<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 September 30, 2000
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
--------------
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 17, 2000
----- ----------------------------------
Common Stock, par value $ .01 63,427,577
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KOPIN CORPORATION
INDEX
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Page No.
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PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements:
Consolidated Balance Sheets at 3
September 30, 2000 and December 31, 1999
Consolidated Statements of Operations and 4
Comprehensive Income for the three and nine
months ended September 30, 2000 and
October 2, 1999
Consolidated Statements of Stockholders' Equity 5
for the nine months ended September 30, 2000 and
October 2, 1999
Consolidated Statements of Cash Flows for the 6
nine months ended September 30, 2000 and
October 2, 1999
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of 8
Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures 10
About Market Risk
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURES 11
2
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KOPIN CORPORATION
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
September 30, 2000 December 31, 1999
----------------------- ---------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents $ 35,975,202 $ 65,981,848
Marketable securities, at fair value 51,062,663 33,117,555
Accounts receivable, net of allowance of $450,000
Billed 16,415,058 10,547,762
Unbilled 424,874 655,220
Inventory 4,500,765 6,157,195
Prepaid expenses and other current assets 1,434,164 1,651,905
------------ ------------
Total current assets 109,812,726 118,111,485
Equipment and improvements:
Equipment 42,248,168 32,849,431
Leasehold improvements 808,884 808,884
Furniture and fixtures 523,947 459,097
Equipment under construction 19,546,356 7,207,812
------------ ------------
63,127,355 41,325,224
Accumulated depreciation and amortization 24,459,018 20,653,963
------------ ------------
38,668,337 20,671,261
Other assets 9,909,587 4,352,793
Intangible assets 1,629,529 1,938,190
------------ ------------
Total assets $160,020,179 $145,073,729
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 5,671,861 $ 7,564,070
Accrued payroll and expenses 725,623 990,073
Other accrued liabilities 2,469,451 933,583
Current portion of long-term obligations 1,531,887 2,142,373
------------ ------------
Total current liabilities 10,398,822 11,630,099
Long-term obligations, less current portion 1,500,000 2,567,100
Minority interest 1,368,786 809,238
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, 120,000,000 shares;
issued, 63,418,797 shares in 2000 and 60,298,724 shares in 1999 634,188 602,987
Additional paid-in capital 192,149,720 185,776,145
Deferred compensation (68,770) (110,035)
Accumulated other comprehensive income 469,764 509,725
Deficit (46,432,331) (56,711,530)
------------ ------------
Total stockholders' equity 146,752,571 130,067,292
------------ ------------
Total liabilities and stockholders' equity $160,020,179 $145,073,729
============ ============
</TABLE>
See notes to consolidated financial statements.
3
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KOPIN CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------- ------------------
September 30, October 2, September 30, October 2,
2000 1999 2000 1999
---------------- ------------ ---------------- --------------
<S> <C> <C> <C> <C>
Revenues:
Product revenues $23,279,680 $ 9,191,188 $66,922,088 $23,102,252
Research and development revenues 551,051 545,093 1,043,050 1,978,026
----------- ----------- ----------- -----------
23,830,731 9,736,281 67,965,138 25,080,278
Expenses:
Cost of product revenues 17,643,127 7,162,856 48,450,166 16,984,338
Research and development 1,713,681 1,550,513 6,241,616 4,897,327
Selling, general and administrative 1,520,358 1,525,932 6,501,474 3,869,929
Other 66,900 89,816 466,974 269,091
----------- ----------- ----------- -----------
20,944,066 10,329,117 61,660,230 26,020,685
----------- ----------- ----------- -----------
Income (loss) from operations 2,886,665 (592,836) 6,304,908 (940,407)
Other income and expense:
Interest and other income 1,446,321 374,814 4,331,890 1,316,450
Interest expense (94,290) (85,622) (280,336) (301,782)
----------- ----------- ----------- -----------
Income before minority interest 4,238,696 (303,644) 10,356,462 74,261
Minority interest in income of (47,414) (50,141) (77,263) (75,656)
subsidiary ----------- ----------- ----------- -----------
Net income (loss) $ 4,191,282 ($ 353,785) $10,279,199 ($ 1,395)
=========== =========== =========== ===========
Net income (loss) per share:
Basic $.07 ($ .01) $.16 $.00
=========== =========== =========== ===========
Diluted $.06 ($ .01) $.15 $.00
=========== =========== =========== ===========
Weighted average number of common
shares outstanding:
Basic 63,237,559 50,331,780 62,759,293 49,873,132
=========== =========== =========== ===========
Diluted 67,278,717 50,331,780 67,714,654 49,873,132
=========== =========== =========== ===========
</TABLE>
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------ -----------------
September 30, October 2, September 30, October 2,
2000 1999 2000 1999
--------------- ------------- ---------------- --------------
<S> <C> <C> <C> <C>
Net income (loss) $4,191,282 ($ 353,785) $10,279,199 ($ 1,395)
Foreign currency translation (3,551) (96,047) 2,100 (45,092)
adjustments
Unrealized gain (loss) on marketable
securities, net 74,141 1,930 (42,061) (8,468)
---------- ---------- ----------- ---------
Comprehensive income (loss) $4,261,872 ($ 447,902) $10,239,238 ($ 54,955)
========== ========== =========== =========
</TABLE>
See notes to consolidated financial statements.
4
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KOPIN CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 2000 AND OCTOBER 2, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
Accumulated
Common Stock Additional Other
------------- Paid-in Deferred Comprehensive
Shares Amount Capital Compensation Income Deficit Total
-------- ------ -------- ------------ ------ ------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1998 49,074,244 $490,742 $108,586,723 ($165,055) $420,812 ($57,486,799) $ 51,846,423
Exercise of stock options 1,518,344 15,183 2,850,950 -- -- -- 2,866,133
Amortization of compensation
relating to grant of stock -- -- -- 41,265 -- -- 41,265
options
Net unrealized loss on marketable
securities, net -- -- -- -- (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 50,592,588 $505,925 $111,437,673 ($123,790) $367,252 ($57,488,194) $ 54,698,866
========== ======== ============ ========= ======== ============ ============
Balance, December 31, 1999 60,298,724 $602,987 $185,776,145 ($110,035) $509,725 ($56,711,530) $130,067,292
Exercise of stock options 3,120,073 31,201 6,373,575 -- -- -- 6,404,776
Amortization of compensation
relating to grant of stock -- -- -- 41,265 -- -- 41,265
options
Net unrealized loss on marketable
securities, net -- -- -- -- (42,061) -- (42,061)
Foreign currency translation
adjustments -- -- -- -- 2,100 -- 2,100
Net income for the nine month
period ended September 30, 2000 -- -- -- -- -- 10,279,199 10,279,199
---------- -------- ------------ --------- -------- ------------ ------------
Balance, September 30, 2000 63,418,797 $634,188 $192,149,720 ($68,770) $469,764 ($46,432,331) $146,752,571
========== ======== ============ ========= ======== ============ ============
</TABLE>
See notes to consolidated financial statements.
5
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KOPIN CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
-----------------
September 30, 2000 October 2, 1999
-------------------- ----------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 10,279,199 ($ 1,395)
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating activities:
Depreciation and amortization 5,508,197 2,991,349
Amortization of compensation relating to grant
of stock options 41,265 41,265
Minority interest in income of subsidiary 77,263 75,656
Changes in assets and liabilities:
Accounts receivable (5,623,823) (6,647,744)
Inventory 1,670,298 (2,292,815)
Prepaid expenses and other current assets 221,186 (443,748)
Intangible assets (158,312) (218,886)
Accounts payable and accrued expenses (717,795) 5,018,853
------------ ------------
Net cash provided by (used in) operating activities 11,297,478 (1,477,465)
------------ ------------
Cash flows from investing activities:
Marketable securities (17,987,169) (2,278,791)
Other assets (5,581,295) (113,954)
Capital expenditures (22,998,551) (9,203,774)
------------ ------------
Net cash used in investing activities (46,567,015) (11,596,519)
------------ ------------
Cash flows from financing activities:
Principal payment on long-term obligations (1,677,586) (1,282,555)
Issuance of stock by subsidiary 507,101 -
Proceeds from exercise of stock options 6,404,776 2,866,133
------------ ------------
Net cash provided by financing activities 5,234,291 1,583,578
------------ ------------
Effect of exchange rate changes on cash 28,600 (19,129)
------------ ------------
Net increase (decrease) in cash and equivalents (30,006,646) (11,509,535)
Cash and equivalents, beginning of period 65,981,848 30,807,335
------------ ------------
Cash and equivalents, end of period $ 35,975,202 $ 19,927,800
============ ============
Supplementary information -Interest paid in cash $ 271,766 $ 327,723
</TABLE>
See notes to consolidated financial statements.
6
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KOPIN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
---------------------
The consolidated financial statements for the nine month periods ended September
30, 2000 and October 2, 1999 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 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, 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. ("Kowon"), a majority
owned (67%) subsidiary located in Korea. All intercompany transactions and
balances have been eliminated.
All share data, income per share, and related information for 1999 and 2000 give
retroactive effect to the 2 for 1 stock split effected in the form of a stock
dividend for shareholders of record as of June 30, 2000, which was effected on
July 12, 2000. All share data, income per share, and related information for
1999 was also given retroactive effect to the 2 for 1 stock split effected in
the form of a stock dividend for shareholders of record as of December 20, 1999,
which was effected on December 29, 1999.
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
other comprehensive income and aggregate $515,184 of unrealized gain at
September 30, 2000. 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 shares of common stock outstanding during the period. Diluted net income
(loss) per share is computed using the weighted average number of common shares
and potential common shares outstanding during the period using the treasury
method. Potential common shares consist of outstanding options issued under the
Company's stock option plans, and have not been included in any periods that the
effect would be anti-dilutive.
4. STOCKHOLDERS' EQUITY
--------------------
In October 1999, the Company completed a public offering of 9,200,000 shares of
common stock at a price of $8.49 per share. Net proceeds to the Company totaled
approximately $73,154,000.
5. 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 us is not expected to
have a material effect on financial position or results of operations.
The Securities and Exchange Commission ("SEC") has released staff accounting
Bulletin No. 101, "Revenue Recognition in Financial Statements", which sets
forth their views regarding revenue recognition. The Company believes its
revenue recognition practices are substantially in compliance with this
bulletin.
6. SUBSEQUENT EVENT
----------------
On October 18, 2000, we acquired Super Epitaxial Products, Inc. (SEP), a
privately held company engaged in research and development of optoelectronic
materials and devices. Under the terms of the agreement, 1.7 million shares of
Kopin stock, with an aggregate value of approximately $25 million, will be
exchanged for all the outstanding shares of SEP under the purchase method of
accounting. We expect to take a one-time charge of approximately $5,000,000 in
the fourth quarter of 2000 in connection with the acquisition of purchased
in-process research and development and acquisition expenses.
7
<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 flat panel displays. We use our proprietary technology
to design, manufacture and market products used in highly demanding commercial
wireless communications and high resolution portable applications. Our products
enable our customers to develop and market an improved generation of products
for these target applications.
We have two principal components of revenues: product revenues and research
and development revenues. Historically, product revenues have consisted of sales
of our Heterojunction Bipolar Transistor ("HBT") transistors. For the nine month
period ended September 30, 2000, we had product revenues of $66.9 million, or
98.5% of total revenues compared to $23.1 million, or 92.1% of total revenues
for the same period in 1999. We began shipping our CyberDisplay product in 1998.
This product line represented 19.6% of our product revenues for the nine months
ended September 30, 2000 compared to 11.7% for the same period in 1999.
Research and development revenues consist primarily of development contracts
with agencies of the U.S. government. Management has intensified its efforts on
the marketing and sales of its commercial products over the past few years
resulting in the decline of research and development revenues as a percentage of
total revenues. For the nine months ended September 30, 2000, research and
development revenues declined to $1.0 million, or 1.5% of total revenues
compared to $2.0 million, or 7.9% of total revenues for the same period in 1999.
We believe that research and development revenues will continue to decline on an
annual basis as a percentage of total revenues for the near future.
RESULTS OF OPERATIONS
REVENUES. Our total revenues for the three and nine months ended
September 30, 2000 were $23.8 million and $68.0 million, respectively, compared
to $9.7 million and $25.1 million during the corresponding periods in 1999. This
represented increases of approximately $14.1 million or 145.4% and $42.9 million
or 170.9% for the three and nine months ended September 30, 2000, respectively.
Our product revenues were $23.3 million and $66.9 million for the three and nine
months ended September 30, 2000, respectively, compared to $9.2 million and
$23.1 million for the same periods in 1999, increases of approximately $14.1
million or 153.3% and $43.8 million or 189.6%, respectively. Product revenue
growth was attributable principally to an increase in sales of our gallium
arsenide products as well as our CyberDisplay products in the three and nine
months ended September 30, 2000 compared to the same periods in 1999. For the
nine months ended September 30, 2000, gallium arsenide product sales and
CyberDisplay product sales were $53.8 million and $13.1 million, respectively,
as compared to $20.3 million and $2.8 million, respectively, for the nine months
ended October 2, 1999. Research and development revenues for the three and nine
months ended September 30, 2000 were $.5 million and $1.0 million compared to
$.5 million and $2.0 million for the same period in 1999, a decrease of $1.0
million or 50.0% for the nine month periods. Research and development revenues
declined primarily due to the expirations of multi-year contracts with the U.S.
government.
COST OF PRODUCT REVENUES. Cost of product revenues, which is comprised of
materials, labor and manufacturing overhead related to our products, was $17.6
million and $48.5 million for the three and nine months ended September 30, 2000
compared to $7.2 million and $17.0 million during the corresponding periods in
1999. This represented an increase of $10.4 million, or 144.4% for the three
months ended September 30, 2000, and an increase of $31.5 million or 185.3% for
the nine months ended September 30, 2000. Cost of product revenues for the three
months ended September 30, 2000 and October 2, 1999 was 75.8% and 77.9%,
respectively. For the nine months ended September 30, 2000 and October 2, 1999,
cost of product revenues as a percentage of sales was 72.4% and 73.5%,
respectively. Cost of product revenues were 69.2% for the three months ended
July 1, 2000. The increase in cost of product revenues as a percentage of sales
for the three month period October 2, 2000 as compared to the three month period
July 1, 2000 was primarily the result of a decline in CyberDisplay manufacturing
yields resulting from a decline in the quality of raw materials received from
vendors. Also impacting gross margins was the construction of our second gallium
arsenide fabrication facility. The facility is expected to be operational in the
fourth quarter of 2000. Gross margins will be negatively impacted until the
facility is operational and commences product shipments.
RESEARCH AND DEVELOPMENT. Research and development expenses (R&D) are
incurred under development programs for gallium arsenide and display products in
support of internal development programs or programs funded by agencies of the
U.S. government. R&D costs include staffing, purchases of materials and
laboratory supplies, circuit design costs, fabrication and packaging of display
products, and overhead. Funded R&D was $.3 million and $.9 million for the three
and nine months ended September 30, 2000 compared to $.9 million and $2.7
million for the same periods in the prior
8
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year, decreases of $.6 million and $1.8 million, respectively, due to reduced
expenses caused by the expiration of multi-year contracts with agencies of the
U.S. government. Internal R&D was $1.4 million and $5.3 million for the three
and nine months ended September 30, 2000 compared to $.6 million and $2.2
million during the corresponding periods in 1999. The increase in internal R&D
was primarily the result of development activities related primarily to higher
resolution displays.
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 $1.5 million for the three months ended September 30, 2000
and $1.5 million during the corresponding period in 1999. S,G&A was $6.5 million
for the nine months ended September 30, 2000 compared to $3.9 million during the
corresponding period in 1999, an increase of $2.6 million, or 66.7%. The
increase in S,G&A was primarily due to increases in sales and marketing travel
expenses, headcount in procurement, management information and accounting
staffs. In addition, S,G&A expenses include non-cash charges for compensation
expense of $41,265 for both nine month periods in 2000 and 1999, relating to the
issuance of certain stock options.
OTHER. Other expenses, primarily amortization of patents and licenses, were
$.1 million and $.5 million for the three and nine month periods ended September
30, 2000 compared to $.1 million and $.3 million during the corresponding
periods in 1999.
OTHER INCOME, NET. Other income, net was $1.4 million and $4.1 million for
the three and nine months ended September 30, 2000 compared to $.3 million and
$1.0 million during the corresponding period in 1999. Interest income earned
during the three and nine months ended September 30, 2000 increased $1.1 million
and $3.0 million, respectively, due to higher cash balances resulting from the
October 1999 equity placement and higher interest rates.
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. We believe our available
cash resources will support our operations and capital needs for at least the
next twelve months.
As of September 30, 2000, we had cash and equivalents and marketable
securities of $87.0 million and working capital of $99.4 million compared to
$99.1 million and $106.5 million, respectively, as of December 31, 1999. The
decrease in cash and equivalents and marketable securities was primarily due to
capital and investment expenditures of $28.6 million and principal payments on
long-term obligations of $1.7 million, partially offset by cash provided by
operations of $11.3 million and proceeds from the exercise of stock options of
$6.4 million. The increase in capital expenditures is primarily for our
expansion programs to increase manufacturing capacity for our gallium arsenide
and display products.
Our subsidiary, Kowon, issued additional shares of common stock to its
existing shareholders during the second quarter which resulted in an increase in
cash and equivalents of $.5 million.
We periodically enter into long-term debt arrangements to finance equipment
purchases and other activities. As of September 30, 2000, debt obligations
totaled $3.0 million, of which $1.5 million is payable in the next twelve
months.
Our CyberDisplay products are targeted at 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. We believe that it will be
necessary to continue to make significant investments in equipment and
development in order to produce current and future CyberDisplay products. As a
result of the current cost structure of our CyberDisplay product line, our
ability to achieve profitability in that product line depends upon achieving
significant sales volumes and higher gross profit margins. We have not yet
produced our CyberDisplay products at volumes necessary to achieve
profitability. Accordingly, we may not be able to obtain sufficient sales
volumes, or if sufficient sales volumes are achieved, we may not be able to
produce our CyberDisplay products at a gross margin which will allow the product
line to generate a profit. In the three month period ended September 30, 2000,
cost of product revenues as a percentage of sales increased as a result of a
decline in manufacturing yields of the CyberDisplay products. Yields were
negatively impacted by lower quality raw materials received from vendors. We are
working with our vendors to improve the quality of their raw materials, but if
they are unable to improve the quality of their product and provide us with our
required quantity of such product we may be unable to increase our production
capacity and achieve profitability.
We lease equipment and our facilities located in Taunton and Westborough,
Massachusetts, and Los Gatos, California, under non-cancelable operating leases.
The Taunton leases expire through May 2010. The Westborough lease expires in
9
<PAGE>
October 2002, with renewable options for up to two additional years at our
election. The Los Gatos lease covers a five year period terminating in 2002. We
will make lease payments of approximately $1.4 million per year over the
remaining terms of these leases.
On October 18, 2000, we acquired Super Epitaxial Products, Inc. (SEP), a
privately held company engaged in research and development of optoelectronic
materials and devices. Under the terms of the agreement, 1.7 million shares of
Kopin stock, with an aggregate value of approximately $25 million, will be
exchanged for all the outstanding shares of SEP under the purchase method of
accounting. We expect to take a one-time charge of approximately $5,000,000 in
the fourth quarter of 2000 in connection with the acquisition of purchased
in-process research and development and acquisition expenses.
We expect to expend approximately $25 million on capital expenditures over the
next twelve months, primarily for the acquisition of equipment relating to the
production of our gallium arsenide products and the manufacturing, packaging and
testing of CyberDisplay products, including the establishment of a second
manufacturing product facility for our HBT transistor wafers.
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 us is not expected to
have a material effect on financial position or results of operations.
The Securities and Exchange Commission ("SEC") has released staff accounting
Bulletin No. 101, "Revenue Recognition in Financial Statements", which sets
forth their views regarding revenue recognition. The Company believes its
revenue recognition practices are substantially in compliance with this
bulletin.
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 a number of 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 and the gallium arsenide integrated circuit and materials industries,
sales growth of the wireless handset industry, the impact of competitive
products and pricing, availability of third party components and wafer
substrates, availability of integrated circuit fabrication facilities, cost and
yields associated with production of the Company's CyberDisplay imaging devices
and HBT transistor wafers, successful completion and operation of our second
gallium arsenide fabrication facility, loss of significant customers, acceptance
of the Company's products, continuation of strategic relationships, 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, 1999.
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
27 Financial Data Schedule
(b) Reports on Form 8-K
None
<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 14, 2000 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 14, 2000 By: /s/ Richard A. Sneider
__________________________
Richard A. Sneider
Treasurer and Chief Financial Officer
(Principal Financial and Accounting
Officer)
11
