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KOPIN CORP - Quarter Report: 2003 March (Form 10-Q)


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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 29, 2003

Commission file number 0-19882

KOPIN CORPORATION
(Exact name of Registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)
  04-2833935
(I.R.S. Employer
Identification No.)

695 Myles Standish Blvd., Taunton, MA
(Address of principal executive offices)

 

02780-1042
(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 15(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 ý    No o

        Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes ý    No o

        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 April 30, 2003
Common Stock, par value $.01   69,402,539

KOPIN CORPORATION


INDEX

 
   
  Page No.
RISK FACTORS   3

PART I—FINANCIAL INFORMATION

 

 
 
Item 1.

 

Condensed Consolidated Financial Statements:

 

 

 

 

Condensed Consolidated Balance Sheets at March 29, 2003 and December 31, 2002

 

10

 

 

Condensed Consolidated Statements of Operations for the three months ended March 29, 2003 and March 30, 2002

 

11

 

 

Condensed Consolidated Statements of Comprehensive Loss for the three months ended March 29, 2003 and March 30, 2002

 

11

 

 

Condensed Consolidated Statements of Stockholders' Equity for the three months ended March 29, 2003 and March 30, 2002

 

12

 

 

Condensed Consolidated Statements of Cash Flows for the three months ended March 29, 2003 and March 30, 2002

 

13

 

 

Notes to Unaudited Condensed Consolidated Financial Statements

 

14
 
Item 2.

 

Management's Discussion and Analysis of Financial Condition and Results of Operations

 

16
 
Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

19
 
Item 4.

 

Controls and Procedures

 

19

PART II—OTHER INFORMATION

 

 
 
Item 4.

 

Submission of Matters to a Vote of Security Holders

 

20
 
Item 6.

 

Exhibits and Reports on Form 8-K

 

20

SIGNATURES

 

21

SECTION 302 CERTIFICATIONS

 

22

2



RISK FACTORS

        This Form 10-Q report contains forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current expectations, estimates, forecasts and projections about the industries in which we operate, management's beliefs, and assumptions made by management. In addition, other written or oral statements which constitute forward-looking statements may be made by or on behalf of us. Words such as "expects", "anticipates", "intends", "plans", "believes", "could", "seeks", "estimates", variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements, whether as a result of new information, future events or otherwise.

        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 and the gallium arsenide integrated circuit and materials industries, sales growth of the wireless handset industry, the successful introduction of our CyberLite™ product, the impact of competitive products and pricing, availability of integrated circuit fabrication facilities, cost and yields associated with the production of our products, availability of interface electronic chips to run our CyberDisplay™ products, loss of significant customers, acceptance of our 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 our Annual Report on Form 10-K for the fiscal year ended December 31, 2002.

        Factors that could cause or contribute to differences in outcomes and results include, but are not limited to, those discussed below.

        We have experienced a history of losses and have a significant accumulated deficit.    Since inception, we have incurred significant net operating losses. As of March 29, 2003 we had an accumulated deficit of $107.3 million. We cannot assure investors that we will achieve profitability in the future.

        Our revenue and cash flow could be negatively affected by the loss of any of the few customers who account for a substantial portion of our revenues.    A few customers account for a substantial portion of our revenues. In 2002, Conexant Systems merged its wireless division with Alpha Industries to create Skyworks Solutions, Inc. On a pro forma basis, assuming the merger occurred on January 1, 2000, sales of our HBT transistor wafers to Skyworks Solutions would have accounted for approximately 26%, 24%, and 46% of our total revenues for the years ended December 31, 2002, 2001, and 2000, respectively. For the year ended December 31, 2002 Samsung, JVC and Panasonic accounted for 26%, 15% and 13% of our total revenues, respectively. For the year ended December 31, 2001 Samsung and Panasonic accounted for 22% and 15% of our total revenues, respectively. Sales to Mitsubishi Electric Company, Ltd. were 11% of our total revenues for the year ended December 31, 2000. For the years ended December 31, 2002, 2001 and 2000, revenues from multiple contracts with various U.S. governmental agencies accounted for approximately 3%, 3%, and 2%, respectively, of our total revenues.

        We anticipate that sales to Skyworks Solutions, Samsung, JVC and Panasonic will continue to represent a significant portion of our revenues for the near future. Skyworks Solutions has publicly stated that its desire is to qualify additional sources for HBT transistor wafers. We believe that historically we provided the vast majority of HBT transistor wafers to Skyworks Solutions. A reduction or delay in orders from Skyworks Solutions or any of our other significant customers would materially reduce our revenue and cash flow and adversely affect our ability to achieve profitability.

3



        We may be unable to increase revenues from HBT transistor wafers if new product applications are not developed.    The growth rates of wireless handsets have been very unpredictable over the last several years. Some analysts believe that the wireless handset market growth could be in the range of 10 to 15 percent for the year ended December 31, 2003. We expect prices of our HBT transistor will decline by 10 to 15 percent during 2003. Accordingly, if we are unable to find additional applications for our HBT transistor wafers, revenue may not grow which may impact our ability to become profitable.

        We may be unable to increase revenues from CyberDisplay™ products if new product applications are not developed.    CyberDisplay revenues for the years ended December 31, 2002, 2001, and 2000 were $44.1 million, $23.6 million and $20.4 million, respectively. The increase in CyberDisplay revenues has resulted primarily from increasing sales of our monochrome CyberDisplay 320 product to existing customers for use in camcorders. We believe we have captured significant market share in the camcorder market and future growth in this market is limited. Accordingly, if we are unable to expand into new markets our revenues may not grow which may impact our ability to become profitable.

        If we are unable to significantly increase our unit sales volume and reduce our production costs, our business will suffer.    Our III-V and CyberDisplay product lines currently have significant fixed costs and our ability to achieve profitability depends upon achieving significant sales volumes and higher gross profit margins. We recently introduced our CyberLite light emitting diode (LED) product which is included within our III-V product group. We currently do not sell our CyberLite LEDs in sufficient volume to cover its operating costs. If we are unable to increase our III-V and CyberDisplay production levels and reduce manufacturing costs, we may lose customer orders and our business will remain unprofitable.

        Our CyberDisplay™ products may not be widely accepted by the market.    Our success will in large part depend on the widespread adoption of the viewing format of our CyberDisplay products in multiple applications. Our success also depends upon the widespread consumer acceptance of our customers' products. CyberDisplay products work best when used close to the eye which may not be acceptable to consumers. Potential customers may be reluctant to adopt our CyberDisplay products because of concerns surrounding perceived risks relating to:

    The introduction of our display technology generally;

    Consumer acceptance of our CyberDisplay products; and

    The relative complexity, reliability, usefulness and cost-effectiveness of our display products compared to other display products available in the market or that may be developed by our competitors.

        In addition, our customers may be reluctant to rely upon a relatively small company such as ours for a critical component. We cannot assure investors that prospective customers will adopt our CyberDisplay products or that consumers will accept our CyberDisplay products. If we fail to achieve market acceptance of our CyberDisplay products, our business may not be successful and we may not be able to achieve profitablity.

        We have never manufactured CyberLite™ LEDs in volume and may not be able to achieve sales or production volume.    We anticipate our CyberLite LED products will be very important to our revenue growth and achieving profitability, however, we have never manufactured our CyberLite LEDs in volume. Failure to achieve high sales volume production will affect our revenue growth, our ability to become profitable and acceptance of our CyberLite LEDs. In addition, we may be able to achieve volume production but may not be able to do so in a cost effective manner, which would negatively impact our ability to achieve profitability.

        We generally do not have long-term contracts with our customers, which makes forecasting our revenues and operating results difficult.    We generally do not enter into agreements with our customers obligating

4



them to purchase our products. Our business is characterized by short-term purchase orders and shipment schedules and we generally permit orders to be canceled or rescheduled without significant penalty. As a result, our customers may cease purchasing our products at any time, which makes forecasting our revenues difficult. In addition, due to the absence of substantial noncancellable backlog, we typically plan our production and inventory levels based on internal forecasts of customer demand, which are highly unpredictable and can fluctuate substantially. Our operating results are difficult to forecast because we are continuing to invest in capital equipment and increasing our operating expenses for new product development. If we fail to accurately forecast our revenues and operating results, our business may not be successful and the value of investors' investment in us may decline.

        Potential fluctuations in operating results make financial forecasting difficult and could adversely affect the price of our common stock.    Our quarterly and annual revenues and operating results may fluctuate significantly for several reasons including:

    The timing and successful introduction of additional manufacturing capacity;

    The timing of the initial selection of our III-V and CyberDisplay products as a component in our customers' new products;

    Availability of interface electronics for our CyberDisplay products supplied by Motorola and other vendors;

    Competitive pressures on selling prices of our products;

    The timing and cancellation of customer orders;

    Our ability to introduce new products and technologies on a timely basis;

    Our ability to successfully reduce costs;

    The cancellation of U.S. government contracts; and

    Our ability to secure agreements from our major customers for the purchase of our products.

        We typically plan our production and inventory levels based on internal forecasts of customer demand, which are highly unpredictable and can fluctuate substantially. Our operating results are difficult to forecast because we are continuing to invest in capital equipment and increasing our operating expenses for new product development.

        As a result of these and other factors, investors should not rely on our revenues and our operating results for any one quarter or year as an indication of our future revenues or operating results. If our quarterly revenues or results of operations fall below expectations of investors or public market analysts, the price of our common stock could fall substantially.

        Disruptions of our production of our III-V products would adversely affect our operating results.    If we were to experience any significant disruption in the operation of our facilities, we would be unable to supply III-V products to our customers. Our manufacturing processes are highly complex and customer specifications are extremely precise. We periodically modify our processes in an effort to improve yields and product performance and to meet particular customer requirements. Process changes or other problems that occur in the complex manufacturing process can result in interruptions in production or significantly reduced yields. Additionally, as we introduce new equipment into our manufacturing processes, our III-V products could be subject to especially wide variations in manufacturing yields and efficiency. We may experience manufacturing problems that would result in delays in product introduction and delivery or yield fluctuations. We are also subject to the risks associated with the shortage of raw materials used in the manufacture of our products.

5



        Our ability to manufacture and distribute our CyberDisplay™ products would be severely limited if the third party that we rely on to manufacture integrated circuits for our CyberDisplay™ products fails to provide those services.    We depend on United Microelectronics Corporation, or UMC, for the fabrication of integrated circuits for our CyberDisplay products. We have no long-term contracts with UMC. If UMC were to terminate its arrangement with us or become unable to provide the required capacity and quality on a timely basis, we would be able to manufacture and ship our CyberDisplay products only in limited quantities until replacement foundry services could be obtained. Furthermore, we cannot assure investors we would be able to establish alternative manufacturing and packaging relationships on acceptable terms.

        Our reliance on UMC involves certain risks, including:

    Lack of control over production capacity and delivery schedules;

    Limited control over quality assurance, manufacturing yields and production costs; and

    The risks associated with international commerce, including unexpected changes in legal and regulatory requirements, changes in tariffs and trade policies and political and economic instability.

        UMC, as well as several other third parties with which we do business, is located in Taiwan. Due to the earthquake that occurred in Taiwan in 1999 and the typhoon that occurred in Taiwan in September 2001, many Taiwanese companies, including UMC, experienced related business interruptions. UMC has resumed normal operations; however, our business could suffer significantly if UMC's operations were disrupted again for an extended period of time, due to natural disaster or political unrest.

        In 2003, there has been an outbreak of Severe Acute Respiratory Syndrome ("SARS"). At the time of this 10-Q filing, the outbreak has been concentrated largely in mainland China, although cases have been confirmed in other locations, including Hong Kong, Taiwan, Singapore, Vietnam, the United States and Canada. There have been reports that consumer demand has been negatively impacted by the outbreak of SARS. Since we conduct business in Asia, our sales, manufacturing and distribution processes, and in turn our overall business operations, may be adversely affected if the SARS situation continues and/or spreads.

        We depend on third parties to provide integrated circuit chip sets and other critical raw materials for use with our CyberDisplay™ products.    We do not manufacture the integrated circuit chip sets necessary for use with our CyberDisplay products. Instead, we rely on third party independent contractors for these integrated circuit chip sets and other critical raw materials. Motorola currently produces all integrated circuit chip sets used with our CyberDisplay products in camcorders. If Motorola or any other third party were unable or unwilling to supply these integrated circuit chip sets and other critical raw materials, we would be unable to sell our CyberDisplay products until a replacement supplier could be found. We cannot assure investors that a replacement supplier could be found on reasonable terms or in a timely manner. In the past we have experienced situations when our vendors could not supply the quantity or quality of critical raw materials we needed. As a result, we were unable to meet customer demand and our manufacturing yield and gross margins were adversely affected. Any interruption in our ability to manufacture and distribute our CyberDisplay products could cause our display business to be unsuccessful and the value of investors' investment in Kopin may decline.

        We may not be able to operate multiple manufacturing facilities successfully.    A critical part of our business strategy is the expansion of our production capacity both internally and using third party manufacturers. We are developing an internal facility to manufacture our CyberLite LED products. We increasingly rely on our Korean subsidiary, Kowon Technology Co., Ltd. (Kowon) for back-end packaging of our CyberDisplay products. If we are unable to maintain or increase our manufacturing

6



capacity at Kowon, we may be able to manufacture and ship our CyberDisplay products only in limited quantities until replacement foundry services could be obtained.

        We are also considering the establishment of additional internal and third party manufacturing capabilities to produce both our III-V and CyberDisplay products. To date, we have operated only one facility for our III-V product line.

        Our ability to successfully operate additional manufacturing sites will depend on a number of factors including:

    The identification and availability of appropriate and affordable sites;

    The management of facility construction and development timing and costs;

    The transfer of our manufacturing techniques to additional sites, particularly Kowon;

    The establishment of adequate management and information systems and financial controls; and

    The adaptation of our complex manufacturing process in our additional sites.

        Additionally, we cannot be sure that any new or expanded manufacturing facilities will have operating results similar to those of our current facilities. Any failure to effectively implement our expansion strategy would adversely impact our ability to grow our business.

        Increased competition may result in decreased demand or prices for our products.    Competition in the markets for our products is intense and we may not be able to compete successfully. We compete with several companies primarily engaged in the business of designing, manufacturing and selling integrated circuits or alternative display technologies, as well as the supply of other discrete products. Our competitors could develop new process technologies that may be superior to ours, including technologies that target markets in which our products are sold. Many of our existing and potential competitors have strong market positions, considerable internal manufacturing capacity, established intellectual property rights and substantial technological capabilities. Furthermore, they also have greater financial, technical, manufacturing, marketing and personnel resources than we do, and we may not be able to compete successfully with them.

        In addition, many of our existing and potential customers manufacture or assemble wireless communications devices and have substantial in-house technological capabilities and substantially greater resources than we do. We may not be able to sell our products to these customers and they may begin to commercialize their internal capabilities and become our competitors. If one of our large customers establishes internal design and manufacturing capabilities, it could have an adverse effect on our operating results.

        We expect competition to increase. This could mean lower prices or reduced demand for our products. Any of these developments would have an adverse effect on our operating results.

        If we fail to keep pace with changing technologies, we may lose customers.    The advanced semiconductor materials and display industries are characterized by rapidly changing customer requirements and evolving technologies and industry standards. To achieve our goals, we need to enhance our existing products and develop and market new products that keep pace with continuing changes in industry standards and requirements and customer preferences. If we cannot keep pace with these changes, our business could suffer.

        We may not be successful in protecting our intellectual property and proprietary rights.    Our success depends in part on our ability to protect our intellectual property and proprietary rights. We have obtained certain domestic and foreign patents and we intend to continue to seek patents on our inventions when appropriate. We also attempt to protect our proprietary information with contractual arrangements and under trade secret laws. Our employees and consultants generally enter into

7



agreements containing provisions with respect to confidentiality and the assignment of rights to inventions made by them while in our employ. These measures may not adequately protect our intellectual and proprietary rights. Existing trade secret, trademark and copyright laws afford only limited protection and our patents could be invalidated or circumvented. Moreover, the laws of certain foreign countries in which our products are or may be manufactured or sold may not fully protect our intellectual property rights. Misappropriation of our technology and the costs of defending our intellectual property rights from misappropriation could substantially impair our business. If we are unable to protect our intellectual property and proprietary rights, our business may not be successful and the value of investors' investment in us may decline.

        Our products could infringe on the intellectual property rights of others.    Our products could be found to infringe on the intellectual property rights of others. Other companies may hold or obtain patents or inventions or other proprietary rights in technology necessary for our business. If we are forced to defend against infringement claims, we may face costly litigation, diversion of technical and management personnel, and product shipment delays, even if the allegations of infringement are unwarranted. If there is a successful claim of infringement against us and we are unable to develop non-infringing technology or license the infringed or similar technology on a timely basis, or if we are required to cease using one or more of our business or product names due to a successful trademark infringement claim against us, it could adversely affect our business.

        Our business could suffer if we lose the services of, or fail to attract, key personnel.    In order to continue to provide quality products in our rapidly changing business, we believe it is important to retain personnel with experience and expertise relevant to our business. Our success depends in large part upon a number of key management and technical employees. The loss of the services of one or more key employees, including John C.C. Fan, our President and Chief Executive Officer, could seriously impede our success. We do not maintain any "key-man" insurance policies on Dr. Fan or any other employees. In addition, due to the level of technical and marketing expertise necessary to support our existing and new customers, our success will depend upon our ability to attract and retain highly skilled management, technical, and sales and marketing personnel. Competition for highly skilled personnel is intense and there may be only a limited number of persons with the requisite skills to serve in these positions. Due to lower III-V product revenues resulting from the current slowdown in the market for wireless and fiber optic communications products, we have taken certain cost reduction measures, including reducing our workforce, reducing senior management pay and delaying salary increases. If the wireless and fiber optic communications markets experience an upturn, we may need to increase our workforce. Due to the competitive nature of the labor markets in which we operate, we may be unsuccessful in attracting and retaining these personnel. Our inability to attract and retain key personnel could adversely affect our ability to develop and manufacture our products.

        We may be unable to grow at our historical growth rates or at all, and if we grow we may be unable to manage our growth effectively.    In 1999 and 2000, we experienced significant growth in sales of our III-V and CyberDisplay products. We believe that the high growth rates of 1999 and 2000, driven principally by sales of our HBT Transistor wafers, was the result of the adoption of digital wireless handsets. Due to a significant slowdown in the wireless and fiber optic communication markets and other general economic conditions, our sales declined in 2001. In addition, we cannot assure investors that our systems, procedures, controls and existing and planned space will be adequate to support our future operations. As a result of these concerns, we cannot be sure that we will grow, or, if we do grow, that we will be able to achieve our historical growth rate.

        We may pursue acquisitions and investments that could adversely affect our business.    In the past we have made, and in the future we may make, acquisitions of and investments in businesses, products and technologies that could complement or expand our business. If we identify an acquisition candidate, we may not be able to successfully negotiate or finance the acquisition or integrate the acquired

8



businesses, products or technologies into our existing business and products. Future acquisitions could result in potentially dilutive issuances of equity securities, the incurrence of debt and contingent liabilities, amortization expenses and write-downs of acquired assets.

        We may incur significant liabilities if we fail to comply with stringent environmental regulations or if we did not comply with these regulations in the past.    We are subject to a variety of federal, state and local governmental regulations related to the use, storage, discharge and disposal of toxic or otherwise hazardous chemicals used in our manufacturing process. Although we believe our activities conform to environmental regulations, the failure to comply with present or future regulations could result in fines being imposed on us, suspension of production, or, a cessation of operations. We cannot assure investors that we have not, in the past, violated applicable laws or regulations which could result in required remediation or other liabilities.

        Investors should not expect to receive dividends from us.    We have not paid cash dividends in the past, nor do we expect to pay cash dividends for the foreseeable future. We anticipate that earnings, if any, will be retained for the development of our businesses.

        Our stock price may be volatile in the future.    The trading price of our common stock has been subject to wide fluctuations in response to quarter-to-quarter variations in results of operations, announcements of technological innovations or new products by us or our competitors, general conditions in the wireless communications, semiconductor and display markets, changes in earnings estimates by analysts or other events or factors. In addition, the public stock markets recently have experienced extreme price and trading volatility. This volatility has significantly affected the market prices of securities of many technology companies for reasons frequently unrelated to the operating performance of the specific companies. These broad market fluctuations may adversely affect the market price of our common stock.

9



PART I. FINANCIAL INFORMATION


KOPIN CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

 
  March 29, 2003
  December 31, 2002
 
Assets              
Current assets:              
  Cash and equivalents   $ 39,534,340   $ 35,297,639  
  Marketable securities, at fair value     75,615,007     82,693,673  
  Accounts receivable, net of allowance of $1,200,000 as of 2003 and 2002     9.871,710     6,680,538  
  Inventory     5,424,538     4,773,333  
  Prepaid expenses and other current assets     1,152,257     1,118,944  
   
 
 
    Total current assets     131,597,852     130,564,127  

Property, plant and equipment, net

 

 

33,395,476

 

 

34,748,361

 

Other assets

 

 

9,748,058

 

 

8,773,040

 
Intangible assets, net     360,649     480,866  
   
 
 
    Total assets   $ 175,102,035   $ 174,566,394  
   
 
 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 
Current liabilities:              
  Accounts payable   $ 10,545,709   $ 7,414,774  
  Accrued payroll and expenses     2,043,316     2,105,206  
  Accrued warranty     830,000     830,000  
  Unearned revenue     1,158,180     1,108,180  
  Other accrued liabilities     2,899,731     3,259,200  
   
 
 
    Total current liabilities     17,476,936     14,717,360  

Minority interest

 

 

3,024,803

 

 

2,931,366

 
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: 69,391,349 shares in 2003 and 2002     693,913     693,913  
  Additional paid-in capital     260,253,567     260,253,567  
  Accumulated other comprehensive income     932,716     1,013,040  
  Accumulated deficit     (107,279,900 )   (105,042,852 )
   
 
 
    Total stockholders' equity     154,600,296     156,917,668  
   
 
 
    Total liabilities and stockholders' equity   $ 175,102,035   $ 174,566,394  
   
 
 

See notes to unaudited condensed consolidated financial statements.

10



KOPIN CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

 
  Three Months Ended
 
 
  March 29, 2003
  March 30, 2002
 
Revenues:              
  Product revenues   $ 18,048,746   $ 17,355,889  
  Research and development revenues         227,056  
   
 
 
      18,048,746     17,582,945  

Expenses:

 

 

 

 

 

 

 
  Cost of product revenues     15,058,930     14,645,593  
  Research and development     2,881,176     3,308,745  
  Selling, general and administrative     2,619,286     3,022,202  
  Other     120,216     265,426  
   
 
 
      20,679,608     21,241,966  
   
 
 

Loss from operations

 

 

(2,630,862

)

 

(3,659,021

)
Other income and expense:              
  Interest and other income     1,060,903     708,825  
  Interest and other expense     (393,538 )   (14,232 )
   
 
 

Loss before minority interest in income of subsidiary and cumulative effect of accounting change

 

 

(1,963,497

)

 

(2,964,428

)
Minority interest in income of subsidiary     (273,551 )   (220,148 )
   
 
 

Loss before cumulative effect of accounting change

 

 

(2,237,048

)

 

(3,184,576

)
Cumulative effect of accounting change         (12,582,383 )
   
 
 

Net loss

 

$

(2,237,048

)

$

(15,766,959

)
   
 
 

Loss before cumulative effect of accounting change per share:

 

 

 

 

 

 

 
  Basic   $ (.03 ) $ (.05 )
   
 
 
  Diluted   $ (.03 ) $ (.05 )
   
 
 
Cumulative effect of accounting change per share:              
  Basic   $   $ (.18 )
   
 
 
  Diluted   $   $ (.18 )
   
 
 
Net loss per share:              
  Basic   $ (.03 ) $ (.23 )
   
 
 
  Diluted   $ (.03 ) $ (.23 )
   
 
 
Weighted average number of common shares outstanding:              
  Basic     69,391,207     69,163,120  
   
 
 
  Diluted     69,391,207     69,163,120  
   
 
 

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(unaudited)

 
  Three Months Ended
 
 
  March 29, 2003
  March 30, 2002
 
Net loss   $ (2,237,048 ) $ (15,766,959 )
Foreign currency translation adjustments     (369,014 )   (13,035 )
Holding gain (loss) on marketable securities     288,690     (1,162,771 )
   
 
 
Comprehensive loss   $ (2,317,372 ) $ (16,942,765 )
   
 
 

See notes to unaudited condensed consolidated financial statements.

11



KOPIN CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

Three months ended March 29, 2003 and March 30, 2002

(unaudited)

 
  Common Stock
   
   
   
   
 
 
  Additional
Paid
Capital

  Accumulated Other
Comprehensive
Income (Loss)

  Accumulated
Deficit

   
 
 
  Shares
  Amount
  Total
 
Balance, December 31, 2001   64,045,532   $ 690,455   $ 259,141,718   $ (2,369,677 ) $ (73,131,534 ) $ 184,330,962  
  Exercise of stock options   148,775     1,488     473,700             475,188  
  Net unrealized holding gain on
    marketable securities
              (1,162,771 )       (1,162,771 )
  Foreign currency translation
    adjustments
              (13,035 )       (13,035 )
  Net loss for the three-month period
    ended March 30, 2002
                  (15,766,959 )   (15,766,959 )
   
 
 
 
 
 
 
Balance, March 30, 2002   69,194,307   $ 691,943   $ 259,615,418   $ (3,545,483 ) $ (88,898,493 ) $ 167,863,385  
   
 
 
 
 
 
 

Balance, December 31, 2002

 

69,391,349

 

$

693,913

 

$

260,253,567

 

$

1,013,040

 

$

(105,042,852

)

$

156,917,668

 
  Net unrealized holding loss on
    marketable securities
              288,690         288,690  
  Foreign currency translation
    adjustments
              (369,014 )       (369,014 )
  Net loss for the three-month period
    ended March 29, 2003
                  (2,237,048 )   (2,237,048 )
   
 
 
 
 
 
 
Balance, March 29, 2003   69,391,349   $ 693,913   $ 260,253,567   $ 932,716   $ (107,279,900 ) $ 154,600,296  
   
 
 
 
 
 
 

See notes to unaudited condensed consolidated financial statements.

12



KOPIN CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

 
  Three months ended
 
 
  March 29, 2003
  March 30, 2002
 
Cash flows from operating activities:              
  Net loss   $ (2,237,048 ) $ (15,766,959 )
  Adjustments to reconcile net loss to net cash provided by (used in) operating activities:              
    Depreciation and amortization     2,486,935     2,927,831  
    Minority interest in income of subsidiary     273,551     233,183  
    Net loss on investment activity     249,047     166,076  
    Cumulative effect of accounting change         12,582,383  
    Changes in assets and liabilities:              
      Accounts receivable     (3,323,863 )   631,704  
      Inventory     (750,565 )   975,087  
      Prepaid expenses and other current assets     (2,001 )   1,041,974  
      Accounts payable and accrued expenses     2,879,817     (2,047,696 )
   
 
 
        Net cash provided by (used in) operating activities     (424,127 )   743,583  
   
 
 

Cash flows from investing activities:

 

 

 

 

 

 

 
  Marketable securities     7,010,900     (30,921,845 )
  Other assets     (904,052 )   (26,369 )
  Capital expenditures     (1,196,054 )   (449,122 )
   
 
 
        Net cash provided by (used in) investing activities     4,910,794     (31,397,336 )
   
 
 

Cash flows from financing activities:

 

 

 

 

 

 

 
  Proceeds from exercise of stock options         475,188  
   
 
 
        Net cash provided by financing activities         475,188  
   
 
 

Effect of exchange rate changes on cash

 

 

(249,966

)

 

(11,416

)
   
 
 

Net increase (decrease) in cash and equivalents

 

 

4,236,701

 

 

(30,189,981

)

Cash and equivalents, beginning of period

 

 

35,297,639

 

 

74,425,853

 
   
 
 
Cash and equivalents, end of period   $ 39,534,340   $ 44,235,872  
   
 
 

See notes to unaudited condensed consolidated financial statements.

13


KOPIN CORPORATION


NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.     BASIS OF PRESENTATION

        The condensed consolidated financial statements for the three months ended March 29, 2003 and March 30, 2002 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. Effective January 1, 2002, Kopin Corporation (the "Company") recorded a transitional goodwill impairment charge of $12,582,383 as the cumulative effect of an accounting change resulting from the adoption of Statement of Financial Accounting Standard ("SFAS") No.142, Goodwill and Other Intangible Assets. The Company estimated the fair value of the impacted reporting unit using a discounted cash flow model. The condensed consolidated financial statements at March 30, 2002 and for the three months then ended reflect the change in accounting as of the January 1, 2002 effective date. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in Kopin Corporation's Annual Report on Form 10-K filed with the Securities and Exchange Commission (File No. 0-19882) for the year ended December 31, 2002.

        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 subsidiaries and Kowon Technology Co., Ltd. ("Kowon"), a majority owned (67%) 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 recorded as part of accumulated other comprehensive loss and aggregate $217,200 of unrealized gain at March 29, 2003. 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 where the effect would be anti-dilutive.

14



4.     INVENTORY

        Inventory is stated at the lower of cost (first in, first out method or specific identification method) or market and consists of the following:

 
  March 29, 2003
  December 31, 2002
Raw Materials   $ 3,008,708   $ 3,080,000
Work in Progress     1,254,632     1,041,759
Finished Goods     1,161,198     651,574
   
 
Total Inventory   $ 5,424,538   $ 4,773,333
   
 

5.     OTHER CURRENT AND NON-CURRENT ASSETS

        Other assets consist primarily of marketable and non-marketable securities in various companies. Non-marketable equity securities are carried at cost and aggregated approximately $3,964,000 and $4,213,000 at March 29, 2003 and December 31, 2002, respectively.

        At December 31, 2000, the Company had a 20% interest in Kendin Communications, Inc. ("Kendin"), which was accounted for using the equity method and had a carrying value of $3,170,000. During the second quarter of 2001, the Company exchanged its interest in Kendin for 986,054 shares of Micrel Incorporated ("Micrel"), as part of Micrel's acquisition of Kendin, and recorded a net gain of $24,600,000 on the exchange. At the time of the exchange Micrel's stock was trading at $29.31 per share. Following this transaction, the Company discontinued the use of the equity method to account for this investment and has accounted for its investment in Micrel common stock as available-for-sale securities and temporary changes in the value of the Micrel investment are reflected in other comprehensive income. During the third quarter of 2001 the Company sold 200,000 of its Micrel shares and recorded a gain of $700,000.

        During the second quarter of 2002, as the result of the lapse of a contingency period related to the sale of Kendin, the Company received 115,448 shares of Micrel common stock which were previously held in escrow. Also during the quarter the Company sold 249,448 shares of Micrel and recognized a net loss of approximately $101,000 on these transactions. During the fourth quarter of 2002 the Company sold 150,000 shares of Micrel and recorded a loss on the disposition of $2,525,000.

        On December 31, 2002 the closing price of Micrel's common stock was $8.98 per share. As a result of the continuing decline in the price of Micrel common stock, the decline in fair value was considered to be other than temporary and accordingly a charge of $10,211,000 was recognized to record the Micrel investment at fair value.

        The gains and losses recognized from the exchange of the Micrel investment and subsequent activity related to Micrel is included in other income and expense. Since the receipt of the Micrel shares the Company has sold approximately 600,000 shares for total proceeds of $12,240,000. As of March 29, 2003, the Company held approximately 500,000 shares of Micrel common stock with a market value of $4,860,000.

15



Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD LOOKING STATEMENTS

        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 within the meaning of the United States Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current expectations, estimates, forecasts and projections about the industries in which we operate, management's beliefs, and assumptions made by management. In addition, other written or oral statements which constitute forward-looking statements may be made by or on behalf of us. Words such as "expects", "anticipates", "intends", "plans", "believes", "could", "seeks", "estimates", variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements, whether as a result of new information, future events or otherwise. Factors that could cause or contribute to such differences in outcomes and results, include, but are not limited to, those discussed above under "Risk Factors."

        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 and the gallium arsenide integrated circuit and materials industries, sales growth of the wireless handset industry, the successful introduction of our CyberLite product, the impact of competitive products and pricing, availability of integrated circuit fabrication facilities, cost and yields associated with the production of our products, availability of interface electronic chips to run our CyberDisplay products, loss of significant customers, acceptance of our 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 our Annual Report on Form 10-K for the fiscal year ended December 31, 2002.

BUSINESS MATTERS

        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 our III-V and CyberDisplay products for use in highly demanding commercial wireless communication 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. Product revenues consist of sales of our III-V products, which includes gallium arsenide ("GaAs") HBT transistor wafers and CyberLite light emitting diodes (LEDs), and our line of CyberDisplay products. Our GaAs HBT transistor wafers, CyberLite LEDs and our CyberDisplay products are used primarily in wireless handsets, mobile communication devices and camcorders, respectively.

        Research and development revenues consist primarily of development contracts with agencies of the U.S. government for advanced displays. For the three months ended March 29, 2003, there were no research and development revenues, compared to $.2 million, or 1.1% of total revenues for the same period in 2002. There were no research and development revenues for the quarter ended March 29, 2003 because we did not achieve milestones required by contracts.

16



Results of Operations

        Revenues.    Our total revenues for the three months ended March 29, 2003 were $18.0 million, compared to $17.6 million during the corresponding period in 2002. This represents an increase in total revenue of approximately $.4 million for the three months ended March 29, 2003. Our product revenues were $18.0 million for the three months ended March 29, 2003 compared to $17.4 million for the corresponding period in 2002, an increase of approximately $.6 million. For the three months ended March 29, 2003, III-V and CyberDisplay product sales were $9.5 million and $8.5 million, respectively, as compared to $7.7 million and $9.7 million, respectively, for the three months ended March 30, 2002. For the three months ended March 29, 2003, the increase in III-V product revenues is attributable to increased demand from customers who incorporate our GaAs HBT transistor wafers into components used in wireless handsets and local area network chip sets and initial sales of our CyberLite product of $1.3 million. The decrease in CyberDisplay product sales is a result of a decline in demand from customers who incorporate the CyberDisplay into camcorders.

        International sales represented 59% and 65% of revenues for the three months ended March 29, 2003 and March 30, 2002, respectively. International sales are primarily sales of CyberDisplay and CyberLite products to consumer electronic manufacturers primarily located in Japan and Korea. Our international sales are primarily denominated in U.S. currency. Consequently, a strengthening of the U.S. dollar could increase the price in local currencies of our products in foreign markets and make our products relatively more expensive than competitors' products that are denominated in local currencies, leading to a reduction in sales or profitability in those foreign markets. In addition, sales of our CyberDisplay products in Korea are transacted through our Korean subsidiary, Kowon. Kowon's sales are primarily denominated in U.S. dollars, however Kowon's operating costs are denominated in Korean won. As a result, our financial position and results of operations are subject to exchange rate fluctuation. We have not taken any protective measures against exchange rate fluctuations, such as purchasing hedging instruments with respect to such fluctuations, because of the relatively stable exchange rate between the Japanese yen, Korean won and the U. S. dollar.

        Cost of Product Revenues.    Cost of product revenues, which is comprised of materials, labor and manufacturing overhead related to our products, was $15.1 million for the three months ended March 29, 2003 compared to $14.6 million during the corresponding period in 2002. For the three months ended March 29, 2003 and March 30, 2002, cost of product revenues as a percentage of product sales was 83.4% and 84.4%, respectively. Cost of product revenues as a percentage of sales remained consistent. However, during the three month period ended March 29, 2003 gross margins were negatively impacted by declining sales prices of some of Kopin's products and the start-up inefficiencies of CyberLite production, but were favorably impacted by lower raw material costs and better manufacturing efficiencies for HBT products. The HBT manufacturing efficiencies occurred because we were able to redeploy certain equipment and personnel, which were previously dedicated to the production of HBT transistor wafers, to produce CyberLite LEDs.

        Research and Development.    Research and development expenses (R&D) are incurred under development programs for III-V products, CyberDisplay products and other products and in support of development programs funded by agencies of the U.S. government. R&D costs include staffing, purchases of materials and laboratory supplies, equipment, circuit design costs, fabrication and packaging of display products, and overhead. Funded R&D expense was $.3 million for the three months ended March 29, 2003 compared to $.8 million for the corresponding period in the prior year, representing a decrease of $.5 million. Internal R&D expense was $2.6 million for the three months ended March 29, 2003, compared to $2.5 million during the corresponding period in 2002.

        Selling, General and Administrative.    Selling, general and administrative expenses (S,G&A) consist of expenses incurred by our sales and marketing personnel and related expenses, and administrative and general corporate expenses. S,G&A was $2.6 million for the three months ended

17



March 29, 2003 as compared to $3.0 million during the corresponding period in 2002. The reduction in S,G&A expense from the corresponding three month period in the prior year is principally the result of lower travel and labor expenses.

        Other.    Other expenses, consisting primarily of amortization of patents were approximately $.1 million for the three month period ended March 29, 2003, compared to approximately $.3 million during the corresponding period in 2002.

        Other Income and Expenses.    Other income and expense, net, was $.7 million for the three months ended March 29, 2003 compared to $.7 million during the corresponding period in 2002. Included in the three months ended March 29, 2003 was approximately $71,800 of foreign exchange gains resulting from our Korean subsidiary, Kowon. Also included in Other Income and Expenses for the three months ended March 29, 2003 is our share of the net losses of our equity investment in KTC of approximately $249,000.

        Cumulative Effect of Change in Accounting.    Effective January 1, 2002, we adopted Statement of Financial Accounting Standards ("SFAS") No. 142, Goodwill and Other Intangible Assets. This statement changed the accounting for goodwill and indefinite-lived intangible assets from an amortization approach to an impairment-only approach. In addition, SFAS No. 142 ceased the amortization of goodwill.

        As of January 1, 2002, we had $12.6 million of goodwill related to the October 2000 acquisition of Super Epitaxial Products, Inc. Using the SFAS No. 142 approach described above, we recorded a transitional goodwill impairment charge of $12.6 million which is presented as a cumulative effect of accounting change in the consolidated statements of operations. The Company estimated the fair value of the impacted reporting unit using a discounted cash flow model.

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 III-V and CyberDisplay products. We believe our available cash resources will support our operations and capital needs for at least the next twelve months.

        As of March 29, 2003, we had cash and equivalents and marketable securities of $115.1 million and working capital of $114.1 million compared to $118.0 million and $115.8 million, respectively, as of December 31, 2002. During the three month period ended March 29, 2003, the decrease in cash and equivalents and marketable securities was primarily due to cash used in operations of $.4 million and capital expenditures of $1.2 million. In addition, other assets increased by approximately $900,000 as a result of a deposit to acquire more shares of our Korean subsidiary, Kowon from existing shareholders. Upon acquisition of the shares our ownership percentage on Kowon will increase from 67% to 72%. At March 29, 2003 we were awaiting for government approval for this purchase.

        We lease facilities located in Taunton and Westborough, Massachusetts, Scotts Valley, California, and Columbia, Maryland, under non-cancelable operating leases. The Taunton leases expire through May 2010. The Westborough lease expires in April 2008. The California lease expires in 2007. The Maryland lease expires in 2005. We are currently obligated to make lease payments of approximately $8.0 million over the remaining terms of these leases.

        We expect to expend between $7.0 and $10.0 million on capital expenditures over the next twelve months, primarily for the acquisition of equipment relating to the production of our CyberLite and CyberDisplay products. The funding for these capital expenditures will come from available cash balances.

18



        On October 9, 2002, the Company authorized the re-purchase of up to $15 million of Kopin Stock over a two year period. The Company has not repurchased any stock through March 29, 2003.


Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

        We invest our excess cash in high-quality government and corporate financial instruments which bear lower levels of relative 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. Included in other assets is an equity investment in Micrel, Incorporated (Micrel) totaling approximately $4.9 million which is subject to changes in value because of either specific operating issues at Micrel or an overall changes in the stock market. We sell our products to customers worldwide. We maintain a reserve of $1.2 million, or 7% of revenue, for potential credit losses. We are exposed to changes in foreign currency exchange rates primarily through our translation of our foreign subsidiary's financial position, results of operations, and transaction gains and losses as a result of non U.S. dollar denominated cashflows related to business activities in Asia. We do not believe that changes in currency will have a material impact on our financial position.


Item 4. CONTROLS AND PROCEDURES

        Within the 90 days prior to the date of this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective in timely alerting them to material information relating to us (including our subsidiaries) required to be included in our periodic filings with the Securities and Exchange Commission. Our management, including our Chief Executive Officer and Chief Financial Officer, reviewed our internal controls. There have been no significant changes in our internal controls or to our knowledge, in other factors that could significantly affect such internal controls subsequent to the date of their evaluation.

        Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

19



PART II. OTHER INFORMATION

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

        On April 24, 2003, the Company held an Annual Meeting of Stockholders to consider and vote upon the following three proposals:

    (1)
    A proposal to elect six (6) 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 an amendment to the Company's 2001 Equity Incentive Plan to increase the number of shares authorized for issuance under the Plan from 2,400,000 to 3,500,000.

    (3)
    A proposal to ratify the appointment of Deloitte & Touche LLP as independent public accountants of the Company for the current fiscal year.

        Results with respect to the voting on each of the proposals were as follows:

Proposal 1:

  Director Nominee
  For
  Withheld Authority
    John C.C. Fan   52,538,688   7,476,497
    David E. Brook   48,639,461   11,375,724
    Andrew H. Chapman   59,200,817   814,368
    Morton Collins   59,197,720   817,465
    Chi Chia Hsieh   58,594,753   1,420,432
    Michael A. Wall   49,244,705   10,770,480

    

 

 

 

 

 

 

 

 
Proposal 2:

  For
  Against
  Abstentions
  Broker Non-Votes
    55,869,588   3,939,872   205,725   0

    

 

 

 

 

 

 

 

 
Proposal 3:

  For
  Against
  Abstentions
  Broker Non-Votes
    58,953,310   936,016   125,859   2


Item 6. EXHIBITS AND REPORTS ON FORM 8-K

    (a)
    Exhibits

 
  Exhibit No.

  Description
       99.1   Certificate of John C.C. Fan, Chief Executive Officer of the Registrant, filed pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).

    

 

99.2

 

Certificate of Richard A. Sneider, Chief Financial Officer of the Registrant, filed pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).
    (b)
    Reports on Form 8-K

    In a Form 8-K filed February 13, 2003, the Registrant reported under Item 9 "Regulation FD Disclosure" a press release in which it announced its financial results for the fourth quarter and full year ended December 31, 2002.

    In a Form 8-K filed February 14, 2003, the Registrant reported under Item 9 "Regulation FD Disclosure" certain disclosures regarding operations made during a February 13, 2002 conference call for investors.

    In a Form 8-K filed March 14, 2003, the Registrant reported under Item 9 "Regulation FD Disclosure" certifications of its Chief Executive Officer and Chief Financial Officer made solely for the purpose of satisfying the requirements of Section 906 of the Sarbanes-Oxley Act of 2002.

20



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: May 12, 2003

 

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: May 12, 2003

 

By:

 

/s/  
RICHARD A. SNEIDER      
Richard A. Sneider
Treasurer and Chief Financial Officer (Principal Financial and Accounting Officer)

21



CERTIFICATIONS

I, John C.C. Fan, the President and Chief Executive Officer of Kopin Corporation, certify that:

1.
I have reviewed this quarterly report on Form 10-Q of Kopin Corporation;

2.
Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.
Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this quarterly report;

4.
The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we have:

(a)
Designed such disclosure controls and procedures to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

(b)
Evaluated the effectiveness of the Registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and

(c)
Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.
The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the Registrant's auditors and the audit committee of Registrant's board of directors (or persons performing the equivalent function):

(a)
All significant deficiencies in the design or operation of internal controls which could adversely affect the Registrant's ability to record, process, summarize and report financial data and have identified for the Registrant's auditors any material weaknesses in internal controls; and

(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal controls; and

6.
The Registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: May 12, 2003    

/s/  
JOHN C. C. FAN      
John C. C. Fan
President and Chief Executive Officer

 

    

22


I, Richard A. Sneider, the Chief Financial Officer of Kopin Corporation, certify that:

1.
I have reviewed this quarterly report on Form 10-Q of Kopin Corporation;

2.
Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.
Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this quarterly report;

4.
The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we have:

(a)
Designed such disclosure controls and procedures to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

(b)
Evaluated the effectiveness of the Registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and

(c)
Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.
The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the Registrant's auditors and the audit committee of Registrant's board of directors (or persons performing the equivalent function):

(a)
All significant deficiencies in the design or operation of internal controls which could adversely affect the Registrant's ability to record, process, summarize and report financial data and have identified for the Registrant's auditors any material weaknesses in internal controls; and

(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal controls; and

6.
The Registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: May 12, 2003    

/s/  
RICHARD A. SNEIDER      
Richard A. Sneider
Chief Financial Officer

 

 

23