KOPIN CORP (KOPN)

CIK: 0000771266. SIC: 3674 Semiconductors & Related Devices. Latest 10-K as of: 2026-04-13.

SIC breadcrumb: Manufacturing > Electronic And Other Electrical Equipment And Components, Except Computer Equipment > SIC 3674 Semiconductors & Related Devices

SEC company page: https://www.sec.gov/edgar/browse/?CIK=771266. Latest filing source: 0001493152-26-016338.

Selected Fundamentals

Financials

Annual standardized facts from SEC companyfacts as of latest extracted filing date 2026-04-13. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0000771266.json. Derived margins, ratios, and free cash flow are computed from the extracted annual SEC facts.

Flow metrics use full-year FY periods from 10-K/10-K/A filings; balance-sheet metrics use FY-end instants. Free cash flow = operating cash flow - capital expenditures. Missing metrics are omitted rather than fabricated.

Ratios

ROE and ROA use period-end equity/assets. Liabilities / equity uses total liabilities divided by stockholders' equity. Current ratio uses current assets divided by current liabilities when both are reported.

Financial Charts

Quarterly

Quarterly standardized facts from SEC companyfacts as of latest extracted filing date 2026-05-12. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0000771266.json.

Flow metrics use discrete quarter-length periods from 10-Q/10-Q/A filings. Q4 revenue and net income are derived only when annual FY and nine-month YTD facts exist for the same fiscal year; derived Q4 values are labeled. EPS Q4 is not derived.

Quarterly Charts

Macro Cross-References

• CPIAUCSL - Consumer Price Index for All Urban Consumers: All Items in U.S. City Average
• UNRATE - Unemployment Rate
• FEDFUNDS - Federal Funds Effective Rate
• CES0500000003 - Average Hourly Earnings of All Employees, Total Private
• DFEDTARU - Federal Funds Target Range - Upper Limit
• DFEDTARL - Federal Funds Target Range - Lower Limit
• DGS3MO - Market Yield on U.S. Treasury Securities at 3-Month Constant Maturity
• DGS2 - Market Yield on U.S. Treasury Securities at 2-Year Constant Maturity
• DGS10 - Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity
• DGS30 - Market Yield on U.S. Treasury Securities at 30-Year Constant Maturity
• T10Y2Y - 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity
• CPILFESL - Consumer Price Index for All Urban Consumers: All Items Less Food and Energy
• CPIUFDSL - Consumer Price Index for All Urban Consumers: Food
• CPIENGSL - Consumer Price Index for All Urban Consumers: Energy
• CUSR0000SAH1 - Consumer Price Index for All Urban Consumers: Shelter
• PCEPI - Personal Consumption Expenditures: Chain-type Price Index
• PCEPILFE - Personal Consumption Expenditures Excluding Food and Energy: Chain-type Price Index
• PPIACO - Producer Price Index by Commodity: All Commodities
• T10YIE - 10-Year Breakeven Inflation Rate
• U6RATE - Total Unemployed, Plus All Marginally Attached Workers Plus Total Employed Part Time for Economic Reasons
• PAYEMS - All Employees, Total Nonfarm
• CIVPART - Labor Force Participation Rate
• EMRATIO - Employment-Population Ratio
• UNEMPLOY - Unemployed
• CE16OV - Employment Level
• ICSA - Initial Claims
• JTSJOL - Job Openings: Total Nonfarm
• JTSQUR - Quits: Total Nonfarm
• GDPC1 - Real Gross Domestic Product
• A191RL1Q225SBEA - Real Gross Domestic Product: Percent Change from Preceding Period
• INDPRO - Industrial Production: Total Index
• TCU - Capacity Utilization: Total Index
• HOUST - New Privately-Owned Housing Units Started: Total Units
• PERMIT - New Privately-Owned Housing Units Authorized in Permit-Issuing Places: Total Units
• RSAFS - Advance Retail Sales: Retail Trade
• PCE - Personal Consumption Expenditures
• DSPIC96 - Real Disposable Personal Income
• PSAVERT - Personal Saving Rate
• M2SL - M2
• BOPGSTB - U.S. International Trade in Goods and Services: Balance
• MSPUS - Median Sales Price of Houses Sold for the United States
• HSN1F - New One Family Houses Sold: United States
• RHORUSQ156N - Homeownership Rate in the United States
• TTLCONS - Total Construction Spending: Total Construction in the United States
• RRVRUSQ156N - Rental Vacancy Rate in the United States
• TOTALSL - Total Consumer Credit Owned and Securitized
• REVOLSL - Revolving Consumer Credit Owned and Securitized
• DRCCLACBS - Delinquency Rate on Credit Card Loans, All Commercial Banks
• GDP - Gross Domestic Product
• GPDI - Gross Private Domestic Investment
• GCE - Government Consumption Expenditures and Gross Investment
• PCEC - Personal Consumption Expenditures
• NETEXP - Net Exports of Goods and Services
• GFDEBTN - Federal Debt: Total Public Debt
• GFDEGDQ188S - Federal Debt: Total Public Debt as Percent of Gross Domestic Product
• FYFSD - Federal Surplus or Deficit
• FGRECPT - Federal Government Current Receipts
• FGEXPND - Federal Government: Current Expenditures
• MANEMP - All Employees, Manufacturing
• USCONS - All Employees, Construction
• USTRADE - All Employees, Retail Trade
• USFIRE - All Employees, Financial Activities
• USGOVT - All Employees, Government
• AWHAETP - Average Weekly Hours of All Employees, Total Private
• DGORDER - Manufacturers' New Orders: Durable Goods
• NEWORDER - Manufacturers' New Orders: Nondefense Capital Goods Excluding Aircraft
• BUSINV - Total Business Inventories
• EXPGS - Exports of Goods and Services
• IMPGS - Imports of Goods and Services
• IR - Import Price Index (End Use): All Commodities
• PPIFIS - Producer Price Index by Commodity: Final Demand

Latest quarter (10-Q)

Latest 10-Q source: 0001493152-26-022534.

Extracted from Part I Item 2 to the first post-MD&A boundary after HTML sanitization. Confidence: high. Filing date: 2026-05-12. Report date: 2026-03-28.

Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward
Looking Statements

This
Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as
amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
which are subject to the safe harbor created by such sections. Words such as “expects,” “anticipates,” “intends,”
“plans,” “believes,” “could,” “would,” “seeks,” “estimates,”
and variations of such words and similar expressions, and the negatives thereof, are intended to identify such forward-looking statements.
We caution readers not to place undue reliance on any such “forward-looking statements,” which speak only as of the date
made, and advise readers that these forward-looking statements are not guarantees of future performance and involve certain risks, uncertainties,
estimates, and assumptions by us that are difficult to predict. Various factors, some of which are beyond our control, could cause actual
results to differ materially from those expressed in, or implied by, such forward-looking statements. All such forward-looking statements,
whether written or oral, and whether made by us or on our behalf, are expressly qualified by these cautionary statements and any other
cautionary statements which may accompany the forward-looking statements. In addition, we disclaim any obligation to update any forward-looking
statements to reflect events or circumstances after the date of this report, except as may otherwise be required by the federal securities
laws.

We
have identified the following important factors that could cause actual results to differ materially from those discussed in our forward-looking
statements. Such factors may be in addition to the risks described in Part I, Item 1A. “Risk Factors;” Part II, Item 7. “Management’s
Discussion and Analysis of Financial Condition and Results of Operations;” and other parts of our Annual Report on Form 10-K for
the fiscal year ended December 27, 2025, as amended. These factors include: our ability to source semiconductor components and other
raw materials used in the manufacturing of our products amidst continued intermittent shortages, including from new and alternative suppliers;
our ability to prosecute and defend our proprietary technology aggressively or successfully; our ability to recruit and retain personnel
with experience and expertise relevant to our business; our ability to invest in research and development to achieve profitability even
during periods when we are not profitable; any disruptions or delays in our supply chains, particularly with respect to semiconductor
components, whether resulting from regional or global geopolitical developments, changes imposed by the new U.S. presidential administration,
or otherwise; costs and outcomes relating to any disputes, governmental inquiries or investigations, regulatory proceedings, legal proceedings
or litigation; our ability to continue to introduce new products in our target markets; our ability to generate revenue growth and positive
cash flow, and reach profitability; the strengthening of the U.S. dollar and its effects on the price of our products in foreign markets;
the impact of new regulations and customer demands relating to conflict minerals; our ability to obtain a competitive advantage in the
wearable technologies market through our extensive portfolio of patents, trade secrets and non-patented know-how; our ability to grow
within our targeted markets; the importance of small form factor displays in the development of defense, consumer, and industrial products
such as thermal weapon sights, safety equipment, virtual and augmented reality gaming, training and simulation products and metrology
tools; the suitability of our properties for our needs for the foreseeable future; and our need to achieve and maintain positive cash
flow and profitability.

Overview

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. Our products enable our customers to develop and market an
improved generation of products for these target applications.

The
following discussion should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended December 27, 2025, as
amended and our unaudited condensed consolidated financial statements included in this Form 10-Q.

Results
of Operations

Our
interim period results of operations and period-to-period comparisons of such results may not be indicative of our future operating results.
Additionally, we use a fiscal calendar that may result in differences in the number of workdays in the current and comparable prior interim
periods and could affect period-to-period comparisons. The following discussion of comparative results of operations among periods should
be viewed in this context.

28

Revenues.
For the three months ended March 28, 2026 and March 29, 2025, our revenues by display application, which include product sales and
amounts earned from research and development contracts (“R&D”), were as follows:

(In thousands)

Three Months Ended

March 28, 2026

Three Months Ended

March 29, 2025

Defense

$

5,310

$

8,461

Industrial

64

392

Medical

—

359

Consumer and other product

50

17

Net product revenues

5,424

9,229

R&D

1,290

1,237

License and royalties

65

72

ASC 606 revenues

6,779

10,538

Grant

3,442

—

Collaboration

330

—

Non ASC 606 revenues

3,772

—

Total Revenues

$

10,551

$

10,538

Sales
of our products for Defense applications include systems used by the military both in the field and for training and simulation. Sales
of our products for Defense applications may be for a one-time purchase or for programs that run for several years. Revenues from product
sales to defense customers decreased in the three months ended March 28, 2026 as compared to the three months ended March 29, 2025, primarily
due to lower production volumes of our products for thermal weapon sight applications and liquid crystal displays.

Industrial
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 Asia-based contract manufacturers who use the 3D metrology machines for quality control purposes. The industrial applications
market has seen new entrants over the last few years, which has led to increased price competition. We have introduced lower priced products
in 2025 to compete with our competitors, but we expect this trend will continue and hence we are focusing our product and selling efforts
on other more attractive market segments.

Sales
of our displays for Consumer applications are primarily for use in thermal imaging products, recreational rifle and hand-held scopes.

R&D
revenues increased slightly in the three months ended March 28, 2026 as compared to the three months ended March 29, 2025 primarily due
to the timing of both starts of new programs and completion of our existing programs. This variance falls within the normal ebb and flow
of funded programs. These contracts typically reimburse us for direct costs and allocated overhead and selling, general and administrative
costs and in some cases profit.

The
slight decrease in license and royalty revenue in the three months ended March 28, 2026 as compared to the three months ended March 29,
2025 is due to a decrease in royalties earned under IP license agreements for industrial wearable headsets.

Grant
revenues increased in the three months ended March 28, 2026 as compared to the three months ended March 29, 2025 in connection with the
Company’s government grant, in the fourth quarter of 2025, for the development of ultra-bright, full color MicroLED displays optimized
for ground soldier augmented reality applications.

Collaboration
revenues increased in the three months ended March 28, 2026 as compared to the three months ended March 29, 2025 as a result of the Company’s
strategic partnership, in the fourth quarter of 2025, to develop the next generation clip on with augmented reality and thermal integration
capabilities based on the Company’s micro-display technology.

29

Cost
of Product Revenues. Cost of product revenues, which is comprised of materials, labor and manufacturing overhead related to the production
of our products for the three months ended March 28, 2026 and March 29, 2025 were as follows:

Three Months Ended

Three Months Ended

(In thousands, except for percentages)

March 28, 2026

March 29, 2025

Cost of product revenues

$

5,609

$

7,629

Cost of product revenues as a % of net product revenues

103

%

83

%

The
increase in cost of product revenues as a percentage of net product revenues for the three months ended March 28, 2026, compared to the
three months ended March 29, 2025, was primarily attributable to reduced production efficiency and lower production volume. The Company
believes the negative 3% product gross margin for the three months ended March 28, 2026 was an uncommon occurrence related to events in the quarter that we do not expect to reoccur.
The Company expects a combination of customer price increases on follow-on customer purchase orders and improvements in production efficiency
will result in positive product margins in future periods.

Research
and Development. R&D expenses are incurred in support of internal display development programs and 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 overhead. In fiscal year 2026, we expect our R&D
expenditures to be related to our display products, overlay weapon sights and OLED display technologies. R&D expenses for the three
months ended March 28, 2026 and March 29, 2025 were as follows:

Three Months Ended

Three Months Ended

(In thousands)

March 28, 2026

March 29, 2025

Funded

$

3,806

$

639

Internal

1,105

1,477

Total research and development expense

$

4,911

$

2,116

Funded
R&D expense for the three months ended March 29, 2026 increased as compared to the three months ended March 29, 2025 primarily due
to the Company’s government grant for the development of ultra-bright, full color MicroLED displays optimized for ground soldier
augmented reality applications. Funded R&D expense includes costs related to grant and collaboration income. Internal R&D expense
decreased due to an increase in process improvements.

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. SG&A expenses for the
three months ended March 28, 2026 and March 29, 2025 were as follows:

Three Months Ended

Three Months Ended

(In thousands, except for percentages)

March 28, 2026

March 29, 2025

Selling, general and administration expense

$

6,017

$

4,701

Selling, general and administration expense as a % of revenues

57

%

45

%

30

SG&A
increased for the three months ended March 28, 2026 as compared to the three months ended March 29, 2025 primarily due to increases in
professional fees and accrued performance-based compensation.

Other
Income, net. Other income,

[Excerpt truncated for page length; source filing is linked above.]

Latest 10-K MD&A

Extracted from Item 7 to the first post-MD&A boundary after HTML sanitization. Confidence: high. Filing date: 2026-04-13. Report date: 2025-12-27.

Item
7.

Management’s
Discussion and Analysis of Financial Condition and Results of Operations

Overview

The
following discussion should be read in conjunction with our consolidated financial statements and notes to those statements and other
financial information appearing elsewhere in this Form 10-K. The following discussion contains forward-looking statements. Our actual
results could differ materially from those anticipated in the forward-looking statements as a result of a number of factors, including
the risks discussed in “Item 1A- Risk Factors”, and elsewhere in this Form 10-K. Please refer to our cautionary note on Forward-Looking
Statements on page 3 of this Form 10-K.

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. 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. 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.
The preparation of these financial statements requires us to make estimates and judgments that affect the reported amount of assets,
liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our
estimates, including those related to revenue recognition under the cost-to-cost measurement method, and investment valuations. We base
our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the
results of which form the basis for judgments about the carrying values of assets and liabilities that are not apparent from other sources.
Actual results may differ from these estimates under different assumptions.

We
believe the following critical accounting policies are most affected by our more significant judgments and estimates used in the preparation
of our consolidated financial statements:

Revenue
Recognition

Substantially
all of our product revenues are derived from the sales of microdisplays, which are sold as individual displays, modules that include
electronics and optics, or higher-level subassemblies for use in defense, industrial and consumer near-eye applications such as avionic
helmets, thermal weapon sights or virtual reality headsets. We also have development contracts for the design, manufacture and modification
of products for the U.S. Government or a prime contractor for the U.S. Government or for a customer that sells into the industrial or
consumer markets. The Company’s contracts with the U.S. Government are typically subject to the Federal Acquisition Regulations
(“FAR”) and are priced based on estimated or actual costs of producing goods. The FAR provides guidance on the types of costs
that are allowable in establishing prices for goods provided under U.S. Government contracts. The pricing for non-U.S. Government contracts
is based on the specific negotiations with each customer.

Our
fixed-price contracts with the U.S. Government or other customers may result in revenue recognized in excess of amounts currently billed.
We disclose the excess of revenues over amounts actually billed as Contract assets on the balance sheet. Amounts billed and due from
our customers are classified as Accounts receivable on the balance sheets. In some instances, the U.S. Government retains a small portion
of the contract price until completion of the contract. The portion of the payments retained until final contract settlement is not considered
a significant financing component because the intent is to protect the customer. For contracts with the U.S. Government, we typically
receive interim payments either as work progresses, by achieving certain milestones or based on a schedule in the contract. We recognize
a liability for these advance payments in excess of revenue recognized and present it as Contract liabilities on the balance sheets.
Advanced payment typically is not considered a significant financing component because it is used to meet working capital demands that
can be higher in the early stages of a contract and to protect us from the other party failing to adequately complete some or all of
its obligations under the contract. 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.

The
Company recognizes revenue from a contract when it has approval and commitment from both parties, the rights of the parties are identified,
payment terms are identified, the contract has commercial substance and collectability of consideration is probable.

For
certain contracts with the U.S. Government, the Company recognizes revenue over time as we deliver goods or perform services because
of continuous transfer of control to the customer and the lack of an alternative use for the product. The continuous transfer of control
to the customer is subject to liability clauses in the contract that allow the U.S. 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. For contracts with commercial
customers, while the contract may have a similar liability clause, our products historically have an alternative use and thus, revenue
is recognized at a point in time.

28

In
situations where control transfers over time, revenue is recognized based on the extent of progress towards completion of the performance
obligation. We use the cost-to-cost approach to measure the extent of progress towards completion of the performance obligation for our
contracts because we believe it best depicts the transfer of assets to the customer. Under the cost-to-cost measure approach, the extent
of progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of
the performance obligation. Revenues are recorded proportionally as costs are incurred.

Accounting
for design, development and production contracts requires judgment relative to assessing risks, estimating contract revenues and costs
and making assumptions for schedule and technical issues. Due to the size and nature of the work required to be performed in many of
our contracts, the estimation of total revenue and cost at completion is complicated and subject to many variables. Contract costs include
material, labor and subcontracting costs, as well as an allocation of indirect costs. We have to make assumptions regarding the number
of labor hours required to complete a task, the complexity of the work to be performed, the availability and cost of materials and performance
by our subcontractors. For contract change orders, claims or similar items, we apply judgment in estimating the amounts and assessing
the potential for realization. These amounts are only included in 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
achievement is incorrect, our revenue could be overstated or understated and the profits or loss reported could be subject to adjustment.

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 perform services, which is upon delivery of the product to the customer
or performance of the services. Revenue is recorded as the amount of consideration we expect to receive in exchange for transferring
goods or providing services. Provisions for product returns and allowances are reductions in the transaction price and are recorded in
the same period as the related revenues. We analyze historical returns, current economic trends and changes in customer demand when evaluating
the adequacy of sales returns and other allowances. Certain product sales are made to distributors under agreements allowing for a limited
right of return on unsold products. Sales to distributors are primarily made for sales to the distributors’ customers and not for
stocking of inventory. Sales, value add and other taxes we collect concurrently with revenue-producing activities are excluded from revenue.

The
Company also licenses its intellectual property (“IP”) through technology license agreements which provides the customer
the right to use our IP as it exists at a point in time. These agreements may include other performance obligations including the sale
of products to the customer. The satisfaction of the Company’s performance obligation, and related recognition of revenue, occurs
when the IP is delivered to the customer, the license period has begun and there are no additional performance obligations in the agreement.
When the license is distinct from other obligations in the agreement, the Company treats the license and other performance obligations
as separate performance obligations. Accordingly, the license is recognized at a point in time or over time based on the standalone selling
price. Under certain license agreements, we may receive royalties based on the sales of the licensed product. We recognize royalty revenue
upon the later of when the related sales occur, or when the performance obligation to which some or all of the royalty has been allocated
has been satisfied (or partially satisfied). Under our current license agreements for which a royalty exists, we have recorded revenue
when the related sales by our customer occur because the performance obligation related to the delivery of the license to the customer
has been satisfied.

Investment
Valuation

We
periodically make equity investments in private companies, accounted for as an equity investment, whose values are difficult to determine.
When assessing investments in private companies for impairment, we consider such factors as, among others, the share price from the investee’s
latest financing round, the performance of the investee in relation to its own operating targets and its business plan, the investee’s
revenue and cost trends, the liquidity and cash position, including its cash burn rate and market acceptance of the investee’s
products and services. Because these are private companies that we do not control we may not be able to obtain all of the information
we want in order to make a complete assessment of the investment on a timely basis. Accordingly, our estimates may be revised if
other information becomes available at a later date.

Consolidation, Variable Interest
Entities, and Deconsolidation of Kopin Europe

We evaluate whether entities
in which we hold an ownership or contractual interest should be consolidated in accordance with ASC 810, Consolidation. This evaluation
requires significant judgment, including determining whether an entity is a variable interest entity (“VIE”) and, if so, whether
we are the primary beneficiary.

On October 16, 2025, following
a strategic transaction with Theon International Plc (“Theon”), pursuant to which Theon acquired a 49% equity interest in
Kopin Europe Ltd. (“Kopin Europe”) and the parties entered into a shareholder agreement, management reassessed its interest
in Kopin Europe under the VIE model. Although we continue to hold a variable interest in Kopin Europe, management concluded that Kopin
Europe is a VIE for which we are no longer the primary beneficiary.

This conclusion required significant
judgment, particularly in evaluating whether we have the power to direct the activities that most significantly impact Kopin Europe’s
economic performance and whether we have the obligation to absorb losses or the right to receive benefits that could be potentially significant.
In making this determination, management considered, among other factors, the governance provisions in the shareholder agreement, the
substantive decision making rights held by Theon, the nature of the activities that most significantly affect Kopin Europe’s economic
performance, and our exposure to Kopin Europe’s economics following the transaction. Decisions regarding those significant activities
require the consent of both Kopin and Theon.

As a result of this assessment,
Kopin Europe was deconsolidated from our consolidated financial statements, and we recognized a gain on deconsolidation. Our retained
interest in Kopin Europe is accounted for under the equity method, and we elected the fair value option for this investment.

Because this assessment involves significant judgment
and is sensitive to changes in facts and circumstances, including modifications to governance arrangements, ownership interests, or operating
activities, different assumptions or changes in circumstances could result in a different consolidation conclusion in future periods.

Results
of Operations

We
have two principal sources of revenues: product revenues and research and development (“R&D”) revenues. 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. KEL manufactures our LCOS microdisplays
in its facility located in Scotland. Our OLED displays are designed by us with silicon wafer and OLED depostion by third parties,
and final assembly and test by us or in some instances by our deposition partners.

We
are a display supplier for the U.S. Army’s Family of Weapon Sights-Individual and Joint Strike Fighter F-35 programs. 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. There are other firms offering products which compete against us in the
defense programs and all of the programs we supply product to are subject to the U.S. Government defense budget and procurement process.
Accordingly, there can be no assurances we will continue to ship under our defense contracts.

29

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. We cannot assure that the R&D contracts
will result in workable products or, if successful, our products developed under these contracts will be procured by our customers. If
we do not continue to win R&D contracts or if there is no demand for the products developed under these contracts, our ability to
achieve profitability and positive cash flow could be negatively affected because the R&D revenues (or the products derived from
the R&D contracts) would not be available to cover the allocated overhead and selling, general and administrative costs which may
remain. Some of our contracts are fixed priced and we may incur cost overruns that would result in losses on the contracts. If we incur
such losses on our contracts, our ability to achieve profitability and positive cash flow could be negatively affected.

Because
our fiscal year ends on the last Saturday of December, every seven years we have a fiscal year with 53 weeks. Our fiscal years 2025
and 2024 were 52-week years.

Revenues.
Our revenues by display application, which include product sales and amounts earned from research and development contracts, for
fiscal years 2025 and 2024 by category, were as follows:

(In thousands)

2025

2024

Defense

$

29,361

$

41,249

Industrial

3,025

2,200

Consumer

9

24

Medical

594

103

Other product

78

—

Net product revenues

33,067

43,576

R&D

4,590

5,997

License and royalties

410

762

ASC 606 revenues

38,067

50,335

Grant

858

—

Collaboration

399

—

Non ASC 606 revenues

1,257

—

Total Revenues

$

39,324

$

50,335

Fiscal
Year 2025 Compared to Fiscal Year 2024

Sales
of our products for Defense applications include systems used by the military both in the field and for training and simulation. Sales
of our products for Defense applications may be for a one-time purchase or for programs that run for several years. Revenues from product
sales to defense customers decreased in 2025 compared to 2024, primarily due to a decrease in shipments of our products for thermal weapon
sight applications.

Industrial
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 Asia-based contract manufacturers who use the 3D metrology machines for quality control purposes.
The industrial applications market has seen new entrants over the last few years, which has led to increased price competition. We
have introduced lower priced products in 2025 to compete with our competitors, but we expect this trend will continue and hence we are focusing our
product and selling efforts on other more attractive market segments.

Sales of our displays for Consumer applications are primarily for use in thermal imaging products, recreational rifle
and hand-held scopes. The decrease in Consumer applications in 2025 compared to 2024 was primarily due to our re-focusing the Company’s
sales and marketing efforts on defense applications.

R&D
revenues decreased in 2025 as compared to 2024 primarily due to the timing of both starts of new programs and completion of our existing programs. This variance falls within the
normal ebb and flow of funded programs. These contracts typically reimburse us
for direct costs and allocated overhead and selling, general and administrative costs and in some cases profit. In 2025 and 2024, our
R&D revenues exceeded funded R&D expenses by approximately $1.1 million and $2.2 million, respectively.

The
decrease in license and royalty revenue in 2025 compared to 2024 is due to a decrease in royalties earned under IP license agreements
for industrial wearable headsets.

International product sales represented
approximately 5% of product revenues for 2025 and 2024. 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. 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 2025 as compared to 2024 due mainly to a decrease in sales of our products for 3D metrology application
by Kopin Europe Ltd. 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.
As a result, our financial position and results of operations are subject to exchange rate fluctuation in transactional and functional
currency. We have not taken any protective measures against exchange rate fluctuations, such as purchasing hedging instruments with respect
to such fluctuations, because of the historically stable exchange rate between the Japanese yen, Great Britain pound and the U.S. dollar.

30

Cost
of Product Revenues. Cost of product revenues, which are comprised of materials, labor and manufacturing overhead related to the production
of our products for fiscal years 2025 and 2024 were as follows:

(In thousands, except percentages)

2025

2024

Cost of product revenues

$

27,831

$

36,164

Cost of product revenues as a % of net product
revenues

84.2

%

83.0

%

Fiscal
Year 2025 Compared to Fiscal Year 2024

Cost
of product revenues increased as a percentage of revenues in 2025 as compared to 2024 primarily due to lower overhead absorption due
to lower total product volume, as well as higher one-time write downs of obsolete materials that offset gains in operational
efficiencies. Additionally, the margin improvements from efficiency gains within our thermal weapon sights product line were
partially offset by lower margin contribution from industrial and training and simulation revenues due to their lower 2025 sales.
The Company also implemented several programs and hired additional employees to improve manufacturing quality and
efficiency.

The
United States government is or is in the process of increasing or implementing tariffs on the importation of certain goods. In some
cases, our contracts allow us to pass along new or increased tariffs subject to ability to prove the impact of the tariff on the
cost of our product. If we are unable to increase our prices due to the implementation or increase in tariffs, duties and other
taxes our gross margin and overall profitability will be negatively impacted. Furthermore, order intake along with certain
programmatic revenue recognition was hindered by several government shutdowns that imposed significant delays to our 2025 plan.
Several expected orders and subsequent revenue recognition have been delayed into 2026 due to substantial backlogs within the
contracting pipeline.

The
issues associated with the global shortage of semiconductor circuit chips and other raw materials decreased in 2025 and 2024. However, we have identified several semiconductor components which continue to have long delivery times. We continue to search for and procure all necessary components from our current vendors and from new vendors. In certain
situations, we may procure alternative components or procure them at an increased cost. 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 2026.
If we are unable to obtain all necessary components, we may be required to stop production, which would negatively affect our cash flow
and results of operations.

Research
and Development. 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. 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 2025, 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 expenses for fiscal
years 2025 and 2024 were as follows:

(In thousands)

2025

2024

Funded

$

3,455

$

3,802

Internal

6,692

5,833

Total

$

10,147

$

9,635

Fiscal
Year 2025 Compared to Fiscal Year 2024

Funded
R&D expense for 2025 decreased as compared to 2024 primarily due to decreased spending on U.S. defense programs and programs
previously in development are transitioning into production. Internal R&D expense for 2025 increased as compared to 2024
primarily due to an increase in internally developed technology focused on future process improvement. During the second half of
2025 we were awarded a $15.4 million Other Transaction Agreement (“OTA”) from the Office of the Secretary of War
(“OSW”) through the U.S. Army Contracting Command (“ACC”) under the Industrial Base Analysis and Sustainment
(“IBAS”) program. This contract is for the first stages of enablement for domestic microLED production and development
of ultra-bright, full-color MicroLED displays optimized for ground soldier augmented reality (“AR”) applications. As a
result of this contract and other contracts we have received, we believe funded research and development expenses will increase in
fiscal year 2026 as compared to fiscal year 2025.

31

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. SG&A expenses for the
fiscal years 2025 and 2024 were as follows:

(In thousands, except percentages)

2025

2024

Selling, general and administrative
expense

$

16,299

$

22,845

Selling, general and administrative expense
as a % of total revenue

41.4

%

45.4

%

Fiscal
Year 2025 Compared to Fiscal Year 2024

SG&A
for 2025 decreased compared to 2024 primarily due to a decrease of approximately $6.4 million in legal fees and $0.1 million in professional
fees.

Litigation
Damages. Litigation damages were accrued as a result of the April 22, 2024, jury verdict that was entered against the Company
awarding approximately $5.1 million in damages as well as recommending $19.7 million in disgorgement and exemplary damages. On
September 5, 2025, Kopin received a judgment from the courts in the BlueRadios litigation awarding BlueRadios $19.7 million in
damages but denying permanent injunction and prejudgment interest. This most recent judgment also provides for the accrual of
interest of less than $0.1 million per month until the final settlement. As a result, the accrued litigation damages were reduced by
$5.1 million in fiscal year 2025. We also recognized approximately $0.3 million of litigation damages related to the interest on the
judgment in fiscal year 2025.

32

Total Non-operating Income (Expense).
Non-operating Income (expense) is primarily composed of interest income, revaluation and impairment of equity investments, foreign
currency transactions, gain due to the Deconsolidation of Kopin Europe Ltd, as defined and discussed in Note 1. and other non-operating
income items. Non-operating income (expense) for the fiscal years 2025 and 2024 were as follows:

(In thousands)

2025

2024

Total non-operating
income (expense)

$

12,669

$

(599

)

Fiscal
Year 2025 Compared to Fiscal Year 2024

In 2025, we recorded $11.1 million gain
on deconsolidation and $0.8 million of impairment losses on equity investments. In 2024, we recorded $1.6 million of impairment losses
on equity investments. In 2025, we recorded $0.3 million in foreign currency gains compared to $0.2 million of foreign currency gains
recorded in 2024.

Tax
provision

(In thousands)

2025

2024

Tax provision

$

(208)

$

(170

)

Fiscal
Year 2025 Compared to Fiscal Year 2024

The
provision for income taxes for the fiscal years ended 2025 and 2024 of approximately $(0.2) 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.

33

Liquidity
and Capital Resources

At December 27, 2025 and December 28,
2024, we had cash and cash equivalents, including restricted cash, and marketable securities of $61.6 million and working capital of $33.6
million compared to $36.6 million and $18.9 million, respectively.

The increase in cash, cash equivalents, and restricted cash for the twelve months ended December 27, 2025 was primarily due to proceeds
from the sales of marketable securities of $36.4 million, proceeds from issuance of preferred stock of $6.7 million partially offset by
purchases of marketable securities of $15.2 million, cash used in operations of $15.5 million, capital expenditures of $1.4 million and
proceeds from the sale of an equity investment of $0.3 million. For the twelve months ended December 27, 2025, cash used in operating
activities consisted of net income of $2.6 million, net cash used to fund changes in operating assets and liabilities of $6.3 million,
and non-cash charges totaling $11.9 million, which was primarily related to accrued litigation damages offset by stock-based compensation,
inventory reserves, depreciation, and investment impairment net of unrealized gains. We expect that net cash used for or provided by operating
activities to fluctuate based on our operating results.

Litigation
damages were accrued as a result of the April 22, 2024, jury verdict that was entered against the Company awarding approximately $5.1
million in damages as well as recommending $19.7 million in disgorgement and exemplary damages. On September 5, 2025, Kopin received
a judgment from the courts in the BlueRadios litigation awarding BlueRadios $19.7 million in damages but denying permanent injunction
and prejudgment interest. This most recent judgment also provides for the accrual of interest of less than $0.1 million per month until
the final settlement. As a result, the accrued litigation damages were reduced by $5.1 million in fiscal year 2025. We also recognized
approximately $0.3 million of litigation damages related to the interest on the judgment in fiscal year 2025. On October 2, 2025, the Company posted a supersedeas bond for $23.0 million which consisted of the $19.7 million judgement, legal expenses,
and interest that would accrue over the expected term of the Company’s appeal to the verdict.

Equity
offerings

On
September 30, 2024, we sold 2,405,000 shares of common stock and received gross proceeds of $1.5 million.

On
September 23, 2024, we sold 37,550,000 shares of common stock at a public offering price of $0.65 per share. In addition, in lieu of
common stock to certain investors, we offered pre-funded warrants to purchase 4,000,000 shares of our common stock at a purchase price
of $0.64 per pre-funded warrant, which equals the public offering price per share of the common stock less the $0.01 exercise price per
share of each pre-funded warrant. We received gross proceeds of $27.0 million before deducting underwriting discounts and offering expenses
paid by us of $1.8 million. In addition, we granted the underwriters a 30-day option to purchase up to an additional 6,232,500 shares
of common stock at the public offering price, less underwriting discounts and commissions.

On September 29, 2025, the Company entered into a securities purchase agreement (the “Purchase
Agreement”) for a private investment in public equity financing (the “PIPE”) for 19,545,950 shares of its common stock,
par value $0.01 per share (the “Shares”). The net proceeds to the Company from the offering were approximately
$38.1 million, after deducting placement agent fees and commissions and estimated offering expenses payable by the Company. The transaction
was consummated on September 30, 2025.

On October 16,
2025, the Company completed a $15 million strategic investment with Theon International Plc. Under the terms of
the Agreements, Theon acquired a 49% interest in Kopin’s subsidiary, Kopin Europe Ltd. for $8.0 million and the parties
entered into a licensing and development agreement and funding agreements relating to the joint development of military products. In
addition, Theon purchased $7.0 million worth of shares of Series A Convertible Preferred Stock, par value $0.01 per share, of the
Company (the “Preferred Stock”). Each share of the Preferred Stock is convertible into shares of common stock, par value
$0.01 per share, of the Company (the “Common Stock”) at an initial fixed conversion price of $3.00 per share, pursuant
to the terms of the Certificate of Designation for Series A Convertible Preferred Stock of the Company (the “Certificate of
Designations”). The Company will have the ability to force the conversion of the preferred stock into common stock once the
Company’s common stock trades at $5.50 per share or higher for 10 Trading Days (as defined in the Certificate of Designation)
within a 30 consecutive Trading Day period. The Preferred Stock will carry an annual dividend of at the base rate dividend rate of
4%, 2% payable in cash and 2% payable in stock. With the close of this transaction, Kopin Europe Ltd. was deconsolidated from the Company’s consolidated financial
statements. The consolidated statement of operations therefore includes nine months and sixteen days of activity related to Kopin Europe
Ltd. The assets and liabilities of Kopin Europe Ltd. are no longer included within the Company’s consolidated balance sheets. Any discussions
related to results, operations, and accounting policies associated with Kopin Europe Ltd. are referring to the current period through
this transaction and prior periods as consolidated.

At-the-market
offerings

During
the three months ended March 30, 2024, we sold 3,080,000 shares of common stock for gross proceeds of $7,466,755 (average of $2.42 per
share) before deducting broker expenses paid by us of approximately $0.2 million, pursuant to our then effective At-The-Market Equity
Offering Sales Agreement, dated as of March 5, 2021 (the “ATM Agreement”) with Stifel, Nicolaus & Company, Incorporated
(“Stifel”), as agent. The ATM Agreement terminated in the three months ended March 30, 2024. On January 24, 2025, we entered
into a new At-The-Market Equity Offering Sales Agreement with Stifel, Nicolaus & Company, Incorporated (“Stifel”), as
agent, for the sale of up to $50 million of securities.

The
following table presents the components of our cash, cash equivalents, restricted cash and marketable securities held in U.S. dollars
as of the dates presented:

December
27, 2025

December
28, 2024

Domestic locations

$

61,627,146

$

36,491,339

Foreign locations

—

56,984

Subtotal cash, cash equivalents,
restricted cash and marketable securities held in U.S. dollars

61,627,146

36,548,323

Cash and cash equivalents
held in other currencies and converted to U.S. dollars

—

81,455

Total cash, cash equivalents,
restricted cash and marketable securities

$

61,627,146

$

36,629,778

The
domestic locations balance of $61.6 million for the fiscal year ended 2025 includes $25.3 million of restricted cash that is not
available for current operating use.

The
manufacturing operations at our Korean facility, Kowon, have ceased and Kowon was liquidated at fiscal year ended 2018. 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.

34

We had net income of of $2.6
million in fiscal year 2025 and a net loss of $43.9 million in fiscal year 2024, and net cash outflows from operations of $15.5
million and $14.2 million for the fiscal years ended 2025 and 2024, respectively. Our net cash outflows from operations were
partially a result of funding our ongoing investments in research and development which we believe will continue. However, the Company raised approximately $45.8 million during the fiscal year ended December 27, 2025, through the issuance of common
stock, pre-funded warrants and preferred stock. Moreover, the Company has posted a bond to satisfy the court’s verdict of $19.7
million in damages and anticipated accrued interest in the matter of BlueRadios vs. Kopin Corporation, Inc. should the Company’s
appeal be unsuccessful (refer to Note 14 of our consolidated financial statements for more information). As of December 27, 2025, the
Company had $36.4 million cash and cash equivalents (excluding restricted cash), which the Company believes is sufficient to support
its operations and satisfy its obligations for at least the next twelve months from the date of this filing. We estimate we will have sufficient liquidity to fund operations at least through the end of the second quarter of 2027. Nonetheless,
we monitor the capital markets on an ongoing basis and may consider raising capital if favorable market conditions develop. If our actual
results are less than projected or we need to raise capital for additional liquidity, we may be required to do additional equity financing,
reduce expenses or enter into a strategic transaction. However, we can make no assurance that we will be able to raise additional capital,
reduce expenses sufficiently, or enter into a strategic transaction on terms acceptable to us, or at all

Off-Balance
Sheet Arrangements

We
have no off-balance sheet arrangements.

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
2026.

Contractual
Obligations

Under
our former CEO’s (“Dr. Fan”) employment agreement, commencing in January 2023, Dr. 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 28, 2024, the monthly installments have been paid. In addition, under Dr. 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 27, 2025:

Payment
due by period

Total

Less
than

1 year

1-3
Years

4-5
years

More
than

5 years

Operating
Lease Obligations

$

1,603,198

732,610

870,588

—

—

35