Revenues for the first quarter of 2017 were $6.1 million as compared to $7.0 million in the first quarter of 2016. Last year’s quarter included $1.0 million in revenue from a licensing agreement for our HMD technology with a major electronics company.
“Our overarching focus is to advance our projects with our strategic partners,” commented Andrew Sculley, president and CEO. “We have been in active discussions with high volume manufacturers to join us and our consumer electronics partners to fund and build the production capacity to handle the volumes required for the commercial market. Our objective is to align the display performance demands of these companies, which our products achieve, with a mass production partner who can execute at the volumes and cost levels required.
“The excitement around the technology that we have today is largely driven by our proprietary direct patterning, which we believe gives the highest brightness in the market,” Sculley added. “This is critical to our partners as it is the only way to avoid blurring and motion artifacts while achieving the speed and contrast required for the next generation of VR and AR headsets. We have been working on this for several years and have demonstrated over 5,000 nits in color, far beyond what we believe anyone else has today, and have in production monochrome displays with brightness levels exceeding 15,000 nits.
“Consumer electronics and technology companies who see VR/AR headsets as the next growth engine have been studying the performance and acceptance of first generation headsets and have strong ideas about what performance characteristics are critical for next generation products. Across the board, these companies are telling us that our high brightness technology represents the best path forward for meeting end user requirements.
“While our military business was down from last year due to the wind down of certain domestic military programs, our product revenue was up 20% from the fourth quarter as we begin to ramp up volumes for the new multi-year programs,” continued Sculley.
Product revenues totaled $4.4 million versus $5.3 million in the first quarter last year and $3.7 million in the fourth quarter of 2016. R&D contract revenues totaled approximately $1.7 versus $706,000 reported in the prior year quarter and $905 thousand reported last quarter. The increase in R&D contract revenue over the prior year is primarily due to the addition of a commercial contract with a major consumer electronics company.
Overall gross margin for the fourth quarter was 30% on gross profit of $1.8 million compared to a gross margin of 48% on gross profit of $3.3M in the first quarter of 2016. The decline in gross profit margin was attributable to the favorable impact of $1.0 million in license revenue recorded in the first quarter of 2016, against which no cost of revenues was recorded, and the impact of lower production volumes on our fixed production costs.
Operating loss for the first quarter was $2.0 million versus operating income of $22,000 in the first quarter of last year.