1. BASIS OF PRESENTATION

The accompanying condensed consolidated financial statements include the accounts of Kopin Corporation, its wholly-owned subsidiaries, Kowon Technology Co., Ltd. (Kowon), a majority owned (78%) subsidiary located in Korea and Kopin Taiwan Corporation (KTC), a majority owned (90%) subsidiary located in Taiwan (collectively the “Company” or ‘we”). Ownership interests of Kowon and KTC not attributable to the Company are referred to as noncontrolling interests. All intercompany transactions and balances have been eliminated. The condensed consolidated financial statements for the three and six months ended June 30, 2012 and June 25, 2011 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. These condensed consolidated financial statements should be read in conjunction with the Company’s financial statements and notes thereto, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011.

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.

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. The condensed consolidated statements of operations and comprehensive income for the three and six months ended June 30, 2012 and condensed consolidated statements of cash flows for the six months ended June 30, 2012 were not impacted by this error.

The effects of this restatement on the consolidated balance sheet as of December 31, 2011 are as follows (in thousands):


Balance Sheet Data	December 31, 2011 as previously reported			Adjustment			December 31, 2011 as restated
ASSETS
Current assets:
Cash and equivalents	$	43,095		$	—		$	43,095
Marketable debt securities, at fair value		62,323			—			62,323
Accounts receivable, net of allowance of $513,000 in 2011		16,511			—			16,511
Accounts receivable from unconsolidated affiliates		1,341			—			1,341
Unbilled receivable		36			—			36
Inventory		21,416			(947	)		20,469
Prepaid taxes		412			256			668
Prepaid expenses and other current assets		1,294			—			1,294

Total current assets		146,428			(691	)		145,737
Property, plant & equipment, net		32,369			—			32,369
Deferred tax assets		4,202			—			4,202
Goodwill		1,665			—			1,665
Intangible assets		1,954			—			1,954
Other assets		7,946			—			7,946

Total assets	$	194,564		$	(691	)	$	193,873

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	12,385			—		$	12,385
Accrued payroll and expenses		4,183			—			4,183
Accrued warranty		1,318			—			1,318
Billings in excess of revenue earned		2,467			—			2,467
Other accrued liabilities		2,127			—			2,127

Total current liabilities		22,480			—			22,480
Asset Retirement obligations		1,296			—			1,296
Commitments and contingencies					—			—
Stockholders’ equity:
Preferred stock		—			—			—
Common stock		732			—			732
Additional paid-in capital		315,710			—			315,710
Treasury stock		(30,995	)		—			(30,995	)
Accumulated other comprehensive income		4,146			—			4,146
Accumulated deficit		(124,008	)		(623	)		(124,631	)

Total Kopin Corporation stockholders’ equity		165,585			(623	)		164,962
Non controlling interest		5,203			(68	)		5,135

Total stockholder’ equity		170,788			(691	)		170,097

Total liabilities and stockholders’ equity	$	194,564		$	(691	)	$	193,873