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Financial Instruments | 12 Months Ended
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Dec. 31, 2022
Investments, All Other Investments [Abstract] |
Financial Instruments | 5. Financial Instruments Fair Value Measurements Financial instruments are categorized as Level 1, Level 2 or Level 3 based upon the method by which their fair value is computed. An investment is categorized as Level 1 when its fair value is based on unadjusted quoted prices in active markets for identical assets that the Company has the ability to access at the measurement date. An investment is categorized as Level 2 if its fair market value is based on quoted market prices for similar assets in active markets, quoted prices for identical or similar assets in markets that are not active, based on observable inputs such as interest rates, yield curves, or derived from or corroborated by observable market data by correlation or other means. An investment is categorized as Level 3 if its fair value is based on assumptions developed by the Company about what a market participant would use in pricing the assets. The following table details the fair value measurements of the Company’s financial assets: Schedule of Fair Value Measurements of Financial Assets
|  | Total |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |
|  |  |  |  | Fair Value Measurement at December 31, 2022 Using: |
|  | Total |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |
Cash and cash equivalents |  | $ | 8,258,878 |  |  | $ | 8,258,878 |  |  | $ | — |  |  | $ | — |
U.S. Government and agency backed securities |  |  | 2,397,730 |  |  |  | — |  |  |  | 2,397,730 |  |  |  | — |
Corporate debt |  |  | 1,500,445 |  |  |  | — |  |  |  | 1,500,445 |  |  |  | — |
Certificates of deposit |  |  | 490,603 |  |  |  | 490,603 |  |  |  | — |  |  |  | — |
Equity Investments |  |  | 7,721,206 |  |  |  | 213,016 |  |  |  | — |  |  |  | 7,508,190 |
Financial instruments, owned, at fair value |  | $ | 20,368,862 |  |  | $ | 8,962,497 |  |  | $ | 3,898,175 |  |  | $ | 7,508,190 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
|  | Total |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |
|  |  |  |  | Fair Value Measurement at December 25, 2021 Using: |
|  | Total |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |
Cash and cash equivalents |  | $ | 26,787,931 |  |  | $ | 26,787,931 |  |  | $ | — |  |  | $ | — |
U.S. Government and agency backed securities |  |  | 1,000,650 |  |  |  | — |  |  |  | 1,000,650 |  |  |  | — |
Corporate debt |  |  | 1,506,885 |  |  |  | — |  |  |  | 1,506,885 |  |  |  | — |
Equity Investments |  |  | 4,912,022 |  |  |  | 296,173 |  |  |  | — |  |  |  | 4,615,849 |
Financial instruments, owned, at fair value |  | $ | 34,207,488 |  |  | $ | 27,084,104 |  |  | $ | 2,507,535 |  |  | $ | 4,615,849 |
The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate fair value because of their short-term nature. If accrued liabilities were carried at fair value, these would be classified as Level 2 in the fair value hierarchy. Changes in Level 3 investments are as follows: Schedule of Fair Value, Liabilities Measured On Recurring Basis
|  | December 25, 2021 |  |  | Unrealized gains |  |  | Unrealized losses |  |  | Purchases, issuances and settlements |  |  | December 31, 2022 |
Equity investments |  | $ | 4,615,849 |  |  | $ | 4,700,000 |  |  | $ | (2,307,657 | ) |  | $ | 499,998 |  |  | $ | 7,508,190 |
Equity Investments Equity investments rarely traded or not quoted will generally have less (or no) pricing observability and a higher degree of judgment utilized in measuring fair value. Initial measurement of equity investments occurs when an observable price for the equity investment is available. The Company adopted the measurement alternative for equity investments without readily determinable fair values (often referred to as cost method investments) on a prospective basis. As a result, these investments will be revalued upon occurrence of an observable price change for similar investments and for impairments. The Company has limited, if any, control over their governance, financial reporting and operations. The Company relies on the financial reporting provided by these investments in order to evaluate them for possible impairment. As a result, we face certain operating, financial and other risks relating to these investments, including risks related to the financial strength of the investments. The Company has an equity interest in a company which it acquired through purchasing capital and contributing certain intellectual property totaling $3.9 million by December 26, 2020. In the third quarter of 2022, the Company reviewed the financial condition of its equity interest in the company and, as a result of valuing the investment through discounted cash flow and guideline public company methods, recorded an impairment charge of $2.0 million to reduce its investment. For the year ended December 31, 2022, the Company also recorded approximately $0.3 million of unrealized losses and for the years ended December 25, 2021 and December 26, 2020, the Company recorded approximately $0.1 million and $0.3 million of unrealized losses on this equity investment, respectively, due to a fluctuation in the foreign exchange rate. As of December 31, 2022, the Company owned an approximate 10% interest in this investment and the carrying value of this equity investment was $1.6 million at December 31, 2022 and $3.9 million at December 25, 2021. In 2017 the Company had 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 Company used the pricing and terms of the qualified financing round by the customer in determining the value of its Series A warrant and recorded a gain of $2.0 million. The Company acquired an equity interest in the customer by exercising the Series A warrant into Series A shares in the second quarter of 2018 and recorded a loss of less than $0.1 million. In addition, the Company acquired shares of the customer’s Series B shares valued at $2.5 million based on the fair value of the Series B at the closing in May 2019. During the second quarter of 2019, the Company recognized a $0.8 million gain based on an observable price change for the Series A shares by using the customer’s Series B capital structure, pricing of the shares being offered and the liquidation preference of Series B. In the fourth quarter of 2019, the Company reviewed the financial condition and other factors of the customer and, as a result, the Company recorded an impairment charge of $5.2 million to reduce its investment in the customer to zero. In the first quarter of 2022, the customer raised additional equity capital and based on an observable price change of the customer’s share prices and terms of the equity sale, the Company remeasured the fair market value of its investment and recorded a gain of $4.7 million. In the second quarter of 2022 the Company made an additional equity investment of $0.5 million. As of December 31, 2022, the Company owned an approximate 2.8% interest in this investment the carrying value of this equity investment was $5.2 million. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) On September 30, 2019 the Company entered into an Asset Purchase Agreement (the “Solos Purchase Agreement”) pursuant to which the Company sold and licensed certain assets of our SolosTM (“Solos”) product line and WhisperTM Audio (“Whisper”) technology. As consideration for the transaction the Company received a 20.0% equity stake in Solos Incorporation (“Solos Inc.”). The Company’s 20.0% equity stake will be maintained until Solos Inc. has raised a total of $7.5 million in equity financing. The Company will also receive a royalty in the single digits on the net sales amount of Solos products for a three-year period, after the commencement of commercial production. The Company has performed the analysis and identified Solos Technology as a variable interest entity that should not be consolidated by Kopin, as Kopin is not the primary beneficiary of the entity. Kopin is not obligated to provide any additional funding support to Solos Inc., and its potential loss exposure is the value of the investment recorded on its books. Based on the price paid for equity by the other 80.0% owners of Solos Inc., volatility based on a peer group and assumptions about the risk-free interest rate, the Company estimated the fair value of its equity holdings at $0.6 million and in 2019 recorded a $0.6 million gain on its investment for this equity transaction as the basis of assets transferred was zero. The investment balance remains at $0.4 million as of December 31, 2022 and December 25, 2021 as a result of an impairment analysis and write down performed in 2020. Marketable Debt Securities The corporate debt consists of floating rate notes with a maturity that is over multiple years but has interest rates that are reset every three months based on the then-current three-month London Interbank Offering Rate (“three-month Libor”). The Company validates the fair market values of the financial instruments above by using discounted cash flow models, obtaining independent pricing of the securities or through the use of a model that incorporates the three-month Libor, the credit default swap rate of the issuer and the bid and ask price spread of the same or similar investments which are traded on several markets. Investments in available-for-sale marketable debt securities are as follows at December 31, 2022 and December 25, 2021: Schedule of Available-for-sale Marketable Debt Securities
|  | Amortized Cost |  |  | Unrealized Gains/(Losses) |  |  | Fair Value |
|  | 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |
U.S. Government and agency backed securities |  | $ | 2,500,006 |  |  | $ | 1,000,128 |  |  | $ | (102,276 | ) |  | $ | 522 |  |  | $ | 2,397,730 |  |  | $ | 1,000,650 |
Corporate debt |  |  | 2,000,012 |  |  |  | 1,500,000 |  |  |  | (8,964 | ) |  |  | 6,885 |  |  |  | 1,991,048 |  |  |  | 1,506,885 |
Total |  | $ | 4,500,018 |  |  | $ | 2,500,128 |  |  | $ | (111,240 | ) |  | $ | 7,407 |  |  | $ | 4,388,778 |  |  | $ | 2,507,535 |
The contractual maturity of the Company’s marketable debt securities is as follows at December 31, 2022: Schedule of Contractual Maturity
|  | Less than One year |  |  | One to Five years |  |  | Total |
U.S. Government and agency backed securities |  | $ | — |  |  | $ | 2,397,730 |  |  | $ | 2,397,730 |
Corporate debt |  |  | 1,500,445 |  |  |  | 490,603 |  |  |  | 1,991,048 |
Total |  | $ | 1,500,445 |  |  | $ | 2,888,333 |  |  | $ | 4,388,778 |

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- Definition The entire disclosure for financial instruments. This disclosure includes, but is not limited to, fair value measurements of short and long term marketable securities, international currencies forward contracts, and auction rate securities. Financial instruments may include hedging and non-hedging currency exchange instruments, derivatives, securitizations and securities available for sale at fair value. Also included are investment results, realized and unrealized gains and losses as well as impairments and risk management disclosures. + References No definition available. + Details
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