UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q



x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September ~~24, 2016~~30, 2017



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to _____

Commission file number 0-19882

KOPIN CORPORATION

(Exact name of registrant as specified in its charter)



Delaware		04-2833935
State or other jurisdiction of incorporation or organization		(I.R.S. Employer Identification No.)

125 North Drive, Westborough, MA		01581-3335
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (508) 870-5959

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	¨		Accelerated filer	x
Non-accelerated filer	¨	(Do not check if a smaller reporting company)	Smaller reporting company	¨
			Emerging growth company	¨

Indicate by check mark whether the registrant is a shell company (as defined in ~~rule~~Rule 12b-2 of the Exchange Act). Yes ¨ No x

Indicate the number of shares outstanding of each issuer’s classes of common stock, as of the latest practicable date.



Class	Outstanding as of November ~~4, 2016~~6, 2017
Common Stock, par value ~~$.01~~$0.01	~~66,740,502~~75,336,563

Kopin Corporation

INDEX




		Page No.
Part I – Financial Information
Item 1.	Condensed Consolidated Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets at September ~~24, 2016~~30, 2017 (Unaudited) and December ~~26, 2015~~31, 2016	3
	Condensed Consolidated Statements of Operations (Unaudited) for the three and nine months ended September ~~24, 2016~~30, 2017 and September ~~26, 2015~~24, 2016	4
	Condensed Consolidated Statements of Comprehensive Loss (Unaudited) for the three and nine months ended September ~~24, 2016~~30, 2017 and September ~~26, 2015~~24, 2016	5
	Condensed Consolidated Statements of Stockholders' Equity (Unaudited) for the nine months ended September ~~24, 2016~~30, 2017	6
	Condensed Consolidated Statements of Cash Flows (Unaudited) for the nine months ended September ~~24, 2016~~30, 2017 and September ~~26, 2015~~24, 2016	7
	Notes to Unaudited Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1517
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2123
Item 4.	Controls and Procedures	2123

Part II – Other Information		2224
Item 1.	Legal Proceedings	2224
Item 1A.	Risk Factors	2324
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2324
Item 6.	Exhibits	2425
Signatures		2526

Part 1: FINANCIAL INFORMATION


Item 1:	Condensed Consolidated Financial Statements (Unaudited)

KOPIN CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


	September 24, 2016			December 26, 2015			September 30, 2017			December 31, 2016
ASSETS
Current assets:
Cash and equivalents	$	20,998,402		$	19,767,889		$	25,882,554		$	15,822,495
Marketable debt securities, at fair value	63,034,380			60,942,891			51,454,910			61,375,401
Accounts receivable, net of allowance of $153,000 in 2016 and 2015, respectively	1,666,306			1,487,633
Accounts receivable, net of allowance of $149,000 in 2017 and $136,000 in 2016							2,023,618			1,664,488
Unbilled receivables	94,970			87,340			124,068			34,707
Inventory	3,197,984			2,512,473			5,949,010			3,302,112
Prepaid taxes	94,623			437,586			166,461			341,144
Prepaid expenses and other current assets	986,126			920,410			1,089,948			853,757
Note receivable	—			15,000,000
Total current assets	90,072,791			101,156,222			86,690,569			83,394,104
Property, plant and equipment, net	2,936,621			2,677,103			3,660,925			2,976,006
Goodwill	869,984			946,082			2,376,577			844,023
Intangible assets, net							1,356,546			—
Other assets	618,563			461,416			968,083			618,139
Property and plant held for sale	—			819,263
Total assets	$	94,497,959		$	106,060,086		$	95,052,700		$	87,832,272
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	3,888,707		$	3,959,704		$	3,965,760		$	4,355,462
Accrued payroll and expenses	1,815,618			1,631,292			2,755,150			1,443,976
Accrued warranty	518,000			518,000			585,000			518,000
Billings in excess of revenue earned	1,274,826			1,407,566			728,281			981,761
Other accrued liabilities	3,152,649			2,553,282			4,792,347			2,560,144
Income tax payable							724,688			935,364
Deferred tax liabilities	2,547,717			1,207,000			2,606,312			2,571,000
Total current liabilities	13,197,517			11,276,844			16,157,538			13,365,707
Asset retirement obligations	259,404			298,463			268,068			246,922
Commitments and contingencies
Stockholders’ equity:
Preferred stock, par value $.01 per share: authorized, 3,000 shares; none issued	—			—			—			—
Common stock, par value $.01 per share: authorized, 120,000,000 shares; issued 78,842,759 shares in 2016 and 78,271,659 shares in 2015; outstanding 64,047,985 shares in 2016 and 63,977,385 shares in 2015	761,502			760,796
Common stock, par value $.01 per share: authorized, 120,000,000 shares; issued 79,669,818 shares in 2017 and 79,648,618 in 2016; outstanding 72,187,688 shares in 2017 and 64,538,686 shares in 2016							767,009			766,409
Additional paid-in capital	328,339,749			326,558,527			331,008,801			328,524,644
Treasury stock (12,102,258 shares in 2016 and 2015, respectively, at cost)	(42,741,551		)	(42,741,551		)
Treasury stock (4,513,256 shares in 2017 and 12,102,258 shares in 2016, at cost)							(17,238,669		)	(42,741,551		)
Accumulated other comprehensive income	3,307,825			771,774			2,346,909			1,570,971
Accumulated deficit	(208,852,911		)	(190,608,671		)	(238,319,253		)	(214,042,787		)
Total Kopin Corporation stockholders’ equity	80,814,614			94,740,875			78,564,797			74,077,686
Noncontrolling interest	226,424			(256,096		)	62,297			141,957
Total stockholders’ equity	81,041,038			94,484,779			78,627,094			74,219,643
Total liabilities and stockholders’ equity	$	94,497,959		$	106,060,086		$	95,052,700		$	87,832,272

See notes to unaudited condensed consolidated financial statements

KOPIN CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	Three Months Ended						Nine Months Ended						Three Months Ended						Nine Months Ended
	September 24, 2016			September 26, 2015			September 24, 2016			September 26, 2015			September 30, 2017			September 24, 2016			September 30, 2017			September 24, 2016
Revenues:
Net product revenues	$	5,522,584		$	7,119,145		$	15,597,247		$	23,734,238		$	5,589,402		$	5,522,584		$	14,501,945		$	15,597,247
Research and development revenues	272,222			881,781			671,972			3,708,286			549,765			272,222			1,942,819			671,972
	5,794,806			8,000,926			16,269,219			27,442,524			6,139,167			5,794,806			16,444,764			16,269,219
Expenses:
Cost of product revenues	4,573,581			5,357,217			13,856,469			17,000,729			4,144,884			4,573,581			11,379,467			13,856,469
Research and development	4,123,268			4,008,391			12,282,620			13,752,593			5,253,860			4,123,268			14,213,950			12,282,620
Selling, general and administration	3,980,605			4,558,609			12,023,717			14,053,050			5,344,999			3,980,605			16,186,946			12,023,717
Gain on sale of property and plant	—			—			(7,700,522		)	—			—			—			—			(7,700,522		)
	12,677,454			13,924,217			30,462,284			44,806,372			14,743,743			12,677,454			41,780,363			30,462,284
Loss from operations	(6,882,648		)	(5,923,291		)	(14,193,065		)	(17,363,848		)	(8,604,576		)	(6,882,648		)	(25,335,599		)	(14,193,065		)
Other income and expense:
Other income (expense):
Interest income	191,472			175,803			532,185			584,364			191,613			191,472			611,532			532,185
Other (expense) income, net	(257,384		)	42,137			(415,758		)	87,404			(109,546		)	(257,384		)	215,883			(415,758		)
Foreign currency transaction (losses) gains	(1,124,526		)	623,999			(1,581,962		)	973,548
Gain on sale of investments	—			357,202			—			7,960,022
Foreign currency transaction gains (losses)													224,370			(1,124,526		)	(410,373		)	(1,581,962		)
Gain on investments													—			—			274,000			—
	(1,190,438		)	1,199,141			(1,465,535		)	9,605,338			306,437			(1,190,438		)	691,042			(1,465,535		)
Loss before (provision) benefit for income taxes, equity loss in unconsolidated affiliate and net (income) loss attributable to noncontrolling interest	(8,073,086		)	(4,724,150		)	(15,658,600		)	(7,758,510		)
Loss before (provision) benefit for income taxes and net loss (income) attributable to noncontrolling interest													(8,298,139		)	(8,073,086		)	(24,644,557		)	(15,658,600		)
Tax (provision) benefit	(114,000		)	62,500			(2,218,000		)	37,500			(4,500		)	(114,000		)	1,141,500			(2,218,000		)
Loss before equity loss in unconsolidated affiliate and net loss (income) attributable to noncontrolling interest	(8,187,086		)	(4,661,650		)	(17,876,600		)	(7,721,010		)
Equity loss in unconsolidated affiliate	—			—			—			(47,443		)
Net loss	(8,187,086		)	(4,661,650		)	(17,876,600		)	(7,768,453		)	(8,302,639		)	(8,187,086		)	(23,503,057		)	(17,876,600		)
Net loss (income) attributable to the noncontrolling interest	69,782			(13,690		)	(367,640		)	36,094			55,217			69,782			65,223			(367,640		)
Net loss attributable to the controlling interest	$	(8,117,304	)	$	(4,675,340	)	$	(18,244,240	)	$	(7,732,359	)	$	(8,247,422	)	$	(8,117,304	)	$	(23,437,834	)	$	(18,244,240	)
Net loss per share
Basic	$	(0.13	)	$	(0.07	)	$	(0.29	)	$	(0.12	)
Diluted	$	(0.13	)	$	(0.07	)	$	(0.29	)	$	(0.12	)
Weighted average number of common shares outstanding:
Basic	64,047,852			63,068,321			64,012,490			63,072,668
Diluted	64,047,852			63,068,321			64,012,490			63,072,668
Basic and diluted													$	(0.11	)	$	(0.13	)	$	(0.34	)	$	(0.29	)
Weighted average number of common shares outstanding
Basic and diluted													72,187,688			64,047,852			69,117,640			64,012,490

See notes to unaudited condensed consolidated financial statements

KOPIN CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited)

Three Months Ended Nine Months Ended
September 24, 2016 September 26, 2015 September 24, 2016 September 26, 2015
Net loss $ (8,187,086 ) $ (4,661,650 ) $ (17,876,600 ) $ (7,768,453 )
Other comprehensive income (loss):
     Foreign currency translation adjustments 1,718,596
(886,963 ) 2,362,552
(1,442,185 )
     Unrealized holding (losses) gains on marketable securities (73,443 ) (416,768 ) 336,663
908,756
     Reclassification of holding gains in net loss (14,092 ) (422,489 ) (48,284 ) (821,835 )
Other comprehensive income (loss) 1,631,061
(1,726,220 ) 2,650,931
(1,355,264 )
Comprehensive loss $ (6,556,025 ) $ (6,387,870 ) $ (15,225,669 ) $ (9,123,717 )
Comprehensive (income) loss attributable to the noncontrolling interest (19,656 ) 95,056
(482,520 ) 76,330
Comprehensive loss attributable to controlling interest $ (6,575,681 ) $ (6,292,814 ) $ (15,708,189 ) $ (9,047,387 )



	Three Months Ended						Nine Months Ended
	September 30, 2017			September 24, 2016			September 30, 2017			September 24, 2016
Net loss	$	(8,302,639	)	$	(8,187,086	)	$	(23,503,057	)	$	(17,876,600	)
Other comprehensive (loss) income:
Foreign currency translation adjustments	(272,618		)	1,718,596			658,443			2,362,552
Unrealized holding gains on marketable securities	(29,584		)	(73,443		)	108,196			336,663
Reclassification of holding losses in net loss	(1,238		)	(14,092		)	(5,138		)	(48,284		)
Other comprehensive (loss) income	(303,440		)	1,631,061			761,501			2,650,931
Comprehensive loss	$	(8,606,079	)	$	(6,556,025	)	$	(22,741,556	)	$	(15,225,669	)
Comprehensive income (loss) attributable to the noncontrolling interest	63,306			(19,656		)	79,660			(482,520		)
Comprehensive loss attributable to controlling interest	$	(8,542,773	)	$	(6,575,681	)	$	(22,661,896	)	$	(15,708,189	)

See notes to unaudited condensed consolidated financial statements

KOPIN CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)


	Common Stock					Additional Paid-in Capital				Treasury Stock				Accumulated Other Comprehensive Income				Accumulated Deficit				Total Kopin Corporation Stockholders’ Equity			Noncontrolling Interest				Total Stockholders’ Equity			Common Stock					Additional Paid-in Capital				Treasury Stock			Accumulated Other Comprehensive Income			Accumulated Deficit				Total Kopin Corporation Stockholders’ Equity				Noncontrolling Interest				Total Stockholders’ Equity
	Shares		Amount										Shares								Amount
Balance, December 26, 2015	76,079,643		$	760,796					$			326,558,527				$	(42,741,551	)		$	771,774						$	(190,608,671				)	$	94,740,875		$	(256,096	)		$	94,484,779
Balance, December 31, 2016																																76,640,943		$	766,409		$	328,524,644			$	(42,741,551	)	$	1,570,971		$	(214,042,787	)		$	74,077,686			$	141,957			$	74,219,643
Stock-based compensation	—		—			1,791,081				—				—				—				1,791,081			—				1,791,081			—		—			2,484,757				—			—			—				2,484,757				—				2,484,757
Vesting of restricted stock	75,000		750			(750		)		—				—				—				—			—				—			60,000		600			(600		)		—			—			—				—				—				—
Other comprehensive income	—		—			—				—				2,536,051				—				2,536,051			114,880				2,650,931			—		—			—				—			775,938			—				775,938				(14,437		)		761,501
Restricted stock for tax withholdings	(4,400	)	(44		)	(9,109		)		—				—				—				(9,153		)	—				(9,153		)
Sale of unregistered stock																																—		—			—				25,502,882			—		—	(838,632		)	—	24,664,250			—	—			—	24,664,250
Net loss	—		—			—				—				—				(18,244,240		)		(18,244,240		)	367,640				(17,876,600		)	—		—			—				—			—			(23,437,834		)		(23,437,834		)		(65,223		)		(23,503,057		)
Balance, September 24, 2016	76,150,243		$	761,502		$	328,339,749			$	(42,741,551	)		$	3,307,825			$	(208,852,911	)		$	80,814,614		$	226,424			$	81,041,038
Balance, September 30, 2017																																76,700,943		$	767,009		$	331,008,801			$	(17,238,669	)	$	2,346,909		$	(238,319,253	)		$	78,564,797			$	62,297			$	78,627,094

See notes to unaudited condensed consolidated financial statements

~~Table of Contents~~

KOPIN CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Nine Months Ended						Nine Months Ended
	September 24, 2016			September 26, 2015			September 30, 2017			September 24, 2016
Cash flows from operating activities:
Net loss	$	(17,876,600	)	$	(7,768,453	)	$	(23,503,057	)	$	(17,876,600	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	949,854			1,860,300			1,878,363			949,854
Accretion (amortization) of premium or discount on marketable debt securities	104,282			291,252
Accretion of premium or discount on marketable debt securities							40,204			104,282
Stock-based compensation	1,479,481			2,786,494			2,990,157			1,479,481
Foreign currency losses (gains)	1,715,901			(1,012,904		)
Change in allowance for bad debt	—			74,500
Foreign currency losses							400,542			1,715,901
Unrealized gain on warrant							(274,000		)	—
Deferred income taxes	1,192,128			(75,000		)	(1,170,017		)	1,192,128
Gain on sale of property and plant	(7,700,522		)	—			—			(7,700,522		)
Gain on sale of investments	—			(7,960,022		)
Other non-cash items	503,115			1,405,369			673,720			503,115
Changes in assets and liabilities:
Change in warranty reserves							68,003			—
Changes in assets and liabilities, net of acquired assets and liabilities:
Accounts receivable	(524,084		)	1,398,155			71,400			(524,084		)
Inventory	(1,231,705		)	88,853			(2,519,197		)	(1,231,705		)
Prepaid expenses and other current assets	213,028			71,409			13,345			213,028
Accounts payable and accrued expenses	1,271,171			(2,349,429		)	1,743,215			1,271,171
Billings in excess of revenue earned	(132,740		)	1,048,675			(253,480		)	(132,740		)
Net cash used in operating activities	(20,036,691		)	(10,140,801		)	(19,840,802		)	(20,036,691		)
Cash flows from investing activities:
Other assets	(7,801		)	17,063			(79,916		)	(7,801		)
Capital expenditures	(329,414		)	(993,299		)	(1,341,744		)	(329,414		)
Proceeds from sale of marketable debt securities	43,836,978			18,483,666			33,395,422			43,836,978
Purchase of marketable debt securities	(45,905,075		)	(14,465,311		)	(22,974,668		)	(45,905,075		)
Proceeds from sale of investments	—			7,960,022
Proceeds from sale of property and plant	8,106,819			—			—			8,106,819
Cash paid for acquisition, net of cash acquired							(3,690,047		)	—
Proceeds from sale of III-V product line	15,000,000			—			—			15,000,000
Net cash provided by investing activities	20,701,507			11,002,141			5,309,047			20,701,507
Cash flows from financing activities:
Proceeds from exercise of stock options and warrants	—			86,047
Sale of unregistered stock							24,664,250			—
Settlements of restricted stock for tax withholding obligations	(9,153		)	(459,609		)	—			(9,153		)
Net cash used in financing activities	(9,153		)	(373,562		)
Net cash provided by (used in) financing activities							24,664,250			(9,153		)
Effect of exchange rate changes on cash	574,850			(146,096		)	(72,436		)	574,850
Net increase in cash and equivalents	1,230,513			341,682			10,060,059			1,230,513
Cash and equivalents:
Beginning of period	19,767,889			14,635,801			15,822,495			19,767,889
End of period	$	20,998,402		$	14,977,483		$	25,882,554		$	20,998,402
Supplemental disclosure of cash flow information:
Income taxes paid	$	366,000		$	57,000		$	—		$	366,000
Supplemental schedule of noncash investing activities:
Construction in progress included in accrued expenses	$	—		$	—
Non cash proceeds from exercise of warrants	$	—		$	1,330,000

See notes to unaudited condensed consolidated financial statements

KOPIN CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


1.	BASIS OF PRESENTATION

The condensed consolidated financial statements of Kopin Corporation (the Company) as of September ~~24, 2016~~30, 2017 and for the three and nine ~~months~~month periods ended September ~~24, 2016~~30, 2017 and September ~~26, 2015~~24, 2016 are unaudited and include all adjustments which, in the opinion of management, are necessary to present fairly the results of operations for the periods then ended. These condensed consolidated financial statements should be read in conjunction with the Company’s financial statements and notes thereto, included in the Company’s Annual Report on Form 10-K for the year ended December ~~26, 2015.~~31, 2016. The results of the Company's operations for any interim period are not necessarily indicative of the results of the Company's operations for any other interim period or for a full fiscal year.

In June 2016, the Company’s subsidiary Kowon sold its plant and the land on which the plant resided for 9.5 billion KRW (approximately $8.1 million on the closing date). Kowon had ceased its production activities at the facility in 2013. The plant and land had a cost basis of approximately $0.4 million. Accordingly, the Company recorded a gain on the sale of the plant and land of $7.7 million.

Recently Issued Accounting Pronouncements

Revenue from Contracts with Customers

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606). This new standard outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. In addition, ASU 2014-09 provides guidance on accounting for certain revenue-related costs including, but not limited to, when to capitalize costs associated with obtaining and fulfilling a contract. The standard also requires certain new disclosures. The standard was effective for annual and interim reporting periods beginning after December 15, 2016.

~~In August 2015,~~March 2016, the FASB issued ASU ~~2015-14,~~2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)., which is an amendment on assessing whether an entity is a principal or an agent in a revenue transaction. This amendment addresses issues to clarify the principal versus agent assessment and lead to more consistent application. In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, which contains amendments to the new revenue recognition standard on identifying performance obligations and accounting for licenses of intellectual property. The amendments related to identifying performance obligations clarify when a promised good or service is separately identifiable and allows entities to disregard items that are immaterial in ~~this~~ the context of a contract. The licensing implementation amendments clarify how an entity should evaluate the nature of its promise in granting a license of intellectual property, which will determine whether revenue is recognized over time or at a point in time. In May 2016, the FASB issued ASU ~~defer~~2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, which provides clarity and implementation guidance on assessing collectability, presentation of sales taxes, noncash consideration, and completed contracts and contract modifications at transition. The new standards have the same effective date ofand transition requirements as ASU 2014-09. ~~Public companies should apply~~The new standard also requires entities to enhance disclosures about the ~~guidance in ASU 2014-09 to annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Early adoption is permitted only as~~nature, amount, timing and uncertainty of ~~annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period.~~ revenue and cash flows arising from contracts with customers.

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

Leases

In February 2016, the FASB issued ~~ASU~~Accounting Standards Update No. 2016-02 ~~Leases~~ (Topic 842)Leases. ~~This new standard requires~~Topic 842 supersedes the lease recognition requirements in Accounting Standards Codification Topic 840, "Leases". Under Topic 842, lessees are required to recognize ~~a lease liability~~assets and ~~a right-of-use asset~~liabilities on the balance sheet for most leases and ~~aligns many of the underlying principles of the new lessor model with~~provide enhanced disclosures. Leases will continue to be classified as either finance or operating. Topic 842 is effective for annual reporting periods, and interim periods within those in ~~Topic 606, Revenue from Contracts with Customers. Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply~~years beginning after December 15, 2018. Entities are required to use a modified retrospective ~~transition~~ approach for leases ~~existing at,~~that exist or are entered into after the beginning of the earliest comparative period ~~presented~~ in the financial ~~statements.~~statements, and there are certain optional practical expedients that an entity may elect to apply. Full retrospective application is prohibited and early adoption by public entities is permitted. The Company expects to complete its assessment in 2018 and is required to adopt ASU

2016-02 as of January 1, 2019 using the modified retrospective ~~approach would not require any transition accounting~~method. The Company expects the potential impact of adopting ASU 2016-02 to be material to our lease liabilities and assets on its consolidated balance sheets.

Business Combinations

In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805). The new guidance clarifies the definition of a business that an entity uses to determine whether a transaction should be accounted for ~~leases that expired before the earliest comparative period presented. Lessees and lessors may not apply~~as an asset acquisition (or disposal) or a ~~full retrospective transition approach.The new standard~~business combination. The guidance is expected to cause fewer acquired sets of assets (and liabilities) to be identified as businesses. The guidance is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, ~~2018, including~~2017. Early adoption is permitted for transactions that meet certain requirements. The Company is evaluating the impact this standard will have on its financial statements.

Intangibles- Goodwill and Other

In January 2017, the FASB issued ASU 2017-04, Intangibles- Goodwill and Other (Topic 350). The new guidance simplifies the accounting for goodwill impairments by eliminating Step 2 from the goodwill impairment test. The guidance requires, among other things, recognition of an impairment loss when the carrying amount of a reporting unit exceeds its fair value. The loss recognized is limited to the total amount of goodwill allocated to that reporting unit. The guidance is effective for fiscal years, and for interim periods within those fiscal years. Early application is permitted for all public business entities and all nonpublic business entities. The Company is currently evaluating the expected impact of this new guidance on its consolidated financial statements and available adoption methods.

~~Compensation-Stock Compensation~~

~~In March 2016, the FASB issued ASU No.~~ ~~2016-09~~, ~~Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.~~ This guidance is intended to simplify the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. The amendments in this update are effective for financial statements issued for annual periodsyears, beginning after December 15, ~~2016, including interim periods within those annual periods, and early application~~2019. Early adoption is permitted ~~as of the beginning of an~~for interim or annual ~~reporting period.~~goodwill impairment tests performed on testing dates after January 1, 2017. The Company is ~~currently~~ evaluating the ~~expected~~ impact of this ~~new guidance~~standard will have on its ~~consolidated~~ financial ~~statements and available adoption methods.~~statements.

~~Statement of Comprehensive Income~~

During the nine months ended September 24, 2016, the change in the Company's accumulated other comprehensive income was net of $2.4 million foreign currency translation adjustments and $0.3 million unrealized holding gains on marketable securities.


2.	CASH AND EQUIVALENTS AND MARKETABLE SECURITIES

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

Marketable debt securities consist primarily of ~~certificates of deposit,~~commercial paper, medium-term corporate ~~debt,~~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.”~~debt securities, at fair value”. The Company's investment in GCS Holdings is included in "Other Assets" as available-for-sale and at fair value. The Company records the amortization of premium and accretion of ~~discount~~discounts on marketable debt securities in the results of operations.

The Company uses the specific identification method as a basis for determining cost and calculating realized gains and losses with respect to marketable debt securities. The gross gains and losses realized related to sales and maturities of marketable debt securities were not material during the three and nine months ended September ~~24, 2016~~30, 2017 and the year ended December ~~26, 2015.~~31, 2016.

Investments in available-for-sale marketable debt securities are as follows at September ~~24, 2016~~30, 2017 and December ~~26, 2015:~~31, 2016


	Amortized Cost				Unrealized Gains				Unrealized Losses						Fair Value				Amortized Cost				Unrealized Gains				Unrealized Losses						Fair Value
	2016		2015		2016		2015		2016			2015			2016		2015		2017		2016		2017		2016		2017			2016			2017		2016
U.S. government and agency backed securities	$	42,366,974	$	46,586,224	$	71,208	$	—	$	—		$	(121,561	)	$	42,438,182	$	46,464,663	$	36,365,672	$	36,343,817	$	—	$	—	$	(180,768	)	$	(252,556	)	$	36,184,904	$	36,091,261
Corporate debt and certificates of deposit	20,654,599		14,534,247		—		—		(58,401		)	(56,019		)	20,596,198		14,478,228		15,311,458		25,323,428		—		—		(41,452		)	(39,288		)	15,270,006		25,284,140
Total	$	63,021,573	$	61,120,471	$	71,208	$	—	$	(58,401	)	$	(177,580	)	$	63,034,380	$	60,942,891	$	51,677,130	$	61,667,245	$	—	$	—	$	(222,220	)	$	(291,844	)	$	51,454,910	$	61,375,401

The contractual maturity of the Company’s marketable debt securities is as follows at September ~~24, 2016:~~30, 2017:


	Less than One year		One to Five years		Greater than Five years		Total		Less than One year		One to Five years		Greater than Five years		Total
U.S. government and agency backed securities	$	16,904,660	$	18,479,622	$	7,053,900	$	42,438,182	$	21,245,723	$	12,993,121	$	1,946,060	$	36,184,904
Corporate debt and certificates of deposit	16,491,826		4,104,372		—		20,596,198		9,585,467		5,684,539		—		15,270,006
Total	$	33,396,486	$	22,583,994	$	7,053,900	$	63,034,380	$	30,831,190	$	18,677,660	$	1,946,060	$	51,454,910

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

The Company further estimates the amount of OTTI resulting from a decline in the creditworthiness of the issuer (credit-related OTTI) and the amount of non credit-related OTTI. Non credit-related OTTI can be caused by such factors as market illiquidity. Credit-related OTTI is recognized in earnings while non credit-related OTTI on securities not expected to be sold is recognized in other comprehensive income (loss). The Company did not record an OTTI for the three and nine months ended September ~~24, 2016~~30, 2017 and September ~~26, 2015.~~24, 2016.


3.	FAIR VALUE MEASUREMENTS

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

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


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

			Fair Value Measurement September 24, 2016 Using:								Fair Value Measurement December 31, 2016 Using:
	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Cash and Equivalents	$	20,998,402	$	20,998,402	$	—	$	—	$	15,822,495	$	15,822,495	$	—	$	—
U.S. Government Securities	42,438,182		11,643,390		30,794,792		—		36,091,261		7,144,767		28,946,494		—
Corporate Debt	8,491,436		—		8,491,436		—		7,557,029		—		7,557,029		—
Certificates of Deposit	12,104,762		—		12,104,762		—		17,727,111		—		17,727,111		—
GCS Holdings	329,767		329,767		—		—		331,454		331,454		—		—
	$	84,362,549	$	32,971,559	$	51,390,990	$	—	$	77,529,350	$	23,298,716	$	54,230,634	$	—


			Fair Value Measurement December 26, 2015 Using:
	Total		Level 1		Level 2		Level 3
Cash and Equivalents	$	19,767,889	$	19,767,889	$	—	$	—
U.S. Government Securities	46,464,663		16,381,152		30,083,511		—
Corporate Debt	6,886,495		—		6,886,495		—
Certificates of Deposit	7,591,733		—		7,591,733		—
GCS Holdings	232,037		232,037		—		—
	$	80,942,817	$	36,381,078	$	44,561,739	$	—

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

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


4.	INVENTORY

Inventory is stated at the lower of cost (determined on the first-in, first-out) or market and consists of the following at September ~~24, 2016~~30, 2017 and December ~~26, 2015~~31, 2016:


	September 24, 2016		December 26, 2015		September 30, 2017		December 31, 2016
Raw materials	$	1,786,401	$	844,475	$	2,517,803	$	1,986,491
Work-in-process	1,242,020		1,281,891		2,552,517		1,186,162
Finished goods	169,563		386,107		878,690		129,459
	$	3,197,984	$	2,512,473	$	5,949,010	$	3,302,112


5.	NET LOSS PER SHARE

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

~~Weighted average common shares outstanding used to calculate basic and diluted earnings per share are as follows:~~

Three Months Ended Nine Months Ended
September 24, 2016 September 26, 2015 September 24, 2016 September 26, 2015
Weighted average common shares outstanding-basic 64,047,852
63,068,321
64,012,490
63,072,668
Stock options and non-vested restricted common stock —
—
—
—
Weighted average common shares outstanding-diluted 64,047,852
63,068,321
64,012,490
63,072,668

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

Three Months Ended Nine Months Ended
September 24, 2016 September 26, 2015 September 24, 2016 September 26, 2015
Non-vested restricted common stock 2,692,516
2,924,811
2,692,516
2,924,811



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


6.	STOCKHOLDERS' EQUITY AND STOCK-BASED COMPENSATION

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

Non-Vested Restricted Common Stock

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

~~Non-Vested Restricted Common Stock~~



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

Shares Weighted
Average
Grant
Fair
Value
Balance, December 26, 2015 2,192,016
$ 3.82
Granted 634,500
1.88
Forfeited (59,000 ) 3.14
Vested (75,000 ) 3.60
Balance, September 24, 2016 2,692,516
$ 3.38

Stock-Based Compensation

The following table summarizes stock-based compensation expense within each of the categories below as it relates to non-vested restricted common stock awards for the three and nine months ended September ~~24, 2016~~30, 2017 and September ~~26, 2015~~24, 2016 (no tax benefits were recognized):


	Nine Months Ended				Three Months Ended				Nine Months Ended
	September 24, 2016		September 26, 2015		September 30, 2017		September 24, 2016		September 30, 2017		September 24, 2016
Cost of component revenues	$	426,357	$	620,494
Cost of product revenues					$	142,604	$	136,420	$	405,778	$	426,357
Research and development	378,156		669,605		203,288		129,308		616,500		378,156
Selling, general and administrative	674,968		1,496,395		676,137		262,700		1,967,879		674,968
Total	$	1,479,481	$	2,786,494	$	1,022,029	$	528,428	$	2,990,157	$	1,479,481

Unrecognized compensation expense for non-vested restricted common stock as of September ~~24, 2016~~30, 2017 totaled $3.8 million and is expected to be recognized over a weighted average period of approximately two years.

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


7.	~~OTHER ASSETS AND~~ NOTE RECEIVABLE

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

On February 25, 2015, the Company acquired approximately 251,000 shares of Vuzix Corporation (Vuzix) common stock through a cashless exercise of warrants. The Company received the warrants in August 2013 as part of a restructuring of debt owed by Vuzix to the Company. Upon receipt of the warrants, the Company should have recorded the value of the warrant of approximately $352,000 in its consolidated financial statements. Subsequently, the Company should have marked to market the warrants at the end of each reporting period. Had the Company recorded the warrants in its consolidated financial statements and marked to market the warrants as of December 28, 2013 and December 27, 2014, the Company would have recorded gains in its statement of operations of approximately $646,000 and $171,000, respectively. In the first quarter of 2015, the Company recorded the warrants in its consolidated financial statements and as a result recorded a gain of approximately $1.3 million with $817,000 attributed to prior periods. The value of the warrants as of August 2013, December 28, 2013 and December 27, 2014 was determined using the Black-Scholes pricing model. The Company does not believe the unrecorded gains were material to the consolidated financial statements as the loss from operations for the fiscal years ended December 28, 2013 and December 27, 2014 were $35.9 million and $28.5 million, respectively.


8.	~~GOODWILL~~

~~The Company’s goodwill balance is as follows:~~

Balance, December 26, 2015 $ 946,082
Change due to exchange rate fluctuations (76,098 )
Balance, September 24, 2016 $ 869,984


9.	ACCRUED WARRANTY

The Company typically warrants its products against defect for 12 months., however, for certain products a customer may purchase an extended warranty. A provision for estimated future costs and estimated returns for credit relating to such warranty is recorded in the period when product is shipped and revenue recognized, and is updated as additional information becomes available. The Company’s estimate of future costs to satisfy warranty obligations is based primarily on historical warranty expense experienced and a provision for potential future product failures. Changes in the accrued warranty for the nine months ended September ~~24, 2016~~30, 2017 are as follows:


Balance, December 26, 2015	$	518,000
Balance, December 31, 2016				$	518,000
Additions	442,305			83,000
Claims	(442,305		)	(16,000		)
Balance, September 24, 2016	$	518,000
Balance, September 30, 2017				$	585,000

Extended Warranties

Deferred revenue represents the purchase of extended warranties by the Company's customers. The Company recognizes revenue from an extended warranty on the straight-line method over the life of the extended warranty, which is typically 12 to 15 months beyond the standard 12 month warranty. The Company classifies deferred revenue under other accrued liabilities in its consolidated balance sheets. The Company currently has $0.5 million of deferred revenue related to extended warranties.


~~10.~~9.	INCOME TAXES

The Company’s tax ~~provison~~benefit of approximately ~~$114,000~~$1.1 million for the nine months ended September 30, 2017 represents the net of $0.1 million for foreign income taxes related to uncertain tax positions and a benefit for the net reduction in estimated foreign withholding. We reduced the valuation allowance on our net deferred tax assets in the amount of $1.0 million and such reduction was recognized as a benefit for income taxes for the nine months ended September 30, 2017. The Company’s tax provision of approximately $0.1 million for the three months ended September 24, 2016, represents less than $14,000 of state income tax and $0.1 million of foreign income taxes including interest income on intercompany loan and net movement in estimated foreign withholding. The ~~Company's~~Company’s tax provision of approximately $2.2 million for the nine months ended September 24, 2016, represents $1.0 million of income taxes on the gain on the sale of Kowon’s plant and land, $1.2 million ofof net movement in estimated foreign withholding on anticipated future remitted earnings of a foreign subsidiary, and $22,000 in state income taxes. The Company’s tax benefit of approximately $62,500 and $37,500 for the three and nine month periods ended September 26, 2015 represents the net movement in estimated foreign withholding on anticipated future remitted earnings of an international subsidiary and state taxes.

As of September ~~24, 2016,~~30, 2017, the Company has available for tax purposes U.S. federal NOLs of approximately ~~$105~~$153.0 million expiring through ~~2035.~~2036. The Company has recognized a full valuation allowance on its domestic and certain foreign net deferred tax assets due to the uncertainty of realization of such assets.

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

The tax years 2001 through 2016 remain open to examination by major taxing jurisdictions to which the Company is subject to United States federal tax. These periods have carryforward attributes generated in years past that may still be adjusted upon examination by the Internal Revenue Service or state tax authorities if they have or will be used in a future period. State statutes are generally shorter with shorter carryforward periods. The Company ~~has~~is currently not ~~historically recorded, nor does it intend to record the tax benefits from stock awards until realized. Unrecorded benefits from stock awards approximate $10 million.~~

~~The Company’s income tax returns have not been examined~~under examination by the Internal Revenue Service and is currently under examination by Massachusetts for the 2013 tax year. The Company recognizes both accrued interest and penalties related to its uncertain tax positions related to intercompany loan interest and potential transfer pricing exposure related to its Korean subsidiary.

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


10.	BUSINESS COMBINATION AND GOODWILL

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

The allocation of the purchase price is as follows:



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

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

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



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

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

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



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

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

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



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

The Company has entered into two joint venture agreements and other agreements which are subject to ~~examination for all years since 2001. State income tax returns are generally subject to examination for a period of 3 to 5 years after filing of~~certain closing conditions including government approvals. If the ~~respective return. The state impact of any federal changes remains subject to examination by various states for a period of up to one year after formal notification to~~transactions close the ~~states.~~Company will contribute certain intellectual property and approximately $8.0 million.

11. SEGMENTS AND GEOGRAPHICAL INFORMATION

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

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



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

Three Months Ended
September 24, 2016 September 26, 2015
Kopin FDD Total Kopin FDD Total

Revenues $ 4,707
$ 1,087
$ 5,794
$ 7,036
$ 965
$ 8,001
Net loss attributable to the controlling interest (7,982 ) (216 ) (8,198 ) (4,029 ) (646 ) (4,675 )


	Nine Months Ended
	September 24, 2016									September 26, 2015									Nine Months Ended
	Kopin			FDD			Total			Kopin			FDD			Total			September 30, 2017									September 24, 2016
																			Kopin			Industrial			Total			Kopin			Industrial			Total
Revenues	$	13,176		$	3,093		$	16,269		$	24,800		$	2,643		$	27,443		$	10,409		$	6,036		$	16,445		$	13,176		$	3,093		$	16,269
Net loss attributable to the controlling interest	(17,628		)	(616		)	(18,244		)	(6,548		)	(1,184		)	(7,732		)	(23,170		)	(268		)	(23,438		)	(17,628		)	(616		)	(18,244		)
Total assets	92,799			1,699			94,498			113,510			1,367			114,877			87,043			8,010			95,053			92,799			1,699			94,498
Long-lived assets	2,937			—			2,937			3,550			92			3,642			3,544			117			3,661			2,937			—			2,937

The total assets of Kopin are net of ~~$6.2~~$6.0 million and ~~$5.8~~$6.2 million in intercompany loans to ~~FDD~~Industrial as of September 30, 2017 and September 24, 2016, ~~and September 26, 2015,~~ respectively.

During the three and nine month periods ended September ~~24, 2016~~30, 2017 and September ~~26, 2015,~~24, 2016, the Company derived its sales from the following geographies (as a percentage of net revenues):


	Three Months Ended				Nine Months Ended				Three Months Ended				Nine Months Ended
	September 24, 2016		September 26, 2015		September 24, 2016		September 26, 2015		September 30, 2017		September 24, 2016		September 30, 2017		September 24, 2016
United States	49	%	68	%	36	%	73	%	47	%	49	%	48	%	36	%
Others	—	%	—	%	—	%	1	%
Americas	49	%	68	%	36	%	74	%
Asia-Pacific	37	%	22	%	48	%	19	%	22	%	37	%	25	%	48	%
Europe	14	%	10	%	16	%	7	%	31	%	14	%	27	%	16	%
Total Revenues	100	%	100	%	100	%	100	%	100	%	100	%	100	%	100	%


12.	LITIGATION

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

13. RELATED PARTY TRANSACTIONS

The Company may from time to time enter into agreements with shareholders, affiliates and other companies engaged in certain aspects of the display, electronics, optical and software industries as part of our business strategy. In addition, the wearable computing product market is relatively new and there may be other technologies the Company needs to purchase from affiliates in order to enhance its product offering. The Company and Goertek have entered into agreements to jointly develop and commercialize a range of technologies and wearable products. These include: a mutual exclusive supply and manufacturing arrangement for a certain display product for twenty four months after mass production begins; an agreement that provides the Company with the right of first refusal to invest in certain manufacturing capacity for certain products with Goertek; an agreement whereby Goertek will provide system level original equipment manufacturing services for the Company's wearable products; an arrangement whereby the Company will supply display modules for Goertek's virtual reality and augmented reality products; and other agreements related to promotion around certain products as well as providing designs relating to head mounted displays.

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



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

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



	Receivables		Payables
Goertek	$	—	$	103,100


~~13.~~14.	EMBEZZLEMENT

During the third quarter of 2016, the Company discovered embezzlement activities at its Korean subsidiary. Based upon the results of forensic investigation procedures, wethe Company identified that the embezzlement activities occurred from fiscal year 2011 through fiscal year 2016. The embezzlement resulted in a total theft loss of $1,589,000 over that period and ~~will~~as a result of the embezzlement the Company has made the following correcting adjustments to the amounts presented in ~~the immaterial restatement of~~its previously issued ~~annual financial statements and unaudited~~ quarterly financial ~~information in the Company’s 2016 annual report on Form 10-K.~~information.

In the three and nine month periods ended September ~~26,~~24, 2016, the Company has recorded in Other income (expense) ~~income,~~, net, embezzlement expense of approximately $200,000 and $420,000, respectively, representing the total amount of theft loss that occurred in the first nine months of fiscal 2016. Of that amount, $114,000 had previously been expensed, although misclassified ($47,000 as Cost of component revenues and $67,000 as Foreign currency transaction losses), and $86,000 had been incurred but not yet recorded in the first two quarters of 2016. Accordingly, the embezzlement expense recorded in the accompanying financial statements includes the effects of correcting those misstatements. The Company will restate the above referenced first and second quarter 2016 amounts when they are next presented as comparative balances in its first and second quarter reports on Form 10-Q for fiscal 2017.

The family of the embezzler has contributed certain assets as reparations. In addition, the Company has insurance to cover employee fraud. Whether the Company can collect the insurance and keep the assets is pending civil and criminal investigations against the embezzler. The value of the assets recovered, if any, will be recorded during the period in which settlement is determined to be probable.occurred.


~~14.~~	~~SUBSEQUENT EVENTS~~

~~Subsequent to September 24, 2016, we entered into two strategic agreements.~~

The first agreement established a strategic relationship with a Chinese company under which the Company and the Chinese Company will provide services for each other and jointly develop and manufacture products. In addition the Chinese company will acquire 7,589,000 shares of unregistered stock of the Company for approximately USD $24.7 million.

The second agreement established a joint venture (JV Agreement) in China. Under the terms of the JV Agreement the Company will contribute certain intellectual property and the equivalent of USD $1 million in Renminbi for a minority equity ownership. The purpose of the joint venture is to develop and market wearable products.

~~Both transactions are subject to standard closing conditions and government approval.~~


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

Forward Looking Statements

This Quarterly Report on Form 10-Q ~~which we have filed with~~(including the ~~Securities and Exchange Commission~~information incorporated by reference) contains ‘‘forward-looking ~~statements~~statements’’ within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the United States Private Securities Litigation Reform Act of 1995, ~~including,~~and that involve risks and uncertainties. These statements and other risks described below as well as those discussed elsewhere in this Quarterly Report Form 10-Q, documents incorporated by reference and other documents and reports that we file periodically with the Securities and Exchange Commission (“SEC”) include, without limitation, statements ~~made~~ relating to our ~~expectation~~belief that ~~we will ship Solos headsets in the fourth quarter of 2016;~~ we will incur significant development and marketing costs in ~~2016~~2017 to commercialize our Wearable technologies; our expectation that the cash and marketable debt securities held by Kowon will eventually be remitted back to the U.S.; our expectation that the U.S. government will significantly reduce funding for programs through which we sell high margin military products; our expectation that customers that purchase our products for Wearable applications will launch products in 2016; our expectation that we will offer our proprietary noise cancellation chip which we refer to as “Whisper Chip™” in ~~2016;~~2017; our expectation that any market risk associated with our international operations is unlikely to have a material adverse effect on our business, financial condition or results of operation; our belief that a strengthening of the U.S. dollar could increase the price of our products in foreign markets; our expectation that we will expend between $2.0 million and $3.0 million on capital expenditures over the next twelve months; our belief that our available cash resources will support our operations and capital needs for at least the next twelve months; our expectation that we will have ~~taxes based on federal alternative minimum tax rules and on our foreign operations in 2016; our expectation that we will have~~ a state tax provision in ~~2016;~~2017; and our belief that the effect, if any, of reasonably possible near-term changes in interest rates on our financial position, results of operations, and cash flows should

not be material. This Quarterly Report on Form 10-Q should be read in conjunction with our Form 10-K and other documents filed with the Securities and Exchange Commission. Our Form 10-K and other documents we have filed with the Securities and Exchange Commission also contain these additional forward-looking statements. These forward-looking statements are based on current expectations, estimates, forecasts and projections about the industries in which we operate, management's beliefs, and assumptions made by management. In addition, other written or oral statements, which constitute forward-looking statements, may be made by or on behalf of us. Words such as “expects”, “anticipates”, “intends”, “plans”, “believes”, “could”, “seeks”, “estimates”, and variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties

and assumptions, which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements, whether as a result of new information, future events or otherwise. Factors that could cause or contribute to such differences in outcomes and results include, but are not limited to, those discussed below in Item 1A and those set forth in our other periodic filings filed with the Securities and Exchange Commission. Except as required by law, we do not intend to update any forward-looking statements even if new information becomes available or other events occur in the future.

Critical Accounting Policies

Management's discussion and analysis of our financial condition and results of operations are based upon our unaudited condensed 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 disclosures of contingent assets and liabilities. We ~~continually~~regularly evaluate our estimates used in the preparation of our financial statements, including those related to revenue recognition under the percentage of completion method, bad debts, inventories, warranty reserves, investment valuations, valuation of stock compensation awards and recoverability of deferred tax assets. When we make acquisitions we use estimates in determining the allocation of the purchase price. These estimates included the forecasted operating results and cash flow projections of the acquired company, the appropriate time period to analyze the forecasted operating results and cash flow projections, additional investments, if any, in order to complete development of products and the cost to bring them to market, the weighted average cost of capital for the Company and discount rates. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about carrying values of assets and liabilities that are not apparent from other sources. Actual results will most likely differ from these estimates. Further detail regarding our critical accounting policies can be found in “Item 7. Management Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December ~~26, 2015.~~31, 2016.

Business Matters

We were incorporated in Delaware in 1984 and are a leading inventor, developer, manufacturer and seller of Wearable technologies which include components and systems.

Kopin Wearable technology includes component technologies which can be integrated to create products, and proprietary headset systems which use voice as the primary user interface and, through the use of wireless technologies, can contact other user devices in close proximity or information from the cloud.

Components

The components we offer for sale primarily consist of our displays, backlights, ASICs and optical lenses. In ~~2016,~~2017, we also anticipate offering our proprietary noise cancellation chip which we refer to as “Whisper Chip™”.

Our principal display products are miniature high density color or monochrome Active Matrix Liquid Crystal Displays (AMLCDs) with resolutions ~~which~~that range from approximately 320 x 240 resolution to 2048 x 2048 resolution, sold in either a transmissive or reflective format. We sell our displays individually or in combination with our other components assembled in a unit. For example, we sell a module unit which includes a single display, backlight and optics in a plastic housing, a binocular display module unit which includes two displays, backlights and optics in a plastic housing or a Higher-Level Assembly (HLA) which contains a display, light emitting diode based illumination, optics, and electronics in a sealed housing, primarily for military applications.

Our transmissive display products, which we refer to as CyberDisplay™ products, utilize high quality, single crystal silicon-the same high quality silicon used in conventional integrated circuits. This single crystal silicon is not grown on glass; rather, it is first formed on a silicon wafer and patterned into an integrated circuit (including the active matrix, driver circuitry and other logic circuits) in an integrated circuit foundry. The silicon wafer is then sent to our facilities and the integrated circuit is lifted off as a thin film and transferred to glass using our proprietary Wafer™ Engineering technology, so that the transferred layer is a fully functional active matrix integrated circuit which now resides on a transparent substrate.

Our reflective LCOS display products are miniature high density dual mode color sequential/monochrome reflective micro displays with resolutions which range from approximately 1280 x 720 pixels (720P) resolution to 2048 x 1536 pixels (QXGA) resolution. These displays are manufactured at our facility in Scotland, U.K. Our reflective displays are based on a

proprietary, very high-speed, ferroelectric liquid crystal on silicon (FLCOS) platform. Our digital software and logic-based drive electronics combined with the very fast switching binary liquid crystal enables our micro display to process images purely digitally and create red, green and blue gray scale in the time domain. This architecture has major advantages in visual performance over other liquid crystal, organic light-emitting diode and MEMS based technologies: precisely controlled full color or monochrome gray scale is achieved on a matrix of undivided high fill factor pixels, motion artifacts are reduced to an insignificant level and there are no sub-pixels, no moving mirrors and no analog conversions to detract from the quality of the image.

We are developing organic light emitting diode (OLED) displays. We design the display and are using foundries services to manufacture the display. We are targeting virtual reality systems with the OLED displays and they are expected to be available in 2018.

We offer a variety of optical lenses, some of which we have developed internally and others we license the rights to sell. We also offer a variety of backlights, some of which we have developed and are “off-the-shelf” components. Our lenses come in a variety of sizes with the smallest being our Pupil lens, followed by our Pearl lens and then our largest being our Prism lens. 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. For example, a Pearl lens will provide the viewer with

an image approximately equivalent to what the viewer would see looking at a smart phone, whereas a Prism lens provides the viewer with an image approximately equivalent to what the viewer would see looking at a tablet. A Pearl lens is smaller than a Prism lens, however, it may enable a more fashionable design. Therefore a customer designing a consumer-oriented product may choose a Pearl lens but a customer designing an enterprise-oriented product might choose a Prism lens. We use third parties to manufacture these lenses.

The Whisper Chip is designed to enhance the performance of existing audio systems and speech recognition engines by allowing the speaker’s voice to be clearly “heard” by the listener, whether the “listener” is a person or a machine. The Whisper chip incorporates our Voice Extraction™ Filter (VEF). VEF is a patented approach to singulating the voice signal without distorting it. The Whisper Chip is an all-digital solution that runs at 16MHz, consumes less than 12mW of power and replaces the CODEC so no ADC or DAC is needed. The Whisper Chip is 4 x 4 mm in size and accepts up to four (4) digital microphone inputs. We use third parties to manufacture the Whisper Chip.

Headset Systems

Our headset systems include:

Consumer-oriented headsets which resemble typical eyeglasses but include voice and audio capabilities allowing the user to communicate with other users and a Pupil display module;

Augmented reality health and fitness sunglasses, called Solos™, that have voice and audio capabilities, a Pupil display module which overlays situational information on the glasses, our Whisper Chip; ~~and an~~

Industrial headset reference design, which is essentially a complete head-worn computer that includes an optical pod with one of our display products, a microprocessor, battery, camera, memory and various commercially available software packages that we ~~license.~~license; and

Professional virtual reality systems that allow customers to visualize and interact with simulated 3D environments.

Our headsets receive or transmit data from or to the internet by interfacing with a smartphone or similar device via WiFi or Bluetooth. They can also receive information from devices in close proximity using ANT+. The display module or optical pod allows users to view the information such as WEB data, emails, text messages, maps or biometric data (heart rate), situational data (speed, distance traveled, Watts produced) at a “normal” viewing size because of our specialized optics. Our industrial headset provides the capability of viewing technical diagrams, by enabling the user to zoom in to see finer details or zoom out to see a larger perspective. Our industrial headset is equipped with a camera to enable a picture to be taken, video to be streamed or face-to-face communication to occur. The camera enables users to send pictures or stream live video to a remote subject matter expert so that both the user and expert can analyze an issue at the same time and collaboratively identify and implement a solution. Our headset reference designs utilize operating system software we developed. ~~We expect~~Our professional virtual reality systems allow our customers to ~~ship units of the Solos headset in the second half of 2016.~~develop high-fidelity training and simulation applications.

We have three sources of revenues: product revenues, which are our primary source of revenues, research and development (R&D) revenues primarily from development contracts with agencies or prime contractors of the U.S. government and commercial enterprises and license revenues from our reference designs. To date our license revenues have been de minimis. For the three and nine months ended September ~~24, 2016,~~30, 2017, R&D revenues were $0.5 million and $1.9 million, or 9.0% and 11.8% of total revenues, respectively. This contrasted with $0.3 million and $0.7 million, or 4.7% and 4.1% of total revenues ~~respectively. This contrasted with $0.9 million and $3.7 million, or 11.0% and 13.5% of total revenues, respectively,~~ for the corresponding ~~periods~~period in ~~2015.~~2016.

On October 27, 2016, we issued a press release and filed a Form 8-K with a preliminary net loss of $17.9 million and a preliminary cash used in operations of $19.4 million for the nine months ended September 24, 2016. Subsequent to the press release, certain adjustments were made which resulted in a net loss of $18.2 million and cash used in operations of $20.0 million for the nine month period ended September 24, 2016.

Results of Operations

The three and nine month periods ended September ~~24, 2016~~30, 2017 and September ~~26, 2015~~24, 2016 are referred to as ~~2016~~2017 and ~~2015,~~2016, respectively. The year ended period December ~~26, 2015~~31, 2016 is referred to as fiscal year ~~2015.~~

2016.

Revenues. For ~~2016~~2017 and ~~2015,~~2016, our revenues, which include ~~component~~product sales and amounts earned from research and development contracts, were as follows (in millions):


	Three Months Ended				Nine Months Ended				Three Months Ended				Nine Months Ended
Display Revenues by Application	September 24, 2016		September 26, 2015		September 24, 2016		September 26, 2015		September 30, 2017		September 24, 2016		September 30, 2017		September 24, 2016
Wearable	$	1.5	$	3.5	$	5.9	$	10.6
Consumer									$	1.3	$	1.5	$	2.8	$	5.9
Military	1.2		1.9		3.6		8.9		2.9		1.2		6.1		3.6
Industrial	2.4		1.2		4.6		2.9		1.1		2.4		4.3		4.6
Consumer	0.4		0.5		1.5		1.3
Other									0.3		0.4		1.3		1.5
Research & Development	0.3		0.9		0.7		3.7		0.5		0.3		1.9		0.7
Total	$	5.8	$	8.0	$	16.3	$	27.4	$	6.1	$	5.8	$	16.4	$	16.3

Wearable Applications primarily represents sales of our components for products that are worn on the body for other than Military Applications. In the third quarter of 2015, revenues from the sale of our products for Wearable Applications was primarily driven by shipments to a customer launching a new product. The decrease in Wearable Applications revenues in 2016 as compared to 2015 is primarily because in the third quarter of 2015, a customer decreased their forecasted orders for products and as such we billed at higher price per unit in accordance with the contractual terms which increased revenues by approximately $1.8 million. Sales of our products to customers that use our products for Wearable Applications is a critical part of our strategy to increase revenues and return to profitability and positive cash flow. Our success in selling our products for Wearable Applications will depend on the demand for our customers’ new products, which we are unable to predict. Consumer Applications primarily represents sales of our components for products that are worn on the head and body for gaming and other applications. The decrease in Consumer Applications revenues in 2017 as compared to 2016 is primarily because of a decrease in sales to customers who use our products for drone headset applications and a health and fitness application. Sales of our products for Military Applications ~~decreased~~increased in ~~2016~~2017 as compared to ~~2015~~2016 primarily because of a ~~decrease~~company we acquired in ~~demand~~the first quarter of 2017 that produces virtual reality systems for professional 3D applications. Revenue from the ~~U.S. government~~2017 acquired company were approximately $1.9 million and $3.7 million in the three and nine months ended September 30, 2017, respectively. Included in Military Applications is incremental revenue of the acquired company of $1.9 million and $3.2 million for ~~our products used in Thermal Weapon Sights (TWS) program as~~ the ~~U.S. government transitions to new programs.~~three and nine months ended September 30, 2017, respectively. We are in qualification for the USU.S. military’s Family of Weapon Sights (FWS) program. The FWS program has several sub-programs and we are currently proposing to be a supplier for the FWS-I and FWS-C programs. As part of the qualification process we are receiving low volume orders for the FWS-I program. The revenues for the FWS programs are recorded in Research & Development (R&D) and are the reason for the increase in R&D revenues in 2017 as compared to 2016.

Industrial Applications represents customers who purchase our display products for use in headsets used for applications in public safety and equipment such as 3D ~~metrology. Sales of our products for use~~metrology and training and simulation. Revenue from the 2017 acquired company were approximately $0.4 million in ~~3D metrology applications~~the nine months ended September 30, 2017 and are included in ~~2016 have increased as compared to 2015. For~~ the first quarter of 2015, a substantial portion of our Research & Development (R&D) revenue was earned from customers funding development efforts associated with Wearable Applications. The decline in R&D from 2015 to 2016 is because these customers either discontinued the program or the products moved into the commercialization phase. Consumer Applications primarily represents customers who purchase our products for personal electronics applications.Industrial category.

International sales represented ~~64%~~52% and ~~27%~~64% of product revenues for the nine months ended September ~~24, 2016~~30, 2017 and September ~~26, 2015,~~24, 2016, respectively. Our international sales are primarily denominated in U.S. currency. 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, leading to a reduction in sales or profitability in those foreign markets. In addition, our Korean subsidiary, Kowon, holds U.S. dollars. 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, Korean won and the U.S. dollar. Foreign currency translation impact on our results, if material, is described in further detail under "Item 3. Quantitative and Qualitative Disclosures About Market Risk" section below.

Cost of ~~Component~~Product Revenues.


	Three Months Ended						Nine Months Ended						Three Months Ended						Nine Months Ended
	September 24, 2016			September 26, 2015			September 24, 2016			September 26, 2015			September 30, 2017			September 24, 2016			September 30, 2017			September 24, 2016
Cost of product revenues (in millions):	$	4.6		$	5.4		$	13.9		$	17.0		$	4.1		$	4.6		$	11.4		$	13.9
Cost of product revenues as a % of net product revenues	82.8		%	75.3		%	88.8		%	71.6		%	74.2		%	82.8		%	78.5		%	88.8		%

For the three and nine months ended September ~~24, 2016,~~30, 2017, cost of product revenues, which is comprised of materials, labor and manufacturing overhead related to the production of our products, ~~increased~~decreased as a percentage of revenues in ~~2016~~2017 as

compared to ~~2015~~2016 because ~~in the third quarter~~ of ~~2015~~ a customer decreased their forecasted orders for products and as such we billed at higher price per unit in accordance with the contractual terms which increased revenues by approximately $1.8 million with no corresponding increase in ~~cost~~sales of ~~sales~~our military products which have higher gross margins than the other products sold during same period in ~~the quarter and the under absorption of fixed costs due to lower volume of sales.~~

2016.

Research and Development. Research and development (R&D) expenses are incurred in support of internal development programs or programs funded by agencies or prime contractors of the U.S. government and commercial partners. ~~In fiscal year 2016, our R&D expenditures will be related to our display products and wearable technologies.~~ R&D revenues associated with funded programs are presented separately in revenue in the statement of operations. Research and development costs include staffing, purchases of materials and laboratory supplies, circuit design costs, fabrication and packaging of display products, and overhead. For the three and nine months ended September ~~24, 2016~~30, 2017 and September ~~26, 2015,~~24, 2016, R&D expense was as follows (in millions):


	Three Months Ended				Nine Months Ended				Three Months Ended				Nine Months Ended
	September 24, 2016		September 26, 2015		September 24, 2016		September 26, 2015		September 30, 2017		September 24, 2016		September 30, 2017		September 24, 2016
Funded	$	0.2	$	0.7	$	0.4	$	2.8	$	0.8	$	0.2	$	2.4	$	0.4
Internal	3.9		3.3		11.9		11.0		4.5		3.9		11.8		11.9
Total research and development expense	$	4.1	$	4.0	$	12.3	$	13.8	$	5.3	$	4.1	$	14.2	$	12.3

Funded R&D expense for the three and nine months ended September ~~24, 2016 decreased~~30, 2017 increased as compared to the prior year due to ~~a reduction~~an increase in ~~programs with customers developing products~~spending for ~~Wearable Applications. The decrease occurred because customers either discontinued~~military programs. For the ~~program or the products moved into the commercialization phase.~~three months ended September 30, 2017, internal R&D increased as compared to prior year due to an increase in spending for wearable technology. For the nine months ended September ~~24, 2016,~~30, 2017, internal R&D ~~costs increased as compared to~~was essentially flat with the same period in ~~2015 due to investments in Wearable product development and military programs.~~2016. We expect to incur significant development costs in fiscal year ~~2016~~2017 to commercialize our Wearable ~~technologies.~~technologies and develop military products.

Selling, General and Administrative. Selling, general and administrative (S,G&A) expenses consist of the expenses incurred by our sales and marketing personnel and related expenses, and administrative and general corporate expenses.


	Three Months Ended						Nine Months Ended						Three Months Ended						Nine Months Ended
	September 24, 2016			September 26, 2015			September 24, 2016			September 26, 2015			September 30, 2017			September 24, 2016			September 30, 2017			September 24, 2016
Selling, general and administration expense (in millions):	$	4.0		$	4.6		$	12.0		$	14.1
Selling, general and administration expense (in millions)													$	5.3		$	4.0		$	16.2		$	12.0
Selling, general and administration expense as a % of revenues	68.7		%	57.0		%	73.9		%	51.2		%	87.1		%	68.7		%	98.4		%	73.9		%

S,G&A ~~decreased~~increased for the ~~nine~~three months ended September ~~24, 2016~~30, 2017 as compared to the same period in ~~2015,~~2016, reflecting incremental S,G&A of $0.5 million from our acquisition of NVIS and an increase in stock-based compensation of $0.5 million. S,G&A increased for the nine months ended September 30, 2017 as compared to the same period in 2016, reflecting incremental S,G&A of $1.1 million from our acquisition of NVIS, an increase in stock-based compensation of $1.5 million and a ~~decrease~~$1.0 million increase in professional fees. The incremental S,G&A from NVIS for the three and ~~consulting fees and patent~~nine months ended September 30, 2017 primarily relates to the amortization ~~which were partially offset by higher compensation expense.~~

~~Gain on sale~~ of ~~property and plant.~~ ~~In June 2016, our subsidiary Kowon sold its plant and~~intangibles resulting from the ~~land the plant resided on and we recorded a gain on the sale of $7.7 million.~~acquisition.

Other Income and ~~Expense~~

Expense.

Three Months Ended Nine Months Ended
September 24, 2016 September 26, 2015 September 24, 2016 September 26, 2015
Other income and expense (in millions): $ (1.2 ) $ 1.2
$ (1.5 ) $ 9.6



	Three Months Ended					Nine Months Ended
	September 30, 2017		September 24, 2016			September 30, 2017		September 24, 2016
Other income (expense), net (in millions):	$	0.3	$	(1.2	)	$	0.7	$	(1.5	)

Other income ~~and expense,~~(expense), net, is primarily composed of interest income, foreign currency transaction and remeasurement gains and losses incurred by our Korean and UK-based subsidiaries and other non-operating income items. During the three and nine months ended September 30, 2017, we recorded $0.2 million of foreign currency gains and $0.4 million of foreign currency losses, ~~resulting from the impairment or sale of investments.~~respectively. During the three and nine months ended September 24, 2016, we recorded $1.1 million and $1.6 million of foreign currency losses. During the three and nine months ended September 26, 2015, we recorded $0.6 million and $1.0 million of foreign currency gains. During the three and nine months ended September 26, 2015 we sold investments and recorded $0.4 million and $8.0 million of gains,losses, respectively.

During the nine months ended September ~~26, 2015,~~30, 2017, we recorded a non-cash $0.3 million gain on the mark-to-market of ~~$1.3 million as~~ a ~~result of recording warrants determined to be derivative assets. We~~warrant we received ~~the warrants in August 2013~~ as part of a ~~restructuring~~license of ~~debt owed by Vuzix Corporation to us. Upon receipt of the warrants,~~our technology.

In 2016, we ~~should have recorded the value of the warrants~~discovered embezzlement at our Korean subsidiary of approximately ~~$352,000 in our consolidated financial statements. Subsequently, we determined that we should have marked to market~~$1.6 million which occurred during the warrants at the end of each reporting period. Had we recorded the warrants in our consolidated financial statements and marked to market the warrants as of December 28, 2013 and December 27, 2014, we would have recorded gains in our statement of operations of approximately $646,000 and $171,000, respectively.period 2011 through 2016. In the ~~first quarter of 2015, we recorded the warrants in our~~

~~condensed consolidated financial statements~~three and ~~as a result recorded a gain of approximately $1.3 million with $817,000 attributed to prior periods.~~

~~During the third quarter of 2016, the Company discovered embezzlement activities at Kowon, its Korean subsidiary. The amount stolen for the~~ nine month ~~period~~periods ended September 24, 2016, ~~was~~we recorded in Other income (expense), net, embezzlement expense of approximately ~~$420,000.~~$0.2 million and $0.4 million, respectively, representing the total amount of theft loss that occurred during those time periods. During the nine months ended September 30, 2017 we recognized a recovery of approximately $0.3 million received from the family of the embezzler as restitution.

~~Equity Losses in Unconsolidated Affiliates.~~Tax Provision. For the nine months ended September ~~26, 2015,~~30, 2017, we recorded a tax benefit of $1.1 million, which represents the ~~equity loss~~net of $0.1 million for foreign income taxes related to uncertain tax positions and a benefit for the net reduction in ~~unconsolidated affiliate of $47,000 represents our funding~~estimated foreign withholding. In addition, as a result of the ~~operations~~acquisition of ~~one~~a company, we recognized $1.0 million of net deferred tax liabilities which provides evidence of recoverability of our ~~investments.~~

~~Tax Provision.~~net deferred tax assets that previously carried a full valuation allowance. We reduced the valuation allowance on our net deferred tax assets in the amount of $1.0 million and such reduction was recognized as a benefit for income taxes for the nine months ended September 30, 2017. For the three and nine months ended September 24, 2016, we recorded a tax provision of ~~$114,000~~$0.1 million and $2.2 million, respectively, for estimated foreign income taxes, an increase in estimated foreign withholding on anticipated future remitted earnings of ana foreign subsidiary and estimated state income ~~tax, as compared to a tax benefit of $62,500 and $37,500, respectively, for the three and nine months ended September 26, 2015.~~tax.

Net Income Attributable to Noncontrolling Interest. As of September ~~24, 2016,~~30, 2017, we owned approximately 93% of the equity of Kowon and 80% of the equity of 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. The change in net income attributable to noncontrolling interest is the result of the change in the results of operations of Kowon and eMDT for the three and nine ~~month periods~~months ended September 30, 2017 and September 24, 2016 and Kowon, Kopin Software Ltd and eMDT for the three and nine month periods ended September 26, 2015. In October 2015, we acquired the remaining equity of Kopin Software Ltd. for £1 as part of a transaction in which we contributed the intellectual property of two software products for 17.5% equity ownership in a new company formed to commercialize the software products.2016.

Liquidity and Capital Resources

~~As of~~At September ~~24, 2016,~~30, 2017, we had cash and equivalents and marketable securities of ~~$84.0~~$77.3 million and working capital of ~~$76.9~~$70.5 million compared to ~~$80.7~~$77.2 million and ~~$89.9~~$70.0 million, respectively, as of December ~~26, 2015.~~31, 2016. The change in cash and equivalents and marketable securities was primarily due to net outflow of cash used in operating activities of ~~$20.0~~$19.8 million and acquisition of a company for $3.7 million, offset by cash provided by investing activities of $20.7 million. The cash provided by investing activities was primarily from the receipt of final installment of $15 million from the 2013 sale of our III-V product line and investment in Kopin Taiwan Corporation and the sale of ~~our Korean subsidiary plant and land~~7.6 million shares of treasury stock for ~~approximately $8.1~~$24.7 million.

Cash and marketable debt securities held in U.S. ~~dollars:~~

dollars at September 30, 2017:



Domestic	$	63,713,314	$	58,739,986
Foreign	9,012,195		9,166,205
Subtotal cash and marketable debt securities	72,725,509		67,906,191
Cash and marketable debt securities held in other currencies and converted to U.S. dollars	11,307,273		9,431,273
Total cash and marketable debt securities	$	84,032,782	$	77,337,464

We have no plans to repatriate the cash and marketable debt securities held in our foreign subsidiaries FDD and Kopin Software Ltd. and, as such, we have not recorded any deferred tax liability with respect to such cash. The manufacturing operations at our Korean facility, Kowon, have ceased. Kowon has approximately ~~$19.2~~$18.0 million of cash and marketable debt securities which we anticipate will eventually be remitted to the U.S. and, accordingly, we have recorded deferred tax liabilities associated with its unremitted earnings.

In ~~December 2016,~~March 2017, we ~~entered into an agreement with a Chinese company under which they will acquire 7,589,000 shares~~acquired 100% of ~~unregistered~~the outstanding stock of a company for $3.7 million plus contingent consideration. An additional $2.0 million can be earned if certain cash flow milestones are met and certain employees remain with the ~~Company for approximately USD $24.7 million. The transaction is subject to standard closing conditions and government approval.~~

We lease facilities located in Westborough, Massachusetts, San Jose, California and Scotts Valley, California under non-cancelable operating leases. The Westborough, San Jose and Scotts Valley leases expire in 2023, 2021 and 2018, respectively.

We lease a facility in Dalgety Bay, Scotland which expires in 2019, two facilities in Nottingham, United Kingdom, which expire in 2016 and 2017, respectively, an office in Hong Kong which expires in 2018 and an office in Japan which expires in 2017.

company through March 2020.

We expect to expend between $2$2.0 million and $3$3.0 million on capital expenditures over the next twelve months. We own approximately 93% of Kowon, our Korean subsidiary. The owners of the remaining 7% have expressed a desire to sell their shares to ~~the Company.~~us. We are evaluating whether to purchase the shares. The Company has entered into two joint venture agreements and other agreements which are subject to certain closing conditions including government approvals. If the transactions close the Company will contribute certain intellectual property and approximately $8.0 million

As of September ~~24, 2016,~~30, 2017, we had U.S. federal and state tax loss carry-forwards, which may be used to offset U.S. future federal and state taxable income. We also had tax loss carry-forwards generated in our foreign subsidiaries which may be used to offset future foreign taxable income. We may be subject to alternative minimum taxes, foreign taxes and state income taxes depending on our taxable income and sources of taxable income.

Historically, we have financed our operations primarily through public and private placements of our equity securities and cash generated from operations. We believe our available cash resources will support our operations and capital needs for at least the next twelve months.

Seasonality

There has been no seasonal pattern to our sales in fiscal years ~~2016~~2017 and ~~2015.~~2016.

~~Contractual Obligations~~

~~The following is a summary of our contractual payment obligations for operating leases as of September 24, 2016:~~

Contractual Obligations Total Less than 1 year 1-3 Years 3-5 years More than 5 years
Operating Lease Obligations $ 6,094,310
$ 1,218,401
$ 2,043,354
2,488,625
$ 2,459,222
$ 373,333


Item 3.	Quantitative and Qualitative Disclosures about Market Risk

We invest our excess cash in high-quality U.S. government, government-backed ~~(i.e:~~(i.e.: Fannie Mae, FDIC guaranteed bonds and certificates of deposit) and corporate debt instruments, which bear lower levels of relative risk. We believe that the effect, if any, of reasonably possible near-term changes in interest rates on our financial position, results of operations and cash flows should not be material to our cash flows or income. It is possible that interest rate movements would increase our unrealized gain or loss on interest rate securities. We are exposed to changes in foreign currency exchange rates primarily through our translation of our foreign subsidiaries' financial position, results of operations, and transaction gains and losses as a result of non U.S. dollar denominated cash flows related to business activities in Asia and Europe, and remeasurement of U.S. dollars to the functional currency of our U.K. and Kowon subsidiaries. We are also exposed to the effects of exchange rates in the purchase of certain raw materials which are in U.S. dollars but the price on future purchases is subject to change based on the relationship of the Japanese yen to the U.S. dollar. We do not currently hedge our foreign currency exchange rate risk. We estimate that any market risk associated with our international operations is unlikely to have a material adverse effect on our business, financial condition or results of operation. Our portfolio of marketable debt securities is subject to interest rate risk although our intent is to hold securities until maturity. The credit rating of our investments may be affected by the underlying financial health of the guarantors of our investments. We use silicon wafers but do not enter into forward or futures hedging contracts.


Item 4.	Controls and Procedures

Evaluation of Disclosure Controls and Procedures

~~As of the end of the period covered by this Quarterly Report~~Based on ~~Form 10-Q, Kopin carried out~~ an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and ~~our~~ Chief Financial Officer, as of the ~~effectiveness~~end of ~~our disclosure controls and procedures, (as defined in Rule 13a-15(e) under~~ the Securities and Exchange Act of 1934, as amended, (“the Exchange Act”)). Disclosure controls and procedures are controls and other procedures designed to reasonably assure that information required to be disclosed in our reports filed or submitted under the Exchange Act, such asperiod covered by this Quarterly Report on Form 10-Q, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures are also designed to reasonably assure that this information is accumulated and communicated to our management, including the Chief Executive Officer and the Chief Financial Officer, to allow timely decisions regarding required disclosure.

Based on that evaluation, Kopin’s Chief Executive Officer and Chief Financial Officer have concluded that, as of September 24, 2016, our disclosure controls and procedures were not effective as a result of the material weaknesses that existed in our internal control over financial reporting described below.

~~Notwithstanding the material weaknesses discussed below,~~ our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the ~~consolidated financial statements included~~Securities Exchange Act of 1934, as amended (the Exchange Act) were not effective. This conclusion was based on the existence of the material weaknesses in ~~this report fairly present, in all material respects,~~ our ~~financial~~

~~condition, results of operations and cash flows for the periods presented in conformity with accounting principles generally accepted in the United States.~~

~~Material Weaknesses in Internal Control over Financial Reporting~~

~~A material weakness is a deficiency, or combination of deficiencies, in~~ internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. Management identified the following material weaknessespreviously disclosed and discussed below and as ~~of September 24, 2016:~~

We did not maintain effective controls related to segregation of duties with respect to the establishment of bank accounts, cash disbursements, the cash reconciliation process, and posting of journal entries.

~~We did not maintain effective controls related to the monitoring and oversight of accounting and financial reporting functions and reviews of financial statements.~~

~~While these material weaknesses did not result~~more fully discussed in ~~any material misstatement of~~ our historical financial statements, they did result in errors in income statement classifications for each of the respective quarterly periods in the three and nine-month periods ended September 24, 2016 and September 26, 2015, which were corrected by immaterial restatement of the quarterly financial statements included in the Company’s 2016 Annual Report on Form ~~10-K.~~10-K for the year ended December 31, 2016.

~~Management’s~~As disclosed in our Annual Report on Form 10-K, Item 9A, for the year ended December 31, 2016, our management concluded that our internal control over financial reporting was not effective at December 31, 2016. We are actively engaged in the implementation of a remediation plan, described below, to ensure that controls contributing to the material weaknesses are designed appropriately and will operate effectively.

Management's Plan to Remediate the Material Weaknesses

Our Korean subsidiary ~~had~~ stopped production in 2013 and was maintained by a small staff, pending the sale of the facilities, which occurred in June of 2016. The ~~Company~~employee responsible for the embezzlement was able, in large part, to perpetrate the fraud by obtaining the Company’s seal ~~which was necessary~~and using it to ~~commit the embezzlement,~~authenticate fraudulent documents. The Company's seal was removed from local management’s control by December 31, 2016 and now resides with an independent party. Local management must now make requests of ~~the Company’s~~our corporate accounting department to execute transactions. ~~The Company’s~~Our corporate accounting department coordinates with the independent party to execute any transactions. INOur Korean subsidiaries' accounting function has been outsourced to an independent third party who reports directly to the corporate accounting department. In addition, enhanced reviews of bank statements, account reconciliations and supporting analysis are ~~now~~ being performed by ~~the Company’s~~our corporate accounting department. We have also hired additional qualified personnel in our corporate accounting department who are implementing additional internal reporting procedures, including those designed to add depth to our review processes.

~~Management believes~~We expect that ~~these~~our remediation efforts will ~~effectively remediate~~continue, although the material ~~weaknesses. However, the material~~ weaknesses ~~in our internal control over financial reporting~~ will not be considered remediated until ~~the new~~our controls ~~are fully implemented, in operation~~have been operational for a ~~sufficient~~ period of time, ~~and~~such controls are tested and ~~concluded by~~ management ~~to be designed~~concludes that such controls are effective.

Notwithstanding the identified material weakness and ~~operating effectively, and we cannot provide any assurance~~management’s assessment that ~~these remediation efforts will be successful or that our~~ internal control over financial reporting ~~will be effective~~was ineffective as ~~a result~~ of ~~these efforts. In addition, as~~September 30, 2017, management believes that the ~~Company continues to evaluate~~consolidated financial statements contained in this Quarterly Report on Form 10-Q fairly present, in all material respects, our financial condition, results of operations and ~~work to improve its internal control over financial reporting, management may determine to take additional measures to address control deficiencies or determine to modify~~cash flows for the remediation plan described above. Management will test and evaluate the implementation of these new processes and internal controls during its 2017 fiscal year to ascertain whether they are designed and operating effectively to provide reasonable assurance that they will prevent or detect a material errorperiods presented in conformity with accounting principles generally accepted in the ~~Company’s financial statements. Subject to the foregoing, management believes these remediation efforts will be completed by December 30, 2017.~~United States of America.

Changes in Internal Control over Financial Reporting

~~Except for the material weaknesses described above, there~~There were no changes in the our internal ~~control~~controls over financial reporting ~~(as defined~~identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules ~~13a-15(f) and 15d-15(f) under the Exchange Act)~~13a-15 or 15d-15 that ~~occurred~~was conducted during the ~~period covered by this Quarterly Report on Form 10-Q~~quarter ended September 30, 2017 that ~~has~~have materially affected, or isare reasonably likely to materially affect, our internal control over financial ~~reporting.~~reporting, except for our remediation efforts described above.

~~Item 5. None~~

Part II. OTHER INFORMATION


Item 1.	Legal Proceedings

We 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.


Item 1A.	Risk Factors

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for our fiscal year ended December ~~26, 2015.~~31, 2016. The risks discussed in our Annual Report on Form 10-K could materially affect our business, financial condition and future results. The risks described in our Annual Report on Form 10-K are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition or operating results.


Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds

Sale of Unregistered Securities

In December 2016, we entered into an agreement with a Chinese company, Goertek Inc. (“Goertek”) pursuant to which Goertek would acquire 7,589,000 shares of unregistered stock of the ~~past three years~~Company for approximately $24.7 million. The transaction was completed on April 20, 2017. Other than the sale to Goertek we have not sold any securities in the past three years which were not registered under the Securities Act.

Use of Proceeds

The information required by this item regarding use of proceeds by the Company is reported herein in Part I, Item 2 under “Liquidity and Capital Resources”.

Item 6. Exhibits



Exhibit No.		Description
~~3.1~~ 31.1		~~Amended and Restated Certificate of Incorporation (1)~~
~~3.2~~		~~Amendment to Certificate of Incorporation (2)~~
~~3.3~~		~~Amendment to Certificate of Incorporation (2)~~
~~3.4~~		~~Fifth Amended and Restated By-laws (3)~~
~~31.1~~		Certification of John C.C. Fan, Chief Executive Officer, filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350) *
31.2		Certification of Richard A. Sneider, Chief Financial Officer, filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350) *
32.1		Certification of John C.C. Fan, Chief Executive Officer, furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350) **
32.2		Certification of Richard A. Sneider, Chief Financial Officer, furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350) **
101.INS		XBRL Instance Document*
101.SCH		XBRL Taxonomy Extension Schema Document*
101.CAL		XBRL Taxonomy Calculation Linkbase Document*
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document*
101.LAB		XBRL Taxonomy Label Linkbase Document*
101.PRE		XBRL Taxonomy Presentation Linkbase Document*


*	Submitted electronically herewith


**	Furnished and not filed herewith


~~(1)~~	~~Filed as an exhibit to Registration Statement on Form S-1, File No. 33-57450, and incorporated herein by reference.~~


~~(2)~~	~~Filed as an exhibit to Quarterly Report on Form 10-Q for the quarterly period July 1, 2000 and incorporated herein by reference.~~


~~(3)~~	~~Filed as an exhibit to Current Report on Form 8-K filed on July 18, 2016 and incorporated herein by reference.~~

Attached as Exhibit 101 to this report are the following formatted in XBRL (Extensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets at September ~~24, 2016~~30, 2017 (Unaudited) and December ~~26, 2015,~~31, 2016, (ii) Condensed Consolidated Statements of Operations (Unaudited) for the three and nine months ended September ~~24, 2016~~30, 2017 and September ~~26, 2015,~~24, 2016, (iii) Condensed Consolidated Statement of Comprehensive (Loss) Income (Unaudited) for the three and nine months ended September ~~24, 2016~~30, 2017 and September ~~26, 2015,~~24, 2016, (iv) Condensed Consolidated Statements of Stockholders’ Equity (Unaudited) for the nine months ended September ~~24, 2016,~~30, 2017, (v) Condensed Consolidated Statements of Cash Flows (Unaudited) for the nine months ended September ~~24, 2016~~30, 2017 and September ~~26, 2015,~~24, 2016, and (vi) Notes to Unaudited Condensed Consolidated Financial Statements.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



		KOPIN CORPORATION (Registrant)

Date:	~~March 22,~~November 9, 2017	By:	/S/ John C.C. Fan
			John C.C. Fan
			President, Chief Executive Officer and Chairman of the Board of Directors
			(Principal Executive Officer)

Date:	~~March 22,~~November 9, 2017	By:	/S/ RICHARD A. SNEIDER
			Richard A. Sneider
			Treasurer and Chief Financial Officer
			(Principal Financial and Accounting Officer)

2526



Contractual Obligations	Total		Less than 1 year		1-3 Years			3-5 years		More than 5 years
Operating Lease Obligations	$	6,094,310	$	1,218,401	$	2,043,354	2,488,625	$	2,459,222	$	373,333