Q2 2021 eMagin Corp Earnings Call
[music].
Ladies and gentlemen, your conference call will begin shortly please continue to standby and thank you for your patience.
[music].
Good morning, and welcome to imagine Corporation's second quarter 'twenty 'twenty, One earnings conference call.
Please note this event is being recorded.
After managements prepared remarks, there will be a question and answer session.
I'll now turn the conference over to Mark catch imagine CFO. Please go ahead.
Thank you and good morning, everyone. Welcome to imagine second quarter 2021 earnings conference call before we begin I would like to remind you that in the following prepared remarks, and our Q&A session. We will make statements about expected future results and may be forward looking statements for the purposes of fed.
Securities laws.
These statements relate to our current expectations estimates and projections and are not guarantees of future performance.
They involve risks uncertainties and assumptions that are difficult to predict and may not prove to be accurate, especially in light of the effects of the current pandemic.
Actual results may vary materially from those expressed or implied by these forward looking statements.
We undertake no obligation to update these disclosures.
These forward looking statements should be considered only in conjunction with the detailed information contained in our rescue SEC filings, including the risk factors described in Europe 2020 annual report on form 10-K.
During this call. We will also refer to adjusted EBITDA, a non-GAAP financial measure to provide additional information to investors.
A reconciliation of adjusted EBITDA to net income, which is the most directly comparable GAAP financial measure is provided in the press release that we issued this morning.
Non-GAAP financial measures such as adjusted EBITDA are not meant to be considered in isolation or as a substitute for our GAAP financial measures and financial statements.
With that I will turn the call over to our CEO Andrew Sculley. Thank you Mark and Hello, everyone. Thank you for joining US today, we hope that you your loved ones and work colleagues are continuing to stay safe on today's call I'll provide some key takeaways from our quarterly results and provide color.
Regarding our end markets technological advances in equipment schedule Mark will then discuss our consolidated results in greater detail.
In the second quarter, we continued to make steady progress on developing our direct patterning display or <unk> technology.
Main on schedule to produce disruptive.
Industry, leading high brightness high resolution in full color prototypes this year.
We believe our improvements in the OLED architecture at DPT processes will meet the performance goals of our tier one OEM customers using the high resolution back planes, we have developed for them.
We have said in earlier calls we are on track this year to produce full color displays with peak luminance over 10000 candela per meter squared or niche with great color.
This is needed to eliminate motion artifacts and nausea.
Our new back plane designs have many unique capabilities for <unk> applications, including lower power consumption and lower cost.
As a further testament to our technological leadership, a number of new patents for our DPP technology were issued and allowed in Q2 centering on improvements to the <unk> process for improved yield and device performance.
In addition to our perform and improvements in DPT OLED architectures and processes, we have advance the state of the art with our <unk> technology, which utilizes a way to let emitter with color filters.
As technology provides customers with a substantial gain in luminance <unk> power savings for their applications.
We have already closed a major design win with a military customer to use these displays and are currently ramping production.
We will enhance the technology over the next year to provide customers with even greater luminance improvement.
Which is a critical need for the military medical and commercial <unk> solutions, our strategy of disrupting the industry with direct patterning combined with improvements in the color filter roadmap will enable us to continue to lead the brightness road roadmap with actually manufactured at needed volumes.
Today, and DPT with the capability to drive the RBR applications in the future.
In the second quarter, we continued to see uptake of our technology into new applications, including new head mounted display programs undersea connected diver products and new thermal weapon scopes. The thermal scope business overall continued to show a strong recovery in post pandemic order growth.
We believe that as <unk> continued to mature we will accelerate our growth of new technology insertions.
In terms of revenue our second quarter results were mixed we continued display revenue growth in our <unk> program and increased shipments to medical veterinary and hunting scope customers.
However, our year over year decrease in total revenue was impacted by production issues and the unexpected manufacturing tool downtown.
As we continue to bring on new tooling as part of our $39.1 million I bass entitled III program. We expect that these issues will be resolved with that I'll turn the call over to Mark who will discuss our financials as we announced in today's earnings release, our board of directors has formally appointed Mark.
As our CFO I know I speak for the board when I say, congratulations Mark and thank you for all your hard work.
Thanks, very much Andrew and Hello, everyone.
The outset I would like to remind you about an accounting change and allocating overhead that we made in Q1, and which you can read about in our earnings release and 10-Q.
With this change overhead is now fully allocated to products, resulting in an increase in standard cost in inventory values.
In Q2, the impact of this change was a decrease of approximately zero point $2 million in the carrying value of our work in process and finished goods inventory with a corresponding decrease in product cost of goods sold.
Turning to our Q2 numbers total revenue for the second quarter of 2021 were $6.3 million compared with $7.7 million reported in the prior year period.
Total revenue consisted of both product revenue and contract revenue.
Product revenues for Q2 of 2021 were $5.7 million a decrease of zero point $5 million from product revenues of $6.3 million reported in the prior year period the.
The year over year decrease in display revenue resulted mainly from downtime experienced with manufacturing equipment, which delayed certain display shipments into the third quarter.
Decline was partially offset by higher sales to medical and veterinary customers.
Contract revenues were zero point $5 million compared with $1.4 million reported in the prior year, primarily reflecting the timing of phases in milestones associated with the contract for a tier one consumer company.
We are continuing to work on a proof of concept for this customer and anticipate ongoing contract revenue under this program.
Total gross margin for Q2 with 9% on gross profit of <unk> 6 million compared with a gross margin of 26% on gross profit of $2 <unk> million in the prior year period.
The decrease in gross margin reflects decreased shipments of displays in the three months ended June 32021.
Bind with the impact of lower manufacturing volumes and decreases in period costs capitalized into inventory due to equipment issues that occurred during the second quarter of 2021.
Operating expenses for Q2 of 2021, including R&D expenses were $3.5 million compared with $3.3 million in the prior year period.
Operating expenses as a percentage of sales were 55% in Q2 of 2021 compared with 43% in the prior year period.
The year over year increase in R&D reflects materials and other overhead costs related to the development and qualification of the company's higher brightness <unk> in deep deep displays and a decrease in costs allocated to contracts, reflecting lower contract revenues in the 2021 period.
Operating loss for Q2 of 2021 was $2.9 million compared with an operating loss of $1.3 million in the prior year period, reflecting the decreased gross margin and increased investments in R&D in the current year.
Net loss for Q2 of 2021 with zero point $3 million or zero per share compared with a loss of $2.8 million or <unk> <unk> per share in the prior year period.
Net loss for the current period includes a $2.6 billion noncash profit related to the change in the fair value of our warrant liability.
Excluding the impact of the change in the fair value of the warrant liability in both periods.
Net loss for Q2 of 2021 was $2.9 million or <unk> <unk> per share versus a net loss of $1.3 million or <unk> <unk> per share in the prior year period.
Adjusted EBITDA for Q2 was a negative $2.8 million compared with a negative 0.8 million in the prior year period.
Turning to the balance sheet.
As of June 32021, the company had cash and cash equivalents of $10.6 million and working capital of $9.1 million during the second quarter. The company borrowed a net 0.2 million under its asset based lending facility and realized proceeds from the <unk>.
<unk> sighs of stock options and warrants of $1 million.
Borrowings and availability under the ABL facility was zero, <unk> 4 million and $1.9 million respectively as of June 32021.
During Q2, we took delivery of two additional production tools and continuing to make down payments with vendors that are building equipment requested under our government funding awards.
With that we will open the call for questions.
Operator, Please go ahead.
Thank you, ladies and gentlemen, as a reminder to ask a question on the phone lines. Please press. The Star then the one key on your Touchtone telephone to withdraw your question press the pound key.
Please standby will be compile the Q&A roster.
Yeah.
Again to ask a question please press star one.
Okay.
And our first question coming from the line of Kevin Dede with H C. W. Your line is open.
Good morning, gentlemen.
Gratulation smart.
Great News.
Happy to hear it.
Thank you.
I guess the first one is just.
I apologize maybe too much wax my years. This morning, but maybe you could go through the.
The delay in product I guess that it appears that.
And I lost you on this.
That one particular program was pushed to the to the September quarter.
Didn't quite hear you well enough there apologies.
No actually we said that there was a.
Tools down and that actually pushed.
Things out to the right.
And that will casually offset by.
The increase in the hunting scope and medical market.
And I think we mentioned on the contract revenue, Kevin that just vary compared to a year ago due to basically the timing the phases of our work under under that program.
That's right and you'll recall Kevin that last.
Last year, we were developing and designing the wafer.
<unk>.
A lot of time last year, we did a lot of work in the second quarter of this year were.
Taking the wafers and putting the direct patterning on and Thats going to happen from for the rest of the year.
Okay.
The.
Yes.
Alright, so was interested in your press release backlog looked like it went up 6 million in the July quarter can we speak to that.
Did I misunderstand that or misread it.
No. We just got some large military orders in July, which I think as we said before the orders tend to come in.
Periodic fashion.
So.
I think within the range of normal Lumpiness, if you will in our order pattern.
But it is clearly a statement that the military.
Wedded to our displays.
Okay.
That begs the question on the <unk>.
You mentioned Andrew that.
Hugh.
Some interesting.
Second quarter sales on a product and I'm wondering if that's <unk> that shipping off the shelf or it's.
Our initial low rate production can you give us a little more color on that the deal that you spoke to and is that outside of the N V. G. B.
I.
I can't mention anything specific about ENV GB because then we're talking about one of those two primes and that's a little too close for them.
Be happy too but.
What we face there so the <unk> one there was there is a program that actually pick that one as the as the product to us and that's very good for us because it confirms that that product is ready to go.
We are we have been and are shipping it for that program.
Okay.
Okay.
I guess I'm just kind of wondering if you can offer a little more color on where you are in that product development is it just going right off the shelf.
To end user and is it is that product hit full steam production.
Well, it's the <unk>.
Product is it in production.
Going off the shelf, yes, we're making it and selling it.
The statement that we made is that we're continuing to bring it to full production as you know we have two OLED machines and we do the work for the products on the smaller machine before putting it on the big machine. So that's the next step.
Okay.
Can you give us some insight on where the F 35 helmet stands.
I know you can't speak too much about what your customers' decision is going to be but maybe you can just give us I mean, we had thought that at this point, we hear a little bit more about that moving to owl, Rip and I'm, just kind of curious where that stands.
We can't talk very much about it I apologize, but we are still supporting the customer for that.
And.
We believe that OLED is.
A good way to go for aviation in general.
Okay.
The $5.7 million in product revenue can you talk about the mix between commercial specifically this quarter specific military.
It did it swing very heavy to the commercial side just on account of.
I Dunno order flow.
It's reasonably similar but we as we did say that some of the delay was.
Due to a machine down we did get additional volume from the medical and industrial.
And hunting scope.
Yes.
Ben.
So which has been a post pandemic recovery for us Kevin with some of those you know as we mentioned before with the <unk>.
Discretionary.
<unk> picking up in the hunting market picking up as well.
Looking at new new opportunities, there and working with customers for that so we're very happy with that.
Way that's going.
Okay.
Machine issues, Andrew can you talk to.
The timeline do you think there are resolved and where you are with the the $39 million equipment.
Subsidies that you've received.
Were those machines are.
Okay.
The issue that we had the one that caused our problems that's fixed no problem now.
It's fixed in the future too so the.
Ipass in title III, we have two pieces of equipment in and the third one is as we speak soon we have the schedule for the.
Entire program, obviously laid out a long time ago and that is going very well in terms of timing and design of the equipment set.
Et cetera, very very good support by the U S government.
Yeah.
Okay last question for me can you just give us a.
Quick overview I'm, sorry, one other thing just to remind everyone that the.
One of the things a big piece of that over half of the $39 million is for an OLED deposition tool that will be able to do production of direct patterning Youll remember now it's an R&D effort for us, but this will do real production for direct patterning.
Obviously, it will make any other display that we won but the good news for us as well as direct patterning. So we're very happy with the government support of this technology.
Right and that's that's a third machine Thats on route if I understand correctly, yes.
Yes, it's designed in.
And we're proceeding with it.
Can you give us insight on I know you said, it's moving according to schedule, but.
If I understand correctly that mid.
Mid year 'twenty two we're looking at later in 'twenty two yes.
And because it's a big tool. So it takes a while and the design is unique to us because of direct patterning.
And we're very happy with the vendor who is supporting this and again very happy with the U S government, who said, yes, we need this high brightness color.
Okay.
There's one other thing I apologize. It's also when you talk to the ARV our customers.
You talked to them. They say you need high brightness and the way to get this is to remove the color filters.
Instead of white with color filters to put down a red green and blue separate layer and there's nobody who can do that with the space between the sub pixels, which is about one micron this is where.
We're the only ones who can direct pattern at that.
Pixel pitch in that space between the pixels and Thats very important to eliminate the screen door at the same time get the brightness.
We need and as you know we've already talked that we can go well beyond the 10000 that goal we have this year.
And.
We have a path to do that as well.
But right now for the AAR VR, where in the place that they need to go.
And just to paraphrase your prepared remarks, you said you're on track to deliver that device. This year, yes and here. The key is that we're on the back planes that we have developed that's important.
Okay.
Last question for me Andrew Thank you.
Curious.
If you could just give us a quick overview of all the.
The commercial projects that you have on <unk> I know that number goes up and down depending on where your partner customers are.
And you know I always ask because I do know it's dynamic so can you fill us in on where we stand at this point.
Well on the <unk> side, we have one customer that we're working on that we designed the new wafer for <unk>.
Significant revenue, but we have still the other customer that we are.
I'm going to do direct patterning on the other display as well.
Very important to satisfy both and we're working on a number of other potentials.
Thank you very much.
Thank you Kevin.
Thank you Kevin.
And I'm showing no further questions at this time.
Ladies and gentlemen that does conclude our conference for today.
Thank you for your participation you may now disconnect.
Everyone have a great day.
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Yes.
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Thanks.
[music].
Yes.
Yes.
[music].
[music].
Good morning, and welcome to imagine Corporation's second quarter 'twenty 'twenty, One earnings conference call.
Please note this event is being recorded.
After managements prepared remarks, there will be a question and answer session.
I will now turn the conference over to Mark catch imagine CFO. Please go ahead.
Thank you and good morning, everyone. Welcome to imagine second quarter 2021 earnings conference call before we begin I would like to remind you that in the following prepared remarks and in our Q&A session. We will make statements about expected future results and may be forward looking statements for the purposes of fed.
Europe Securities laws.
These statements relate to our current expectations estimates and projections and are not guarantees of future performance.
They involve risks uncertainties and assumptions that are difficult to predict and may not prove to be accurate, especially in light of the effects of the current pandemic.
Actual results may vary materially from those expressed or implied by these forward looking statements and we undertake no obligation to update these disclosures.
These forward looking statements should be considered only in conjunction with the detailed information contained in our SEC filings, including the risk factors described in Europe 2020 annual report on form 10-K.
During this call. We will also refer to adjusted EBITDA, a non-GAAP financial measure to provide additional information to investors.
A reconciliation of adjusted EBITDA to net income, which is the most directly comparable GAAP financial measure is provided in the press release that we issued this morning.
Non-GAAP financial measures such as adjusted EBITDA are not meant to be considered in isolation or as a substitute for our GAAP financial measures and financial statements.
With that I will turn the call over to our CEO Andrew Sculley. Thank you Mark and Hello, everyone. Thank you for joining US today, we hope that you your loved ones and work colleagues are continuing to stay safe on today's call I'll provide some key takeaways from our quarterly results and provide color.
Regarding our end markets technological advances in equipment schedule Mark will then discuss our consolidated results in greater detail.
In the second quarter, we continued to make steady progress on developing our direct patterning display our DPP technology and remain on schedule to produce disruptive.
And the industry, leading high brightness high resolution in full color prototypes this year.
We believe our improvements in the OLED architecture, and bpd processes will meet the performance goals of our tier one OEM customers using the high resolution back planes, we have developed for them.
We have said in earlier calls we are on track this year to produce full color displays with peak luminance over 10000 candela per meter squared or nits with great color.
This is needed to eliminate motion artifacts and nausea.
Our new back plane designs have many unique capabilities for <unk> applications, including lower power consumption and lower cost.
As a further testament to our technological leadership, a number of new patents for our DPP technology were issued and allowed in Q2 centering on improvements to the <unk> process for improved yield and device performance.
In addition to our perform and improvements in DPT OLED architectures and processes, we have advanced the state of the art with our <unk> technology, which utilizes a white OLED meter with color filters.
This technology provides customers with a substantial gain in luminance and our power savings for their applications.
We have already closed a major design win with a military customer to use these displays and are currently ramping production.
We will enhance the technology over the next year to provide customers with even greater luminance improvement.
Which is a critical need for the military medical and commercial <unk> solutions, our strategy of disrupting the industry with direct patterning combined with improvements in the color filter roadmap will enable us to continue to lead the brightness rollout roadmap with actually manufactured at needed volume.
<unk> today, and DPT with the capability to drive the AAR VR applications in the future.
In the second quarter, we continued to see uptake of our technology into new applications, including new head mounted display programs undersea connected diver products and new thermal weapon scopes. The thermal scope business overall continued to show a strong recovery and post pandemic order growth.
We believe that as <unk> and DVD continue to mature we will accelerate our growth of new technology insertions.
In terms of revenue our second quarter results were mixed we continued display revenue growth in our <unk> program and increased shipments to medical veterinary and hunting scope customers.
However, our year over year decrease in total revenue was impacted by production issues and the unexpected manufacturing tool downtown.
As we continue to bring on new tooling as part of our $39.1 million dollar Ipass entitled III program. We expect that these issues will be resolved with that I'll turn the call over to Mark who will discuss our financials as we announced in today's earnings release, our board of directors has formally appointed Mark.
As our CFO I know I speak for the board when I say, congratulations Mark and thank you for all your hard work.
Thanks, very much Andrew and Hello, everyone.
The outset I would like to remind you about an accounting change and allocating overhead that we made in Q1, and which you can read about in our earnings release and 10-Q.
With this change overhead is now fully allocated to products, resulting in an increase in standard cost in inventory values in.
In Q2, the impact of this change was a decrease of approximately zero point $2 million in the carrying value of our work in process and finished goods inventory with a corresponding decrease in product cost of goods sold.
Turning to our Q2 numbers.
Total revenue for the second quarter of 2021 were $6.3 million compared with $7.7 million reported in the prior year period.
Total revenue consisted of both product revenue and contract revenue.
Product revenues for Q2 of 2021 were $5.7 million a decrease of zero point $5 million from product revenues of $6.3 million reported in the prior year period the.
The year over year decrease in display revenue resulted mainly from downtime experienced with manufacturing equipment, which delayed certain display shipments into the third quarter.
The decline was partially offset by higher sales to medical and veterinary customers.
Contract revenues were zero or <unk> 5 million compared with $1.4 million reported in the prior year, primarily reflecting the timing of phases in milestones associated with the contract for a tier one consumer company.
We are continuing to work on a proof of concept for this customer and anticipate ongoing contract revenue under this program.
Total gross margin for Q2 was 9% on a gross profit of <unk> 6 million compared with a gross margin of 26% on gross profit of $2.8 million in the prior year period.
The decrease in gross margin reflects decreased shipments of displays in the three months ended June 32021, combined with the impact of lower manufacturing volumes and decreases in period costs capitalized into inventory due to equipment issues that occurred during the second quarter of 2021.
Operating expenses for Q2 of 2021, including R&D expenses were $3.5 million compared with $3.3 million in the prior year period.
Operating expenses as a percentage of sales were 55% in Q2 of 2021 compared with 43% in the prior year period.
The year over year increase in R&D reflects materials and other overhead costs related to the development and qualification of the company's higher for Isis <unk> and deep deep displays and a decrease in costs allocated to contracts, reflecting lower contract revenues in the 2021 period.
Operating loss for Q2 of 2021 was $2.9 million compared with an operating loss of $1.3 million in the prior year period, reflecting the decreased gross margin and increased investments in R&D in the current year.
Net loss for Q2 of 2021 was zero point $3 million or zero per share compared with a loss of $2.8 million or <unk> <unk> per share in the prior year period.
Net loss for the current period includes a $2.6 million noncash profit related to the change in the fair value of our warrant liability.
Excluding the impact of the change in the fair value of the warrant liability in both periods net loss for Q2 of 2021 was $2.9 million or <unk> <unk> per share versus a net loss of $1.3 million or <unk> <unk> per share in the prior year period.
Adjusted EBITDA for Q2 was negative $2.8 million compared with a negative zero point $8 million in the prior year period.
Turning to the balance sheet.
As of June 32021, the company had cash and cash equivalents of $10.6 million and working capital of $9 million.
During the second quarter the company borrowed a net 0.2 million under its asset based lending facility and realized proceeds from the exercise of stock options and warrants of $1 million.
Borrowings and availability under the ABL facility or zero, <unk> 4 million and $1.9 million respectively as of June 32021.
During Q2, we took delivery on two additional production tools and continuing to make down payments with vendors that are building equipment requested under our government funding awards.
With that we will open the call for questions.
Operator, Please go ahead.
Thank you ladies and gentlemen at your line is to ask a question on the phone lines. Please press. The Star then the one key on your Touchtone telephone to withdraw your question press the pound key.
Please dunbar will be compile the Q&A roster.
Again to ask a question please press star one.
And our first question coming from the line of Kevin Dede with H C. W. Your line is open.
Good morning, gentlemen.
Congratulations Mark.
Great News.
Happy to hear it.
Thank you.
I guess the first one is just.
I apologize maybe too much wax my years. This morning, but maybe you could go through.
<unk>.
The delay in.
And product I guess that it appears that.
And I lost you on this.
That one particular program was pushed to the to the September quarter.
I didn't quite hear you well enough there apologies.
No actually we said that there was a.
Our tools down and that actually pushed.
Things out to the right.
And that will casually offset by.
The increase in the hunting scope and medical market.
And I think we mentioned on the contract revenue Kevin does that just vary compared to a year ago due to basically the timing the phases of our work under under that program.
Yeah, that's right and you will recall Kevin.
Last year, we were developing and designing the wafer.
<unk>.
A lot of time last year, we did a lot of work in that.
Second quarter this year were.
Taking the wafers and putting the direct patterning on and Thats going to happen from for the rest of the year.
Okay.
C.
Alright, so was interested in your press release backlog looked like it went up 6 million in the July quarter can we speak to that.
Did I misunderstand that or misread it.
No. We just got some large military orders in July, which I think as we said before our orders tend to come in.
Periodic fashion.
So I.
I think within the range of normal Lumpiness, if you will and in our order pattern.
But it is clearly a statement that the military.
Whether to our displays.
Okay.
That begs the question on the <unk>.
You mentioned Andrew that.
You.
Some interesting SEC.
Second quarter sales on our product and I'm wondering if that's <unk> that shipping off the shelf or it's.
Our initial low rate production can you give us a little more color on the deal that you spoke to and is that outside of the in the GB.
Well I.
I can't mention anything specific about <unk>. Because then we're talking about one of those two primes and Thats, a little too close for them.
Be happy too but.
What we face there so the the <unk>. One there was there is a program that actually pick that one as the as the product to us and that's very good for us because it confirms that that product is ready to go.
We are we have been and are shipping it for that program.
Okay.
Okay.
I guess I'm just kind of wondering if you can offer a little more color on where you are in that product development is it just going right off the shelf.
To end user and is it is that product hit full steam production.
Well it's a.
The product is it in production and.
Going off the shelf, yes, we're making it and selling it.
The statement that we made is that we're continuing to bring it to full production as you know we have two OLED machines.
Do the work for the products on the smaller machine before putting it on the big machine. So that's the next step.
Okay.
Can you give us some insight on where the F 35 helmet stands.
<unk>.
I know you can't speak too much about what your customers' decision is going to be but maybe you can just give us I mean.
We had thought that at this point, we hear a little bit more about that moving to our rep and I'm just kind of curious where that stands.
We can't talk very much about it I apologize, but we are still supporting the customer for that.
And we believe that OLED is good.
A good way to go for aviation in general.
Okay.
The $5.7 million in product revenue can you talk about the mix between commercial.
Specifically this quarter specific military.
It did it swing very heavy to the commercial side just on account of.
I Dunno order flow.
It's reasonably similar but we as we did say that some of the delay was.
Due to the machine down we did get additional volume from the medical industrial.
And hunting scope scope, which have been.
So which had been a post pandemic recovery for us Kevin with some of those as we mentioned before with the discretionary surgery picking up in the hunting market picking up as well and we are looking at new new opportunities, there and working with customers for that.
So we're very happy with that.
Way that's going.
Okay on the machine issues, Andrew can you talk to the.
The timeline you think there are resolved and where you are with the the $39 million of equipment.
Subsidies that you received and where those machines are.
Okay.
<unk> issue that we had the one that caused our problems that's fixed no problem now and it's fixed in the future too so the.
The Ipass in title III, we have two.
Two pieces of equipment in and the third one is as we speak soon.
The schedule for the.
Entire program, obviously laid out a long time ago and that is going very well in terms of timing and design of the equipment et.
Et cetera, very very good support by the U S government.
Okay.
Okay last question for me can you just give us a quick.
With that overview I'm, sorry, one other thing just to remind everyone that the.
One of the things a big piece of that over half of the $39 million is for a an OLED deposition tool that will be able to do production of direct patterning Youll remember now it's an R&D effort for us, but this will do real production for direct patterning.
And obviously it will make any other display that we want but the good news for us as well as direct patterning. So we're very happy with the government support of this technology.
And that's that's a third machine thats on route if I understand correctly, yes.
Yes designed in.
And we're proceeding with it.
Can you give us insight on I know you said, it's moving according to schedule, but.
If I understand correctly that.
Mid year 'twenty two we're looking at later in 'twenty two yes.
And because it.
It's a big tools. So it takes a while and the design is unique to us because of direct patterning.
And we're very happy with the vendor who is supporting this and again very happy with the U S government, who said, yes, we need this high brightness color.
Okay.
There's one other thing I apologize. It's also when you talk to the ARV our customers when you talk to them. They say you need high brightness and the way to get this is to remove the color filters.
Instead of white with color filters to put down a red green and blue separate layer and there's nobody who can do that with the space between the sub pixels, which is about one micron this is where.
We're the only ones who can direct pattern at that.
Pixel pitch in that space between the pixels and Thats very important to eliminate the screen door at the same time get the brightness.
You need as you know we've already talked that we can go well beyond the 10000 that goal we have this year.
And.
We have a path to do that as well.
But right now for the AAR VR, where in the place that they need to go.
And just to paraphrase. Your prepared remarks, you said you were on track to deliver that device. This year, yes and here. The key is that we're on the back planes that we have developed that's important.
Okay.
Last question for me Andrew Thank you.
Curious.
If you could just give us a quick overview of all the.
The commercial projects that you have on <unk> I know that number goes up and down depending on where your partner customers are.
And you know I always ask because I do know it's dynamic so can you fill us in on where we stand at this point.
Well on the <unk> side, we have one customer that we're working on that we designed the new wafer for Cigna.
Significant revenue.
We have still the other customer that we are.
Going to do direct patterning on the other display as well.
Very important to satisfy both and we are working on a number of other potentials.
Thank you very much.
Thank you Kevin.
Thank you Kevin.
And I'm showing no further questions at this time ladies.
Ladies and gentlemen that does conclude our conference for today.
For your participation you may now disconnect.
Everyone have a great day.