| Price | 0.71 | EPS | -0 | |
| Shares | 82 | P/E | -2 | |
| MCap | 58 | P/FCF | -3 | |
| Net Debt | -9 | EBIT | -33 | |
| TEV | 50 | TEV/EBIT | -1 | TTM 2019-09-30, in MM, except price, ratios |
| 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 | 2020-05-18 | |
| 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 |
| 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 |
| Balance Sheet | Income Statement | Cash Flow |
|---|---|---|
|
Assets, Equity
|
Rev, G Profit, Net Income
|
Ops, Inv, Fin
|
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _____ to _____
Commission file number
(Exact name of registrant as specified in its charter)
| Delaware | ||
State or other jurisdiction of incorporation or organization | (I.R.S. Employer Identification No.) | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code:
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| 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 May 6, 2019 | |
| Common Stock, par value $0.01 |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☒ | |
| Non-accelerated filer | ☐ | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes ☐ No☒
Kopin Corporation
INDEX
| 2 |
Part 1. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (Unaudited)
KOPIN CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
| March 28, 2020 | December 28, 2019 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and equivalents | $ | $ | ||||||
| Marketable debt securities, at fair value | ||||||||
| Accounts receivable, net of allowance of $ | ||||||||
| Contract assets and unbilled receivables | ||||||||
| Inventory | ||||||||
| Prepaid taxes | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Property, plant and equipment, net | ||||||||
| Operating lease right-of-use assets | ||||||||
| Other assets | ||||||||
| Equity investments | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued payroll and expenses | ||||||||
| Accrued warranty | ||||||||
| Contract liabilities and billings in excess of revenues earned | ||||||||
| Operating lease liabilities | ||||||||
| Other accrued liabilities | ||||||||
| Taxes payable | ||||||||
| Total current liabilities | ||||||||
| Noncurrent contract liabilities and asset retirement obligations | ||||||||
| Operating lease liabilities, net of current portion | ||||||||
| Other long-term obligations | ||||||||
| Commitments and contingencies (Note 13) | - | - | ||||||
| Stockholders’ equity: | ||||||||
| Preferred stock, par value $per share: authorized, shares; issued | - | - | ||||||
Common stock, par value $per share: authorized, shares; issued shares in 2020 and shares in 2019; outstanding in 2020 and 2019 | ||||||||
| Additional paid-in capital | ||||||||
| Treasury stock (shares in 2020 and 2019, at cost) | ( | ) | ( | ) | ||||
| Accumulated other comprehensive income | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Kopin Corporation stockholders’ equity | ||||||||
| Noncontrolling interest | ( | ) | ( | ) | ||||
| Total Kopin Corporation stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
See notes to unaudited condensed consolidated financial statements
| 3 |
KOPIN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| Three months ended | Three months ended | |||||||
| March 28, 2020 | March 30, 2019 | |||||||
| Revenues: | ||||||||
| Net product revenues | $ | $ | ||||||
| Research and development and other revenues | ||||||||
Total revenues | ||||||||
| Expenses: | ||||||||
| Cost of product revenues | ||||||||
| Research and development | ||||||||
| Selling, general and administration | ||||||||
Total expenses | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other (expense) income: | ||||||||
| Interest income | ||||||||
| Other income (expense), net | ( | ) | ||||||
| Foreign currency transaction (losses) gains | ( | ) | ||||||
Total other income and expense | ( | ) | ||||||
| Loss before provision for income taxes and net loss (income) attributable to noncontrolling interest | ( | ) | ( | ) | ||||
| Tax provision | ( | ) | ( | ) | ||||
| Net loss | ( | ) | ( | ) | ||||
| Net loss (income) attributable to the noncontrolling interest | ( | ) | ||||||
| Net loss attributable to Kopin Corporation | $ | ( | ) | $ | ( | ) | ||
| Net loss per share | ||||||||
| Basic and diluted | $ | ( | ) | $ | ( | ) | ||
| Weighted average number of common shares outstanding | ||||||||
| Basic and diluted | ||||||||
See notes to unaudited condensed consolidated financial statements
| 4 |
KOPIN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF comprehensive loss
(Unaudited)
| Three months ended | Three months ended | |||||||
| March 28, 2020 | March 30, 2019 | |||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Other comprehensive (loss) income, net of tax: | ||||||||
| Foreign currency translation adjustments | ( | ) | ||||||
| Unrealized holding (loss) gain on marketable securities | ( | ) | ||||||
| Reclassification of holding losses in net loss | ( | ) | ( | ) | ||||
| Other comprehensive (loss) income, net of tax | ( | ) | ||||||
| Comprehensive loss | ( | ) | ( | ) | ||||
| Comprehensive loss (income) attributable to the noncontrolling interest | ( | ) | ||||||
| Comprehensive loss attributable to Kopin Corporation | $ | ( | ) | $ | ( | ) | ||
See notes to unaudited condensed consolidated financial statements
| 5 |
KOPIN CORPORATION
Condensed Consolidated Statements of Stockholders’ Equity
(Unaudited)
| Common Stock | Common Stock | Additional Paid-in | Treasury | Accumulated Other Comprehensive | Accumulated | Total Kopin Corporation Stockholders | Noncontrolling | Total Stockholders’ | ||||||||||||||||||||||||||||
| Shares | Amount | Capital | Stock | Income | Deficit | Equity | Interest | Equity | ||||||||||||||||||||||||||||
| Balance, December 28, 2019 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||||||||||
| Stock-based compensation expense | - | - | - | - | - | - | ||||||||||||||||||||||||||||||
| Other comprehensive income (loss) | - | - | - | - | ( | ) | - | ( | ) | - | ( | ) | ||||||||||||||||||||||||
| Net loss | - | - | - | - | - | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance, March 28, 2020 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||||||||||
| Common Stock | Common Stock | Additional Paid-in | Treasury | Accumulated Other Comprehensive | Accumulated | Total Kopin Corporation Stockholders | Noncontrolling | Total Stockholders’ | ||||||||||||||||||||||||||||
| Shares | Amount | Capital | Stock | Income | Deficit | Equity | Interest | Equity | ||||||||||||||||||||||||||||
| Balance, December 29, 2018 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||||||||||
| Stock-based compensation expense | - | - | - | - | - | - | ||||||||||||||||||||||||||||||
| Vesting of restricted stock | ( | ) | - | - | - | - | - | - | ||||||||||||||||||||||||||||
| Repurchases of restricted stock to satisfy tax withholding obligations | ( | ( | ( | ) | - | - | - | ( | ) | - | ( | ) | ||||||||||||||||||||||||
| Other comprehensive income (loss) | - | - | - | - | - | - | ||||||||||||||||||||||||||||||
| Sale of registered stock | - | - | - | - | ||||||||||||||||||||||||||||||||
| Net (loss) income | - | - | - | - | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
| Balance, March 30, 2019 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||||||||||
See notes to unaudited condensed consolidated financial statements
| 6 |
KOPIN CORPORATION
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| Three months ended | Three months ended | |||||||
| March 28, 2020 | March 30, 2019 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Accretion of premium or discount on marketable debt securities | - | |||||||
| Stock-based compensation | ||||||||
| Foreign currency losses (gains) | ( | ) | ||||||
| Change in allowance for bad debt | ( | ) | ||||||
| Loss on disposal of plant and equipment | - | |||||||
| Write-off of excess inventory | ||||||||
| Other non-cash items | ( | ) | ||||||
| Changes in assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Contract assets | ( | ) | ||||||
| Inventory | ( | ) | ( | ) | ||||
| Prepaid expenses and other current assets | ( | ) | ||||||
| Accounts payable and accrued expenses | ( | ) | ||||||
| Billings in excess of revenue earned | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Other assets | ( | ) | ||||||
| Capital expenditures | ( | ) | ( | ) | ||||
| Proceeds from sale of marketable debt securities | ||||||||
| Net cash provided by investing activities | ||||||||
| Cash flows from financing activities: | ||||||||
| Sale of registered stock | - | |||||||
| Settlements of restricted stock for tax withholding obligations | - | ( | ) | |||||
| Net cash provided by financing activities | - | |||||||
| Effect of exchange rate changes on cash | ( | ) | ( | ) | ||||
| Net increase in cash and cash equivalents | ||||||||
| Cash and cash equivalents: | ||||||||
| Beginning of period | ||||||||
| End of period | $ | $ | ||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Issuance costs included in accounts payable and accrued expenses | $ | $ | ||||||
See notes to unaudited condensed consolidated financial statements
| 7 |
KOPIN CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The condensed consolidated financial statements of Kopin Corporation as of March 28, 2020 and for the three month periods ended March 28, 2020 and March 30, 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 has incurred net losses of $
The Company’s products are targeted towards the military and industrial wearable market. 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. The loan may be forgiven if the funds are used for payroll and other qualified expenses. The Company received $
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. These financial statements do not include any adjustments that might result from the outcome of this uncertainty.
2. ACCOUNTING STANDARDS
Accounting Standards Issued But Not Yet Adopted
In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which requires measurement and recognition of expected credit losses for financial assets held. In November 2019, the FASB issued ASU 2019-10 that has extended the effective date of ASU 2016-13 for Smaller Reporting Entities to fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022. The Company is currently evaluating ASU 2016-13 and its impact on our consolidated financial statements.
| 8 |
3. CASH AND CASH EQUIVALENTS AND MARKETABLE DEBT SECURITIES
The Company considers all highly liquid, short-term debt instruments with original maturities of three months or less to be cash equivalents.
Marketable debt securities consist primarily of commercial paper, medium-term corporate notes, and U.S. government and agency backed securities. The Company classifies these marketable debt securities as available-for-sale at fair value in “Marketable debt securities, at fair value.” The Company records the amortization of premium and accretion of discounts on marketable debt securities in the results of operations.
The Company uses the specific identification method as a basis for determining cost and calculating realized gains and losses with respect to marketable debt securities. The gross gains and losses realized related to sales and maturities of marketable debt securities were not material during the three months ended March 28, 2020 and March 30, 2019.
Investments in available-for-sale marketable debt securities were as follows at March 28, 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 | $ | $ | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||||
| Corporate debt | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||||||||||||
The contractual maturity of the Company’s marketable debt securities was as follows at March 28, 2020:
| Less than One year | One to Five years | Total | ||||||||||
| U.S. government and agency backed securities | $ | $ | $ | |||||||||
| Corporate debt | ||||||||||||
| Total | $ | $ | $ | |||||||||
| 9 |
4. FAIR VALUE MEASUREMENTS
Financial instruments are categorized as Level 1, Level 2 or Level 3 based upon the method by which their fair value is computed. An investment is categorized as Level 1 when its fair value is based on unadjusted quoted prices in active markets for identical assets that the Company has the ability to access at the measurement date. An investment is categorized as Level 2 if its fair market value is based on quoted market prices for similar assets in active markets, quoted prices for identical or similar assets in markets that are not active, based on observable inputs such as interest rates, yield curves, or derived from or corroborated by observable market data by correlation or other means. An investment is categorized as Level 3 if its fair value is based on assumptions developed by the Company about what a market participant would use in pricing the assets.
The following table details the fair value measurements of the Company’s financial assets:
| Fair Value Measurement March 28, 2020 Using: | ||||||||||||||||
| Total | Level 1 | Level 2 | Level 3 | |||||||||||||
| Cash and Cash Equivalents | $ | $ | $ | $ | ||||||||||||
| U.S. Government Securities | ||||||||||||||||
| Corporate Debt | ||||||||||||||||
| Equity Investments | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
| Fair Value Measurement at December 28, 2019 Using: | ||||||||||||||||
| Total | Level 1 | Level 2 | Level 3 | |||||||||||||
| Cash and Cash Equivalents | $ | $ | $ | $ | ||||||||||||
| U.S. Government Securities | ||||||||||||||||
| Corporate Debt | ||||||||||||||||
| Equity Investments | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
Transfers between levels of the fair value hierarchy are reported at the beginning of the reporting period in which they occur. Changes in Level 3 investments were as follows:
| December 28, 2019 | Net unrealized losses | Purchases, issuances and settlements | Transfers in and or out of Level 3 | March 28, 2020 | ||||||||||||||||
| Equity Investments | $ | $ | ( | $ | $ | - | $ | |||||||||||||
The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate fair value because of their short-term nature. If accrued liabilities were carried at fair value, these would be classified as Level 2 in the fair value hierarchy.
Marketable Debt Securities
The corporate debt consists of floating rate notes with a maturity that is over multiple years but has interest rates that are reset every three months based on the then-current three-month London Interbank Offering Rate (“three-month Libor”). The Company validates the fair market values of the financial instruments above by using discounted cash flow models, obtaining independent pricing of the securities or through the use of a model that incorporates the three-month Libor, the credit default swap rate of the issuer and the bid and ask price spread of the same or similar investments which are traded on several markets.
Equity Investments
The Company acquired an equity interest in a company in the first quarter of 2018. The Company made a $
| 10 |
In 2017 the Company had a warrant to acquire up to
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
5. INVENTORY
Inventories are stated at standard cost adjusted to approximate the lower of cost (first-in, first-out method) or net realizable value and consist of the following at March 28, 2020 and December 28, 2019:
| March 28, 2020 | December 28, 2019 | |||||||
| Raw materials | $ | $ | ||||||
| Work-in-process | ||||||||
| Finished goods | ||||||||
| Total | $ | $ | ||||||
Basic net loss per share is computed using the weighted-average number of shares of common stock outstanding during the period less any unvested restricted shares. Diluted net loss per share is calculated using weighted-average shares outstanding and contingently issuable shares, less weighted-average shares reacquired during the period. The net outstanding shares are adjusted for the dilutive effect of shares issuable upon the assumed conversion of the Company’s common stock equivalents, which consist of unvested restricted stock.
| Three months ended | Three months ended | |||||||
| March 28, 2020 | March 30, 2019 | |||||||
| Non-vested restricted common stock | ||||||||
| 11 |
Registered sale of equity securities
On March 15, 2019, the Company sold million shares of registered common stock for gross proceeds of $
Non-Vested Restricted Common Stock
The fair value of non-vested restricted common stock awards is generally the market value of the Company’s common stock on the date of grant. The non-vested restricted common stock awards require the employee to fulfill certain obligations, including remaining employed by the Company for one, two or four years (the vesting period) and in certain cases also require meeting either performance criteria or the Company’s stock achieving a certain price. For non-vested restricted common stock awards that solely require the recipient to remain employed with the Company, the stock compensation expense is amortized over the anticipated service period. For non-vested restricted common stock awards that require the achievement of performance criteria, the Company reviews the probability of achieving the performance goals on a periodic basis. If the Company determines that it is probable that the performance criteria will be achieved, the amount of compensation cost derived for the performance goal is amortized over the anticipated service period. If the performance criteria are not met, no compensation cost is recognized and any previously recognized compensation cost is reversed.
Restricted stock activity was as follows:
| Shares | Weighted Average Grant Fair Value | |||||||
| Balance, December 28, 2019 | $ | |||||||
| Granted | ||||||||
| Forfeited | ( | |||||||
| Vested | ||||||||
| Balance, March 28, 2020 | $ | |||||||
| 12 |
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, 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, 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 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
| For the three months ended March 28, 2020 | ||||||||||||
| Performance price target | $ | $ | $ | |||||||||
| Expected volatility | % | % | % | |||||||||
| Interest rate | % | % | % | |||||||||
| Expected life (years) | ||||||||||||
| Dividend yield | % | % | % | |||||||||
Stock-Based Compensation
| Three Months Ended | Three Months Ended | |||||||
| March 28, 2020 | March 30, 2019 | |||||||
| Cost of product revenues | $ | $ | ||||||
| Research and development | ||||||||
| Selling, general and administrative | ||||||||
| Total | $ | $ | ||||||
Unrecognized compensation expense for non-vested restricted common stock as of March 28, 2020 totaled $million and is expected to be recognized over a weighted average period of approximately two years.
8. ACCRUED WARRANTY
| Balance, December 28, 2019 | $ | |||
| Additions | ||||
| Claims | ( | ) | ||
| Balance, March 28, 2020 | $ |
Extended Warranties
Deferred revenue represents the purchase of extended warranties by the Company’s customers.
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9. INCOME TAXES
The Company recorded a provision for income taxes of less than $
10. CONTRACT ASSETS AND LIABILITIES
Contract assets include unbilled amounts typically resulting from sales under contracts when the cost-to-cost method of revenue recognition is utilized and revenue recognized from customer arrangements, including licensing, exceeds the amount billed to the customer, and right to payment is not just subject to the passage of time. Amounts may not exceed their net realizable value. Contract assets are generally classified as current. The Company classifies the noncurrent portion of contract assets under other assets in its condensed consolidated balance sheets.
Contract liabilities consist of advance payments and billings in excess of cost incurred and deferred revenue.
Net contract assets (liabilities) consisted of the following:
| March 28, 2020 | December 28, 2019 | $ Change | % Change | |||||||||||||
| Contract assets—current | $ | $ | $ | |||||||||||||
| Contract liabilities and billings in excess of revenues earned | ( | ) | ( | ) | ( | ) | ||||||||||
| Contract liabilities—noncurrent | ( | ) | ( | ) | ( | |||||||||||
| Net contract assets (liabilities) | $ | $ | $ | |||||||||||||
The $
In the three months ended March 28, 2020, the Company recognized revenue of $
The Company did not recognize impairment losses on our contract assets in the three months ended March 28, 2020 or March 30, 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 | |||||||
| March 28, 2020 | March 30, 2019 | |||||||
| Point in time | ||||||||
| Over time | ||||||||
Remaining performance obligations represent the transaction price of orders for which work has not been performed and excludes unexercised contract options and potential orders under ordering-type contracts (e.g., indefinite-delivery, indefinite-quantity (“IDIQ”)). As of March 28, 2020, the aggregate amount of the transaction price allocated to remaining performance obligations was $
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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 March 28, 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 | |||||||
| March 28, 2020 | March 30, 2019 | |||||||
| Operating lease cost | $ | $ | ||||||
At March 28, 2020, the Company’s future lease payments under non-cancellable leases were as follows:
| 2020 (excluding the three months ended March 28, 2020) | $ | |||
| 2021 | ||||
| 2022 | ||||
| 2023 | ||||
| Thereafter |
| |||
| Total future lease payments | ||||
| Less imputed interest | ( | ) | ||
| Total | $ |
The Company’s lease liabilities recognized in the Company’s condensed consolidated balance sheet at March 28, 2020 was as follows:
| March 28, 2020 | ||||
| Operating lease liabilities–current | $ | |||
| Operating lease liabilities–noncurrent | ||||
| Total lease liabilities | $ | |||
Supplemental cash flow information related to leases was as follows:
| Three months ended | ||||
| March 28, 2020 | ||||
| Cash paid for amounts included in the measurement of operating lease liabilities | $ | |||
Other information related to leases was as follows:
| March 28, 2020 | ||||
| Weighted Average Discount Rate–Operating Leases | ||||
| Weighted Average Remaining Lease Term–Operating Leases (in years) | ||||
12. SEGMENTS AND DISAGGREGATION OF REVENUE
We continually monitor and review our segment reporting structure in accordance with authoritative guidance to determine if any changes have occurred that would affect our reportable segments. In the fourth quarter of 2019, as a result of the changes in our operations and management structure we commenced reporting one segment. We have retrospectively adjusted our segment disclosures to present
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Total long-lived assets by country at March 28, 2020 and December 28, 2019 were:
| Total Long-lived Assets (in thousands) | March 28, 2020 | December 28, 2019 | ||||||
| U.S. | $ | $ | ||||||
| United Kingdom | ||||||||
| China | ||||||||
| Japan | ||||||||
| Total | $ | $ | ||||||
We disaggregate our revenue from contracts with customers by geographic location and by display application, as we believe it best depicts how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors.
During the three months ended March 28, 2020 and March 30, 2019, the Company derived its sales from the following geographies:
| March 28, 2020 | March 30, 2019 | |||||||||||||||
| (In thousands, except percentages) | Revenue | % of Total | Revenue | % of Total | ||||||||||||
| United States | $ | % | $ | % | ||||||||||||
| Other Americas | ||||||||||||||||
| Total Americas | ||||||||||||||||
| Asia-Pacific | ||||||||||||||||
| Europe | ||||||||||||||||
| Total Revenues | $ | % | $ | % | ||||||||||||
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During the three months ended March 28, 2020 and March 30, 2019, the Company derived its sales from the following display applications:
(In thousands) | March 28, 2020 | March 30, 2019 | ||||||
| Military | $ | $ | ||||||
| Industrial | ||||||||
| Consumer | ||||||||
| R&D | ||||||||
| Other | ||||||||
| Total Revenues | $ | $ | ||||||
13. LITIGATION
The Company may engage in legal proceedings arising in the ordinary course of business. Claims, suits, investigations and proceedings are inherently uncertain and it is not possible to predict the ultimate outcome of such matters and our business, financial condition, results of operations or cash flows could be affected in any particular period.
BlueRadios, Inc. v. Kopin Corporation, Civil Action No. 16-02052-JLK (D. Col.):
On August 12, 2016, BlueRadios, Inc. (“BlueRadios”) filed a complaint in the U.S. District Court for the District of Colorado, alleging that the Company breached a contract between it and BlueRadios concerning an alleged joint venture between the Company and BlueRadios to design, develop and commercialize micro-display products with embedded wireless technology referred to as “Golden-i” breached the covenant of good faith and fair dealing associated with that contract, breached its fiduciary duty to BlueRadios, and misappropriated trade secrets owned by BlueRadios in violation of Colorado law (C.R.S. § 7-74-104(4)) and the Defend Trade Secrets Act (18 U.S.C. § 1836(b)(1)). BlueRadios further alleges that the Company was unjustly enriched by its alleged misconduct, BlueRadios is entitled to an accounting to determine the amount of profits obtained by the Company as a result of its alleged misconduct, and the inventorship on at least ten patents or patent applications owned by the Company need to be corrected to list BlueRadios’ employees as inventors and thereby list BlueRadios as co-assignees of the patents. BlueRadios seeks monetary, declaratory, and injunctive relief, including for alleged non-payment of engineering retainer fees.
On October 11, 2016, the Company filed its Answer and Affirmative Defenses. The parties completed expert depositions on November 15, 2019. On December 2, 2019, the Company filed a Motion for Partial Summary Judgment requesting the Court dismiss counts 2-7 in their entirety and counts 1 and 8 in part. BlueRadios also filed a Motion for Partial Summary Judgment alleging it is the co-owner of U.S. Patent No. 8,909,296. Responses to the Motions for Partial Summary Judgment were filed on January 15, 2020, and replies were filed on February 19, 2020. A trial date has not yet been set by the Court. The Company has not concluded a loss from this matter is probable; therefore, we have not recorded an accrual for litigation or claims related to this matter for the period ended March 28, 2020. The Company will continue to evaluate information as it becomes known and will record an estimate for losses at the time or times when it is both probable that a loss has been incurred and the amount of the loss is reasonably estimable.
14. RELATED PARTY TRANSACTIONS
The Company may from time to time enter into agreements with stockholders, affiliates and other companies engaged in certain aspects of the display, electronics, optical and software industries as part of our business strategy. In addition, the wearable computing product market is relatively new and there may be other technologies the Company needs to purchase from affiliates to enhance its product offering.
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During the three month periods ended March 28, 2020 and March 30, 2019, the Company had the following transactions with related parties:
| Three months ended | Three months ended | |||||||||||||||
| March 28, 2020 | March 30, 2019 | |||||||||||||||
| Sales | Purchases | Sales | Purchases | |||||||||||||
| Goertek | $ | $ | $ | $ | ||||||||||||
| Solos Technology | ||||||||||||||||
| RealWear, Inc. | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
At March 28, 2020 and December 28, 2019, the Company had the following receivables, contract assets and payables with related parties:
| March 28, 2020 | December 28, 2019 | |||||||||||||||||||||||
| Receivables | Contract assets | Payables | Receivables | Contract assets | Payables | |||||||||||||||||||
| Solos Technology | $ | $ | $ | $ | ||||||||||||||||||||
| RealWear, Inc. | ||||||||||||||||||||||||
| $ | $ | $ | $ | $ | $ | |||||||||||||||||||
15. SUBSEQUENT EVENTS
On April 21, 2020, the Company received the proceeds from a loan in the amount of approximately $
All or a portion of the PPP Loan may be forgiven by the U.S. Small Business Administration (“SBA”) upon application by the Company beginning 60 days but not later than 120 days after loan approval and upon documentation of expenditures in accordance with the SBA requirements. Under the CARES Act, loan forgiveness is available for the sum of documented payroll costs, covered rent payments, covered mortgage interest and covered utilities during the eight-week period beginning on the date of loan approval. For purposes of the CARES Act, payroll costs exclude compensation of an individual employee in excess of $
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which are subject to the safe harbor created by such sections. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “could,” “would,” “seeks,” “estimates,” and variations of such words and similar expressions, and the negatives thereof, are intended to identify such forward-looking statements. We caution readers not to place undue reliance on any such “forward-looking statements,” which speak only as of the date made, and advise readers that these forward-looking statements are not guarantees of future performance and involve certain risks, uncertainties, estimates, and assumptions by us that are difficult to predict. Various factors, some of which are beyond our control, could cause actual results to differ materially from those expressed in, or implied by, such forward-looking statements. All such forward-looking statements, whether written or oral, and whether made by us or on our behalf, are expressly qualified by these cautionary statements and any other cautionary statements which may accompany the forward-looking statements. In addition, we disclaim any obligation to update any forward-looking statements to reflect events or circumstances after the date of this report, except as may otherwise be required by the federal securities laws.
We have identified the following important factors that could cause actual results to differ materially from those discussed in our forward-looking statements. Such factors may be in addition to the risks described in Part I, Item 1A, “Risk Factors;” Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations; and other parts of our Annual Report on Form 10-K for the fiscal year ended December 28, 2019. These factors include: the extent of the impact of the coronavirus (“COVID-19”) pandemic on our business and operations, and the economic and societal disruptions resulting from the COVID-19 pandemic; our ability to continue as a going concern; the material weakness management has identified in our internal control over financial reporting, our conclusion that our disclosure controls and procedures were not effective as of the fiscal year ended December 28, 2019 or the period ended March 28, 2020 and our ability to remediate that material weakness; our ability to obtain raw materials and other goods as well as services from our suppliers as needed; our expectation that our Scotland plant will increase production through the second quarter of 2020 and achieve normal production rates in the third quarter of 2020; our expectation that our production staffing levels at our United States plants will be below normal levels through the second fiscal quarter of 2020; the potential for customers to choose our competitors as their supplier; our expectation that we will have negative cash flow from operating activities in 2020; 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. d