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Kopin Corp.$0.56($.01)(1.75%)

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 Kopin Provides Business Update and Second Quarter 2019 Operating Results
   Thursday, August 08, 2019 7:30:00 AM ET
  • Takes Strategic Steps to Focus Business on Components and Subsystems for Defense and Enterprise
  • Continues steps toward Monetizing Intellectual Property and Technologies
  • Significant Reductions in Expenses, Including 30% Reduction in Payroll Costs
  • Announced Microdisplays Are Included in New Google Glass

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 29, 2019.

“We took a number of major strategic steps during the quarter to monetize our intellectual property (IP) and reduce our cost structure. We expect these changes to allow us to focus on our core microdisplay component and subsystem business for military and enterprise, where Kopin is an industry leader and derives most of its revenue,” said Dr. John C.C. Fan, CEO of Kopin.

“During the past few years, Kopin has developed advanced concept wearable systems for both enterprise and consumer markets. These concept systems have helped Kopin create industry leading components and modules for our wearable customers, such as our display modules for the new version of Google Glass, and the growing demand of our display modules from RealWear, to whom we licensed our original concept Golden-I system for an ongoing royalty stream, equity position and component sales. This successful model led us to aggressively pursue similar opportunities. To that end we have taken the following strategic steps this quarter:

“First, we executed a transaction for Golden-I Infinity® technology with RealWear for $3.5 million, and will receive future royalties and sell display component supplies. We believe RealWear’s leading position supplying AR headsets to the enterprise markets will increase distribution and demand for Golden-I Infinity®, thereby benefitting Kopin through the sale of displays, royalty income and equity appreciation.

“Second, we have engaged in negotiations to spin out our Solos™ technology, along with our Whisper™ Audio Technology, to a group of employees and outside investors. If the transaction is completed, we expect to receive equity in the new company in exchange for the transfer of intellectual property, inventory and equipment. In addition, Kopin expects to maintain the right to utilize and sublicense the current Whisper Audio Technology, as well as future enhancements, for defense and enterprise applications. We anticipate this transaction will close by the end of the third quarter, 2019.

“Importantly, these products currently contribute negligible revenues while incurring significant costs. With the headcount reductions and changes related to these transactions, along with the steps taken to streamline our core microdisplay business, we have reduced our payroll costs by approximately 30% on an annualized basis as well as eliminated the development costs for Golden-I Infinity®, Solos and Whisper. Going forward, we no longer plan on internally funding the development of concept wearable systems.”

Dr. Fan continued, “We believe these strategic changes will allow us to focus on our core competency as the leading supplier of components and subsystems for defense and industrial applications as well as offering the broadest selection of displays: transmissive and reflective LCD displays, along with our Lightning® OLED microdisplay for the growing AR and VR markets. We have made significant progress in developing our Lightning OLED microdisplay and currently are working with two partners under their contracts to develop displays for their applications.

“With our dominant position supplying microdisplays to the military and enterprise, the revenue streams from our IP licensing agreements, the progress in developing OLED with our fabless, IP-based model and the significant reduction in our cost structure, we believe Kopin is well-positioned as the AR and VR markets accelerate in the coming years. In addition, we believe this strategic plan provides the best value for our shareholders, as we benefit from our technology investments while cost-effectively enhancing our role in the growing microdisplay market,” concluded Dr. Fan.

Second Quarter Financial Results

Total revenues for the second quarter ended June 29, 2019 were $9.1 million, compared with $5.9 million for the second quarter ended June 30, 2018. In the second quarter of 2019 Kopin entered into a transaction wherein it licensed certain intellectual property to RealWear for $3.5 million. We subsequently used $2.5 million of the cash to participate in a financing round of RealWear.

Cost of product revenues were $5.2 million for the second quarter ended June 29, 2019, compared with $3.5 million for the second quarter ended June 30, 2018. Included in cost of product revenues for the second quarter of 2019 is a $1.2 million write-off of inventory.

Research and development (R&D) expenses for the second quarter of 2019 were $3.3 million compared to $4.5 million for the second quarter of 2018.

Selling, general and administrative (SG&A) expenses were $5.4 million for the second quarter of 2019 compared to $6.9 million for the second quarter of 2018. The decrease is primarily attributable to a decrease in stock-based compensation, amortization of intangible assets, and marketing expenses including product promotion, partially offset by an increase in legal expenses.

Net loss attributable to the controlling interest for the second quarter of 2019 was $4.3 million, or $0.05 per share, compared with net loss of $9.2 million, or $0.13 per share, for the second quarter of 2018.

Direct Solos, Whisper Technology and Golden-I Infinity® expenses included in the six month period ended June 29, 2019 and the fiscal year ended December 29, 2018 were approximately $4.0 million and $9.0 million, respectively.

Kopin’s cash and equivalents and marketable securities were approximately $31.6 million at June 29, 2019 as compared to $37.2 million at December 29, 2018. The Company has no long-term debt.

All amounts above are estimates and readers should refer to our Form 10-Q for the quarter ended June 29, 2019, for final disposition as well as important risk factors.

Conference Call

Kopin will host a conference call this morning at 8:30am ET. To participate, please dial 877-709-8150 (U.S. and Canada) or (201) 689-8354 (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 .

Kopin, Golden-I, Lightning, Solos and Whisper and trademarks of Kopin Corporation.

Forward-Looking Statements

Statements in this press release may be considered “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which are subject to the safe harbor created by such sections. Words such as “expects,” “believes,” “can,” “will,” “estimates,” and variations of such words and similar expressions, and the negatives thereof, are intended to identify such forward-looking statements. These forward-looking statements these forward-looking statements also include, but are not limited to, statements concerning: expected results and consequences from recent strategic steps to focus on the microdisplay components and subsystems for military and enterprise businesses; our belief in the increase in demand for and distribution of the Golden-I Infinity® technology through RealWear, and the benefits Kopin expects to derive therefrom; our expectation to receive equity in the new company if we successfully spin out our Solos technology and to retain certain rights in the Whisper Technology; our expectation to close the spin out by the end of the third fiscal quarter of 2019; our belief that we will reduce our annual payroll and eliminate the development costs for Golden-I Infinity® and Solos; our plan to no longer internally fund the development of additional concept wearable systems; the benefits we expect to derive from our strategic changes; and our belief that our strategic changes will provide value to our stockholders, benefit the Company, and allow us to expand our role in the microdisplay market.

We caution readers not to place undue reliance on any such “forward-looking statements,” which speak only as of the date made, and advise readers that these forward-looking statements are not guarantees of future performance and involve certain risks, uncertainties, estimates, and assumptions by us that are difficult to predict. Various factors, some of which are beyond our control, could cause actual results to differ materially from those expressed in, or implied by, such forward-looking statements. All such forward-looking statements, whether written or oral, and whether made by us or on our behalf, are expressly qualified by these cautionary statements and any other cautionary statements that may accompany the forward-looking statements. In addition, we disclaim any obligation to update any forward-looking statements to reflect events or circumstances after the date of this press release, except as may otherwise be required by the federal securities laws. These forward-looking statements are only predictions, subject to risks and uncertainties, and actual results could differ materially from those discussed. Important factors that could affect performance and cause results to differ materially from management's expectations are described in Part I, Item 1A, Risk Factors; Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations; and other parts of our Annual Report on Form 10-K for the fiscal year ended December 29, 2018, as updated from time to time in the Company’s Securities and Exchange Commission filings.

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

June 29, 2019

June 30, 2018

June 29, 2019

June 30, 2018

Display Revenues by Category (in millions)
Military Applications

$

1.8

$

1.6

$

3.2

$

3.9

Industrial Applications

 

2.1

 

1.2

 

4.6

 

3.0

Consumer Electronics Applications

 

0.5

 

1.5

 

1.2

 

2.4

Research and Development

 

0.5

 

1.5

 

1.2

 

2.1

Other

 

-

 

0.1

 

-

 

0.2

License and Royalties

 

4.2

 

4.4

 

-

Total

$

9.1

$

5.9

$

14.6

$

11.6

 
 
Stock-Based Compensation Expense
Cost of component revenues

$

32,000

$

156,000

$

64,000

$

266,000

Research and development

 

84,000

 

194,000

 

188,000

 

468,000

Selling, general and administrative

 

422,000

 

939,000

 

1,102,000

 

1,954,000

$

538,000

$

1,289,000

$

1,354,000

$

2,688,000

 
 
Other Financial Information
Depreciation and amortization

$

174,000

$

575,000

$

438,000

$

1,130,000

Kopin Corporation
Condensed Consolidated Statements of Operations
(Unaudited)
 
Three Months EndedSix Months Ended

June 29, 2019

June 30, 2018

June 29, 2019

June 30, 2018

Revenues:
Net product revenues

$

4,435,401

 

$

4,472,079

 

$

9,049,257

 

$

9,516,888

 

Research and development revenues

 

4,674,732

 

 

1,471,819

 

 

5,603,801

 

 

2,080,630

 

 

9,110,133

 

 

5,943,898

 

 

14,653,058

 

 

11,597,518

 

Expenses:
Cost of product revenues

 

5,242,514

 

 

3,497,750

 

 

11,119,591

 

 

7,559,941

 

Research and development

 

3,330,202

 

 

4,526,156

 

 

8,296,918

 

 

8,977,809

 

Selling, general and administrative

 

5,375,671

 

 

6,913,503

 

 

11,658,474

 

 

13,844,913

 

 

13,948,387

 

 

14,937,409

 

 

31,074,983

 

 

30,382,663

 

 
Loss from operations

 

(4,838,254

)

 

(8,993,511

)

 

(16,421,925

)

 

(18,785,145

)

 
Other income (expense), net

 

627,230

 

 

(52,162

)

 

916,991

 

 

4,267,368

 

 
Loss before provision for income taxes and net (income) loss

 

(4,211,024

)

 

(9,045,673

)

 

(15,504,934

)

 

(14,517,777

)

from noncontrolling interest
 
Provision for income taxes

 

(26,000

)

 

(201,000

)

 

(52,000

)

 

(201,000

)

 
Net loss

 

(4,237,024

)

 

(9,246,673

)

 

(15,556,934

)

 

(14,718,777

)

 
Net (income) loss attributable to noncontrolling interest

 

(23,367

)

 

5,716

 

 

(34,384

)

 

(58,458

)

 
Net loss attributable to the controlling interest

$

(4,260,391

)

$

(9,240,957

)

$

(15,591,318

)

$

(14,777,235

)

 
Net loss per share:
Basic and diluted

$

(0.05

)

$

(0.13

)

$

(0.20

)

$

(0.20

)

 
Weighted average number of common shares outstanding:
Basic and diluted

 

81,950,352

 

 

73,095,253

 

 

78,459,666

 

 

73,086,752

 

Kopin Corporation
Condensed Consolidated Balance Sheets
(Unaudited)
 

June 29, 2019

December 29, 2018

ASSETS
Current assets:
Cash and marketable securities

$

31,554,755

 

$

37,244,363

 

Accounts receivable, net

 

4,904,247

 

 

3,088,360

 

Contract assets and unbilled receivables

 

1,222,605

 

 

4,797,238

 

Inventory

 

3,700,174

 

 

3,089,663

 

Prepaid and other current assets

 

907,124

 

 

1,184,401

 

 
Total current assets

 

42,288,905

 

 

49,404,025

 

 
Plant and equipment, net

 

2,029,406

 

 

2,598,842

 

Operating lease right-of-use assets

 

3,242,146

 

 

-

 

Goodwill

 

331,344

 

 

331,344

 

Other assets

 

1,325,163

 

 

1,361,375

 

Equity investments

 

9,141,133

 

 

5,853,525

 

 
Total assets

$

58,358,097

 

$

59,549,111

 

 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable

$

4,116,685

 

$

3,921,878

 

Accrued expenses

 

5,992,535

 

 

5,510,554

 

Contract liabilities and billings in excess of revenue earned

 

1,227,198

 

 

388,933

 

Operating lease liabilities

 

1,017,234

 

 

-

 

Deferred tax liabilities

 

527,000

 

 

546,000

 

 
Total current liabilities

 

12,880,652

 

 

10,367,365

 

 
Asset retirement obligations

 

254,096

 

 

254,098

 

Operating lease liabilities, net of current portion

 

2,314,032

 

 

-

 

Other long term liabilities

 

1,049,926

 

 

1,214,827

 

 
Total Kopin Corporation stockholders' equity

 

41,974,060

 

 

47,861,874

 

Noncontrolling interest

 

(114,669

)

 

(149,053

)

Total stockholders' equity

 

41,859,391

 

 

47,712,821

 

Total liabilities and stockholders' equity

$

58,358,097

 

$

59,549,111

 

 

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



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