An earlier version of this article was published on June 7, 2022. The undated ad from Simpkins is circulating again now, with some small changes, so we have updated the story to incorporate the company’s recent results and performance below.

Today’s pitch for our consideration claims to be focused on “black box” spending, and the revolutionary ideas brought forth by the firehose of money that flows into military programs, but it ends up being yet another “metaverse” and “augmented reality” pitch.

Which makes sense, I guess — augmented reality was essentially invented by the military, with the most well-known application, decades before Pokemon Go, being those heads-up displays and interactive helmets worn by fighter pilots to project targeting information and other data into their field of view.

So… what’s the secret tiny defense contractor being pitched by Jason Simpkins now? Let’s go through and check the clues, and we’ll see if the Thinkolator can find a name for you. This all comes from an ad for his “upgrade” service at the Outsider Club, which is called Secret Stock Files (currently being sold at $1,999/yr). Here’s the lead-in to get your juices flowing…

“The Secret Stock Files

“How One Tiny Defense Contractor Could Soon Hand Investors a 26,221% Gain

“… I’m pulling back the curtain…

“And taking you inside a world few have ever seen.

“A world of secret cutting-edge innovations and future-bending inventions.

“You’re about to discover the technology that will redefine our world over the next three, five, and 10 years.

“But most importantly, I will reveal the companies that are behind these breakthroughs.”

And after a spiel about DARPA and the many government programs that contributed to foundational technology that went into winners like the iPhone, we get into some specifics…

“… this time, the technology that’s about to be commercialized will be bigger than the iPhone…

“Bigger than the internet…

“And will give early investors a shot at life-changing wealth.”

And he calls that foundational technology, from the late 1960s, the “retinal matrix” — it came out of DARPA funding, and used goggles to project a cube over the person’s field of view, so it was pretty simple, but that project helped lead to the fully integrated $400,000 augmented reality pilot helmets we see today in the F-35, fully replacing the projected “heads up display” on the windscreen.

And that “Retinal Matrix” term is what he uses for “augmented reality” throughout, just to make it sound more novel and mysterious (if the term sounds familiar, and you could research it on your own, why subscribe to a newsletter?)

But with “Retinal Matrix” company is being teased, you ask? The big picture from the ad is that this Retinal Matrix technology will be the third major wave of technology revolution in our lifetimes — first the internet, then the mobile internet, and now the virtual “Retinal Matrix” world that is constantly augmented by technology.

“… the Retinal Matrix will soon replace nearly every single device you own.

“We’ve seen this pattern play out before.

“Think about life before the iPhone.

“You had to carry around a camera… an address book… a map… a phone… a watch… a wallet… a calendar… and a computer to live your life.

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“But when the iPhone exploded onto the scene, all of those different functions were rolled into one easy-to-use device….

“Well, that’s exactly what the Retinal Matrix is going to do…

“Except it’s going to take things a step further.

“It will condense all of your devices — your iPhone, your computer, your smartwatch, and all your other wearables — down into an even simpler, more elegant, and convenient form.

“But instead of condensing all of these technologies down into a smaller physical format…

“The Retinal Matrix is going to turn them all virtual.”

I know, I know, to some of you that sounds like a nightmare. But let’s get into the specific clues Simpkins drops in his pitch… he talks about well-known augmented reality toys like Pokemon Go or the e-commerce tools that let you try on new glasses or makeup virtually, or show you what new furniture would look like in your home, and about the applications in medicine, for finding veins or even helping to guide surgeons in their work, and then, finally, he starts to hint at the specific company he likes for this “Retinal Matrix” tech.

And it starts out with a bunch of redacted patents, which always look impressive to folks who haven’t researched patents before…

“A few months ago, my contacts within the Beltway sent me an encrypted message.

Enclosed within the message was a series of documents….

This patent details an “organic light-emitting diode display” composed of three subpixels, each “fabricated with a separate anode” and surrounded with a “dielectric barrier.”

“… this…. Which details an array of “thin film transistors” on silicon substrates and the “slicing and dicing of such substrates for transfer to a common module body.”

“And this:

“Which explains the functionality of a “pixel array driver” with a “ramp signal generator” combined with a “second amplifier to receive the ramp signal.”

And, as you might have guessed, he thinks those are key patents for this “Retinal Matrix” technology…

“All of these patents are owned by a tiny DARPA-funded government contractor.

“Which means any company that wants to use the Retinal Matrix will have to pay this company for its technology.

“And no, this company isn’t Raytheon, Boeing, or Northrop Grumman.

“In fact, I can guarantee you’ve never heard about it before.

“Right now, it’s trading for just under $5 a share.

“And last year, its revenue was just $45 million.

“But according to my D.C. sources, this company is going to be the main supplier for the entire $7 trillion Retinal Matrix revolution as it kicks into high gear.

“And over the next few months, I expect its revenue to soar — carrying its share price along with it.”

And we get a few reasons why Simpkins thinks this will be a big winner…

“It’s already inked a $52 million deal to supply critical Retinal Matrix components for the Army’s Family of Weapon Sight Programs…

“Google has confirmed that this company will be the supplier of critical components for Google’s $800 million Retinal Matrix push.

“Lenovo’s $500 million Capital and Incubator Group has also just partnered with this tiny tech company to grow its Retinal Matrix footprint as well.

“And it’s rumored that Apple Glass — the Retinal Matrix-enabled eyeglasses that Apple is expected to release next year — also relies on this government contractor for its raw components.

“And that’s not even considering all the other supply and manufacturing deals this firm has signed with dozens of companies ranging from Raytheon, Panasonic, and Verizon to Nikon, Garmin, and Northrop Grumman.”

And he goes a little over the top in assessing the opportunity, comparing the key technology owned by this company to the invention of the semiconductor… and calling this company “the one single choke point for the $7 trillion worth of economic activity that will be unleashed by the Retinal Matrix.”

We’ve already got enough for the Thinkolator to work with, I’m sure, but Simpkins also tosses in some clues about the founder…

“The founder is one of the most talented engineers in the world.

“Before starting this company, he worked at MIT’s prestigious Lincoln Laboratory, where he was the head of the Electronic Materials Group.

“After leaving MIT, he started three separate companies that were each sold to larger, publicly traded corporations.

“He’s been named by NASA as one of the “top 15 nanotechnology innovators” in the country.

“And he personally owns over 70 patents for cutting-edge breakthroughs in electrical engineering.

“It’s no wonder then that he and his team were able to lock down so many patents for Retinal Matrix technology before anyone else…

“And achieve a total stranglehold on the fundamental technological components required to power it.”

OK, so that’s an embarrassment of clues now… the Thinkolator even got a bit sulky about being dragged out of the garage for this fairly simple task, but relented and confirmed our answer quick enough: This is Kopin (KOPN), which has been teased as a possibly foundational Augmented Reality/Virtual Reality stock for years — I think I first wrote about it when VentureCap Strategist (which no longer exists) teased it as the “only ‘pure play’ VR/AR company in the world” back in 2016.

All the specifics match, of course — the founder. Dr. John Fan, has been at the helm since the founding in 1985 (they came public in 1992), and did play roles in founding several chip companies that have been taken over, and did indeed get named a “top nanotechnology innovator” by NASA back in 2005. They are primarily known for their innovation in microdisplays, which first found a market in the viewfinders for digital camcorders but did also end up being used in military helmets and scopes, and early “smart glasses” like the Vuzix M100, and they have continued to innovate in high-resolution, high brightness microdisplays.

And yet, on the balance sheet, Kopin just passed its 30th birthday as a publicly traded company last year, with essentially nothing to show investors for its decades of innovation. It has mostly acted like an R&D company, never generating a consistent level of income from its products or innovations, selling shares every couple years to keep the lights on, and spending a total of about $320 million along the way. They did in fact have $45 million in revenue in 2021, and that number has grown for four years now (it got to $47 million in 2022), but that followed a long decline after the camcorder business essentially disappeared a decade ago (their best year was 2009, when they thought they were on an upward trajectory, they had $115 million in revenue, $19.5 million in profit, and were launching the augmented reality i-Sight device and investing in the next generation of display technologies).

It’s a fascinating company, and they really do believe that they’re in a key spot when it comes to smart glasses and AR/VR equipment, with their innovative OLED microdisplays and similar technologies, but it’s really hard to guess at when (or if) that will mean something for investors — the stock had a huge surge in 2021, when they got the “metaverse” bug during the market mania that peaked about two years ago, and they were at least smart enough to sell some shares during that excitement to raise a bit of cash, but I assume that also means there are a lot of newer investors who feel burned by the failure of the “story” to generate any real financial performance. As with Vuzix, the smart glasses maker and onetime Kopin customer which we look at every now and then (they may still be a Kopin customer, though they’re also working with Atomistic to develop new microLED displays), sometimes you have to sit back and wait for the company to actually prove to you that they can sell something before you buy into the story that they expect to be a leader in a sector that hasn’t yet really emerged.

Is that happening now? That’s what Simpkins seems to believe, with that $52 million military order ready to send them soaring into the next era, and perhaps he’ll end up being right someday — though that particular order, for the FWS-I thermal sight eyepieces, is not one order, it’s several, and it look to me like more than half of that order, so far, has already been fulfilled (they got a $19.8 million order to push the total over $50 million late in 2021, and most of that hit the revenue line in 2022, though they might also get more orders).

Kopin is the sole source provider for the microdisplays in those F-35 helmets, but, of course, they’re also not making all that many of them, not at $400,000 a pop, and the microdisplay is not the most expensive part. They get steady orders from the DoD, but this isn’t a mass-market device, it looks like they generally get orders for those helmet displays that tally up to between $5-10 million a year, and that will probably continue, and might accelerate, as long as F-35s keep being built and used (at least another decade, perhaps much longer). They’re still losing money, and growing revenue at only 4% last year is not nearly enough to make up for those losses, particularly when their gross margins also got worse (as costs rose throughout the tech supply chain), but they did finally make some changes toward the end of last year.

The founder is still looking forward, and still optimistic, this is his quote from the 2021 results press release:

“2021 was both an exciting and challenging year for Kopin. We successfully navigated the global supply chain issues and continued to lead with innovations in display technologies and optics that enable a superior AR and VR experience for the users….

“We are focused on continuing the growth of our core product lines, as we actively innovate and advance our technology roadmap for AR/VR/MR applications. Interest in the Metaverse continues to be strong, and we believe we are well positioned to capitalize on these opportunities it will create. In 2021, to capture these opportunities, we increased our internal R&D spending, with major focus on Pancake optics and microOLEDs. We also worked with our partners to fund R&D activities on MicroLEDs. We enter 2022 with a very strong backlog of orders and we believe this will be another year of good growth. However, like many companies we continue to deal with supply chain issues, and it is a very dynamic and challenging situation. While we have been very successful to date in preventing shipment disruptions related to the supply chain, we continue to closely monitor the situation. In summary, demands for our products are strong in all sectors, and despite the challenges of Covid, parts shortages, and the process improvements to our FWS-I line, revenue grew 14% in 2021. Furthermore, our technology advances and innovations for AR/VR in 2021 have been excellent, both in optics and displays and we expect they will create future opportunities for us. Our financials are solid, with no long-term debt. We remain well positioned for continued growth.”

But they’ve also made quite a shift since bringing on Michael Murray as their new CEO back in September, and the communications have a different tone now as they try to reset investor expectations. Here’s what Murray said in the press release:

“2022 was an instrumental year in Kopin’s evolution to becoming a leading provider of specialized solutions combining advanced microdisplay and optics technologies. While we continued to develop leading edge technologies for the various markets we serve over the last few years, we believed that a fundamental shift was required for our business to prosper over the long term. Since I became CEO in September of 2022, we have taken several steps towards operational improvements. My immediate focus is on yield improvements, on time and in full deliveries as well as cost controls, leading to improved margins and cash flow….

“As we move into 2023, I see numerous long-term opportunities to drive revenue growth in our defense and industrial markets but we must establish operational excellence for this to be profitable growth. In addition to our operational improvements, we are focusing our business development efforts on offering our higher value added integrated optical display assemblies, which are critical to increasing the applications for AR/VR/MR, among other opportunities.”

Those steps were indeed necessary, it appears, because the fourth quarter numbers were a hot mess — costs ballooned, so their gross margin disappeared, and the only thing saving their revenue line was pretty robust defense orders, because everything else fell pretty dramatically. They also raised another $20 million at $1 a share in January, and had to offer warrants to do that, so the combination of an equity raise and some poor results has weighed quite a bit on the stock, which is back to the 95-cent neighborhood, a new low for the year (it was way below that during the early 2020 downturn, it got down to 30-40 cents or so, but also soared above $10 during the 2021 metaverse mania).

So there you have it, Kopin does indeed have a few hundred patents in the microdisplay area, and some innovations in semiconductor and display technologies that they think set them apart, with hopes that they might be built in to whatever the next mass-market devices might be in augmented reality… but so far, it’s mostly an R&D shop and a small-scale military supplier that can’t quite turn a profit. That may turn, and Kopin has caught the eyes of investors a few times over the past couple decades and soared to higher prices, but it’s hard to guess at when that might happen… or whether their technology will be beaten by someone else along the way, and never make it into the next wave of high volume “retinal matrix” devices for the consumer market. T

he other microdisplay-related companies that I’ve seen talked up over the years are HiMax (HIMX) and eMagin (EMAN), Vuzix (VUZI) may be entering that fray with their Atomistic deal, and there are probably plenty of others working in this space who don’t happen to be pure-play publicly traded companies with a “AR” story to tell, but this is what those four stocks look like over the past decade or so, a period that encompassed the first fascination with Google Glass smart glasses in 2013 and the first real “Virtual Reality is becoming a big deal” investor pitches around 2015 or 2016 — that’s the Nasdaq 100 in pink, HIMX in blue as the only one of the four with a positive return over the past ten years or so, and VUZI (orange), KOPN (green) and EMAN (purple) down in the basement:

To be fair, HiMax is not really a “pure play” on Augmented Reality or microdisplays, they offer a variety of display controllers, touch controllers, and other integrated circuits for LEDs and other display technologies, including televisions, and the market is telling us they’re a commoditized provider of cheap chips — they are much larger than those other companies, with a market cap of about $1.4 billion, trade at a PE of about 6, and are valued at about 1X sales.

But, of course, it’s still been a pretty weak decade for investors in all of these, despite the off-and-on “story” excitement over smart glasses and virtual reality.

Will this next wave of “metaverse” story catch fire again, maybe with the leadup to Apple’s augmented reality headset over the next year or so? Maybe… and it can be fun to speculate on such things, especially if it’s money you were otherwise going to use at the blackjack table, but I’ll leave it to you to guess at the timing. Just remember that stories have to turn into revenue and earnings, eventually, or the stock will pay the price.

So… have a favorite “metaverse” stock? Think Kopin will finally break through to profitability and lead this revolution, or do you think Vuzix or someone else will lap them as we close in on the augmented reality finish line, when Apple or Meta Platforms or someone else actually starts making money in this sector, perhaps within the next few years? Let us know with a comment below (we’ve kept the comments on our earlier article attached, for some perspective).

Disclosure: Of the companies mentioned above, I own shares of Google parent Alphabet. I will not trade in any covered stock for at least three days after publication, per Stock Gumshoe’s trading rules.