Good evening, everyone, and welcome to the Copen Corporation Second Quarter 2026 Earnings Conference Call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions. This conference is being recorded today, and the earnings press release accompanying this conference call was issued earlier today. Before we get started, I'd like to remind everyone that during today's call, we will be making forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These statements are based on the company's current expectations, projections, beliefs, and estimates and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those forward-looking statements. Potential risks include, but are not limited to demand for our products, operating results of our subsidiaries, market conditions, and other factors discussed in our most recent annual report on Form 10-K and other documents filed with the Securities and Exchange Commission. Although the company believes that the assumptions underlying these statements are reasonable, any of them can be proven inaccurate and there can be no assurance that the results will be realized. The company undertakes no obligation to update the forward-looking statements made during today's call. Copen Corporation's Chief Executive Officer, Michael Murray, will begin today's call with an overview of Copen's strategic progress and business development during the second quarter and the period that has followed. following Michael Kopin's CFO, Eric Manz, will review the company's second quarter 2026 financial results. I would now like to turn the conference over to Michael Murray. Michael, the floor is yours.

Well, thank you very much, Operator, and good afternoon to everyone and welcome to our second quarter. We laid out at the beginning of this year. In our U.S. Army color micro-LED program, FPV drone, and we continue to make this in our U.S. Engineering and Manufacturing in Dallas, Texas initiative, micro-LED-based transceivers and co-packaged opt-own achievements. Our color micro-LED development program under the U.S. government and does represent significant progress towards establishing a fully U.S.-based micro-LED display manufacturing capability that advances towards next generation, achieved over 150,000 nits of single-panel, full-color brightness to target. This required for daytime-readable, full-color augmented reality in the LED technology into U.S. Army ground soldier vision applications. This brings Copen closer to enabling full micro-LED bonding equipment at our Westboro This advanced system enables the precise attachment of the micro-LED array to the digital backplane, an essential step in micro-LED production, failing domestic manufacture. 2027, key U.S. supplier of next-generation micro-LED display technology. It could enable hundreds, as exactly what positions Copen, to gain access to future programs of record, like Soldier Born Mission Command and many others. We received the 50-duration U.S. defense micro-LED display as well with a weapon-mounted sight and as well beyond the Army program receivers, near-package optics, and co-package optic chipset advancements. In several conversations with prospective customers, it is clear that the lack of advancement in micro-LEDs in AI infrastructure applications is due to three competition and our customers who are trying to develop this technology internally are struggling with. And they happen to be the issues COPAN is uniquely capable of solving and have solved for LEDs is exceptionally difficult to do, either in a display or a transceiver configuration, which has 16 millimetres increasing yields, which makes our technology and capability unique to our transceiver portfolio as well. This capability will allow LEDs into one square millimeter GPU, CPU, and capability very soon. Talk and interference issues like dispersion and culmination of light sources, truly a difficult problem to solve. Technology in the worst possible environments. Decade, about their lifetime test data, longevity of supply. Now turning to Sentinel FPV, see multiple for the U.S. government's one-way attack, or OWA, domestic leadership in small drone and FPV capabilities, while reducing reliance on foreign-made FPV technologies. These are headsets that visually put the drone pilot in the cockpit, if you will, because of its operational awareness, fully block the operator's peripheral view, while preserving the operator's DDP winner's PV goggles, and volume orders DDP face for immediate delivery. Each of our current prototype engagements represents the potential for significant volume production, and we are preparing our U.S. production capabilities to meet the demand with speed and precision. Supported by the in-house OLED manufacturing capability, we enable strategic partnerships with drone manufacturers and system integrators seeking high-performance system to remain one of the fastest-moving opportunities through the balance of 2026. It goes from drone customers both inside and outside the drone dominance program. Significant growth we expect in this market next year. In fact, we are currently negotiating several large production orders for 2027, and we will update you on those engagements as they convert. This business, it also remains active in this community. Technology Demo Day's tour, shooting against the awards we announced earlier this year, and $5 million of orders in 2020. budget demands through 2030, quantity, or IDIQ, which provides additional upside flexibility above operational, approximately $1 million in annual utilization, data communication, and an engineering center, advanced R&D capabilities, focus capacity for neural IO optical solutions. It strengthens our domestic engineering capabilities, deepens our expertise, and accelerates our ability to deliver next-generation focus on defense. The industry's growing need for optical transceivers and co-packaged optics capabilities for several years to design and manufacture micro led and are patented by now applying that same expertise to build micro leds that transmit data this is not a copen is uniquely positioned to take given our micro led devices all micro led development specific and unique advantage in the marketplace fabric ai continues to advance on the roadmap we described last quarter with a 15 million dollar initial development order funding a demonstrable chiplet that we expect to compete by the end of 2026. Having the advanced design to customer is on track, and we expect to demonstrate the capability of the platform at CES in January 2027. Production anchored by a 1.6 terabit per second transceiver solution. Virtual engagement, which is quickly accelerating alongside this technology. Quantum computing and defense and government agencies on ecosystem. Co-Connect white paper technology developments with FPV drone programs affirms our decision to bring OLED deposition in-house. OLED deposition line to come online early in 2020. Position consumer demand and micro-LED milestones under our IBAS program in 2027 production into the FPV drone market into multiple new prototype orders tied to the drone dominance program. New platforms, global markets, programs, the long balance sheet, and the discipline that has defined our capital deployment. I'll now turn the call over to our CFO, Eric Manns, to review our second quarter 2026 financial results in further detail.

Hi, Bass, MicroLED program, our emerging AI infrastructure opportunity. And to be clear, when we speak about the momentum in front of us, we're not referring to a single product line or a single growth initiative. What we are seeing is progress on multiple fronts. Opportunities we have deliberately prepared for and are ready to execute upon as they scan a year ago period. Higher defense revenues from product revenue were $5.1 million in the second quarter of 2026 in the second quarter of 2025. With our government award, augmented reality, and as our heads-up display applications, internal research and development spend on fewer labor hours in 2026 as compared to $4.9 million in the second quarter of 2025. The increase was primarily driven due to higher professional fees and accrued performance-based compensation. Taken together, our internal R&D and SG&A results underscore a theme that we've been committed to for the past several quarters, maintaining operating expenses at a relatively stable level while our revenue base continues to expand. This discipline will continue to move our operating margin trajectory in line with benchmark for high-growth technology companies. On investments, $4.2 million gives litigation appeal. With respect to the legacy litigation, we do not expect any further updates. Closing remarks.

Thank you very much, Eric. Before we open up for questions, I wanted to leave you with this. The second quarter demonstrated that COPEN strategy is working. Our micro-LED milestones keep us on track for domestic production in mid-2027. Sentinel FPV is converting into real program traction as drone dominance program accelerates. Our new Dallas Design Center expands our capacity to deliver neural core defense franchise continues to provide a durable foundation underneath it all. The world manufacturing centers of bi-directional micro-displays to stay in production ahead, and our technology platform is now being deployed. We'll begin to demonstrate the full markets as we see continue and continue to execute on our strategic plan. With that on later, we can open the call to a few questions.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Thank you. Our first question comes from the line of Josh Sullivan with Jones Trading.

Hey, good afternoon.

Good.

So with the planned demo of NeuralIO at CS and 27, can you just give us a little more color on what we should expect to see or what proof points are going to be on display?

Customers last week in California, what they're looking to see is whether to demonstrate just that. We'll be sending bits, receiving the transceiver tie into semiconductor sizes, and then achieve the 1.6 terabits per second that customers last week, and they're blown away with. And then I guess, what has inbound interest from potential partners been since the first InterConnect white paper was released? And maybe what questions do those inbound parties have that might be answered in some of the white papers to come? You bet. Great question. So, rough order of magnitude, we've received over 200, roughly 200 or more, individual downloads of the white paper thus far. The number of companies that I didn't expect to see there, I can't mention them, back plain. Companies that, you know, and backplanes, the receive side of the transceiver, companies are really struggling with paper and immediately contacted us for meetings. We've got a great transmitter, white paper, and you should.

Perfect. Thank you.

Next question comes from the line of John Seichman with Stiefel. Please go ahead.

Hey, good afternoon. Thanks for taking my question. Hey, just on congratulations on the progress on the IBAS micro-LED, can you maybe just talk about what remaining catalysts we might see for the remaining year? You had earlier talked about potential follow-on funding for some capacity and just was seeing if that was still on track.

I'm pleased that the Army is pleased with our progress. We're still working very hard, which we expect to in Q4 of this year, to finish off this year to provide the industry and the government with samples next year of the color micro-LED. So those are the next milestones that we have, and the team is working very well. We do expect funding for potentially other devices as well, thinking that micro-LED will have its home in other applications, not just soldier-born mission command type of vision systems or thermal weapon sites or night vision goggles. We're actually seeing some other demand from the Army for other devices, so it's too early to talk about those as potential wins for us just yet, but there is active conversation going on for us.

Thank you, and if I could just slip in one for Eric as well. The $45 million in orders year-to-date, that's really helpful, but there has been some changes in what you report in your financials with your remaining performance obligations. I think that was related to the deconsolidation of Europe. Can you just maybe reconcile what those changes were with the numbers you're reporting today? Thank you.

Revenue loss to us right now, but when we remeasure, we end up with a deconsolidation.

But on the backlog specifically, your backlog was down in Q1 versus Q4. You've got that large targeting order after the quarter. I was just wondering how to reconcile some of these backlog numbers.

Yes, from the backlog, John.

We'll follow up afterwards.

Thank you. Yeah, sure.

The question comes from the line of Alex Furman with Lucid Capital Market. Please go ahead.

Hey, guys. Thanks very much for taking my question. Can you tell me about what investments need to be made in order to scale production of Sentinel, SPV, and how long those investments will take, and then any sense on when you might know how many units could be associated with the drone dominance program?

So the major investment, which we did this year, million dollar number, that's the major. The rest of the eyepieces that we need to manufacture are current CapEx and OpEx to do so. And that's the big reason why we moved to just going to be more profitable to do so. Part of your question, we expect to see more orders by the end of this year. Gauntlet 2 goes off shortly. And we've been seeing the Pentagon actually play, but then there's a translation between them placing orders in our core, we should have a very good order book around our Sentinel FPV for 2026. And certainly, we'll still be taking orders in the early part of 2026.

Okay. Thanks, Michael. That's really helpful. And then, you know, on Sentinel, it's really interesting that you're one of the only FPV goggles that enables peripheral vision. It seems like that would be a really important feature on the battlefield. How is it that you're able to accomplish that when others can't? Is that primarily a matter of the level of brightness on the display, or are there other factors that contribute to that?

Great question. It boils down to what I talk about all the time, which is application. We chose to have a non-occluded version, meaning we don't fully believe that he or she will want to see their feet and keep their eyes on the rifle and eyes on the horizon for any threats. which is usually a team of four, one pilot, security personnel, we want to be able to reduce that level of personnel for our environment. But many of the goggles, but that's not where they're going to be coming from in the future.

Okay, that's really helpful. Thank you very much.

Your next question comes from the line of Austin Moeller with Canaccord Genuity. Please go ahead. Hi, good afternoon.

So just my first question here, how should we be thinking about the market or the TAM opportunity for the micro-LED transmitter component within the AI data center infrastructure space versus the receiver side?

Great question. Thanks, Austin. Good seeing you today. So when I think about the market, three chunks. The first market is our transceiver portfolio. will sit likely between the second part of the market that we consider. That is a very, and in some cases, receiver technology. The receivers themselves come from things like photo document and camera technology, micro-LEDs, not that much investment, very hard to do in a transceiver. Director companies is transceiver for LEDs. By the end of this year, for LEDs for the market that I think about segmenting the market, the market, it's 60%.

Okay. And as far as the manufacturing facility, so, I mean, you're going to initially be building these micro LEDs for the AI infrastructure market on that soldier-born mission command production line. Obviously, it sounds like you have a lot more demand out there than you have production capacity right now. So at what point might you start looking at building out additional capacity? What kind of customer signals have to be sent first? And could they provide some of that customer-funded CapEx or R&D to make that happen?

Absolutely. And that's starting to form up right now. To be clear, the IBAS is funding a lot of our learning and development. Secondly, the government is actually going to provide them with lower costs because of our utilization of their power production line will go up because we'll be shipping AI infrastructure micro LEDs. It actually benefits the government. So when we told them, they were quite happy with that. And then lastly, we produce in our production line, the quicker, better, faster our yields will become. Clear yield number, we'll be able to understand how many wafers we're going to have to start and what our yields will be and therefore how many devices will come off our production. So packaged optic, near package optic, as well as potentially other foundry services that we're engaged in negotiations on, TBD. We're companies that are willing to support us in helping us grow that capacity, to work with us, to grow that capacity, because they too, ear-packaged opt-in, there was, I guess, an edict. I'm not going to continue. So we think the government will be there to support us with volumes if we need it, and we think industry will be there to support it. We'll make that decision until about this time next time.

Excellent. Exciting time, so I'll pass it back.

Your next question comes from the line of Jason Schmidt with Lake Street Capital Markets. Please go ahead.

Yes, thanks for taking my questions. Michael, I just want to follow up on your comments on the strong international demand. And I guess specifically, can you update us on how things are progressing with Theon and how your European business is tracking?

Firstly, with Theon, things are going well that they gave us to connect Night Vision Goggle. So that's just been completed. They're in testing now. I expect that testing to go well, and hopefully we'll move to production rather quickly. But they just got their new prototypes. We're working with Theon on a number of different opportunities. Two companies are working well together, in fact, for a few weeks, and opportunities that I don't think we would have seen before.

No, that's helpful. And then just as a follow-up, I know there's a lot of moving parts with sort of the revenue mix, but how should we think about gross margin trending the rest of this year?

Yeah, I think the gross margin story is going to be good as we progress through the rest of this year and into next. We certainly see improvement in this quarter, and we're expecting that to continue. We look at it from the profile and absorption of those, exactly what we've been saying right along. Our fixed costs are not moving. The volume in the business is what's actually driving the margins to be.

Okay, perfect. Thanks, guys.

Your next question is from Christian Swab with Craig Hallam Capital Group. Please go ahead.

Great, thanks. Eric, you talked about exceeding previous guidance in the second half of the year. I think your guidance last quarter for the year was 52 to 60 million. Do you have a bracket of guidance that you're anticipating for the year now? uh we're looking at exceeding the numbers that we last initial guidance uh official guidance number or range okay that's fair and then and then as we think about you know some of the bigger opportunities you know michael do you anticipate can you give us a range you know the the sentinel one, the first-person view drone opportunity seems like it could be very strong in 27. Can you give us some color of the range of opportunities that could represent in 2027?

It's exciting. It's at least, you know, it's definitely tens of millions of dollars in new customer orders and deliveries that we would expect in 2027, our own dominance gauntlets, provides us a different mix. What I mean by that is there are some companies that we're partnered with that may not win a certain amount of volume. They're getting awards upon them. Millions of dollars actually depended on who wins.

Yeah, that's fair. And then as we look at IBAS and FAMC and the lines being ready, Would you expect to, or would you be disappointed if you did get, would you expect revenue in calendar 2027 from either or combined?

Confidence is growing. Our micro-LED in front of the major prime will also be exceptionally high. And at the very least, we see some volume early 2027, but the main production.

Great. And then lastly, just on the Nero I.O. platform, would you anticipate that from the numerous different opportunities that you highlighted that you would have production orders and revenue from the Nero I.O. platform in 2027?

I don't think production in 27 will happen in terms of revenue because we're getting a significant amount of content. My tentativeness is something that we can build, and I think the answer is this is something that our customer development and tape organization that we need to have with Fabric AI. Revenue for 2027, I doubt it. It would likely be 2028. But we would see development revenue or development orders. We expect that to be in the…

So if I just sum those three up, plus a little bit more success with Neon Weapons and Collins and Darkwave and health care, we're on the cusp of substantial revenue growth in 27. Is that fair? compliance.

And we do have 100 million in sight for 2028 potential for 2027, albeit a small potential. But we're having the team prepare for SOX compliance in 2027.

Great. No other questions. Thank you.

Your last question comes from the line of Martin Yang with Oppenheimer and Company. Please go ahead.

Hi, thank you for taking my question. A quick question on OLED.

Once you have your in-house tools ready online for 27 how do you think that could impact your profitability good to hear your voice i think martin we use our own we'll just be cannibalizing our own currently have deposition in europe with and reducing that margin stacking that we're paying for right now so whenever we deposit oled in our european margin which so we think we'll see at least 15 points of gross margin improvement next year by depositing our own OLED. In fact, I think that's a low number. If it's that low, I'll be disappointed.

Got it. I will follow up, if I may. Can you maybe directly talk about the capacity we'll bring online once fully wrapped? Do you have the capacity to go fully in-house, or do you still need some portion of outsourcing capabilities?

Yes.

We'll be fine internal. The system that we have to produce, at least for the foreseeable future, the demand that we have for first-person viewer drones, their programs, at least for 2027 and 2028. To add capacity to our OLED production line, it's actually quite easy and not that expensive. We would just add another reactor, probably another node to our reactor, 10%. So it's a very flexible system. one that we can expand and grow our volume.

Thank you. This now concludes our question and answer session. I would like to turn the floor back over to CEO Michael Murray for closing comments.

Joining us today, and a big thank you to the employees of Copen and our operations team for delivering a great quarter and four quarters in a row of excellent quality. Thank you for doing everything I've asked you to do.

Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines and have a wonderful day. Thank you.