NASDAQ: KOPN $ 1.43 +0.02( +1.42%) Volume: 16,639 December 17, 2018 20 min delay

Kopin Provides Business Update and Second Quarter 2018 Operating Results

08/06/2018
  • SOLOS ® Smart Glasses Begin Shipping
  • Launches Golden-i™ Infinity
  • Received First Production Order for FWS-I Units
  • Revises Full Year Revenue Guidance to $30 million to $35 million

WESTBOROUGH, Mass.--(BUSINESS WIRE)-- Kopin Corporation (NASDAQ: KOPN), a leading developer of innovative wearable computing technologies and solutions, today provided an update on its business initiatives and reported financial results for the second quarter ended June 30, 2018.

“The commercialization of SOLOS, our smart glasses for cyclists, triathletes and runners, was a highlight of the second quarter,” said Dr. John C.C. Fan, CEO of Kopin Corp. “SOLOS, which has been described as the most advanced AR smart glasses available for sports and consumer fitness, became available in May. SOLOS uses our Pupil® display module and Whisper® voice extraction technology to allow athletes to view data as if it is floating in front of them and receive information through audio messages. SOLOS smart glasses are currently available at www.solos-wearables.com and we have started expanding distribution to select locations of sports and technology retailers across the country. In addition to partnering with USA Cycling, SOLOS was recently named the Official Smart Glasses Partner of IRONMAN, which hosts endurance sporting events around the globe. We continue to identify opportunities like the IRONMAN partnership to raise the visibility of SOLOS with key audiences. It is still early days for SOLOS but we are excited about the reception from athletes around the world.

“We introduced a second revolutionary product in the quarter – the Golden- iTM Infinity which is targeted to industrial workers. The Golden-i Infinity smart screen is the first wearable device that supports Android and Windows 10-based computing solutions. The Golden-i Infinity utilizes our display and Whisper voice technology and it connects to a worker’s smart phone or mini PC via a cable to make the headset lighter and less costly. We have seen significant interest from major industrial and enterprise companies. We expect to begin pilot tests in September with Fortune 500 customers and the professional value added reseller (VAR) channels.”

Dr. Fan continued, “We were pleased to see that the US Defense Department and Lockheed Martin recently reached an agreement for a new order of the F-35 fighter jets, where Kopin is the sole supplier of displays for the pilots’ helmets. This order supports the F-35 program as a $100 million long term revenue opportunity for Kopin. In the second quarter, we were finally fully qualified for the FWS-I program and we are delighted to have received the first production order which we expect to begin shipping in October 2018. Although it is several months later than originally estimated, we are excited that production has started. We expect the FWS program, like our previous TWS program, to last for many years and we believe it is also a $100 million revenue opportunity for Kopin. In the second quarter of 2018 we commenced development work on a display system for a recently awarded armored vehicle program. Finally, we continue to see strong forecasted demand from our customers manufacturing a variety of AR headsets targeting the industrial wearable market. We believe their traction proves that AR is close to an inflection point for enterprise and industrial customers.

“Overall, we are pleased with the progress of our efforts in moving our development activities to products, production and commercialization. However, some delays in our business ramp up, primarily in the military, will impact our anticipated rapid revenue growth in the second half of this year," concluded Dr. Fan.

Second Quarter Financial Results

Total revenues for the second quarter ended June 30, 2018 were $5.9 million, compared with $5.9 million for the second quarter ended June 30, 2017.

Research and development (R&D) expenses for the second quarter of 2018 were $4.5 million compared to $4.7 million for the second quarter of 2017.

Selling, general and administrative (SG&A) expenses were $6.9 million for the second quarter of 2018 compared to $5.2 million for the second quarter of 2017.

Net loss attributable to the controlling interest for the second quarter of 2018 was $9.2 million, or $0.13 per share, compared with net loss of $7.3 million, or $0.10 per share, for the second quarter of 2017.

During the second quarter of 2018 Kopin had 11 patents granted and filed for 6 new applications. Kopin has over 300 patents and patents pending, almost all of which are related to wearable applications.

Net cash used in operating activities for the second quarter ended June 30, 2018 was approximately $13.2 million. Kopin has maintained a strong financial position with cash and equivalents and marketable securities were approximately $53.4 million at June 30, 2018.

“We expect full year revenues will be $30 million to $35 million, below the $35-40 million we originally expected,” said Richard Sneider, Kopin’s CFO. “There is no change to our expectation of achieving breakeven on profitability by the end of 2019.” Effective December 31, 2017, Kopin adopted ASC Topic 606 using the “modified retrospective” approach, meaning the standard was applied only to the financial results of fiscal year 2018 with a cumulative adjustment to retained earnings. Under this transition method, Kopin applied the standard only to contracts that were not complete at the initial adoption date.

The following tables shows the impact of adoption of Topic 606 on the three and six months periods ended June 30, 2018 results of operations (amount in millions):

 

Three Months Ended June 30, 2018

Statement of Operations

 

As Reported

 

Balances Without
Adoption of
Topic 606

 

Effect of
Change
Higher/(Lower)

Net product revenues $ 4.5   $ 4.5   $ -
Research and development revenues 1.5 1.6

(0.1

)

Cost of product revenues 3.5 3.5 -
Net loss attributable to the controlling interest   $ (9.2 )   $ (9.2 )   $ (0.1 )
 
Six Months Ended June 30, 2018
Statement of Operations   As Reported  

Balances Without
Adoption of
Topic 606

 

Effect of
Change
Higher/(Lower)

Net product revenues $ 9.5 $ 11.0 $ (1.5 )
Research and development revenues 2.1 2.3 (0.2 )
Cost of product revenues 7.6 8.6 (1.0 )
Net loss attributable to the controlling interest   $ (14.8 )   $ (14.1 )   $ (0.7 )
 

All amounts above are estimates and readers should refer to our Form 10-Q for the quarter ended June 30, 2018 for final disposition. To participate on the conference call, please dial 201-689-8354 (U.S. and Canada) or 877-709-8150 (International). The call will also be available as a live and archived audio webcast on the “Investors” section of the Kopin website, www.kopin.com

SOLOS, Golden-i, Whisper and Kopin are registered trademarks of Kopin Corporation.

Forward-Looking Statements

Statements in this press release may be considered “forward-looking” statements under the “Safe Harbor” provisions of the Private Securities Litigation Reform Act of 1995. These include, without limitation, statements relating to our expectation to begin Golden-i Infinity pilot tests in September with Fortune 500 customers and the professional value added reseller (VAR) channels; our belief that the F-35 program is a $100 million opportunity for Kopin long term; we expect to begin shipments of FWS-I units in October, 2018; our expectation that the FWS program, like our previous TWS program, will last for many years and we believe it is also a $100 million revenue opportunity for Kopin; our belief that the good forecasted demand from our customers proves that AR is close to an inflection; and our expectation that our revenues for the fiscal year 2018 will be in the range of $30 to $35 million. These statements involve a number of risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements. These risks and uncertainties include, but are not limited to, delays in the development or production issues with Golden-I Infinity units may prevent pilot tests to begin in September to any customers; development or production issues with the Golden-I Infinity products, lack of demand for the Golden-i Infinity product or other issues may prevent the sale of Golden-i Infinity; development or production issues may prevent the FWS-I units being shipped in October, 2018; either or both the F-35 or FWS-I programs could be cancelled; we may not receive additional orders for our components for the F-35 and FWS-I programs; we may be designed out of the F-35 and FWS-I programs; our enterprise customers expectations of demand may be wrong and not occur which would negatively impact sales of our components to them; we may be unable to roll out SOLOS through other distribution formats during 2018 due to a lack of demand, cost, or our inexperience in selling a device like SOLOS smart glasses; our revenues for the fiscal year 2018 may not be in the range of $30 to $35 million; and other risk factors and cautionary statements listed in Kopin’s periodic reports and registration statements filed with the Securities and Exchange Commission, including the Annual Report on Form 10-K for the 12 months ended December 31, 2017, and Kopin’s subsequent filings with the Securities and Exchange Commission. You should not place undue reliance on any forward-looking statements, which are based only on information currently available to Kopin and only as of the date on which they are made. We undertake no obligation to update any of these forward-looking statements to reflect events or circumstances occurring after the date of this release.

       

Kopin Corporation

Condensed Consolidated Statements of Operations
(Unaudited)
 
Three Months Ended Six Months Ended

June 30, 2018

July 1, 2017

June 30, 2018

July 1, 2017

Revenues:
Net product revenues $ 4,472,079 $ 4,979,400 $ 9,516,888 $ 8,912,543
Research and development revenues   1,471,819     948,069     2,080,630     1,393,054  
5,943,898 5,927,469 11,597,518 10,305,597
Expenses:
Cost of product revenues 3,497,750 4,117,226 7,559,941 7,234,583
Research and development 4,526,156 4,678,221 8,977,809 8,960,090
Selling, general and administrative   6,913,503     5,200,261     13,844,913     10,841,947  
14,937,409 13,995,708 30,382,663 27,036,620
 
Loss from operations (8,993,511 ) (8,068,239 ) (18,785,145 ) (16,731,023 )
 
Other (expense) income, net   (52,162 )   807,699     4,267,368     384,606  
 

Loss before (provision) benefit for income taxes and net loss (income) from noncontrolling interest

(9,045,673 ) (7,260,540 ) (14,517,777 ) (16,346,417 )
 
(Provision) benefit for income taxes   (201,000 )   -     (201,000 )   1,146,000  
 
Net loss (9,246,673 ) (7,260,540 ) (14,718,777 ) (15,200,417 )
 

Net loss (income) attributable to noncontrolling interest

  5,716     (71,431 )   (58,458 )   10,007  
 
Net loss attributable to the controlling interest $ (9,240,957 ) $ (7,331,971 ) $ (14,777,235 ) $ (15,190,410 )
 
Net loss per share:
Basic and diluted $ (0.13 ) $ (0.10 ) $ (0.20 ) $ (0.22 )
 
Weighted average number of common shares outstanding:
Basic and diluted   73,916,548     70,626,542     73,497,446     67,582,615  
 

 
Kopin Corporation
Condensed Consolidated Balance Sheets
(Unaudited)
 
 

June 30, 2018

 

December 30, 2017

ASSETS
Current assets:
Cash and marketable securities $ 53,423,704 $ 68,755,684
Accounts receivable, net 2,785,081 4,659,986
Inventory 4,257,702 5,080,797
Contract assets and unbilled receivables 2,384,307 -
Prepaid and other current assets   1,274,005     1,243,029  
 
Total current assets 64,124,799 79,739,496
 
Land, equipment and improvements, net 5,125,629 5,077,043
Goodwill and intangible assets 2,210,357 2,663,883
Equity investment 3,759,000 -
Other assets   4,123,244     3,842,068  
 
Total assets $ 79,343,029   $ 91,322,490  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,894,049 $ 4,918,605
Accrued expenses 4,054,172 4,351,537
Income tax payable 161,620 1,416,892
Deferred income taxes 863,000 520,000
Contract liabilities and billings in excess of revenue earned   317,094     896,479  
 
Total current liabilities 9,289,935 12,103,513
 
Other long term liabilities 1,939,618 1,569,253
Lease commitments 264,238 269,877
 
Total Kopin Corporation stockholders' equity 68,539,215 78,099,269
Noncontrolling interest   (689,977 )   (719,422 )
Total stockholders' equity   67,849,238     77,379,847  
Total liabilities and stockholders' equity $ 79,343,029   $ 91,322,490  
 

 
Kopin Corporation
Supplemental Information
(Unaudited)
       
Three Months Ended Six Months Ended
 

June 30, 2018

July 1, 2017

June 30, 2018

July 1, 2017

Display Revenues by Category (in millions)
Military Applications $ 1.6 $ 2.2 $ 3.9 $ 3.6
Industrial Applications 1.2 1.4 3.0 2.9
Consumer Electronics Applications 1.5 0.9 2.4 1.5
Research and Development 1.5 1.0 2.1 1.4
Other   0.1   0.4   0.2   0.9
Total $ 5.9 $ 5.9 $ 11.6 $ 10.3
 
 
Stock-Based Compensation Expense
Cost of component revenues $ 156,000 $ 159,000 $ 266,000 $ 263,000
Research and development 194,000 195,000 468,000 413,000
Selling, general and administrative   939,000   322,000   1,954,000   1,292,000
$ 1,289,000 $ 676,000 $ 2,688,000 $ 1,968,000
 
 
Other Financial Information
Depreciation and amortization $ 575,000 $ 699,000 $ 1,130,000 $ 1,143,000
 

Kopin Corporation
Richard Sneider, 508-870-5959
Treasurer and Chief Financial Officer
Richard_Sneider@kopin.com
or
Market Street Partners
Joann Horne, 415-445-3233
JHorne@marketstreetpartners.com

Source: Kopin Corporation