KOPIN CORP, 10-Q filed on 5/4/2016
Quarterly Report
Document and Entity Information
3 Months Ended
Mar. 26, 2016
Apr. 29, 2016
Document Documentand Entity Information [Abstract]
 
 
Document Type
10-Q 
 
Amendment Flag
false 
 
Document Period End Date
Mar. 26, 2016 
 
Document Fiscal Year Focus
2016 
 
Document Fiscal Period Focus
Q1 
 
Trading Symbol
KOPN 
 
Entity Registrant Name
KOPIN CORP 
 
Entity Central Index Key
0000771266 
 
Current Fiscal Year End Date
--12-31 
 
Entity Filer Category
Accelerated Filer 
 
Entity Common Stock, Shares Outstanding
 
66,673,276 
CONDENSED CONSOLIDATED BALANCE SHEETS (USD $)
Mar. 26, 2016
Dec. 26, 2015
Current assets:
 
 
Cash and equivalents
$ 27,635,331 
$ 19,767,889 
Marketable debt securities, at fair value
63,248,313 
60,942,891 
Accounts receivable, net of allowance of $158,000 and $153,000 in 2016 and 2015, respectively
1,661,113 
1,487,633 
Unbilled receivables
19,116 
87,340 
Inventory
2,705,857 
2,512,473 
Prepaid taxes
145,524 
437,586 
Prepaid expenses and other current assets
695,419 
920,410 
Note receivable
15,000,000 
Total current assets
96,110,673 
101,156,222 
Property, plant and equipment, net
2,712,658 
2,677,103 
Goodwill
928,066 
946,082 
Other assets
711,317 
461,416 
Real Estate Held-for-sale
860,750 
819,263 
Total assets
101,323,464 
106,060,086 
Current liabilities:
 
 
Accounts payable
4,439,780 
3,959,704 
Accrued payroll and expenses
1,466,094 
1,631,292 
Accrued warranty
516,000 
518,000 
Billings in excess of revenue earned
1,329,986 
1,407,566 
Other accrued liabilities
2,651,836 
2,553,282 
Deferred tax liabilities
1,330,000 
1,207,000 
Deferred tax liabilities
11,733,696 
11,276,844 
Asset retirement obligations
282,760 
298,463 
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, 120,000,000 shares; issued 78,775,534 shares in 2016 and 78,271,659 shares in 2015; outstanding 63,979,260 shares in 2016 and 63,977,385 shares in 2015
760,815 
760,796 
Additional paid-in capital
327,141,664 
326,558,527 
Treasury stock (12,102,258 shares in 2016 and 2015, respectively, at cost)
(42,741,551)
(42,741,551)
Accumulated other comprehensive income
1,797,607 
771,774 
Accumulated deficit
(197,526,132)
(190,608,671)
Total Kopin Corporation stockholders’ equity
89,432,403 
94,740,875 
Noncontrolling interest
(125,395)
(256,096)
Total stockholders’ equity
89,307,008 
94,484,779 
Total liabilities and stockholders’ equity
$ 101,323,464 
$ 106,060,086 
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)
Mar. 26, 2016
Dec. 26, 2015
Statement of Financial Position [Abstract]
 
 
Accounts receivable, allowance
$ 0 
$ 153,000 
Preferred stock, par value
$ 0.01 
$ 0.01 
Preferred stock, authorized
3,000 
3,000 
Preferred stock, issued
Common stock, par value
$ 0.01 
$ 0.01 
Common stock, authorized
120,000,000 
120,000,000 
Common stock, issued
78,775,534 
78,271,659 
Common stock, outstanding
63,979,260 
63,977,385 
Treasury stock, shares
12,102,258 
12,102,258 
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (USD $)
3 Months Ended
Mar. 26, 2016
Mar. 28, 2015
Revenues:
 
 
Net component revenues
$ 5,978,134 
$ 7,128,369 
Research and development revenues
141,004 
1,456,622 
Total revenues
6,119,138 
8,584,991 
Expenses:
 
 
Cost of component revenues
4,647,041 
5,283,733 
Research and development
4,039,951 
4,860,192 
Selling, general and administration
3,760,849 
4,386,215 
Total expenses
12,447,841 
14,530,140 
Loss from operations
(6,328,703)
(5,945,149)
Other income and expense:
 
 
Interest income
164,948 
209,664 
Other income, net
37,907 
19,510 
Foreign currency transaction losses
(551,940)
(179,589)
Gain on sale of investments
2,142,421 
Total other income and expense
(349,085)
2,192,006 
Loss before provision for income taxes, equity loss in unconsolidated affiliate and net income attributable to noncontrolling interest
(6,677,788)
(3,753,143)
Tax provision
(141,000)
(12,500)
Loss before equity loss in unconsolidated affiliate and net income attributable to noncontrolling interest
(6,818,788)
(3,765,643)
Equity loss in unconsolidated affiliate
(47,443)
Net loss
(6,818,788)
(3,813,086)
Net income attributable to the noncontrolling interest
(98,673)
(24,906)
Net loss attributable to the controlling interest
$ (6,917,461)
$ (3,837,992)
Net (loss) income per share
 
 
Earnings Per Share, Basic
$ (0.11)
$ (0.06)
Earnings Per Share, Diluted
$ (0.11)
$ (0.06)
Weighted average number of common shares
 
 
Weighted average common shares outstanding, basic
63,978,048 
63,083,652 
Weighted average common shares outstanding, diluted
63,978,048 
63,083,652 
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (USD $)
3 Months Ended
Mar. 26, 2016
Mar. 28, 2015
Statement of Comprehensive Income [Abstract]
 
 
Net loss
$ (6,818,788)
$ (3,813,086)
Foreign currency translation adjustments
736,184 
14,422 
Holding (loss) gain on marketable securities
317,510 
824,922 
Reclassifications of gains in net (loss) income
4,167 
(377,561)
Other Comprehensive Income (Loss), Net of Tax
1,057,861 
461,783 
Comprehensive (loss) income
(5,760,927)
(3,351,303)
Comprehensive loss (income) attributable to the noncontrolling interest
66,645 
57,798 
Comprehensive (loss) income attributable to controlling interest
$ (5,694,282)
$ (3,293,505)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (USD $)
Total
Common Stock
Additional Paid-in Capital
Treasury Stock
Accumulated Other Comprehensive Income
Accumulated Deficit
Stockholders' Equity, Total [Member]
Noncontrolling Interest
Beginning Balance at Dec. 26, 2015
$ 94,484,779 
$ 760,796 
$ 326,558,527 
$ (42,741,551)
$ 771,774 
$ (190,608,671)
$ 94,740,875 
$ (256,096)
Beginning Balance (in shares) at Dec. 26, 2015
 
76,079,643 
 
 
 
 
 
 
Stock-based compensation
584,656 
 
584,656 
 
 
 
584,656 
 
Adjustments To Additional Paid In Capital Other Shares
 
2,500 
 
 
 
 
 
 
Adjustments to Additional Paid in Capital, Other
 
25 
(25)
 
 
 
 
 
Other Comprehensive Income (Loss), Unrealized Holding Gain (Loss) on Securities Arising During Period, Net of Tax
1,057,861 
 
 
 
1,025,833 
 
1,025,833 
32,028 
Shares Paid for Tax Withholding for Share Based Compensation
 
(625)
 
 
 
 
 
 
Settlements of restricted stock for tax withholding obligations
(1,500)
(6)
(1,494)
 
 
 
(1,500)
 
Net loss
(6,818,788)
 
 
 
 
(6,917,461)
(6,917,461)
98,673 
Ending Balance at Mar. 26, 2016
$ 89,307,008 
$ 760,815 
$ 327,141,664 
$ (42,741,551)
$ 1,797,607 
$ (197,526,132)
$ 89,432,403 
$ (125,395)
Ending Balance (in shares) at Mar. 26, 2016
 
76,081,518 
 
 
 
 
 
 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
3 Months Ended
Mar. 26, 2016
Mar. 28, 2015
Cash flows from operating activities:
 
 
Net loss
$ (6,818,788)
$ (3,813,086)
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
 
 
Depreciation and amortization
335,478 
681,899 
Accretion (amortization) of premium or discount on marketable debt securities
37,971 
20,645 
Stock-based compensation
56,454 
997,464 
Foreign currency losses
535,294 
137,074 
Provision for Doubtful Accounts
(74,500)
Deferred Income Tax Expense (Benefit)
123,000 
Gain on sale of investments
(2,142,421)
Adjustments, Noncash Items, to Reconcile Net Income (Loss) to Cash Provided by (Used in) Operating Activities
94,050 
548,627 
Changes in assets and liabilities:
 
 
Accounts receivable
(123,073)
(696,222)
Inventory
(306,431)
(140,810)
Increase (Decrease) in Prepaid Expense and Other Assets
(491,455)
(168,651)
Accounts payable and accrued expenses
98,847 
(3,071,919)
Billings in excess of revenue earned
(77,580)
1,907,449 
Net cash used in operating activities
(5,553,323)
(5,477,149)
Cash flows from investing activities:
 
 
Other assets
(92,276)
(8,250)
Capital expenditures
(223,520)
(314,400)
Proceeds from sale of marketable debt securities
11,229,734 
3,805,945 
Purchase of marketable debt securities
(13,474,384)
(2,073,061)
Proceeds from sale of investments
1,869,804 
Proceeds from Sale of Buildings
791,623 
Proceeds from Divestiture of Businesses
15,000,000 
Net cash provided by investing activities
13,231,177 
3,280,038 
Net cash used in financing activities
 
 
Settlements of restricted stock for tax withholding obligations
(1,500)
Net cash used in financing activities
(1,500)
Effect of exchange rate changes on cash
191,088 
22,246 
Net increase (decrease) in cash and equivalents
7,867,442 
(2,174,865)
Cash and equivalents:
 
 
Beginning of period
19,767,889 
14,635,801 
End of period
27,635,331 
12,460,936 
Supplemental disclosure of cash flow information:
 
 
Income taxes paid
50,000 
Supplemental schedule of noncash investing activities:
 
 
Construction in progress included in accrued expenses
136,000 
150,000 
Non cash proceeds from exercise of warrants
$ 0 
$ 1,330,000,000 
BASIS OF PRESENTATION
Basis of Accounting [Text Block]
BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements as of March 26, 2016 include the accounts of Kopin Corporation, its wholly-owned subsidiaries, Kowon Technology Co., Ltd. (Kowon), a majority owned (93%) subsidiary located in Korea, and eMDT America Inc. (eMDT), a majority owned (80%) subsidiary located in the U.S.A. (collectively, the Company). In the fourth quarter of 2015, the Company increased its investment in Kopin Software Ltd. (KSL) (formerly Intoware Ltd.) from 58% to 100%. Ownership interests of Kowon, KSL and eMDT not attributable to the Company are referred to as noncontrolling interests. All intercompany transactions and balances have been eliminated. The condensed consolidated financial statements for the three months ended March 26, 2016 and March 28, 2015 are unaudited and include all adjustments which, 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 year ended December 26, 2015.
The Company ceased its production activities at its Kowon facility in 2013 and commenced offering the facility for sale. In February 2016, the Company entered into an agreement to sell the Kowon Facility for 9.5 billion KRW (approximately $8.1 million as of March 26, 2016). Upon entering into the Purchase & Sale agreement, (P&S), the Company received a 10% deposit (approximately $800,000 as of March 26, 2016), which is included in "Other accrued liabilities" on our Condensed Consolidated Balance Sheets. The P&S allows the buyer to cancel the transaction under certain conditions.
The Company believes the facility will be sold within the next 12 months and has classified the facility assets as held for sale.
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.
During the three months ended March 26, 2016, the change in the Company's accumulated other comprehensive income was net of $0.7 million foreign currency translation adjustments and $0.3 million unrealized holding gains on marketable securities.
CASH AND EQUIVALENTS AND MARKETABLE SECURITIES
CASH AND EQUIVALENTS AND MARKETABLE SECURITIES
CASH AND EQUIVALENTS AND MARKETABLE 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 certificates of deposit, medium-term corporate debt, and U.S. government and agency backed securities. The Company classifies these marketable debt securities as available-for-sale in “Marketable Debt Securities”. The Company records the amortization of premium and accretion of discount 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 26, 2016 and the year ended December 26, 2015.
Investments in available-for-sale marketable debt securities are as follows at March 26, 2016 and December 26, 2015:
 
Amortized Cost

Unrealized Gains

Unrealized Losses

Fair Value
 
2016

2015

2016

2015

2016

2015

2016

2015
U.S. government and agency backed securities
$
46,664,124


$
46,586,224


$
61,467


$


$


$
(121,561
)

$
46,725,591


$
46,464,663

Corporate debt and certificates of deposit
16,597,702


14,534,247






(74,980
)

(56,019
)

16,522,722


14,478,228

Total
$
63,261,826

 
$
61,120,471

 
$
61,467

 
$

 
$
(74,980
)
 
$
(177,580
)
 
$
63,248,313

 
$
60,942,891


The contractual maturity of the Company’s marketable debt securities is as follows at March 26, 2016:
 
Less than
One year
 
One to
Five years
 
Greater than
Five years
 
Total
U.S. government and agency backed securities
$
17,594,525

 
$
24,333,433

 
$
4,797,633

 
$
46,725,591

Corporate debt and certificates of deposit
14,136,068

 
2,386,654

 

 
16,522,722

Total
$
31,730,593

 
$
26,720,087

 
$
4,797,633

 
$
63,248,313


The Company conducts a review of its marketable debt securities on a quarterly basis for the presence of other-than-temporary impairment (OTTI). The Company assesses whether OTTI is present when the fair value of a debt security is less than its amortized cost basis at the balance sheet date. Under these circumstances OTTI is considered to have occurred (1) if the Company intends to sell the security before recovery of its amortized cost basis; (2) if it is “more likely than not” the Company will be required to sell the security before recovery of its amortized cost basis; or (3) the present value of expected cash flows is not sufficient to recover the entire amortized cost basis.
The Company further estimates the amount of OTTI resulting from a decline in the credit worthiness of the issuer (credit-related OTTI) and the amount of non credit-related OTTI. Non credit-related OTTI can be caused by such factors as market illiquidity. Credit-related OTTI is recognized in earnings while non credit-related OTTI on securities not expected to be sold is recognized in other comprehensive income (loss). The Company did not record an OTTI for the three months ended March 26, 2016 and March 28, 2015.
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS
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 26, 2016 Using:
 
Total
 
Level 1
 
Level 2
 
Level 3
Cash and Equivalents
$
27,635,331

 
$
27,635,331

 
$

 
$

U.S. Government Securities
46,725,591

 
15,547,936

 
31,177,655

 

Corporate Debt
5,027,952

 

 
5,027,952

 

Certificates of Deposit
11,494,770

 

 
11,494,770

 

GCS Holdings
389,715

 
389,715

 

 

 
$
91,273,359

 
$
43,572,982

 
$
47,700,377

 
$

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fair Value Measurement December 26, 2015 Using:
 
Total
 
Level 1
 
Level 2
 
Level 3
Cash and Equivalents
$
19,767,889

 
$
19,767,889

 
$

 
$

U.S. Government Securities
46,464,663

 
16,381,152

 
30,083,511

 

Corporate Debt
6,886,495

 

 
6,886,495

 

Certificates of Deposit
7,591,733

 

 
7,591,733

 

GCS Holdings
232,037

 
232,037

 

 

 
$
80,942,817

 
$
36,381,078

 
$
44,561,739

 
$

The corporate debt consists of floating rate notes with a maturity that is over multiple years but has interest rates which 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 which 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.
The carrying amounts of cash and 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.
INVENTORY
Inventory
INVENTORY
Inventory is stated at the lower of cost (determined on the first-in, first-out) or market and consists of the following at March 26, 2016 and December 26, 2015:
 
March 26,
2016
 
December 26,
2015
Raw materials
$
1,036,421

 
$
844,475

Work-in-process
1,411,829

 
1,281,891

Finished goods
257,607

 
386,107

 
$
2,705,857

 
$
2,512,473

NET (LOSS) INCOME PER SHARE
Net (loss) Income per share
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 non-vested restricted shares. Diluted earnings per common share, if applicable, 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 outstanding stock options and non-vested restricted stock units.
Weighted average common shares outstanding used to calculate basic and diluted earnings per share are as follows:
 
Three Months Ended
 
March 26, 2016
 
March 28, 2015
Weighted average common shares outstanding-basic and diluted
63,978,048

 
63,083,652


The following were not included in weighted average common shares outstanding-diluted because they are anti-dilutive or performance or market conditions had not been met at the end of the period:
 
Three months ended
 
March 26, 2016
 
March 28, 2015
Non-vested restricted common stock
2,694,016

 
3,342,111

Stock options

 
130,000

Total
2,694,016

 
3,472,111


For the three month period ended March 28, 2015 warrants to purchase 148,000 shares of the Company's common stock for $3.49 per share were not included in weighted average common shares outstanding-diluted. These warrants were fully exercised in 2015.
STOCK-BASED COMPENSATION
STOCK-BASED COMPENSATION
STOCK-BASED COMPENSATION
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 which 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 which 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. The Company recognizes compensation costs on a straight-line basis over the requisite service period for time-vested awards.
On February 24, 2016, the Company granted Dr. Fan 87,500 shares of restricted stock, 50% of which will vest on December 10, 2016 and 50% will vest on December 10, 2017.
Non-Vested Restricted Common Stock
A summary of the activity for non-vested restricted common stock awards as of March 26, 2016 and changes during the three month period then ended is presented below:

 
Shares
 
Weighted
Average
Grant
Fair
Value
Balance, December 26, 2015
2,192,016

 
$
3.82

Granted
504,500

 
1.84

Forfeited

 

Vested
(2,500
)
 
1.84

Balance, March 26, 2016
2,694,016

 
$
3.45


Stock-Based Compensation
The following table summarizes stock-based compensation expense within each of the categories below as it relates to non-vested restricted common stock awards for the three months ended March 26, 2016 and March 28, 2015 (no tax benefits were recognized):
 
Three Months Ended
 
March 26,
2016
 
March 28,
2015
Cost of component revenues
$
142,534

 
$
199,239

Research and development
116,895

 
234,406

Selling, general and administrative
(202,975
)
 
563,819

Total
$
56,454

 
$
997,464


The $0.2 million benefit in selling, general and administrative expense is primarily driven by the mark to market accounting of stock based compensation arrangements classified and recorded as liabilities.
Unrecognized compensation expense for non-vested restricted common stock as of March 26, 2016 totaled $4.7 million and is expected to be recognized over a weighted average period of two years.
OTHER ASSETS AND AMOUNTS DUE TO / FROM AFFILIATES
OTHER ASSETS AND AMOUNTS DUE TO / FROM AFFILIATES
OTHER ASSETS AND NOTE RECEIVABLE
At December 26, 2015, the Company had recorded a $15.0 million note receivable resulting from the sale of its III-V product line and its investment in KTC, which was received in January, 2016.

On February 25, 2015, the Company acquired approximately 251,000 shares of Vuzix Corporation (Vuzix) common stock through a cashless exercise of warrants. The Company received the warrants in August 2013 as part of a restructuring of debt owed by Vuzix to the Company. Upon receipt of the warrants, the Company should have recorded the value of the warrant of approximately $352,000 in its consolidated financial statements. Subsequently, the Company should have marked to market the warrants at the end of each reporting period. Had the Company recorded the warrants in its consolidated financial statements and marked to market the warrants as of December 28, 2013 and December 27, 2014, the Company would have recorded gains in its statement of operations of approximately $646,000 and $171,000, respectively. In the first quarter of 2015, the Company recorded the warrants in its consolidated financial statements and as a result recorded a gain of approximately $1.3 million with $817,000 attributed to prior periods. The value of the warrants as of August 2013, December 28, 2013 and December 27, 2014 was determined using the Black-Scholes pricing model. The Company does not believe the unrecorded gains were material to the consolidated financial statements as the loss from operations for the fiscal years ended December 28, 2013 and December 27, 2014 were $35.9 million and $28.5 million, respectively.
ACCRUED WARRANTY
ACCRUED WARRANTY
ACCRUED WARRANTY
The Company typically warrants its products against defect for 12 months. A provision for estimated future costs and estimated returns for credit relating to such warranty is recorded in the period when product is shipped and revenue recognized, and is updated as additional information becomes available. The Company’s estimate of future costs to satisfy warranty obligations is based primarily on historical warranty expense experienced and a provision for potential future product failures. Changes in the accrued warranty for the three months ended March 26, 2016 are as follows:
Balance, December 26, 2015
$
518,000

Additions
267,000

Claim and reversals
(269,000
)
Balance, March 26, 2016
$
516,000

INCOME TAXES
INCOME TAXES
INCOME TAXES
The Company’s tax provision of approximately $141,000 for the three month period ended March 26, 2016 represents the net movement in estimated foreign withholding on anticipated future remitted earnings of an international subsidiary and state taxes. The Company’s tax provision of approximately $12,500 for the three month period ended March 28, 2015 represents state taxes.
As of March 26, 2016, the Company has available for tax purposes U.S. federal NOLs of approximately $89 million expiring through 2035. The Company has recognized a full valuation allowance on its domestic and certain foreign net deferred tax assets due to the uncertainty of realization of such assets. The Company has not historically recorded, nor does it intend to record the tax benefits from stock awards until realized. Unrecorded benefits from stock awards approximate $10 million.
The Company’s income tax returns have not been examined by the Internal Revenue Service and are subject to examination for all years since 2001. State income tax returns are generally subject to examination for a period of 3 to 5 years after filing of the respective return. The state impact of any federal changes remains subject to examination by various states for a period of up to one year after formal notification to the states.
SEGMENTS AND GEOGRAPHICAL INFORMATION
SEGMENTS AND GEOGRAPHICAL INFORMATION
SEGMENTS AND GEOGRAPHICAL INFORMATION
The Company’s chief operating decision maker is its Chief Executive Officer. The Company has determined it has two reportable segments, FDD, the manufacturer of its reflective display products for test and simulation products, and Kopin, which is comprised of Kopin Corporation, Kowon, Kopin Software Ltd. and eMDT. The following table presents the Company’s reportable segment results (in thousands):
 
Three Months Ended
 
March 26, 2016
 
Kopin
 
FDD
 
Total
 
 
 
 
 
 
Revenues
$
5,148

 
$
971

 
$
6,119

Net loss attributable to the controlling interest
(6,571
)
 
(346
)
 
(6,917
)
Total Assets
99,811

 
1,512

 
101,323

Long lived assets from continuing operations
2,695

 
18

 
2,713

Property and Plant held for sale
861

 

 
861

 
Three Months Ended
 
March 28, 2015
 
Kopin
 
FDD
 
Total
 
 
 
 
 
 
Revenues
$
7,586

 
$
999

 
$
8,585

Net loss attributable to the controlling interest
(3,373
)
 
(465
)
 
(3,838
)
Total assets
117,684

 
1,523

 
119,207

Long-lived assets from continuing operations
4,067

 
180

 
4,247


The total assets of Kopin is net of $6.1 million and $5.2 million in intercompany loans to FDD as of March 26, 2016 and March 28, 2015, respectively.
During the three month periods ended March 26, 2016 and March 28, 2015, the Company derived its sales from the following geographies (as a percentage of net revenues):
 
Three Months Ended
 
March 26, 2016
 
March 28, 2015
United States
29
%
 
74
%
Others
%
 
2
%
        Americas
29
%
 
76
%
Asia-Pacific
51
%
 
16
%
Europe
20
%
 
8
%
       Total Revenues
100
%
 
100
%
LITIGATION
LITIGATION
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.
CASH AND EQUIVALENTS AND MARKETABLE SECURITIES (Tables)
Investments in available-for-sale marketable debt securities are as follows at March 26, 2016 and December 26, 2015:
 
Amortized Cost

Unrealized Gains

Unrealized Losses

Fair Value
 
2016

2015

2016

2015

2016

2015

2016

2015
U.S. government and agency backed securities
$
46,664,124


$
46,586,224


$
61,467


$


$


$
(121,561
)

$
46,725,591


$
46,464,663

Corporate debt and certificates of deposit
16,597,702


14,534,247






(74,980
)

(56,019
)

16,522,722


14,478,228

Total
$
63,261,826

 
$
61,120,471

 
$
61,467

 
$

 
$
(74,980
)
 
$
(177,580
)
 
$
63,248,313

 
$
60,942,891

The contractual maturity of the Company’s marketable debt securities is as follows at March 26, 2016:
 
Less than
One year
 
One to
Five years
 
Greater than
Five years
 
Total
U.S. government and agency backed securities
$
17,594,525

 
$
24,333,433

 
$
4,797,633

 
$
46,725,591

Corporate debt and certificates of deposit
14,136,068

 
2,386,654

 

 
16,522,722

Total
$
31,730,593

 
$
26,720,087

 
$
4,797,633

 
$
63,248,313

FAIR VALUE MEASUREMENTS (Tables)
Fair Value Measurements of Financial Instruments
The following table details the fair value measurements of the Company’s financial assets:
 
 
 
Fair Value Measurement March 26, 2016 Using:
 
Total
 
Level 1
 
Level 2
 
Level 3
Cash and Equivalents
$
27,635,331

 
$
27,635,331

 
$

 
$

U.S. Government Securities
46,725,591

 
15,547,936

 
31,177,655

 

Corporate Debt
5,027,952

 

 
5,027,952

 

Certificates of Deposit
11,494,770

 

 
11,494,770

 

GCS Holdings
389,715

 
389,715

 

 

 
$
91,273,359

 
$
43,572,982

 
$
47,700,377

 
$

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fair Value Measurement December 26, 2015 Using:
 
Total
 
Level 1
 
Level 2
 
Level 3
Cash and Equivalents
$
19,767,889

 
$
19,767,889

 
$

 
$

U.S. Government Securities
46,464,663

 
16,381,152

 
30,083,511

 

Corporate Debt
6,886,495

 

 
6,886,495

 

Certificates of Deposit
7,591,733

 

 
7,591,733

 

GCS Holdings
232,037

 
232,037

 

 

 
$
80,942,817

 
$
36,381,078

 
$
44,561,739

 
$

INVENTORY (Tables)
Inventory Stated at the Lower of Cost or Market
Inventory is stated at the lower of cost (determined on the first-in, first-out) or market and consists of the following at March 26, 2016 and December 26, 2015:
 
March 26,
2016
 
December 26,
2015
Raw materials
$
1,036,421

 
$
844,475

Work-in-process
1,411,829

 
1,281,891

Finished goods
257,607

 
386,107

 
$
2,705,857

 
$
2,512,473

NET (LOSS) INCOME PER SHARE (Tables)
Weighted average common shares outstanding used to calculate basic and diluted earnings per share are as follows:
 
Three Months Ended
 
March 26, 2016
 
March 28, 2015
Weighted average common shares outstanding-basic and diluted
63,978,048

 
63,083,652

The following were not included in weighted average common shares outstanding-diluted because they are anti-dilutive or performance or market conditions had not been met at the end of the period:
 
Three months ended
 
March 26, 2016
 
March 28, 2015
Non-vested restricted common stock
2,694,016

 
3,342,111

Stock options

 
130,000

Total
2,694,016

 
3,472,111

STOCK-BASED COMPENSATION (Tables)
A summary of the activity for non-vested restricted common stock awards as of March 26, 2016 and changes during the three month period then ended is presented below:

 
Shares
 
Weighted
Average
Grant
Fair
Value
Balance, December 26, 2015
2,192,016

 
$
3.82

Granted
504,500

 
1.84

Forfeited

 

Vested
(2,500
)
 
1.84

Balance, March 26, 2016
2,694,016

 
$
3.45

The following table summarizes stock-based compensation expense within each of the categories below as it relates to non-vested restricted common stock awards for the three months ended March 26, 2016 and March 28, 2015 (no tax benefits were recognized):
 
Three Months Ended
 
March 26,
2016
 
March 28,
2015
Cost of component revenues
$
142,534

 
$
199,239

Research and development
116,895

 
234,406

Selling, general and administrative
(202,975
)
 
563,819

Total
$
56,454

 
$
997,464

ACCRUED WARRANTY (Tables)
Accrued Warranty
Changes in the accrued warranty for the three months ended March 26, 2016 are as follows:
Balance, December 26, 2015
$
518,000

Additions
267,000

Claim and reversals
(269,000
)
Balance, March 26, 2016
$
516,000

SEGMENTS AND GEOGRAPHICAL INFORMATION (Tables)
The following table presents the Company’s reportable segment results (in thousands):
 
Three Months Ended
 
March 26, 2016
 
Kopin
 
FDD
 
Total
 
 
 
 
 
 
Revenues
$
5,148

 
$
971

 
$
6,119

Net loss attributable to the controlling interest
(6,571
)
 
(346
)
 
(6,917
)
Total Assets
99,811

 
1,512

 
101,323

Long lived assets from continuing operations
2,695

 
18

 
2,713

Property and Plant held for sale
861

 

 
861

 
Three Months Ended
 
March 28, 2015
 
Kopin
 
FDD
 
Total
 
 
 
 
 
 
Revenues
$
7,586

 
$
999

 
$
8,585

Net loss attributable to the controlling interest
(3,373
)
 
(465
)
 
(3,838
)
Total assets
117,684

 
1,523

 
119,207

Long-lived assets from continuing operations
4,067

 
180

 
4,247

During the three month periods ended March 26, 2016 and March 28, 2015, the Company derived its sales from the following geographies (as a percentage of net revenues):
 
Three Months Ended
 
March 26, 2016
 
March 28, 2015
United States
29
%
 
74
%
Others
%
 
2
%
        Americas
29
%
 
76
%
Asia-Pacific
51
%
 
16
%
Europe
20
%
 
8
%
       Total Revenues
100
%
 
100
%
BASIS OF PRESENTATION (Details)
3 Months Ended 3 Months Ended
Mar. 26, 2016
USD ($)
Mar. 26, 2016
KRW (?)
Mar. 26, 2016
Kowon Technology Corporation Limited
Mar. 26, 2016
eMDT
Mar. 26, 2016
Accumulated Translation Adjustment
USD ($)
Mar. 26, 2016
Accumulated Net Unrealized Investment Gain (Loss)
USD ($)
Dec. 26, 2015
Kopin Software Ltd.
Minimum
Dec. 26, 2015
Kopin Software Ltd.
Maximum
Organization, Consolidation and Presentation of Financial Statements Disclosure [Line Items]
 
 
 
 
 
 
 
 
Noncontrolling Interest, Ownership Percentage by Parent
 
 
93.00% 
80.00% 
 
 
58.00% 
100.00% 
Disposal Group, Including Discontinued Operation, Consideration
$ 0 
? 9,500,000,000 
 
 
 
 
 
 
Retail Land Sales Deposit Method Deposit Percent Received
10.00% 
 
 
 
 
 
 
 
Retail Land Sales, Deposit Method, Deposit Received
800,000 
 
 
 
 
 
 
 
Accumulated Other Comprehensive Income (Loss), Foreign Currency Translation Adjustment, Net of Tax
 
 
 
 
700,000 
 
 
 
Other Comprehensive Income (Loss), Unrealized Holding Gain (Loss) on Securities Arising During Period, Net of Tax
$ 1,057,861 
 
 
 
 
$ 300,000 
 
 
CASH AND EQUIVALENTS AND MARKETABLE SECURITIES (Details) (USD $)
Mar. 26, 2016
Dec. 27, 2014
Schedule of Available-for-sale Securities [Line Items]
 
 
Available-for-sale Debt Securities, Amortized Cost Basis
$ 63,261,826 
$ 61,120,471 
Unrealized Gains
61,467 
Unrealized Losses
(74,980)
(177,580)
Fair Value
63,248,313 
60,942,891 
Available-for-sale Securities, Debt Maturities, Fair Value, Fiscal Year Maturity [Abstract]
 
 
Less than one year
31,730,593 
 
One to five years
26,720,087 
 
Greater than five years
4,797,633 
 
Available-for-sale Securities
63,248,313 
 
U.S. government and agency backed securities
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
Available-for-sale Debt Securities, Amortized Cost Basis
46,664,124 
46,586,224 
Unrealized Gains
61,467 
Unrealized Losses
(121,561)
Fair Value
46,725,591 
46,464,663 
Available-for-sale Securities, Debt Maturities, Fair Value, Fiscal Year Maturity [Abstract]
 
 
Less than one year
17,594,525 
 
One to five years
24,333,433 
 
Greater than five years
4,797,633 
 
Available-for-sale Securities
46,725,591 
 
Corporate debt and certificates of deposit
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
Available-for-sale Debt Securities, Amortized Cost Basis
16,597,702 
14,534,247 
Unrealized Gains
Unrealized Losses
(74,980)
(56,019)
Fair Value
16,522,722 
14,478,228 
Available-for-sale Securities, Debt Maturities, Fair Value, Fiscal Year Maturity [Abstract]
 
 
Less than one year
14,136,068 
 
One to five years
2,386,654 
 
Greater than five years
 
Available-for-sale Securities
$ 16,522,722 
 
FAIR VALUE MEASUREMENTS (Details) (USD $)
Mar. 26, 2016
Dec. 26, 2015
Fair Value Measurements [Line Items]
 
 
Financial Instruments, Owned, at Fair Value
$ 91,273,359 
$ 80,942,817 
Money Markets, Cash and Equivalents
 
 
Fair Value Measurements [Line Items]
 
 
Financial Instruments, Owned, at Fair Value
27,635,331 
19,767,889 
U.S. Government Securities
 
 
Fair Value Measurements [Line Items]
 
 
Financial Instruments, Owned, at Fair Value
46,725,591 
46,464,663 
Corporate Debt
 
 
Fair Value Measurements [Line Items]
 
 
Financial Instruments, Owned, at Fair Value
5,027,952 
6,886,495 
Certificates of Deposit
 
 
Fair Value Measurements [Line Items]
 
 
Financial Instruments, Owned, at Fair Value
11,494,770 
7,591,733 
GCS
 
 
Fair Value Measurements [Line Items]
 
 
Financial Instruments, Owned, at Fair Value
389,715 
232,037 
Level 1
 
 
Fair Value Measurements [Line Items]
 
 
Financial Instruments, Owned, at Fair Value
43,572,982 
36,381,078 
Level 1 |
Money Markets, Cash and Equivalents
 
 
Fair Value Measurements [Line Items]
 
 
Financial Instruments, Owned, at Fair Value
27,635,331 
19,767,889 
Level 1 |
U.S. Government Securities
 
 
Fair Value Measurements [Line Items]
 
 
Financial Instruments, Owned, at Fair Value
15,547,936 
16,381,152 
Level 1 |
GCS
 
 
Fair Value Measurements [Line Items]
 
 
Financial Instruments, Owned, at Fair Value
389,715 
232,037 
Level 2
 
 
Fair Value Measurements [Line Items]
 
 
Financial Instruments, Owned, at Fair Value
47,700,377 
44,561,739 
Level 2 |
U.S. Government Securities
 
 
Fair Value Measurements [Line Items]
 
 
Financial Instruments, Owned, at Fair Value
31,177,655 
30,083,511 
Level 2 |
Corporate Debt
 
 
Fair Value Measurements [Line Items]
 
 
Financial Instruments, Owned, at Fair Value
5,027,952 
6,886,495 
Level 2 |
Certificates of Deposit
 
 
Fair Value Measurements [Line Items]
 
 
Financial Instruments, Owned, at Fair Value
11,494,770 
7,591,733 
Level 3
 
 
Fair Value Measurements [Line Items]
 
 
Financial Instruments, Owned, at Fair Value
Level 3 |
Money Markets, Cash and Equivalents
 
 
Fair Value Measurements [Line Items]
 
 
Financial Instruments, Owned, at Fair Value
Level 3 |
U.S. Government Securities
 
 
Fair Value Measurements [Line Items]
 
 
Financial Instruments, Owned, at Fair Value
Level 3 |
Corporate Debt
 
 
Fair Value Measurements [Line Items]
 
 
Financial Instruments, Owned, at Fair Value
Level 3 |
Certificates of Deposit
 
 
Fair Value Measurements [Line Items]
 
 
Financial Instruments, Owned, at Fair Value
Level 3 |
GCS
 
 
Fair Value Measurements [Line Items]
 
 
Financial Instruments, Owned, at Fair Value
$ 0 
$ 0 
INVENTORY (Details) (USD $)
Mar. 26, 2016
Dec. 26, 2015
Inventory Disclosure [Abstract]
 
 
Raw materials
$ 1,036,421 
$ 844,475 
Work-in-process
1,411,829 
1,281,891 
Finished goods
257,607 
386,107 
Inventory
$ 2,705,857 
$ 2,512,473 
NET (LOSS) INCOME PER SHARE (Details) (USD $)
3 Months Ended
Mar. 26, 2016
Mar. 28, 2015
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
 
 
Weighted average common shares outstanding, basic
63,978,048 
63,083,652 
Antidilutive securities excluded from computation of earnings per share, number of shares
2,694,016 
3,472,111 
Issuance Of Warrants, number of shares
148,000 
 
Exercise Price Of Warrants, per share
$ 3.49 
 
Unvested Restricted Stock Awards
 
 
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
 
 
Antidilutive securities excluded from computation of earnings per share, number of shares
2,694,016 
3,342,111 
Stock options
 
 
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
 
 
Antidilutive securities excluded from computation of earnings per share, number of shares
130,000 
STOCK-BASED COMPENSATION (Details) (USD $)
3 Months Ended 12 Months Ended 3 Months Ended
Mar. 26, 2016
Mar. 28, 2015
Mar. 26, 2016
Restricted Stock
Mar. 26, 2016
Share-based Compensation Award, Tranche One
Mar. 26, 2016
Share-based Compensation Award, Tranche Two
Mar. 26, 2016
Share-based Compensation Award, Tranche Three
Dec. 31, 2016
Scenario, Forecast
Mar. 26, 2016
Selling, general and administrative
Mar. 28, 2015
Selling, general and administrative
Class of Warrant or Right [Line Items]
 
 
 
 
 
 
 
 
 
Allocated Share-based Compensation Expense
$ 56,454 
$ 997,464 
 
 
 
 
 
$ (202,975)
$ 563,819 
Nonvested common stock awards employment obligations (in years)
 
 
 
1 year 
2 years 
4 years 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award, Shares Issued in Period
87,500 
 
 
 
 
 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage
 
 
 
 
 
 
50.00% 
 
 
Unrecognized compensation cost related to nonvested stock awards
 
 
$ 4,700,000 
 
 
 
 
 
 
Unrecognized compensation cost related to nonvested stock awards, period of recognition (in years)
 
 
2 years 
 
 
 
 
 
 
STOCK-BASED COMPENSATION - Summary of Activity for Nonvested Restricted Common Stock Awards (Details) (Unvested Restricted Stock Awards, USD $)
3 Months Ended
Mar. 26, 2016
Unvested Restricted Stock Awards
 
Shares
 
Beginning Balance
2,192,016 
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period
504,500 
Forfeited
Vested
(2,500)
Ending Balance
2,694,016 
Weighted Average Grant Fair Value
 
Beginning Balance
$ 3.82 
Granted
$ 1.84 
Forfeited
$ 0.00 
Vested
$ 1.84 
Ending Balance
$ 3.45 
OTHER ASSETS AND AMOUNTS DUE TO / FROM AFFILIATES (Details) (USD $)
3 Months Ended 12 Months Ended
Mar. 26, 2016
Mar. 28, 2015
Dec. 27, 2014
Dec. 28, 2013
Dec. 29, 2012
Other Assets and Related Party Transactions Disclosure [Abstract]
 
 
 
 
 
Class of Warrant or Right, Unissued
 
251,000 
 
 
 
Warrants and Rights Outstanding
 
$ 352,000 
 
 
 
Prior Period Reclassification Adjustment
 
1,300,000 
171,000 
646,000 
817,000 
Net loss
$ (6,818,788)
$ (3,813,086)
$ 28,500,000 
$ 35,900,000 
 
ACCRUED WARRANTY (Details) (USD $)
3 Months Ended
Mar. 26, 2016
Product Warranties Disclosures [Abstract]
 
Product warranty term
12 months 
Movement in Standard Product Warranty Accrual [Roll Forward]
 
Beginning Balance
$ 518,000 
Additions
267,000 
Claim and reversals
(269,000)
Ending Balance
$ 516,000 
INCOME TAXES (Details) (USD $)
3 Months Ended
Mar. 26, 2016
Mar. 28, 2015
Income Taxes [Line Items]
 
 
State income and foreign tax expenses
$ 141,000 
$ 12,500 
Net operating loss carryforwards available for tax purposes
89,000,000 
 
Unrecorded benefits from stock award
$ 10,000,000 
 
Minimum
 
 
Income Taxes [Line Items]
 
 
State income tax returns examination period
3 years 
 
Maximum
 
 
Income Taxes [Line Items]
 
 
State income tax returns examination period
5 years 
 
The state impact of any federal changes, subject to examination by various states (in years)
1 year 
 
SEGMENTS AND GEOGRAPHICAL INFORMATION (Details) (USD $)
3 Months Ended
Mar. 26, 2016
Mar. 28, 2015
Dec. 26, 2015
Dec. 27, 2014
Revenues from External Customers and Long-Lived Assets [Line Items]
 
 
 
 
Revenues
$ 6,119,138 
$ 8,584,991 
 
 
Net Income (Loss) Attributable to Parent
(6,917,461)
(3,837,992)
 
 
Assets
101,323,464 
 
106,060,086 
 
Debt of Subsidiary, Not Assumed
6,100,000 
 
 
5,200,000 
Percentage of total revenue
100.00% 
100.00% 
 
 
UNITED STATES
 
 
 
 
Revenues from External Customers and Long-Lived Assets [Line Items]
 
 
 
 
Percentage of total revenue
29.00% 
74.00% 
 
 
All Others
 
 
 
 
Revenues from External Customers and Long-Lived Assets [Line Items]
 
 
 
 
Percentage of total revenue
0.00% 
2.00% 
 
 
Americas
 
 
 
 
Revenues from External Customers and Long-Lived Assets [Line Items]
 
 
 
 
Percentage of total revenue
29.00% 
76.00% 
 
 
Asia-Pacific
 
 
 
 
Revenues from External Customers and Long-Lived Assets [Line Items]
 
 
 
 
Percentage of total revenue
51.00% 
16.00% 
 
 
Europe
 
 
 
 
Revenues from External Customers and Long-Lived Assets [Line Items]
 
 
 
 
Percentage of total revenue
20.00% 
8.00% 
 
 
Segment, Continuing Operations
 
 
 
 
Revenues from External Customers and Long-Lived Assets [Line Items]
 
 
 
 
Revenues
6,119 
9,000 
 
 
Net Income (Loss) Attributable to Parent
(6,917)
(4,000)
 
 
Assets
101,323 
119,207 
 
 
Long-Lived Assets
2,713 
4,247 
 
 
Disposal Group, Including Discontinued Operation, Property, Plant and Equipment, Noncurrent
861 
 
 
 
Segment, Continuing Operations |
Kopin United States
 
 
 
 
Revenues from External Customers and Long-Lived Assets [Line Items]
 
 
 
 
Revenues
5,148 
8,000 
 
 
Net Income (Loss) Attributable to Parent
(6,571)
(3,000)
 
 
Assets
99,811 
117,684 
 
 
Long-Lived Assets
2,695 
4,067 
 
 
Disposal Group, Including Discontinued Operation, Property, Plant and Equipment, Noncurrent
861 
 
 
 
Segment, Continuing Operations |
Forth Dimension Displays Limited
 
 
 
 
Revenues from External Customers and Long-Lived Assets [Line Items]
 
 
 
 
Revenues
971 
1,000 
 
 
Net Income (Loss) Attributable to Parent
(346)
 
 
Assets
1,512 
1,523 
 
 
Long-Lived Assets
180 
 
 
Disposal Group, Including Discontinued Operation, Property, Plant and Equipment, Noncurrent
$ 0