Document and Entity Information

6 Months Ended

Jun. 28, 2014

Aug. 1, 2014

Document Documentand Entity Information [Abstract]

Document Type

10-Q

Amendment Flag

false

Document Period End Date

Jun. 28, 2014

Document Fiscal Year Focus

2014

Document Fiscal Period Focus

Q2

Trading Symbol

KOPN

Entity Registrant Name

KOPIN CORP

Entity Central Index Key

0000771266

Current Fiscal Year End Date

--12-27

Entity Filer Category

Accelerated Filer

Entity Common Stock, Shares Outstanding

66,060,623

CONDENSED CONSOLIDATED BALANCE SHEETS (USD $)

Jun. 28, 2014

Dec. 28, 2013

Current assets:

Cash and equivalents

$ 13,305,327

$ 16,756,666

Marketable debt securities, at fair value

85,593,516

95,972,535

Accounts receivable, net of allowance of $171,000 and $202,000 in 2014 and 2013, respectively

3,771,733

2,388,461

Inventory

3,294,840

3,078,055

Prepaid taxes

156,806

233,642

Prepaid expenses and other current assets

1,425,891

1,178,643

Total current assets

107,548,113

119,608,002

Property, plant and equipment, net

5,311,666

6,034,963

Goodwill

1,039,246

1,016,132

Intangible assets, net

1,098,716

1,581,502

Other assets

1,193,571

3,024,458

Accounts and Notes Receivable, Net

14,900,002

14,866,666

Total assets

131,091,314

146,131,723

Current liabilities:

Accounts payable

4,361,832

3,868,865

Accrued payroll and expenses

1,725,197

1,436,391

Accrued warranty

716,000

Billings in excess of revenue earned

289,492

547,681

Other accrued liabilities

3,041,570

3,157,394

Deferred Tax Liabilities, Net, Current

1,418,442

1,512,771

Total current liabilities

11,552,533

11,239,102

Asset retirement obligations

340,541

329,435

Commitments and contingencies

Stockholders' equity:

Preferred stock, par value $.01 per share: authorized, 3,000 shares; none issued

0

Common stock, par value $.01 per share: authorized, 120,000,000 shares; issued 78,128,881 shares in 2014 and 77,567,631 shares in 2013; outstanding 62,643,475 shares in 2014 and 62,560,946 shares in 2013

747,458

745,935

Additional paid-in capital

323,230,037

320,511,458

Treasury stock (12,102,258 and 12,032,537 shares in 2014 and 2013, respectively, at cost)

(42,741,551)

(42,442,932)

Accumulated other comprehensive income

3,647,019

3,441,997

Accumulated deficit

(165,643,570)

(147,703,211)

Total Kopin Corporation stockholders' equity

119,239,393

134,553,247

Noncontrolling interest

(41,153)

9,939

Total stockholders' equity

119,198,240

134,563,186

Total liabilities and stockholders' equity

$ 131,091,314

$ 146,131,723

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)

Jun. 28, 2014

Dec. 28, 2013

Statement of Financial Position [Abstract]

Accounts receivable, allowance

$ 171,000

$ 202,000

Preferred stock, par value

$ 0.01

Preferred stock, authorized

3,000

Preferred stock, issued

0

Common stock, par value

$ 0.01

Common stock, authorized

120,000,000

Common stock, issued

78,128,881

77,567,631

Common stock, outstanding

62,643,475

62,560,946

Treasury stock, shares

12,102,258

12,032,537

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (USD $)

3 Months Ended

6 Months Ended

Jun. 28, 2014

Jun. 29, 2013

Jun. 28, 2014

Jun. 29, 2013

Revenues:

Net product revenues

$ 4,906,663

$ 5,608,778

$ 9,134,422

$ 11,176,802

Research and development revenues

2,036,624

469,867

2,503,634

1,220,928

Total revenues

6,943,287

6,078,645

11,638,056

12,397,730

Expenses:

Cost of product revenues

4,153,739

6,203,960

8,379,188

12,168,366

Research and development

5,137,033

3,657,952

10,223,317

7,905,508

Selling, general and administration

4,921,194

4,852,533

9,917,993

10,601,649

Total expenses

14,211,966

14,714,445

28,520,498

30,675,523

(Loss) income from operations

(7,268,679)

(8,635,800)

(16,882,442)

(18,277,793)

Other income and expense:

Interest income

193,305

285,227

431,477

595,664

Other income net

200,754

195,073

260,581

17,904

Foreign currency transaction (losses) gains

(674,456)

371,215

(492,706)

591,923

Asset Impairment Charges

(1,319,287)

0

(1,319,287)

(2,485,393)

Total other income and expense

(1,599,684)

851,515

(1,119,935)

(1,279,902)

(Loss) income before provision for income taxes, equity losses in unconsolidated affiliates and net loss (income) attributable to noncontrolling interest

(8,868,363)

(7,784,285)

(18,002,377)

(19,557,695)

Tax provision

(37,000)

(194,000)

106,000

12,846,000

(Loss) income before equity loss in unconsolidated affiliates and net (loss) income of noncontrolling interest

(8,905,363)

(7,978,285)

(17,896,377)

(6,711,695)

Equity losses in unconsolidated affiliates

(122,553)

(83,697)

(102,305)

(182,785)

Payments to Acquire Interest in Subsidiaries and Affiliates

(224,858)

Income (Loss) from Continuing Operations, Including Portion Attributable to Noncontrolling Interest

(9,027,916)

(8,061,982)

(18,121,235)

(6,894,480)

Income (Loss) from Discontinued Operations, Net of Tax, Including Portion Attributable to Noncontrolling Interest

0

(49,356)

0

20,147,532

Net (loss) income

(9,027,916)

(8,111,338)

(18,121,235)

13,253,052

Net loss (income) attributable to the noncontrolling interest

221,973

201,492

180,876

470,911

Net (loss) income attributable to the controlling interest

$ (8,805,943)

$ (7,909,846)

$ (17,940,359)

$ 13,723,963

Net (loss) income per share

Income (Loss) from Continuing Operations, Per Basic Share

$ (0.14)

$ (0.13)

$ (0.29)

$ (0.10)

Income (Loss) from Discontinued Operations, Net of Tax, Per Basic Share

$ 0.00

$ 0.32

Basic

$ (0.14)

$ (0.13)

$ (0.29)

$ 0.22

Income (Loss) from Continuing Operations, Per Diluted Share

$ (0.14)

$ (0.13)

$ (0.29)

$ (0.10)

Income (Loss) from Discontinued Operations, Net of Tax, Per Diluted Share

$ 0.00

$ 0.32

Diluted

$ (0.14)

$ (0.13)

$ (0.29)

$ 0.22

Weighted average number of common shares

Basic

62,643,506

62,492,352

62,586,854

62,160,046

Diluted

62,643,506

62,492,352

62,586,854

63,442,466

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (USD $)

3 Months Ended

6 Months Ended

Jun. 28, 2014

Jun. 29, 2013

Jun. 28, 2014

Jun. 29, 2013

Statement of Comprehensive Income [Abstract]

Net (loss) income

$ (9,027,916)

$ (8,111,338)

$ (18,121,235)

$ 13,253,052

Foreign currency translation adjustments

947,386

(627,789)

87,787

(1,238,372)

Holding (loss) gain on marketable securities

(33,852)

(1,767,500)

149,589

(1,566,306)

Reclassifications of gains in net (loss) income

10,131

(25,910)

(3,952)

(29,193)

Other Comprehensive Income (Loss), Net of Tax

923,665

(2,421,199)

233,424

(2,833,871)

Comprehensive (loss) income

(8,104,251)

(10,532,537)

(17,887,811)

10,419,181

Comprehensive loss (income) attributable to the noncontrolling interest

143,489

241,793

152,474

558,973

Comprehensive (loss) income attributable to controlling interest

$ (7,960,762)

$ (10,290,744)

$ (17,735,337)

$ 10,978,154

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (USD $)

Total

Common Stock

Additional Paid-in Capital

Stockholders' Equity, Total [Member]

Treasury Stock

Accumulated Other Comprehensive Income

Accumulated Deficit

Noncontrolling Interest

Beginning Balance at Dec. 28, 2013

$ 134,563,186

$ 745,935

$ 320,511,458

$ 134,553,247

$ (42,442,932)

$ 3,441,997

$ (147,703,211)

$ 9,939

Beginning Balance (in shares) at Dec. 28, 2013

74,593,483

Stock-based compensation

2,693,043

Adjustments To Additional Paid In Capital Other Shares

118,000

Net unrealized holding gain on marketable securities

233,424

205,022

28,402

Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period

34,250

Stock Issued During Period, Value, Stock Options Exercised

343

128,098

Adjustments to Additional Paid in Capital, Other

1,180

(1,180)

Proceeds from Sales of Business, Affiliate and Productive Assets

0

Proceeds from exercise of stock options

128,441

Noncontrolling Interest, Increase from Business Combination

0

(101,382)

101,382

Stockholders' Equity Attributable to Noncontrolling Interest

(41,153)

Treasury Stock, Value, Acquired, Cost Method

298,619

Net loss

(18,121,235)

(17,940,359)

(180,876)

Ending Balance at Jun. 28, 2014

$ 119,198,240

$ 747,458

$ 323,230,037

$ 119,239,393

$ (42,741,551)

$ 3,647,019

$ (165,643,570)

$ (41,153)

Ending Balance (in shares) at Jun. 28, 2014

74,745,733

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)

6 Months Ended

Jun. 28, 2014

Jun. 29, 2013

Cash flows from operating activities:

Net (loss) income

$ (18,121,235)

$ 13,253,052

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

Depreciation and amortization

1,779,594

2,135,458

Amortization of premium or discount on marketable debt securities

36,841

(66,181)

Stock-based compensation

2,362,446

2,419,528

Loss in unconsolidated affiliate

102,305

182,785

Asset Impairment Charges

1,319,287

2,485,393

Gain from sale of III-V product line

0

(33,452,176)

Deferred income taxes

(95,262)

300,700

Foreign currency gains (losses)

507,792

(596,213)

Gain (Loss) on Disposition of Property Plant Equipment

(250,000)

0

Change in allowance for bad debt

14,679

(56,072)

Other non-cash items

314,335

807,964

Changes in assets and liabilities:

Accounts receivable

(1,018,638)

4,349,611

Inventory

(518,105)

1,569,883

Prepaid expenses and other current assets

(81,989)

(232,787)

Accounts payable and accrued expenses

865,328

(1,005,477)

Billings in excess of revenue earned

(258,189)

710,455

Net cash used in operating activities

(13,040,811)

(7,194,077)

Cash flows from investing activities:

Proceeds from sale of marketable debt securities

23,861,627

12,201,313

Purchase of marketable debt securities

(13,106,060)

(45,321,366)

Proceeds from sale of III-V product line

0

55,188,020

Payments to Acquire Business Two, Net of Cash Acquired

0

211,484

Purchases of cost based investments

0

(2,750,278)

Other assets

(36,455)

(8,681)

Capital expenditures

(978,037)

(513,780)

Net cash provided by investing activities

9,741,075

19,006,712

Net cash used in financing activities

Treasury stock purchases

(298,619)

(2,230,843)

Purchase of noncontrolling interest in Kowon

0

(3,662,400)

Proceeds from exercise of stock options

128,441

0

Settlement of restricted stock for tax withholding obligations

0

(11,449)

Net cash used in financing activities

(170,178)

(5,904,692)

Effect of exchange rate changes on cash

18,575

(243,778)

Net (decrease) increase in cash and equivalents

(3,451,339)

5,664,165

Cash and equivalents:

Beginning of period

16,756,666

End of period

13,305,327

Supplemental disclosure of cash flow information:

Income taxes paid

70,300

113,700

Supplemental schedule of noncash investing activities:

Construction in progress included in accrued expenses

156,000

0

Non-cash proceeds from sale of III-V product line

$ 0

BASIS OF PRESENTATION

Basis of Accounting [Text Block]

BASIS OF PRESENTATION

The accompanying condensed consolidated financial statements include the accounts of Kopin Corporation, its wholly-owned subsidiaries, Kowon Technology Co., Ltd. (Kowon), a majority owned (93%) subsidiary located in Korea, Ikanos Consulting Ltd. (Ikanos), a majority owned (58%) subsidiary located in the United Kingdom, and eMDT America Inc. (eMDT), a majority owned (80%) subsidiary located in California (collectively, the “Company”). Ownership interests of Kowon, Ikanos 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 and six months ended June 28, 2014 and June 29, 2013 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 28, 2013.

During the first quarter of 2013, the Company paid approximately $3.7 million to acquire an additional 15% ownership in its Kowon subsidiary from the minority shareholders, as part of the Company's plan to close Kowon. As of June 28, 2014 and December 28, 2013, the sale of the facility does not meet the criteria for assets held for sale based on the anticipated time to sell the facility.

During the second quarter of 2014, the Company paid approximately $0.3 million to acquire an additional 29% ownership in its eMDT subsidiary.

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.

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contract with Customers (Topic 606). The reporting standard requires the Company to identify the performance obligations in a contract, determine the transaction price, allocate the transaction price to each of the obligations and then recognizes the transaction price as the obligations are fulfilled. The standard also requires certain new disclosures. The standard is effective for annual and interim reporting periods beginning after December 15, 2016. The Company is currently assessing the potential impact of the adoption of ASU 2014-09 on its consolidated financial statements.

During the six months ended June 28, 2014, the change in the Company's accumulated other comprehensive income was the net of $0.1 million foreign currency translation adjustment and $0.1 million unrealized holding gains on marketable securities.

DISCONTINUED OPERATIONS

Disposal Groups, Including Discontinued Operations, Disclosure [Text Block]

Discontinued Operations

On January 16, 2013 (the Closing Date), the Company sold its III-V product line, including all of the outstanding equity interest in KTC Wireless, LLC, a wholly owned subsidiary of the Company, to IQE KC, LLC and IQE plc pursuant to a Purchase Agreement (the Purchase Agreement) entered into on January 10, 2013, for a net purchase price of $70.2 million and the gain on the sale, net of tax, was $20.4 million. Under the terms of the Purchase Agreement, $55 million was paid to the Company in January 2013, $0.2 million was paid in April 2013 and the remaining $15.0 million will be paid to the Company on the third anniversary of the Closing Date. The Company has recorded the $15.0 million receivable at the discounted value of $14.8 million, at the date of disposition. The Company is accreting this balance over the three year period.

The operating results of the III-V product line prior to the sale are reported within income from discontinued operations, net of tax, in the consolidated statement of operations.

The following table summarizes the results from discontinued operations (in millions) for the six months ended June 29, 2013:



	June 29, 2013
Net product and research and development revenues	$	2.3
Loss from discontinued operations before income taxes	(0.2		)
Provision for income taxes on discontinued operations	—
Discontinued operations, net of tax	$	(0.2	)
Gain on sale, net of $13.1 million of tax	20.4
Income from discontinued operations, net of tax	$	20.2

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 United States 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 six months ended June 28, 2014 and the year ended December 28, 2013.

Investments in available-for-sale marketable debt securities are as follows at June 28, 2014 and December 28, 2013:



	Amortized Cost				Unrealized Gains				Unrealized Losses						Fair Value
	2014		2013		2014		2013		2014			2013			2014		2013
U.S. government and agency backed securities	$	65,056,839	$	68,970,505	$	—	$	—	$	(116,328	)	$	(686,113	)	$	64,940,511	$	68,284,392
Corporate debt and certificates of deposit	20,683,071		27,767,513		—		—		(30,066		)	(79,370		)	20,653,005		27,688,143
Total	$	85,739,910	$	96,738,018	$	—	$	—	$	(146,394	)	$	(765,483	)	$	85,593,516	$	95,972,535

The contractual maturity of the Company’s marketable debt securities is as follows at June 28, 2014:



	Less than One year		One to Five years		Greater than Five years		Total
U.S. government and agency backed securities	$	14,650,279	$	40,890,239	$	9,399,993	$	64,940,511
Corporate debt and certificates of deposit	17,083,693		2,588,062		981,250		20,653,005
Total	$	31,733,972	$	43,478,301	$	10,381,243	$	85,593,516

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. Noncredit-related OTTI can be caused by such factors as market illiquidity. Credit-related OTTI is recognized in earnings while noncredit-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 and six months ended June 28, 2014 and June 29, 2013.

FAIR VALUE MEASUREMENTS

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

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



			Fair Value Measurement June 28, 2014 Using:
			Level 1		Level 2		Level 3
Cash and Equivalents	$	13,305,327	$	13,305,327	$	—	$	—
U.S. Government Securities	64,940,511		22,809,054		42,131,457		—
Corporate Debt	7,534,933		—		7,534,933		—
Certificates of Deposit	13,118,072		—		13,118,072		—
Vuzix Corporation	983,267		983,267		—		—
	$	99,882,110	$	37,097,648	$	62,784,462	$	—


			Fair Value Measurement December 28, 2013 Using:
			Level 1		Level 2		Level 3
Cash and Equivalents	$	16,756,666	$	16,756,666	$	—	$	—
U.S. Government Securities	68,284,392		16,542,003		51,742,389		—
Corporate Debt	12,984,331		—		12,984,331		—
Certificates of Deposit	14,703,812		—		14,703,812		—
Vuzix Corporation	1,433,102		1,433,102		—		—
	$	114,162,303	$	34,731,771	$	79,430,532	$	—

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 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 is stated at the lower of cost (determined on the first-in, first-out) or market and consists of the following at June 28, 2014 and December 28, 2013:



	June 28, 2014		December 28, 2013
Raw materials	$	1,903,047	$	1,441,569
Work-in-process	1,120,531		1,003,540
Finished goods	271,262		632,946
	$	3,294,840	$	3,078,055

NET (LOSS) INCOME PER SHARE

Basic net (loss) income 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 unvested restricted stock units.

Weighted average common shares outstanding used to calculate earnings per share are as follows:



	Three Months Ended		Six Months Ended
	June 28, 2014	June 29, 2013	June 28, 2014	June 29, 2013
Weighted average common shares outstanding-basic	62,643,506	62,492,352	62,586,854	62,160,046
Stock options and non-vested restricted common stock	—	—	—	1,282,420
Weighted average common shares outstanding-diluted	62,643,506	62,492,352	62,586,854	63,442,466

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.



	June 28, 2014	June 29, 2013
Non-vested restricted common stock	3,383,148	410,000
Stock options	399,600	848,334
Total	3,782,748	1,258,334

Not included in weighted average common shares outstanding-diluted are the warrants to purchase 200,000 shares of the Company’s common stock for $3.49 per share.

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 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.

During the six months ended June 28, 2014, the 2010 Equity Plan was amended to increase the number of authorized shares by 1.9 million.

A summary of award activity under the stock option plans as of June 28, 2014 and changes during the six month period then ended is as follows (all options were vested as of June 28, 2014):



	Six Months Ended June 28, 2014
	Shares		Weighted Average Exercise Price
Balance, December 28, 2013	558,850		$	5.09
Options forfeited/canceled	(125,000	)	5.00
Options exercised	(34,250	)	3.75
Balance, all exercisable, June 28, 2014	399,600		$	5.24

The following table summarizes information about stock options outstanding and exercisable at June 28, 2014:



	Options Outstanding and Exercisable
Range of Exercise Prices	Number Outstanding and Exercisable		Weighted Average Exercise Price
$ 3.15—$ 3.50	130,000		$	3.49
$ 3.75—$ 5.00	169,600		3.77
$10.00	100,000		10.00
	399,600		$	5.24
Aggregate intrinsic value on June 28, 2014	$	900

The weighted average remaining contractual life of the outstanding options is less than one year. The Company has issued warrants to purchase 200,000 shares of the Company’s common stock for $3.49 per share.

Non-Vested Restricted Common Stock

A summary of the activity for non-vested restricted common stock awards as of June 28, 2014 and changes during the six month period then ended is presented below:



	Shares		Weighted Average Grant Fair Value
Balance, December 28, 2013	2,974,148		$	4.25
Granted	527,000		4.09
Forfeited	—		—
Vested	(118,000	)	3.84
Balance, June 28, 2014	3,383,148		$	4.24

Included within the non-vested restricted common stock table above is 50,000 awards granted for which the performance conditions have yet to be determined and therefore a grant date has not yet been established for the award. No stock based compensation expense has been recorded relating to this award during the three and six month period ended June 28, 2014.

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 six months ended June 28, 2014 and June 29, 2013 (no tax benefits were recognized):



	Six Months Ended
	June 28, 2014		June 29, 2013
Cost of component revenues	$	472,213	$	118,692
Research and development	637,528		125,774
Selling, general and administrative	1,252,705		2,175,062
Total	$	2,362,446	$	2,419,528

Unrecognized compensation expense for non-vested restricted common stock as of June 28, 2014 totaled $5.6 million and is expected to be recognized over a weighted average period of 2 years.

OTHER ASSETS AND AMOUNTS DUE TO / FROM AFFILIATES

OTHER ASSETS AND NOTE RECEIVABLE

During the three month period ended June 28, 2014 the Company wrote-off its $1.3 million investment in Kobrite. For the three and six month periods ended June 28, 2014, the Company recorded approximately $0.1 million of losses for KoBrite in Equity Loss in Unconsolidated Affiliate in the Statement of Operations. Prior to the write-off, the Company accounted for its 12% ownership interest using the equity method. One of the Company’s directors is a member of the Board of Directors of Bright LED, principal investor of KoBrite.

The Company has recorded a $14.9 million note receivable resulting from the sale of its III-V product line and its investment in KTC which is due January 16, 2016. The receivable is collateralized by certain assets of the buyer of the III-V product line. The buyer has outstanding debt and the repayment of the receivable is subject to the buyer remaining within its debt compliance obligations at the time of repayment.

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 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 six months ended June 28, 2014 are as follows:



Balance, December 28, 2013	$	716,000
Additions	262,000
Claim and reversals	(262,000		)
Balance, June 28, 2014	$	716,000

INCOME TAXES

The Company’s tax provision of approximately $37,000 and tax benefit of approximately $106,000 for the three and six month periods ended June 28, 2014 represent the net movement in estimated foreign withholding taxes due on an international subsidiary.

For the three and six month periods ended June 29, 2013, discontinued operations reflects the gain on the sale of the III-V product line and investment in KTC. The Company has federal net operating loss carryforwards which may be used to offset the gain on the sale of the III-V product line and investment in KTC. The federal tax benefit from the utilization of the net operating losses is shown in the Company's tax provision in the condensed consolidated statement of operations.

In accordance with U.S. GAAP, intraperiod tax allocation provisions require allocation of a tax expense to the gain on discontinued operations based upon the Company's statutory tax rate. The Company has net operating loss (NOL) carryforwards available to offset the tax expense. The benefit of these NOLs is reflected in the tax benefit from continuing operations. Accordingly, the Company recorded a tax expense in discontinued operations and a benefit in continuing operations of approximately $13.1 million in 2013.

As of June 28, 2014, the Company has available for tax purposes U.S. federal NOLs of approximately $57.8 million expiring through 2033. 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 $10.0 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 2002. 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

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, Ikanos and eMDT. The following table presents the Company’s reportable segment results (in thousands):



	Three Months Ended
	June 28, 2014									June 29, 2013
	Kopin			FDD			Total			Kopin			FDD			Total

Revenues	$	6,007		$	936		$	6,943		$	5,138		$	941		$	6,079
Net (loss) income attributable to the controlling interest	(8,479		)	(327		)	(8,806		)	(7,523		)	(387		)	(7,910		)
Total assets from continuing operations	129,160			1,932			131,091			166,841			3,577			170,419
Long-lived assets from continuing operations	4,930			381			5,312			5,864			566			6,430



	Six Months Ended
	June 28, 2014									June 29, 2013
	Kopin			FDD			Total			Kopin		FDD			Total

Revenues	$	9,909		$	1,729		$	11,638		$	10,660	$	1,737		$	12,398
Net (loss) income attributable to the controlling interest	(17,103		)	(838		)	(17,940		)	14,708		(984		)	13,724

During the three and six month periods ended June 28, 2014 and June 29, 2013, the Company derived its sales from the following geographies (as a percentage of net revenues):



	Three Months Ended				Six Months Ended
	June 28, 2014		June 29, 2013		June 28, 2014		June 29, 2013
US	52	%	61	%	47	%	62	%
Others	1	%	—	%	—	%	—	%
Americas	53	%	61	%	47	%	62	%
Asia-Pacific	34	%	30	%	39	%	29	%
Europe	13	%	9	%	14	%	9	%
Total Revenues	100	%	100	%	100	%	100	%

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.

DISCONTINUED OPERATIONS Results from Discontinued Operations (Tables)

Schedule of Disposal Groups, Including Discontinued Operations, Income Statement, Balance Sheet and Additional Disclosures [Table Text Block]

The following table summarizes the results from discontinued operations (in millions) for the six months ended June 29, 2013:



	June 29, 2013
Net product and research and development revenues	$	2.3
Loss from discontinued operations before income taxes	(0.2		)
Provision for income taxes on discontinued operations	—
Discontinued operations, net of tax	$	(0.2	)
Gain on sale, net of $13.1 million of tax	20.4
Income from discontinued operations, net of tax	$	20.2

CASH AND EQUIVALENTS AND MARKETABLE SECURITIES (Tables)

Cash Cash Equivalents and Marketable Securities Table

Investments in available-for-sale marketable debt securities are as follows at June 28, 2014 and December 28, 2013:



	Amortized Cost				Unrealized Gains				Unrealized Losses						Fair Value
	2014		2013		2014		2013		2014			2013			2014		2013
U.S. government and agency backed securities	$	65,056,839	$	68,970,505	$	—	$	—	$	(116,328	)	$	(686,113	)	$	64,940,511	$	68,284,392
Corporate debt and certificates of deposit	20,683,071		27,767,513		—		—		(30,066		)	(79,370		)	20,653,005		27,688,143
Total	$	85,739,910	$	96,738,018	$	—	$	—	$	(146,394	)	$	(765,483	)	$	85,593,516	$	95,972,535

Marketable Debt Securities

The contractual maturity of the Company’s marketable debt securities is as follows at June 28, 2014:



	Less than One year		One to Five years		Greater than Five years		Total
U.S. government and agency backed securities	$	14,650,279	$	40,890,239	$	9,399,993	$	64,940,511
Corporate debt and certificates of deposit	17,083,693		2,588,062		981,250		20,653,005
Total	$	31,733,972	$	43,478,301	$	10,381,243	$	85,593,516

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 June 28, 2014 Using:
			Level 1		Level 2		Level 3
Cash and Equivalents	$	13,305,327	$	13,305,327	$	—	$	—
U.S. Government Securities	64,940,511		22,809,054		42,131,457		—
Corporate Debt	7,534,933		—		7,534,933		—
Certificates of Deposit	13,118,072		—		13,118,072		—
Vuzix Corporation	983,267		983,267		—		—
	$	99,882,110	$	37,097,648	$	62,784,462	$	—


			Fair Value Measurement December 28, 2013 Using:
			Level 1		Level 2		Level 3
Cash and Equivalents	$	16,756,666	$	16,756,666	$	—	$	—
U.S. Government Securities	68,284,392		16,542,003		51,742,389		—
Corporate Debt	12,984,331		—		12,984,331		—
Certificates of Deposit	14,703,812		—		14,703,812		—
Vuzix Corporation	1,433,102		1,433,102		—		—
	$	114,162,303	$	34,731,771	$	79,430,532	$	—

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 June 28, 2014 and December 28, 2013:



	June 28, 2014		December 28, 2013
Raw materials	$	1,903,047	$	1,441,569
Work-in-process	1,120,531		1,003,540
Finished goods	271,262		632,946
	$	3,294,840	$	3,078,055

NET (LOSS) INCOME PER SHARE (Tables)

Weighted Average Common Shares Outstanding

Weighted average common shares outstanding used to calculate earnings per share are as follows:



	Three Months Ended		Six Months Ended
	June 28, 2014	June 29, 2013	June 28, 2014	June 29, 2013
Weighted average common shares outstanding-basic	62,643,506	62,492,352	62,586,854	62,160,046
Stock options and non-vested restricted common stock	—	—	—	1,282,420
Weighted average common shares outstanding-diluted	62,643,506	62,492,352	62,586,854	63,442,466

Weighted Average Common Shares Outstanding-Diluted

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.



	June 28, 2014	June 29, 2013
Non-vested restricted common stock	3,383,148	410,000
Stock options	399,600	848,334
Total	3,782,748	1,258,334

STOCK-BASED COMPENSATION (Tables)

Stock- Based Compensation

A summary of award activity under the stock option plans as of June 28, 2014 and changes during the six month period then ended is as follows (all options were vested as of June 28, 2014):



	Six Months Ended June 28, 2014
	Shares		Weighted Average Exercise Price
Balance, December 28, 2013	558,850		$	5.09
Options forfeited/canceled	(125,000	)	5.00
Options exercised	(34,250	)	3.75
Balance, all exercisable, June 28, 2014	399,600		$	5.24

Stock Options Outstanding and Exercisable

The following table summarizes information about stock options outstanding and exercisable at June 28, 2014:



	Options Outstanding and Exercisable
Range of Exercise Prices	Number Outstanding and Exercisable		Weighted Average Exercise Price
$ 3.15—$ 3.50	130,000		$	3.49
$ 3.75—$ 5.00	169,600		3.77
$10.00	100,000		10.00
	399,600		$	5.24
Aggregate intrinsic value on June 28, 2014	$	900

NonVested Restricted Common Stock

A summary of the activity for non-vested restricted common stock awards as of June 28, 2014 and changes during the six month period then ended is presented below:



	Shares		Weighted Average Grant Fair Value
Balance, December 28, 2013	2,974,148		$	4.25
Granted	527,000		4.09
Forfeited	—		—
Vested	(118,000	)	3.84
Balance, June 28, 2014	3,383,148		$	4.24

Stock-Based Compensation Expense

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 six months ended June 28, 2014 and June 29, 2013 (no tax benefits were recognized):



	Six Months Ended
	June 28, 2014		June 29, 2013
Cost of component revenues	$	472,213	$	118,692
Research and development	637,528		125,774
Selling, general and administrative	1,252,705		2,175,062
Total	$	2,362,446	$	2,419,528

ACCRUED WARRANTY (Tables)

Accrued Warranty

Changes in the accrued warranty for the six months ended June 28, 2014 are as follows:



Balance, December 28, 2013	$	716,000
Additions	262,000
Claim and reversals	(262,000		)
Balance, June 28, 2014	$	716,000

SEGMENTS AND GEOGRAPHICAL INFORMATION (Tables)

Schedule of Segment Reporting Information, by Segment [Table Text Block]

The following table presents the Company’s reportable segment results (in thousands):



	Three Months Ended
	June 28, 2014									June 29, 2013
	Kopin			FDD			Total			Kopin			FDD			Total

Revenues	$	6,007		$	936		$	6,943		$	5,138		$	941		$	6,079
Net (loss) income attributable to the controlling interest	(8,479		)	(327		)	(8,806		)	(7,523		)	(387		)	(7,910		)
Total assets from continuing operations	129,160			1,932			131,091			166,841			3,577			170,419
Long-lived assets from continuing operations	4,930			381			5,312			5,864			566			6,430



	Six Months Ended
	June 28, 2014									June 29, 2013
	Kopin			FDD			Total			Kopin		FDD			Total

Revenues	$	9,909		$	1,729		$	11,638		$	10,660	$	1,737		$	12,398
Net (loss) income attributable to the controlling interest	(17,103		)	(838		)	(17,940		)	14,708		(984		)	13,724

Percentage of Net Revenues by Geographies

During the three and six month periods ended June 28, 2014 and June 29, 2013, the Company derived its sales from the following geographies (as a percentage of net revenues):



	Three Months Ended				Six Months Ended
	June 28, 2014		June 29, 2013		June 28, 2014		June 29, 2013
US	52	%	61	%	47	%	62	%
Others	1	%	—	%	—	%	—	%
Americas	53	%	61	%	47	%	62	%
Asia-Pacific	34	%	30	%	39	%	29	%
Europe	13	%	9	%	14	%	9	%
Total Revenues	100	%	100	%	100	%	100	%

BASIS OF PRESENTATION (Details) (USD $)

6 Months Ended

3 Months Ended

Jun. 28, 2014

Kowon Technology Corporation Limited [Member]

Jun. 28, 2014

Ikanos

Jun. 28, 2014

eMDT

Jun. 28, 2014

Accumulated Translation Adjustment [Member]

Jun. 28, 2014

Accumulated Net Unrealized Investment Gain (Loss) [Member]

Organization, Consolidation and Presentation of Financial Statements Disclosure [Line Items]

Noncontrolling Interest, Ownership Percentage by Parent

93.00%

58.00%

80.00%

Other Comprehensive Income (Loss), Unrealized Holding Gain (Loss) on Securities Arising During Period, Net of Tax

$ 233,424

$ 100,000

Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Changes, Purchase of Interest by Parent

0.15

0.29

Payments to Acquire Additional Interest in Subsidiaries

3,700,000

300,000

Accumulated Other Comprehensive Income (Loss), Foreign Currency Translation Adjustment, Net of Tax

$ 100,000

DISCONTINUED OPERATIONS (Details) (USD $)

3 Months Ended

6 Months Ended

1 Months Ended

3 Months Ended

6 Months Ended

Jun. 28, 2014

Jun. 29, 2013

Jun. 28, 2014

Jun. 29, 2013

Dec. 28, 2013

Jan. 16, 2013

Jan. 31, 2013

III-V product line including all outstanding equity interest in KTC Wireless, LLC

Jun. 28, 2014

III-V product line including all outstanding equity interest in KTC Wireless, LLC

Jun. 29, 2013

III-V product line including all outstanding equity interest in KTC Wireless, LLC

Jan. 16, 2013

III-V product line including all outstanding equity interest in KTC Wireless, LLC

Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]

Net purchase price

$ 70,200,000

Proceeds received from divestiture

55,000,000

200,000

Receivable

15,000,000

Accounts and Notes Receivable, Net

14,900,002

14,866,666

14,800,000

Disposal Group, Including Discontinued Operation, Income Statement Disclosures [Abstract]

Net sales and other operating revenues

2,300,000

Income from operations before income taxes

(200,000)

Provision for income taxes on operations

0

Income from operations, net of tax

(200,000)

Discontinued Operation, Gain (Loss) on Disposal of Discontinued Operation, Net of Tax

20,400,000

Income (Loss) from Discontinued Operations, Net of Tax, Including Portion Attributable to Noncontrolling Interest

$ 0

$ (49,356)

$ 0

$ 20,147,532

$ 20,200,000

CASH AND EQUIVALENTS AND MARKETABLE SECURITIES (Details) (USD $)

6 Months Ended

Jun. 28, 2014

Dec. 28, 2013

Jun. 29, 2013

Debt securities

Jun. 28, 2014

U.S. government and agency backed securities

Dec. 28, 2013

U.S. government and agency backed securities

Jun. 28, 2014

Corporate debt and certificates of deposit

Dec. 28, 2013

Corporate debt and certificates of deposit

Schedule of Available-for-sale Securities [Line Items]

Other than Temporary Impairment Losses, Investments, Portion Recognized in Earnings, Net, Available-for-sale Securities

$ 0

Available-for-sale Debt Securities, Amortized Cost Basis

85,739,910

96,738,018

65,056,839

68,970,505

20,683,071

27,767,513

Unrealized Gains

0

Unrealized Losses

(146,394)

(765,483)

(116,328)

(686,113)

(30,066)

(79,370)

Fair Value

85,593,516

95,972,535

64,940,511

68,284,392

20,653,005

27,688,143

Available-for-sale Securities, Debt Maturities, Fair Value, Fiscal Year Maturity [Abstract]

Less than one year

31,733,972

14,650,279

17,083,693

One to five years

43,478,301

40,890,239

2,588,062

Greater than five years

10,381,243

9,399,993

981,250

Available-for-sale Securities

$ 85,593,516

$ 64,940,511

$ 20,653,005

FAIR VALUE MEASUREMENTS (Details) (USD $)

Jun. 28, 2014

Dec. 28, 2013

Level 1