Richard Sneider - Treasurer and Chief Financial Officer John Fan - President and Chief Executive Officer.

Jeff Bernstein - Cowen & Company.

Greetings and welcome to the Kopin Corporation Third Quarter Earnings Conference Call. At this time, all participants are in a listen only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder this conference is being recorded. I would now like to turn the conference to the speaker today, Mr.

Rich Sneider, Treasurer and CFO. Please begin sir..

Thank you, operator. Welcome everyone and thank you for joining us this morning. John will begin today's call with a discussion of our strategy, technology, and markets; I will go through the 2017 fiscal third 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, November 7, 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 for our products, operating results for 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 the call over to John..

Thank you for joining us this morning. We continued making record progress in the third quarter in many fronts. First, let's talk about Lightning OLED microdisplays. As we have addressed in the past, our goal is to be the world's leading OLED microdisplays provider.

Our revolutionary 2K by 2K Lightning OLED displays and reference headset design could develop with BOE Tech has continued to make a strong impact on the industry. The small size, high resolution, low power and high field sector makes it perfect for the future generation of VR headsets.

We already received development order for several Tier 1 global partners. In parallel to our current aggressive push, to further enhance our Lightning OLED performance. Our partner has made rapid progress in getting our OLED microdisplay ready for production.

New OLED production equipment is to be delivered to our partner later this months as scheduled. And we planned to start volume production of OLED displays in the first quarter of 2018. These displays were incorporating exciting consumer asset which will be introduced by our partner SCS.

In adding, working with our joint venture partners, BOE and Olightek, we now expect to break ground shortly on the world's largest OLED on silicon factory, that to be built in Kunming, China. The interest in AR and VR continue to grow around globe. We also believe the OLED microdisplays are uniquely suited for this market.

We are seeing a strong interest in our microdisplays for our key players in the consumer, enterprise and military markets. So those of OLED displays will be available on this new fact should be a game changing event for the industry.

As we push forward our OLED microdisplay strategy, we have taken another job in our leadership of our LCD market with the current introduction of our brilliant LED microdisplay product line.

This generation of LCDs incorporates vast designs and processing techniques to dramatically increase performance over current LCD in brightness, switching speed, uniformity and contrast. We have already right received feedbacks for our military customers.

The new offer brightness only possible with LCDs, which are critical for many AR applications, especially for military enterprise. We believe we are hopeful with the development of AR market. Our third quarter results were driven by military business were revenues more than doubling for a year ago.

To be clear, our military business really is one of our wearable business. We have been providing critical components for military headsets. We continue to shift displays for F-35 AR helmets. And we have this optical systems for stimulation training headsets are entering into production a revenue phase in this quarter.

And we look forward the momentum to accelerate into Q4. We are also pleased that in this quarter we have won a major new military production program, which represents tens of millions of dollars in revenue for Kopin in the coming decade. We'll provide additional details in this program when we are able to do so.

Our extensive experience in military wearable headsets will help us to overcome many of the coming issues they are slow expansion of AR VR market such as the weight, then look and ease of use of the headsets.

We have seen our insights and knowledge reflecting in a significant increase in end users applications as well as rapid development on new types of headsets. We have spent many new exciding enterprise in customer headsets to be announced and shown in CES in January 2018.

In fact, we plan to host a special reception at CES highlighting the newest AR VR headset platforms for consumer enterprise applications. Many of these new innovative headsets will be shown in AR receptions. Since its founding, Kopin has provided pilots and customers were enabling component.

A unique procession has allowed - has also allow us to come to become a solid leader in wearable computing.

While we continue to actively support our customers as we develop and innovative products, we have steps to help to accelerate wearable market options and to show the industry what's possible when combing Kopin's technology with our industry's insight. Our first success this year was with Solos, a branded headset for health and fitness.

As a reminder, we shipped hundreds of units earlier this year under kick start program. We also received, and we have been benefited from substantial feedback on this early adopters. We have met many enhancements and our Solos product is in the final preparation with our manufacturer partner Goertek.

We expect to launch it at CES in January and begin shipping in the first quarter of 2018. The Solos was showcased much of our Kopin's most exciting new technology, including Whisper audio technology and our Pupil optics along with many other new features. Finally, we have made good progress with our Whisper technology.

Whisper's mainly useful for headsets. And many of the new headsets showing in CES will feature Whisper inside. So, Whisper technology has not been successfully a standard to include mid-field and far-field applications which expands the potential business uses. Improving the voice interface is critical for wearable.

So Whisper's ability to make voice more reliable and useful prevent numerous opportunities. In summary, we expect a strong fourth quarter for our military business, which support our 70% revenue growth in the second half. The new innovative enterprise and customer headsets are coming soon. The wait is over. And we are facing the comp before big wave.

We have close to $80 million in cash and no debt. Our product expand are in place. We are ready. Thank you..

Thank you, John. Total revenues for the third quarter 2017 were $6.1 million, compared with $5.8 million for the third quarter 2016.

The increase in Q3 revenue year-over-year was primarily driven by an increase in sales of our virtual reality systems for military training which is partially offset by a decline in sales of our products for industrial applications.

The sales for our industrial applications declined in Q3 2016 with the first quarter we shipped products to many new customers for incidence display models used in the thermal fighter pilot mask, so some changes on it. In addition, we use to sell display products to NVIS, the company we acquired in 2017.

These sales are now eliminated in consolidation. Cost of goods sold for third quarter was 74% product revenues compared with 83% for the third quarter of last year. R&D expenses in the third quarter of 2017 were 5.3 million compared with 4.1 million in the third quarter of 2016.

SG&A expense were 5.3 million in the third quarter of 2017 compared with 4 million in the third quarter of 2016. The increase in third quarter 2017 as compared with the same quarter 2016 was primarily due to an increase of approximately 500 of stock compensation expense and additional expense of approximately 500,000 from the NVIS acquisition.

The incremental SG&A from the NVIS acquisition for the three months ended September 30, 2017 primarily relates to the amortization of intangibles resulting from the acquisition. Other income expense was approximately 306,000 for the third quarter of 2017 compared with expense of approximately 1.2 million for the third quarter 2016.

Third 2017 included approximately 80,000 of interest and other income and 224,000 of foreign currency. Third quarter of 2016 includes approximately 150,000 interest and other income, loss of approximately 200,000 and approximately 1.1 million of foreign currency losses.

Turning to our bottom line, our net loss attributable to the controlling interest for the quarter was approximately 8.2 million or $0.11 per share compared with a net loss of 8.1 million or $0.13 per share for the third quarter 2016. Third quarter amounts for depreciation and stock compensation expense are attached to a table of our Q3 press release.

Turning for the fourth quarter, as stated in our second conference call, expectation is for revenues for the second half will increase in a range of 70% over the first half. You will note that inventory increased 2.6 million over the prior year - year end, this inventory isn't support our Q4 anticipated shipment.

We believe operating expenses will remain largely flat with 2016. We conclude the quarter with approximately 77 million of cash and marketable securities, we have no long-term debt and we continue to maintain a very strong cash and marketable securitization in order to execute our strategy.

As always listener should review our final form 10-Q for possible updates. And now operator, we'll take questions..

[Operator Instructions] Our first question comes from Jeff Bernstein with Cowen. Please proceed with your question..

Hi guys, good morning. Just a couple of questions here.

The new military program I know you are not going to say much about it, but I just wanted to confirm that that's not associated with the FWS programs?.

No, it's not, it's entirely different program, but it still involves with displays..

Gotcha, okay.

And then you talked about five new AR VR headsets that will be introduced at CES, does that include your Solos product?.

Yes, one of them is Solos product, yeah.

Gotcha, okay.

And then can you given an update on the 3D machine vision business, I think that was pretty strong last quarter and just what's going on there?.

That's pretty much on track. It's fairly solid year-over-year. As I mentioned in our prepared remarks, our overall industrial sales are down because FDDs sold NVIS and those sales now are eliminating consolidation. So right now, I can see the benefits of those until Q4..

Gotcha.

And then has anything happened with China on the 3D machine vision, I think that was sort of an inflection point you were waiting for?.

Yeah, I think which has to stay tuned now. China is actually moving towards 3D now, yeah..

Okay.

And then John, you guys were awarded a pattern spectacle within visible optics and it looks like lot of other guys are trying to do that, you know is this is a real future kind of thing or is this something that's going to be happen in the next I don't know year or two?.

Well, I think in visible optics is dream that we have maybe even five, six years ago ultimately it is clear that display and optics will be better into it. It may take some time maybe three or five years from now to be really practical, meanwhile I think Solos represent a really a near term viable approach..

It's great, thank you..

I am glad we have pattern because we are the earliest guys allocating it and we have our original pattern now, yes, year-over-year. I am impressed that you study all our patterns.

Maybe we should announce more of them, we have lot of new patterns which are very fundamental but as we know we are never happy with this patterns, maybe we should start having a new approach talk about patterns, yeah..

Thanks..

[Operator Instructions] We have a follow-up question with Jeff Bernstein with Cowen. Please proceed with your question..

Aright.

Just you talked about to extending Whisper to mid-field and far-field at this point, so are you just showing this at CES for the first time for people to see or you guys already in discussions with people about the technology?.

Yes, it's both comments, we will be showing this at CES suite. In addition to that we are talking to potential customers at this time..

John, I know guys like Knows you know a lot of audio guys are trying to do things here, is it repetitive to kind of have both things, or they additive or how do you look at Whisper versus some of the other things that people are doing?.

I think that first of all the show has advantage. In addition to that sometimes using our technology allow them to use their processes more efficiently. So, there are two ways, one is better technology anyway and maybe get some ease of system applications..

Great, thanks..

[Operator Instructions] There are no further questions at this time, I would like to turn the call back over to management for closing comment..

Okay, thank you very much for joining us this morning. And I hope to see you all at this coming CES, it will be exciting at CES. Thank you..

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