Document and Entity Information

9 Months Ended

Sep. 30, 2017

Nov. 6, 2017

Document Documentand Entity Information [Abstract]

Document Type

10-Q

Amendment Flag

false

Document Period End Date

Sep. 30, 2017

Document Fiscal Year Focus

2017

Document Fiscal Period Focus

Q3

Trading Symbol

KOPN

Entity Registrant Name

KOPIN CORP

Entity Central Index Key

0000771266

Current Fiscal Year End Date

--12-30

Entity Filer Category

Accelerated Filer

Entity Common Stock, Shares Outstanding

75,336,563

CONDENSED CONSOLIDATED BALANCE SHEETS (USD $)

Sep. 30, 2017

Dec. 31, 2016

Current assets:

Cash and equivalents

$ 25,882,554

$ 15,822,495

Marketable debt securities, at fair value

51,454,910

61,375,401

Accounts receivable, net of allowance of $149,000 in 2017 and $136,000 in 2016

2,023,618

1,664,488

Unbilled receivables

124,068

34,707

Inventory

5,949,010

3,302,112

Prepaid taxes

166,461

341,144

Prepaid expenses and other current assets

1,089,948

853,757

Total current assets

86,690,569

83,394,104

Property, plant and equipment, net

3,660,925

2,976,006

Goodwill

2,376,577

844,023

Intangible assets, net

1,356,546

0

Other assets

968,083

618,139

Total assets

95,052,700

87,832,272

Current liabilities:

Accounts payable

3,965,760

4,355,462

Accrued payroll and expenses

2,755,150

1,443,976

Accrued warranty

585,000

518,000

Billings in excess of revenue earned

728,281

981,761

Other accrued liabilities

4,792,347

2,560,144

Income tax payable

724,688

935,364

Deferred tax liabilities

2,606,312

2,571,000

Total current liabilities

16,157,538

13,365,707

Asset retirement obligations

268,068

246,922

Commitments and contingencies

Stockholders’ equity:

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

0

Common stock, par value $.01 per share: authorized, 120,000,000 shares; issued 79,669,818 shares in 2017 and 2016; outstanding 72,187,688 shares in 2017 and 64,538,686 shares in 2016

767,009

766,409

Additional paid-in capital

331,008,801

328,524,644

Treasury stock (4,513,256 shares in 2017 and 12,102,258 shares in 2016, at cost)

(17,238,669)

(42,741,551)

Accumulated other comprehensive income

2,346,909

1,570,971

Accumulated deficit

(238,319,253)

(214,042,787)

Total Kopin Corporation stockholders’ equity

78,564,797

74,077,686

Noncontrolling interest

62,297

141,957

Total stockholders’ equity

78,627,094

74,219,643

Total liabilities and stockholders’ equity

$ 95,052,700

$ 87,832,272

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)

Sep. 30, 2017

Dec. 31, 2016

Statement of Financial Position [Abstract]

Accounts receivable, allowance

$ 149,000

$ 136,000

Preferred stock, par value

$ 0.01

Preferred stock, authorized

3,000

Preferred stock, issued

0

Common stock, par value

$ 0.01

Common stock, authorized

120,000,000

Common stock, issued

79,669,818

79,648,618

Common stock, outstanding

72,187,688

64,538,686

Treasury stock, shares

4,513,256

12,102,258

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (USD $)

3 Months Ended

9 Months Ended

Sep. 30, 2017

Sep. 24, 2016

Sep. 30, 2017

Sep. 24, 2016

Revenues:

Net product revenues

$ 5,589,402

$ 5,522,584

$ 14,501,945

$ 15,597,247

Research and development revenues

549,765

272,222

1,942,819

671,972

Total revenues

6,139,167

5,794,806

16,444,764

16,269,219

Expenses:

Cost of product revenues

4,144,884

4,573,581

11,379,467

13,856,469

Research and development

5,253,860

4,123,268

14,213,950

12,282,620

Selling, general and administration

5,344,999

3,980,605

16,186,946

12,023,717

Gain on sale of property and plant

0

(7,700,522)

Total expenses

14,743,743

12,677,454

41,780,363

30,462,284

Loss from operations

(8,604,576)

(6,882,648)

(25,335,599)

(14,193,065)

Other income and expense:

Interest income

191,613

191,472

611,532

532,185

Other (expense) income, net

(109,546)

(257,384)

215,883

(415,758)

Foreign currency transaction gains (losses)

224,370

(1,124,526)

(410,373)

(1,581,962)

Gain on investments

0

274,000

0

Total other income and expense

306,437

(1,190,438)

691,042

(1,465,535)

Loss before benefit (provision) for income taxes and net (income) loss attributable to noncontrolling interest

(8,298,139)

(8,073,086)

(24,644,557)

(15,658,600)

Tax benefit (provision)

(4,500)

(114,000)

1,141,500

(2,218,000)

Net loss

(8,302,639)

(8,187,086)

(23,503,057)

(17,876,600)

Net loss (income) attributable to the noncontrolling interest

55,217

69,782

65,223

(367,640)

Net loss attributable to the controlling interest

$ (8,247,422)

$ (8,117,304)

$ (23,437,834)

$ (18,244,240)

Net (loss) income per share

Basic and diluted (usd per share)

$ (0.11)

$ (0.13)

$ (0.34)

$ (0.29)

Weighted average number of common shares

Basic and diluted (in shares)

72,187,688

64,047,852

69,117,640

64,012,490

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (USD $)

3 Months Ended

9 Months Ended

Sep. 30, 2017

Sep. 24, 2016

Sep. 30, 2017

Sep. 24, 2016

Statement of Comprehensive Income [Abstract]

Net loss

$ (8,302,639)

$ (8,187,086)

$ (23,503,057)

$ (17,876,600)

Other comprehensive (loss) income:

Foreign currency translation adjustments

(272,618)

1,718,596

658,443

2,362,552

Unrealized holding gains on marketable securities

(29,584)

(73,443)

108,196

336,663

Reclassification of holding losses in net loss

(1,238)

(14,092)

(5,138)

(48,284)

Other comprehensive (loss) income

(303,440)

1,631,061

761,501

2,650,931

Comprehensive loss

(8,606,079)

(6,556,025)

(22,741,556)

(15,225,669)

Comprehensive income attributable to the noncontrolling interest

63,306

(19,656)

79,660

(482,520)

Comprehensive loss attributable to controlling interest

$ (8,542,773)

$ (6,575,681)

$ (22,661,896)

$ (15,708,189)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (USD $)

Total

Common Stock

Additional Paid-in Capital

Treasury Stock

Accumulated Other Comprehensive Income

Accumulated Deficit

Total Kopin Corporation Stockholders’ Equity

Noncontrolling Interest

Beginning balance at Dec. 31, 2016

$ 74,219,643

$ 766,409

$ 328,524,644

$ (42,741,551)

$ 1,570,971

$ (214,042,787)

$ 74,077,686

$ 141,957

Beginning Balance (in shares) at Dec. 31, 2016

76,640,943

Increase (Decrease) in Stockholders' Equity [Roll Forward]

Stock-based compensation

2,484,757

Vesting of restricted stock

600

(600)

Vesting of restricted stock (shares)

60,000

Other comprehensive income

761,501

775,938

(14,437)

Sale of unregistered stock

24,664,250

25,502,882

24,664,250

Net loss

(23,503,057)

(23,437,834)

(65,223)

Ending balance at Sep. 30, 2017

$ 78,627,094

$ 767,009

$ 331,008,801

$ (17,238,669)

$ 2,346,909

$ (238,319,253)

$ 78,564,797

$ 62,297

Ending Balance (in shares) at Sep. 30, 2017

76,700,943

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)

9 Months Ended

Sep. 30, 2017

Sep. 24, 2016

Cash flows from operating activities:

Net loss

$ (23,503,057)

$ (17,876,600)

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

Depreciation and amortization

1,878,363

949,854

Accretion of premium or discount on marketable debt securities

40,204

104,282

Stock-based compensation

2,990,157

1,479,481

Foreign currency losses

400,542

1,715,901

Unrealized gain on warrant

(274,000)

0

Deferred income taxes

(1,170,017)

1,192,128

Gain on sale of property and plant

0

(7,700,522)

Other non-cash items

673,720

503,115

Change in warranty reserves

68,003

0

Changes in assets and liabilities, net of acquired assets and liabilities:

Accounts receivable

71,400

(524,084)

Inventory

(2,519,197)

(1,231,705)

Prepaid expenses and other current assets

13,345

213,028

Accounts payable and accrued expenses

1,743,215

1,271,171

Billings in excess of revenue earned

(253,480)

(132,740)

Net cash used in operating activities

(19,840,802)

(20,036,691)

Cash flows from investing activities:

Other assets

(79,916)

(7,801)

Capital expenditures

(1,341,744)

(329,414)

Proceeds from sale of marketable debt securities

33,395,422

43,836,978

Purchase of marketable debt securities

(22,974,668)

(45,905,075)

Proceeds from sale of property and plant

0

8,106,819

Cash paid for acquisition, net of cash acquired

(3,690,047)

0

Proceeds from sale of III-V product line

0

15,000,000

Net cash provided by investing activities

5,309,047

20,701,507

Cash flows from financing activities:

Sale of unregistered stock

24,664,250

0

Settlements of restricted stock for tax withholding obligations

0

(9,153)

Net cash provided by (used in) financing activities

24,664,250

(9,153)

Effect of exchange rate changes on cash

(72,436)

574,850

Net increase in cash and equivalents

10,060,059

1,230,513

Cash and equivalents:

Beginning of period

15,822,495

19,767,889

End of period

25,882,554

20,998,402

Supplemental disclosure of cash flow information:

Income taxes paid

$ 0

$ 366,000

BASIS OF PRESENTATION

The condensed consolidated financial statements of Kopin Corporation (the Company) as of September 30, 2017 and for the three and nine month periods ended September 30, 2017 and September 24, 2016 are unaudited and include all adjustments which, in the opinion of management, are necessary to present fairly the results of operations for the periods then ended. These condensed consolidated financial statements should be read in conjunction with the Company’s financial statements and notes thereto, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016. The results of the Company's operations for any interim period are not necessarily indicative of the results of the Company's operations for any other interim period or for a full fiscal year.

Recently Issued Accounting Pronouncements

Revenue from Contracts with Customers

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606). This new standard outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which is an amendment on assessing whether an entity is a principal or an agent in a revenue transaction. This amendment addresses issues to clarify the principal versus agent assessment and lead to more consistent application. In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, which contains amendments to the new revenue recognition standard on identifying performance obligations and accounting for licenses of intellectual property. The amendments related to identifying performance obligations clarify when a promised good or service is separately identifiable and allows entities to disregard items that are immaterial in the context of a contract. The licensing implementation amendments clarify how an entity should evaluate the nature of its promise in granting a license of intellectual property, which will determine whether revenue is recognized over time or at a point in time. In May 2016, the FASB issued ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, which provides clarity and implementation guidance on assessing collectability, presentation of sales taxes, noncash consideration, and completed contracts and contract modifications at transition. The new standards have the same effective date and transition requirements as ASU 2014-09. The new standard also requires entities to enhance disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.

The Company continues to evaluate the potential impact of ASC 606 on its consolidated financial statements and related disclosures. As part of the Company's assessment work to date, the Company with assistance from an external consulting firm is continuing to review and finalize its conclusions relative to is contracts with customers. For the remainder of 2017, the Company plans to finalize its evaluation and implement any required policy, process, and internal control changes required as a result of that evaluation. While the Company continues to assess all potential impacts of the new standard on its consolidated financial statements, the adoption of ASC 606 may accelerate the timing of revenue recognition for certain research and development contracts and the sale of products to military programs whereby revenue will be recognized as the product is produced (as opposed to at a point in time when the product is shipped to the customer) as the Company has an enforceable right to payment for performance completed to date and the inventory has no alternative use. Upon the adoption of ASC 606 using the modified retrospective method on December 31, 2017, the Company expects to record an adjustment to accumulated deficit for the amount that would have been recognized in 2017 under the new guidance and would not have been recognized until shipment of the product in 2018 under the current guidance. The new standard will also require an enhanced level of disclosures in the Company’s quarterly and annual consolidated financial statements.

Leases

In February 2016, the FASB issued Accounting Standards Update No. 2016-02 (Topic 842) Leases. Topic 842 supersedes the lease recognition requirements in Accounting Standards Codification Topic 840, "Leases". Under Topic 842, lessees are required to recognize assets and liabilities on the balance sheet for most leases and provide enhanced disclosures. Leases will continue to be classified as either finance or operating. Topic 842 is effective for annual reporting periods, and interim periods within those years beginning after December 15, 2018. Entities are required to use a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements, and there are certain optional practical expedients that an entity may elect to apply. Full retrospective application is prohibited and early adoption by public entities is permitted. The Company expects to complete its assessment in 2018 and is required to adopt ASU 2016-02 as of January 1, 2019 using the modified retrospective method. The Company expects the potential impact of adopting ASU 2016-02 to be material to our lease liabilities and assets on its consolidated balance sheets.

Business Combinations

In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805). The new guidance clarifies the definition of a business that an entity uses to determine whether a transaction should be accounted for as an asset acquisition (or disposal) or a business combination. The guidance is expected to cause fewer acquired sets of assets (and liabilities) to be identified as businesses. The guidance is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2017. Early adoption is permitted for transactions that meet certain requirements. The Company is evaluating the impact this standard will have on its financial statements.

Intangibles- Goodwill and Other

In January 2017, the FASB issued ASU 2017-04, Intangibles- Goodwill and Other (Topic 350). The new guidance simplifies the accounting for goodwill impairments by eliminating Step 2 from the goodwill impairment test. The guidance requires, among other things, recognition of an impairment loss when the carrying amount of a reporting unit exceeds its fair value. The loss recognized is limited to the total amount of goodwill allocated to that reporting unit. The guidance is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company is evaluating the impact this standard will have on its financial statements.

CASH AND EQUIVALENTS AND MARKETABLE SECURITIES

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

Marketable debt securities consist primarily of commercial paper, medium-term corporate notes, and U.S. government and agency backed securities. The Company classifies these marketable debt securities as available-for-sale at fair value in “Marketable debt securities, at fair value”. The Company's investment in GCS Holdings is included in "Other Assets" as available-for-sale and at fair value. The Company records the amortization of premium and accretion of discounts on marketable debt securities in the results of operations.

The Company uses the specific identification method as a basis for determining cost and calculating realized gains and losses with respect to marketable debt securities. The gross gains and losses realized related to sales and maturities of marketable debt securities were not material during the three and nine months ended September 30, 2017 and the year ended December 31, 2016.

Investments in available-for-sale marketable debt securities are as follows at September 30, 2017 and December 31, 2016



	Amortized Cost				Unrealized Gains				Unrealized Losses						Fair Value
	2017		2016		2017		2016		2017			2016			2017		2016
U.S. government and agency backed securities	$	36,365,672	$	36,343,817	$	—	$	—	$	(180,768	)	$	(252,556	)	$	36,184,904	$	36,091,261
Corporate debt and certificates of deposit	15,311,458		25,323,428		—		—		(41,452		)	(39,288		)	15,270,006		25,284,140
Total	$	51,677,130	$	61,667,245	$	—	$	—	$	(222,220	)	$	(291,844	)	$	51,454,910	$	61,375,401

The contractual maturity of the Company’s marketable debt securities is as follows at September 30, 2017:



	Less than One year		One to Five years		Greater than Five years		Total
U.S. government and agency backed securities	$	21,245,723	$	12,993,121	$	1,946,060	$	36,184,904
Corporate debt and certificates of deposit	9,585,467		5,684,539		—		15,270,006
Total	$	30,831,190	$	18,677,660	$	1,946,060	$	51,454,910

The Company conducts a review of its marketable debt securities on a quarterly basis for the presence of other-than-temporary impairment (OTTI). The Company assesses whether OTTI is present when the fair value of a debt security is less than its amortized cost basis at the balance sheet date. Under these circumstances OTTI is considered to have occurred (1) if the Company intends to sell the security before recovery of its amortized cost basis; (2) if it is “more likely than not” the Company will be required to sell the security before recovery of its amortized cost basis; or (3) the present value of expected cash flows is not sufficient to recover the entire amortized cost basis.

The Company further estimates the amount of OTTI resulting from a decline in the creditworthiness of the issuer (credit-related OTTI) and the amount of non credit-related OTTI. Non credit-related OTTI can be caused by such factors as market illiquidity. Credit-related OTTI is recognized in earnings while non credit-related OTTI on securities not expected to be sold is recognized in other comprehensive income (loss). The Company did not record an OTTI for the three and nine months ended September 30, 2017 and September 24, 2016.

FAIR VALUE MEASUREMENTS

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

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



			Fair Value Measurement September 30, 2017 Using:
	Total		Level 1		Level 2		Level 3
Cash and Equivalents	$	25,882,554	$	25,882,554	$	—	$	—
U.S. Government Securities	36,184,904		6,923,591		29,261,313		—
Corporate Debt	7,652,455		—		7,652,455		—
Certificates of Deposit	7,617,551		—		7,617,551		—
GCS Holdings	365,017		365,017		—		—
Warrant	274,000		—		—		274,000
	$	77,976,481	$	33,171,162	$	44,531,319	$	274,000

			Fair Value Measurement December 31, 2016 Using:
	Total		Level 1		Level 2		Level 3
Cash and Equivalents	$	15,822,495	$	15,822,495	$	—	$	—
U.S. Government Securities	36,091,261		7,144,767		28,946,494		—
Corporate Debt	7,557,029		—		7,557,029		—
Certificates of Deposit	17,727,111		—		17,727,111		—
GCS Holdings	331,454		331,454		—		—
	$	77,529,350	$	23,298,716	$	54,230,634	$	—

The corporate debt consists of floating rate notes with a maturity that is over multiple years but has interest rates which are reset every three months based on the then-current three month London Interbank Offering Rate (three month Libor). The Company validates the fair market values of the financial instruments above by using discounted cash flow models, obtaining independent pricing of the securities or through the use of a model which incorporates the three month Libor, the credit default swap rate of the issuer and the bid and ask price spread of the same or similar investments which are traded on several markets. The Company has a warrant to acquire up to 15% of the next round of equity offered by a customer as part of the licensing of technology to the customer. The fair market value of the warrant was determined based upon expectations from the customer’s management and then applying probabilities of occurrence and discounting back the values using expected returns required for similar instruments.

The carrying amounts of cash and equivalents, accounts receivable, accounts payable and accrued liabilities approximate fair value because of their short-term nature. If accrued liabilities were carried at fair value, these would be classified as Level 2 in the fair value hierarchy.

INVENTORY

Inventory is stated at the lower of cost (determined on the first-in, first-out) or market and consists of the following at September 30, 2017 and December 31, 2016:



	September 30, 2017		December 31, 2016
Raw materials	$	2,517,803	$	1,986,491
Work-in-process	2,552,517		1,186,162
Finished goods	878,690		129,459
	$	5,949,010	$	3,302,112

NET LOSS PER SHARE

Basic net loss per share is computed using the weighted average number of shares of common stock outstanding during the period less any non-vested restricted shares. Diluted earnings per common share, if applicable, is calculated using weighted average shares outstanding and contingently issuable shares, less weighted average shares reacquired during the period. The net outstanding shares are adjusted for the dilutive effect of shares issuable upon the assumed conversion of the Company’s common stock equivalents, which consist of outstanding stock options and non-vested restricted stock units.

The following were not included in weighted average common shares outstanding-diluted because they are anti-dilutive or performance or market conditions had not been met at the end of the period:



	Three Months Ended		Nine Months Ended
	September 30, 2017	September 24, 2016	September 30, 2017	September 24, 2016
Non-vested restricted common stock	2,968,874	2,692,516	2,968,874	2,692,516

STOCKHOLDERS' EQUITY AND STOCK-BASED COMPENSATION

On April 20, 2017, the Company sold 7,589,000 shares of unregistered common stock to Goertek Inc. for $24,664,250 ($3.25 per share). This represents approximately 10.1% of Kopin’s total outstanding shares of common stock as of the date of purchase. In addition, Kopin and Goertek have entered into agreements to jointly develop and commercialize a range of technologies and wearable products. Goertek is a leading innovative global technology company headquartered in Weifang, China that designs and manufactures a range of consumer electronics products for brand customers including wearables, virtual and augmented reality headsets, and audio products. The transaction was accounted for under FASB ASC 505-30 "Treasury Stock", and the loss on the sale of the treasury stock of approximately $0.8 million was charged to retained earnings. See "Note 13. Amounts Due To/Due From Affiliates" for additional discussion around agreements with Goertek.

Non-Vested Restricted Common Stock

The fair value of non-vested restricted common stock awards is generally the market value of the Company’s common stock on the date of grant. The non-vested restricted common stock awards require the employee to fulfill certain obligations, including remaining employed by the Company for one, two or four years (the vesting period) and in certain cases also require meeting either performance criteria or the Company’s stock achieving a certain price. For non-vested restricted common stock awards which solely require the recipient to remain employed with the Company, the stock compensation expense is amortized over the anticipated service period. For non-vested restricted common stock awards which require the achievement of performance criteria, the Company reviews the probability of achieving the performance goals on a periodic basis. If the Company determines that it is probable that the performance criteria will be achieved, the amount of compensation cost derived for the performance goal is amortized over the anticipated service period. If the performance criteria are not met, no compensation cost is recognized and any previously recognized compensation cost is reversed. Some of the restricted stock awards vest upon our stock price achieving certain levels. These awards are referred to as Liability Awards and are mark-to-market. Accordingly in some periods there is expense and in other periods the expense may reverse. The Company recognizes compensation costs on a straight-line basis over the requisite service period for time-vested awards.



	Shares		Weighted Average Grant Fair Value
Balance, December 31, 2016	3,007,674		$	3.21
Granted	120,000		3.44
Forfeited	(98,800	)	3.17
Vested	(60,000	)	1.70
Balance, September 30, 2017	2,968,874		$	3.26

Stock-Based Compensation

The following table summarizes stock-based compensation expense within each of the categories below as it relates to non-vested restricted common stock awards for the three and nine months ended September 30, 2017 and September 24, 2016 (no tax benefits were recognized):



	Three Months Ended				Nine Months Ended
	September 30, 2017		September 24, 2016		September 30, 2017		September 24, 2016
Cost of product revenues	$	142,604	$	136,420	$	405,778	$	426,357
Research and development	203,288		129,308		616,500		378,156
Selling, general and administrative	676,137		262,700		1,967,879		674,968
Total	$	1,022,029	$	528,428	$	2,990,157	$	1,479,481

Unrecognized compensation expense for non-vested restricted common stock as of September 30, 2017 totaled $3.8 million and is expected to be recognized over a weighted average period of approximately two years.

The selling, general and administrative expense includes Liability Awards and the increase in expense for the nine months ended September 30, 2017 as compared to September 24, 2016 is partially the result of a higher stock price of the Company at September 30, 2017 as compared to September 24, 2016. Included in Other accrued liabilities is $1.6 million in deferred compensation from equity awards which are classified as Liability Awards.

NOTE RECEIVABLE

In January 2016, the Company received the final $15.0 million payment resulting from the sale of its III-V product line and its investment in KTC.

ACCRUED WARRANTY

The Company typically 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 recognized, and is updated as additional information becomes available. The Company’s estimate of future costs to satisfy warranty obligations is based primarily on historical warranty expense experienced and a provision for potential future product failures. Changes in the accrued warranty for the nine months ended September 30, 2017 are as follows:



Balance, December 31, 2016	$	518,000
Additions	83,000
Claims	(16,000		)
Balance, September 30, 2017	$	585,000

Extended Warranties

Deferred revenue represents the purchase of extended warranties by the Company's customers. 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 15 months beyond the standard 12 month warranty. The Company classifies deferred revenue under other accrued liabilities in its consolidated balance sheets. The Company currently has $0.5 million of deferred revenue related to extended warranties.

INCOME TAXES

The Company’s tax benefit of approximately $1.1 million for the nine months ended September 30, 2017 represents the net of $0.1 million for foreign income taxes related to uncertain tax positions and a benefit for the net reduction in estimated foreign withholding. We reduced the valuation allowance on our net deferred tax assets in the amount of $1.0 million and such reduction was recognized as a benefit for income taxes for the nine months ended September 30, 2017. The Company’s tax provision of approximately $0.1 million for the three months ended September 24, 2016, represents less than $14,000 of state income tax and $0.1 million of foreign income taxes including interest income on intercompany loan and net movement in estimated foreign withholding. The Company’s tax provision of approximately $2.2 million for the nine months ended September 24, 2016, represents $1.0 million of income taxes on the gain on the sale of Kowon’s plant and land, $1.2 million of net movement in estimated foreign withholding on anticipated future remitted earnings of a foreign subsidiary, and $22,000 in state income taxes. As of September 30, 2017, the Company has available for tax purposes U.S. federal NOLs of approximately $153.0 million expiring through 2036. The Company has recognized a full valuation allowance on its domestic and certain foreign net deferred tax assets due to the uncertainty of realization of such assets.

Ownership changes, as defined by the Internal Revenue Code, may substantially limit the amount of net operating loss carryforwards that can be utilized annually to offset future taxable income. The ownership change in 2017 did not result in an annual net operating loss limitation as the acquired entity was an S Corporation and did not have loss carryforwards. Subsequent ownership changes could affect the limitation in future years. Such annual limitations could result in the expiration of net operating loss and tax credit carryforwards before utilization.

The tax years 2001 through 2016 remain open to examination by major taxing jurisdictions to which the Company is subject to United States federal tax. These periods have carryforward attributes generated in years past that may still be adjusted upon examination by the Internal Revenue Service or state tax authorities if they have or will be used in a future period. State statutes are generally shorter with shorter carryforward periods. The Company is currently not under examination by the Internal Revenue Service and is currently under examination by Massachusetts for the 2013 tax year. The Company recognizes both accrued interest and penalties related to its uncertain tax positions related to intercompany loan interest and potential transfer pricing exposure related to its Korean subsidiary.

The Company has concluded that it does not maintain its permanent reinvestment assertion with regard to the unremitted earnings of its Korean subsidiaries. As such, it accrues U.S. tax for the possible future repatriation of these unremitted foreign earnings. If the Company were to repatriate these earnings, it expects to have foreign withholding at a rate of 16.5% and does not expect any taxes to be paid in the U.S when repatriated as it currently is expected to be a return of capital.

BUSINESS COMBINATION AND GOODWILL

In March 2017, the Company purchased 100% of a company for $3.7 million. The acquired company produces virtual reality systems for 3D applications. Additional payments of up to $2.0 million may be required if certain future operating performance milestones are met and the selling shareholders remain employed through March 2020. As there is a requirement to remain employed to earn the contingent payments, these contingent payments will be treated as compensation expense. Commencing on the date of acquisition, the Company consolidated the financial results of the acquired company. The identifiable assets acquired and liabilities assumed at the acquisition date have been recognized at fair value.

The allocation of the purchase price is as follows:



Cash and marketable securities	$	2,600
Accounts receivable	490,700
Inventory	768,400
Other identifiable assets	46,800
Order backlog	840,000
Customer relationships	1,000,000
Developed technology	460,000
Trademark portfolio	160,000
Current liabilities	(480,500		)
Net deferred tax liabilities	(1,084,000		)
Goodwill	1,489,000
Total	$	3,693,000

Goodwill represents the recording of the excess of the purchase price over the fair values of the net tangible assets acquired. The values assigned to the acquired assets and liabilities are based on preliminary estimates of fair value available as of the date of this filing and will be adjusted upon completion of final valuations of certain assets and liabilities. Any changes in these fair values could potentially result in an adjustment to the goodwill recorded for this transaction.

The identified intangible assets will be amortized on a straight-line basis over the following lives, in years:



Order backlog	1
Customer relationships	2
Developed technology	2
Trademark portfolio	2

The Company recognized $1.1 million in amortization for the nine month period ended September 30, 2017 related to its intangible assets. In conjunction with the acquisition the Company recorded deferred tax liabilities of approximately $1.0 million associated with the future non-deductible amortization of the intangible assets. These deferred tax liabilities can be used to offset the Company’s net deferred tax assets in future years. The Company reduced the valuation allowance on its net deferred tax assets in the amount of $1.0 million and such reduction was recognized as a benefit for income taxes for the nine month period ended September 30, 2017. Acquisition expenses were approximately $0.2 million and are recorded in selling, general and administration expenses.

The following unaudited supplemental pro forma disclosures are provided for the three and nine month periods ended September 24, 2016 and the nine month period ended September 30, 2017, assuming the acquisition of the company had occurred as of December 26, 2015. All intercompany transactions have been eliminated.



	Three months ended			Nine months ended
	September 24, 2016			September 30, 2017			September 24, 2016
Revenues	$	6,698,701		$	17,081,144		$	17,894,777
Net loss	(7,710,770		)	(23,271,116		)	(18,226,203		)

Since the date of acquisition, the Company recorded revenue and net loss of $1.9 million and $0.1 million, respectively, in the three month period ended September 30, 2017, and for the nine month period ended September 30, 2017 the revenues and net loss from the acquired company were $3.7 million and $0.5 million, respectively.

A rollforward of the Company's goodwill by segment is as follows:



	Kopin		Industrial		Total
Balance, December 31, 2016	$	844,023	$	—	$	844,023
March 2017 acquisition	—		1,488,650		1,488,650
Change due to exchange rate fluctuations	43,904		—		43,904
Balance, September 30, 2017	$	887,927	$	1,488,650	$	2,376,577

The Company has entered into two joint venture agreements and other agreements which are subject to certain closing conditions including government approvals. If the transactions close the Company will contribute certain intellectual property and approximately $8.0 million.

SEGMENTS AND GEOGRAPHICAL INFORMATION

The Company’s chief operating decision maker is its Chief Executive Officer. The Company has determined it has two reportable segments, Industrial, which includes the operations that develop and manufacture its reflective display products and virtual reality systems for test and simulation products, and Kopin, which includes the operations that develop and manufacture its other products. Previously, the Company had two segments consisting of Kopin and FDD. The acquired company is included in the segment formerly known as FDD and the segment has been renamed to Industrial.

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



	Three Months Ended
	September 30, 2017									September 24, 2016
	Kopin			Industrial			Total			Kopin			Industrial			Total
Revenues	$	3,744		$	2,395		$	6,139		$	4,708		$	1,087		$	5,795
Net loss attributable to the controlling interest	(8,117		)	(130		)	(8,247		)	(7,901		)	(216		)	(8,117		)



	Nine Months Ended
	September 30, 2017									September 24, 2016
	Kopin			Industrial			Total			Kopin			Industrial			Total
Revenues	$	10,409		$	6,036		$	16,445		$	13,176		$	3,093		$	16,269
Net loss attributable to the controlling interest	(23,170		)	(268		)	(23,438		)	(17,628		)	(616		)	(18,244		)
Total assets	87,043			8,010			95,053			92,799			1,699			94,498
Long-lived assets	3,544			117			3,661			2,937			—			2,937

The total assets of Kopin are net of $6.0 million and $6.2 million in intercompany loans to Industrial as of September 30, 2017 and September 24, 2016, respectively.

During the three and nine month periods ended September 30, 2017 and September 24, 2016, the Company derived its sales from the following geographies (as a percentage of net revenues):



	Three Months Ended				Nine Months Ended
	September 30, 2017		September 24, 2016		September 30, 2017		September 24, 2016
United States	47	%	49	%	48	%	36	%
Asia-Pacific	22	%	37	%	25	%	48	%
Europe	31	%	14	%	27	%	16	%
Total Revenues	100	%	100	%	100	%	100	%

LITIGATION

The Company may be named in legal proceedings arising in the ordinary course of business. Claims, suits, investigations and proceedings are inherently uncertain and it is not possible to predict the ultimate outcome of such matters and our business, financial condition, results of operations or cash flows could be affected in any particular period.

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 our 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 Goertek have entered into agreements to jointly develop and commercialize a range of technologies and wearable products. These include: a mutual exclusive supply and manufacturing arrangement for a certain display product for twenty four months after mass production begins; an agreement that provides the Company with the right of first refusal to invest in certain manufacturing capacity for certain products with Goertek; an agreement whereby Goertek will provide system level original equipment manufacturing services for the Company's wearable products; an arrangement whereby the Company will supply display modules for Goertek's virtual reality and augmented reality products; and other agreements related to promotion around certain products as well as providing designs relating to head mounted displays.

During the three and nine month periods ended September 30, 2017, the Company had the following transactions with related parties:



	Three Months Ended				Nine Months Ended
	September 30, 2017				September 30, 2017
	Sales		Purchases		Sales		Purchases
Goertek	$	—	$	207,694	$	—	$	390,619
Affiliate 1	48,320		—		109,952		—
	$	48,320	$	207,694	$	109,952	$	390,619

At September 30, 2017, the Company had the following receivables and payables with related parties:



	Receivables		Payables
Goertek	$	—	$	103,100

EMBEZZLEMENT

IMMATERIAL RESTATEMENT


	EMBEZZLEMENT

During the third quarter of 2016, the Company discovered embezzlement activities at its Korean subsidiary. Based upon the results of forensic investigation procedures, the Company identified that the embezzlement activities occurred from fiscal year 2011 through fiscal year 2016. The embezzlement resulted in a total theft loss of $1,589,000 over that period and as a result of the embezzlement the Company has made the following correcting adjustments to the amounts presented in its previously issued quarterly financial information.

In the three and nine month periods ended September 24, 2016, the Company has recorded in Other income (expense), net, embezzlement expense of approximately $200,000 and $420,000, respectively, representing the total amount of theft loss that occurred.

BASIS OF PRESENTATION (Policies)

Recently Issued Accounting Pronouncements

Revenue from Contracts with Customers

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606). This new standard outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which is an amendment on assessing whether an entity is a principal or an agent in a revenue transaction. This amendment addresses issues to clarify the principal versus agent assessment and lead to more consistent application. In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, which contains amendments to the new revenue recognition standard on identifying performance obligations and accounting for licenses of intellectual property. The amendments related to identifying performance obligations clarify when a promised good or service is separately identifiable and allows entities to disregard items that are immaterial in the context of a contract. The licensing implementation amendments clarify how an entity should evaluate the nature of its promise in granting a license of intellectual property, which will determine whether revenue is recognized over time or at a point in time. In May 2016, the FASB issued ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, which provides clarity and implementation guidance on assessing collectability, presentation of sales taxes, noncash consideration, and completed contracts and contract modifications at transition. The new standards have the same effective date and transition requirements as ASU 2014-09. The new standard also requires entities to enhance disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.

The Company continues to evaluate the potential impact of ASC 606 on its consolidated financial statements and related disclosures. As part of the Company's assessment work to date, the Company with assistance from an external consulting firm is continuing to review and finalize its conclusions relative to is contracts with customers. For the remainder of 2017, the Company plans to finalize its evaluation and implement any required policy, process, and internal control changes required as a result of that evaluation. While the Company continues to assess all potential impacts of the new standard on its consolidated financial statements, the adoption of ASC 606 may accelerate the timing of revenue recognition for certain research and development contracts and the sale of products to military programs whereby revenue will be recognized as the product is produced (as opposed to at a point in time when the product is shipped to the customer) as the Company has an enforceable right to payment for performance completed to date and the inventory has no alternative use. Upon the adoption of ASC 606 using the modified retrospective method on December 31, 2017, the Company expects to record an adjustment to accumulated deficit for the amount that would have been recognized in 2017 under the new guidance and would not have been recognized until shipment of the product in 2018 under the current guidance. The new standard will also require an enhanced level of disclosures in the Company’s quarterly and annual consolidated financial statements.

Leases

In February 2016, the FASB issued Accounting Standards Update No. 2016-02 (Topic 842) Leases. Topic 842 supersedes the lease recognition requirements in Accounting Standards Codification Topic 840, "Leases". Under Topic 842, lessees are required to recognize assets and liabilities on the balance sheet for most leases and provide enhanced disclosures. Leases will continue to be classified as either finance or operating. Topic 842 is effective for annual reporting periods, and interim periods within those years beginning after December 15, 2018. Entities are required to use a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements, and there are certain optional practical expedients that an entity may elect to apply. Full retrospective application is prohibited and early adoption by public entities is permitted. The Company expects to complete its assessment in 2018 and is required to adopt ASU 2016-02 as of January 1, 2019 using the modified retrospective method. The Company expects the potential impact of adopting ASU 2016-02 to be material to our lease liabilities and assets on its consolidated balance sheets.

Business Combinations

In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805). The new guidance clarifies the definition of a business that an entity uses to determine whether a transaction should be accounted for as an asset acquisition (or disposal) or a business combination. The guidance is expected to cause fewer acquired sets of assets (and liabilities) to be identified as businesses. The guidance is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2017. Early adoption is permitted for transactions that meet certain requirements. The Company is evaluating the impact this standard will have on its financial statements.

Intangibles- Goodwill and Other

In January 2017, the FASB issued ASU 2017-04, Intangibles- Goodwill and Other (Topic 350). The new guidance simplifies the accounting for goodwill impairments by eliminating Step 2 from the goodwill impairment test. The guidance requires, among other things, recognition of an impairment loss when the carrying amount of a reporting unit exceeds its fair value. The loss recognized is limited to the total amount of goodwill allocated to that reporting unit. The guidance is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company is evaluating the impact this standard will have on its financial statements.

CASH AND EQUIVALENTS AND MARKETABLE SECURITIES (Tables)

Cash Cash Equivalents and Marketable Securities Table

Investments in available-for-sale marketable debt securities are as follows at September 30, 2017 and December 31, 2016



	Amortized Cost				Unrealized Gains				Unrealized Losses						Fair Value
	2017		2016		2017		2016		2017			2016			2017		2016
U.S. government and agency backed securities	$	36,365,672	$	36,343,817	$	—	$	—	$	(180,768	)	$	(252,556	)	$	36,184,904	$	36,091,261
Corporate debt and certificates of deposit	15,311,458		25,323,428		—		—		(41,452		)	(39,288		)	15,270,006		25,284,140
Total	$	51,677,130	$	61,667,245	$	—	$	—	$	(222,220	)	$	(291,844	)	$	51,454,910	$	61,375,401

Marketable Debt Securities

The contractual maturity of the Company’s marketable debt securities is as follows at September 30, 2017:



	Less than One year		One to Five years		Greater than Five years		Total
U.S. government and agency backed securities	$	21,245,723	$	12,993,121	$	1,946,060	$	36,184,904
Corporate debt and certificates of deposit	9,585,467		5,684,539		—		15,270,006
Total	$	30,831,190	$	18,677,660	$	1,946,060	$	51,454,910

FAIR VALUE MEASUREMENTS (Tables)

Fair Value Measurements of Financial Instruments

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



			Fair Value Measurement September 30, 2017 Using:
	Total		Level 1		Level 2		Level 3
Cash and Equivalents	$	25,882,554	$	25,882,554	$	—	$	—
U.S. Government Securities	36,184,904		6,923,591		29,261,313		—
Corporate Debt	7,652,455		—		7,652,455		—
Certificates of Deposit	7,617,551		—		7,617,551		—
GCS Holdings	365,017		365,017		—		—
Warrant	274,000		—		—		274,000
	$	77,976,481	$	33,171,162	$	44,531,319	$	274,000

			Fair Value Measurement December 31, 2016 Using:
	Total		Level 1		Level 2		Level 3
Cash and Equivalents	$	15,822,495	$	15,822,495	$	—	$	—
U.S. Government Securities	36,091,261		7,144,767		28,946,494		—
Corporate Debt	7,557,029		—		7,557,029		—
Certificates of Deposit	17,727,111		—		17,727,111		—
GCS Holdings	331,454		331,454		—		—
	$	77,529,350	$	23,298,716	$	54,230,634	$	—

INVENTORY (Tables)

Inventory Stated at the Lower of Cost or Market

Inventory is stated at the lower of cost (determined on the first-in, first-out) or market and consists of the following at September 30, 2017 and December 31, 2016:



	September 30, 2017		December 31, 2016
Raw materials	$	2,517,803	$	1,986,491
Work-in-process	2,552,517		1,186,162
Finished goods	878,690		129,459
	$	5,949,010	$	3,302,112

NET LOSS PER SHARE (Tables)

Weighted Average Common Shares Outstanding-Diluted

The following were not included in weighted average common shares outstanding-diluted because they are anti-dilutive or performance or market conditions had not been met at the end of the period:



	Three Months Ended		Nine Months Ended
	September 30, 2017	September 24, 2016	September 30, 2017	September 24, 2016
Non-vested restricted common stock	2,968,874	2,692,516	2,968,874	2,692,516

STOCKHOLDERS' EQUITY AND STOCK-BASED COMPENSATION (Tables)

NonVested Restricted Common Stock



	Shares		Weighted Average Grant Fair Value
Balance, December 31, 2016	3,007,674		$	3.21
Granted	120,000		3.44
Forfeited	(98,800	)	3.17
Vested	(60,000	)	1.70
Balance, September 30, 2017	2,968,874		$	3.26

Stock-Based Compensation Expense

The following table summarizes stock-based compensation expense within each of the categories below as it relates to non-vested restricted common stock awards for the three and nine months ended September 30, 2017 and September 24, 2016 (no tax benefits were recognized):



	Three Months Ended				Nine Months Ended
	September 30, 2017		September 24, 2016		September 30, 2017		September 24, 2016
Cost of product revenues	$	142,604	$	136,420	$	405,778	$	426,357
Research and development	203,288		129,308		616,500		378,156
Selling, general and administrative	676,137		262,700		1,967,879		674,968
Total	$	1,022,029	$	528,428	$	2,990,157	$	1,479,481

ACCRUED WARRANTY (Tables)

Accrued Warranty

Changes in the accrued warranty for the nine months ended September 30, 2017 are as follows:



Balance, December 31, 2016	$	518,000
Additions	83,000
Claims	(16,000		)
Balance, September 30, 2017	$	585,000

BUSINESS COMBINATION AND GOODWILL (Tables)

Allocation of the Purchase Price

The allocation of the purchase price is as follows:



Cash and marketable securities	$	2,600
Accounts receivable	490,700
Inventory	768,400
Other identifiable assets	46,800
Order backlog	840,000
Customer relationships	1,000,000
Developed technology	460,000
Trademark portfolio	160,000
Current liabilities	(480,500		)
Net deferred tax liabilities	(1,084,000		)
Goodwill	1,489,000
Total	$	3,693,000

Identified Intangible Assets

The identified intangible assets will be amortized on a straight-line basis over the following lives, in years:



Order backlog	1
Customer relationships	2
Developed technology	2
Trademark portfolio	2

Schedule of Goodwill

A rollforward of the Company's goodwill by segment is as follows:



	Kopin		Industrial		Total
Balance, December 31, 2016	$	844,023	$	—	$	844,023
March 2017 acquisition	—		1,488,650		1,488,650
Change due to exchange rate fluctuations	43,904		—		43,904
Balance, September 30, 2017	$	887,927	$	1,488,650	$	2,376,577

SEGMENTS AND GEOGRAPHICAL INFORMATION (Tables)

Schedule of Segment Reporting Information, by Segment

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



	Three Months Ended
	September 30, 2017									September 24, 2016
	Kopin			Industrial			Total			Kopin			Industrial			Total
Revenues	$	3,744		$	2,395		$	6,139		$	4,708		$	1,087		$	5,795
Net loss attributable to the controlling interest	(8,117		)	(130		)	(8,247		)	(7,901		)	(216		)	(8,117		)



	Nine Months Ended
	September 30, 2017									September 24, 2016
	Kopin			Industrial			Total			Kopin			Industrial			Total
Revenues	$	10,409		$	6,036		$	16,445		$	13,176		$	3,093		$	16,269
Net loss attributable to the controlling interest	(23,170		)	(268		)	(23,438		)	(17,628		)	(616		)	(18,244		)
Total assets	87,043			8,010			95,053			92,799			1,699			94,498
Long-lived assets	3,544			117			3,661			2,937			—			2,937

Percentage of Net Revenues by Geographies

During the three and nine month periods ended September 30, 2017 and September 24, 2016, the Company derived its sales from the following geographies (as a percentage of net revenues):



	Three Months Ended				Nine Months Ended
	September 30, 2017		September 24, 2016		September 30, 2017		September 24, 2016
United States	47	%	49	%	48	%	36	%
Asia-Pacific	22	%	37	%	25	%	48	%
Europe	31	%	14	%	27	%	16	%
Total Revenues	100	%	100	%	100	%	100	%

RELATED PARTY TRANSACTIONS (Tables)

Schedule of Related Party Transactions

During the three and nine month periods ended September 30, 2017, the Company had the following transactions with related parties:



	Three Months Ended				Nine Months Ended
	September 30, 2017				September 30, 2017
	Sales		Purchases		Sales		Purchases
Goertek	$	—	$	207,694	$	—	$	390,619
Affiliate 1	48,320		—		109,952		—
	$	48,320	$	207,694	$	109,952	$	390,619

At September 30, 2017, the Company had the following receivables and payables with related parties:



	Receivables		Payables
Goertek	$	—	$	103,100

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

Sep. 30, 2017

Dec. 31, 2016

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

Amortized Cost

$ 51,677,130

$ 61,667,245

Unrealized Gains

0

Unrealized Losses

(222,220)

(291,844)

Fair Value

51,454,910

61,375,401

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

Less than one year

30,831,190

One to five years

18,677,660

Greater than five years

1,946,060

Available-for-sale Securities

51,454,910

U.S. government and agency backed securities

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

Amortized Cost

36,365,672

36,343,817

Unrealized Gains

0

Unrealized Losses

(180,768)

(252,556)

Fair Value

36,184,904

36,091,261

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

Less than one year

21,245,723

One to five years

12,993,121

Greater than five years

1,946,060

Available-for-sale Securities

36,184,904

Corporate debt and certificates of deposit

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

Amortized Cost

15,311,458

25,323,428

Unrealized Gains

0

Unrealized Losses

(41,452)

(39,288)

Fair Value

15,270,006

25,284,140

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

Less than one year

9,585,467

One to five years

5,684,539

Greater than five years

0

Available-for-sale Securities

$ 15,270,006

FAIR VALUE MEASUREMENTS (Details) (USD $)

9 Months Ended

Sep. 30, 2017

Dec. 31, 2016

Fair Value Measurements [Line Items]

Financial Instruments, Owned, at Fair Value

$ 77,976,481

$ 77,529,350

Noncash or Part Noncash Acquisition, Interest Acquired

15.00%

Cash and Equivalents

Fair Value Measurements [Line Items]

Financial Instruments, Owned, at Fair Value

25,882,554

15,822,495

U.S. Government Securities

Fair Value Measurements [Line Items]

Financial Instruments, Owned, at Fair Value

36,184,904

36,091,261

Corporate Debt

Fair Value Measurements [Line Items]

Financial Instruments, Owned, at Fair Value

7,652,455

7,557,029

Certificates of Deposit

Fair Value Measurements [Line Items]

Financial Instruments, Owned, at Fair Value

7,617,551

17,727,111

GCS Holdings

Fair Value Measurements [Line Items]

Financial Instruments, Owned, at Fair Value

365,017

331,454

Warrant [Member]

Fair Value Measurements [Line Items]

Financial Instruments, Owned, at Fair Value

274,000

Level 1

Fair Value Measurements [Line Items]

Financial Instruments, Owned, at Fair Value

33,171,162

23,298,716

Level 1 |
Cash and Equivalents

Fair Value Measurements [Line Items]

Financial Instruments, Owned, at Fair Value

25,882,554

15,822,495

Level 1 |
U.S. Government Securities

Fair Value Measurements [Line Items]

Financial Instruments, Owned, at Fair Value

6,923,591

7,144,767

Level 1 |
GCS Holdings

Fair Value Measurements [Line Items]

Financial Instruments, Owned, at Fair Value

365,017

331,454

Level 1 |
Warrant [Member]

Fair Value Measurements [Line Items]

Financial Instruments, Owned, at Fair Value

0

Level 2

Fair Value Measurements [Line Items]

Financial Instruments, Owned, at Fair Value

44,531,319

54,230,634

Level 2 |
U.S. Government Securities

Fair Value Measurements [Line Items]

Financial Instruments, Owned, at Fair Value

29,261,313

28,946,494

Level 2 |
Corporate Debt

Fair Value Measurements [Line Items]

Financial Instruments, Owned, at Fair Value

7,652,455

7,557,029

Level 2 |
Certificates of Deposit

Fair Value Measurements [Line Items]

Financial Instruments, Owned, at Fair Value

7,617,551

17,727,111

Level 2 |
GCS Holdings

Fair Value Measurements [Line Items]

Financial Instruments, Owned, at Fair Value

0

Level 2 |
Warrant [Member]

Fair Value Measurements [Line Items]

Financial Instruments, Owned, at Fair Value

0

Level 3

Fair Value Measurements [Line Items]

Financial Instruments, Owned, at Fair Value

274,000

0

Level 3 |
Cash and Equivalents

Fair Value Measurements [Line Items]

Financial Instruments, Owned, at Fair Value

0

Level 3 |
U.S. Government Securities

Fair Value Measurements [Line Items]

Financial Instruments, Owned, at Fair Value

0

Level 3 |
Corporate Debt

Fair Value Measurements [Line Items]

Financial Instruments, Owned, at Fair Value

0

Level 3 |
Certificates of Deposit

Fair Value Measurements [Line Items]

Financial Instruments, Owned, at Fair Value

0

Level 3 |
GCS Holdings

Fair Value Measurements [Line Items]

Financial Instruments, Owned, at Fair Value

0

Level 3 |
Warrant [Member]

Fair Value Measurements [Line Items]

Financial Instruments, Owned, at Fair Value

$ 274,000

INVENTORY (Details) (USD $)

Sep. 30, 2017

Dec. 31, 2016

Inventory Disclosure [Abstract]

Raw materials

$ 2,517,803

$ 1,986,491

Work-in-process

2,552,517

1,186,162

Finished goods

878,690

129,459

Inventory

$ 5,949,010

$ 3,302,112

NET LOSS PER SHARE (Details) (Unvested Restricted Stock Awards)

3 Months Ended

9 Months Ended

Sep. 30, 2017

Sep. 24, 2016

Sep. 30, 2017

Sep. 24, 2016

Unvested Restricted Stock Awards

Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]

Antidilutive securities excluded from computation of earnings per share, number of shares

2,968,874

2,692,516

2,968,874

2,692,516

STOCKHOLDERS' EQUITY AND STOCK-BASED COMPENSATION (Details) (USD $)

9 Months Ended

0 Months Ended

Sep. 30, 2017

Restricted Stock

Sep. 30, 2017

Share-based Compensation Award, Tranche One

Sep. 30, 2017

Share-based Compensation Award, Tranche Two

Sep. 30, 2017

Share-based Compensation Award, Tranche Three

Apr. 22, 2017

Sale of Stock to Goertek

Apr. 22, 2017

Sale of Stock to Goertek

Apr. 22, 2017

Accumulated Deficit

Class of Warrant or Right [Line Items]

Sale of Stock, Number of Shares Issued in Transaction

7,589,000

Sale of unregistered stock

$ 24,664,250

Price per share

$ 3.25

Noncontrolling Interest, Ownership Percentage by Noncontrolling Owners

10.10%

Gain (Loss) on Sale of Treasury Stock

(800,000)

Nonvested common stock awards employment obligations (in years)

1 year

2 years

4 years

Unrecognized compensation cost related to nonvested stock awards

3,800,000

Unrecognized compensation cost related to nonvested stock awards, period of recognition (in years)

2 years

Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Share-based Liabilities Paid

$ 1,600,000

STOCKHOLDERS' EQUITY AND STOCK-BASED COMPENSATION - Summary of Activity for Nonvested Restricted Common Stock Awards (Details) (Unvested Restricted Stock Awards, USD $)

9 Months Ended

Sep. 30, 2017

Unvested Restricted Stock Awards

Shares

Beginning Balance

3,007,674

Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period

120,000

Forfeited

(98,800)

Vested

(60,000)

Ending Balance

2,968,874

Weighted Average Grant Fair Value

Beginning Balance

$ 3.21

Granted

$ 3.44

Forfeited

$ 3.17

Vested

$ 1.70

Ending Balance

$ 3.26

STOCKHOLDERS' EQUITY AND STOCK-BASED COMPENSATION - Expense Related to Employee Stock Options and Nonvested Restricted Common Stock Awards (Details) (USD $)

3 Months Ended

9 Months Ended

Sep. 30, 2017

Sep. 24, 2016

Sep. 30, 2017

Sep. 24, 2016

Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]

Allocated Share-based Compensation Expense

$ 1,022,029

$ 528,428

$ 2,990,157

$ 1,479,481

Cost of product revenues

Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]

Allocated Share-based Compensation Expense

142,604

136,420

405,778

426,357

Research and development

Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]

Allocated Share-based Compensation Expense

203,288

129,308

616,500

378,156

Selling, general and administrative

Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]

Allocated Share-based Compensation Expense

$ 676,137

$ 262,700

$ 1,967,879

$ 674,968

NOTE RECEIVABLE (Details) (USD $)

9 Months Ended

Sep. 30, 2017

Sep. 24, 2016

Receivables [Abstract]

Proceeds from sale of III-V product line

$ 0

$ 15,000,000

GOODWILL AND INTANGIBLES (Details) (USD $)

Sep. 30, 2017

Dec. 31, 2016

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill

$ 2,376,577

$ 844,023

ACCRUED WARRANTY (Details) (USD $)

9 Months Ended

Sep. 30, 2017

Deferred Revenue Arrangement [Line Items]

Product warranty term

12 months

Movement in Standard Product Warranty Accrual [Roll Forward]

Beginning Balance

$ 518,000

Additions

83,000

Claim and reversals

(16,000)

Ending Balance

585,000

Extended Warranties [Member]

Deferred Revenue Arrangement [Line Items]

Deferred Revenue

$ 500,000

Minimum [Member]

Deferred Revenue Arrangement [Line Items]

Extended Warranty Period

12 months

Maximum [Member]

Deferred Revenue Arrangement [Line Items]

Extended Warranty Period

15 months

INCOME TAXES (Details) (USD $)

3 Months Ended

9 Months Ended

Sep. 30, 2017

Sep. 24, 2016

Sep. 30, 2017

Sep. 24, 2016

Income Taxes [Line Items]

Tax benefit (provision)

$ (4,500)

$ (114,000)

$ 1,141,500

$ (2,218,000)

Current Foreign Tax Expense (Benefit)

100,000

Deferred Tax Liabilities, Net

1,000,000

Reduction in net deferred tax assets

1,000,000

Current State and Local Tax Expense (Benefit)

14,000

22,000

Foreign Earnings Repatriated

1,200,000

Net operating loss carryforwards available for tax purposes

153,000,000

Effective Income Tax Rate Reconciliation, Repatriation of Foreign Earnings, Percent

16.50%

Kowon [Member]

Income Taxes [Line Items]

Gain (Loss) on Sale of Properties, Applicable Income Taxes

$ 1,000,000

BUSINESS COMBINATION AND GOODWILL (Details) (USD $)

0 Months Ended

3 Months Ended

7 Months Ended

9 Months Ended

Mar. 7, 2017

Sep. 30, 2017

Sep. 24, 2016

Sep. 30, 2017

Sep. 24, 2016

Mar. 7, 2017

Business Acquisition [Line Items]

Percentage of Voting Interests Acquired

100.00%

Consideration transferred

$ 3,693,000

Business Combination, Contingent Consideration, Asset

2,000,000

Effective Income Tax Rate Reconciliation, Nondeductible Expense, Amortization, Amount

1,100,000

Deferred Tax Liabilities, Net

1,000,000

Reduction in net deferred tax assets

1,000,000

Business Acquisition, Transaction Costs

200,000

Business Acquisition, Pro Forma Revenue

6,698,701

17,081,144

17,894,777

Business Acquisition, Pro Forma Net Income (Loss)

(7,710,770)

(23,271,116)

(18,226,203)

Business Acquisition, Revenue Reported by Acquired Entity for Last Annual Period

1,900,000

3,700,000

Business Combination, Pro Forma Information, Earnings or Loss of Acquiree since Acquisition Date, Actual

(100,000)

(500,000)

Intellectual Property

$ 8,000,000

BUSINESS COMBINATION AND GOODWILL - Purchase Price Allocation (Details) (USD $)

0 Months Ended

Mar. 7, 2017

Business Combinations [Abstract]

Cash and marketable securities

$ 2,600

Accounts receivable

490,700

Inventory

768,400

Other identifiable assets

46,800

Order backlog

840,000

Customer relationships

1,000,000

Developed technology

460,000

Trademark portfolio

160,000

Current liabilities

(480,500)

Net deferred tax liabilities

(1,084,000)

Goodwill

1,489,000

Total

$ 3,693,000

BUSINESS COMBINATION AND GOODWILL - Intangible Asset Amortization (Details)

9 Months Ended

Sep. 30, 2017

Order backlog

Finite-Lived Intangible Assets [Line Items]

Intangible asset amortization period

1 year

Customer relationships

Finite-Lived Intangible Assets [Line Items]

Intangible asset amortization period

2 years

Developed technology

Finite-Lived Intangible Assets [Line Items]

Intangible asset amortization period

2 years

Trademark portfolio

Finite-Lived Intangible Assets [Line Items]

Intangible asset amortization period

2 years

BUSINESS COMBINATION AND GOODWILL - Changes in Goodwill (Details) (USD $)

9 Months Ended

Sep. 30, 2017

Goodwill [Roll Forward]

December 31, 2016

$ 844,023

March 2017 acquisition

1,488,650

Change due to exchange rate fluctuations

43,904

September 30, 2017

2,376,577

Kopin United States [Member]

Goodwill [Roll Forward]

December 31, 2016

844,023

March 2017 acquisition

0

Change due to exchange rate fluctuations

43,904

September 30, 2017

887,927

Industrial [Member]

Goodwill [Roll Forward]

December 31, 2016

0

March 2017 acquisition

1,488,650

Change due to exchange rate fluctuations

0

September 30, 2017

$ 1,488,650

SEGMENTS AND GEOGRAPHICAL INFORMATION (Details) (USD $)

3 Months Ended

9 Months Ended

3 Months Ended

9 Months Ended

3 Months Ended

9 Months Ended

3 Months Ended

9 Months Ended

3 Months Ended

9 Months Ended

3 Months Ended

9 Months Ended

3 Months Ended

9 Months Ended

Sep. 30, 2017

Sep. 24, 2016

Sep. 30, 2017

Sep. 24, 2016

Dec. 31, 2016

Sep. 30, 2017

UNITED STATES

Sep. 24, 2016

UNITED STATES

Sep. 30, 2017

UNITED STATES

Sep. 24, 2016

UNITED STATES

Sep. 30, 2017

Asia-Pacific

Sep. 24, 2016

Asia-Pacific

Sep. 30, 2017

Asia-Pacific

Sep. 24, 2016

Asia-Pacific

Sep. 30, 2017

Europe

Sep. 24, 2016

Europe

Sep. 30, 2017

Europe

Sep. 24, 2016

Europe

Sep. 30, 2017

Kopin United States

Sep. 24, 2016

Kopin United States

Dec. 26, 2015

Kopin United States

Sep. 30, 2017

Industrial [Member]

Sep. 24, 2016

Industrial [Member]

Sep. 30, 2017

Segment, Continuing Operations

Sep. 24, 2016

Segment, Continuing Operations

Sep. 30, 2017

Segment, Continuing Operations

Sep. 24, 2016

Segment, Continuing Operations

Sep. 30, 2017

Segment, Continuing Operations

Kopin United States

Sep. 24, 2016

Segment, Continuing Operations

Kopin United States

Sep. 30, 2017

Segment, Continuing Operations

Kopin United States

Sep. 24, 2016

Segment, Continuing Operations

Kopin United States

Sep. 30, 2017

Segment, Continuing Operations

Industrial [Member]

Sep. 24, 2016

Segment, Continuing Operations

Industrial [Member]

Sep. 30, 2017

Segment, Continuing Operations

Industrial [Member]

Sep. 24, 2016

Segment, Continuing Operations

Industrial [Member]

Revenues from External Customers and Long-Lived Assets [Line Items]

Revenues

$ 6,139,167

$ 5,794,806

$ 16,444,764

$ 16,269,219

$ 6,139,000

$ 5,795,000

$ 16,445,000

$ 16,269,000

$ 3,744,000

$ 4,708,000

$ 10,409,000

$ 13,176,000

$ 2,395,000

$ 1,087,000

$ 6,036,000

$ 3,093,000

Net Income (Loss) Attributable to Parent

(8,247,422)

(8,117,304)

(23,437,834)

(18,244,240)

(8,247,000)

(8,117,000)

(23,438,000)

(18,244,000)

(8,117,000)

(7,901,000)

(23,170,000)

(17,628,000)

(130,000)

(216,000)

(268,000)

(616,000)

Total assets

95,052,700

94,498,000

95,052,700

94,498,000

87,832,272

87,043,000

92,799,000

8,010,000

1,699,000

Long-Lived Assets

3,661,000

2,937,000

3,661,000

2,937,000

3,544,000

2,937,000

117,000

0

Debt of Subsidiary, Not Assumed

$ 6,000,000

$ 6,200,000

$ 6,000,000

$ 6,200,000

Percentage of total revenue

100.00%

47.00%

49.00%

48.00%

36.00%

22.00%

37.00%

25.00%

48.00%

31.00%

14.00%

27.00%

16.00%

RELATED PARTY TRANSACTIONS (Details) (USD $)

3 Months Ended

9 Months Ended

Sep. 30, 2017

Related Party Transactions [Abstract]

Receivables

$ 0

Payables

103,100

Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]

Sales

48,320

109,952

Purchases

207,694

390,619

Goertek [Member]

Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]

Sales

0

Purchases

207,694

390,619

Affiliate 1 [Member]

Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]

Sales

48,320

109,952

Purchases

$ 0

EMBEZZLEMENT (Details) (USD $)

3 Months Ended

9 Months Ended

Sep. 24, 2016

Quantifying Misstatement in Current Year Financial Statements [Line Items]

Unusual or Infrequent Item, or Both, Gain, Gross

$ 1,589,000

Unusual or Infrequent Item, or Both, Loss, Gross

$ 200,000

$ 420,000