<PAGE>
UNITED STATES
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 October 2, 1999
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 29, 1999
----- ----------------------------------
Common Stock, par value $ .01 14,955,778
<PAGE>
KOPIN CORPORATION
INDEX
-----
<TABLE>
<CAPTION>
Page No.
-------
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements:
Consolidated Balance Sheets at 3
October 2, 1999 and December 31, 1998
Consolidated Statements of Operations and Comprehensive Income (Loss) 4
for the Three and Nine months ended October 2, 1999 and September 26, 1998
Consolidated Statements of Stockholders' Equity for the 5
Nine months ended October 2, 1999 and September 26, 1998
Consolidated Statements of Cash Flows for the 6
Nine months ended October 2, 1999 and September 26, 1998
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition 9
and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk 12
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>
October 2, 1999 December 31, 1998
--------------- -----------------
<S> <C> <C>
ASSETS
- ------
Current assets:
Cash and equivalents $ 19,297,800 $ 30,807,335
Marketable securities 8,271,206 6,000,883
Accounts receivable, net of allowance of $150,000
Billed 8,842,943 2,743,211
Unbilled 1,447,417 910,787
Inventory 5,621,322 3,337,178
Prepaid expenses and other current assets 1,184,309 743,069
-------------- -------------
Total current assets 44,664,997 44,542,463
Equipment and improvements:
Equipment 27,133,518 24,953,456
Leasehold improvements 808,884 808, 884
Furniture and fixtures 435,526 426,084
Equipment under construction 6,996,342 25,131
-------------- -------------
35,374,270 26,213,555
Accumulated depreciation and amortization 19,583,564 16,867,698
-------------- -------------
15,790,706 9,345,857
Other assets 6,286,942 6,173,153
Intangible assets 1,799,334 1,844,148
-------------- -------------
Total assets $68,541,979 $61,905,621
============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Accounts payable $ 6,280,646 $ 1,728,596
Accrued payroll and expenses 434,608 541,732
Other accrued liabilities 1,484,074 913,908
Current portion of long-term obligations 1,995,433 1,999,494
-------------- -------------
Total current liabilities 10,194,761 5,183,730
Long-term obligations, less current portion 2,930,980 4,209,474
Minority interest 717,372 665,994
Commitments
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, 12,648,147 shares in 1999 and 12,268,561 shares in 1998 126,481 122,686
Additional paid-in capital 111,817,117 108,954,779
Deferred compensation (123,790) (165,055)
Accumulated other comprehensive income 367,252 420,812
Deficit (57,488,194) (57,486,799)
------------ ------------
Total stockholders' equity 54,698,866 51,846,423
------------ ------------
Total liabilities and stockholders' equity $68,541,979 $61,905,621
============ ============
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
KOPIN CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
(unaudited)
Three Months Ended Nine Months Ended
------------------ -----------------
October 2, September 26, October 2, September 26,
---------- ------------- ---------- -------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Product revenues $ 9,191,188 $ 6,957,162 $23,102,252 $17,284,741
Research and development revenues 545,093 878,745 1,978,026 2,701,650
----------- ----------- ----------- -----------
9,736,281 7,835,907 25,080,278 19,986,391
----------- ----------- ----------- -----------
Costs and expenses:
Cost of product revenues 7,162,856 4,126,560 16,984,338 10,361,425
Research and development 1,550,513 2,400,476 4,897,327 7,459,697
Selling, general, and administrative 1,525,932 1,174,315 3,869,929 3,300,442
Other 89,816 97,574 269,091 285,204
----------- ----------- ----------- -----------
10,329,117 7,798,925 26,020,685 21,406,768
----------- ----------- ----------- -----------
Income (loss) from operations (592,836) 36,982 (940,407) (1,420,377)
Other income and expense:
Interest and other income 374,814 544,707 1,316,450 1,472,291
Interest expense (85,622) (127,432) (301,782) (383,591)
----------- ----------- ----------- -----------
Income (loss) before minority interest (303,644) 454,257 74,261 (331,677)
Minority interest in income of (50,141) - (75,656) -
subsidiary ----------- ----------- ----------- -----------
Net income (loss) ($ 353,785) $ 454,257 ($ 1,395) ($ 331,677)
=========== =========== =========== ===========
Net income (loss) per share - Basic ($.03) $.04 $.00 ($.03)
=========== =========== =========== ===========
Net income (loss) per share - Diluted ($.03) $.03 $.00 ($.03)
=========== =========== =========== ===========
Weighted average number of common
shares outstanding:
Basic 12,582,945 12,192,952 12,468,283 12,009,242
=========== =========== =========== ===========
Diluted 12,582,945 13,001,328 12,468,283 12,009,242
=========== =========== =========== ===========
</TABLE>
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
<TABLE>
<CAPTION>
(unaudited)
Three Months Ended Nine Months Ended
------------------ -----------------
October 2, September 26, October 2, September 26,
---------- ------------- ---------- -------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income (loss) ($ 353,785) $454,257 ($ 1,395) ($ 331,677)
Foreign currency translation adjustments (96,047) (1,939) (45,092) 183,608
Unrealized gain (loss) on marketable
securities, net 1,930 11,677 (8,468) 17,678
---------- -------- --------- ----------
Comprehensive income (loss) ($ 447,902) $463,995 ($ 54,955) ($ 130,391)
========== ======== ========= ==========
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
KOPIN CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Nine months ended October 2, 1999 and September 26, 1998
(unaudited)
<TABLE>
<CAPTION>
Additional Accumulated Other
Common Stock Paid-in Deferred Comprehensive
------------------
Shares Amount Capital Compensation Income (Loss) Deficit Total
------ ------- ------ ------------ ------------ ------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1997 11,122,143 $111,221 $ 90,514,233 ($231,955) ($ 6,001) ($54,518,912) $35,868,586
Issuance of common stock, net of
costs of $1,829,000 1,000,000 10,000 17,161,418 -- -- -- 17,171,418
Exercise of stock options 91,526 916 870,948 -- -- -- 871,864
Amortization of compensation
relating to grant of stock
options -- -- -- 50,175 -- -- 50,175
Net unrealized gain on marketable
securities -- -- -- -- 17,678 -- 17,678
Foreign currency translation
adjustments -- -- -- -- 183,608 -- 183,608
Net loss for the nine month
period ended September 26, 1998 -- -- -- -- -- (331,677) (331,677)
---------- -------- ------------ ---------- -------- ------------ -----------
Balance, September 26, 1998 12,213,669 $122,137 $108,546,599 ($181,780 $195,285 ($54,850,589) $53,831,652
========== ======== ============ ========== ======== ============ ===========
Balance, December 31, 1998 12,268,561 $122,686 $108,954,779 ($165,055) $420,812 ($57,486,799) $51,846,423
Exercise of stock options 379,586 3,795 2,862,338 -- -- -- 2,866,133
Amortization of compensation
relating to grant of stock
options -- -- -- 41,265 -- -- 41,265
Net unrealized loss on marketable
securities -- -- -- -- (8,468) -- (8,468)
Foreign currency translation
adjustments -- -- -- -- (45,092) -- (45,092)
Net loss for the nine month
period ended October 2, 1999 -- -- -- -- -- (1,395) (1,395)
---------- -------- ------------ ---------- -------- ------------ -----------
Balance, October 2, 1999 12,648,147 $126,481 $111,817,117 ($ 123,790 $367,252 ($57,488,194) $54,698,866
========== ======== ============ ========== ======== ============ ===========
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
KOPIN CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
-----------------
October 2, 1999 September 26, 1998
--------------- ------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss ($1,395) ($331,677)
Adjustments to reconcile net loss to
net cash provided by (used in) operating activities:
Depreciation and amortization 2,991,349 3,104,277
Amortization of compensation relating to grant
of stock options 41,265 50,175
Decrease in deferred rent - (165,166)
Minority interest in income of subsidiary 75,656 -
Changes in assets and liabilities:
Accounts receivable (6,647,744) (1,142,295)
Inventory (2,292,815) (999,169)
Prepaid expenses and other current assets (443,748) (77,465)
Intangible assets (218,886) (381,585)
Accounts payable and accrued expenses 5,018,853 691,055
------------ -----------
Net cash provided by (used in) operating activities (1,477,465) 748,150
------------ -----------
Cash flows from investing activities:
Marketable securities (2,278,791) (2,591,078)
Other assets (113,954) (1,051,608)
Capital expenditures (9,203,774) (2,770,241)
------------ -----------
Net cash used in investing activities (11,596,519) (6,412,927)
------------ -----------
Cash flows from financing activities:
Net proceeds from issuance of common stock - 17,171,418
Net proceeds from issuance of subsidiary stock - 383,583
Principal payment on notes payable - (450,000)
Proceeds from long-term obligations - 5,000,000
Principal payment on long-term obligations (1,282,555) (1,648,783)
Proceeds from exercise of stock options 2,866,133 871,864
------------ -----------
Net cash provided by financing activities 1,583,578 21,328,082
------------ -----------
Effect of exchange rate changes on cash (19,129) (19,901)
------------ -----------
Net increase (decrease) in cash and equivalents (11,509,535) 15,643,404
Cash and equivalents, beginning of period 30,807,335 14,425,400
------------ -----------
Cash and equivalents, end of period $ 19,297,800 $30,068,804
============ ===========
Supplementary information -Interest paid in cash $327,723 $362,661
</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 October 2, 1999
and September 26, 1998 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. Certain reclassifications have been made to the September 26, 1998
amounts to conform to the 1999 presentation. These consolidated financial
statements should be read in conjunction with the consolidated 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, 1998 and our Form S-3 filed on October 22, 1999.
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.
The consolidated financial statements include the accounts of the Company, its
wholly-owned subsidiary and Kowon Technology Co., Ltd., a majority-owned (65%)
subsidiary located in Korea. All intercompany transactions and balances have
been eliminated.
2. FOREIGN CURRENCY TRANSLATION
----------------------------
Assets and liabilities of non-U.S. operations are translated into U.S. dollars
at period end exchange rates, and revenues and expenses at rates prevailing
during the quarter. Resulting translation adjustments are accumulated as part of
the other comprehensive income and aggregate $369,400 of unrealized gain at
October 2, 1999. Transaction gains or losses are recognized in income or loss
currently.
3. NET INCOME (LOSS) PER SHARE
---------------------------
Basic net income (loss) per share is computed using the weighted average number
of common shares outstanding during the period. Diluted net income (loss) per
share is computed using the weighted average number of common shares and common
share equivalents outstanding during the period using the treasury stock method.
Common share equivalents have not been included in any periods that the effect
would be anti-dilutive.
4. LONG-TERM OBLIGATIONS
---------------------
In March 1998, the Company entered into a $5,000,000 term loan which requires
the Company to make quarterly principal payments of $250,000 plus interest at a
floating rate based upon LIBOR. This term loan is secured by the Company's
accounts receivable.
5. STOCKHOLDERS' EQUITY
--------------------
In February 1998, the Company completed a public offering of 2,000,000 shares of
common stock at a price of $19.00 per share. Of the total shares sold, 1,000,000
shares were sold by Kopin and the other 1,000,000 shares were sold by a
shareholder. Net proceeds to the Company totaled approximately $17,171,000.
6. RECENT PRONOUNCEMENTS
---------------------
The Financial Accounting Standards Board ("FASB") has issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities", which is effective for fiscal years
commencing after June 15, 2000. SFAS No. 133 requires fair value accounting for
all stand-alone derivatives and many derivatives embedded in other financial
instruments and contracts. The impact of SFAS No. 133 on the Company has not yet
been determined.
7
<PAGE>
7. SUBSEQUENT EVENT
----------------
On October 27, 1999, the Company completed a public offering of 2,300,000 shares
of common stock at a price of $33.94 per share. Net proceeds to the Company from
the sale of 2,300,000 shares of common stock totaled approximately $73,200,000.
8
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
-----------------------------------------------------------------------
OF OPERATIONS
-------------
Kopin is a leading developer and manufacturer of advanced semiconductor
materials and miniature displays. The Company was incorporated in 1984 to
further develop and commercialize certain semiconductor expertise developed at
MIT. Our primary revenue source since 1995 has been from the sales of our
gallium arsenide products, principally our Heterojunction Bipolar Transistor
("HBT") transistor wafers. We have been unprofitable annually since inception
and, at October 2, 1999, we had an accumulated deficit of $57,488,194.
Results of Operations
Revenues. Our total revenues increased $1,900,374 for the three months and
$5,093,887 for the nine months ended October 2, 1999 to $9,736,281 and
$25,080,278 for the three and nine months ended October 2, 1999 compared to
$7,835,907 and $19,986,391 during the corresponding periods in 1998,
respectively. This represented 24.3% and 25.5% increases in revenue for the
three and nine months ended October 2, 1999, respectively. Our product revenues
were $9,191,188 and $23,102,252 for the three and nine months ended October 2,
1999 compared to $6,957,162 and $17,284,741 for the three and nine months ended
September 26, 1998, increases of $2,234,026 or 32.1% and $5,817,511 or 33.7%,
respectively. The increase in sales of our gallium arsenide products principally
resulted from an increase in sales of HBT transistors. Research and development
revenues decreased 38.0% to $545,093 for the three months ended October 2, 1999
compared to $878,745 during the corresponding period in 1998 and decreased 26.8%
to $1,978,026 for the nine months ended October 2, 1999 compared to $2,701,650
for the same period in the prior year. As a result of the expirations of multi-
year contracts with the federal government and our increased emphasis on product
revenues, we believe that research and development revenues will decline as a
percentage of total revenues for the near future.
Cost of Product Revenues. Cost of product revenues, which is comprised of
materials, labor and manufacturing overhead related to our products, was
$7,162,856 for the three months ended October 2, 1999 compared to $4,126,560 for
the same period in the prior year. Cost of product revenues was $16,984,338 for
the nine months ended October 2, 1999 compared to $10,361,425 for the same
period in the prior year. The increase in cost of product revenues as a
percentage of product revenues in 1999 is attributable to increased production
staffing as we increase production capacity, re-deploy certain assets and
personnel previously involved in development activities to manufacturing
activities, and Cyberdisplay sales increase as a percentage of our total sales.
Cyberdisplay products have a lower gross margin as compared to gallium arsenide
products. (See "Liquidity and Capital Resources.")
Research and Development. Research and development expenses (R&D) are
incurred under development programs for display devices and products and gallium
arsenide products either in support of internal development programs or programs
funded by agencies of the federal government. R&D costs include staffing,
purchases of materials and laboratory supplies, and overhead. Funded research
and development expenses were $923,180 and $2,671,945 for the three and nine
months ended October 2, 1999 compared to $983,818 and $3,299,968 for the same
periods in the prior year, decreases of $60,638 and $628,023, respectively,
associated with reduced subcontractor expenses caused by the expiration of
multi-year contracts with agencies of the federal government. Internal
research and development expenses were $627,333 and $2,225,382 for the three and
nine months ended October 2, 1999 compared to $1,416,658 and $4,332,729 during
the corresponding periods in 1998. The decrease in internal R&D was the result
as we re-deploy certain assets and personnel from development activities into
manufacturing activities.
Selling, General and Administrative. Selling, general, and administrative
expenses (S,G&A) consist of the expenses incurred by our sales and marketing
personnel and related expenses, and administrative and general corporate
expenses. S,G&A was $1,525,932 for the three months ended October 2, 1999
compared to $1,174,315 during the corresponding period in 1998, an increase of
$351,617. S,G&A was $3,869,929 for the nine months ended October 2, 1999
compared to $3,300,442 during the corresponding period in 1998, an increase of
$569,487. The increase in S,G&A is primarily due to increases in headcount in
the sales and marketing staff and significant travel associated with supporting
new customer activities.
Other. Other expenses were $89,816 and $269,091 for the three and nine
months ended October 2, 1999 compared to $97,574 and $285,204 during the
corresponding periods in 1998.
9
<PAGE>
Other Income, Net. Other income, net was $289,192 and $1,014,668 for the
three and nine months ended October 2, 1999 compared to $417,275 and $1,088,700
during the corresponding periods in 1998. The decrease was primarily due to a
decrease in interest and other income to $374,814 for the three months ended
October 2, 1999 compared to $544,707 for the corresponding period in 1998.
Interest and other income was $1,316,450 for the nine months ended October 2,
1999 compared to $1,472,291 in the corresponding period in 1998. The decrease in
interest income earned during the three months ended October 2, 1999 was due to
lower cash balances available for investing as we fund the expansion of our
gallium arsenide and display products manufacturing capacity. Interest expense
decreased $41,810 and $81,809 for the three and nine months ended October 2,
1999 from the corresponding periods in 1998 due to the expiration of certain
debt obligations.
Liquidity and Capital Resources
We have financed our operations primarily through public and private
placements of our equity securities, research and development contract revenues,
and sales of our gallium arsenide and display products. Subsequent to the
quarter ended October 2, 1999, we completed a public offering of 2,300,000
shares of common stock at a price of $33.94 per share on October 27, 1999. Net
proceeds to us from the sale of 2,300,000 shares of common stock totaled
approximately $73,200,000. We believe our available cash resources will support
our operations and capital needs.
As of October 2, 1999, we had cash and equivalents and marketable
securities of $27,569,006 and working capital of $34,470,236 compared to
$36,808,218 and $39,358,733, respectively, as of December 31, 1998. The decrease
in cash and equivalents and marketable securities was primarily due to cash used
in operations of $1,477,465, capital expenditures of $9,203,774, and principal
payments on long-term obligations of $1,282,555, offset by proceeds from the
exercise of stock options of $2,866,133. The increase in capital expenditures is
primarily for our expansion programs to increase manufacturing capacity for our
gallium arsenide and display products.
We periodically enter into various long-term debt arrangements to finance
equipment purchases and other activities. As of October 2, 1999, long-term debt
obligations totaled $4,926,413, of which $1,995,433 is payable in the next
twelve months.
The markets the CyberDisplay product is targeted at are large sales volume
consumer electronic and wireless communication applications. We believe that in
order to obtain customers in these markets, it has been necessary to make
significant investments in equipment and infrastructure. In addition, we have
spent approximately $5,000,000 and $7,000,000 annually in 1998 and 1997,
respectively, to develop and improve CyberDisplay products. We believe that it
will be necessary to continue to make significant investments in equipment and
development in order to produce the current CyberDisplay product and later
display products. As a result of the current cost structure of the CyberDisplay
product line, the ability of the CyberDisplay product line to achieve
profitability is dependent upon achieving significant sales volumes and
reasonable gross profit margins. We have not yet produced the CyberDisplay
product at volumes necessary to achieve profitability. Accordingly, we may not
be able to obtain sufficient sales volumes, or if sufficient sales volumes are
achieved, produce the CyberDisplay at a gross margin which will allow the
product line to generate a profit.
We lease equipment and our facilities located in Taunton and Westborough,
Massachusetts, and Los Gatos, California, under non-cancelable operating leases.
The Taunton lease expires in October 2002. The Westborough lease expires in
October 2001, with renewable options for up to three additional years at our
election. The Los Gatos lease covers a five year period terminating in 2002. We
record costs incurred under operating leases as rent expense and this expense
aggregated approximately $1.1 million for 1998.
We expect to expend approximately $30.0 million on capital expenditures
over the next twelve months, primarily for the acquisition of equipment relating
to the production of our HBT transistor wafers and the manufacturing, packaging
and testing of CyberDisplay products, including the establishment of a second
manufacturing production facility for our HBT transistor wafers.
10
<PAGE>
Recent Accounting Pronouncements
The Financial Accounting Standards Board ("FASB") has issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities", which is effective for fiscal years
commencing after June 15, 2000. SFAS No. 133 requires fair value accounting for
all stand-alone derivatives and many derivatives embedded in other financial
instruments and contracts. The impact of SFAS No. 133 on the Company has not yet
been determined.
Year 2000
The Year 2000 issue refers to the potential for disruption to business
activities caused by system failures or miscalculations that are triggered by
advancement of date records past the year 1999. For example, if software that
uses the calendar year in computations is not ready for the millennial calendar
change, it may interpret a 21/st/ century date as a 20th century date (for
example, mistaking 2001 for 1901).
We have developed plans to address issues related to the impact on its
systems from the "Year 2000 Problem". Financial and operational systems are
being assessed and plans have been implemented to address systems modification
requirements.
Utilizing both internal and external resources to address the Year 2000
issue, we expect to be substantially complete with this project by the end of
November 1999. The current estimate of total project cost is approximately
$700,000, which includes the cost of purchasing certain equipment and software
which will be capitalized in accordance with normal policy. The cost of
equipment and software account for approximately 30 percent of the total
estimated project cost while internal resources, primarily salary costs, are 30
percent of the cost and external resources are the remaining 40 percent.
Approximately 90 percent of the total project cost has been spent through
October 2, 1999, with remaining amount to be spent in 1999. The plan costs will
be paid from cashflow generated from operations. The Year 2000 project will not
result in the delay in implementation of any previously planned information
technology projects.
Our products, which are Year 2000 compliant, require high quality raw
materials in order to achieve historical manufacturing yields and performance.
We require suppliers to meet stringent quality standards before we will accept
their product. We are continually performing an assessment of our key suppliers'
Year 2000 readiness and their plans for becoming Year 2000 compliant. Although
we have multiple suppliers for each raw material, failure by one or more key
suppliers to achieve Year 2000 readiness could impact our ability to produce
product at historical levels. In addition, certain critical raw material
suppliers allocate capacity to us. Accordingly, there can be no assurance that
if one or more suppliers are unable to meet their commitments to us, the
remaining suppliers will be able to make-up the shortfall. We are developing of
contingency plans, however, there can be no assurance that we will adequately
address the Year 2000 problem, that any contingency plans we implement would be
adequate to meet our needs without materially impacting our operations, that any
such plan would be successful or that our results of operations and financial
condition would not be materially and adversely affected by the delays and
inefficiencies in conducting operations in an alternative manner.
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 the
following: general economic and business conditions and growth in the flat panel
display industry, growth in the gallium arsenide integrated circuit and
materials industries, growth in the wireless handset market, 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 CyberDisplay imaging devices and
device transistors, loss of significant customers, acceptance of the Company's
products, continuation of strategic relationships, Year 2000 matters, changes in
foreign currency exchange rates, and the risk factors and cautionary statements
listed from time to time in our periodic reports and registration statements
filed with the Securities and Exchange Commission, including but not limited to
our Annual Report on Form 10-K for the fiscal year ended December 31, 1998 and
our Form S-3 filed on October 22, 1999.
11
<PAGE>
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
----------------------------------------------------------
We invest our excess cash in high quality government and corporate
financial instruments which bear minimal 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. We sell
our products to customers worldwide. We maintain a reserve for potential credit
losses and such losses have been minimal. We are exposed to changes in foreign
currency exchange primarily through our translation of our foreign subsidiary's
financial position, results of operations, and cash flows and the sale of
CyberDisplay products to customers in Asia.
PART II. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.29 1992 Stock Option Amendment
27 Financial Data Schedule
(b) Reports on Form 8-K:
Item 5. Other Event
On September 16, 1999, Kopin filed a report on Form 8-K containing its
press release dated September 16, 1999 relating to new digital cameras featuring
its color CyberDisplay and anticipated third quarter performance.
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 16, 1999 By: /s/ John C.C.Fan
--------------------------------------
John C.C. Fan
President, Chief Executive Officer and
Chairman of the Board of Directors
Date: November 16, 1999 By: /s/ Richard A. Sneider
--------------------------------------
Richard A. Sneider
Treasurer and Chief Financial Officer
(Principal Financial and Accounting
Officer)
13
<PAGE>
EXHIBIT 10.29
Kopin Corporation
1992 Stock Option Plan
AMENDMENT
Kopin Corporation the ("Company"), pursuant to authority reserved in
Section 18 of the 1992 Stock Option Plan, as amended, of the Company (the "1992
Plan"), hereby amends the 1992 Plan as follows:
Effective as of May 1, 1999, the date of the adoption by the Board of
Directors of the Company of the amendment provided hereby, the first sentence of
Section 5 of the 1992 Plan is deleted in its entirety and is replaced with the
following:
5. Stock Subject to the Plan. The Plan covers 3,250,000 shares of
Stock; provided, that the number of shares purchased pursuant to
the exercise of Options granted under the Plan and options
granted under the Old Plan and the number of shares subject to
outstanding Options granted under the Plan and options granted
under the Old Plan shall be charged against the shares covered by
the Plan; but shares subject to Options granted under the Plan or
options granted under the Old Plan which terminated without being
exercised shall not be so charged.
IN WITNESS WHEREOF, the Company has adopted this Amendment as of the 20th
day of May, 1999 to be effective as hereinabove provided.
KOPIN CORPORATION
BY: /s/John C. C. Fan
-----------------------------
The following does not form part of this Amendment but is included solely
for information purposes:
Date of Board Approval: May 1, 1999
Date of Shareholder Approval: May 20, 1999
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