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KOPN:LightningSiliconTechonologyIncMember
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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 September 30, 2023
☐ |
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the transition period from _____ to _____
Commission
file number 0-19882
KOPIN
CORPORATION
(Exact
name of registrant as specified in its charter)
Delaware |
|
04-2833935 |
State
or other jurisdiction of
incorporation
or organization |
|
(I.R.S.
Employer
Identification
No.) |
|
|
|
125
North Drive, Westborough, MA |
|
01581-3335 |
(Address
of principal executive offices) |
|
(Zip
Code) |
Registrant’s
telephone number, including area code: (508) 870-5959
Securities
registered pursuant to Section 12(b) of the Act:
Title
of each class |
|
Trading
Symbol(s) |
|
Name
of each exchange on which registered |
Common
Stock, par value $0.01 |
|
KOPN |
|
Nasdaq
Capital Market |
Indicate
the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Class |
|
Outstanding
as of November 3, 2023 |
Common
Stock, par value $0.01 |
|
114,449,134 |
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 September 30, 2023 (Unaudited) and December 31, 2022 |
3 |
|
|
|
|
Condensed
Consolidated Statements of Operations (Unaudited) for the three and nine months ended September 30, 2023 and September 24, 2022 |
4 |
|
|
|
|
Condensed
Consolidated Statements of Comprehensive Loss (Unaudited) for the three and nine months ended September 30, 2023 and September 24,
2022 |
5 |
|
|
|
|
Condensed
Consolidated Statements of Stockholders’ Equity (Unaudited) for the three and nine months ended September 30, 2023 and September
24, 2022 |
6 |
|
|
|
|
Condensed
Consolidated Statements of Cash Flows (Unaudited) for the nine months ended September 30, 2023 and September 24, 2022 |
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 |
23 |
|
|
|
Part
II – Other Information |
24 |
|
|
|
Item
1. |
Legal
Proceedings |
24 |
|
|
|
Item
1A. |
Risk
Factors |
25 |
|
|
|
Item
2. |
Unregistered
Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities |
25 |
|
|
|
Item
6. |
Exhibits |
25 |
|
|
|
Signatures |
26 |
Part
1. FINANCIAL INFORMATION
Item
1. Condensed Consolidated Financial Statements (Unaudited)
KOPIN
CORPORATION
CONDENSED
CONSOLIDATED BALANCE SHEETS
(Unaudited)
| |
September
30, 2023 | | |
December
31, 2022 | |
| |
(unaudited) | | |
| |
ASSETS | |
| | | |
| | |
Current
assets: | |
| | | |
| | |
Cash
and cash equivalents | |
$ | 9,599,675 | | |
$ | 8,258,878 | |
Restricted
cash | |
| 500,000 | | |
| — | |
Marketable
debt securities, at fair value | |
| 11,610,485 | | |
| 4,388,778 | |
Accounts
receivable, net of allowance of $1,025,000 in 2023 and $303,000 in 2022 | |
| 7,118,214 | | |
| 6,537,891 | |
Contract
assets and unbilled receivables | |
| 5,882,340 | | |
| 4,068,364 | |
Inventory | |
| 9,074,492 | | |
| 6,426,400 | |
Prepaid
taxes | |
| 104,671 | | |
| 105,495 | |
Prepaid
expenses and other current assets | |
| 1,478,375 | | |
| 1,074,867 | |
Total
current assets | |
| 45,368,252 | | |
| 30,860,673 | |
Property,
plant and equipment, net | |
| 1,794,832 | | |
| 1,831,641 | |
Operating
lease right-of-use assets | |
| 2,670,116 | | |
| 3,168,520 | |
Other
assets | |
| 169,132 | | |
| 170,132 | |
Equity
investments | |
| 4,603,014 | | |
| 7,721,206 | |
Total
assets | |
$ | 54,605,346 | | |
$ | 43,752,172 | |
| |
| | | |
| | |
LIABILITIES
AND STOCKHOLDERS’ EQUITY | |
| | | |
| | |
Current
liabilities: | |
| | | |
| | |
Accounts
payable | |
$ | 7,187,025 | | |
$ | 5,438,980 | |
Accrued
payroll and expenses | |
| 1,717,584 | | |
| 2,879,139 | |
Accrued
warranty | |
| 2,161,000 | | |
| 1,966,000 | |
Contract
liabilities and billings in excess of revenues earned | |
| 668,046 | | |
| 930,500 | |
Operating
lease liabilities | |
| 762,521 | | |
| 786,928 | |
Accrued
post-retirement benefits | |
| 790,000 | | |
| 790,000 | |
Other
accrued liabilities | |
| 1,765,544 | | |
| 1,182,346 | |
Customer
deposits | |
| 559,503 | | |
| — | |
Deferred
tax liabilities | |
| 450,480 | | |
| 482,739 | |
Total
current liabilities | |
| 16,061,703 | | |
| 14,456,632 | |
Noncurrent
contract liabilities and asset retirement obligations | |
| 267,226 | | |
| 248,284 | |
Operating
lease liabilities, net of current portion | |
| 2,008,077 | | |
| 2,576,883 | |
Accrued
post-retirement benefits, net of current portion | |
| 507,496 | | |
| 1,110,000 | |
Other
long-term obligations, net of current portion | |
| 1,391,121 | | |
| 1,369,758 | |
Total
liabilities | |
| 20,235,623 | | |
| 19,761,557 | |
Commitments
and contingencies | |
| - | | |
| - | |
Stockholders’
equity: | |
| | | |
| | |
Preferred
stock, par value $.01 per share: authorized, 3,000 shares; none issued | |
| — | | |
| — | |
Common
stock, par value $.01 per share: authorized, 150,000,000 shares; issued 114,415,269 shares in 2023 and 94,920,060 shares in 2022;
outstanding 110,396,217 in 2023 and 92,883,524 in 2022, respectively | |
| 1,104,668 | | |
| 929,540 | |
Additional
paid-in capital | |
| 383,898,603 | | |
| 360,567,631 | |
Treasury
stock (70,635 shares in 2023 and 2022, at cost) | |
| (103,127 | ) | |
| (103,127 | ) |
Accumulated
other comprehensive income | |
| 1,135,641 | | |
| 1,176,068 | |
Accumulated
deficit | |
| (351,666,062 | ) | |
| (338,406,815 | ) |
Total
Kopin Corporation stockholders’ equity | |
| 34,369,723 | | |
| 24,163,297 | |
Noncontrolling
interest | |
| — | | |
| (172,682 | ) |
Total
Kopin Corporation stockholders’ equity | |
| 34,369,723 | | |
| 23,990,615 | |
Total
liabilities and stockholders’ equity | |
$ | 54,605,346 | | |
$ | 43,752,172 | |
See
notes to unaudited condensed consolidated financial statements
KOPIN
CORPORATION
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| |
Three months ended | | |
Three months ended | | |
Nine months ended | | |
Nine months ended | |
| |
September 30, 2023 | | |
September 24, 2022 | | |
September 30, 2023 | | |
September 24, 2022 | |
Revenues: | |
| | | |
| | | |
| | | |
| | |
Net product revenues | |
$ | 5,506,193 | | |
$ | 8,254,686 | | |
$ | 19,172,302 | | |
$ | 23,765,872 | |
Research and development revenues | |
| 4,956,386 | | |
| 3,374,873 | | |
| 11,737,062 | | |
| 11,089,015 | |
Other revenues | |
| 135,918 | | |
| 99,820 | | |
| 907,180 | | |
| 361,946 | |
Total revenues | |
| 10,598,497 | | |
| 11,729,379 | | |
| 31,816,544 | | |
| 35,216,833 | |
Expenses: | |
| | | |
| | | |
| | | |
| | |
Cost of product revenues | |
| 5,437,953 | | |
| 7,987,154 | | |
| 17,759,117 | | |
| 23,676,283 | |
Research and development | |
| 3,089,935 | | |
| 3,441,405 | | |
| 8,534,411 | | |
| 13,995,393 | |
Selling, general and administration | |
| 4,798,598 | | |
| 4,320,117 | | |
| 15,912,848 | | |
| 13,112,133 | |
Total expenses | |
| 13,326,486 | | |
| 15,748,676 | | |
| 42,206,376 | | |
| 50,783,809 | |
Loss from operations | |
| (2,727,989 | ) | |
| (4,019,297 | ) | |
| (10,389,832 | ) | |
| (15,566,976 | ) |
Other income (expense) | |
| | | |
| | | |
| | | |
| | |
Interest income | |
| 299,506 | | |
| 21,663 | | |
| 623,971 | | |
| 41,195 | |
Other income (expense), net | |
| 31,608 | | |
| (3,225 | ) | |
| 104,403 | | |
| (7,952 | ) |
(Loss) gain on investments | |
| — | | |
| (2,000,000 | ) | |
| (3,327,347 | ) | |
| 2,700,000 | |
Foreign currency transaction losses | |
| (14,438 | ) | |
| (112,315 | ) | |
| (153,442 | ) | |
| (227,294 | ) |
Total other income (expense) | |
| 316,676 | | |
| (2,093,877 | ) | |
| (2,752,415 | ) | |
| 2,505,949 | |
Tax provision | |
| (39,000 | ) | |
| (36,000 | ) | |
| (117,000 | ) | |
| (108,000 | ) |
Net loss | |
| (2,450,313 | ) | |
| (6,149,174 | ) | |
| (13,259,247 | ) | |
| (13,169,027 | ) |
Net loss attributable to the noncontrolling interest | |
| — | | |
| — | | |
| — | | |
| 280 | |
Net loss attributable to Kopin Corporation | |
$ | (2,450,313 | ) | |
$ | (6,149,174 | ) | |
$ | (13,259,247 | ) | |
$ | (13,168,747 | ) |
Net loss per share | |
| | | |
| | | |
| | | |
| | |
Basic and diluted | |
$ | (0.02 | ) | |
$ | (0.07 | ) | |
$ | (0.12 | ) | |
$ | (0.14 | ) |
Weighted average number of common shares outstanding | |
| | | |
| | | |
| | | |
| | |
Basic and diluted | |
| 110,360,814 | | |
| 93,516,231 | | |
| 108,436,146 | | |
| 91,317,288 | |
See
notes to unaudited condensed consolidated financial statements
KOPIN
CORPORATION
CONDENSED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited)
| |
Three
months ended | | |
Three
months ended | | |
Nine
months ended | | |
Nine
months ended | |
| |
September
30, 2023 | | |
September
24, 2022 | | |
September
30, 2023 | | |
September
24, 2022 | |
Net
loss | |
$ | (2,450,313 | ) | |
$ | (6,149,174 | ) | |
$ | (13,259,247 | ) | |
$ | (13,169,027 | ) |
Other
comprehensive loss, net of tax: | |
| | | |
| | | |
| | | |
| | |
Foreign
currency translation adjustments | |
| (10,229 | ) | |
| (128,994 | ) | |
| 31,955 | | |
| (170,349 | ) |
Unrealized
holding loss on marketable securities | |
| (54,175 | ) | |
| (34,110 | ) | |
| (72,382 | ) | |
| (212,889 | ) |
Reclassification
of holding losses in net loss | |
| — | | |
| — | | |
| — | | |
| (522 | ) |
Other
comprehensive loss, net of tax | |
| (64,404 | ) | |
| (163,104 | ) | |
| (40,427 | ) | |
| (383,760 | ) |
Comprehensive
loss | |
| (2,514,717 | ) | |
| (6,312,278 | ) | |
| (13,299,674 | ) | |
| (13,552,787 | ) |
Comprehensive
loss attributable to the noncontrolling interest | |
| — | | |
| — | | |
| — | | |
| 280 | |
Comprehensive
loss attributable to Kopin Corporation | |
$ | (2,514,717 | ) | |
$ | (6,312,278 | ) | |
$ | (13,299,674 | ) | |
$ | (13,552,507 | ) |
See
notes to unaudited condensed consolidated financial statements
KOPIN
CORPORATION
Condensed
Consolidated Statements of Stockholders’ Equity
(Unaudited)
| |
Shares | | |
Amount | | |
Capital | | |
Stock | | |
Income | | |
Deficit | | |
Equity | | |
Interest | | |
Equity | |
| |
Common
Stock | | |
Additional
Paid-in | | |
Treasury | | |
Accumulated
Other Comprehensive | | |
Accumulated | | |
Total
Kopin Corporation Stockholders’ | | |
Noncontrolling | | |
Total
Stockholders’ | |
| |
Shares | | |
Amount | | |
Capital | | |
Stock | | |
Income | | |
Deficit | | |
Equity | | |
Interest | | |
Equity | |
Balance,
December 31, 2022 | |
| 92,954,159 | | |
$ | 929,540 | | |
$ | 360,567,631 | | |
$ | (103,127 | ) | |
$ | 1,176,068 | | |
$ | (338,406,815 | ) | |
$ | 24,163,297 | | |
$ | (172,682 | ) | |
$ | 23,990,615 | |
Vesting
of restricted stock | |
| 17,500 | | |
| 175 | | |
| (175 | ) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
Stock-based
compensation expense | |
| - | | |
| - | | |
| 194,190 | | |
| - | | |
| - | | |
| - | | |
| 194,190 | | |
| - | | |
| 194,190 | |
Other
comprehensive income | |
| - | | |
| - | | |
| - | | |
| - | | |
| 6,227 | | |
| - | | |
| 6,227 | | |
| - | | |
| 6,227 | |
Issuance
of common stock and pre-funded warrants, net of costs | |
| 17,000,000 | | |
| 170,000 | | |
| 21,165,000 | | |
| - | | |
| - | | |
| - | | |
| 21,335,000 | | |
| - | | |
| 21,335,000 | |
Acquisition
of noncontrolling interest | |
| - | | |
| - | | |
| (172,682 | ) | |
| - | | |
| - | | |
| - | | |
| (172,682 | ) | |
| 172,682 | | |
| - | |
Net
loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (2,628,555 | ) | |
| (2,628,555 | ) | |
| - | | |
| (2,628,555 | ) |
Balance,
April 1, 2023 | |
| 109,971,659 | | |
$ | 1,099,715 | | |
$ | 381,753,964 | | |
$ | (103,127 | ) | |
$ | 1,182,295 | | |
$ | (341,035,370 | ) | |
$ | 42,897,477 | | |
$ | - | | |
$ | 42,897,477 | |
Vesting
of restricted stock | |
| 404,966 | | |
| 4,050 | | |
| (4,050 | ) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
Stock-based
compensation expense | |
| - | | |
| - | | |
| 1,191,257 | | |
| - | | |
| - | | |
| - | | |
| 1,191,257 | | |
| - | | |
| 1,191,257 | |
Other
comprehensive income | |
| - | | |
| - | | |
| - | | |
| - | | |
| 17,750 | | |
| - | | |
| 17,750 | | |
| - | | |
| 17,750 | |
Net
loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (8,180,379 | ) | |
| (8,180,379 | ) | |
| - | | |
| (8,180,379 | ) |
Balance,
July 1, 2023 | |
| 110,376,625 | | |
$ | 1,103,765 | | |
$ | 382,941,171 | | |
$ | (103,127 | ) | |
$ | 1,200,045 | | |
$ | (349,215,749 | ) | |
$ | 35,926,105 | | |
$ | - | | |
$ | 35,926,105 | |
Vesting
of restricted stock | |
| 90,227 | | |
| 903 | | |
| (903 | ) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
Stock-based
compensation expense | |
| - | | |
| - | | |
| 958,335 | | |
| - | | |
| - | | |
| - | | |
| 958,335 | | |
| - | | |
| 958,335 | |
Other
comprehensive loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| (64,404 | ) | |
| - | | |
| (64,404 | ) | |
| - | | |
| (64,404 | ) |
Net
loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (2,450,313 | ) | |
| (2,450,313 | ) | |
| - | | |
| (2,450,313 | ) |
Balance,
September 30, 2023 | |
| 110,466,852 | | |
$ | 1,104,668 | | |
$ | 383,898,603 | | |
$ | (103,127 | ) | |
$ | 1,135,641 | | |
$ | (351,666,062 | ) | |
$ | 34,369,723 | | |
$ | - | | |
$ | 34,369,723 | |
| |
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 25, 2021 | |
| 90,069,169 | | |
$ | 900,691 | | |
$ | 356,931,157 | | |
$ | (366,110 | ) | |
$ | 1,414,351 | | |
$ | (319,080,898 | ) | |
$ | 39,799,191 | | |
$ | (172,334 | ) | |
$ | 39,626,857 | |
Vesting
of restricted stock | |
| 154,421 | | |
| 1,544 | | |
| (1,544 | ) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
Stock-based
compensation expense | |
| - | | |
| - | | |
| 656,073 | | |
| - | | |
| - | | |
| - | | |
| 656,073 | | |
| - | | |
| 656,073 | |
Other
comprehensive loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| (113,906 | ) | |
| - | | |
| (113,906 | ) | |
| - | | |
| (113,906 | ) |
Restricted
stock for tax withholding obligations | |
| - | | |
| - | | |
| - | | |
| (95,613 | ) | |
| - | | |
| - | | |
| (95,613 | ) | |
| - | | |
| (95,613 | ) |
Net
loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (1,372,641 | ) | |
$ | (1,372,641 | ) | |
| (23 | ) | |
| (1,372,664 | ) |
Balance,
March 26, 2022 | |
| 90,223,590 | | |
$ | 902,235 | | |
$ | 357,585,686 | | |
$ | (461,723 | ) | |
$ | 1,300,445 | | |
$ | (320,453,539 | ) | |
$ | 38,873,104 | | |
$ | (172,357 | ) | |
$ | 38,700,747 | |
Vesting
of restricted stock | |
| 50,000 | | |
| 500 | | |
| (500 | ) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
Stock-based
compensation expense | |
| - | | |
| - | | |
| 417,033 | | |
| - | | |
| - | | |
| - | | |
| 417,033 | | |
| - | | |
| 417,033 | |
Other
comprehensive loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| (106,750 | ) | |
| - | | |
| (106,750 | ) | |
| - | | |
| (106,750 | ) |
Sale
of registered stock | |
| 1,529,047 | | |
| 15,290 | | |
| 1,550,092 | | |
| 461,723 | | |
| - | | |
| - | | |
| 2,027,105 | | |
| - | | |
| 2,027,105 | |
Net
loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (5,646,932 | ) | |
| (5,646,932 | ) | |
| (257 | ) | |
| (5,647,189 | ) |
Balance,
June 25, 2022 | |
| 91,802,637 | | |
$ | 918,025 | | |
$ | 359,552,311 | | |
$ | - | | |
$ | 1,193,695 | | |
$ | (326,100,471 | ) | |
$ | 35,563,560 | | |
$ | (172,614 | ) | |
$ | 35,390,946 | |
Vesting
of restricted stock | |
| 149,422 | | |
| 1,495 | | |
| (1,495 | ) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
Stock-based
compensation expense | |
| - | | |
| - | | |
| 297,549 | | |
| - | | |
| - | | |
| - | | |
| 297,549 | | |
| - | | |
| 297,549 | |
Other
comprehensive loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| (163,104 | ) | |
| - | | |
| (163,104 | ) | |
| - | | |
| (163,104 | ) |
Sale
of registered stock | |
| 675,000 | | |
| 6,750 | | |
| 825,486 | | |
| - | | |
| - | | |
| - | | |
| 832,236 | | |
| - | | |
| 832,236 | |
Net
loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (6,149,174 | ) | |
| (6,149,174 | ) | |
| - | | |
| (6,149,174 | ) |
Balance,
September 24, 2022 | |
| 92,627,059 | | |
$ | 926,270 | | |
$ | 360,673,851 | | |
$ | - | | |
$ | 1,030,591 | | |
$ | (332,249,645 | ) | |
$ | 30,381,067 | | |
$ | (172,614 | ) | |
$ | 30,208,453 | |
See
notes to unaudited condensed consolidated financial statements
KOPIN
CORPORATION
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| |
Nine
months ended | | |
Nine
months ended | |
| |
September
30, 2023 | | |
September
24, 2022 | |
Cash
flows from operating activities: | |
| | | |
| | |
Net
loss | |
$ | (13,259,247 | ) | |
$ | (13,169,027 | ) |
Adjustments
to reconcile net loss to net cash used in operating activities: | |
| | | |
| | |
Depreciation
and amortization | |
| 498,188 | | |
| 665,217 | |
Accretion
of premium or discount on marketable debt securities | |
| — | | |
| 128 | |
Stock-based
compensation | |
| 2,343,782 | | |
| 1,370,654 | |
Foreign
currency losses | |
| 27,478 | | |
| 339,186 | |
Change
in allowance for credit losses | |
| 726,413 | | |
| 4,772 | |
Write-off
of excess inventory | |
| 292,405 | | |
| 1,670,993 | |
Investment
impairment (unrealized gains on investments) | |
| 2,887,893 | | |
| (2,700,000 | ) |
Loss
on sale of property and plant | |
| 18,878 | | |
| 202,670 | |
Income
taxes | |
| 117,316 | | |
| 107,509 | |
Changes
in other non-cash items | |
| 194,890 | | |
| 1,451,478 | |
Changes
in assets and liabilities: | |
| | | |
| | |
Accounts receivable | |
| (2,137,460 | ) | |
| 3,756,182 | |
Contract assets and unbilled receivables | |
| (1,651,437 | ) | |
| (2,302,972 | ) |
Inventory | |
| (2,944,672 | ) | |
| (1,944,577 | ) |
Prepaid
expenses, other current assets and other assets | |
| (461,365 | ) | |
| (272,446 | ) |
Accounts
payable and accrued expenses | |
| 1,799,444 | | |
| (1,651,538 | ) |
Contract
liabilities and billings in excess of revenue earned | |
| (244,188 | ) | |
| (3,130,965 | ) |
Net
cash used in operating activities | |
| (11,791,682 | ) | |
| (15,602,736 | ) |
Cash flows from investing activities: | |
| | | |
| | |
Other assets | |
| 14,656 | | |
| 23,802 | |
Capital expenditures | |
| (478,282 | ) | |
| (642,146 | ) |
Equity
investment purchase | |
| — | | |
| (499,998 | ) |
Proceeds
from sale of marketable debt securities | |
| 10,374,593 | | |
| 1,000,000 | |
Net
cash used in investing activities | |
| (7,713,812 | ) | |
| (4,118,384 | ) |
Cash
flows from financing activities: | |
| | | |
| | |
Sale
of treasury stock, net of costs | |
| — | | |
| 461,723 | |
Issuance
of common stock and pre-funded warrants, net of costs | |
| 21,335,000 | | |
| 2,397,618 | |
Settlements
of restricted stock for tax withholding obligations | |
| — | | |
| (95,613 | ) |
Net
cash provided by financing activities | |
| 21,335,000 | | |
| 2,763,728 | |
Effect
of exchange rate changes on cash | |
| 11,291 | | |
| (205,125 | ) |
Net
increase (decrease) in cash, cash equivalents, and restricted cash | |
| 1,840,797 | | |
| (17,162,517 | ) |
Cash,
cash equivalents and restricted cash: | |
| | | |
| | |
Beginning
of period | |
| 8,258,878 | | |
| 26,787,931 | |
End
of period | |
$ | 10,099,675 | | |
$ | 9,625,414 | |
See
notes to unaudited condensed consolidated financial statements
KOPIN
CORPORATION
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1.
BASIS OF PRESENTATION
The
condensed consolidated financial statements of Kopin Corporation as of September 30, 2023 and for the nine month periods ended September
30, 2023 and September 24, 2022 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 31, 2022. The results of the Company’s operations for any interim period are not necessarily indicative of
the results of the Company’s operations for any other interim period or for a full fiscal year. As used in this report, the terms
“we”, “us”, “our”, “Kopin” and the “Company” mean Kopin Corporation and its
subsidiaries, unless the context indicates another meaning.
The
condensed consolidated financial statements for the nine months ended September 30, 2023 include the accounts of Kopin Corporation and
its wholly owned subsidiaries. The condensed consolidated financial statements for the nine months ended September 24, 2022 include the
accounts of Kopin Corporation and its wholly owned subsidiaries. Net loss attributable to noncontrolling interest in the Company’s
condensed consolidated statements of operations for the nine months ended September 24, 2022 represents the 20% of the results of operations
of a former partially owned subsidiary which is allocated to the shareholders of the equity interests not owned by the Company. All intercompany
transactions and balances have been eliminated.
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.
On
January 27, 2023, the Company sold 17,000,000
shares of common stock and pre-funded warrants to purchase up to 6,000,000
shares of common stock at a public offering price of $0.99
per share for net proceeds of approximately $21.4
million. The Company believes that its existing cash and cash equivalents will be adequate to satisfy its current operating plans for
at least the next twelve months from the issuance of these financial statements. The Company has in the past sold equity securities
through at-the-market equity offerings and in the traditional fashion of significant equity offerings. Nonetheless, management
monitors the capital markets on an ongoing basis and may consider raising capital if favorable market conditions develop. If the
Company’s actual results are less than projected or the Company needs to raise capital for additional liquidity, the Company
may be required to do additional equity financings, reduce expenses, or enter into a strategic transaction. However, management can
make no assurance that the Company will be able to raise additional capital, reduce expenses sufficiently, or enter into a strategic
transaction on terms acceptable to the Company, or at all.
On
January 5, 2023, the Company entered into a Technology License Agreement and an Asset Purchase Agreement (the “LST Agreements”)
with Lightning Silicon Technology, Inc. (“LST”). Pursuant to the LST Agreements, the Company issued a license to LST for
certain technology associated with our Organic Light Emitting Technology, transferred in-process development contracts with two customers
and accounts receivables that the Company had previously determined were not collectible. The technology license agreement provides for
Kopin to transfer certain patents to LST if LST achieves certain milestones; however upon transfer, Kopin will receive a license to the
technology. To the extent LST makes improvements to the technology licensed from Kopin, Kopin will receive a license for these improvements
for certain markets. Kopin is not obligated to provide any additional funding support to LST. As consideration for the transaction, the
Company received 18,000,000 preferred shares in LST, which the Company determined had no fair value as of the transaction date or as
of September 30, 2023. While these shares represent a 20.0% equity stake in LST, they do not provide the Company with voting rights to
elect LST’s Governance Board. The Company will also receive a royalty based on unit sales of products that utilize the technology
licensed. Drs. John Fan, the Company’s former President, CEO and Chairman of the Board, Boryeu Tsaur, a former Executive Vice President
of the Company and Hong Choi, the Company’s former Chief Technology Officer terminated their employment with the Company and became
investors in and members of the management team of LST. Dr. Fan is the Founder of LST. As a result of this transaction, in 2022 the Company
wrote off the two operating lease assets associated with facilities used for the development of our organic light emitting diode (OLED)
products.
2.
ACCOUNTING STANDARDS
ASU
2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments became effective for
smaller reporting companies for fiscal years beginning after December 15, 2022. The amendments in ASU 2016-13 are intended to provide
more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held
by a reporting entity at each reporting date. The Company adopted this standard on January 1, 2023 and there was not a material impact.
3.
CASH AND CASH EQUIVALENTS, RESTRICTED CASH, 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.
Restricted
cash of approximately $0.5 million is included on the consolidated balance sheet as of September 30, 2023, and represents cash deposited
by the Company into a separate account and designated as collateral for a standby letter of credit in the same amount in accordance with
contractual agreements.
Marketable
debt securities consist primarily of commercial paper, medium-term corporate notes, and U.S. government and agency backed securities.
The Company classifies these marketable debt securities as available-for-sale at fair value in “Marketable debt securities, at
fair value.” The Company records the amortization of premium and accretion of discounts on marketable debt securities in the results
of operations.
The
Company uses the specific identification method as a basis for determining cost and calculating realized gains and losses with respect
to marketable debt securities. The gross gains and losses realized related to sales and maturities of marketable debt securities were
not material during the three and nine months ended September 30, 2023 and September 24, 2022.
Investments
in available-for-sale marketable debt securities were as follows at September 30, 2023 and December 31, 2022:
SCHEDULE
OF AVAILABLE-FOR-SALE MARKETABLE DEBT SECURITIES
| |
Amortized
Cost | | |
Unrealized
(Losses) Gains | | |
Fair
Value | |
| |
2023 | | |
2022 | | |
2023 | | |
2022 | | |
2023 | | |
2022 | |
U.S.
government and agency backed securities | |
$ | 4,500,030 | | |
$ | 2,500,006 | | |
$ | (61,715 | ) | |
$ | (102,276 | ) | |
$ | 4,438,315 | | |
$ | 2,397,730 | |
Corporate
debt and certificates of deposit | |
| 7,250,174 | | |
| 2,000,012 | | |
| (78,004 | ) | |
| (8,964 | ) | |
| 7,172,170 | | |
| 1,991,048 | |
Total | |
$ | 11,750,204 | | |
$ | 4,500,018 | | |
$ | (139,719 | ) | |
$ | (111,240 | ) | |
$ | 11,610,485 | | |
$ | 4,388,778 | |
The
contractual maturity of the Company’s marketable debt securities was as follows at September 30, 2023:
SCHEDULE
OF MARKETABLE DEBT SECURITIES
| |
Less
than One year | | |
One
to Five years | | |
Total | |
U.S.
government and agency backed securities | |
$ | 2,468,075 | | |
$ | 1,970,240 | | |
$ | 4,438,315 | |
Corporate
debt and certificates of deposit | |
| 3,724,927 | | |
| 3,447,243 | | |
| 7,172,170 | |
Total | |
$ | 6,193,002 | | |
$ | 5,417,483 | | |
$ | 11,610,485 | |
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, based on quoted prices for identical or similar assets in
markets that are not active, based on observable inputs such as interest rates or yield curves, or derived from or corroborated by
observable market data by correlation or other means. An investment is categorized as Level 3 if its fair value is based on
assumptions developed by the Company about what a market participant would use in pricing the assets.
The
following table details the fair value measurements of the Company’s financial assets:
SCHEDULE
OF FAIR VALUE MEASUREMENTS OF FINANCIAL ASSETS
| |
Total | | |
Level
1 | | |
Level
2 | | |
Level
3 | |
| |
| | |
Fair
Value Measurement at September 30, 2023 Using: | |
| |
Total | | |
Level
1 | | |
Level
2 | | |
Level
3 | |
Cash
and cash equivalents and restricted cash | |
$ | 10,099,675 | | |
$ | 10,099,675 | | |
$ | — | | |
$ | — | |
U.S.
government securities | |
| 4,438,315 | | |
| — | | |
| 4,438,315 | | |
| — | |
Certificates
of deposit | |
| 7,172,170 | | |
| 7,172,170 | | |
| — | | |
| — | |
Equity
investments | |
| 4,603,014 | | |
| 169,112 | | |
| — | | |
| 4,433,902 | |
Financial
instruments, owned, at fair value | |
$ | 26,313,174 | | |
$ | 17,440,957 | | |
$ | 4,438,315 | | |
$ | 4,433,902 | |
| |
Total | | |
Level
1 | | |
Level
2 | | |
Level
3 | |
| |
| | |
Fair
Value Measurement at December 31, 2022 Using: | |
| |
Total | | |
Level
1 | | |
Level
2 | | |
Level
3 | |
Cash
and cash equivalents | |
$ | 8,258,878 | | |
$ | 8,258,878 | | |
$ | — | | |
$ | — | |
U.S.
government securities | |
| 2,397,730 | | |
| — | | |
| 2,397,730 | | |
| — | |
Corporate
debt | |
| 1,500,445 | | |
| — | | |
| 1,500,445 | | |
| — | |
Certificates
of deposit | |
| 490,603 | | |
| 490,603 | | |
| — | | |
| — | |
Equity
investments | |
| 7,721,206 | | |
| 213,016 | | |
| — | | |
| 7,508,190 | |
Financial instruments,
owned, at fair value | |
$ | 20,368,862 | | |
$ | 8,962,497 | | |
$ | 3,898,175 | | |
$ | 7,508,190 | |
Transfers
between levels of the fair value hierarchy are reported at the beginning of the reporting period in which they occur. Changes in Level
3 investments were as follows:
SCHEDULE
OF FAIR VALUE, LIABILITIES MEASURED ON RECURRING BASIS
| |
December
31, 2022 | | |
Net
unrealized losses | | |
Foreign
currency losses | | |
Purchases,
issuances and settlements | | |
September
30,
2023 | |
Equity
investments | |
$ | 7,508,190 | | |
$ | (3,327,347 | ) | |
$ | (186,395 | ) | |
$ | 439,454 | | |
$ | 4,433,902 | |
The
carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate fair value because
of their short-term nature. If accrued liabilities were carried at fair value, these would be classified as Level 2 in the fair value
hierarchy.
Marketable
Debt Securities
Corporate
debt consists of floating rate notes with a maturity that is over multiple years but has interest rates that are reset every three months
based on the then-current three-month London Interbank Offering Rate (“Three-month Libor”). The Company validates the fair
market values of the financial instruments above by using discounted cash flow models, obtaining independent pricing of the securities
or through the use of a model that incorporates the Three-month Libor, the credit default swap rate of the issuer and the bid and ask
price spread of the same or similar investments which are traded on several markets.
Equity
Investments
From
2017 through 2019, the Company made several equity investments in a customer. In the fourth quarter of 2019, the Company reviewed
the financial condition and other factors of the customer and, as a result, recorded an impairment charge of $5.2 million
to reduce its investment in the customer to zero as
of December 28, 2019. In the first quarter of 2022, the customer raised additional equity capital and, based on an observable price
change of the customer’s share prices and terms of the equity sale, the Company remeasured the fair market value of its
investment and recorded a gain of $4.7 million.
In the second quarter of 2022, the Company made an additional equity investment of $0.5 million.
During the quarter ended July 1, 2023, the Company received common stock of the equity investment valued at approximately $0.4 million
for the payment of royalties. During the three and nine months ended September 30, 2023, the Company also performed an impairment
evaluation using an Option Pricing Method and as a result recorded impairment charges of approximately $0 and $3.1 million,
respectively. As of September 30, 2023, the Company owned an approximate 2.9%
interest in this investment.
On
September 30, 2019, the Company entered into an Asset Purchase Agreement pursuant to which the Company sold and licensed certain assets
of our SolosTM product line and WhisperTM Audio technology. As
consideration for the transaction, the Company received a 20.0% equity stake in Solos Incorporation (“Solos Inc.”). The Company’s
20.0% equity stake will be maintained until Solos Inc. has raised a total of $7.5
million
in equity financing. Based on the price paid for equity by the other 80.0% owners of Solos Inc. and other factors, the Company estimated
the fair value of its equity holdings at $0.6
million
and in 2019 recorded a $0.6
million
gain on its investment for this equity transaction as the basis of assets transferred was zero. The investment was written down to $0.4
million
as a result of an impairment analysis and write down performed in 2020.
During the three and nine months ended September 30, 2023, the Company recorded impairment charges of $0 and $0.2
million, respectively.
During
the three and nine months ended September 30, 2023, the Company recorded approximately $0.1 million and $0.2 million, respectively, of
unrealized losses on its equity interest in a company due to a fluctuation in the foreign exchange rate.
5.
ACCOUNTS RECEIVABLE, NET
Accounts
receivable consisted of the following:
SCHEDULE
OF ACCOUNTS RECEIVABLE
| |
September
30, 2023 | | |
December
31, 2022 | |
Accounts
receivable | |
$ | 8,143,214 | | |
$ | 6,840,891 | |
Less
— allowance for credit losses | |
| (1,025,000 | ) | |
| (303,000 | ) |
Total | |
$ | 7,118,214 | | |
$ | 6,537,891 | |
Changes
to the allowance for credit losses for the nine months ended September 30, 2023 were as follows:
SCHEDULE
OF CHANGE IN ALLOWANCE FOR CREDIT LOSSES
| |
| | |
Balance,
December 31, 2022 | |
$ | 303,000 | |
Additions | |
| 798,000 | |
Write-offs | |
| (76,000 | ) |
Balance,
September 30, 2023 | |
$ | 1,025,000 | |
6.
INVENTORY
Inventories
are stated at standard cost adjusted to approximate the lower of cost (first-in, first-out method) or net realizable value and consist
of the following at September 30, 2023 and December 31, 2022:
SCHEDULE
OF INVENTORY
| |
September
30, 2023 | | |
December
31, 2022 | |
Raw
materials | |
$ | 5,522,913 | | |
$ | 4,285,757 | |
Work-in-process | |
| 2,527,748 | | |
| 1,735,454 | |
Finished
goods | |
| 1,023,831 | | |
| 405,189 | |
Total | |
$ | 9,074,492 | | |
$ | 6,426,400 | |
7.
NET LOSS PER SHARE
Basic
net loss per share is computed using the weighted-average number of shares of common stock outstanding during the period less any unvested
restricted shares. Diluted net loss per share is calculated using weighted-average shares outstanding and contingently issuable shares,
less weighted-average shares reacquired during the period. The net outstanding shares are adjusted for the dilutive effect of shares
issuable upon the assumed conversion of the Company’s common stock equivalents, which consist of unvested restricted stock.
The
following were not included in weighted-average common shares outstanding-diluted because they are anti-dilutive or performance conditions
have not been met at the end of the period:
SCHEDULE
OF NON-VESTED RESTRICTED COMMON STOCK
| |
Three
Months Ended | | |
Three
Months Ended | | < |