Good day, and welcome to the Kopin Corporation First Quarter 2020 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Richard Sneider, Chief Financial Officer. Please go ahead, 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 first quarter results at a high level. John will 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 5, 2020, 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 with well our subsidiaries, market conditions and other factors discussed in our most 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.

Good morning, and thank you for joining us to discuss our first quarter results. Given the unprecedented circumstances we are facing, I want to start by expressing my hope that all of you and your families are staying safe and well. Before I discuss our strong start to the year, I first want to review our response to COVID-19, and how it has impacted our business. Like all companies, in March, we quickly shift our employees to remote work where possible. Our teams adjusted quickly and that structure has worked well. But as a defense-related company, we have many employees considered essential, and they have continued to work every day. I cannot tell you how grateful I am to this group, their positive attitude and their commitment to see Kopin succeed. While our AMLCD products are making a Class 10 cleanroom, which provide an inherent level of safety and protection with mask, gloves and goggles. We did take extra precautions. The COVID thing has varied and is directly responsible for a strong first quarter, and the momentum was carried into second quarter. We have had a very good start to the year with demand holding steady. Our suppliers keep us in stock with only a few minor bumps and interruptions. Our dedicated employees keeping the business on track and are performing. We are very pleased with the results. In particular, our defense business is strong with product revenues increasing 144%. In the enterprise sector, our core applications area has slowed recently. Others have remained strong, particularly in the -- for the safety. Our total revenue increased about 42% compared with the first quarter of 2019. In addition, we have reduced our R&D and SG&A expenses by 49% and continue to look at ways to streamline our cost structure. We expect…

Thank you, John. Turning to our financial results. Total revenues for the first quarter of 2020 were $7.9 million compared to $5.5 million for the first quarter of 2019, an increase of 42%. Cost of goods sold for the first quarter of 2020 was $5.6 million or 95% of product revenues compared with $5.9 million or 127% for the first quarter of last year. The decrease in cost of product revenues for 3 months ended March 28, 2020, as compared to the 3 months ended March 30, 2019, was primarily due to improved manufacturing yields and higher volumes, which reduced fixed cost per unit at our U.S. plant, partially offset by lower manufacturing efficiencies at our Scotland plant, caused by some supply issues. R&D expenses in the first quarter of 2020 were $2.3 million compared with $5 million in the first quarter of 2019. The lower R&D costs for the first quarter of 2020 as compared to the prior year was a result of curtailment of certain programs. SG&A expenses were $3.4 million in the first quarter of 2020 compared to $6.3 million in the first quarter of 2019. The decrease was primarily due to a decrease in compensation expenses, including stock-based compensation, bad-debt expense, professional fees, information technology expenses and the accretion of the endless continued consideration. Other income/expense was expense of approximately $86,000 for the first quarter of 2020 compared with $300,000 of income for the first quarter of 2019. During the 3 months ended March 28, 2020, we recorded $200,000 of foreign currency losses as compared to $200,000 of foreign currency gains for the 3 months ended March 30, 2019. Turning to the bottom line, our net loss attributable to controlling interest for the quarter was approximately $3.6 million or $0.04 per share compared with a net loss of $11.3 million or 15% -- $0.15 per share in the first quarter of 2019, a 68% improvement. Cash and marketable securities were approximately $17.6 million at March 28, 2020, compared with $21.8 million at December 28, 2019. Subsequent to the end of the quarter, we received a $2.1 million Payment Protection Plan loan under the CARES Act, which is not included in the $17.6 million cash position as of March in 2020. We currently do not have plans on raising additional capital. First quarter amounts for depreciation and stock compensation are attached in the table to the Q1 press release. The amounts discussed above are based on current estimates and listeners should review our Form 10-Q for the first quarter of 2020 for any possible changes and additional disclosures. Finally, with regards to the NASDAQ minimum listing requirements, we have until December 2020 to regain compliance. Operator, we'll now take calls.

[Operator Instructions]. We'll take our first question from Glenn Mattson with Ladenburg Thalmann.

Nice to see the good results. I'm curious on the enterprise side. Just kind of, I guess, a couple of things. First of all, is the thermal-imaging technology that you have, can that be -- is there an application for that as far as judging people maybe at high temperatures from a distance? And is there any possibility for an uptick in that? And then secondly, I'm curious just about, in general, the fire and safety and the first responders part of the business. I know that's had a big portion of the Q4 revenue. And just curious as to the breakdown between that versus some of the more industrial applications in the current quarter.

So we have talked to some of our customers, and there are folks experimenting with thermal applications as kind of a first line of defense when people are coming into a building to identify their temperatures and so on and so forth. I don't know if any of that was actually implemented that, but they have talked about that extensively. And sorry, man, what was the second piece of the question?

Yes, sure. Just on the fire -- first responders for fireman, people like that, just the breakdown between that versus the more industrial applications on the enterprise side?

So in both Q4 of last year and Q1 of this year, we had a significant increase in volume in that application. As we'll say in the 10-Q tomorrow when we file it -- that we anticipate filing it, we don't expect the run rate that we had in Q1 to continue through the year. I don't know if it was just them filling some of the supply chain or what have you, but it was a very good quarter for that application.

Okay. And curious on the gross margin, it was down a little sequentially. I guess that's more -- as the business gets a little more heavily weighted towards defense, can you talk about the outlook for gross margin for the rest of the year?

Yes. We continue to see yield improvements during the course of the year and hopefully, higher volumes and all of that will result in improved gross margins. The product revenues were slightly down in the quarter sequentially, which is why the gross margin was down slightly sequentially. It's the fixed cost per unit aspect of it.

Right. Great. And then just on last on sales and marketing. Do you expect that this level is kind of a baseline from here? Do you expect it to grow significantly as you try and penetrate more enterprise allocations, things like that?

Yes. That $3.8 million to $4 million is kind of the baseline that we're shooting for. The wildcard there is only stock compensation, which can be affected by the stock price, obviously. But on the noncash front -- on a cash basis, I guess, we would expect it to be in that type of level.

[Operator Instructions]. And it appears we have no further questions at this time. I'd like to turn the conference back to Dr. John Fan for any additional or closing remarks.

Thank you for joining us this morning, and I hope to talk to you in the next call. Bye, bye.

And that does conclude today's conference. We thank you for your participation. You may now disconnect.