Kopin (KOPN) 8-K Unaudited Pro Forma Condensed Consolidated Financial Statements

Exhibit 99.1

KOPIN CORPORATION

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

On January 15, 2013 (the “Closing Date”), Kopin Corporation (the “Company”) completed the sale of its III-V product line, including all of the outstanding equity interest in KTC Wireless, LLC, a wholly-owned subsidiary of the Company that held the Company’s investment in Kopin Taiwan Corporation (“KTC”), to IQE KC, LLC (“IQE”) and IQE plc (“Parent”, and collectively with IQE, the “Buyer”) pursuant to a Purchase Agreement (the “Purchase Agreement”) entered into on January 10, 2013 for an aggregate purchase price of approximately $75 million, subject to certain adjustments, including working capital adjustments and escrow (the “Sale”). Of the total consideration, $55 million was paid to the Company as of the Closing Date and $5 million was placed in escrow pending a final determination of adjustments and working capital as of the Closing Date. The remaining $15 million will be paid to the Company on the third anniversary of the Closing Date.

The following unaudited pro forma condensed consolidated financial statements are presented to comply with Article 11 of Regulation S-X and follow prescribed SEC regulations. The unaudited condensed consolidated pro forma financial statements do not purport to present what the Company’s results would have been had the disposition actually occurred on the dates indicated or to project what the Company’s results of operations or financial position would have been for any future period. The prescribed regulations limit pro forma adjustments to those that are directly attributable to the disposition on a factually supported basis. Consequently, the Company was not permitted within the condensed consolidated pro forma financial statements to allocate to the disposed operations any indirect corporate overhead or costs, such as administrative corporate functions or any other costs that were shared with the retained business of the Company. As a result such costs are not reflected in the pro forma adjustments and are included in the retained business of the Company. Additionally, the unaudited condensed consolidated pro forma financial statements do not include costs associated with transferring the assets, liabilities or contracts resulting from the Sale. The pro forma adjustments are described in the notes to the unaudited condensed consolidated pro forma financial statements.

The unaudited condensed consolidated pro forma financial statements have been prepared for informational purposes and to assist in the analysis of Company’s sale of its III-V product line assets and its investment in KTC to the Buyer. This information should be read together with the historical consolidated financial statements and related notes of Kopin included in its Annual Report on Form 10-K for the year ended December 31, 2011 and its Quarterly Report on Form 10-Q for the quarter ended September 29, 2012.

The unaudited pro forma condensed consolidated statements of operations for the nine months ended September 29, 2012 and the years ended December 31, 2011, December 25, 2010 and December 26, 2009, assume the Sale occurred on the first day of the earliest fiscal period presented. The unaudited pro forma condensed consolidated balance sheet as of September 29, 2012, assumes the Sale occurred on September 29, 2012. The unaudited pro forma condensed consolidated financial statements are derived from the historical consolidated financial statements of Kopin and are based on assumptions that management believes are reasonable in the circumstances.

Kopin Corporation

Unaudited Pro Forma Condensed Consolidated Balance Sheets

At September 29, 2012

	Kopin			Pro Forma Adjustments					Pro Forma Kopin
ASSETS
Current assets:
Cash and equivalents	$	25,263,239		$	55,000,000		(A	)	$	80,263,239
Restricted cash held in escrow cash held in escrow		—			5,000,000		(A	)		5,000,000
Marketable debt securities, at fair value		69,273,996			—					69,273,996
Accounts receivable, net of allowance of $454,000		12,293,195			(8,038,792	)	(B	)		4,254,403
Accounts receivable from unconsolidated affiliates		2,072,892			(1,990,772	)	(B	)		82,120
Unbilled receivables		587,652			(9,129	)	(B	)		578,523
Inventory		19,684,989			(13,461,679	)	(B	)		6,223,310
Prepaid taxes		878,320			(335,239	)	(B	)		543,081
Prepaid expenses and other current assets		1,052,351			(45,211	)	(B	)		1,007,140
Total current assets		131,106,634			36,119,178					167,225,812
Property, plant and equipment, net		33,710,208			(25,395,984	)	(B	)		8,314,224
Deferred tax assets, net		3,472,437			(3,472,437	)	(B	)		—
Goodwill		1,140,787			—					1,140,787
Intangible assets, net		1,829,151			—					1,829,151
Note receivable		—			14,800,000		(F	)		14,800,000
Other assets		9,287,486			(48,171	)	(B	)		9,239,315
Total assets	$	180,546,703		$	22,002,586				$	202,549,289
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	9,503,243		$	(6,252,531	)	(B	)	$	3,250,712
Accrued payroll and expenses		3,037,011			(1,553,006	)	(B	)		1,484,005
Accrued warranty		1,015,000			(150,000	)	(B	)		865,000
Billings in excess of revenue earned		2,214,889			—					2,214,889
Other accrued liabilities		4,925,003			(1,114,923	)	(B	)		3,810,080
Total current liabilities		20,695,146			(9,070,460	)				11,624,686
Asset retirement obligations		1,144,773			(820,624	)	(C	)		324,149
Commitments and contingencies
Stockholders’ equity:
Preferred stock, par value $.01 per share: authorized, 3,000 shares; none issued		—			—					—
Common stock, par value $.01 per share: authorized, 120,000,000 shares; issued 76,156,551 shares; outstanding 63,414,292		732,754			—					732,754
Additional paid-in capital		318,515,179			—					318,515,179
Treasury stock (9,861,139 shares, at cost)		(34,450,978	)		—					(34,450,978	)
Accumulated other comprehensive income		6,380,602			(1,389,363	)	(D	)		4,991,239
Accumulated deficit		(139,132,141	)		35,839,331		(D	)		(103,292,810	)
Total Kopin Corporation stockholders’ equity		152,045,416			34,449,968					186,495,384
Noncontrolling interest		6,661,368			(2,556,298	)	(D	)		4,105,070
Total stockholders’ equity		158,706,784			31,893,670					190,600,454
Total liabilities and stockholders’ equity	$	180,546,703		$	22,002,586				$	202,549,289

The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial statements.

Kopin Corporation

Unaudited Pro Forma Condensed Consolidated Statements of Operations

Nine Months Ended September 29, 2012

	Kopin			Pro Forma Adjustments					Pro Forma Kopin
Revenues:
Net product revenues	$	67,449,979		$	(43,648,821	)	(E	)	$	23,801,158
Research and development revenues		2,585,900			(319,682	)	(E	)		2,266,218
		70,035,879			(43,968,503	)				26,067,376
Expenses:
Cost of product revenues		49,714,995			(32,745,296	)	(E	)		16,969,699
Research and development		16,519,193			(5,849,328	)	(E	)		10,669,865
Selling, general and administration		15,591,101			(2,571,369	)	(E	)		13,019,732
Impairment of goodwill		1,704,770			—					1,704,770
		83,530,059			(41,165,993	)				42,364,066
Loss from continuing operations		(13,494,180	)		(2,802,510	)				(16,296,690	)
Other income and expense:
Interest income		829,028			21,208		(E	)		850,236
Other income net		290,114			(119,550	)	(E	)		170,564
Foreign currency transaction (losses) gains		(656,334	)		231,009		(E	)		(425,325	)
Gain on sale of investments		856,170			—					856,170
Loss on investment in Ikanos		(557,594	)		—					(557,594	)
		761,384			132,667					894,051
Loss from continuing operations before provision for income taxes, equity losses in unconsolidated affiliates and loss attributable to noncontrolling interest		(12,732,796	)		(2,669,843	)				(15,402,639	)
Tax provision		(1,335,500	)		1,312,700		(G	)		(22,800	)
Loss from continuing operations before equity losses in unconsolidated affiliates and loss of noncontrolling interest		(14,068,296	)		(1,357,143	)	(E	)		(15,425,439	)
Equity losses from continuing operations in unconsolidated affiliates		(592,480	)		—					(592,480	)
Loss from continuing operations		(14,660,776	)		(1,357,143	)				(16,017,919	)
Loss from continuing operations attributable to the noncontrolling interest		160,300			336,387		(E	)		496,687
Loss from continuing operations attributable to the controlling interest	$	(14,500,476	)	$	(1,020,756	)			$	(15,521,232	)
Loss from continuing operations per share
Basic	$	(0.23	)						$	(0.24	)
Diluted	$	(0.23	)						$	(0.24	)
Weighted average number of common shares
Basic		63,572,753								63,572,753
Diluted		63,572,753								63,572,753

The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial statements.

Kopin Corporation

Unaudited Pro Forma Condensed Consolidated Statements of Operations

Twelve Months Ended December 31, 2011

	Kopin (As Restated)			Pro Forma Adjustments					Kopin Pro Forma
Revenues:
Net product revenues	$	125,464,687		$	(65,955,728	)	(E	)	$	59,508,959
Research and development revenues		5,679,908			(530,264	)	(E	)		5,149,644
		131,144,595			(66,485,992	)				64,658,603
Expenses:
Cost of product revenues		82,941,219			(48,282,199	)	(E	)		34,659,020
Research and development-funded programs		3,741,602			(400,527	)	(E	)		3,341,075
Research and development-internal		22,133,360			(8,915,342	)	(E	)		13,218,018
Selling, general and administrative		18,928,996			(2,937,600	)	(E	)		15,991,396
Impairment of intangible assets and goodwill		4,999,512			—					4,999,512
		132,744,689			(60,535,668	)				72,209,021
Loss from continuing operations		(1,600,094	)		(5,950,324	)				(7,550,418	)
Other income and expense:
Interest income		1,305,240			(13,649	)	(E	)		1,291,591
Other income and expense, net		93,125			49,823		(E	)		142,948
Foreign currency transaction gains (losses)		12,403			(2,731	)	(E	)		9,672
Gain on sales of investments		368,641			—					368,641
Other-than-temporary impairment of marketable debt securities		(150,644	)		—					(150,644	)
Gain on sales of patents		155,658			—					155,658
		1,784,423			33,443					1,817,866
Income (loss) from continuing operations before benefit (provision) for income taxes, and equity loss in unconsolidated affiliate and (income) loss of noncontrolling interest		184,329			(5,916,881	)				(5,732,552	)
Tax benefit (provision)		3,796,691			(4,051,242	)	(G	)		(254,551	)
Income (loss) from continuing operations before equity loss in unconsolidated affiliate and (income) loss of noncontrolling interest		3,981,020			(9,968,123	)				(5,987,103	)
Equity loss from continuing operations in unconsolidated affiliate		(296,451	)		—					(296,451	)
Income (loss) from continuing operations		3,684,569			(9,968,123	)				(6,283,554	)
(Income) loss from continuing operations attributable to the noncontrolling interest		(605,206	)		588,121		(E	)		(17,085	)
Income (loss) from continuing operations per share attributable to the controlling interest	$	3,079,363		$	(9,380,002	)			$	(6,300,639	)
Income (loss) per share
Basic	$	0.05							$	(0.10	)
Diluted	$	0.05							$	(0.10	)
Weighted average number of common shares outstanding:
Basic		64,405,776								64,405,776
Diluted		65,234,212								65,234,212

The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial statements.

Kopin Corporation

Unaudited Pro Forma Condensed Consolidated Statements of Operations

Twelve Months Ended December 25, 2010

	Kopin (As Restated)			Pro Forma Adjustments					Kopin Pro Forma
Revenues:
Net product revenues	$	116,622,692		$	(61,653,222	)	(E	)	$	54,969,470
Research and development revenues		3,763,074			(590,912	)	(E	)		3,172,162
		120,385,766			(62,244,134	)				58,141,632
Expenses:
Cost of product revenues		81,340,602			(45,743,571	)	(E	)		35,597,031
Research and development-funded programs		2,692,488			(517,007	)	(E	)		2,175,481
Research and development-internal		17,041,440			(6,069,410	)	(E	)		10,972,030
Selling, general and administrative		14,837,519			(2,515,910	)	(E	)		12,321,609
		115,912,049			(54,845,898	)				61,066,151
Income (loss) from continuing operations		4,473,717			(7,398,236	)				(2,924,519	)
Other income and expense:
Interest income		2,192,334			(214,643	)	(E	)		1,977,691
Other income and expense, net		77,202			(107,421	)	(E	)		(30,219	)
Foreign currency transaction (losses) gains		(418,710	)		114,583		(E	)		(304,127	)
Gain on sales of investments		2,597,505			—					2,597,505
Gain on sales of patents		769,797			—					769,797
		5,218,128			(207,481	)				5,010,647
Income from continuing operations before provision for income taxes, equity loss in unconsolidated affiliates and (income) loss of noncontrolling interest		9,691,845			(7,605,717	)				2,086,128
Tax provision		(252,000	)		—					(252,000	)
Income before equity loss in unconsolidated affiliate and (income) loss of noncontrolling interest		9,439,845			(7,605,717	)				1,834,128
Equity loss from continuing operations in unconsolidated affiliate		(600,299	)		—					(600,299	)
Income from continuing operations		8,839,546			(7,605,717	)				1,233,829
(Income) loss from continuing operations attributable to the noncontrolling interest		(10,225	)		54,419		(E	)		44,194
Income from continuing operations attributable to the controlling interest	$	8,829,321		$	(7,551,298	)			$	1,278,023
Income from continuing operations per share
Basic	$	0.14							$	0.02
Diluted	$	0.13							$	0.02
Weighted average number of common shares outstanding:
Basic		66,019,847								66,019,847
Diluted		66,711,501								66,711,501

The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial statements.

Kopin Corporation

Unaudited Pro Forma Condensed Consolidated Statements of Operations

Twelve Months Ended December 26, 2009

	Kopin			Pro Forma Adjustments					Kopin Pro Forma
Revenues
Net product revenues	$	108,118,271		$	(45,606,437	)	(E	)	$	62,511,834
Research and development revenues		6,536,486			(845,655	)	(E	)		5,690,831
		114,654,757			(46,452,092	)				68,202,665
Expenses:
Cost of product revenues		75,982,694			(36,876,505	)	(E	)		39,106,189
Research and development-funded programs		3,586,372			(526,775	)	(E	)		3,059,597
Research and development-internal		10,560,662			(2,265,903	)	(E	)		8,294,759
Selling, general and administrative		14,136,482			(1,192,259	)	(E	)		12,944,223
		104,266,210			(40,861,442	)				63,404,768
Income from continuing operations		10,388,547			(5,590,650	)				4,797,897
Other income and expense:
Interest income		2,180,678			(2,573	)	(E	)		2,178,105
Other income and expense, net		728,686			(389,533	)	(E	)		339,153
Foreign currency transaction gains (losses)		(1,005,184	)		62,723		(E	)		(942,461	)
Gain on loans to KTC		1,187,937			(1,187,937	)	(E	)		—
Gain on remeasurement of investment in KTC		599,328			(599,328	)	(E	)		—
Other-than-temporary impairment of marketable debt securities		(926,630	)		—					(926,630	)
Gain on sales of patents		6,323,934			—					6,323,934
		9,088,749			(2,116,648	)				6,972,101
Income from continuing operations before provision for income taxes, equity earnings (losses) in unconsolidated affiliates and loss of noncontrolling interest		19,477,296			(7,707,298	)				11,769,998
Tax provision		(690,200	)		—					(690,200	)
Income from continuing operations before earnings (losses) in unconsolidated affiliates and loss of noncontrolling interest		18,787,096			(7,707,298	)				11,079,798
Equity earnings (losses) from continuing operations in unconsolidated affiliates		483,057			(824,276	)	(E	)		(341,219	)
Income from continuing operations		19,270,153			(8,531,574	)				10,738,579
Loss from continuing operations attributable to the noncontrolling interest		173,217			95,402		(E	)		268,619
Income from continuing operations attributable to the controlling interest	$	19,443,370		$	(8,436,172	)			$	11,007,198
Income from continuing operations per share
Basic	$	0.29							$	0.16
Diluted	$	0.29							$	0.16
Weighted average number of common shares outstanding:
Basic		66,849,890								66,849,890
Diluted		67,457,751								67,457,751

The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial statements.

Note 1 — Description of Transaction

On January 15, 2013, (the “Closing Date”) Kopin Corporation consummated the sale of all of its III-V product line assets and its investment in Kopin Taiwan Corporation (“KTC”) to IQE KC LLC, a wholly-owned subsidiary of IQE plc, and IQE plc, for a gross purchase price of $75 million which was subject to certain adjustments including working capital adjustments and an escrow. $55 million of the purchase price was paid as of the Closing Date, $15 million of the purchase price will be paid on the third anniversary of the Closing Date, and $5 million was placed in escrow pending a final determination of the working capital purchase price adjustments, which is expected to be completed within 90 days of the Closing Date.

Note 2 — Pro Forma Adjustments

Immaterial Restatement

During the second quarter of 2012, the Company identified an error in the calculation of intercompany profit elimination in inventory for prior periods. While the Company believes the correction of this error is not material to its previously issued historical consolidated financial statements, the Company has restated certain balances within the condensed consolidated balance sheet as of December 31, 2011 to correct this error.

	Fiscal year ended December 31, 2011
	As  previously reported			Adjustment			As restated
Expenses:
Cost of product revenues		82,110			831			82,941
Loss from continuing operations		(769	)		(831	)		(1,600	)
Income from continuing operations before benefit for income taxes, equity loss in unconsolidated affiliate and (income) loss of noncontrolling interest		1,015			(831	)		184
Tax benefit		3,541			256			3,797
Income from continuing operations before equity loss in unconsolidated affiliate and (income) loss of noncontrolling interest		4,556			(575	)		3,981
Equity loss from continuing operations in unconsolidated affiliate		(296	)		—			(296	)
Income (loss) from continuing operations		4,260			(575	)		3,685
(Income) loss from continuing operations attributable to the noncontrolling interest		(662	)		57			(605	)
Income (loss) from continuing operations attributable to the controlling interest	$	3,598		$	(518	)	$	3,080
Income (loss) from continuing operations per share:
Basic	$	0.06		$	(0.01	)	$	0.05
Diluted	$	0.06		$	(0.01	)	$	0.05
Weighted average number of common shares:
Basic		64,406						64,406
Diluted		65,234						65,234

	Fiscal year ended December 25, 2010
	As previously reported			Adjustment			As restated
Expenses:
Cost of product revenues		81,224			116			81,340
Income (loss) from continuing operations		4,591			(116	)		4,475
Income from continuing operations before provision for income taxes, equity loss in unconsolidated affiliate and (income) loss of noncontrolling interest		9,809			(116	)		9,693
(Income) loss from continuing operations attributable to the noncontrolling interest		(22	)		11			(11	)
Income (loss) from continuing operations attributable to the controlling interest	$	8,935		$	(105	)	$	8,830
Income from continuing operations per share:
Basic	$	0.14		$	—		$	0.14
Diluted	$	0.13		$	—		$	0.13
Weighted average number of common shares:
Basic		66,020						66,020
Diluted		66,712						66,712

Pro Forma Adjustments:The pro forma adjustments made to the historical condensed consolidated financial statements of Kopin are described as follows:

A. Reflects proceeds of $55 million received in cash from the sale and $5 million held in escrow until the final determination of working capital.

B. Reflects the adjustments to eliminate the assets and liabilities sold related to the III-V product line, and an additional $0.5 million accrued for professional fees related to the transaction.

C. Represents liabilities that will not be retained by Kopin as a result of the sale.

D. Represents the difference between the estimated cash to be received and the net asset value transfer to IQE KC, LLC on the sale as discussed above.

Estimated net proceeds	$	74,800,000
Net assets sold		38,796,486
Net change in consolidated net assets		36,003,514
Assets sold		52,797,414
Estimated Liabilities transferred to Buyer		(14,000,928	)
Estimated Net assets sold		38,796,486

E. Represents the revenue and expenses directly attributable to the III-V product line and KTC operations. The pro forma adjustments exclude the indirect and fixed costs allocated to the sold business.

F. Represents the $15 million Note Receivable to be paid in three years by IQE, discounted based on the 3 year treasury rate (.37%) as of the Closing Date.

G. Represents income taxes owed on earnings of KTC.