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What changed in KOPIN CORP's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of KOPIN CORP's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+308 added−281 removedSource: 10-K (2024-03-14) vs 10-K (2023-03-14)

Top changes in KOPIN CORP's 2023 10-K

308 paragraphs added · 281 removed · 188 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

74 edited+15 added−12 removed87 unchanged
Biggest changeExamples of products manufactured by our customers that include our AMLCD components include: ● Weapon sights and target locators for soldiers to enable faster and more accurate target acquisition; ● Weapon sight systems that support artificial intelligence (“AI”) based targeting systems in land-based armored systems, light vehicles, and tanks; ● Fighter pilot helmets that use our display to overlay information (targeting, plane operation, etc.) over the real world scene; ● Industrial headsets for applications such as field maintenance/service where a service worker can visually access diagrams and drawings in real time while keeping both hands free to conduct work or to access a remote expert with live video to help solve a problem remotely – thereby increasing productivity and effectiveness; ● Public safety devices such as firefighter masks that include our displays so that a firefighter may use the thermal imager to navigate a smoke-filled building; and ● AR and VR consumer products for recreational use including rifle sights.
Biggest changeExamples of products manufactured by our customers that include our AMLCD and OLED displays include: ● Weapon sights and target locators for soldiers to enable faster and more accurate target acquisition; ● Weapon sight systems that support artificial intelligence (“AI”) based targeting systems in tanks; ● Fighter and helicopter pilot helmets that use our display to overlay information (targeting, flight operation, etc.); ● Headsets and systems used by soldiers for training and simulation purposes; ● Industrial headsets for applications such as field maintenance/service where a service worker can visually access diagrams and drawings in real time while keeping both hands free to conduct work or to access a remote expert with live video to help solve a problem remotely – thereby increasing productivity and effectiveness; ● Medical headsets used by surgeons that include our displays so that the surgeon simply glances down to see the patient or glances up and sees a magnified image of the anatomy being worked on; and ● AR consumer products for recreational use including rifle sights.
The products we make for the defense market must be able to withstand the extreme shock and vibration experienced in weapons fire. Accordingly, our intellectual property includes not just our patented microdisplays and a broad range of optics and but also our know-how to manufacture products that can withstand the shock and vibration of weapons fire and extreme environments.
The products we make for the defense market must be able to withstand the extreme shock and vibration experienced in weapons fire. Accordingly, our intellectual property includes not just our patented microdisplays and a broad range of optics but also our know-how to manufacture products that can withstand the shock and vibration of weapons fire and extreme environments.
We believe that following by the values noted above and doing our part in each of these areas, we can achieve our business objectives and long-term stockholder value.
We believe that by following the values noted above and doing our part in each of these areas, we can achieve our business objectives and long-term stockholder value.
Availability Information We make available free of charge through our website, www.kopin.com, our Annual Reports on Form 10-K and other reports that we file or furnish with the SEC as soon as reasonably practicable after they are filed or furnished, as well as certain of our corporate governance policies, including the charters for the Board of Directors’ audit, compensation and nominating and corporate governance committees and our code of ethics, corporate governance guidelines and whistleblower policy.
Availability of Information We make available free of charge through our website, www.kopin.com, our Annual Reports on Form 10-K and other reports that we file or furnish with the SEC as soon as reasonably practicable after they are filed or furnished, as well as certain of our corporate governance policies, including the charters for the Board of Directors’ audit, compensation, and nominating and corporate governance committees and our code of ethics, corporate governance guidelines and whistleblower policy.
The considerable know-how that goes into the design, materials selection, assembly, and testing of these subassemblies is an important part of our technology. Display Products Small form factor displays used in near-eye applications are widely used in defense in many applications such as thermal weapon sights, avionic helmets and training and simulation systems.
The considerable know-how that goes into the design, materials selection, assembly, and testing of these subassemblies and headsets is an important part of our technology. Display Products Small form factor displays used in near-eye applications are widely used in defense in many applications such as thermal weapon sights, avionic helmets and training and simulation systems.
There are many large and small companies that manufacture or are developing products based on these technologies. We outsource the manufacturing of our OLED displays to Chinese foundries. We expect these foundries to offer their own products. Our display products will compete with other displays utilizing these and other competing display technologies.
There are many large and small companies that manufacture or are developing products based on these technologies. We outsource the manufacturing of our OLED displays to Chinese and European foundries. We expect these foundries to offer their own products. Our display products will compete with other displays utilizing these and other competing display technologies.
John Fan, the Company’s former President and CEO and current Chairman of the Board, Boryeu Tsaur, a former Executive Vice President of the Company and Hong Choi, the Company’s former Chief Technology Officer, terminated their employment with the Company and became investors in and members of the management team of LST. Dr. Fan is also the founder of LST.
John Fan, the Company’s former President, CEO and Chairman of the Board, Boryeu Tsaur, a former Executive Vice President of the Company and Hong Choi, the Company’s former Chief Technology Officer, terminated their employment with the Company and became investors in and members of the management team of LST. Dr. Fan is also the founder of LST.
Assuming a user is willing to use a near-eye display device, companies such as Samsung and Meta are offering near-eye virtual reality headset products that use large display panels on glass to provide the image as opposed to using microdisplays.
Assuming a user is willing to use a near-eye display device, companies such as Apple, Meta, and Samsung are offering near-eye virtual reality headset products that use large display panels on glass to provide the image as opposed to using microdisplays.
In addition to sales of our components and subassemblies, we also derive a significant portion of our revenue from developing custom product solutions for our customers which we refer to as Funded Research and Development.
In addition to sales of our components, subassemblies, and headsets, we also derive a significant portion of our revenue from developing custom product solutions for our customers, which we refer to as Funded Research and Development.
Our primary current sources of product revenues are from the sale of display and optical components and subassemblies for defense and industrial applications and development contracts primarily for U.S. defense programs.
Our primary sources of product revenues are from the sale of display and optical components and subassemblies for defense and industrial applications and development contracts primarily for U.S. defense programs.
We perform research and development contracts for U.S. Government agencies and prime contractors of the U.S. Government. Under these contracts, the U.S. Government funds all or a portion of our efforts to develop next-generation microdisplays, related technologies and products for aviation systems such as pilot helmets, soldier-centric systems such as weapon sights, training and simulation systems and defense armored vehicles.
We perform research and development contracts for U.S. Government agencies and prime contractors of the U.S. Government. Under these contracts, the U.S. Government funds all or a portion of our efforts to develop next-generation microdisplays, related technologies and products for aviation systems such as pilot helmets, soldier-centric systems such as rifle weapon sights, training and simulation systems and armored vehicles.
This enables us to supplement our internal research and development budget with additional funding and adds to our expertise in technology, products, and systems. ● Understand Our Customer Needs. We believe our system know-how, be it a defense, industrial or consumer system, is a compelling reason why customers choose Kopin as their supplier.
This enables us to supplement our internal research and development budget with additional funding and adds to our expertise in technology, products, and systems. ● Understand Our Customers’ Needs. We believe our system know-how, be it a defense, industrial or consumer system, is a compelling reason why customers choose Kopin as their supplier.
The general commercial display market is highly competitive and is currently dominated by large Asian-based electronics companies, including AUO, BOE Technology Group, Himax, LG Display, Samsung, Sharp, Sony and Texas Instruments. In addition, several companies focus on OLED microdisplays including eMAGIN, MicroOLED, Olightek, BOE Technology, Seeya, Seiko Epson and Sony.
The general commercial display market is highly competitive and is currently dominated by large Asian-based electronics companies, including AUO, BOE Technology Group, Himax, LG Display, Samsung, Sharp, Sony and Texas Instruments. In addition, several companies focus on OLED microdisplays including BOE Technology Group, Lakeside, MicroOLED, Olightek, Seeya, Seiko Epson and Sony.
We believe we also are well-positioned with our technology and intellectual property, manufacturing capabilities and partnerships and reputation to take advantage of the emerging market for AR and VR applications and products of which microdisplays are the cornerstone technology. At the center of all our products is a display.
We believe we also are well-positioned with our technology, intellectual property, manufacturing capabilities and partnerships and reputation to take advantage of the emerging market for AR and VR applications and products of which microdisplays are the cornerstone technology. At the center of all our products is a microdisplay.
The AMLCD display driver ASICs we offer are the electronic interfaces between our displays and the products into which the displays are incorporated. The optical lenses and backlights we offer are based on either our proprietary designs or designs we license from third parties. The ASICs, optical lenses, and backlights are manufactured by third parties. Our NVIS, Inc.
The AMLCD display driver ASICs we offer are the electronic interfaces between our displays and the products into which the displays are incorporated. The optical lenses and backlights we offer are based on either our proprietary designs or designs we license from third parties. The ASICs, optical lenses, and backlights are manufactured by third parties.
Previously we used internally funded research and development funds to design headset systems that were focused on the emerging enterprise and consumer markets for head-worn, hands-free, voice-and gesture-controlled wireless computing and communication devices.
Previously we used internally funded research and development funds to design headset systems that were focused on the emerging industrial and consumer markets for head-worn, hands-free, voice-and gesture-controlled wireless computing and communication devices.
The success of our display product offerings will also depend upon the adoption of our display products by consumers as an alternative to other active-matrix LCDs or OLEDs and upon our ability to compete against other types of well-established display products and new emerging display products.
The success of our display product offerings will also depend upon the adoption of our display products by customers as an alternative to other active-matrix LCDs or OLEDs and upon our ability to compete against other types of well-established display products and new emerging display products.
We do not manufacture optical lenses, backlights, or ASICs but we either have them made to our specifications or buy standard off-the-shelf products. Patents, Proprietary Rights and Licenses An important part of our product development strategy is to seek, when appropriate, protection for our products and proprietary technology through the use of various U.S. and foreign patents and contractual arrangements.
We do not manufacture optical lenses, backlights, or ASICs but we either have them made to our specifications or buy standard off-the-shelf products. Patents, Proprietary Rights and Licenses An important part of our product development strategy is to seek, when appropriate, protection for our products and proprietary technology using various U.S. and foreign patents and contractual arrangements.
Of these employees, 8 hold Ph.D. degrees in Material Science, Electrical Engineering or Physics. Our management and professional employees have significant prior experience in semiconductor materials, device transistor and display processing, optical design, manufacturing and other related technologies. Our employees are located in the U.S., Europe and Asia and the laws regarding employee relationships are different by jurisdiction.
Of these employees, 3 hold Ph.D. degrees in Material Science, Electrical Engineering or Physics. Our management and professional employees have significant prior experience in semiconductor materials, device transistor and display processing, optical design, manufacturing, and other related technologies. Our employees are in the U.S., Europe and Asia and the laws regarding employee relationships are different by jurisdiction.
Particularly significant is a consumer’s willingness to use a near-eye display device, as opposed to a direct-view display that may be viewed from several inches to several feet.
Particularly significant is a user’s willingness to use a near-eye display device, as opposed to a direct-view display that may be viewed from several inches to several feet.
We use third parties to manufacture these lenses. 8 Headset Systems We license an industrial headset reference design, which is a complete head-worn computer that connects to the Internet wirelessly and includes an optical pod with one of our display products, a microprocessor, battery, camera, memory, and various commercially available software packages that we license.
We use third parties to manufacture these lenses. 8 Headset Systems We license a wireless industrial headset reference design to customers that is a head-worn computer that connects to the Internet wirelessly and includes an optical pod with one of our display products, a microprocessor, battery, camera, memory, and various commercially available software packages that we license.
Kopin is aims to disrupt the OLED microdisplays industry with a new fabless, scalable business model. We believe the partitioning of OLED manufacturing into multiple parties, each focusing on their core competencies, can make a significant difference in OLED microdisplays performance and supply chain, while reducing the capital cost and overhead costs of entering this business.
We aim to disrupt the OLED microdisplays industry with a new fabless, scalable business model. We believe the partitioning of OLED manufacturing into multiple parties, each focusing on their core competencies, can make a significant difference in OLED microdisplays performance and supply chain, while reducing the capital cost and overhead costs of entering this business.
Markets and Customers Our business model is to primarily generate product revenues by selling display components and subassemblies to customers who offer defense, industrial or consumer products and to a lesser extent license our system designs and know-how.
Markets and Customers Our business model is to primarily generate product revenues by selling display components, subassemblies and headsets to customers who offer defense, industrial, or medical products and to a lesser extent license our system designs and know-how.
Our OLED microdisplays have a combo C-PHY/D-PHY Mobile Industry Processor Interface and display stream compression to allow 120 Hz operation at the full resolution. This display is designed for high-end VR and content streaming applications. Kopin is also exploring the development of MicroLED microdisplays which offer the possibility of high brightness, wide viewing angle, excellent contrast, and low cost.
Our OLED microdisplays have a combo C-PHY/D-PHY Mobile Industry Processor Interface and display stream compression to allow 120 Hz operation at full resolution. This display is designed for high-end VR and content streaming applications. We offer MicroLED microdisplays which offer the possibility of high brightness, wide viewing angle, excellent contrast, and low cost.
The fabricated wafers are then returned to our facilities, where we lift the integrated circuits off the silicon wafers and transfer them to glass using our proprietary Wafer Engineering technology. The transferred integrated circuits are then processed, packaged with liquid crystal, and assembled into display panels at our Display Manufacturing Center in Westborough, Massachusetts.
The fabricated wafers are then returned to our facilities, where we lift the integrated circuits off the silicon wafers and transfer them to glass using our proprietary Wafer Engineering technology. The transferred integrated circuits are then processed, packaged with liquid crystal, and assembled into display panels at our Westborough, Massachusetts facility.
Sales to significant non-affiliated customers for fiscal years 2022, 2021 and 2020, as a percentage of total revenues, were as follows: Sales as a Percent of Total Revenue Fiscal Year 2022 2021 2020 Customer Defense Customers in Total 52 % 40 % 50 % DRS Network & Imaging Systems, LLC 40 % 31 % 35 % Collins Aerospace 28 % 30 % 27 % Funded Research and Development Contracts 30 % 32 % 25 % Our fiscal year ends on the last Saturday in December.
Sales to significant non-affiliated customers for fiscal years 2023, 2022 and 2021, as a percentage of total revenues, were as follows: Sales as a Percent of Total Revenue Fiscal Year 2023 2022 2021 Customer Defense Customers in Total 56 % 52 % 40 % DRS Network & Imaging Systems, LLC 33 % 40 % 31 % Collins Aerospace 27 % 28 % 30 % Funded Research and Development Contracts 33 % 30 % 32 % Our fiscal year ends on the last Saturday in December.
Revenues attributable to research and development contracts for fiscal years 2022, 2021 and 2020 totaled $14.4 million, $14.7 million and $10.1 million, respectively. Competition Kopin’s strategy is to focus on providing our customers application specific optical solutions which sets us apart from our competition who typically only provide displays.
Revenues attributable to research and development contracts for fiscal years 2023, 2022 and 2021 totaled $13.5 million, $14.4 million and $14.7 million, respectively. Competition Kopin’s strategy is to focus on providing our customers with application specific optical solutions which sets us apart from our competition who typically only provide displays.
We intend to prosecute and defend our proprietary technology aggressively. Many of our U.S. patents and applications have counterpart foreign patents, foreign patent applications or international patent applications through the Patent Cooperation Treaty. Human Capital Resources As of December 31, 2022, our consolidated business employed 177 individuals.
We intend to prosecute and defend our proprietary technology aggressively. Many of our U.S. patents and applications have counterpart foreign patents, foreign patent applications or international patent applications through the Patent Cooperation Treaty. Human Capital Resources As of December 30, 2023, our consolidated business employed 144 individuals.
We currently sell our display products to our customers in various configurations including but not limited to a single display component, a module that includes a display, optic, backlight and focus mechanism and electronics, a binocular display module that includes two displays, lenses, and backlights, and as HLAs for defense customers.
We currently sell our display products to our customers in various configurations including but not limited to a single display component, a subassembly that includes a display, optic, backlight and focus mechanism and electronics, a binocular display subassembly that includes two displays, lenses, and backlights, and as a subassembly (also known as an HLA) for defense customers.
For example, we offer a display as a product, a module product unit that includes a single display, backlight and optics in a plastic housing, a binocular display module product that includes two displays, backlights and optics in a plastic housing, and a subassembly that we refer to as an HLA (“Higher-Level Assembly”) that contains a display, light emitting diode based illumination, optics, and electronics in a sealed housing, primarily for defense applications.
For example, we offer a display as a product, an industrial subassembly unit that includes one or two displays, backlight and optics in a plastic housing, and a subassembly for defense applications that we refer to as an HLA (“Higher-Level Assembly”) that contains a display, light emitting diode-based illumination, optics, and electronics in a sealed housing.
We offer emissive OLED displays with a resolution of 1280 x 720 (“720p”), 2048 x 2048 2K, 1280 x 960 (“QVGA”) and have demonstrated a 2560 x 2560 (“2.6K”). We sell our displays individually or in combination with our other components assembled in a unit.
We offer emissive OLED displays with a resolution of 1280 x 720 (“720p”), 2048 x 2048 2K, 1280 x 960 (“QVGA”) and have demonstrated a 2560 x 2560 (“2.6K”). We are developing emissive Light Emitting Diode (“LED”) displays. We sell our displays individually or in combination with our other components assembled in a subassembly.
We are the only company, to our knowledge, that offers AMLCDs, LCOS displays and OLED displays, and related optics, which enable us to serve the markets and customers based on their need and the problems they are trying to solve. We are also in development to create MicroLED displays.
We are the only company, to our knowledge, that offers AMLCDs, LCOS displays and OLED displays, and related optics, which enable us to serve the markets and customers based on their needs and the problems they are trying to solve. We are also in development to create MicroLED displays and displays with additional capabilities such as eye-tracking.
An important piece of our strategy is to continue to accumulate valuable patented and non-patented technical know-how relating to our microdisplays, including backplane design, and other critical technologies for advanced wearable systems such as optics and drive electronics. ● Maintain Our Technological Leadership in Defense and Industrial Markets.
An important piece of our strategy is to continue to accumulate valuable patented and non-patented technical know-how relating to our microdisplays, including backplane design, optics and other critical technologies for subassemblies and headsets. ● Maintain Our Technological Leadership in Defense and Industrial Markets.
We acquired an equity interest in Lenovo New Vision in the first quarter of 2018 for $1.0 million and the contribution of certain intellectual property. As of December 31, 2022, we own approximately 10% interest in this investment and the carrying value of our investment is $1.6 million. We acquired an equity interest in a medical device company in 2021.
We acquired an equity interest in Lenovo New Vision in the first quarter of 2018 for $1.0 million and the contribution of certain intellectual property. As of December 30, 2023, we own approximately 10% interest in this investment and the carrying value of our investment is $1.5 million.
There is a trade-off between the lens size and the size of the perceived image to the viewer. For example, a Pearl™ lens will provide the viewer with an image approximately equivalent to what the viewer would see looking directly at a smartphone, whereas a Pancake™ lens will provide the viewer with an immersive experience.
For example, a Pearl™ lens will provide the viewer with an image approximately equivalent to what the viewer would see looking directly at a smartphone, whereas a Pancake™ lens will provide the viewer with an immersive experience.
A HLA is similar to a module but includes additional components such as an eye cup specific to a defense application. We have sold our AMLCD products to Collins Aerospace, Elbit, and DRS RSTA Inc. for use in defense applications, to RealWear and Iristik for enterprise wearable products, and to Scott Safety for public safety applications.
An HLA is like a module but includes additional components such as an eye cup specific to a defense application and is designed for extreme shock, vibration and hostile environments. We have sold our AMLCD products to Collins Aerospace, Elbit, and DRS RSTA Inc. for use in defense applications, and to RealWear and Iristik for industrial wearable products.
We believe this outsourcing model allows us to leverage our underlying backplane intellectual property as well as the existing infrastructure to obtain lower cost manufacturing and avail ourselves of manufacturing technology improvements as they occur.
The deposition foundries will either sell the displays to their customers or to us for resale to our customers. We believe this outsourcing model allows us to leverage our underlying backplane intellectual property as well as the existing infrastructure to obtain lower cost manufacturing and avail ourselves of manufacturing technology improvements as they occur.
The pixel size of our current reflective display products ranges from 8.2 to 13.6 microns. The resolutions of our current commercially available reflective display products are 1,280 x 768, 1,280 x 1,024, 2,048 x 1,536, and 2,048 x 2,048 pixels. 10 Our AMLCD display product development efforts are primarily focused on improving performance and reducing manufacturing costs.
The resolutions of our current commercially available reflective display products are 1,280 x 768, 1,280 x 1,024, 2,048 x 1,536, and 2,048 x 2,048 pixels. 10 Our AMLCD display product development efforts are primarily focused on improving performance and reducing manufacturing costs. We are continually evaluating our display manufacturing process to reduce costs.
We have sold our LCOS display products to Saki, Jutze and Mirtec for use in 3D metrology equipment. Our revenues from our OLED displays have primarily been from development contracts with customers that are designing our displays into their products. For our AMLCD display products to function properly in their intended applications, ASICs and backlights are generally required.
We have sold our LCOS display products to Saki, Jutze and Mirtec for use in 3D optical inspection equipment. Our revenues from our OLED and MicroLED displays have primarily been from development contracts with customers that are designing our displays into their products.
We intend to continue to pursue development contracts for applications that relate to our defense and commercial product applications. Our contracts contain certain milestones relating to technology development and may be terminated prior to completion of funding. Our funded development projects often lead to a product or component supply agreement.
Our contracts contain certain milestones relating to technology development and may be terminated prior to completion of funding. Our customer funded development projects often lead to a product or component supply agreement.
For these markets to develop and grow, advances and investment in display technology, optics, application software, and wireless communications systems with greater bandwidth such as 5G networks will be necessary. These advances in display technologies must increase performance but at the same time the cost of displays must decrease.
For these markets to develop and grow, advances and investment in display technology, optics, application software, and wireless communications systems with greater bandwidth such as 5G networks will be necessary.
We also licensed an industrial headset reference design, which is a device that attaches to a pair of safety glasses, includes an optical pod with one of our display products and a camera and is operated primarily through the use of voice.
We also licensed an industrial headset reference design that attaches to a pair of safety glasses, includes an optical pod with one of our display products, a camera, is operated primarily using voice and is tethered to an information source, such as a smartphone, via a wire.
A significant portion of the LCOS displays is sold to customers for incorporation into SLMs, which are built into manufacturing equipment that are used for 3D optical measurement. Our OLED displays provide either color or monochrome images and are offered in a variety of sizes and resolutions. We are currently developing color and monochrome MicroLED displays.
A significant portion of the LCOS displays are sold to customers for incorporation into SLMs, which are built into manufacturing equipment that are used for 3D optical measurement. We are currently developing color and monochrome MicroLED displays and displays with additional capabilities.
The subassemblies we offer combine one or two of our displays, backlight, ASIC, complex optics, and other electronics in an assembly that is then included in a larger system (for example a weapon sight or a targeting system in an armored vehicle). These subassemblies must survive the shock and vibration of weapons fire and operate in extreme environmental conditions.
We also offer backlights and ASICs that work with our AMLCD displays. The subassemblies we offer combine one or two of our displays, backlight, ASIC, complex optics, and other electronics in an assembly that is then included in a larger system (for example a weapon sight or a targeting system in an armored vehicle).
NVIS products allow customers to visualize and interact with simulated 3D environments and equipment for training purposes. Our customers develop high-fidelity training and simulation applications that require high-performance visuals, intuitive controls, and unsurpassed customer support. 4 The focus of our internally funded research and development activities is on our OLED and MircoLED display technologies.
Our customers develop high-fidelity training and simulation applications that require high-performance visuals, intuitive controls, and unsurpassed customer support. 4 The focus of our internally funded research and development activities is on our OLED, MicroLED and other display technologies.
Our transmissive AMLCD products, which we refer to as CyberDisplay® products, utilize high-quality, single-crystal-on-silicon, which is the same high-quality silicon used in conventional integrated circuits.
The defense subassembly or HLA is designed specifically for the repetitive shock experienced in extreme environments and use. Our transmissive AMLCD products, which we refer to as CyberDisplay® products, utilize high-quality, single-crystal-on-silicon, which is the same high-quality silicon used in conventional integrated circuits.
These pixel sizes are much smaller than a pixel size of approximately 100 microns in a typical laptop computer display. The resolutions of our current commercially available AMLCD display products are 428 x 240, 640 x 360, 640 x 480, 854 x 480, 800 x 600, 1,280 x 720 and 1,280 x 1,024 and 2048 x 2048 pixels.
The resolutions of our current commercially available AMLCD display products are 428 x 240, 640 x 360, 640 x 480, 854 x 480, 800 x 600, 1,280 x 720 and 1,280 x 1,024 and 2048 x 2048 pixels. The pixel size of our current reflective display products ranges from 8.2 to 13.6 microns.
Item 1. Business Overview Incorporated in Delaware in 1984, Kopin Corporation (“Kopin” or “the Company”) is a leading developer and provider of high-performance application-specific optical solutions consisting of high-resolution microdisplays, microdisplays subassemblies and related components for defense, enterprise, industrial, and consumer products.
Item 1. Business Overview Incorporated in Delaware in 1984, Kopin Corporation (“Kopin” or “the Company”) is a leading developer and provider of high-performance application-specific optical solutions consisting of high-resolution microdisplays and optics, subassemblies, and headsets. We define microdisplays as displays that have a diagonal measurement of less than 2 inches.
OLED displays currently have less brightness range but offer superior contrast and response time characteristics and therefore are better suited in an immersive products environment that blocks out ambient light. Optical Lenses and Backlights We offer a variety of optical lenses, some of which we have developed internally and others for which we license the rights to sell.
OLED displays currently have less brightness range but offer superior contrast and response time characteristics and therefore are better suited in an immersive products environment that blocks out ambient light. MicroLEDs hold the promise of brightness, high contrast, superior response time and low cost.
Our Solution Kopin Technology Kopin technology includes the ability to design, and in most cases, manufacture proprietary small form factor AMLCD, LCOS, OLED and MicroLED displays and optical lenses and the know-how to design and manufacture components and subassemblies based on our display technologies. We also offer proprietary backlights and ASICs that work with our AMLCD displays.
These advances in display technologies must increase performance but at the same time the cost of displays must decrease. 5 Our Solution Kopin Technology Kopin technology includes the ability to design, and in most cases, manufacture proprietary small form factor AMLCD, LCOS, OLED and MicroLED displays and optical lenses and the know-how to design and manufacture subassemblies and headsets based on our display technologies.
We terminated operations of our subsidiary, Kopin Software Ltd., in the third quarter of 2019 and are in the process of liquidating it. On January 5, 2023, the Company entered into a Technology License Agreement and an Asset Purchase Agreement (the “LST Agreements”) with Lightning Silicon Technology, Inc (“LST”).
On January 5, 2023, the Company entered into a Technology License Agreement and an Asset Purchase Agreement (the “LST Agreements”) with Lightning Silicon Technology, Inc (“LST”).
We refer to our AMLCD as “CyberDisplay®,” our LCOS displays/Spatial Light Modulators (“SLMs”) as “Time Domain Imaging TM technology”, and our OLED displays as “Lightning® displays”. Our transmissive AMLCDs are designed in Westborough, Massachusetts, have initial manufacturing steps performed in Taiwan and then are completed in our facility in Westborough, Massachusetts. Our AMLCD components are sold separately or in subassemblies.
Our transmissive AMLCDs are designed in Westborough, Massachusetts, have initial manufacturing steps performed in Taiwan and then are completed in our facility in Westborough, Massachusetts. Our AMLCD and OLED displays are sold separately or in subassemblies.
We believe our display technologies, combined with our extensive expertise in optics, system electronics and human factors, are the reason why many customers come to us. The components we offer for sale consist of our proprietary miniature AMLCD, LCOS, OLED, MicroLED display technologies, application specific integrated circuits (“ASICs”), backlights, and optical lenses.
We believe our display technologies, combined with our extensive expertise in optics, system electronics and human factors, are the reason why many customers come to us.
The components that are made to order rely on either intellectual property we developed or acquired or that we license from third parties. Funded Research and Development We have entered various development contracts with agencies and prime contractors of the U.S. Government and commercial customers. These contracts help support the continued development of our core technologies.
Funded Research and Development We have entered various development contracts with agencies and prime contractors of the U.S. Government and commercial customers. These contracts help support the continued development of our core technologies. We intend to continue to pursue development contracts for applications that relate to our defense and commercial product applications.
We also offer a variety of backlights, some of which we have developed internally and some of which are “off-the-shelf” components. The lenses come in a variety of sizes with the smallest being our Pupil™, followed by our Pearl™ and Pancake™ lenses. The different sizes of lenses give us and our customers design flexibility when creating headset systems.
The lenses come in a variety of sizes with the smallest being our Pupil™, followed by our Pearl™ and Pancake™ lenses. The different sizes of lenses give us and our customers design flexibility when creating headset systems. There is a trade-off between the lens size and the size of the perceived image to the viewer.
We also enter development contracts from customers to either design custom products for them or help them integrate our technology into their products (Funded Research and Development).
Eventually we believe our technologies can generate revenues in the consumer AR and VR markets if we successfully develop differentiated products at an acceptable price point. We also enter development contracts from customers to either design custom products for them or help them integrate our technology into their products (Funded Research and Development).
Lightning Silicon received a license to certain Kopin intellectual property to develop, manufacture and sell OLED technologies for use in the consumer market. We received an equity interest in Lightning Silicon and expect to receive royalties from the sale of products related to the licenses.
The Technology License agreement provides for Kopin to transfer certain patents to Lightning Silicon if they achieve certain milestones, however upon transfer Kopin will receive a license to the technology. We received an equity interest in Lightning Silicon and expect to receive royalties from the sale of products related to the licenses.
Our components are used in our customers’ products, such as headsets for field service personnel, medical professionals, or consumer rifle scopes. We also offer backlights and ASICs that work with our AMLCD displays.
We also offer proprietary backlights and ASICs that work with our AMLCD displays. Our displays and optics are used in defense applications (thermal weapon rifle sights, pilot helmets, armored vehicle targeting systems, and training and simulation headsets), industrial applications (headsets for field service personnel), medical applications (surgeon’s headsets), or consumer applications (recreational rifle scopes).
Our products are used for soldier, avionic, armored vehicle, and training & simulation defense applications; industrial, public safety and medical headsets; 3D optical inspection systems; and consumer augmented reality (“AR”) and virtual reality (“VR”) wearable headsets systems.
Our products are used for defense applications (thermal weapon rifle sights, fixed and rotary wing pilot helmets, armored vehicle targeting systems, and training & simulation headsets); industrial and medical headsets; and 3D optical inspection systems. We believe that the technologies we are developing may eventually be used in consumer augmented reality (“AR”) and virtual reality (“VR”) wearable headset systems.
Fan, our Chairman of the Board, and former Chief Executive Officer, to develop and supply advanced OLED microdisplays for the consumer augmented reality and virtual reality markets. Our strategy is to focus on providing our customers application-specific optical solutions, which sets us apart from our competition who typically only provide displays.
Our strategy is to focus on providing our defense, industrial and medical customers with application-specific optical solutions, which sets us apart from our competition who typically only provide displays.
For fiscal year 2022, Collins Aerospace and DRS Network & Imaging Systems LLC accounted for approximately 28% and 40% of our revenues, respectively. For fiscal years 2022, 2021 and 2020, research and development revenues, primarily from multiple contracts with various prime contractors of U.S. Government agencies, accounted for approximately 30%, 32% and 25%, respectively, of our total revenues.
For fiscal years 2023, 2022 and 2021, research and development revenues, primarily from multiple contracts with various prime contractors of U.S. Government agencies, accounted for approximately 33%, 30% and 32%, respectively, of our total revenues. Product Development We believe that continued introduction of new products in our target markets is essential to our growth.
However, the initial manufacturing steps for fabricating the silicon wafers are performed at capital-intensive Taiwan foundries. With OLED displays, which we design, we similarly use silicon wafer foundries to produce our backplanes, and we also use OLED deposition foundries to perform the OLED deposition steps for our displays.
However, the initial manufacturing steps for fabricating the silicon wafers are performed at capital-intensive Taiwan foundries.
Our model is to sell these wafers to foundries that deposit the organic material on the backplane and manufacture the displays. The deposition foundries will either sell the displays to their customers or to us for resale to our customers.
The backplane drives the performance of the display. 7 We have engaged foundry services for the fabrication of the Lightning® OLED backplane wafers. Our model is to sell these wafers to foundries that deposit the organic material on the backplane and manufacture the displays.
The Company will also receive a royalty based on unit sales of product that utilize the technology licensed. Drs.
The Technology License agreement provides for Kopin to transfer certain patents to Lightning Silicon if they achieve certain milestones, however upon transfer Kopin will receive a license to the technology. The Company will also receive a royalty based on unit sales of products that utilize the technology licensed. Drs.
Failure to comply with present or future regulations could result in fines being imposed on us, suspension of production, or a cessation of operations.
Cybersecurity and data security and protection laws and regulations are evolving and present increasing compliance challenges, which may increase our costs, affect our competitiveness, cause reputational harm, and expose us to substantial fines or other penalties. Failure to comply with present or future regulations could result in fines being imposed on us, suspension of production, or a cessation of operations.
Our primary development efforts are focused on AMLCD display subassemblies for defense and industrial applications and OLED display components for defense, industrial and consumer applications. Component Products and Subassemblies The pixel size of our current AMLCD transmissive display products ranges from 6.8 to 15 microns.
Component Products and Subassemblies The pixel size of our current AMLCD transmissive display products ranges from 6.8 to 15 microns. These pixel sizes are much smaller than a pixel size of approximately 100 microns in a typical laptop computer display.
As of December 31, 2022, the carrying value of this investment is $0.3 million. As of December 31, 2022, we own 100% of the outstanding common stock of NVIS and FDD and 80% of the outstanding common stock of e-MDT America (“eMDT”) and we consolidate each of their financial results within our consolidated financial statements.
We acquired a right to an equity interest in a medical device company in 2021. As of December 30, 2023, the carrying value of this investment is $0.3 million. As of December 30, 2023, we own 100% of the outstanding common stock of NVIS, Inc (“NVIS”), FDD, and e-MDT America Inc.
Several companies have designed ASICs to work with our display products and our customers can procure these chip sets directly from the manufacturer or through us. For fiscal years 2022, 2021 and 2020, sales to defense customers, excluding research and development contracts, as a percentage of total revenue were 52%, 40% and 50%, respectively.
For our AMLCD display products to function properly in their intended applications, ASICs and backlights are generally required. Several companies have designed ASICs to work with our display products and our customers can procure these chip sets directly from the manufacturer or through us.
We are continually evaluating our display manufacturing process to reduce costs. Our defense products include subassemblies, and our advanced subassemblies are referred to as HLAs. The HLA may include a display and multiple optical lenses in a hermetically sealed housing.
Our defense products include subassemblies, and our defense subassemblies are referred to as HLAs. The HLA may include a display and multiple optical lenses in a hermetically sealed housing. The HLAs are made to very exact tolerances, which require Kopin to manage its supply chain to procure raw materials that meet specification while enabling Kopin to achieve high yields.
Product Development We believe that continued introduction of new products in our target markets is essential to our growth. Our industrial and consumer products tend to have one-to three-year life cycles. We have assembled a group of highly skilled engineers who work internally as well as with our customers to continue our product development efforts.
We have assembled a group of highly skilled engineers who work internally as well as with our customers to continue our product development efforts. Our primary internal development efforts are focused on AMLCD display subassemblies for defense and industrial applications and OLED display components for defense, industrial and medical applications.
We offer display technologies, from our portfolio of display technologies (micro inorganic light emitting diode (“MicroLED”), OLED, liquid crystal on silicon (“LCOS”), and active-matrix liquid crystal displays (“AMLCDs”)) with specific optical designs, and drive electronics in a subassembly for the customer’s particular application. Typically, our product offerings provide a digital image which is overlayed on the analog world.
Our application-specific optical solutions are based on our proprietary microdisplay technologies, which include micro inorganic light emitting diode (“MicroLED”), OLED, liquid crystal on silicon (“LCOS”), and active-matrix liquid crystal displays (“AMLCDs”) and various optics which may be our proprietary designs.
We have only recently commenced OLED display developments and therefore our OLED products are much less mature than our AMLCD products. We offer components such as our optical lenses, backlights, and ASICs, manufactured to our specifications, which we then buy and resell.
We offer components such as our optical lenses, backlights, and ASICs, manufactured to our specifications, which we then buy and resell. The components that are made to order rely on either intellectual property we developed or acquired or that we license from third parties.
Kopin is working with other partners to explore the potential benefits and implementation of the technology. If Kopin is successful in developing prototypes, then we expect that high-volume manufacturing process development may be required, including the development of equipment.
Currently MicroLEDs are expensive to manufacture, in order to make them commercially viable we expect that high-volume manufacturing process development may be required, including the development of equipment.
The HLAs are made to very exact tolerances, which require Kopin to manage its supply chain to procure raw materials that meet specification while enabling Kopin to achieve high yields. The pixel size of our current OLED displays range from 7.8 to 9.2 microns with resolutions of 1,280 x 720, 2,048 x 2,048 and 2,560 x 2,560.
The pixel size of our current OLED displays ranges from 7.8 to 9.2 microns with resolutions of 1,280 x 720, 2,048 x 2,048 and 2,560 x 2,560. We have only recently commenced offering OLED displays and therefore our OLED products are much less mature than our AMLCD products. Our MicroLED products are still in the development stage.
Removed
(“NVIS”) subsidiary is a designer and manufacturer of defense and industrial head-mounted and hand-held VR products and training simulation defense equipment in Reston, Virginia. Depending on the size of the order, NVIS’s products are either manufactured in its Reston, Virginia facility or by a contract manufacturer in the U.S.A.
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Our products are primarily used to overlay digital information on the real-world scene.
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The fiscal years ended December 31, 2022, December 25, 2021, and December 26, 2020 are referred to herein as fiscal years 2022, 2021 and 2020, respectively. Augmented and Virtual Reality The introduction and wide acceptance of the smartphone has generated advances in many technologies including smaller and cheaper electronic components, voice search engines, and wireless 4G and 5G networks.
Added
Lightning Silicon received a license under a Technology License agreement to certain Kopin intellectual property to develop, manufacture and sell OLED display technologies for use in the consumer market, based on 12 inch deposition technology development.
Removed
Smartphone adoption has also been the catalyst for the development of software for a wide range of applications. Leveraging off these new technologies and the growth of cloud computing, a new category of emerging AR and VR markets is starting to develop.
Added
Fan, our former Chairman of the Board, and former Chief Executive Officer, to develop and supply advanced OLED microdisplays for the consumer augmented reality and virtual reality markets. We are transitioning from selling just displays to a solution that includes our display, optics, and drive electronics in a subassembly or a headset for the customer’s particular application.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeOur success depends in part on our ability to protect our intellectual property and proprietary rights. We have obtained certain domestic and foreign patents and we intend to continue to seek patents on our inventions when appropriate. We also attempt to protect our proprietary information with contractual arrangements and under trade secret laws.
Biggest changeWe also rely on nondisclosure agreements, confidentiality obligations in contracts, IT security systems, and other measures to protect certain customer and supplier information and intellectual property that we have in our possession or to which we have access. We have obtained certain domestic and foreign patents and we intend to continue to seek patents on our inventions when appropriate.
In the event that our products might infringe upon the patent rights of others, we may be notified, from time to time, that we could be or we are infringing certain patents or other intellectual property rights of others.
In the event that our products might infringe upon the patent or other intellectual property rights of others, we may be notified, from time to time, that we could be or we are infringing certain patents or other intellectual property rights of others.
Geopolitical tensions and any conflicts resulting therefrom may negatively affect our ability to source materials and components required to manufacture our products. We depend principally on a Taiwanese foundry for the fabrication of integrated circuits for our defense display products. We use a Chinese foundry for the deposition process in creating our OLED displays.
Geopolitical tensions and any conflicts resulting therefrom may negatively affect our ability to source materials and components required to manufacture our products. We depend principally on a Taiwanese foundry for the fabrication of integrated circuits for our AMLCD defense display products. We use a Chinese foundry for the deposition process in creating our OLED displays.
If a government review or investigation uncovers improper or illegal activities, we may be subject to civil or criminal penalties or administrative sanctions, including: ● Termination of contracts; ● Forfeiture of profits; ● Cost associated with triggering of price reduction clauses; ● Suspension of payments; ● Fines; and ● Suspension or debarment from doing business with federal government agencies. 19 Additionally, the False Claims Act provides for substantial civil penalties where, for example, a contractor presents a false or fraudulent claim to the government for payment or approval.
If a government review or investigation uncovers improper or illegal activities, we may be subject to civil or criminal penalties or administrative sanctions, including: ● Termination of contracts; ● Forfeiture of profits; ● Cost associated with triggering of price reduction clauses; ● Suspension of payments; ● Fines; and ● Suspension or debarment from doing business with federal government agencies. 20 Additionally, the False Claims Act provides for substantial civil penalties where, for example, a contractor presents a false or fraudulent claim to the government for payment or approval.
We may incur losses on fixed-price and IDIQ contracts that we had expected to be profitable, or such contracts may be less profitable than expected, which could have a material adverse effect on our business, financial condition, results of operations, and cash flows. 16 The widespread outbreak of an illness, communicable disease, or any other public health crisis could adversely affect our business, results of operations and financial condition.
We may incur losses on fixed-price and IDIQ contracts that we had expected to be profitable, or such contracts may be less profitable than expected, which could have a material adverse effect on our business, financial condition, results of operations, and cash flows. 17 The widespread outbreak of an illness, communicable disease, or any other public health crisis could adversely affect our business, results of operations and financial condition.
Most recently, the federal government was shut down due to a lack of funding for over one month between late 2018 and early 2019. Additionally, the national debt has recently threatened to reach the statutory debt ceiling in 2023, and such an event in future years could result in the U.S. Government defaulting on its debts.
Most recently, the federal government was shut down due to a lack of funding for over one month between late 2018 and early 2019. Additionally, the national debt has recently threatened to reach the statutory debt ceiling in 2024, and such an event in future years could result in the U.S. Government defaulting on its debts.
Government contracts; and ● Our ability to secure agreements from our major customers for the purchase of our products. 17 As a result of these and other factors, investors should not rely on our revenues and our operating results for any one quarter or year as an indication of our future revenues or operating results.
Government contracts; and ● Our ability to secure agreements from our major customers for the purchase of our products. 18 As a result of these and other factors, investors should not rely on our revenues and our operating results for any one quarter or year as an indication of our future revenues or operating results.
We may in the future receive show-cause or cure notices under contracts that, if not addressed to the federal government’s satisfaction, could give the government the right to terminate those contracts for default or to cease procuring our services under those contracts. 18 In addition, U.S.
We may in the future receive show-cause or cure notices under contracts that, if not addressed to the federal government’s satisfaction, could give the government the right to terminate those contracts for default or to cease procuring our services under those contracts. 19 In addition, U.S.
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 the performance of our subcontractors.
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, delivery date and cost of materials and the performance of our subcontractors.
In 2022 we experienced quality issues with the products we supplied for the FWS-I program. These quality issues resulted in suspension of shipments to our customer at various times during 2022 as we made modifications to our production processes. We are continuing to make modifications to our production processes as we resolve certain issues.
In 2023 we experienced quality issues with the products we supplied for the FWS-I program. These quality issues resulted in suspension of shipments to our customer at various times during 2023 as we made modifications to our production processes. We are continuing to make modifications to our production processes as we resolve certain issues.
We depend principally on a Taiwanese foundry for the fabrication of integrated circuits for our defense display products. In addition, we use Chinese foundries’ services for OLED deposition and processing of OLED displays. We also use foundries in Korea and France and are evaluating other European foundries.
We depend principally on a Taiwanese foundry for the fabrication of integrated circuits for our defense display products. In addition, we use a Chinese foundry’s services for OLED deposition and processing of OLED displays. We also use foundries in Korea and France and are evaluating other European foundries.
Government to unilaterally terminate the contract for convenience, pay us for costs incurred plus a reasonable profit, and take control of any work in process. Contracts with commercial customers may have a similar liability clause.
Government to unilaterally terminate the contract for convenience, pay us for costs incurred and may allow a reasonable profit, and take control of any work in process. Contracts with commercial customers may have a similar liability clause.
We have experienced a history of losses, have a significant accumulated deficit, have had negative cash flow from operating activities in fiscal years 2022, 2021, and 2020, and expect to have negative cash flow from operating activities in fiscal year 2023 . Since inception, we have incurred significant net operating losses.
We have experienced a history of losses, have a significant accumulated deficit, have had negative cash flow from operating activities in fiscal years 2023, 2022, and 2021, and expect to have negative cash flow from operating activities in fiscal year 2024 . Since inception, we have incurred significant net operating losses.
Government, we recognize revenue over time as we perform services or deliver goods. The continuous transfer of control to, or performance of services for, the customer is subject to liability clauses in the contract that allow the U.S.
Government, we recognize revenue over time as we perform services or manufacture the goods. The continuous transfer of control to, or performance of services for, the customer is subject to liability clauses in the contract that allow the U.S.
We have no long-term contracts with the foundries we use and from time to time we have been put on allocation, which means the foundry will limit the number of wafers they will process for us.
We have no long-term contracts with the foundries we use and from time to time we have been put on allocation, which means the foundry will limit or delay the number of wafers they will process for us.
This reliance involves several risks, including reduced control over availability, capacity utilization, delivery schedules, manufacturing yields, and costs. Geopolitical changes in China-Taiwan or China-U.S. relations could disrupt these foundries’ operations and cause these risks to materialize, which would adversely affect our ability to manufacture our display products.
Our reliance on these foundries involves several risks, including reduced control over availability, capacity utilization, delivery schedules, manufacturing yields, and costs. Geopolitical changes in China-Taiwan or China-U.S. relations could disrupt these foundries’ operations and cause these risks to materialize, which would adversely affect our ability to manufacture our display products.
We recognize revenue for our defense contracts and some commercial contracts on the over time method which requires significant management judgement, and errors in our judgement could result in our revenue being overstated or understated and the profits or loss reported could be subject to adjustment . For certain contracts with the U.S.
We recognize revenue for some of our defense contracts and some commercial contracts on the over-time method which requires significant management judgment, and errors in our judgment could result in our revenue being overstated or understated and the profits or loss reported could be subject to adjustment . For certain contracts with the U.S.
If we are forced to defend against patent infringement claims, we may face costly litigation, diversion of technical and management personnel, and product shipment delays, even if the allegations of infringement are unwarranted.
If we are forced to defend against patent or other intellectual property infringement claims, we may face costly litigation, diversion of technical and management personnel, and product shipment delays, even if the allegations of infringement are unwarranted.
Companies may decide to stop supporting the software we license or new versions of the software may not be compatible with our software, which would require us to rewrite our software, which we may not be able to do.
Should we violate the terms of a license, our license could be canceled. Companies may decide to stop supporting the software we license, or new versions of the software may not be compatible with our software, which would require us to rewrite our software, which we may not be able to do.
As a result, DoD funding levels have fluctuated and have been difficult to predict. Future spending levels are subject to a wide range of factors, including Congressional action. In addition, in recent years the U.S.
Government appropriations have been affected by larger U.S. Government budgetary issues and related legislation. As a result, DoD funding levels have fluctuated and have been difficult to predict. Future spending levels are subject to a wide range of factors, including Congressional action. In addition, in recent years the U.S.
If we are unable to be qualified into new U.S. defense programs, remain qualified in existing programs, or win orders against our competition, or if defense programs are not funded, then our ability to generate revenues and achieve profitability and positive cash flow will be materially and negatively impacted.
If we are unable to be qualified into new U.S. defense programs, remain qualified in existing programs, or win orders against our competition, or if defense programs are not funded, then our ability to generate revenues and achieve profitability and positive cash flow will be materially and negatively impacted. 16 Our investments in the development and sale of OLED microdisplays may not be successful, which may materially adversely affect our sales, profitability and cash flow.
Government agency chooses to spend money on other programs, our customers’ contracts may be terminated for convenience. The Anti-Deficiency Act, prohibit involving the government in any obligation to pay money before funds have been appropriated for that purpose, unless otherwise allowed by law. Therefore, the Anti-Deficiency Act indirectly regulates how agencies award our contracts and pay our invoices.
The Anti-Deficiency Act prohibits involving the government in any obligation to pay money before funds have been appropriated for that purpose, unless otherwise allowed by law. Therefore, the Anti-Deficiency Act indirectly regulates how agencies award our contracts and pay our invoices.
The individual components that we offer for sale (displays, optical lenses, backlights and ASICs) are also offered by companies whose sole business focuses on that individual component. For example, there are companies whose sole business is to sell optical lenses. Accordingly, our strategy requires us to develop technologies and to compete in multiple markets.
There are a number of companies that develop or may develop products that compete in our targeted markets. The individual components that we offer for sale (displays, optical lenses, backlights and ASICs) are also offered by companies whose sole business focuses on that individual component. For example, there are companies whose sole business is to sell optical lenses.
We routinely receive emails probing our Internet security, and our Internet security systems have detected outside organizations attempting to install Trojan virus software packages in our systems. We rely on our electronic information systems to perform routine transactions to run our business.
Significantly larger organizations with much greater resources than us have been the victim of cybercrimes. We routinely receive emails probing our Internet security, and our Internet security systems have detected outside organizations attempting to install Trojan virus software packages in our systems. We rely on our electronic information systems to perform routine transactions to run our business.
Government defense budget, changes in spending or budgetary priorities, a prolonged U.S. Government shutdown or delays in contract awards may significantly and adversely affect our future revenues, cash flow and financial results . In addition to the Anti-Deficiency Act, in recent years U.S. Government appropriations have been affected by larger U.S. Government budgetary issues and related legislation.
If our revenues and costs require adjustment, our stock price could decline. A decline in the U.S. Government defense budget, changes in spending or budgetary priorities, a prolonged U.S. Government shutdown or delays in contract awards may significantly and adversely affect our future revenues, cash flow and financial results . In addition to the Anti-Deficiency Act, in recent years U.S.
As of December 31, 2022, we had an accumulated deficit of $338.4 million. At December 31, 2022 and December 25, 2021, we had $12.6 million and $29.3 million of cash and cash equivalents and marketable securities, respectively. For the years 2022 and 2021, net cash used in operating activities was $17.7 million and $10.7 million, respectively.
As of December 30, 2023, we had an accumulated deficit of $358.2 million. At December 30, 2023 and December 31, 2022, we had $17.9 million and $12.6 million of cash and cash equivalents, including restricted cash, and marketable debt securities, respectively. For the years 2023 and 2022, net cash used in operating activities was $15.3 million and $17.7 million, respectively.
Our data processing systems and our Enterprise Resource Planning (“ERP”) software are cloud-based and hosted by third parties. We also use software packages that are no longer supported by their developer. We have experienced short-term (i.e., a few days) interruptions in our Internet connectivity.
We also use software packages that are no longer supported by their developer. We have experienced short-term (i.e., a few days) interruptions in our Internet connectivity.
We have experienced intermittent shortages of raw materials, which has affected our ability to manufacture and ship units. These shortages have also resulted in an increase in the cost of raw materials and semiconductor components.
We have experienced intermittent shortages of raw materials, which has affected our ability to manufacture and ship units. These shortages have also resulted in an increase in the cost of raw materials and semiconductor components. Our products sold for defense applications go through an expensive and long qualification period before the government will accept the products.
Our employees and consultants generally enter into agreements containing provisions with respect to confidentiality and the assignment of rights to us for inventions made by them while in our employ or consulting for us. These measures may not adequately protect our intellectual property or proprietary rights.
We also attempt to protect our proprietary information with contractual arrangements and under trade secret laws. Our employees and consultants generally enter into agreements containing provisions with respect to confidentiality and the assignment of rights to us for inventions made by them while in our employ or consulting for us.
As discussed above, we are seeing a global shortage of semiconductors and other raw materials which is resulting in a significant increase in some raw material prices. In addition, the U.S. is experiencing inflation levels not seen in many years which is driving higher labor costs. Some of our contracts have specific provisions relating to cost, scheduling, and performance.
In addition, the U.S. is experiencing inflation levels not seen in many years which is driving higher labor costs. Some of our contracts have specific provisions relating to cost, scheduling, and performance.
In addition, these investments may be required to raise additional capital, which may result in our ownership percentage being decreased. If we are unable to obtain or maintain existing software license relationships or other relationships relating to the intellectual property we use, our ability to grow revenue and achieve profitability and positive cash flow may be negatively affected.
If we are unable to obtain or maintain existing software license relationships or other relationships relating to the intellectual property we use, our ability to grow revenue and achieve profitability and positive cash flow may be negatively affected. Our headset systems include software that we license from other companies.
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 or understated, and the profits or loss reported could be subject to adjustment. If our revenues and costs require adjustment, our stock price could decline. A decline in the U.S.
These amounts are only included in the contract value when they can be reliably estimated, and realization is considered probable. 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 or understated, and the profits or loss reported could be subject to adjustment.
The process of seeking patent protection can be time consuming and expensive and we cannot be certain that patents will be issued from currently pending or future patent applications.
If we are unable to protect our intellectual property or proprietary rights, our business may not be successful, and the price of our common stock may decline. The process of seeking patent protection can be time consuming and expensive and we cannot be certain that patents will be issued from currently pending or future patent applications.
Existing trade secret, trademark and copyright laws afford only limited protection and our patents could be invalidated, held to be unenforceable or circumvented. Moreover, the laws of certain foreign countries in which our products are or may be manufactured or sold may not provide full protection of our intellectual property rights.
These measures may not adequately protect our intellectual property or proprietary rights. Existing trade secret, trademark and copyright laws afford only limited protection and our patents could be invalidated, held to be unenforceable or circumvented.
Our success will depend substantially upon our ability to enhance our products and technologies and to develop and introduce, on a timely and cost-effective basis, new products and features that meet changing customer requirements and incorporate technological enhancements. If we are unable to develop new products and enhance functionalities or technologies to adapt to these changes, our business will suffer.
They may also devote greater resources to the development, promotion and sale of their products than we do. Our success will depend substantially upon our ability to enhance our products and technologies and to develop and introduce, on a timely and cost-effective basis, new products and features that meet changing customer requirements and incorporate technological enhancements.
For example, in the third quarter of 2022, we reviewed the financial condition and other factors of our investment in Lenovo New Vision and as a result, we recorded an impairment charge of $2.0 million to reduce the carrying value of our investment. These investments may not contribute to our earnings or cash flows.
We are required to periodically review the value of these investments for impairment. For example, in the second quarter of 2023, we reviewed the financial condition and other factors of our investment in a customer and as a result, we recorded an impairment charge of $3.1 million to reduce the carrying value of our investment.
Our trade secrets may not be secure from discovery or independent development by competitors, in which case we may not be able to rely on these trade secrets to prevent our competitors from using them. Our products could infringe on the intellectual property rights of others. Companies in the display industry steadfastly pursue and protect their intellectual property rights.
Our trade secrets may not be secure from discovery or independent development by competitors, in which case we may not be able to rely on these trade secrets to prevent our competitors from using them. 23 Our business could suffer if we lose the services of, or fail to attract, key personnel.
Disruptions of our production could adversely affect our operating results. If we were to experience any significant disruption in the operation of our facilities, we would be unable to supply our products to our customers. Many of our sales contracts include financial penalties for late delivery.
If we are unable to develop new products and enhance functionalities or technologies to adapt to these changes, our business will suffer. Disruptions of our production could adversely affect our operating results. If we were to experience any significant disruption in the operation of our facilities, we would be unable to supply our products to our customers.
Congress funds the vast majority of the federal budget on an annual basis, and Congress often does not provide agencies with all the money requested in their budget. Many of our customers’ contracts cover multiple years and, as such, are not fully funded at contract award. If Congress or a U.S.
Government contracts generally are not fully funded at inception and may be terminated or modified prior to completion, which could adversely affect our business. Congress funds the vast majority of the federal budget on an annual basis, and Congress often does not provide agencies with all the money requested in their budget.
We believe that for certain applications OLED microdisplays have performance advantages and we believe some customers have switched or will want to switch from AMCLDs to OLED microdisplays in the next two to three years. We are in the process of designing and developing OLED microdisplays.
Historically, we have sold products that incorporate our proprietary AMLCDs. We believe that for certain applications OLED microdisplays have performance advantages and we have received future display product needs from some customers that plan to switch from AMCLDs to OLED microdisplays in the next two to three years.
We expect to make additional monetary investments in their commercialization, though our plan is to outsource their production. We have little experience in production outsourcing. If we are unsuccessful in designing and developing OLED microdisplays or if we are unable to find cost-effective third-party production partners, our sales and profitability may be negatively affected.
We are in the process of designing and developing OLED microdisplays and establishing foundry relationships to manufacture them. We expect to make additional monetary investments in their commercialization, though our plan is to outsource their production. We have little experience in production outsourcing.
If we fail to achieve or maintain profitability on a quarterly or annual basis within the timeframe expected by investors, the market price of our common stock may decline. Supply shortages have and could continue to impair the quality, reduce the availability or increase the cost of raw materials, which could harm our business.
If we fail to achieve or maintain profitability on a quarterly or annual basis within the timeframe expected by investors, the market price of our common stock may decline. Our products could infringe on the intellectual property rights of others. Companies in the display industry steadfastly pursue and protect their intellectual property rights.
If our quarterly revenues or results of operations fall below the expectations of investors or public market analysts, the price of our common stock could fall substantially.
If our quarterly revenues or results of operations fall below the expectations of investors or public market analysts, the price of our common stock could fall substantially. Our customers who purchase display products for defense applications typically incorporate our products into their products, which are sold to the U.S. Government under contracts. U.S.
In the past, we have experienced power outages at our facilities, which ranged in duration from one to four days. We have certain critical pieces of equipment necessary to operate our facilities that are no longer offered for sale and we may not have service contracts or spare parts for the equipment.
We have certain critical pieces of equipment necessary to operate our facilities that are no longer offered for sale and we may not have service contracts or spare parts for the equipment. Additionally, as we introduce new equipment into our manufacturing processes, our display products could be subject to especially wide variations in manufacturing yields and efficiency.
Additionally, as we introduce new equipment into our manufacturing processes, our display products could be subject to especially wide variations in manufacturing yields and efficiency. We may experience manufacturing problems that would result in delays in product introduction and delivery or yield fluctuations. 21 A disruption to our information technology systems could significantly impact our operations, revenue and profitability.
We may experience manufacturing problems that would result in delays in product introduction and delivery or yield fluctuations. A disruption to our information technology systems could significantly impact our operations, revenue and profitability. Our data processing systems and our Enterprise Resource Planning (“ERP”) software are cloud-based and hosted by third parties.
We cannot provide assurance against supplier price increases that negatively impact the cost of producing products, which may adversely affect sales or profitability.
We cannot provide assurance against supplier price increases that negatively impact the cost of producing products, which may adversely affect sales or profitability. Finding and/or qualifying a more cost-effective replacement supplier may take significant time. 21 The markets in which we operate are highly competitive and rapidly changing and we may be unable to compete successfully.
We may not achieve some or all of the anticipated benefits of our equity investments. At December 31, 2022, we had equity investments in companies totaling $7.7 million, where we have limited, if any, control over their governance, financial reporting and operations.
At December 30, 2023, we had equity investments in companies totaling $4.7 million, where we have limited, if any, control over their governance, financial reporting and operations. As a result, we face certain operating, financial and other risks relating to these investments, including risks related to the financial strength of the investments.
Some of our competitors are much larger than we are and have significantly greater financial, development and marketing resources than we do. The competition in these markets could adversely affect our operating results by reducing the volume of the products we sell or the prices we can charge.
The competition in these markets could adversely affect our operating results by reducing the volume of the products we sell or the prices we can charge. These competitors may be able to respond more rapidly than us to new or emerging technologies or changes in customer requirements.
Misappropriation of our technology and the costs of defending our intellectual property rights from misappropriation could substantially impair our business. If we are unable to protect our intellectual property or proprietary rights, our business may not be successful, and the price of our common stock may decline.
Moreover, the laws of certain foreign countries in which our products are or may be manufactured or sold may not provide full protection of our intellectual property rights. Misappropriation of our technology and the costs of defending our intellectual property rights from misappropriation could substantially impair our business.
If the initial estimates that we use to calculate the sales price and the cost to perform the work prove to be incorrect, we could incur losses. We have had situations where we have underestimated the cost of a program and incurred losses in fulfilling the contract.
While firm fixed-price contracts allow us to benefit from potential cost savings, they also expose us to the risk of cost overruns. If the initial estimates that we use to calculate the sales price and the cost to perform the work prove to be incorrect, we could incur losses.
Under a fixed-price contract, we receive only the amount indicated in the contract, regardless of the actual cost to produce the goods. While firm fixed-price contracts allow us to benefit from potential cost savings, they also expose us to the risk of cost overruns.
Most of our defense sales are on a fixed-price basis, which could subject us to losses if there are cost overruns. Under a fixed-price contract, we receive only the amount indicated in the contract, regardless of the actual cost to produce the goods.
As a result, we face certain operating, financial and other risks relating to these investments, including risks related to the financial strength of the investments. We are required to periodically review the value of these investments for impairment.
As a result, we face certain operating, financial and other risks relating to these investments, including risks related to the financial strength of the investments. As a result, these investments may not contribute to our earnings or cash flows. In addition, these investments may be required to raise additional capital, which may result in our ownership percentage being decreased.
Furthermore, we cannot assure that we would be able to establish alternative manufacturing and packaging relationships on acceptable terms or at all. Most of our defense sales are on a fixed-price basis, which could subject us to losses if there are cost overruns.
Furthermore, we cannot assure that we would be able to establish alternative manufacturing and packaging relationships on acceptable terms or at all. We are in the process of transitioning from using a Chinese deposition foundry to a European foundry for certain OLED products for defense applications.
We are currently involved in an intellectual property dispute with Blue Radios, Inc., as described under
We are currently involved in an intellectual property dispute with Blue Radios, Inc., as described under Item 3. Legal Proceedings. If the outcome of such a dispute is adverse to us, our business could be adversely affected.
If our information technology security systems were infiltrated and confidential and/or proprietary information were taken, we could be subject to fines, lawsuits and loss of customers . Significantly larger organizations with much greater resources than us have been the victim of cybercrimes.
Our business and financial performance may be adversely affected by cyber-attacks on information technology infrastructure and products, as well as changes in cybersecurity and if our information technology security systems were infiltrated and confidential and/or proprietary information were taken, we could be subject to fines, lawsuits and loss of customers .
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.
Due to the number of significant factors affecting revenue recognition, forecasting revenue at a point in time in the future is difficult. For contract change orders, claims or similar items, we apply judgment in estimating the amounts and assessing the potential for realization.
Removed
The decrease in our cash and cash equivalents and marketable securities is primarily a result of funding our operating losses, of which a significant component is our investments in research and development.
Added
The increase in our cash and cash equivalents and marketable securities is primarily due to gross proceeds of $22.9 million received from the sale of 17,000,000 shares of common stock and the pre-funded warrants to purchase up to 6,000,000 shares of common stock at a public offering price of $0.99 per share.
Removed
Our customers who purchase display products for defense applications typically incorporate our products into their products, which are sold to the U.S. Government under contracts. U.S. Government contracts generally are not fully funded at inception and may be terminated or modified prior to completion, which could adversely affect our business.
Added
We cannot be certain that licenses will be obtainable on acceptable terms, if at all, or that damages for infringement will not be assessed or that further litigation will not occur.
Removed
Finding and/or qualifying a more cost-effective replacement supplier may take significant time. 20 Our investments in the development and sale of OLED microdisplays may not be successful which may materially adversely affect our sales, profitability and cash flow. Historically, we have sold products that incorporate our proprietary AMLCDs.
Added
The failure to obtain necessary licenses or other rights or litigation arising out of any such claims or any adverse decision or ruling relating to such litigation, including the Blue Radios litigation, could adversely affect our ability to conduct our business or conduct our business as we presently conduct it and as we plan to conduct it in the future.
Removed
The markets in which we operate are highly competitive and rapidly changing and we may be unable to compete successfully. There are a number of companies that develop or may develop products that compete in our targeted markets.
Added
We may be unable to manufacture our products cost effectively to meet contractual specifications or customer requirements. Our products are required to meet specifications agreed to in purchase orders and related agreements with our customers.
Removed
These competitors may be able to respond more rapidly than us to new or emerging technologies or changes in customer requirements. They may also devote greater resources to the development, promotion and sale of their products than we do.
Added
Our ability to produce products which meet these specifications is dependent on a number of factors including but not limited to our manufacturing processes and our vendors providing raw materials that meet the specifications we have agreed to with them.
Removed
Our headset systems include software that we license from other companies. Should we violate the terms of a license, our license could be canceled.
Added
In addition, while there may be agreement with our customers on the specifications there may be ambiguity with the method to measure compliance with meeting the specifications.
Added
When we commence production of new products, we normally go through a period of low production efficiency as we modify our production processes for higher volume output and train more production employees on how to make the product.
Added
Low production efficiency means that the cost to make the product is more than what we anticipated when we accepted the purchase order from the customer. In addition, after we commence selling our products customers may request changes to the products which may also result in the low production efficiency starting again.
Added
We currently have several new products and new product configurations going to production. If the products we deliver are found to have undetected defects or latent defects when we ship them, we may incur the cost to recall the products.
Added
Product recalls and product liability and warranty claims can result in significant damages and costs, including fines, as well as other harm to our business. If we are unable to manufacture our products cost effectively, our revenue and ability to obtain profitability will be adversely affected.
Added
If we are unsuccessful in designing and developing OLED microdisplays or if we are unable to find cost-effective third-party production partners, our sales and profitability may be negatively affected. Supply shortages have and could continue to impair the quality, reduce the availability or increase the cost of raw materials, which could harm our business.
Added
Once the product for a defense application is accepted there are restrictions on our ability to substitute a different raw material or component for the one used in the qualification of the product.
Added
We depend principally on a Chinese foundry for the deposition process in creating our OLED displays but we are in the process of having the deposition process performed by a European foundry.
Added
If we are unsuccessful in executing our transition plan or if the transition is significantly delayed, our ability to manufacture and distribute our products could continue to be adversely affected, which in turn would adversely affect our results of operations or financial condition.
Added
We have had situations where we have underestimated the cost of a program and incurred losses in fulfilling the contract. As discussed above, we are seeing a global shortage of semiconductors and other raw materials which is resulting in a significant increase in some raw material prices.
Added
Many of our customers’ contracts cover multiple years and, as such, are not fully funded at contract award. If Congress or a U.S. Government agency chooses to spend money on other programs, our customers’ contracts may be terminated for convenience.
Added
Accordingly, our strategy requires us to develop technologies and to compete in multiple markets. Some of our competitors are much larger than we are and have significantly greater financial, development and marketing resources than we do.
Added
Many of our sales contracts include financial penalties for late delivery. In the past, we have experienced power outages at our facilities, which ranged in duration from one to four days.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeNVIS, our subsidiary in Reston, Virginia, leases 6,100 square feet in Reston. FDD, our subsidiary in Scotland, leases 20,000 square feet in Dalgety Bay, 5,000 square feet of which is contiguous environmentally controlled production clean rooms operated between Class 10 and Class 10,000 levels. FDD also leases an office in Berlin, Germany.
Biggest changeFDD, our subsidiary in Scotland, leases 20,000 square feet in Dalgety Bay, 5,000 square feet of which is contiguous environmentally controlled production clean rooms operated between Class 10 and Class 10,000 levels. FDD also leases an office in Berlin, Germany. At this time, we believe these properties are suitable for our needs for the foreseeable future.
Item 2. Properties We lease our 74,000 square foot production facility in Westborough, Massachusetts, 10,000 square feet of which is contiguous environmentally controlled production clean rooms operated between Class 10 and Class 1,000 levels. In addition to our Massachusetts facility, we lease a 3,100 square foot facility in Santa Clara, California. We also have a lease in Tokyo, Japan.
Item 2. Properties We lease our 74,000 square foot production facility in Westborough, Massachusetts, 10,000 square feet of which is contiguous environmentally controlled production clean rooms operated between Class 10 and Class 1,000 levels. NVIS, our subsidiary in Reston, Virginia, leases 6,100 square feet in Reston.
Removed
At this time, we believe these properties are suitable for our needs for the foreseeable future. Item 3. Legal Proceedings The Company may engage in legal proceedings arising in the ordinary course of business.
Removed
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.
Removed
District Court for the District of Colorado, alleging that the Company breached a contract between it and BlueRadios concerning an alleged 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)).
Removed
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.
Removed
BlueRadios seeks monetary, declaratory, and injunctive relief, including for alleged non-payment of engineering retainer fees. On October 11, 2016, the Company filed its Answer and Affirmative Defenses. The parties completed expert depositions on November 15, 2019.
Removed
On December 2, 2019, the Company filed a Motion for Partial Summary Judgment requesting the Court dismiss counts 2-7 in their entirety and counts 1 and 8 in part. BlueRadios also filed a Motion for Partial Summary Judgment alleging it is the co-owner of U.S. Patent No. 8,909,296.
Removed
Responses to the Motions for Partial Summary Judgment were filed on January 15, 2020, and replies were filed on February 19, 2020. On September 25, 2020, the Court denied BlueRadios’ Motion for Partial Summary Judgment.
Removed
On August 3, 2022, the Court granted the Company’s Motion for Partial Summary Judgment by dismissing counts 3, 6, 7, punitive damages under count 2, and count 8 as it relates to patent applications, and denying the motion as it relates to counts 1, 4, and 5, and the remainder of counts 2 and 8.
Removed
The Court also ordered discovery reopened for certain limited purposes. A trial date has not yet been set by the Court. 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 period ended December 31, 2022.
Removed
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.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Removed
Item 3. Legal Proceedings . If the outcome of such a dispute is adverse to us, our business could be adversely affected. We cannot be certain that licenses will be obtainable on acceptable terms, if at all, or that damages for infringement will not be assessed or that litigation will not occur.
Added
Item 3. Legal Proceedings 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.
Removed
The failure to obtain necessary licenses or other rights or litigation arising out of any such claims could adversely affect our ability to conduct our business as we presently conduct it and as we plan to conduct it in the future. 23 Our business could suffer if we lose the services of, or fail to attract, key personnel.
Added
Kopin Corporation, Civil Action No. 16-02052-JLK (D. Col.): On August 12, 2016, BlueRadios, Inc. (“BlueRadios”) filed a complaint in the U.S.
Removed
To continue to provide quality products in our rapidly changing business, we believe it is important to retain personnel with experience and expertise relevant to our business. Our success depends in large part upon a number of key management and technical employees. The loss of the services of one or more key employees, including Mr.
Added
District Court for the District of Colorado (“the Court”), alleging that the Company breached a contract between it and BlueRadios concerning an alleged 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)).
Removed
Murray, our President and Chief Executive Officer, could seriously impede our success. We do not maintain any “key-man” insurance policies on Mr. Murray or any other employees.
Added
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.
Removed
In addition, due to the level of technical and marketing expertise necessary to support our existing and new customers, our success will depend upon our ability to attract and retain highly skilled management, technical, and sales and marketing personnel.
Added
BlueRadios seeks monetary, declaratory, and injunctive relief, including for alleged non-payment of engineering retainer fees. On October 11, 2016, the Company filed its Answer and Affirmative Defenses. The parties completed expert depositions on November 15, 2019.
Removed
Competition for highly skilled personnel is intense and there may be only a limited number of persons with the requisite skills to serve in these positions. Due to the competitive nature of the labor markets in which we operate, we may be unsuccessful in attracting and retaining these personnel.
Added
On December 2, 2019, the Company filed a Motion for Partial Summary Judgment requesting the Court dismiss counts 2-7 in their entirety and counts 1 and 8 in part. BlueRadios also filed a Motion for Partial Summary Judgment alleging it is the co-owner of U.S. Patent No. 8,909,296.
Removed
Our inability to attract and retain key personnel could adversely affect our ability to develop and manufacture our products. If we fail to keep pace with changing technologies, we may lose customers. Rapidly changing customer requirements and evolving technologies and industry standards characterize our industries.
Added
Responses to the Motions for Partial Summary Judgment were filed on January 15, 2020, and replies were filed on February 19, 2020. On September 25, 2020, the Court denied BlueRadios’ Motion for Partial Summary Judgment.
Removed
To achieve our goals, we need to enhance our existing products and develop and market new products that keep pace with continuing changes in industry standards, requirements and customer preferences.
Added
On August 3, 2022, the Court granted the Company’s Motion for Partial Summary Judgment by dismissing counts 3, 6, 7, punitive damages under count 2, and count 8 as it relates to patent applications, and denying the motion as it relates to counts 1, 4, and 5, and the remainder of counts 2 and 8.
Removed
We may be unable to bring to market technologies and products that are attractive to our customers, and as a result, our business, financial condition and results of operations may be materially adversely affected. Customer demands and new regulations related to conflict-free minerals may adversely affect us.
Added
Additional factual and expert discovery ordered by The Court has been completed. A trial date has been set by the Court for March 20, 2024. 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 period ended December 30, 2023.
Removed
The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) imposes disclosure requirements regarding the use of “conflict” minerals mined from the Democratic Republic of Congo and adjoining countries in products, whether or not these products are manufactured by third parties.
Added
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.
Removed
These requirements could affect the pricing, sourcing and availability of minerals used in the manufacture of semiconductor devices (including our products). We have incurred additional costs associated with complying with the disclosure requirements, such as costs related to determining the source of any conflict minerals used in our products.
Removed
Our supply chain is complex, and we may be unable to verify the origins of all metals used in our products. We purchase materials from foreign sources that may not cooperate and provide us with the necessary information to allow us to comply with the Dodd-Frank Act. This may require us to find alternative sources, which could delay product shipments.
Removed
We may also encounter challenges with our customers and stockholders if we are unable to certify that our products are conflict-free. Changes in tax laws, an unfavorable resolution of tax examinations, or exposure to additional tax liabilities could have a material adverse effect on our results of operations, financial condition and liquidity.
Removed
We are subject to taxes in the U.S., Korea, China and the United Kingdom. Governments in the jurisdictions in which we operate implement changes to tax laws and regulations periodically.
Removed
Any implementation of tax laws that fundamentally changes the taxation of corporations in the U.S. or in the foreign jurisdictions in which we operate could materially affect our effective tax rate and could have a significant adverse impact on our financial results.
Removed
We may incur significant liabilities if we fail to comply with stringent environmental laws and regulations and the ITAR, or if we did not comply with these regulations in the past.
Removed
We are subject to a variety of federal, state and local government regulations related to the use, storage, discharge and disposal of toxic or other hazardous chemicals used in our manufacturing process.
Removed
We are also subject to federal International Traffic in Arms Regulations (ITAR) laws that regulate the export of technical data and export of products to other nations that may use these products for defense purposes. Failure to comply with present or future regulations could result in fines, suspension of production, or a cessation of operations.
Removed
Any failure on our part to control the use of, or adequately restrict the discharge of, hazardous substances, or otherwise comply with environmental regulations, could subject us to significant future liabilities.
Removed
Any failure on our part to obtain any required licenses for the export of technical data and/or export of our products or to otherwise comply with ITAR, could subject us to significant future liabilities.
Removed
In addition, we cannot be certain that we have not violated applicable laws or regulations in the past, which violations could result in required remediation or other liabilities.
Removed
We also cannot be certain that past use or disposal of environmentally sensitive materials in conformity with then existing environmental laws and regulations will protect us from required remediation or other liabilities under current or future environmental laws or regulations. 24 We may be unable to modify our products to meet regulatory or customer requirements.
Removed
From time to time our display products are subject to new domestic and international requirements, such as the European Union’s Restriction on Hazardous Substances Directive.
Removed
Our customers’ terms and conditions require us to be in compliance with “all laws.” If we are unable to comply with these regulations, we may not be permitted to ship our products, which would adversely affect our revenue and ability to maintain profitability.
Removed
In addition, if we are found to be in violation of laws, we may be subject to fines and penalties. We may be unable to successfully integrate new strategic acquisitions and investments, which could materially adversely affect our business, results of operations and financial condition.
Removed
In the past, we have made, and in the future we may make, acquisitions of, and investments in, businesses, products and technologies that could complement or expand our business. If we identify an acquisition candidate, we may not be able to successfully integrate the acquired businesses, products or technologies into our existing business and products.
Removed
Future acquisitions could result in potentially dilutive issuances of equity securities, the incurrence of debt and contingent liabilities, amortization expenses and write-downs of acquired assets. Additionally, we have several investments where we may have limited, if any, control over their governance, financial reporting and operations.
Removed
As a result, we face certain operating, financial and other risks relating to these investments, including risks related to the financial strength of the investments. As a result, these investments may not contribute to our earnings or cash flows. In addition, these investments may be required to raise additional capital, which may result in our ownership percentage being decreased.
Removed
Changes in China’s laws, legal protections or government policies on foreign investment in China may harm our business. Our business and corporate transactions are subject to laws and regulations applicable to foreign investment in China as well as laws and regulations applicable to foreign-invested enterprises.
Removed
These laws and regulations frequently change, and their interpretation and enforcement involve uncertainties that could limit the legal protections available to us. Regulations and rules on foreign investments in China impose restrictions on the means that a foreign investor like us may apply to facilitate corporate transactions we may undertake.
Removed
In addition, the Chinese legal system is based in part on government policies and internal rules, some of which are not published on a timely basis or at all, that may have a retroactive effect. As a result, we may not be aware of our violation of these policies and rules until sometime after the violation.
Removed
If any of our past operations are deemed to be non-compliant with Chinese law, we may be subject to penalties and our business and operations may be adversely affected. For instance, under the catalogue for the Guidance of Foreign Investment Industries, some industries are categorized as sectors that are encouraged, restricted or prohibited for foreign investment.
Removed
As the catalogue for the Guidance of Foreign Investment Industries is updated every few years, there can be no assurance that China’s government will not change its policies in a manner that would render part or all of our business to fall within the restricted or prohibited categories.
Removed
If we cannot obtain approval from relevant authorities to engage in businesses that has become prohibited or restricted for foreign investors, we may be forced to sell or restructure such business. Furthermore, China’s government has broad discretion in dealing with violations of laws and regulations, including levying fines, revoking business and other licenses and requiring actions necessary for compliance.
Removed
In particular, licenses and permits issued or granted to us by relevant governmental bodies may be revoked at a later time by higher regulatory bodies.
Removed
If we are forced to adjust our corporate structure or business as a result of changes in government policy on foreign investment or changes in the interpretation and application of existing or new laws, our business, financial condition, results of operations and prospects may be harmed.
Removed
Moreover, uncertainties in the Chinese legal system may impede our ability to enforce contracts with our business partners, customers and suppliers, or otherwise pursue claims in litigation to recover damages or loss of property, which could adversely affect our business and operations. 25 Raising additional funds by issuing securities may cause dilution to our existing stockholders or restrict our operations.
Removed
To the extent that we raise additional capital by issuing equity securities, the share ownership of existing stockholders will be diluted.
Removed
The terms of any financing may adversely affect the holdings or the rights of our stockholders and the issuance of additional securities, whether equity or debt, or the possibility of such issuance, may cause the market price of our shares to decline.
Removed
We may sell shares or other securities in other offerings at a price per share that is less than the prices per share paid by other investors, and investors purchasing shares of our common stock or other securities in the future could have rights superior to existing stockholders.
Removed
The sale of additional equity or convertible securities would dilute all of our stockholders and the terms of these securities may include liquidation or other preferences that adversely affect our existing stockholders.
Removed
We have no present intention to pay dividends on our common stock in the foreseeable future and, consequently, your only opportunity to achieve a return on your investment during that time is if the price of our common stock appreciates. We have no present intention to pay dividends on our common stock in the foreseeable future.
Removed
Historically, our earnings, if any, have been retained for the development of our businesses. Any recommendation by our Board of Directors to pay dividends will depend on many factors, including our financial condition, results of operations, and other factors.
Removed
Accordingly, if the price of our common stock declines in the foreseeable future, you will incur a loss on your investment, without the likelihood that this loss will be offset in part or at all by potential future cash dividends.
Removed
Our operations are subject to political, legal and economic risks and natural disasters, which could adversely affect our business, results of operations, financial condition and prospects. Credit rating downgrades in certain European countries and/or speculation regarding changes to the composition or viability of the EU create uncertain global economic conditions.
Removed
The ongoing uncertainty could have a negative economic impact and result in further volatility in the markets for several years. The impact of the Brexit referendum and such ongoing uncertainty may result in various economic and financial consequences for businesses operating in the UK, the EU and beyond.
Removed
We hold significant assets in the UK and operate a UK subsidiary, and the future impacts of Brexit and the continued uncertainty surrounding the EU could have a material impact on our business, financial condition, results of operations and cash flows.
Removed
Changes in government trade policies may increase the cost of our products, which may materially adversely affect our sales or profitability. We depend on a Taiwanese foundry for the manufacture of integrated circuits for our AMLCD display products and on Chinese and Korean foundries for our OLED display products.
Removed
In recent years the U.S. has imposed, among other actions, new or higher tariffs on specified imported products originating from China in response to what it characterizes as unfair trade practices, and China has responded by proposing or implementing new or higher tariffs on specified products imported from the U.S.
Removed
Tariffs on components that we import from China or other nations that have imposed, or may in the future impose, tariffs have in some case and may in the future cause our expenses to increase, which would adversely affect our profitability unless we were able to exclude our products from the tariffs or we raise prices for our products, which may result in our products becoming less attractive relative to products offered by our competitors.
Removed
In addition, future actions or escalations by either the U.S. or China that affect trade relations may also affect our business or that of our suppliers or customers, and we cannot provide any assurances as to whether such actions will occur or the form that they may take.
Removed
Moreover, it is uncertain to what extent, if any, the U.S. tariffs on components that we import from China will affect the Taiwanese foundries on which we depend, in part because many Taiwanese foundries conduct parts of their manufacturing in China.
Removed
A protectionist trade environment in either the U.S. or those foreign countries in which we do business, such as a change in the current tariff structures, export compliance or other trade policies, may materially adversely affect our ability to sell our products in foreign markets.
Removed
To the extent that our sales or profitability are affected negatively by any such tariffs or other trade actions, our business and results of operations may be materially adversely affected. As a publicly traded company, we are subject to a significant body of regulation, including the Sarbanes-Oxley Act of 2002.
Removed
While we have developed and instituted a corporate compliance program based on what we believe are the current best practices in corporate governance and continue to update this program in response to newly implemented or changing regulatory requirements, we cannot provide assurance that we are or will be in compliance with all potentially applicable corporate regulations.
Removed
If we fail to comply with any of these regulations, we could be subject to a range of regulatory actions, fines or other sanctions or litigation. If we must disclose any material weakness in our internal control over financial reporting, our stock price could decline. 26

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changePlan Category Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) Weighted-average exercise price of outstanding options, warrants and rights (b) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a) (b) Equity compensation plans approved by security holders 1,965,901 $ 2.22 7,143,668 (1) Equity compensation plans not approved by security holders — $ — — (1) Amount includes shares available under the 2020 Equity Incentive Plan. 28 Company Stock Performance The following graph shows a five-year comparison of cumulative total shareholder return for the Company, the Nasdaq US Benchmark TR Index and the S&P 500 Information Technology index.
Biggest changePlan Category Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) Weighted-average exercise price of outstanding options, warrants and rights (b) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a) (b) Equity compensation plans approved by security holders 1,931,767 $ 1.65 5, 809,910 (1) Equity compensation plans not approved by security holders — $ — — (1) Amount includes shares available under the 2020 Equity Incentive Plan. 29 Company Stock Performance The following graph shows a five-year comparison of cumulative total shareholder return for the Company, the Nasdaq US Benchmark TR Index and the S&P 500 Information Technology index.
The graph assumes $100 was invested in each of the Company’s common stock, the Nasdaq US Benchmark TR Index and the S&P 500 Information Technology index on December 31, 2017. Data points on the graph are annual. Note that historical price performance is not necessarily indicative of future performance. 29
The graph assumes $100 was invested in each of the Company’s common stock, the Nasdaq US Benchmark TR Index and the S&P 500 Information Technology index on December 31, 2017 . Data points on the graph are annual. Note that historical price performance is not necessarily indicative of future performance. 30
We anticipate that earnings, if any, will be retained for the development of our businesses. Equity Compensation Plan Information The following table sets forth information as of December 31, 2022 about shares of the Company’s common stock issuable upon the exercise of outstanding options, warrants and rights and available for issuance under our existing equity compensation plans.
We anticipate that earnings, if any, will be retained for the development of our businesses. Equity Compensation Plan Information The following table sets forth information as of December 30, 2023 about shares of the Company’s common stock issuable upon the exercise of outstanding options, warrants and rights and available for issuance under our existing equity compensation plans.
As of March 9, 2023, there were approximately 298 shareholders of record of our common stock, which does not reflect those shares held beneficially or those shares held in “street” name. We have not paid cash dividends in the past, nor do we expect to pay cash dividends for the foreseeable future.
As of March 7, 2024, there were approximately 291 shareholders of record of our common stock, which does not reflect those shares held beneficially or those shares held in “street” name. We have not paid cash dividends in the past, nor do we expect to pay cash dividends for the foreseeable future.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

52 edited+8 added−9 removed65 unchanged
Biggest changeResearch and Development. R&D expenses are incurred in support of internal display development programs or programs funded by agencies or prime contractors of the U.S. Government and commercial partners. R&D costs include staffing, purchases of materials and laboratory supplies, circuit design costs, fabrication and packaging of display products and allocated overhead.
Biggest changeIn the fourth quarter of 2022, gross margins declined due to lower absorption of costs as we reduced production to make process changes in manufacturing the products. Research and Development. R&D expenses are incurred in support of internal display development programs or programs funded by agencies or prime contractors of the U.S. Government and commercial partners.
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.
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 the contract value when they can be reliably estimated and realization is considered probable.
Industrial/Enterprise applications revenues represent customers who purchase our display products for use in headsets used for manufacturing, distribution, public safety, 3D metrology equipment and other industrial applications. Our 3D metrology customers are primarily located in Asia and they sell to Asian contract manufacturers who use the 3D metrology machines for quality control purposes.
Industrial/Enterprise applications revenues represent customers who purchase our display products for use in headsets used for manufacturing, distribution, public safety, 3D metrology equipment and other industrial applications. Our 3D metrology customers are primarily located in Asia and they sell to Asian contract manufacturers who use the 3D metrology machines for quality control purposes.
In the second quarter of 2022, we sold 1.5 million shares of common stock and 0.2 million shares of treasury stock for gross proceeds of $2.1 million (average of $1.26 per share) before deducting broker expenses paid by us of less than $0.1 million and in the third quarter of 2022, the Company sold 675,000 shares of common stock for gross proceeds of approximately $0.9 million (average of $1.27 per share) before deducting broker expenses paid by us of less than $0.1 million, pursuant to pursuant to the Current ATM Agreement.
In the second quarter of 2022, we sold 1.5 million shares of common stock and 0.2 million shares of treasury stock for gross proceeds of $2.1 million (average of $1.26 per share) before deducting broker expenses paid by us of less than $0.1 million and in the third quarter of 2022, the Company sold 675,000 shares of common stock for gross proceeds of approximately $0.9 million (average of $1.27 per share) before deducting broker expenses paid by us of less than $0.1 million, pursuant to the Current ATM Agreement.
For industrial and consumer purchase orders, we typically receive payments within 30 to 60 days of shipment of the product, although for some purchase orders, we may require advanced payment prior to shipment of the product. 30 To determine the proper revenue recognition method for contracts with the same customer, we evaluate whether two or more contracts should be combined and accounted for as one single contract and whether the combined or single contract should be accounted for as more than one performance obligation.
For industrial and consumer purchase orders, we typically receive payments within 30 to 60 days of shipment of the product, although for some purchase orders, we may require advanced payment prior to shipment of the product. 31 To determine the proper revenue recognition method for contracts with the same customer, we evaluate whether two or more contracts should be combined and accounted for as one single contract and whether the combined or single contract should be accounted for as more than one performance obligation.
Seasonality Our revenues have not followed a seasonal pattern for the past three years and we do not anticipate any seasonal trend to our revenues in 2023. Contractual Obligations Under our former CEO’s (“Dr. Fan”) employment agreement, commencing in January 2023, Dr.
Seasonality Our revenues have not followed a seasonal pattern for the past three years and we do not anticipate any seasonal trend to our revenues in 2024. Contractual Obligations Under our former CEO’s (“Dr. Fan”) employment agreement, commencing in January 2023, Dr.
If our estimate of total contract costs or our determination of whether the customer agrees that a milestone achievement is incorrect, our revenue could be overstated or understated and the profits or loss reported could be subject to adjustment. 31 For our commercial customers, the Company’s revenue is recognized when obligations under the terms of a contract with our customer are satisfied and the Company transfers control of the products or performs services, which is generally upon delivery of the product to the customer or performance of the services.
If our estimate of total contract costs or our determination of whether the customer agrees that a milestone achievement is incorrect, our revenue could be overstated or understated and the profits or loss reported could be subject to adjustment. 32 For our commercial customers, the Company’s revenue is recognized when obligations under the terms of a contract with our customer are satisfied and the Company transfers control of the products or performs services, which is generally upon delivery of the product to the customer or performance of the services.
Other income is primarily composed of interest income, revaluation and impairment of equity investments, foreign currency transactions, remeasurement gains and losses incurred by our UK-based subsidiaries and other non-operating income items.
Non-operating (expense) income is primarily composed of interest income, revaluation and impairment of equity investments, foreign currency transactions, remeasurement gains and losses incurred by our UK-based subsidiaries and other non-operating income items.
Historically, we have periodically recorded other-than-temporary impairment losses, however we have not done so recently. 32 Income Taxes We have historically incurred domestic operating losses from both a financial reporting and tax return standpoint. We establish valuation allowances to the extent it appears more likely than not that our deferred tax assets will not be realized.
Historically, we have periodically recorded other-than-temporary impairment losses, however we have not done so recently. 33 Income Taxes We have historically incurred domestic operating losses from both a financial reporting and tax return standpoint. We establish valuation allowances to the extent it appears more likely than not that our deferred tax assets will not be realized.
Fiscal Year 2021 Compared to Fiscal Year 2020 The provision for income taxes for the fiscal years ended 2021 and 2020 of approximately $(0.1) million was due to the accretion of additional potential liabilities related to uncertain tax positions and deferred tax liabilities for the Company’s former Korean subsidiary. Net loss (income) attributable to noncontrolling interest.
Fiscal Year 2022 Compared to Fiscal Year 2021 The provision for income taxes for the fiscal years ended 2022 and 2021 of approximately $(0.1) million was due to the accretion of additional potential liabilities related to uncertain tax positions and deferred tax liabilities for the Company’s former Korean subsidiary. Net loss attributable to noncontrolling interest.
Internal R&D expense for 2021 increased as compared to the prior year primarily due to increased OLED development. Selling, General and Administrative. Selling, general and administrative (“SG&A”) expenses consist of the expenses incurred by our sales and marketing personnel and related expenses, and administrative and general corporate expenses.
Internal R&D expense for 2022 increased as compared to the prior year primarily due to increased OLED development. Selling, General and Administrative. Selling, general and administrative (“SG&A”) expenses consist of the expenses incurred by our sales and marketing personnel and related expenses, and administrative and general corporate expenses.
We estimate we will have sufficient liquidity to fund operations at least through the first quarter of 2024. Nonetheless, we monitor the capital markets on an ongoing basis and may consider raising capital if favorable market conditions develop.
We estimate we will have sufficient liquidity to fund operations at least through the first quarter of 2025. Nonetheless, we monitor the capital markets on an ongoing basis and may consider raising capital if favorable market conditions develop.
Foreign currency translation impact on our results, if material, is described in further detail under “Item 7A. Quantitative and Qualitative Disclosures About Market Risk” section below. 34 Fiscal Year 2021 Compared to Fiscal Year 2020 Sales of our products for Defense applications include systems used by the military both in the field and for training and simulation.
Foreign currency translation impact on our results, if material, is described in further detail under “Item 7A. Quantitative and Qualitative Disclosures About Market Risk” section below. 35 Fiscal Year 2022 Compared to Fiscal Year 2021 Sales of our products for Defense applications include systems used by the military both in the field and for training and simulation.
Our international sales are primarily denominated in U.S. dollars. Consequently, a strengthening of the U.S. dollar could increase the price in local currencies of our products in foreign markets and make our products relatively more expensive than competitors’ products that are denominated in local currencies, which could result in a reduction in sales or profitability in those foreign markets.
Consequently, a strengthening of the U.S. dollar could increase the price in local currencies of our products in foreign markets and make our products relatively more expensive than competitors’ products that are denominated in local currencies, which could result in a reduction in sales or profitability in those foreign markets.
We have recorded deferred tax liabilities for any additional withholding tax that may be due to the Korean government upon Kowon’s final tax return acceptance. 39 We have incurred net losses of $19.3 million, $13.4 million and $4.4 million for the fiscal years 2022, 2021 and 2020, respectively, and net cash outflows from operations of $17.7 million, $10.7 million and $4.4 million for the fiscal years ended 2022, 2021 and 2020, respectively.
We have recorded deferred tax liabilities for any additional withholding tax that may be due to the Korean government upon Kowon’s final tax return acceptance. 40 We have incurred net losses of $19.7 million, $19.3 million and $13.4 million for the fiscal years 2023, 2022 and 2021, respectively, and net cash outflows from operations of $15.3 million, $17.7 million and $10.7 million for the fiscal years ended 2023, 2022 and 2021, respectively.
Because our fiscal year ends on the last Saturday of December, every seven years we have a fiscal year with 53 weeks. Our fiscal year 2022 was a 53-week year and 2021 and 2020 were 52-week years. Revenues.
Because our fiscal year ends on the last Saturday of December, every seven years we have a fiscal year with 53 weeks. Our fiscal year 2023 was a 52-week year, 2022 was a 53-week year and 2021 was a 52-week year. Revenues.
The decrease in license and royalty revenue in 2021 compared to 2020 is due to lower royalties earned under IP license agreements for industrial wearable headsets. International product sales represented approximately 38% and 20% of product revenues for 2021 and 2020, respectively.
The decrease in license and royalty revenue in 2022 compared to 2021 is due to lower royalties earned under IP license agreements for industrial wearable headsets. International product sales represented approximately 22% and 38% of product revenues for 2022 and 2021, respectively.
Tax provision (In thousands) 2022 2021 2020 Tax provision $ (144 ) $ (129 ) $ (129 ) Fiscal Year 2022 Compared to Fiscal Year 2021 The provision for income taxes for the fiscal years ended 2022 and 2021 of approximately $(0.1) million was due to the accretion of additional potential liabilities related to uncertain tax positions and deferred tax liabilities for the Company’s former Korean subsidiary.
Tax provision (In thousands) 2023 2022 2021 Tax provision $ (156 ) $ (144 ) $ (129 ) Fiscal Year 2023 Compared to Fiscal Year 2022 The provision for income taxes for the fiscal years ended 2023 and 2022 of approximately $(0.2) million and $(0.1) million, respectively, was due to the accretion of additional potential liabilities related to uncertain tax positions and deferred tax liabilities for the Company’s former Korean subsidiary.
Internal R&D expense for 2022 increased as compared to the prior year primarily due to increased OLED development. 36 Fiscal Year 2021 Compared to Fiscal Year 2020 Funded R&D expense for 2021 increased as compared to 2020 primarily due to an increase in the number of defense related contracts we have been awarded.
Internal R&D expense for 2023 decreased as compared to the prior year primarily due to decreased OLED development. 37 Fiscal Year 2022 Compared to Fiscal Year 2021 Funded R&D expense for 2022 increased as compared to 2021 primarily due to an increase in the number of defense related contracts we have been awarded.
Predicting our R&D revenue and related trends is challenging because we have limited ability to forecast whether we will be awarded additional R&D contracts in the future as such awards depend on the U.S. military budget and priorities.
Accordingly, there can be no assurances we will continue to ship under our defense contracts. 34 Predicting our R&D revenue and related trends is challenging because we have limited ability to forecast whether we will be awarded additional R&D contracts in the future as such awards depend on the U.S. military budget and priorities.
Our revenues by display application, which include product sales and amounts earned from research and development contracts, for fiscal years 2022, 2021 and 2020 by category, were as follows: (In thousands) 2022 2021 2020 Defense $ 24,780 $ 18,180 $ 20,231 Industrial/Enterprise 6,136 9,710 6,882 Consumer 1,497 1,871 852 Research and Development 14,357 14,669 10,123 Other 7 121 553 License and royalties 624 1,115 1,487 Total Revenues $ 47,401 $ 45,666 $ 40,128 Fiscal Year 2022 Compared to Fiscal Year 2021 Sales of our products for Defense applications include systems used by the military both in the field and for training and simulation.
Our revenues by display application, which include product sales and amounts earned from research and development contracts, for fiscal years 2023, 2022 and 2021 by category, were as follows: (In thousands) 2023 2022 2021 Defense $ 22,615 $ 24,780 $ 18,180 Industrial/Enterprise 2,736 6,136 9,710 Consumer 573 1,497 1,871 Research and Development 13,455 14,357 14,669 Other 13 7 121 License and royalties 1,002 624 1,115 Total Revenues $ 40,394 $ 47,401 $ 45,666 Fiscal Year 2023 Compared to Fiscal Year 2022 Sales of our products for Defense applications include systems used by the military both in the field and for training and simulation.
For example, if the customer is located in Asia or if a U.S. customer has its Asian contract manufacturer order product from us and we deliver the product to Asia, we categorize both these sales as international.
We categorize our revenues as either domestic or international based upon the delivery destination of our product. For example, if the customer is located in Asia or if a U.S. customer has its Asian contract manufacturer order product from us and we deliver the product to Asia, we categorize both these sales as international.
The increase in Industrial/Enterprise applications revenues in 2021 compared to 2020 was primarily due to an increase in sales to customers who use our display components in 3D metrology equipment and industrial headsets. Sales of our displays for Consumer applications is primarily for the use in thermal imaging products, recreational rifle and hand-held scopes.
The decrease in Industrial/Enterprise applications revenues in 2023 compared to 2022 was primarily due to a decrease in sales to customers who use our display components in 3D metrology equipment and industrial headsets. Sales of our displays for Consumer applications are primarily for use in thermal imaging products, recreational rifle and hand-held scopes.
These contracts typically reimburse us for direct costs and allocated overhead and selling, general and administrative costs and in some cases profit. In 2021 and 2020 our R&D revenues exceeded funded R&D expenses by approximately $4.7 million and $2.4 million, respectively.
These contracts typically reimburse us for direct costs and allocated overhead and selling, general and administrative costs and in some cases profit. In 2023 and 2022, our R&D revenues exceeded funded R&D expenses by approximately $6.3 million and $4.1 million, respectively.
SG&A expenses for the fiscal years 2022, 2021 and 2020 were as follows: (In thousands, except percentages) 2022 2021 2020 Selling, general and administrative expense $ 17,965 $ 18,101 $ 11,823 Selling, general and administrative expense as a % of total revenue 37.9 % 39.6 % 29.5 % Fiscal Year 2022 Compared to Fiscal Year 2021 SG&A for 2022 decreased as compared to 2021 primarily due to a decrease of approximately $2.9 million in non-cash stock-based compensation, partially offset by a $0.8 million increase in compensation and benefits and $1.4 million of higher professional fees.
SG&A expenses for the fiscal years 2023, 2022 and 2021 were as follows: (In thousands, except percentages) 2023 2022 2021 Selling, general and administrative expense $ 21,842 $ 17,965 $ 18,101 Selling, general and administrative expense as a % of total revenue 54.1 % 37.9 % 39.6 % Fiscal Year 2023 Compared to Fiscal Year 2022 SG&A for 2023 increased as compared to 2022 primarily due to an increase of approximately $5.0 million in legal and professional fees and $1.0 million in non-cash stock-based compensation, partially offset by a $1.3 million decrease in compensation and benefits.
Our OLED displays are designed by us and manufactured by third parties for us. We are a display supplier for the U.S. Army’s Family of Weapon Sights-Individual and Joint Strike Fighter F-35 programs and are undergoing qualification for the FWS - Crew Served variant.
FDD, our wholly-owned subsidiary, manufactures our LCOS microdisplays in its facility located in Scotland. Our OLED displays are designed by us and manufactured by third parties for us. We are a display supplier for the U.S. Army’s Family of Weapon Sights-Individual and Joint Strike Fighter F-35 programs and are undergoing qualification for the FWS - Crew Served variant.
In 2022 we recorded a $2.0 million impairment charge on an equity investment. Also in 2022, we recorded $0.3 million of foreign currency losses compared to $0.1 million of foreign currency gains recorded in 2021.
Fiscal Year 2022 Compared to Fiscal Year 2021 In 2022 we recorded a gain of $4.7 million resulting from the revaluation of an equity investment. In 2022 we recorded a $2.0 million impairment charge on an equity investment. Also in 2022, we recorded $0.3 million of foreign currency losses compared to $0.1 million of foreign currency gains recorded in 2021.
The inability to procure a single component will prevent the completion of our product and the ability to sell the product. Our products go through extensive qualification processes and therefore our customers may not accept a replacement component. We are unable to determine if we will be able to obtain all necessary components for fiscal 2023.
Our products go through extensive qualification processes and therefore our customers may not accept a replacement component. We are unable to determine if we will be able to obtain all necessary components for fiscal 2024.
As of December 31, 2022, we owned 80% of the equity of eMDT. Net loss (income) attributable to noncontrolling interest on our consolidated statement of operations represents the portion of the results of operations of our majority owned subsidiaries which is allocated to the shareholders of the equity interests not owned by us.
In the first quarter of 2023, we acquired the remaining interest in eMDT. Net loss attributable to noncontrolling interest on our consolidated statement of operations represents the portion of the results of operations of our majority owned subsidiaries which is allocated to the shareholders of the equity interests not owned by us.
R&D revenues consist primarily of development contracts with agencies or prime contractors of the U.S. Government and commercial enterprises. We manufacture transmissive and reflective microdisplays. Our commercial and defense transmissive display production is being performed entirely in our Westborough, Massachusetts facility. FDD, our wholly-owned subsidiary, manufactures our reflective microdisplays in its facility located in Scotland.
R&D revenues consist primarily of development contracts with agencies or prime contractors of the U.S. Government and commercial enterprises. We manufacture Active-matrix Liquid Crystal (“AMLCD”) transmissive and Liquid Crystal on Silicon (“LCOS”) reflective microdisplays. Our AMLCD display production is being performed entirely in our Westborough, Massachusetts facility.
Cost of product revenues, which is comprised of materials, labor and manufacturing overhead related to the production of our products for fiscal years 2022, 2021 and 2020 were as follows: (In thousands, except percentages) 2022 2021 2020 Cost of product revenue $ 32,559 $ 25,052 $ 21,398 Cost of product revenues as a % of net product revenues 100 % 83.8 % 75.0 % Fiscal Year 2022 Compared to Fiscal Year 2021 Cost of product revenues increased as a percentage of revenues in 2022 as compared to 2021 primarily due to lower production volumes in the second and third quarters of fiscal year 2022.
Cost of product revenues, which is comprised of materials, labor and manufacturing overhead related to the production of our products for fiscal years 2023, 2022 and 2021 were as follows: (In thousands, except percentages) 2023 2022 2021 Cost of product revenues $ 24,952 $ 32,559 $ 25,052 Cost of product revenues as a % of net product revenues 96.2 % 100 % 83.8 % Fiscal Year 2023 Compared to Fiscal Year 2022 Cost of product revenues decreased as a percentage of revenues in 2023 as compared to 2022 primarily due to increased sales of higher margin products for defense applications in 2023 versus 2022 and lower sales of lower margin products from defense applications in 2023 versus 2022.
R&D expenses for fiscal years 2022, 2021 and 2020 were as follows: (In thousands) 2022 2021 2020 Funded $ 10,280 $ 9,976 $ 7,746 Internal 8,388 6,312 3,924 Total $ 18,668 $ 16,288 $ 11,670 Fiscal Year 2022 Compared to Fiscal Year 2021 Funded R&D expense for 2022 increased as compared to 2021 primarily due to an increase in the number of defense related contracts we have been awarded.
R&D expenses for fiscal years 2023, 2022 and 2021 were as follows: (In thousands) 2023 2022 2021 Funded $ 7,177 $ 10,280 $ 9,976 Internal 3,600 8,388 6,312 Total $ 10,777 $ 18,668 $ 16,288 Fiscal Year 2023 Compared to Fiscal Year 2022 Funded R&D expense for 2023 decreased as compared to 2022 primarily due to the completion of contracts for defense programs awarded prior to 2023.
The following table presents the components of our cash and cash equivalents and marketable debt securities held in U.S. dollars as of the dates presented: December 31, 2022 December 25, 2021 Domestic locations $ 11,778,324 $ 27,031,695 Foreign locations 629,793 865,416 Subtotal cash and cash equivalents and marketable debt securities held in U.S. dollars 12,408,117 27,897,111 Cash and cash equivalents held in other currencies and converted to U.S. dollars 239,539 1,398,355 Total cash and cash equivalents and marketable debt securities $ 12,647,656 $ 29,295,466 We have no plans to repatriate the cash and cash equivalents held in our foreign subsidiary FDD.
The following table presents the components of our cash, cash equivalents, restricted cash and marketable debt securities held in U.S. dollars as of the dates presented: December 30, 2023 December 31, 2022 Domestic locations $ 17,725,979 $ 11,778,324 Foreign locations 95,547 629,793 Subtotal cash, cash equivalents, restricted cash and marketable debt securities held in U.S. dollars 17,821,526 12,408,117 Cash and cash equivalents held in other currencies and converted to U.S. dollars 81,159 239,539 Total cash, cash equivalents, restricted cash and marketable debt securities $ 17,902,685 $ 12,647,656 We have no plans to repatriate the cash and cash equivalents held in our foreign subsidiary FDD.
The change in net loss attributable to noncontrolling interest in 2022 compared to 2021 was $0.1 million and in 2021 compared to 2020 was $0.1 million and was a result of net losses attributable to minority shareholders of eMDT. 38 Liquidity and Capital Resources At December 31, 2022 and December 25, 2021, we had cash and cash equivalents and marketable securities of $12.6 million and working capital of $16.4 million compared to $29.3 million and $34.7 million, respectively.
The change in net loss attributable to noncontrolling interest in 2023 compared to 2022 was less than $0.1 million and in 2022 compared to 2021 was less than $0.1 million and was the result of operations of eMDT. 39 Liquidity and Capital Resources At December 30, 2023 and December 31, 2022, we had cash and cash equivalents, including restricted cash, and marketable securities of $17.9 million and working capital of $24.0 million compared to $12.6 million and $16.4 million, respectively.
In addition, if we earn royalties on sales from a customer, the royalties are categorized as domestic or international based on how the product revenues are categorized. Our international sales decreased in 2022 as compared to 2021 due to a decrease in sales of our products for 3D metrology application by our subsidiary, FDD and industrial headset products manufactured overseas.
Our international sales decreased in 2022 as compared to 2021 due to a decrease in sales of our products for 3D metrology application by our subsidiary, FDD and industrial headset products manufactured overseas. 36 Cost of Product Revenues.
In fiscal year 2022, our Funded R&D expenditures were primarily related to our display products and defense systems and our Internal R&D was primarily related to the development of OLED displays.
R&D costs include staffing, purchases of materials and laboratory supplies, circuit design costs, fabrication and packaging of display products and allocated overhead. In fiscal year 2023, our Funded R&D expenditures were primarily related to our display products and defense systems and our Internal R&D was primarily related to the development of OLED displays.
The decrease in license and royalty revenue in 2022 compared to 2021 is due to lower royalties earned under IP license agreements for industrial wearable headsets. International product sales represented approximately 22% and 38% of product revenues for 2022 and 2021, respectively. We categorize our revenues as either domestic or international based upon the delivery destination of our product.
The increase in license and royalty revenue in 2023 compared to 2022 is due to an increase in royalties earned under IP license agreements for industrial wearable headsets. International product sales represented approximately 13% and 22% of product revenues for 2023 and 2022, respectively.
Fiscal Year 2021 Compared to Fiscal Year 2020 SG&A for 2021 increased as compared to 2020 primarily due to increases of approximately $3.1 million in non-cash stock-based compensation, $1.4 million in compensation and benefits, $0.3 million in insurance and $0.9 million in bad debt expense, partially offset by $0.6 million of lower professional fees. Impairment of Goodwill and Intangibles.
Fiscal Year 2022 Compared to Fiscal Year 2021 SG&A for 2022 decreased as compared to 2021 primarily due to a decrease of approximately $2.9 million in non-cash stock-based compensation, partially offset by a $0.8 million increase in compensation and benefits and $1.4 million of higher professional fees. 38 Total Non-operating (Expense) Income.
For fiscal year 2022 we have identified a shortage of several semiconductor components from our normal vendors which are necessary to manufacture our products. We continue to search for and procure all necessary components from our current vendors and new alternative vendors. In certain situations, we can obtain the components but at a significantly increased cost.
We continue to search for and procure all necessary components from our current vendors and new alternative vendors. In certain situations, we can obtain the components but at a significantly increased cost. The inability to procure a single component will prevent the completion of our product and the ability to sell the product.
Fan (or in the event of his death prior to completion of all installments to his surviving spouse, or if none to his estate) will receive $1,500,000 in equal monthly installments.
Fan (or in the event of his death prior to completion of all installments to his surviving spouse, or if none to his estate) would receive $1,500,000 in twenty-four (24) equal monthly installments. As of December 30, 2023, we owed Dr. Fan $750,000 which will be paid in equal monthly installments during 2024. In addition, under Dr.
The gross proceeds of these transactions were $22.9 million, before deducting underwriting discounts and offering expenses paid by us of $1.5 million.
The gross proceeds of these transactions were $22.9 million, before deducting underwriting discounts and offering expenses paid by us of $1.5 million. At December 30, 2023, we had available $41.4 million for sale of common stock under the Current ATM Agreement.
Fiscal Year 2021 Compared to Fiscal Year 2020 Cost of product revenues increased as a percentage of revenues in 2021 as compared to 2020 primarily due to lower production volumes in the second and third quarter of fiscal year 2021, which resulted from reduced production of our FWS-I products as we made some process changes in manufacturing the products.
Fiscal Year 2022 Compared to Fiscal Year 2021 Cost of product revenues increased as a percentage of revenues in 2022 as compared to 2021 primarily due to lower production volumes in the second and third quarters of fiscal year 2022.
We are also in development for a new series of displays systems for the System Enhancement Package (SEP IV) program. The FWS, SEP IV and our existing production avionic programs are expected to increase production for the next several years.
We are also in development for new display systems for armored vehicles and a medical headset for surgeons. Our existing and new production programs are expected to increase production for the next several years.
The net proceeds from the sale of common shares were used for general corporate purposes, including working capital. At December 31, 2022 we had available $41.4 million for sale of common stock under the Current ATM Agreement.
The net proceeds from the sale of common shares were used for general corporate purposes, including working capital.
Other income, for the fiscal years 2022, 2021 and 2020 were as follows: (In thousands) 2022 2021 2020 Total other income , net $ 2,608 $ 436 $ 361 Fiscal Year 2022 Compared to Fiscal Year 2021 In 2022 we recorded a gain of $4.7 million resulting from the revaluation of an equity investment.
Non-operating (expense) income for the fiscal years 2023, 2022 and 2021 were as follows: (In thousands) 2023 2022 2021 Total non-operating (expense) income $ (2,415 ) $ 2,608 $ 436 Fiscal Year 2023 Compared to Fiscal Year 2022 In 2023, we recorded $3.3 million of impairment losses on equity investments.
The following is a summary of our contractual lease payment obligations as of December 31, 2022: Payment due by period Total Less than 1 year 1-3 Years 4-5 years More than 5 years Operating Lease Obligations $ 3,914,894 976,329 2,133,232 805,333 — 40
Fan’s employment agreement he receives $40,000 per year through 2033. The following is a summary of our contractual lease payment obligations as of December 30, 2023: Payment due by period Total Less than 1 year 1-3 Years 4-5 years More than 5 years Operating Lease Obligations $ 2,844,590 795,884 1,847,373 201,333 — 41
Fiscal Year 2021 Compared to Fiscal Year 2020 In 2021, we recorded $0.1 million of foreign currency gains compared to $0.3 million of foreign currency gains recorded in 2020. In 2021, we recorded a $0.3 million gain on an equity investment.
In 2022, we recorded a gain of $4.7 million resulting from the revaluation of an equity investment. Also in 2022, we recorded a $2.0 million impairment charge on an equity investment. In 2023, we recorded $0.2 million of foreign currency losses compared to $0.3 million of foreign currency losses recorded in 2022.
Sales of our products for Defense applications may be for a one-time purchase order or for programs that run for several years. Revenues from product sales to defense customers decreased in 2021 compared to 2020, primarily due to a decrease in shipments of our products into the Joint Strike Fighter program and training and simulation programs.
Revenues from product sales to defense customers decreased in 2023 compared to 2022, primarily due to a decrease in shipments of our products for thermal weapon sight applications that was partially offset by an increase in sales of our products for defense pilot helmets and training and simulation programs.
The increase in Consumer applications in 2021 compared to 2020 was primarily due to increased demand for our OLEDs. R&D revenues increased in 2021 as compared to 2020 primarily due to additional funding for new display technology development which we believe will be used in U.S. defense programs.
R&D revenues decreased in 2023 as compared to 2022 primarily due to decreased funding for new display technology development for U.S. defense programs and OLED display development, which was partially offset by increased funding for armor vehicle targeting system and medical headset development.
Our international sales increased in 2021 as compared to 2020 due to an increase in sales of our products for 3D metrology application by our subsidiary, FDD, located in Scotland. 35 Cost of Product Revenues.
Our international sales decreased in 2023 as compared to 2022 due to a decrease in sales of our products for 3D metrology application by our subsidiary, FDD, our OLED displays for consumer applications and industrial headset products manufactured overseas. Our international sales are primarily denominated in U.S. dollars.
The change in cash and cash equivalents and marketable securities was primarily due to cash used in operations of $17.7 million, which was partially offset by cash generated from sales of our common stock.
The change in cash and cash equivalents and marketable securities was primarily due to gross proceeds of $22.9 million received from the sale of 17,000,000 shares of common stock and the pre-funded warrants to purchase up to 6,000,000 shares of common stock at a public offering price of $0.99 per share.
Our products enable our customers to develop and market an improved generation of products for these target applications. Critical Accounting Estimates Management’s discussion and analysis of our financial condition and results of operations are based upon our audited consolidated financial statements.
We believe that the technologies we are developing may eventually be used in consumer augmented reality (“AR”) and virtual reality (“VR”) wearable headsets systems. Our products are primarily used to overlay digital information on the real-world scene. Critical Accounting Estimates Management’s discussion and analysis of our financial condition and results of operations are based upon our audited consolidated financial statements.
Removed
We are a leading developer, manufacturer and seller of miniature displays and optical lenses (our “components”) for sale as individual displays, components, modules or higher-level subassemblies. We also license our intellectual property through technology license agreements. Our component products are used in highly demanding high-resolution portable defense, enterprise and consumer electronic applications, training and simulation equipment, and 3D metrology equipment.
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We are a leading developer and provider of high-performance application-specific optical solutions consisting of high-resolution microdisplays and optics, microdisplays subassemblies and headsets. We define microdisplays as displays that have a diagonal measurement of less than 2 inches.
Removed
Accordingly, there can be no assurances we will continue to ship under our defense contracts. 33 We offer microdisplays and optical lenses for use in consumer, enterprise and public safety products and systems which are targeted at AR and VR markets, among other areas. We refer to the sale of microdisplays and optical lenses as our component sales.
Added
Our products are used for defense applications (soldier thermal weapon rifle sights, avionic fixed and rotary wing pilot helmets, armored vehicle targeting systems, and training & simulation headsets); industrial and medical headsets; and 3D optical inspection systems.
Removed
We also offer head mounted, voice and gesture controlled, hands-free headset system designs that include our components and software for consumer and enterprise applications.
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Sales of our products for Defense applications may be for a one-time purchase or for programs that run for several years.
Removed
In the fourth quarter of 2022, gross margins declined due to lower absorption of costs as we reduced production to make process changes in manufacturing the products. There is currently a global shortage of semiconductor circuit chips and other raw materials. The shortage did not have a material impact on our results of operations for the fiscal year 2021.
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The decrease in Consumer applications in 2023 compared to 2022 was primarily due to a decrease in sales of our OLED displays for consumer applications.
Removed
Goodwill and intangibles are evaluated for impairment annually or more often if indicators of potential impairment are present. Our annual impairment testing of goodwill is performed separately from our impairment testing of intangibles. The Company performs impairment tests of goodwill at its reporting unit level.
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In addition, if we earn royalties on sales from a customer, the royalties are categorized as domestic or international based on how the product revenues are categorized.
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The goodwill valuations that are utilized to test these assets for impairment are depending on a number of significant estimates and assumptions, including macroeconomic conditions, overall growth rates, competitive activities, cost containment, Company business plans and the discount rate applied to cash flows.
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The Company also implemented several programs and hired additional employees to improve manufacturing quality and efficiencies. The issues associated with the global shortage of semiconductor circuit chips and other raw materials decreased in 2023 as compared to 2022 and 2021. However, we have identified several semiconductor components which continue to have long lead delivery times.
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We believe these estimates and assumptions are reasonable and are comparable to those that would be used by other market participants. There was no impairment of goodwill for the fiscal years 2022, 2021 and 2020. 37 Total Other Income , Net.
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In February 2024, we sold 3.1 million shares of common stock under our Current ATM for gross proceeds of $7.5 million at an average per share price of $2.42 before deducting underwriting expenses of $0.2 million. Our Current ATM and our shelf registration statement expired on March 5, 2024.
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During the second quarter of 2021, we received proceeds from loans in the amount of approximately $2.2 million pursuant to the Paycheck Protection Program (“the PPP loan”) of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”).
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We expect to file a new shelf registration statement and enter into a new ATM in 2024.
Removed
During the second quarter of the fiscal year 2021 we repaid $2.1 million of the loans and we repaid $0.1 million in July 2020. Our decision to terminate the loans was based on additional guidance issued by the Small Business Administration. There were no prepayment penalties in connection with the voluntary repayment.

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