Rich Sneider - Chief Financial Officer John Fan - Chairman and Chief Executive Officer.

Matthew Robison - Wunderlich Jeff Bernstein - Cowen Prime Investors Robert Mertens - Needham & Company.

Good morning and welcome to the Kopin Corporation's Conference Call to provide a Business Update and Results for the Fiscal First Quarter ended April 1, 2017. Today’s call is being recorded for internet replay. You many access an archived version of the call on Kopin’s website at www.kopin.com.

With us today from the company are Chairman and Chief Executive Officer, Dr. John C.C. Fan; and Chief Financial Officer, Mr. Rich Sneider. Please go ahead, sir..

John will begin today’s call with a discussion of our strategy, technology, and markets; I will go through the first quarter results at a high level; John will then conclude our prepared remarks and then we'll be happy to take your questions.

I would like to remind everyone that during today's call taking place on Tuesday, May 9, 2017 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 of 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.

The company undertakes no obligation to update the forward-looking statements made during today's call. And with that, I'll turn it over to John..

Thank you for joining us to discuss our first quarter results. Since we have reviewed our full-year results only six weeks ago, I will briefly update you on the same topics today. Many of my comments are tied to my most recent trip to Asia. I just came back this past weekend from another productive trip. I met all our major partners on this trip.

Goertek, BOE, Lenovo, Olightek among others. Once again, they have great interest in Kopin’s technologies and products. For virtual reality and augmented reality solutions. Now, allow me to go over some of the key developments. First, I am very, very pleased with the progress achieved in our agreement with Goertek.

As a reminder, Goertek is the world’s largest manufacturer wearables, and we are partnering with Goertek with design and manufacture smart headsets. The two companies are working very well together and I am very pleased with the design and schedules.

My visit to their facility confirm that we are on track to introduce the initial products for our product shifts later this year. A few weeks ago, we also announced that we had closed the sales of approximately 7.6 million shares of our common stocks for $24.6 million, with Goertek taking 10.1% in Kopin.

We view Goertek’s position to be a significant investor, to be very strong in dollar spend of that technology. Our agreement with Goertek also includes the manufacturing Solos, Solos is an innovative smart headset for cyclist and we are very proud that Kopin is the official sponsor of US Cycling.

Solos was used by US Olympic cycling team for training and they are real. The cycling team won two silver medals. On the screening studies, we have refined Solo. It has begun shipping through the Kickstarter customers and early responses have been very positive.

Solo has the look and feel of the athletic sunglasses, yet integrates Kopin’s proprietary LCD technology, display technology and pupil optics that allows the rider to assess widgets such as speak, distance, cadence, heartbeat, elevation, calorie, and even maps, viewed through a sunlight-readable see-through headset display.

We are now waking now with Goertek for the next generation Solos to advance discoverabilities to target other significant applications such as running. We look to introduce this model later this year. In Asia, I also have many meetings related to our Lightning OLED Microdisplay for virtual reality.

Since introducing this 2K by 2K OLED display at CES just a few months ago, we have demonstrated [indiscernible] factors around the world. And the response there have always been to our Lightning technology is a huge leap forward for BI.

The speed, the image quality, and the enumeration of the latency which caused motion sickness is for BI users have created many new opportunities for VR partnerships. Kopin is the only company providing transmissive LCD, LCOS, a OLED micro displays, my meetings in Asia were very protective.

One of the many unique attributes of lightening displays is our use of the world's first OLED approach. In Q1, we took active steps to establish OLED deposition capability and capacity. We signed an agreement with Olightek in China to join purchase and advance production OLED deposition machine.

We anticipate that all production would be available for this machine early next year. Kopin would get 50% of that capacity. We have signed an even more five reaching agreement with Olightek and BOE Technology Group. BOE is the largest manufacturer of smart phone and TV display in China.

This agreement is to create the world’s largest OLED-on-Silicon manufacturing center. Lack of manufacturing capacity for OLEDS microdisplays has delayed a widespread adoption microdisplay technology. So this agreement is particularly important in meeting future demand for VR, AR users.

The combination of the improved quality and help volume especially for this new facility may well have a significant impact in the development of global wearable market. Our new SiMax battery was also an important part of my discussion. As a compact high capacity battery is one of the missing components in creating mobile headsets in wearables.

Developed under an agreement with Hitachi Maxwell, the battery has completed all certification requirements, which I think I understand became even more difficult after Samsung's battery failure issues. We are currently in discussion to develop a manufacturing plant for the battery.

We are continuing to penetrate enterprise market, working with customers such as Scott Safety. Using our display and imaging technology Scott Sight creates a breathing mask that incorporated a real time lightweight imaging camera with a display screen inside the mask.

This is the first only hands-free thermal imaging system for firefighters, and allows firefighters to see the dark and through smoke. Kopin is the sole supplier of the display screen.

While working closely with the Scott Sight and others to continue develop the next generation of these types of products, which we see this is a good example of the real world applications of AR, and anticipate to announce additional enterprise partnerships in the coming years. The military business continued on track in Q1.

The F-35 Joint Strike program, with Kopin as the sole display supplier for the AR helmets used by the fighter pilots, continues to ramp on schedule. The cadence for the Family of Weapon Sight programs is also on track for Kopin to provide weapon sight eyepiece assemblies.

We are shipping under the low rate initial production segment of the FWS-I and production volumes should ramp during the year. We are also working through the development phase of FWS-1 Crew Served program. The military continues to be a part of Kopin.

We are optimistic with the current administration's budget we increase military spending, we are well positioned to benefit. The Goertek investment further strengthened our financial position, even as we continue aggressively to invest in our technology and to establish the commercialization strategy for our products.

We have close to $90 million in cash and marketable securities and no debt. As I said in the beginning of my remarks, my travel and meetings in Asia only reconfirm that the mass adoption of AR, VR is near. I must say that we are beginning to be recognized as one of the leaders in warehouse.

I will be giving a keynote presentation and a AR, VR symposium in the Annual Society of Information Displays Conference on May 24 in Los Angeles. Now we have another keynote speech on AR in the coming in augmented reality will expose in Santa Clara, California on June 1. Both of these two events are key conferences for AR, VR this year.

I hope to see some of you there. I will now turn the call back to Rich to discuss our first quarter results in greater details..

Thank you, John. Today's total revenues for the first quarter of 2017 were $4.4 million compared with $6.1 million for the first quarter of 2016. The decrease in Q1 revenues year-over-year was primarily driven by a decrease in sales of our products for growing applications.

First quarter 2017 revenues will also include approximately 400,000 from a company we acquired late in the quarter. Cost of goods sold for the fourth quarter was 79% of product revenues, compared with 78% for the first quarter of last year.

R&D expenses in the first quarter of 2017 were $4.3 million, compared with $4 million in the first quarter of 2016. SG&A expenses were $5.6 million in the first quarter of 2017, compared with $3.8 million in the first quarter of 2016.

The increase in first quarter 2017, as compared to the same quarter in 2016 was primarily due to an increase in stock-based compensation of $1.1 billion and professional fees of $800,000. Other income expenses was approximately $400,000 for the first quarter of 2017, consistent with $400,000 for the first quarter of 2016.

The first quarter of 2017 included approximately 280,000 partial restitution from the fraud at our Korean subsidiary that we discussed last year, and 274,000 from the mark-to-market of a warrant we received as part of a technology license transaction.

The first quarter of 2017 included approximately $1.2 million of foreign currency losses as compared to approximately 500,000 of currency losses in 2016.

In March, we acquired a small company that produces systems for military-industrial simulation test equipment for $3.25 million in cash, as well as a $2 million earn-out to achieve certain milestones by March 2020. Kopin has net deferred tax assets with a full valuation allowance.

As a result of the acquisition, we recorded approximately $1 million of deferred liability, tax liabilities. This resulted in Kopin reducing its valuation allowance and recording a tax benefit of approximately 1 million in the first quarter 2017.

Turning to the bottom-line, our net loss for the quarter was approximately $7.9 million or $0.12 per share, compared with a net loss of $6.9 million or $0.11 per share for the first quarter 2016. First quarter amounts versus depreciation and stock compensation expense are in a table in the Q1 press release.

As previously announced, we completed the sale of approximately 7.6 million shares of our stock to Goertek. The company is finalizing the accounting for this transaction so we suggest you review our final 10-Q for any changes in estimates.

Turning to 2017, we're not providing guidance due to the lack of visibility inherited in any newly developing market like wearables. However, just to give us sense of how we see the year developing, we expect revenues will be backend loaded, as the products John discussed ramp in the fourth quarter.

We believe operating expenses will remain largely flat with 2016. We conclude the year, the quarter with approximately $67.8 million of cash and marketable securities, and subsequent as I mentioned, we completed the sales of stock to Goertek for approximately $24.7 million.

Again, we have no long term debt and we continue to meet our very strong cash and marketable security position allowing us to execute our strategy. And with that operator, we will take questions..

Thank you. [Operator Instructions] Our first question comes from the line of Matthew Robison with Wunderlich. Please proceed with your question..

Hi, thanks and congratulations for closing the Goertek investment. Can you comment on - if you are seeing any restocking orders and what kind of applications those might involve, also provide CapEx and if you can the current cash balance and also please repeat what you said for currency losses..

As far as restocking orders, so in the first quarter we mentioned that the drone sales were down due to the fact that the customers are switching to higher resolution displays, and so on the first quarter we had kind of a slowdown of the older - as we start to ramp up the new displays. Forex loss for the quarter was $1.2 million.

The cash balance as I mentioned was $67.8 million at the end of the quarter. We then received roughly $25 million from Goertek, we are burning cash at a rate of approximately $6 million, so you can feel we are halfway through the quarter, so you can deduct three and you get somewhere between 87 and 90 million currently..

On the higher risk displays for the drones, have you seen orders for the newer products yet?.

Yes, we are shipping now..

Okay so you didn't get the restocking revenue in the first quarter, but you’ve gotten the orders for those kinds of products. It sounds like, confirm that, and let me know if you have got any other applications that are reordering at this point..

Yes we have received orders on higher resolution and as John mentioned on things like the Scott Sight, a lot of those were new products last year and we are in design efforts for the second generation of those products as you come up this year..

Okay, so going from - still thinking in terms of going from Gen 0 in 2016 to Gen 1 in 2017 with the ramp in the fourth quarter?.

Yes..

And when we think about the military business, do you expect to see a step up there in the third quarter or do you expect we will have to wait for the fourth quarter for that..

No, we expect that to step up in the third..

Very well, thank you..

Thank you. Our next question comes from the line of Jeff Bernstein with Cowen Prime Investors. Please proceed with your question..

Yes, hi guys, you just talked a little bit about the Whisper chip and when we might see some design wins, I guess you are also working on applications, but will we potentially see some designs and lever applications..

This is John Fan, Jeff. The Whisper chip and Whisper technology is already designing to headset. So a bunch of headsets, I think we announced it last six weeks ago, there are four headsets product coming up with Whisper chip. So that’s not a surprise because Whisper was developed for smart headsets.

What we are doing now is to improve our technology over the chip to address for what they call home use, for [indiscernible] home use, the personal assistance in home, and that we will - as I said, we will hope to expect those benefits of the new technology and the end of this year..

And then I guess you guys are supplying music [ph] down in their M300, I think they are new generation AR for commercial and industrial use, did you have orders there in this quarter?.

We cannot comment about our customers, but we are providing optical margins for them yes..

Thank you..

Thank you. [Operator Instructions] Our next question comes from the line of Robert Mertens with Needham & Company. Please proceed with your question..

I'm here on behalf of Rajiv Gill.

I wanted to get a little bit more clarity into your Whisper chip technology you just mentioned that you are looking into using it in home use, may be having design wins by the end of the year, can you give me clarity to sort of roadblocks you might face in the technology, is there fundamental difference between the algorithms used for close-up voice recognition in the home use where you might be dealing with a lot more background noise and then I have one follow-up after that?.

Yes, the question is about the difference between the near field, which is the headset case is the far field. It is basically all in the bean farming, how to attract the beans of the voice and we have a patent approach to take care of far field of course we are not ready to disclose yet.

We believe that new technology will be a period of what is it now in the market..

Okay. Thank you.

And then just as a follow-up, I wanted to see if you had any more clarity into your industrial applications and any sort of outlook for the year with that product line?.

We believe that from a helmet type of approach is beginning to catch a lot of attention, so it is not just got helmets doing it now, we are working with other companies to develop those type of helmets. So this is a vehicle industrial AR use.

The military use continue and we have three new smart headsets coming out by the end of this year with Goertek and I am pretty excited by them. I think they are very unique and people would be surprised..

Okay great, thank you..

Thank you. We have a follow-up question coming from Matthew Robison with Wunderlich. Please proceed with your question..

Hi thanks.

Can you talk a little bit more about this acquisition? I know it is small, but it took the time to do it and it seems like it is, how does it fit in with the military business? I know you described it briefly in the press release, but a little bit more detail would be of interest in whether there is any revenue from the company now?.

Yes, as I mentioned in this quarter there was $400,000 of revenue not much other than the million dollars of the benefit we got, non-cash benefit we got from the recording of the deferred tax liabilities.

The actual results of operations did not contribute much to the bottom line at all because of all the step-up of the assets and the amortization and all that good stuff. It is a company that actually was a customer of ours.

The bought our displays for training and simulation, they were primarily a customer of subsidiary in Scotland FDD, which has always had training simulation customers like the 3D metrology and such.

It was somebody that we were familiar with already and we just thought that combining our know-how with their know-how we could significantly expand it to additional markets in the test and simulation. So, while they are military customers, again it is training simulation it is not fielded units..

And that 400K reflects the quarterly run rate or is it more of the more of the stock [ph]?.

That is the stock [ph]. That’s what - we acquired them on March 7, so it is from that period, but I wouldn't extrapolate that will be much. I would not extrapolate that..

Okay. Thanks..

Thank you. We have another follow-up coming from the line of Jeff Bernstein with Cowen Prime Investors. Please proceed with your question..

On the - just on the subject of the FDD, can you talk a little bit about what is going on with 3-D machine vision, how it was impacting the quarter and what is happening with China adoption?.

Yes, Jeff Bernstein’s question is about the FDD who makes LCOS display and their major customers are using it from 3-D metrology and the equipments to look at intimate factoring. Right now they are growing. We have about 67% market share in the world.

The other - only one competitor is from compare [indiscernible] in China, which is really the market that we are really - our focus are, they are beginning to build those machines with our display OpEx and currently we will be the only one there DLP is now designing in China.

So with the ones that took off that particular growth would be you know steeper..

So is that more of a 2018 phenomena?.

Yes late this year and 2018. Yes..

Okay.

And then just back on the SiMax battery, so you would think there would be a lot of interest in this, is there a potential for an product guy to put capital in on the manufacturing side, just give us a little color about who you guys are talking to about manufacturing and has it been inspecting in any of the designs that you have in the pipeline?.

While right now the first good news is technology is now approved and certified, which is always the toughest battle. Now the question is how to you get it manufactured in a model and price point that people can use for consumers. And that is where we are now negotiating and help them to negotiate to restore such a professional line.

This is still early stage negotiation with multiple companies. So it is too early to talk about it. .

Any predictions for when we would have some actual design wins of that battery?.

No, until we solve the manufacturing I don't think people would put in their real [indiscernible]..

Yes.

And then just you mentioned F-35 ramping, there is a I guess a significant development there with moment from LRIP kind of orders to higher volume orders by the US, there has been a lot of interest overseas et cetera, any change to your view? I think you were talking about kind of a stair step five into eventually 10 million annual kind of run rate, has that changed at all?.

No, I mean what we quote is the program of record that we know..

So there is no international in that?.

We are not predicting exactly who is going to get what claims and things like that. We're just given a program of record by our contract and we match that up against what we see in the federal budget to make sure it is accurate and that’s what we plan on. [Indiscernible].

Yes, I think, I just want to add on that point on F-35, since we are the sole supplier of display system to the helmet, so it actually is very easy to calculate, once you know how many have been shipped internationally..

Okay got it.

And then just on the FWSC, so you are in a development contract now when would the program actually be awarded for volume production?.

I believe, middle of next year..

Got you. Great, thank you..

Thank you. There are no further questions at this time. I would like to turn the turn the floor back to Dr. Fan for closing comments..

In summary, we have the right partners, we have the right products, and we have the right technology. The timing is also right. And we are now being recognized. Finally, we have our Annual Meeting on May 31. Our shareholders please send in your votes as soon as possible for our annual meeting.

Anyways thank you for joining us this morning, and hope to see you in the conferences. Thank you..

This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation..