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