# Kopin (KOPN) 10-Q SEC filing - Q3 FY2022
- Filed: Nov 8, 2022, 4:06 PM EST
- Fiscal quarter: Q3 FY2022
- Calendar quarter: Q3 2022
- Accession: 0001493152-22-030943
- OpenCapital page: https://www.opencapital.sh/filings/0001493152-22-030943
- Markdown URL: https://www.opencapital.sh/filings/0001493152-22-030943.md
- Official SEC filing index: https://www.sec.gov/Archives/edgar/data/771266/000149315222030943/0001493152-22-030943-index.htm
## Filing documents
- [10-Q (form10-q.htm)](https://www.sec.gov/Archives/edgar/data/771266/000149315222030943/form10-q.htm)
- [EX-10.1 (ex10-1.htm)](https://www.sec.gov/Archives/edgar/data/771266/000149315222030943/ex10-1.htm)
- [EX-31.1 (ex31-1.htm)](https://www.sec.gov/Archives/edgar/data/771266/000149315222030943/ex31-1.htm)
- [EX-31.2 (ex31-2.htm)](https://www.sec.gov/Archives/edgar/data/771266/000149315222030943/ex31-2.htm)
- [EX-32.1 (ex32-1.htm)](https://www.sec.gov/Archives/edgar/data/771266/000149315222030943/ex32-1.htm)
- [EX-32.2 (ex32-2.htm)](https://www.sec.gov/Archives/edgar/data/771266/000149315222030943/ex32-2.htm)
---
## 10-Q
SEC source: [form10-q.htm](https://www.sec.gov/Archives/edgar/data/771266/000149315222030943/form10-q.htm)
**UNITED
STATES**
**SECURITIES
AND EXCHANGE COMMISSION**
**WASHINGTON,
D.C. 20549**
**FORM10-Q**
☒ **QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**
**For
the quarterly period ended September 24, 2022**
☐ **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 0-19882**
**KOPIN CORPORATION**
**(Exact
name of registrant as specified in its charter)**
| Delaware | 04-2833935 |
| --- | --- |
| State or other jurisdiction of incorporation or organization | (I.R.S. Employer Identification No.) |
| 125 North Drive, Westborough, MA | 01581-3335 |
| (Address of principal executive offices) | (Zip Code) |
**Registrant’s
telephone number, including area code: (508) 870-5959**
Securities
registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, par value $0.01 KOPN Nasdaq Capital Market
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 October 28, 2022**
Common Stock, par value $0.01 95,124,458
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. Yes ☒ No ☐
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). Yes ☒ No ☐
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**
| | | **Page**
**No.** |
| --- | --- | --- |
| [Part I – Financial Information](#ET_001) | | |
| Item 1. | [Condensed Consolidated Financial Statements (Unaudited)](#ET_002) | 3 |
| | [Condensed Consolidated Balance Sheets at September 24, 2022 (Unaudited) and December 25, 2021](#ET_10) | 3 |
| | [Condensed Consolidated Statements of Operations (Unaudited) for the three and nine months ended September 24, 2022 and September 25, 2021](#ET_003) | 4 |
| | [Condensed Consolidated Statements of Comprehensive Loss (Unaudited) for the three and nine months ended September 24, 2022 and September 25, 2021](#ET_004) | 5 |
| | [Condensed Consolidated Statements of Stockholders’ Equity (Unaudited) for the three and nine months ended September 24, 2022 and September 25, 2021](#ET_005) | 6 |
| | [Condensed Consolidated Statements of Cash Flows (Unaudited) for the nine months ended September 24, 2022 and September 25, 2021](#ET_006) | 7 |
| | [Notes to Unaudited Condensed Consolidated Financial Statements](#ET_007) | 8 |
| Item 2. | [Management’s Discussion and Analysis of Financial Condition and Results of Operations](#a_001) | 18 |
| Item 3. | [Quantitative and Qualitative Disclosures About Market Risk](#a_002) | 23 |
| Item 4. | [Controls and Procedures](#a_003) | 24 |
| [Part II – Other Information](#a_004) | | 25 |
| Item 1. | [Legal Proceedings](#a_005) | 25 |
| Item 1A. | [Risk Factors](#a_006) | 25 |
| Item 2. | [Unregistered Sales of Equity Securities and Use of Proceeds](#a_007) | 26 |
| Item 6. | [Exhibits](#a_008) | 26 |
| [Signatures](#a_009) | | 27 |
2
**Part
1. FINANCIAL INFORMATION**
**Item
1. Condensed Consolidated Financial Statements (Unaudited)**
**KOPIN CORPORATION**
### CONDENSED CONSOLIDATED BALANCE SHEETS
_(Unaudited)_
| Line item | September 24, 2022 | December 25, 2021 |
| --- | --- | --- |
| ASSETS | | |
| Current assets: | | |
| Cash and equivalents | $9,625,414 | $26,787,931 |
| Marketable debt securities, at fair value | 5,377,595 | 2,507,535 |
| Accounts receivable, net of allowance of $134,000 in 2022 and $150,000 in 2021 | 8,531,835 | 12,113,070 |
| Contract assets and unbilled receivables | 4,605,889 | 2,299,392 |
| Inventory | 6,660,810 | 6,581,139 |
| Prepaid taxes | 139,605 | 160,599 |
| Prepaid expenses and other current assets | 1,586,620 | 1,758,079 |
| Total current assets | 36,527,768 | 52,207,745 |
| Property, plant and equipment, net | 1,627,468 | 1,888,963 |
| Operating lease right-of-use assets | 3,540,073 | 3,828,066 |
| Other assets | 170,932 | 170,932 |
| Equity investments | 7,612,065 | 4,912,022 |
| Total assets | $49,478,306 | $63,007,728 |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | | |
| Current liabilities: | | |
| Accounts payable | $4,936,931 | $5,483,970 |
| Accrued payroll and expenses | 2,661,645 | 2,413,744 |
| Accrued warranty | 1,966,000 | 517,000 |
| Contract liabilities and billings in excess of revenues earned | 1,097,919 | 4,063,031 |
| Operating lease liabilities | 761,734 | 701,204 |
| Other accrued liabilities | 2,893,502 | 1,202,635 |
| Customer deposits | 378,201 | 2,638,103 |
| Deferred tax liabilities | 424,433 | 513,417 |
| Total current liabilities | 15,120,365 | 17,533,104 |
| Noncurrent contract liabilities and asset retirement obligations | 225,210 | 288,634 |
| Operating lease liabilities, net of current portion | 2,753,885 | 3,108,236 |
| Other long-term obligations | 1,170,393 | 2,450,897 |
| Total liabilities | 19,269,853 | 23,380,871 |
| Commitments and contingencies (Note 13) | - | - |
| Stockholders’ equity: | | |
| Preferred stock, par value $.01 per share: authorized, 3,000 shares; none issued | - | - |
| Common stock, par value $.01 per share: authorized, 150,000,000 shares; issued 95,107,358 shares in 2022 and 92,146,761 shares in 2021; outstanding 92,627,059 in 2022 and 89,988,528 in 2021 | 926,270 | 900,691 |
| Additional paid-in capital | 360,673,851 | 356,931,157 |
| Treasury stock (80,641 shares in 2021, at cost) | - | (366,110) |
| Accumulated other comprehensive income | 1,030,591 | 1,414,351 |
| Accumulated deficit | (332,249,645) | (319,080,898) |
| Total Kopin Corporation stockholders’ equity | 30,381,067 | 39,799,191 |
| Noncontrolling interest | (172,614) | (172,334) |
| Total Kopin Corporation stockholders’ equity | 30,208,453 | 39,626,857 |
| Total liabilities and stockholders’ equity | $49,478,306 | $63,007,728 |
See
notes to unaudited condensed consolidated financial statements
3
**KOPIN CORPORATION**
### CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
_(Unaudited)_
| Line item | 2022 / Three months ended / September 24, 2022 | 2021 / Three months ended / September 25, 2021 | 2022 / Nine months ended / September 24, 2022 | 2021 / Nine months ended / September 25, 2021 |
| --- | --- | --- | --- | --- |
| Revenues: | | | | |
| Net product revenues | $8,254,686 | $6,591,852 | $23,765,872 | $21,089,515 |
| Research and development and other revenues | 3,474,693 | 4,295,321 | 11,450,961 | 11,379,282 |
| Total revenues | 11,729,379 | 10,887,173 | 35,216,833 | 32,468,797 |
| Expenses: | | | | |
| Cost of product revenues | 7,987,154 | 5,145,175 | 23,676,283 | 17,586,389 |
| Research and development | 3,441,405 | 3,751,729 | 13,995,393 | 11,055,282 |
| Selling, general and administration | 4,320,117 | 4,035,998 | 13,112,133 | 13,982,682 |
| Total expenses | 15,748,676 | 12,932,902 | 50,783,809 | 42,624,353 |
| Loss from operations | (4,019,297) | (2,045,729) | (15,566,976) | (10,155,556) |
| Other (expense) income | | | | |
| Interest income | 21,663 | 9,959 | 41,195 | 22,244 |
| Other expense, net | (3,225) | (31,529) | (7,952) | (33,574) |
| (Loss) gain on investments | (2,000,000) | — | 2,700,000 | — |
| Foreign currency transaction (losses) gains | (112,315) | (29,384) | (227,294) | 100,597 |
| Total other (expense) income | (2,093,877) | (50,954) | 2,505,949 | 89,267 |
| Loss before provision for income taxes and net loss attributable to noncontrolling interest | (6,113,174) | (2,096,683) | (13,061,027) | (10,066,289) |
| Tax provision | (36,000) | (32,000) | (108,000) | (97,000) |
| Net loss | (6,149,174) | (2,128,683) | (13,169,027) | (10,163,289) |
| Net (income) loss attributable to the noncontrolling interest | — | (107) | 280 | 39,394 |
| Net loss attributable to Kopin Corporation | $(6,149,174) | $(2,128,790) | $(13,168,747) | $(10,123,895) |
| Net loss per share | | | | |
| Basic and diluted | $(0.07) | $(0.02) | $(0.14) | $(0.11) |
| Weighted average number of common shares outstanding | | | | |
| Basic and diluted | 93,516,231 | 90,517,330 | 91,317,288 | 88,903,658 |
See
notes to unaudited condensed consolidated financial statements
4
**KOPIN CORPORATION**
### CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
_(Unaudited)_
| Line item | 2022 / Three months ended / September 24, 2022 | 2021 / Three months ended / September 25, 2021 | 2022 / Nine months ended / September 24, 2022 | 2021 / Nine months ended / September 25, 2021 |
| --- | --- | --- | --- | --- |
| Net loss | $(6,149,174) | $(2,128,683) | $(13,169,027) | $(10,163,289) |
| Other comprehensive loss, net of tax: | | | | |
| Foreign currency translation adjustments | (128,994) | 9,575 | (170,349) | (44,592) |
| Unrealized holding (loss) gain on marketable securities | (34,110) | 10,125 | (212,889) | (11,755) |
| Reclassification of holding losses in net loss | — | — | (522) | — |
| Other comprehensive (loss) income, net of tax | (163,104) | 19,700 | (383,760) | (56,347) |
| Comprehensive loss | (6,312,278) | (2,108,983) | (13,552,787) | (10,219,636) |
| Comprehensive (income) loss attributable to the noncontrolling interest | — | (107) | 280 | 39,394 |
| Comprehensive loss attributable to Kopin Corporation | $(6,312,278) | $(2,109,090) | $(13,552,507) | $(10,180,242) |
See
notes to unaudited condensed consolidated financial statements
5
**KOPIN CORPORATION**
### Condensed Consolidated Statements of Stockholders’ Equity
_(Unaudited)_
| Line item | Shares / Common Stock | Amount / Common Stock | Capital / Additional Paid-in | Stock / Treasury | Income / Accumulated Other Comprehensive | Deficit / Accumulated | Equity / Total Kopin Corporation Stockholders’ | Interest / Noncontrolling | Equity / Total Stockholders’ |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Balance, December 25, 2021 | 90,069,169 | $900,691 | $356,931,157 | $(366,110) | $1,414,351 | $(319,080,898) | $39,799,191 | $(172,334) | $39,626,857 |
| Stock-based compensation expense | - | - | 656,073 | - | - | - | 656,073 | - | 656,073 |
| Vesting of restricted stock | 154,421 | 1,544 | (1,544) | - | - | - | - | - | - |
| Restricted stock for tax withholding obligations | - | - | - | (95,613) | - | - | (95,613) | - | (95,613) |
| Other comprehensive loss | - | - | - | - | (113,906) | - | (113,906) | - | (113,906) |
| Net loss | - | - | - | - | - | (1,372,641) | (1,372,641) | (23) | (1,372,664) |
| Balance, March 26, 2022 | 90,223,590 | 902,235 | 357,585,686 | (461,723) | 1,300,445 | (320,453,539) | 38,873,104 | (172,357) | 38,700,747 |
| Stock-based compensation expense | - | - | 417,033 | - | - | - | 417,033 | - | 417,033 |
| Vesting of restricted stock | 50,000 | 500 | (500) | - | - | - | - | - | - |
| Sale of registered stock | 1,529,047 | 15,290 | 1,550,092 | 461,723 | - | - | 2,027,105 | - | 2,027,105 |
| Other comprehensive loss | - | - | - | - | (106,750) | - | (106,750) | - | (106,750) |
| Net loss | - | - | - | - | - | (5,646,932) | (5,646,932) | (257) | (5,647,189) |
| Balance, June 25, 2022 | 91,802,637 | 918,025 | 359,552,311 | - | 1,193,695 | (326,100,471) | 35,563,560 | (172,614) | 35,390,946 |
| Stock-based compensation expense | - | - | 297,549 | - | - | - | 297,549 | - | 297,549 |
| Vesting of restricted stock | 149,422 | 1,495 | (1,495) | - | - | - | - | - | - |
| Sale of registered stock | 675,000 | 6,750 | 825,486 | - | - | - | 832,236 | - | 832,236 |
| Other comprehensive loss | - | - | - | - | (163,104) | - | (163,104) | - | (163,104) |
| Net loss | - | - | - | - | - | (6,149,174) | (6,149,174) | - | (6,149,174) |
| Balance, September 24, 2022 | 92,627,059 | $926,270 | $360,673,851 | - | $1,030,591 | $(332,249,645) | $30,381,067 | $(172,614) | $30,208,453 |
| Line item | Common Stock / Shares | Common Stock / Amount | Additional Paid-in / Capital | Treasury / Stock | Accumulated Other Comprehensive / Income | Accumulated / Deficit | Total Kopin Corporation Stockholders’ / Equity | Noncontrolling / Interest | Total Stockholders’ / Equity |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Balance, December 26, 2020 | 88,007,535 | $880,075 | $341,512,893 | $(9,793,946) | $1,484,434 | $(305,648,025) | $28,435,431 | $(136,836) | $28,298,595 |
| Stock-based compensation expense | - | - | 2,610,166 | - | - | - | 2,610,166 | - | 2,610,166 |
| Vesting of restricted stock | 950,000 | 9,500 | (9,500) | - | - | - | - | - | - |
| Sale of registered stock | - | - | 6,336,470 | 9,183,614 | - | - | 15,520,084 | - | 15,520,084 |
| Restricted stock for tax withholding obligations | (3,586) | (37) | (32,668) | - | - | - | (32,705) | - | (32,705) |
| Other comprehensive loss | - | - | - | - | (19,556) | - | (19,556) | - | (19,556) |
| Net loss | - | - | - | - | - | (4,146,238) | (4,146,238) | (39,485) | (4,185,723) |
| Balance, March 27, 2021 | 88,953,949 | 889,538 | 350,417,361 | (610,332) | 1,464,878 | (309,794,263) | 42,367,182 | (176,321) | 42,190,861 |
| Stock-based compensation expense | - | - | 514,509 | - | - | - | 514,509 | - | 514,509 |
| Vesting of restricted stock | 60,000 | 600 | (600) | - | - | - | - | - | - |
| Sale of registered stock | - | - | 487,714 | 352,680 | - | - | 840,394 | - | 840,394 |
| Other comprehensive loss | - | - | - | - | (56,491) | - | (56,491) | - | (56,491) |
| Net loss | - | - | - | - | - | (3,848,867) | (3,848,867) | (16) | (3,848,883) |
| Balance, June 26, 2021 | 89,013,949 | $890,138 | $351,418,984 | $(257,652) | $1,408,387 | $(313,643,130) | $39,816,727 | $(176,337) | $39,640,390 |
| Stock-based compensation expense | - | - | 642,184 | - | - | - | 642,184 | - | 642,184 |
| Sale of registered stock | 532,540 | 5,326 | 4,427,917 | 257,652 | - | - | 4,690,895 | - | 4,690,895 |
| Other comprehensive Income | - | - | - | - | 19,700 | - | 19,700 | - | 19,700 |
| Other comprehensive Income (Loss) | - | - | - | - | 19,700 | - | 19,700 | - | 19,700 |
| Net loss | - | - | - | - | - | (2,128,790) | (2,128,790) | 107 | (2,128,683) |
| Balance, September 25, 2021 | 89,546,489 | $895,464 | $356,489,085 | - | $1,428,087 | $(315,771,920) | $43,040,716 | $(176,230) | $42,864,486 |
See
notes to unaudited condensed consolidated financial statements
6
**KOPIN CORPORATION**
### CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
_(Unaudited)_
| Line item | 2022 / Nine months ended / September 24, 2022 | 2021 / Nine months ended / September 25, 2021 |
| --- | --- | --- |
| Cash flows from operating activities: | | |
| Net loss | $(13,169,027) | $(10,163,289) |
| Adjustments to reconcile net loss to net cash used in operating activities: | | |
| Depreciation and amortization | 665,217 | 566,092 |
| Accretion of premium or discount on marketable debt securities | 128 | 6,559 |
| Stock-based compensation | 1,370,654 | 3,766,859 |
| Foreign currency losses (gains) | 339,186 | (174,213) |
| Change in allowance for bad debt | 4,772 | 70,552 |
| Write-off of excess inventory | 1,670,993 | 492,230 |
| Unrealized gains on investments, net of impairment | (2,700,000) | — |
| Loss on disposal of property and plant | 202,670 | 71,400 |
| Deferred income taxes | 107,509 | 96,210 |
| Provision for warranty | 1,451,478 | 6,861 |
| Changes in assets and liabilities: | | |
| Accounts receivable | 3,756,182 | 2,148,942 |
| Contract assets | (2,302,972) | 617,191 |
| Inventory | (1,944,577) | (2,772,548) |
| Prepaid expenses and other current assets | (272,446) | (765,430) |
| Accounts payable and accrued expenses | (1,651,538) | (2,938,795) |
| Billings in excess of revenue earned | (3,130,965) | (82,850) |
| Net cash used in operating activities | (15,602,736) | (9,054,229) |
| Cash flows from investing activities: | | |
| Other assets | 23,802 | (9,309) |
| Capital expenditures | (642,146) | (865,417) |
| Equity investment purchase | (499,998) | — |
| Proceeds from sale of marketable debt securities | 1,000,000 | 200,000 |
| Purchases of marketable debt securities | (4,000,042) | — |
| Net cash used in investing activities | (4,118,384) | (674,726) |
| Cash flows from financing activities: | | |
| Sale of treasury stock, net of costs | 461,723 | — |
| Settlements of restricted stock for tax withholding obligations | (95,613) | (32,705) |
| Issuance of common stock, net of costs | 2,397,618 | 21,051,373 |
| Net cash provided by financing activities | 2,763,728 | 21,018,668 |
| Effect of exchange rate changes on cash | (205,125) | (52,784) |
| Net (decrease) increase in cash and cash equivalents | (17,162,517) | 11,236,929 |
| Cash and cash equivalents: | | |
| Beginning of period | 26,787,931 | 17,112,869 |
| End of period | $9,625,414 | $28,349,798 |
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 September 24, 2022 and for the three and nine month periods ended
September 24, 2022 and September 25, 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 $13.2 million and $13.4 million
for the nine-month period ended September 24, 2022 and for the fiscal year ended December 25, 2021, respectively, and net cash outflows
from operations of $15.6 million and $10.7 million for the nine-month period ended September 24, 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 and production inefficiencies resulting from intermittent supply
chain disruptions. These factors initially raise substantial doubt about the Company’s ability to continue as a going concern. Management’s
plans to alleviate the conditions that raise substantial doubt include operational improvements being implemented and the curtailment
of certain development programs, both of which are expected to preserve cash. Management estimates the Company will have sufficient liquidity
to fund operations at least through the fourth quarter of 2023. The Company has in the past sold equity securities through at-the-market
equity offerings and in the traditional fashion of significant equity offerings. Nonetheless, management monitors the capital markets
on an ongoing basis and may consider raising capital if favorable market conditions develop. If the Company’s actual results are
less than projected or the Company needs to raise capital for additional liquidity, the Company may be required to do additional equity
financings, reduce expenses, or enter into a strategic transaction. However, management can make no assurance that the Company will be
able to raise additional capital, reduce expenses sufficiently, or enter into a strategic transaction on terms acceptable to the Company,
or at all.
8
**2.ACCOUNTING STANDARDS**
*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 nine months ended September 24, 2022 and September 25, 2021.
Investments
in available-for-sale marketable debt securities were as follows at September 24, 2022 and December 25, 2021:
SCHEDULE
OF AVAILABLE-FOR-SALE MARKETABLE DEBT SECURITIES
| Line item | Amortized Cost / 2022 | Amortized Cost / 2021 | Unrealized (Losses) Gains / 2022 | Unrealized (Losses) Gains / 2021 | Fair Value / 2022 | Fair Value / 2021 |
| --- | --- | --- | --- | --- | --- | --- |
| U.S. government and agency backed securities | $2,500,006 | $1,000,128 | $(115,706) | $522 | $2,384,300 | $1,000,650 |
| Corporate debt and certificates of deposit | 3,000,036 | 1,500,000 | (6,741) | 6,885 | 2,993,295 | 1,506,885 |
| Total | $5,500,042 | $2,500,128 | $(122,447) | $7,407 | $5,377,595 | $2,507,535 |
The
contractual maturity of the Company’s marketable debt securities was as follows at September 24, 2022:
SCHEDULE
OF MARKETABLE DEBT SECURITIES
| Line item | Less than One year | One to Five years | Total |
| --- | --- | --- | --- |
| U.S. government and agency backed securities | - | $2,384,300 | $2,384,300 |
| Corporate debt and certificates of deposit | 2,501,160 | 492,135 | 2,993,295 |
| Total | $2,501,160 | $2,876,435 | $5,377,595 |
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:
SCHEDULE
OF FAIR VALUE MEASUREMENTS OF FINANCIAL ASSETS
| Line item | Total | Level 1 / Fair Value Measurement at September 24, 2022 Using: | Level 2 / Fair Value Measurement at September 24, 2022 Using: | Level 3 / Fair Value Measurement at September 24, 2022 Using: |
| --- | --- | --- | --- | --- |
| Cash and cash equivalents | $9,625,414 | $9,625,414 | — | — |
| U.S. government securities | 2,384,300 | — | 2,384,300 | — |
| Corporate debt | 1,501,160 | — | 1,501,160 | — |
| Certificates of deposit | 1,492,135 | 1,492,135 | — | — |
| Equity investments | 7,612,065 | 212,616 | — | 7,399,449 |
| Financial instruments, owned, at fair value | $22,615,074 | $11,330,165 | $3,885,460 | $7,399,449 |
| Line item | Total | Level 1 / Fair Value Measurement at December 25, 2021 Using: | Level 2 / Fair Value Measurement at December 25, 2021 Using: | Level 3 / Fair Value Measurement at December 25, 2021 Using: |
| --- | --- | --- | --- | --- |
| 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 |
10
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
| Line item | December 25, 2021 | Unrealized gains | Unrealized losses | Purchases, issuances and settlements | September 24, 2022 |
| --- | --- | --- | --- | --- | --- |
| Equity investments | $4,615,849 | $4,700,000 | $(2,416,398) | $499,998 | $7,399,449 |
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 September 24, 2022, the Company owned an approximate 2.3% interest
in this investment.
In the third quarter of
2022, the Company reviewed the financial condition of an equity interest in a company and, as a result, recorded an impairment
charge of $2.0 million to reduce its investment. Additionally, during
the three and nine months ended September 24, 2022, the Company recorded approximately $0.2 million and $0.4 million, respectively, of unrealized losses on its equity interest in this 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 September 24, 2022 and December 25, 2021:
SCHEDULE
OF INVENTORY
| Line item | September 24, 2022 | December 25, 2021 |
| --- | --- | --- |
| Raw materials | $4,407,064 | $5,044,334 |
| Work-in-process | 1,766,304 | 1,032,519 |
| Finished goods | 487,442 | 504,286 |
| Total | $6,660,810 | $6,581,139 |
11
**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
| Line item | 2022 / Three Months Ended / September 24, 2022 | 2021 / Three Months Ended / September 25, 2021 | 2022 / Nine months Ended / September 24, 2022 | 2021 / Nine months Ended / September 25, 2021 |
| --- | --- | --- | --- | --- |
| Non-vested restricted common stock | 2,480,299 | 2,628,717 | 2,480,299 | 2,628,717 |
**7.STOCKHOLDERS’ EQUITY AND STOCK-BASED COMPENSATION**
*Registered
sale of equity securities*
During
the three and nine months ended September 24, 2022, the Company sold 675,000 and 2.3 million shares of common stock for gross proceeds of approximately $858,000 (average of $1.27 per share) and $2,948,000 (average of $1.26 per share), respectively, 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 the Company 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 nine months ended September 25, 2021, the Company sold 600,000 and 3.1 million shares of common stock for gross proceeds of $4.8 million (average of $8.00 per share) and $21.7 million (average of $7.00 per share), respectively, before deducting broker expenses paid by us of $0.1 million and $0.7 million, respectively, pursuant to the Company’s ATM Agreement with Stifel, as agent, under which the Company can sell up to
$50 million of its common stock and an At-The-Market Equity Offering Sales Agreement dated as of February 8, 2019 (the “Previous
ATM Agreement”) also 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.
*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 nine months ended September 24, 2022 was as follows:
SCHEDULE
OF NON-VESTED RESTRICTED STOCK ACTIVITY
| Line item | Shares | Weighted Average / Grant Fair Value |
| --- | --- | --- |
| Balance, December 25, 2021 | 2,077,592 | $2.90 |
| Granted | 996,500 | 1.32 |
| Forfeited | (239,950) | 2.56 |
| Vested | (353,843) | 2.19 |
| Balance, September 24, 2022 | 2,480,299 | $2.40 |
12
*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 nine months ended September 24, 2022 and September 25, 2021 (no tax benefits were recognized):
SCHEDULE
OF STOCK-BASED COMPENSATION EXPENSE
| Line item | 2022 / Three Months Ended / September 24, 2022 | 2021 / Three Months Ended / September 25, 2021 | 2022 / Nine months Ended / September 24, 2022 | 2021 / Nine months Ended / September 25, 2021 |
| --- | --- | --- | --- | --- |
| Cost of product revenues | $41,373 | $37,674 | $119,754 | $206,247 |
| Research and development | 111,928 | 180,152 | 367,654 | 395,217 |
| Selling, general and administrative | 144,247 | 424,358 | 883,246 | 3,165,395 |
| Total | $297,548 | $642,184 | $1,370,654 | $3,766,859 |
Unrecognized
compensation expense for non-vested restricted common stock as of September 24, 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 nine months ended September 24, 2022 were as follows:
SCHEDULE
OF ACCRUED WARRANTY
| Line item | 2022 |
| --- | --- |
| Balance, December 25, 2021 | $517,000 |
| Additions | 2,040,857 |
| Claims | (591,857) |
| Balance, September 24, 2022 | $1,966,000 |
*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 September 24, 2022, the Company had less than $0.1 million of deferred
revenue related to extended warranties.
13
**9.INCOME TAXES**
The
Company recorded a provision for income taxes of less than $0.1 million and $0.1 million in the three and nine months ended September 24, 2022 and September 25, 2021, respectively. As of
September 24, 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 $86.3 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
| Line item | September 24, 2022 | December 25, 2021 | $ Change | % Change |
| --- | --- | --- | --- | --- |
| Contract assets —current | $4,605,889 | $2,299,392 | $2,306,497 | 100% |
| Contract liabilities—current | (1,097,919) | (4,063,031) | 2,965,112 | (73 |
| Contract liabilities—noncurrent | (8,156) | (20,664) | 12,508 | (61 |
| Net contract assets (liabilities) | $3,499,814 | $(1,784,303) | $5,284,117 | (296 |
The
$5.3 million increase in the Company’s net contract assets (liabilities) at September 24, 2022 as compared to December 25, 2021
was primarily due to a change in 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 nine months ended September 24, 2022, the Company recognized revenue of $0.5 million and $3.6 million, respectively, related
to our contract liabilities at December 25, 2021. In the three and nine months ended September 25, 2021, the Company recognized revenue
of $1.1 million and $2.4 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 nine months ended September 24, 2022 or September
25, 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
| Line item | Three months ended / September 24, 2022 | Three months ended / September 25, 2021 | Nine months ended / September 24, 2022 | Nine months ended / September 25, 2021 |
| --- | --- | --- | --- | --- |
| Point in time | 29% | 34% | 23% | 34% |
| Over time | 71% | 66% | 77% | 66% |
| 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 September 24, 2022, the aggregate amount of the transaction price allocated to remaining performance obligations was $20.6 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.
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 September 24, 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
| Line item | Three Months Ended / September 24, 2022 | Three Months Ended / September 25, 2021 | Nine months Ended / September 24, 2022 | Nine months Ended / September 25, 2021 |
| --- | --- | --- | --- | --- |
| Operating lease cost | $242,833 | $295,252 | $742,697 | $874,176 |
At
September 24, 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 nine months ended September 24, 2022) | $227,363 |
| 2023 | 968,535 |
| 2024 | 878,450 |
| 2025 | 634,147 |
| 2026 | 604,000 |
| Thereafter | 805,332 |
| Total future lease payments | 4,117,827 |
| Less imputed interest | (602,208) |
| Total | $3,515,619 |
The
Company’s lease liabilities recognized in the Company’s condensed consolidated balance sheets at September 24, 2022 were
as follows:
SCHEDULE OF OPERATING LEASE PAYMENTS RECOGNIZED IN CONSOLIDATED BALANCE SHEETS
_September 24, 2022_
| | |
| --- | --- |
| Operating lease liabilities - current | $761,734 |
| Operating lease liabilities - noncurrent | 2,753,885 |
| Total lease liabilities | $3,515,619 |
Supplemental
cash flow information related to leases was as follows:
SCHEDULE OF SUPPLEMENTAL INFORMATION RELATED TO LEASES
_September 24, 2022_
| Line item | Nine months ended |
| --- | --- |
| Cash paid for amounts included in the measurement of operating lease liabilities | $743,785 |
Other
information related to leases was as follows:
September 24, 2022
Weighted Average Discount Rate - Operating Leases 5.93%
Weighted Average Remaining Lease Term - Operating Leases (in years) 4.92
15
**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 September 24, 2022 and December 25, 2021 were:
SCHEDULE OF LONG-LIVED ASSETS BY GEOGRAPHIC AREAS
| Total Long-lived Assets (in thousands) | September 24, 2022 | December 25, 2021 |
| --- | --- | --- |
| U.S. | $4,770 | $5,381 |
| United Kingdom | 398 | 264 |
| Japan | — | 72 |
| Total | $5,168 | $5,717 |
The
Company disaggregates its revenue from contracts with customers by geographic location and by display application, as it believes it
best depicts how the nature, amount, timing and uncertainty of the Company’s revenue and cash flows are affected by economic factors.
During
the three and nine months ended September 24, 2022 and September 25, 2021, the Company derived its sales from the following geographies:
SCHEDULE OF SEGMENT INFORMATION BY REVENUE TYPE
| (In thousands, except percentages) | Three months ended / September 24, 2022 / Revenue | Three months ended / September 24, 2022 / % of Total | Three months ended / September 25, 2021 / Revenue | Three months ended / September 25, 2021 / % of Total | Nine months ended / September 24, 2022 / Revenue | Nine months ended / September 24, 2022 / % of Total | Nine months ended / September 25, 2021 / Revenue | Nine months ended / September 25, 2021 / % of Total |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| United States | $9,360 | 80% | $7,665 | 70% | $28,695 | 82% | $22,293 | 69% |
| Other Americas | 4 | - | - | - | 4 | - | - | - |
| Total Americas | 9,364 | 80 | 7,665 | 70 | 28,699 | 82 | 22,293 | 69 |
| Asia - Pacific | 2,039 | 17 | 2,771 | 26 | 5,747 | 16 | 9,158 | 28 |
| Europe | 326 | 3 | 451 | 4 | 771 | 2 | 1,018 | 3 |
| Total Revenues | $11,729 | 100% | $10,887 | 100% | $35,217 | 100% | $32,469 | 100% |
During
the three and nine months ended September 24, 2022 and September 25, 2021, the Company derived its sales from the following display applications:
SCHEDULE OF SEGMENT REPORTING INFORMATION, BY SEGMENT
| (In thousands) | Three months ended / September 24, 2022 | Three months ended / September 25, 2021 | Nine months ended / September 24, 2022 | Nine months ended / September 25, 2021 |
| --- | --- | --- | --- | --- |
| Defense | $5,851 | $3,483 | $17,695 | $12,257 |
| Industrial | 1,727 | 2,724 | 4,889 | 7,394 |
| Consumer | 676 | 384 | 1,182 | 1,318 |
| R&D | 3,375 | 4,099 | 11,089 | 10,364 |
| Other | 100 | 197 | 362 | 1,136 |
| Total Revenues | $11,729 | $10,887 | $35,217 | $32,469 |
**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, the Company has not recorded an accrual for litigation or claims related to this matter
for the period ended September 24, 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.
16
**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 nine months ended September 24, 2022 and September 25, 2021, the Company had the following transactions with related parties:
SCHEDULE OF TRANSACTIONS WITH RELATED PARTIES
| Line item | Sales / Three Months Ended / September 24, 2022 | Sales / Three Months Ended / September 25, 2021 |
| --- | --- | --- |
| HMDmd, Inc. | $329,100 | $262,096 |
| RealWear, Inc. | 108,725 | 539,250 |
| Sales | $437,825 | $801,346 |
| Line item | Sales / Nine Months Ended / September 24, 2022 | Sales / Nine Months Ended / September 25, 2021 |
| --- | --- | --- |
| HMDmd, Inc. | $392,025 | $506,986 |
| RealWear, Inc. | 827,746 | 3,100,207 |
| Sales | $1,219,771 | $3,607,193 |
At
September 24, 2022 and December 25, 2021, the Company had the following receivables with related parties:
| Line item | September 24, 2022 / Receivables | December 25, 2021 / Receivables |
| --- | --- | --- |
| HMDmd, Inc. | $358,500 | - |
| RealWear, Inc. | 160,806 | 306,307 |
| | $519,306 | $306,307 |
17
**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 25, 2021. These factors include: the extent of the impact of the coronavirus (“COVID-19”) pandemic and
government responses thereto on our business and operations, and the economic and societal disruptions resulting from the COVID-19 pandemic;
our ability to source semiconductor components and other raw materials used in the manufacturing of our products amidst continued intermittent
shortages, including from new and alternative suppliers; our ability to prosecute and defend our proprietary technology aggressively
or successfully; our ability to 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, and our expectation that if we do not 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 military, 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.
18
The
following discussion should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended December 25, 2021 and
our unaudited condensed consolidated financial statements included in this Form 10-Q.
*Results
of Operations*
Our
interim period results of operations and period-to-period comparisons of such results may not be indicative of our future operating results.
Additionally, we use a fiscal calendar which may result in differences in the number of workdays in the current and comparable prior
interim periods and could affect period-to-period comparisons. The following discussions of comparative results among periods, including
the discussion of results by display application, should be viewed in this context.
*Revenues.* For the three and nine months ended September 24, 2022 and September 25, 2021, our revenues by display application, which include
product sales and amounts earned from research and development contracts (“R&D”), were as follows:
| (In thousands) | Three months ended / September 24, 2022 | Three months ended / September 25, 2021 | Nine months ended / September 24, 2022 | Nine months ended / September 25, 2021 |
| --- | --- | --- | --- | --- |
| Defense | $5,851 | $3,483 | $17,695 | $12,257 |
| Industrial | 1,727 | 2,724 | 4,889 | 7,394 |
| Consumer | 676 | 384 | 1,182 | 1,318 |
| R&D | 3,375 | 4,099 | 11,089 | 10,364 |
| Other | 100 | 197 | 362 | 1,136 |
| Total Revenues | $11,729 | $10,887 | $35,217 | $32,469 |
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 for the three and nine months ended September 24, 2022 as compared to the three and nine months
ended September 25, 2021 is primarily from an increase in volume shipments for our thermal weapon sight systems for soldiers. We continue
to experience intermittent shortages of raw materials, which affected our ability to ship units in the nine month period ended September 24, 2022 and may
affect our ability to manufacture and ship products in the fourth quarter of 2022 and beyond.
19
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 and nine months ended September 24, 2022 as compared to the three and nine months ended September 25, 2021
was primarily due to a decrease in sales of products used within wearable headsets used for applications in manufacturing and
distribution and a decrease in sales of display products for 3D automated optical inspection (“AOI”) metrology equipment. Shortages of certain components affected our
ability to manufacture and ship products in 2022 for the AOI market.
Our
displays for Consumer applications are used primarily in thermal imaging products, recreational rifle and hand-held scopes and augmented
reality (AR) and virtual reality (VR) headsets. The increases in Consumer applications revenues for the three months ended September
24, 2022 as compared to the three months ended September 25, 2021 were primarily due to an increased demand for our organic light emitting
diode (“OLED”) products. The decreases in Consumer applications revenues for the nine months ended September 24, 2022 as
compared to the nine months ended September 25, 2021 were primarily due to a decreased demand for our OLED products. Our OLED
products are new and therefore orders are sporadic as customers are qualifying and developing products using our OLED products.
R&D
revenues decreased in the three months ended September 24, 2022 as compared to the three months ended September 25, 2021, primarily due
to existing customer funded R&D programs moving into production. R&D revenues increased in the nine months ended September 24,
2022 as compared to the nine months ended September 25, 2021, primarily due to an increase in funding for U.S. defense programs and development
of OLED displays.
International
revenues represented 20% and 18% of total revenues for the three and nine months ended September 24, 2022, respectively, and 30% and 31% of total
revenues for the three and nine months ended September 25, 2021, 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
decrease in international revenues was a result of a decrease in sales of products for 3D AOI 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.
*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 and nine months ended September 24, 2022 and September 25, 2021, were as follows:
| (In thousands, except for percentages) | Three Months Ended / September 24, 2022 | Three Months Ended / September 25, 2021 | Nine Months Ended / September 24, 2022 | Nine Months Ended / September 25, 2021 |
| --- | --- | --- | --- | --- |
| Cost of product revenues | $7,987 | $5,145 | $23,676 | $17,586 |
| Cost of product revenues as a % of net product revenues | 97% | 78% | 100% | 83% |
The
increase in cost of product revenues as a percentage of net product revenues for the three months ended September 24, 2022, as
compared to the three months ended September 25, 2021, was primarily due to an additional $1.0 million warranty charge
resulting from defective material received from a supplier and manufacturing inefficiencies caused by supply chain disruptions. The
increase in cost of product revenues as a percentage of net product revenues for the nine months ended September 24, 2022, as
compared to the nine months ended September 25, 2021, was primarily due to lower manufacturing efficiencies driven by disruptions to
the manufacturing process caused by intermittent raw material shortages, higher prices for raw materials, and the $1.0 million warranty charge.
During
2021, we became aware of global shortages of semiconductor components and production capacity affecting many industries. In the first
nine months of 2022, we were impacted by a shortage of several semiconductor components from our regular vendors that are necessary to
manufacture our products. We are also seeing prices increase for semiconductor components and other raw materials. We are evaluating
other possible sources for the components we use and are in the process of redesigning certain of our products to incorporate alternative
semiconductor components. If we are unable to find replacement components, we expect that our production will be disrupted. 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.
20
*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 2022, we expect our R&D
expenditures to be related to our display products, overlay weapon sights and OLED display technologies. Funded and internal R&D
expenses are combined in research and development expenses in the condensed consolidated statements of operations. R&D expenses for
the three and nine months ended September 24, 2022 and September 25, 2021 were as follows:
| (In thousands) | Three Months Ended / September 24, 2022 | Three Months Ended / September 25, 2021 | Nine Months Ended / September 24, 2022 | Nine Months Ended / September 25, 2021 |
| --- | --- | --- | --- | --- |
| Funded | $1,843 | $1,996 | $8,391 | $6,622 |
| Internal | 1,598 | 1,756 | 5,604 | 4,433 |
| Total research and development expense | $3,441 | $3,752 | $13,995 | $11,055 |
Funded
R&D expense for the three months ended September 24, 2022 decreased as compared to the three months ended September 25, 2021 primarily
due to U.S. defense programs transitioning to production. Funded R&D expense for the nine months ended September 24, 2022 increased
as compared to the nine months ended September 25, 2021 primarily due to increased spending on U.S. defense programs. Internal R&D
expenses for the three months ended September 24, 2022 decreased compared to the three months ended September 25, 2021 primarily due
to decrease in OLED development costs. Internal R&D expenses for the nine months ended September 24, 2022 increased compared to the
nine months ended September 25, 2021 primarily due to an increase in OLED development costs and the redesign of certain products to incorporate
different semiconductor components as a result of shortages of the legacy semiconductor components.
*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 and nine months ended September 24, 2022 and September 25, 2021 were as follows:
| (In thousands, except for percentages) | Three Months Ended / September 24, 2022 | Three Months Ended / September 25, 2021 | Nine Months Ended / September 24, 2022 | Nine Months Ended / September 25, 2021 |
| --- | --- | --- | --- | --- |
| Selling, general and administration expense | $4,320 | $4,036 | $13,112 | $13,983 |
| Selling, general and administration expense as a % of revenues | 37% | 37% | 37% | 43% |
S,G&A
expense increased for the three months ended September 24, 2022 as compared to the three months ended September 25, 2021 primarily due
to an increase in compensation and professional fees, which were partially offset by lower stock-based compensation. S,G&A expense
decreased for the nine months ended September 24, 2022 as compared to the nine months ended September 25, 2021 primarily due to a decrease
in stock-based compensation and professional fees partially offset by increases in compensation costs, information technology expenses and
travel expenses.
*Other
(Expense) Income, net.* Other (expense) income, net, is primarily composed of interest income, foreign currency transaction and remeasurement
gains and losses incurred by our U.K.-based subsidiary and fair value adjustments for equity investments. Other (expense) income, net, for the three
and nine months ended September 24, 2022 and September 25, 2021 was as follows:
| (In thousands) | Three Months Ended / September 24, 2022 | Three Months Ended / September 25, 2021 | Nine Months Ended / September 24, 2022 | Nine Months Ended / September 25, 2021 |
| --- | --- | --- | --- | --- |
| Other (expense) income, net | $(2,094) | $(51) | $2,506 | $89 |
In the three months ended September
24, 2022, we recorded a $2.0 million impairment charge on an equity investment. Other income for the first quarter of 2022 includes a
gain of $4.7 million resulting from the mark to market of an equity investment. During the three and nine months ended September 24, 2022,
we recorded foreign currency losses of $0.1 million and $0.2 million, respectively, as compared to foreign currency losses of less than
$0.1 million and gains of $0.1 million, respectively for the three and nine months ended September 25, 2021.
*Tax
Provision.* We recorded a provision for income taxes of less than $0.1 million and approximately $0.1 million in the three and nine
months ended September 24, 2022 and September 25, 2021, respectively.
Net
Loss Attributable to Noncontrolling Interest. As of September 24, 2022, we owned 80% of the equity of eMDT America (“eMDT”).
Net loss attributable to noncontrolling interest on our condensed consolidated statements of operations represents the portion of the
results of operations of eMDT which is allocated to the stockholders of the equity interests not owned by us. The change in net loss
attributable to noncontrolling interest is the result of the change in the results of operations of eMDT for the three and nine months
ended September 24, 2022 and September 25, 2021.
21
*Net
Loss Attributable to Kopin Corporation.* We incurred net losses attributable to Kopin Corporation of $6.1 million and $13.2 million
during the three and nine months ended September 24, 2022, respectively, compared to net losses attributable to Kopin Corporation of
$2.1 million and $10.1 million during the three and nine months ended September 25, 2021, respectively. The increase in the net loss
attributable to Kopin Corporation during the three and nine months ended September 24, 2022 compared to the three and nine months ended
September 25, 2021 was partially due to a $1.0 million warranty charge due to a supply chain related quality issue from a vendor, lower
gross margins, and a $2.0 million impairment charge on an equity investment.
**Liquidity
and Capital Resources**
At
September 24, 2022 and December 25, 2021, we had cash and cash equivalents and marketable debt securities of $15.0 million and $29.3
million, respectively, and working capital of $21.4 million and $34.7 million, respectively. The change in cash and cash equivalents
and marketable debt securities was primarily due to net outflow of cash used in operating activities of $15.6 million and capital expenditures
of $0.6 million, partially offset by the sale of 2.3 million shares of common stock for net proceeds of $2.8 million.
We have incurred net losses of $13.2 million and $13.4 million for the
nine-month period ended September 24, 2022 and for the fiscal year ended December 25, 2021, respectively, and net cash outflows from operations
of $15.6 million and $10.7 million for the nine-month period ended September 24, 2022 and for the fiscal year ended December 25, 2021,
respectively. These factors initially raise substantial doubt about our ability to continue as a going concern. Management’s plans
to alleviate the conditions that raise substantial doubt include operational improvements being implemented and the curtailment of certain
development programs, both of which are expected to preserve cash.
During
the nine months ended September 24, 2022, we sold 2.2 million shares of common stock and 0.1 million shares of treasury stock for gross
proceeds of $2.9 million (average of $1.26 per share) before deducting broker expenses paid by us of less than $0.1 million, pursuant
to our 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 $50.0 million of our common
stock. We have approximately $41.4 million worth of common stock remaining available for sale under the ATM Agreement.
During
the nine months ended September 25, 2021, wey sold 3.1 million shares of common stock for gross proceeds of $21.7 million (average
of $7.00 per share), before deducting broker expenses paid by us of $0.7 million, pursuant to our ATM agreement with
Stifel as agent, under which we can sell up to $50.0 million of our common stock and an At-The-Market Equity Offering Sales
Agreement dated as of February 8, 2019 (the “Previous ATM Agreement”) also 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.
Cash
and cash equivalents and marketable debt securities held in U.S. dollars at September 24, 2022 and December 25, 2021 were as follows:
| Line item | September 24, 2022 | December 25, 2021 |
| --- | --- | --- |
| Domestic locations | $14,127,354 | $27,031,695 |
| International locations | 81,148 | 865,416 |
| Subtotal cash and cash equivalents marketable debt securities held in U.S. dollars | 14,208,502 | 27,897,111 |
| Cash and cash equivalents held in other currencies and converted to U.S. dollars | 794,507 | 1,398,355 |
| Total cash and cash equivalents and marketable debt securities | $15,003,009 | $29,295,466 |
22
We
have no plans to repatriate the cash and cash equivalents held in our foreign subsidiary, Forth Dimension Displays, Ltd. 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 2022.
In October 2022, we entered into an agreement to invest $2.0 million in
an Asian company pending the completion of a development agreement and other actions between Kopin and the Asian company. The investment
is expected to take place in the fourth quarter of 2022.
**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.
23
**Item
4. Controls and Procedures**
**Evaluation
of Disclosure Controls and Procedures**
As
of September 24, 2022, 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 September 24, 2022, 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
September 24, 2022, 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.
**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 September
24, 2022 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial
reporting.
24
**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. 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 September 24, 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.
**Item
1A. Risk Factors**
Our
business and financial results are subject to numerous risks and uncertainties. As a result, the risks and uncertainties discussed in
Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the fiscal year ended December 25, 2021 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 25, 2021, except for the risk factor noted below.
*Supply
shortages have and could continue to 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. The semiconductor industry has been and continues to experience a shortage of semiconductor components. We have
experienced intermittent shortages of raw materials, which has affected our ability to manufacture and ship units. These shortages have
also resulted in an increase in the cost of raw materials and semiconductor components. If these shortages were to further affect our
supply of raw materials, our ability to manufacture and distribute our products could continue to be adversely affected, which in turn
would adversely affect our results of operations or financial condition.
*Geopolitical
tensions and any conflicts resulting therefrom may negatively affect our ability to source materials and components required to manufacture
our products.* We depend principally on a Taiwanese foundry for the fabrication of integrated circuits for our defense display products.
This reliance involves several risks, including reduced control over availability, capacity utilization, delivery schedules, manufacturing
yields, and costs. Geopolitical changes in China-Taiwan relations could disrupt this foundry’s operations and cause these risks
to materialize, which would adversely affect our ability to manufacture our Display products. If this foundry were to become unable to
provide the required capacity, services and or quality on a timely basis due to a military or other form of conflict, geopolitical tensions,
or other reasons relating thereto, we may not be able to manufacture and ship our Display products or we may be forced to manufacture
them in limited quantities until replacement foundry services can be obtained. Furthermore, we cannot assure that we would be able to
establish alternative manufacturing and packaging relationships on acceptable terms.
25
**Item
2. Unregistered Sales of Equity Securities and Use of Proceeds**
We
did not sell any securities during the nine months ended September 24, 2022 that were not registered under the Securities Act.
**Item
6. Exhibits**
| Exhibit No. | Description |
| --- | --- |
| 10.1 | Letter Agreement between Kopin Corporation and Michael Murray, dated July 14, 2022. |
| 10.2 | Amendment to Employment Agreement between Kopin Corporation and John C. C. Fan, dated September 5, 2022. |
| 31.1 | Certification of Michael Murray, Chief Executive Officer, filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350) * |
| 31.2 | Certification of Richard A. Sneider, Chief Financial Officer, filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350) * |
| 32.1 | Certification of Michael Murray, Chief Executive Officer, furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350) ** |
| 32.2 | Certification of Richard A. Sneider, Chief Financial Officer, furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350) ** |
| 101.INS | Inline XBRL Instance Document* |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document* |
| 101.CAL | Inline XBRL Taxonomy Calculation Linkbase Document* |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document* |
| 101.LAB | Inline XBRL Taxonomy Label Linkbase Document* |
| 101.PRE | Inline XBRL Taxonomy Presentation Linkbase Document* |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
\* Submitted electronically herewith
\*\* Furnished and not filed herewith
Attached
as Exhibit 101 to this report are the following formatted in XBRL (Extensible Business Reporting Language): (i) Condensed Consolidated
Balance Sheets at September 24, 2022 (Unaudited) and December 25, 2021, (ii) Condensed Consolidated Statements of Operations (Unaudited)
for the three and nine months ended September 24, 2022 and September 25, 2021, (iii) Condensed Consolidated Statements of Comprehensive
Loss (Unaudited) for the three and nine months ended September 24, 2022 and September 25, 2021, (iv) Condensed Consolidated Statements
of Stockholders’ Equity (Unaudited) for the three and nine months ended September 24, 2022 and September 25, 2021, (v) Condensed
Consolidated Statements of Cash Flows (Unaudited) for the nine months ended September 24, 2022 and September 25, 2021, and (vi) Notes
to Unaudited Condensed Consolidated Financial Statements.
26
**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: November 8, 2022 By: */S/ MICHAEL MURRAY*
**Michael Murray**
**President, Chief Executive Officer**
**(Principal Executive Officer)**
Date: November 8, 2022 By: */S/ RICHARD A. SNEIDER*
**Richard A. Sneider**
**Treasurer and Chief Financial Officer**
**(Principal Financial and Accounting Officer)**
27
---
## EX-10.1
SEC source: [ex10-1.htm](https://www.sec.gov/Archives/edgar/data/771266/000149315222030943/ex10-1.htm)
**Exhibit
10.1**
July
14, 2022
Michael
Murray
Dear
Michael,
It
is my pleasure to offer you a position as Chief Executive Officer of Kopin Corporation (“Kopin”). I am certain your experience
will greatly enhance Kopin’s capabilities.
Your
base bi-weekly rate of pay will be $17,307.69 which will be paid bi-weekly in accordance with Kopin’s standard payroll practices
and is equal to a gross annual salary of $450,000.
In
addition, upon commencement of employment, we will grant you eight hundred thousand (800,000) restricted stock units representing eight
hundred thousand (800,000) shares of Kopin’s common stock upon commencement of employment. The eight hundred thousand (800,000)
restricted stock units will vest at the rate of 20% on each of the first five December 10th anniversaries occurring after December 10,
2022.You will also be eligible, based on performance, to receive one hundred and thirty-five thousand (135,000) restricted stock units
in December 2022 which will be subject to similar vesting conditions as the restricted stock unit grants for other officers of Kopin
which is typically at the rate of 25% on each of the first four December 10th anniversaries occurring after December 10, 2022. The grant
of these restricted stock units will be made under, and pursuant to the terms of, the 2020 Equity Incentive Plan (the “Plan”)
and Kopin’s standard restricted stock unit agreement, subject to formal approval by Kopin’s Compensation Committee. You must
be employed with Kopin on the applicable vesting date for the restricted stock units to vest.
During
your continued employment for fiscal years following 2022, you will be eligible to receive additional cash and equity annual bonuses
and long-term awards, subject to formal approval by Kopin’s Compensation Committee (“Annual Award”). The form (i.e..,
cash or equity) of the Annual Award and all other terms and conditions will be determined by the Compensation Committee. The actual amount
of your Annual Award in any fiscal year shall be determined by the Compensation Committee based upon competitive market data at that
time and your performance based on predefined performance or other metrics. For illustration purposes only, based on an analysis of the
competitive market place and the Company’s current stock price the range of performance based annual awards would be in the range
$375,000 to $450,000.
We
are pleased to pay you a discretionary sign-on/retention bonus in the gross amount of $100,000 (“Bonus Payment”). You agree
that, if you do not remain continuously employed by Kopin for a period of one (1) year from your start date, you will repay to Kopin
the Bonus Payment in full, within thirty (30) calendar days following your termination from employment except in the case of a termination
of your employment due to death or disability or Change in Control.
You
will be eligible for Kopin’s standard benefit package and to participate in all applicable group employee benefit plans or programs
offered by Kopin on the same basis as other Westborough employees, in accordance with the terms of those benefit plans or programs, as
they may be amended from time to time. Current benefits for which you are eligible include one hundred and twenty (120) hours paid vacation
per year which accrues pro-rata monthly, forty (40) hours of annual sick time which accrues pro-rata each pay period, 401K plan, medical,
dental, vision and life insurance, as well as the established holiday schedule. Please note that paid vacation cannot be taken within
the first three months of employment unless previously agreed upon. Nothing in this offer letter shall preclude Kopin or any of its affiliates
from terminating or amending any employee benefit plan or program from time to time.
Kopin
Corporation 125 North Drive, Westborough, MA 01581 Tel: 508.870.5959 Fax: 508.870.0660 www.Kopin.com
Kopin
Confidential
In
the event of your termination of employment by Kopin without Cause (defined in Appendix 1 attached to this offer letter) upon or within
twelve (12) months following a Change of Control (defined in Appendix 1 attached to this offer letter), and provided you execute and
do not revoke a separation agreement and general release of any and all claims against Kopin and all related parties with respect to
all matters arising out of your employment by Kopin, and the termination thereof (“Release”), you will receive, in lieu of
any payments under any severance plan or program for employees or executives, (i) a lump sum payment within sixty (60) days following
the termination date equal to the greater of $450,000 and your annualized base salary immediately prior to your termination, (ii) any
outstanding equity awards that you hold on the termination date that vest based solely on continued service and would have vested over
the following twelve (12) months if not for the termination of employment will become vested, (iii) a lump sum payment within sixty (60)
days following the termination date equal to the COBRA premiums that you would pay if you had elected continued health coverage under
Kopin’s health plan for you and your eligible dependents for the twelve (12) months following your termination date, based on the
COBRA rates in effect at the termination date and (IV) if you are terminated without Cause as a result of a Change in Control occurs
within one (1) year of your commencement of employment you will not be required to repay the sign-on/retention bonus.
Effective
as of the date of any termination of employment, you will resign from all Kopin-related positions, including as an officer and director
of Kopin and its parents, subsidiaries and affiliates.
In
the event of a change in ownership or control under Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”),
if it shall be determined that any payment or distribution in the nature of compensation (within the meaning of Section 280G(b)(2) of
the Code) to or for your benefit, whether paid or payable or distributed or distributable pursuant to the terms of this offer letter
or otherwise (a “Payment”), would constitute an “excess parachute payment” within the meaning of Section 280G
of the Code, the aggregate present value of the Payments covered by this offer letter shall be reduced (but not below zero) to the Reduced
Amount (defined below) if and only if the Accounting Firm (described below) determines that the reduction will provide you with a greater
net after-tax benefit than would no reduction. No reduction shall be made unless the reduction would provide you with a greater net after-tax
benefit. The determinations shall be made as follows:
(i)
The “Reduced Amount” shall be an amount expressed in present value which maximizes the aggregate present value of
Payments under this offer letter without causing any Payment under this offer letter to be subject to the Excise Tax (defined
below), determined in accordance with Section 280G(d)(4) of the Code. The term “Excise Tax” means the excise tax imposed
under Section 4999 of the Code, together with any interest or penalties imposed with respect to such excise tax.
(ii)
Payments contemplated under this offer letter shall be reduced on a nondiscretionary basis in such a way as to minimize the
reduction in the economic value deliverable to you. Where more than one Payment has the same value for this purpose and they are
payable at different times, they will be reduced on a pro rata basis.
(iii)
All determinations to be made with respect to the analysis under 280G of the Code shall be made by an independent certified public
accounting firm selected by Kopin and agreed to by you immediately prior to the change-in-ownership or -control transaction (the
“Accounting Firm”). The Accounting Firm shall provide its determinations and any supporting calculations both to Kopin
and to you. Any such determination by the Accounting Firm shall be binding upon Kopin and you.
All
payments under this offer letter shall be made subject to applicable tax withholding, and Kopin shall withhold from any payments hereunder
all federal, state and local taxes as Kopin is required to withhold pursuant to any law or governmental rule or regulation. You shall
bear all expense of, and be solely responsible for, all federal, state and local taxes due with respect to any payment received hereunder.
Page 2 of 6
This
offer letter and the compensation payable hereunder shall be subject to any applicable clawback or recoupment policies, share trading
policies, and other policies that may be implemented by the Kopin Board of Directors from time to time with respect to officers of Kopin.
This
offer letter is intended to comply with section 409A of the Internal Revenue Code of 1986, as amended (the “Section 409A”),
and its corresponding regulations, or an exemption thereto, and payments may only be made under this offer letter upon an event and in
a manner permitted by Section 409A, to the extent applicable, including the six-month delay for specified employees. Severance benefits
under this offer letter are intended to be exempt from Section 409A under the “short-term deferral” exception. For purposes
of Section 409A of the Code, each payment hereunder shall be treated as a separate payment. In no event may you, directly or indirectly,
designate the fiscal year of a payment. Notwithstanding any provision of this offer letter to the contrary, in no event shall the timing
of the your execution of the Release, directly or indirectly, result in your designating the fiscal year of payment of any amounts of
deferred compensation subject to Section 409A, and if a payment that is subject to execution of the Release could be made in more than
one taxable year, payment shall be made in the later taxable year.
This
offer is contingent upon you not having any other agreement with another employer or similar arrangements that imposes any restriction
on your employment with Kopin. By signing below, you certify that you are not a party to any other such agreement and that your acceptance
of this offer will not breach any obligation to any other party. If you have such an agreement, please immediately provide a copy to
Kopin for review. You further certify that you are not aware of any situation creating or appearing to create a conflict of interest
between you and Kopin.
While
employed by Kopin, you agree to devote your full time, attention, energy, knowledge, and skills to carrying out your duties and responsibilities,
which you promise to perform faithfully, diligently and to the best of your ability. Throughout your employment with Kopin, you will
be subject to and required to comply with such policies and procedures as Kopin may establish from time to time, including, but not limited
to, those set forth in Kopin’s employee handbook, a copy of which will be provided to you on the first day of your employment with
Kopin.
By
signing this letter, you understand and agree your employment is “at will,” meaning that either party can terminate the relationship
at any time with or without cause and with or without notice. This letter is not intended, nor should it be considered, as a contract
of employment. Rather, the terms contained herein are a summary of our initial employment relationship and are subject to later modification
by Kopin. Neither length of employment nor any express or implied representations can alter the at-will employment relationship, which
can be modified only by a written agreement setting forth a specific term of employment and signed by the Chairman of the Board.
This
offer is contingent upon verification of proof of authorization to obtain employment in the United States as required by the Immigration
Reform and Control Act of 1986. On your first day of work, please bring two documents with you; one for identification (i.e., driver’s
license or state issued identification card with photograph) and one for work authorization (i.e., U.S. birth certificate, U.S. passport,
or a social security card without work restrictions).
You
acknowledge that this offer letter represents the entire agreement between you and Kopin with respect to the subject matter hereof and
supersedes any and all prior agreements or understanding between you and Kopin, whether written or verbal,
Page 3 of 6
This
offer letter shall be governed by, and construed and enforced in accordance with, the substantive and procedural laws of Massachusets
without regard to rules governing conflicts of law.
To
accept this offer of employment, please sign and date both copies of this letter. Please return one executed copy to Lindi Lee, Human
Resources Director. Acceptance of this offer is required no later than July 22, 2022 and is contingent on completion of our standard
New Hire processes including acceptable background check and personal references. It is our wish that you will join Kopin Corporation
no later than September 1, 2022.
This
offer of employment is further contingent upon Kopin receiving from you all required signed new-hire documents, including the attached
restrictive covenants agreement.
Sincerely,
*/s/ Richard Sneider*
Richard Sneider
Chief Financial Officer
Agreed to and accepted by:
*/s/ Michael A. Murray*
Michael A. Murray
Page 4 of 6
Appendix
1
“Cause”
shall mean your: (1) breach of this offer letter or any confidentiality, nonsolicitation, noncompetition or inventions assignment agreement
with Kopin and its affiliates; (2) commission of an act of dishonesty, fraud, embezzlement or theft; (3) engagement in conduct that causes,
or is likely to cause, material damage to the property or reputation of Kopin and it affiliates; (4) failure to perform satisfactorily
the material duties of your position (other than by reason of disability) after receipt of a written warning from the Board; (5) conviction
of, or written admission or plea of nolo contendere to, a felony or crime of moral turpitude ; (6) willful contravention of written instructions
of the Board of Directors of Kopin or (6) material failure to comply with Kopin code of conduct or employment policies.
“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 Kopin(“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 paragraph(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) below are satisfied; or
(ii)
Individuals who, as of the date hereof or of the most recent renewal hereof, constitute the Kopin 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 paragraph (i) above
or paragraph (iii) below 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
Page 5 of 6
(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 definition 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
(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 definition which
shall vest by reason of the action of the Board of Directors or the stockholders pursuant hereto 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.
Page 6 of 6
---
## EX-31.1
SEC source: [ex31-1.htm](https://www.sec.gov/Archives/edgar/data/771266/000149315222030943/ex31-1.htm)
**Exhibit
31.1**
CERTIFICATION
OF THE CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302
OF
THE SARBANES-OXLEY ACT OF 2002
I,
Michael Murray, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q for the period ended September 24, 2022, 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:
November 8, 2022
By: */S/ MICHAEL MURRAY*
Michael Murray
**President and Chief Executive Officer**
---
## EX-31.2
SEC source: [ex31-2.htm](https://www.sec.gov/Archives/edgar/data/771266/000149315222030943/ex31-2.htm)
**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 September 24, 2022, 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:
November 8, 2022
By: */S/ RICHARD A. SNEIDER*
**Richard A. Sneider**
**Chief Financial Officer**
---
## EX-32.1
SEC source: [ex32-1.htm](https://www.sec.gov/Archives/edgar/data/771266/000149315222030943/ex32-1.htm)
**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 September 24,
2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael Murray, 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: November 8, 2022
By: */S/ MICHAEL MURRAY*
**Michael Murray**
**President and Chief Executive Officer**
---
## EX-32.2
SEC source: [ex32-2.htm](https://www.sec.gov/Archives/edgar/data/771266/000149315222030943/ex32-2.htm)
**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 September 24,
2022, 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: November 8, 2022
By: */S/ RICHARD A. SNEIDER*
**Richard A. Sneider**
**Chief Financial Officer**