KOPIN CORP

Kopin Corporation is a leading developer and provider of innovative display, and application-specific optical solutions sold as critical components and subassemblies for defense, enterprise, professional and consumer products. Kopin’s portfolio includes microdisplays, display modules, eyepiece assemblies, image projection modules, and vehicle mounted and head-mounted display systems that incorporate ultra-small high-resolution Active Matrix Liquid Crystal displays (“AMLCD”), Ferroelectric Liquid Crystal on Silicon (“FLCoS”) displays, MicroLED displays (“µLED”) and Organic Light Emitting Diode (“OLED”) displays, a variety of optics, and low-power ASICs.

1. Summary of Significant Accounting Policies

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. As used in these notes, the terms “we,” “us,” “our,” “Kopin” and the “Company” mean Kopin Corporation and its subsidiaries, unless the context indicates another meaning.

Basis of Presentation

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The accompanying consolidated financial statements reflect the operations of Kopin Corporation and its wholly owned subsidiaries. Certain reclassifications have been made to the fiscal year 2023 presentation to conform to the fiscal year 2024 presentation. These reclassifications had no effect on the reported results of operations. An adjustment has been made to the Consolidated Balance Sheet for fiscal year ended December 30, 2023 to reclassify prepaid taxes of $85,572 into prepaid expenses and other current assets and accrued legal expenses of $2,129,421 from accounts payable into accrued legal expenses. The Company disclosed certificates of deposit as Level 1 financial instruments as of December 30, 2023 and has reclassified these amounts to Level 2 financial instruments in the current comparative presentation in Note 5. An adjustment has been made to the deferred income tax assets and liabilities table included within Note 8 to reclassify $56,000 of December 30, 2023 other deferred tax assets to accrued legal deferred tax assets.

Fiscal Year

The Company’s fiscal year ends on the last Saturday in December. The fiscal years ended December 28, 2024 and December 30, 2023 include 52 weeks and the fiscal year ended December 31, 2022 includes 53 weeks, and are referred to as fiscal years 2024, 2023, and 2022, respectively, herein.

Principles of Consolidation

The consolidated financial statements for fiscal year 2024 include the accounts of Kopin Corporation and its wholly owned subsidiaries. For fiscal year 2022, the consolidated financial statements include the accounts of Kopin Corporation and its wholly owned subsidiaries and a majority owned 80% subsidiary, eMDT America, Inc., located in California (collectively the Company). In the first quarter of fiscal year 2023, the Company acquired the remaining 20% interest in eMDT America, Inc. Net loss attributable to noncontrolling interest in the Company’s consolidated statements of operations represents the portion of the results of operations of which is allocated to the shareholders of the equity interests not owned by the Company. All intercompany transactions and balances have been eliminated.

Liquidity

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 $43.9 million and $19.7 million for the year ended December 28, 2024 and for the fiscal year ended December 30, 2023, respectively, and net cash outflows from operations of $14.2 million and $15.3 million for the year ended December 28, 2024 and for the fiscal year ended December 30, 2023, respectively. The Company’s net cash outflows from operations were partially a result of funding its ongoing investments in research and development, which management believes will continue, production inefficiencies resulting from intermittent supply chain disruptions and legal fees in association with the litigation costs. In 2024, the Company sold 43.0 million shares of common stock and 4.0 million prefunded warrants for net proceeds of $33.9 million. As described in Note 12 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. On May 22, 2024, the Company filed its Motion for Judgment as a Matter of Law or in the alternative for a New Trial, as well as two submissions arguing that the disgorgement and exemplary damages should not be awarded. That same day, BlueRadios filed motions seeking a permanent injunction prohibiting Kopin from selling any products that incorporate BlueRadios’ trade secrets, over $10.8 million in pre-judgment interest, and over $10.2 million in attorneys’ fees and costs. 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. Final briefings on the motions were made by the parties on October 29, 2024. As the Company is unable to conclude that a favorable outcome in this litigation is probable and due to the net losses and negative cash flows from operations, management has concluded that there is substantial doubt about the Company’s ability to continue as a going concern for twelve months from the issuance of these financial statements.

Management has implemented certain plans to reduce cash outflows including operational improvements and the curtailment of certain develope programs, both of which are expected to preserve cash. The Company has in the past sold equity securities through at-the-market equity offerings and in the traditional fashion of significant equity offerings. Nonetheless, management monitors the capital markets on an ongoing basis and may consider raising capital if favorable market conditions develop. If the Company’s actual results are less than projected or the Company needs to raise capital for additional liquidity, the Company may be required to do additional equity financings, reduce expenses, or enter into a strategic transaction. However, management can make no assurance that the Company will be able to raise additional capital, reduce expenses sufficiently, or enter into a strategic transaction on terms acceptable to the Company, or at all.

Revenue Recognition

Substantially all of the Company’s product and license and other revenues are derived from the sales of components and subassemblies and the license of intellectual property for use in defense and industrial applications. The Company also has development contracts for the design, manufacture and or modification of products for the U.S. Government or prime contractors for the U.S. Government and for customers that expect to sell into the defense markets. The Company may offer technologies developed under these defense research and development contracts in products sold to industrial, medical and consumer markets. The Company’s contracts with the U.S. Government are typically subject to the Federal Acquisition Regulations (“FAR”) and are priced based on estimated or actual costs of producing goods. The FAR provides guidance on the types of costs that are allowable in establishing prices for goods provided under U.S. Government contracts. The pricing for non-U.S. Government contracts is based on the specific negotiations with each customer.

In accordance with ASC 606, revenue is recognized when a customer obtains control of promised products, and the amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for these products and excludes taxes collected from customers which are subsequently remitted to government authorities.

The Company applies the following five steps to guide revenue recognition:

License and other revenues

The rights and benefits to the Company’s intellectual property are conveyed to certain customers through royalty bearing technology license agreements. These sales-based royalties are recognized when they are earned. Revenues from sales-based royalties under license agreements are shown under License and other revenues on the Company’s consolidated statements of operations.

The Company’s fixed-price contracts with the U.S. Government or other customers may result in revenue recognized in excess of amounts currently billed. The Company discloses the excess of revenues over amounts actually billed as Contract assets and unbilled receivables on the consolidated balance sheets. Amounts billed and due from the Company’s customers are classified as Accounts receivable on the consolidated balance sheets. In some instances, the U.S. Government may retain a small portion of the contract price until completion of the contract. For contracts with the U.S. Government and some commercial customers, the Company typically receives payments either as work progresses or by achieving certain milestones or based on a schedule in the contract. The Company recognizes a liability for these advance payments in excess of revenue recognized and present it as Contract liabilities and billings in excess of revenue earned on the consolidated balance sheets. Advanced payments typically are not considered a significant financing component because it is used to meet working capital demands that can be higher in the early stages of a contract and to protect the Company from the other party failing to adequately complete some or all of its obligations under the contract. For industrial and consumer purchase orders, the Company typically receives payments within 30 to 60 days of shipment of the product, although for some purchase orders, the Company may require an advanced payment prior to shipment of the product.

Contract Assets

Contract assets include unbilled amounts typically resulting from sales under contracts when the cost-to-cost method of revenue recognition is utilized and revenue recognized from customer arrangements, including licensing, exceeds the amount billed to the customer, and right to payment is not just subject to the passage of time. Amounts may not exceed their net realizable value. Contract assets are generally classified as current. The Company classifies the noncurrent portion of contract assets under Other assets in its consolidated balance sheets.

Contract Liabilities

Contract liabilities consist of advance payments and billings in excess of revenue recognized for the contract.

Performance Obligations

The Company’s revenue recognition related to performance obligations that were satisfied at a point in time and over time were as follows:

The value of remaining performance obligations represents the transaction price of orders for which work has not been performed and excludes unexercised contract options and potential orders under ordering-type contracts. As of December 28, 2024, the aggregate amount of the transaction price allocated to remaining performance obligations was $14.0 million, which the Company expects to recognize revenue over the next 12 months. The remaining performance obligations represent amounts to be earned under government contracts, which are subject to cancellation.

Research and Development Costs

Research and development expenses are incurred in support of internal display product development programs or programs funded by agencies or prime contractors of the U.S. Government and commercial partners. Research and development costs include staffing, purchases of materials and laboratory supplies, circuit design costs, fabrication and packaging of experimental display products, and overhead, and are expensed immediately.

Cash, Cash Equivalents and Restricted Cash

The Company considers all highly liquid, short-term debt instruments with original maturities of three months or less to be cash equivalents.

Restricted cash of approximately $1.1 million is included on the consolidated balance sheet as of December 28, 2024, and represents cash deposited by the Company into a separate account and designated as collateral for a standby letter of credit in the same amount in accordance with a contractual agreement with a vendor.

Marketable Securities

Marketable securities consist primarily of corporate notes and U.S. Government and agency-backed securities. The Company classifies these marketable securities as available-for-sale at fair value in “Marketable securities, at fair value” in the consolidated balance sheets, with unrealized gains and losses reported as a component of other comprehensive income (loss). The Company records the amortization of premiums and accretion of discounts on marketable 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 securities. The gross gains and losses realized related to sales and maturities of marketable securities were not material during the fiscal years ended 2024, 2023 and 2022.

For our available-for-sale debt securities in an unrealized loss position, we determine whether a credit loss exists. In this assessment, among other factors, we consider the extent to which the fair value is less than the amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security. If factors indicate a credit loss exists, an allowance for credit loss is recorded to other income (loss), net, limited by the amount that the fair value is less than the amortized cost basis. The Company excludes the applicable accrued interest from both the fair value and amortized costs basis of the Company’s available-for-sale securities for purposes of identifying and measuring an impairment. Accrued interest receivable on available-for-sale securities is recorded within prepaid and other assets on the consolidated balance sheets. The Company made an accounting policy election to (1) not measure an allowance for credit loss for accrued interest receivable, and (2) to write off any uncollectible accrued interest receivable as a reversal of interest income in a timely manner, which the Company considers to be in the period in which it determines the accrued interest will not be collected.

Accounts Receivable and Allowance for Credit Losses

Accounts receivable are presented net of any necessary allowance(s) for credit losses. Receivables are recorded at the invoiced amount and generally do not bear interest. When necessary, an allowance for credit losses is established based on prior experience and other factors which, in management’s judgment, deserve consideration in estimating bad debts. Management assesses the collectability of the customer’s account based on current aging status, collection history, and financial condition. Based on a review of these factors, management establishes or adjusts the allowance for specific customers and the entire accounts receivable portfolio. We had an allowance for credit losses of $1.1 million and $1.0 million at December 31, 2024 and 2023, respectively.

Fair Value of Financial Instruments

Financial instruments consist of marketable securities, equity investments, accounts receivable, and certain current liabilities. These assets (excluding marketable securities and equity investments) and liabilities are carried at cost, which approximates fair value. Marketable securities are recorded at fair value and equity investments are recorded using the cost method, adjusted for changes in observable market transactions.

Inventory

Inventories are stated at standard cost adjusted to approximate the lower of cost (first-in, first-out method) or net realizable value. The Company adjusts inventory carrying value for the estimated difference between the cost of inventory and the estimated net realizable value based upon assumptions about future demand. The Company fully reserves for inventories and non-cancellable purchase orders for inventory deemed obsolete. The Company performs periodic reviews of inventory items to identify excess inventories on hand by comparing on-hand balances to anticipated usage using recent historical activity as well as judgements and estimates about anticipated or forecasted demand. If estimates of customer demand diminish further or market conditions become less favorable than those projected by the Company, additional inventory adjustments may be required, subject to judgement and estimation. At the point of a loss recognition, a new, lower cost basis for that inventory is established, and subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established basis.

Inventory consists of the following at December 28, 2024 and December 30, 2023:

Property, Plant and Equipment

Property, plant and equipment are recorded at cost. Depreciation and amortization are provided using the straight-line method over the estimated useful lives of the assets, generally 3 to 5 years. Leasehold improvements and leased equipment are amortized over the remaining lease term or the useful life of the improvement or equipment. As discussed below, obligations for asset retirement are accrued at the time property, plant and equipment is initially purchased or as such obligations are generated from use.

Recognition and Measurement of Financial Assets and Liabilities

The Company periodically makes equity investments in private companies, accounted for as an equity investment, which require estimates and judgement in determining their value. The Company uses the measurement alternative for equity investments without readily determinable fair values, which is often referred to as “the cost method,” adjusted for changes in observable market transactions. When assessing investments in private companies for impairment, the Company considers such factors as, among other things, the share price from the investee’s latest financing round, the performance of the investee in relation to its own operating targets and its business plan, the investee’s revenue and cost trends, the liquidity and cash position, including its cash burn rate and market acceptance of the investee’s products and services.

Product Warranty

The Company generally sells products with a limited warranty of product quality and a limited indemnification of customers against intellectual property infringement claims related to the Company’s products. The Company accrues for known warranty and indemnification issues if a loss is probable and can be reasonably estimated and accrues for estimated incurred but unidentified issues based on historical activity.

Extended Warranties

The Company recognizes revenue from an extended warranty on the straight-line method over the life of the extended warranty, which is typically 12 to 18 months beyond the standard 12-month warranty. The Company classifies the current portion of extended warranties under Contract liabilities and billings in excess of revenue earned and the noncurrent portion of extended warranties under Noncurrent contract liabilities and asset retirement obligations in its consolidated balance sheets. The Company had less than $0.1 million of contract liabilities related to extended warranties at December 28, 2024 and December 30, 2023.

Asset Retirement Obligations

Included in Other long-term liabilities, net of current portion are asset retirement obligations (“ARO”) liabilities of $0.4 million and $0.3 million at December 28, 2024 and December 30, 2023, respectively as reported on the Consolidated Balance Sheets as Noncurrent contract liabilities and asset retirement obligations. This represents the legal obligations associated with the retirement of the Company’s assets when the timing and/or method of settling the obligation are conditional on a future event that may or may not be within the control of the Company. Changes in ARO liabilities for fiscal years 2024 and 2023 are as follows:

Income Taxes

The consolidated financial statements reflect provisions for federal, state, local and foreign income taxes. The Company recognizes deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis, as well as operating loss and tax credit carryforwards. The Company measures deferred tax assets and liabilities using enacted tax rates expected to apply to taxable income in the years in which those temporary differences and carryforwards are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company provides valuation allowances if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

The 2017 Act imposes a U.S. tax on global intangible low taxed income (“GILTI”) that is earned by certain foreign affiliates owned by a U.S. shareholder. The Company has made a policy election to treat future taxes related to GILTI as a current period expense in the reporting period in which the tax is incurred.

Foreign Currency

The reporting currency of the Company is U.S. dollars. Assets and liabilities of non-U.S. operations where the functional currency is other than the U.S. dollar is translated from the functional currency into U.S. dollars at year end exchange rates, and revenues and expenses are translated at average rates prevailing during the year. Resulting translation adjustments are accumulated as part of accumulated other comprehensive income. Transaction gains or losses are recognized in income or loss in the period in which they occur.

Net Loss Per Share

Basic net loss per share is computed using the weighted-average number of shares of common stock outstanding during the period including the pre-funded warrants, less any unvested restricted shares. Diluted net loss per share is calculated using weighted-average shares outstanding, including the pre-funded warrants, 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.

The following were not included in weighted-average common shares outstanding-diluted because they are anti-dilutive:

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentration of credit risk other than marketable securities consist principally of trade accounts receivable. Trade receivables are primarily derived from sales to manufacturers of components and subassemblies for defense applications. Concentration of credit risk with respect to accounts receivable is limited to certain customers to whom we make substantial sales. To reduce risk, we routinely assess the financial strength of our customers and, as a consequence, believe that our accounts receivable credit risk exposure is limited. Management assesses the collectability of the customer’s account based on current aging status, collection history, and financial condition. Based on a review of these factors, management establishes or adjusts the allowance for specific customers and the entire accounts receivable portfolio. The Company sells its products to customers worldwide and generally does not require collateral.

The Company primarily invests its excess cash in government-backed and corporate debt securities that management believes to be of high creditworthiness, which bear lower levels of relative credit risk. The Company relies on rating agencies to ascertain the creditworthiness of its marketable securities and, where applicable, guarantees made by the Federal Deposit Insurance Company.

Stock-Based Compensation

The fair value of nonvested restricted common stock awards is generally the quoted price of the Company’s equity shares on the date of grant. The nonvested restricted common stock awards require the employee to fulfil certain obligations, including remaining employed bythe Company for periods ranging from one to five years (the vesting period) and in certain cases also require meeting performance criteria. The performance criteria primarily consist of the achievement of established milestones. For nonvested 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 nonvested 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 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. We have elected to account for forfeitures as they occur.

Comprehensive Loss

Comprehensive loss is the total of net (loss) income and all other non-owner changes in equity including such items as unrealized holding (losses) gains on marketable equity and debt securities classified as available-for-sale and foreign currency translation adjustments.

The components of accumulated other comprehensive income are as follows:

Impairment of Long-Lived Assets

The Company evaluates its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. Examples of such triggering events applicable to the Company’s assets include, but are not limited to, a significant decrease in the market price of a long-lived asset or asset group, a current-period operating or cash flow loss combined with a history of operating or cash flow losses, a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset or asset group, or adverse industry or economic trends. If any indicator of impairment exists, the Company would then assess the recoverability of the affected long-lived assets by determining whether the carrying value of the asset group can be recovered through undiscounted future operating cash flows. If impairment is indicated, the Company would estimate the asset group’s fair value using future discounted cash flows associated with the use of the asset group and adjust the carrying value of the asset group accordingly. Given the Company’s history of negative operating losses and negative operating cash flows, the Company performed an analysis of its long-lived assets for fiscal years 2024 and 2023. Upon completion of its assessment, the Company did not identify an impairment charge on its long-lived assets for the years ended December 28, 2024 or December 30, 2023.

Leases

The Company determines if an arrangement is a lease or contains an embedded lease at inception. For lease arrangements with both lease and non-lease components (e.g., common-area maintenance costs), the Company accounts for the non-lease components separately.

All of the Company’s leases are operating leases. Operating lease right-of-use assets (“ROU”) and operating lease liabilities are recognized based on the present value of future lease payments over the lease term at the commencement date. The operating lease right-of-use assets also include any initial direct costs and any lease payments made at or before the commencement date and is reduced for any unrestricted incentives received at or before the commencement date.

For the majority of the Company’s leases, the discount rate used to determine the present value of the lease payments is the Company’s incremental borrowing rate at the lease commencement date, as the implicit rate is not readily determinable. The discount rate represents a risk-adjusted rate on a secured basis and is the rate at which the Company would borrow funds to satisfy the scheduled lease liability payment streams commensurate with the lease term. For new or renewed leases, the discount rate is determined using available data at lease commencement and based on the lease term including any reasonably certain renewal periods.

Some of the Company’s leases include options to extend or terminate the lease. The Company includes these options in the recognition of the Company’s ROU assets and lease liabilities when it is reasonably certain that the Company will exercise the option. In most cases, the Company has concluded that renewal and early termination options are not reasonably certain of being exercised by the Company (and thus not included in its ROU asset and lease liability) unless there is an economic, financial or business reason to do so. None of the Company’s leases include variable lease-related payments, such as escalation clauses based on the consumer price index (“CPI”) rates or residual guarantees.

Recently Issued Accounting Pronouncements

In December 2023, the Financial Accounting Standards Board (“FASB”) issued ASU Number 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”). ASU 2023-09 requires more disaggregated income tax disclosures, including additional information in the rate reconciliation and additional disclosures about income taxes paid. ASU 2023-09 will become effective for the Company for the fiscal year ending December 27, 2025. Early adoption is permitted, and guidance should be applied prospectively, with an option to apply guidance retrospectively. The Company is currently evaluating the impact of the adoption of ASU 2023-09 on its consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03, which requires disaggregated disclosure of income statement expenses for public business entities (“PBEs”). The ASU does not change the expense captions an entity presents on the face of the income statement; rather, it requires disaggregation of certain expense captions into specified categories in disclosures within the footnotes to the financial statements. ASU 2024-03 is effective for all PBEs for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact that this guidance will have on the presentation of its consolidated financial statements and accompanying notes.

Recently Adopted Accounting Pronouncements

In November 2023, the FASB issued ASU Number 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” (“ASU 2023-07”). ASU 2023-07 requires disclosure of significant segment expenses that are regularly provided to the chief operating decision maker(s) that are included within each reported measure of segment profit or loss. The guidance also expands disclosure requirements for interim periods, as well as requires disclosure of other segment items, including the title and position of the entity’s chief operations decision maker(s). ASU 2023-07 became effective for the Company for the fiscal year ending December 28, 2024, and for interim periods starting in the Company’s first quarter of 2025. The Company adopted this standard for fiscal year 2024 and there was not a material impact, reference additional disclosure within Note 13. Segments and Disaggregation of Revenue.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The amendments in ASU 2016-13 will provide more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. The ASU is effective for annual reporting periods beginning after December 15, 2019, including interim periods within that year. Following the release of ASU 2019-10 in November 2019, the new effective date, as long as the Company remains a smaller reporting company, would be annual reporting periods beginning after December 15, 2022. The Company adopted this standard on January 1, 2023 and there was not a material impact.

2. Property, Plant and Equipment

Property, plant and equipment consisted of the following at December 28, 2024 and December 30, 2023:

Depreciation expense for fiscal year 2024 and 2023 was approximately $0.6 million and $0.7 million for fiscal year 2022.

3. Leases

The Company enters into operating leases primarily for manufacturing, engineering, research, administration and sales facilities, and information technology (“IT”) equipment. At December 28, 2024 and December 30, 2023, the Company did not have any finance leases. Almost all of the Company’s future lease commitments, and related lease liability, relate to the Company’s facility leases. Some of the Company’s leases include options to extend or terminate the lease.

At December 28, 2024, the Company’s future lease payments under non-cancellable leases were as follows:

Cash paid for operating cash flows from operating leases:

Other information related to leases was as follows:

4. Contract Assets and Liabilities

Contract assets (liabilities) consisted of the following:

The $3.7 million increase in the Company’s contract assets from December 30, 2023 to December 28, 2024 was primarily due to an increase in amounts owed from customers for whom we produce products for defense applications. The accounts receivable balance at December 31, 2022 was $6.5 million.

The $0.8 million decrease in the Company’s contract liabilities from December 30, 2023 to December 28, 2024 was primarily due to satisfaction of performance obligations that were paid in advance.

The Company records contract assets or contract liabilities on a contract-by-contract basis. The Company records a contract asset for unbilled revenue when the Company’s performance exceeds amounts billed or billable. The Company classifies the contract asset as either current or non-current based on the expected timing of the Company’s right to bill under the terms of the contract, which the Company expects to be able to bill for within one year.

Contract liabilities consist of payments received in advance of product shipment. The liability is removed with shipment of the product.

The Company recognized revenue of approximately $0.9 million, $0.9 million, and $3.7 million during fiscal 2024, 2023, 2022 that was included in the opening contract liabilities as of December 30, 2023, December 31, 2022, and December 25, 2021, respectively. There was no revenue recognized from performance obligations satisfied in prior periods.

The Company did not recognize impairment losses on its contract assets during the years ended December 28, 2024, December 30, 2023, and December 31, 2022.

5. Financial Instruments

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. The Company’s Level 2 investments are based on a yield to maturity models and market interest rates. An investment is categorized as Level 3 if its fair value is based on unobservable inputs for the asset.

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

The carrying amounts of cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued liabilities approximate fair value because of their short-term nature.

Marketable Securities

The Company validates the fair market values of the financial instruments below by using a model that incorporates current interest rates and remaining term. The restricted cash balance at December 28, 2024 is invested in a certificate of deposit and money market funds. The restricted cash balance that is invested in a certificate of deposit is classified as a Corporate debt available-for-sale marketable security. Investments in available-for-sale marketable securities are as follows at December 28, 2024 and December 30, 2023:

The contractual maturity of the Company’s marketable debt securities is as follows at December 28, 2024:

Equity Investments

Equity investments rarely traded or not quoted will generally have less (or no) pricing observability and a higher degree of judgment utilized in measuring fair value. Initial measurement of equity investments occurs when an observable price for the equity investment is available. The Company adopted the measurement alternative for equity investments without readily determinable fair values, which is often referred to as cost method investments , adjusted for changes in observable market transaction. As a result, these investments are revalued upon occurrence of an observable price change for similar investments and for impairments. As of December 28, 2024 and December 28, 2023, the carrying value of these equity investments was $0.9 million and $4.5 million, respectively.

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 its organic light emitting technology, transferred in-process development contracts with two customers and accounts receivables that the Company had previously determined were not collectible. The technology license agreement provides for Kopin to transfer certain patents to LST if LST achieves certain milestones, however upon transfer Kopin will receive a license to the technology. To the extent LST makes improvements to the technology licensed from Kopin, Kopin will receive a license for these improvements for certain markets. Kopin is not obligated to provide any additional funding support to LST. As consideration for the transaction, the Company received 18,000,000 common shares representing a 20.0% equity stake in LST. The Company has recorded its investment in LST at $0 as of December 28, 2024 and December 30, 2023. The Company receives a royalty based on unit sales of products that utilize the technology licensed. Royalty received to date has been de minimis. Drs. John Fan, the Company’s former President and CEO and former Chairman of the Board, Boryeu Tsaur, a former Executive Vice President of the Company and Hong Choi, the Company’s former Chief Technology Officer terminated their employment with the Company and became investors in and members of the management team of LST. Dr. Fan is the Founder of LST. As a result of this transaction, in 2022 the Company wrote off the two operating lease assets associated with facilities used for the development of the Company’s organic light emitting diode (“OLED”) products.

The Company has an equity interest in a Lenovo New Vision which it acquired through purchasing capital and contributing certain intellectual property totalling $3.9 million on December 25, 2021. In the third quarter of 2022, the Company reviewed the financial condition of its equity interest in the company and, as a result of valuing the investment through discounted cash flow and guideline public company methods, recorded an impairment charge of $2.0 million to reduce the value of its investment. The investment is denominated in Chinese Yuan and for the years ended December 28, 2024, December 30, 2023 and December 31, 2022, the Company recorded approximately $0, $0.2 million and $0.3 million of changes in investment value, respectively, due to a fluctuation in the foreign exchange rate. As of December 28, 2024, the Company owned an approximate 10% interest in this investment and the carrying value of this equity investment was $1.5 million at December 28, 2024 and December 30, 2023.

In 2017 the Company received a warrant to acquire equity in RealWear Inc. (RealWear) as part of the licensing of technology to the customer. The Company exercised the warrant in 2018 and made additional investments. In the fourth quarter of 2019, the Company reviewed the financial condition and other factors of the customer and, as a result, the Company recorded an impairment charge to reduce its investment in the customer to $0. In the first quarter of 2022, RealWear raised additional equity capital and based on an observable price change of the customer’s share prices and terms of the equity sale, the Company remeasured the fair market value of its investment and recorded a gain of $4.7 million. In the second quarter of 2022, the Company made an additional equity investment of $0.5 million. In the second quarter of 2023, the Company received shares valued at approximately $0.4 million as payment of royalties. In the second quarter of 2023, the Company reviewed the financial condition and an observable price point in an equity transaction, and as a result, the Company recorded an impairment charge of $3.1 million to reduce the value of the investment to $2.5 million. In the second quarter of 2024, the Company reviewed the financial condition and an observable price point in an equity transaction, and as a result, recorded impairment charges of $0.7 million. In the fourth quarter of 2024, RealWear entered into a merger agreement and based upon the information provided, in the third quarter of 2024, the Company recorded an impairment charge of $1.1 million, reducing the value of the investment to $0.7 million. In the fourth quarter of 2024 RealWear completed its merger, subject to post closing events. The Company performed a valuation of the investment based on the merger agreement, available financial statements and projections, assumptions on the post-closing events and the resulting dilution, and 100% volatility, a risk-free interest rate of 4.5% and an expected term of one year and recorded a write up in the RealWear investment of $0.2 million. As of December 28, 2024, the Company owns an approximate 1.8% interest in this investment and the investment is valued at $0.9 million. The valuation performed by the Company was categorized within level 3 in the fair value hierarchy in accordance with ASC 820.

On September 30, 2019 the Company entered into an Asset Purchase Agreement (the “Solos Purchase Agreement”) pursuant to which the Company sold and licensed certain assets of the Company’s Solos TM (“Solos”) product line and Whisper TMAudio (“Whisper”) technology. As consideration for the transaction the Company received a 20.0% equity stake in Solos Incorporation (“Solos Inc.”). The Company’s 20.0% equity stake will be maintained until Solos Inc. has raised a total of $7.5 million in equity financing. The Company receives a royalty in the single digits on the net sales amount of Solos products for a three-year period, after the commencement of commercial production. The Company has performed the analysis and identified Solos Technology as a variable interest entity that should not be consolidated by Kopin, as Kopin is not the primary beneficiary of the entity. Kopin is not obligated to provide any additional funding support to Solos, and its potential loss exposure is the value of the investment recorded on its books. Based on the price paid for equity by the other 80.0% owners of Solos, volatility based on a peer group and assumptions about the risk-free interest rate, the Company estimated the fair value of its equity holdings at $0.6 million and in 2019 recorded a $0.6 million gain on its investment for this equity transaction as the basis of assets transferred was zero. In the second quarter of 2023, the Company reviewed the financial condition and other factors of the customer and, as a result, the Company recorded an impairment charge of $0.2 million to reduce its investment in the customer to $0.2 million. The investment balance is $0.2 million as of December 28, 2024.

6. Stockholders’ Equity and Stock-Based Compensation

Registered Sale of Equity Securities

In the second quarter of 2022, the Company sold 1.5 million shares of common stock and 0.2 million shares of treasury stock for gross proceeds of $2.1 million (average of $1.26 per share) before deducting broker expenses paid by the Company of less than $0.1 million and in the third quarter of 2022, the Company sold 675,000 shares of common stock for gross proceeds of approximately $0.9 million (average of $1.27 per share) before deducting broker expenses paid by the Company of less than $0.1 million, pursuant to the At-The-Market Equity Offering Sales Agreement (the “ATM Agreement”) with Stifel, Nicolaus & Company, Incorporated, (“Stifel”) as agent. The net proceeds from the sale of common shares were used for general corporate purposes, including working capital.

In the first quarter of 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 the Company of approximately $0.2 million, pursuant to the Company’s then effective ATM Agreement with Stifel, as agent. The ATM Agreement terminated in the three months ended March 30, 2024.

On January 27, 2023, the Company sold 17 million shares of registered common stock and issued pre-funded warrants to purchase up to 6,000,000 shares of common stock at a public offering price of $0.99 per pre-funded warrant, for gross proceeds of $22.9 million before deducting underwriting discounts and offering expenses paid by the Company of $1.5 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.

On September 23, 2024, the Company 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 and received gross proceeds of $27.0 million before deducting underwriting discounts and offering expenses paid by the Company 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. On September 30, 2024, the Company sold 2,405,000 shares of common stock and received gross proceeds of $1.6 million.

On June 6, 2024, the Company’s shareholders approved an amendment to the Company’s Amended and Restated Certificate of Incorporation (the “Charter”) to increase the number of authorized shares of the Company’s common stock, par value $0.01 per share, from 150,000,000 shares to 200,000,000 shares.

The issued pre-funded warrants were classified as a component of permanent equity in the Company’s Consolidated Balance Sheets as they are freestanding financial instruments that are immediately exercisable, do not embody an obligation for the Company to repurchase its own shares, and permit the holders to receive a fixed number of shares of common stock upon exercise. All of the shares underlying the pre-funded warrants have been included in the weighted-average number of shares of common stock used to calculate net loss per share, basic and diluted, attributable to common stockholders as the shares may be issued for little or no consideration, are fully vested, and are exercisable after the original issuance date of the pre-funded warrants. As of December 28, 2024, none of the pre-funded warrants had been exercised.

The table below summarizes pre-funded warrants activity:

Sale of Treasury Stock

During the year ended December 31, 2022, the Company sold 126,389 shares of its common stock held in treasury for approximately $0.2 million through the sale of shares under its ATM Agreement, dated March 5, 2021. Commissions paid were less than $10,000.

Restricted Stock Awards

In 2020, the Company adopted the 2020 Equity Incentive Plan (“2020 Equity Plan”) which authorized the issuance of shares of common stock to employees, certain consultants and advisors who perform services for the Company, and non-employee members of the Board. The 2020 Equity Plan is a successor to the Company’s 2010 Equity Incentive Plan (“2010 Equity Plan”). The number of shares authorized under the 2020 Equity Plan was 4,000,000 shares of common stock, which has since been amended to authorize the issuance of 11,000,000 shares of common stock. In addition, shares of common stock underlying any outstanding award granted under the 2010 Equity Plan that expires, or is terminated, surrendered or forfeited for any reason without issuance of such shares shall be available for the award of new grants under the 2020 Plan. As of December 28, 2024, the Company has approximately 4.9 million shares of common stock authorized and available for issuance under the Company’s 2020 Equity Plan.

The fair value of non-vested restricted common stock awards is generally the market value of the Company’s common stock on the date of grant. The non-vested restricted common stock awards require the employee to fulfil certain obligations, including remaining employed bythe Company for periods ranging from one to five years (the vesting period) and in certain cases also require meeting either performance criteria. For non-vested restricted common stock awards that solely require the recipient to remain employed with the Company, the stock compensation expense is amortized over the requisite service period. For non-vested restricted common stock awards that 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.

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 fiscal years 2024, 2023 and 2022 (no tax benefits were recognized):

Unrecognized compensation expense for non-vested restricted common stock as of December 28, 2024 totaled $5.7 million and is expected to be recognized over a weighted average period of approximately 2 years.

7. Concentrations of Risk

Ongoing credit evaluations of customers’ financial condition are performed and collateral, such as letters of credit, are generally not required. Customer’s accounts receivable balance as a percentage of total accounts receivable was as follows:

The Company had product sales to defense customers for 2024, 2023 and 2022 of 82%,56%52% of total revenues.

The Company had revenue from funded research and development contracts for 2024, 2023, and 2022 of 12%,33% and 30% of total revenues.

Sales to significant customers for fiscal years 2024, 2023 and 2022, as a percentage of total revenues, is as follows:

Note: The caption “Defense Customers in Total” excludes research and development contracts.

8. Income Taxes

The provision for income taxes from continuing operations consists of the following for the fiscal years indicated:

The following table sets forth the changes in the Company’s balance of unrecognized tax benefits for the year ended:

U.S. GAAP requires applying a ‘more likely than not’ threshold to the recognition and derecognition of uncertain tax positions either taken or expected to be taken by the Company’s income tax returns. The total amount of the Company’s gross tax liability for tax positions that may not be sustained under a ‘more likely than not’ threshold amounts to $0.4 million as of December 28, 2024 and December 30, 2023. The Company’s policy regarding the classification of interest and penalties is to include these amounts as a component of income tax expense. The total amount of accrued interest and penalties related to the Company’s unrecognized tax benefits was $1.2 million and $1.0 million as of December 28, 2024 and December 30, 2023, respectively, located in other long-term liabilities, net of current position.

Net operating losses were not utilized in 2024, 2023 and 2022 to offset federal and state taxes.

The actual income tax provisions reported from operations are different from those which would have been computed by applying the federal statutory tax rate to loss before income tax provision. A reconciliation of income tax provision from continuing operations as computed at the U.S. federal statutory income tax rate to the provision for income tax benefit is as follows:

Pretax foreign (loss) income from continuing operations was approximately $(1.5) million for the fiscal year ended 2024, $(0.6) million for fiscal year ended 2023, and $0.4 million for fiscal year ended 2022. Deferred income taxes are provided to recognize the effect of temporary differences between tax and financial reporting. Deferred income tax assets and liabilities consist of the following:

The valuation allowance was approximately $83.8 million and $76.2 million at December 28, 2024 and December 30, 2023, respectively, primarily driven by U.S. net operating loss carryforwards (“NOLs”) and tax credits. Based on the available evidence it is more likely than not the deferred tax assets will not be realized.

As of December 28, 2024, the Company has available for tax purposes NOLs of $116.3 million expiring in 2025 through 2037 and $111.5 million that have an unlimited carryover period. The Company has recognized a full valuation allowance on its net deferred tax assets as the Company has concluded that such assets are not more likely than not to be realized.

The 2017 Tax Act imposes a mandatory transition tax on accumulated foreign earnings and eliminates U.S. taxes on foreign subsidiary distributions. As a result, earnings in foreign jurisdictions are available for distribution to the U.S. without incremental U.S. income taxes. The Company intends to permanently reinvest undistributed earnings. As of December 28, 2024, foreign earnings have been retained by the Company’s foreign subsidiaries for indefinite reinvestment. Upon repatriation of those earnings, in the form of dividends or otherwise, the Company could be subject to withholding taxes payable to the various foreign countries. Determination of the amount of unrecognized deferred income tax liability related to these outside basis differences is not practicable.

Under the provisions of Section 382, certain substantial changes in Kopin’s ownership may limit in the future the amount of net operating loss carryforwards that could be used annually to offset future taxable income and income tax liability.

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 three to five 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. The Company is not currently under examination in these jurisdictions.

International jurisdictions have statutes of limitations generally ranging from three to twenty years after filing of the respective return. Years still open to examination by tax authorities in major jurisdictions include Korea (2011 onward), Japan (2011 onward), Hong Kong (2013 onward) and the United Kingdom (2016 onward). The Company is not currently under examination in these jurisdictions.

9. Accrued Warranty

The Company warrants its products against defect for 12 months, however, for certain products a customer may purchase an extended warranty. A provision for estimated future costs and estimated returns for credit relating to such warranty is recorded in the period when product is shipped and revenue is 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 fiscal years ended 2024 and 2023 are as follows:

10. Employee Benefit Plan and Post Retirement Benefit

The Company has an employee benefit plan pursuant to Section 401(k) of the Internal Revenue Code of 1986, as amended. In 2024, the plan allowed employees to defer an amount of their annual compensation up to a current maximum of $23,000 if they are under the age of 50 and $30,500 if they are over the age of 50. The Company matches 50% of all deferred compensation on the first 6% of each employee’s deferred compensation. The amount charged to operations in connection with this plan was approximately $0.4 million in fiscal year 2024, $0.3 million in fiscal year 2023, and $0.4 million in fiscal year 2022.

On September 5, 2022, John C.C. Fan, the Company’s then President and Chief Executive Officer and Chairman of the Company’s Board of Directors, notified the Company of his resignation as President and CEO effective September 6, 2022. Under the terms of his previous employment agreement Dr. Fan received $750,000 of severance payments for the fiscal year 2024 and 2023. In addition, Dr. Fan received $40,000 for medical benefits for fiscal year 2024 and 2023, and he (or his spouse) will receive $40,000 through 2032.

11. Commitments and Contingencies

The Company is subject to the possibility of loss contingencies arising in the ordinary course of business. Management considers the likelihood of loss related to an asset, or the incurrence of a liability, as well as its ability to reasonably estimate the amount of the loss, in determining loss contingencies. An estimated loss contingency is accrued when it is probable that an asset has been impaired, or a liability has been incurred and the amount of loss can be reasonably estimated. The Company regularly evaluates current information available to determine whether such accruals should be adjusted and whether new accruals are required.

12. 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 the Company’s business, financial condition, results of operations or cash flows could be affected in any particular period. In accordance with applicable accounting guidance, an accrual will be established for legal proceedings if and when those matters present loss contingencies that are both probable and estimable.

BlueRadios, Inc. v. Kopin Corporation, Civil Action No. 16-02052-JLK (D. Col.):

On August 12, 2016, BlueRadios, Inc. (“BlueRadios”) filed a complaint in the U.S. District Court for the District of Colorado, alleging that the Company breached a contract between it and BlueRadios concerning a joint venture between the Company and BlueRadios to design, develop and commercialize micro-display products with embedded wireless technology referred to as “Golden-i,” breached the covenant of good faith and fair dealing associated with that contract, breached its fiduciary duty to BlueRadios, and misappropriated trade secrets owned by BlueRadios in violation of Colorado law (C.R.S. § 7-74-104(4)) and the Defend Trade Secrets Act (18 U.S.C. § 1836(b)(1)). BlueRadios further alleged that the Company was unjustly enriched by its alleged misconduct, BlueRadios is entitled to an accounting to determine the amount of profits obtained by the Company as a result of its alleged misconduct, and the inventorship on at least ten patents or patent applications owned by the Company need to be corrected to list BlueRadios’ employees as inventors and thereby list BlueRadios as co-assignees of the patents. BlueRadios seeks monetary, declaratory, and injunctive relief, including for alleged non-payment of engineering retainer fees.

On October 11, 2016, the Company filed its Answer and Affirmative Defenses. The parties completed expert depositions on November 15, 2019. On December 2, 2019, the Company filed a Motion for Partial Summary Judgment requesting the Court dismiss counts 2-7 in their entirety and counts 1 and 8 in part. BlueRadios also filed a Motion for Partial Summary Judgment alleging it is the co-owner of U.S. Patent No. 8,909,296. Responses to the Motions for Partial Summary Judgment were filed on January 15, 2020, and replies were filed on February 19, 2020. On September 25, 2020, the Court denied BlueRadios’ Motion for Partial Summary Judgment. On August 3, 2022, the Court granted the Company’s Motion for Partial Summary Judgment by dismissing counts 3, 6, 7, the claim for punitive damages under count 2, and count 8 as it relates to patent applications and by denying the motion as it relates to counts 1, 4, and 5, and the remainder of counts 2 and 8. The Court also ordered discovery reopened for certain limited purposes. A trial date was set by the Court for January 22, 2024 to February 5, 2024 but then re-scheduled for March 20, 2024 to April 16, 2024. On Monday, April 22, 2024, after a four week trial, a jury verdict was entered finding for BlueRadios and 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 post-trial briefing. On May 22, 2024, the Company filed its Motion for Judgment as a Matter of Law or in the alternative for a New Trial, as well as two submissions arguing that the disgorgement and exemplary damages should not be awarded. That same day, BlueRadios filed motions seeking a permanent injunction prohibiting Kopin from selling any products that incorporate BlueRadios’ trade secrets, over $10.8 million in pre-judgment interest, and over $10.2 million in attorneys’ fees and costs. Briefing on those issues concluded on June 26, 2024. On September 25, 2024, the Company filed a supplemental brief on issue preclusion arguing that BlueRadios’ claims were untimely because of findings of fact made inBlueRadios, Inc. v. Hamilton, Brook, Smith & Reynolds, P.C., No. 1:21-cv-10488-DJC, ECF 268 (D. Mass. Sept. 18, 2024). That supplemental briefing concluded on October 29, 2024. The Company is currently considering an appeal of any final judgment. As of December 28, 2024, the Company has accrued $24.8 million related to this litigation and $6.3 million of related legal fees.

13. Segments and Disaggregation of Revenue

Operating segments are defined as components of an entity for which separate financial information is available and that is regularly reviewed by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources to an individual segment and in assessing performance. The Company’s CODM is its President and Chief Executive Officer. The Company has determined that it operates in one operating segment and one reportable segment, as the CODM reviews financial information presented on a consolidated basis for purposes of making operating decisions, allocating resources, and evaluating financial performance.

The CODM assesses performance and decides how to allocate resources and make operating decisions based on revenues, loss from operations, and net loss that are reported on the Consolidated Statements of Operations. These metrics are also used to monitor budget versus actual results. The measure of segment assets is reported on the Consolidated Balance Sheets as total assets. Revenues, expenses, and assets requiring disclosure in accordance with ASC 280, Segment Reporting, are also included in the accompanying Consolidated Financial Statements. See the Consolidated Statements of Operations for the fiscal years ended 2024, 2023, and 2022 and the Consolidated Balance Sheets as of December 28, 2024 and December 30, 2023, for details.

Total long-lived assets by country at December 28, 2024 and December 30, 2023 were:

The Company disaggregates its revenue from contracts with customers by geographic location and by display application, as the Company believes it best depicts how the nature, amount, timing and uncertainty of its revenue and cash flows are affected by economic factors.

Total revenue by geographical area for the fiscal years ended December 28, 2024, December 30, 2023 and December 31, 2022:

Total revenue by display application for the fiscal years ended December 28, 2024, December 30, 2023 and December 31, 2022 was as follows:

14. Related Party Transactions

The Company may from time to time enter into agreements with shareholders, affiliates and other companies engaged in certain aspects of the display, electronics, optical and software industries as part of the Company’s business strategy. In addition, the wearable computing product market is relatively new and there may be other technologies the Company needs to purchase from affiliates in order to enhance its product offering.

The Company and RealWear have entered into agreements where the Company have agreed to supply display modules to RealWear, and license certain intellectual property to RealWear. In conjunction with these agreements the Company received an equity interest in RealWear, one-time $1.5 million license fees and will receive royalties of future product sales. In May 2019, the Company signed an additional agreement to license certain intellectual property to Realwear for a $3.5 million license fee and additional sales-based royalties. Of the $3.5 million license fee, $2.5 million was paid upon signing of the license agreement and the other $1.0 million was paid in quarterly installments of $0.25 million. See Note 5 for a description of the Company’s investments in RealWear. As of December 28, 2024, the Company owned approximately 1.8% of RealWear.

On September 30, 2019, the Company entered into an Asset Purchase Agreement (the “Solos Purchase Agreement”) with Solos Technology Limited (“Solos Technology”). Pursuant to the Solos Purchase Agreement, the Company sold and licensed to Solos Technology certain assets of its Solos TM (“Solos”) product line and Whisper TM Audio (“Whisper”) technology. As consideration for the transaction the Company received 1,172,000 common shares representing a 20.0% equity stake in Solos Technology’s parent company, Solos Incorporation (“Solos Inc.”). As of December 28, 2024, and December 30, 2023, the Company had less than $30,000 and $10,000, respectively, of receivables outstanding from Solos Technology and had payables of less than $10,000 to Solos Technology.

As of December 28, 2024, the Company’s former Chairman and founder of Solos Inc., Dr. John C.C. Fan, has an investment in Solos Inc.

The Company has warrants to purchase shares of Preferred Stock of HMDmd. The fair value of the investment was determined to be $0.3 million as of December 28, 2024.

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 also receives a royalty based on unit sales of products that utilize the technology licensed.

As of December 28, 2024, the Company’s former Chairman and founder of Lightning Silicon Technology, Inc., Dr. John C.C. Fan, has an individual ownership interest of Lightning Silicon Technology Inc.

On September 5, 2022, John C.C. Fan, the Company’s then President and Chief Executive Officer and Chairman of the Company’s Board of Directors, notified the Company of his resignation as President and CEO effective September 6, 2022. Under the terms of his previous employment agreement Dr. Fan received $750,000 of severance payments for the fiscal year 2024 and 2023. In addition, Dr. Fan received $40,000 for medical benefits for fiscal year 2024 and 2023, and he (or his spouse) will receive $40,000 through 2032.

During fiscal years 2024, 2023 and 2022, the Company had the following transactions with related parties:

At December 28, 2024 and December 30, 2023, the Company had the following receivables and payables with related parties:

15. Subsequent Events

The Company has evaluated subsequent events or transactions that have occurred after the consolidated balance sheet date of December 28, 2024 through the date of this filing of the consolidated financial statements with the SEC on this Annual Report on Form 10-K and determined that, except as disclosed below, there have been no material subsequent events that have occurred since December 28, 2024 through the date of this filing that would require recognition or disclosure in our consolidated financial statements.

On January 24, 2025, the Company entered into an At-The-Market Equity Offering Sales Agreement (the “Sales Agreement”) with Stifel, Nicolaus & Company, Incorporated, as agent (“Stifel”), pursuant to which the Company may offer and sell, from time to time through Stifel, shares of its common stock, par value $0.01 per share (the “Common Stock”), with aggregate gross proceeds of up to $50.0 million (the “Shares”) assuming market conditions, company stock price and number of available shares authorized for issuance. The offer and sale of the Shares will be made pursuant to a shelf registration statement on Form S-3 and the related prospectus, which became effective upon filing with the Securities and Exchange Commission on June 4, 2024, and a prospectus supplement dated January 24, 2025 related thereto. Subsequent to year end, the Company cannot use the ATM Agreement entered into on January 24, 2025 until such time the Company can utilize Form S-3.

16. Allowance for Credit Losses

The following table sets forth activity in Kopin’s allowance for credit losses:

INDEX TO EXHIBITS