<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 July 3, 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 July 31, 1999
----- -------------------------------
Common Stock, par value $ .01 12,550,683
<PAGE>
KOPIN CORPORATION
INDEX
-----
Page No.
-------
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements:
Consolidated Balance Sheets at 3
July 3, 1999 and December 31, 1998
Consolidated Statements of Operations and
Comprehensive Income (Loss) for the Three and Six
months ended July 3, 1999 and June 27, 1998 4
Consolidated Statements of Stockholders' Equity for the 5
Six months ended July 3, 1999 and June 27, 1998
Consolidated Statements of Cash Flows for the 6
Six months ended July 3, 1999 and June 27, 1998
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 10
PART II - OTHER INFORMATION
Item 4. Submissions of Matters to a Vote of Security-Holders 11
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 12
2
<PAGE>
KOPIN CORPORATION
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
July 3, 1999 December 31, 1998
------------ -----------------
<S> <C> <C>
ASSETS
- ------
Current assets:
Cash and equivalents $ 20,218,858 $ 30,807,335
Marketable securities 7,719,405 6,000,883
Accounts receivable, net of allowance of $150,000
Billed 7,254,603 2,743,211
Unbilled 662,325 910,787
Inventory 5,138,972 3,337,178
Prepaid expenses and other current assets 1,223,218 743,069
------------- -------------
Total current assets 42,217,381 44,542,463
Equipment and improvements:
Equipment 26,118,659 24,953,456
Leasehold improvements 808,884 808, 884
Furniture and fixtures 433,113 426,084
Equipment under construction 4,825,157 25,131
------------- -------------
32,185,813 26,213,555
Accumulated depreciation and amortization 18,619,918 16,867,698
------------- -------------
13,565,895 9,345,857
Other assets 6,272,441 6,173,153
Intangible assets 1,837,957 1,844,148
------------- -------------
Total assets $ 63,893,674 $ 61,905,621
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Accounts payable $ 3,213,865 $ 1,728,596
Accrued payroll and expenses 574,337 541,732
Other accrued liabilities 915,207 913,908
Current portion of long-term obligations 1,792,631 1,999,494
------------- -------------
Total current liabilities 6,496,040 5,183,730
Long-term obligations, less current portion 3,241,000 4,209,474
Minority interest 718,947 665,994
Commitments and contingencies
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 12,482,694 shares
in 1999 and 12,268,561 shares in 1998 124,827 122,686
Additional paid-in capital 110,123,445 108,954,779
Deferred compensation (137,545) (165,055)
Accumulated other comprehensive income 461,369 420,812
Deficit (57,134,409) (57,486,799)
------------- -------------
Total stockholders' equity 53,437,687 51,846,423
------------- -------------
Total liabilities and stockholders' equity $ 63,893,674 $ 61,905,621
============= =============
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
KOPIN CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ -----------------
July 3,1999 June 27, 1998 July 3, 1999 June 27, 1998
----------- ------------- ------------ -------------
Revenue:
<S> <C> <C> <C> <C>
Product revenues $ 7,926,132 $ 5,666,895 $13,911,064 $10,327,579
Research and development revenues 688,269 1,017,042 1,432,933 1,822,905
----------- ----------- ----------- -----------
8,614,401 6,683,937 15,343,997 12,150,484
----------- ----------- ----------- -----------
Costs and expenses:
Cost of product revenues 5,891,308 3,511,627 9,821,482 6,234,865
Research and development 1,347,670 2,509,216 3,346,814 5,059,221
Selling, general, and administrative 1,421,067 1,134,432 2,343,997 2,126,127
Other 91,375 95,731 179,275 187,630
----------- ----------- ----------- -----------
8,751,420 7,251,006 15,691,568 13,607,843
----------- ----------- ----------- -----------
Loss from operations (137,019) (567,069) (347,571) (1,457,359)
Other income and expense:
Interest and other income 407,120 548,349 941,636 927,584
Interest expense (97,896) (156,189) (216,160) (256,159)
----------- ----------- ----------- -----------
Income (loss) before minority interest 172,205 (174,909) 377,905 (785,934)
Minority interest in income of (25,682) - (25,515) -
subsidiary ----------- ----------- ----------- -----------
Net income (loss) $ 146,523 $ (174,909) $ 352,390 $ (785,934)
=========== =========== =========== ===========
Net income (loss) per share - Basic $ .01 $ (.01) $ .03 $ (.07)
=========== =========== =========== ===========
Net income (loss) per share - Diluted $ .01 $ (.01) $ .03 $ (.07)
=========== =========== =========== ===========
Weighted average number of common
shares outstanding - Basic 12,436,394 12,158,768 12,411,882 11,915,323
=========== =========== =========== ===========
Weighted average number of common
shares outstanding - Diluted 13,149,608 12,158,768 13,144,102 11,915,323
=========== =========== =========== ===========
</TABLE>
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
<TABLE>
<CAPTION>
(unaudited)
Three Months Ended Six months Ended
------------------ ----------------
July 3, 1999 June 27, 1998 July 3, 1999 June 27, 1998
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
Net income (loss) $146,523 $ (174,909) $352,390 $ (785,934)
Foreign currency translation adjustments 107,471 185,547 50,955 185,547
Unrealized gain (loss) on marketable
securities, net (3,086) 3,190 (10,398) 6,001
-------- ----------- -------- ----------
Comprehensive income (loss) $250,908 $ 13,828 $392,947 $ (594,386)
======== =========== ======== ==========
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
KOPIN CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
SIX MONTHS ENDED JULY 3, 1999 AND JUNE 27, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
Accumulated
Common Stock Additional Other
---------------- 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
issuance costs of $1,829,000 1,000,000 10,000 17,161,418 -- -- -- 17,171,418
Exercise of stock options 50,793 508 498,223 -- -- -- 498,731
Amortization of compensation
relating to grant of stock -- -- -- 33,450 -- -- 33,450
options
Net unrealized gain on marketable
securities -- -- -- -- 6,001 -- 6,001
Foreign currency translation
adjustments -- -- -- -- 185,547 -- 185,547
Net loss for the six month
period ended June 27, 1998 -- -- -- -- -- (785,934) (785,934)
---------- -------- ------------ ---------- -------- ------------ -----------
Balance, June 27, 1998 12,172,936 $121,729 $108,173,874 $ (198,505) $185,547 ($55,304,846) $52,977,799
========== ======== ============ ========== ======== ============ ===========
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 214,133 2,141 1,168,666 -- -- -- 1,170,807
Amortization of compensation
relating to grant of stock -- -- -- 27,510 -- -- 27,510
options
Net unrealized loss on marketable
securities -- -- -- -- (10,398) -- (10,398)
Foreign currency translation
adjustments -- -- -- -- 50,955 -- 50,955
Net income for the six month
period ended July 3, 1999 -- -- -- -- -- 352,390 352,390
---------- -------- ------------ ---------- -------- ------------ -----------
Balance, July 3, 1999 12,482,694 $124,827 $110,123,445 $ (137,545) $461,369 ($57,134,409) $53,437,687
========== ======== ============ ========== ======== ============ ===========
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
KOPIN CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six months Ended
----------------
July 3, 1999 June 27, 1998
------------ -------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 352,390 $ (785,934)
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating activities:
Depreciation and amortization 1,916,113 2,047,303
Amortization of compensation relating to grant
of stock options 27,510 33,450
Decrease in deferred rent - (165,166)
Minority interest in income of subsidiary 25,515 -
Changes in assets and liabilities:
Accounts receivable (4,251,666) 649,970
Inventory (1,792,579) (595,020)
Prepaid expenses and other current assets (477,584) (79,287)
Intangible assets (169,609) (235,399)
Accounts payable and accrued expenses 1,514,468 119,639
------------ -----------
Net cash provided by (used in) operating activities (2,855,442) 989,556
------------ -----------
Cash flows from investing activities:
Marketable securities (1,728,920) 3,126,885
Other assets (99,077) (982,170)
Capital expenditures (5,922,168) (2,761,651)
------------ -----------
Net cash provided by (used in) investing activities (7,750,165) (616,936)
------------ -----------
Cash flows from financing activities:
Net proceeds from issuance of common stock - 17,171,418
Net proceeds from issuance of subsidiary stock - 582,981
Principal payment on notes payable - (450,000)
Proceeds from long-term obligations - 5,000,000
Principal payment on long-term obligations (1,175,337) (1,012,049)
Proceeds from exercise of stock options 1,170,807 498,731
------------ -----------
Net cash provided by (used in) financing activities (4 ,530) 21,791,081
------------ -----------
Effect of exchange rate changes on cash 21,660 (2,662)
------------ -----------
Net increase (decrease) in cash and equivalents (10,588,477) 22,161,039
Cash and equivalents, beginning of period 30,807,335 14,425,400
------------ -----------
Cash and equivalents, end of period $ 20,218,858 $36,586,439
============ ===========
Supplementary information -Interest paid in cash $ 235,547 $ 191,651
</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 July 3, 1999 and June
27, 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 June 27, 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.
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 $465,447 of unrealized gain at
July 3, 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>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
-----------------------------------------------------------------------
OPERATIONS
----------
Kopin is a leading developer and manufacturer of advanced semiconductor
materials and small form factor displays. The Company was incorporated in 1984
to further develop and commercialize certain semiconductor expertise developed
at MIT. The Company's primary revenue source since 1995 has been from the sales
of its gallium arsenide products. The Company has been unprofitable annually
since inception and, at July 3, 1999, the Company had an accumulated deficit of
$57,134,409.
RESULTS OF OPERATIONS
REVENUES. The Company's total revenues increased $1,930,464 for the
three months and $3,193,513 for the six months ended July 3, 1999 to $8,614,401
and $15,343,997 for the three and six months ended July 3, 1999 compared to
$6,683,937 and $12,150,484 during the corresponding periods in 1998. This
represented 28.9% and 26.3% increases in revenue for the three and six months
ended July 3, 1999, respectively. The Company's product revenues were $7,926,132
and $13,911,064 for the three and six months ended July 3, 1999 compared to
$5,666,895 and $10,327,579 for the three and six months ended June 27, 1998,
increases of $2,259,237 or 39.9% and $3,583,485 or 34.7%, respectively.
The increase in sales of the Company's gallium arsenide products principally
resulted from an increase in sales of device transistors. Research and
development revenues decreased 32.3% to $688,269 for the three months ended
July 3, 1999 compared to $1,017,042 during the corresponding period in 1998 and
decreased 21.4% to $1,432,933 for the six months ended July 3, 1999 compared to
$1,822,905 for the same period in the prior year. As a result of the expirations
of multi-year contracts with the federal government and the Company's increased
emphasis on product revenues, the Company believes 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 the Company's products,
was $5,891,308 for the three months ended July 3, 1999 compared to $3,511,627
for the same period in the prior year. Cost of product revenues was $9,821,482
for the six months ended July 3, 1999 compared to $6,234,865 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
the Company increases production capacity, the re-deployment of certain assets
and personnel previously involved in development activities to manufacturing
activities, and an increase in Cyberdisplay sales as a percentage of 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 $849,006 and $1,748,765 for the three and six
months ended July 3, 1999 compared to $1,260,016 and $2,316,150 for the same
periods in the prior year, decreases of $411,010 and $567,385, 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 $498,664 and $1,598,049 for the three and six
months ended July 3, 1999 compared to $1,249,200 and $2,743,071 during the
corresponding periods in 1998. The decrease in internal R&D was primarily a
result of the re-deployment of 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 the Company's sales and
marketing personnel and related expenses, and administrative and general
corporate expenses. S,G&A was $1,421,067 for the three months ended July 3, 1999
compared to $1,134,432 during the corresponding period in 1998, an increase of
$286,635. S,G&A was $2,343,997 for the six months ended July 3, 1999 compared to
$2,126,127 during the corresponding period in 1998, an increase of $217,870.
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 $91,375 and $179,275 for the three and six months
ended July 3, 1999 compared to $95,731 and $187,630 during the corresponding
periods in 1998.
8
<PAGE>
OTHER INCOME, NET. Other income, net was $309,224 and $725,476 for the three
and six months ended July 3, 1999 compared to $392,160 and $671,425 during the
corresponding periods in 1998. The decrease was primarily due to a decrease in
interest and other income to $407,120 for the three months ended July 3, 1999
compared to $548,349 for the corresponding period in 1998. Interest and other
income was $941,636 for the six months ended July 3, 1999 compared to $927,584
from corresponding period in 1998. The decrease in interest income earned during
the three months ended July 3, 1999 was due to lower cash balances available for
investing as the Company funds the expansion of its gallium arsenide and display
products manufacturing capacity. Interest expense decreased $58,293 and $39,999
for the three and six months ended July 3, 1999 from the corresponding periods
in 1998 due to the expiration of certain debt obligations.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations primarily through public and
private placements of its equity securities, research and development contract
revenues, and sales of its gallium arsenide and display products. The Company
believes its available cash resources will support its operations and capital
needs for at least the next twelve months.
As of July 3, 1999, the Company had cash and equivalents and marketable
securities of $27,938,263 and working capital of $35,721,341 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 $2,855,442, capital expenditures of $5,922,168, and principal
payments on long-term obligations of $1,175,337, offset by proceeds from the
exercise of stock options of $1,170,807. The increase in capital expenditures is
primarily for the Company's expansion program to increase manufacturing capacity
for the Company's gallium arsenide and display products.
The Company periodically enters into various long-term debt arrangements to
finance equipment purchases and other activities. As of July 3, 1999, long-term
debt obligations totaled $5,033,631, of which $1,792,631 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. The Company
believes that in order to obtain customers in these markets, it has been
necessary to make significant investments in equipment and infrastructure. In
addition, the Company has spent approximately $5,000,000 and $7,000,000 annually
in 1998 and 1997, respectively, to develop and improve CyberDisplay products.
The Company believes 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. The Company has not yet
produced the CyberDisplay product at volumes necessary to achieve profitability.
Accordingly, there can be no assurances that the Company will 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.
The Company leases a 74,000 square foot manufacturing facility. This
facility, which includes 10,000 square feet of environmentally controlled clean
rooms, is used primarily for the Company's production of display products. This
facility is occupied under a lease that expires in October 2000, with renewable
options for up to four additional years at the Company's election. The Company
will make lease payments of approximately $1.0 million per year over the
remaining term of the lease.
The Company expects to expend approximately $10,000,000 on capital
expenditures over the next twelve months, primarily for the acquisition of
equipment relating to the production of the Company's gallium arsenide products
and the manufacturing, packaging and testing of CyberDisplay products.
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.
9
<PAGE>
Year 2000
The Company has 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.
The Company, utilizing both internal and external resources to address the
Year 2000 issue, expects to be substantially complete with this project by the
third quarter of calendar 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 75 percent of the total project cost has been spent through
July 3, 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.
The Company's products, which are Year 2000 compliant, require high quality
raw materials in order to achieve historical manufacturing yields and
performance. The Company requires suppliers to meet stringent quality standards
before the Company will accept their product. The Company is continually
performing an assessment of its key suppliers' Year 2000 readiness and their
plans for becoming Year 2000 compliant. Although the Company has multiple
suppliers for each raw material, failure by one or more key suppliers to achieve
Year 2000 readiness could impact the Company's ability to produce product at
historical levels. In addition, certain critical raw material suppliers allocate
capacity to the Company. Accordingly, there can be no assurance that if one or
more suppliers are unable to meet their commitments to the Company, the
remaining suppliers will be able to make-up the shortfall. Development of
contingency plans is in progress and will be developed in detail in 1999.
There can be, however, no assurance that the Company will adequately address the
Year 2000 problem, that any contingency plans implemented by the Company would
be adequate to meet the Company's needs without materially impacting its
operations, that any such plan would be successful or that the Company's 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 the Company's periodic reports and registration
statements 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, 1998.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
----------------------------------------------------------
The Company invests its excess cash in high quality government and
corporate financial instruments which bear minimal risk. The Company believes
that the effect, if any, of reasonably possible near-term changes in interest
rates on the Company's financial position, results of operations, and cash flows
should not be material. The Company sells its products to customers worldwide.
The Company maintains a reserve for potential credit losses and such losses have
been minimal. The Company is exposed to changes in foreign currency exchange
primarily through its translation of its foreign subsidiary's financial
position, results of operations, and cash flows and the sale of CyberDisplay
products to Asian customers.
10
<PAGE>
PART II. OTHER INFORMATION
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
On May 20, 1999, the Company held an Annual Meeting of Stockholders to consider
and vote upon the following three proposals:
(1) A proposal to elect six directors of the Company to serve until the next
Annual Meeting of Stockholders and until their successors are duly elected
and qualified.
(2) A proposal to ratify the amendment to the Company's 1992 Stock Option Plan
increasing the number of shares authorized for issuance under the Plan.
(3) A proposal to ratify the appointment of Deloitte & Touche LLP as
independent accountants of the Company for the current fiscal year.
Results with respect to the voting on each of the proposals were as follows:
<TABLE>
<CAPTION>
Withheld
For Authority
---------- ---------
<S> <C> <C>
Proposal 1: John C.C. Fan 10,833,409 594,045
David E. Brook 10,863,494 563,960
Andrew H. Chapman 10,864,494 562,960
Morton Collins 10,862,294 565,160
Chi Chia Hsieh 10,863,394 564,060
Michael A. Wall 10,863,194 564,260
</TABLE>
Proposal 2: 9,216,346 votes for; 2,160,643 votes against; 50,465 abstentions;
and 0 broker non-votes.
Proposal 3: 11,328,069 votes for; 80,950 votes against; 18,435 abstentions;
and 0 broker non-votes.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
None
11
<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: August 13, 1999 By: /s/ John C.C. Fan
---------------------------------------
John C.C. Fan
President, Chief Executive Officer and
Chairman of the Board of Directors
Date: August 13, 1999 By: /s/ Richard A. Sneider
---------------------------------------
Richard A. Sneider
Treasurer and Chief Financial Officer
(Principal Financial and Accounting
Officer)
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUL-03-1999
<CASH> 20,218,858
<SECURITIES> 7,719,405
<RECEIVABLES> 7,916,928
<ALLOWANCES> 0
<INVENTORY> 5,138,972
<CURRENT-ASSETS> 42,217,381
<PP&E> 32,185,813
<DEPRECIATION> 18,619,918
<TOTAL-ASSETS> 63,893,674
<CURRENT-LIABILITIES> 6,496,040
<BONDS> 3,241,000
0
0
<COMMON> 124,827
<OTHER-SE> 53,312,860
<TOTAL-LIABILITY-AND-EQUITY> 63,893,674
<SALES> 13,911,064
<TOTAL-REVENUES> 15,343,997
<CGS> 9,821,482
<TOTAL-COSTS> 13,168,296
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 216,160
<INCOME-PRETAX> 352,390
<INCOME-TAX> 0
<INCOME-CONTINUING> 352,390
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 352,390
<EPS-BASIC> .03
<EPS-DILUTED> .03
</TABLE>
