KOPIN CORP 10-Q Summary: Quarter Ended March 28, 1998
Business Context and Reporting Period
This Form 10-Q covers the quarterly period ended March 28, 1998. Kopin Corporation is a developer and manufacturer of advanced semiconductor materials and small form factor displays. The company has transitioned from primarily government research contracts to commercial product sales, specifically device wafers and CyberDisplay products. As of the reporting date, the company had an accumulated deficit of $55.1 million.
Key Financial Metrics
| Metric | Q1 1998 | Q1 1997 |
|---|---|---|
| Total Revenues | $5,466,547 | $3,714,013 |
| Product Revenues | $4,660,684 | $2,882,077 |
| R&D Revenues | $805,863 | $831,936 |
| Net Loss | ($611,025) | ($2,101,618) |
| Loss Per Share (Basic/Diluted) | ($0.05) | ($0.19) |
| Cash and Equivalents | $35,557,165 | $15,900,155 |
| Working Capital | $39,574,250 | $21,465,606 |
| Total Long-Term Debt | $8,119,311 | $3,501,786 |
| Operating Cash Flow | $34,904 | ($2,177,632) |
Margins: Cost of product revenues was 58.4% of product revenues in Q1 1998, an improvement from 73.3% in the prior year period.
Material Changes vs. Prior Period
- Revenue Growth: Total revenues increased by $1.75 million (47.2%) year-over-year, driven primarily by a 55.4% increase in device wafer sales to major customer Rockwell International.
- Profitability Improvement: Net loss narrowed significantly to $611,025 from $2.1 million in the prior year, aided by improved gross margins and reduced internal R&D expenses.
- Liquidity Surge: Cash and equivalents increased by $21.1 million, primarily due to a public stock offering and a new term loan.
- Capital Structure: The company entered into a $5 million term loan in March 1998 secured by accounts receivable.
Guidance, Outlook, and Risks
- Capital Expenditures: Management expects to expend approximately $5 million over the next twelve months on equipment for CyberDisplay manufacturing and device wafer production.
- Revenue Mix: Management anticipates R&D revenues will continue to decline as a percentage of total revenues due to expiring government contracts and a strategic shift toward product sales.
- Year 2000 Compliance: The company is reviewing systems for the "Year 2000" issue and does not anticipate material financial impact.
- Risks: Key risks include dependence on significant customers (e.g., Rockwell International), competitive pricing, availability of third-party components, and production yields for new display devices.
Investor Verification Checklist
- Verify the sustainability of the 55.4% growth in device wafer sales and the concentration risk associated with Rockwell International.
- Confirm the terms and covenants of the new $5 million term loan secured by accounts receivable.
- Monitor the execution of the planned $5 million capital expenditure program and its impact on future cash burn.
- Assess the timeline for CyberDisplay product commercialization and revenue contribution.
- Review the status of expiring government R&D contracts and the pipeline for replacement commercial contracts.