KOPIN CORP

Overview

Corporate Background and Market Presence

As used herein, the terms “Company,” “we,” “us,” or “our” refer to Kopin Corporation, a Delaware corporation.

Kopin Corporation, a Delaware corporation that was incorporated in 1984 and is headquartered in Westborough, Massachusetts, is renowned for its innovative microdisplay technologies and optical systems, catering to defense, enterprise, industrial, consumer, and medical sectors. Our portfolio, as evidenced by our official websitewww.kopin.com, includes four types of miniature active-matrix liquid crystal displays (“AMLCDs”), liquid crystal on silicon (“LCOS”) displays, organic light emitting diode (“OLED”) displays, and emerging micro light emitting diode (“MicroLED”) displays, in addition to optics, electronics, and housings for subsystems which we call Application Specific Optical Solutions (“ASOS”). These microdisplays and subsystem solutions are all geared toward enhancing human performance when it matters most – in critical applications.

Within the reporting period, we announced a patent pending fifth-generation MicroDisplay called NeuralDisplay™ which is in development. The display is a bi-directional, human-in-the-loop and AI enabled backplane that can be manufactured into microdisplays using either OLED or MicroLED deposition technology.

While microdisplays are at the heart of everything we make, we also bring value to our customers through the design and manufacture of high-performance subsystems of ASOS which include optics, electronics, and housings that are designed to meet the rigorous performance, size, weight, power, and cost requirements of the applications into which they are used.

These products are critical for applications ranging from weapon mounted thermal sights to spatial computing devices and medical headsets. We have been supplying our microdisplays and ASOS to the U.S. Department of Defense for many years for solider centric systems, rotary and fixed wing aircraft and are developing products for armored vehicles and soldier carried missile systems. Our market reach now extends globally, with significant operations in the Americas, Asia-Pacific, and Europe. This global footprint and strategic focus underscore our capability to serve diverse and demanding markets, particularly in defense, where it supports both U.S. and international customers with development and production programs.

Strategic Initiatives and Recent Developments

Historically, we have focused on selling individual display components, but we have shifted our focus to offering higher-value complete solutions. These solutions integrate displays, optics, and drive electronics into subassemblies or headsets, catering to the growing demand for integrated, application-specific products – our ASOS. This move is supported by our proprietary technologies, which enable the design and manufacture of high-performance, rugged systems. The additional capability in offering complete solutions positions us to better serve our customers by offering a seamless integration of components, ensuring optimal performance and ease of use. This is a critical differentiator, as competitors like Samsung, LG, and Sony, while strong in display manufacturing, do not typically provide integrated subassemblies or headsets, requiring customers to handle the highly complex additional integration which requires complex processes, know-how and trade secrets, and specialized equipment and facilities to do correctly.

Our ability to meet specific customer needs is enhanced by our proprietary technologies, which include over 200 patents and patent applications covering microdisplays, optics, and related systems, providing a significant intellectual property advantage, as noted in recent patent filings. Technological edge allows us to develop products that are not only high-resolution and low power but also rugged enough for defense applications, such as pilot helmets and armored vehicle targeting systems.

The Company’s competitive edge is further strengthened by our focus on application-specific solutions, which cater to the unique requirements of each market segment. For example, in the industrial sector, we license wireless headset reference designs that integrate displays and optics for field service personnel, enhancing productivity. Similarly, in the medical field our stereoscopic 3D high-resolution headset is used by surgeons to provide comfortable and convenient visual support with more comfort and convenience.

ONE Kopin Strategic Initiative and Rebranding

In alignment with our “ONE Kopin” strategic initiative, we have undertaken a strategic initiative to reorganize and streamline our operations. This initiative will include a rebranding effort to unify our corporate identity, and as announced in recent corporate updates, includes the introduction of a new logo, corporate identity, and website, reflecting a modernized brand image.

Our unified business now operates through various market and technology groups, strategically located across multiple sites to support our global operations. These groups are organized by market segments (e.g., defense, industrial, consumer) and technology areas (e.g., AMLCD, FLCOS, OLED, MicroLED), with locations including Westborough, Massachusetts, Dalgety Bay, Scotland, and Reston, Virginia.

In addition to unifying our operations, we have also expanded and unified our sales and business development team, substantially increasing our investment in new customer acquisition, existing customer revenue and margin enhancement, and diversification of our customer base. In the defense, medical and industrial segments that we serve, product development cycles and transitions from development to manufacturing are lengthy. Therefore, maintaining a robust pipeline of active customer-funded development programs that will evolve into production programs is a critical part of growing revenues and expanding our customer base. In conjunction with our portfolio of unique microdisplays and ASOS, we have also invested heavily in our sales and business development group – nearly doubling the resources focused on acquisition of new customers and programs over the past 18 months.

This reorganization is designed to improve coordination and innovation, leveraging the strengths of each division under a single umbrella, and growing and diversify our customer base. Our multiple locations ensure global reach, supporting customers in the Americas, Asia-Pacific, and Europe as these regions become more focused on sovereign defense spending, medical research and semiconductor developments.

Product Portfolio and Technological Edge

Our product lineup is diverse, with four microdisplay technologies inclusive of both off-the-shelf and custom products, as well as complete headset solutions for training & simulation and medical applications, and ASOS sub-systems.

Manufacturing processes vary. For example, AMLCDs are designed in Westborough, then initial manufacturing steps occur in Taiwan and then the product is completed in Westborough, while FLCOS products are handled by our facility in Dalgety Bay, Scotland. Our OLED displays are designed in Westborough, the initial manufacturing occurs in South Korea, then they are completed in Europe or Asia. These displays are sold separately or integrated into subassemblies, including binocular modules and higher-level assemblies (“HLAs”) for defense, used in applications like weapon sights, pilot helmets, and training headsets.

Our development of OLED and MicroLED displays, including color and monochrome variants with capabilities such as NeuralDisplay™ Artificial Intelligent (“AI”) based eye-tracking, signifies our forward-looking approach to deliver new capabilities designed to enhance human performance where and when it matters most. Additionally, we offer display drivers, application-specific integrated circuits (“ASICS”), optical lenses, and backlights, manufactured by third parties, complementing its core offerings.

Revenue Streams and Market Opportunities

Revenue generation derives primarily from the sale of displays, optical components, and Application Specific Optical Solutions (ASOS) that we manufacture for defense, industrial, medical and training and simulation applications, alongside customer-funded development contracts for U.S. defense programs. This dual revenue stream ensures stability and growth potential. Most of the programs designed for these market segments tend to run for extended time periods, yielding multiple years of revenue and margin streams.

We are particularly well-positioned for the emerging augmented reality (AR) and virtual reality (VR) markets, leveraging our technology and intellectual property. Our unique position as the only known USA-based provider offering AMLCDs, LCOS, OLED and MicroOLED Displays, combined with optics, enhances our ability to offer the market the best solution for each unique application, serving customers based on their specific needs. This is a significant competitive advantage for us. The addition of AI Enabled backplane architectures and pending patent applications in this area puts us at the forefront of display technology for consumer and defense applications.

Research and Development Focus

Internally funded research and development is concentrated on advancing OLED, MicroLED, and other display technologies such as bi-directional pixel architectures and software defined, AI enabled backplane architectures. Historically, we have invested in headset systems for emerging industrial and consumer markets, now licensed under agreements that may include royalties and purchase commitments. We believe this licensing strategy results in revenue from past innovations while freeing resources for new developments.

Funded Research and Development

We have entered various development contracts with agencies and prime contractors of the U.S. Government and commercial customers. These contracts help support the continued development of our core technologies. A substantial percentage of our revenue derives from Funded Research and Development, focusing on developing custom product solutions, particularly for the U.S. defense industry. These programs are typically fixed price and span several years, aiming for production orders post-design completion and are cancellable at short notice. The knowledge gained, as per corporate strategy outlines, enhances our expertise, positioning us for future business opportunities. The potential for technologies developed for defense to eventually transition to commercial and consumer applications underscores long-term growth prospects.

Operational Flexibility and Market Adaptability

A key aspect of our operations is our flexibility in sourcing, purchasing, and developing display backplanes and deposition solutions from other companies for integration with proprietary optics and headset designs, particularly in new or cost-sensitive markets. This adaptability ensures competitiveness and responsiveness to market dynamics, geo-political conflicts, tariffs, and US Department of Defense and Asian and European defense requirements for country-of-origin and source of supply requirements.

We have shifted our business development efforts to focus on markets where we have a greater competitive advantage and as a result revenues from defense applications have increased. Sales to significant non-affiliated customers for fiscal years 2024, 2023 and 2022, as a percentage of total revenues, were as follows:

Our fiscal year ends on the last Saturday in December. The fiscal years ended December 28, 2024, December 30, 2023, and December 21, 2022, are referred to herein as fiscal years 2024, 2023 and 2022, respectively.

Augmented and Virtual Reality

Kopin Corporation, a leader in optical solutions, has expressed views on the future of augmented reality (“AR”) and virtual reality (“VR”) in defense, industrial, and consumer sectors. Our opinion on these technologies reflects current market dynamics and technological advancements. The focus is on the adoption trends, necessary technological developments, and the ongoing challenge of balancing performance and cost in display technologies.

Industry Overview and Market Interest

We believe, and current trends support, that defense, industrial, and consumer companies are increasingly integrating AR and VR into their operations, which we believe positions us very well for business expansion given our expertise in these technologies. These technologies are viewed as innovative applications and computing platforms, transforming how sectors operate. For instance:

This widespread interest underscores the potential for AR and VR to become mainstream, but their growth is contingent on several technological advancements.

Necessary Technological Advancements

For AR and VR markets to mature and expand, sustained investment and innovation are required in the following areas:

Our updated opinion reflects a robust and growing interest in AR and VR across defense, industrial, and consumer sectors. The path to widespread adoption hinges on continuous innovation in display technology, optics, application software, and software integration, with a particular emphasis on balancing performance and cost. The integration of advanced bi-directional, human-in-the-loop sensing, coupled with low power, edge node algorithms will also be required to enable the performance requirements for Defense, Consumer and Medical applications.

Our Solution and Technology

Kopin Corporation is a leader in high-performance optical solutions, focusing on microdisplays and related technologies for various markets. We design and manufacture small form factor displays, including AMLCDs, LCOS, OLED, and developing MicroLED, along with optical lenses, backlights, and ASICs. The Company recently invented a fifth generation microdisplay architecture, NeuralDisplay™ which includes bi-directional, human-in-the-loop and AI-based algorithms resident within the backplane of the display. This technological advancement can be utilized with either OLED or MicroLED depositions. These components are used in defense, industrial, medical, and consumer applications, offering complete solutions that include subassemblies and headsets.

Products and Applications

Our displays are critical for near-eye applications, such as thermal weapon sights and pilot helmets in defense, wearable headsets for field service in industry, surgeon headsets in medical fields, and spatial computing devices for consumers. Their subassemblies combine displays, optics, and electronics, designed to survive extreme conditions like weapon fire shock and vibration, while headsets are standalone products, our displays and subsystems are integrated into the finished products built by our customers.

Competitive Edge

A critical aspect of our business is our ability to offer tailored and complete solutions, not just displays, which differentiate us from competitors. We offer active-matrix liquid crystal, organic light emitting diode, ferroelectic liquid crystal on silicon and inorganic light emitting diode microdisplays as stand-alone products and in modules and subassemblies which include our optics and electronics. Furthermore, we believe we are the only USA based, small business that offers five variants of microdisplay technologies which provide a vast array of technological options for customers’ application needs. A “small business” as defined in U.S. procurement may receive preferential treatment in awarding contracts. We can assist customers with choosing and customizing the right display architecture for their unique application as compared to competitors who only offer one technology, for all applications. Specifically, our strategy enables us to design products for rugged environments, a key advantage in defense and industrial markets, while offering these solutions to be manufactured in multiple locations within the USA and Europe.

Detailed Analysis of Kopin Corporation’s Technology and Market Position

Kopin Corporation, a leader in optical solutions, is recognized for our advanced microdisplay technologies and related products, catering to defense, industrial, medical, and emerging consumer AR and VR markets. This analysis, prepared as of March 2025, provides a comprehensive overview of the Company’s technology, products, strategy, and market position. The focus is on detailing the Company’s capabilities, competitive advantages, and potential risks, ensuring a thorough understanding of potential investment decisions.

Corporate Background and Technology Portfolio

We design and manufacture a range of small form factor displays, including AMLCDs, LCOS displays, OLED displays, and are developing MicroLED displays. These displays are complemented by optical lenses, backlights, and ASICs, forming the backbone of our product offerings.

Our technology extends beyond individual components to include subassemblies and headsets, which integrate displays, optics, and electronics. These products are designed to withstand extreme environmental conditions, such as the shock and vibration experienced in weapons fire, making them particularly suitable for defense applications. This capability is a critical differentiator, as it ensures reliability in rugged environments, a key requirement for defense, medical and industrial customers.

OurAMLCDs, branded as CyberDisplay® products, utilize a proprietary process involving the transfer of integrated circuits from silicon wafers to glass. This process, detailed in corporate disclosures, enables greater miniaturization, higher pixel density, lower power consumption, and higher brightness compared to conventional active-matrix LCDs. The manufacturing involves initial steps at foundries in Taiwan, with final assembly at our facility in Westborough, Massachusetts, as noted in recent financial reports.

LCOSdisplays, manufactured by our subsidiary Kopin Europe Limited (“KEL”) in Scotland, are reflective and used in 3D optical inspection equipment, offering high-speed, high-density imaging capabilities.

OLEDdisplays, with their emissive nature, provide high contrast and fast response times, making them ideal for AR and VR applications. We have recently launched a new OLED display with improved brightness and resolution, aimed at the AR/VR market, as announced in November 2024.

MicroLEDdisplays are in development, promising high brightness, wide viewing angle, excellent contrast, and potentially low cost. We received a patent for our MicroLED manufacturing process in September 2024, which is expected to enhance production efficiency and reduce costs, positioning the Company for future growth in this emerging technology.

**NeuralDisplay™**architecture is a software-based development focused on integrating bi-directional sensing into the subpixel of either an OLED or MicroLED display. We believe this patent pending technology will reduce the size, weight, power consumption of consumer and defense AR solutions by reducing several cameras which are required for eye-tracking, gaze, and dynamic brightness and contrast controls. The display system is being designed to utilize software and AI accelerating algorithms to adjust the display image and thereby reduce nausea, latency, and overall system weight which will increase user comfort and battery life.

Product Offerings and Applications

Our products are utilized across multiple sectors, each with specific applications:

Our subassemblies, such as HLAs for defense, combine displays, optics, and electronics in sealed housings, designed for exact tolerances to meet rugged environment requirements. Headsets, on the other hand, are standalone products that interface with larger systems, requiring significant know-how in design, materials selection, assembly, and testing.

Manufacturing and Supply Chain

Our manufacturing process varies by product. AMLCDs involve initial fabrication at Taiwan foundries, with final assembly in Westborough, Massachusetts, using proprietary Wafer Engineering technology. LCOS displays are manufactured at Kopin Europe Limited in Scotland, ensuring localized production capabilities. For OLED displays, we design the critical backplane and outsource manufacturing to foundries, adopting a fabless model to reduce capital costs and leverage existing infrastructure with best of class manufacturing partners globally.

Optical lenses and backlights are either developed internally or licensed, with third-party manufacturing used to meet specifications. This approach reduces investment in plants and equipment, allowing us to stay agile and adapt to technological advancements.

Our ASOS products are currently manufactured using a significant amount of direct labor. However, we have implemented initiatives to automate many of the processes required to manufacture the products. For example, we removed human defect inspection of lenses and changed the process to use camera inspection.

Strategy and Market Expansion

Our strategy is centered on participating in U.S. defense development programs, funded by government agencies and prime contractors, to develop leading-edge microdisplay technologies. This approach supplements internal R&D budgets and enhances expertise, with revenues from these contracts contributing significantly to past years.

We also utilize Small Business Innovation Research (“SBIR”) and Cooperative Research & Development Awards (“CRADA”) to work with Defense end-users directly to learn, develop, demonstrate, and commercialize new technologies.

The knowledge gained is leveraged for industrial, medical, and consumer applications, aiming to diversify revenue streams. We maintain a broad intellectual property portfolio, with approximately 200 patents and patent applications, covering microdisplays, optics, and related technologies, which we believe provides a technology and manufacturing platform competitive advantage.

We are also developing software-defined backplanes with AI capabilities, known as NeuralDisplay™, to address specific use cases in defense and consumer markets, indicating a forward-looking approach to innovation, as mentioned in recent product development updates.

Markets, Customers, and Financial Performance

Our primary market is defense, with significant customers including Collins Aerospace and DRS Network & Imaging Systems LLC. In fiscal year 2024, defense sales (excluding R&D contracts) accounted for 82% of total revenue, up from 56% in 2023 and 52% in 2022, indicating a strong reliance on this sector. These results were a by-product of an intentional strategic shift in market focus, which we believe is already proving successful.

Industrial and medical markets are growing, with customers like HMDmD, expanding our customer base. Research and development revenues, primarily from U.S. Government contracts, accounted for 12% of total revenues in 2024, down from 33% in 2023 and 30% in 2022, suggesting a shift from research and development to low-rate initial production (“LRIP”) sales.

Financially, we reported a 25% revenue increase in fiscal year 2024 compared to 2023, driven by defense product sales, and are progressing towards profitability with a reduced net loss, indicating operational improvements, as noted in market analyses.

Competition and Risks

The general commercial display market is highly competitive, and we face competition from large Asian electronics companies such as AUO, BOE Technology Group, Himax, LG Display, Samsung, Sharp, and Sony in the near eye microdisplay sector. We cannot be certain that we will be able to compete against these companies and technologies, or that consumers will accept the use of such eyewear in general or our customers’ product form factor specifically.

The Company differentiates itself from its competitors by offering a USA small business, designed and built, complete solutions, including displays, optics, and electronics such as MicroLED, OLED, LCOS and AMLCD, that are tailored to application specific solutions. Furthermore, the Company is the only USA based, small business which offers five variants of microdisplay technologies, which provide a vast array of technological options for customers’ application needs. The Company can assist customers to choose the right display architecture for the application versus competitors who only offer one technology for all applications. Specifically, the Company’s strategy enables it to design products for rugged environments, a key advantage in defense and industrial markets, while offering these solutions to be manufactured in multiple locations within the USA and Europe.

Key risks include dependence on major customers, such as DRS Network & Imaging Systems LLC comprising 65% of revenues in 2024 and therefore posing a concentration risk. The need for continuous innovation in a rapidly evolving technology market and managing complex supply chains to maintain high production yields for defense subassemblies are additional challenges.

Recent Developments and Future Outlook

Recent developments include a partnership with a major defense contractor in January 2025 for advanced microdisplays, enhancing its defense market position. The launch of a new OLED display in November 2024 and the MicroLED manufacturing patent in September 2024 further strengthen its AR/VR market potential, along with several noted updates on the emerging NeuralDisplay™ architecture development.

A strategic aspect with regards to geopolitical uncertainties, potential tariffs and sovereign sources of supply for US DoD and European DoD, is our flexibility in manufacturing, using third-party foundries for OLED and MicroLED displays, which reduces capital expenditure and allows for scalability, a strategy not always highlighted in standard overview.

Patents, Proprietary Rights and Licenses

An important part of our product development strategy is to seek, when appropriate, protection for our products and proprietary technology using various U.S. and foreign patents and contractual arrangements. We intend to prosecute and defend our proprietary technology aggressively. Many of our U.S. patents and applications have counterpart foreign patents, foreign patent applications or international patent applications through the Patent Cooperation Treaty. Although we believe that our patents or other proprietary products and processes do not infringe upon the intellectual property rights of any third parties, third parties may assert infringement claims against us from time to time.

Human Capital Resources

As of December 28, 2024, our consolidated business employed 181 full-time employees. Of these employees, 3 hold Ph.D. degrees in Material Science, Electrical Engineering or Physics. Our management and professional employees have significant prior experience in semiconductor materials, device transistor and display processing, optical design, manufacturing, and other related technologies. Our employees are in the U.S. and Europe and the laws regarding employee relationships are different by jurisdiction. None of our employees are covered by a collective bargaining agreement. We have policies to prevent discrimination based on gender, race, ethnicity, nationality, religion, sexual orientation, gender identity or gender expression. We take affirmative action to ensure that applicants are hired, and that employees are treated during employment without regard to their race, ethnicity, religion, sex, or national origin. We also take affirmative action to employ and advance veterans in employment. We consider relations with our employees to be good.

In 2004, we finalized and adopted a Code of Business Conduct and Ethics regarding the standards of conduct of our directors, officers and employees. The code is reviewed and updated periodically by our Board of Directors and is available on our website at www.kopin.com.

Environmental, Social & Governance (ESG) Initiatives

We strive to create and maintain a working environment that fosters honesty and hard work and rewards all of our employees’ hard work. We endeavor to make Kopin Corporation a place people are proud to be associated with. With the growing awareness of environmental and social issues, we are in the process of creating a more formalized ESG strategy. Our initial process for strategy creation includes work by a cross-functional ESG team of leaders representing operations, human resources, supply chain, finance, marketing, and facilities departments. We also utilize third-party facilities, environmental and legal consulting services. These third-party consultants are assisting us in creating an ESG materiality assessment from which we can develop a baseline assessment for monitoring our progress. Our progress in creating our ESG strategy and other related activities are reported to the Board of Directors.

We provide recurring company-wide communication of our formalized values, a summary of which are:

We are not a member of the Responsible Business Alliance (“RBA”); however, we have utilized the themes of the RBA Code of Conduct to supplement our Code of Ethics, including the RBA Code of Conduct’s five critical areas of corporate social responsibility: labor, health and safety, environment, management systems, and ethics. We believe that by following the values noted above and doing our part in each of these areas, we can achieve our business objectives and long-term stockholder value. For additional information, see “Item 1 – Business: Human Capital Resources” in this Form 10-K.

We strive to create a workplace based on the following principles and goals:

Care for Our People

● We believe in upholding the principles of human rights, worker safety, and observing fair labor practices within our organization.

● We respect different viewpoints and perspectives, and ultimately individual thoughts create innovation and achieve better results. We continually evaluate how we provide organizational training, formalize company values, and revitalize recruitment strategy.

● We are committed to employee safety. We have installed safety protocols and monitoring systems. We have periodic audits by third parties to test our systems and perform preventive maintenance. Our policies prohibit an employee from being alone in our production facilities or in unsupervised areas of our facilities.

Environmental Responsibility

● We are committed to protecting the natural environment and our community by complying with all applicable legal and regulatory requirements. We maintain an environmental management system and a specific framework for implementing relevant sustainable practices.

● We ask our employees to help us contribute towards environmental sustainability by looking for opportunities to conserve energy, reduce consumption of natural resources, preserve air and water quality, manage waste properly, reuse and recycle, and reduce the use of toxic substances in our operations where possible, including, in particular, in our clean room and lab facilities. Our clean room facility emissions are less than permitting and reporting thresholds, and we track emissions monthly to verify compliance with the regulations.

● We look for ways to reduce energy consumption in our facilities around the world, including upgrades and/or retrofits to smart heating, ventilation, and air conditioning systems. For instance, we have installed variable speed fans, which only turn on based on various metrics, thereby reducing energy usage.

Ethics & Corporate Responsibility

● We are committed to ensuring ethical organizational governance and embracing diversity and inclusion in the board room and throughout the organization.

● We are committed to observing fair, transparent, and accountable operating practices.

● We seek to create and foster a healthy, balanced, and ethical work environment for everyone in our organization. To this end, we promote an ethical organizational culture and encourage all employees to raise questions or concerns about actual or potential ethical issues and Company policies and to offer suggestions about how we can make our organization better. We have a Whistleblower Ethics Hotline that includes global telephone access and online access. We have an independent third party periodically test the Whistleblower Ethics Hotline.

Supply Chain Responsibility

● We intend to request that our suppliers adhere to the RBA Code of Conduct or its equivalent by flowing this requirement through our commercial contracts.

● We also adhere to Rule 13p-1 under the Exchange Act and support efforts to avoid sourcing conflict minerals that directly or indirectly finance or benefit armed groups in the Democratic Republic of Congo and in adjoining countries. Consistent with the Organization for Economic Co-operation and Development Due Diligence Guidance concerning conflict minerals, we adopted the Conflict-Free Sourcing Initiative Due Diligence reporting process and seek to obtain conflict minerals content declarations from our suppliers each year, all in an effort to promote supply chain transparency. We do not directly source tin, tantalum, tungsten, or gold (collectively referred to as 3TG) from mines, smelters or refiners, and we are in most cases several or more levels removed from these supply chain participants.

Government Regulations

Our business is subject to extensive regulation in the industries we serve. We deal with numerous U.S. Government agencies and entities, including but not limited to branches of the Department of Defense (“DoD”).

U.S. defense contractors are among our largest customers, representing a substantial majority of our total revenues. The U.S. Government may terminate a contract with us or our customers either “for convenience” (for instance, due to a change in its perceived needs) or if we default due to our failure or the failure of a general or subcontractor to perform under the contract. If the federal government terminates a contract with one of our customers, our contract with our customers would entitle us to recover only our incurred or committed costs, settlement expenses and possibly profit on the work completed prior to termination. However, under certain circumstances, our recovery costs upon termination for convenience of such a contract may be limited. If terminated by the government because of our default, we could be liable for payments made to us for undelivered goods or services, additional costs the government incurs in acquiring undelivered goods or services from another source, and any other damages it suffers.

In addition, we are subject to a variety of federal, state and local governmental regulations including the use, storage, discharge and disposal of toxic, volatile or otherwise hazardous chemicals used in our manufacturing process. Failure to comply with present or future regulations could result in fines being imposed on us, suspension of production or cessation of operations. Any failure on our part to control the use of, or adequately restrict the discharge of hazardous substances, or otherwise comply with environmental regulations, could subject us to significant future liabilities. We also cannot be certain that past use or disposal of environmentally sensitive materials in conformity with the existing environmental laws and regulations will protect us from required remediation or other liabilities under current or future environmental laws or regulations. Certain chemicals we import are subject to regulation by the U.S. Government. If we or our suppliers do not comply with applicable laws, we could be subject to adverse government actions and may not be able to import critical supplies.

The costs, burdens, and/or impacts of complying with federal and state regulations could be an expensive and time-consuming process, and failure to comply with any such legal requirements could have a significant impact on our financial position, results of operations, and cash flows.

We are also subject to federal International Traffic in Arms Regulations (“ITAR”) laws which regulate the protection (cybersecurity) and export of technical data and export of products to other nations that may use such data or products for defense purposes. Cybersecurity and data security and protection laws and regulations are evolving and present increasing compliance challenges, which may increase our costs, affect our competitiveness, cause reputational harm, and expose us to substantial fines or other penalties. Failure to comply with present or future regulations could result in fines being imposed on us, suspension of production, or a cessation of operations. Any failure on our part to obtain any required licenses for the export of technical data and/or export of our products, or to otherwise comply with ITAR, could subject us to significant future liabilities.

We are also subject to federal importation laws that regulate the importation of raw materials and equipment from other nations that are used in our products. Failure to comply with present or future regulations could result in fines being imposed on us, suspension of production, or a cessation of operations.

Investments in Related Businesses

On September 30, 2019, we entered into an Asset Purchase Agreement with Solos Technology Limited (“Solos Technology”), pursuant to which we sold and licensed certain assets of our Solos product line and Whisper Audio (“Whisper”) technology. As consideration for the transaction, we received 1,172,000 common shares representing a 20.0% equity stake in Solos Technology’s parent company, Solos Incorporation (“Solos Inc.”). Our 20.0% equity stake will be maintained until Solos Inc. has raised a total of $7.5 million in equity financing after which we will need to participate in future equity offerings, or our ownership percentage will be diluted.

We acquired an equity interest in Lenovo New Vision in the first quarter of 2018 for $1.0 million and the contribution of certain intellectual property. As of December 28, 2024, we have approximately 10% interest in this investment and the carrying value of our investment is $1.5 million.

We acquired a right to an equity interest in a medical device company in 2021. As of December 28, 2024, the carrying value of this investment is $0.3 million.

As of December 28, 2024, we own 100% of the outstanding common stock of Kopin Virginia, Inc. (formerly NVIS, Inc), KEL, and e-MDT America Inc. (“eMDT”) and we consolidate each of their financial results within our consolidated financial statements.

We terminated operations of our subsidiary, Kopin Software Ltd., in the third quarter of 2019 and are in the process of liquidating it.

On January 5, 2023, the Company entered into a Technology License Agreement and an Asset Purchase Agreement (the “LST Agreements”) with Lightning Silicon Technology, Inc (“LST”). Pursuant to the LST Agreements, the Company issued a license to LST for certain technology associated with our Organic Light Emitting Technology, transferred in-process development contracts with two customers and accounts receivables that the Company had previously determined were not collectible. As consideration for the transaction, the Company received 18,000,000 common shares representing a 20.0% equity stake in LST. The Technology License agreement provides for Kopin to transfer certain patents to Lightning Silicon if they achieve certain milestones, however upon transfer Kopin will receive a license to the technology. The Company will also receive a royalty based on unit sales of products that utilize the technology licensed.

We may from time to time make further equity investments in these and other companies engaged in certain aspects of the display, electronics, optical and software industries as part of our business strategy. In addition, the wearable computing product market is relatively new and there may be other technologies we need to invest in to enhance our product offering. These investments may not provide us with any financial return or other benefit, and any losses by these companies or associated losses in our investments may negatively impact on our operating results.

Sources and Availability of Raw Materials and Components

We rely on third-party independent contractors for certain integrated circuit chip sets, backlights and other critical raw materials such as special glasses, wafers and chemicals. In addition, our CyberDisplay subassemblies, HLAs, binocular display modules, and other modules include lenses, backlights, printed circuit boards and other components that we purchase from third-party suppliers. Some of these third-party contractors and suppliers are small companies with limited financial resources. In addition, our defense customers typically buy a small number of units, which prevents us from qualifying and buying components economically from multiple vendors. As a result, we are highly dependent on the select number of third-party contractors and suppliers.

Availability of Information

We make available free of charge through our website, www.kopin.com, our Annual Reports on Form 10-K and other reports that we file or furnish with the SEC as soon as reasonably practicable after they are filed or furnished, as well as certain of our corporate governance policies, including the charters for the Board of Directors’ audit, compensation, and nominating and corporate governance committees and our code of ethics, corporate governance guidelines and whistleblower policy. We will also provide any person without charge, upon request, a copy of any of the foregoing materials. Any such request must be made in writing to us, c/o Investor Relations, Kopin Corporation, 125 North Drive, Westborough, MA, 01581.