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 March 27, 2021

☐	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 May 5, 2021
Common Stock, par value $0.01		91,284,873

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 March 27, 2021 (Unaudited) and December 26, 2020	3

	Condensed Consolidated Statements of Operations (Unaudited) for the three months ended March 27, 2021 and March 28, 2020	4

	Condensed Consolidated Statements of Comprehensive Loss (Unaudited) for the three months ended March 27, 2021 and March 28, 2020	5

	Condensed Consolidated Statements of Stockholders’ Equity (Unaudited) for the three months ended March 27, 2021 and March 28, 2020	6

	Condensed Consolidated Statements of Cash Flows (Unaudited) for the three months ended March 27, 2021 and March 28, 2020	7

	Notes to Unaudited Condensed Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19

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 and Use of Proceeds	25

Item 6.	Exhibits	25

Signatures		26

Part 1. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements (Unaudited)

KOPIN CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

	March 27, 2021 (unaudited)			December 26, 2020
ASSETS
Current assets:
Cash and equivalents	$	32,203,311		$	17,112,869
Marketable debt securities, at fair value		3,430,371			3,635,681
Accounts receivable, net of allowance of $275,000 in 2021 and $175,000 in 2020		7,807,465			9,260,865
Contract assets and unbilled receivables		1,115,419			3,521,753
Inventory		5,455,134			4,455,756
Prepaid taxes		225,751			205,568
Prepaid expenses and other current assets		1,811,003			1,263,688
Total current assets		52,048,454			39,456,180
Property, plant and equipment, net		1,662,315			1,626,930
Operating lease right-of-use assets		1,521,315			1,780,039
Other assets		162,473			162,473
Equity investments		4,522,445			4,523,525
Total assets	$	59,917,002		$	47,549,147

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	5,594,876		$	5,606,910
Accrued payroll and expenses		2,074,043			1,977,851
Accrued warranty		906,000			508,000
Contract liabilities and billings in excess of revenues earned		1,176,872			1,493,847
Operating lease liabilities		886,609			982,375
Other accrued liabilities		1,543,146			1,809,495
Customer deposits		2,782,056			3,950,031
Deferred tax liabilities		538,826			554,000
Total current liabilities		15,502,428			16,882,509
Noncurrent contract liabilities and asset retirement obligations		313,632			276,409
Operating lease liabilities, net of current portion		643,043			821,306
Other long-term obligations		1,267,038			1,270,328
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 91,444,666 shares in 2021 and 91,059,407 shares in 2020; outstanding 88,794,156 in 2021 and 85,443,378 in 2020		889,538			880,075
Additional paid-in capital		350,417,361			341,512,893
Treasury stock (159,793 and 2,564,155 shares in 2021 and 2020, at cost)		(610,332	)		(9,793,946	)
Accumulated other comprehensive income		1,464,878			1,484,434
Accumulated deficit		(309,794,263	)		(305,648,025	)
Total Kopin Corporation stockholders’ equity		42,367,182			28,435,431
Noncontrolling interest		(176,321	)		(136,836	)
Total Kopin Corporation stockholders’ equity		42,190,861			28,298,595
Total liabilities and stockholders’ equity	$	59,917,002		$	47,549,147

See notes to unaudited condensed consolidated financial statements

KOPIN CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	March 27, 2021			March 28, 2020
	Three months ended			Three months ended
	March 27, 2021			March 28, 2020
Revenues:
Net product revenues	$	7,568,845		$	5,919,206
Research and development revenues		3,560,743			1,959,399
Other revenues		546,781			-—
Total revenues		11,676,369			7,878,605
Expenses:
Cost of product revenues		6,396,671			5,647,847
Research and development		3,563,300			2,339,748
Selling, general and administration		5,905,706			3,432,092
Total expenses		15,865,677			11,419,687
Loss from operations		(4,189,308	)		(3,541,082	)
Other income (expense):
Interest income		8,744			73,406
Other (expense) income, net		(1,150	)		12,678
Foreign currency transaction gains (losses)		28,991			(172,993	)
Total other income (expense)		36,585			(86,909	)
Loss before provision for income taxes and net loss attributable to noncontrolling interest		(4,152,723	)		(3,627,991	)
Tax provision		(33,000	)		(29,000	)
Net loss		(4,185,723	)		(3,656,991	)
Net loss attributable to the noncontrolling interest		39,485			61,472
Net loss attributable to Kopin Corporation	$	(4,146,238	)	$	(3,595,519	)
Net loss per share
Basic and diluted	$	(0.05	)	$	(0.04	)
Weighted average number of common shares outstanding
Basic and diluted		87,378,288			82,536,416

See notes to unaudited condensed consolidated financial statements

KOPIN CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF comprehensive loss

(Unaudited)

	March 27, 2021			March 28, 2020
	Three months ended			Three months ended
	March 27, 2021			March 28, 2020
Net loss	$	(4,185,723	)	$	(3,656,991	)
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustments		(27,842	)		189,078
Unrealized holding gain (loss) on marketable securities		8,286			(278,362	)
Reclassification of holding losses in net loss		—			(9,348	)
Other comprehensive loss, net of tax		(19,556	)		(98,632	)
Comprehensive loss		(4,205,279	)		(3,755,623	)
Comprehensive loss attributable to the noncontrolling interest		39,485			61,472
Comprehensive loss attributable to Kopin Corporation	$	(4,165,794	)	$	(3,694,151	)

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 26, 2020		88,007,535		$	880,075		$	341,512,893		$	(9,793,946	)	$	1,484,434		$	(305,648,025	)	$	28,435,431		$	(136,836	)	$	28,298,595
Stock-based compensation expense		-			-			2,610,166			-			-			-			2,610,166			-			2,610,166
Vesting of restricted stock		950,000			9,500			(9,500	)		-			-			-			-			-			-
Sale of registered stock		-			-			6,336,470			9,183,614			-			-			15,520,084			-			15,520,084
Restricted stock for tax withholding obligations		(3,586	)		(37	)		(32,668	)		–			–			–			(32,705	)		–			(32,705	)
Other comprehensive loss		-			-			-			-			(19,556	)		-			(19,556	)		-			(19,556	)
Net loss		-			-			-			-			-			(4,146,238	)		(4,146,238	)		(39,485	)		(4,185,723	)
Balance, March 27, 2021		88,953,949		$	889,538		$	350,417,361		$	(610,332	)	$	1,464,878		$	(309,794,263	)	$	42,367,182		$	(176,321	)	$	42,190,861

	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 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 loss		-		-		-		-			(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

See notes to unaudited condensed consolidated financial statements

KOPIN CORPORATION

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	March 27, 2021			March 28, 2020
	Three months ended			Three months ended
	March 27, 2021			March 28, 2020
Cash flows from operating activities:
Net loss	$	(4,185,723	)	$	(3,656,991	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		205,023			170,805
Accretion of premium or discount on marketable debt securities		1,534			2,344
Stock-based compensation		2,610,166			158,465
Foreign currency losses (gains)		(68,351	)		193,073
Change in allowance for bad debt		95,931			(150,500	)
Write-off of excess inventory		408,939			676,063
Other non-cash items		412,161			(985	)
Changes in assets and liabilities:
Accounts receivable		1,258,770			260,602
Contract assets		2,406,334			(473,551	)
Inventory		(1,398,350	)		(356,766	)
Prepaid expenses and other current assets		(773,067	)		(33,168	)
Accounts payable and accrued expenses		(934,132	)		(1,086,534	)
Billings in excess of revenue earned		(284,515	)		428,688
Net cash used in operating activities		(245,280	)		(3,868,455	)
Cash flows from investing activities:
Other assets		—			55,231
Capital expenditures		(346,450	)		(155,930	)
Proceeds from sale of marketable debt securities		200,000			6,297,500
Net cash (used in) provided by investing activities		(146,450	)		6,196,801
Cash flows from financing activities:
Sale of treasury stock, net of costs		15,520,084			-
Settlements of restricted stock for tax withholding obligations		(32,705	)		-
Net cash provided by financing activities		15,487,379			-
Effect of exchange rate changes on cash		(5,207	)		(23,990	)
Net increase in cash and cash equivalents		15,090,442			2,304,356
Cash and cash equivalents:
Beginning of period		17,112,869			6,029,247
End of period	$	32,203,311		$	8,333,603

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 March 27, 2021 and for the three month periods ended March 27, 2021 and March 28, 2020 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 26, 2020. 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.

The Company’s products are targeted towards the defense and industrial/enterprise wearable markets. Management believes the industrial wearable market is still developing and cannot predict how long it will take to develop or if the Company’s products will be accepted. In addition, the Company’s current strategy is to continue to invest in research and development, even during unprofitable periods, which may result in the Company continuing to incur net losses and negative cash flows from operations. If the Company is unable to achieve and maintain positive cash flows and profitability in the foreseeable future, its financial condition may ultimately be materially adversely affected such that management may be required to reduce operating expenses, including investments in research and development, or raise additional capital. While there can be no assurance the Company will be able to successfully reduce operating expenses or raise additional capital, management believes its historical success in managing cash flows and obtaining capital will continue in the foreseeable future.

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 months ended March 27, 2021 and March 28, 2020.

Investments in available-for-sale marketable debt securities were as follows at March 27, 2021 and December 26, 2020:

	Amortized Cost				Unrealized Gains				Fair Value
	2021		2020		2021		2020		2021		2020
U.S. government and agency backed securities	$	1,002,993	$	1,003,941	$	14,997	$	19,179	$	1,017,990	$	1,023,120
Corporate debt		2,403,119		2,603,704		9,262		8,857		2,412,381		2,612,561
Total	$	3,406,112	$	3,607,645	$	24,259	$	28,036	$	3,430,371	$	3,635,681

The contractual maturity of the Company’s marketable debt securities was as follows at March 27, 2021:

SCHEDULE OF MARKETABLE DEBT SECURITIES

	Less than One year		One to Five years		Total
U.S. government and agency backed securities	$	1,017,990	$	—	$	1,017,990
Corporate debt		901,611		1,510,770		2,412,381
Total	$	1,919,601	$	1,510,770	$	3,430,371

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 at March 27, 2021 Using:

Total

Level 1

Level 2

Level 3

Cash and cash equivalents

SEC Form 10-Q filed by Kopin Corporation