<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR l5(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 28, 1996
Commission file number 0-19882
KOPIN CORPORATION
-----------------
(Exact name of registrant as specified in its charter)
DELAWARE 04-2833935
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
695 MYLES STANDISH BLVD.,TAUNTON, MA 02780-1042
- ------------------------------------ ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (508) 824-6696
--------------
Not Applicable
--------------
Former name, former address, and former fiscal year,
if changed since last report
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or l5(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 such
filing requirements for the past 90 days.
Yes X No
--- --
Applicable only to corporate issuers:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding as of October 31, 1996
----- ----------------------------------
Common Stock, par value $ .01 10,928,384
<PAGE>
KOPIN CORPORATION
INDEX
-----
<TABLE>
<CAPTION>
Page No.
-------
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets at
September 28, 1996 and December 31, 1995 3
Consolidated Statements of Operations for the
Three and nine months ended September 28, 1996
and September 30, 1995 4
Consolidated Statements of Stockholders' Equity
for the Nine months ended September 28, 1996
and September 30, 1995 5
Consolidated Statements of Cash Flows for the
Nine months ended September 28, 1996 and
September 30, 1995 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 13
</TABLE>
2
<PAGE>
KOPIN CORPORATION
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
September 28, 1996 December 31, 1995
------------------- -----------------
<S> <C> <C>
ASSETS
- ------
Current assets:
Cash and equivalents $14,499,094 $ 24,718,023
Marketable securities 13,372,081 17,278,954
Accounts receivable, net of allowance of
$107,400 and $85,600:
Billed 4,102,378 3,147,846
Unbilled 4,084,222 3,438,766
Inventory 5,589,765 6,402,190
Prepaid expenses and
other current assets 1,356,424 1,984,612
----------- ------------
Total current assets 43,003,964 56,970,391
Equipment and improvements:
Equipment 20,440,455 19,258,354
Leasehold improvements 840,814 835,900
Furniture and fixtures 432,757 414,707
Equipment under construction 945,938 964,446
----------- ------------
22,659,964 21,473,407
Accumulated depreciation and amortization 11,319,328 9,902,444
----------- ------------
11,340,636 11,570,963
Other assets 3,662,925 3,438,334
Intangible assets 2,807,256 4,179,877
----------- ------------
Total assets $60,814,781 $ 76,159,565
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Notes payable $ 500,000 $ 3,000,000
Accounts payable 7,796,902 7,712,508
Accrued payroll and
expenses 1,331,271 808,826
Current portion of long-term obligations 994,220 629,643
Current portion of unearned revenue 92,004 92,004
----------- ------------
Total current liabilities 10,714,397 12,242,981
Deferred rent 414,333 388,833
Unearned revenue, less
current portion 11,481 80,484
Long-term obligations,
less current portion 2,251,397 1,605,050
Minority interest 724,736 -
Stockholders' equity:
Preferred stock, par value $.01 per share:
Authorized, 3,000 shares; none issued and outstanding
Common stock, par value $.01 per share:
Authorized, 20,000,000 shares;
issued 10,924,277 shares in 1996 and 10,915,019
shares in 1995 109,243 109,150
Additional paid-in capital 88,387,522 88,355,145
Deferred compensation (59,400) (94,482)
Marketable securities
valuation 267,195 137,183
Accumulated deficit (42,006,123) (26,664,779)
----------- ------------
Total stockholders' equity 46,698,437 61,842,217
----------- ------------
Total liabilities and
stockholders' equity $60,814,781 $ 76,159,565
=========== ============
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
KOPIN CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
----------------------------- ----------------------------
September 28 September 30 September 28 September 30
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue:
Product sales $ 2,784,910 $ 1,698,214 $ 8,411,166 $ 3,299,871
Research and development 1,852,700 2,290,930 5,278,072 6,607,222
Interest and other income 457,326 293,009 1,463,507 1,205,331
------------- ------------- ------------- -------------
5,094,936 4,282,153 15,152,745 11,112,424
------------- ------------- ------------- -------------
Costs and expenses:
Cost of sales 2,331,662 1,646,928 7,264,732 3,053,654
Research and 4,093,692 3,352,070 13,297,020 11,688,719
development
General, administrative and selling 1,393,977 1,210,425 5,304,588 2,785,021
Interest 49,408 105,291 266,926 258,972
Other 158,638 110,353 445,675 243,619
Non-recurring charge -- -- 4,990,412 --
------------- ------------- ------------- -------------
8,027,377 6,425,067 31,569,353 18,029,985
------------- ------------- ------------- -------------
Loss before minority interest (2,932,441) (2,142,914) (16,416,608) ( 6,917,561)
Minority interest in loss of subsidiary 205,189 -- 1,075,264 --
------------- ------------- ------------- -------------
Net loss ($ 2,727,252) ($ 2,142,914) ($15,341,344) ($ 6,917,561)
============= ============= ============= =============
Net loss per share ($ .25) ($ .23) ($ 1.41) ($ .74)
====== ===== ======= =====
Weighted average number of common
shares outstanding 10,921,673 9,307,170 10,918,771 9,302,630
============= ============= ============= =============
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
KOPIN CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 28, 1996 AND SEPTEMBER 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
Common Stock Additional
-------------------- Paid-in Deferred Securities
Shares Amount Capital Compensation Valuation Deficit Total
---------- -------- ----------- ------------- ----------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1994 9,298,711 $ 92,987 $61,926,736 ($224,670) ($670,000) ($17,673,780) $ 43,451,273
Exercise of stock options 15,681 157 15,525 -- -- -- 15,682
Amortization of compensation
relating to grant of stock options -- -- -- 97,641 -- -- 97,641
Net unrealized gain on marketable
securities -- -- -- -- 481,217 -- 481,217
Net loss for the nine month
period ended September 30, 1995 -- -- -- -- -- (6,917,561) (6,917,561)
---------- -------- ----------- ------------ ---------- ------------ ------------
Balance, September 30, 1995 9,314,392 $ 93,144 $61,942,261 ($ 127,029) ($188,783) ($24,591,341) $ 37,128,252
========== ======== =========== ============ ========== ============ ============
Balance, December 31, 1995 10,915,019 $109,150 $88,355,145 ($94,482) $ 137,183 ($26,664,779) $ 61,842,217
Exercise of stock options 9,258 93 32,377 -- -- -- 32,470
Amortization of compensation
relating to grant of stock options -- -- -- 35,082 -- -- 35,082
Net unrealized gain on marketable
securities -- -- -- -- 130,012 -- 130,012
Net loss for the nine month
period ended September 28, 1996 -- -- -- -- -- (15,341,344) (15,341,344)
---------- -------- ----------- ------------ ---------- ------------ ------------
Balance, September 28, 1996 10,924,277 $109,243 $88,387,522 ($ 59,400) $ 267,195 ($42,006,123) $ 46,698,437
========== ======== =========== ============ ========== ============ ============
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
KOPIN CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
September 28 September 30
1996 1995
-------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net loss ($15,341,344) ($6,917,561)
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation and amortization 2,696,171 2,198,028
Amortization of compensation relating to grant
of stock options 35,082 97,641
Non-recurring charge 4,990,412 -
Decrease in unearned revenue (69,003) (69,003)
Increase in accrued rent 25,500 25,501
Minority interest in loss of (1,075,264) -
subsidiary
Changes in assets and liabilities:
Accounts receivable (1,599,988) (1,067,306)
Inventory 812,425 (1,405,118)
Prepaid expenses and other (225,179) (1,097,920)
current assets
Intangible assets (1,519,441) (300,530)
Accounts payable and accrued (293,161) 340,814
expenses ------------- ------------
Net cash used in operating (11,563,790) (8,195,454)
activities ------------- ------------
Cash flows from investing activities:
Acquisition of Forte Technologies,
Inc., net of
cash acquired - (1,361,257)
Marketable securities 4,036,885 8,030,229
Other assets (224,591) 365,690
Capital expenditures (2,810,827) (2,243,530)
------------- ------------
Net cash provided by investing 1,001,467 4,791,132
activities ------------- ------------
Cash flows from financing activities:
Net proceeds from issuance of
subsidiary
preferred stock 1,800,000 -
Proceeds from notes payable 500,000 3,000,000
Principal payment on notes payable (3,000,000) -
Proceeds from long-term obligations 1,692,326 -
Principal payment on long-term (681,402) (450,839)
obligations
Proceeds from exercise of stock 32,470 15,682
options ------------- ------------
Net cash provided by financing 343,394 2,564,843
activities ------------- ------------
Net decrease in cash and equivalents (10,218,929) (839,479)
Cash and equivalents, beginning of
period 24,718,023 1,887,271
------------- ------------
Cash and equivalents, end of period $ 14,499,094 $ 1,047,792
============= ============
Non-cash investing and financing
transactions:
Marketable securities valuation $ 130,012 $ 481,217
Supplementary information -Interest
paid in cash $ 277,028 $ 236,618
</TABLE>
See notes to consolidated financial statements.
6
<PAGE>
KOPIN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
---------------------
The financial statements for the nine month periods ended September 28, 1996 and
September 30, 1995 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. All such adjustments are of a normal recurring
nature. These financial statements should be read in conjunction with the
financial statements and notes thereto included in the Company's Annual Report
on Form 10-K filed with the Securities and Exchange Commission (File No. 0-
19882) for the year ended December 31, 1995.
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. Certain reclassifications have been
made to the prior year financial statements to be in conformity with the current
year presentation.
The consolidated financial statements include the accounts of the Company and
its wholly-owned and majority-owned subsidiaries. All intercompany transactions
and balances have been eliminated. In 1994, the Company made equity investments
in Forte Technologies, Inc. In May 1995, the Company obtained a controlling
interest in Forte and has consolidated the financial statements of Forte with
those of the Company since that date.
2. NET LOSS PER SHARE
------------------
Net loss per share is computed using the weighted average number of common
shares outstanding during the period. Common share equivalents have not been
included because the effect would be anti-dilutive.
3. INVESTMENT IN FORTE TECHNOLOGIES, INC. AND MINORITY INTEREST
------------------------------------------------------------
In October 1994, Kopin acquired a 31% equity interest in Forte Technologies,
Inc., a developer and manufacturer of virtual reality head-mounted systems.
During 1995, Kopin made a series of additional equity investments in and loans
to Forte which resulted in an aggregate equity investment totaling $4,750,000
and loans outstanding of $1,750,000 at December 31, 1995.
In January 1996, Kopin converted a $1,000,000 loan outstanding to Forte as part
of a $2,800,000 private equity offering of Forte common stock. Net proceeds to
Forte totaled $1,800,000 from minority investors. Additionally, in January
1996, Kopin guaranteed an aggregate of $1,000,000 of equipment and working
capital loans obtained by Forte from a senior lender and agreed to subordinate
its remaining $750,000 loan to Forte to the equipment and working capital loans.
In June 1996, Kopin entered into a subordinated debt agreement with Forte as
part of a $2,118,000 subordinated debt financing pursuant to which Kopin
purchased as part of the initial closing $841,837 of subordinated notes and
warrants. In September 1996, Kopin completed the second and final closing on an
additional $841,837 of subordinated notes and warrants. At September 28, 1996,
Kopin held a 59% equity ownership in Forte.
4. NOTE PAYABLE AND LONG-TERM OBLIGATIONS
--------------------------------------
In 1995, the Company entered into a $3,000,000 demand note agreement with a bank
bearing interest at 1/2% above prime. In May 1996, the note was repaid in full.
During the three months ended March 30, 1996, the Company entered into two
separate equipment financing agreements totaling approximately $1,286,000 as
well as a $500,000 demand note agreement.
7
<PAGE>
5. NON-RECURRING CHARGE
--------------------
On January 1, 1996 , the Company adopted SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of ." This
Statement establishes accounting standards for the carrying value of long-lived
and certain identifiable intangible assets. In January 1996, the Company
incurred a non-recurring charge of $4,990,412 which included a write-down
associated with the initial adoption of SFAS No.121, the expensing of purchased
technology, and the write-off of certain previously deferred expenses.
6. RECENT PRONOUNCEMENTS
---------------------
In October 1995, the Financial Accounting Standards Board issued SFAS No. 123,
"Accounting for Stock-Based Compensation," which was effective for the Company
beginning January 1, 1996. SFAS No.123 requires expanded disclosures of stock-
based compensation arrangements with employees and encourages (but does not
require) compensation costs to be measured based upon the fair value of the
equity instrument awarded. However, companies are permitted to continue to apply
APB Opinion No. 25, which recognizes compensation cost based on the intrinsic
value of the equity instrument awarded. The Company will continue to apply APB
Opinion No. 25 to its stock based compensation awards to employees and will
disclose the required pro forma effect on net income and earnings per share in
the Company's year ending December 31, 1996 financial statements.
8
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
Kopin Corporation and its subsidiaries (the "Company") are engaged in the
development, manufacture and sale of flat panel display devices and products,
and custom wafer-engineered electronic materials for commercial and consumer
markets. To date, the Company's revenue has been derived primarily from
development contracts with commercial companies and agencies of the federal
government, as well as from sales of its custom wafer-engineered materials and
flat panel display devices and products.
RESULTS OF OPERATIONS
The Company's research and development and product sale revenue was
$4,637,610 and $13,689,238 during the three and nine months ended September 28,
1996 compared to $3,989,144 and $9,907,093 earned during the corresponding
periods in the prior year, an increase of $648,466 or 16% for the three months
and $3,782,145 or 38% for the nine months ended September 28, 1996. Research and
development revenue decreased 19% to $1,852,700 for the three months ended
September 28, 1996 from $2,290,930 in the prior year and decreased 20% to
$5,278,072 for the nine months ended September 28, 1996 from $6,607,222 in the
prior year. The decreases in 1996 research and development revenue were
primarily attributable to a reduction in contract revenue from agencies of the
federal government. The Company's product sales increased 64% to $2,784,910
during the three months ended September 28, 1996 from $1,698,214 in the prior
year and increased 155% to $8,411,166 for the nine months ended September 28,
1996 from $3,299,871 during the corresponding period in the prior year. The
sales increase was primarily a result of an increase in unit sales of the
Company's wafer-engineered materials, due to the increase in demand for these
materials by the Company's customers for use in various wireless
telecommunications products. The percentage increase in third quarter sales
experienced over the prior year is not expected to continue in the fourth
quarter as a result of sales levels of the Company's virtual reality head-
mounted systems achieved in the fourth quarter of 1995 that the Company does not
expect to achieve in 1996.
Interest and other income was $457,326 and $1,463,507 for the three and
nine months ended September 28, 1996 compared to $293,009 and $1,205,331 during
the corresponding period in 1995. The increases in 1996 from the corresponding
periods in the prior year reflect the Company's higher cash balances during
1996.
The Company's total operating expenses were $8,027,377 for the three
months ended September 28, 1996 and $31,569,353 for the nine months then ended
compared to $6,425,067 and $18,029,985 for the same periods in the prior year.
The increase of $1,602,310 or 25% for the three months ended September 28, 1996
and $13,539,368 or 75% for the nine months then ended was primarily due to the
increase in cost of sales associated with higher sales volume of wafer-
engineered materials and display products, increased costs incurred for internal
development programs, personnel increases and increased sales and marketing
costs for the Company's wafer-engineered materials and display products.
Additionally, expenses for the nine months ended September 28, 1996 included an
increase of $4,990,412 related to a non-recurring charge for the write-down of
certain intangible and long-lived assets in connection with the Company's
adoption of Statement of Financial Accounting Standards No. 121, the expensing
of purchased technology, and the write-off of certain previously deferred
expenses. Cost of sales, which is comprised of materials, labor and
manufacturing overhead, were approximately 84% and 86% of product sales for the
three and nine months ended September 28, 1996, respectively, compared to
approximately 97% and 93% of product sales for the corresponding periods in the
prior year. The reduction of the cost of sales percentage from the comparable
prior periods is primarily due to the manufacturing start-up costs incurred in
the initial production of the Company's head-mounted display systems in 1995,
and increased unit volumes of the Company's wafer-engineered materials in 1996.
Reducing cost of sales as a percentage of sales for the Company's products is
generally dependent on achieving manufacturing economies of scale in order to
manufacture at a lower per unit basis.
Research and development expenses include expenses incurred in support
of internal development programs and programs funded by agencies of the federal
government. Total research and development expenses for the three and nine
months ended September 28, 1996 were $4,093,692 and $13,297,020 compared to
$3,352,070 and $11,688,719 during the corresponding periods in 1995. The
increases of $741,622 or 22% for the three months and $1,608,301 or 14% for the
nine months then ended were primarily due to increased activity in the Company's
internal development programs for electronic imaging devices and display
products, wafer-engineered materials and head-mounted display systems, including
increases in circuit design costs, staffing, purchases of materials and
laboratory supplies, subcontractor development work, and fabrication and
packaging of the Company's SMART SLIDE imaging devices. These increases were
partially offset by a
9
<PAGE>
reduction in research and development expenses incurred in support of programs
funded by agencies of the federal government.
General, administrative and selling expenses consist of the expenses
incurred by the Company's business development and sales personnel, marketing
expenses, and administrative and general corporate expenses. General,
administrative and selling expenses were $1,393,977 and $5,304,588 for the three
and nine months ended September 28, 1996, compared to $1,210,425 and $2,785,021
for the corresponding periods in the prior year. The increase in general,
administrative and selling expenses in 1996 was primarily due to increases in
display product marketing costs, advertising and trade show costs, as well as
increased personnel and related costs. In addition, general and administrative
expenses include non-cash charges for compensation expense of $11,694 and
$35,082 for the three and nine months ended September 28, 1996, relating to the
issuance of certain stock options. The Company expects to incur additional
increases in general, administrative and selling expenses in the future as it
commercializes its imaging devices and display products.
During 1995, the Company adopted SFAS No. 107, "Disclosure About Fair
Value of Financial Instruments," effective January 1, 1995, as required. The
effect of this adoption had no material impact on the Company's financial
statements.
On January 1, 1996 , the Company adopted SFAS No. 121, "Accounting for
the Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of ."
This Statement establishes accounting standards for the carrying value of long-
lived and certain identifiable intangible assets. In January 1996, the Company
incurred a non-recurring charge of $4,990,412 which included a write-down
associated with the initial adoption of SFAS No.121, the expensing of purchased
technology, and the write-off of certain previously deferred expenses.
In October 1995, the Financial Accounting Standards Board issued SFAS
No. 123, "Accounting for Stock-Based Compensation," which was effective for the
Company beginning January 1, 1996. SFAS No.123 requires expanded disclosures of
stock-based compensation arrangements with employees and encourages (but does
not require) compensation costs to be measured based upon the fair value of the
equity instrument awarded. However, companies are permitted to continue to apply
APB Opinion No. 25, which recognizes compensation cost based on the intrinsic
value of the equity instrument awarded. The Company will continue to apply APB
Opinion No. 25 to its stock based compensation awards to employees and will
disclose the required pro forma effect on net income and earnings per share in
the Company's year ended December 31, 1996 financial statements.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations primarily through private
placements of its equity securities, the initial public offering of its common
stock in April 1992, another public offering in March 1993, research and
development revenue, and sales of its custom wafer-engineered materials and flat
panel display devices and products. The Company currently has an unused line of
credit of $500,000. The Company periodically enters into loan agreements to
finance equipment purchases and other activities. As of September 28, 1996,
sales of equity securities have raised approximately $92,500,000, including
$13,300,000 of net proceeds from the Company's initial public offering,
$26,500,000 of net proceeds from the Company's March 1993 public offering,
$3,300,000 from a private stock sale in November 1992, $4,375,000 from the
exercise of a 625,000 share stock warrant in December 1993, and $30,437,000 from
private stock sales to Telecom Holding Co., Ltd. and United Microelectronics
Corporation and its affiliate in the fourth quarter of 1995.
As of September 28, 1996, the Company had cash and equivalents and
marketable securities of $27,871,175 and working capital of $32,289,567 compared
to $41,996,977 and $44,727,410 as of December 31, 1995. The decrease in cash and
equivalents and marketable securities is primarily due to $11,563,790 of cash
used in operations and $2,810,827 for capital expenditures. These decreases were
partially offset by borrowings of $1,692,326 and $1,800,000 in equity financing
raised by one of the Company's subsidiaries from certain of its minority
stockholders. The Company also has approximately $1,950,000 of marketable
securities held in escrow as equipment financing collateral which is shown in
other assets.
Revenue from long-term contracts is recognized on the percentage-
of-completion method of accounting as work is performed, based upon the
ratio that incurred costs or hours bear to estimated total completion
costs or hours. Amounts received under long-term contracts are recognized
as revenue is earned, and amounts earned on contracts in progress in
10
<PAGE>
excess of billings are classified as unbilled receivables. Unbilled receivables
are billed based on dates stipulated in the related agreement or in periodic
installments based upon the Company's invoicing cycle.
The Company periodically enters into various long-term debt
arrangements in connection with the acquisition of certain capital equipment.
During the nine months ended September 28, 1996, the Company entered into two
separate equipment financing agreements and a subordinated debt agreement
totaling $1,692,326. As of September 28, 1996, total long-term debt obligations
totaled $3,245,617, of which $994,220 is payable within one year. Additionally,
in January 1996, the Company entered into a $500,000 demand note agreement.
In October 1993, the Company entered into a five-year lease for a
74,000 square foot manufacturing facility. This facility, which includes 7,000
square feet of environmentally controlled clean rooms, is being used for
production of wafer-engineered materials and electronic imaging devices for
certain of the Company's display products. The Company will make lease payments
of approximately $4.0 million over the five-year term.
The Company expects to expend approximately $6,000,000 over the next 36
months on equipment primarily related to development and manufacturing of
electronic imaging devices and display products and wafer-engineered electronic
materials. Of this amount, the Company expects to use approximately $500,000 in
the remainder of 1996, $2,000,000 in 1997, $2,000,000 in 1998 and $1,500,000 in
1999 for capital equipment and expansion of the Company's manufacturing
capabilities. Of these amounts, approximately $4,000,000 is expected to be used
for expansion of manufacturing equipment required for development and
manufacturing of electronic imaging devices and display products, and wafer-
engineered materials, and the balance is expected to be used for the acquisition
of laboratory and testing equipment and general facility upgrades. The Company
also expects to use approximately $3,000,000 for development of advanced display
circuit designs for its electronic imaging devices.
The Company expects to incur significant additional research and
development and other costs, including costs related to the development and
commercialization of its electronic imaging devices and display products. The
Company's future capital requirements will depend on many factors involving
risks and uncertainties, including the establishment of collaborative
arrangements, the cost of manufacturing facilities, commercialization activities
and arrangements, continued scientific progress in its imaging device and
display product development programs, the magnitude of these programs, the costs
involved in filing, prosecuting and enforcing patent claims, and competing
technological and market developments.
In October 1994, the Company made an equity investment of $1,000,000 in
Forte Technologies, Inc., a developer and manufacturer of virtual reality head-
mounted systems. Subsequently, the Company has made a series of additional
equity investments in Forte totaling $4,750,000, increasing its equity ownership
to 59% at September 28, 1996. From time to time, Kopin may make equity and
nonequity investments in other companies, including Forte, engaged in certain
aspects of the flat panel display and electronics industries as part of its
business strategy.
The Company believes that its present cash and equivalents and
marketable securities will be adequate to finance its anticipated operating and
capital requirements and to meet liquidity needs through at least fiscal 1998.
FUTURE OPERATING RESULTS
Certain of the statements contained in this Form 10-Q, including
Management's Discussion and Analysis of Financial Condition and Results of
Operations, are forward-looking statements that involve risks and uncertainties.
In addition to the risks and uncertainties set forth in this Form 10-Q, other
factors that could cause actual results to differ materially include (without
limitation) the following: general economic and business conditions and growth
in the flat panel display industry, the impact of competitive products and
pricing, availability of third party components, availability of integrated
circuit fabrication facilities, cost and yields associated with production of
the Company's SMART SLIDE imaging devices, and the risk factors listed from time
to time in the Company's periodic reports filed with the Securities and Exchange
Commission, including but not limited to the Company's Annual Report on Form 10-
K for the fiscal year ended December 31, 1995.
11
<PAGE>
PART II. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
None
12
<PAGE>
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: November 11, 1996 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: November 11, 1996 By: /s/ Paul J. Mitchell
------------------------
Paul J. Mitchell
Treasurer and Chief Financial Officer
(Principal Financial and
Accounting Officer)
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-28-1996
<CASH> 14,499,094
<SECURITIES> 13,372,081
<RECEIVABLES> 8,186,600
<ALLOWANCES> 0
<INVENTORY> 5,589,765
<CURRENT-ASSETS> 43,003,964
<PP&E> 22,659,964
<DEPRECIATION> 11,319,328
<TOTAL-ASSETS> 60,814,781
<CURRENT-LIABILITIES> 10,714,397
<BONDS> 2,251,397
0
0
<COMMON> 109,243
<OTHER-SE> 46,589,194
<TOTAL-LIABILITY-AND-EQUITY> 60,814,781
<SALES> 8,411,166
<TOTAL-REVENUES> 15,152,745
<CGS> 7,264,732
<TOTAL-COSTS> 20,561,752
<OTHER-EXPENSES> 4,990,412<F1>
<LOSS-PROVISION> 42,000
<INTEREST-EXPENSE> 266,926
<INCOME-PRETAX> (15,341,344)
<INCOME-TAX> 0
<INCOME-CONTINUING> (15,341,344)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (15,341,344)
<EPS-PRIMARY> (1.41)
<EPS-DILUTED> (1.41)
<FN>
<F1>Non-recurring charge of $4,990,412 included a write-down associated with the
initial adoption of SFAS No. 121, the expensing of purchased technology, and
the write-off of certain previously deferred expenses.
</FN>
</TABLE>
