Kopin Corporation Announces Second Quarter 2011 Financial Results

•Total revenues of $31.4 million, up 4% from the same quarter in 2010

•Company reiterates 2011 revenue guidance of $130 million to $140 million

Kopin Corporation, supplier of advanced semiconductor products and micro displays for mobile applications including smartphones, tablet PCs, military thermal weapons sights and wearable computers, today announced financial results for the second quarter ended June 25, 2011.

Financial Highlights

 Total revenues increased 4 percent to $31.4 million from $30.2 million for the same quarter of last year. III-V revenue increased to $16.0 million, compared with $15.9 million in the second quarter of 2010. Display revenue increased to $15.4 million from $14.3 million for the same quarter last year.

Gross margin increased to $10.5 million, or 35 percent of product revenues, compared with $7.3 million, or 25 percent of product revenues, for the comparable period of 2010.

Operating expenses were $31.0 million in the second quarter of 2011, compared with $30.9 million in the second quarter of 2010. R&D expenses were $7.1 million, or 23 percent of revenues, compared with $4.9 million, or 16 percent of revenues, in the second quarter of 2010, reflecting Kopin’s investments in its Golden-i technology, III-V smartphone products and capacity expansion, military display products, and the inclusion of Forth Dimension Display’s (FDD) expenses. Selling, general and administration (S,G&A) expenses were $4.7 million in the second quarter of 2011, compared with $4.2 million for the same period of last year. The increase in S,G&A expenses is attributable to the inclusion of FDD’s expenses.

Net income was $0.8 million, or $0.01 per diluted share, for the second quarter of 2011 compared with $1.9 million, or $0.03 per diluted share, for the second quarter of 2010. Net income for the second quarter of 2010 included a $1.9 million gain from the sale of investments and a $0.7 million gain related to foreign currency fluctuations. Kopin’s 2011 second quarter results included a net gain of $0.4 million from the sale of investments and a net loss of $0.3 million from foreign currency fluctuations.

Kopin’s cash and marketable securities balance at the end of the second quarter was $99.3 million and no long-term debt.

“Our second-quarter operating results reflect a continuation of the strategy we set forth at the beginning of the year – balancing short-term financial performance with a focus on long-term growth,” said Kopin President and Chief Executive Officer Dr. John C.C. Fan. “We are in the enviable position of having strong growth projections for our III-V products, the opportunity to add a new military display product category, night vision systems, to our current portfolio of thermal weapon sight products and the development of a potentially game-changing, hands-free wireless industrial computing product in Golden-i. Because of the current strong growth of smart phones, the requirement for those competing for an award of the Enhanced Night Vision program in 2012 to provide qualification units in 2011 and our drive to be a leader in voice activated cloud computing, these opportunities have required significant investments this year.”

“Yet with all of our development efforts, through the first half of fiscal 2011 we have maintained strong operating results,” Dr. Fan said. “Overall our revenues are up 19%, with our III-V revenues up 10 percent over the same period last year as we head into what historically has been our strongest part of the year. Although the current federal budget situation has impacted the timing of display product sales, we expect another year of strong military revenues as evidenced by our recently announced $23.2 million in follow-on orders for the TWS Bridge (TWS-IIB) program. Our income from operations is $2.6 million for the first half of 2011 compared with a loss of $0.8 million through the same period last year, we have generated $3.5 million in cash flow from operating activities and repurchased $1.9 million of our common stock.”

Smartphones Continue to Drive III-V Business

“Our III-V technology is helping to drive the rapid adoption of advanced 3G and 4G technologies across the major smartphone and tablet platforms,” Dr. Fan said. “These advanced new devices not only require more III-V transistors, but structures that are more technologically complex and challenging to produce. As these phones continue to become more complex, Kopin is benefitting with higher and higher dollar content per handset. Our ability to produce these advanced products in volume and at a competitive price is simply unmatched in the industry.”

Display Business Excels through System Expertise

“Just as with our III-V business, our display customers also require products that are technologically more complex to produce,” Dr. Fan said. “The trend today is toward full system solutions, including displays, backlights, optics, ASIC chips, hardware and software. Once again this trend plays to our strength, as we believe that our decades of technology expertise and display system manufacturing experience differentiate us in the market.”

Golden-i Program on Schedule

“Together with our business partner Motorola Solutions, we continue to make excellent progress in bringing our Golden-i® hands-free mobile computing solution to market in 2012,” Dr. Fan said. “Initial response to field tests of Golden-i by select customers has been extremely positive. Golden-i was demonstrated this month at the Microsoft® -hosted Imagine Cup 2011 in New York and the World Future 2011 in Vancouver.”

Business Outlook

“With revenues for the first six months of 2011 at $66 million and the third and fourth quarters traditionally our strongest, we are on course to achieve our full-year revenue guidance of $130 million to $140 million,” Dr. Fan said. “Robust smartphone demand should continue to fuel our III-V business, just as the TWS-IIB and a number of military R&D programs are expected to generate momentum for our display unit.”