 per share for the Q2 of 2020. Open's cash and marketable securities were approximately $30,700,000 at June 26, 2021 as compared to $20,700,000 at December 26, 2020. Net cash used in operating activities for the Q2 ended June 26, 2021 was approximately $5,400,000 During the 3 months ended June 26, 2020, we sold 92,335 shares of our stock under our ATM program for gross proceeds of approximately $832,000 before deducting expenses of us A by S of $24,000 For the 6 months ended June 26, 2020, we sold 2,496,690 shares for gross proceeds of approximately $16,800,000 before deducting broker expenses paid by us of approximately $500,000 pursuant to our existing ATM and previous ATM agreement. On June 28, 2021, the 1st day of our fiscal Q3, we sold 600,000 shares of common stock for growth proceeds of $4,800,000 before deducting broker expenses paid by us of approximately $145,000 pursuant to our existing ATM program.
2nd quarter amounts for depreciation and stock compensation expense are attached in the table into the Q2 press release. The amounts discussed above are current estimates and listeners should review our Form 10 Q for the Q2 of 2021 for any possible changes and of course additional disclosures. And with that, operator, we'll take questions.
Thank We'll now take our first question. It comes from Glenn Maxim of Ladenburg Thalmann. Please go ahead.
Yes. Hi. Thanks for taking the questions. So just as far as the delays go for this quarter and I guess next, can you give us some sense, just a little more color on kind of what How confident you are or what gives you the confidence that there's going to be a bounce back in the Q4 on that? And just some color The degree of bounce back whether or not you think you can make up a majority of the revenue lost or if you need to or if there'll be some Further push out to 2022?
Sure. So, 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.
And so the extent that you can make yield improvements, drive costs down, that all falls to the bottom line. And we share in that. And so they've come through with some ideas for yield improvement on the overall system. They slowed shipments As they implemented those improvements, it requires us to do some engineering to work with them to make sure there's no downstream effects, And that's what we're doing. And so how fast we can make it up, we've talked to the customer, they are very eager To make it up themselves, it affects their revenues too.
So our interests and their interests are aligned. So it's just a matter of going through and making sure all the testing done properly and that there are as we mentioned no downstream effects and then once that happens we hopefully can turn this thing on. And that will just be a matter of how many weeks are left and how much volume we can get out of the facility over the rest of the quarter. We're optimistic we can put a pretty good dent in the Q4 if we can get this thing turned on soon.
Okay, Great. And as far as the new programs that went into low rate initial production, can you talk about any specifics about what exactly And just kind of sense of how it will ramp in the back half and into next year?
Yes. So it's a weapon site. 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 So we did recognize product revenues 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. So it hasn't gone to full rate production, which will happen next year.
Thanks, Rich. And so the 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. So, and obviously the downtick in the weapons So being that that will continue in Q3, should we expect kind of similar margins in Q3 and then perhaps Starting to improve in Q4 and beyond. Is that a good way to think about the model?
Yes. Great.
And then I just had a question about the new LED microdisplay, you talked about kind of a global leader there as the partner. Maybe I don't know if Rich, John is the best person to talk about it, but just love to get more insight into How big that could be down the road and just any other color on the upside that opportunity presents would be great.
Yes. Glenn, this is Jonathan. This is a very interesting program, a very exciting program. As you will know, We obviously have been working on LCDs and outcasts and recently really focused on micro OLED. But micro LED has a peculiar features.
It can be very bright in some way people think it's the ultimate display. You can do the micro LED, then the brightness is so high, it can be so efficient. They'd be very, very good for see through AR optics, optical systems. As you well know, The augmented reality optical see through systems in many ways is the ultimate dream for everybody. So this is it.
This is the ultimate dream, but technology is very difficult. We actually pioneered It's processed on silicon in 1991 with DARPA. DARPA actually wanted from day 1. Just going back, 1991, they are finding us to do that. We stopped it because we don't think it can do a color very well.
And now we're reactivating the whole process as well funded from customer and we have a very big company. We already disclosed it from Japan as a global consumer and consumer is enterprise consumer, both type of company and we're very excited. I think in 2 years, we'll have that 1 inch 2 ks by 2 ks full color, if we achieve that, that will be the world's leading Display, there's no such ambitious program yet and will be the first one. We will provide the backplane design. It's a very unique design that we Pedaling right now, yes.
Great. That's helpful. Okay. That's 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 on to the Looking at the Glenn brought up the LED display. You mentioned a consumer company helping you develop that 2 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, full color 1 inches 2 ks by 2 ks display. Not the end user system. As you well know, it's a very good question because a lot Just a display alone when I solve the problem of the ARVR consumer application, it is not true.
Optics is just as important. Universal optics couldn't display Maybe 30,000 times by optics and give you a very clear image. And that's why the Pankaj Optics Tanki Optics, that is actually our trademark. We actually use Tanki Optics in the defense industry for quite a while. But because it does make it as in high performance optics.
But in those cases, they usually have glass in there, Glass lens, which is heavy, it's okay for the soldiers, but it's not okay for consumers. So This all plastic optics that go with our very high performance display, together we will provide Whole units of people. Yes, for the product play only, we have Individual, it's separate programs are optics. Okay. So That was going
to be my next question, John. Thanks for leaving me in. So the this optics development, Is the plastic cast, number 1, is the development there sponsored by a consumer company or was this something that Gopin Endeavor to solve on its own. And could you give us a little insight on how you're pairing it with both This LED development and the OLED development in AR and VR?
Yes. Thank you for asking the question. I think for any ARVR systems, you need a display And you need optics and you need a very, very well designed package assembly. And we learned this and we have been doing this for defense and enterprise world. In fact, for defense world, Therefore, for instance, avionics and gun side, we have delivered 100 of 1000 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 you're automatically sealed? And with those know how, Kopin has accumulated a lot. And therefore, when we start looking at the consumer well, we recognize Not only at a very, very high performance display, you need a very thin, very well imaged optics. And PANCK optics, remember in the defense industry, we use very different kind of optics.
We actually provide optics To our customers. So we take pancake as the one for consumer. And then we're also trying to work With a vendor, a material company and we developed that special material that it has no biofringency fat. And therefore the whole plastic optics is unique and we're patterning like crazy. I think we've already filed 3 patterns on it and we're Finally more.
And I think with this, a very lightweight based, highly, VR asset is Very likely now, very likely. It's safer for us. The amount of waste saving is as we mentioned It's significant. I think it's at least more than 10 grams per eye. So you have Very significant savings.
It was a good, a better actually a better image quality to your eyes. It's just something that people dream about it. Nobody can crack the nut except that we did.
So John, was it really a drive in trying to shave weight or is it also a safety factor?
Okay. We never mentioned safety factor. It is also a safety factor. That's absolutely true. The glass however is pretty strong usually unless you have some strange effect, but it is really actually everything, cost, Size, weight, image quality and now of course, thank you, Kevin, you mentioned it, it's certainly safer.
Okay. So just getting back to sort of my thinking on this, John. Was this something That you wanted to take your team to develop in addressing all of those things? Or did you get a 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 be a talking product. So Because our technology is so advanced, we decided to do that ourselves. Now of course, we have partners to develop The material, we're certainly not a chemical company. So 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 it do you see this development John transferring to some of the other Programs that you have like with the Scott Fire Helmet and those types of environments where Maybe plastic hasn't worked so well before?
We this is a very good question. We are so if I have to say, we have a lot of strong interest after we announced it. And there's range from Enterprise all the way to consumer, I must say the consumer More extreme. Most everybody who are consumer Tile headsets We'd like to try to drive this type of optics because it seems on paper, it is the ultimate display. I'll give you an update.
I'm sorry.
Okay. Yes, yes, yes. Good. Yes. So that sort of gets me to the to another line of questioning, John.
Help me understand How Kopin is looking at LED versus OLED? I just want to understand where you see Obviously, you've mentioned that LED becomes the ultimate in solving see through AR. But I'm wondering how You see OLED embracing VR, maybe nearer term or maybe you could just help me Make sure that I understand the way that you're thinking about it.
Yes. I think in my webinar, I tried to outline, of course, nobody knows exactly how the future will hold. My feeling, our feeling is For VR application, consumer VR application, Micro OLED is great enough. My colleague can give you the low cost high brightness, enough brightness and the resolution you need. And we'll of course continue to try and improve the brightness of the micro OLED.
So as you well know, our 35,000 Nits My call is a world record. We're using dual stack. So that is one area. But if we want to go anything over To about 100,000 nits, we feel that microelectronics will not achieve certainly not in the next 5 to 10 years. So that's why microLED comes in.
Now if you need AI application where you need maybe anywhere between 50,000 to 100,000 little higher, I think we have micro every deal come in. The technology is still quite Immature right now. I think we're talking about 3 to 5 years away for micro LVT to begin to come into the market. So right now, the next 5 years, Michael, I'll let for VR and some AI applications. And we're making great progress there too.
So at the end, we try our optics model is very simple. We provide optical solutions, the modules, the optics, displays, Packaging for ARVR MR. We do not make the end user systems with licenses So people who make end user systems, oftentimes the equities in there. I mean, as you well know, we have made a few Arrangement are ready and we're going to continue to make arrangements licensing to people who make end user systems. But we do not sell and market end user systems in 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 and company in China in the development of MicroLED. So 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 or silicon actually was patented by myself and people in Kopin Many years ago, unfortunately, the 3 patents that we file and issue to us Expired 2 years ago. Okay. The one the fundamental pattern expired 3 years ago. So however, we do have improved patents And then what we have is we actually designed the backplane, the silica as you will know, Displays are becoming display on chips.
Is it really IC chip with LCD or LED Or maybe I indicate LED on top of the silicon chip. So to drive The LED microdisplays via different kind of architecture than micro OLED. So we designed that, we're patent that And such architecture now used either for monochrome, which is the J Bird in China is putting their LED Arrey, on our backplane, so our backplane is ours, okay. And then the display itself when it come back to us is coping. Now using similar pilot backplane, we actually work with the Japanese global company So put LED array on us and then you will have a display micro LED display that ship it back to us.
So we control the backplate and we signed it specially unique design and we actually have a new product We are paying the display product.
Okay. Okay. So it's fair to assume
Tape is on monochrome, not color. Okay, monochrome,
Right. The Japanese one's color.
Color, yes. Okay.
Okay. And then you'll in working with both those companies, you'll preserve the IP In the design of the backplane and that won't be shared.
Yes. In many way display right now on silicon, the brain is in the silicon. Silicon is a brain and now you put different materials to make it emit different color. There are different case LCD or All for the matter LED, but the brain is in the silicon and we believe silicon is a driving force for all the dose displays.
Okay. Thank you. You gentlemen mentioned Avionics As sort of the umbrella for the 3 programs going well, I guess 2 are in LRIP now. I just want to clarify, are all 3 in avionics? Or Help me make sure that I have that in my little brain correctly.
You have it incorrectly. So I said one of them is a scope and one is an avionics of the 2 that are in LRIP now.
Okay. And the 3rd that's going to LRIP expected in the December quarter, Can you speak to that one, Rich or no?
No. We'll discuss that in the Q4.
In due course, very well. 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 ARVR.
Yes, I'm sorry. Let me clarify. I asked with specific intention to address the consumer market?
That's a hard question to answer, Kevin, because If you think about it, I mean everything that we do, particularly in the military, we have an eye towards the consumer. That's the whole idea that you develop in the military, moves to industrial and then ultimately ends up in the consumer. No, I understand, Rich.
I understand. But you as I I mean, as I try to interpret What you've been saying, you do have particular customers from the consumer side Funding development. And I was just wondering how many of those customers you had?
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. As you want to know, there are companies who make Google Glass and in fact we are a supplier of Google Glass. It could be a consumer.
In fact, it was a consumer. If they can turn to enterprise, maybe go back to consumer again. In the case of Microsoft HoloLens, it was a consumer, they go to defense, And maybe go back to enterprise again. So it's very hard. I think this 3 Rich is right.
All our customers Kind of moving from A to B to C, C to back to B, into A again. So we are having quite a few customers supporting us for applications which eventually could be Consumer and maybe it's consumer game, but at the beginning maybe they will go to enterprise. So we have 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?
Understand if I understood 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.
We'll now take our next question. It comes from Jeff Bernstein of Cowen. Please go ahead.
Yes. Hi, guys. Just a couple of quick questions.
I know you
guys have a JV with Lenovo, not sure exactly what's come out of that, but They've started to sort of pre advertise something called their ThinkReality A3. And I'm wondering if that's Under that program or is that something else with a different vendor?
That's a different program. We are working with Lenovo NV, which is a joint venture of Novo with several other companies in China. The one you mentioned is actually came from Novo
Got you. Okay. And then there was strength in the Industrial segment. Can you just differentiate for us what was that from the 3 d Machine Vision side, the 4th dimension LCOS piece or was that RealWear?
Yes.
It was majority was the FDD.
The 3 d metrology, which is you're right, the FDD, Yes. That business as well we have been working with it for the past last 4 or 5 years is really taking off right now. The industry now recognized maybe because of pandemic or not that many of the Circuit boards, which are always 2 d, now moving to 3 d, much higher packaging densities and thinner And 3 d metrology is perfect for in the manufacturing sector for 3 d I mean analysis of circuit boards. So that business really taking off and we're very excited about it. I think it's going to continue As the order factory 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 Acxiom Asset Management.
Hello, John.
Hi, John. Could you
help us understand Well, we know RealWear and SOLOS aren't under your umbrella anymore, but could you explain how we benefit from their success? And maybe you could tell us your perception of RealWear's market share maybe in the marketplace?
Okay. I will answer some of the content here. This is a good very good question. I think we've got our strategy. As you well know, in the early years, We are in order to promote our component, our components is display optics and assembly, the modules, the whole optical modules.
You want to promote our optical module, we actually create systems, reference systems in some ways very close to Product Systems. And during the process, we actually come out with a lot of technology and the whole assets. And we decided to license those ideas and actually help those companies to make those assets. So RealWear is one of the cases they license our headset, which is actually GoldenEye, we call it GoldenEye And we add equity on it and they also buy components and they pay royalties. So there are 3 components there, royalties, Equities and product components and RealWheels doing very well.
As you will know, I will say there's really For enterprise, well, for headsets, I would say they are worth leading now and we are growing with them. So we're very happy with that. We're going to have 3 ways to make our return of technology. We license it large to them. The second case of SOLO is the same way.
SOLO is again with license and it transforms technology to them. The product is coming out. They came out once, version 1 last year during the pandemic And that they sold out the 1st round. So the 2nd round of the product coming out, in fact, in August this year, this month. So again, we have equity there, we have royalty there.
And so it's a very good and then we have a third one, which we just announced About 6 months ago, we were designing and helping them build a headset for surgery, Right. It's a company in San Diego and that company is actually starting to pretty well. They're funded by a very big Medical Device Company. And so I think this particular strategy will continue. I think we will have more of those very interesting event because what people want is not just wanting our optical modules.
They actually learned that we have so much know how building assets for them for special use. And that's what we do. We get equities, get products, get royalties. And I think this is another segment of our business strategy, which is not well understood. I think this could 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
Thank you for joining us this quarter and we look forward to seeing you in the next quarter. Thank you.