UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _____ to _____
Commission file number
(Exact name of registrant as specified in its charter)
|
State or other jurisdiction of incorporation or organization |
(I.R.S. Employer Identification No.) | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area
code:
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
| Class | Outstanding as of May 13, 2025 | |
| Common Stock, par value $ |
Indicate by check mark whether
the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to filing
requirements for the past 90 days.
Indicate by check mark whether
the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit
such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |
| ☒ | Smaller reporting company | |||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether
the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes ☐
No
Kopin Corporation
INDEX
| 2 |
Part 1. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (Unaudited)
KOPIN CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
| March 29, 2025 | December 28, 2024 | |||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash | ||||||||
| Marketable securities, at fair value | ||||||||
| Accounts receivable, net of allowance of $ | ||||||||
| Contract assets | ||||||||
| Inventory | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Property, plant and equipment, net | ||||||||
| Operating lease right-of-use assets | ||||||||
| Other assets | ||||||||
| Equity investments | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued payroll and expenses | ||||||||
| Accrued warranty | ||||||||
| Contract liabilities | ||||||||
| Operating lease liabilities | ||||||||
| Accrued post-retirement benefits | ||||||||
| Other accrued liabilities | ||||||||
| Customer deposits | ||||||||
| Accrued legal expenses | ||||||||
| Deferred tax liabilities | ||||||||
| Accrued litigation damages | ||||||||
| Total current liabilities | ||||||||
| Noncurrent contract liabilities and asset retirement obligations | ||||||||
| Operating lease liabilities, net of current portion | ||||||||
| Accrued post-retirement benefits, net of current portion | ||||||||
| Other long-term liabilities, net of current portion | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Note 13) and Litigation (Note 14) | ||||||||
| Stockholders’ equity: | ||||||||
| Preferred stock, par value $ per share: authorized, shares; shares issued and outstanding as of 2025 and 2024 | ||||||||
| Common stock, par value $ per share: authorized, shares in 2025 and 2024; issued shares in 2025 and shares in 2024; outstanding in 2025 and 2024 | ||||||||
| Additional paid-in capital | ||||||||
| Treasury stock ( shares in 2025 and 2024, at cost) | ( | ) | ( | ) | ||||
| Accumulated other comprehensive income | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
See notes to unaudited condensed consolidated financial statements
| 3 |
KOPIN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| Three months ended | Three months ended | |||||||
| March 29, 2025 | March 30, 2024 | |||||||
| Revenues: | ||||||||
| Net product revenues | $ | $ | ||||||
| Research and development revenues | ||||||||
| License and other revenues | ||||||||
| Total revenues | ||||||||
| Expenses: | ||||||||
| Cost of product revenues | ||||||||
| Research and development | ||||||||
| Selling, general and administration | ||||||||
| Litigation damages | ||||||||
| Total expenses | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other income: | ||||||||
| Interest income | ||||||||
| Other income (expense), net | ( | ) | ||||||
| Loss on impairment of investments, net | ( | ) | ||||||
| Foreign currency transaction gains (losses) | ( | ) | ||||||
| Total other income | ||||||||
| Loss before provision for income taxes | ( | ) | ( | ) | ||||
| Tax provision | ( | ) | ||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Net loss per share | ||||||||
| Basic and diluted | $ | ) | $ | ) | ||||
| Weighted average number of common shares outstanding | ||||||||
| Basic and diluted | ||||||||
See notes to unaudited condensed consolidated financial statements
| 4 |
KOPIN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF comprehensive loss
(Unaudited)
| Three months ended |
Three months ended |
|||||||
| March 29, 2025 | March 30, 2024 | |||||||
| Net loss | $ | ( |
) | $ | ( |
) | ||
| Other comprehensive income, net of tax: | ||||||||
| Foreign currency translation adjustments | ( |
) | ( |
) | ||||
| Unrealized holding (loss) gain on marketable securities | ( |
) | ||||||
| Other comprehensive income, net of tax | ( |
) | ||||||
| Comprehensive loss | $ | ( |
) | $ | ( |
) | ||
See notes to unaudited condensed consolidated financial statements
| 5 |
KOPIN CORPORATION
Condensed Consolidated Statements of Stockholders’ Equity
(Unaudited)
| Common Stock | Additional Paid-in | Treasury | Accumulated Other Comprehensive | Accumulated | Total Kopin Corporation Stockholders’ | |||||||||||||||||||||||
| Shares | Amount | Capital | Stock | Income | Deficit | Equity | ||||||||||||||||||||||
| Balance, December 28, 2024 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||||||
| Stock-based compensation expense | - | |||||||||||||||||||||||||||
| Other comprehensive loss | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance, March 29, 2025 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||||||
| Common Stock | Additional Paid-in | Treasury | Accumulated Other Comprehensive | Accumulated | Total Kopin Corporation Stockholders’ | |||||||||||||||||||||||
| Shares | Amount | Capital | Stock | Income | Deficit | Equity | ||||||||||||||||||||||
| Balance, December 30, 2023 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||||||
| Vesting of restricted stock | ( | ) | ||||||||||||||||||||||||||
| Stock-based compensation expense | - | |||||||||||||||||||||||||||
| Other comprehensive income | - | |||||||||||||||||||||||||||
| Issuance of common stock, net of costs | ||||||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance, March 30, 2024 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||||||
| 6 |
KOPIN CORPORATION
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| Three months ended | Three months ended | |||||||
| March 29, 2025 | March 30, 2024 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Stock-based compensation | ||||||||
| Investment impairment net of unrealized gains | ||||||||
| Income taxes | ||||||||
| Foreign currency (gains) losses | ( | ) | ||||||
| Provision for credit losses | ||||||||
| Noncash provision for excess inventory | ||||||||
| Accrued litigation damages | ||||||||
| Changes in assets and liabilities: | ||||||||
| Accounts receivable | ||||||||
| Contract assets | ( | ) | ( | ) | ||||
| Inventory | ( | ) | ||||||
| Prepaid expenses, other current assets and other assets | ( | ) | ( | ) | ||||
| Accounts payable and accrued expenses | ( | ) | ||||||
| Accrued warranty | ( | ) | ||||||
| Contract liabilities and billings in excess of revenue earned | ( | ) | ( | ) | ||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Capital expenditures | ( | ) | ( | ) | ||||
| Purchases of marketable securities | ( | ) | ( | ) | ||||
| Proceeds from sale of marketable securities | ||||||||
| Other assets | ( | ) | ||||||
| Net cash from investing activities | ||||||||
| Cash flows from financing activities: | ||||||||
| Issuance of common stock, net of costs | ||||||||
| Net cash provided by financing activities | ||||||||
| Effect of exchange rate changes on cash | ( | ) | ( | ) | ||||
| Net increase in cash, cash equivalents and restricted cash | ||||||||
| Cash, cash equivalents and restricted cash: | ||||||||
| Beginning of period | ||||||||
| End of period | $ | $ | ||||||
See notes to unaudited condensed consolidated financial statements
| 7 |
KOPIN CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Kopin Corporation is a leading developer and provider of innovative display, and application-specific optical solutions sold as critical components and subassemblies for defense, enterprise, medical, professional and consumer products. Kopin’s portfolio includes microdisplays, display modules, eyepiece assemblies, image projection modules, and vehicle mounted and head-mounted display systems that incorporate ultra-small high-resolution Active Matrix Liquid Crystal displays (“AMLCD”), Ferroelectric Liquid Crystal on Silicon (“FLCoS”) displays, MicroLED displays (“µLED”) and Organic Light Emitting Diode (“OLED”) displays, a variety of optics, and low-power ASICs.
1. BASIS OF PRESENTATION
The condensed consolidated financial statements of Kopin Corporation as of March 29, 2025 and for the three month periods ended March 29, 2025 and March 30, 2024 are unaudited and include all adjustments that, in the opinion of management, are necessary to present fairly the results of operations for the periods then ended. These condensed consolidated financial statements should be read in conjunction with the Company’s financial statements and notes thereto, included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 28, 2024, as amended. The results of the Company’s operations for any interim period are not necessarily indicative of the results of the Company’s operations for any other interim period or for a full fiscal year. As used in this report, the terms “we”, “us”, “our”, “Kopin” and the “Company” mean Kopin Corporation and its subsidiaries, unless the context indicates another meaning.
The condensed consolidated financial statements for the three month periods ended March 29, 2025 and March 30, 2024 include the accounts of Kopin Corporation and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated.
Liquidity
The
accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the
realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred a net loss of
$
Management has implemented certain plans to reduce cash outflows including operational improvements and the curtailment of certain development programs, both of which are expected to preserve cash. The Company has in the past sold equity securities through at-the-market equity offerings and in the traditional fashion of significant equity offerings. Nonetheless, management monitors the capital markets on an ongoing basis and may consider raising capital if favorable market conditions develop. If the Company’s actual results are less than projected or the Company needs to raise capital for additional liquidity, the Company may be required to do additional equity financings, reduce expenses, or enter into a strategic transaction. However, management can make no assurance that the Company will be able to raise additional capital, reduce expenses sufficiently, or enter into a strategic transaction on terms acceptable to the Company, or at all.
| 8 |
2. ACCOUNTING STANDARDS
Recently Issued Accounting Pronouncements
In December 2023, the Financial Accounting Standards Board (“FASB”) issued ASU Number 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”). ASU 2023-09 requires more disaggregated income tax disclosures, including additional information in the rate reconciliation and additional disclosures about income taxes paid. ASU 2023-09 became effective for the Company for the fiscal year ending December 27, 2025. Early adoption is permitted, and guidance should be applied prospectively, with an option to apply guidance retrospectively. The Company is currently evaluating the impact of the adoption of ASU 2023-09 on its condensed consolidated financial statements.
In November 2024, the FASB issued ASU 2024-03, which requires disaggregated disclosure of income statement expenses for public business entities (“PBEs”). The ASU does not change the expense captions an entity presents on the face of the income statement; rather, it requires disaggregation of certain expense captions into specified categories in disclosures within the footnotes to the financial statements. ASU 2024-03 is effective for all PBEs for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact that this guidance will have on the presentation of its condensed consolidated financial statements and accompanying notes.
Recently Adopted Accounting Pronouncements
In November 2023, the FASB issued ASU Number 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” (“ASU 2023-07”). ASU 2023-07 requires disclosure of significant segment expenses that are regularly provided to the chief operating decision maker(s) that are included within each reported measure of segment profit or loss. The guidance also expands disclosure requirements for interim periods, as well as requires disclosure of other segment items, including the title and position of the entity’s chief operations decision maker(s). ASU 2023-07 became effective for the Company for the fiscal year ending December 28, 2024, and for interim periods starting in the Company’s first quarter of 2025. The Company adopted this standard for fiscal year 2024 and there was not a material impact, reference additional disclosure within Note 12. Segments and Disaggregation of Revenue.
3. FINANCIAL INSTRUMENTS
Fair Value Measurements
Financial instruments are categorized as Level 1, Level 2 or Level 3 based upon the method by which their fair value is computed. An investment is categorized as Level 1 when its fair value is based on unadjusted quoted prices in active markets for identical assets that the Company has the ability to access at the measurement date. An investment is categorized as Level 2 if its fair market value is based on quoted market prices for similar assets in active markets, quoted prices for identical or similar assets in markets that are not active, based on observable inputs such as interest rates, yield curves, or derived from or corroborated by observable market data by correlation or other means. The Company’s Level 2 investments are based on a yield to maturity models and market interest rates. An investment is categorized as Level 3 if its fair value is based on unobservable inputs for the asset.
The following table details the recurring fair value measurements of the Company’s financial assets:
Fair Value Measurement at March 29, 2025 Using: | ||||||||||||||||
| Total | Level 1 | Level 2 | Level 3 | |||||||||||||
| Cash equivalents | $ | $ | $ | $ | ||||||||||||
| U.S. Government and agency backed securities | ||||||||||||||||
| Certificates of deposit | ||||||||||||||||
| Equity Investments | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
Fair Value Measurement at December 28, 2024 Using: | ||||||||||||||||
| Total | Level 1 | Level 2 | Level 3 | |||||||||||||
| Cash equivalents | $ | $ | $ | $ | ||||||||||||
| U.S. Government and agency backed securities | ||||||||||||||||
| Certificates of deposit | ||||||||||||||||
| Equity Investments | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
The carrying amounts of cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued liabilities approximate fair value because of their short-term nature.
| 9 |
Marketable Securities
The Company validates the fair market values of the financial instruments below by using a model that incorporates current interest rates and remaining term. The restricted cash balance at March 29, 2025 and December 28, 2024 is invested in a certificate of deposit and money market funds. The restricted cash balance that is invested in a certificate of deposit is classified as a Corporate debt available-for-sale marketable security. Investments in available-for-sale marketable securities are as follows at March 29, 2025 and December 28, 2024:
| Amortized Cost | Unrealized Gain | Fair Value | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||
| U.S. Government and agency backed securities | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Corporate debt | ||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
The contractual maturity of the Company’s marketable debt securities is as follows at March 29, 2025:
| Less than One year | One to Five years | Total | ||||||||||
| U.S. Government and agency backed securities | $ | $ | $ | |||||||||
| Corporate debt | ||||||||||||
Equity Investments
Equity investments rarely traded
or not quoted will generally have less (or no) pricing observability and a higher degree of judgment utilized in measuring fair value.
Initial measurement of equity investments occurs when an observable price for the equity investment is available. The Company adopted
the measurement alternative for equity investments without readily determinable fair values, which is often referred to as cost method
investments, adjusted for changes in observable market transaction. As a result, these investments are revalued upon occurrence of an
observable price change for similar investments and for impairments. As of March 29, 2025 and December 30, 2024, the carrying value of
these equity investments was $
On January 5, 2023, the Company
entered into a Technology License Agreement and an Asset Purchase Agreement (the “LST Agreements”) with Lightning Silicon
Technology, Inc. (“LST”). Pursuant to the LST Agreements, the Company issued a license to LST for certain technology associated
with its organic light emitting technology, transferred in-process development contracts with two customers and accounts receivables that
the Company had previously determined were not collectible. The technology license agreement provides for Kopin to transfer certain patents
to LST if LST achieves certain milestones, however upon transfer Kopin will receive a license to the technology. To the extent LST makes
improvements to the technology licensed from Kopin, Kopin will receive a license for these improvements for certain markets. Kopin is
not obligated to provide any additional funding support to LST. As consideration for the transaction, the Company received
common shares representing a
The Company has an equity interest
in a Lenovo New Vision which it acquired through purchasing capital and contributing certain intellectual property. As of March 29, 2025,
the Company owned an approximate
The Company has an investment
in RealWear Inc. (RealWear) which had been valued at $
The Company has an equity investment
in Solos Incorporation (“Solos Inc.”). The carrying value of this equity investment was $
| 10 |
4. ACCOUNTS RECEIVABLE, NET
Accounts receivable consisted of the following:
| March 29, 2025 | December 28, 2024 | |||||||
| Accounts receivable | $ | $ | ||||||
| Less — allowance for credit losses | ( | ) | ( | ) | ||||
| Total | $ | $ | ||||||
Changes to the allowance for credit losses for the three months ended March 29, 2025 were as follows:
| Balance, December 28, 2024 | $ | ||||
| Write-offs | $ | ( | ) | ||
| Balance, March 29, 2025 | $ |
5. INVENTORY
Inventories are stated at standard cost adjusted to approximate the lower of cost (first-in, first-out method) or net realizable value and consist of the following at March 29, 2025 and December 28, 2024:
| March 29, 2025 | December 28, 2024 | |||||||
| Raw materials | $ | $ | ||||||
| Work-in-process | ||||||||
| Finished goods | ||||||||
| Total | $ | $ | ||||||
Basic net loss per share is computed using the weighted-average number of shares of common stock outstanding during the period including the pre-funded warrants, less any unvested restricted shares. Diluted net loss per share is calculated using weighted-average shares outstanding, including the pre-funded warrants, and contingently issuable shares, less weighted-average shares reacquired during the period. The net outstanding shares are adjusted for the dilutive effect of shares issuable upon the assumed conversion of the Company’s common stock equivalents, which consist of unvested restricted stock.
| Three months ended | Three months ended | |||||||
| March 29, 2025 | March 30, 2024 | |||||||
| Non-vested restricted common stock | ||||||||
The shares of the Company’s common stock issuable upon the exercise of stock options that were excluded from the calculation of diluted net loss per share because their effect would have been antidilutive are as follows:
| Three months ended | Three months ended | |||||||
| March 29, 2025 | March 30, 2024 | |||||||
| Stock options | ||||||||
| Total | ||||||||
| 11 |
Registered sale of equity securities
On September
23, 2024, the Company sold
shares of common stock and pre-funded warrants to purchase up to
During the three months ended
March 30, 2024, the Company sold shares of common stock for gross proceeds of $
On June 6, 2024, the Company’s shareholders approved an amendment to the Company’s Amended and Restated Certificate of Incorporation (the “Charter”) to increase the number of authorized shares of the Company’s common stock, par value $ per share, from shares to shares.
Non-Vested Restricted Common Stock
The fair value of non-vested restricted common stock awards is generally the market value of the Company’s common stock on the date of grant. The non-vested restricted common stock awards require the employee to fulfill certain obligations, including remaining employed by and in certain cases also require meeting either performance criteria or the Company’s stock achieving a certain price. For non-vested restricted common stock awards that solely require the recipient to remain employed with the Company, the stock compensation expense is amortized over the anticipated service period. For non-vested restricted common stock awards that require the achievement of performance criteria, the Company reviews the probability of achieving the performance goals on a periodic basis. If the Company determines that it is probable that the performance criteria will be achieved, the amount of compensation cost derived for the performance goal is amortized over the anticipated service period. If the performance criteria are not met, no compensation cost is recognized and any previously recognized compensation cost is reversed.
The fair value of non-vested restricted common stock awards is generally the market value of the Company’s common stock on the date of grant. The non-vested restricted common stock awards require the employee to fulfil certain obligations, including remaining employed by and in certain cases also require meeting either performance criteria. For non-vested restricted common stock awards that solely require the recipient to remain employed with the Company, the stock compensation expense is amortized over the requisite service period. For non-vested restricted common stock awards that require the achievement of performance criteria, the Company reviews the probability of achieving the performance goals on a periodic basis. If the Company determines that it is probable that the performance criteria will be achieved, the amount of compensation cost derived for the performance goal is amortized over the anticipated service period. If the performance criteria are not met, no compensation cost is recognized and any previously recognized compensation cost is reversed.
Restricted stock activity for the three month period ended March 29, 2025 was as follows:
| Shares | Weighted Average Grant Fair Value | Fair Value | Intrinsic Value | |||||||||||||
| Non-vested at December 28, 2024 | $ | $ | $ | |||||||||||||
| Granted | $ | |||||||||||||||
| Forfeited | ( | ) | $ | ( | ) | |||||||||||
| Non-vested at March 29, 2025 | $ | $ | $ | |||||||||||||
| Expected to vest | ||||||||||||||||
| 12 |
Stock-Based Compensation
| Three Months Ended | Three Months Ended | |||||||
| March 29, 2025 | March 30, 2024 | |||||||
| Cost of product revenues | $ | $ | ||||||
| Research and development | ||||||||
| Selling, general and administrative | ||||||||
| Total | $ | $ | ||||||
Unrecognized compensation expense for non-vested restricted common stock as of March 29, 2025 totaled $ million and is expected to be recognized over a weighted average period of approximately .
Stock Options
During the three months ended March 29, 2025, an option award for shares of the Company’s common stock was granted to the Chief Executive Officer. These options have a strike price of $ and vest over a period. During the three months ended March 29, 2025, the Company recorded incremental stock-based compensation of less than $ million as a result of the granting of stock option awards. The remaining unrecognized compensation cost of is expected to be recognized over the remaining vesting period. The fair value of this options award was estimated using the Black-Scholes model using the following assumptions and had the following fair values:
| Three Months Ended | ||||
| March 29, 2025 | ||||
| Average risk-free interest rate | % | |||
| Expected dividend yield | None | |||
| Expected life (average, in years) | ||||
| Expected volatility | % | |||
| Weighted average exercise price | $ | |||
| Weighted average fair value | $ | |||
The Company’s 2025 average expected volatility and average expected life is based on the average of the Company’s historical information. The risk-free rate is based on the rate of U.S. Treasury zero-coupon issues with a remaining term equal to the expected life of option grants. The Company has paid no dividends on its common stock in the past and does not anticipate paying any dividends in the future.
A summary of stock option activity for the period ended March 29, 2025 is as follows:
| Number of Options | Weighted Average Exercise Price | Intrinsic Value | ||||||||||
| Outstanding as of December 28, 2024 | $ | $ | ||||||||||
| Granted | $ | |||||||||||
| Outstanding as of March 29, 2025 | $ | $ | ||||||||||
| Options exercisable as of December 28, 2024 | $ | $ | ||||||||||
| Options exercisable as of March 29, 2025 | $ | $ | ||||||||||
8. ACCRUED WARRANTY
| Balance, December 28, 2024 | $ | |||
| Additions | ||||
| Claims | ( | ) | ||
| Balance, March 29, 2025 | $ |
Extended Warranties
9. INCOME TAXES
The Company recorded a provision
for income taxes of less than $
| 13 |
10. CONTRACT ASSETS AND LIABILITIES
Revenue Recognition
Substantially all of the Company’s product and license and other revenues are derived from the sales of components and subassemblies and the license of intellectual property for use in defense and industrial applications. The Company also has development contracts for the design, manufacture and or modification of products for the U.S. Government or prime contractors for the U.S. Government and for customers that expect to sell into the defense markets. The Company may offer technologies developed under these defense research and development contracts in products sold to industrial, medical and consumer markets. The Company’s contracts with the U.S. Government are typically subject to the Federal Acquisition Regulations (“FAR”) and are priced based on estimated or actual costs of producing goods. The FAR provides guidance on the types of costs that are allowable in establishing prices for goods provided under U.S. Government contracts. The pricing for non-U.S. Government contracts is based on the specific negotiations with each customer.
In accordance with ASC 606, revenue is recognized when a customer obtains control of promised products, and the amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for these products and excludes taxes collected from customers which are subsequently remitted to government authorities.
The Company applies the following five steps to guide revenue recognition:
| 1) | Identify the contract(s) with a customer—A contract with a customer exists when (i) the Company enters into an enforceable contract with a customer that defines each party’s rights regarding the products to be transferred and identifies the payment terms related to those products, (ii) the contract has commercial substance and (iii) the Company determines that collection of substantially all consideration for products that are transferred is probable based on the customer’s intent and ability to pay the promised consideration. The Company’s contracts are typically in the form of a purchase order. For certain large customers, the Company may also enter into master service agreements that define general terms but are not customer commitments to purchase until coupled with a purchase order. The Company applies judgment in determining the customer’s ability and intention to pay, which is based on a variety of factors including the customer’s historical payment experience or published credit and financial information pertaining to the customer. |
| 2) | Identify the performance obligations in the contract—Performance obligations promised in a contract are identified based on the products and services that will be transferred. A product or service is distinct if both a) the customer can benefit from the product or service either on its own or together with other resources that are readily available from third parties or from the Company, and b) is separately identifiable from other promises in the contract. To the extent a contract includes multiple promised products or services, the Company must apply judgment to determine whether the products or services meet the criteria to be distinct. If these criteria are not met the promised products or services are accounted for as a combined performance obligation. |
| 3) | Determine the transaction price—The transaction price is determined based on the consideration to which the Company will be entitled in exchange for transferring products to the customer. The Company historically does not have contracts with variable consideration but to the extent the transaction price includes variable consideration, the Company estimates the amount of variable consideration that should be included in the transaction price utilizing either the expected value method or the most likely amount method depending on the nature of the variable consideration. Variable consideration is included in the transaction price if, in the Company’s judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur. |
| 4) | Allocate the transaction price to the performance obligations in the contract—If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. The Company’s contracts do not typically contain multiple performance obligations that require an allocation of the transaction price to each performance obligation on a relative Stand-alone Sales Price (“SSP”). During the years ended 2024, 2023 and 2022 the Company did not have contracts with multiple performance obligations. | |
| 5) | Recognize revenue when (or as) the Company satisfies a performance obligation—The Company satisfies performance obligations either over time or at a point in time as discussed in further detail below. Revenue is recognized at the time the related performance obligation is satisfied by transferring a promised product or service to a customer. |
Product Revenues
For certain contracts with prime contractors for the U.S. Government, the Company recognizes product revenue over time as the Company performs because of continuous transfer of control to the customer and the lack of an alternative use for the product. The continuous transfer of control to the customer is supported by liability clauses in the contract that allow the U.S. Government to unilaterally terminate the contract for convenience, pay the Company for costs incurred plus a reasonable profit and take control of any work in process and finished goods.
In situations where control transfers over time, product revenue is recognized based on the extent of progress towards completion of the performance obligation. The Company uses the cost-to-cost input method to measure the extent of progress towards completion of the performance obligation for its contracts because the Company believes it best depicts the transfer of assets to the customer. Under the cost-to-cost input method, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation which includes the expected yield which is a significant judgment. Revenues are recorded proportionally as costs are incurred.
For certain contracts with prime contractors for the U.S. Government and commercial customers, while the contract may have a similar liability clause, the Company’s products historically have an alternative use and thus, revenue is recognized at a point in time upon transfer of control. Provisions for product returns and allowances are reductions in the transaction price and are recorded in the same period as the related revenues. The Company analyzes historical returns, current economic trends and changes in customer demand when evaluating the adequacy of sales returns and other allowances.
Research & Development Contracts
For most of the Company’s development contracts and contracts with the U.S. Government, the customer contracts with the Company to provide a significant service of integrating a set of components into a single unit. Since these performance obligations are not distinct or capable or being distinct, the entire contract is accounted for as one performance obligation. If there is a follow-on production contract it is assessed whether it is a contract modification or a new contract.
| 14 |
In situations where control transfers over time, revenue is recognized based on the extent of progress towards completion of the performance obligation. The Company generally uses an input method using the cost-to-cost approach to measure the extent of progress towards completion of the performance obligation for its contracts because the Company believes it best depicts the transfer of assets to the customer. Under the cost-to-cost measure approach, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation which requires management to use significant assumptions and judgements. Revenues are recorded proportionally as costs are incurred.
License and other revenues
The rights and benefits to the Company’s intellectual property are conveyed to certain customers through royalty bearing technology license agreements. These sales-based royalties are recognized when they are earned. Revenues from sales-based royalties under license agreements are shown under License and other revenues on the Company’s consolidated statements of operations.
Contract assets include unbilled amounts typically resulting from sales under contracts when the cost-to-cost method of revenue recognition is utilized and revenue recognized from customer arrangements, including licensing, exceeds the amount billed to the customer, and right to payment is not just subject to the passage of time. Amounts may not exceed their net realizable value. Contract assets are generally classified as current. The Company classifies the noncurrent portion of contract assets under Other assets in its condensed consolidated balance sheets.
Contract liabilities consist of advance payments and billings in excess of revenue recognized for the contract.
Net contract assets (liabilities) consisted of the following:
March
29, | December 28, 2024 | December 30, 2023 |
||||||||||
| Contract assets | $ | $ | $ | |||||||||
| Current contract liabilities and billings in excess of revenue earned | ( | ) | ( | ) | ( |
) | ||||||
| Noncurrent contract liabilities | ( | ) | ( | ) | ( |
) | ||||||
The $
The $
The Company records contract assets or contract liabilities on a contract-by-contract basis. The Company records a contract asset for unbilled revenue when the Company’s performance exceeds amounts billed. The Company classifies the contract asset as either current or non-current based on the expected timing of the Company’s right to bill under the terms of the contract, which the Company expects to be able to bill for within one year.
Contract liabilities consist of payments received in advance of product shipment. The liability is removed with shipment of the product.
In the three months ended March
29, 2025, the Company recognized revenue of $
The Company did not recognize impairment losses on its contract assets in the three months ended March 29, 2025, or the years ended December 28, 2024 or December 30, 2023.
Performance Obligations
The Company’s revenue recognition related to performance obligations that were satisfied at a point in time and over time were as follows:
| Three months ended | Three months ended | |||||||
March 29, 2025 | March 30, 2024 | |||||||
| Point in time | % | % | ||||||
| Over time | % | % | ||||||
Remaining performance obligations
represent the transaction price of orders for which work has not been performed and excludes unexercised contract options and potential
orders under ordering-type contracts. As of March 29, 2025, the
aggregate amount of the transaction price allocated to remaining performance obligations was $
| 15 |
11. LEASES
The Company enters into operating leases primarily for: real estate, including for manufacturing, engineering, research, administration and sales facilities, and information technology (“IT”) equipment. At March 29, 2025 and December 28, 2024, the Company did not have any finance leases. Approximately all of its future lease commitments, and related lease liability, relate to the Company’s real estate leases. Some of the Company’s leases include options to extend or terminate the lease.
The components of lease expense were as follows:
| Three months ended | Three months ended | |||||||
| March 29, 2025 | March 30, 2024 | |||||||
| Operating lease cost | $ | $ | ||||||
At March 29, 2025, the Company’s future lease payments under non-cancellable leases were as follows:
| 2025 (excluding the three months ended March 29, 2025) | $ | |||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| Total future lease payments | ||||
| Less effects of discounting | ( | ) | ||
| Total | $ |
The Company’s lease liabilities recognized in the Company’s condensed consolidated balance sheet at March 29, 2025 were as follows:
| March 29, 2025 | ||||
| Operating lease liabilities–current | $ | |||
| Operating lease liabilities–noncurrent | ||||
| Total lease liabilities | $ | |||
Supplemental cash flow information related to leases was as follows:
| Three months ended | Three months ended | |||||||
| March 29, 2025 | March 30, 2024 | |||||||
| Cash paid for amounts included in the measurement of operating lease liabilities | $ | $ | ||||||
Other information related to leases was as follows:
| March 29, 2025 | ||||
| Weighted Average Discount Rate–Operating Leases | % | |||
| Weighted Average Remaining Lease Term–Operating Leases (in years) | ||||
| 16 |
12. SEGMENTS AND DISAGGREGATION OF REVENUE
Operating segments are defined
as components of an entity for which separate financial information is available and that is regularly reviewed by the Chief Operating
Decision Maker (“CODM”) in deciding how to allocate resources to an individual segment and in assessing performance. The Company’s
CODM is its President and Chief Executive Officer. The Company has determined that it operates in
The CODM assesses performance and decides how to allocate resources and make operating decisions based on revenues, loss from operations, and net loss that are reported on the Consolidated Statements of Operations. These metrics are also used to monitor budget versus actual results. The measure of segment assets is reported on the Consolidated Balance Sheets as total assets. Revenues, expenses, and assets requiring disclosure in accordance with ASC 280, Segment Reporting, are also included in the accompanying Condensed Consolidated Financial Statements. See the Condensed Consolidated Statements of Operations for the three months ended March 29, 2025 and March 30, 2024 and the Consolidated Balance Sheets as of March 29, 2025 and December 28, 2024, for details.
Total long-lived assets by country at March 29, 2025 and December 28, 2024 were:
| Total Long-lived Assets (in thousands) | March 29, 2025 | December 28, 2024 | ||||||
| United States | $ | $ | ||||||
| United Kingdom | ||||||||
| Total | $ | $ | ||||||
The Company disaggregates its revenue from contracts with customers by geographic location and by display application, as it believes this best depicts how the nature, amount, timing and uncertainty of its revenue and cash flows are affected by economic factors.
During the three months ended March 29, 2025 and March 30, 2024, the Company derived its sales from the following geographies:
| March 29, 2025 | March 30, 2024 | |||||||||||||||
| (In thousands, except percentages) | Revenue | % of Total | Revenue | % of Total | ||||||||||||
| United States | $ | % | $ | % | ||||||||||||
| Other Americas | ||||||||||||||||
| Total Americas | ||||||||||||||||
| Asia – Pacific | ||||||||||||||||
| Europe | ||||||||||||||||
| Total Revenues | $ | % | $ | % | ||||||||||||
During the three months ended March 29, 2025 and March 30, 2024, the Company derived its sales from the following display applications:
| (In thousands) | March 29, 2025 | March 30, 2024 | ||||||
| Defense | $ | $ | ||||||
| Industrial | ||||||||
| Medical | ||||||||
| Consumer and other | ||||||||
| R&D | ||||||||
| License and royalties | ||||||||
| Total Revenues | $ | $ | ||||||
The issues associated with the global shortage of semiconductor circuit chips and other raw materials decreased in 2024 as compared to 2023 and 2022. However, the Company has identified several semiconductor components which continue to have long lead delivery times. The Company continues to search for and procure all necessary components from its current vendors and new alternative vendors. In certain situations, the Company can obtain the components but at a significantly increased cost. The inability to procure a single component will prevent the completion of the Company’s product and the ability to sell the product. The Company’s products go through extensive qualification processes and therefore its customers may not accept a replacement component. The Company is unable to determine if it will be able to obtain all necessary components for fiscal 2025. If the Company is unable to obtain all necessary components, it may be required to stop production, which would negatively affect its cash flow and results of operations. In addition, the Company depends on a Taiwanese foundry for the manufacture of integrated circuits for its AMLCD display products and on Chinese, Korean, and European foundries for its OLED display products. If there was a disruption of supply from these foundries it would take a significant period of time to identify, and qualify, if possible, a new source.
| 17 |
13. COMMITMENTS AND CONTINGENCIES
The Company is subject to the possibility of loss contingencies arising in the ordinary course of business. Management considers the likelihood of loss related to an asset, or the incurrence of a liability, as well as its ability to reasonably estimate the amount of the loss, in determining loss contingencies. An estimated loss contingency is accrued when it is probable that an asset has been impaired, or a liability has been incurred and the amount of loss can be reasonably estimated. The Company regularly evaluates current information available to determine whether such accruals should be adjusted and whether new accruals are required.
14. LITIGATION
The Company may engage in legal proceedings arising in the ordinary course of business. Claims, suits, investigations and proceedings are inherently uncertain and it is not possible to predict the ultimate outcome of such matters and the Company’s business, financial condition, results of operations or cash flows could be affected in any particular period. In accordance with applicable accounting guidance, an accrual will be established for legal proceedings if and when those matters present loss contingencies that are both probable and estimable.
BlueRadios, Inc. v. Kopin Corporation, Civil Action No. 16-02052-JLK (D. Col.):
On August 12, 2016, BlueRadios, Inc. (“BlueRadios”) filed a complaint in the U.S. District Court for the District of Colorado, alleging that the Company breached a contract between it and BlueRadios concerning a joint venture between the Company and BlueRadios to design, develop and commercialize micro-display products with embedded wireless technology referred to as “Golden-i,” breached the covenant of good faith and fair dealing associated with that contract, breached its fiduciary duty to BlueRadios, and misappropriated trade secrets owned by BlueRadios in violation of Colorado law (C.R.S. § 7-74-104(4)) and the Defend Trade Secrets Act (18 U.S.C. § 1836(b)(1)). BlueRadios further alleged that the Company was unjustly enriched by its alleged misconduct, BlueRadios is entitled to an accounting to determine the amount of profits obtained by the Company as a result of its alleged misconduct, and the inventorship on at least ten patents or patent applications owned by the Company need to be corrected to list BlueRadios’ employees as inventors and thereby list BlueRadios as co-assignees of the patents. BlueRadios seeks monetary, declaratory, and injunctive relief, including for alleged non-payment of engineering retainer fees.
On October 11, 2016, the Company
filed its Answer and Affirmative Defenses. The parties completed expert depositions on November 15, 2019. On December 2, 2019, the Company
filed a Motion for Partial Summary Judgment requesting the Court dismiss counts 2-7 in their entirety and counts 1 and 8 in part. BlueRadios
also filed a Motion for Partial Summary Judgment alleging it is the co-owner of U.S. Patent No. 8,909,296. Responses to the Motions for
Partial Summary Judgment were filed on January 15, 2020, and replies were filed on February 19, 2020. On September 25, 2020, the Court
denied BlueRadios’ Motion for Partial Summary Judgment. On August 3, 2022, the Court granted the Company’s Motion for Partial
Summary Judgment by dismissing counts 3, 6, 7, the claim for punitive damages under count 2, and count 8 as it relates to patent applications
and by denying the motion as it relates to counts 1, 4, and 5, and the remainder of counts 2 and 8. The Court also ordered discovery reopened
for certain limited purposes. A trial date was set by the Court for January 22, 2024 to February 5, 2024 but then re-scheduled for March
20, 2024 to April 16, 2024.
| 18 |
15. RELATED PARTY TRANSACTIONS
The Company may from time to time enter into agreements with stockholders, affiliates and other companies engaged in certain aspects of the display, electronics, optical and software industries as part of its business strategy. In addition, the wearable computing product market is relatively new and there may be other technologies the Company needs to purchase from affiliates to enhance its product offering.
On September 30, 2019,
the Company entered into an Asset Purchase Agreement (the “Solos Purchase Agreement”) with Solos Technology Limited (“Solos
Technology”). Pursuant to the Solos Purchase Agreement, the Company sold and licensed to Solos Technology certain assets of its
SolosTM (“Solos”) product line and WhisperTM Audio (“Whisper”) technology. As consideration
for the transaction the Company received common shares representing a
As of December 28, 2024, the Company’s former Chairman and founder of Solos Inc., Dr. John C.C. Fan, has an investment in Solos Inc.
The Company has warrants to
purchase shares of Preferred Stock of HMDmd. The fair value of the investment was determined to be $
On January 5, 2023, the Company entered into a Technology License Agreement and an Asset Purchase Agreement (the “LST Agreements”) with Lightning Silicon Technology, Inc (“LST”). Pursuant to the LST Agreements, the Company issued a license to LST for certain technology associated with our Organic Light Emitting Technology, transferred in-process development contracts with two customers and accounts receivables that the Company had previously determined were not collectible. As consideration for the transaction, the Company received common shares representing a 20.0% equity stake in LST. The Technology License agreement provides for Kopin to transfer certain patents to Lightning Silicon if they achieve certain milestones, however upon transfer Kopin will receive a license to the technology. The Company also receives a royalty based on unit sales of products that utilize the technology licensed.
As of March 29, 2025, the Company’s former Chairman and founder of Lightning Silicon Technology, Inc., Dr. John C.C. Fan, has an individual ownership interest of Lightning Silicon Technology Inc.
On September 5, 2022, John C.C. Fan, the Company’s then President
and Chief Executive Officer and Chairman of the Company’s Board of Directors, notified the Company of his resignation as President
and CEO effective September 6, 2022. Under the terms of his previous employment agreement Dr. Fan received $
During the three-month periods ended March 29, 2025 and March 30, 2024, the Company had the following transactions with related parties:
| Three months ended | Three months ended | |||||||||||||||
| March 29, 2025 | March 30, 2024 | |||||||||||||||
| Revenue | Purchases | Revenue | Purchases | |||||||||||||
| RealWear, Inc. | $ | $ | $ | $ | ||||||||||||
| HMDmd, Inc. | ||||||||||||||||
| Vuzix Corp | ||||||||||||||||
| Lightning Silicon Technology, Inc. | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
At March 29, 2025 and December 28, 2024, the Company had the following receivables and payables with related parties:
| March 29, 2025 | December 28, 2024 | |||||||||||||||
| Receivables | Payables | Receivables | Payables | |||||||||||||
| RealWear, Inc. | $ | $ | $ | $ | ||||||||||||
| HMDmd, Inc. | ||||||||||||||||
| Solos Technology | ||||||||||||||||
| Lightning Silicon Technology, Inc. | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
| 19 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which are subject to the safe harbor created by such sections. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “could,” “would,” “seeks,” “estimates,” and variations of such words and similar expressions, and the negatives thereof, are intended to identify such forward-looking statements. We caution readers not to place undue reliance on any such “forward-looking statements,” which speak only as of the date made, and advise readers that these forward-looking statements are not guarantees of future performance and involve certain risks, uncertainties, estimates, and assumptions by us that are difficult to predict. Various factors, some of which are beyond our control, could cause actual results to differ materially from those expressed in, or implied by, such forward-looking statements. All such forward-looking statements, whether written or oral, and whether made by us or on our behalf, are expressly qualified by these cautionary statements and any other cautionary statements which may accompany the forward-looking statements. In addition, we disclaim any obligation to update any forward-looking statements to reflect events or circumstances after the date of this report, except as may otherwise be required by the federal securities laws.
We have identified the following important factors that could cause actual results to differ materially from those discussed in our forward-looking statements. Such factors may be in addition to the risks described in Part I, Item 1A. “Risk Factors;” Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations;” and other parts of our Annual Report on Form 10-K for the fiscal year ended December 28, 2024, as amended. These factors include: our ability to source semiconductor components and other raw materials used in the manufacturing of our products amidst continued intermittent shortages, including from new and alternative suppliers; our ability to prosecute and defend our proprietary technology aggressively or successfully; our ability to recruit and retain personnel with experience and expertise relevant to our business; our ability to invest in research and development to achieve profitability even during periods when we are not profitable; any disruptions or delays in our supply chains, particularly with respect to semiconductor components, whether resulting from regional or global geopolitical developments, changes imposed by the new U.S. presidential administration, or otherwise; costs and outcomes relating to any disputes, governmental inquiries or investigations, regulatory proceedings, legal proceedings or litigation; our ability to continue to introduce new products in our target markets; our ability to generate revenue growth and positive cash flow, and reach profitability; the strengthening of the U.S. dollar and its effects on the price of our products in foreign markets; the impact of new regulations and customer demands relating to conflict minerals; our ability to obtain a competitive advantage in the wearable technologies market through our extensive portfolio of patents, trade secrets and non-patented know-how; our ability to grow within our targeted markets; the importance of small form factor displays in the development of defense, consumer, and industrial products such as thermal weapon sights, safety equipment, virtual and augmented reality gaming, training and simulation products and metrology tools; the suitability of our properties for our needs for the foreseeable future; and our need to achieve and maintain positive cash flow and profitability.
Overview
We are a leading developer, manufacturer and seller of miniature displays and optical lenses (our “components”) for sale as individual displays, components, modules or higher-level subassemblies. We also license our intellectual property through technology license agreements. Our component products are used in highly demanding high-resolution portable defense, enterprise and consumer electronic applications, training and simulation equipment and 3D metrology equipment. Our products enable our customers to develop and market an improved generation of products for these target applications.
The following discussion should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended December 28, 2024, as amended and our unaudited condensed consolidated financial statements included in this Form 10-Q.
| 20 |
Results of Operations
Our interim period results of operations and period-to-period comparisons of such results may not be indicative of our future operating results. Additionally, we use a fiscal calendar that may result in differences in the number of workdays in the current and comparable prior interim periods and could affect period-to-period comparisons. The following discussion of comparative results of operations among periods should be viewed in this context.
Revenues. For the three months ended March 29, 2025 and March 30, 2024, our revenues by display application, which include product sales and amounts earned from research and development contracts (“R&D”), were as follows:
| (In thousands) | Three months March 29, 2025 | Three months ended March 30, 2024 | ||||||
| Defense | $ | 8,461 | $ | 8,233 | ||||
| Industrial | 392 | 768 | ||||||
| Medical | 359 | — | ||||||
| Consumer and other | 17 | 25 | ||||||
| R&D | 1,237 | 900 | ||||||
| License and royalties | 72 | 107 | ||||||
| Total Revenues | $ | 10,538 | $ | 10,033 | ||||
Sales of our products for Defense applications include systems used by the military both in the field and for training and simulation. The increase in Defense applications revenues in the three months ended March 29, 2025 as compared to the three months ended March 30, 2024 was primarily due to an increase in revenues from products used in thermal weapon sights and in pilot helmets partially offset by a decline in sales of training and simulation products.
Industrial applications revenue represents customers who purchase our display products for use in 3D metrology equipment and headsets used for applications in manufacturing, distribution, and public safety. Our 3D metrology customers are primarily located in Asia and sell to Asian contract manufacturers who use the 3D metrology machines for quality control purposes. The decrease in Industrial applications revenues for the three months ended March 29, 2025 as compared to the three months ended March 30, 2024 was primarily due to a decline in sales of products for 3D metrology.
Medical revenues represent the initial shipments of head-mounted medical product.
Sales of our displays for Consumer applications are typically “one-off” purchases from companies or organizations using our products for research and development.
R&D revenues increased in the three months ended March 29, 2025 as compared to the three months ended March 30, 2024 primarily due to increases in funding for U.S. defense programs.
The decrease in license and royalty revenue in the first quarter ending March 29, 2025 compared to the first quarter ended March 20, 2024 is due to a decrease in royalties earned under IP license agreements for industrial wearable headsets.
Our international revenues, which are primarily our sales of our products into the 3D AOI market and which comprise the majority of our Industrial sales category, represented 4% and 9% of total revenues for the three months ended March 29, 2025 and March 30, 2024, respectively. These sales are primarily made by Kopin Europe, Ltd. our wholly-owned Scottish subsidiary into Asian markets. We have not taken any protective measures against exchange rate fluctuations, such as purchasing hedging instruments with respect to such fluctuations, because of the historically stable exchange rate between the British Pound Sterling (the functional currency of our U.K. subsidiary) and the U.S. dollar. Foreign currency translation impact on our results, if material, is described in further detail under “Item 3. Quantitative and Qualitative Disclosures About Market Risk” section below.
Cost of Product Revenues. Cost of product revenues, which is comprised of materials, labor and manufacturing overhead related to the production of our products for the three months ended March 29, 2025 and March 30, 2024 were as follows:
| Three Months Ended | Three Months Ended | |||||||
| (In thousands, except for percentages) | March 29, 2025 | March 30, 2024 | ||||||
| Cost of product revenues | $ | 7,629 | $ | 8,542 | ||||
| Cost of product revenues as a % of net product revenues | 83 | % | 95 | % | ||||
The decrease in cost of product revenue as a percent of net product revenues for the three months ended March 29, 2025 as compared to the three months ended March 30, 2024 was due to a decrease in excess and obsolete reserves.
| 21 |
The United States government is or is in the process of increasing or implementing tariffs on the importation of certain goods. In some cases, our contracts allow us to pass along new or increased tariffs subject to ability to prove the impact of the tariff on the cost of our product. If we are unable to increase our prices due to the implementation or increase in tariff, duties and other taxes our gross margin and overall profitability would be negatively impacted.
The issues associated with the global shortage of semiconductor circuit chips and other raw materials decreased in 2024 as compared to 2023 and 2022. However, we have identified several semiconductor components which continue to have long lead delivery times. We continue to search for and procure all necessary components from our current vendors and new alternative vendors. In certain situations, we can obtain the components but at a significantly increased cost. The inability to procure a single component will prevent the completion of our product and the ability to sell the product. Our products go through extensive qualification processes and therefore our customers may not accept a replacement component. We are unable to determine if we will be able to obtain all necessary components for fiscal 2025. If we are unable to obtain all necessary components, we may be required to stop production, which would negatively affect our cash flow and results of operations. In addition, we depend on a Taiwanese foundry for the manufacture of integrated circuits for our AMLCD display products and on Chinese, Korean, and European foundries for our OLED display products. If there was a disruption of supply from these foundries it would take a significant period of time to identify, and qualify, if possible, a new source.
Research and Development. R&D expenses are incurred in support of internal display development programs and programs funded by agencies or prime contractors of the U.S. Government and commercial partners. R&D costs include staffing, purchases of materials and laboratory supplies, circuit design costs, fabrication and packaging of display products, and overhead. In fiscal year 2025, we expect our R&D expenditures to be related to our display products, overlay weapon sights and OLED display technologies. Funded and internal R&D expenses are combined in research and development expenses in the condensed consolidated statement of operations. R&D expenses for the three months ended March 29, 2025 and March 30, 2024 were as follows:
| Three Months Ended | Three Months Ended | |||||||
| (In thousands) | March 29, 2025 | March 30, 2024 | ||||||
| Funded | $ | 639 | $ | 821 | ||||
| Internal | 1,477 | 1,280 | ||||||
| Total research and development expense | $ | 2,116 | $ | 2,101 | ||||
Funded R&D expense for the three months ended March 29, 2025 decreased as compared to the three months ended March 30, 2024 primarily due to decreased spending on U.S. defense programs and programs previously in development are transitioning into production. Internal R&D expense decreased due to an increase in process improvements.
Selling, General and Administrative. Selling, general and administrative (“S,G&A”) expenses consist of the expenses incurred by our sales and marketing personnel and related expenses, and administrative and general corporate expenses. S,G&A expenses for the three months ended March 29, 2025 and March 30, 2024 were as follows:
| Three Months Ended | Three Months Ended | |||||||
| (In thousands, except for percentages) | March 29, 2025 | March 30, 2024 | ||||||
| Selling, general and administration expense | $ | 4,701 | $ | 7,232 | ||||
| Selling, general and administration expense as a % of revenues | 45 | % | 72 | % | ||||
S,G&A decreased for the three months ended March 29, 2025 as compared to the three months ended March 30, 2024 primarily due to a decrease in legal fees of $2.9 million.
Litigation Damages Litigation damages were accrued as of March 30, 2024 as a result of the April 22, 2024 jury verdict that was entered against the Company awarding approximately $5.1 million in damages as well as recommending $19.7 million in disgorgement and exemplary damages.
Other Income, net. Other income, net, is primarily composed of interest income, foreign currency transactions, gains on fair value recording of investments and remeasurement gains and losses incurred by our U.K.-based subsidiary and other non-operating income items. Other income, net, for the three months ended March 29, 2025 and March 30, 2024 were as follows:
| Three Months Ended | Three Months Ended | |||||||
| (In thousands) | March 29, 2025 | March 30, 2024 | ||||||
| Other income, net | $ | 846 | $ | 93 | ||||
During the three months ended March 29, 2025, we sold an investment for a gain of approximately $0.3 million. In addition, interest income increased approximately $0.3 million for the three months ended March 29, 2025 as compared to the three months ended March 30, 2024. During the three months ended March 29, 2025 and March 30, 2024, we recorded foreign currency gains of approximately $0.1 million.
Tax Provision. We recorded a provision for income taxes of less than $0.1 million and $0 in the three months ended March 29, 2025 and March 30, 2024, respectively.
Net Loss. We incurred a net loss of $3.1 million during the three months ended March 29, 2025 compared to a net loss of $32.5 million during the three months ended March 30, 2024. The decrease in the net loss during the three months ended March 29, 2025 compared to the three months ended March 30, 2024 was primarily due to the accrual of litigation damages and legal fees for the three months ended March 30, 2024 in addition to more effective expense management during the three months ended March 29, 2025.
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Liquidity and Capital Resources
At March 29, 2025 and December 28, 2024, we had cash and cash equivalents, including restricted cash, and marketable securities of $32.6 million and working capital of $16.2 million compared to $36.6 million and $18.9 million, respectively.
| Three Months Ended | Three Months Ended | |||||||
| March 29, 2025 | March 30, 2024 | |||||||
| Net cash used for operating activities | $ | (3,414,201 | ) | $ | (3,106,950 | ) | ||
| Net cash from investing activities | 4,586,583 | 4,524,619 | ||||||
| Net cash provided by financing activities | — | 7,242,581 | ||||||
| Effect of exchange rate changes on cash | (588 | ) | (2,173 | ) | ||||
| Increase in cash and equivalents | $ | 1,171,794 | $ | 8,658,077 | ||||
The increase in cash, cash equivalents, and restricted cash for the three months ended March 29, 2025 was primarily due to proceeds from the sale of marketable securities of $4.6 million partially offset by cash used in operations of $3.4 million. The increase in cash, cash equivalents, and restricted cash for the three months ended March 30, 2024 was primarily due to net proceeds from the sale of common stock of $7.2 million and marketable securities of $4.5 million partially offset by cash used in operations of $3.1 million. For the three months ended March 29, 2025, cash used in operating activities consisted of a net loss from operations of $3.1 million and net cash used to fund changes in operating assets and liabilities of $1.9 million, which were partially offset by non-cash charges totaling $1.6 million, which was primarily related to stock-based compensation, depreciation, and inventory reserves. For the three months ended March 30, 2024, cash used in operating activities consisted of a net loss from operations of $32.5 million partially offset by net cash provided by changes in operating assets and liabilities of $2.9 million and non-cash charges totaling $26.5 million, which was primarily related to accrued litigation damages, stock-based compensation, depreciation, and inventory reserves. We expect that net cash used for or provided by operating activities to fluctuate in future periods as a result of a number of factors, including fluctuations in our operating results, the timing of when we recognize revenue, and changes in components of working capital. Our cash and cash equivalents and liquidity could be adversely affected by any amounts that become payable in connection with any adverse results from any litigation we are, or may become, involved in.
Equity offerings
On September 30, 2024, we sold 2,405,000 shares of common stock and received gross proceeds of $1.6 million.
On September 23, 2024, we sold 37,550,000 shares of common stock and pre-funded warrants to purchase up to 4,000,000 shares of common stock at a public offering price of $0.64 per pre-funded warrants, for gross proceeds of $27.0 million before deducting underwriting discounts and offering expenses paid by the us of $1.8 million. The offering price of the pre-funded warrant equals the public offering price per share of the common stock less the $0.01 per share exercise price of each pre-funded warrant.
At-the-market offerings
During the three months ended March 30, 2024, we sold 3,080,000 shares of common stock for gross proceeds of $7,466,755 (average of $2.42 per share) before deducting broker expenses paid by us of approximately $0.2 million, pursuant to our then effective At-The-Market Equity Offering Sales Agreement, dated as of March 5, 2021 (the “ATM Agreement”) with Stifel, Nicolaus & Company, Incorporated (“Stifel”), as agent. The ATM Agreement terminated in the three months ended March 30, 2024. On January 24, 2025 we entered into a new At-The-Market Equity Offering Sales Agreement with Stifel, Nicolaus & Company, Incorporated (“Stifel”), as agent, for the sale of up to $50 million of securities. Subsequent to March 29, 2025, the Company cannot use the ATM Agreement entered into on January 24, 2025 until such time the Company can utilize Form S-3.
The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. We have incurred net losses of $43.9 million and net cash outflows from operations of $14.2 million for the fiscal year ended 2024. We incurred a net loss of $3.1 million for the three months ended March 29, 2025 and net cash outflows from operations of $3.4 million. In addition, we have experienced a significant decline in our cash and cash equivalents and marketable securities over the last several years, which was primarily a result of funding operating losses. As described in Note 14 Litigation, on April 22, 2024, the jury verdict was entered against us awarding approximately $5.1 million in damages as well as recommending $19.7 million in disgorgement and exemplary damages. While no final judgment has been issued by the Court, the Court will take that recommendation under advisement and will rule in its final judgment on the final amount after briefing on the issues. We have argued that the damages, disgorgement and exemplary damages should be reduced or eliminated. Final briefing on the issued occurred on October 29, 2024. We are also considering the appeal of any award in a final judgment. The $5.1 million in damages and $19.7 million in disgorgement and exemplary damages were accrued for as of March 29, 2025 and December 28, 2024. We had $32.6 million of cash and cash equivalents, restricted cash, and marketable securities at March 29, 2025.
We have had historical and current negative cash flow from operations and limited liquidity resources. Our current strategy is to continue to invest in our business and raise additional capital through financing activities that may include public offerings and private placements of our common stock, preferred stock offerings, collaborations and licensing arrangements and issuances of debt and convertible debt instruments. Until such time that additional capital can be raised, we plan to strategically manage our uncommitted spending, execute our priorities and implement cost saving measures to reduce research and development and general and administrative expenditures which could include minimizing staff costs. We may also sell assets and look at other strategic alternatives. There are inherent uncertainties associated with fundraising activities and activities to manage our uncommitted spending and the successful execution of these activities may not be within our control. There are no assurances that such additional funding will be obtained and that we will succeed in our future operations. If we are unable to achieve positive cash flows and profitability in the foreseeable future or cannot successfully raise additional capital and implement our strategic plan, our liquidity, financial condition and business prospects will be materially and adversely affected. As the Company is unable to conclude that a favorable outcome in this litigation is probable and due to the net losses and negative cash flows from operations, management has concluded that there is substantial doubt about the Company’s ability to continue as a going concern for twelve months from the issuance of these financial statements.
The following table presents the components of our cash, cash equivalents, restricted cash and marketable securities held in U.S. dollars as of the dates presented:
| March 29, 2025 | December 28, 2024 | |||||||
| Domestic locations | $ | 32,417,915 | $ | 36,491,339 | ||||
| Foreign locations | 91,751 | 56,984 | ||||||
| Subtotal cash, cash equivalents, restricted cash and marketable securities held in U.S. dollars | 32,509,666 | 36,548,323 | ||||||
| Cash and cash equivalents held in other currencies and converted to U.S. dollars | 76,584 | 81,455 | ||||||
| Total cash, cash equivalents, restricted cash and marketable securities | $ | 32,586,250 | $ | 36,629,778 | ||||
We have no plans to repatriate the cash and cash equivalents held in our foreign subsidiary KEL.
The manufacturing operations at our Korean facility, Kowon, have ceased and Kowon was liquidated at fiscal year ended 2018. We have recorded deferred tax liabilities for any additional withholding tax that may be due to the Korean government upon Kowon’s final tax return acceptance.
We expect to expend between $1.0 million and $2.0 million on capital expenditures in 2025.
Critical Accounting Estimates
Our critical accounting estimates are described in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition” of our Annual Report on Form 10-K for the fiscal year ended December 28, 2024, as amended.
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Item 3. Quantitative and Qualitative Disclosures about Market Risk
We invest our excess cash in high-quality U.S. Government, government-backed (e.g., Fannie Mae, FDIC guaranteed bonds and certificates of deposit) and corporate debt instruments, which bear lower levels of relative risk. We believe that the effect, if any, of reasonably possible near-term changes in interest rates on our financial position, results of operations and cash flows should not be material to our cash flows or income. It is possible that interest rate movements would increase our unrealized gain or loss on debt securities. We are exposed to changes in foreign currency exchange rates primarily through our translation of our foreign subsidiaries’ financial position, results of operations, and transaction gains and losses as a result of non-U.S. dollar denominated cash flows related to business activities in Europe, and remeasurement of U.S. dollars to the British pound, the functional currency of our U.K. subsidiaries. We are also exposed to the effects of exchange rates in the purchase of certain raw materials, which are in U.S. dollars, but the price on future purchases is subject to change based on the relationship of the Japanese yen to the U.S. dollar. We do not currently hedge our foreign currency exchange rate risk. We estimate that any market risk associated with our international operations or investments is unlikely to have a material adverse effect on our business, financial condition or results of operation. Our portfolio of marketable securities is subject to interest rate risk and the credit rating of our investments may be affected by the underlying financial health of the guarantors of our investments. We use silicon wafers but do not enter into forward or futures hedging contracts to mitigate against risks related to the price of silicon.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As of March 29, 2025, the Company conducted an evaluation under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer (its principal executive officer and principal financial officer, respectively) regarding the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of March 29, 2025, as defined in Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The term “disclosure controls and procedures” means controls and other procedures that are designed to ensure that information required to be disclosed by the Company in reports that we file or submit under the Exchange Act are recorded, processed, summarized and reported within the requisite time periods and that such disclosure controls and procedures were effective to ensure that information required to be disclosed by the Company in the reports that we file or submit under the Exchange Act are accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on that evaluation, our management concluded that, as of March 29, 2025, our disclosure controls and procedures were not effective as of March 29, 2025 due to the following material weaknesses which were disclosed in the Company’s Annual Report on Form 10-K for the year ended December 28, 2024, as amended and continue to exist as of March 29, 2025:
We identified control deficiencies, that when aggregated, constitute material weaknesses as follows:
| ● | Design and operating effectiveness of information technology general computer controls in the areas of user access and program change-management for certain information technology systems that are critical to capturing, processing, and reporting financial transactions. These ineffective information technology controls contributed to (i) improper segregation of duties among certain business process controls and (ii) ineffective data validation of spreadsheets and system-generated reports. | |
| ● | Management did not design, implement and retain appropriate documentation of control procedures to achieve timely, complete and accurate recording and disclosures across multiple financial statement areas including accounting and disclosure of stockholder’s equity, share-based compensation, certain other receivables, accruals, and certain investments, including insufficient review controls around completeness and accuracy of information produced by the entity and documentation of evidence of reviews. | |
| ● | Management did not design, implement and retain appropriate documentation of certain business process controls related to the revenue cycle, including insufficient review controls around completeness and accuracy of information produced by the entity including, certain costs incurred, estimates to complete, and documentation of evidence of contract accounting reviews. |
Remediation Activities
Management is actively engaged in the implementation of a remediation plan to implement measures designed to improve our internal control over financial reporting to remediate these material weaknesses with oversight from the Audit Committee of the Board of Directors.
Changes in Internal Control over Financial Reporting
Other than the changes discussed above in connection with the changes designed and implemented as a result of our remediation plan of the previously identified material weaknesses, there have been no changes in the Company’s internal control over financial reporting that occurred during the quarter ended March 29, 2025 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
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Part II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company may engage in legal proceedings arising in the ordinary course of business. Claims, suits, investigations and proceedings are inherently uncertain and it is not possible to predict the ultimate outcome of such matters and our business, financial condition, results of operations or cash flows could be affected in any particular period.
BlueRadios, Inc. v. Kopin Corporation, Civil Action No. 16-02052-JLK (D. Col.):
On August 12, 2016, BlueRadios, Inc. (“BlueRadios”) filed a complaint in the U.S. District Court for the District of Colorado, alleging that the Company breached a contract between it and BlueRadios concerning a joint venture between the Company and BlueRadios to design, develop and commercialize micro-display products with embedded wireless technology referred to as “Golden-i,” breached the covenant of good faith and fair dealing associated with that contract, breached its fiduciary duty to BlueRadios, and misappropriated trade secrets owned by BlueRadios in violation of Colorado law (C.R.S. § 7-74-104(4)) and the Defend Trade Secrets Act (18 U.S.C. § 1836(b)(1)). BlueRadios further alleged that the Company was unjustly enriched by its alleged misconduct, BlueRadios is entitled to an accounting to determine the amount of profits obtained by the Company as a result of its alleged misconduct, and the inventorship on at least ten patents or patent applications owned by the Company need to be corrected to list BlueRadios’ employees as inventors and thereby list BlueRadios as co-assignees of the patents. BlueRadios seeks monetary, declaratory, and injunctive relief, including for alleged non-payment of engineering retainer fees.
On October 11, 2016, the Company filed its Answer and Affirmative Defenses. The parties completed expert depositions on November 15, 2019. On December 2, 2019, the Company filed a Motion for Partial Summary Judgment requesting the Court dismiss counts 2-7 in their entirety and counts 1 and 8 in part. BlueRadios also filed a Motion for Partial Summary Judgment alleging it is the co-owner of U.S. Patent No. 8,909,296. Responses to the Motions for Partial Summary Judgment were filed on January 15, 2020, and replies were filed on February 19, 2020. On September 25, 2020, the Court denied BlueRadios’ Motion for Partial Summary Judgment. On August 3, 2022, the Court granted the Company’s Motion for Partial Summary Judgment by dismissing counts 3, 6, 7, the claim for punitive damages under count 2, and count 8 as it relates to patent applications and by denying the motion as it relates to counts 1, 4, and 5, and the remainder of counts 2 and 8. The Court also ordered discovery reopened for certain limited purposes. A trial date was set by the Court for January 22, 2024 to February 5, 2024 but then re-scheduled for March 20, 2024 to April 16, 2024. On Monday, April 22, 2024, after a four week trial, a jury verdict was entered finding for BlueRadios and awarding approximately $5.1 million in damages as well as recommending $19.7 million in disgorgement and exemplary damages. While no final judgment has been issued by the Court, the Court will take that recommendation under advisement and will rule in its final judgment on the final amount after post-trial briefing. On May 22, 2024, the Company filed its Motion for Judgment as a Matter of Law or in the alternative for a New Trial, as well as two submissions arguing that the disgorgement and exemplary damages should not be awarded. That same day, BlueRadios filed motions seeking a permanent injunction prohibiting Kopin from selling any products that incorporate BlueRadios’ trade secrets, over $10.8 million in pre-judgment interest, and over $10.2 million in attorneys’ fees and costs. Briefing on those issues concluded on June 26, 2024. On September 25, 2024, the Company filed a supplemental brief on issue preclusion arguing that BlueRadios’ claims were untimely because of findings of fact made in BlueRadios, Inc. v. Hamilton, Brook, Smith & Reynolds, P.C., No. 1:21-cv-10488-DJC, ECF 268 (D. Mass. Sept. 18, 2024). That supplemental briefing concluded on October 29, 2024. The Company is currently considering an appeal of any final judgment.
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Item 1A. Risk Factors
Our business and financial results are subject to numerous risks and uncertainties. As a result, the risks and uncertainties discussed in Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the fiscal year ended December 28, 2024, as amended should be carefully considered. There have been no material changes in the assessment of our risk factors from those set forth in our Annual Report on Form 10-K for the fiscal year ended December 28, 2024, as amended.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
We did not sell any securities during the three months ended March 29, 2025 that were not registered under the Securities Act.
Item 6. Exhibits
| * | Submitted electronically herewith |
| ** | Furnished and not filed herewith |
Attached as Exhibit 101 to this report are the following formatted in XBRL (Extensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets at March 29, 2025 (Unaudited) and December 28, 2024, (ii) Condensed Consolidated Statements of Operations (Unaudited) for the three months ended March 29, 2025 and March 30, 2024, (iii) Condensed Consolidated Statement of Comprehensive Loss (Unaudited) for the three months ended March 29, 2025 and March 30, 2024, (iv) Condensed Consolidated Statements of Stockholders’ Equity (Unaudited) for the three months ended March 29, 2025 and March 30, 2024, (v) Condensed Consolidated Statements of Cash Flows (Unaudited) for the three months ended March 29, 2025 and March 30, 2024, and (vi) Notes to Unaudited Condensed Consolidated Financial Statements.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| KOPIN CORPORATION (Registrant) | ||
| Date: May 13, 2025 | By: | /S/ MICHAEL MURRAY |
| Michael Murray | ||
| President, Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| Date: May 13, 2025 | By: | /S/ RICHARD A. SNEIDER |
| Richard A. Sneider | ||
| Treasurer and Chief Financial Officer | ||
| (Principal Financial and Accounting Officer) | ||
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