NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1.
BASIS OF PRESENTATION
The
condensed consolidated financial statements of Kopin Corporation as of June 25, 2022 and for the three and six month periods ended June
25, 2022 and June 26, 2021 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 25, 2021. The results of the Company’s operations for any interim period are not necessarily indicative of
the results of the Company’s operations for any other interim period or for a full fiscal year. As used in this report, the terms
“we,” “us,” “our,” “Kopin” and the “Company” mean Kopin Corporation and its
subsidiaries, unless the context indicates another meaning.
The
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.
The
Company has incurred net losses of $7.0 million and $13.4 million for the six month period ended June 25, 2022 and for the fiscal year
ended December 25, 2021, respectively, and net cash outflows from operations of $11.4 million and $10.7 million for the six month period
ended June 25, 2022 and for the fiscal year ended December 25, 2021, respectively. The Company’s net cash outflows from operations
were partially a result of funding its ongoing investments in research and development which management believes will continue. The Company
has in the past sold equity securities through an At The Money program and in the traditional fashion of significant equity offerings.
Management estimates the Company will have sufficient liquidity to fund operations at least through Q3 2023. Nonetheless, management
monitors the capital markets on an ongoing basis and may consider raising capital if favorable market conditions develop. If the Company’s
actual results are less than projected or the Company needs to raise capital for additional liquidity, the Company may be required to
do additional equity financings, reduce expenses or enter into a strategic transaction. However, management can make no assurance that
the Company will be able to raise additional capital, reduce expenses sufficiently, or enter into a strategic transaction on terms acceptable
to the Company, or at all.
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.
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 and six months ended June 25, 2022 and June 26, 2021.
Investments
in available-for-sale marketable debt securities were as follows at June 25, 2022 and December 25, 2021:
SCHEDULE
OF AVAILABLE-FOR-SALE MARKETABLE DEBT SECURITIES
| |
Amortized Cost | | |
Unrealized (Losses) Gains | | |
Fair Value | |
| |
2022 | | |
2021 | | |
2022 | | |
2021 | | |
2022 | | |
2021 | |
U.S. government and agency backed securities | |
$ | 2,500,006 | | |
$ | 1,000,128 | | |
$ | (69,001 | ) | |
$ | 522 | | |
$ | 2,431,005 | | |
$ | 1,000,650 | |
Corporate debt and certificates of deposit | |
| 2,500,024 | | |
| 1,500,000 | | |
| (3,236 | ) | |
| 6,885 | | |
| 2,496,788 | | |
| 1,506,885 | |
Total | |
$ | 5,000,030 | | |
$ | 2,500,128 | | |
$ | (72,237 | ) | |
$ | 7,407 | | |
$ | 4,927,793 | | |
$ | 2,507,535 | |
The
contractual maturity of the Company’s marketable debt securities was as follows at June 25, 2022:
SCHEDULE
OF MARKETABLE DEBT SECURITIES
| |
Less than One
year | | |
One to Five years | | |
Total | |
U.S. government and agency backed securities | |
$ | — | | |
$ | 2,431,005 | | |
$ | 2,431,005 | |
Corporate debt and certificates of deposit | |
| 2,496,788 | | |
| — | | |
| 2,496,788 | |
Total | |
$ | 2,496,788 | | |
$ | 2,431,005 | | |
$ | 4,927,793 | |
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:
SCHEDULE OF FAIR VALUE MEASUREMENTS OF FINANCIAL ASSETS
| |
| | | |
| | | |
| | | |
| | |
| |
| | |
Fair Value Measurement at June 25,
2022 Using: | |
| |
Total | | |
Level 1 | | |
Level 2 | | |
Level 3 | |
Cash and cash equivalents | |
$ | 13,630,219 | | |
$ | 13,630,219 | | |
$ | - | | |
$ | — | |
U.S. government securities | |
| 2,431,005 | | |
| — | | |
| 2,431,005 | | |
| — | |
Corporate debt | |
| 1,499,360 | | |
| — | | |
| 1,499,360 | | |
| — | |
Certificates of deposit | |
| 997,428 | | |
| 997,428 | | |
| — | | |
| — | |
Equity investments | |
| 9,831,592 | | |
| 196,516 | | |
| — | | |
| 9,635,076 | |
Financial instruments,
owned, at fair value | |
$ | 28,389,604 | | |
$ | 14,824,163 | | |
$ | 3,930,365 | | |
$ | 9,635,076 | |
| |
| | | |
| | | |
| | | |
| | |
| |
| | |
Fair Value Measurement at December 25, 2021 Using: | |
| |
Total | | |
Level 1 | | |
Level 2 | | |
Level 3 | |
Cash and cash equivalents | |
$ | 26,787,931 | | |
$ | 26,787,931 | | |
$ | — | | |
$ | — | |
U.S. government securities | |
| 1,000,650 | | |
| — | | |
| 1,000,650 | | |
| — | |
Corporate debt | |
| 1,506,885 | | |
| — | | |
| 1,506,885 | | |
| — | |
Equity investments | |
| 4,912,022 | | |
| 296,173 | | |
| — | | |
| 4,615,849 | |
Financial instruments,
owned, at fair value | |
$ | 34,207,488 | | |
$ | 27,084,104 | | |
$ | 2,507,535 | | |
$ | 4,615,849 | |
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:
SCHEDULE OF FAIR VALUE, LIABILITIES MEASURED ON RECURRING BASIS
| |
December 25,
2021 | | |
Net unrealized gains | | |
Purchases, issuances and settlements | | |
Transfers in and or out of Level 3 | | |
June 25, 2022 | |
Equity investments | |
$ | 4,615,849 | | |
$ | 4,519,229 | | |
$ | 499,998 | | |
$ | — | | |
$ | 9,635,076 | |
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
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
From
2017 through 2019, the Company made several equity investments in a customer. In the fourth quarter of 2019, the Company reviewed the
financial condition and other factors of the customer and, as a result, recorded an impairment charge of $5.2 million to reduce its investment
in the customer to zero as of December 28, 2019. In the first quarter of 2022 the customer raised additional equity capital and based
on an observable price change of the customer’s share prices and terms of the equity sale the Company remeasured the fair market
value of its investment and recorded a gain of $4.7 million. As of June 25, 2022, the Company owned an approximate 2.3% interest in this
investment.
During
the three and six months ended June 25, 2022, the Company recorded less than $0.1 million and $0.2 million, respectively, of unrealized
losses on an equity interest in a company due to a fluctuation in the foreign exchange rate.
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 June 25, 2022 and December 25, 2021:
SCHEDULE OF INVENTORY
| |
| | | |
| | |
| |
June 25, 2022 | | |
December 25, 2021 | |
Raw materials | |
$ | 4,698,312 | | |
$ | 5,044,334 | |
Work-in-process | |
| 1,539,388 | | |
| 1,032,519 | |
Finished goods | |
| 688,789 | | |
| 504,286 | |
Total | |
$ | 6,926,489 | | |
$ | 6,581,139 | |
6.
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.
The
following were not included in weighted-average common shares outstanding-diluted because they are anti-dilutive or performance conditions
have not been met at the end of the period:
SCHEDULE OF WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING DILUTED
| |
| | | |
| | | |
| | | |
| | |
| |
Three Months Ended | | |
Three Months Ended | | |
Six Months Ended | | |
Six Months Ended | |
| |
June 25, 2022 | | |
June 26, 2021 | | |
June 25, 2022 | | |
June 26, 2021 | |
Non-vested restricted common stock | |
| 1,824,723 | | |
| 2,543,717 | | |
| 1,824,723 | | |
| 2,543,717 | |
7.
STOCKHOLDERS’ EQUITY AND STOCK-BASED COMPENSATION
Registered
sale of equity securities
During
the three months ended June 25, 2022, we sold 1.5
million shares of common stock and 0.2
million shares of treasury stock for gross proceeds of $2.1
million (average of $1.26
per share) before deducting broker expenses paid by us of less than $0.1
million, pursuant to the Company’s At-The-Market Equity Offering Sales Agreement dated as of March 5, 2021 (the” ATM
Agreement”) with Stifel, Nicolaus & Company, Incorporated, (“Stifel”) as agent, under which we may sell up to
$50
million of our common stock. The Company has approximately $41.4
million worth of common stock remaining available for sale under the ATM Agreement.
During
the three and six months ended June 26, 2021, the Company sold 0.1 million and 2.5 million shares of common stock for gross proceeds
of $0.8 million and $16.8 million (average of $6.74 per share), respectively, before deducting broker expenses paid by us of less than
$0.1 million and $0.5 million, respectively, pursuant to the Company’s At-The-Market Equity Offering Sales Agreement dated as of
February 8, 2019 (the “Previous ATM Agreement”) with 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
June 28, 2021 (the first business day of our fiscal third quarter), we sold 0.6 million shares of common stock for gross proceeds of
$4.8 million (average of $8.06 per share), before deducting broker expenses paid by us of less than $0.2 million, pursuant to the ATM Agreement.
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 for the six months ended June 25, 2022 was as follows:
SCHEDULE OF NON-VESTED RESTRICTED STOCK ACTIVITY
| |
| | |
Weighted Average | |
| |
Shares | | |
Grant Fair Value | |
Balance, December 25, 2021 | |
| 2,077,592 | | |
$ | 2.90 | |
Granted | |
| 186,500 | | |
| 1.53 | |
Forfeited | |
| (234,948 | ) | |
| 2.61 | |
Vested | |
| (204,421 | ) | |
| 3.80 | |
Balance, June 25, 2022 | |
| 1,824,723 | | |
$ | 2.70 | |
Stock-Based
Compensation
The
following table summarizes stock-based compensation expense within each of the categories below as it relates to non-vested restricted
common stock awards for the three and six months ended June 25, 2022 and June 26, 2021 (no tax benefits were recognized):
SCHEDULE
OF STOCK-BASED COMPENSATION EXPENSE
| |
| | | |
| | | |
| | | |
| | |
| |
Three Months Ended | | |
Three Months Ended | | |
Six Months Ended | | |
Six Months Ended | |
| |
June 25, 2022 | | |
June 26, 2021 | | |
June 25, 2022 | | |
June 26, 2021 | |
Cost of product revenues | |
$ | 11,713 | | |
$ | 34,789 | | |
$ | 78,381 | | |
$ | 168,573 | |
Research and development | |
| 108,347 | | |
| 121,012 | | |
| 255,726 | | |
| 215,065 | |
Selling, general and administrative | |
| 296,973 | | |
| 358,708 | | |
| 738,999 | | |
| 2,741,037 | |
Total | |
$ | 417,033 | | |
$ | 514,509 | | |
$ | 1,073,106 | | |
$ | 3,124,675 | |
Unrecognized
compensation expense for non-vested restricted common stock as of June 25, 2022 totaled $3.0 million and is expected to be recognized
over a weighted average period of approximately 3.0 years.
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 six months ended June 25, 2022 were as follows:
SCHEDULE OF ACCRUED WARRANTY
| |
| | |
Balance, December 25, 2021 | |
$ | 517,000 | |
Additions | |
| 1,037,000 | |
Claims | |
| (585,000 | ) |
Balance, June 25, 2022 | |
$ | 969,000 | |
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 Contract liabilities and billings in excess
of revenues earned in its condensed consolidated balance sheets. At June 25, 2022, the Company had less than $0.1 million of deferred
revenue related to extended warranties.
9.
INCOME TAXES
The
Company recorded a provision for income taxes of less than $0.1
million in each of the three and six months ended June 25, 2022 and June 26, 2021, respectively. As of June 25, 2022, 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 $82.4
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.
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:
SCHEDULE OF CONTRACT WITH CUSTOMER, ASSET AND LIABILITY
| |
June 25, 2022 | | |
December 25, 2021 | | |
$ Change | | |
% Change | |
Contract assets —current | |
$ | 5,268,754 | | |
$ | 2,299,392 | | |
$ | 2,969,362 | | |
| 129 | % |
Contract liabilities—current | |
| (3,047,208 | ) | |
| (4,063,031 | ) | |
| 1,015,823 | | |
| (25 | )% |
Contract liabilities—noncurrent | |
| (5,371 | ) | |
| (20,664 | ) | |
| 15,293 | | |
| (74 | )% |
Net contract assets (liabilities) | |
$ | 2,216,175 | | |
$ | (1,784,303 | ) | |
$ | 4,000,478 | | |
| (224 | )% |
The
$4.0 million increase in the Company’s net contract assets (liabilities) at June 25, 2022 as compared to December 25, 2021 was
primarily due to a change in its fixed price contracts with the U.S. government that resulted in revenue recognized in excess of amounts
billed and product revenue recognized over time for defense programs.
In
the three and six months ended June 25, 2022, the Company recognized revenue of $2.9 million and $0.2 million, respectively, related
to our contract liabilities at December 25, 2021. In the three and six months ended June 26, 2021, the Company recognized revenue of
$0.1 million and $1.3 million, respectively, related to our contract liabilities at December 26, 2020.
The
Company did not recognize impairment losses on our contract assets in the three or six months ended June 25, 2022 or June 26, 2021.
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:
SCHEDULE
OF SATISFACTION OF PERFORMANCE OBLIGATION
| |
| | | |
| | | |
| | | |
| | |
| |
Three months ended | | |
Three months ended | | |
Six months
ended | | |
Six months
ended | |
| |
June 25, 2022 | | |
June 26, 2021 | | |
June 25, 2022 | | |
June 26, 2021 | |
Point in time | |
| 17 | % | |
| 36 | % | |
| 18 | % | |
| 33 | % |
Over time | |
| 83 | % | |
| 64 | % | |
| 82 | % | |
| 67 | % |
Revenue percentage | |
| | | |
| | | |
| | | |
| | |
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 June 25, 2022, the aggregate amount of the transaction price allocated to remaining performance obligations was $33.4 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.
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 June 25, 2022 and December 25, 2021, 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:
SCHEDULE OF LEASE EXPENSE
| |
| | | |
| | | |
| | | |
| | |
| |
Three Months Ended | | |
Three Months Ended | | |
Six Months
Ended | | |
Six Months
Ended | |
| |
June 25, 2022 | | |
June 26, 2021 | | |
June 25, 2022 | | |
June 26, 2021 | |
Operating lease cost | |
$ | 250,361 | | |
$ | 289,685 | | |
$ | 499,864 | | |
$ | 576,578 | |
At
June 25, 2022, the Company’s future lease payments under non-cancellable leases were as follows:
SCHEDULE OF FUTURE LEASE PAYMENT UNDER NON-CANCELLABLE LEASE
| |
| | |
2022 (excluding the six months ended June 25, 2022) | |
$ | 480,260 | |
2023 | |
| 981,434 | |
2024 | |
| 892,573 | |
2025 | |
| 638,070 | |
2026 | |
| 604,000 | |
Thereafter | |
| 805,333 | |
Total future lease payments | |
| 4,401,670 | |
Less imputed interest | |
| (660,971 | ) |
Total | |
$ | 3,740,699 | |
The
Company’s lease liabilities recognized in the Company’s condensed consolidated balance sheets at June 25, 2022 were as follows:
SCHEDULE OF OPERATING LEASE PAYMENTS RECOGNIZED IN CONSOLIDATED BALANCE SHEETS
| |
| | |
| |
June 25, 2022 | |
Operating lease liabilities - current | |
$ | 767,440 | |
Operating lease liabilities - noncurrent | |
| 2,973,259 | |
Total lease liabilities | |
$ | 3,740,699 | |
Supplemental
cash flow information related to leases was as follows:
SCHEDULE OF SUPPLEMENTAL INFORMATION RELATED TO LEASES
| |
| | |
| |
Six months ended | |
| |
June 25, 2022 | |
Cash paid for amounts included in the measurement of operating lease liabilities | |
$ | 504,916 | |
| |
| | |
Other
information related to leases was as follows:
| |
June 25, 2022 | |
Weighted Average Discount Rate - Operating Leases | |
| 5.89 | % |
Weighted Average Remaining Lease Term - Operating Leases (in years) | |
| 5.11 | |
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 June 25, 2022 and December 25, 2021 were:
SCHEDULE OF LONG-LIVED ASSETS BY GEOGRAPHIC AREAS
| |
| | | |
| | |
Total Long-lived Assets (in thousands) | |
June 25, 2022 | | |
December 25, 2021 | |
U.S. | |
$ | 5,011 | | |
$ | 5,381 | |
United Kingdom | |
| 495 | | |
| 264 | |
Japan | |
| — | | |
| 72 | |
Total | |
$ | 5,506 | | |
$ | 5,717 | |
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 and six months ended June 25, 2022 and June 26, 2021, the Company derived its sales from the following geographies:
SCHEDULE OF SEGMENT INFORMATION BY REVENUE TYPE
| |
Three months ended | | |
Three months ended | | |
Six months ended | | |
Six months ended | |
| |
June 25, 2022 | | |
June 26, 2021 | | |
June 25, 2022 | | |
June 26, 2021 | |
(In thousands, except percentages) | |
Revenue | | |
% of Total | | |
Revenue | | |
% of Total | | |
Revenue | | |
% of Total | | |
Revenue | | |
% of Total | |
United States | |
$ | 10,037 | | |
| 84 | % | |
$ | 6,448 | | |
| 65 | % | |
$ | 19,335 | | |
| 82 | % | |
$ | 14,629 | | |
| 68 | % |
Asia - Pacific | |
| 1,564 | | |
| 13 | | |
| 3,111 | | |
| 31 | | |
| 3,707 | | |
| 16 | | |
| 6,386 | | |
| 29 | |
Europe | |
| 308 | | |
| 3 | | |
| 346 | | |
| 4 | | |
| 445 | | |
| 2 | | |
| 567 | | |
| 3 | |
Total Revenues | |
$ | 11,909 | | |
| 100 | % | |
$ | 9,905 | | |
| 100 | % | |
$ | 23,487 | | |
| 100 | % | |
$ | 21,582 | | |
| 100 | % |
During
the three and six months ended June 25, 2022 and June 26, 2021, the Company derived its sales from the following display applications:
SCHEDULE OF SEGMENT REPORTING INFORMATION, BY SEGMENT
| |
| | | |
| | | |
| | | |
| | |
| |
Three months ended | | |
Three months ended | | |
Six months ended | | |
Six months ended | |
(In thousands) | |
June 25, 2022 | | |
June 26, 2021 | | |
June 25, 2022 | | |
June 26, 2021 | |
Defense | |
$ | 7,087 | | |
$ | 3,779 | | |
$ | 11,844 | | |
$ | 8,772 | |
Industrial | |
| 1,633 | | |
| 2,629 | | |
| 3,162 | | |
| 4,671 | |
Consumer | |
| 284 | | |
| 400 | | |
| 505 | | |
| 934 | |
R&D | |
| 2,806 | | |
| 2,704 | | |
| 7,714 | | |
| 6,265 | |
Other | |
| 99 | | |
| 393 | | |
| 262 | | |
| 940 | |
Total Revenues | |
$ | 11,909 | | |
$ | 9,905 | | |
$ | 23,487 | | |
$ | 21,582 | |
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 the Company’s 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. On August 3, 2022, the Court granted the Company’s Motion for Partial Summary Judgment by dismissing counts 3,
6, 7, punitive damages under count 2, and count 8 as it relates to patent applications, and denying the motion as it relates to counts
1, 4, and 5, and the remainder of counts 2 and 8. The Court also ordered discovery reopened for certain limited purposes. A trial date
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 June 25, 2022. 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.
During
the three and six months ended June 25, 2022 and June 26, 2021, the Company had the following transactions with related parties:
SCHEDULE OF TRANSACTIONS WITH RELATED PARTIES
| |
| | | |
| | |
| |
Three Months Ended | |
| |
June 25, 2022 | | |
June 26, 2021 | |
| |
Sales | | |
Sales | |
HMDmd, Inc. | |
| 62,925 | | |
| 244,890 | |
RealWear, Inc. | |
| 94,805 | | |
| 1,238,072 | |
Sales | |
$ | 157,730 | | |
$ | 1,482,962 | |
| |
| | | |
| | |
| |
Six Months Ended | |
| |
June 25, 2022 | | |
June 26, 2021 | |
| |
Sales | | |
Sales | |
HMDmd, Inc. | |
| 62,925 | | |
| 244,890 | |
RealWear, Inc. | |
| 719,022 | | |
| 2,560,957 | |
Sales | |
$ | 781,947 | | |
$ | 2,805,847 | |
At
June 25, 2022 and December 25, 2021, the Company had the following receivables with related parties:
| |
June 25, 2022 | |
December 25, 2021 |
| |
Receivables | |
|
Receivables | |
RealWear, Inc. | |
$ | 94,805 | |
|
$ | 306,307 | |