KOPIN CORP
For the period ended Sep 28, 2024. Filed Nov 12, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 28, 2024 · Filed Nov 12, 2024
KOPN$3.04+10.4%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-29; filed 2024-08-08.
0001493152-24-030835
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-28; filed 2024-11-12.
0001493152-24-044738
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 35 previous paragraphs and 39 current paragraphs.
13 unchanged; 22 reworded; 4 added; 0 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 6 previous and 6 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (4)
Current report
On September 23, 2024, we sold 37,550,000 shares of common stock and pre-funded warrants to purchase up to 4,000,000 shares of common stock at a public offering price of $0.64 per pre-funded warrant, for gross proceeds of $27.0 million before deducting underwriting discounts and offering expenses paid by the us of $1.8 million. The offering price of the pre-funded warrant equals the public offering price per share of the common stock less the $0.01 per share exercise price of each pre-funded warrant.
Current report
On September 30, 2024, we sold 2,405,000 shares of common stock and received gross proceeds of $1.5 million.
Current report
Critical Accounting Policies and Estimates
Current report
A discussion of our critical accounting policies and estimates is contained in our Annual Report on Form 10-K for the fiscal year ended December 30, 2023.
Reworded paragraphs (22)
Previous wording
*Revenues.*For the three and six months ended June 29, 2024 and July 1, 2023, our revenues by display application, which include product sales and amounts earned from research and development contracts (“R&D”), were as follows:
Current wording
*Revenues.*For the three and nine months ended September 28, 2024 and September 30, 2023, our revenues by display application, which include product sales and amounts earned from research and development contracts (“R&D”), were as follows:
Previous wording
Sales of our products for Defense applications include systems used by the military both in the field and for training and simulation. The increase in Defense applications revenues in the three and six months ended June 29, 2024 as compared to the three and six months ended July 1, 2023 was primarily due to an increase in revenues from products used in thermal weapon sights partially offset by lower revenues from sales of products used in pilot helmets.
Current wording
Sales of our products for Defense applications include systems used by the military both in the field and for training and simulation. The increase in Defense applications revenues in the three months ended September 28, 2024 as compared to the three months ended September 30, 2023 was primarily due to an increase in revenues from products used in thermal weapon sights and to a lesser extent due to an increase in revenues from sales of products used in pilot helmets. The increase in Defense applications revenues in the nine months ended September 28, 2024, as compared to the nine months ended September 30, 2023, was primarily due to an increase in revenues from products used in thermal weapon sights partially offset by a decline in revenues from sales of products used in pilot helmets. In the fourth quarter of 2024, the Company plans on devoting production resources to provide units that customers have made warranty claims on, which may impact our fourth quarter revenues.
Previous wording
Industrial applications revenue represents customers who purchase our display products for use in 3D metrology equipment and headsets used for applications in manufacturing, distribution, and public safety. Our 3D metrology customers are primarily located in Asia and sell to Asian contract manufacturers who use the 3D metrology machines for quality control purposes. The decrease in Industrial applications revenues for the three and six months ended June 29, 2024 as compared to the three and six months ended July 1, 2023 was primarily due to a decline in sales of products for 3D metrology.
Current wording
Industrial applications revenue represents customers who purchase our display products for use in 3D metrology equipment and headsets used for applications in manufacturing, distribution, and public safety. Our 3D metrology customers are primarily located in Asia and sell to Asian contract manufacturers who use the 3D metrology machines for quality control purposes. The increase in Industrial applications revenues for the three months ended September 28, 2024 as compared to the three months ended September 30, 2023 was primarily due to an increase in sales of products for 3D metrology. The decrease in Industrial applications revenues for the nine months ended September 28, 2024 as compared to the nine months ended September 30, 2023 was primarily due to a decrease in sales of products for 3D metrology.
Previous wording
Our displays for Consumer applications are used primarily in thermal imaging products in recreational rifles, first person viewers, and hand-held scopes. The decrease in Consumer applications revenues for the three and six months ended June 29, 2024 as compared to the three and six months ended July 1, 2023 was primarily due to a decrease in sales for first person viewers.
Current wording
Our displays for Consumer applications are used primarily in thermal imaging products in recreational rifles, first person viewers, and hand-held scopes. The decrease in Consumer applications revenues for the three and nine months ended September 28, 2024 as compared to the three and nine months ended September 30, 2023 was primarily due to a decrease in sales for hand-held thermal viewers.
Previous wording
R&D revenues decreased in the three months ended June 29, 2024 as compared to the three months ended July 1, 2023 primarily due to decreases in funding for U.S. defense programs. R&D revenues decreased in the six months ended June 29, 2024 as compared to the six months ended July 1, 2023 primarily due to a decrease in funding for U.S. defense programs as certain programs were completed and customers are evaluating the results and certain programs transitioned to production programs. Included in R&D revenues for the three months ended July 1, 2023 is approximately $400,000 related to OLED development programs with a consumer customer.
Current wording
R&D revenues decreased in the three months ended September 28, 2024 as compared to the three months ended September 30, 2023 primarily due to decreases in funding for U.S. defense programs. R&D revenues decreased in the nine months ended September 28, 2024 as compared to the nine months ended September 30, 2023 primarily due to a decrease in funding for U.S. defense programs as certain programs were completed and customers are evaluating the results and certain programs transitioned to production programs. Included in R&D revenues for the three months ended September 30, 2023 is approximately $400,000 related to OLED development programs with a consumer customer.
Previous wording
International revenues represented 7% and 8% of total revenues for the three and six months ended June 29, 2024, respectively, and 14% and 15% of total revenues for the three and six months ended July 1, 2023, respectively. We categorize our revenues as either domestic or international based upon the delivery destination of our product. For example, if the customer is located in Asia or if a U.S. customer has its Asian contract manufacturer order product from us and we deliver the product to Asia, then we categorize both these sales as international. In addition, if we earn royalties on sales from a customer, the royalties are categorized as domestic or international based on how the product revenues are categorized. The decrease in international revenues was a result of a decrease in sales of our OLED products and our display products for 3D metrology applications. Our international sales are primarily denominated in U.S. currency. Consequently, a strengthening of the U.S. dollar could increase the price in local currencies of our products in foreign markets and make our products relatively more expensive than competitors’ products that are denominated in local currencies, which could lead to a reduction in sales or profitability in those foreign markets. We have not taken any protective measures against exchange rate fluctuations, such as purchasing hedging instruments with respect to such fluctuations, because of the historically stable exchange rate between the British Pound Sterling (the functional currency of our U.K. subsidiary) and the U.S. dollar. Foreign currency translation impact on our results, if material, is described in further detail under “Item 3. Quantitative and Qualitative Disclosures About Market Risk” section below.
Current wording
International revenues represented 5% and 7% of total revenues for the three and nine months ended September 28, 2024, respectively, and 6% and 12% of total revenues for the three and nine months ended September 30, 2023, respectively. We categorize our revenues as either domestic or international based upon the delivery destination of our product. For example, if the customer is located in Asia or if a U.S. customer has its Asian contract manufacturer order product from us and we deliver the product to Asia, then we categorize both of these sales as international. In addition, if we earn royalties on sales from a customer, the royalties are categorized as domestic or international based on how the product revenues are categorized. The decrease in international revenues was a result of a decrease in sales of our OLED products and our display products for 3D metrology applications. Our international sales are primarily denominated in U.S. currency. Consequently, a strengthening of the U.S. dollar could increase the price in local currencies of our products in foreign markets and make our products relatively more expensive than competitors’ products that are denominated in local currencies, which could lead to a reduction in sales or profitability in those foreign markets. We have not taken any protective measures against exchange rate fluctuations, such as purchasing hedging instruments with respect to such fluctuations, because of the historically stable exchange rate between the British Pound Sterling (the functional currency of our U.K. subsidiary) and the U.S. dollar. Foreign currency translation impact on our results, if material, is described in further detail under “Item 3. Quantitative and Qualitative Disclosures About Market Risk” section below.
Previous wording
*Cost of Product Revenues.*Cost of product revenues, which is comprised of materials, labor and manufacturing overhead related to the production of our products for the three and six months ended June 29, 2024 and July 1, 2023 were as follows:
Current wording
*Cost of Product Revenues.*Cost of product revenues, which is comprised of materials, labor and manufacturing overhead related to the production of our products for the three and nine months ended September 28, 2024 and September 30, 2023 were as follows:
Previous wording
The decrease in cost of product revenue as a percent of net product revenues for the three and six months ended June 29, 2024 as compared to the three and six months ended July 1, 2023 was due to a decrease in expected program costs as a result of lower estimate of rework costs. We estimate that the lower estimated rework cost improved gross margins by approximately $1.3 million for the three and six months ended June 29, 2024.
Current wording
The decrease in cost of product revenue as a percent of net product revenues for the three and nine months ended September 28, 2024 as compared to the three and nine months ended September 30, 2023 was due to a decrease in expected program costs as a result of lower estimate of rework costs. In the fourth quarter of 2024, the Company plans on devoting production resources to provide units for which customers have made warranty claims. As the Company has already accrued an estimate of the cost to repair these units, we do not expect this to have a material impact on Cost of product revenues as a percentage of net product revenues.
Previous wording
Research and Development. R&D expenses are incurred in support of internal display development programs and programs funded by agencies or prime contractors of the U.S. Government and commercial partners. R&D costs include staffing, purchases of materials and laboratory supplies, circuit design costs, fabrication and packaging of display products, and overhead. In fiscal year 2024, we expect our R&D expenditures to be related to our display products, overlay weapon sights and OLED display technologies. Funded and internal R&D expenses are combined in research and development expenses in the condensed consolidated statement of operations. R&D expenses for the three and six months ended June 29, 2024 and July 1, 2023 were as follows:
Current wording
Research and Development. R&D expenses are incurred in support of internal display development programs and programs funded by agencies or prime contractors of the U.S. Government and commercial partners. R&D costs include staffing, purchases of materials and laboratory supplies, circuit design costs, fabrication and packaging of display products, and overhead. In fiscal year 2024, our R&D expenditures are related to our display products, overlay weapon sights and OLED display technologies. Funded and internal R&D expenses are combined in research and development expenses in the condensed consolidated statement of operations. R&D expenses for the three and nine months ended September 28, 2024 and September 30, 2023 were as follows:
Previous wording
Funded R&D expense for the three and six months ended June 29, 2024 decreased as compared to the three and six months ended July 1, 2023 primarily due to decreased spending on U.S. defense programs and programs previously in development were completed. Internal R&D expense increased due to an increase in process improvements.
Current wording
Funded R&D expense for the three and nine months ended September 28, 2024 decreased as compared to the three and nine months ended September 30, 2023 primarily due to decreased spending on U.S. defense programs and programs previously in development were completed. Internal R&D expense increased due to an increase in display development costs.
Previous wording
Selling, General and Administrative. Selling, general and administrative (“S,G&A”) expenses consist of the expenses incurred by our sales and marketing personnel and related expenses, and administrative and general corporate expenses. S,G&A expenses for the three and six months ended June 29, 2024 and July 1, 2023 were as follows:
Current wording
Selling, General and Administrative. Selling, general and administrative (“S,G&A”) expenses consist of the expenses incurred by our sales and marketing personnel and related expenses, and administrative and general corporate expenses. S,G&A expenses for the three and nine months ended September 28, 2024 and September 30, 2023 were as follows:
Previous wording
S,G&A increased for the three months ended June 29, 2024 as compared to the three months ended July 1, 2023 primarily due to an increase in legal fees of $1.2 million, partially offset by a decrease in credit loss expense of $0.2 million. S,G&A increased for the six months ended June 29, 2024 as compared to the six months ended July 1, 2023 primarily due to an increase in legal fees of $3.8 million partially offset by a decrease in credit loss expense of $0.7 million.
Current wording
S,G&A increased for the three months ended September 28, 2024 as compared to the three months ended September 30, 2023 primarily due to an increase in legal fees of $0.5 million, partially offset by a decrease in public relation expense of $0.1 million. S,G&A increased for the nine months ended September 28, 2024 as compared to the nine months ended September 30, 2023 primarily due to an increase in legal fees of $3.8 million partially offset by a decrease in credit loss expense of $0.7 million.
Previous wording
Litigation Damages. Litigation damages were accrued as a result of the April 22, 2024 jury verdict that was entered against the Company awarding approximately $5.1 million in damages as well as recommending $19.7 million in disgorgement and exemplary damages.
Current wording
Litigation Damages. Litigation damages were accrued as a result of the April 22, 2024 jury verdict that was entered against us, awarding approximately $5.1 million in damages as well as recommending $19.7 million in disgorgement and exemplary damages.
Previous wording
*Other Expense, net.*Other expense, net, is primarily composed of interest income, foreign currency transactions, losses on fair value recording of investments and remeasurement gains and losses incurred by our U.K.-based subsidiary and other non-operating income items. Other expense, net, for the three and six months ended June 29, 2024 and July 1, 2023 were as follows:
Current wording
*Other (Expense) Income, net.*Other (expense) income, net, is primarily composed of interest income, foreign currency transactions, losses on fair value recording of investments and remeasurement gains and losses incurred by our U.K.-based subsidiary and other non-operating income items. Other (expense) income, net, for the three and nine months ended September 28, 2024 and September 30, 2023 were as follows:
Previous wording
During the three and six months ended June 29, 2024, we recorded foreign currency gains of less than $0.1 million and foreign currency losses of less than $0.1 million, respectively, as compared to foreign currency losses of $0.2 million and $0.1 million for the three and six months ended July 1, 2023, respectively. Other expense, net includes $0.7 million and $3.3 million of impairment losses on equity investments for the second quarter of 2024 and the second quarter of 2023, respectively.
Current wording
During the three and nine months ended September 28, 2024, we recorded foreign currency gains of $0.1 million and less than $0.1 million, respectively, as compared to foreign currency losses of less than $0.1 million and $0.2 million for the three and nine months ended September 30, 2023, respectively. Other (expense) income, net for the nine months ended September 28, 2024 and September 30, 2023 includes $1.6 million and $3.3 million of impairment losses on equity investments, respectively.
Previous wording
Tax Provision. We recorded a provision for income taxes of $0.0 in the three and six months ended June 29, 2024. We recorded a provision for income taxes of less than $0.1 million in the three and six months ended July 1, 2023.
Current wording
Tax Provision. We recorded a provision for income taxes of approximately $0.1 million in the three and nine months ended September 28, 2024. We recorded a provision for income taxes of less than $0.1 million and approximately $0.1 million in the three and nine months ended September 30, 2023.
Previous wording
Net Loss. We incurred net losses of $5.9 million and $38.5 million during the three and six months ended June 29, 2024, respectively, compared to net losses of $8.2 million and $10.8 million during the three and six months ended July 1, 2023, respectively. The decrease in net loss during the three months ended June 29, 2024 compared to the three months ended July 1, 2023 was primarily due to a decrease in impairment losses on equity investments. The increase in the net loss during the six months ended June 29, 2024 compared to the six months ended July 1, 2023 was primarily due to accrued litigation damages and legal fees.
Current wording
Net Loss. We incurred net losses of $3.5 million and $41.9 million during the three and nine months ended September 28, 2024, respectively, compared to net losses of $2.5 million and $13.3 million during the three and nine months ended September 30, 2023, respectively. The decrease in net loss during the three months ended September 28, 2024 compared to the three months ended September 30, 2023 was primarily due to an improvement of gross margins and foreign currency gains partially offset by an increase in legal expense. The increase in the net loss during the nine months ended September 28, 2024 compared to the nine months ended September 30, 2023 was primarily due to accrued litigation damages and legal fees.
Previous wording
At June 29, 2024 and December 30, 2023, we had cash and cash equivalents, restricted cash, and marketable securities of $18.7 million and $17.9 million, respectively, and working capital of $(5.0) million and $24.0 million, respectively. The change in cash and cash equivalents and marketable securities was primarily due to cash used in operations of $6.2 million partially offset by the sale of common stock of $7.2 million. Our cash and cash equivalents and liquidity could be adversely affected by any amounts that become payable in connection with any adverse results from any litigation we are, or may become, involved in.
Current wording
At September 28, 2024 and December 30, 2023, we had cash and cash equivalents, restricted cash, and marketable securities of $37.3 million and $17.9 million, respectively, and working capital of $19.1 million and $24.0 million, respectively. The change in cash and cash equivalents and marketable securities was primarily due to an equity raise of $25.2 million in the third quarter of 2024 in addition to the sale of common stock of $7.2 million in the first quarter of 2024 which was partially offset by cash used in operations of $12.6 million. Our cash and cash equivalents and liquidity could be adversely affected by any amounts that become payable in connection with any adverse results from any litigation we are, or may become, involved in.
Previous wording
During the three months ended March 30, 2024, the Company sold 3,080,000 shares of common stock for gross proceeds of $7,466,755 (average of $2.42 per share) before deducting broker expenses paid by us of approximately $0.2 million, pursuant to the Company’s then effective At-The-Market Equity Offering Sales Agreement, dated as of March 5, 2021 (the “ATM Agreement”) with Stifel, Nicolaus & Company, Incorporated (“Stifel”), as agent. The ATM Agreement terminated in the three months ended March 30, 2024.
Current wording
During the three months ended March 30, 2024, we sold 3,080,000 shares of common stock for gross proceeds of $7,466,755 (average of $2.42 per share) before deducting broker expenses paid by us of approximately $0.2 million, pursuant to our then effective At-The-Market Equity Offering Sales Agreement, dated as of March 5, 2021 (the “ATM Agreement”) with Stifel, Nicolaus & Company, Incorporated (“Stifel”), as agent. The ATM Agreement terminated in the three months ended March 30, 2024.
Previous wording
The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred net losses of $19.7 million and net cash outflows from operations of $15.3 million for the fiscal year ended 2023. The Company incurred a net loss of $38.5 million for the six months ended June 29, 2024 and net cash outflows from operations of $6.2 million. In addition, the Company has experienced a significant decline in its cash and cash equivalents and marketable debt securities over the last several years, which was primarily a result of funding operating losses. As described in Note 14 Litigation, on April 22, 2024, a jury verdict was entered against the Company awarding approximately $5.1 million in damages as well as recommending $19.7 million in disgorgement and exemplary damages. While no final judgment has been issued by the Court, the Court will take that recommendation under advisement and will rule in its final judgment on the final amount after briefing on the issues. The Company plans to argue that the damages, disgorgement and exemplary damages should be reduced or eliminated. The Company is also considering the appeal of any award in a final judgment. The Company had $18.7 million of cash and cash equivalents, restricted cash, and marketable debt securities at June 29, 2024.
Current wording
The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. We have incurred net losses of $19.7 million and net cash outflows from operations of $15.3 million for the fiscal year ended 2023. We incurred a net loss of $41.9 million for the nine months ended September 28, 2024 and net cash outflows from operations of $12.6 million. In addition, we have experienced a significant decline in its cash and cash equivalents and marketable securities over the last several years, which was primarily a result of funding operating losses. As described in Note 14 Litigation, on April 22, 2024, a jury verdict was entered against us awarding approximately $5.1 million in damages as well as recommending $19.7 million in disgorgement and exemplary damages. While no final judgment has been issued by the Court, the Court will take that recommendation under advisement and will rule in its final judgment on the final amount after briefing on the issues. We have argued that the damages, disgorgement and exemplary damages should be reduced or eliminated. Final briefing on the issued occurred on October 29, 2024. We are also considering the appeal of any award in a final judgment. We had $37.3 million of cash and cash equivalents, restricted cash, and marketable securities at September 28, 2024.
Previous wording
The Company has historical and current negative cash flow from operations and limited liquidity resources. The Company’s current strategy is to continue to invest in its business and raise additional capital through financing activities that may include public offerings and private placements of our common stock, preferred stock offerings, collaborations and licensing arrangements and issuances of debt and convertible debt instruments. Until such time that additional capital can be raised, the Company plans to strategically manage its uncommitted spend, execute its priorities and implement cost saving measures to reduce research and development and general and administrative expenditures which could include minimizing staff costs. The Company may also sell assets and look at other strategic alternatives. There are inherent uncertainties associated with fundraising activities and activities to manage our uncommitted spending and the successful execution of these activities may not be within the Company’s control. There are no assurances that such additional funding will be obtained and that the Company will succeed in its future operations. If the Company is unable to achieve positive cash flows and profitability in the foreseeable future or cannot successfully raise additional capital and implement its strategic plan, its liquidity, financial condition and business prospects will be materially and adversely affected. Unless the recommended disgorgement and exemplary damages are significantly reduced or eliminated in the final order, there is substantial doubt about the Company’s ability to continue as a going concern.
Current wording
We have had historical and current negative cash flow from operations and limited liquidity resources. Our current strategy is to continue to invest in its business and raise additional capital through financing activities that may include public offerings and private placements of our common stock, preferred stock offerings, collaborations and licensing arrangements and issuances of debt and convertible debt instruments. Until such time that additional capital can be raised, we plan to strategically manage its uncommitted spending, execute its priorities and implement cost saving measures to reduce research and development and general and administrative expenditures which could include minimizing staff costs. We may also sell assets and look at other strategic alternatives. There are inherent uncertainties associated with fundraising activities and activities to manage our uncommitted spending and the successful execution of these activities may not be within our control. There are no assurances that such additional funding will be obtained and that we will succeed in our future operations. If we are unable to achieve positive cash flows and profitability in the foreseeable future or cannot successfully raise additional capital and implement its strategic plan, our liquidity, financial condition and business prospects will be materially and adversely affected. Unless the recommended disgorgement and exemplary damages are significantly reduced or eliminated in the final order, there is substantial doubt about our ability to continue as a going concern.
Previous wording
Cash and cash equivalents and marketable debt securities held in U.S. dollars at June 29, 2024 and December 30, 2023 were as follows:
Current wording
Cash and cash equivalents, restricted cash, and marketable securities held in U.S. dollars at September 28, 2024 and December 30, 2023 were as follows: