KOPN · Kopin Corporation

Period Performance

Period Performance

For the three months ended September 27, 2025, Kopin reported total revenues of $12.0 million, down 10% from $13.3 million in the same period of 2024. The decline was driven by a 5% decrease in Defense applications revenue to $9.9 million (due to lower revenues from pilot helmets and training/simulation products) and a 47% drop in R&D revenue to $1.2 million (due to decreased funding for U.S. defense programs). Industrial revenue rose 53% to $0.7 million on growth in a public safety application, and Medical contributed $0.001 million from initial shipments of a head-mounted product. License and royalty revenue fell 47% to $0.07 million.

Cost of product revenues as a percentage of net product revenues increased to 79% from 76%, resulting in a product gross margin of 21% vs. 24%. The margin decline reflects higher fixed costs per unit due to lower volumes on training/simulation and 3DAOI products, partially offset by improved efficiency in thermal weapon sights.

Net income for the quarter was $4.1 million, compared to a net loss of $3.5 million in the prior year. The swing was primarily due to a $5.1 million benefit from the reduction in accrued litigation damages (related to the BlueRadios judgment) and a $3.6 million decrease in SG&A (from $5.2 million to $1.6 million), largely from lower legal expenses. Partially offsetting were higher stock-based compensation and professional fees. R&D expense was flat at $2.5 million, with a shift from funded to internal programs.

Segment Dynamics

• Defense: The largest segment, representing 83% of product revenue, declined 5% YoY in Q3 and 15% in the nine-month period. The decrease was attributed to lower volumes in pilot helmets, training/simulation, and thermal weapon sights, though the latter saw a sequential improvement in Q3.
• Industrial: Grew 53% in Q3, driven by a public safety application, but the company noted a decline in 3DAOI products and reliance on new product acceptance for future competitiveness.
• Medical: New product shipments began in 2025, with minimal Q3 revenue as initial units are being evaluated by end customers.
• R&D (contract): Revenue fell 47% in Q3 and 23% in the nine months due to reduced U.S. defense program funding. However, management believes funded R&D will increase in fiscal 2026 following a $15.4 million OTA contract for MicroLED displays for augmented reality ground soldier applications.

Forward View

Management expects funded R&D revenues to increase in fiscal 2026 compared to fiscal 2025, subject to meeting required milestones on the OTA and other contracts. The company also anticipates capital expenditures of $1.0–$2.0 million for 2025. Liquidity improved following a PIPE offering in late September 2025, generating net proceeds of approximately $38.1 million, and a strategic investment from Theon International including $7.0 million in convertible preferred stock. These actions, combined with a $23.0 million supersedeas bond posted for the BlueRadios appeal, have alleviated prior substantial doubt about the company's ability to continue as a going concern for the next twelve months. Risks remain from semiconductor component shortages, tariff impacts, and the outcome of the BlueRadios litigation.

Cash Flow Quality

Cash Flow Quality

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