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.

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	(18,800	)	2.59
Vested	(60,000	)	1.70
Balance, July 1, 2017	3,048,874		$	3.26

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 six months ended July 1, 2017 and June 25, 2016 (no tax benefits were recognized):



	Three Months Ended				Six Months Ended
	July 1, 2017		June 25, 2016		July 1, 2017		June 25, 2016
Cost of component revenues	$	159,081	$	147,403	$	263,174	$	289,937
Research and development	194,655		131,953		413,213		248,848
Selling, general and administrative	322,287		615,243		1,291,741		412,268
Total	$	676,023	$	894,599	$	1,968,128	$	951,053

Unrecognized compensation expense for non-vested restricted common stock as of July 1, 2017 totaled $4.7 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 six month period ended July 1, 2017 as compared to June 25, 2016 is partially the result of a higher stock price of the Company at July 1, 2017 as compared to June 25, 2016. Included in Other accrued liabilities is $1.4 million in deferred compensation from equity awards which are classified as Liability Awards.