Company Quick10K Filing
Kopin
Price0.71 EPS-0
Shares82 P/E-2
MCap58 P/FCF-3
Net Debt-9 EBIT-33
TEV50 TEV/EBIT-1
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-06-27 Filed 2020-08-06
10-Q 2020-03-28 Filed 2020-05-07
10-K 2019-12-28 Filed 2020-03-11
10-Q 2019-09-28 Filed 2019-11-07
10-Q 2019-06-29 Filed 2019-08-08
10-Q 2019-03-30 Filed 2019-05-09
10-K 2018-12-29 Filed 2019-03-14
10-Q 2018-09-29 Filed 2018-11-08
10-Q 2018-06-30 Filed 2018-08-09
10-Q 2018-03-31 Filed 2018-05-10
10-K 2017-12-30 Filed 2018-03-23
10-Q 2017-09-30 Filed 2017-11-09
10-Q 2017-07-01 Filed 2017-08-10
10-Q 2017-04-01 Filed 2017-05-11
10-K 2016-12-31 Filed 2017-03-23
10-K 2016-09-24 Filed 2017-03-23
10-Q 2016-06-25 Filed 2016-08-03
10-Q 2016-03-26 Filed 2016-05-04
10-K 2015-12-26 Filed 2016-03-04
10-Q 2015-09-26 Filed 2015-11-05
10-Q 2015-06-27 Filed 2015-08-06
10-Q 2015-03-28 Filed 2015-05-11
10-K 2014-12-27 Filed 2015-03-12
10-Q 2014-09-27 Filed 2014-11-06
10-Q 2014-06-28 Filed 2014-08-07
10-Q 2014-03-29 Filed 2014-05-08
10-K 2013-12-28 Filed 2014-03-17
10-Q 2013-09-28 Filed 2013-11-05
10-Q 2013-06-29 Filed 2013-08-08
10-Q 2013-03-30 Filed 2013-05-09
10-K 2012-12-29 Filed 2013-03-18
10-Q 2012-09-29 Filed 2012-11-08
10-Q 2012-06-30 Filed 2012-08-09
10-Q 2012-03-31 Filed 2012-05-10
10-K 2011-12-31 Filed 2012-03-15
10-Q 2011-09-24 Filed 2011-11-03
10-Q 2011-06-25 Filed 2011-08-04
10-Q 2011-03-26 Filed 2011-05-05
10-K 2010-12-25 Filed 2011-03-10
10-Q 2010-09-25 Filed 2010-11-03
10-Q 2010-06-26 Filed 2010-08-03
10-Q 2010-03-27 Filed 2010-05-04
10-K 2009-12-26 Filed 2010-03-08
8-K 2020-08-04 Earnings, Exhibits
8-K 2020-05-18
8-K 2020-05-05
8-K 2020-04-21
8-K 2020-04-17
8-K 2020-04-08
8-K 2020-03-10
8-K 2020-03-02
8-K 2019-11-22
8-K 2019-11-07
8-K 2019-10-09
8-K 2019-10-07
8-K 2019-09-30
8-K 2019-08-08
8-K 2019-05-21
8-K 2019-05-07
8-K 2019-04-12
8-K 2019-04-10
8-K 2019-03-19
8-K 2019-03-15
8-K 2019-03-15
8-K 2019-03-14
8-K 2019-03-12
8-K 2019-02-08
8-K 2019-01-17
8-K 2018-11-08
8-K 2018-08-06
8-K 2018-05-09
8-K 2018-05-08
8-K 2018-03-08
8-K 2018-01-04

KOPN 10Q Quarterly Report

Part 1. Financial Information
Item 1. Condensed Consolidated Financial Statements (Unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 6. Exhibits
EX-31.1 ex31-1.htm
EX-31.2 ex31-2.htm
EX-32.1 ex32-1.htm
EX-32.2 ex32-2.htm

Kopin Earnings 2020-06-27

Balance SheetIncome StatementCash Flow
185148111743702012201420172020
Assets, Equity
251791-7-152012201420172020
Rev, G Profit, Net Income
2518114-3-102012201420172020
Ops, Inv, Fin

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2020-06-27 0000771266 KOPN:SolosTechnologyMember 2018-12-30 2019-06-29 0000771266 KOPN:RealWearIncMember 2019-12-29 2020-06-27 0000771266 KOPN:RealWearIncMember 2018-12-30 2019-06-29 0000771266 KOPN:SolosTechnologyMember 2020-06-27 0000771266 KOPN:SolosTechnologyMember 2019-12-28 0000771266 KOPN:RealWearIncMember 2020-06-27 0000771266 KOPN:RealWearIncMember 2019-12-28 iso4217:USD xbrli:shares iso4217:USD xbrli:shares KOPN:Segment xbrli:pure

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 27, 2020

 

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

 

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 August 4, 2020
Common Stock, par value $0.01   84,963,042

 

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  
   
Item 1. Condensed Consolidated Financial Statements (Unaudited) 3
     
  Condensed Consolidated Balance Sheets at June 27, 2020 (Unaudited) and December 28, 2019 3
     
  Condensed Consolidated Statements of Operations (Unaudited) for the three and six months ended June 27, 2020 and June 29, 2019 4
     
  Condensed Consolidated Statements of Comprehensive Loss (Unaudited) for the three and six months ended June 27, 2020 and June 29, 2019 5
     
  Condensed Consolidated Statements of Stockholders’ Equity (Unaudited) for the three and six months ended June 27, 2020 and June 29, 2019 6
     
  Condensed Consolidated Statements of Cash Flows (Unaudited) for the six months ended June 27, 2020 and June 29, 2019 7
     
  Notes to Unaudited Condensed Consolidated Financial Statements 8
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 18
     
Item 3. Quantitative and Qualitative Disclosures About Market Risk 23
     
Item 4. Controls and Procedures 24
     
Part II – Other Information 25
   
Item 1. Legal Proceedings 25
     
Item 1A. Risk Factors 25
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 26
     
Item 6. Exhibits 26
     
Signatures 27

 

 2 

 

 

Part 1. FINANCIAL INFORMATION

 

Item 1. Condensed Consolidated Financial Statements (Unaudited)

 

KOPIN CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

   June 27, 2020   December 28, 2019 
ASSETS          
Current assets:          
Cash and equivalents  $8,776,820   $6,029,247 
Marketable debt securities, at fair value   6,485,696    15,752,997 
Accounts receivable, net of allowance of $427,000 in 2020 and $938,000 in 2019   6,682,329    6,023,250 
Contract assets and unbilled receivables   2,509,258    921,082 
Inventory   3,712,047    3,768,696 
Prepaid taxes   98,137    104,442 
Prepaid expenses and other current assets   1,298,914    1,164,927 
Total current assets   29,563,201    33,764,641 
Property, plant and equipment, net   1,328,207    1,473,341 
Operating lease right-of-use assets   2,260,319    2,753,963 
Other assets   253,750    517,411 
Equity investments   4,222,896    4,537,159 
Total assets  $37,628,373   $43,046,515 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY          
Current liabilities:          
Accounts payable  $3,068,657   $3,998,234 
Accrued payroll and expenses   1,630,783    2,203,773 
Accrued warranty   508,000    509,000 
Contract liabilities and billings in excess of revenues earned   1,687,403    796,794 
Operating lease liabilities   1,077,756    1,041,695 
Other accrued liabilities   1,891,756    2,202,217 
Customer deposits   608,386    33,000 
Taxes payable   506,000    525,000 
Total current liabilities   10,978,741    11,309,713 
Noncurrent contract liabilities and asset retirement obligations   248,384    268,440 
Operating lease liabilities, net of current portion   1,236,818    1,791,590 
Other long-term obligations   1,104,514    1,085,160 
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, 120,000,000 shares; issued 89,483,546 shares in 2020 and 88,912,796 shares in 2019; outstanding 82,596,416 in 2020 and 82,536,416 in 2019, respectively   871,096    870,496 
Additional paid-in capital   344,776,079    344,456,537 
Treasury stock (4,513,256 shares in 2020 and 2019, at cost)   (17,238,669)   (17,238,669)
Accumulated other comprehensive income   1,705,520    1,757,184 
Accumulated deficit   (305,953,973)   (301,236,913)
Total Kopin Corporation stockholders’ equity   24,160,053    28,608,635 
Noncontrolling interest   (100,137)   (17,023)
Total Kopin Corporation stockholders’ equity   24,059,916    28,591,612 
Total liabilities and stockholders’ equity  $37,628,373   $43,046,515 

 

See notes to unaudited condensed consolidated financial statements

 

 3 

 

 

KOPIN CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

   Three months ended   Three months ended   Six months ended   Six months ended 
   June 27, 2020   June 29, 2019   June 27, 2020   June 29, 2019 
Revenues:                    
Net product revenues  $6,670,303   $4,435,401   $12,589,509   $9,049,257 
Research and development and other revenues   2,144,343    4,674,732    4,103,742    5,603,801 
Total revenues   8,814,646    9,110,133    16,693,251    14,653,058 
Expenses:                    
Cost of product revenues   4,779,577    5,242,514    10,427,424    11,119,591 
Research and development   2,221,154    3,330,202    4,560,902    8,296,918 
Selling, general and administration   2,909,366    5,375,671    6,341,457    11,658,474 
Total expenses   9,910,097    13,948,387    21,329,783    31,074,983 
Loss from operations   (1,095,451)    (4,838,254)    (4,636,532)    (16,421,925) 
Other income:                    
Interest income   34,030    154,310    107,436    317,671 
Other expense, net   (49,757)    (111,472)    (37,080)    (221,207) 
Foreign currency transaction gains (losses)   9,995    (183,608)    (162,998)    52,527 
Gain on investments   -    768,000    -    768,000 
Total other income and expense   (5,732)    627,230    (92,642)    916,991 
Loss before provision for income taxes and net loss (income) attributable to noncontrolling interest   (1,101,183)    (4,211,024)    (4,729,174)    (15,504,934) 
Tax provision   (42,000)    (26,000)    (71,000)    (52,000) 
Net loss   (1,143,183)    (4,237,024)    (4,800,174)    (15,556,934) 
Net loss (income) attributable to the noncontrolling interest   21,642    (23,367)    83,114    (34,384) 
Net loss attributable to Kopin Corporation  $(1,121,541)   $(4,260,391)   $(4,717,060)   $(15,591,318) 
Net loss per share                    
Basic and diluted  $(0.01)   $(0.05)   $(0.06)   $(0.20) 
Weighted average number of common shares outstanding                    
Basic and diluted   82,569,379    81,950,352    82,552,896    78,459,666 

 

See notes to unaudited condensed consolidated financial statements

 

 4 

 

 

KOPIN CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited)

 

   Three months ended   Three months ended   Six months ended   Six months ended 
   June 27, 2020   June 29, 2019   June 27, 2020   June 29, 2019 
Net loss  $(1,143,183)   $(4,237,024)   $(4,800,174)   $(15,556,934) 
Other comprehensive income (loss), net of tax:                    
Foreign currency translation adjustments   (37,035)    121,026    152,043    (1,038) 
Unrealized holding gain (loss) on marketable securities   95,683    104,257    (182,679)    326,257 
Reclassification of holding losses in net loss   (11,680)    (4,815)    (21,028)    (7,434) 
Other comprehensive income (loss), net of tax   46,968    220,468    (51,664)    317,785 
Comprehensive loss   (1,096,215)    (4,016,556)    (4,851,838)    (15,239,149) 
Comprehensive loss (income) attributable to the noncontrolling interest   21,642    (23,367)    83,114    (34,384) 
Comprehensive loss attributable to Kopin Corporation  $(1,074,573)   $(4,039,923)   $(4,768,724)   $(15,273,533) 

 

See notes to unaudited condensed consolidated financial statements

 

 5 

 

 

 

KOPIN CORPORATION

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)

 

  

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 28, 2019   87,049,672   $870,496   $344,456,537   $(17,238,669)  $1,757,184   $(301,236,913)  $28,608,635   $(17,023)  $28,591,612 
Stock-based compensation expense   -    -    158,465    -    -    -    158,465    -    158,465 
Other comprehensive Income   -    -    -    -    (98,632)   -    (98,632)   -    (98,632)
Net loss   -    -    -    -    -    (3,595,519)   (3,595,519)   (61,472)   (3,656,991)
Balance, March 28, 2020   87,049,672    870,496    344,615,002    (17,238,669)   1,658,552    (304,832,432)   25,072,949    (78,495)   24,994,454 
Stock-based compensation expense   -    -    161,677    -    -    -    161,677    -    161,677 
Vesting of restricted stock   60,000    600    (600)                  -           
Other comprehensive Income   -    -    -    -    46,968    -    46,968    -    46,968 
Net loss   -    -    -    -    -    (1,121,541)   (1,121,541)   (21,642)   (1,143,183)
Balance, June 27, 2020   87,109,672   $871,096   $344,776,079   $(17,238,669)  $1,705,520   $(305,953,973)  $24,160,053   $(100,137)  $24,059,916

 

 

 

                                             
    

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 29, 2018   78,522,066   $785,220   $334,491,397   $(17,238,669)  $1,554,587   $(271,730,661)  $47,861,874   $(149,053)  $47,712,821 
Stock-based compensation expense   -    -    815,842    -    -    -    815,842    -    815,842 
Vesting of restricted stock   10,000    100    (100)   -    -    -    -    -    - 
Repurchases of restricted stock to satisfy tax withholding obligations   (4,294)   (43)   (7,085)   -    -    -    (7,128)   -    (7,128)
Other comprehensive loss   -    -    -    -    97,317    -    97,317    -    97,317 
Sale of registered stock   7,272,727    72,727    7,237,273    -    -    -    7,310,000    -    7,310,000 
Net (loss) income   -    -    -    -    -    (11,330,927)   (11,330,927)   11,017    (11,319,910)
Balance, March 30, 2019   85,800,499    858,004    342,537,327    (17,238,669)   1,651,904    (283,061,588)   44,746,978    (138,036)   44,608,942 
Stock-based compensation expense   -    -    538,474    -    -    -    538,474    -    538,474 
Vesting of restricted stock   60,000    600    (600)   -    -    -    -    -    - 
Other comprehensive loss   -    -    -    -    220,468    -    220,468    -    220,468 
Sale of registered stock   706,454    7,065    721,466    -    -    -    728,531    -    728,531 
Net (loss) income   -    -    -    -    -    (4,260,391)   (4,260,391)   23,367    (4,237,024)
Balance, June 29, 2019  86,566,953   $865,669   $343,796,667   $(17,238,669)  $1,872,372   $(287,321,979)  $41,974,060   $(114,669)  $41,859,391 

  

See notes to unaudited condensed consolidated financial statements

 

 6 

 

 

KOPIN CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

   Six months ended   Six months ended 
   June 27, 2020   June 29, 2019 
Cash flows from operating activities:          
Net loss  $(4,800,174)   $(15,556,934) 
Adjustments to reconcile net loss to net cash used in operating activities:          
Depreciation and amortization   341,743    438,294 
Accretion of premium or discount on marketable debt securities   4,400    - 
Recovery of impairment on marketable debt securities   (150,644)    - 
Stock-based compensation   320,142    1,354,316 
Foreign currency losses (gains)   186,516    (73,231) 
Change in allowance for bad debt   (504,432)    330,172 
Write-off of excess inventory   924,679    2,406,492 
Unrealized gain on investments   -    (768,000) 
Loss on disposal of plant and equipment   -    251,291 
Deferred income taxes   58,268    52,518 
Other non-cash items   (870)    (19,631) 
Changes in assets and liabilities:          
Accounts receivable   (113,412)    (2,144,699) 
Contract assets   (1,588,176)    1,867,058 
Inventory   (896,783)    (1,309,827) 
Prepaid expenses and other current assets   15,507    418,317 
Accounts payable and accrued expenses   (1,441,710)    304,955 
Billings in excess of revenue earned   885,641    1,070,129 
Net cash used in operating activities   (6,759,305)    (11,378,780) 
Cash flows from investing activities:          
Other assets   266,972    (100,810) 
Capital expenditures   (206,127)    (119,815) 
Proceeds from sale of marketable debt securities   9,296,550    3,789,139 
Cash paid for equity investment   -    (2,500,000) 
Net cash provided by investing activities   9,357,395    1,068,514 
Cash flows from financing activities:          
Paycheck protection program loan receipt   

2,238,000

    - 
Paycheck protection program loan repayment   (2,070,000)   - 
Sale of registered stock   -    8,128,531 
Settlements of restricted stock for tax withholding obligations   -    (7,128) 
Net cash provided by (used in) financing activities   168,000    8,121,403 
Effect of exchange rate changes on cash   (18,517)    (2,958) 
Net increase (decrease) in cash and cash equivalents   2,747,573    (2,191,821) 
Cash and cash equivalents:          
Beginning of period   6,029,247    14,326,347 
End of period  $8,776,820   $12,134,526 
Supplemental disclosure of cash flow information:          
Issuance costs included in accounts payable and accrued expenses  $-   $90,000 
Cash paid for interest   1,495    - 

 

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 June 27, 2020 and for the three and six month periods ended June 27, 2020 and June 29, 2019 are unaudited and include all adjustments that, in the opinion of management, are necessary to present fairly the results of operations for the periods then ended. These condensed consolidated financial statements should be read in conjunction with the Company’s financial statements and notes thereto, included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 28, 2019. The results of the Company’s operations for any interim period are not necessarily indicative of the results of the Company’s operations for any other interim period or for a full fiscal year. The Company reclassified certain prior period amounts to conform to the current period presentation. As used in this report, the terms “we”, “us”, “our”, “Kopin” and the “Company” mean Kopin Corporation and its subsidiaries, unless the context indicates another meaning.

 

Going Concern

 

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company incurred net losses of $29.4 million and net cash outflows from operations of $21.0 million for the fiscal year ended 2019. The Company incurred a net loss of $4.8 million and net cash outflows from operations of $6.8 million for the six months ended June 27, 2020. In addition, the Company has experienced a significant decline in its cash and cash equivalents and marketable debt securities over the last several years, which was primarily a result of funding operating losses, of which a significant component related to the Company’s ongoing investments in the research and development of Wearable products. The Company had $15.3 million of cash and cash equivalents and marketable debt securities at June 27, 2020. The Company’s historical and current use of cash in operations combined with limited liquidity resources raise substantial doubt regarding the Company’s ability to continue as a going concern.

 

The Company’s products are targeted towards the military and industrial 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.

 

In March 2020, the World Health Organization declared COVID-19 a pandemic. The COVID-19 pandemic has negatively impacted the global and national economy, disrupted global supply chains, and created significant volatility in and disruption of financial markets. The extent of the impact of the COVID-19 pandemic on the Company’s operational and financial performance, including the ability to execute business strategies and initiatives in the expected time frame, will depend on future developments, including the duration and spread of the pandemic and related restrictions on travel and transportation, all of which are uncertain and cannot be predicted at this time. An extended period of global supply chain and economic disruption could materially affect Kopin’s business, results of operations, financial condition, and access to sources of liquidity. In this regard, the CARES Act established a Paycheck Protection Program, whereby certain small businesses are eligible for a loan to fund payroll expenses, rent, and related costs. During the second quarter ended June 27, 2020 the Company and a subsidiary each received a loan under the PPP. In May, 2020, the Company voluntarily terminated its PPP Loan and repaid the PPP Loan of $2.1 million and the Company’s subsidiary repaid its PPP loan of $0.1 million in July, 2020. The Company’s decision to terminate the loans was based on additional guidance issued by the Small Business Administration. There were no prepayment penalties in connection with the voluntary terminations.

 

 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 six months ended June 27, 2020 and June 29, 2019.

 

Investments in available-for-sale marketable debt securities were as follows at June 27, 2020 and December 28, 2019:

 

   Amortized Cost   Unrealized Gains   Unrealized Losses   Fair Value 
   2020   2019   2020   2019   2020   2019   2020   2019 
U.S. government and agency backed securities  $1,005,819   $8,304,229   $27,521   $-   $-   $(7,359)  $1,033,340   $8,296,870 
Corporate Debt   5,456,757    7,459,298    -    -    (4,401)   (3,171)   5,452,356    7,456,127 
Total  $6,462,576   $15,763,527   $27,521   $-   $(4,401)  $(10,530)  $6,485,696   $15,752,997 

 

The contractual maturity of the Company’s marketable debt securities was as follows at June 27, 2020:

 

   Less than One year   One to Five years   Total 
U.S. government and agency backed securities  $-    1,033,340    1,033,340 
Corporate debt   1,552,336    3,900,020    5,452,356 
Total  $1,552,336    4,933,360    6,485,696 

 

 

 9 

 

 

4. FAIR VALUE MEASUREMENTS

 

Financial instruments are categorized as Level 1, Level 2 or Level 3 based upon the method by which their fair value is computed. An investment is categorized as Level 1 when its fair value is based on unadjusted quoted prices in active markets for identical assets that the Company has the ability to access at the measurement date. An investment is categorized as Level 2 if its fair market value is based on quoted market prices for similar assets in active markets, quoted prices for identical or similar assets in markets that are not active, based on observable inputs such as interest rates, yield curves, or derived from or corroborated by observable market data by correlation or other means. An investment is categorized as Level 3 if its fair value is based on assumptions developed by the Company about what a market participant would use in pricing the assets.

 

The following table details the fair value measurements of the Company’s financial assets:

 

       Fair Value Measurement June 27, 2020 Using: 
   Total   Level 1   Level 2   Level 3 
Cash and Cash Equivalents  $8,776,820   $8,776,820   $-   $- 
U.S. Government Securities   1,033,340    -    1,033,340    - 
Corporate Debt   5,452,356    -    5,452,356    - 
Equity Investments   4,222,896    299,998    -    3,922,898 
   $19,485,412   $9,076,818   $6,485,696   $3,922,898 

 

       Fair Value Measurement at Dec 28, 2019 Using: 
   Total   Level 1   Level 2   Level 3 
Cash and Cash Equivalents  $6,029,247   $6,029,247   $-   $- 
U.S. Government Securities   8,296,870    -    8,296,870    - 
Corporate Debt   7,456,127    -    7,456,127    - 
Equity Investments   4,537,159    386,711    -    4,150,448 
   $26,319,403   $6,415,958   $15,752,997   $4,150,448 

 

 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:

 

   December 28, 2019   Net unrealized losses   Purchases, issuances and settlements   Transfers in and or out of Level 3   June 27, 2020 
Equity Investments  $4,150,448   $(227,550)  $  -   $ -   $3,922,898 

 

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate fair value because of their short-term nature. If accrued liabilities were carried at fair value, these would be classified as Level 2 in the fair value hierarchy.

 

Marketable Debt Securities

 

The corporate debt consists of floating rate notes with a maturity that is over multiple years but has interest rates that are reset every three months based on the then-current three-month London Interbank Offering Rate (“three-month Libor”). The Company validates the fair market values of the financial instruments above by using discounted cash flow models, obtaining independent pricing of the securities or through the use of a model that incorporates the three-month Libor, the credit default swap rate of the issuer and the bid and ask price spread of the same or similar investments which are traded on several markets.

 

Equity Investments

 

The Company acquired an equity interest in a company in the first quarter of 2018 through a $1.0 million capital contribution and the contribution of certain intellectual property. During the three and six months ended June 27, 2020, the Company recorded less than $0.1 million of unrealized gains on this equity investment due to a fluctuation in the foreign exchange rate. As of June 27, 2020, the Company owned an 11% interest in this investment and the estimated fair value of this equity investment was $3.5 million at June 27, 2020.

 

In 2017 the Company had a warrant to acquire up to 15% of the next round of equity offered by a customer as part of the licensing of technology to the customer. The Company used the pricing and terms of the qualified financing round by the customer in determining the value of its Series A warrant and recorded a gain of $2.0 million. The Company acquired an equity interest in the customer by exercising the Series A warrant into Series A shares in the second quarter of 2018 and recorded a loss of less than $0.1 million. In addition, the Company acquired shares of the customer’s Series B shares valued at $2.5 million based on the fair value of the Series B at the closing in May 2019. During the second quarter of 2019, the Company recognized a $0.8 million gain based on an observable price change for the Series A shares by using the customer’s Series B capital structure, pricing of the shares being offered and the liquidation preference of Series B. 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.

 

On September 30, 2019 the Company entered into an Asset Purchase Agreement (the “Solos Purchase Agreement”) pursuant to which the Company sold and licensed certain assets of our SolosTM (“Solos”) product line and WhisperTM Audio (“Whisper”) technology. As consideration for the transaction the Company received a 20% equity stake in Solos Incorporation (“Solos Inc.”). The Company has recorded a less than $0.2 million impairment charge on its Solos Inc. investment during the three and six months ended June 27, 2020.

 

5. INVENTORY

 

Inventories are stated at standard cost adjusted to approximate the lower of cost (first-in, first-out method) or net realizable value and consist of the following at June 27, 2020 and December 28, 2019:

 

   June 27, 2020   December 28, 2019 
Raw materials  $2,598,727   $2,630,156 
Work-in-process   544,528    711,475 
Finished goods   568,792    427,065 
Total  $3,712,047   $3,768,696 

 

 

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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:

 

   Three Months Ended   Three Months Ended   Six Months Ended   Six Months Ended 
   June 27, 2020   June 29, 2019   June 27, 2020   June 29, 2019 
Non-vested restricted common stock   2,373,874    2,047,374    2,373,874    2,047,374 

 

 

7. STOCKHOLDERS’ EQUITY AND STOCK-BASED COMPENSATION

 

Restricted Stock Awards

 

In May of 2020, the Company adopted a 2020 Equity Incentive Plan (“2020 Equity Plan”) which authorized the issuance of shares of common stock to employees, non-employees, and the Board. The 2020 Equity Plan was a successor to the Company’s 2010 Equity Incentive Plan (“2010 Equity Plan”). The number of shares authorized to be issued under the 2020 Equity Plan is four million shares plus shares of the Company Stock underlying any outstanding award granted under the 2010 Equity Plan that expires, or is terminated, surrendered or forfeited for any reason without issuance of such shares.

 

Registered sale of equity securities

 

On March 15, 2019, the Company sold 7.3 million shares of registered common stock for gross proceeds of $8.0 million ($1.10 per share), before deducting underwriting discounts and offering expenses paid by the Company of $0.7 million. This represented approximately 8.9% of Kopin’s total outstanding shares of common stock as of the date of purchase. The net proceeds from the offering were used for general corporate purposes, including working capital. On April 10, 2019, the Company sold 0.7 million shares of registered common stock for gross proceeds of $0.8 million ($1.10 per share), before deducting underwriting discounts and offering expenses paid by the Company of less than $0.1 million, pursuant to the partial exercise of the underwriters’ overallotment option in connection with its March 15, 2019 public offering. This represented approximately 0.8% of Kopin’s total outstanding shares of common stock as of the date of purchase.

 

Non-Vested Restricted Common Stock

 

The fair value of non-vested restricted common stock awards is generally the market value of the Company’s common stock on the date of grant. The non-vested restricted common stock awards require the employee to fulfill certain obligations, including remaining employed by the Company for one, two or four years (the vesting period) and in certain cases also require meeting either performance criteria or the Company’s stock achieving a certain price. For non-vested restricted common stock awards that solely require the recipient to remain employed with the Company, the stock compensation expense is amortized over the anticipated service period. For non-vested restricted common stock awards that require the achievement of performance criteria, the Company reviews the probability of achieving the performance goals on a periodic basis. If the Company determines that it is probable that the performance criteria will be achieved, the amount of compensation cost derived for the performance goal is amortized over the anticipated service period. If the performance criteria are not met, no compensation cost is recognized and any previously recognized compensation cost is reversed.

 

Restricted stock activity was as follows:

 

       Weighted Average 
   Shares   Grant Fair Value 
Balance, December 28, 2019   1,863,124   $1.60 
Granted   593,000    0.47 
Forfeited   (22,250)   2.07 
Vested   (60,000)   1.12 
Balance, June 27, 2020    2,373,874   $1.32 

 

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On December 31, 2017, the Company amended the employment agreement with our CEO, Dr. John Fan, to expire on December 31, 2020 and as part of the amendment issued restricted stock grants. Of the restricted stock grants issued to Dr. Fan, 640,000 shares will vest upon the first 20 consecutive trading day period following the grant date during which the Company’s common stock trades at a price equal to or greater than $5.25, 150,000 shares will vest at the end of the first 20 consecutive trading day period following the grant date during which the Company’s common stock trades at a price per share equal to or greater than $6.00, and 150,000 shares will vest at the end of the first 20 consecutive trading day period following the grant date during which the Company’s common stock trades at a price per share equal to or greater than $7.00. All of the grants are subject to certain acceleration events and expire on December 31, 2020. The total fair value of these awards on December 31, 2017 was $1.7 million. The value of restricted stock grants that vest based on market conditions is computed on the date of grant using the Monte Carlo model with the following assumptions:

 

 

   For the three months ended    For the three months ended    For the three months ended  
   June 27, 2020   June 27, 2020   June 27, 2020 
Performance price target   $5.25   $6.00   $7.00 
Expected volatility   48.3%    48.3%    48.3% 
Interest rate   1.97%    1.97%    1.97% 
Expected Life (years)   3    3    3 
Dividend yield   %    %    % 

 

Stock-Based Compensation

 

The following table summarizes stock-based compensation expense within each of the categories below as it relates to non-vested restricted common stock awards for the three and six months ended June 27, 2020 and June 29, 2019 (no tax benefits were recognized):

 

   Three Months Ended   Three Months Ended   Six Months Ended   Six Months Ended 
   June 27, 2020   June 29, 2019   June 27, 2020   June 29, 2019 
Cost of product revenues  $16,269   $32,107   $30,246   $64,215 
Research and development   57,523    83,785    112,655    188,515 
Selling, general and administrative   87,885    422,582    177,241    1,101,586 
Total  $161,677   $538,474   $320,142   $1,354,316 

 

Unrecognized compensation expense for non-vested restricted common stock as of June 27, 2020 totaled $0.7 million and is expected to be recognized over a weighted average period of approximately two years.

 

8. ACCRUED WARRANTY

 

The Company typically warrants its products against defect for 12 to 18 months, however, for certain products a customer may purchase an extended warranty. A provision for estimated future costs and estimated returns for credit relating to such warranty is recorded in the period when product is shipped and revenue is recognized and is updated as additional information becomes available. The Company’s estimate of future costs to satisfy warranty obligations is based primarily on historical warranty expense experienced and a provision for potential future product failures. Changes in the accrued warranty for the six months ended June 27, 2020 were as follows:

 

Balance, December 28, 2019   $509,000 
Additions    348,000 
Claims    (349,000) 
Balance, June 27, 2020   $508,000 

 

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 Other accrued liabilities in its condensed consolidated balance sheets. At June 27, 2020, the Company had less than $0.1 million of deferred revenue related to extended warranties.

 

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9. INCOME TAXES

 

The Company recorded a provision for income taxes of less than $0.1 million in the three and six months ended June 27, 2020 and June 29, 2019, respectively. As of June 27, 2020, the Company has available for tax purposes U.S. federal NOLs of approximately $160.5 million expiring 2022 through 2037 and $59.1 million that have an unlimited carryover period. The Company had 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:

 

   June 27, 2020   December 28, 2019   $ Change   % Change 
Contract assets ---current   2,509,258   $921,082   $1,588,176    172% 
Contract liabilities---current   (1,687,403)  $(796,794)   $(890,609)    112% 
Contract liabilities---noncurrent   (1,589)  $(6,557)   $4,968    (76)% 
Net contract assets (liabilities)  $820,266   $117,731   $702,535    597% 

 

The $0.7 million increase in the Company’s net contract assets at June 27, 2020 as compared to December 28, 2019 was primarily due to an increase in inventory and other costs associated with government contracts which recognize revenue over time, which was partially offset by an increase in billing in excess of revenue earned.

 

In the three and six months ended June 27, 2020, the Company recognized revenue of $0.6 million, related to our contract liabilities at December 28, 2019. In the three and six months ended June 29, 2019, the Company recognized revenue of $0.1 million and $0.3 million, respectively, related to our contract liabilities at December 29, 2018.

 

The Company did not recognize impairment losses on our contract assets in the three and six months ended June 27, 2020 or June 29, 2019.

 

Performance Obligations

 

The Company’s revenue recognition related to performance obligations that were satisfied at a point in time and over time were as follows:

 

 

   Three months ended   Three months ended   Six months ended   Six months ended 
   June 27, 2020   June 29, 2019   June 27, 2020   June 29, 2019 
Point in time   39%    78%    37%    75% 
Over time   61%    22%    63%    25% 

 

Remaining performance obligations represent the transaction price of orders for which work has not been performed and excludes unexercised contract options and potential orders under ordering-type contracts (e.g., indefinite-delivery, indefinite-quantity (“IDIQ”)). As of June 27, 2020, the aggregate amount of the transaction price allocated to remaining performance obligations was $5.7 million which the Company expects to recognize over the next 12 months. The remaining performance obligations represent amounts to be earned under government contracts, which are subject to cancellation.

 

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11. LEASES

 

The Company enters into operating leases primarily for: real estate, including for manufacturing, engineering, research, administration and sales facilities, and information technology (“IT”) equipment. At June 27, 2020 and December 28, 2019, the Company did not have any finance leases. Approximately all of our future lease commitments, and related lease liability, relate to the Company’s real estate leases. Some of the Company’s leases include options to extend or terminate the lease.

 

The components of lease expense were as follows:

 

 

   Three Months Ended   Three Months Ended   Six Months Ended   Six Months Ended 
   June 27,2020   June 29, 2019   June 27, 2020   June 29, 2019 
Operating lease cost  $283,443   $308,080   $566,443   $603,565 

 

At June 27, 2020, the Company’s future lease payments under non-cancellable leases were as follows:

 

 

2020 (excluding the six months ended June 27, 2020)  $596,627 
2021   1,048,973 
2022   653,367 
2023   201,333 
Thereafter   - 
Total future lease payments  $2,500,300 
Less imputed interest   (187,955) 
Total  $2,312,345 

 

The Company’s lease liabilities recognized in the Company’s condensed consolidated balance sheets at June 27, 2020 was as follows:

 

 

   June 27, 2020 
Operating lease liabilities - current  $1,077,756 
Operating lease liabilities -noncurrent   1,236,818 
Total lease liabilities  $2,314,574 

 

Supplemental cash flow information related to leases was as follows:

 

 

   Six months ended 
   June 27, 2020 
Cash paid for amounts included in the measurement of operating lease liabilities  $591,500 

 

Other information related to leases was as follows:

 

   June 27, 2020 
Weighted Average Discount Rate - Operating Leases   6.16% 
Weighted Average Remaining Lease Term - Operating Leases (in years)   2.39 

 

   

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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. In the fourth quarter of 2019, as a result of the changes in our operations and management structure we commenced reporting under one segment. We have retrospectively adjusted our segment disclosures to present one reportable segment, as our Chief Executive Officer, who is our chief operating decision maker (“CODM”), reviews results on a total company basis.

 

Total long-lived assets by country at June 27, 2020 and December 28, 2019 were:

 

SCHEDULE OF LONG-LIVED ASSETS BY GEOGRAPHIC AREAS 

Total Long-lived Assets (in thousands)  June 27, 2020   December 28, 2019 
U.S.  $3,144   $3,647 
United Kingdom   352    442 
China   23    37 
Japan   70    101 
Total  $3,589   $4,227 

  

We disaggregate our revenue from contracts with customers by geographic location and by display application, as we believe it best depicts how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors.

 

During the three and six months ended June 27, 2020 and June 29, 2019, the Company derived its sales from the following geographies:

 

  

   Three months ended   Three months ended   Six months
ended
   Six months
ended
 
   June 27, 2020   June 29, 2019   June 27, 2020   June 29, 2019 
(In thousands)  Revenue   % of Total   Revenue   % of Total   Revenue   % of Total   Revenue   % of Total 
United States  $6,938    79%   $2,605    29%   $13,704    82%   $5,011    35% 
Other Americas   -    -    7    -    101    1    25    - 
Total Americas   6,938    79    2,612    29    13,805    83    5,036    35 
Asia - Pacific   1,642    18    5,817    64    2,306    14    7,690    52 
Europe   235    3    671    7    582    3    1,917    13 
Other   -    -    10    -    -    -    10    - 
Total Revenues  $8,815    100%   $9,110    100%   $16,693    100%   $14,653    100% 

 

During the three and six months ended June 27, 2020 and June 29, 2019, the Company derived its sales from the following display applications:

 

 

    Three months ended     Three months ended     Six months ended     Six months ended  
(In thousands)   June 27, 2020     June 29, 2019     June 27, 2020     June 29, 2019  
Military   $ 4,490     $ 1,797     $ 8,003     $ 3,238  
Industrial     1,396       2,135       3,579       4,638  
Consumer     232       503       453       1,149  
R&D     1,772       455       3,733       1,199  
License, royalties and other     925