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 5, 2021 | |
| Common Stock, par value $0.01 |
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 | ☒ | |
| Non-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 27, 2021 (unaudited) | December 26, 2020 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and equivalents | $ | $ | ||||||
| Marketable debt securities, at fair value | ||||||||
| Accounts
receivable, net of allowance of $ | ||||||||
| Contract assets and unbilled receivables | ||||||||
| Inventory | ||||||||
| Prepaid taxes | ||||||||
| 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 and billings in excess of revenues earned | ||||||||
| Operating lease liabilities | ||||||||
| Other accrued liabilities | ||||||||
| Customer deposits | ||||||||
| Deferred tax liabilities | ||||||||
| Total current liabilities | ||||||||
| Noncurrent contract liabilities and asset retirement obligations | ||||||||
| Operating lease liabilities, net of current portion | ||||||||
| Other long-term obligations | ||||||||
| Commitments and contingencies (Note 13) | ||||||||
| Stockholders’ equity: | ||||||||
| Preferred stock, par value $ per share: authorized, shares; issued | - | - | ||||||
| Common stock, par value $ per share: authorized, shares; issued shares in 2021 and shares in 2020; outstanding in 2021 and 2020 | ||||||||
| Additional paid-in capital | ||||||||
| Treasury stock ( and shares in 2021 and 2020, at cost) | ( | ) | ( | ) | ||||
| Accumulated other comprehensive income | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Kopin Corporation stockholders’ equity | ||||||||
| Noncontrolling interest | ( | ) | ( | ) | ||||
| Total Kopin Corporation 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 27, 2021 | March 28, 2020 | |||||||
| Revenues: | ||||||||
| Net product revenues | $ | $ | ||||||
| Research and development revenues | ||||||||
| Other revenues | -— | |||||||
| Total revenues | ||||||||
| Expenses: | ||||||||
| Cost of product revenues | ||||||||
| Research and development | ||||||||
| Selling, general and administration | ||||||||
| Total expenses | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other income (expense): | ||||||||
| Interest income | ||||||||
| Other (expense) income, net | ( | ) | ||||||
| Foreign currency transaction gains (losses) | ( | ) | ||||||
| Total other income (expense) | ( | ) | ||||||
| Loss before provision for income taxes and net loss attributable to noncontrolling interest | ( | ) | ( | ) | ||||
| Tax provision | ( | ) | ( | ) | ||||
| Net loss | ( | ) | ( | ) | ||||
| Net loss attributable to the noncontrolling interest | ||||||||
| Net loss attributable to Kopin Corporation | $ | ( | ) | $ | ( | ) | ||
| 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 27, 2021 | March 28, 2020 | |||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Other comprehensive (loss) income, net of tax: | ||||||||
| Foreign currency translation adjustments | ( | ) | ||||||
| Unrealized holding gain (loss) on marketable securities | ( | ) | ||||||
| Reclassification of holding losses in net loss | ( | ) | ||||||
| Other comprehensive loss, net of tax | ( | ) | ( | ) | ||||
| Comprehensive loss | ( | ) | ( | ) | ||||
| Comprehensive loss attributable to the noncontrolling interest | ||||||||
| Comprehensive loss attributable to Kopin Corporation | $ | ( | ) | $ | ( | ) | ||
See notes to unaudited condensed consolidated financial statements
| 5 |
KOPIN CORPORATION
Condensed Consolidated Statements of Stockholders’ Equity
(Unaudited)
| Shares | Amount | Capital | Stock | Income | Deficit | Equity | Interest | Equity | ||||||||||||||||||||||||||||
| Common Stock | Additional Paid-in | Treasury | Accumulated Other Comprehensive | Accumulated | Total Kopin Corporation Stockholders’ | Noncontrolling | Total Stockholders’ | |||||||||||||||||||||||||||||
| Shares | Amount | Capital | Stock | Income | Deficit | Equity | Interest | Equity | ||||||||||||||||||||||||||||
| Balance, December 26, 2020 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||||||||||
| Stock-based compensation expense | - | - | - | - | - | - | ||||||||||||||||||||||||||||||
| Vesting of restricted stock | ( | ) | - | - | - | - | - | - | ||||||||||||||||||||||||||||
| Sale of registered stock | - | - | - | - | - | |||||||||||||||||||||||||||||||
| Restricted stock for tax withholding obligations | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||
Other comprehensive loss | - | - | - | - | ( | ) | - | ( | ) | - | ( | ) | ||||||||||||||||||||||||
| Net loss | - | - | - | - | - | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance, March 27, 2021 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||||||||||
| Shares | Amount | Capital | Stock | Income | Deficit | Equity | Interest | Equity | ||||||||||||||||||||||||||||
| Common Stock | Additional Paid-in | Treasury | Accumulated Other Comprehensive | Accumulated | Total Kopin Corporation Stockholders’ | Noncontrolling | Total Stockholders’ | |||||||||||||||||||||||||||||
| Shares | Amount | Capital | Stock | Income | Deficit | Equity | Interest | Equity | ||||||||||||||||||||||||||||
| Balance, December 28, 2019 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||||||||||
| Stock-based compensation expense | - | - | - | - | - | - | ||||||||||||||||||||||||||||||
Other comprehensive loss | - | - | - | - | ( | ) | - | ( | ) | - | ( | ) | ||||||||||||||||||||||||
| Net loss | - | - | - | - | - | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance, March 28, 2020 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||||||||||
See notes to unaudited condensed consolidated financial statements
| 6 |
KOPIN CORPORATION
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| Three months ended | Three months ended | |||||||
| March 27, 2021 | March 28, 2020 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Accretion of premium or discount on marketable debt securities | ||||||||
| Stock-based compensation | ||||||||
| Foreign currency losses (gains) | ( | ) | ||||||
| Change in allowance for bad debt | ( | ) | ||||||
| Write-off of excess inventory | ||||||||
| Other non-cash items | ( | ) | ||||||
| Changes in assets and liabilities: | ||||||||
| Accounts receivable | ||||||||
| Contract assets | ( | ) | ||||||
| Inventory | ( | ) | ( | ) | ||||
| Prepaid expenses and other current assets | ( | ) | ( | ) | ||||
| Accounts payable and accrued expenses | ( | ) | ( | ) | ||||
| Billings in excess of revenue earned | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Other assets | ||||||||
| Capital expenditures | ( | ) | ( | ) | ||||
| Proceeds from sale of marketable debt securities | ||||||||
| Net cash (used in) provided by investing activities | ( | ) | ||||||
| Cash flows from financing activities: | ||||||||
| Sale of treasury stock, net of costs | - | |||||||
| Settlements of restricted stock for tax withholding obligations | ( | ) | - | |||||
| Net cash provided by financing activities | - | |||||||
| Effect of exchange rate changes on cash | ( | ) | ( | ) | ||||
| Net increase in cash and cash equivalents | ||||||||
| Cash and cash equivalents: | ||||||||
| Beginning of period | ||||||||
| End of period | $ | $ | ||||||
See notes to unaudited condensed consolidated financial statements
| 7 |
KOPIN CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The condensed consolidated financial statements of Kopin Corporation as of March 27, 2021 and for the three month periods ended March 27, 2021 and March 28, 2020 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 26, 2020. 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. The Company reclassified certain prior period amounts to conform to the current period presentation. 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 Company’s products are targeted towards the defense and industrial/enterprise wearable markets. Management believes the industrial wearable market is still developing and cannot predict how long it will take to develop or if the Company’s products will be accepted. In addition, the Company’s current strategy is to continue to invest in research and development, even during unprofitable periods, which may result in the Company continuing to incur net losses and negative cash flows from operations. If the Company is unable to achieve and maintain positive cash flows and profitability in the foreseeable future, its financial condition may ultimately be materially adversely affected such that management may be required to reduce operating expenses, including investments in research and development, or raise additional capital. While there can be no assurance the Company will be able to successfully reduce operating expenses or raise additional capital, management believes its historical success in managing cash flows and obtaining capital will continue in the foreseeable future.
2. ACCOUNTING STANDARDS
Accounting Standards Issued But Not Yet Adopted
In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which requires measurement and recognition of expected credit losses for financial assets held. In November 2019, the FASB issued ASU 2019-10 that has extended the effective date of ASU 2016-13 for Smaller Reporting Entities to fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022. The Company is currently evaluating ASU 2016-13 and its impact on our consolidated financial statements.
| 8 |
3. CASH AND CASH EQUIVALENTS AND MARKETABLE DEBT SECURITIES
The Company considers all highly liquid, short-term debt instruments with original maturities of three months or less to be cash equivalents.
Marketable debt securities consist primarily of commercial paper, medium-term corporate notes, and U.S. government and agency backed securities. The Company classifies these marketable debt securities as available-for-sale at fair value in “Marketable debt securities, at fair value.” The Company records the amortization of premium and accretion of discounts on marketable debt securities in the results of operations.
The Company uses the specific identification method as a basis for determining cost and calculating realized gains and losses with respect to marketable debt securities. The gross gains and losses realized related to sales and maturities of marketable debt securities were not material during the three months ended March 27, 2021 and March 28, 2020.
Investments in available-for-sale marketable debt securities were as follows at March 27, 2021 and December 26, 2020:
| Amortized Cost | Unrealized Gains | Fair Value | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
| U.S. government and agency backed securities | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Corporate debt | ||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
The contractual maturity of the Company’s marketable debt securities was as follows at March 27, 2021:
| Less than One year | One to Five years | Total | ||||||||||
| U.S. government and agency backed securities | $ | $ | $ | |||||||||
| Corporate debt | ||||||||||||
| Total | $ | $ | $ | |||||||||
| 9 |
4. 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. An investment is categorized as Level 3 if its fair value is based on assumptions developed by the Company about what a market participant would use in pricing the assets.
The following table details the fair value measurements of the Company’s financial assets:
| Fair Value Measurement at March 27, 2021 Using: | ||||||||||||||||
| Total | Level 1 | Level 2 | Level 3 | |||||||||||||
| Cash and cash equivalents | $ | $ | $ | $ | ||||||||||||
| U.S. government and agency-backed securities | ||||||||||||||||
| Corporate debt | ||||||||||||||||
| Equity investments | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
| Fair Value Measurement at December 26, 2020 Using: | ||||||||||||||||
| Total | Level 1 | Level 2 | Level 3 | |||||||||||||
| Cash and cash equivalents | $ | $ | $ | $ | ||||||||||||
| U.S. government and agency- backed securities | ||||||||||||||||
| Corporate debt | ||||||||||||||||
| Equity investments | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
Transfers between levels of the fair value hierarchy are reported at the beginning of the reporting period in which they occur. Changes in Level 3 investments were as follows:
| December 26, 2020 | Net unrealized losses | Purchases, issuances and settlements | Transfers in and or out of Level 3 | March 27, 2021 | ||||||||||||||||
| Equity Investments | $ | $ | ( | ) | $ | $ | $ | |||||||||||||
The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate fair value because of their short-term nature. If accrued liabilities were carried at fair value, these would be classified as Level 2 in the fair value hierarchy.
Marketable Debt Securities
The corporate debt consists of floating rate notes with a maturity that is over multiple years but has interest rates that are reset every three months based on the then-current three-month London Interbank Offering Rate (“three-month Libor”). The Company validates the fair market values of the financial instruments above by using discounted cash flow models, obtaining independent pricing of the securities or through the use of a model that incorporates the three-month Libor, the credit default swap rate of the issuer and the bid and ask price spread of the same or similar investments which are traded on several markets.
Equity Investments
During
the three months ended March 27, 2021, the Company recorded a less than $
| 10 |
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 27, 2021 and December 26, 2020:
| March 27, 2021 | December 26, 2020 | |||||||
| 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 less any unvested restricted shares. Diluted net loss per share is calculated using weighted-average shares outstanding 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 27, 2021 | March 28, 2020 | |||||||
| Non-vested restricted common stock | ||||||||
| 11 |
Registered sale of equity securities
During
the three months ended March 27, 2021, we sold million shares of common stock for gross proceeds
of $
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 the Company for one, two or four years (the vesting period) 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.
Restricted stock activity was as follows:
| Shares | Weighted Average Grant Fair Value | |||||||
| Balance, December 26, 2020 | $ | |||||||
| Granted | ||||||||
| Forfeited | ( | ) | ||||||
| Vested | ( | ) | ||||||
| Balance, March 27, 2021 | $ | |||||||
| 12 |
Stock-Based Compensation
| Three Months Ended | Three Months Ended | |||||||
| March 27, 2021 | March 28, 2020 | |||||||
| Cost of product revenues | $ | $ | ||||||
| Research and development | ||||||||
| Selling, general and administrative | ||||||||
| Total | $ | $ | ||||||
Unrecognized compensation expense for non-vested restricted common stock as of March 27, 2021 totaled $ million and is expected to be recognized over a weighted average period of approximately .
8. ACCRUED WARRANTY
| Balance, December 26, 2020 | $ | |||
| Additions | ||||
| Claims | ( | ) | ||
| Balance, March 27, 2021 | $ |
Extended Warranties
Deferred
revenue represents the purchase of extended warranties by the Company’s customers.
| 13 |
9. INCOME TAXES
The
Company recorded a provision for income taxes of less than $
10. CONTRACT ASSETS AND LIABILITIES
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 cost incurred and deferred revenue.
Net contract assets (liabilities) consisted of the following:
| March 27, 2021 | December 26, 2020 | $ Change | % Change | |||||||||||||
| Contract assets—current | $ | $ | $ | ( | ) | ( | )% | |||||||||
| Contract liabilities and billings in excess of revenues earned | ( | ) | ( | ) | ( | )% | ||||||||||
| Contract liabilities—noncurrent | ( | ) | ( | ) | ( | ) | % | |||||||||
| Net contract (liabilities) assets | $ | ( | ) | $ | $ | ( | ) | ( | )% | |||||||
The
$
In
the three months ended March 27, 2021, the Company recognized revenue of $
The Company did not recognize impairment losses on our contract assets in the three months ended March 27, 2021 or March 28, 2020.
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 27, 2021 | March 28, 2020 | |||||||
| 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 (e.g., indefinite-delivery, indefinite-quantity (“IDIQ”)).
As of March 27, 2021, the aggregate amount of the transaction price allocated to remaining performance obligations was $
| 14 |
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 27, 2021 and December 26, 2020, the Company did not have any finance leases. Approximately all of our 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 27, 2021 | March 28, 2020 | |||||||
| Operating lease cost | $ | $ | ||||||
At March 27, 2021, the Company’s future lease payments under non-cancellable leases were as follows:
| 2021 (excluding the three months ended March 27, 2021) | $ | |||
| 2022 | ||||
| 2023 | ||||
| Total future lease payments | ||||
| Less imputed interest | ( | ) | ||
| Total | $ |
The Company’s lease liabilities recognized in the Company’s condensed consolidated balance sheet at March 27, 2021 was as follows:
| March 27, 2021 | ||||
| Operating lease liabilities–current | $ | |||
| Operating lease liabilities–noncurrent | ||||
| Total lease liabilities | $ | |||
Supplemental cash flow information related to leases was as follows:
| Three months ended | ||||
| March 27, 2021 | ||||
| Cash paid for amounts included in the measurement of operating lease liabilities | $ | |||
Other information related to leases was as follows:
| March 27, 2021 | ||||
| Weighted Average Discount Rate–Operating Leases | % | |||
| Weighted Average Remaining Lease Term–Operating Leases (in years) | ||||
12. SEGMENTS AND DISAGGREGATION OF REVENUE
We continually monitor and review our segment reporting structure in accordance with authoritative guidance to determine if any changes have occurred that would affect our reportable segments. We report under one segment, as our Chief Executive Officer, who is our chief operating decision maker (“CODM”), reviews results on a total company basis.
| 15 |
Total long-lived assets by country at March 27, 2021 and December 26, 2020 were:
| Total Long-lived Assets (in thousands) | March 27, 2021 | December 26, 2020 | ||||||
| U.S. | $ | $ | ||||||
| United Kingdom | ||||||||
| China | ||||||||
| Japan | ||||||||
| Total | $ | $ | ||||||
We disaggregate our revenue from contracts with customers by geographic location and by display application, as we believe it best depicts how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors.
During the three months ended March 27, 2021 and March 28, 2020, the Company derived its sales from the following geographies:
| March 27, 2021 | March 28, 2020 | |||||||||||||||
| (In thousands, except percentages) | Revenue | % of Total | Revenue | % of Total | ||||||||||||
| United States | $ | % | $ | % | ||||||||||||
| Other Americas | ||||||||||||||||
| Total Americas | ||||||||||||||||
| Asia-Pacific | ||||||||||||||||
| Europe | ||||||||||||||||
| Total Revenues | $ | % | $ | % | ||||||||||||
| 16 |
During the three months ended March 27, 2021 and March 28, 2020, the Company derived its sales from the following display applications:
| (In thousands) | March 27, 2021 | March 28, 2020 | ||||||
| Defense | $ | $ | ||||||
| Industrial | ||||||||
| Consumer | ||||||||
| R&D | ||||||||
| Other | ||||||||
| Total Revenues | $ | $ | ||||||
13. 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 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 an alleged 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 alleges 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. A trial date has not yet been set by the Court. The Company has not concluded a loss from this matter is probable; therefore, we have not recorded an accrual for litigation or claims related to this matter for the period ended March 27, 2021. The Company will continue to evaluate information as it becomes known and will record an estimate for losses at the time or times when it is both probable that a loss has been incurred and the amount of the loss is reasonably estimable.
14. 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 our 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.
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During the three month periods ended March 27, 2021 and March 28, 2020, the Company had the following transactions with related parties:
| Three months ended | Three months ended | |||||||||||||||
| March 27, 2021 | March 28, 2020 | |||||||||||||||
| Sales | Purchases | Sales | Purchases | |||||||||||||
| Solos Technology | ||||||||||||||||
| RealWear, Inc. | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
At March 27, 2021 and December 26, 2020, the Company had the following receivables, contract assets and payables with related parties:
| March 27, 2021 | December 26, 2020 | |||||||||||||||
| Receivables | Contract assets | Receivables | Contract assets | |||||||||||||
| RealWear, Inc. | $ | $ | $ | $ | ||||||||||||
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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 26, 2020. These factors include: the extent of the impact of the coronavirus (“COVID-19”) pandemic on our business and operations, and the economic and societal disruptions resulting from the COVID-19 pandemic our ability to prosecute and defend our proprietary technology aggressively or successfully; our ability to 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; 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; our expectation not to pay cash dividends for the foreseeable future and to retain earnings for the development of our businesses; our need to achieve and maintain positive cash flow and profitability, our financial condition will ultimately be materially adversely affected, and we will be required to reduce expenses, including our investments in research and development or raise additional capital and our ability to support our operations and capital needs for at least the next twelve months through our available cash resources.
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.
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The following discussion should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended December 26, 2020 and our unaudited condensed consolidated financial statements included in this Form 10-Q.
Results of Operations
As described in our “Forward-Looking Statements” on page 19 of this Form 10-Q, 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, which may result in differences in the number of work days in the current and comparable prior interim periods and could affect period-to-period comparisons. The following discussions of comparative results among periods, including the discussion of segment results, should be viewed in this context.
Revenues. For the three months ended March 27, 2021 and March 28, 2020, our revenues by display application, which include product sales and amounts earned from research and development contracts (“R&D”), were as follows:
| Three months ended | Three months ended | |||||||
| (In thousands) | March 27, 2021 | March 28, 2020 | ||||||
| Defense | $ | 4,993 | $ | 3,513 | ||||
| Industrial | 2,041 | 2,183 | ||||||
| Consumer | 534 | 222 | ||||||
| R&D | 3,561 | 1,960 | ||||||
| Other | 547 | - | ||||||
| Total Revenues | $ | 11,676 | $ | 7,878 | ||||
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 27, 2021 as compared to the three months ended March 28, 2020 is primarily from an increase in volume shipments for our thermal weapon sight systems for soldiers.
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 27, 2021 as compared to the three months ended March 28, 2020 was primarily due to a decline in sales of products for public safety wearable headsets partially offset by an increase in sales of products for 3D metrology equipment.
Our displays for Consumer applications are used primarily in thermal imaging products, recreational rifle and hand-held scopes and drone racing headsets. The increase in Consumer applications revenues for the three months ended March 27, 2021 as compared to the three months ended March 28, 2020 was primarily due to increased demand for displays and components used in recreational rifle and hand-held scopes, drone racing headsets and sales of our organic light emitting diode (“OLED”) products.
R&D revenues increased in the three months ended March 27, 2021 as compared to the three months ended March 28, 2020 primarily due to increases in funding for U.S. defense programs.
International revenues represented 30% and 14% of total revenues for the three months ended March 27, 2021 and March 28, 2020, respectively. We categorize our revenues as either domestic or international based upon the delivery destination of our product. For example, if the customer is located in Asia or if a U.S. customer has its Asian contract manufacturer order product from us and we deliver the product to Asia we categorize both these sales as international. In addition, if we earn royalties on sales from a customer the royalties are categorized as domestic or international based on how the product revenues are categorized. The increase in international revenues was a result of an increase in sales of products for 3D metrology equipment and industrial wearable headset applications. Our international sales are primarily denominated in U.S. currency. Consequently, a strengthening of the U.S. dollar could increase the price in local currencies of our products in foreign markets and make our products relatively more expensive than competitors’ products that are denominated in local currencies, which could lead to a reduction in sales or profitability in those foreign 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.
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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 27, 2021 and March 28, 2020 were as follows:
| Three Months Ended | Three Months Ended | |||||||
| (In thousands, except for percentages) | March 27, 2021 | March 28, 2020 | ||||||
| Cost of product revenues | $ | 6,397 | $ | 5,648 | ||||
| Cost of product revenues as a % of net product revenues | 85 | % | 95 | % | ||||
The decrease in cost of product revenues as a percentage of product revenues for the three months ended March 27, 2021 as compared to the three months ended March 28, 2020 was primarily due to improved manufacturing efficiencies driven by higher volumes.
During the first quarter of 2021 we became aware of global shortages of semiconductor components and production capacity affecting many industries. We did not experience any shortage issues during the first quarter of 2021 however we were notified by a vendor that provides us with components for our 3D metrology products that they may not be able to honor their purchase commitments to us. We are evaluating other possible sources for this component. The shortage of semiconductor components is a very dynamic situation and we rely on our vendors to provide information about the vendors that they use.
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 2021, 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 statement of operations. R&D expenses for the three months ended March 27, 2021 and March 28, 2020 were as follows:
| Three Months Ended | Three Months Ended | |||||||
| (In thousands) | March 27, 2021 | March 28, 2020 | ||||||
| Funded | $ | 2,115 | $ | 1,505 | ||||
| Internal | 1,448 | 835 | ||||||
| Total research and development expense | $ | 3,563 | $ | 2,340 | ||||
Funded R&D expense for the three months ended March 27, 2021 increased as compared to the three months ended March 28, 2020 primarily due to increased spending on U.S. defense programs. Internal R&D expenses for the three months ended March 27, 2021 increased primarily due to an increase in OLED development.
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 27, 2021 and March 28, 2020 were as follows:
| Three Months Ended | Three Months Ended | |||||||
| (In thousands, except for percentages) | March 27, 2021 | March 28, 2020 | ||||||
| Selling, general and administration expense | $ | 5,906 | $ | 3,432 | ||||
| Selling, general and administration expense as a % of revenues | 51 | % | 44 | % | ||||
S,G&A increased for the three months ended March 27, 2021 as compared to the three months ended March 28, 2020 primarily due to increases in stock-based compensation and bad debt expense which were partially offset by lower professional fees.
Other Income (Expense), net. Other income (expense), net, is primarily composed of interest income, foreign currency transaction and remeasurement gains and losses incurred by our U.K.-based subsidiary and other non-operating income items. Other income (expense), net, for the three months ended March 27, 2021 and March 28, 2020 were as follows:
| Three Months Ended | Three Months Ended | |||||||
| (In thousands) | March 27, 2021 | March 28, 2020 | ||||||
| Other income (expense), net | $ | 37 | $ | (87 | ) | |||
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During the three months ended March 27, 2021, we recorded foreign currency gains of less than $0.1 million as compared to losses of $0.2 million for the three months ended March 28, 2020.
Tax Provision. We recorded a provision for income taxes of less than $0.1 million in the three months ended March 27, 2021 and the three months ended March 28, 2020.
Net Loss (Income) Attributable to Noncontrolling Interest. As of March 27, 2021, we owned 80% of the equity of eMDT America (“eMDT”). Net loss (income) attributable to noncontrolling interest on our consolidated statement of operations represents the portion of the results of operations of our majority owned subsidiary which is allocated to the stockholders of the equity interests not owned by us. The change in net loss (income) attributable to noncontrolling interest is the result of the change in the results of operations of eMDT for the three months ended March 27, 2021 and March 28, 2020.
Net Loss Attributable to Kopin Corporation. We incurred a net loss attributable to Kopin Corporation of $4.1 million during the three months ended March 27, 2021 compared to a net loss attributable to Kopin Corporation of $3.6 million during the three months ended March 28, 2020. The increase in the net loss attributable to Kopin Corporation during the three months ended March 27, 2021 compared to the three months ended March 28, 2020 is due to increases in stock-based compensation expenses partially offset by an increase in gross margin resulting from improved manufacturing efficiencies driven by higher sales volumes.
Liquidity and Capital Resources
At March 27, 2021 and December 26, 2020, we had cash and cash equivalents and marketable securities of $35.6 million and $20.7 million, respectively, and working capital of $36.5 million and $22.6 million, respectively. The change in cash and cash equivalents and marketable securities was primarily due to the sale of 2.4 million shares of common stock for net proceeds of $15.5 million partially offset by capital expenditures of $0.3 million.
In the three months ended March 27, 2021, we sold 2.4 million shares of common stock for gross proceeds of $16 million (average of $6.66 per share), before deducting broker expenses paid by us of $0.5 million under the At-The-Market Equity Offering Sales Agreement, dated as of February 8, 2019 (the “Previous ATM Agreement”) with Stifel, Nicolaus & Company, Incorporated (“Stifel”), as agent. The Previous ATM Agreement has since terminated pursuant to its terms as a result of the sale of all the shares subject to such agreement. On March 5, 2021 the Company entered into a new At-The-Market Equity Offering Sales Agreement with Stifel, under which the Company may sell up to $50 million of its common stock. We expect our cash to fund operations for at least the next 12 months.
Cash and cash equivalents and marketable debt securities held in U.S. Dollars at:
| March 27, 2021 | December 26, 2020 | |||||||
| Domestic locations | $ | 34,940,313 | $ | 19,724,103 | ||||
| International locations | 130,414 | 340,217 | ||||||
| Subtotal cash and cash equivalents marketable debt securities held in U.S. dollars | 35,070,727 | 20,064,320 | ||||||
| Cash and cash equivalents held in other currencies and converted to U.S. dollars | 562,955 | 684,230 | ||||||
| Total cash and cash equivalents and marketable debt securities | $ | 35,633,682 | $ | 20,748,550 | ||||
We have no plans to repatriate the cash and cash equivalents held in our foreign subsidiary Forth Dimension Display, Ltd. (“FDD”), and, as such, we have not recorded any deferred tax liability with respect to such cash.
We expect to expend between $1.0 million and $2.0 million on capital expenditures in 2021.
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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 debt securities is subject to interest rate risk although our intent is to hold securities until maturity. 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 27, 2021, 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 27, 2021, 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 27, 2021, our disclosure controls and procedures were effective in ensuring that material information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, including ensuring that such material information is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.
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Changes in Internal Control over Financial Reporting
There have been no changes in the Company’s internal control over financial reporting that occurred during the quarter ended March 27, 2021 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
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 an alleged 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 alleges 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. A trial date has not yet been set by the Court. The Company has not concluded a loss from this matter is probable; therefore, we have not recorded an accrual for litigation or claims related to this matter for the period ended March 27, 2021. The Company will continue to evaluate information as it becomes known and will record an estimate for losses at the time or times when it is both probable that a loss has been incurred and the amount of the loss is reasonably estimable.
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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 2020 Annual Report on Form 10-K 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 26, 2020, except for the risk factor noted below.
Supply shortages could impair the quality, reduce the availability or increase the cost of raw materials, which could harm our business. We rely on third-party independent contractors for certain integrated circuit chip sets, backlights and other critical raw materials such as special glasses, wafers and chemicals. Lead times for the parts and components that we order vary significantly and depend on factors such as manufacturing cycle times, manufacturing yields, and the availability of raw materials used to produce the parts or components. Currently, the semiconductor industry is experiencing a shortage of semiconductor components. If this shortage were to affect our supply of raw materials, our ability to manufacture and distribute our products could be adversely affect, which in turn would adversely affect our results of operations or financial condition.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
We did not sell any securities during the three months ended March 27, 2021 that were not registered under the Securities Act.
Item 6. Exhibits
| * | Submitted electronically herewith |
| ** | Furnished and not filed herewith |
† |
Management contract or compensatory plan required to be filed as an Exhibit to this Form 10-Q. |
Attached as Exhibit 101 to this report are the following formatted in XBRL (Extensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets at March 27, 2021 (Unaudited) and December 26, 2020, (ii) Condensed Consolidated Statements of Operations (Unaudited) for the three months ended March 27, 2021 and March 28, 2020, (iii) Condensed Consolidated Statement of Comprehensive (Loss) (Unaudited) for the three months ended March 27, 2021 and March 28, 2020, (iv) Condensed Consolidated Statements of Stockholders’ Equity (Unaudited) for the three months ended March 27, 2021 and March 28, 2020, (v) Condensed Consolidated Statements of Cash Flows (Unaudited) for the three months ended March 27, 2021 and March 28, 2020, 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 6, 2021 | By: | /S/ John C.C. Fan |
| John C.C. Fan | |||
President, Chief Executive Officer and Chairman of the Board of Directors | |||
| (Principal Executive Officer) | |||
| Date: | May 6, 2021 | By: | /S/ RICHARD A. SNEIDER |
| Richard A. Sneider | |||
| Treasurer and Chief Financial Officer | |||
| (Principal Financial and Accounting Officer) | |||
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Exhibit 10.1
Certain identified information has been excluded from the exhibit because it both (i) is not material and (ii) would be competitively harmful if publicly disclosed
TENTH
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
THIS AGREEMENT, entered into as of the 31st day of December, 2020, amends and restates the Ninth Amended and Restated Agreement, dated as of the 31st day of December 2017, by and between KOPIN CORPORATION, a Delaware corporation with its principal place of business at 125 North Drive, Westborough, MA 01581 (the “Employer”), and John C. C. Fan, (the “Employee”), as first amended and restated as of May 1, 1995.
1. Freedom to Contract. The Employee represents that he is free to enter into this Agreement, that he has not made and will not make any agreements in conflict with this Agreement, and will not disclose to the Employer, or use for the Employer’s benefit, any trade secrets or confidential information now or hereafter in the Employee’s possession which is the property of any other party other than any trade secrets or confidential information that is authorized by the Employer and third party for disclosure to or use by the Employer.
2. Employment. The Employer hereby agrees to continue to employ the Employee, and the Employee hereby agrees to continue his employment by the Employer, upon the terms and conditions set forth herein.
3. Effective Date and Term. This Agreement shall take effect as of January 1, 2021 (the “Effective Date”), and shall continue thereafter in full force and effect through December 24, 2022, unless terminated prior to such time in accordance with the provisions of this Agreement (the “Employment Term”).
4. Title and Duties; Extent of Services. The Employee shall promote the business and affairs of the Employer as President and Chief Executive Officer of the Employer, with responsibility for performing such duties consistent with such position as the Board of Directors may from time to time designate. As long as he is employed hereunder, the Employee shall also continue to serve, if nominated by the Nominating Committee of the Board of Directors and elected by the shareholders, as a member of the Board of Directors of the Employer. In addition, he shall be nominated to serve on the Board of Directors of the Employer by the Nominating Committee of the Board of Directors at the 2023 annual meeting of shareholders of the Employer, provided that he has completed the Employment Term and has not earlier resigned voluntarily (other than for “Good Reason”) or been terminated for “Cause” and is otherwise qualified to serve,
5. Termination Rights of the Parties. The employment of the Employee by the Employer under this Agreement may be terminated at any time by either the Employee or Employer upon thirty (30) days’ prior written notice of such termination to the other.
6. Compensation.
6.1 Base Salary. Employee shall be paid a salary at an annual rate of Six Hundred Thousand Dollars ($600,000) on the regularly scheduled pay dates for executives. Subject to Section 9, the Board of Directors, in its sole discretion, shall have the absolute right to determine the Employee’s salary and benefits for each subsequent fiscal year during the term hereof; provided that in no event shall such salary or such benefits be reduced during the Employment Term unless the Employer implements a substantially similar reduction for all senior executive employees of the Employer. Employee shall also be entitled to receive an annual cash bonus and an annual stock incentive award consistent with and subject to substantially similar conditions as any annual cash bonuses and annual stock incentive awards granted to other senior executives of the Employer as a group. The Employer agrees to diligently review and consider alternative means of providing the Employee with additional tax advantaged compensation.
6.2 Performance Bonuses. On December 31, 2020, Employee shall be granted two (2) performance bonuses totaling Six Hundred Thousand Dollars ($600,000) (the “Performance Bonuses”) to be earned as follows: (i) Three Hundred Thousand Dollars ($300,000) shall be paid upon the completion of “Milestone #1” as described in Schedule 1 attached hereto, and (ii) Three Hundred Thousand Dollars ($300,000) shall be paid upon the completion of “Milestone #2” as described in Schedule 1. The Performance Bonuses shall be payable in cash and/or shares of the Employer’s Common Stock, at the Employer’s election to be made on or immediately following December 31, 2020. If paid in Employer’s Stock, the number of shares earned under each Milestone shall be determined by dividing $300,000 by the price per share equal to the moving average of the closing price of the Employer’s Common Stock, as quoted on the Nasdaq Global Market, for the twenty (20) consecutive trading day period immediately preceding December 31,2020. As of the Employee’s Termination Date, all rights to earn any of the Performance Bonuses to the extent not previously earned shall terminate. In the event of Employee’s death prior to payment of the Performance Bonuses any earned but unpaid portion of the Performance Bonuses shall be payable to Employee’s surviving spouse or if none to his estate.
6.3 Equity Awards. On December 31, 2020, the Employee shall be granted Nine Hundred Forty Thousand (940,000) shares of Employer Common Stock under the Employer’s 2020 Equity Incentive Plan at a $0.00 price to the Employee and subject to the vesting conditions as described in Schedule 2 attached hereto.
7. Inventions and Proprietary Information.
7.1 Inventions. Employee shall inform the Employer using the established procedures promptly and fully of all inventions, improvements, discoveries, know-how, designs, processes, formulae and techniques, and any related suggestions and ideas (hereinafter “Inventions”), whether patentable or not, which are solely or jointly conceived or made by Employee, during the period of Employee’s employment by the Employer, whether during or out of Employee’s usual hours of work. The Employer shall own all right, title and interest to those inventions (hereinafter “Employer Inventions”) which are: (a) within the scope of the Employer’s business, which includes areas in which research is being conducted and areas of technical or market investigation; and/or (b) related to work done for the Employer by Employee. Employee hereby assigns and agrees to assign to the Employer Employee’s entire right, title and interest in all Employer Inventions and any patents, design patents, and any other forms of intellectual property resulting therefrom. Employee shall protect the Employer’s right to patent Employee’s Employer Inventions by keeping written records, which are witnessed and dated, concerning dates of conception and reduction to practice, and Employee shall not publish information concerning Employer Inventions without prior approval from the Employer. Employee shall also, during and after Employee’s employment, execute such written instruments and render such other assistance as the Employer shall reasonably request to obtain and maintain patents, design patents, or other forms of protection on any Employer Inventions and to vest and confirm in the Employer its entire right, title and interest therein. In this regard, Employee shall be reimbursed by the Employer for actual expenses incurred and, if no longer an employee of the Employer, shall be reasonably compensated for assistance rendered.
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7.2 Proprietary Information.
(a) Employee understands that as a consequence of Employee’s employment by the Employer, proprietary data and confidential information (both hereinafter referred to as “Information”) relating to the business of the Employer may be disclosed to Employee or developed by Employee which is not generally known in the Employer’s trade and which is of considerable value to the Employer. Such Information includes, without limitation, information about trade secrets, the Employer Inventions (as previously defined), patents, licenses, research projects, costs, profits, markets, sales, customer lists, plans for future development, and any other information of a similar nature to the extent not generally known in the trade. Employee acknowledges and agrees that Employee’s relationship to the Employer with respect to such Information shall be fiduciary in nature. Employee shall not make any use of any such Information except in the performance of Employee’s work for the Employer; Employee shall maintain such Information in confidence; and Employee shall not disclose to any person not employed by the Employer any such Information at any time either during or after Employee’s employment or use any such Information in connection with other employment, except as authorized, in writing, by a duly empowered officer of the Employer.
(b) At any time the Employer so reasonably requests, the Employee shall make reasonable efforts to deliver memoranda, notes, records, reports, manuals, drawings, blueprints, plans, customer lists, pricing and/or cost data, and all other property or materials belonging to the Employer, which Employee then possesses or has under Employee’s control. It is acknowledged by the parties that Employee has worked for the Employer for many years and during such time has accumulated copies of property and materials belonging to the Employer which may reside in various hard copy and electronic files. As such, it is understood that any such production of property and materials may be incomplete.
(c) Employee covenants that there are no Inventions and/or patents within the scope of the Employer’s business in which Employee held an interest prior to the date of this Agreement and which are not subject to this Agreement.
(d) For avoidance of doubt, the Employee shall not be deemed to be in violation of Section 7.2 (Proprietary Information) to the extent that any disclosure of Information occurs while the Employee is providing services to any company or business that is sold by the Employer in which the Employer retains any equity interest or that is spun-off by the Employer, and provided that the performance of such services has been approved by the Employer.
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7.3 Remedies. Employee recognizes that irreparable injury may result to the Employer, its business and property, in the event of a breach of any of the agreements, assurances and understandings contained herein. Employee further recognizes that in the event of such a breach, or the substantial likelihood that such a breach will occur, the Employer intends to take legal action, and to seek injunctive relief if available, in accordance with the language and spirit of this Agreement in order to protect fully its interests and property. For the period beginning with the consummation of a Change in Control, the Employer agrees to pay as incurred, to the full extent permitted by law, all legal fees and expenses which the Employee may reasonably incur as a result of any contest, dispute or litigation by the Employee or others of the validity or enforcement of, or liability under, any provision of this Agreement unless the Employee is not the prevailing party in such contest, dispute or litigation in which event the Employee shall also repay any legal fees or expenses previously advanced by the Employer in the same connection.
8. Covenant Not to Compete.
(a) The Employee recognizes that the Employer is engaged in the development and sale of wearable hands-free voice and gesture controlled wireless computing and communication headsets in Massachusetts and throughout the United States and the world, the development of liquid crystal and organic light emitting diode electronic imaging devices and display products based thereon and noise cancellation and signal processing technologies to enhance voice signal quality and voice perception for both human-to-human communications and human-to-machine communications (automatic speech recognition) (collectively, the “Principal Business”). In the event of the termination of the Employee’s employment hereunder, voluntarily or involuntarily, and so long as the Employer is not in material breach of its obligations to the Employee hereunder, the Employee agrees that, for a period of twelve (12) months from the date of such termination, he will neither (i) engage in the Principal Business directly for himself, or in conjunction with or on behalf of any commercial entity, or (ii) work as an employee in the Principal Business for any commercial entity, where either (A) the Employee’s duties in the course of any such activities would be substantially similar to those he has performed for the Employer hereunder or (B) the Employee’s duties in the course of such activities would involve disclosure or use of any confidential or proprietary information relating to the business of the Employer which he may in any way acquire by reason of his employment by the Employer. The Employee’s obligation under this Section 8 shall extend to all geographical areas of the United States and the world in which the Employer, as set forth above, carries on business, either directly or indirectly, including, but not limited to, places where the Employer has a place of business, has employees or representatives, or has advertised or sold any products during the time period specified in this section.
(b) The Employee further agrees that for a period of twelve (12) months from the date of termination of his employment, he will not on behalf of himself or any commercial competitor of the Employer, compete for, or engage in the solicitation of, with respect to the Employer’s products or services, any commercial customer of the Employer, that he has, during the one year immediately preceding such termination, solicited or serviced on behalf of the Employer or that has been so solicited or serviced, during such period, by any person under the Employee’s supervision.
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(c) The Employee further agrees that for a period of twelve (12) months after the date of termination of his employment, he will not, on behalf of himself or any other commercial competitor of the Employer, solicit or attempt to solicit for employment, recruit or hire any employee or independent contractors of the Employer (or any person who was an employee or independent contractor of the Employer during the six (6) month period prior to such activity by the Employee), or induce, attempt to induce or encourage any such person to terminate his or her association with the Employer.
(d) In the event of any violation of the foregoing provisions of this Section 8, the Employer shall be entitled, in addition to any other rights or remedies it may have, to injunctive relief, it being agreed that the damages which the Employer would sustain upon any such violation are difficult or impossible to ascertain in advance and that the Employee’s violations may cause irreparable harm to the Employer.
(e) For avoidance of doubt, the Employee shall not be deemed to be in violation of Section 8 (Covenant Not to Compete) to the extent that Employee is performing services for any company or business that is sold by the Employer in which the Employer retains any equity interest or that is spun-off by the Employer, and provided that the performance of such services has been approved by the Employer.
9. Post-Termination and Related Matters.
9.1 Termination by Employer without Cause; Resignation for Good Reason. If prior to the expiration of the Employment Term (i) the Employee is terminated by the Employer without Cause (as defined in Section 9.4(b) below) other than by reason of disability, (ii) the Employee dies, or (iii) the Employee resigns for Good Reason (as defined in Section 9.4(c) below) within twelve (12) months following a Change in Control (as defined in Section 9.4(d) below) of the Employer, Employer shall pay the following amounts and provide the following benefits to the Employee:
(a) an amount equal to the sum of the Employee’s earned but unpaid base salary and pro-rated annual cash bonus through the date of Employee’s termination, which prorated annual cash bonus shall be calculated by reference to his then current year’s target annual cash bonus, the base salary portion of such amount shall be paid on the Employer’s next regularly scheduled pay date for executives following the Termination Date, and the bonus portion of such amount shall be paid within thirty (30) days following the Termination Date;
(b) an amount equal to the value of Employee’s accrued but unpaid vacation days, which amount shall be paid on the Employer’s next regularly scheduled pay date for executives following the Termination Date; and
(c) immediately vest all options to purchase Employer’s stock, all stock appreciation rights, all restricted stock awards, and any other compensatory equity awards, granted by the Employer to the Employee.
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9.2 Retirement Benefits. Provided that the Employee does not resign prior to the end of the Employment Term and is not terminated by the Employer for Cause, the Employer shall pay to the Employee (or in the event of his death prior to completion of all installments to his surviving spouse, or if none to his estate) a cash retirement benefit of One Million Five Hundred Thousand Dollars ($1,500,000) in twenty-four (24) equal monthly installments commencing with the next regularly scheduled pay date for executives following December 24, 2022. Provided that the Employee does not resign prior to the end of the Employment Term and is not terminated by the Employer for Cause, each January the Employer shall pay to the Employee (or in the event of his death prior to completion of all installments to his spouse) Forty Thousand Dollars ($40,000) per year commencing with January 2023 and ending with January 2032 to enable the Employee (or, in the event of the death of the Employee, his spouse) to purchase for himself and his spouse supplemental health coverage (including Medicare Part B, Medicare Part D and Medigap coverage) beyond the coverage that they may obtain from Medicare Part A.
9.3 Section 409A. Any amounts payable under Section 9.1 and Section 9.2 shall be subject to applicable tax withholding. It is the intention of the parties that this Agreement comply with and be interpreted in accordance with Section 409Aof the Internal Revenue Code of 1986, as amended and the United States Department of Treasury regulations and other guidance issued thereunder (collectively, “Section 409A”). Each payment in a series of payments provided to the Employee pursuant to this Agreement will be deemed a separate payment for purposes of Section 409A. If any amount payable under this Agreement upon a termination of employment is determined by the Employer to constitute nonqualified deferred compensation for purposes of Section 409A (after taking into account the short-term deferral exception, the involuntary separation pay exception, and payments made at a time or in accordance with fixed schedule under section 1.409A-3(a)(4) of the regulations promulgated under Section 409A which are hereby incorporated by reference), such amount shall not be paid unless and until the Employee’s termination of employment also constitutes a “separation from service” from the Employer for purposes of Section 409A. In the event that the Employee is determined by the Employer to be a “specified employee” for purposes of Section 409A at the time of his separation from service with the Employer, then any payments of nonqualified deferred compensation (after giving effect to any exemptions available under Section 409A and payments made at a time or in accordance with a fixed schedule under Section 409A) otherwise payable to the Employee during the first six (6) months following his separation from service shall be delayed and paid in a lump sum upon the earlier of (x) the Employee’s date of death, or (y) the first day of the seventh month following the Employee’s separation from service, together with interest on such delayed payments at the prime rate as published in the Eastern edition of The Wall Street Journal on the business day immediately preceding the Employee’s separation from service and the balance of the installments (if any) will be payable in accordance with their original schedule. To the extent any expense, reimbursement or in-kind benefit provided to the Employee constitutes nonqualified deferred compensation for purposes of Section 409A, (i) the amount of any expense eligible for reimbursement or the provision of any in-kind benefit with respect to any calendar year shall not affect the amount of expense eligible for reimbursement or the amount of in-kind benefit provided to the Employee in any other calendar year, (ii) the reimbursements for expenses for which the Employee is entitled to be reimbursed shall be made on or before the last day of the calendar year following the calendar year in which the applicable expense is incurred, and (iii) the right to payment or reimbursement or in-kind benefits hereunder may not be subject to liquidation for any other benefit.
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9.4 Other.
(a) “Termination Date” shall mean the earlier of (i) the expiration of the Employment Term, or (ii) the date the Employee’s employment is terminated (x) by his death, then the date of his death, (y) by his long-term disability, then the date of his occurrence of his long-term disability, or (z) for any other reason (including the Employee’s resignation for Good Reason following a Change in Control), then the date on which such termination of employment is to be effective pursuant to the notice of termination to be given by the party terminating the relationship.
(b) “Cause” shall mean occurrence during his employment of (i) willful misconduct in the performance of Employee’s duties and responsibilities, (ii) willful nonperformance of Employee’s duties and responsibilities, (iii) willful contravention of written instructions of the Board of Directors of the Employer, (iv) breach by Employee of a material term of this Agreement, (v) Employee’s breach of trust, duty of loyalty or fiduciary duty owed to the Employer, Employer’s Board of Directors or Employer’s shareholders, of (vi) Employee’s conviction of, or written admission or plea of nolo contendere to, a felony or crime of moral turpitude, or Employee’s imprisonment for any crime; provided, however, that such termination may not occur until thirty (30) days after Employer’s Board of Directors has given Employee a written notice specifying the ground(s) for such termination for Cause and an opportunity during such thirty (30) day notice period to have a hearing concerning such notice before the Board of Directors of the Employer, and then only if the Employee has failed to cure the Cause giving rise to such potential termination, if such Cause is curable. Any Cause that results in adverse publicity concerning the Employer or damage to the Employer’s business or reputation shall be deemed to be incurable.
(c) “Good Reason” shall mean the occurrence during his employment, without the Employee’s written consent, of any of the following events or circumstances:
(i) the assignment to the Employee of duties that are inconsistent in any material respect with the Employee’s position (including status, offices, titles, and reporting requirements), authority, or responsibilities, or any other action or omission by the Employer that results in a material diminution in such position, authority, or responsibility, including the failure to appoint Employee as the Chief Executive Officer of the combined or acquiring entity reporting to its Board of Directors following a Change in Control;
(ii) a reduction in the Employee’s base salary, other than as part of a similar reduction in base salary for all senior executive employees of the Employer but not to exceed fifteen percent (15%) of the Employee’s base salary;
(iii) the failure by the Employer to (1) continue in effect any material compensation or benefit plan or program in which the Employee participates, or that is applicable to the Employee, unless an equitable arrangement providing substantially similar benefits in the aggregate (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan or program, (2) continue the Employee’s participation therein (or in such substitute or alternative plan) on a basis not materially less favorable, in terms of the monetary value of benefits provided, or (3) award annual bonuses to the Employee in amounts and in a manner substantially consistent with the Employer’s past practice in light of the Employer’s financial performance;
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(iv) a change by the Employer in the location at which the Employee performs the Employee’s principal duties for the Employer to a new location that is both: (1) further from the Employee’s principal residence, and (2) more than fifty (50) miles from the location at which the Employee performed the Employee’s principal duties for the Employer;
(v) the failure of the Employer to obtain the agreement from any successor to the Employer to assume and agree to perform this Agreement, as required by Section 9.5;
(vi) any failure of the Employer to pay or provide to the Employee any portion of the Employee’s compensation or benefits within seven (7) days of the date such compensation or benefits are due, unless such failure to pay is inadvertent and is cured within thirty (30) days with interest at LIBOR plus two percent (2%); or
(vii) any material breach by the Employer of this Agreement.
For clarity, Employee shall not be entitled to resign for Good Reason if the Employer and Employee mutually agree in writing to any of the matters described under clauses (i) through (vii). A termination by the Employee for Good Reason may not occur until thirty (30) days after the Employee has given the Board of Directors written notice specifying the ground(s) for such termination for Good Reason and an opportunity during such thirty (30) day notice period for the Board of Directors of the Employer to discuss such notice with the Employee, and then only if the Employer has failed to cure the event or circumstance (including compensation for any losses or damages resulting therefrom) giving rise to such Good Reason, if such Good Reason is curable.
(d) “Change in Control” shall mean:
(i) The acquisition by any individual, entity, or group within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of fifty percent (50%) or more of either (1) the then outstanding shares of the common stock of the Employer (“Stock”), or (2) the combined voting power of the then outstanding securities of the Employer ordinarily having the right to vote at elections of directors (“Outstanding Employer Voting Securities”); provided, however, that the following acquisitions shall not constitute a Change in Control under this Section 9.4(d)(i): (A) any acquisition directly from the Employer (excluding an acquisition by virtue of the exercise of a conversion privilege), (B) any acquisition by the Employer or by any corporation controlled by the Employer; (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Employer or any corporation controlled by the Employer; or (D) any acquisition by any corporation pursuant to a consolidation or merger, if, following such consolidation or merger, the conditions described in clauses (1), (2) and (3) of paragraph (iii) of this Section 9.4(d) are satisfied; or
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(ii) Individuals who, as of the date hereof or of the most recent renewal hereof, constitute the Board of Directors (the “Incumbent Board”) ceasing for any reason (other than in connection with his or her voluntary resignation or election not to stand for re-election or arising out of a change in the Incumbent Board due to regulatory compliance reasons) to constitute at least a majority of the Board of Directors; provided, however, that any individual becoming a director (other than a director designated by a Person who has entered into an agreement with the Employer to effect a transaction described in paragraphs (i) or (iii) of this Section 9.4(d)) subsequent to the date hereof whose election, or nomination for election by the Employer’s shareholders, was approved by a vote or resolution of at least a majority of the directors then composing the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-1l of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board of Directors; or
(iii) The consummation of the transactions contemplated by a resolution of the Board of Directors approving an agreement of consolidation of the Employer with or merger of the Employer into another corporation or business entity in each case, unless, following such consolidation, or merger, (1) more than fifty percent (50%) of, respectively, the then outstanding shares of common stock of the corporation resulting from such consolidation or merger and/or the combined voting power of the then outstanding voting securities of such corporation or business entity entitled to vote generally in the election of directors (or other persons having the general power to direct the affairs of such entity) is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Stock and Outstanding Employer Voting Securities immediately prior to such consolidation or merger in substantially the same proportions as their ownership, immediately prior to such consolidation or merger, of the Stock and Outstanding Employer Voting Securities, as the case may be, (2) no Person (excluding the Employer, any employee benefit plan (or related trust) of the Employer or such corporation or other business entity resulting from such consolidation or merger) and any Person beneficially owning, immediately prior to such consolidation or merger, directly or indirectly, fifty percent (50%) or more of the Stock or Outstanding Employer Voting Securities, as the case may be, beneficially owns, directly or indirectly, fifty percent (50%) or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such consolidation or merger and/or the combined voting power of the then outstanding voting securities of such corporation or business entity entitled to vote generally in the election of its directors (or other persons having the general power to direct the affairs of such entity) and (3) at least a majority of the members of the board of directors (or other group of persons having the general power to direct the affairs of the corporation or other business entity) resulting from such consolidation or merger were members of the Incumbent Board at the time of the execution of the initial agreement providing for such consolidation or merger; provided, that any right to receive compensation pursuant to this Section 9.4(d) which shall vest by reason of the action of the Board of Directors pursuant to this paragraph (iii) shall be divested upon (A) the rejection of such agreement of consolidation or merger by the stockholders of the Employer or (B) its abandonment by either party thereto in accordance with its terms; or
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(iv) The consummation of the transactions contemplated by the adoption by the requisite majority of the whole Board of Directors, or by the holders of such majority of stock of the Employer as is required by law or by the Certificate of incorporation or By-Laws of the Employer as then in effect, of a resolution or consent authorizing (1) the dissolution of the Employer or (2) the sale or other disposition of all or substantially all of the assets of the Employer, other than to a corporation or other business entity with respect to which, following the such sale or other disposition, (A) more than fifty percent (50%) of, respectively, the then outstanding shares of common stock of such corporation and/or the combined voting power of the outstanding voting securities of such corporation or other entity to vote generally in the election of its directors (or other persons have the general power to direct its affairs) is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Stock and Outstanding Employer Voting Securities immediately prior to such sale or other disposition in substantially the same proportion as their ownership, immediately prior to such sale or other disposition, of the Stock and/or Outstanding Employer Voting Securities, as the case may be, (B) no Person (excluding the Employer and any employee benefit plan (or related trust) of the Employer or such corporation or other business entity) and any Person beneficially owning, immediately prior to such sale or other disposition, directly or indirectly, fifty percent (50%) or more of the Stock and/or Outstanding Employer Voting Securities, as the case may be, beneficially owns, directly or indirectly, fifty percent (50%) or more of, respectively, the then outstanding shares of common stock of such corporation and/or the combined voting power of the then outstanding voting securities of such corporation or other business entity entitled to vote generally in the election of directors (or other persons having the general power to direct its affairs), and (C) at least a majority of the members of the board of directors or group of persons having the general power to direct the affairs of such corporation or other entity were members of the Incumbent Board at the time of the execution of the initial agreement of action of the Board of Directors providing for such sale or other disposition of assets of the Employer; provided, that any right to receive compensation pursuant to this Section 9.4(d) which shall vest by reason of the action of the Board of Directors or the stockholders pursuant to this subsection shall be divested upon the abandonment by the Employer of such dissolution, or such sale of or other disposition of assets, as the case may be.
9.5 Successor. The failure of any successor (whether direct or indirect, by purchase, merger, consolidation, spin-off, or otherwise) to all or substantially all of the business or assets of the Employer to assume this Agreement or to perform the Employer’s obligations under this Agreement shall, at the election of the Employee, be deemed to constitute a termination of the Employee by the Employer without Cause.
9.6 Mitigation. The Employee shall not be required to mitigate the amount of any payment or benefits provided for in this Agreement by seeking other employment or otherwise. Further, the amount of any payment or benefits provided for in this Agreement shall not be reduced by any compensation earned by the Employee as a result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by the Employee to the Employer or otherwise.
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9.7 Indemnification. To the maximum extent permitted under Delaware law as from time to time in effect, the Employer shall indemnify the Employee and hold him harmless from, against, and in respect of any and all damages, deficiencies, actions, suits, proceedings, demands, assessments, excise taxes, judgments, claims, losses, costs, expenses, obligations, and liabilities arising from or relating to the performance of the Employee’s duties and responsibilities under this Agreement. To the maximum extent permitted under Delaware law, the Employer shall advance all expenses incurred by or on behalf of the Employee in connection with any proceeding arising in connection with the Employer’s obligations under this Section 9.7 within thirty (30) days after the receipt by the Employer of a statement or statements from the Employee requesting such advance or advances from time to time, whether prior to or after final disposition of such proceeding. Such statement or statements shall reasonably evidence the expenses incurred by the Employee and shall include or be preceded or accompanied by a written undertaking by or on behalf of the Employee to repay any expenses advanced if it shall ultimately be determined that the Employee is not entitled to be indemnified against such expenses.
9.8 D&O Coverage. For so long as, and only for so long as, the Employer continues to maintain directors’ and officers’ liability insurance, the Employer shall use best efforts to maintain a policy covering the Employee in the amount of Five Million Dollars ($5,000,000) in the aggregate, or such amount of coverage as may be provided by the Employer to directors and officers generally after the Effective Date. The Employer will also use best efforts to obtain coverage for Employee under any such policy for six (6) years after Employee ceases being an officer or director.
9.9 Survival of Obligations and Rights. The obligations and rights of the parties to this Agreement under Sections 6 through 9 of this Agreement shall survive the expiration of this Agreement.
10. Provisions of General Application.
10.1 Governing Law. This Agreement and the rights and obligations of the parties hereunder shall be construed, interpreted and determined in accordance with the laws of the Commonwealth of Massachusetts.
10.2 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original and all of which, taken together, shall constitute one and the same instrument. In making proof of this Agreement it shall not be necessary to produce or account for more than one such counterpart.
10.3 Other Agreements. This Agreement represents the entire understanding and agreement between the parties as to the subject matter hereof and supersedes and replaces the Ninth Amended and Restated Employment Agreement between the parties dated as of December 31, 2017. No prior, concurrent or subsequent agreement, whether written or oral, shall be construed to change, amend, alter, repeal or invalidate this Agreement, unless this Agreement is specifically identified in and made subject to such other written agreement.
10.4 Amendment. This Agreement may be amended only by a written instrument executed in one or more counterparts by the parties hereto.
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10.5 Waiver. No consent to or waiver of any breach or default in the performance of any obligation hereunder shall be deemed or construed to be a consent to or waiver of any other breach or default in the performance of any of the same or any other obligation hereunder. Failure on the part of either party to complain of any act or failure to act of the other party or to declare the other party in default, irrespective of the duration of such failure, shall not constitute a waiver or rights hereunder and no waiver hereunder shall be effective unless it is in writing, executed by the party waiving the breach or default hereunder.
10.6 Headings. The headings of sections and subsections of this Agreement have been inserted for convenience of reference only and shall not be deemed to be a part of this Agreement or to affect the meaning of any of its provisions.
10.7 Severability. If any provision of this Agreement shall, in whole or in part, prove to be invalid for any reason, such invalidity shall affect only the portion of such provision which shall be invalid, and in all other respects this Agreement shall stand as if such invalid provision, or the invalid portion thereof, had not been a part hereof.
10.8 Notices and Other Communications. All notices and other communications required hereunder shall be effective if in writing and if delivered or sent by certified or registered mail, return receipt requested (a) if to the Employee, at his last known residence address as retained in the records of the Company, with a copy to Arthur S. Meyers, Gunster Yoakley & Stewart, P.A., 777 South Flagler Drive, Suite 500 East, West Palm Beach, FL 33401, and (b) if to the Employer, at 125 North Drive, Westborough, MA 01581, Attention: Chief Financial Officer, with a copy to John H. Chu, Esq., Prince Lobel Tye LLP, One International Place, Boston, MA 02110, or to such other persons or addresses as the parties hereto may specify by a written notice to the other from time to time.
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IN WITNESS WHEREOF, this Agreement has been executed by the Employer, by its duly authorized officer, and by the Employee, as of the date first above written.
| KOPIN CORPORATION | EMPLOYEE | ||
| /s/ Mort Collins | /s/ John C. C. Fan | ||
| By: | Mort Collins, Chair | John C. C. Fan | |
| Compensation Committee of the Board | |||
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SCHEDULE 1
Performance Bonus Milestones
Milestone #1
1. [redacted].
Milestone #2
2. [redacted].
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SCHEDULE 2
Equity Award
| ● | Of the total shares of Common Stock to be awarded by Employer to Employee under Section 6.3 of this Agreement (the “Acquired Shares”), 188,000 of such shares will vest (a) at the end of the first twenty (20) consecutive trading day period beginning on the date hereof and ending on the third (3rd) anniversary of the date of this Agreement during which the closing price of the Common Stock of the Employer, as quoted on the Nasdaq Global Market, at least equals any of the share prices indicated in the table below, as adjusted for stock splits, stock dividends, or any other actions and events provided in the Employer’s 2020 Equity Incentive Plan, or (b) if upon or in connection with the closing of a Change of Control (as defined in this Agreement on or before the third (3rd) anniversary of the date of this Agreement the price of the Common Stock of the Employer, as so adjusted, is at least such price; provided, however, that the Employee does not resign or is not terminated by the Employer for Cause prior the earlier of (i) December 24, 2022, or (ii) the satisfaction of the conditions described in clause (a) or (b) above: |
| Share Price | Shares Vesting (cumulatively) | |||
| $2.25 per share | 188,000 | |||
| $2.50 per share | 188,000 | |||
| $3.00 per share | 188,000 | |||
| $3.50 per share | 188,000 | |||
| $4.00 per share | 188,000 | |||
| ● | In addition, all of the Acquired Shares will vest if the Employer terminates the Employee’s employment in connection with a long-term disability arising from sickness, accident or injury suffered while traveling on Employer’s business (but not in connection with any disability arising from any other circumstances). |
| ● | In the event of the Employee’s termination of employment by the Employer without Cause or upon the Employee’s resignation for Good Reason or due to the Employee’s death in each case prior to a Change of Control, one hundred percent (100%) of the Acquired Shares shall vest. |
| ● | The Acquired Shares will be awarded under five separate Restricted Stock Grant Agreements dated the date hereof in customary form providing for the separate award of 188,000 Acquired Shares with each such award subject to the respective Share Price and related vesting conditions described herein. |
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Exhibit 31.1
CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
I, John C.C. Fan, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q for the period ended March 27, 2021, of Kopin Corporation; | |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report; | |
| 4. | The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. | |
| (c) | Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| (d) | Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and |
| 5. | The Registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and | |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting. |
Date: May 6, 2021
| By: | /S/ JOHN C.C. FAN | |
| John C.C. Fan | ||
| President and Chief Executive Officer |
Exhibit 31.2
CERTIFICATION OF THE CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
I, Richard A. Sneider, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q for the period ended March 27, 2021, of Kopin Corporation; | |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report; | |
| 4. | The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. | |
| (c) | Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| (d) | Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and |
| 5. | The Registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and | |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting. |
Date: May 6, 2021
| By: | /S/ RICHARD A. SNEIDER | |
| Richard A. Sneider | ||
| Chief Financial Officer |
Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
The certification set forth below is hereby made solely for the purpose of satisfying the requirements of Section 906 of the Sarbanes-Oxley Act of 2002 and may not be relied upon or used for any other purposes.
In connection with the Quarterly Report of Kopin Corporation (the “Company”) on Form 10-Q for the period ended March 27, 2021, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John C.C. Fan, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
A signed original of this written statement required by Section 906 or other document authenticating, acknowledging or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
| Date: | May 6, 2021 | |
| By: | /S/ JOHN C.C. FAN | |
| John C.C. Fan | ||
| President and Chief Executive Officer |
Exhibit 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
The certification set forth below is hereby made solely for the purpose of satisfying the requirements of Section 906 of the Sarbanes-Oxley Act of 2002 and may not be relied upon or used for any other purposes.
In connection with the Quarterly Report of Kopin Corporation (the “Company”) on Form 10-Q for the period ended March 27, 2021, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Richard A. Sneider, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
A signed original of this written statement required by Section 906 or other document authenticating, acknowledging or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
| Date: | May 6, 2021 | |
| By: | /S/ RICHARD A. SNEIDER | |
| Richard A. Sneider | ||
| Chief Financial Officer |
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($) |
Mar. 27, 2021 |
Dec. 26, 2020 |
|---|---|---|
| Statement of Financial Position [Abstract] | ||
| Accounts receivable, allowance | $ 275,000 | $ 175,000 |
| Preferred stock, par value | $ 0.01 | $ 0.01 |
| Preferred stock, shares authorized | 3,000 | 3,000 |
| Preferred stock, shares issued | 0 | 0 |
| Common Stock, Par or Stated Value Per Share | $ 0.01 | |
| Common Stock, Shares Authorized | 120,000,000 | |
| Common Stock, Shares, Issued | 91,444,666 | 91,059,407 |
| Common Stock, Shares, Outstanding | 88,794,156 | 85,443,378 |
| Treasury stock, shares | 159,793 | 2,564,155 |
Condensed Consolidated Statements of Comprehensive Loss (Unaudited) - USD ($) |
3 Months Ended | |
|---|---|---|
Mar. 27, 2021 |
Mar. 28, 2020 |
|
| Income Statement [Abstract] | ||
| Net loss | $ (4,185,723) | $ (3,656,991) |
| Other comprehensive (loss) income, net of tax: | ||
| Foreign currency translation adjustments | (27,842) | 189,078 |
| Unrealized holding gain (loss) on marketable securities | 8,286 | (278,362) |
| Reclassification of holding losses in net loss | (9,348) | |
| Other comprehensive loss, net of tax | (19,556) | (98,632) |
| Comprehensive loss | (4,205,279) | (3,755,623) |
| Comprehensive loss attributable to the noncontrolling interest | 39,485 | 61,472 |
| Comprehensive loss attributable to Kopin Corporation | $ (4,165,794) | $ (3,694,151) |
Condensed Consolidated Statements of Stockholders' Equity (Unaudited) - USD ($) |
Common Stock [Member] |
Additional Paid-in Capital [Member] |
Treasury Stock [Member] |
AOCI Attributable to Parent [Member] |
Retained Earnings [Member] |
Total Kopin Corporation Stockholders Equity [Member] |
Noncontrolling Interest [Member] |
Total |
|---|---|---|---|---|---|---|---|---|
| Beginning balance, value at Dec. 28, 2019 | $ 870,496 | $ 344,456,537 | $ (17,238,669) | $ 1,757,184 | $ (301,236,913) | $ 28,608,635 | $ (17,023) | $ 28,591,612 |
| Balance, shares at Dec. 28, 2019 | 87,049,672 | |||||||
| Stock-based compensation expense | 158,465 | 158,465 | 158,465 | |||||
| Other comprehensive loss | (98,632) | (98,632) | (98,632) | |||||
| Net loss | (3,595,519) | (3,595,519) | (61,472) | (3,656,991) | ||||
| Ending balance, value at Mar. 28, 2020 | $ 870,496 | 344,615,002 | (17,238,669) | 1,658,552 | (304,832,432) | 25,072,949 | (78,495) | 24,994,454 |
| Balance, shares at Mar. 28, 2020 | 87,049,672 | |||||||
| Beginning balance, value at Dec. 26, 2020 | $ 880,075 | 341,512,893 | (9,793,946) | 1,484,434 | (305,648,025) | 28,435,431 | (136,836) | 28,298,595 |
| Balance, shares at Dec. 26, 2020 | 88,007,535 | |||||||
| Stock-based compensation expense | 2,610,166 | 2,610,166 | 2,610,166 | |||||
| Vesting of restricted stock | $ 9,500 | (9,500) | ||||||
| Vesting of restricted stock, shares | 950,000 | |||||||
| Sale of registered stock | 6,336,470 | 9,183,614 | 15,520,084 | 15,520,084 | ||||
| Restricted stock for tax withholding obligations | $ (37) | (32,668) | (32,705) | (32,705) | ||||
| Restricted stock for tax withholding obligations, shares | (3,586) | |||||||
| Other comprehensive loss | (19,556) | (19,556) | (19,556) | |||||
| Net loss | (4,146,238) | (4,146,238) | (39,485) | (4,185,723) | ||||
| Ending balance, value at Mar. 27, 2021 | $ 889,538 | $ 350,417,361 | $ (610,332) | $ 1,464,878 | $ (309,794,263) | $ 42,367,182 | $ (176,321) | $ 42,190,861 |
| Balance, shares at Mar. 27, 2021 | 88,953,949 |
BASIS OF PRESENTATION |
3 Months Ended |
|---|---|
Mar. 27, 2021 | |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| BASIS OF PRESENTATION | 1. BASIS OF PRESENTATION
The condensed consolidated financial statements of Kopin Corporation as of March 27, 2021 and for the three month periods ended March 27, 2021 and March 28, 2020 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 26, 2020. 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. The Company reclassified certain prior period amounts to conform to the current period presentation. 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 Company’s products are targeted towards the defense and industrial/enterprise wearable markets. Management believes the industrial wearable market is still developing and cannot predict how long it will take to develop or if the Company’s products will be accepted. In addition, the Company’s current strategy is to continue to invest in research and development, even during unprofitable periods, which may result in the Company continuing to incur net losses and negative cash flows from operations. If the Company is unable to achieve and maintain positive cash flows and profitability in the foreseeable future, its financial condition may ultimately be materially adversely affected such that management may be required to reduce operating expenses, including investments in research and development, or raise additional capital. While there can be no assurance the Company will be able to successfully reduce operating expenses or raise additional capital, management believes its historical success in managing cash flows and obtaining capital will continue in the foreseeable future.
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ACCOUNTING STANDARDS |
3 Months Ended |
|---|---|
Mar. 27, 2021 | |
| Accounting Policies [Abstract] | |
| ACCOUNTING STANDARDS | 2. ACCOUNTING STANDARDS
Accounting Standards Issued But Not Yet Adopted
In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which requires measurement and recognition of expected credit losses for financial assets held. In November 2019, the FASB issued ASU 2019-10 that has extended the effective date of ASU 2016-13 for Smaller Reporting Entities to fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022. The Company is currently evaluating ASU 2016-13 and its impact on our consolidated financial statements.
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CASH AND CASH EQUIVALENTS AND MARKETABLE DEBT SECURITIES |
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| Cash and Cash Equivalents [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CASH AND CASH EQUIVALENTS AND MARKETABLE DEBT SECURITIES | 3. CASH AND CASH EQUIVALENTS AND MARKETABLE DEBT SECURITIES
The Company considers all highly liquid, short-term debt instruments with original maturities of three months or less to be cash equivalents.
Marketable debt securities consist primarily of commercial paper, medium-term corporate notes, and U.S. government and agency backed securities. The Company classifies these marketable debt securities as available-for-sale at fair value in “Marketable debt securities, at fair value.” The Company records the amortization of premium and accretion of discounts on marketable debt securities in the results of operations.
The Company uses the specific identification method as a basis for determining cost and calculating realized gains and losses with respect to marketable debt securities. The gross gains and losses realized related to sales and maturities of marketable debt securities were not material during the three months ended March 27, 2021 and March 28, 2020.
Investments in available-for-sale marketable debt securities were as follows at March 27, 2021 and December 26, 2020:
The contractual maturity of the Company’s marketable debt securities was as follows at March 27, 2021:
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FAIR VALUE MEASUREMENTS |
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Mar. 27, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| FAIR VALUE MEASUREMENTS | 4. 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. An investment is categorized as Level 3 if its fair value is based on assumptions developed by the Company about what a market participant would use in pricing the assets.
The following table details the fair value measurements of the Company’s financial assets:
Transfers between levels of the fair value hierarchy are reported at the beginning of the reporting period in which they occur. Changes in Level 3 investments were as follows:
The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate fair value because of their short-term nature. If accrued liabilities were carried at fair value, these would be classified as Level 2 in the fair value hierarchy.
Marketable Debt Securities
The corporate debt consists of floating rate notes with a maturity that is over multiple years but has interest rates that are reset every three months based on the then-current three-month London Interbank Offering Rate (“three-month Libor”). The Company validates the fair market values of the financial instruments above by using discounted cash flow models, obtaining independent pricing of the securities or through the use of a model that incorporates the three-month Libor, the credit default swap rate of the issuer and the bid and ask price spread of the same or similar investments which are traded on several markets.
Equity Investments
During the three months ended March 27, 2021, the Company recorded a less than $0.1 million unrealized loss on an equity interest in a company due to a fluctuation in the foreign exchange rate.
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INVENTORY |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
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Mar. 27, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||
| Inventory Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
| INVENTORY | 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 27, 2021 and December 26, 2020:
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NET LOSS PER SHARE |
3 Months Ended | |||||||||||||||||||||||||||
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Mar. 27, 2021 | ||||||||||||||||||||||||||||
| Net loss per share | ||||||||||||||||||||||||||||
| NET LOSS PER SHARE |
Basic net loss per share is computed using the weighted-average number of shares of common stock outstanding during the period less any unvested restricted shares. Diluted net loss per share is calculated using weighted-average shares outstanding 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.
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STOCKHOLDERS’ EQUITY AND STOCK-BASED COMPENSATION |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| STOCKHOLDERS’ EQUITY AND STOCK-BASED COMPENSATION |
Registered sale of equity securities
During the three months ended March 27, 2021, we sold million shares of common stock for gross proceeds of $16 million (average of $per share), before deducting broker expenses paid by us of $0.5 million, pursuant to our At-The-Market Equity Offering Sales Agreement dated as of February 8, 2019 (the “Previous ATM Agreement”) with Stifel, Nicolaus & Company, Incorporated, (“Stifel”) as agent. The Previous ATM Agreement has since terminated pursuant to its terms as a result of the sale of all the shares subject to such agreement. On March 5, 2021 the Company entered into a new At-The-Market Offering Sales Agreement dated as of March 5, 2021 (the “Current ATM Agreement”) with Stifel under which the Company may sell up to $50 million of its common stock.
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 the Company for one, two or four years (the vesting period) 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.
Restricted stock activity was as follows:
Stock-Based Compensation
Unrecognized compensation expense for non-vested restricted common stock as of March 27, 2021 totaled $ million and is expected to be recognized over a weighted average period of approximately .
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ACCRUED WARRANTY |
3 Months Ended | ||||||||||||||||||||
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Mar. 27, 2021 | |||||||||||||||||||||
| Guarantees and Product Warranties [Abstract] | |||||||||||||||||||||
| ACCRUED WARRANTY | 8. ACCRUED WARRANTY
The Company typically warrants its products against defect for 12 to 18 months, however, for certain products a customer may purchase an extended warranty. A provision for estimated future costs and estimated returns for credit relating to such warranty is recorded in the period when product is shipped and revenue is recognized and is updated as additional information becomes available. The Company’s estimate of future costs to satisfy warranty obligations is based primarily on historical warranty expense experienced and a provision for potential future product failures. Changes in the accrued warranty for the three months ended March 27, 2021 were as follows:
Extended Warranties
Deferred revenue represents the purchase of extended warranties by the Company’s customers. The Company recognizes revenue from an extended warranty on the straight-line method over the life of the extended warranty, which is typically 12 to 15 months beyond the standard 12 to 18 month warranty. The Company classifies the current portion of deferred revenue under Other accrued liabilities in its condensed consolidated balance sheets. At March 27, 2021, the Company had less than $0.1 million of deferred revenue related to extended warranties.
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INCOME TAXES |
3 Months Ended |
|---|---|
Mar. 27, 2021 | |
| Income Tax Disclosure [Abstract] | |
| INCOME TAXES | 9. INCOME TAXES
The Company recorded a provision for income taxes of less than $0.1 million in the three months ended March 27, 2021 and the three months ended March 28, 2020. As of March 27, 2021, the Company has available for tax purposes U.S. federal net operating loss carryforwards (“NOLs”) of approximately $160.3 million expiring 2022 through 2037 and $61.5 million that have an unlimited carryover period. The Company has recognized a full valuation allowance on its domestic and certain foreign net deferred tax assets due to the uncertainty of realization of such assets. The Company recognizes both accrued interest and penalties related to its uncertain tax positions related to intercompany loan interest and potential transfer pricing exposure related to its foreign subsidiaries.
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CONTRACT ASSETS AND LIABILITIES |
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Mar. 27, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Contract Assets And Liabilities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CONTRACT ASSETS AND LIABILITIES | 10. CONTRACT ASSETS AND LIABILITIES
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 cost incurred and deferred revenue.
Net contract assets (liabilities) consisted of the following:
The $2.1 million decrease in the Company’s net contract (liabilities) assets at March 27, 2021 as compared to December 26, 2020 was primarily due to the shipment of inventory which was in process at December 26, 2020 and recording of revenues earned against advanced payments.
In the three months ended March 27, 2021, the Company recognized revenue of $1.2 million related to our contract liabilities at December 26, 2020. In the three months ended March 28, 2020, the Company recognized revenue of $0.6 million related to our contract liabilities at December 28, 2019.
The Company did not recognize impairment losses on our contract assets in the three months ended March 27, 2021 or March 28, 2020.
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:
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 (e.g., indefinite-delivery, indefinite-quantity (“IDIQ”)). As of March 27, 2021, the aggregate amount of the transaction price allocated to remaining performance obligations was $21.0 million which the Company expects to recognize over the next 12 months. The remaining performance obligations represent amounts to be earned under government contracts, which are subject to cancellation.
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LEASES |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 27, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Leases [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| LEASES | 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 27, 2021 and December 26, 2020, the Company did not have any finance leases. Approximately all of our 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:
At March 27, 2021, the Company’s future lease payments under non-cancellable leases were as follows:
The Company’s lease liabilities recognized in the Company’s condensed consolidated balance sheet at March 27, 2021 was as follows:
Supplemental cash flow information related to leases was as follows:
Other information related to leases was as follows:
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SEGMENTS AND DISAGGREGATION OF REVENUE |
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Mar. 27, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SEGMENTS AND DISAGGREGATION OF REVENUE | 12. SEGMENTS AND DISAGGREGATION OF REVENUE
We continually monitor and review our segment reporting structure in accordance with authoritative guidance to determine if any changes have occurred that would affect our reportable segments. We report under one segment, as our Chief Executive Officer, who is our chief operating decision maker (“CODM”), reviews results on a total company basis.
Total long-lived assets by country at March 27, 2021 and December 26, 2020 were:
We disaggregate our revenue from contracts with customers by geographic location and by display application, as we believe it best depicts how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors.
During the three months ended March 27, 2021 and March 28, 2020, the Company derived its sales from the following geographies:
During the three months ended March 27, 2021 and March 28, 2020, the Company derived its sales from the following display applications:
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LITIGATION |
3 Months Ended |
|---|---|
Mar. 27, 2021 | |
| Commitments and Contingencies Disclosure [Abstract] | |
| LITIGATION | 13. 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 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 an alleged 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 alleges 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. A trial date has not yet been set by the Court. The Company has not concluded a loss from this matter is probable; therefore, we have not recorded an accrual for litigation or claims related to this matter for the period ended March 27, 2021. The Company will continue to evaluate information as it becomes known and will record an estimate for losses at the time or times when it is both probable that a loss has been incurred and the amount of the loss is reasonably estimable.
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RELATED PARTY TRANSACTIONS |
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Mar. 27, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Related Party Transactions [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| RELATED PARTY TRANSACTIONS | 14. 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 our 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.
During the three month periods ended March 27, 2021 and March 28, 2020, the Company had the following transactions with related parties:
At March 27, 2021 and December 26, 2020, the Company had the following receivables, contract assets and payables with related parties:
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ACCOUNTING STANDARDS (Policies) |
3 Months Ended |
|---|---|
Mar. 27, 2021 | |
| Accounting Policies [Abstract] | |
| Accounting Standards Issued But Not Yet Adopted | Accounting Standards Issued But Not Yet Adopted
In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which requires measurement and recognition of expected credit losses for financial assets held. In November 2019, the FASB issued ASU 2019-10 that has extended the effective date of ASU 2016-13 for Smaller Reporting Entities to fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022. The Company is currently evaluating ASU 2016-13 and its impact on our consolidated financial statements. |
CASH AND CASH EQUIVALENTS AND MARKETABLE DEBT SECURITIES (Tables) |
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Mar. 27, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cash and Cash Equivalents [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF AVAILABLE-FOR-SALE MARKETABLE DEBT SECURITIES | Investments in available-for-sale marketable debt securities were as follows at March 27, 2021 and December 26, 2020:
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| SCHEDULE OF MARKETABLE DEBT SECURITIES | The contractual maturity of the Company’s marketable debt securities was as follows at March 27, 2021:
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FAIR VALUE MEASUREMENTS (Tables) |
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Mar. 27, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF FAIR VALUE MEASUREMENTS OF FINANCIAL ASSETS | The following table details the fair value measurements of the Company’s financial assets:
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| SCHEDULE OF FAIR VALUE, LIABILITIES MEASURED ON RECURRING BASIS | Transfers between levels of the fair value hierarchy are reported at the beginning of the reporting period in which they occur. Changes in Level 3 investments were as follows:
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INVENTORY (Tables) |
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Mar. 27, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||
| Inventory Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF 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 27, 2021 and December 26, 2020:
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NET LOSS PER SHARE (Tables) |
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Mar. 27, 2021 | ||||||||||||||||||||||||||||
| Net loss per share | ||||||||||||||||||||||||||||
| SCHEDULE OF WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING DILUTED |
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STOCKHOLDERS’ EQUITY AND STOCK-BASED COMPENSATION (Tables) |
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Mar. 27, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF NON-VESTED RESTRICTED STOCK ACTIVITY | Restricted stock activity was as follows:
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| SCHEDULE OF STOCK-BASED COMPENSATION EXPENSE |
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ACCRUED WARRANTY (Tables) |
3 Months Ended | ||||||||||||||||||||
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Mar. 27, 2021 | |||||||||||||||||||||
| Guarantees and Product Warranties [Abstract] | |||||||||||||||||||||
| SCHEDULE OF ACCRUED WARRANTY |
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CONTRACT ASSETS AND LIABILITIES (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 27, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Contract Assets And Liabilities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF CONTRACT WITH CUSTOMER, ASSET AND LIABILITY | Net contract assets (liabilities) consisted of the following:
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| SCHEDULE OF SATISFACTION OF 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:
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LEASES (Tables) |
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Mar. 27, 2021 | |||||||||||||||||||||||||||||||
| Leases [Abstract] | |||||||||||||||||||||||||||||||
| SCHEDULE OF LEASE EXPENSE | The components of lease expense were as follows:
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| SCHEDULE OF FUTURE LEASE PAYMENT UNDER NON-CANCELLABLE LEASE | At March 27, 2021, the Company’s future lease payments under non-cancellable leases were as follows:
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| SCHEDULE OF OPERATING LEASE PAYMENTS RECOGNIZED IN CONSOLIDATED BALANCE SHEETS | The Company’s lease liabilities recognized in the Company’s condensed consolidated balance sheet at March 27, 2021 was as follows:
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| SCHEDULE OF SUPPLEMENTAL INFORMATION RELATED TO LEASES | Supplemental cash flow information related to leases was as follows:
Other information related to leases was as follows:
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SEGMENTS AND DISAGGREGATION OF REVENUE (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 27, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF LONG-LIVED ASSETS BY GEOGRAPHIC AREAS | Total long-lived assets by country at March 27, 2021 and December 26, 2020 were:
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| SCHEDULE OF SEGMENT INFORMATION BY REVENUE TYPE | During the three months ended March 27, 2021 and March 28, 2020, the Company derived its sales from the following geographies:
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| SCHEDULE OF SEGMENT REPORTING INFORMATION, BY SEGMENT | During the three months ended March 27, 2021 and March 28, 2020, the Company derived its sales from the following display applications:
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RELATED PARTY TRANSACTIONS (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 27, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Related Party Transactions [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF TRANSACTIONS WITH RELATED PARTIES | During the three month periods ended March 27, 2021 and March 28, 2020, the Company had the following transactions with related parties:
At March 27, 2021 and December 26, 2020, the Company had the following receivables, contract assets and payables with related parties:
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SCHEDULE OF AVAILABLE-FOR-SALE MARKETABLE DEBT SECURITIES (Details) - USD ($) |
Mar. 27, 2021 |
Dec. 26, 2020 |
|---|---|---|
| Fair Value Measurement Inputs and Valuation Techniques [Line Items] | ||
| Amortized Cost | $ 3,406,112 | $ 3,607,645 |
| Unrealized Gains | 24,259 | 28,036 |
| Fair Value | 3,430,371 | 3,635,681 |
| US Government and Agency Backed Securities [Member] | ||
| Fair Value Measurement Inputs and Valuation Techniques [Line Items] | ||
| Amortized Cost | 1,002,993 | 1,003,941 |
| Unrealized Gains | 14,997 | 19,179 |
| Fair Value | 1,017,990 | 1,023,120 |
| Corporate Debt [Member] | ||
| Fair Value Measurement Inputs and Valuation Techniques [Line Items] | ||
| Amortized Cost | 2,403,119 | 2,603,704 |
| Unrealized Gains | 9,262 | 8,857 |
| Fair Value | $ 2,412,381 | $ 2,612,561 |
SCHEDULE OF MARKETABLE DEBT SECURITIES (Details) |
Mar. 27, 2021
USD ($)
|
|---|---|
| Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |
| Less than One year | $ 1,919,601 |
| One to Five Years | 1,510,770 |
| Total | 3,430,371 |
| US Government and Agency Backed Securities [Member] | |
| Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |
| Less than One year | 1,017,990 |
| One to Five Years | |
| Total | 1,017,990 |
| Corporate Debt [Member] | |
| Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |
| Less than One year | 901,611 |
| One to Five Years | 1,510,770 |
| Total | $ 2,412,381 |
SCHEDULE OF FAIR VALUE, LIABILITIES MEASURED ON RECURRING BASIS (Details) - Equity Investments [Member] |
3 Months Ended |
|---|---|
|
Mar. 27, 2021
USD ($)
| |
| Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items] | |
| Financial instrument fair value, beginning | $ 4,229,634 |
| Net unrealized losses | (13,142) |
| Purchases, issuances and settlements | |
| Transfers in and or out of Level 3 | |
| Financial instrument fair value, ending | $ 4,216,492 |
FAIR VALUE MEASUREMENTS (Details Narrative) $ in Millions |
3 Months Ended |
|---|---|
|
Mar. 27, 2021
USD ($)
| |
| Fair Value Disclosures [Abstract] | |
| Unrealized Gain (Loss) on Securities | $ 0.1 |
SCHEDULE OF INVENTORY (Details) - USD ($) |
Mar. 27, 2021 |
Dec. 26, 2020 |
|---|---|---|
| Inventory Disclosure [Abstract] | ||
| Raw materials | $ 4,526,224 | $ 3,609,710 |
| Work-in-process | 658,070 | 565,986 |
| Finished goods | 270,840 | 280,060 |
| Total | $ 5,455,134 | $ 4,455,756 |
SCHEDULE OF WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING DILUTED (Details) - shares |
3 Months Ended | |
|---|---|---|
Mar. 27, 2021 |
Mar. 28, 2020 |
|
| Net loss per share | ||
| Non-vested restricted common stock | 2,490,717 | 2,377,624 |
SCHEDULE OF NON-VESTED RESTRICTED STOCK ACTIVITY (Details) |
3 Months Ended |
|---|---|
|
Mar. 27, 2021
$ / shares
shares
| |
| Equity [Abstract] | |
| Number of Shares, Restricted stock Outstanding Beginning | shares | 3,051,874 |
| Weighted Average Grant Date Fair Value, Restricted stock Outstanding Beginning | $ / shares | $ 1.67 |
| Number of Shares, Restricted stock Granted | shares | 1,373,843 |
| Weighted Average Grant Date Fair Value, Restricted stock Granted | $ / shares | $ 2.65 |
| Number of Shares, Restricted stock Forfeited | shares | (985,000) |
| Weighted Average Grant Date Fair Value, Restricted stock Forfeited | $ / shares | $ 1.81 |
| Number of Shares, Restricted stock Vested | shares | (950,000) |
| Weighted Average Grant Date Fair Value, Restricted stock Vested | $ / shares | $ 2.52 |
| Number of Shares, Restricted stock Outstanding Ending | shares | 2,490,717 |
| Weighted Average Grant Date Fair Value, Restricted stock Outstanding Ending | $ / shares | $ 1.88 |
SCHEDULE OF STOCK-BASED COMPENSATION EXPENSE (Details) - USD ($) |
3 Months Ended | |
|---|---|---|
Mar. 27, 2021 |
Mar. 28, 2020 |
|
| Share-based Payment Arrangement, Expense | $ 2,610,166 | $ 158,465 |
| Cost of Product Revenues [Member] | ||
| Share-based Payment Arrangement, Expense | 133,784 | 13,977 |
| Research and Development [Member] | ||
| Share-based Payment Arrangement, Expense | 94,053 | 55,132 |
| Selling, General and Administrative [Member] | ||
| Share-based Payment Arrangement, Expense | $ 2,382,329 | $ 89,356 |
STOCKHOLDERS’ EQUITY AND STOCK-BASED COMPENSATION (Details Narrative) - USD ($) $ / shares in Units, $ in Millions |
3 Months Ended | |
|---|---|---|
Mar. 05, 2021 |
Mar. 27, 2021 |
|
| Subsidiary, Sale of Stock [Line Items] | ||
| Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Amount | $ 2.9 | |
| Unrecognized compensation expense period for recognition | 3 years | |
| At The Market Offering [Member] | ||
| Subsidiary, Sale of Stock [Line Items] | ||
| Sale of Stock, Number of Shares Issued in Transaction | 2,400,000 | |
| Gross proceeds from registered sale equity securities | $ 16.0 | |
| Shares Issued, Price Per Share | $ 6.66 | |
| Underwriting discounts and offering expenses from sale of equity | $ 0.5 | |
| At The Market Offering [Member] | Common Stock [Member] | Stifel [Member] | Minimum [Member] | ||
| Subsidiary, Sale of Stock [Line Items] | ||
| Sale of Stock, Consideration Received Per Transaction | $ 50.0 |
SCHEDULE OF ACCRUED WARRANTY (Details) |
3 Months Ended |
|---|---|
|
Mar. 27, 2021
USD ($)
| |
| Guarantees and Product Warranties [Abstract] | |
| Balance, December 26, 2020 | $ 508,000 |
| Additions | 424,000 |
| Claims | (26,000) |
| Balance, March 27, 2021 | $ 906,000 |
ACCRUED WARRANTY (Details Narrative) $ in Millions |
3 Months Ended |
|---|---|
|
Mar. 27, 2021
USD ($)
| |
| Warrant [Member] | |
| Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | |
| Deferred revenue | $ 0.1 |
| Revenue Benchmark [Member] | |
| Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | |
| Extended Product Warranty Description | The Company recognizes revenue from an extended warranty on the straight-line method over the life of the extended warranty, which is typically 12 to 15 months |
| Standard Product Warranty Description | standard 12 to 18 month warranty. |
| Warranty [Member] | |
| Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | |
| Product warranty term | The Company typically warrants its products against defect for 12 to 18 months, however, for certain products a customer may purchase an extended warranty. |
INCOME TAXES (Details Narrative) - USD ($) $ in Millions |
3 Months Ended | |
|---|---|---|
Mar. 27, 2021 |
Mar. 28, 2020 |
|
| Income Tax Disclosure [Abstract] | ||
| Current Income Tax Expense (Benefit) | $ 0.1 | |
| Net operating loss carryforwards | $ 160.3 | |
| Net operating loss expiry period | expiring 2022 through 2037 | |
| Operating loss carryforwards unlimited | $ 61.5 | |
SCHEDULE OF CONTRACT WITH CUSTOMER, ASSET AND LIABILITY (Details) - USD ($) |
3 Months Ended | |
|---|---|---|
Mar. 27, 2021 |
Dec. 26, 2020 |
|
| Contract Assets And Liabilities | ||
| Contract assets-current | $ 1,115,419 | $ 3,521,753 |
| Change in contract assets-current | $ (2,406,334) | |
| Percentage of change in contract assets-current | (68.00%) | |
| Contract liabilities and billings in excess of revenue earned | $ (1,176,872) | (1,493,847) |
| Change Contract liabilities and billings in excess of revenue earned | $ 316,975 | |
| Percentage Contract liabilities and billings in excess of revenue earned | (21.00%) | |
| Contract liabilities-noncurrent | $ (37,529) | (5,069) |
| Change in contract liabilities-noncurrent | $ (32,460) | |
| Percentage of change in contract liabilities-noncurrent | 640.00% | |
| Net contract (liabilities) assets | $ (98,982) | $ 2,022,837 |
| Change in Net contract (liabilities) assets | $ (2,121,819) | |
| Percentage of change in Net contract (liabilities) assets | (105.00%) |
SCHEDULE OF SATISFACTION OF PERFORMANCE OBLIGATIONS (Details) |
3 Months Ended | |
|---|---|---|
Mar. 27, 2021 |
Mar. 28, 2020 |
|
| Transferred at Point in Time [Member] | ||
| Disaggregation of Revenue [Line Items] | ||
| Revenue percentage from products and services transferred customers | 32.00% | 36.00% |
| Transferred over Time [Member] | ||
| Disaggregation of Revenue [Line Items] | ||
| Revenue percentage from products and services transferred customers | 68.00% | 64.00% |
CONTRACT ASSETS AND LIABILITIES (Details Narrative) - USD ($) $ in Millions |
3 Months Ended | |
|---|---|---|
Mar. 27, 2021 |
Mar. 28, 2020 |
|
| Contract Assets And Liabilities | ||
| Decrease in contract assets and liabilities | $ 2.1 | |
| Contract with Customer, Liability, Revenue Recognized | 1.2 | $ 0.6 |
| Revenue, Remaining Performance Obligation, Amount | $ 21.0 | |
SCHEDULE OF LEASE EXPENSE (Details) - USD ($) |
3 Months Ended | |
|---|---|---|
Mar. 27, 2021 |
Mar. 28, 2020 |
|
| Leases [Abstract] | ||
| Operating lease cost | $ 290,884 | $ 283,000 |
SCHEDULE OF FUTURE LEASE PAYMENT UNDER NON-CANCELLABLE LEASE (Details) |
Mar. 27, 2021
USD ($)
|
|---|---|
| Leases [Abstract] | |
| 2021 (excluding the three months ended March 27, 2021) | $ 764,613 |
| 2022 | 657,674 |
| 2023 | 201,333 |
| Total future lease payments | 1,623,620 |
| Less imputed interest | (93,968) |
| Total | $ 1,529,652 |
SCHEDULE OF OPERATING LEASE PAYMENTS RECOGNIZED IN CONSOLIDATED BALANCE SHEETS (Details) - USD ($) |
Mar. 27, 2021 |
Dec. 26, 2020 |
|---|---|---|
| Leases [Abstract] | ||
| Operating lease liabilities–current | $ 886,609 | $ 982,375 |
| Operating lease liabilities–noncurrent | 643,043 | $ 821,306 |
| Total lease liabilities | $ 1,529,652 |
SCHEDULE OF SUPPLEMENTAL INFORMATION RELATED TO LEASES (Details) |
3 Months Ended |
|---|---|
|
Mar. 27, 2021
USD ($)
| |
| Leases [Abstract] | |
| Cash paid for amounts included in the measurement of operating lease liabilities | $ 301,995 |
| Weighted Average Discount Rate–Operating Leases | 6.17% |
| Weighted Average Remaining Lease Term-Operating Leases (in years) | 2 years 3 months 29 days |
SCHEDULE OF LONG-LIVED ASSETS BY GEOGRAPHIC AREAS (Details) - USD ($) $ in Thousands |
Mar. 27, 2021 |
Dec. 26, 2020 |
|---|---|---|
| Revenues from External Customers and Long-Lived Assets [Line Items] | ||
| Total Long-lived Assets | $ 3,184 | $ 3,407 |
| UNITED STATES | ||
| Revenues from External Customers and Long-Lived Assets [Line Items] | ||
| Total Long-lived Assets | 2,870 | 3,028 |
| UNITED KINGDOM | ||
| Revenues from External Customers and Long-Lived Assets [Line Items] | ||
| Total Long-lived Assets | 285 | 329 |
| CHINA | ||
| Revenues from External Customers and Long-Lived Assets [Line Items] | ||
| Total Long-lived Assets | 6 | 11 |
| JAPAN | ||
| Revenues from External Customers and Long-Lived Assets [Line Items] | ||
| Total Long-lived Assets | $ 23 | $ 39 |
SCHEDULE OF SEGMENT REPORTING INFORMATION, BY SEGMENT (Details) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Mar. 27, 2021 |
Mar. 28, 2020 |
|
| Revenue from External Customer [Line Items] | ||
| Total Revenues | $ 11,676 | $ 7,878 |
| Defense [Member] | ||
| Revenue from External Customer [Line Items] | ||
| Total Revenues | 4,993 | 3,513 |
| Industrial [Member] | ||
| Revenue from External Customer [Line Items] | ||
| Total Revenues | 2,041 | 2,183 |
| Consumer [Member] | ||
| Revenue from External Customer [Line Items] | ||
| Total Revenues | 534 | 222 |
| Research and Development [Member] | ||
| Revenue from External Customer [Line Items] | ||
| Total Revenues | 3,561 | 1,960 |
| Product and Service, Other [Member] | ||
| Revenue from External Customer [Line Items] | ||
| Total Revenues | $ 547 | |
SCHEDULE OF TRANSACTIONS WITH RELATED PARTIES (Details) - USD ($) |
3 Months Ended | ||
|---|---|---|---|
Mar. 27, 2021 |
Mar. 28, 2020 |
Dec. 26, 2020 |
|
| Related Party Transaction [Line Items] | |||
| Sales | $ 1,323,885 | $ 140,068 | |
| Purchases | 9,000 | ||
| Solos Technology [Member] | |||
| Related Party Transaction [Line Items] | |||
| Sales | 140,068 | ||
| Purchases | 9,000 | ||
| RealWear, Inc. [Member] | |||
| Related Party Transaction [Line Items] | |||
| Sales | 1,323,885 | ||
| Purchases | |||
| Receivables | 489,276 | $ 817,388 | |
| Contract assets | |||