KOPIN CORP, 10-K filed on 3/23/2018
Annual Report
v3.8.0.1
Document and Entity Information - USD ($)
12 Months Ended
Dec. 30, 2017
Mar. 14, 2018
Jul. 01, 2017
Document Documentand Entity Information [Abstract]      
Document Type 10-K    
Amendment Flag false    
Document Period End Date Dec. 30, 2017    
Document Fiscal Year Focus 2017    
Document Fiscal Period Focus FY    
Trading Symbol KOPN    
Entity Registrant Name KOPIN CORP    
Entity Central Index Key 0000771266    
Current Fiscal Year End Date --12-30    
Entity Well-known Seasoned Issuer No    
Entity Current Reporting Status Yes    
Entity Voluntary Filers No    
Entity Filer Category Accelerated Filer    
Entity Common Stock, Shares Outstanding   76,524,532  
Entity Public Float     $ 279,127,638
v3.8.0.1
CONSOLIDATED BALANCE SHEETS - USD ($)
Dec. 30, 2017
Dec. 31, 2016
Current assets:    
Cash and equivalents $ 24,848,227 $ 15,822,495
Marketable debt securities, at fair value 43,907,457 61,375,401
Accounts receivable, net of allowance of $149,000 and $136,000 in 2017 and 2016, respectively 3,955,123 1,664,488
Unbilled receivables 704,863 34,707
Inventory 5,080,797 3,302,112
Prepaid taxes 264,352 341,144
Prepaid expenses and other current assets 978,677 853,757
Total current assets 79,739,496 83,394,104
Property, plant and equipment, net 5,077,043 2,976,006
Goodwill 1,780,247 844,023
Intangible Assets, Net (Excluding Goodwill) 883,636 0
Other assets 3,842,068 618,139
Total assets 91,322,490 87,832,272
Current liabilities:    
Accounts payable 4,918,605 4,355,462
Accrued payroll and expenses 1,636,512 1,443,976
Accrued warranty 649,000 518,000
Billings in excess of revenue earned 896,479 981,761
Other accrued liabilities 2,066,025 2,560,144
Taxes Payable, Current 1,416,892 935,364
Deferred tax liabilities 520,000 2,571,000
Total current liabilities 12,103,513 13,365,707
Deferred Revenue, Noncurrent 374,171 0
Asset retirement obligations 269,877 246,922
Other long-term liabilities 1,195,082 0
Commitments and contingencies (Note 12)
Stockholders’ equity:    
Preferred stock, par value $.01 per share: authorized, 3,000 shares; none issued 0 0
Common stock, par value $.01 per share: authorized, 120,000,000 shares; issued 80,201,313 shares in 2017 and 79,648,618 shares in 2016; outstanding 73,058,783 in 2017 and 64,538,686 in 2016, respectively 775,720 766,409
Additional paid-in capital 331,119,340 328,524,644
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 3,564,779 1,570,971
Accumulated deficit (240,121,901) (214,042,787)
Total Kopin Corporation stockholders’ equity 78,099,269 74,077,686
Noncontrolling interest (719,422) 141,957
Total stockholders’ equity 77,379,847 74,219,643
Total liabilities and stockholders’ equity $ 91,322,490 $ 87,832,272
v3.8.0.1
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($)
Dec. 30, 2017
Dec. 31, 2016
Accounts receivable, allowance $ 149,000 $ 136,000
Preferred stock, par value $ 0.01 $ 0.01
Preferred stock, authorized 3,000 3,000
Preferred stock, issued 0 0
Common stock, par value $ 0.01 $ 0.01
Common stock, authorized 120,000,000 120,000,000
Common stock, issued 80,201,313 79,648,618
Common stock, outstanding 73,058,783 64,538,686
Treasury stock, shares 4,513,256 12,102,258
v3.8.0.1
CONSOLIDATED STATEMENT OF OPERATIONS - USD ($)
12 Months Ended
Dec. 30, 2017
Dec. 31, 2016
Dec. 26, 2015
Revenues:      
Net product revenues $ 24,894,805 $ 21,115,125 $ 28,163,118
Research and development revenues 2,946,685 1,527,441 3,891,301
Total revenues 27,841,490 22,642,566 32,054,419
Expenses:      
Cost of product revenues 18,118,418 17,814,271 21,524,826
Research and development-funded programs 3,364,658 786,867 3,006,352
Research and development-internal 15,515,057 15,252,794 14,625,061
Selling, general and administrative 20,541,244 16,961,773 18,134,580
Goodwill, Impairment Loss 600,086 0 0
Gain (Loss) on Disposition of Property Plant Equipment 0 (7,700,522) 0
Total expenses 58,139,463 43,115,183 57,290,819
Loss from operations (30,297,973) (20,472,617) (25,236,400)
Non-operating income (expense), net:      
Interest income 775,626 658,384 758,153
Other income (expense), net 247,291 (448,581) (210,488)
Foreign Currency Transaction Gain (Loss), Unrealized (1,068,059) (672,727) 661,192
Gain on investments 2,000,000 1,034,396 9,206,919
Total other income and expense 1,954,858 571,472 10,415,776
Loss before benefit (provision) for income taxes, and equity losses in unconsolidated affiliates and net loss (income) of noncontrolling interest (28,343,115) (19,901,145) (14,820,624)
Total (benefit) provision for income taxes 2,963,000 (3,130,000) 25,000
Income Before Minority Interest Earnings And Equity Investments (25,380,115) (23,031,145) (14,795,624)
Equity losses in unconsolidated affiliates 0 0 (47,443)
Net loss (25,380,115) (23,031,145) (14,843,067)
Net loss (income) attributable to the noncontrolling interest 139,633 (402,971) 149,651
Net loss attributable to the controlling interest $ (25,240,482) $ (23,434,116) $ (14,693,416)
Basic and diluted      
Earnings Per Share, Basic and Diluted $ (0.36) $ (0.37) $ (0.23)
Weighted average number of common shares outstanding:      
Weighted Average Number of Shares Outstanding, Basic and Diluted 69,914,956 64,045,675 63,465,797
v3.8.0.1
CONSOLIDATED STATEMENT OF COMPREHENSIVE LOSS Statement - USD ($)
12 Months Ended
Dec. 30, 2017
Dec. 31, 2016
Dec. 26, 2015
Net loss $ (25,380,115) $ (23,031,145) $ (14,843,067)
Other Comprehensive Income (Loss), Foreign Currency Transaction and Translation Adjustment, before Tax 1,921,655 809,099 (1,060,186)
Other Comprehensive Income (Loss), Unrealized Holding Gain (Loss) on Securities Arising During Period, before Tax 148,520 33,464 104,362
Other Comprehensive Income (Loss), Reclassification Adjustment from AOCI for Sale of Securities, before Tax (6,376) (48,284) (1,490,776)
Other Comprehensive Income (Loss), Net of Tax 2,063,799 794,279 (2,446,600)
Comprehensive Income (Loss), Net of Tax, Attributable to Parent (23,316,316) (22,236,866) (17,289,667)
Comprehensive Income (Loss), Net of Tax, Attributable to Noncontrolling Interest 69,642 (398,051) (91,200)
Comprehensive Income (Loss), Net of Tax, Including Portion Attributable to Noncontrolling Interest $ (23,246,674) $ (22,634,917) $ (17,380,867)
v3.8.0.1
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($)
Total
Common Stock
Additional Paid-in Capital
Treasury Stock
Accumulated Other Comprehensive Income (Loss)
Accumulated Deficit
Total Kopin Corporation Stockholders' Equity
Noncontrolling Interest
Beginning Balance (in shares) at Dec. 27, 2014   75,183,207            
Beginning Balance at Dec. 27, 2014 $ 109,387,303 $ 751,833 $ 324,625,694 $ (42,741,551) $ 3,126,239 $ (175,915,255) $ 109,846,960 $ (459,656)
Increase (Decrease) in Stockholders' Equity [Roll Forward]                
Exercise of stock options (in shares)   39,798            
Exercise of stock options   $ 398 85,649       86,047  
Stock Issued During Period, Shares, Restricted Stock Award, Net of Forfeitures   1,226,992            
Stock Issued During Period, Value, Restricted Stock Award, Net of Forfeitures   $ 12,270 (12,270)          
Stock-based compensation expense 3,373,479   3,373,479       3,373,479  
Other Comprehensive Income (Loss), Net of Tax (2,446,600)       (2,388,148)   (2,388,148) (58,452)
Income Before Minority Interest Earnings And Equity Investments     (445,344)          
Other Comprehensive Income Loss Foreign Currency Transaction And Translation Adjustments Before Tax 2       33,683   (411,661) 411,663
Restricted stock for tax withholding obligations (in shares)   (370,354)            
Restricted stock for tax withholding obligations (1,072,385) $ (3,704) (1,068,681)       (1,072,385)  
Net income (loss) (14,843,067)         (14,693,416) (14,693,416) (149,651)
Ending Balance (in shares) at Dec. 26, 2015   76,079,643            
Ending Balance at Dec. 26, 2015 94,484,780 $ 760,797 326,558,527 (42,741,551) 771,774 (190,608,671) 94,740,876 (256,096)
Increase (Decrease) in Stockholders' Equity [Roll Forward]                
Stock Issued During Period, Shares, Restricted Stock Award, Net of Forfeitures   736,842            
Stock Issued During Period, Value, Restricted Stock Award, Net of Forfeitures   $ 7,368 (7,368)          
Stock-based compensation expense 2,482,326   2,482,326       2,482,326  
Other Comprehensive Income (Loss), Net of Tax 794,279       799,197   799,197 (4,918)
Restricted stock for tax withholding obligations (in shares)   (175,542)            
Restricted stock for tax withholding obligations (510,597) $ (1,756) (508,841)       (510,597)  
Net income (loss) (23,031,145)         (23,434,116) (23,434,116) 402,971
Ending Balance (in shares) at Dec. 31, 2016   76,640,943            
Ending 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
Increase (Decrease) in Stockholders' Equity [Roll Forward]                
Stock Issued During Period, Shares, Restricted Stock Award, Net of Forfeitures   1,170,847            
Stock Issued During Period, Value, Restricted Stock Award, Net of Forfeitures   $ 11,708 (11,708)          
Stock-based compensation expense 3,375,330   3,375,330       3,375,330  
Other Comprehensive Income (Loss), Net of Tax 2,063,799       1,993,808     69,991
Restricted stock for tax withholding obligations (in shares)   (239,752)            
Restricted stock for tax withholding obligations (771,323) $ (2,397) (768,926)       (771,323)  
Stock Issued During Period, Value, Treasury Stock Reissued 24,664,250     25,502,882     24,664,250  
Noncontrolling Interest, Decrease from Distributions to Noncontrolling Interest Holders (791,737)             (791,737)
Gain (Loss) on Sale of Treasury Stock           (800,000)    
Net income (loss) (25,380,115)         (25,240,482) (25,240,482) (139,633)
Ending Balance (in shares) at Dec. 30, 2017   77,572,038            
Ending Balance at Dec. 30, 2017 $ 77,379,847 $ 775,720 $ 331,119,340 $ (17,238,669) $ 3,564,779 $ (240,121,901) $ 78,099,269 $ (719,422)
v3.8.0.1
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)
12 Months Ended
Dec. 30, 2017
Dec. 31, 2016
Dec. 26, 2015
Statement of Cash Flows [Abstract]      
Payments of Dividends $ (791,737) $ 0 $ 0
Cash flows from operating activities:      
Net loss (25,380,115) (23,031,145) (14,843,067)
Adjustments to reconcile net loss to net cash used in operating activities:      
Depreciation and amortization 2,501,891 993,621 2,138,982
Accretion of premium or discount on marketable debt securities 41,364 130,032 168,217
Stock-based compensation 2,296,131 2,425,326 3,145,479
Net gain on investment transactions (2,000,000) (1,034,396) (9,206,919)
Gain (Loss) on Disposition of Property Plant Equipment, Excluding Oil and Gas Property and Timber Property 0 0 180,715
Deferred income taxes (2,421,040) 1,451,858 (75,000)
Foreign Currency Transaction Gain (Loss), before Tax 893,260 711,356 (455,614)
Gain (Loss) on Disposition of Property Plant Equipment 0 (7,700,522) 0
Goodwill, Impairment Loss 600,086 0 0
Change in allowance for bad debt 13,000 (17,000) (112,500)
Change in warranty reserves 654,694 677,330 1,560,259
Extended Product Warranty Accrual, Preexisting Increase (Decrease) 142,328 0 (200,000)
Changes in assets and liabilities:      
Accounts receivable (2,376,593) (39,629) 2,850,942
Inventory (1,633,027) (1,527,602) (8,484)
Prepaid expenses and other current assets (1,084,146) 48,295 (207,421)
Accounts payable and accrued expenses 1,924,751 1,163,586 (2,632,385)
Billings in excess of revenue earned (85,282) (425,805) 777,247
Net cash used in operating activities (25,912,698) (26,174,695) (16,919,549)
Cash flows from investing activities:      
Proceeds from sale of marketable debt securities 37,536,004 50,835,253 38,055,759
Purchase of marketable debt securities (19,633,903) (51,828,988) (22,835,740)
Proceeds from Sale and Maturity of Other Investments 0 1,034,396 9,206,919
Business Combination, Consideration Transferred (3,690,047) 0 0
Proceeds from Divestiture of Businesses 0 15,000,000 0
Increase (Decrease) in Assets Held-for-sale 0 8,106,819 0
Other assets (140,860) 80,793 (1,772)
Capital expenditures (2,794,467) (394,897) (1,122,808)
Net cash provided by investing activities 11,276,727 22,833,376 23,302,358
Cash flows from financing activities:      
Proceeds from Sale of Treasury Stock 24,664,250 0 0
Proceeds from exercise of stock options and warrants 0 0 86,047
Settlements of restricted stock for tax withholding obligations (771,323) (510,597) (1,072,385)
Net cash provided by (used in) financing activities 23,101,190 (510,597) (986,338)
Effect of exchange rate changes on cash 560,513 (93,478) (264,383)
Net increase (decrease) in cash and equivalents 9,025,732 (3,945,394) 5,132,088
Cash and equivalents:      
Cash and cash equivalents at beginning of year 15,822,495 19,767,889  
Cash and cash equivalents at end of year 24,848,227 15,822,495 19,767,889
Supplemental schedule of noncash investing activities:      
Income Taxes Paid, Net 281,000 723,000 50,000
Construction in Progress Expenditures Incurred but Not yet Paid $ 212,000 $ 0 $ 0
v3.8.0.1
Summary of Significant Accounting Policies
12 Months Ended
Dec. 30, 2017
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies
 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.
Fiscal Year
The Company’s fiscal year ends on the last Saturday in December. The fiscal years ended December 30, 2017 includes 52 weeks, December 31, 2016 includes 53 weeks and December 26, 2015 includes 52 weeks, and are referred to as fiscal years 2017, 2016 and 2015, respectively, herein. The impact of the 53rd week in the 2016 fiscal year was not material to the Company's results of operations.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries, a majority owned 93% subsidiary, Kowon Technology Co., Ltd. ("Kowon"), located in Korea, and a majority owned 80% subsidiary, eMDT America Inc ("eMDT"), located in California (collectively the Company). In the fourth quarter of 2015, the Company increased its investment in Kopin Software Ltd. ("KSL") (formerly Intoware Ltd.) from 58% to 100%. Net loss attributable to noncontrolling interest in the Company's Consolidated Statement 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.
Revenue Recognition
We recognize revenue if four basic criteria have been met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred and services rendered; (3) the price to the buyer is fixed or determinable; and (4) collectability is reasonably assured. We do not recognize revenue for products prior to customer acceptance unless we believe the product meets all customer specifications and has a history of consistently achieving customer acceptance of the product. Provisions for product returns and allowances are recorded in the same period as the related revenues. We analyze historical returns, current economic trends and changes in customer demand and acceptance of product when evaluating the adequacy of sales returns and other allowances. Certain product sales are made to distributors under agreements allowing for a limited right of return on unsold products. Sales to distributors are primarily made for sales to the distributors' customers and not for stocking of inventory. We delay revenue recognition for our estimate of distributor claims of right of return on unsold products based upon our historical experience with our products and specific analysis of amounts subject to return based upon discussions with our distributors or their customers.
We recognize revenues from long-term research and development government contracts on the percentage-of-completion method of accounting as work is performed, based upon the ratio of costs or hours already incurred to the estimated total cost of completion or hours of work to be performed. Revenue recognized at any point in time is limited to the amount funded by the U.S. government or contracting entity. We recognize revenue for product development and research contracts that have established prices for distinct phases when delivery and acceptance of the deliverable for each phase has occurred. In some instances, we are contracted to create a deliverable which is anticipated to go into full production. In those cases, we discontinue the percentage-of-completion method after formal qualification of the deliverable has been completed and revenue is then recognized based on the criteria established for sale of products. In certain instances, qualification may be achieved and delivery of production units may commence however our customer may have either identified new issues to be resolved or wish to incorporate a newer display technology. In these circumstances new units delivered will continue to be accounted for under the criteria established for sale of products. Under certain of our research and development contracts, we recognize revenue using a milestone methodology. This revenue is recognized when we achieve specified milestones based on our past performance.
We classify amounts earned on contracts in progress that are in excess of amounts billed as unbilled receivables and we classify amounts received in excess of amounts earned as billings in excess of revenues earned. We invoice based on dates specified in the related agreement or in periodic installments based upon our invoicing cycle. We recognize the entire amount of an estimated ultimate loss in our financial statements at the time the loss on a contract becomes known.
Accounting for design, development and production contracts requires judgment relative to assessing risks, estimating contract revenues and costs, and making assumptions for schedule and technical issues. Due to the size and nature of the work required to be performed on many of our contracts, the estimation of total revenue and cost at completion is complicated and subject to many variables. Contract costs include material, labor and subcontracting costs, as well as an allocation of indirect costs. We have to make assumptions regarding the number of labor hours required to complete a task, the complexity of the work to be performed, the availability and cost of materials, and performance by our subcontractors. For contract change orders, claims or similar items, we apply judgment in estimating the amounts and assessing the potential for realization. These amounts are only included in contract value when they can be reliably estimated and realization is considered probable. We have accounting policies in place to address these as well as other contractual and business arrangements to properly account for long-term contracts. If our estimate of total contract costs or our determination of whether the customer agrees that a milestone is achieved is incorrect, our revenue could be overstated and profits would be negatively impacted.
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 and Cash 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 United States 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 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 of marketable debt securities were not material during fiscal years 2017, 2016 and 2015.
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 estimated obsolescence equal to the difference between the cost of inventory and the estimated net realizable value based upon assumptions about future demand and market conditions. 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 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.
We regularly review inventory quantities on-hand and in the retail channels. We write down inventory based on excess or obsolete inventories determined primarily by future anticipated demand for our products. Inventory write-downs are measured as the difference between the cost of the inventory and net realizable value, based upon assumptions about future demand, which are inherently difficult to assess and dependent on market conditions. 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 30, 2017 and December 31, 2016:
 
2017
 
2016
Raw materials
$
2,070,153

 
$
1,986,491

Work-in-process
1,829,805

 
1,186,162

Finished goods
1,180,839

 
129,459

 
$
5,080,797

 
$
3,302,112


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 10 years. Leasehold improvements and leased equipment are amortized over the shorter of the term of the lease 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.
Collaborative Arrangements
The Company evaluates whether an arrangement is a collaborative arrangement under the Financial Accounting Standards Board (the “FASB”) Accounting Standards Codification (“ASC”) Topic 808Collaborative Arrangements, at its inception based on the facts and circumstances specific to the arrangement. The Company also reevaluates whether an arrangement qualifies or continues to qualify as a collaborative arrangement whenever there is a change in either the roles of the participants or the participants’ exposure to significant risks and rewards dependent on the ultimate commercial success of the endeavor. For those collaborative arrangements where it is determined that the Company is the principal participant, costs incurred and revenue generated from third parties are recorded on a gross basis in the financial statements.
From time to time, the Company enters into collaborative arrangements for the research and development, manufacture and/or commercialization of products. The Company’s collaboration agreements with third parties are performed on a ‘‘best efforts’’ basis with no guarantee of either technological or commercial success.
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. Accrued warranty costs and warranty claims are not material in the periods presented.
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 the current portion of deferred revenue under other accrued liabilities in its consolidated balance sheets. The Company currently has $0.7 million of deferred revenue related to extended warranties at December 30, 2017.
Asset Retirement Obligations
The Company recorded asset retirement obligations ("ARO") liabilities of $0.3 million and $0.2 million at December 30, 2017 and December 31, 2016, respectively. This represents the legal obligations associated with 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 2017 and 2016 are as follows:
 
2017
 
2016
Beginning balance
$
246,922

 
$
298,463

Exchange rate change
22,955

 
(51,541
)
Ending balance
$
269,877

 
$
246,922


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.

Foreign Currency
Assets and liabilities of non-U.S. operations where the functional currency is other than the U.S. dollar are 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 less any unvested restricted shares. Diluted net loss per share is calculated using weighted-average shares outstanding and contingently issuable shares, less weighted-average shares reacquired during the period. The net outstanding shares are adjusted for the dilutive effect of shares issuable upon the assumed conversion of the Company’s common stock equivalents, which consist of outstanding stock options and unvested restricted stock.
The following were not included in weighted-average common shares outstanding-diluted because they are anti-dilutive or performance conditions have not been met at the end of the period:
 
2017
 
2016
 
2015
Nonvested restricted common stock
2,629,274

 
3,007,674

 
2,192,016


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 consumer electronic devices and wireless components or military applications. The Company sells its products to customers worldwide and generally does not require collateral. The Company maintains a reserve for potential credit losses.
The Company primarily invests its excess cash in government backed and corporate debt securities that management believes to be of high credit worthiness, which bear lower levels of relative credit risk. The Company relies on rating agencies to ascertain the credit worthiness of its marketable securities and, where applicable, guarantees made by the Federal Deposit Insurance Company.
Fair Value of Financial Instruments
Financial instruments consist of marketable debt securities, accounts receivable and certain current liabilities. These assets (excluding marketable securities which are recorded at fair value) and liabilities are carried at cost, which approximates fair value.
Marketable Debt 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 year ended December 30, 2017 and December 31, 2016.
Other-than-Temporary Impairments
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 any OTTI for the fiscal years 2017, 2016 and 2015.
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 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 market condition. 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.
The value of restricted stock grants that vest based on market conditions is computed on the date of grant using the Monte Carlo model. The fair value of stock option awards is estimated on the date of grant using the Black-Scholes-Merton option-pricing model. There were no stock options granted in fiscal years 2017, 2016 or 2015.
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:
 
Cumulative
Translation
Adjustment
 
Unrealized Holding
 Gain (Loss) on
Marketable
Securities
 
Accumulated Other
Comprehensive
Income
Balance as of December 27, 2014
$
1,534,075

 
$
1,592,164

 
$
3,126,239

Changes during year
(968,050
)
 
(1,386,415
)
 
(2,354,465
)
Balance as of December 26, 2015
566,025

 
205,749

 
771,774

Changes during year
814,017

 
(14,820
)
 
799,197

Balance as of December 31, 2016
1,380,042

 
190,929

 
1,570,971

Changes during year
1,851,664

 
142,144

 
1,993,808

Balance as of December 30, 2017
$
3,231,706

 
$
333,073

 
$
3,564,779


Goodwill and Other Indefinite-Lived Assets
We account for goodwill in accordance with ASC Topic 350. Under ASC Topic 350, goodwill is considered to have an indefinite life, and is carried at cost. Acquired trade names are assessed as indefinite lived assets if there is no foreseeable limits on the periods of time over which they are expected to contribute cash flows. Goodwill and indefinite-lived assets are not amortized, but are subject to an annual impairment test, as well as between annual tests when events or circumstances indicate that the carrying value may not be recoverable. We perform our annual impairment testing at the end of each fiscal year.
Our annual goodwill impairment test is performed at the reporting unit level. We have determined our reporting units based on the guidance within ASC Subtopic 350-20. As of December 30, 2017 and December 31, 2016, our reporting units are the same as our operating segments. Indicators of impairment include, but are not limited to, the loss of significant business or other significant adverse changes in industry or market conditions. The Company reviews the carrying amounts of goodwill and other indefinite-lived assets annually, or when indications of impairment exist, to determine if such assets may be impaired by performing a quantitative assessment. We estimate the fair value of our reporting units using a discounted cash flow model based on our most recent long-range plan in place at the time of our impairment testing, and compare the estimated fair value of each reporting unit to its net book value, including goodwill. Significant changes in these forecasts or the discount rate selected could affect the estimated fair value of one or more of our reporting units and could result in a goodwill impairment charge in a future period. 
Impairment of Long-Lived Assets
The Company periodically reviews the carrying value of its long-lived assets to determine if facts and circumstances suggest that they may be impaired or that the amortization or depreciation period may need to be changed. The carrying value of a long-lived asset is considered impaired when the anticipated identifiable undiscounted cash flows from such asset are less than its carrying value. For assets that are to be held and used, impairment is measured based upon the amount by which the carrying amount of the asset exceeds its fair value.
Recently Issued Accounting Pronouncements
Revenue from Contracts with Customers
The Company plans to adopt ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) effective December 31, 2017 (the first day of the Company's fiscal year 2018) and apply the modified retrospective method. This comprehensive new standard will supersede existing revenue recognition guidance and require revenue to be recognized when promised goods or services are transferred to customers in amounts that reflect the consideration to which the company expects to be entitled in exchange for those goods or services. The standard also requires expanded disclosures regarding revenue and contracts with customers.
The adoption of the new standard may have a material impact on the Company’s consolidated statement of operations and consolidated balance sheets. We currently expect that some of our military contracts that recognize revenue as products are shipped to customers will begin to recognize revenue under the new standard on a percentage of completion method using a cost to cost approach. This new approach may affect the timing of revenue and expense recognition and will rely more on management's judgments on the timing of revenue recognition and the timing and estimates of cost to fulfill contracts.
Upon the adoption of ASC 606 using the modified retrospective method on December 31, 2017, the Company will 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 assessment of this adjustment under the new standard has been omitted from this Annual Report on Form 10-K because the assessment was incomplete as of the filing date. We are in the process of finalizing the results from the adoption and the adjustment under the new standard will be included in the Company's Quarterly Report on Form 10-Q for the first quarter of 2018. The new standard requires additional detailed disclosures regarding the Company’s contracts with customers, including disclosure of remaining unsatisfied performance obligations, in the first quarter 2018 which we are continuing to assess. We are also identifying and implementing changes to the Company’s business processes, systems and controls to support adoption of the new standard in 2018.
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 December 30, 2018 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 our consolidated balance sheets.
Classification of Certain Cash Receipts and Cash Payments
In August 2016, the FASB issued ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments (Topic 230). The standard addresses the classification and presentation of eight specific cash flow issues that currently result in diverse practices. This pronouncement is effective for annual reporting periods beginning after December 15, 2017. The Company will adopt this standard on December 31, 2017. The Company does not expect the potential impact of adopting ASU 2016-15 to be material to our financial position, results of operations or liquidity.
Intangibles - Goodwill and Other
In January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. ASU 2017-04 simplifies the subsequent measurement of goodwill by eliminating “Step 2” from the goodwill impairment test. The amendment also eliminates the requirement for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company has adopted this amendment in its test of goodwill impairment for the fiscal year ended December 30, 2017.
Stock Compensation
In May 2017, the FASB issued ASU No. 2017-09, Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting (ASU 2017-09), which clarifies when to account for a change to the terms or conditions of a share-based payment award as a modification. Under the new guidance, modification accounting is required only if the fair value, the vesting conditions, or the classification of the award changes as a result of the change in terms or conditions. The amendments in this ASU also clarify that no new measurement date will be required if an award is not probable of vesting at the time a change is made and there is no change to the fair value, vesting conditions, and classification. The amendments in this ASU are effective for public business entities for annual periods beginning after December 15, 2017, including interim periods within those annual periods. We intend to adopt the standard prospectively after the effective date and have determined this ASU has an immaterial impact to our financial position, results of operations or liquidity.
v3.8.0.1
Property, Plant and Equipment
12 Months Ended
Dec. 30, 2017
Property, Plant and Equipment [Abstract]  
Property, Plant and Equipment
Property, Plant and Equipment
Property, plant and equipment consisted of the following at December 30, 2017 and December 31, 2016:
 
Useful Life
 
2017
 
2016
Equipment
3-5 years
 
$
16,811,526

 
$
17,886,124

Leasehold improvements
Life of the lease
 
3,851,269

 
3,721,176

Furniture and fixtures
3 years
 
531,870

 
488,802

Equipment under construction
 
 
2,415,957

 
88,227

 
 
 
23,610,622

 
22,184,329

Accumulated depreciation and amortization
 
 
(18,533,579
)
 
(19,208,323
)
Property, plant and equipment, net
 
 
$
5,077,043

 
$
2,976,006


In June 2016, the Company's subsidiary Kowon sold its plant and the land on which the plant resided for approximately $8.1 million and recognized a gain of $7.7 million. Other than the sales of the Kowon plant and land there were no material gains or losses on disposals of long-lived assets in fiscal years 2017, 2016 and 2015. Depreciation expense for the fiscal years 2017, 2016 and 2015 was approximately $0.9 million, $1.0 million and $1.5 million, respectively.
Collaborative Arrangements
The Company signed an agreement to jointly purchase and jointly own an advanced production OLED deposition machine with another party to be installed within the other party's facility in order to augment the other party’s existing capacity. This OLED deposition machine is expected to be placed in service in 2018. Under the terms of the agreement, the Company will be entitled to 50% of the new machine capacity. The Company includes the machine in equipment under property, plant and equipment, net, in its consolidated balance sheets. At December 30, 2017, the Company has paid $1.8 million of the expected total cost of $2.0 million for the machine.
v3.8.0.1
Other Assets
12 Months Ended
Dec. 30, 2017
Other Assets [Abstract]  
Other Assets
Other Assets
Marketable Equity Securities
As of December 30, 2017 and December 31, 2016, the Company had an investment in GCS Holdings which had a fair market value of $0.5 million and $0.3 million, respectively, and an adjusted cost basis of $0.0 million.
Non-Marketable Securities
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. As of December 30, 2017, the Company recognized a gain of $2.0 million, which is the fair value of the warrant.
v3.8.0.1
Business Combinations
12 Months Ended
Dec. 30, 2017
Business Combinations [Abstract]  
Business Combinations
Business Combinations
In March 2017, we purchased 100% of the outstanding stock of NVIS, Inc. ("NVIS") for $3.7 million. NVIS produces virtual reality systems for 3D applications. Additional payments by the Company of up to $2.0 million may be required if certain future operating performance milestones are met and the selling shareholders remain employed with NVIS 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.
The identifiable assets acquired and liabilities assumed at the acquisition date have been recognized at fair value.
The allocation of the purchase price as of the acquisition date 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. No significant adjustments were recorded to the purchase price allocation during the measurement period. During the fourth quarter of 2017, we finalized the fair values of the acquired assets and liabilities.
The identified intangible assets are being amortized on a straight-line basis over the following lives, in years:
Order backlog
1
Customer relationships
2
Developed technology
2
Trademark portfolio
2

In conjunction with the acquisition, the Company recorded deferred tax liabilities of approximately $1.1 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. The Company reduced the valuation allowance on its net deferred tax assets in the amount of $1.1 million and such reduction was recognized as a benefit for income taxes for 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 fiscal year ended December 30, 2017 and December 31, 2016, assuming the acquisition of the company had occurred as of December 26, 2015. All intercompany transactions have been eliminated.
Fiscal year ended
2017
 
2016
Revenues
$
28,477,870

 
$
25,029,681

Net loss
(26,302,840
)
 
(23,736,518
)
Basic and diluted earnings per share
$
(0.38
)
 
$
(0.37
)

Since the date of acquisition, the Company recorded revenue and net income of $9.1 million and $0.2 million, respectively.
v3.8.0.1
Goodwill and Intangibles (Notes)
12 Months Ended
Dec. 30, 2017
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill and Intangibles
 Goodwill and Intangibles
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 of NVIS, Inc.

 
1,488,650

 
1,488,650

Impairment of goodwill from NVIS, Inc.

 
(600,086
)
 
(600,086
)
Change due to exchange rate fluctuations
47,660

 

 
47,660

Balance, December 30, 2017
$
891,683

 
$
888,564

 
$
1,780,247


The Company performs impairment tests of goodwill at its reporting unit level. The Company conducts its annual goodwill impairment test on the last day of each fiscal year unless factors indicate that an impairment may have occurred. At December 30, 2017, the Company performed an impairment analysis of goodwill based on a comparison of the discounted cash flows to the recorded carrying value of the reporting units, and determined that the discounted cash flows were less than the carrying value of the NVIS reporting unit. The input methods for goodwill and intangibles are analyzed for impairment on a nonrecurring basis using fair value measurements with unobservable inputs, which is Level 3 in the fair value hierarchy. As a result, the Company recorded an impairment of $0.6 million related to NVIS's goodwill at December 30, 2017.
The Company recognized $1.6 million, $0.0 million and $0.6 million in amortization expense for the fiscal years ended 2017, 2016 and 2015, respectively, related to intangible assets. At December 30, 2017, the Company has a carrying value of $2.5 million, accumulated amortization of $1.6 million and a net book value of $0.9 million related to intangibles. The intangibles have a remaining life of 1 year.
v3.8.0.1
Financial Instruments
12 Months Ended
Dec. 30, 2017
Financial Instruments [Abstract]  
Financial Instruments
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. 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 at December 30, 2017 Using:
 
Total
 
Level 1        
 
Level 2        
 
Level 3        
Cash and cash equivalents
$
24,848,227

 
$
24,848,227

 
$

 
$

U.S. government and agency backed securities
34,725,811

 
6,927,323

 
27,798,488

 

Corporate debt
8,980,906

 

 
8,980,906

 

Certificates of deposit
200,740

 

 
200,740

 

GCS Holdings
478,546

 
478,546

 

 

Warrant
2,000,000

 

 

 
2,000,000

 
$
71,234,230

 
$
32,254,096

 
$
36,980,134

 
$
2,000,000

 
 
 
Fair Value Measurement at December 31, 2016 Using:
 
Total
 
Level 1        
 
Level 2        
 
Level 3        
Cash and cash equivalents
$
15,822,495

 
$
15,822,495

 
$

 
$

U.S. government and agency backed 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

 
$


Transfers between levels of the fair value hierarchy are reported at the beginning of the reporting period in which they occur.
Changes in Level 3 investments are as follows:
 
December 31, 2016
 
Net unrealized gains/(losses)
 
Purchases, issuances and settlements
 
Transfers in and or out of Level 3
 
December 30, 2017
Warrant
$

 
$
2,000,000

 
$

 
$

 
$
2,000,000

 
$

 
$
2,000,000

 
$

 
$

 
$
2,000,000


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 Company used the pricing and terms of the qualified financing round by the customer in determining the value of its warrant. Subsequent to year-end, the customer closed the qualified financing round and the Company expects to exercise the warrant in the first quarter of 2018.
The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate fair value because of their short-term nature. If accrued liabilities were carried at fair value, these would be classified as Level 2 in the fair value hierarchy.
Marketable Debt Securities
Investments in available-for-sale marketable debt securities are as follows at December 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
$
35,014,593

 
$
36,343,817

 
$

 
$

 
$
(288,782
)
 
$
(252,556
)
 
$
34,725,811

 
$
36,091,261

Corporate debt
8,988,608

 
7,596,755

 

 

 
(7,702
)
 
(39,727
)
 
8,980,906

 
7,557,028

Certificates of deposits
201,000

 
17,726,673

 

 
439

 
(260
)
 

 
200,740

 
17,727,112

Total
$
44,204,201

 
$
61,667,245

 
$

 
$
439

 
$
(296,744
)
 
$
(292,283
)
 
$
43,907,457

 
$
61,375,401


 
The contractual maturity of the Company’s marketable debt securities is as follows at December 30, 2017:
 
Less than
One year
 
One to
Five years
 
Greater than
Five years
 
Total
U.S. government and agency backed securities
$
20,390,246

 
$
12,411,125

 
$
1,924,440

 
$
34,725,811

Corporate debt
1,715,720

 
7,265,186

 

 
8,980,906

Certificates of deposits
200,740

 

 

 
200,740

Total
$
22,306,706

 
$
19,676,311

 
$
1,924,440

 
$
43,907,457

v3.8.0.1
Stockholders' Equity and Stock-Based Compensation
12 Months Ended
Dec. 30, 2017
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Stockholders' Equity and Stock-Based Compensation
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 represented 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. At completion of the transaction, the U.S. Government requested certain information regarding the transaction for the Committee on Foreign Investment. See Note 17. Related Party Transactions for additional discussion around agreements with Goertek.
On December 31, 2017 (fiscal year beginning 2018), the Company amended the employment agreement with our CEO Dr. John Fan to expire on December 31, 2020 and as part of the amendment issued restricted stock grants. 640,000 shares of restricted stock which will vest upon the first 20 consecutive trading day period following the grant date during which the Company's common stock trades at a price equal to or greater than $5.25150,000 shares of restricted stock will vest at the end of the first 20 consecutive trading day period following the grant date during which the Company’s common stock trades at a price per share equal to or greater than $6.00, and 150,000 shares of restricted common stock will vest at the end of the first 20 consecutive trading day period following the grant date during which the Company’s common stock trades at a price per share equal to or greater than $7.00. All of the grants are subject to certain acceleration events and terminate on December 31, 2020.
Restricted Stock Awards
In 2010, the Company adopted a 2010 Equity Incentive Plan (the 2010 Equity Plan) which authorized the issuance of shares of common stock to employees, non-employees, and the Board. The 2010 Equity Plan was a successor to the Company’s 2001 Equity Incentive Plan ("2001 Equity Plan") and has been subsequently amended to increase the number of authorized shares to 13,100,000 as of December 30, 2017. The number of shares authorized under the 2010 Equity Plan is the number of shares approved by the shareholders plus the number of shares of common stock which were available for grant under the 2001 Equity Plan, the number of shares of common stock which were the subject of awards outstanding under the 2001 Equity Plan and are forfeited, terminated, canceled or expire after the adoption of the 2010 Equity Plan and the number of shares of common stock delivered to the Company either in exercise of an 2001 Equity Plan award or in satisfaction of a tax withholding obligation. The term and vesting period for restricted stock awards granted under the 2010 Equity Plan are determined by the Board’s compensation committee.
As of December 30, 2017, the Company has approximately 1.3 million shares of common stock authorized and available for issuance under the Company’s 2010 Equity Plan.
The Company has issued shares of nonvested restricted common stock to certain employees. Each award requires 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 meeting performance criteria. Restricted stock activity was as follows:
 
Shares
 
Weighted
Average
Grant
Fair Value
Outstanding at December 27, 2014
2,551,631

 
$
3.75

Granted
1,255,696

 
3.77

Forfeited
(388,320
)
 
3.64

Vested
(1,226,991
)
 
3.68

Outstanding at December 26, 2015
2,192,016

 
3.82

Granted
1,663,000

 
2.40

Forfeited
(110,500
)
 
3.21

Vested
(736,842
)
 
3.17

Balance at December 31, 2016
3,007,674

 
3.21

Granted
1,152,000

 
3.40

Forfeited
(465,150
)
 
3.82

Vested
(1,065,250
)
 
2.90

Balance at December 30, 2017
2,629,274

 
$
3.31



The forfeitures in 2017 were primarily due to fact that the performance criteria related to these awards were not achieved.
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 2017, 2016 and 2015 (no tax benefits were recognized):
 
2017
 
2016
 
2015
Cost of product revenues
$
490,481

 
$
561,791

 
$
729,715

Research and development
799,485

 
527,081

 
776,946

Selling, general and administrative
1,006,165

 
1,336,454

 
1,638,818

Total
$
2,296,131

 
$
2,425,326

 
$
3,145,479


Unrecognized compensation expense for non-vested restricted common stock as of December 30, 2017 totaled $6.0 million and is expected to be recognized over a weighted average period of approximately two years.
v3.8.0.1
Concentrations of Risk
12 Months Ended
Dec. 30, 2017
Risks and Uncertainties [Abstract]  
Concentrations of Risk
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:
 
Percent of Gross
Accounts Receivable
Customer
December 30,
2017
 
December 31,
2016
Elbit Systems
*
 
21%
DRS Technologies
*
 
19%
Scott Safety
14%
 
18%
RealWear, Inc.
10%
 
*
U.S. Army
43%
 
*
Note: The symbol “*” indicates that accounts receivables from that customer were less than 10% of the Company’s total accounts receivable.
Sales to significant non-affiliated customers for fiscal years 2017, 2016 and 2015, as a percentage of total revenues, is as follows:
 
Sales as a Percent
of Total Revenue
 
Fiscal Year
Customer
2017
 
2016
 
2015
Military Customers in Total
48%
 
24%
 
32%
Raytheon Company
*
 
*
 
18%
DRS Technologies
10%
 
*
 
*
Google, Inc.
*
 
*
 
22%
Rockwell Collins
10%
 
12%
 
*
Shenzhen Oriscape
*
 
20%
 
*
U.S. Army
12%
 
*
 
*
Funded Research and Development Contracts
11%
 
7%
 
12%

Note: The symbol “*” indicates that sales to that customer were less than 10% of the Company’s total revenues. The caption "Military Customers in Total" excludes research and development contracts.
v3.8.0.1
Income Taxes
12 Months Ended
Dec. 30, 2017
Income Tax Disclosure [Abstract]  
Income Taxes
Income Taxes
The (benefit) provision for income taxes from continuing operations consists of the following for the fiscal years indicated: 
 
Fiscal Year
 
2017
 
2016
 
2015
Current
 
 
 
 
 
State
$
5,000

 
$
33,000

 
$
50,000

Foreign
(568,000
)
 
1,656,000

 

Total current provision
(563,000
)
 
1,689,000

 
50,000

Deferred
 
 
 
 
 
Federal
15,461,000

 
(8,718,000
)
 
(5,356,000
)
State
(493,000
)
 
(1,264,000
)
 
(62,000
)
Foreign
(187,000
)
 
2,308,000

 
188,000

Change in valuation allowance
(17,181,000
)
 
9,115,000

 
5,155,000

Total deferred (benefit) provision
(2,400,000
)
 
1,441,000

 
(75,000
)
Total (benefit) provision for income taxes
$
(2,963,000
)
 
$
3,130,000

 
$
(25,000
)

The benefit for income taxes for the fiscal year ended 2017 of $3.0 million was driven by a reduction in foreign tax expense for the rate difference on a dividend distribution from the Company's Korean subsidiary of $0.8 million, an increase of uncertain tax positions of $0.2 million, the recognition of $1.1 million of net deferred tax liabilities in connection with the NVIS acquisition provided evidence of recoverability of the Company's net deferred tax tax assets that previously carried a full valuation allowance and resulted in a reduction in the valuation allowance of $1.1 million, a $1.0 million AMT credit carryforward that is expected to be utilized in the future and $0.3 million tax benefit related to the Kowon embezzlement loss.
The following table sets forth the changes in Kopin's balance of unrecognized tax benefits for the year ended:

Total
Unrecognized tax benefits at December 26, 2015
$

Gross increases—prior year tax positions
374,000

Unrecognized tax benefits at December 31, 2016
374,000

Gross increases—current year tax positions
20,000

Unrecognized tax benefits at December 30, 2017
$
394,000


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 Kopin's income tax returns. The total amount of our 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 30, 2017 and December 31, 2016. Kopin'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 $0.5 million and $0.3 million as of December 30, 2017 and December 31, 2016, respectively.
Net operating losses were not utilized in 2017, 2016 and 2015 to offset federal and state taxes.
The actual income tax (benefit) provision reported from operations are different than those which would have been computed by applying the federal statutory tax rate to loss before income tax (benefit) provision. A reconciliation of income tax (benefit) 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:
 
Fiscal Year
 
2017
 
2016
 
2015
Tax provision at federal statutory rates
$
(9,884,000
)
 
$
(6,965,000
)
 
$
(5,187,000
)
State tax liability
5,000

 
22,000

 
33,000

Foreign deferred tax rate differential
15,000

 
(678,000
)
 
153,000

Foreign withholding
(771,000
)
 
1,441,000

 
(75,000
)
Outside basis in Kowon, net unremitted earnings
(2,888,000
)
 
958,000

 
(180,000
)
Permanent items
774,000

 
259,000

 
(402,000
)
Increase in net state operating loss carryforwards
(300,000
)
 
(502,000
)
 
(158,000
)
Utilization of net operating losses for U.K. research and development refund

 
(142,000
)
 
719,000

Provision to tax return adjustments and tax rate change (1)
24,833,000

 
(66,000
)
 
264,000

Tax credits
24,000

 
(762,000
)
 
(501,000
)
Non-deductible 162M compensation limitations
199,000

 

 
40,000

Non-deductible equity compensation
1,901,000

 
(360,000
)
 
(34,000
)
Uncertain tax position for transfer pricing
203,000

 
671,000

 

Other, net
107,000

 
139,000

 
148,000

Change in valuation allowance
(17,181,000
)
 
9,115,000

 
5,155,000

 
$
(2,963,000
)
 
$
3,130,000

 
$
(25,000
)

(1)
Due to the Tax Act which was enacted in December 2017, our U.S. deferred tax assets and liabilities as of December 30, 2017 were re-measured to 21%. The provisional amount recorded related to the remeasurement of our deferred tax balance was approximately $25.1 million of tax expense.
Pretax foreign loss from continuing operations was approximately $0.4 million for fiscal year ended 2017, pretax foreign income from continuing operations was approximately $5.4 million for fiscal year ended 2016 and pretax foreign losses from continuing operations were approximately $1.0 million for fiscal year ended 2015. 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: 
 
Fiscal Year
 
2017
 
2016
Deferred tax liability:
 
 
 
Foreign withholding liability
$
(812,000
)
 
$
(2,571,000
)
Foreign unremitted earnings
(468,000
)
 
(3,659,000
)
Intangible assets
(259,000
)
 

Deferred tax assets:
 
 
 
Federal net operating loss carryforwards
34,555,000

 
46,968,000

State net operating loss carryforwards
2,708,000

 
2,129,000

Foreign net operating loss carryforwards
1,500,000

 
1,375,000

Equity awards
55,000

 
2,258,000

Tax credits
7,470,000

 
7,495,000

Property, plant and equipment
544,000

 
814,000

Unrealized losses on investments
1,792,000

 
3,535,000

Other
3,037,000

 
5,823,000

Net deferred tax assets
50,122,000

 
64,167,000

Valuation allowance
(50,642,000
)
 
(66,738,000
)
 
$
(520,000
)
 
$
(2,571,000
)

The valuation allowance was approximately $50.6 million and $66.7 million at December 30, 2017 and December 31, 2016, respectively, primarily driven by U.S. net operating loss carryforwards ("NOLs") and tax credits that the Company does not believe will ultimately be realized.
On December 22, 2017, the 2017 Tax Cuts and Jobs Act ("the Tax Act") was enacted into law and the new legislation contains several key tax provisions that affected us, including a one-time mandatory transition tax on accumulated foreign earnings and a reduction of the corporate income tax rate to 21% effective January 1, 2018, among others. The Company are required to recognize the effect of the tax law changes in the period of enactment, such as determining the transition tax, re-measuring our U.S. deferred tax assets and liabilities as well as reassessing the net realizability of our deferred tax assets and liabilities. In December 2017, the SEC staff issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act ("SAB 118"), which allows us to record provisional amounts during a measurement period not to extend beyond one year of the enactment date. At December 30, 2017, the Company has not completed our accounting for the tax effects of enactment of the Act; however, as described below, the Company has made a reasonable estimate of the effects on our existing deferred tax balances and the one-time transition tax. For these items, the Company did not recognize any provisional amounts in the (benefit) provision for income taxes from continuing operations in accordance with SAB 118. The Company expects to finalize these provisional estimates before the end of 2018 after completing our reviews and analysis, including reviews and analysis of any interpretations issued during this measurement period.
Deferred tax assets and liabilities—The Company provisionally remeasured certain deferred tax assets and liabilities, excluding those items that will be included on the Company's 2017 tax return, based on the rates the Company expects to realize the deferred tax assets and liabilities at in the future, which is generally 21%. However, the Company is still analyzing certain aspects of the Act, such as the transition rules and the minimum tax on foreign earnings, and refining our calculations, which could potentially affect the measurement of these balances or potentially give rise to new deferred tax amounts in the measurement period. The provisional amount recorded related to the remeasurement of the Company's deferred tax balance was approximately $25.1 million of tax expense.
The Company recorded a reduction in the valuation allowance during 2017 of approximately $1.0 million which was previously recorded against the Company’s AMT credit carryforward. The Company expects to receive a refund of $1.0 million from our AMT credit carryforward in accordance with the Tax Act and have recorded the receivable in "Other assets" on the Company's consolidated balance sheets at December 30, 2017.
With the adoption of a minimum tax on foreign earnings, the Company will be subject to tax on global intangible low-taxed income (“GILTI”) in future years. The Company is continuing to evaluate this provision and will not make a policy election on how to account for GILTI (as a period expense or as part of our rate on deferred taxes) until the Company has the necessary information available, including the interpretations of the new rules, to analyze the impacts and complete our analysis. The Company will make an election before the end of 2018. Because the Company has not made a policy election, no amounts for GILTI are included in our deferred taxes.
Foreign tax effects—The one-time transition tax is based on our total post-1986 earnings and profits (“E&P”) for which the Company has previously deferred U.S. income taxes. The Company is estimating that the Compan will not have a provisional requirement amount for our one-time transition tax liability, using an estimated applicable tax rate of 15.5%, resulting in no increase in income tax expense. The Company has not yet completed our calculation of the total post-1986 foreign E&P for these foreign subsidiaries. Further, the transition tax is based in part on the amount of those earnings held in cash and other specified assets. This amount may change when the Company finalizes the calculation of post-1986 foreign E&P previously deferred from U.S. federal taxation and finalize the amounts held in cash or other specified assets. The Company also expects additional clarifying and interpretative technical guidance to be issued related to the calculation of our one-time transition tax. No additional income taxes have been provided for any remaining undistributed foreign earnings not subject to the transition tax and any additional outside basis difference inherent in these entities as these amounts continue to be indefinitely reinvested in foreign operations.
Although the Company believes the significant impacts from the Tax Act are those described above, the Company will continue to review and evaluate the other provisions of the Tax Act. This review could result in changes to the amounts the Company has provisionally recorded. The Company expects to complete this review and evaluation before the end of 2018.
As of December 30, 2017, the Company has available for tax purposes NOLs of $164.5 million expiring 2022 through 2037. 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 decrease in valuation allowance during fiscal year 2017 was a result of decreases in the federal tax rate as part of the Tax Act and a reduction in the valuation allowance as a result of deferred tax liabilities assumed as part of the acquisition of NVIS.
The Tax Act imposes a mandatory transition tax on accumulated foreign earnings and eliminates U.S. taxes on foreign subsidiary distribution. As a result, earnings in foreign jurisdictions are available for distribution to the U.S. without incremental U.S. taxes.
Under the provisions of the 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 2001. 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.
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 (2009 onward), Japan (2009 onward), Hong Kong (2011 onward) and United Kingdom (2014 onward). The Company is not currently under examination in these jurisdictions.
v3.8.0.1
Accrued Warranty
12 Months Ended
Dec. 30, 2017
Product Warranties Disclosures [Abstract]  
Accrued Warranty
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 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 2017, 2016 and 2015 are as follows:
 
Fiscal Year Ended
 
December 30,
2017
 
December 31,
2016
 
December 26,
2015
Beginning balance
$
518,000

 
$
518,000

 
$
716,000

Additions
328,000

 
440,000

 
598,000

Claim and reversals
(197,000
)
 
(440,000
)
 
(796,000
)
Ending Balance
$
649,000

 
$
518,000

 
$
518,000

v3.8.0.1
Employee Benefit Plan
12 Months Ended
Dec. 30, 2017
Retirement Benefits [Abstract]  
Employee Benefit Plan
Employee Benefit Plan
The Company has an employee benefit plan pursuant to Section 401(k) of the Internal Revenue Code of 1986, as amended. In 2017, the plan allowed employees to defer an amount of their annual compensation up to a current maximum of $18,000 if they are under the age of 50 and $24,000 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 $334,000, $347,000 and $324,000 in fiscal years 2017, 2016 and 2015, respectively.
v3.8.0.1
Commintments and Contingencies
12 Months Ended
Dec. 30, 2017
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies
Commitments and Contingencies
Leases
The Company leases various facilities. The following is a schedule of minimum rental commitments under non-cancelable operating leases at December 30, 2017:
Fiscal year ending,
Amount
2018
$
1,223,000

2019
974,000

2020
902,000

2021
843,000

2022
616,000

Thereafter
201,000

Total minimum lease payments
$
4,759,000


Amounts incurred under operating leases are recorded as rent expense on a straight-line basis. Total rent expense in the fiscal years ended 2017, 2016 and 2015 were approximately $1.5 million, $1.3 million and $1.7 million, respectively.
v3.8.0.1
Litigation
12 Months Ended
Dec. 30, 2017
Commitments and Contingencies Disclosure [Abstract]  
Litigation
Litigation
The Company may engage in legal proceedings arising in the ordinary course of business. Claims, suits, investigations and proceedings are inherently uncertain and it is not possible to predict the ultimate outcome of such matters and our business, financial condition, results of operations or cash flows could be affected in any particular period.
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 alleges 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.
On October 11, 2016, the Company filed its Answer and Affirmative Defenses. The Company has not concluded a loss from this matter is probable; therefore, we have not recorded an accrual for litigation or claims related to this matter for the year ended December 30, 2017. The Company will continue to evaluate information as it becomes known and will record an estimate for losses at the time or times when it is both probable that a loss has been incurred and the amount of the loss is reasonably estimable.
The parties are in the midst of discovery, with fact discovery scheduled to close March 15, 2018. The parties have filed motions with the Court to extend the close of discovery beyond March 15, 2018. A trial date has not yet been set by the Court.
v3.8.0.1
Segments and Geographical Information
12 Months Ended
Dec. 30, 2017
Segment Reporting [Abstract]  
Segments and Geographical Information
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. NVIS is included in the Industrial segment.
Segment financial results were as follows:
Total Revenue (in thousands)
2017
 
2016
 
2015
Kopin
$
15,942

 
$
18,734

 
$
28,538

Industrial
13,584

 
3,909

 
3,516

Eliminations
(1,685
)
 

 

Total
$
27,841

 
$
22,643

 
$
32,054

 
 
 
 
 
 
Total Intersegment Revenue (in thousands)
2017
 
2016
 
2015
Kopin
$

 
$

 
$

Industrial
1,685

 

 

Total
$
1,685

 
$

 
$

 
 
 
 
 
 
Net Loss Attributable to the Controlling Interest (in thousands)
2017
 
2016
 
2015
Kopin
$
(26,153
)
 
$
(22,622
)
 
$
(13,429
)
Industrial
1,277

 
(812
)
 
(1,264
)
Eliminations
(364
)
 

 

Total
$
(25,240
)
 
$
(23,434
)
 
$
(14,693
)
 
 
 
 
 
 
Intersegment Loss Attributable to the Controlling Interest (in thousands)
2017
 
2016
 
2015
Kopin
$

 
$

 
$

Industrial
364

 

 

Total
$
364

 
$

 
$