NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1.
BASIS OF PRESENTATION
The
condensed consolidated financial statements of Kopin Corporation as of March 26, 2022 and for the three month periods ended March 26,
2022 and March 27, 2021 are unaudited and include all adjustments that, in the opinion of management, are necessary to present fairly
the results of operations for the periods then ended. These condensed consolidated financial statements should be read in conjunction
with the Company’s financial statements and notes thereto, included in the Company’s Annual Report on Form 10-K for the fiscal
year ended December 25, 2021. The results of the Company’s operations for any interim period are not necessarily indicative of
the results of the Company’s operations for any other interim period or for a full fiscal year. As used in this report, the terms “we”, “us”,
“our”, “Kopin” and the “Company” mean Kopin Corporation and its subsidiaries, unless the context
indicates another meaning.
The
Company’s products are targeted towards the defense and industrial/enterprise and consumer wearable markets. The Company’s
revenues from sales of products into the consumer market include sales of its organic light emitting diode (OLED) displays. The Company’s
OLED products are relatively new and sales are sporadic. Management believes the enterprise wearable market is still developing and
cannot predict how long it will take to develop or if the Company’s products will be accepted. In addition, the Company’s
current strategy is to continue to invest in research and development, even during unprofitable periods, which may result in the Company
continuing to incur net losses and negative cash flows from operations. If the Company is unable to achieve and maintain positive cash
flows and profitability in the foreseeable future, its financial condition may ultimately be materially adversely affected such that
management may be required to reduce operating expenses, including investments in research and development, or raise additional capital.
While there can be no assurance the Company will be able to successfully reduce operating expenses or raise additional capital, management
believes its historical success in managing cash flows and obtaining capital will continue in the foreseeable future.
2.
ACCOUNTING STANDARDS
Accounting
Standards Issued But Not Yet Adopted
In
June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial
Instruments (“ASU 2016-13”), which requires measurement and recognition of expected credit losses for financial assets
held. In November 2019, the FASB issued ASU 2019-10 that has extended the effective date of ASU 2016-13 for Smaller Reporting Entities
to fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022. The Company is currently evaluating
ASU 2016-13 and its impact on our consolidated financial statements.
3.
CASH AND CASH EQUIVALENTS AND MARKETABLE DEBT SECURITIES
The
Company considers all highly liquid, short-term debt instruments with original maturities of three months or less to be cash equivalents.
Marketable
debt securities consist primarily of commercial paper, medium-term corporate notes, and U.S. government and agency backed securities.
The Company classifies these marketable debt securities as available-for-sale at fair value in “Marketable debt securities, at
fair value.” The Company records the amortization of premium and accretion of discounts on marketable debt securities in the results
of operations.
The
Company uses the specific identification method as a basis for determining cost and calculating realized gains and losses with respect
to marketable debt securities. The gross gains and losses realized related to sales and maturities of marketable debt securities were
not material during the three months ended March 26, 2022 and March 27, 2021.
Investments
in available-for-sale marketable debt securities were as follows at March 26, 2022 and December 25, 2021:
SCHEDULE
OF AVAILABLE-FOR-SALE MARKETABLE DEBT SECURITIES
| |
Amortized Cost | | |
Unrealized (Losses) Gains | | |
Fair Value | |
| |
2022 | | |
2021 | | |
2022 | | |
2021 | | |
2022 | | |
2021 | |
U.S. government and agency backed securities | |
$ | 2,000,006 | | |
$ | 1,000,128 | | |
$ | (49,326 | ) | |
$ | 522 | | |
$ | 1,950,680 | | |
$ | 1,000,650 | |
Corporate debt and certificates of deposit | |
| 2,500,024 | | |
| 1,500,000 | | |
| 384 | | |
| 6,885 | | |
| 2,500,408 | | |
| 1,506,885 | |
Total | |
$ | 4,500,030 | | |
$ | 2,500,128 | | |
$ | (48,942 | ) | |
$ | 7,407 | | |
$ | 4,451,088 | | |
$ | 2,507,535 | |
The
contractual maturity of the Company’s marketable debt securities was as follows at March 26, 2022:
SCHEDULE
OF MARKETABLE DEBT SECURITIES
| |
Less than One year | | |
One to Five years | | |
Total | |
U.S. government and agency backed securities | |
$ | — | | |
$ | 1,950,680 | | |
$ | 1,950,680 | |
Corporate debt | |
| 1,998,263 | | |
| 502,145 | | |
| 2,500,408 | |
Total | |
$ | 1,998,263 | | |
$ | 2,452,825 | | |
$ | 4,451,088 | |
4.
FAIR VALUE MEASUREMENTS
Financial
instruments are categorized as Level 1, Level 2 or Level 3 based upon the method by which their fair value is computed. An investment
is categorized as Level 1 when its fair value is based on unadjusted quoted prices in active markets for identical assets that the Company
has the ability to access at the measurement date. An investment is categorized as Level 2 if its fair market value is based on quoted
market prices for similar assets in active markets, quoted prices for identical or similar assets in markets that are not active, based
on observable inputs such as interest rates, yield curves, or derived from or corroborated by observable market data by correlation or
other means. An investment is categorized as Level 3 if its fair value is based on assumptions developed by the Company about what a
market participant would use in pricing the assets.
The
following table details the fair value measurements of the Company’s financial assets:
SCHEDULE
OF FAIR VALUE MEASUREMENTS OF FINANCIAL ASSETS
| |
| | |
Fair Value Measurement at March 26, 2022 Using: | |
| |
Total | | |
Level 1 | | |
Level 2 | | |
Level 3 | |
Cash and cash equivalents | |
$ | 21,867,492 | | |
$ | 21,867,492 | | |
$ | — | | |
$ | — | |
U.S. government and agency-backed securities | |
| 1,950,680 | | |
| — | | |
| 1,950,680 | | |
| — | |
Corporate debt | |
| 1,501,745 | | |
| — | | |
| 1,501,745 | | |
| — | |
Certificates of deposit | |
| 998,663 | | |
| 998,663 | | |
| — | | |
| — | |
Equity investments | |
| 9,553,628 | | |
| 244,549 | | |
| — | | |
| 9,309,079 | |
| |
$ | 35,872,208 | | |
$ | 23,110,704 | | |
$ | 3,452,425 | | |
$ | 9,309,079 | |
| |
| | |
Fair Value Measurement at December 25, 2021 Using: | |
| |
Total | | |
Level 1 | | |
Level 2 | | |
Level 3 | |
Cash and cash equivalents | |
$ | 26,787,931 | | |
$ | 26,787,931 | | |
$ | — | | |
$ | — | |
U.S. government and agency- backed securities | |
| 1,000,650 | | |
| — | | |
| 1,000,650 | | |
| — | |
Corporate debt | |
| 1,506,885 | | |
| — | | |
| 1,506,885 | | |
| — | |
Equity investments | |
| 4,912,022 | | |
| 296,173 | | |
| — | | |
| 4,615,849 | |
| |
$ | 34,207,488 | | |
$ | 27,084,104 | | |
$ | 2,507,535 | | |
$ | 4,615,849 | |
Transfers
between levels of the fair value hierarchy are reported at the beginning of the reporting period in which they occur. Changes in Level
3 investments were as follows:
SCHEDULE
OF FAIR VALUE, LIABILITIES MEASURED ON RECURRING BASIS
| |
December 25, 2021 | | |
Net unrealized gains | | |
Purchases, issuances and settlements | | |
Transfers in and or out of Level 3 | | |
March 26, 2022 | |
Equity Investments | |
$ | 4,912,022 | | |
$ | 4,641,606 | | |
$ | — | | |
$ | — | | |
$ | 9,553,628 | |
The
carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate fair value because
of their short-term nature. If accrued liabilities were carried at fair value, these would be classified as Level 2 in the fair value
hierarchy.
Marketable
Debt Securities
Corporate
debt consists of floating rate notes with a maturity
that may be over multiple years but has interest rates that are reset every three months based on the then-current three-month London
Interbank Offering Rate (“three-month Libor”). The Company validates the fair market values of the financial instruments
above by using discounted cash flow models, obtaining independent pricing of the securities or through the use of a model that incorporates
the three-month Libor, the credit default swap rate of the issuer and the bid and ask price spread of the same or similar investments
which are traded on several markets.
Equity
Investments
From
2017 through 2019, the Company made several
equity investments in a customer. In the fourth quarter of 2019, the Company reviewed the financial condition and other factors of the
customer and, as a result, recorded an impairment charge of $5.2
million to reduce its investment in the customer
to zero as of December 28, 2019. In the first quarter of 2022 the customer raised additional equity capital and based on an observable
price change of the customer’s share prices and terms of the equity sale the Company remeasured the fair market value of its investment
and recorded a gain of $4.7
million. As of March 26, 2022, the Company owned an approximate
2.3%
interest in this investment.
During
the three months ended March 26, 2022, the Company recorded a less than $0.1 million unrealized loss on an equity interest in a company
due to a fluctuation in the foreign exchange rate.
5.
INVENTORY
Inventories
are stated at standard cost adjusted to approximate the lower of cost (first-in, first-out method) or net realizable value and consist
of the following at March 26, 2022 and December 25, 2021:
SCHEDULE OF INVENTORY
| |
March 26, 2022 | | |
December 25, 2021 | |
Raw materials | |
$ | 5,629,085 | | |
$ | 5,044,334 | |
Work-in-process | |
| 984,241 | | |
| 1,032,519 | |
Finished goods | |
| 519,291 | | |
| 504,286 | |
Total | |
$ | 7,132,617 | | |
$ | 6,581,139 | |
6.
NET LOSS PER SHARE
Basic
net loss per share is computed using the weighted-average number of shares of common stock outstanding during the period less any unvested
restricted shares. Diluted net loss per share is calculated using weighted-average shares outstanding and contingently issuable shares,
less weighted-average shares reacquired during the period. The net outstanding shares are adjusted for the dilutive effect of shares
issuable upon the assumed conversion of the Company’s common stock equivalents, which consist of unvested restricted stock.
The
following were not included in weighted-average common shares outstanding-diluted because they are anti-dilutive or performance conditions
have not been met at the end of the period:
SCHEDULE OF WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING DILUTED
| |
Three months ended | | |
Three months ended | |
| |
March 26, 2022 | | |
March 27, 2021 | |
Non-vested restricted common stock | |
| 1,953,171 | | |
| 2,490,717 | |
7.
STOCKHOLDERS’ EQUITY AND STOCK-BASED COMPENSATION
Registered
sale of equity securities
During
the three months ended March 27, 2021, we sold 2.4
million shares of common stock for gross proceeds
of $16
million (average of $6.66
per share), before deducting broker expenses
paid by us of $0.5
million, pursuant to our At-The-Market Equity
Offering Sales Agreement dated as of February 8, 2019 (the “Previous ATM Agreement”) with Stifel, Nicolaus & Company,
Incorporated (“Stifel”), as agent. The Previous ATM Agreement has since terminated pursuant to its terms as a result
of the sale of all the shares subject to such agreement. On March 5, 2021 the Company entered into a new At-The-Market Equity
Offering Sales Agreement dated as of March 5, 2021 (the “Current ATM Agreement”) with Stifel under which the Company may
sell up to $50
million of its common stock.
Non-Vested
Restricted Common Stock
The
fair value of non-vested restricted common stock awards is generally the market value of the Company’s common stock on the date
of grant. The non-vested restricted common stock awards require the employee to fulfill certain obligations, including remaining employed
by the Company for one, two or four years (the vesting period) and in certain cases also require meeting either performance criteria
or the Company’s stock achieving a certain price. For non-vested restricted common stock awards that solely require the recipient
to remain employed with the Company, the stock compensation expense is amortized over the anticipated service period. For non-vested
restricted common stock awards that require the achievement of performance criteria, the Company reviews the probability of achieving
the performance goals on a periodic basis. If the Company determines that it is probable that the performance criteria will be achieved,
the amount of compensation cost derived for the performance goal is amortized over the anticipated service period. If the performance
criteria are not met, no compensation cost is recognized and any previously recognized compensation cost is reversed.
Restricted
stock activity for the three month period ended March 26, 2022 was as follows:
SCHEDULE OF NON-VESTED RESTRICTED STOCK ACTIVITY
| |
Shares | | |
Weighted Average Grant Fair Value | |
Balance, December 25, 2021 | |
| 2,077,592 | | |
$ | 2.90 | |
Granted | |
| 37,100 | | |
| 2.36 | |
Forfeited | |
| (7,100 | ) | |
| 4.40 | |
Vested | |
| (154,421 | ) | |
| 2.73 | |
Balance, March 26, 2022 | |
| 1,953,171 | | |
$ | 2.90 | |
Stock-Based
Compensation
The
following table summarizes stock-based compensation expense within each of the categories below as it relates to non-vested restricted
common stock awards for the three months ended March 26, 2022 and March 27, 2021 (no tax benefits were recognized):
SCHEDULE OF STOCK-BASED COMPENSATION EXPENSE
| |
Three Months Ended | | |
Three Months Ended | |
| |
March 26, 2022 | | |
March 27, 2021 | |
Cost of product revenues | |
$ | 66,668 | | |
$ | 133,784 | |
Research and development | |
| 147,379 | | |
| 94,053 | |
Selling, general and administrative | |
| 442,026 | | |
| 2,382,329 | |
Total | |
$ | 656,073 | | |
$ | 2,610,166 | |
Unrecognized
compensation expense for non-vested restricted common stock as of March 26, 2022 totaled $3.7 million and is expected to be recognized
over a weighted average period of approximately three years.
8.
ACCRUED WARRANTY
The
Company typically warrants its products against defect for 12 to 18 months, however, for certain products a customer may purchase an
extended warranty. A provision for estimated future costs and estimated returns for credit relating to such warranty is recorded in the
period when product is shipped and revenue is recognized and is updated as additional information becomes available. The Company’s
estimate of future costs to satisfy warranty obligations is based primarily on historical warranty expense experienced and a provision
for potential future product failures. Changes in the accrued warranty for the three months ended March 26, 2022 were as follows:
SCHEDULE OF ACCRUED WARRANTY
| |
| | |
Balance, December 25, 2021 | |
$ | 517,000 | |
Additions | |
| 725,000 | |
Claims | |
| (272,000 | ) |
Balance, March 26, 2022 | |
$ | 970,000 | |
Extended
Warranties
Deferred
revenue represents the purchase of extended warranties by the Company’s customers. The Company recognizes revenue from an extended
warranty on the straight-line method over the life of the extended warranty, which is typically 12 to 15 months beyond
the standard
12 to 18-month warranty. The Company classifies
the current portion of deferred revenue under Other accrued liabilities in its condensed consolidated balance sheets. At March 26, 2022,
the Company had less than $0.1
million of deferred revenue related to extended
warranties.
9.
INCOME TAXES
The
Company recorded a provision for income taxes of less than $0.1
million in each of the three months ended
March 26, 2022 and the three months ended March 27, 2021. As of March 26, 2022, the Company has available for tax purposes U.S. federal
net operating loss carryforwards (“NOLs”) of approximately $160.3
million expiring
2022 through 2037 and $76.0
million that have an unlimited carryover period.
The Company has recognized a full valuation allowance on its domestic and certain foreign net deferred tax assets due to the uncertainty
of realization of such assets. The Company recognizes both accrued interest and penalties related to its uncertain tax positions related
to intercompany loan interest and potential transfer pricing exposure related to its foreign subsidiaries.
10.
CONTRACT ASSETS AND LIABILITIES
Contract
assets include unbilled amounts typically resulting from sales under contracts when the cost-to-cost method of revenue recognition is
utilized and revenue recognized from customer arrangements, including licensing, exceeds the amount billed to the customer, and right
to payment is not just subject to the passage of time. Amounts may not exceed their net realizable value. Contract assets are generally
classified as current. The Company classifies the noncurrent portion of contract assets under other assets in its condensed consolidated
balance sheets.
Contract
liabilities consist of advance payments and billings in excess of cost incurred and deferred revenue.
Net
contract assets (liabilities) consisted of the following:
SCHEDULE OF CONTRACT WITH CUSTOMER, ASSET AND LIABILITY
| |
March 26, 2022 | | |
December 25, 2021 | | |
$ Change | | |
% Change | |
Contract assets—current | |
$ | 2,552,201 | | |
$ | 2,299,392 | | |
$ | 252,809 | | |
| 11 | % |
Contract liabilities and billings in excess of revenues earned | |
| (1,756,202 | ) | |
| (4,063,031 | ) | |
| 2,306,829 | | |
| (57 | )% |
Contract liabilities—noncurrent | |
| (10,371 | ) | |
| (20,664 | ) | |
| 10,293 | | |
| (50 | )% |
Net contract assets (liabilities) | |
$ | 785,628 | | |
$ | (1,784,303 | ) | |
$ | 2,569,931 | | |
| (144 | )% |
The
$2.6
million increase in the Company’s net contract
assets (liabilities) at March 26, 2022 as compared to December 25, 2021 was primarily due to recording of revenue earned against
advanced payments.
In
the three months ended March 26, 2022, the Company recognized revenue of $2.9 million related to our contract liabilities at December
25, 2021. In the three months ended March 27, 2021, the Company recognized revenue of $1.2 million related to our contract liabilities
at December 26, 2020.
The
Company did not recognize impairment losses on our contract assets in the three months ended March 26, 2022 or March 27, 2021.
Performance
Obligations
The
Company’s revenue recognition related to performance obligations that were satisfied at a point in time and over time were as follows:
SCHEDULE OF SATISFACTION OF PERFORMANCE OBLIGATIONS
| |
Three months ended | | |
Three months ended | |
| |
March 26, 2022 | | |
March 27, 2021 | |
Point in time | |
| 20 | % | |
| 32 | % |
Over time | |
| 80 | % | |
| 68 | % |
Remaining
performance obligations represent the transaction price of orders for which work has not been performed and excludes unexercised contract
options and potential orders under ordering-type contracts (e.g., indefinite-delivery, indefinite-quantity (“IDIQ”)). As
of March 26, 2022, the aggregate amount of the transaction price allocated to remaining performance obligations was $29.3 million which
the Company expects to recognize over the next 12 months. The remaining performance obligations represent amounts to be earned under
government contracts, which are subject to cancellation.
11.
LEASES
The
Company enters into operating leases primarily for: real estate, including for manufacturing, engineering, research, administration and
sales facilities, and information technology (“IT”) equipment. At March 26, 2022 and December 25, 2021, the Company did not
have any finance leases. Approximately all of our future lease commitments, and related lease liability, relate to the Company’s
real estate leases. Some of the Company’s leases include options to extend or terminate the lease.
The
components of lease expense were as follows:
SCHEDULE OF LEASE EXPENSE
| |
Three months ended | | |
Three months ended | |
| |
March 26, 2022 | | |
March 27, 2021 | |
Operating lease cost | |
$ | 249,503 | | |
$ | 290,884 | |
| |
| | | |
| | |
At
March 26, 2022, the Company’s future lease payments under non-cancellable leases were as follows:
SCHEDULE OF FUTURE LEASE PAYMENT UNDER NON-CANCELLABLE LEASE
| |
| | |
2022 (excluding the three months ended March 26, 2022) | |
$ | 645,519 | |
2023 | |
| 867,756 | |
2024 | |
| 769,923 | |
2025 | |
| 604,000 | |
2026 | |
| 604,000 | |
Thereafter | |
| 805,333 | |
Total future lease payments | |
| 4,296,531 | |
Less imputed interest | |
| (691,239 | ) |
Total | |
$ | 3,605,292 | |
The
Company’s lease liabilities recognized in the Company’s condensed consolidated balance sheet at March 26, 2022 were
as follows:
SCHEDULE OF OPERATING LEASE PAYMENTS RECOGNIZED IN CONSOLIDATED BALANCE SHEETS
| |
March 26, 2022 | |
Operating lease liabilities–current | |
$ | 658,298 | |
Operating lease liabilities–noncurrent | |
| 2,946,994 | |
Total lease liabilities | |
$ | 3,605,292 | |
Supplemental
cash flow information related to leases was as follows:
SCHEDULE OF SUPPLEMENTAL INFORMATION RELATED TO LEASES
| |
Three months ended | |
| |
March 26, 2022 | |
Cash paid for amounts included in the measurement of operating lease liabilities | |
$ | 248,754 | |
| |
| | |
Other
information related to leases was as follows:
| |
March 26, 2022 | |
Weighted Average Discount Rate–Operating Leases | |
| 5.92 | % |
Weighted Average Remaining Lease Term–Operating Leases (in years) | |
| 5.53 | |
12.
SEGMENTS AND DISAGGREGATION OF REVENUE
We
continually monitor and review our segment reporting structure in accordance with authoritative guidance to determine if any changes
have occurred that would affect our reportable segments. We report under one segment, as our Chief Executive Officer, who is our chief
operating decision maker (“CODM”), reviews results on a total company basis.
Total
long-lived assets by country at March 26, 2022 and December 25, 2021 were:
SCHEDULE OF LONG-LIVED ASSETS BY GEOGRAPHIC AREAS
Total Long-lived Assets (in thousands) | |
March 26, 2022 | | |
December 25, 2021 | |
U.S. | |
$ | 5,287 | | |
$ | 5,381 | |
United Kingdom | |
| 226 | | |
| 264 | |
Japan | |
| 57 | | |
| 72 | |
Total | |
$ | 5,570 | | |
$ | 5,717 | |
Total Long-lived Assets | |
$ | 5,570 | | |
$ | 5,717 | |
We
disaggregate our revenue from contracts with customers by geographic location and by display application, as we believe it best depicts
how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors.
During
the three months ended March 26, 2022 and March 27, 2021, the Company derived its sales from the following geographies:
SCHEDULE OF SEGMENT INFORMATION BY REVENUE TYPE
| |
March 26, 2022 | | |
March 27, 2021 | |
(In thousands, except percentages) | |
Revenue | | |
% of Total | | |
Revenue | | |
% of Total | |
United States | |
$ | 9,297 | | |
| 80 | % | |
$ | 8,180 | | |
| 70 | % |
Asia-Pacific | |
| 2,144 | | |
| 19 | | |
| 3,275 | | |
| 28 | |
Europe | |
| 137 | | |
| 1 | | |
| 221 | | |
| 2 | |
Total Revenues | |
$ | 11,578 | | |
| 100 | % | |
$ | 11,676 | | |
| 100 | % |
During
the three months ended March 26, 2022 and March 27, 2021, the Company derived its sales from the following display applications:
SCHEDULE OF SEGMENT REPORTING INFORMATION, BY SEGMENT
(In thousands) | |
March 26, 2022 | | |
March 27, 2021 | |
Defense | |
$ | 4,757 | | |
$ | 4,993 | |
Industrial | |
| 1,530 | | |
| 2,041 | |
Consumer | |
| 220 | | |
| 534 | |
R&D | |
| 4,908 | | |
| 3,561 | |
License and royalties | |
| 163 | | |
| 547 | |
Total Revenues | |
$ | 11,578 | | |
$ | 11,676 | |
13.
LITIGATION
The
Company may engage in legal proceedings arising in the ordinary course of business. Claims, suits, investigations and proceedings are
inherently uncertain and it is not possible to predict the ultimate outcome of such matters and our business, financial condition, results
of operations or cash flows could be affected in any particular period.
BlueRadios,
Inc. v. Kopin Corporation, Civil Action No. 16-02052-JLK (D. Col.):
On
August 12, 2016, BlueRadios, Inc. (“BlueRadios”) filed a complaint in the U.S. District Court for the District of Colorado,
alleging that the Company breached a contract between it and BlueRadios concerning 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)). BlueRadios further alleges that the Company was unjustly enriched by its alleged misconduct, BlueRadios
is entitled to an accounting to determine the amount of profits obtained by the Company as a result of its alleged misconduct, and the
inventorship on at least ten patents or patent applications owned by the Company need to be corrected to list BlueRadios’ employees
as inventors and thereby list BlueRadios as co-assignees of the patents. BlueRadios seeks monetary, declaratory, and injunctive relief,
including for alleged non-payment of engineering retainer fees.
On
October 11, 2016, the Company filed its Answer and Affirmative Defenses. The parties completed expert depositions on November 15, 2019.
On December 2, 2019, the Company filed a Motion for Partial Summary Judgment requesting the Court dismiss counts 2-7 in their entirety
and counts 1 and 8 in part. BlueRadios also filed a Motion for Partial Summary Judgment alleging it is the co-owner of U.S. Patent No.
8,909,296. Responses to the Motions for Partial Summary Judgment were filed on January 15, 2020, and replies were filed on February 19,
2020. On September 25, 2020, the Court denied BlueRadios’ Motion for Partial Summary Judgment. 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 March 26, 2022. 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.
14.
RELATED PARTY TRANSACTIONS
The
Company may from time to time enter into agreements with stockholders, affiliates and other companies engaged in certain aspects of the
display, electronics, optical and software industries as part of our business strategy. In addition, the wearable computing product market
is relatively new and there may be other technologies the Company needs to purchase from affiliates to enhance its product offering.
During
the three-month periods ended March 26, 2022 and March 27, 2021, the Company had the following transactions with related parties:
SCHEDULE OF TRANSACTIONS WITH RELATED PARTIES
| |
Three months ended | | |
Three months ended | |
| |
March 26, 2022 | | |
March 27, 2021 | |
| |
Sales | | |
Purchases | | |
Sales | | |
Purchases | |
RealWear, Inc. | |
$ | 624,216 | | |
$ | — | | |
$ | 1,323,885 | | |
$ | — | |
At
March 26, 2022 and December 25, 2021, the Company had the following receivables and contract assets with related
parties:
| |
March 26, 2022 | | |
December 25, 2021 | |
| |
Receivables | | |
Contract assets | | |
Receivables | | |
Contract assets | |
RealWear, Inc. | |
$ | 628,923 | | |
$ | — | | |
$ | 306,307 | | |
$ | — | |