10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the Quarterly Period Ended June 30, 2016

or

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

For the Transition Period from                      to                     

COMMISSION FILE NUMBER: 0-49737

UNI-PIXEL, INC.

(Exact Name of Registrant as Specified in Its Charter)

DELAWARE	75-2926437
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

4699 Old Ironsides Drive, Suite 300

Santa Clara, California 95054

(Address of Principal Executive Offices)

(281) 825-4500

(Issuer’s Telephone Number, Including Area Code)

8708 Technology Forest Place, Suite 100

The Woodlands, Texas 77381

(Former Address)

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. [X] Yes [  ] No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [  ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [  ] No [X]

As of August 5, 2016, the issuer had 45,041,730 shares of issued and outstanding common stock, par value $0.001 per share.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [  ]	Accelerated filer [  ]
Non-accelerated filer [  ]	Smaller reporting company [X]
(Do not check if a smaller reporting company)

TABLE OF CONTENTS

Part I.	Financial Information
Item 1.	Condensed Consolidated Financial Statements	3
	Condensed Consolidated Balance Sheets June 30, 2016 (unaudited) and December 31, 2015	3
	Condensed Consolidated Statements of Operations Three and six months ended June 30, 2016 (unaudited) and June 30, 2015 (unaudited)	4
	Condensed Consolidated Statements of Cash Flows Six months ended June 30, 2016 (unaudited) and June 30, 2015 (unaudited)	5
	Notes to Unaudited Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	25
Item 4.	Controls and Procedures	25
Part II.	Other Information
Item 1.	Legal Proceedings	26
Item 1A.	Risk Factors	26
Item 6.	Exhibits	28

2

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

Uni-Pixel, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except per share data)

	June 30, 2016			December 31, 2015
	(unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	11,284		$	7,618
Restricted cash		—			4,098
Account receivable, net		317			334
Inventory		518			769
Debt issuance costs		—			526
Prepaid licenses		4,900			4,900
Prepaid expenses		815			819
Total current assets		17,834			19,064
Property and equipment, net		1,497			1,842
Other long-term assets		13			13
Prepaid licenses, net of current portion		3,179			5,629
Total assets	$	22,523		$	26,548
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	1,587		$	1,150
Accrued liabilities		680			780
Convertible notes payable		—			2,773
Derivative liability		1,140			491
Total current liabilities		3,407			5,194
Royalty liability		721			1,175
Long term liabilities		514			645
Long term debt		—			450
Total liabilities		4,642			7,464
Commitments and contingencies		—			—
Shareholders’ equity
Common stock, $0.001 par value; 100,000,000 shares authorized, 45,025,386 shares issued and outstanding at June 30, 2016 and 32,170,778 shares issued and outstanding at December 31, 2015		45			32
Additional paid-in capital		181,584			168,243
Accumulated deficit		(163,748	)		(149,191	)
Total shareholders’ equity		17,881			19,084
Total liabilities and shareholders’ equity	$	22,523		$	26,548

The accompanying notes are an integral part of these consolidated financial statements.

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Uni-Pixel, Inc.

Condensed Consolidated Statements of Operations

(In thousands, except for share data)

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
Revenue	$	957		$	1,362		$	1,807		$	1,369
Cost of revenues		3,947			3,420			8,197			3,427
Gross margin		(2,990	)		(2,058	)		(6,390	)		(2,058	)
Selling, general and administrative expenses		1,870			3,678			3,722			6,644
Research and development		1,013			1,477			1,940			4,199
Operating loss		(5,873	)		(7,213	)		(12,052	)		(12,901	)
Other income (expense)
Debt issuance cost amortization expense		—			(376	)		(526	)		(376	)
Gain (loss) on change in warrant liability		(271	)		3,900			(679	)		3,900
Accretion of discount on convertible notes		—			(3,122	)		(1,291	)		(3,122	)
Interest income (expense), net		—			(232	)		(9	)		(228	)
Other income (expense), net		(271	)		170			(2,505	)		174
Net loss from continuing operations	$	(6,144	)	$	(7,043	)	$	(14,557	)	$	(12,727	)
Discontinued operations (note 8)
Loss on discontinued operations		—			(1,093	)		—			(1,093	)
Loss on impairment of property and equipment		—			(7,609	)		—			(7,609	)
		—			(8,702	)		—			(8,702	)
Net loss	$	(6,144	)	$	(15,745	)	$	(14,557	)	$	(21,429	)
Per share information
Basic
Loss from continuing operations	$	(0.16	)	$	(0.52	)	$	(0.38	)	$	(0.99	)
Net loss	$	(0.16	)	$	(1.17	)	$	(0.38	)	$	(1.66	)
Diluted
Loss from continuing operations	$	(0.16	)	$	(0.52	)	$	(0.38	)	$	(0.99	)
Net loss	$	(0.16	)	$	(1.17	)	$	(0.38	)	$	(1.66	)
Weighted average number of basic common shares outstanding		39,363,684			13,418,395			37,995,835			12,914,133
Weighted average number of diluted common shares outstanding		39,363,684			13,418,395			37,995,835			12,914,133

See accompanying notes to these condensed consolidated financial statements.

4

Uni-Pixel, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands, except for share data)

(Unaudited)

	Six Months Ended June 30,
	2016			2015
Cash flows from operating activities
Net loss	$	(14,557	)	$	(21,429	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		2,548			4,127
Restricted stock issuance		562			730
Stock compensation expense		333			949
Amortization of debt issuance costs		526			376
Issuance of common stock to convert notes and interest		—			167
Accretion of discount on convertible note		1,291			3,122
Net increase (decrease) in fair value of derivatives		679			(3,900	)
Loss on R&D equipment related to discontinued operations		—			7,609
Change in operating assets and liabilities:
(Increase) decrease in accounts receivable		17			(1,043	)
(Increase) decrease in inventory		251			(473	)
(Increase) decrease in prepaid assets and other current assets		5			(146	)
Increase (decrease) in accounts payable		437			1,432
Increase (decrease) in long-term liabilities		(132	)		—
Increase (decrease) in accrued expenses and other liabilities		(98	)		5,190
Decrease in deferred revenue		—			(5,000	)
Net cash used in operating activities		(8,138	)		(8,289	)
Cash flows from investing activities
Purchase of property and equipment		(208	)		(449	)
Purchase of prepaid licenses		—			(14,000	)
Net cash used in investing activities		(208	)		(14,449	)
Cash flows from financing activities
Decrease (increase) in cash restricted for convertible notes payable		4,098			(6,000	)
Proceeds from exercise of stock options, net		1			75
Proceeds from issuance of common stock, net		8,389			—
Payments on note payable		(2,867	)		—
Proceeds from convertible notes and warrants issued, less debt issuance costs		2,391			13,195
Net cash provided by financing activities		12,012			7,270
Net increase (decrease) in cash and cash equivalents		3,666			(15,468	)
Cash and cash equivalents, beginning of period		7,618			23,663
Cash and cash equivalents, end of period	$	11,284		$	8,195
Supplemental disclosures of cash flow information:
Cash paid for interest	$	8		$	17
Cash paid for income taxes	$	—		$	—
Supplemental disclosures of non-cash financing information:
Issuance of common stock for legal settlements	$	—		$	2,275
Issuance of common stock to convert notes and interest	$	1,675		$	3,867
Acquisition of XTouch assets from Atmel	$	—		$	1,821
Beneficial conversion feature on convertible notes	$	—		$	5,970
Warrants issued in connection with convertible notes	$	—		$	5,980

See accompanying notes to these unaudited condensed consolidated financial statements.

5

Uni-Pixel, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Note 1 — Basis of Presentation, Business and Organization

Uni-Pixel, Inc., a Delaware corporation, is the parent company of Uni-Pixel Displays, Inc., its wholly-owned operating subsidiary. As used herein, “Uni-Pixel,” “the Company,” “we,” “us,” and “our” refer to Uni-Pixel, Inc. and Uni-Pixel Displays, Inc. Our common stock, par value $0.001 per share, is quoted on The NASDAQ Capital Market under the ticker symbol “UNXL.”

On April 16, 2015 we acquired certain assets and licenses related to the manufacture of XTouch touch sensors from Atmel Corporation and CIT Technology Ltd. and we closed a private offering consisting of $15 million in principal amount of our Senior Secured Convertible Promissory Notes together with warrants. On April 22, 2015 we terminated the Manufacturing Facility Installation and Supply Agreement dated April 15, 2013 which was entered into by Uni-Pixel Displays, Inc. and Eastman Kodak Company.

Our decision to change the focus of our business from developing and manufacturing InTouch sensors to manufacturing and selling XTouch touch sensors was based on, among other things, the pressure of declining prices and margin compression in the touch sensor market. We believe that our purchase of the XTouch technology will provide us with a stand-alone, go-to-market strategy that we expect to provide a better economic model and lead to a scalable business in a more rapid time frame.

In addition to the flexible electronic films described above, we are developing a hard coat resin that can be applied using film, spray or inkjet coating methods for applications as protective cover films, a cover lens replacement or a conformal hard coat for plastic components. We plan to sell our hard coat resin and optical films under the Diamond Guard® brand.

Our strategy is to further develop our proprietary Performance Engineered Film™ technology around the vertical markets that we have identified as high growth profitable market opportunities. These markets include touch sensors, antennas, automotive and lighting.

As of June 30, 2016, Uni-Pixel had accumulated a total deficit of $163.7 million from operations in pursuit of these objectives.

As of June 30, 2016, we had cash and cash equivalents of $11.3 million. Our long-term viability is dependent upon our ability to successfully operate our business, develop our manufacturing process, develop our products, establish the business relationships we need to manufacture and market our products, and raise additional capital through offerings of our debt and equity securities to meet our business objectives.

The Company is subject to a number of risks, including, but not limited to, whether it can successfully integrate the XTouch operations; whether the manufacture and sale of the XTouch touch sensors will ultimately prove to be profitable; whether the Company will be able to raise capital when it needs to do so; whether the Company can successfully compete in the industry, particularly against larger organizations with greater financial and other resources; whether the Company will continue to receive the services of its key personnel; whether its intellectual property is adequately protected; and other risks related to the electronics market industry.

Basis of Presentation

The condensed consolidated financial statements presented in this quarterly report include Uni-Pixel, Inc. and our wholly-owned subsidiary, Uni-Pixel Displays, Inc. All significant intercompany transactions and balances have been eliminated.

Note 2 — Summary of Significant Accounting Policies

Interim financial information

The condensed consolidated financial statements included herein, which have not been audited pursuant to the rules and regulations of the Securities and Exchange Commission, reflect all adjustments which, in the opinion of management, are necessary for a fair presentation of financial position, results of operations and cash flows for the interim periods on a basis consistent with the annual audited statements. All such adjustments are of a normal recurring nature. The results of operations for interim periods are not necessarily indicative of the results that may be expected for any other interim period or for a full year. Certain information, accounting policies and footnote disclosures normally included in condensed consolidated financial statements prepared in conformity with accounting principles generally accepted in the United States of America have been omitted pursuant to such rules and regulations, although we believe that the disclosures are adequate to make the information presented not misleading. These condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements included in our Form 10-K, for the year ended December 31, 2015, filed with the Securities and Exchange Commission on March 30, 2016.

6

The accounting and reporting policies of the Company conform to U.S. generally accepted accounting principles (GAAP) and to the practices within the technology industry. There have been no significant changes in the Company’s significant accounting policies during the six months ended June 30, 2016 compared to what was previously disclosed in the Company’s Annual Report on 10-K for the year ended December 31, 2015. The consolidated financial information as of December 31, 2015 included herein has been derived from the Company’s audited consolidated financial statements as of, and for the fiscal year ended, December 31, 2015.

Significant Accounting Policies

Use of estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Examples include provisions for bad debts, useful lives of property and equipment and intangible assets, valuation of derivative liability, impairment of property and equipment and intangible assets, deferred taxes, and the provision for and disclosure of litigation and loss contingencies and stock based compensation. Actual results may differ materially from those estimates.

Statement of cash flows

For purposes of the statements of cash flows, we consider all highly liquid investments (i.e., investments which, when purchased, have original maturities of three months or less) to be cash equivalents.

Concentration of credit risk

We maintain our cash with major U.S. domestic banks. The amounts held in interest bearing accounts periodically exceed the Federal Deposit Insurance Corporation (“FDIC”) insured limit of $250,000 at June 30, 2016 and December 31, 2015. We have not incurred losses related to these deposits.

Restricted cash

As of June 30, 2016 and December 31, 2015 we had restricted cash of $0 and $4.1 million, respectively. At December 31, 2015 the $4.1 million of restricted cash represents the amount we are required to maintain on our balance sheet in accordance with the terms of the Securities Purchase Agreement we entered into on April 16, 2015 for the sale of our Senior Secured Convertible Promissory Notes. This amount was released from restriction in the first quarter of 2016 upon conversion of the Senior Secured Promissory Notes.

Accounts Receivable

The carrying value of our accounts receivable, net of allowance for doubtful accounts, represents their estimated net realizable value. We estimate the allowance for doubtful accounts based on type of customer, age of outstanding receivable, historical collection trends, and existing economic conditions. If events or changes in circumstances indicate that a specific receivable balance may be unrealizable, further consideration is given to the collectability of those balances, and the allowance is adjusted accordingly. Receivable balances deemed uncollectible are written off against the allowance. We had $0.3 million accounts receivable balances at June 30, 2016 and December 31, 2015.

Property and equipment

Property and equipment, consisting primarily of production equipment, lab equipment, computer equipment, software, leasehold improvements, and office furniture and fixtures is carried at cost less accumulated depreciation and amortization. Depreciation and amortization for financial reporting purposes is provided by the straight-line method over the estimated useful lives of three to five years. Leasehold improvements are amortized using the straight-line method over the remaining lease term or the life of the asset, whichever is shorter. The cost of repairs and maintenance is charged as an expense as incurred. Gains or losses related to retirements or dispositions of fixed assets are recognized in the period incurred.

Convertible debt

The Company accounts for its convertible debt as equal to its proceeds, less discounts. The Company records discounts on its convertible debt for the fair value of freestanding and embedded derivatives and beneficial conversion features associated with the issuance of the debt. Discounts are amortized over the life of the convertible debt. The convertible debt is presented on the face of the financial statement as proceeds less the balance of unamortized discounts.

7

Inventory

Inventory is stated at the lower of cost or market. Cost is determined using standard cost, which approximates the first-in, first-out method. Adjustments to reduce the carrying value of inventory to its net realizable value are made for estimated excess, obsolete or impaired balances. These adjustments are measured as the excess of the cost of the inventory over its market value based upon assumptions about future demand and charged to cost of revenue. At the point of the loss recognition, a new, lower cost basis for that inventory is established, and subsequent changes in facts and circumstances do not result in the restoration of the original cost basis or increases in the newly established cost basis.

Derivative liabilities

In accordance with ASC 815-40-25 and ASC 815-10-15 Derivatives and Hedging and ASC 480-10-25 Liabilities-Distinguishing from Equity, the Company’s convertible notes are accounted for net, outside of shareholder’s equity and warrants are accounted for as liabilities at their fair value during periods where the full ratchet anti-dilution provision is in effect.

The warrants are accounted for a liability at their fair value at each reporting period. The value of the derivative warrant liability will be re-measured at each reporting period with changes in fair value recorded as earnings. To derive an estimate of the fair value of these warrants, a binomial model is utilized that computes the impact of share dilution upon the exercise of the warrant shares. This process relies upon inputs such as shares outstanding, estimated stock prices, strike price and volatility assumptions to dynamically adjust the payoff of the warrants in the presence of the dilution effect.

Revenue recognition

We recognize revenue over the period the service is performed. In general, this requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence that an arrangement exists, (2) delivery has occurred or services have been rendered, (3) the fee is fixed and determinable, and (4) collectability is reasonably assured.

Advance payments are deferred until shipment of product has occurred or the service has been rendered.

Revenue from licenses and other up-front fees are recognized on a ratable basis over the term of the respective agreement.

Revenue on certain fixed price contracts where we provide research and development services are recognized over the contract term based on achievement of milestones. When the contracts provide for milestone or other interim payments, the Company will recognize revenue under the milestone method. The milestone method requires the Company to deem all milestone payments within each contract as either substantive or non-substantive. That conclusion is determined based upon a thorough review of each contract and the Company’s deliverables committed to in each contract. For substantive milestones, the Company concludes that upon achievement of each milestone, the amount of the corresponding defined payments is commensurate with the effort required to achieve such milestone or the value of the delivered item. The payment associated with each milestone relates solely to past performance and is deemed reasonable upon consideration of the deliverables and the payment terms within the contract. For non-substantive milestones, including advance payments, the recognition of such payments are pro-rated to the substantive milestones.

In April 2013, we entered into an agreement with Intel Corporation (“Intel”) (the “Capacity License Agreement”), whereby we were to receive $10 million of cash proceeds to assist us in increasing our production capacity. Under the terms of the Capacity License Agreement, there were two milestones with related contingent consideration of $5 million for each milestone plus certain commissions as described below. The Capacity License Agreement required us to purchase certain equipment, which we purchased in 2013 and which we consider not a substantive milestone. The Capacity License Agreement required us to have the capability to produce at least 1 million sensor units per month (as defined in the Capacity License Agreement) by April 2014, which we consider a substantive milestone. We received $5 million in May 2013, which is non-refundable and is recorded as deferred revenue in the consolidated balance sheet at December 31, 2014. As of December 31, 2015 the $5 million is no longer in deferred revenue. Upon achieving the deliverables of the Capacity License Agreement, we would have paid a commission to Intel of 10% on revenue derived from the sales of InTouch™ Sensors jointly developed with Kodak made directly to Intel or to those of Intel’s manufacturing partners that use Intel’s Preferred Price and Capacity License Agreement (“Designated Customers”). The commission amount was to be paid until the aggregate commissions paid equaled the commission cap of $18.5 million. The term of the Capacity License Agreement is the later of 3 years or the full payment of the commission cap. If the Company committed a material breach of the license agreement, certain equipment of the Company with an original cost of approximately $10.1 million would be assigned to Intel to make them whole on any remaining amounts due under the commission cap of $18.5 million.

8

In April 2014, we entered into the First Amendment to the Capacity License Agreement with Intel (the “Amended Capacity License Agreement”). The Amended Capacity License Agreement modified the original Capacity License Agreement terms as follows: 1) the inability of the Company to reach, by April 2014, the minimum production capability and the required quality standards specified in the Capacity License Agreement will no longer constitute a material breach to the Capacity License Agreement; 2) the total amount of cash proceeds to be received was reduced from $10 million to $5 million, which included the $5 million we received in May 2013; 3) the cap on the commission amount was reduced from $18.5 million to $6.25 million; 4) the term “commission” was defined as 10% of gross revenue from the sale of all InTouch™ sensors sold by the Company, which includes sales of sensors to all customers including, but not limited to, Intel and its Designated Customers; 5) if the Company becomes the subject of any proceeding under any bankruptcy, insolvency or liquidation law, the Company will assign all title and ownership to certain designated equipment (the “Equipment”) to Intel; and 6) if the Company materially breaches the Amended Capacity License Agreement, which breach is not cured within 30 days after receipt of notice from Intel, the Company may choose to either (A) pre-pay the cap on the commission to Intel (less the total of all previously paid commissions) or (B) assign all title and ownership to the Equipment to Intel. The only remaining milestone of the Amended Capacity License Agreement was the capability to produce at least 1 million sensors units per month. However, the Capacity License Agreement pertained to the old technology that was jointly developed with Kodak was terminated in April 2015 and the Company has abandoned this technology. The Company recorded a $5 million gain on relief of deferred revenue liability for discontinued operations in the fourth quarter of 2015.

Loss per share data

Basic loss per share is calculated based on the weighted average common shares outstanding during the period. Diluted earnings per share also gives effect to the dilutive effect of stock options, warrants (calculated based on the treasury stock method), convertible notes and convertible preferred stock.

At June 30, 2016, 1,260,000 restricted shares and options and warrants to purchase 11,654,252 shares of common stock at exercise prices ranging from $0.55 to $38.70 per share were outstanding, and were not included in the computation of diluted earnings per share as their effect would be anti-dilutive.

Fair Value of Financial Instruments

ASC Topic 820, Fair Value Measurement and Disclosures, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. This topic also establishes a fair value hierarchy, which requires classification based on observable and unobservable inputs when measuring fair value. The fair value hierarchy distinguishes between assumptions based on market data (observable inputs) and an entity’s own assumptions (unobservable inputs). The hierarchy consists of three levels:

Level 1 – Quoted prices in active markets for identical assets and liabilities;

Level 2 – Inputs other than level one inputs that are either directly or indirectly observable; and

Level 3 – Unobservable inputs developed using estimates and assumptions, which are developed by the reporting entity and reflect those assumptions that a market participant would use.

Our financial instruments consist of accounts receivable, prepaid expenses, derivative liability and accounts payable. We believe the fair values of our accounts receivable, prepaid expenses and accounts payable reflect their respective carrying amounts given the short term nature of these instruments. The derivative liability is measured at fair value on a recurring basis.

Recently issued accounting pronouncements

In February 2016, the Financial Accounting Standards Update (ASU) 2016-02 Leases (Topic). This ASU requires a lessee to recognize a right-of-use asset and a lease liability under most operating leases in its balance sheet. For public companies, the ASU is effective for annual and interim periods beginning after December 15, 2018. Early adoption is permitted. The company is currently evaluating the effects that the adoption of ASU 2016-02 will have on the financial position, results of operations or cash flows.

Accounting Guidance Not Yet Effective

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. ASU 2014-09 requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve this core principle, the guidance provides that an entity should apply the following steps: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when, or as, the entity satisfies a performance obligation. The Company expects to adopt ASU 2014-09 for the fiscal year ending December 31, 2017 and the Company will continue to assess the impact on its financial statements.

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies are not expected to have a material impact on the Company’s financial position, results of operations and cash flows.

9

Note 3 — Commitments and Contingencies

The Company entered into a lease for office, warehouse and laboratory facilities for approximately 7,186 square feet at 3400 Research Forest Drive, Suite B2, The Woodlands, Texas 77381 under a third party non-cancelable operating lease through May 31, 2018. In conjunction with the acquisition of the XTouch technology, the Company entered into a lease for office and production facilities for approximately 28,918 square feet at 1150 E. Cheyenne Mountain Boulevard, Colorado Springs, Colorado 80906 under a third party non-cancelable operating lease through October 15, 2016. In July 2015, the company entered into a lease for office space for 4,478 square feet at 4699 Old Ironsides Drive, Ste. 300, Santa Clara, CA 95054 through July 14, 2018 Future minimum lease commitments as of June 30, 2016 are as follows:

Year Ending June 30 (in thousands)
Six months ending 2016	$	152
2017		306
2018		141
2019		—
2020		—
2021		—
Total	$	599

Eco-System Partner Royalty Obligation

As discussed in Note 2 above, in April 2013, we entered into a Capacity License Agreement with Intel, whereby we were to receive $10 million of cash proceeds to assist us in increasing our production capacity. Under the terms of the Capacity License Agreement, there were two milestones with related contingent consideration of $5 million for each milestone plus certain commissions as described below. The Capacity License Agreement required us to purchase certain equipment, which we purchased in 2013 and which we consider not a substantive milestone. The Capacity License Agreement required us to have the capability to produce at least 1 million sensor units per month (as defined in the Capacity License Agreement) by April 2014, which we consider a substantive milestone. We received $5 million in May 2013, which is non-refundable and is recorded as deferred revenue in the consolidated balance sheet at December 31, 2014. As of December 31, 2015 the $5 million is no longer in deferred revenue. Upon achieving the deliverables of the Capacity License Agreement, we would have paid a commission to Intel of 10% on revenue derived from the sales of InTouch™ Sensors jointly developed with Kodak made directly to Designated Customers. The commission amount was to be paid until the aggregate commissions paid equaled the commission cap of $18.5 million. The term of the Capacity License Agreement is the later of 3 years or the full payment of the commission cap. If the Company committed a material breach of the license agreement, certain equipment of the Company with an original cost of approximately $10.1 million would be assigned to Intel to make them whole on any remaining amounts due under the commission cap of $18.5 million.

As discussed in Note 2 above, in April 2014, we entered into the Amended Capacity License Agreement with Intel. The Amended Capacity License Agreement modified the original Capacity License Agreement terms as follows: 1) the inability of the Company to reach, by April 2014, the minimum production capability and the required quality standards specified in the Capacity License Agreement will no longer constitute a material breach to the Capacity License Agreement; 2) the total amount of cash proceeds to be received was reduced from $10 million to $5 million, which included the $5 million we received in May 2013; 3) the cap on the commission amount was reduced from $18.5 million to $6.25 million; 4) the term “commission” is defined as 10% of gross revenue from the sale of all sensors sold by the Company, which includes sales of InTouch™ Sensors to all customers including, but not limited to, Intel and its Designated Customers; 5) if the Company becomes the subject of any proceeding under any bankruptcy, insolvency or liquidation law, the Company will assign all title and ownership to the Equipment to Intel; and 6) if the Company materially breaches the Amended Capacity License Agreement, which breach is not cured within 30 days after receipt of notice from Intel, the Company may choose to either (A) pre-pay the cap on the commission to Intel (less the total of all previously paid commissions) or (B) assign all title and ownership to the Equipment to Intel. The only remaining milestone of the Amended Capacity License Agreement is the capability to produce at least 1 million sensors units per month.

In the fourth quarter of 2015, the Company recorded a $5.0 million gain on relief of deferred revenue liability for discontinued operations. The $5 million was originally received in 2013 and was related to the technology in the Capacity License Agreement that was based on the InTouch™ Sensor technology which is no longer used. The InTouch™ Sensor technology was developed in the partnership with Kodak which was terminated in April 2015.

In March 2016, Intel, claiming that the XTouch sensors manufactured using the assets acquired from Atmel are the same as the InTouch™ Sensors jointly developed by the Company and Kodak that the Company has abandoned and transferred to Kodak, alleged that the Company breached the Amended Capacity License Agreement by not paying commissions to Intel based on the sales of the XTouch sensors which were subsequently developed using assets acquired and licensed from Atmel because Intel claims (and the Company disputes) that the XTouch sensors are somehow the same as the InTouch™ Sensors that were abandoned and transferred to Kodak. No litigation or other legal proceeding has commenced on this claim. The Company is engaged in discussions with Intel regarding formulation of a mutually agreeable commercial relationship. While it is not possible to predict the outcome of these discussions with certainty at the present time, if the Company is unable to reach an acceptable relationship, it intends to vigorously contest any claim that Intel might make.

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Securities and Exchange Commission Complaint against former Officers of the Company and Settlement with the Company

On November 19, 2013, the Company learned that the Fort Worth Regional Office of the United States Securities and Exchange Commission (“SEC”) issued subpoenas concerning the Company’s agreements related to our InTouch™ Sensors. The Company cooperated fully with the SEC regarding this non-public, fact-finding inquiry, which resulted in a complaint filed by the SEC on March 9, 2016 naming the Company and two of the Company’s former executive officers as defendants. The U.S. District Court for the Southern District of Texas on March 16, 2016 signed a final judgment on this complaint pursuant to our consent (the “Final Judgment”), which the Company gave without admitting or denying the allegations of the SEC’s complaint. Without admitting or denying the allegations of the SEC’s complaint, we consented to the Final Judgment, which permanently enjoins us from violating Sections 10(b) and 13(b)(2)(A) and (B) of the Securities Exchange Act of 1934 (the “Exchange Act”), Rule 10b-5 of the SEC and Section 17(a) of the Securities Act of 1933. The Final Judgment also permanently enjoins the filing with the SEC any periodic report pursuant to Section 13(a) of the Exchange Act and Rules 13a-1, 13a-11, 13a-13 and 12b-20 of the SEC, which contains any untrue statement of material fact, or which omits to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or which fails to comply in any material respect with the requirements of Section 13(a) of the Exchange Act and the rules and regulations thereunder. The Final Judgment also provides for a civil penalty in the amount of $750,000 to be paid in accordance with the following schedule:

(1) $20,000, within 14 days of entry of this Final Judgment;

(2) $20,000, within 104 days of entry of this Final Judgment;

(3) $30,000, within 194 days of entry of this Final Judgment;

(4) $45,000, within 284 days of entry of this Final Judgment;

(5) $60,000, within 374 days of entry of this Final Judgment;

(6) $70,000, within 464 days of entry of this Final Judgment;

(7) $80,000, within 554 days of entry of this Final Judgment;

(8) $80,000, within 644 days of entry of this Final Judgment;

(9) $80,000, within 734 days of entry of this Final Judgment;

(10) $85,000, within 824 days of entry of this Final Judgment;

(11) $90,000, within 914 days of entry of this Final Judgment;

(12) $90,000, within 1004 days of entry of this Final Judgment

The $750,000 settlement was recorded in other expense on the consolidated income statement and $115,000 in current liabilities and $635,000 in long-term liabilities in the consolidated balance sheet at December 31, 2015. As of June 30, the settlement is recorded in current liabilities of $205,000 and $505,000 in long-term liabilities. The Company paid $40,000 in the first half of 2016.

The allegations of the SEC in this complaint against the two former executive officers include that they made more than $2 million in personal profits from selling their own shares of the Company’s common stock following disclosures regarding the Company’s agreement related to our InTouch™ Sensors. The Company’s Amended and Restated Bylaws contain provisions regarding indemnification and advancement of expenses actually and reasonably incurred by the Company’s officers in connection with civil, criminal, administrative or investigative matters provided that such officers acted in good faith and in a manner such officers reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal action or proceeding, had no reason or cause to believe such officer’s conduct was unlawful. The advancement of expenses is expressly conditioned upon receipt of an undertaking by the officer to repay all such amounts so advanced in the event that it shall ultimately be determined that the officer is not entitled to be indemnified by the Company.

Note 4 — Equity, Stock Plan and Warrants

Common Stock

During the six months ended June, 2016, (1) we issued 726,253 shares of common stock to directors and employees; issued 1,595,000 shares related to exercise of warrants; issued 6,152,500 shares and received proceeds of $8.4 million, net of issuance costs of $0.8 million.

During the six months ended June 30, 2015, we (1) issued 12,500 shares of common stock for cash in connection with the exercise of stock options; (2) issued 105,017 shares of common stock to various directors, officers and employees as stock awards; (3) issued 20,833 shares of common stock for the settlement of the derivative lawsuit; (4) issued 430,000 shares of common stock for the settlement of the class action lawsuit; and (5) issued 1,311,692 shares of common stock to convert $3.7 million of principal and $0.2 million of interest into shares of commons stock.

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Restricted Stock

Total compensation expense recognized for restricted stock was approximately $0.6 million for the six months ended June 30, 2016 and $0.7 million for the six months ended June 30, 2015, respectively. The Company has recorded approximately $0.6 million of restricted stock expense in selling, general and administrative expenses, approximately $4,000 in research and development expense and approximately $4,000 in cost of revenue for the six months ended June 30, 2016 and approximately $0.5 million of restricted stock expense in selling, general and administrative expenses and approximately $0.2 million in research and development expense for the six months ended June 30, 2015.

In the second quarter ended June 30, 2016 the Company granted 1,260,000 restricted stock units (“RSUs”) with a grant-date fair value of approximately $1.9 million or $1.50 per share.

RSUs are converted into shares of the Company’s common stock upon vesting on a one-for-one basis. Typically, vesting of RSUs is subject to the employee’s continuing service to the Company. RSUs generally vest over a period of three years and are expensed ratably on a straight line basis over their respective vesting period net of estimated forfeitures. The fair value of the RSUs granted is the product of the number of shares granted and the grant date fair value of the Company’s common stock. The RSUs that will vest in future periods will be net-share settled such that the Company will withhold shares with value equivalent to the employees’ minimum statutory obligation for the applicable income and other employment taxes, and remitted the cash to the appropriate taxing authorities. The total shares to be withheld will be based on the value of the RSUs on their vesting date as determined by the Company’s closing stock price.

At June 30, 2016, there was $2.6 million of total unrecognized compensation cost related to non-vested shares of restricted stock which is expected to be recognized over a weighted-average period of 2.43 years. There were 725,203 shares of restricted stock, net that became vested during the six months ended June 30, 2016.

Stock Incentive Plans

The Company has adopted four stock incentive plans: the 2005 Stock Incentive Plan, the 2007 Stock Incentive Plan, the 2010 Stock Incentive Plan and the 2011 Stock Incentive Plan (collectively, the “Stock Incentive Plans”). The Stock Incentive Plans allow for an aggregate of up to 5,500,001 shares of our common stock to be awarded through incentive and non-qualified stock options, stock appreciation rights, restricted stock, performance shares and other types of awards.

Our Stock Incentive Plans are administered by our Board of Directors, which has the sole discretion to select participants who will receive the awards and to determine the type, size and terms of each award granted. As of June 30, 2016, there were 505,552 shares available for issuance under the Stock Incentive Plans.

The following disclosures provide information regarding the Company’s stock-based compensation awards, all of which are classified as equity awards:

Total compensation expense recognized for options was approximately $0.3 million and $0.9 million for the six months ended June 30, 2016 and June 30, 2015, respectively. The Company has recorded approximately $40,000 of stock compensation expense in cost of revenue, approximately $0.1 million in selling, general and administrative expenses and approximately $0.1 million in research and development expense for the six months ended June 30, 2016 and approximately $0.3 million of stock compensation expense in selling, general and administrative expenses and approximately $0.6 million in research and development expense for the six months ended June 30, 2015.

A summary of the changes in the total stock options outstanding during the six months ended June 30, 2016 follows:

				Weighted
				Average
	Options			Exercise Price
Outstanding and expected to vest, at December 31, 2015		1,941,194		$	6.54
Granted		384,000		$	1.38
Forfeited or expired		(145,252	)	$	9.97
Exercised		(1,050	)	$	1.24
Outstanding and expected to vest, at June 30, 2016		2,178,892		$	5.41
Vested and exercisable at June 30, 2016		1,461,121		$	7.26

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The fair values of the Company’s options were estimated on the date of grant using the Black-Scholes valuation model with the following weighted-average assumptions:

	Three Months ended June 30, 2016			Three Months ended June 30, 2015		Six Months ended June 30, 2016			Six Months ended June 30, 2015
Expected life (years)		5 years			na		5 years			5 years
Interest rate		1.10 to 1.23	%		na		1.10 to 1.23	%		1.31 to 1.57	%
Dividend yield		—			na		—			—
Volatility		98.50	%		na		94.31 to 98.50	%		144.34 to 147.50	%
Forfeiture rate		—			—		—			—
Weighted average fair value of options granted	$	1.10		$	na	$	1.01		$	5.00

At June 30, 2016, there was $0.8 million of total unrecognized compensation cost related to non-vested stock option awards which is expected to be recognized over a weighted-average period of 2.15 years. There were approximately 0.2 million that became vested during the six months ended June 30, 2016.

Common Stock Warrants

As of June 30, 2016, the Company has 9,475,360 common stock warrants outstanding with a weighted average exercise price of $1.61 per share. Information regarding outstanding warrants as of June 30, 2016 is as follows:

Grant date	Warrants Outstanding		Exercisable		Weighted Exercise Price		Remaining Life (Years)
June 10, 2009		15,796		15,796	$	7.50		2.93
August 31, 2009		24,934		24,934	$	7.50		2.93
October 2, 2009		205,000		205,000	$	5.00		3.33
March 15, 2010		8,337		8,337	$	7.50		3.50
April 5, 2010		930		930	$	7.50		3.50
April 16, 2015 (1)		1,151,121		1,151,121	$	1.50		3.50
November 5, 2015 (1)		38,371		38,371		1.50		3.75
November 30, 2015 (1)		8,030,871		8,030,871	$	1.50		4.42
Total		9,475,360		9,475,360

(1) The exercise price of the warrants and the number of shares for which the warrants are exercisable are subject to certain adjustments if the Company issues or sells additional shares of common stock or common stock equivalents at a price per share less than the exercise price then in effect, or without consideration.

Note 5 — Property and Equipment and Inventory

A summary of the components of property and equipment at June 30, 2016 and December 31, 2015 (in thousands) are as follows:

	Estimated Useful Lives	June 30, 2016			December 31, 2015
Production equipment	3 to 5 years	$	1,988		$	1,966
Research and development equipment	3 to 5 years		3,583			3,572
Leasehold improvements	5 years		23			23
Computer equipment	5 years		98			98
Office equipment	3 to 5 years		20			20
Construction-in-progress			351			176
			6,063			5,855
Accumulated depreciation			(4,566	)		(4,013	)
Property and equipment, net		$	1,497		$	1,842

Depreciation and amortization expense of property and equipment for the six months ended June 30, 2016 and June 30, 2015 was approximately $0.6 million and $3.3 million, respectively.

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A summary of the components of inventory at June 30, 2016 and December 31, 2015 (in thousands):

	June 30, 2016		December 31, 2015
Raw materials	$	312	$	419
Work-in-progress		193		328
Finish Goods		13		22
Inventory	$	518	$	769

Note 6 — Senior Secured Convertible Notes and Warrants

Concurrent with the consummation of the XTouch acquisition, on April 16, 2015 (the “Effective Date”), and pursuant to a Securities Purchase Agreement, we sold $15 million in Senior Secured Convertible Notes, together with warrants for the purchase of 1,151,121 shares of our common stock (the “Warrants”), to two accredited investors (the “Investors”). In addition, we sold an additional $0.5 million Convertible Note to one of these Investors in November 2015, and the Warrant issued to that Investor was adjusted for an additional 38,371 shares of common stock. The number of shares of common stock subject to the Warrants equaled 65% of the number of shares of common stock the Investors would receive if the Convertible Notes were converted at the Conversion Price (as defined below) on the trading day immediately prior to the Effective Date.

The Convertible Notes accrue simple interest at the rate of 9% per year (“Interest”). On November 23, 2015, the Interest was reduced to 4%. The Convertible Notes together with all accrued and unpaid Interest were due and payable on April 16, 2016 (the “Maturity Date”). The Investors may, at any time, elect to convert the Convertible Notes into shares of our common stock at the conversion price, subject to certain beneficial ownership limitations. The conversion price is the lesser of $8.47 per share (the “Conversion Price”), subject to adjustment as set forth in the Convertible Notes for stock splits, dividends, recapitalizations and similar events, which equaled 110% of the last closing price of our common stock prior to the execution and delivery of the Securities Purchase Agreement and 85% of the lowest closing sale price during the prior 30 trading day period. As of February 16, 2016, the Convertible Note had been fully repaid.

The Warrants when issued had a five-year term and a per share exercise price of $9.63, subject to adjustment as set forth in the Warrants, which equaled 125% of the closing price of our common stock prior to the Effective Date. If, after the Effective Date, we issue or sell, or are deemed to have issued or sold, any shares of common stock (with the exception of certain Excluded Securities, as those are defined in the Warrants) for a consideration per share less than a price equal to the exercise price of the Warrants in effect immediately prior to such issue or sale (or deemed issuance or sale) (a “Dilutive Issuance”), then immediately after the Dilutive Issuance, (x) if the Dilutive Issuance occurs prior to the one year anniversary of the Effective Date, then the exercise price then in effect will be reduced to an amount equal to the product of (A) the exercise price in effect immediately prior to the Dilutive Issuance and (B) the quotient determined by dividing (1) the sum of (I) the product derived by multiplying the exercise price in effect immediately prior to the Dilutive Issuance and the number of Common Shares Deemed Outstanding (as defined in the Warrants) immediately prior to the Dilutive Issuance plus (II) the consideration, if any, received by us on such Dilutive Issuance, by (2) the product derived by multiplying (I) the exercise price in effect immediately prior to the Dilutive Issuance by (II) the number of Common Shares Deemed Outstanding immediately after the Dilutive Issuance and (y) if the Dilutive Issuance occurs after the one year anniversary of the Effective Date but within five years of the Effective Date, the exercise price then in effect will be reduced to an amount equal to the price of the shares of common stock issued in the Dilutive Issuance. The Warrants will be exercisable for cash, but if a prospectus covering the shares of common stock underlying the Warrants is not available, the Investors may exercise the Warrants using a cashless exercise provision. The Warrants may not be exercised if, after giving effect to the exercise, the Investor would beneficially own in excess of 4.99% or 9.99% of the outstanding shares of common stock, depending on the Investor. At the Investor’s option, the cap applicable to the exercise of the Warrants may be raised or lowered to any other percentage not in excess of 9.99%, except that any increase will only be effective upon 61-days’ prior notice to us.

As per the terms of the November 2015 equity transaction, the 1,189,492 Warrants were exchanged for new warrants to purchase an equivalent number of shares of common stock in the same form and same terms as the warrants issued in such equity transaction, including a repricing to $1.50 per share exercise price. The exercise price of the Warrants and the number of shares for which the Warrants are exercisable are subject to certain adjustments if the Company issues or sells additional shares of common stock or common stock equivalents at a price per share less than the exercise price then in effect, or without consideration. Notwithstanding the foregoing, there will be no adjustment to the exercise price of the Warrants or number of warrant shares issuable upon exercise in connection with the issuance of common stock upon Board of Director-approved employee benefit plans or upon the conversion, exercise or payment of certain outstanding, excluded securities.

Pursuant to a Pledge and Security Agreement (the “Security Agreement”) we entered into in favor of Hudson Bay Fund LP as Collateral Agent, the Convertible Notes are secured by a perfected first priority security interest in all of our assets and are senior in right of payment to all of our existing and future indebtedness, subject to Permitted Liens, as defined in the Convertible Notes. With the exception of Permitted Liens, we have agreed that we will not grant a security interest in our assets so long as the Convertible Notes remain outstanding and that we will not incur any new debt except for Permitted Indebtedness, as that term is defined in the Convertible Notes.

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In conjunction with the issuance of the Convertible Notes and the Warrants, we entered into a Registration Rights Agreement pursuant to which we agreed to file a registration statement covering the sum of (i) 200% of the maximum number of shares underlying the Convertible Notes and (ii) the maximum number of shares underlying the Warrants (the “Registrable Securities”). We have agreed to keep any registration statement we file pursuant to the Registration Rights Agreement effective until the earlier of (i) the date as of which the Investors may sell all of the Registrable Securities covered by the Registration Statement without restriction or limitation pursuant to Rule 144 and without the requirement to be in compliance with Rule 144(c)(1) (or any successor thereto) or (ii) the date on which the Investors shall have sold all of the securities covered by such Registration Statement.

We were to use our reasonable best efforts to have the registration statement declared effective within 90 days after the Effective Date (the “Registration Statement Effective Date”). If we failed to register the Registrable Securities or the registration statement is not declared effective by the SEC before the Registration Statement Effective Date, or if on any day after the Registration Statement Effective Date, sales of the Registrable Securities required to be included on the Registration Statement cannot be made (collectively, a “Registration Default”), we will pay to each Investor an amount in cash equal to 1% of the aggregate Purchase Price (as that term is defined in the Securities Purchase Agreement) of the Investor’s Registrable Securities, whether or not the Registrable Securities were included in the registration statement, and 1% per month (or a portion thereof pro rata) that the Registration Default continues to exist. We are not required to make these payment if, when a Registration Default occurs, the Investors can freely sell our common stock pursuant to Rule 144 without restriction or limitation. We filed the registration statement within 90 days and therefore did not have to make any payments to the Investors.

Investors in the offering have the right to participate for no less than 35% of any future offering of our equity or equity equivalent securities until the second anniversary of the Effective Date when the Convertible Notes were purchased.

We agreed to keep at least $6.0 million of restricted cash on our balance sheet at all times until the Maturity Date or until the outstanding principal amount of the Convertible Notes is less than $6.0 million, at which time the amount of restricted cash we are required to keep on our balance sheet will be adjusted downward, dollar for dollar. As of June 30, 2016 and December 31, 2015, the restricted cash was $0 and $4.1 million, respectively.

As additional security for repayment of the Convertible Notes, Uni-Pixel Displays, Inc. entered into to a Guarantee Agreement in favor of the Investors.

Cowen and Company, LLC acted as our financial advisor in the acquisition of the assets and as our placement agent in the financing transaction. We paid Cowen and Company, LLC approximately $1.7 million for these services.

On April 16, 2015, the Company determined that the Convertible Notes had a carrying amount of $3.1 million. The Company utilized a binomial model in determining the fair market value of the Warrants of $6.0 million.

The Company also determined there was a beneficial conversion feature (“BCF”) as a result of the intrinsic value between the effective exercise price and the market price at the time of conversion of $6.0 million. The BCF was included in additional paid in capital. As a result of the down-round protection on the warrants, they have been accounted for as a derivative liability upon issuance and at December 31, 2015.

At inception, the Convertible Notes balance (in thousands) and unamortized discount in millions were as follows:

Convertible notes	$	15,000
Discount attributable to warrants		(5,980	)
Discount attributable to BCF		(5,970	)
Carrying amount of Convertible Notes at inception	$	3,050

As of June 30, 2016, both Investors had been issued an aggregate of 13,984,411 shares of common stock when the Investor had converted as of such date $11.6 million of principal and $0.3 million of interest into shares of common stock.

The following table summarizes the charges to interest, amortization and other expense, net for the six months ended June 30, 2016 (in thousands):

Interest expense on convertible notes	$	9
Accretion of convertible note discount	$	1,291

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Note 7 — Agreements with Atmel Corporation and CIT Technology LTD.

Atmel Corporation Asset Acquisition and License Agreements

On April 16, 2015 (the “Effective Date”), Uni-Pixel Displays, Inc. (“Displays”) acquired from Atmel Corporation (“Atmel”), pursuant to the terms of a Purchase and Sale Agreement, a Patent License Agreement, an IP License Agreement, a Bill of Sale and Assignment and Assumption Agreement and two leases for real property, certain assets used for the production of capacitive touch sensors comprised of fine lines of copper metal photo lithographically patterned and plated on flexible plastic film (the “Touch Sensors”). $450,000 was paid for the machinery, parts and equipment needed to manufacture the Touch Sensors and the existing inventory on hand. Displays paid this amount with a secured promissory note due on or before the earlier of (i) the second anniversary of the Effective Date or (ii) the sale of equity and/or debt securities after the Effective Date pursuant to which Displays or any affiliate of our receives gross proceeds of no less than $5 million. Interest accrues on the unpaid principal amount at a rate equal to 2% per annum compounded semi-annually and is to be paid in arrears semi-annually, commencing with the six-month anniversary of the Effective Date. Displays has granted to Atmel a security interest in the purchased assets and all accounts receivable subsequently arising from Display’s manufacture and sale of Touch Sensors and all proceeds therefrom. Pursuant to the Purchase and Sale Agreement, Displays assumed certain liabilities of Atmel, including open purchase and supply orders, related to the Touch Sensor business. In April 2016, the $450,000 promissory note was fully repaid.

Through the Patent License Agreement, Atmel licensed to Displays a non-sublicensable, worldwide, royalty-bearing license under its Touch Sensors patents to make or have made, use, offer for sale, sell, and import the Touch Sensors. In consideration for this license, Displays agreed to pay an annual royalty fee during the initial five year term of the license (the “Initial Term”) of the greater of $3.25 million or 3.33% of the total net sales (as defined in the Patent License Agreement) of the Touch Sensors during the Initial Term. Displays has the right to renew the license for a term of 10 years. If Displays exercises this right, the annual royalty fee will consist of 2.5% of the total net sales of the Touch Sensors until it reaches a total of $16.75 million, at which time no further annual royalty fees will be due. Upon execution of the Patent License Agreement, Displays paid a non-refundable, non-returnable prepayment of minimum annual royalty fees of $9.33 million (the “Royalty Prepayment”). The Royalty Prepayment will be applied to the annual royalty fees Displays owes under the Patent License Agreement. If, during the Initial Term, Displays’ cash balances as of the quarter end immediately prior to the date of the royalty period to which an unpaid annual royalty relates is less than $30 million, it may pay the annual royalty fee with a secured promissory note. Atmel has agreed that it will not enter into a license agreement for the licensed patents that is effective prior to the second anniversary of the Effective Date.

Through the IP License Agreement, Atmel licensed to Displays a non-sublicensable, worldwide, royalty-free license to the intellectual property necessary to make or have made, use, offer for sale, sell, and import the Touch Sensors. The term of the IP License Agreement is co-extensive with the term of the Patent License Agreement. Atmel has agreed that it will not enter into a license agreement for the licensed intellectual property that is effective prior to the second anniversary of the Effective Date.

As part of the asset acquisition, Displays also entered into leases with Atmel Corporation for Building 2 and Building 4, both of which are located at 1150 E. Cheyenne Mountain Boulevard, Colorado Springs, Colorado. The term of each lease is 18 months (the “Primary Lease Term”). The term of each lease may be extended for two additional six month periods. During the Primary Lease Term, the initial base rent for each of Building 2 and Building 4 will be $100 per month. During the first renewal term, the monthly base rent for Building 2 will be $5,625 and during the second renewal term the monthly base rent will be $8,437. During the first renewal term, the monthly base rent for Building 4 will be $39,375 and during the second renewal term the monthly base rent will be $59,062. Aside from the base rent, Displays is responsible for the payment of its share of operating expenses attributable to the buildings, real estate taxes attributable to the buildings, sales and personal property taxes, utilities and additional services provided by Atmel (as defined in the leases).

Transition Services Agreement

In conjunction with the above-described transaction, Displays and Atmel entered into a Transition Services Agreement. Pursuant to the Transition Services Agreement, Atmel agreed to provide the following services for the periods described: (i) quality assurance and failure analysis services for the XTouch Touch Sensors for a period of six months starting from the Effective Date, (ii) operations services for a period of 30 days starting from the Effective Date and (iii) other services, as those are defined in the Transition Services Agreement, for a period of three months starting from the Effective Date. In exchange for the services, Displays has agreed to pay reasonable and documented direct costs incurred by Atmel in performing the services together with actual out-of-pocket third-party expenses reasonably incurred by Atmel in providing the services. The service fees include, but are not limited to, (a) the actual out-of-pocket employment costs (base salary, payroll taxes and out-of-pocket medical benefits) for the individuals performing the services (based on the actual time expended by such individuals in performing the services), (b) costs of materials, (c) the actual out-of-pocket third-party expenses reasonably incurred by Atmel in providing the services, and (d) direct supervisory and management expenses incurred by Atmel in providing the services. On the Effective Date, we paid $0.4 million to Atmel and was applied against certain designated services. The transition services have been completed.

CIT Technology Ltd. License Agreements and Manufacturing and Technology Transfer Agreement

On the Effective Date Displays entered into an FLT (Fine Line Technology) Patent License Agreement (the “CIT Patent License Agreement”), an FLT (Fine Line Technology) Intellectual Property License Agreement (the “CIT IP License Agreement”) and a Manufacturing and Technology Transfer Agreement (the “Manufacturing Agreement”) with CIT Technology Ltd. (“CIT”).

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Through the CIT Patent License Agreement, CIT licensed to Displays a non-sublicensable, worldwide, royalty-bearing license under its fine line technology (“FLT”) patents to make or have made, use, offer for sale, sell, and import licensed FLT products (the “Licensed Products”), which are defined as capacitive touch sensors comprising fine lines of copper metal printed on flexible plastic film. In consideration for this license, Displays agreed to pay an annual royalty fee during the initial five year term of the license (the “Initial License Term”) of the greater of $1.65 million or 1.67% of the total net sales (as defined in the CIT Patent License Agreement) of the Licensed Products during the Initial License Term. Displays has the right to renew the license for a term of 10 years. If Displays exercises this right, the annual royalty fee will consist of 1.67% of the total net sales of the Licensed Products until it reaches a total of $8.25 million, at which time no further annual royalty fees will be due. Further, the total royalty fees payable for the initial 5 year term and the subsequent 10 year term is capped at $30 million. Upon execution of the CIT Patent License Agreement, Displays paid a non-refundable, non-returnable prepayment of minimum annual royalty fees of $4.67 million (the “CIT Royalty Prepayment”). The CIT Royalty Prepayment will be applied to the annual royalty fees Displays owes under the CIT Patent License Agreement. If, during the Initial License Term, Displays’ cash balances as of the quarter end immediately prior to the date of the royalty period to which an unpaid annual royalty relates is less than $30 million, Displays may pay the annual royalty fee with a secured promissory note. CIT has agreed that it will not enter into a license agreement for the licensed patents as they relate to the Licensed Products that is effective prior to the second anniversary of the Effective Date.

Through the CIT IP License Agreement, CIT licensed to Displays a non-sublicensable, worldwide, royalty-free license to the intellectual property necessary to make or have made, use, offer for sale, sell, and import the Licensed Products. The term of the CIT IP License Agreement is co-extensive with the term of the CIT Patent License Agreement. CIT has agreed that it will not enter into a license agreement for the licensed intellectual property as it relates to the Licensed Products that is effective prior to the second anniversary of the Effective Date.

The Manufacturing Agreement had a term of six months, where Displays agreed that for a period of 16 consecutive weeks it will order, on a weekly basis, 11,500 linear meters of coated film manufactured by CIT at a cost of $7.90 per linear meter. The agreement had been completed and the process was transferred to the Colorado Springs facility in fiscal year 2015.

Note 8 — Loss on Discontinued Operations

On April 22, 2015 Displays exercised its right to terminate that certain Manufacturing Facility Installation and Supply Agreement dated April 15, 2013 (the “Supply Agreement”), which was entered into by Displays and Eastman Kodak Company (“Kodak”). The term of the Supply Agreement was to end on December 31, 2017.

Displays did not renew that certain Joint Development Agreement dated February 5, 2013, also with Kodak, which was related to flexible patterned conductive films.

In connection with the discontinued operations, the Company took a $7.6 million write down on equipment in the second quarter of 2015.

Note 9 — Fair Value Measurements

Liabilities measured at fair value (in thousands) on a recurring basis are summarized as follows:

							Carrying
	Fair Value Measurements Using Inputs						Amount at
Financial Instruments	Level 1		Level 2		Level 3		June 30, 2016
Liabilities:
Derivative liability	$	-	$	1,140	$	-	$	1,140
Total	$	-	$	1,140	$	-	$	1,140

As described in Note 6, the derivative liability is related to warrants to purchase 1,151,121 shares of common stock issued by the Company in connection with our Convertible Note of $15.0 million in April 2015, which included a down-round protection on the warrants. The original exercise price of these warrants were $9.63 per share and they expire in April 2020. With the additional $0.5 million in Convertible Note issued in November 2015, the original Warrant was adjusted for an additional 38,371 shares of common stock. In connection with the November 2015 equity transaction (Note 7), the total outstanding warrants for 1,189,492 warrants were repriced to $1.50 per share. These warrants were not issued with the intent of effectively hedging any future cash flow, fair value of any asset, liability or any net investment in a foreign operation. The fair value of these warrants were $6.0 million at inception as described in Note 6. The Company recognized $0.7 million of other expense for the six months ended June 30, 2016 in the accompanying consolidated statements of operations, resulting from the increase in the fair value of the derivative liability at June 30, 2016. The derivative liability will be measured at fair value, with changes in fair value recognized in earnings, until the warrants are exercised, expire or are otherwise extinguished.

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Note 10 — Revenue and Credit Concentrations

During the six months ended June 30, 2016 and 2015, revenues by customers with more than 10% of revenue were as follows:

	Six months ended June 30, 2016					Six months ended June 30, 2015
	Amount		%			Amount		%
Company A	$	1,111		62	%	$	842		62	%
Company B		626		35	%		438		32	%
Total	$	1,737		96	%	$	1,280		94	%

As of June 30, 2016 and December 31, 2015 customers with more than 10% of accounts receivables balances were as follows:

	As of June 30, 2016					As of December 31, 2015
	Amount		%			Amount		%
Company A	$	57		18	%	$	133		40	%
Company B		209		66	%		164		49
Total	$	266		84	%	$	297		89	%

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward Looking Statements

This report, including the documents that we incorporate by reference, may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

Forward-looking statements in or incorporated by reference in this report include, without limitation, statements related to our plans, strategies, objectives, expectations, intentions and adequacy of resources. Investors are cautioned that such forward-looking statements involve risks and uncertainties. Important factors that could cause actual results to differ materially from those indicated in the forward-looking statements include, but are not limited to, the possibility that we will be unable to successfully combine the XTouch business and operations with our business and operations, the development of technologies superior to our technologies, the loss of key customers of the XTouch products, our inability to achieve cost savings following the acquisition of the XTouch business, the imposition of unanticipated liabilities as a result of the acquisition of the XTouch business, the rate and degree of market acceptance of our products, our ability to develop and market new and enhanced products, our ability to obtain financing as and when we need it, competition from existing and new products and our ability to effectively react to other risks and uncertainties described from time to time in our SEC filings, such as fluctuation of quarterly financial results, reliance on third party manufacturers and suppliers, litigation or other proceedings, government regulation and stock price volatility.

In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “expects,” “plans,” “intends,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” or “continue’’ or the negative of such terms or other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date such statements are made. We do not undertake any obligation to publicly update or revise any forward-looking statement.

XTouch Acquisition, Financing and Change in Business Strategy

On April 16, 2015 we acquired certain assets and licenses related to the manufacture of XTouch touch sensors from Atmel Corporation and CIT Technology Ltd. and we closed a private offering consisting of $15 million in principal amount of our Senior Secured Convertible Promissory Notes (the “Notes”) together with warrants. A more complete discussion of these transactions is included in Note 7 to our financial statements, which are included at Item 1of Part I of this report, and in the Current Report on Form 8-K that we filed with the Securities and Exchange Commission on April 17, 2015.

On April 22, 2015 we terminated the Manufacturing Facility Installation and Supply Agreement dated April 15, 2013 which was entered into by our wholly owned subsidiary, Uni-Pixel Displays, Inc., and Eastman Kodak Company. A more complete discussion of this matter is included in Note 8 to our financial statements, which are included at Item 1 of Part I of this report, and in the Current Report on Form 8-K that we filed with the Securities and Exchange Commission on April 27, 2015.

Our decision to change the focus of our business from developing and manufacturing InTouch sensors to manufacturing and selling XTouch touch sensors was based on, among other things, the pressure of declining prices and margin compression in the touch sensor market. We believe that our purchase of the XTouch technology will provide us with a stand-alone, go-to-market strategy that we expect to provide a better economic model and lead to a scalable business in a more rapid time frame.

Critical Accounting Policies and Estimates

In preparing our condensed consolidated financial statements in accordance with accounting principles generally accepted in the U.S. and pursuant to the rules and regulations promulgated by the SEC, we make assumptions, judgments and estimates that can have a significant impact on our net income/(loss) and affect the reported amounts of certain assets, liabilities, revenue and expenses, and related disclosures. We base our assumptions, judgments and estimates on historical experience and various other factors that we believe to be reasonable under the circumstances. Actual results could differ materially from these estimates under different assumptions or conditions. On a regular basis, we evaluate our assumptions, judgments and estimates. We also discuss our critical accounting policies and estimates with the Audit Committee of our Board of Directors.

We believe that the assumptions, judgments and estimates involved in the accounting for revenue recognition, income taxes, and long-lived assets, have the greatest impact on our condensed consolidated financial statements, so we consider these to be our critical accounting policies. Historically, our assumptions, judgments and estimates relative to our critical accounting policies have not differed materially from actual results.

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There have been no significant changes to our critical accounting policies and estimates during the six months ended June 30, 2016, as compared to the critical accounting policies and estimates disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2015, which was filed with the SEC on March 30, 2016.

Derivative liabilities: The Company, in accordance with ASC 815-40-25 and ASC 815-10-15 Derivatives and Hedging and ASC 480-10-25 Liabilities-Distinguishing from Equity, convertible preferred shares are accounted for net, outside of shareholder’s equity and warrants are accounted for as liabilities at their fair value during periods where the full ratchet anti-dilution provision is in effect.

The warrants are accounted for a liability at their fair value at each reporting period. The value of the derivative warrant liability will be re-measured at each reporting period with changes in fair value recorded as earnings. To derive an estimate of the fair value of these warrants, a binomial model is utilized that computes the impact of share dilution upon the exercise of the warrant shares. This process relies upon inputs such as shares outstanding, estimated stock prices, strike price and volatility assumptions to dynamically adjust the payoff of the warrants in the presence of the dilution effect.

Revenue Recognition: The Company sells its products to original equipment manufacturers (“OEMs”) and distributors and recognizes revenue when the rights and risks of ownership have passed to the customer, when persuasive evidence of an arrangement exists, the product has been delivered, the price is fixed or determinable, and collection of the resulting receivable is reasonably assured. Allowances for sales returns and other credits are recorded at the time of sale.

Contracts and customer purchase orders are used to determine the existence of an arrangement. Shipping documents are used to verify delivery. The Company assesses whether the price is fixed or determinable based on the payment terms associated with the transaction and whether the sales price is subject to refund or adjustment. The Company assesses collectability based primarily on the creditworthiness of the customer as determined by credit checks and analysis, as well as the customer’s payment history. Sales terms do not include post-shipment obligations except for product warranty.

Advance payments are deferred until shipment of product has occurred or the service has been rendered.

Revenue from licenses and other up-front fees are recognized on a ratable basis over the term of the respective agreement.

Revenue on certain fixed price contracts where we provide research and development services is recognized over the contract term based on achievement of milestones. When the contracts provide for milestone or other interim payments, the Company will recognize revenue under the milestone method. The milestone method requires the Company to designate all milestone payments within each contract as either substantive or non-substantive. That conclusion is determined based upon a thorough review of each contract and the deliverables to be made by the Company pursuant to each contract. For substantive milestones, the Company concludes that upon achievement of each milestone, the amount of the corresponding defined payments is commensurate with the effort required to achieve such milestone or the value of the delivered item. The payment associated with each milestone relates solely to past performance and is deemed reasonable upon consideration of the deliverables and the payment terms within the contract. For non-substantive milestones, including advance payments, the recognition of such payments is pro-rated to the substantive milestones.

In April 2013, we entered into an agreement with Intel (the “Capacity License Agreement”), whereby we were to receive $10 million of cash proceeds to assist us in increasing our production capacity. Under the terms of the Capacity License Agreement, there were two milestones with related contingent consideration of $5 million for each milestone plus certain commissions as described below. The Capacity License Agreement required us to purchase certain equipment, which we purchased in 2013 and which we considered not a substantive milestone. The Capacity License Agreement required us to have the capability to produce at least 1 million sensor units per month (as defined in the Capacity License Agreement) by April 2014, which we considered a substantive milestone. We received $5 million in May 2013, which was non-refundable and is recorded as accrued liabilities in the accompanying consolidated balance sheet at June 30, 2015. Upon achieving the deliverables of the Capacity License Agreement, we would have paid a commission to Intel of 10% on revenue derived from the sales of InTouch™ Sensors made directly to Intel or to those of Intel’s manufacturing partners that use Intel’s Preferred Price and Capacity License Agreement (“Designated Customers”). The commission amount was to be paid until the aggregate commissions paid equaled the commission cap of $18.5 million. The term of the Capacity License Agreement is the later of 3 years or the full payment of the commission cap. If the Company committed a material breach of the license agreement, certain equipment of the Company with an original cost of approximately $10.1 million would be assigned to Intel to make Intel whole on any remaining amounts due under the commission cap of $18.5 million.

In April 2014, we entered into the Amended Capacity License Agreement with Intel (the “Amended Capacity License Agreement”). The Amended Capacity License Agreement modified the original Capacity License Agreement terms as follows: 1) the inability of the Company to reach, by April 2014, the minimum production capability and the required quality standards specified in the Capacity License Agreement will no longer constitute a material breach to the Capacity License Agreement; 2) the total amount of cash proceeds to be received was reduced from $10 million to $5 million, which included the $5 million we received in May 2013; 3) the cap on the commission amount was reduced from $18.5 million to $6.25 million; 4) the term “commission” is defined as 10% of gross revenue from the sale of all sensors sold by the Company, which includes sales of sensors to all customers including, but not limited to, Intel and its Designated Customers; 5) if the Company becomes the subject of any proceeding under any bankruptcy, insolvency or liquidation law, the Company will assign all title and ownership to certain designated equipment (the “Equipment”) to Intel; and 6) if the Company materially breaches the Amended Capacity License Agreement, which breach is not cured within 30 days after receipt of notice from Intel, the Company may choose to either (A) pre-pay the cap on the commission to Intel (less the total of all previously paid commissions) or (B) assign all title and ownership to the Equipment to Intel.

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As the Company has discontinued its joint development activities with Kodak to develop, manufacture and market touch sensors based on the InTouch technology (Note 8), the Company is currently in discussions with Intel regarding the Capacity License Agreement.

Cost of Revenues, Selling, General and Administrative Expenses and Research and Development Expenses: The primary purpose of our facilities in Colorado Spring, Colorado and The Woodlands, Texas is for manufacturing, to conduct research on the development, testing and delivery of our prototype devices, and to pursue the commercialization of our products.

If, in the future, the purposes for which we operate our facilities in Colorado Springs, Colorado and in The Woodlands, Texas, or any new facilities we open, changes, the allocation of the costs incurred in operating that facility between cost of sales and research and development expenses could change to reflect such operational changes.

Research and Development Expenses: Research and development costs are expensed as incurred and include salaries and benefits, costs paid to third-party contractors for research, development and manufacturing of materials and devices, and a portion of facilities cost. Prototype development costs are a significant component of research and development expenses and include costs associated with third-party contractors. Invoicing from third-party contractors for services performed can lag several months. We accrue the costs of services rendered in connection with third-party contractor activities based on our estimate of management fees, site management and monitoring costs and data management costs. Actual costs may differ in some cases from estimated costs and are adjusted for in the period in which they become known.

Stock-Based Compensation: We measure stock-based compensation expense for all share-based awards on the estimated fair value of those awards at grant-date. The fair values of stock option awards are estimated using a Black-Scholes valuation model. The compensation costs are recognized net of any estimated forfeitures on a straight-line basis over either the employee’s requisite service period, or other such vesting requirements as are stipulated in the stock option award agreements. No compensation cost is recognized for equity instruments for which employees do not render the requisite service. Forfeiture rates are estimated at grant date based on historical experience and adjusted in subsequent periods for any differences in actual forfeitures from those estimates.

Recent Accounting Pronouncements

See Note 2 of our accompanying condensed consolidated financial statements for a full description of recent accounting pronouncements and our expectation of their impact, if any, on our results of operations and financial condition.

RESULTS OF OPERATIONS

Comparison of the six months ending June 30, 2016 and 2015

REVENUES. Revenues were $1.8 million for the six months ended June 30, 2016 as compared to $1.4 million for the six months ended June 30, 2015. Revenues for the six months ended June 30, 2016 and 2015 were mainly comprised of sales of XTouch sensors.

COST OF REVENUES. Cost of revenues include all direct expenses associated with the delivery of services and costs of manufacturing including internal labor costs and materials. Cost of revenues was $8.2 million for the six months ended June 30, 2016 and $3.4 million for the six months ended June 30, 2015. We recorded cost of revenue expenses for the full six months in 2016 compared to only three months in 2015 as we did not begin to ship products until the second quarter of 2015.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative expenses decreased by 44% or approximately $2.9 million, to $3.7 million for the six months ended June 30, 2016 from $6.6 million for the six months ended June 30, 2015. The major changes to selling, general and administrative expenses are as follows:

a) Salaries and benefits decreased by approximately $0.2 million to $1.7 million for the six months ended June 30, 2016 compared to $1.9 million for the six months ended June 30, 2015 due to the following: salaries increased to $0.9 million for the six months ended June 30, 2016 compared to $0.8 million for the six months ended June 30, 2015; a decrease in severance to $0 for the six months ended June 30, 2016 compared to $0.1 million for the six months ended June 30, 2015; a decrease in stock compensation expense to $0.1 million for the six months ended June 30, 2016 compared to $0.3 million for the six months ended June 30, 2015;

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b) Contract labor expense increased by approximately $0.1 million to $0.2 million for the six months ended June 30, 2016 compared to $0.1 million for the six months ended June 30, 2015;

c) Legal expense decreased by approximately $0.2 million to $0.6 million for the six months ended June 30, 2016 compared to $0.8 million for the six months ended June 30, 2015;

d) Office expense increased by approximately $0.2 million to $0.2 million for the six months ended June 30, 2016 compared to $28,000 for the six months ended June 30, 2015;

e) Travel expense increased by approximately $0.1 million to $0.3 million for the six months ended June 30, 2016 compared to $0.2 million for the six months ended June 30, 2015 primarily due to increased travel visiting potential customers and suppliers;

f) Depreciation and amortization expense decreased by approximately $3.0 million to $0.1 million for the six months ended June 30, 2016 compared to $3.1 million for the six months ended June 30, 2015 due to the write-off of equipment.

RESEARCH AND DEVELOPMENT. Research and development expenses decreased by approximately $2.3 million, or 55%, to $1.9 million during the six months ended June 30, 2016 from $4.2 million for the six months ended June 30, 2015. The major changes to research and development expenses are as follows:

a) Salaries and benefits attributable to research and development decreased by approximately $1.2 million to $1.0 million for the six months ended June 30, 2016 compared to $2.2 million for the six months ended June 30, 2015 due to the following: a decrease in salaries to $0.7 million for the six months ended June 30, 2016 compared to $1.1 million for the six months ended June 30, 2015; a decrease in severance to $0 for the six months ended June 30, 2016 compared to $0.1 million for the six months ended June 30, 2015; a decrease in stock compensation expense to $0.1 million for the six months ended June 30, 2016 compared to $0.6 million for the six months ended June 30, 2015; and a decrease in restricted stock expense to approximately $4,000 for the six months ended June 30, 2016 compared to $0.2 million for the six months ended June 30, 2015;

b) Consulting expense attributable to research and development increased by approximately $0.2 million to $0.3 million for the six months ended June 30, 2016 compared to $0.1 million for the six months ended June 30, 2015;

c) Lab expense decreased by approximately $1.1 million to $0.4 million for the six months ended June 30, 2016 compared to $1.5 million for the six months ended June 30, 2015; and

d) Travel expense decreased by approximately $0.1 million to $0.1 million for the six months ended June 30, 2016 compared to $0.2 million for the six months ended June 30, 2015.

OTHER INCOME (EXPENSE), NET.

Debt issuance expense increased to $0.5 million for the six months ended June 30, 2016 from $0.4 million for the six months ended June 30, 2015, due to the offering of the Notes completed in April 2015.

Gain (loss) on change in warrant liability decreased to a loss of $0.7 million for the six months ended June 30, 2016 from a gain of approximately $3.9 million for the six months ended June 30, 2015, due to the offering of the Notes completed in April 2015.

Accretion on convertible notes expense decreased from $3.1 million for the six months ended June 30, 2015 to approximately $1.3 million for the six months ended June 30, 2016 due to the offering of the Notes completed in April 2015.

Interest expense, net, decreased to expense of approximately $9,000 for the six months ended June 30, 2016 as compared to expense of $0.2 million for the six months ended June 30, 2015, primarily due to the decrease of interest expense associated with the offering of the Notes completed in April 2015.

NET LOSS. Net loss from continuing operations was $14.6 million for the six months ended June 30, 2016, as compared to a net loss from continuing operations of $12.7 million for the six months ended June 30, 2015. Loss on discontinued operations was $0 for the six months ended June 30, 2016, as compared to a loss on discontinued operations of $8.7 million for the six months ended June 30, 2015. Net loss was $14.6 million for the six months ended June 30, 2016, as compared to a net loss of $21.4 million for the six months ended June 30, 2015.

Comparison of the three months ending June 30, 2016 and 2015

REVENUES. Revenues were $1.0 million for the three months ended June 30, 2016 as compared to $1.4 million for the three months ended June 30, 2015. Revenues for the three months ended June 30, 2016 and 2015 were mainly comprised of sales of XTouch sensors.

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COST OF REVENUES. Cost of revenues include all direct expenses associated with the delivery of services and costs of manufacturing including internal labor costs and materials. Cost of revenues were $3.9 million for the three months ended June 30, 2016 and $3.4 million for the three months ended June 30, 2015. The major changes to cost of revenues are as follows:

a) Salaries and benefits increased by approximately $0.1 million to $1.1 million for the three months ended June 30, 2016 compared to $1.0 million for the three months ended June 30, 2015;

b) Materials and chemicals decreased by approximately $0.3 million to $0.5 million for the three months ended June 30, 2016 compared to $0.8 million for the three months ended June 30, 2015;

c) Warranty expense increased by approximately $0.3 million to $0.3 million for the three months ended June 30, 2016 compared to $0 for the three months ended June 30, 2015;

d) Shipping expense increased by approximately $0.1 million to $0.1 million for the three months ended June 30, 2016 compared to $62,000 for the three months ended June 30, 2015;

e) Depreciation and amortization expense increased by approximately $0.2 million to $1.2 million for the three months ended June 30, 2016 compared to $1.0 million for the three months ended June 30, 2015;

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative expenses decreased by 51% or approximately $1.9 million, to $1.8 million for the three months ended June 30, 2016 from $3.7 million for the three months ended June 30, 2015. The major changes to selling, general and administrative expenses are as follows:

a) Salaries and benefits decreased by approximately $0.3 million to $0.8 million for the three months ended June 30, 2016 compared to $1.1 million for the three months ended June 30, 2015 primarily due to the following: a decrease in salaries to $0.4 million for the three months ended June 30, 2016 compared to $0.5 million for the three months ended June 30, 2015; a decrease in severance to $0 for the three months ended June 30, 2016 compared to $0.1 million for the three months ended June 30, 2015; a decrease in stock compensation expense to $0.1 million for the three months ended June 30, 2016 compared to $0.2 million for the three months ended June 30, 2015;

b) Legal expense decreased by approximately $0.2 million to $0.3 million for the three months ended June 30, 2016 compared to $0.5 million for the three months ended June 30, 2015;

c) Office expense increased by approximately $0.1 million to $0.1 million for the three months ended June 30, 2016 compared to $23,000 for the three months ended June 30, 2015;

d) Depreciation and amortization expense decreased by approximately $1.5 million to $0.1 million for the three months ended June 30, 2016 compared to $1.6 million for the three months ended June 30, 2015.

RESEARCH AND DEVELOPMENT. Research and development expenses decreased by approximately $0.5 million, or 33%, during the three months ended June 30, 2016 to $1.0 million from $1.5 million for the three months ended June 30, 2015. The major changes to research and development expenses are as follows:

a) Salaries and benefits attributable to research and development decreased by approximately $0.4 million to $0.5 million for the three months ended June 30, 2016 compared to $0.9 million for the three months ended June 30, 2015 primarily due to the following: a decrease in severance to $0 for the three months ended June 30, 2016 compared to $0.1 million for the three months ended June 30, 2015; a decrease in stock compensation expense to $0.1 million for the three months ended June 30, 2016 compared to $0.3 million for the three months ended June 30, 2015; a decrease in restricted stock expense to approximately $4,000 for the three months ended June 30, 2016 compared to $0.1 million for the three months ended June 30, 2015;

b) Lab expense decreased by approximately $0.2 million to $0.3 million for the three months ended June 30, 2016 compared to $0.5 million for the three months ended June 30, 2015; and

c) Consulting expense increased by approximately $0.1 million to $0.1 for the three months ended June 30, 2016 compared to $23,000 for the three months ended June 30, 2015.

OTHER INCOME (EXPENSE), NET.

Debt issuance expense decreased to $0 for the three months ended June 30, 2016 compared to $0.4 million for the three months ended June 30, 2015 due to the offering of Notes completed in April 2015.

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Gain (loss) on change in warrant liability decreased to a loss of $0.3 million for the three months ended June 30, 2016 compared to a gain of approximately $3.9 for the three months ended June 30, 2015, due to the offering of the Notes completed in April 2015.

Accretion on convertible notes expense decreased to $0 for the three months ended June 30, 2016 from approximately $3.1 million for the three months ended June 30, 2015 due to the offering of the Notes completed in April 2015.

Interest expense, net, decreased to $0 for the three months ended June 30, 2016 from expense of $0.2 million for the three months ended June 30, 2015, primarily due to the interest expense associated with the offering of Notes completed in April 2015.

NET LOSS. Net loss from continuing operations was $6.2 million for the three months ended June 30, 2016, as compared to a net loss from continuing operations of $7.0 million for the three months ended June 30, 2015. Loss on discontinued operations was $0 for the three months ended June 30, 2016, as compared to a loss on discontinued operations of $8.7 million for the three months ended June 30, 2015. Net loss was $6.2 million for the three months ended June 30, 2016, as compared to a net loss of $15.7 million for the three months ended June 30, 2015.

Off-Balance Sheet Transactions

We do not engage in material off-balance sheet transactions.

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LIQUIDITY AND CAPITAL RESOURCES

We have historically financed our operations primarily through the issuance of equity and debt securities and by relying on other commercial financing. Until our products begin to earn enough revenue to support our operations, which may never happen, we will continue to be highly dependent on financing from third parties. On April 16, 2015, we sold $15 million in principal amount of our Senior Secured Convertible Promissory Notes. As of June 30, 2016 the Notes have been fully repaid. On November 30, 2015, we sold 9,625,871 shares for net proceeds of approximately $7.2 million. On June 2, 2016, we sold 6,152,500 shares for net proceeds of approximately $8.4 million. In addition, we received cash proceeds of $2.4 million in connection with warrant exercises in the first half of 2016. We expect the proceeds from the sale of our common stock, together with our cash on hand, to support our operations through December 31, 2016.

Operating Activities

Cash used in operating activities during the six months ended June 30, 2016 was $8.1 million as compared to cash used in operating activities during the six months ended June 30, 2015 of $8.3 million. Cash used in operating activities are primarily due to net loss in operations.

Investing Activities

Cash used for investing activities during the six months ended June 30, 2016 was $0.2 million as compared to $14.4 million of cash used for the six months ended June 30, 2015. The use of cash for investing activities during the six months ended June 30, 2016 was related to purchases of equipment. The use of cash for investing activities during the six months ended June 30, 2015 was primarily attributable to the purchase of prepaid licenses.

Financing Activities

Historically, we have financed our operating and investing activities primarily from the proceeds of private placements and public offerings of common stock, convertible investor notes, and a preferred stock offering. However, in 2015 the Company began recording revenue from shipments and expects this to continue in the future.

The total net cash provided by financing activities was $12.0 million for the six months ended June 30, 2016, which was comprised of proceeds from issuance of common stock of $8.4 million, $2.4 million from the exercise of warrants, $4.1 million of release of restricted cash offset by $2.9 million of payments on notes payable.

The total net cash provided by financing activities was $7.3 million for the six months ended June 30, 2015, which was comprised of increase of $6.0 million in cash restricted for note payable, $0.1 million of net proceeds from the exercise of stock options and $13.2 million in net proceeds from the issuance of a convertible note, less debt issuance costs.

Working Capital

We have historically financed our operations primarily through the issuance of equity and debt securities and by relying on other commercial financing. Until our products begin to earn enough revenue to support our operations, which may never happen, we will continue to be highly dependent on financing from third parties. In April and June 2016, we received $2.4 million from exercise of warrants. On June 2, 2016 we sold 6,152,500 shares for net proceeds of approximately $8.4 million. We expect the proceeds from the exercise of warrants, proceeds from our sale of shares and our revenue shipments, together with our cash on hand, to support our operations through December 31, 2016.

As of June 30, 2016, we had a cash balance of approximately $11.3 million and working capital of $14.4 million.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable.

ITEM 4. CONTROLS AND PROCEDURES.

Disclosure Controls and Procedures

As of June 30, 2016, management, including our Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial and accounting officer), performed an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934. Based on their evaluation, management concluded that, as of June 30, 2016, our disclosure controls and procedures are effective to ensure that material information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

Changes in Internal Control Over Financial Reporting

We maintain a system of internal control over financial reporting that is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with accounting principles generally accepted in the United States. Based on the most recent evaluation, our Chief Executive Officer and Chief Financial Officer have determined that no significant changes in our internal control over financial reporting occurred during our most recent fiscal quarter that have materially affected, or are reasonably like to materially affect, our internal control over financial reporting.

25

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Securities and Exchange Commission Complaint against former Officers of the Company

On November 19, 2013, the Company learned that the Fort Worth Regional Office of the United States Securities and Exchange Commission (“SEC”) issued subpoenas concerning the Company’s agreements related to our InTouch™ Sensors. The Company cooperated fully with the SEC regarding this non-public, fact-finding inquiry, which resulted in a complaint filed by the SEC on March 9, 2016 naming the Company and two of the Company’s former executive officers as defendants. The U.S. District Court for the Southern District of Texas on March 16, 2016 signed a final judgment, providing for, among other things, a civil penalty in the amount of $750,000 on this complaint pursuant to our consent (the “Final Judgment”), which the Company gave without admitting or denying the allegations of the SEC’s complaint.

The allegations of the SEC in this complaint against the two former executive officers include that they made more than $2 million in personal profits from selling their own shares of the Company’s common stock following disclosures regarding the Company’s agreement related to our InTouch™ Sensors. The Company’s Amended and Restated Bylaws contain provisions regarding indemnification and advancement of expenses actually and reasonably incurred by the Company’s officers in connection with civil, criminal, administrative or investigative matters provided that such officers acted in good faith and in a manner such officers reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal action or proceeding, had no reason or cause to believe such officer’s conduct was unlawful. The advancement of expenses is expressly conditioned upon receipt of an undertaking by the officer to repay all such amounts so advanced in the event that it shall ultimately be determined that the officer is not entitled to be indemnified by the Company.

Intel Corporation

The Company’s Capacity License Agreement with Intel, as amended by the Amended Capacity License Agreement, provided for a payment of a commission to Intel of ten percent of gross revenue from the sale InTouch™ Sensors jointly developed by the Company and Kodak. In March 2016, Intel alleged that the Company breached the Amended Capacity License Agreement by not paying commissions to Intel based on the sales of the XTouch sensors which were subsequently developed using assets acquired and licensed from Atmel because Intel claims (and the Company disputes) that the XTouch sensors are somehow the same as the InTouch™ Sensors that were abandoned and transferred to Kodak. No litigation or other legal proceeding has commenced on this claim. The Company is engaged in discussions with Intel regarding formulation of a mutually agreeable commercial relationship. While it is not possible to predict the outcome of these discussions with certainty at the present time, if the Company is unable to reach an acceptable commercial relationship, it intends to vigorously contest any claim that Intel might make.

ITEM 1A. RISK FACTORS

We incorporate herein by reference the risk factors included in our Annual Report on Form 10-K, which we filed with the Securities and Exchange Commission on March 30, 2016. The following are risks set forth in our Annual Report on Form 10-K which are reiterated and updated below as well as certain new risks related to our business.

Expansion into new markets may increase the complexity of our business, cause us to increase our research and development expenses to develop new products and technologies or cause our capital expenditures to increase, and if we are unable to successfully adapt our business processes and product offerings as required by these new markets, our ability to grow will be adversely affected.

As we expand our product lines to sell into new markets, such as automotive, the overall complexity of our business may increase at an accelerated rate and we may become subject to different market dynamics. These dynamics may include, among other things, different demand volume, seasonality, product requirements, sales channels, and warranty and return policies. In addition, expansion into other markets may result in increases in research and development expenses and substantial investments in manufacturing capability or technology enhancements. If we fail to successfully expand into new markets with products that we do not currently offer, we may lose business to our competitors or new entrants who offer these products.

26

We are a company with a limited operating history, our future profitability is uncertain and we anticipate future losses and negative cash flow, which may limit or delay our ability to become profitable.

We are a company with a limited operating history and little revenues to date. We may never be able to produce material revenues or operate on a profitable basis. As a result, we have incurred losses since our inception and expect to experience operating losses and negative cash flow for the foreseeable future. As of June 30, 2016, we had an accumulated total deficit of $163.7 million.

We anticipate our losses will continue to increase from current levels because we expect to incur additional costs and expenses related to prototype development, consulting costs, laboratory development costs, marketing and other promotional activities, the addition of engineering and manufacturing personnel, and the continued development of relationships with strategic business partners. Moreover, planned products based upon our Performance Engineered Film™ technology may never become commercially viable and thus may never generate any revenues. Even if we find commercially viable applications for our Performance Engineered Film™ technology and materials, we may never recover our research and development expenses.

We have had a history of losses and may require additional capital to fund our operations, which capital may not be available on commercially attractive terms or at all.

We have experienced substantial net losses in each fiscal period since our inception. These net losses resulted from a lack of substantial revenues and the significant costs incurred in the development and acceptance of our technology. We may in the future require sources of capital in addition to cash on hand to continue operations and to implement our business plan. We project that we have sufficient liquid assets to continue operating for at least the next twelve months. However, if our operations do not become cash flow positive, we may be forced to seek credit line facilities from financial institutions, equity investments, or debt arrangements. No assurances can be given that we will be successful in obtaining such additional financing on reasonable terms, or at all. If adequate funds are not available when needed on acceptable terms, or at all, we may be unable to adequately fund our business plan, which could have a negative effect on our business, results of operations, and financial condition.

We have a significant number of outstanding warrants and options, and future sales of the underlying shares of common stock could adversely affect the market price of our common stock.

As of June 30, 2016, we had outstanding warrants and options exercisable for an aggregate of 11,654,252 shares of common stock at a weighted average exercise price of $2.32 per share. Upon exercise of these warrants or options, we would issue additional shares of our stock. As a result, our current stockholders as a group would own a substantially smaller interest in us and may have less influence on our management and policies than they now have. Furthermore, the holders may sell these shares in the public markets from time to time, without limitations on the timing, amount or method of sale. As our stock price rises, the holders may exercise more of their warrants and options and sell a large number of shares. This could cause the market price of our common stock to decline.

In addition, warrants covering 9,625,871 shares which were issued in November 2015 have an exercise price of $1.50 per share and have a term of five years from the date of issuance. In the second quarter of 2016, 1,595,000 warrants were exercised and as of June 30, 2016, 8,030,871 of such warrants are still outstanding. The exercise price of the warrants and the number of shares for which the warrants are exercisable are subject to certain adjustments if we issue or sell additional shares of common stock or common stock equivalents at a price per share less than the exercise price then in effect, or without consideration. Notwithstanding the foregoing, there will be no adjustment to the exercise price of these warrants or number of warrant shares issuable upon exercise in connection with the issuance of common stock upon Board of Director-approved employee benefit plans or upon the conversion, exercise or payment of certain outstanding, excluded securities.

We may be required to raise additional financing by issuing new securities with terms or rights superior to those of our existing stockholders, which could adversely affect the market price of our shares of common stock and our business.

We may require additional financing to fund future operations, including expansion in current and new markets, development and acquisition, capital costs and the costs of any necessary implementation of technological innovations or alternative technologies. We may not be able to obtain financing on favorable terms, if at all. If we raise additional funds by issuing equity securities, the percentage ownership of our current stockholders will be reduced, and the holders of the new equity securities may have rights superior to those of the holders of shares of common stock, which could adversely affect the market price and the voting power of shares of our common stock. If we raise additional funds by issuing debt securities, the holders of these debt securities would similarly have some rights senior to those of the holders of shares of common stock, and the terms of these debt securities could impose restrictions on operations and create a significant interest expense for us which could have a materially adverse effect on our business.

The market price of our common stock has been volatile, and the value of stockholders’ investments could decline significantly.

The trading price for our common stock has been, and may continue to be, volatile. The price at which our common stock trades depends upon a number of factors, many of which are beyond our control. These factors include our historical and anticipated operating results, our financial situation, announcements of technological innovations or new products by us or our competitors, customer and vendor relationships, our ability or inability to raise the additional capital we may need and the terms on which we raise it, changes in earnings estimates by analysts and general market and economic conditions. Further, broad market fluctuations may lower the market price of our common stock and affect our trading volume.

27

We may not be able to successfully integrate the production of the XTouch Touch Sensors into our ongoing business operations, which may result in our inability to fully realize the intended benefits of the asset acquisition and license transactions, or may disrupt our current operations, which could have a material adverse effect on our business, financial position and/or results of operations.

We are in the process of integrating the production of the XTouch Touch Sensors into our business, and this process may absorb significant management attention, produce unforeseen operating difficulties and expenditures and may not produce the favorable business and market opportunities the asset acquisition and license transactions were intended to provide. If we fail to successfully integrate the XTouch business into our business, our business, financial position and results of operations could be materially adversely affected.

Provisions in our Amended and Restated Bylaws provide for indemnification of officers and directors in certain circumstances, which could require us to direct funds away from our business.

Our Amended and Restated Bylaws contain provisions regarding indemnification and advancement of expenses actually and reasonably incurred by the Company’s officers in connection with civil, criminal, administrative or investigative matters provided that such officers acted in good faith and in a manner such officers reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal action or proceeding, had no reason or cause to believe such officer’s conduct was unlawful. The advancement of expenses is expressly conditioned upon receipt of an undertaking by the officer to repay all such amounts so advanced in the event that it shall ultimately be determined that the officer is not entitled to be indemnified by the Company. Funds paid in satisfaction of judgments, fines and expenses may be funds we need for the operation and growth of our business.

ITEM 6. EXHIBITS.

Exhibit No.	Description of Document
31.1	Certification of the Chief Executive Officer, President and Principal Executive Officer of Uni-Pixel, Inc., pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (1)
31.2	Certification of the Chief Financial Officer of Uni-Pixel, Inc., pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (1)
32.1	Certification of the Chief Executive Officer, President and Principal Executive Officer of Uni-Pixel, Inc., pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (1) (2)
32.2	Certification of the Chief Financial Officer of Uni-Pixel, Inc., pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (1) (2)

(1) Filed herewith

(2) The certification attached as Exhibit 32.1 and Exhibit 32.2 accompany this Quarterly Report on From 10-Q pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, shall not be deemed “filed” by the Registrant for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

28

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	UNI-PIXEL, INC.
August 11, 2016	By:	/s/ Jeff A. Hawthorne
Date		Jeff A. Hawthorne, Chief Executive Officer and President
	By:	/s/ Christine A. Russell
		Christine A. Russell, Chief Financial Officer

29

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Jeff A. Hawthorne, Principal Executive Officer of Uni-Pixel, Inc. certify that:

1.     I have reviewed this Quarterly Report on Form 10-Q of Uni-Pixel, Inc.;

2.     Based on my knowledge, this 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 report;

3.     Based on my knowledge, the financial statements, and other financial information included in this 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 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-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.     Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared;

b.     Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.     Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.     Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.     The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.     All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.     Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

August 11, 2016

By:	/s/ Jeff A. Hawthorne
Chief Executive Officer and President
Principal Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Christine Russell, Chief Financial Officer of Uni-Pixel, Inc. certify that:

1.     I have reviewed this Quarterly Report on Form 10-Q of Uni-Pixel, Inc.;

2.     Based on my knowledge, this 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 report;

3.     Based on my knowledge, the financial statements, and other financial information included in this 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 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-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.     Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared;

b.     Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.     Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.     Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.     The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.     All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.     Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

August 11, 2016

By:	/s/ Christine A. Russell
Chief Financial Officer
Principal Financial and Accounting Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Uni-Pixel, Inc. (the “Company”) on Form 10-Q for the quarter ended June 30, 2016 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jeff A. Hawthorne, Chief Executive Officer, President and Principal Executive Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

●     The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C 78m or 78o(d)); and

●     The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 11, 2016	By:	/s/ Jeff A. Hawthorne
	Jeff A. Hawthorne, Chief Executive Officer,
	President and Principal Executive Officer

A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to Uni-Pixel, Inc. and will be retained by Uni-Pixel, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Uni-Pixel, Inc. (the “Company”) on Form 10-Q for the quarter ending June 30, 2016 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Christine Russell, Chief Financial Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

●     The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C 78m or 78o(d)); and

●     The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 11, 2016	By:	/s/ Christine A. Russell
	Christine A. Russell, Chief Financial Officer
	(Principal Financial and Accounting Officer)

A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to Uni-Pixel, Inc. and will be retained by Uni-Pixel, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2016	Aug. 05, 2016
Document And Entity Information
Entity Registrant Name	Uni-Pixel
Entity Central Index Key	0001171012
Document Type	10-Q
Document Period End Date	Jun. 30, 2016
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		45,041,730
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2016

XML

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Current assets
Cash and cash equivalents	$ 11,284	$ 7,618
Restricted cash		4,098
Account receivable, net	317	334
Inventory	518	769
Debt issuance costs		526
Prepaid licenses	4,900	4,900
Prepaid expenses	815	819
Total current assets	17,834	19,064
Property and equipment, net	1,497	1,842
Other long-term assets	13	13
Prepaid licenses, net of current portion	3,179	5,629
Total assets	22,523	26,548
Current liabilities
Accounts payable	1,587	1,150
Accrued liabilities	680	780
Convertible notes payable		2,773
Derivative liability	1,140	491
Total current liabilities	3,407	5,194
Royalty liability	721	1,175
Long term liabilities	514	645
Long term debt		450
Total liabilities	4,642	7,464
Commitments and contingencies
Shareholders' equity
Common stock, $0.001 par value; 100,000,000 shares authorized, 45,025,386 shares issued and outstanding at June 30, 2016 and 32,170,778 shares issued and outstanding at December 31, 2015	45	32
Additional paid-in capital	181,584	168,243
Accumulated deficit	(163,748)	(149,191)
Total shareholders' equity	17,881	19,084
Total liabilities and shareholders' equity	$ 22,523	$ 26,548

XML

Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Jun. 30, 2016	Dec. 31, 2015
Statement of Financial Position [Abstract]
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	45,025,386	32,170,778
Common stock, shares outstanding	45,025,386	32,170,778

XML

Condensed Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Income Statement [Abstract]
Revenue	$ 957	$ 1,362	$ 1,807	$ 1,369
Cost of revenues	3,947	3,420	8,197	3,427
Gross margin	(2,990)	(2,058)	(6,390)	(2,058)
Selling, general and administrative expenses	1,870	3,678	3,722	6,644
Research and development	1,013	1,477	1,940	4,199
Operating loss	(5,873)	(7,213)	(12,052)	(12,901)
Other income (expense)
Debt issuance cost amortization expense		(376)	(526)	(376)
Gain (loss) on change in warrant liability	(271)	3,900	(679)	3,900
Accretion of discount on convertible notes		(3,122)	(1,291)	(3,122)
Interest income (expense), net		(232)	(9)	(228)
Other income (expense), net	(271)	170	(2,505)	174
Net loss from continuing operations	(6,144)	(7,043)	(14,557)	(12,727)
Discontinued operations (note 8)
Loss on discontinued operations		(1,093)		(1,093)
Loss on impairment of property and equipment		(7,609)		(7,609)
Net loss from discontinued operations		(8,702)		(8,702)
Net loss	$ (6,144)	$ (15,745)	$ (14,557)	$ (21,429)
Basic
Loss from continuing operations	$ (0.16)	$ (0.52)	$ (0.38)	$ (0.99)
Net loss	(0.16)	(1.17)	(0.38)	(1.66)
Diluted
Loss from continuing operations	(0.16)	(0.52)	(0.38)	(0.99)
Net loss	$ (0.16)	$ (1.17)	$ (0.38)	$ (1.66)
Weighted average number of basic common shares outstanding	39,363,684	13,418,395	37,995,835	12,914,133
Weighted average number of diluted common shares outstanding	39,363,684	13,418,395	37,995,835	12,914,133

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
Cash flows from operating activities
Net loss	$ (14,557)	$ (21,429)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	2,548	4,127
Restricted stock issuance	562	730
Stock compensation expense	333	949
Amortization of debt issuance costs	526	376
Issuance of common stock to convert notes and interest		167
Accretion of discount on convertible note	1,291	3,122
Net increase (decrease) in fair value of derivatives	679	(3,900)
Loss on R&D equipment related to discontinued operations		7,609
Change in operating assets and liabilities:
(Increase) decrease in accounts receivable	17	(1,043)
(Increase) decrease in inventory	251	(473)
(Increase) decrease in prepaid assets and other current assets	5	(146)
Increase (decrease) in accounts payable	437	1,432
Increase (decrease) in long-term liabilities	(132)
Increase (decrease) in accrued expenses and other liabilities	(98)	5,190
Decrease in deferred revenue		(5,000)
Net cash used in operating activities	(8,138)	(8,289)
Cash flows from investing activities
Purchase of property and equipment	(208)	(449)
Purchase of prepaid licenses		(14,000)
Net cash used in investing activities	(208)	(14,449)
Cash flows from financing activities
Decrease (increase) in cash restricted for convertible notes payable	4,098	(6,000)
Proceeds from exercise of stock options, net	1	75
Proceeds from issuance of common stock, net	8,389
Payments on note payable	(2,867)
Proceeds from convertible notes and warrants issued, less debt issuance costs	2,391	13,195
Net cash provided by financing activities	12,012	7,270
Net increase (decrease) in cash and cash equivalents	3,666	(15,468)
Cash and cash equivalents, beginning of period	7,618	23,663
Cash and cash equivalents, end of period	11,284	8,195
Supplemental disclosures of cash flow information:
Cash paid for interest	8	17
Cash paid for income taxes
Supplemental disclosures of non-cash financing information:
Issuance of common stock for legal settlements		2,275
Issuance of common stock to convert notes and interest	1,675	3,867
Acquisition of XTouch assets from Atmel		1,821
Beneficial conversion feature on convertible notes		5,970
Warrants issued in connection with convertible notes		$ 5,980

XML

Basis of Presentation, Business and Organization

6 Months Ended

Jun. 30, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation, Business and Organization

Note 1 — Basis of Presentation, Business and Organization

Uni-Pixel, Inc., a Delaware corporation, is the parent company of Uni-Pixel Displays, Inc., its wholly-owned operating subsidiary. As used herein, “Uni-Pixel,” “the Company,” “we,” “us,” and “our” refer to Uni-Pixel, Inc. and Uni-Pixel Displays, Inc. Our common stock, par value $0.001 per share, is quoted on The NASDAQ Capital Market under the ticker symbol “UNXL.”

On April 16, 2015 we acquired certain assets and licenses related to the manufacture of XTouch touch sensors from Atmel Corporation and CIT Technology Ltd. and we closed a private offering consisting of $15 million in principal amount of our Senior Secured Convertible Promissory Notes together with warrants. On April 22, 2015 we terminated the Manufacturing Facility Installation and Supply Agreement dated April 15, 2013 which was entered into by Uni-Pixel Displays, Inc. and Eastman Kodak Company.

Our decision to change the focus of our business from developing and manufacturing InTouch sensors to manufacturing and selling XTouch touch sensors was based on, among other things, the pressure of declining prices and margin compression in the touch sensor market. We believe that our purchase of the XTouch technology will provide us with a stand-alone, go-to-market strategy that we expect to provide a better economic model and lead to a scalable business in a more rapid time frame.

In addition to the flexible electronic films described above, we are developing a hard coat resin that can be applied using film, spray or inkjet coating methods for applications as protective cover films, a cover lens replacement or a conformal hard coat for plastic components. We plan to sell our hard coat resin and optical films under the Diamond Guard® brand.

Our strategy is to further develop our proprietary Performance Engineered Film™ technology around the vertical markets that we have identified as high growth profitable market opportunities. These markets include touch sensors, antennas, automotive and lighting.

As of June 30, 2016, Uni-Pixel had accumulated a total deficit of $163.7 million from operations in pursuit of these objectives.

As of June 30, 2016, we had cash and cash equivalents of $11.3 million. Our long-term viability is dependent upon our ability to successfully operate our business, develop our manufacturing process, develop our products, establish the business relationships we need to manufacture and market our products, and raise additional capital through offerings of our debt and equity securities to meet our business objectives.

The Company is subject to a number of risks, including, but not limited to, whether it can successfully integrate the XTouch operations; whether the manufacture and sale of the XTouch touch sensors will ultimately prove to be profitable; whether the Company will be able to raise capital when it needs to do so; whether the Company can successfully compete in the industry, particularly against larger organizations with greater financial and other resources; whether the Company will continue to receive the services of its key personnel; whether its intellectual property is adequately protected; and other risks related to the electronics market industry.

Basis of Presentation

The condensed consolidated financial statements presented in this quarterly report include Uni-Pixel, Inc. and our wholly-owned subsidiary, Uni-Pixel Displays, Inc. All significant intercompany transactions and balances have been eliminated.

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Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2016

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Note 2 — Summary of Significant Accounting Policies

Interim financial information

The condensed consolidated financial statements included herein, which have not been audited pursuant to the rules and regulations of the Securities and Exchange Commission, reflect all adjustments which, in the opinion of management, are necessary for a fair presentation of financial position, results of operations and cash flows for the interim periods on a basis consistent with the annual audited statements. All such adjustments are of a normal recurring nature. The results of operations for interim periods are not necessarily indicative of the results that may be expected for any other interim period or for a full year. Certain information, accounting policies and footnote disclosures normally included in condensed consolidated financial statements prepared in conformity with accounting principles generally accepted in the United States of America have been omitted pursuant to such rules and regulations, although we believe that the disclosures are adequate to make the information presented not misleading. These condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements included in our Form 10-K, for the year ended December 31, 2015, filed with the Securities and Exchange Commission on March 30, 2016.

The accounting and reporting policies of the Company conform to U.S. generally accepted accounting principles (GAAP) and to the practices within the technology industry. There have been no significant changes in the Company’s significant accounting policies during the six months ended June 30, 2016 compared to what was previously disclosed in the Company’s Annual Report on 10-K for the year ended December 31, 2015. The consolidated financial information as of December 31, 2015 included herein has been derived from the Company’s audited consolidated financial statements as of, and for the fiscal year ended, December 31, 2015.

Significant Accounting Policies

Use of estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Examples include provisions for bad debts, useful lives of property and equipment and intangible assets, valuation of derivative liability, impairment of property and equipment and intangible assets, deferred taxes, and the provision for and disclosure of litigation and loss contingencies and stock based compensation. Actual results may differ materially from those estimates.

Statement of cash flows

For purposes of the statements of cash flows, we consider all highly liquid investments (i.e., investments which, when purchased, have original maturities of three months or less) to be cash equivalents.

Concentration of credit risk

We maintain our cash with major U.S. domestic banks. The amounts held in interest bearing accounts periodically exceed the Federal Deposit Insurance Corporation (“FDIC”) insured limit of $250,000 at June 30, 2016 and December 31, 2015. We have not incurred losses related to these deposits.

Restricted cash

As of June 30, 2016 and December 31, 2015 we had restricted cash of $0 and $4.1 million, respectively. At December 31, 2015 the $4.1 million of restricted cash represents the amount we are required to maintain on our balance sheet in accordance with the terms of the Securities Purchase Agreement we entered into on April 16, 2015 for the sale of our Senior Secured Convertible Promissory Notes. This amount was released from restriction in the first quarter of 2016 upon conversion of the Senior Secured Promissory Notes.

Accounts Receivable

The carrying value of our accounts receivable, net of allowance for doubtful accounts, represents their estimated net realizable value. We estimate the allowance for doubtful accounts based on type of customer, age of outstanding receivable, historical collection trends, and existing economic conditions. If events or changes in circumstances indicate that a specific receivable balance may be unrealizable, further consideration is given to the collectability of those balances, and the allowance is adjusted accordingly. Receivable balances deemed uncollectible are written off against the allowance. We had $0.3 million accounts receivable balances at June 30, 2016 and December 31, 2015.

Property and equipment

Property and equipment, consisting primarily of production equipment, lab equipment, computer equipment, software, leasehold improvements, and office furniture and fixtures is carried at cost less accumulated depreciation and amortization. Depreciation and amortization for financial reporting purposes is provided by the straight-line method over the estimated useful lives of three to five years. Leasehold improvements are amortized using the straight-line method over the remaining lease term or the life of the asset, whichever is shorter. The cost of repairs and maintenance is charged as an expense as incurred. Gains or losses related to retirements or dispositions of fixed assets are recognized in the period incurred.

Convertible debt

The Company accounts for its convertible debt as equal to its proceeds, less discounts. The Company records discounts on its convertible debt for the fair value of freestanding and embedded derivatives and beneficial conversion features associated with the issuance of the debt. Discounts are amortized over the life of the convertible debt. The convertible debt is presented on the face of the financial statement as proceeds less the balance of unamortized discounts.

Inventory

Inventory is stated at the lower of cost or market. Cost is determined using standard cost, which approximates the first-in, first-out method. Adjustments to reduce the carrying value of inventory to its net realizable value are made for estimated excess, obsolete or impaired balances. These adjustments are measured as the excess of the cost of the inventory over its market value based upon assumptions about future demand and charged to cost of revenue. At the point of the loss recognition, a new, lower cost basis for that inventory is established, and subsequent changes in facts and circumstances do not result in the restoration of the original cost basis or increases in the newly established cost basis.

Derivative liabilities

In accordance with ASC 815-40-25 and ASC 815-10-15 Derivatives and Hedging and ASC 480-10-25 Liabilities-Distinguishing from Equity, the Company’s convertible notes are accounted for net, outside of shareholder’s equity and warrants are accounted for as liabilities at their fair value during periods where the full ratchet anti-dilution provision is in effect.

The warrants are accounted for a liability at their fair value at each reporting period. The value of the derivative warrant liability will be re-measured at each reporting period with changes in fair value recorded as earnings. To derive an estimate of the fair value of these warrants, a binomial model is utilized that computes the impact of share dilution upon the exercise of the warrant shares. This process relies upon inputs such as shares outstanding, estimated stock prices, strike price and volatility assumptions to dynamically adjust the payoff of the warrants in the presence of the dilution effect.

Revenue recognition

We recognize revenue over the period the service is performed. In general, this requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence that an arrangement exists, (2) delivery has occurred or services have been rendered, (3) the fee is fixed and determinable, and (4) collectability is reasonably assured.

Advance payments are deferred until shipment of product has occurred or the service has been rendered.

Revenue from licenses and other up-front fees are recognized on a ratable basis over the term of the respective agreement.

Revenue on certain fixed price contracts where we provide research and development services are recognized over the contract term based on achievement of milestones. When the contracts provide for milestone or other interim payments, the Company will recognize revenue under the milestone method. The milestone method requires the Company to deem all milestone payments within each contract as either substantive or non-substantive. That conclusion is determined based upon a thorough review of each contract and the Company’s deliverables committed to in each contract. For substantive milestones, the Company concludes that upon achievement of each milestone, the amount of the corresponding defined payments is commensurate with the effort required to achieve such milestone or the value of the delivered item. The payment associated with each milestone relates solely to past performance and is deemed reasonable upon consideration of the deliverables and the payment terms within the contract. For non-substantive milestones, including advance payments, the recognition of such payments are pro-rated to the substantive milestones.

In April 2013, we entered into an agreement with Intel Corporation (“Intel”) (the “Capacity License Agreement”), whereby we were to receive $10 million of cash proceeds to assist us in increasing our production capacity. Under the terms of the Capacity License Agreement, there were two milestones with related contingent consideration of $5 million for each milestone plus certain commissions as described below. The Capacity License Agreement required us to purchase certain equipment, which we purchased in 2013 and which we consider not a substantive milestone. The Capacity License Agreement required us to have the capability to produce at least 1 million sensor units per month (as defined in the Capacity License Agreement) by April 2014, which we consider a substantive milestone. We received $5 million in May 2013, which is non-refundable and is recorded as deferred revenue in the consolidated balance sheet at December 31, 2014. As of December 31, 2015 the $5 million is no longer in deferred revenue. Upon achieving the deliverables of the Capacity License Agreement, we would have paid a commission to Intel of 10% on revenue derived from the sales of InTouch™ Sensors jointly developed with Kodak made directly to Intel or to those of Intel’s manufacturing partners that use Intel’s Preferred Price and Capacity License Agreement (“Designated Customers”). The commission amount was to be paid until the aggregate commissions paid equaled the commission cap of $18.5 million. The term of the Capacity License Agreement is the later of 3 years or the full payment of the commission cap. If the Company committed a material breach of the license agreement, certain equipment of the Company with an original cost of approximately $10.1 million would be assigned to Intel to make them whole on any remaining amounts due under the commission cap of $18.5 million.

In April 2014, we entered into the First Amendment to the Capacity License Agreement with Intel (the “Amended Capacity License Agreement”). The Amended Capacity License Agreement modified the original Capacity License Agreement terms as follows: 1) the inability of the Company to reach, by April 2014, the minimum production capability and the required quality standards specified in the Capacity License Agreement will no longer constitute a material breach to the Capacity License Agreement; 2) the total amount of cash proceeds to be received was reduced from $10 million to $5 million, which included the $5 million we received in May 2013; 3) the cap on the commission amount was reduced from $18.5 million to $6.25 million; 4) the term “commission” was defined as 10% of gross revenue from the sale of all InTouch™ sensors sold by the Company, which includes sales of sensors to all customers including, but not limited to, Intel and its Designated Customers; 5) if the Company becomes the subject of any proceeding under any bankruptcy, insolvency or liquidation law, the Company will assign all title and ownership to certain designated equipment (the “Equipment”) to Intel; and 6) if the Company materially breaches the Amended Capacity License Agreement, which breach is not cured within 30 days after receipt of notice from Intel, the Company may choose to either (A) pre-pay the cap on the commission to Intel (less the total of all previously paid commissions) or (B) assign all title and ownership to the Equipment to Intel. The only remaining milestone of the Amended Capacity License Agreement was the capability to produce at least 1 million sensors units per month. However, the Capacity License Agreement pertained to the old technology that was jointly developed with Kodak was terminated in April 2015 and the Company has abandoned this technology. The Company recorded a $5 million gain on relief of deferred revenue liability for discontinued operations in the fourth quarter of 2015.

Loss per share data

Basic loss per share is calculated based on the weighted average common shares outstanding during the period. Diluted earnings per share also gives effect to the dilutive effect of stock options, warrants (calculated based on the treasury stock method), convertible notes and convertible preferred stock.

At June 30, 2016, 1,260,000 restricted shares and options and warrants to purchase 11,654,252 shares of common stock at exercise prices ranging from $0.55 to $38.70 per share were outstanding, and were not included in the computation of diluted earnings per share as their effect would be anti-dilutive.

Fair Value of Financial Instruments

ASC Topic 820, Fair Value Measurement and Disclosures, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. This topic also establishes a fair value hierarchy, which requires classification based on observable and unobservable inputs when measuring fair value. The fair value hierarchy distinguishes between assumptions based on market data (observable inputs) and an entity’s own assumptions (unobservable inputs). The hierarchy consists of three levels:

Level 1 – Quoted prices in active markets for identical assets and liabilities;

Level 2 – Inputs other than level one inputs that are either directly or indirectly observable; and

Level 3 – Unobservable inputs developed using estimates and assumptions, which are developed by the reporting entity and reflect those assumptions that a market participant would use.

Our financial instruments consist of accounts receivable, prepaid expenses, derivative liability and accounts payable. We believe the fair values of our accounts receivable, prepaid expenses and accounts payable reflect their respective carrying amounts given the short term nature of these instruments. The derivative liability is measured at fair value on a recurring basis.

Recently issued accounting pronouncements

In February 2016, the Financial Accounting Standards Update (ASU) 2016-02 Leases (Topic). This ASU requires a lessee to recognize a right-of-use asset and a lease liability under most operating leases in its balance sheet. For public companies, the ASU is effective for annual and interim periods beginning after December 15, 2018. Early adoption is permitted. The company is currently evaluating the effects that the adoption of ASU 2016-02 will have on the financial position, results of operations or cash flows.

Accounting Guidance Not Yet Effective

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. ASU 2014-09 requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve this core principle, the guidance provides that an entity should apply the following steps: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when, or as, the entity satisfies a performance obligation. The Company expects to adopt ASU 2014-09 for the fiscal year ending December 31, 2017 and the Company will continue to assess the impact on its financial statements.

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies are not expected to have a material impact on the Company’s financial position, results of operations and cash flows.

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2016

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Note 3 — Commitments and Contingencies

The Company entered into a lease for office, warehouse and laboratory facilities for approximately 7,186 square feet at 3400 Research Forest Drive, Suite B2, The Woodlands, Texas 77381 under a third party non-cancelable operating lease through May 31, 2018. In conjunction with the acquisition of the XTouch technology, the Company entered into a lease for office and production facilities for approximately 28,918 square feet at 1150 E. Cheyenne Mountain Boulevard, Colorado Springs, Colorado 80906 under a third party non-cancelable operating lease through October 15, 2016. In July 2015, the company entered into a lease for office space for 4,478 square feet at 4699 Old Ironsides Drive, Ste. 300, Santa Clara, CA 95054 through July 14, 2018 Future minimum lease commitments as of June 30, 2016 are as follows:

Year Ending June 30 (in thousands)
Six months ending 2016	$	152
2017		306
2018		141
2019		—
2020		—
2021		—
Total	$	599

Eco-System Partner Royalty Obligation

As discussed in Note 2 above, in April 2013, we entered into a Capacity License Agreement with Intel, whereby we were to receive $10 million of cash proceeds to assist us in increasing our production capacity. Under the terms of the Capacity License Agreement, there were two milestones with related contingent consideration of $5 million for each milestone plus certain commissions as described below. The Capacity License Agreement required us to purchase certain equipment, which we purchased in 2013 and which we consider not a substantive milestone. The Capacity License Agreement required us to have the capability to produce at least 1 million sensor units per month (as defined in the Capacity License Agreement) by April 2014, which we consider a substantive milestone. We received $5 million in May 2013, which is non-refundable and is recorded as deferred revenue in the consolidated balance sheet at December 31, 2014. As of December 31, 2015 the $5 million is no longer in deferred revenue. Upon achieving the deliverables of the Capacity License Agreement, we would have paid a commission to Intel of 10% on revenue derived from the sales of InTouch™ Sensors jointly developed with Kodak made directly to Designated Customers. The commission amount was to be paid until the aggregate commissions paid equaled the commission cap of $18.5 million. The term of the Capacity License Agreement is the later of 3 years or the full payment of the commission cap. If the Company committed a material breach of the license agreement, certain equipment of the Company with an original cost of approximately $10.1 million would be assigned to Intel to make them whole on any remaining amounts due under the commission cap of $18.5 million.

As discussed in Note 2 above, in April 2014, we entered into the Amended Capacity License Agreement with Intel. The Amended Capacity License Agreement modified the original Capacity License Agreement terms as follows: 1) the inability of the Company to reach, by April 2014, the minimum production capability and the required quality standards specified in the Capacity License Agreement will no longer constitute a material breach to the Capacity License Agreement; 2) the total amount of cash proceeds to be received was reduced from $10 million to $5 million, which included the $5 million we received in May 2013; 3) the cap on the commission amount was reduced from $18.5 million to $6.25 million; 4) the term “commission” is defined as 10% of gross revenue from the sale of all sensors sold by the Company, which includes sales of InTouch™ Sensors to all customers including, but not limited to, Intel and its Designated Customers; 5) if the Company becomes the subject of any proceeding under any bankruptcy, insolvency or liquidation law, the Company will assign all title and ownership to the Equipment to Intel; and 6) if the Company materially breaches the Amended Capacity License Agreement, which breach is not cured within 30 days after receipt of notice from Intel, the Company may choose to either (A) pre-pay the cap on the commission to Intel (less the total of all previously paid commissions) or (B) assign all title and ownership to the Equipment to Intel. The only remaining milestone of the Amended Capacity License Agreement is the capability to produce at least 1 million sensors units per month.

In the fourth quarter of 2015, the Company recorded a $5.0 million gain on relief of deferred revenue liability for discontinued operations. The $5 million was originally received in 2013 and was related to the technology in the Capacity License Agreement that was based on the InTouch™ Sensor technology which is no longer used. The InTouch™ Sensor technology was developed in the partnership with Kodak which was terminated in April 2015.

In March 2016, Intel, claiming that the XTouch sensors manufactured using the assets acquired from Atmel are the same as the InTouch™ Sensors jointly developed by the Company and Kodak that the Company has abandoned and transferred to Kodak, alleged that the Company breached the Amended Capacity License Agreement by not paying commissions to Intel based on the sales of the XTouch sensors which were subsequently developed using assets acquired and licensed from Atmel because Intel claims (and the Company disputes) that the XTouch sensors are somehow the same as the InTouch™ Sensors that were abandoned and transferred to Kodak. No litigation or other legal proceeding has commenced on this claim. The Company is engaged in discussions with Intel regarding formulation of a mutually agreeable commercial relationship. While it is not possible to predict the outcome of these discussions with certainty at the present time, if the Company is unable to reach an acceptable relationship, it intends to vigorously contest any claim that Intel might make.

Securities and Exchange Commission Complaint against former Officers of the Company and Settlement with the Company

On November 19, 2013, the Company learned that the Fort Worth Regional Office of the United States Securities and Exchange Commission (“SEC”) issued subpoenas concerning the Company’s agreements related to our InTouch™ Sensors. The Company cooperated fully with the SEC regarding this non-public, fact-finding inquiry, which resulted in a complaint filed by the SEC on March 9, 2016 naming the Company and two of the Company’s former executive officers as defendants. The U.S. District Court for the Southern District of Texas on March 16, 2016 signed a final judgment on this complaint pursuant to our consent (the “Final Judgment”), which the Company gave without admitting or denying the allegations of the SEC’s complaint. Without admitting or denying the allegations of the SEC’s complaint, we consented to the Final Judgment, which permanently enjoins us from violating Sections 10(b) and 13(b)(2)(A) and (B) of the Securities Exchange Act of 1934 (the “Exchange Act”), Rule 10b-5 of the SEC and Section 17(a) of the Securities Act of 1933. The Final Judgment also permanently enjoins the filing with the SEC any periodic report pursuant to Section 13(a) of the Exchange Act and Rules 13a-1, 13a-11, 13a-13 and 12b-20 of the SEC, which contains any untrue statement of material fact, or which omits to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or which fails to comply in any material respect with the requirements of Section 13(a) of the Exchange Act and the rules and regulations thereunder. The Final Judgment also provides for a civil penalty in the amount of $750,000 to be paid in accordance with the following schedule:

(1) $20,000, within 14 days of entry of this Final Judgment;

(2) $20,000, within 104 days of entry of this Final Judgment;

(3) $30,000, within 194 days of entry of this Final Judgment;

(4) $45,000, within 284 days of entry of this Final Judgment;

(5) $60,000, within 374 days of entry of this Final Judgment;

(6) $70,000, within 464 days of entry of this Final Judgment;

(7) $80,000, within 554 days of entry of this Final Judgment;

(8) $80,000, within 644 days of entry of this Final Judgment;

(9) $80,000, within 734 days of entry of this Final Judgment;

(10) $85,000, within 824 days of entry of this Final Judgment;

(11) $90,000, within 914 days of entry of this Final Judgment;

(12) $90,000, within 1004 days of entry of this Final Judgment

The $750,000 settlement was recorded in other expense on the consolidated income statement and $115,000 in current liabilities and $635,000 in long-term liabilities in the consolidated balance sheet at December 31, 2015. As of June 30, the settlement is recorded in current liabilities of $205,000 and $505,000 in long-term liabilities. The Company paid $40,000 in the first half of 2016.

The allegations of the SEC in this complaint against the two former executive officers include that they made more than $2 million in personal profits from selling their own shares of the Company’s common stock following disclosures regarding the Company’s agreement related to our InTouch™ Sensors. The Company’s Amended and Restated Bylaws contain provisions regarding indemnification and advancement of expenses actually and reasonably incurred by the Company’s officers in connection with civil, criminal, administrative or investigative matters provided that such officers acted in good faith and in a manner such officers reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal action or proceeding, had no reason or cause to believe such officer’s conduct was unlawful. The advancement of expenses is expressly conditioned upon receipt of an undertaking by the officer to repay all such amounts so advanced in the event that it shall ultimately be determined that the officer is not entitled to be indemnified by the Company.

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Equity, Stock Plan and Warrants

6 Months Ended

Jun. 30, 2016

Stockholders' Equity Note [Abstract]

Equity, Stock Plan and Warrants

Note 4 — Equity, Stock Plan and Warrants

Common Stock

During the six months ended June, 2016, (1) we issued 726,253 shares of common stock to directors and employees; issued 1,595,000 shares related to exercise of warrants; issued 6,152,500 shares and received proceeds of $8.4 million, net of issuance costs of $0.8 million.

During the six months ended June 30, 2015, we (1) issued 12,500 shares of common stock for cash in connection with the exercise of stock options; (2) issued 105,017 shares of common stock to various directors, officers and employees as stock awards; (3) issued 20,833 shares of common stock for the settlement of the derivative lawsuit; (4) issued 430,000 shares of common stock for the settlement of the class action lawsuit; and (5) issued 1,311,692 shares of common stock to convert $3.7 million of principal and $0.2 million of interest into shares of commons stock.

Restricted Stock

Total compensation expense recognized for restricted stock was approximately $0.6 million for the six months ended June 30, 2016 and $0.7 million for the six months ended June 30, 2015, respectively. The Company has recorded approximately $0.6 million of restricted stock expense in selling, general and administrative expenses, approximately $4,000 in research and development expense and approximately $4,000 in cost of revenue for the six months ended June 30, 2016 and approximately $0.5 million of restricted stock expense in selling, general and administrative expenses and approximately $0.2 million in research and development expense for the six months ended June 30, 2015.

In the second quarter ended June 30, 2016 the Company granted 1,260,000 restricted stock units (“RSUs”) with a grant-date fair value of approximately $1.9 million or $1.50 per share.

RSUs are converted into shares of the Company’s common stock upon vesting on a one-for-one basis. Typically, vesting of RSUs is subject to the employee’s continuing service to the Company. RSUs generally vest over a period of three years and are expensed ratably on a straight line basis over their respective vesting period net of estimated forfeitures. The fair value of the RSUs granted is the product of the number of shares granted and the grant date fair value of the Company’s common stock. The RSUs that will vest in future periods will be net-share settled such that the Company will withhold shares with value equivalent to the employees’ minimum statutory obligation for the applicable income and other employment taxes, and remitted the cash to the appropriate taxing authorities. The total shares to be withheld will be based on the value of the RSUs on their vesting date as determined by the Company’s closing stock price.

At June 30, 2016, there was $2.6 million of total unrecognized compensation cost related to non-vested shares of restricted stock which is expected to be recognized over a weighted-average period of 2.43 years. There were 725,203 shares of restricted stock, net that became vested during the six months ended June 30, 2016.

Stock Incentive Plans

The Company has adopted four stock incentive plans: the 2005 Stock Incentive Plan, the 2007 Stock Incentive Plan, the 2010 Stock Incentive Plan and the 2011 Stock Incentive Plan (collectively, the “Stock Incentive Plans”). The Stock Incentive Plans allow for an aggregate of up to 5,500,001 shares of our common stock to be awarded through incentive and non-qualified stock options, stock appreciation rights, restricted stock, performance shares and other types of awards.

Our Stock Incentive Plans are administered by our Board of Directors, which has the sole discretion to select participants who will receive the awards and to determine the type, size and terms of each award granted. As of June 30, 2016, there were 505,552 shares available for issuance under the Stock Incentive Plans.

The following disclosures provide information regarding the Company’s stock-based compensation awards, all of which are classified as equity awards:

Total compensation expense recognized for options was approximately $0.3 million and $0.9 million for the six months ended June 30, 2016 and June 30, 2015, respectively. The Company has recorded approximately $40,000 of stock compensation expense in cost of revenue, approximately $0.1 million in selling, general and administrative expenses and approximately $0.1 million in research and development expense for the six months ended June 30, 2016 and approximately $0.3 million of stock compensation expense in selling, general and administrative expenses and approximately $0.6 million in research and development expense for the six months ended June 30, 2015.

A summary of the changes in the total stock options outstanding during the six months ended June 30, 2016 follows:

				Weighted
				Average
	Options			Exercise Price
Outstanding and expected to vest, at December 31, 2015		1,941,194		$	6.54
Granted		384,000		$	1.38
Forfeited or expired		(145,252	)	$	9.97
Exercised		(1,050	)	$	1.24
Outstanding and expected to vest, at June 30, 2016		2,178,892		$	5.41
Vested and exercisable at June 30, 2016		1,461,121		$	7.26

The fair values of the Company’s options were estimated on the date of grant using the Black-Scholes valuation model with the following weighted-average assumptions:

	Three Months ended June 30, 2016			Three Months ended June 30, 2015		Six Months ended June 30, 2016			Six Months ended June 30, 2015
Expected life (years)		5 years			na		5 years			5 years
Interest rate		1.10 to 1.23	%		na		1.10 to 1.23	%		1.31 to 1.57	%
Dividend yield		—			na		—			—
Volatility		98.50	%		na		94.31 to 98.50	%		144.34 to 147.50	%
Forfeiture rate		—			—		—			—
Weighted average fair value of options granted	$	1.10		$	na	$	1.01		$	5.00

At June 30, 2016, there was $0.8 million of total unrecognized compensation cost related to non-vested stock option awards which is expected to be recognized over a weighted-average period of 2.15 years. There were approximately 0.2 million that became vested during the six months ended June 30, 2016.

Common Stock Warrants

As of June 30, 2016, the Company has 9,475,360 common stock warrants outstanding with a weighted average exercise price of $1.61 per share. Information regarding outstanding warrants as of June 30, 2016 is as follows:

Grant date	Warrants Outstanding		Exercisable		Weighted Exercise Price		Remaining Life (Years)
June 10, 2009		15,796		15,796	$	7.50		2.93
August 31, 2009		24,934		24,934	$	7.50		2.93
October 2, 2009		205,000		205,000	$	5.00		3.33
March 15, 2010		8,337		8,337	$	7.50		3.50
April 5, 2010		930		930	$	7.50		3.50
April 16, 2015 (1)		1,151,121		1,151,121	$	1.50		3.50
November 5, 2015 (1)		38,371		38,371		1.50		3.75
November 30, 2015 (1)		8,030,871		8,030,871	$	1.50		4.42
Total		9,475,360		9,475,360

(1) The exercise price of the warrants and the number of shares for which the warrants are exercisable are subject to certain adjustments if the Company issues or sells additional shares of common stock or common stock equivalents at a price per share less than the exercise price then in effect, or without consideration.

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Property and Equipment and Inventory

6 Months Ended

Jun. 30, 2016

Property, Plant and Equipment [Abstract]

Property and Equipment and Inventory

Note 5 — Property and Equipment and Inventory

A summary of the components of property and equipment at June 30, 2016 and December 31, 2015 (in thousands) are as follows:

	Estimated Useful Lives	June 30, 2016			December 31, 2015
Production equipment	3 to 5 years	$	1,988		$	1,966
Research and development equipment	3 to 5 years		3,583			3,572
Leasehold improvements	5 years		23			23
Computer equipment	5 years		98			98
Office equipment	3 to 5 years		20			20
Construction-in-progress			351			176
			6,063			5,855
Accumulated depreciation			(4,566	)		(4,013	)
Property and equipment, net		$	1,497		$	1,842

Depreciation and amortization expense of property and equipment for the six months ended June 30, 2016 and June 30, 2015 was approximately $0.6 million and $3.3 million, respectively.

A summary of the components of inventory at June 30, 2016 and December 31, 2015 (in thousands):

	June 30, 2016		December 31, 2015
Raw materials	$	312	$	419
Work-in-progress		193		328
Finish Goods		13		22
Inventory	$	518	$	769

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Senior Secured Convertible Notes and Warrants

6 Months Ended

Jun. 30, 2016

Debt Disclosure [Abstract]

Senior Secured Convertible Notes and Warrants

Note 6 — Senior Secured Convertible Notes and Warrants

Concurrent with the consummation of the XTouch acquisition, on April 16, 2015 (the “Effective Date”), and pursuant to a Securities Purchase Agreement, we sold $15 million in Senior Secured Convertible Notes, together with warrants for the purchase of 1,151,121 shares of our common stock (the “Warrants”), to two accredited investors (the “Investors”). In addition, we sold an additional $0.5 million Convertible Note to one of these Investors in November 2015, and the Warrant issued to that Investor was adjusted for an additional 38,371 shares of common stock. The number of shares of common stock subject to the Warrants equaled 65% of the number of shares of common stock the Investors would receive if the Convertible Notes were converted at the Conversion Price (as defined below) on the trading day immediately prior to the Effective Date.

The Convertible Notes accrue simple interest at the rate of 9% per year (“Interest”). On November 23, 2015, the Interest was reduced to 4%. The Convertible Notes together with all accrued and unpaid Interest were due and payable on April 16, 2016 (the “Maturity Date”). The Investors may, at any time, elect to convert the Convertible Notes into shares of our common stock at the conversion price, subject to certain beneficial ownership limitations. The conversion price is the lesser of $8.47 per share (the “Conversion Price”), subject to adjustment as set forth in the Convertible Notes for stock splits, dividends, recapitalizations and similar events, which equaled 110% of the last closing price of our common stock prior to the execution and delivery of the Securities Purchase Agreement and 85% of the lowest closing sale price during the prior 30 trading day period. As of February 16, 2016, the Convertible Note had been fully repaid.

The Warrants when issued had a five-year term and a per share exercise price of $9.63, subject to adjustment as set forth in the Warrants, which equaled 125% of the closing price of our common stock prior to the Effective Date. If, after the Effective Date, we issue or sell, or are deemed to have issued or sold, any shares of common stock (with the exception of certain Excluded Securities, as those are defined in the Warrants) for a consideration per share less than a price equal to the exercise price of the Warrants in effect immediately prior to such issue or sale (or deemed issuance or sale) (a “Dilutive Issuance”), then immediately after the Dilutive Issuance, (x) if the Dilutive Issuance occurs prior to the one year anniversary of the Effective Date, then the exercise price then in effect will be reduced to an amount equal to the product of (A) the exercise price in effect immediately prior to the Dilutive Issuance and (B) the quotient determined by dividing (1) the sum of (I) the product derived by multiplying the exercise price in effect immediately prior to the Dilutive Issuance and the number of Common Shares Deemed Outstanding (as defined in the Warrants) immediately prior to the Dilutive Issuance plus (II) the consideration, if any, received by us on such Dilutive Issuance, by (2) the product derived by multiplying (I) the exercise price in effect immediately prior to the Dilutive Issuance by (II) the number of Common Shares Deemed Outstanding immediately after the Dilutive Issuance and (y) if the Dilutive Issuance occurs after the one year anniversary of the Effective Date but within five years of the Effective Date, the exercise price then in effect will be reduced to an amount equal to the price of the shares of common stock issued in the Dilutive Issuance. The Warrants will be exercisable for cash, but if a prospectus covering the shares of common stock underlying the Warrants is not available, the Investors may exercise the Warrants using a cashless exercise provision. The Warrants may not be exercised if, after giving effect to the exercise, the Investor would beneficially own in excess of 4.99% or 9.99% of the outstanding shares of common stock, depending on the Investor. At the Investor’s option, the cap applicable to the exercise of the Warrants may be raised or lowered to any other percentage not in excess of 9.99%, except that any increase will only be effective upon 61-days’ prior notice to us.

As per the terms of the November 2015 equity transaction, the 1,189,492 Warrants were exchanged for new warrants to purchase an equivalent number of shares of common stock in the same form and same terms as the warrants issued in such equity transaction, including a repricing to $1.50 per share exercise price. The exercise price of the Warrants and the number of shares for which the Warrants are exercisable are subject to certain adjustments if the Company issues or sells additional shares of common stock or common stock equivalents at a price per share less than the exercise price then in effect, or without consideration. Notwithstanding the foregoing, there will be no adjustment to the exercise price of the Warrants or number of warrant shares issuable upon exercise in connection with the issuance of common stock upon Board of Director-approved employee benefit plans or upon the conversion, exercise or payment of certain outstanding, excluded securities.

Pursuant to a Pledge and Security Agreement (the “Security Agreement”) we entered into in favor of Hudson Bay Fund LP as Collateral Agent, the Convertible Notes are secured by a perfected first priority security interest in all of our assets and are senior in right of payment to all of our existing and future indebtedness, subject to Permitted Liens, as defined in the Convertible Notes. With the exception of Permitted Liens, we have agreed that we will not grant a security interest in our assets so long as the Convertible Notes remain outstanding and that we will not incur any new debt except for Permitted Indebtedness, as that term is defined in the Convertible Notes.

In conjunction with the issuance of the Convertible Notes and the Warrants, we entered into a Registration Rights Agreement pursuant to which we agreed to file a registration statement covering the sum of (i) 200% of the maximum number of shares underlying the Convertible Notes and (ii) the maximum number of shares underlying the Warrants (the “Registrable Securities”). We have agreed to keep any registration statement we file pursuant to the Registration Rights Agreement effective until the earlier of (i) the date as of which the Investors may sell all of the Registrable Securities covered by the Registration Statement without restriction or limitation pursuant to Rule 144 and without the requirement to be in compliance with Rule 144(c)(1) (or any successor thereto) or (ii) the date on which the Investors shall have sold all of the securities covered by such Registration Statement.

We were to use our reasonable best efforts to have the registration statement declared effective within 90 days after the Effective Date (the “Registration Statement Effective Date”). If we failed to register the Registrable Securities or the registration statement is not declared effective by the SEC before the Registration Statement Effective Date, or if on any day after the Registration Statement Effective Date, sales of the Registrable Securities required to be included on the Registration Statement cannot be made (collectively, a “Registration Default”), we will pay to each Investor an amount in cash equal to 1% of the aggregate Purchase Price (as that term is defined in the Securities Purchase Agreement) of the Investor’s Registrable Securities, whether or not the Registrable Securities were included in the registration statement, and 1% per month (or a portion thereof pro rata) that the Registration Default continues to exist. We are not required to make these payment if, when a Registration Default occurs, the Investors can freely sell our common stock pursuant to Rule 144 without restriction or limitation. We filed the registration statement within 90 days and therefore did not have to make any payments to the Investors.

Investors in the offering have the right to participate for no less than 35% of any future offering of our equity or equity equivalent securities until the second anniversary of the Effective Date when the Convertible Notes were purchased.

We agreed to keep at least $6.0 million of restricted cash on our balance sheet at all times until the Maturity Date or until the outstanding principal amount of the Convertible Notes is less than $6.0 million, at which time the amount of restricted cash we are required to keep on our balance sheet will be adjusted downward, dollar for dollar. As of June 30, 2016 and December 31, 2015, the restricted cash was $0 and $4.1 million, respectively.

As additional security for repayment of the Convertible Notes, Uni-Pixel Displays, Inc. entered into to a Guarantee Agreement in favor of the Investors.

Cowen and Company, LLC acted as our financial advisor in the acquisition of the assets and as our placement agent in the financing transaction. We paid Cowen and Company, LLC approximately $1.7 million for these services.

On April 16, 2015, the Company determined that the Convertible Notes had a carrying amount of $3.1 million. The Company utilized a binomial model in determining the fair market value of the Warrants of $6.0 million.

The Company also determined there was a beneficial conversion feature (“BCF”) as a result of the intrinsic value between the effective exercise price and the market price at the time of conversion of $6.0 million. The BCF was included in additional paid in capital. As a result of the down-round protection on the warrants, they have been accounted for as a derivative liability upon issuance and at December 31, 2015.

At inception, the Convertible Notes balance (in thousands) and unamortized discount in millions were as follows:

Convertible notes	$	15,000
Discount attributable to warrants		(5,980	)
Discount attributable to BCF		(5,970	)
Carrying amount of Convertible Notes at inception	$	3,050

As of June 30, 2016, both Investors had been issued an aggregate of 13,984,411 shares of common stock when the Investor had converted as of such date $11.6 million of principal and $0.3 million of interest into shares of common stock.

The following table summarizes the charges to interest, amortization and other expense, net for the six months ended June 30, 2016 (in thousands):

Interest expense on convertible notes	$	9
Accretion of convertible note discount	$	1,291

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Agreements with Atmel Corporation and CIT Technology LTD.

6 Months Ended

Jun. 30, 2016

Business Combinations [Abstract]

Agreements with Atmel Corporation and CIT Technology LTD.

Note 7 — Agreements with Atmel Corporation and CIT Technology LTD.

Atmel Corporation Asset Acquisition and License Agreements

On April 16, 2015 (the “Effective Date”), Uni-Pixel Displays, Inc. (“Displays”) acquired from Atmel Corporation (“Atmel”), pursuant to the terms of a Purchase and Sale Agreement, a Patent License Agreement, an IP License Agreement, a Bill of Sale and Assignment and Assumption Agreement and two leases for real property, certain assets used for the production of capacitive touch sensors comprised of fine lines of copper metal photo lithographically patterned and plated on flexible plastic film (the “Touch Sensors”). $450,000 was paid for the machinery, parts and equipment needed to manufacture the Touch Sensors and the existing inventory on hand. Displays paid this amount with a secured promissory note due on or before the earlier of (i) the second anniversary of the Effective Date or (ii) the sale of equity and/or debt securities after the Effective Date pursuant to which Displays or any affiliate of our receives gross proceeds of no less than $5 million. Interest accrues on the unpaid principal amount at a rate equal to 2% per annum compounded semi-annually and is to be paid in arrears semi-annually, commencing with the six-month anniversary of the Effective Date. Displays has granted to Atmel a security interest in the purchased assets and all accounts receivable subsequently arising from Display’s manufacture and sale of Touch Sensors and all proceeds therefrom. Pursuant to the Purchase and Sale Agreement, Displays assumed certain liabilities of Atmel, including open purchase and supply orders, related to the Touch Sensor business. In April 2016, the $450,000 promissory note was fully repaid.

Through the Patent License Agreement, Atmel licensed to Displays a non-sublicensable, worldwide, royalty-bearing license under its Touch Sensors patents to make or have made, use, offer for sale, sell, and import the Touch Sensors. In consideration for this license, Displays agreed to pay an annual royalty fee during the initial five year term of the license (the “Initial Term”) of the greater of $3.25 million or 3.33% of the total net sales (as defined in the Patent License Agreement) of the Touch Sensors during the Initial Term. Displays has the right to renew the license for a term of 10 years. If Displays exercises this right, the annual royalty fee will consist of 2.5% of the total net sales of the Touch Sensors until it reaches a total of $16.75 million, at which time no further annual royalty fees will be due. Upon execution of the Patent License Agreement, Displays paid a non-refundable, non-returnable prepayment of minimum annual royalty fees of $9.33 million (the “Royalty Prepayment”). The Royalty Prepayment will be applied to the annual royalty fees Displays owes under the Patent License Agreement. If, during the Initial Term, Displays’ cash balances as of the quarter end immediately prior to the date of the royalty period to which an unpaid annual royalty relates is less than $30 million, it may pay the annual royalty fee with a secured promissory note. Atmel has agreed that it will not enter into a license agreement for the licensed patents that is effective prior to the second anniversary of the Effective Date.

Through the IP License Agreement, Atmel licensed to Displays a non-sublicensable, worldwide, royalty-free license to the intellectual property necessary to make or have made, use, offer for sale, sell, and import the Touch Sensors. The term of the IP License Agreement is co-extensive with the term of the Patent License Agreement. Atmel has agreed that it will not enter into a license agreement for the licensed intellectual property that is effective prior to the second anniversary of the Effective Date.

As part of the asset acquisition, Displays also entered into leases with Atmel Corporation for Building 2 and Building 4, both of which are located at 1150 E. Cheyenne Mountain Boulevard, Colorado Springs, Colorado. The term of each lease is 18 months (the “Primary Lease Term”). The term of each lease may be extended for two additional six month periods. During the Primary Lease Term, the initial base rent for each of Building 2 and Building 4 will be $100 per month. During the first renewal term, the monthly base rent for Building 2 will be $5,625 and during the second renewal term the monthly base rent will be $8,437. During the first renewal term, the monthly base rent for Building 4 will be $39,375 and during the second renewal term the monthly base rent will be $59,062. Aside from the base rent, Displays is responsible for the payment of its share of operating expenses attributable to the buildings, real estate taxes attributable to the buildings, sales and personal property taxes, utilities and additional services provided by Atmel (as defined in the leases).

Transition Services Agreement

In conjunction with the above-described transaction, Displays and Atmel entered into a Transition Services Agreement. Pursuant to the Transition Services Agreement, Atmel agreed to provide the following services for the periods described: (i) quality assurance and failure analysis services for the XTouch Touch Sensors for a period of six months starting from the Effective Date, (ii) operations services for a period of 30 days starting from the Effective Date and (iii) other services, as those are defined in the Transition Services Agreement, for a period of three months starting from the Effective Date. In exchange for the services, Displays has agreed to pay reasonable and documented direct costs incurred by Atmel in performing the services together with actual out-of-pocket third-party expenses reasonably incurred by Atmel in providing the services. The service fees include, but are not limited to, (a) the actual out-of-pocket employment costs (base salary, payroll taxes and out-of-pocket medical benefits) for the individuals performing the services (based on the actual time expended by such individuals in performing the services), (b) costs of materials, (c) the actual out-of-pocket third-party expenses reasonably incurred by Atmel in providing the services, and (d) direct supervisory and management expenses incurred by Atmel in providing the services. On the Effective Date, we paid $0.4 million to Atmel and was applied against certain designated services. The transition services have been completed.

CIT Technology Ltd. License Agreements and Manufacturing and Technology Transfer Agreement

On the Effective Date Displays entered into an FLT (Fine Line Technology) Patent License Agreement (the “CIT Patent License Agreement”), an FLT (Fine Line Technology) Intellectual Property License Agreement (the “CIT IP License Agreement”) and a Manufacturing and Technology Transfer Agreement (the “Manufacturing Agreement”) with CIT Technology Ltd. (“CIT”).

Through the CIT Patent License Agreement, CIT licensed to Displays a non-sublicensable, worldwide, royalty-bearing license under its fine line technology (“FLT”) patents to make or have made, use, offer for sale, sell, and import licensed FLT products (the “Licensed Products”), which are defined as capacitive touch sensors comprising fine lines of copper metal printed on flexible plastic film. In consideration for this license, Displays agreed to pay an annual royalty fee during the initial five year term of the license (the “Initial License Term”) of the greater of $1.65 million or 1.67% of the total net sales (as defined in the CIT Patent License Agreement) of the Licensed Products during the Initial License Term. Displays has the right to renew the license for a term of 10 years. If Displays exercises this right, the annual royalty fee will consist of 1.67% of the total net sales of the Licensed Products until it reaches a total of $8.25 million, at which time no further annual royalty fees will be due. Further, the total royalty fees payable for the initial 5 year term and the subsequent 10 year term is capped at $30 million. Upon execution of the CIT Patent License Agreement, Displays paid a non-refundable, non-returnable prepayment of minimum annual royalty fees of $4.67 million (the “CIT Royalty Prepayment”). The CIT Royalty Prepayment will be applied to the annual royalty fees Displays owes under the CIT Patent License Agreement. If, during the Initial License Term, Displays’ cash balances as of the quarter end immediately prior to the date of the royalty period to which an unpaid annual royalty relates is less than $30 million, Displays may pay the annual royalty fee with a secured promissory note. CIT has agreed that it will not enter into a license agreement for the licensed patents as they relate to the Licensed Products that is effective prior to the second anniversary of the Effective Date.

Through the CIT IP License Agreement, CIT licensed to Displays a non-sublicensable, worldwide, royalty-free license to the intellectual property necessary to make or have made, use, offer for sale, sell, and import the Licensed Products. The term of the CIT IP License Agreement is co-extensive with the term of the CIT Patent License Agreement. CIT has agreed that it will not enter into a license agreement for the licensed intellectual property as it relates to the Licensed Products that is effective prior to the second anniversary of the Effective Date.

The Manufacturing Agreement had a term of six months, where Displays agreed that for a period of 16 consecutive weeks it will order, on a weekly basis, 11,500 linear meters of coated film manufactured by CIT at a cost of $7.90 per linear meter. The agreement had been completed and the process was transferred to the Colorado Springs facility in fiscal year 2015.

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Loss on Discontinued Operations

6 Months Ended

Jun. 30, 2016

Discontinued Operations and Disposal Groups [Abstract]

Loss on Discontinued Operations

Note 8 — Loss on Discontinued Operations

On April 22, 2015 Displays exercised its right to terminate that certain Manufacturing Facility Installation and Supply Agreement dated April 15, 2013 (the “Supply Agreement”), which was entered into by Displays and Eastman Kodak Company (“Kodak”). The term of the Supply Agreement was to end on December 31, 2017.

Displays did not renew that certain Joint Development Agreement dated February 5, 2013, also with Kodak, which was related to flexible patterned conductive films.

In connection with the discontinued operations, the Company took a $7.6 million write down on equipment in the second quarter of 2015.

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Fair Value Measurements

6 Months Ended

Jun. 30, 2016

Fair Value Disclosures [Abstract]

Fair Value Measurements

Note 9 — Fair Value Measurements

Liabilities measured at fair value (in thousands) on a recurring basis are summarized as follows:

							Carrying
	Fair Value Measurements Using Inputs						Amount at
Financial Instruments	Level 1		Level 2		Level 3		June 30, 2016
Liabilities:
Derivative liability	$	-	$	1,140	$	-	$	1,140
Total	$	-	$	1,140	$	-	$	1,140

As described in Note 6, the derivative liability is related to warrants to purchase 1,151,121 shares of common stock issued by the Company in connection with our Convertible Note of $15.0 million in April 2015, which included a down-round protection on the warrants. The original exercise price of these warrants were $9.63 per share and they expire in April 2020. With the additional $0.5 million in Convertible Note issued in November 2015, the original Warrant was adjusted for an additional 38,371 shares of common stock. In connection with the November 2015 equity transaction (Note 7), the total outstanding warrants for 1,189,492 warrants were repriced to $1.50 per share. These warrants were not issued with the intent of effectively hedging any future cash flow, fair value of any asset, liability or any net investment in a foreign operation. The fair value of these warrants were $6.0 million at inception as described in Note 6. The Company recognized $0.7 million of other expense for the six months ended June 30, 2016 in the accompanying consolidated statements of operations, resulting from the increase in the fair value of the derivative liability at June 30, 2016. The derivative liability will be measured at fair value, with changes in fair value recognized in earnings, until the warrants are exercised, expire or are otherwise extinguished.

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Revenue and Credit Concentrations

6 Months Ended

Jun. 30, 2016

Risks and Uncertainties [Abstract]

Revenue and Credit Concentrations

Note 10 — Revenue and Credit Concentrations

During the six months ended June 30, 2016 and 2015, revenues by customers with more than 10% of revenue were as follows:

	Six months ended June 30, 2016					Six months ended June 30, 2015
	Amount		%			Amount		%
Company A	$	1,111		62	%	$	842		62	%
Company B		626		35	%		438		32	%
Total	$	1,737		96	%	$	1,280		94	%

As of June 30, 2016 and December 31, 2015 customers with more than 10% of accounts receivables balances were as follows:

	As of June 30, 2016					As of December 31, 2015
	Amount		%			Amount		%
Company A	$	57		18	%	$	133		40	%
Company B		209		66	%		164		49
Total	$	266		84	%	$	297		89	%

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Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2016

Accounting Policies [Abstract]

Use of Estimates

Use of estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Examples include provisions for bad debts, useful lives of property and equipment and intangible assets, valuation of derivative liability, impairment of property and equipment and intangible assets, deferred taxes, and the provision for and disclosure of litigation and loss contingencies and stock based compensation. Actual results may differ materially from those estimates.

Statement of Cash Flows

Statement of cash flows

For purposes of the statements of cash flows, we consider all highly liquid investments (i.e., investments which, when purchased, have original maturities of three months or less) to be cash equivalents.

Concentration of Credit Risk

Concentration of credit risk

We maintain our cash with major U.S. domestic banks. The amounts held in interest bearing accounts periodically exceed the Federal Deposit Insurance Corporation (“FDIC”) insured limit of $250,000 at June 30, 2016 and December 31, 2015. We have not incurred losses related to these deposits.

Restricted Cash

Restricted cash

As of June 30, 2016 and December 31, 2015 we had restricted cash of $0 and $4.1 million, respectively. At December 31, 2015 the $4.1 million of restricted cash represents the amount we are required to maintain on our balance sheet in accordance with the terms of the Securities Purchase Agreement we entered into on April 16, 2015 for the sale of our Senior Secured Convertible Promissory Notes. This amount was released from restriction in the first quarter of 2016 upon conversion of the Senior Secured Promissory Notes.

Accounts Receivable

Accounts Receivable

The carrying value of our accounts receivable, net of allowance for doubtful accounts, represents their estimated net realizable value. We estimate the allowance for doubtful accounts based on type of customer, age of outstanding receivable, historical collection trends, and existing economic conditions. If events or changes in circumstances indicate that a specific receivable balance may be unrealizable, further consideration is given to the collectability of those balances, and the allowance is adjusted accordingly. Receivable balances deemed uncollectible are written off against the allowance. We had $0.3 million accounts receivable balances at June 30, 2016 and December 31, 2015.

Property and Equipment

Property and equipment

Property and equipment, consisting primarily of production equipment, lab equipment, computer equipment, software, leasehold improvements, and office furniture and fixtures is carried at cost less accumulated depreciation and amortization. Depreciation and amortization for financial reporting purposes is provided by the straight-line method over the estimated useful lives of three to five years. Leasehold improvements are amortized using the straight-line method over the remaining lease term or the life of the asset, whichever is shorter. The cost of repairs and maintenance is charged as an expense as incurred. Gains or losses related to retirements or dispositions of fixed assets are recognized in the period incurred.

Convertible Debt

Convertible debt

The Company accounts for its convertible debt as equal to its proceeds, less discounts. The Company records discounts on its convertible debt for the fair value of freestanding and embedded derivatives and beneficial conversion features associated with the issuance of the debt. Discounts are amortized over the life of the convertible debt. The convertible debt is presented on the face of the financial statement as proceeds less the balance of unamortized discounts.

Inventory

Inventory

Inventory is stated at the lower of cost or market. Cost is determined using standard cost, which approximates the first-in, first-out method. Adjustments to reduce the carrying value of inventory to its net realizable value are made for estimated excess, obsolete or impaired balances. These adjustments are measured as the excess of the cost of the inventory over its market value based upon assumptions about future demand and charged to cost of revenue. At the point of the loss recognition, a new, lower cost basis for that inventory is established, and subsequent changes in facts and circumstances do not result in the restoration of the original cost basis or increases in the newly established cost basis.

Derivative Liabilities

Derivative liabilities

In accordance with ASC 815-40-25 and ASC 815-10-15 Derivatives and Hedging and ASC 480-10-25 Liabilities-Distinguishing from Equity, the Company’s convertible notes are accounted for net, outside of shareholder’s equity and warrants are accounted for as liabilities at their fair value during periods where the full ratchet anti-dilution provision is in effect.

The warrants are accounted for a liability at their fair value at each reporting period. The value of the derivative warrant liability will be re-measured at each reporting period with changes in fair value recorded as earnings. To derive an estimate of the fair value of these warrants, a binomial model is utilized that computes the impact of share dilution upon the exercise of the warrant shares. This process relies upon inputs such as shares outstanding, estimated stock prices, strike price and volatility assumptions to dynamically adjust the payoff of the warrants in the presence of the dilution effect.

Revenue Recognition

Revenue recognition

We recognize revenue over the period the service is performed. In general, this requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence that an arrangement exists, (2) delivery has occurred or services have been rendered, (3) the fee is fixed and determinable, and (4) collectability is reasonably assured.

Advance payments are deferred until shipment of product has occurred or the service has been rendered.

Revenue from licenses and other up-front fees are recognized on a ratable basis over the term of the respective agreement.

Revenue on certain fixed price contracts where we provide research and development services are recognized over the contract term based on achievement of milestones. When the contracts provide for milestone or other interim payments, the Company will recognize revenue under the milestone method. The milestone method requires the Company to deem all milestone payments within each contract as either substantive or non-substantive. That conclusion is determined based upon a thorough review of each contract and the Company’s deliverables committed to in each contract. For substantive milestones, the Company concludes that upon achievement of each milestone, the amount of the corresponding defined payments is commensurate with the effort required to achieve such milestone or the value of the delivered item. The payment associated with each milestone relates solely to past performance and is deemed reasonable upon consideration of the deliverables and the payment terms within the contract. For non-substantive milestones, including advance payments, the recognition of such payments are pro-rated to the substantive milestones.

In April 2013, we entered into an agreement with Intel Corporation (“Intel”) (the “Capacity License Agreement”), whereby we were to receive $10 million of cash proceeds to assist us in increasing our production capacity. Under the terms of the Capacity License Agreement, there were two milestones with related contingent consideration of $5 million for each milestone plus certain commissions as described below. The Capacity License Agreement required us to purchase certain equipment, which we purchased in 2013 and which we consider not a substantive milestone. The Capacity License Agreement required us to have the capability to produce at least 1 million sensor units per month (as defined in the Capacity License Agreement) by April 2014, which we consider a substantive milestone. We received $5 million in May 2013, which is non-refundable and is recorded as deferred revenue in the consolidated balance sheet at December 31, 2014. As of December 31, 2015 the $5 million is no longer in deferred revenue. Upon achieving the deliverables of the Capacity License Agreement, we would have paid a commission to Intel of 10% on revenue derived from the sales of InTouch™ Sensors jointly developed with Kodak made directly to Intel or to those of Intel’s manufacturing partners that use Intel’s Preferred Price and Capacity License Agreement (“Designated Customers”). The commission amount was to be paid until the aggregate commissions paid equaled the commission cap of $18.5 million. The term of the Capacity License Agreement is the later of 3 years or the full payment of the commission cap. If the Company committed a material breach of the license agreement, certain equipment of the Company with an original cost of approximately $10.1 million would be assigned to Intel to make them whole on any remaining amounts due under the commission cap of $18.5 million.

In April 2014, we entered into the First Amendment to the Capacity License Agreement with Intel (the “Amended Capacity License Agreement”). The Amended Capacity License Agreement modified the original Capacity License Agreement terms as follows: 1) the inability of the Company to reach, by April 2014, the minimum production capability and the required quality standards specified in the Capacity License Agreement will no longer constitute a material breach to the Capacity License Agreement; 2) the total amount of cash proceeds to be received was reduced from $10 million to $5 million, which included the $5 million we received in May 2013; 3) the cap on the commission amount was reduced from $18.5 million to $6.25 million; 4) the term “commission” was defined as 10% of gross revenue from the sale of all InTouch™ sensors sold by the Company, which includes sales of sensors to all customers including, but not limited to, Intel and its Designated Customers; 5) if the Company becomes the subject of any proceeding under any bankruptcy, insolvency or liquidation law, the Company will assign all title and ownership to certain designated equipment (the “Equipment”) to Intel; and 6) if the Company materially breaches the Amended Capacity License Agreement, which breach is not cured within 30 days after receipt of notice from Intel, the Company may choose to either (A) pre-pay the cap on the commission to Intel (less the total of all previously paid commissions) or (B) assign all title and ownership to the Equipment to Intel. The only remaining milestone of the Amended Capacity License Agreement was the capability to produce at least 1 million sensors units per month. However, the Capacity License Agreement pertained to the old technology that was jointly developed with Kodak was terminated in April 2015 and the Company has abandoned this technology. The Company recorded a $5 million gain on relief of deferred revenue liability for discontinued operations in the fourth quarter of 2015.

Loss Per Share Data

Loss per share data

Basic loss per share is calculated based on the weighted average common shares outstanding during the period. Diluted earnings per share also gives effect to the dilutive effect of stock options, warrants (calculated based on the treasury stock method), convertible notes and convertible preferred stock.

At June 30, 2016, 1,260,000 restricted shares and options and warrants to purchase 11,654,252 shares of common stock at exercise prices ranging from $0.55 to $38.70 per share were outstanding, and were not included in the computation of diluted earnings per share as their effect would be anti-dilutive.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

ASC Topic 820, Fair Value Measurement and Disclosures, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. This topic also establishes a fair value hierarchy, which requires classification based on observable and unobservable inputs when measuring fair value. The fair value hierarchy distinguishes between assumptions based on market data (observable inputs) and an entity’s own assumptions (unobservable inputs). The hierarchy consists of three levels:

Level 1 – Quoted prices in active markets for identical assets and liabilities;

Level 2 – Inputs other than level one inputs that are either directly or indirectly observable; and

Level 3 – Unobservable inputs developed using estimates and assumptions, which are developed by the reporting entity and reflect those assumptions that a market participant would use.

Our financial instruments consist of accounts receivable, prepaid expenses, derivative liability and accounts payable. We believe the fair values of our accounts receivable, prepaid expenses and accounts payable reflect their respective carrying amounts given the short term nature of these instruments. The derivative liability is measured at fair value on a recurring basis.

Recently Issued Accounting Pronouncements

Recently issued accounting pronouncements

In February 2016, the Financial Accounting Standards Update (ASU) 2016-02 Leases (Topic). This ASU requires a lessee to recognize a right-of-use asset and a lease liability under most operating leases in its balance sheet. For public companies, the ASU is effective for annual and interim periods beginning after December 15, 2018. Early adoption is permitted. The company is currently evaluating the effects that the adoption of ASU 2016-02 will have on the financial position, results of operations or cash flows.

Accounting Guidance Not Yet Effective

Accounting Guidance Not Yet Effective

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. ASU 2014-09 requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve this core principle, the guidance provides that an entity should apply the following steps: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when, or as, the entity satisfies a performance obligation. The Company expects to adopt ASU 2014-09 for the fiscal year ending December 31, 2017 and the Company will continue to assess the impact on its financial statements.

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies are not expected to have a material impact on the Company’s financial position, results of operations and cash flows.

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Commitments and Contingencies (Tables)

6 Months Ended

Jun. 30, 2016

Commitments and Contingencies Disclosure [Abstract]

Schedule of Future Minimum Rental Payments for Operating Leases

Future minimum lease commitments as of June 30, 2016 are as follows:

Year Ending June 30 (in thousands)
Six months ending 2016	$	152
2017		306
2018		141
2019		—
2020		—
2021		—
Total	$	599

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Equity, Stock Plan and Warrants (Tables)

6 Months Ended

Jun. 30, 2016

Stockholders' Equity Note [Abstract]

Summary of Changes in Stock Options Outstanding

A summary of the changes in the total stock options outstanding during the six months ended June 30, 2016 follows:

				Weighted
				Average
	Options			Exercise Price
Outstanding and expected to vest, at December 31, 2015		1,941,194		$	6.54
Granted		384,000		$	1.38
Forfeited or expired		(145,252	)	$	9.97
Exercised		(1,050	)	$	1.24
Outstanding and expected to vest, at June 30, 2016		2,178,892		$	5.41
Vested and exercisable at June 30, 2016		1,461,121		$	7.26

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions

The fair values of the Company’s options were estimated on the date of grant using the Black-Scholes valuation model with the following weighted-average assumptions:

	Three Months ended June 30, 2016			Three Months ended June 30, 2015		Six Months ended June 30, 2016			Six Months ended June 30, 2015
Expected life (years)		5 years			na		5 years			5 years
Interest rate		1.10 to 1.23	%		na		1.10 to 1.23	%		1.31 to 1.57	%
Dividend yield		—			na		—			—
Volatility		98.50	%		na		94.31 to 98.50	%		144.34 to 147.50	%
Forfeiture rate		—			—		—			—
Weighted average fair value of options granted	$	1.10		$	na	$	1.01		$	5.00

Schedule of Outstanding Warrants

Information regarding outstanding warrants as of June 30, 2016 is as follows:

Grant date	Warrants Outstanding		Exercisable		Weighted Exercise Price		Remaining Life (Years)
June 10, 2009		15,796		15,796	$	7.50		2.93
August 31, 2009		24,934		24,934	$	7.50		2.93
October 2, 2009		205,000		205,000	$	5.00		3.33
March 15, 2010		8,337		8,337	$	7.50		3.50
April 5, 2010		930		930	$	7.50		3.50
April 16, 2015 (1)		1,151,121		1,151,121	$	1.50		3.50
November 5, 2015 (1)		38,371		38,371		1.50		3.75
November 30, 2015 (1)		8,030,871		8,030,871	$	1.50		4.42
Total		9,475,360		9,475,360

(1) The exercise price of the warrants and the number of shares for which the warrants are exercisable are subject to certain adjustments if the Company issues or sells additional shares of common stock or common stock equivalents at a price per share less than the exercise price then in effect, or without consideration.

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Property and Equipment and Inventory (Tables)

6 Months Ended

Jun. 30, 2016

Property, Plant and Equipment [Abstract]

Schedule of Property and Equipment

A summary of the components of property and equipment at June 30, 2016 and December 31, 2015 (in thousands) are as follows:

	Estimated Useful Lives	June 30, 2016			December 31, 2015
Production equipment	3 to 5 years	$	1,988		$	1,966
Research and development equipment	3 to 5 years		3,583			3,572
Leasehold improvements	5 years		23			23
Computer equipment	5 years		98			98
Office equipment	3 to 5 years		20			20
Construction-in-progress			351			176
			6,063			5,855
Accumulated depreciation			(4,566	)		(4,013	)
Property and equipment, net		$	1,497		$	1,842

Schedule of Inventory

A summary of the components of inventory at June 30, 2016 and December 31, 2015 (in thousands):

	June 30, 2016		December 31, 2015
Raw materials	$	312	$	419
Work-in-progress		193		328
Finish Goods		13		22
Inventory	$	518	$	769

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Senior Secured Convertible Notes and Warrants (Tables)

6 Months Ended

Jun. 30, 2016

Debt Disclosure [Abstract]

Schedule of Convertible Debt

At inception, the Convertible Notes balance (in thousands) and unamortized discount in millions were as follows:

Convertible notes	$	15,000
Discount attributable to warrants		(5,980	)
Discount attributable to BCF		(5,970	)
Carrying amount of Convertible Notes at inception	$	3,050

Schedule of Debt

The following table summarizes the charges to interest, amortization and other expense, net for the six months ended June 30, 2016 (in thousands):

Interest expense on convertible notes	$	9
Accretion of convertible note discount	$	1,291

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Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2016

Fair Value Disclosures [Abstract]

Fair Value, Liabilities Measured on Recurring Basis

Liabilities measured at fair value (in thousands) on a recurring basis are summarized as follows:

							Carrying
	Fair Value Measurements Using Inputs						Amount at
Financial Instruments	Level 1		Level 2		Level 3		June 30, 2016
Liabilities:
Derivative liability	$	-	$	1,140	$	-	$	1,140
Total	$	-	$	1,140	$	-	$	1,140

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Revenue and Credit Concentrations (Tables)

6 Months Ended

Jun. 30, 2016

Risks and Uncertainties [Abstract]

Schedules of Credit Concentration Risk

During the six months ended June 30, 2016 and 2015, revenues by customers with more than 10% of revenue were as follows:

	Six months ended June 30, 2016					Six months ended June 30, 2015
	Amount		%			Amount		%
Company A	$	1,111		62	%	$	842		62	%
Company B		626		35	%		438		32	%
Total	$	1,737		96	%	$	1,280		94	%

As of June 30, 2016 and December 31, 2015 customers with more than 10% of accounts receivables balances were as follows:

	As of June 30, 2016					As of December 31, 2015
	Amount		%			Amount		%
Company A	$	57		18	%	$	133		40	%
Company B		209		66	%		164		49
Total	$	266		84	%	$	297		89	%

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Basis of Presentation, Business and Organization (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands	Jun. 30, 2016	Dec. 31, 2015	Nov. 30, 2015	Jun. 30, 2015	Apr. 16, 2015	Dec. 31, 2014
Note 1 - Basis of Presentation, Business and Organization (Details) [Line Items]
Common stock, par value	$ 0.001	$ 0.001
Debt principal amount	$ 15,000		$ 500		$ 15,000
Accumulated deficit	163,748	$ 149,191
Cash and cash equivalents	$ 11,284	$ 7,618		$ 8,195		$ 23,663
Atmel Corporation X Touch [Member] | Convertible Debt [Member]
Note 1 - Basis of Presentation, Business and Organization (Details) [Line Items]
Debt principal amount			$ 500		$ 15,000

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Summary of Significant Accounting Policies (Details Narrative) $ / shares in Units, $ in Thousands	1 Months Ended			3 Months Ended	6 Months Ended
	Apr. 30, 2014 USD ($) Sensor	May 31, 2013 USD ($)	Apr. 30, 2013 USD ($) Sensor	Dec. 31, 2015 USD ($)	Jun. 30, 2016 USD ($) $ / shares shares	Dec. 31, 2014 USD ($)
Note 2 - Summary of Significant Accounting Policies (Details) [Line Items]
Cash, FDIC insured amount				$ 250	$ 250
Restricted cash				4,098
Accounts receivable, net				334	$ 317
Deferred revenue, current						$ 5,000
Restricted Stock [Member]
Note 2 - Summary of Significant Accounting Policies (Details) [Line Items]
Antidilutive securities | shares					1,260,000
Stock Option [Member]
Note 2 - Summary of Significant Accounting Policies (Details) [Line Items]
Antidilutive securities | shares					1,260,000
Warrant [Member]
Note 2 - Summary of Significant Accounting Policies (Details) [Line Items]
Antidilutive securities | shares					11,654,252
Capacity License Agreement [Member] | Intel Corporation [Member]
Note 2 - Summary of Significant Accounting Policies (Details) [Line Items]
Proceeds to received in increase production			$ 10,000
Revenue milestones with related contingent consideration			$ 5,000
Number of units produced, capability requirement | Sensor			1,000,000
Deferred revenue, current			$ 5,000
Commisson, percentage			10.00%
Fees and commissions			$ 18,500
Revenue agreement, term			3 years
Payments to acquire machinery and equipment			$ 10,100
Amended Capacity License Agreement [Member] | Intel Corporation [Member]
Note 2 - Summary of Significant Accounting Policies (Details) [Line Items]
Commisson, percentage	10.00%
Cash proceeds from license		$ 5,000
Gain on relief of deferred revenue liability for discontinued operations				$ 5,000
Minimum [Member]
Note 2 - Summary of Significant Accounting Policies (Details) [Line Items]
Property, plant and equipment, useful life					3 years
Minimum [Member] | Options And Warrants [Member]
Note 2 - Summary of Significant Accounting Policies (Details) [Line Items]
Antidilutive securities price per share | $ / shares					$ 0.55
Minimum [Member] | Capacity License Agreement [Member] | Intel Corporation [Member]
Note 2 - Summary of Significant Accounting Policies (Details) [Line Items]
Number of units produced, capability requirement | Sensor	1,000,000
Minimum [Member] | Amended Capacity License Agreement [Member] | Intel Corporation [Member]
Note 2 - Summary of Significant Accounting Policies (Details) [Line Items]
Number of units produced, capability requirement | Sensor	1,000,000
Fees and commissions	$ 6,250
Cash proceeds from license	5,000
Maximum [Member]
Note 2 - Summary of Significant Accounting Policies (Details) [Line Items]
Property, plant and equipment, useful life					5 years
Maximum [Member] | Options And Warrants [Member]
Note 2 - Summary of Significant Accounting Policies (Details) [Line Items]
Antidilutive securities price per share | $ / shares					$ 38.70
Maximum [Member] | Capacity License Agreement [Member] | Intel Corporation [Member]
Note 2 - Summary of Significant Accounting Policies (Details) [Line Items]
Fees and commissions			$ 18,500
Maximum [Member] | Amended Capacity License Agreement [Member] | Intel Corporation [Member]
Note 2 - Summary of Significant Accounting Policies (Details) [Line Items]
Fees and commissions	18,500
Cash proceeds from license	$ 10,000

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Commitments and Contingencies (Details Narrative) $ in Thousands		1 Months Ended				3 Months Ended	6 Months Ended
	Nov. 19, 2013 USD ($)	Jul. 31, 2015 ft²	Apr. 30, 2014 USD ($) Sensor	May 31, 2013 USD ($)	Apr. 30, 2013 USD ($) Sensor	Dec. 31, 2015 USD ($)	Jun. 30, 2016 USD ($) ft²	Dec. 31, 2014 USD ($)
Deferred revenue								$ 5,000
Other liabilities, noncurrent						$ 1,175	$ 721
Two Former Executive Officers [Member]
Personal profits from selling own shares							2,000
Final Judgment [Member]
Litigation settlement, amount	$ 750						40
Other liabilities						750
Other liabilities, current						115	205
Other liabilities, noncurrent						635	$ 505
Final Judgment [Member] | Within 14 Days [Member]
Litigation settlement, amount	20
Final Judgment [Member] | Within 104 Days [Member]
Litigation settlement, amount	20
Final Judgment [Member] | Within 194 Days [Member]
Litigation settlement, amount	30
Final Judgment [Member] | Within 284 Days [Member]
Litigation settlement, amount	45
Final Judgment [Member] | Within 374 Days [Member]
Litigation settlement, amount	60
Final Judgment [Member] | Within 464 Days [Member]
Litigation settlement, amount	70
Final Judgment [Member] | Within 554 Days [Member]
Litigation settlement, amount	80
Final Judgment [Member] | Within 644 Days [Member]
Litigation settlement, amount	80
Final Judgment [Member] | Within 734 Days [Member]
Litigation settlement, amount	80
Final Judgment [Member] | Within 824 Days [Member]
Litigation settlement, amount	85
Final Judgment [Member] | Within 914 Days [Member]
Litigation settlement, amount	90
Final Judgment [Member] | Within 1004 Days [Member]
Litigation settlement, amount	$ 90
Capacity License Agreement [Member] | Intel Corporation [Member]
Proceeds to received in increase production					$ 10,000
Revenue milestones with related contingent consideration					$ 5,000
Number of units produced, capability requirement | Sensor					1,000,000
Deferred revenue					$ 5,000
Commisson, percentage					10.00%
Fees and commissions					$ 18,500
Cost of equipment					10,100
Capacity License Agreement [Member] | Intel Corporation [Member] | Minimum [Member]
Number of units produced, capability requirement | Sensor			1,000,000
Capacity License Agreement [Member] | Intel Corporation [Member] | Maximum [Member]
Fees and commissions					$ 18,500
Amended Capacity License Agreement [Member] | Intel Corporation [Member]
Commisson, percentage			10.00%
Cash proceeds from license				$ 5,000
Gain on relief of deferred revenue liability for discontinued operations						$ 5,000
Amended Capacity License Agreement [Member] | Intel Corporation [Member] | Minimum [Member]
Number of units produced, capability requirement | Sensor			1,000,000
Fees and commissions			$ 6,250
Cash proceeds from license			5,000
Amended Capacity License Agreement [Member] | Intel Corporation [Member] | Maximum [Member]
Fees and commissions			18,500
Cash proceeds from license			$ 10,000
Building [Member]
Area of Real Estate Property | ft²							7,186
Building [Member] | Atmel Corporation X Touch [Member]
Area of Real Estate Property | ft²							28,918
Building [Member] | Santa Clara CA [Member]
Area of Real Estate Property | ft²		4,478
Lease Expiration Date		Jul. 14, 2018
Building 2 And 4 [Member] | Atmel Corporation [Member]
Lease Expiration Date							Oct. 15, 2016

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Commitments and Contingencies - Schedule of Future Minimum Rental Payments for Operating Leases (Details) $ in Thousands	Jun. 30, 2016 USD ($)
Commitments and Contingencies Disclosure [Abstract]
Six months ending 2016	$ 152
2017	306
2018	141
2019
2020
2021
Total	$ 599

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Equity, Stock Plan and Warrants (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
Number of common stock shares issued for cash in connection with exercise of stock options	1,050	12,500
Compensation expense recognized for options	$ 333	$ 949
Common stock warrants outstanding	$ 9,475,360
Class of warrant weighted average exercise price	$ 1.61
Stock Incentive Plans [Member]
Number of common stock shares awarded	5,500,001
Number of shares available for issuance	505,552
Two Former Executive Officers [Member]
Number of common stock shares issued for compensation	1,900
Number of restricted stock of shares	1,260,000
Restricted Stock [Member]
Compensation expense recognized for restricted stock	$ 600	700
Unrecognized compensation cost related to non-vested shares of restricted stock	$ 2,600
Recognized over a weighted-average period	2 years 5 months 5 days
Number of restricted stock of shares	725,203
Sale of stock price per share	$ 1.50
Restricted Stock [Member] | Selling, General and Administrative Expenses [Member]
Compensation expense recognized for restricted stock	$ 4	500
Restricted Stock [Member] | Research and Development Expense [Member]
Compensation expense recognized for restricted stock	4	200
Stock Option [Member]
Unrecognized compensation cost related to non-vested shares of restricted stock	$ 800
Recognized over a weighted-average period	2 years 1 month 24 days
Compensation expense recognized for options	$ 300	900
Number of vested option increase during the period	40,000
Stock Option [Member] | Selling, General and Administrative Expenses [Member]
Compensation expense recognized for options	$ 100	130
Stock Option [Member] | Research and Development Expense [Member]
Compensation expense recognized for options	$ 100	$ 600
Directors and Employees [Member]
Number of common stock shares issued for compensation	726,253
Number of shares issued for exercise of warrants	1,595,000
Number of shares issued during period	6,152,500
Number of shares issued during period, value	$ 8,400
Equity issuance cost	$ 800
Officer and Employees [Member]
Number of common stock shares issued for compensation		105,017
Number of stock issued for settlement of derivative lawsuit		20,833
Number of stock issued for settlement of class action lawsuit		430,000
Debt conversion into stock		1,311,692
Number of common stock issed for conversion of debt principal		$ 3,700
Number of common stock issed for conversion of debt interest		$ 200

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Equity, Stock Plan and Warrants - Summary of Changes in Stock Options Outstanding (Details) - $ / shares	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
Stockholders' Equity Note [Abstract]
Options Outstanding and expected to vest, Beginning Balance	1,941,194
Options Granted	384,000
Options Forfeited or expired	(145,252)
Options Exercised	(1,050)	(12,500)
Options Outstanding and expected to vest, Ending Balance	2,178,892
Options Vested and exercisable	1,461,121
Weighted Average Exercise Price Outstanding and expected to vest, Beginning Balance	$ 6.54
Weighted Average Exercise Price Granted	1.38
Weighted Average Exercise Price Forfeited or expired	9.97
Weighted Average Exercise Price Exercised	1.24
Weighted Average Exercise Price Outstanding and expected to vest, Ending Balance	5.41
Weighted Average Exercise Price Vested and exercisable	$ 7.26

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Equity, Stock Plan and Warrants - Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions (Details) - $ / shares	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Stockholders' Equity Note [Abstract]
Expected life (years)	5 years	0 years	5 years	5 years
Interest rate, minimum	1.10%	0.00%	1.10%	1.31%
Interest rate, maximum	1.23%	0.00%	1.23%	1.57%
Dividend yield	0.00%	0.00%	0.00%	0.00%
Volatility	98.50%	0.00%
Volatility, minimum			94.31%	144.34%
Volatility, maximum			98.50%	147.50%
Forfeiture rate				0.00%
Weighted average fair value per share of options granted	$ 1.10	$ 0.00	$ 1.01	$ 5.00

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Equity, Stock Plan and Warrants - Schedule of Outstanding Warrants (Details) - $ / shares		6 Months Ended
		Jun. 30, 2016	Nov. 30, 2015	Apr. 16, 2015
Warrants Outstanding		9,475,360	1,189,492	1,151,121
Exercisable		9,475,360
Weighted Exercise Price		$ 1.61
June 10, 2009 [Member]
Warrants Outstanding		15,796
Exercisable		15,796
Weighted Exercise Price		$ 7.50
Remaining Life (Years)		2 years 11 months 5 days
August 31, 2009 [Member]
Warrants Outstanding		24,934
Exercisable		24,934
Weighted Exercise Price		$ 7.50
Remaining Life (Years)		2 years 11 months 5 days
October 2, 2009 [Member]
Warrants Outstanding		205,000
Exercisable		205,000
Weighted Exercise Price		$ 5.00
Remaining Life (Years)		3 years 3 months 29 days
March 15, 2010 [Member]
Warrants Outstanding		8,337
Exercisable		8,337
Weighted Exercise Price		$ 7.50
Remaining Life (Years)		3 years 6 months
April 5, 2010 [Member]
Warrants Outstanding		930
Exercisable		930
Weighted Exercise Price		$ 7.50
Remaining Life (Years)		3 years 6 months
April 16, 2015 [Member]
Warrants Outstanding	[1]	1,151,121
Exercisable	[1]	1,151,121
Weighted Exercise Price	[1]	$ 1.50
Remaining Life (Years)	[1]	3 years 6 months
November 5, 2015 [Member]
Warrants Outstanding	[1]	38,371
Exercisable	[1]	38,371
Weighted Exercise Price	[1]	$ 1.50
Remaining Life (Years)	[1]	3 years 9 months
November 30, 2015 [Member]
Warrants Outstanding	[1]	8,030,871
Exercisable	[1]	8,030,871
Weighted Exercise Price	[1]	$ 1.50
Remaining Life (Years)	[1]	4 years 5 months 1 day

[1] The exercise price of the warrants and the number of shares for which the warrants are exercisable are subject to certain adjustments if the Company issues or sells additional shares of common stock or common stock equivalents at a price per share less than the exercise price then in effect, or without consideration.

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Property and Equipment and Inventory (Details Narrative) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
Property, Plant and Equipment [Abstract]
Depreciation	$ 600	$ 3,300

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Property and Equipment and Inventory - Schedule of Property and Equipment (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2016	Dec. 31, 2015
Property, and Equipment	$ 6,063	$ 5,855
Accumulated depreciation	(4,566)	(4,013)
Property and equipment, net	$ 1,497	1,842
Minimum [Member]
Property and Equipment, Estimated Useful Lives	3 years
Maximum [Member]
Property and Equipment, Estimated Useful Lives	5 years
Production Equipment [Member]
Property, and Equipment	$ 1,988	1,966
Production Equipment [Member] | Minimum [Member]
Property and Equipment, Estimated Useful Lives	3 years
Production Equipment [Member] | Maximum [Member]
Property and Equipment, Estimated Useful Lives	5 years
Research and Development Equipment [Member]
Property, and Equipment	$ 3,583	3,572
Research and Development Equipment [Member] | Minimum [Member]
Property and Equipment, Estimated Useful Lives	3 years
Research and Development Equipment [Member] | Maximum [Member]
Property and Equipment, Estimated Useful Lives	5 years
Leasehold Improvements [Member]
Property and Equipment, Estimated Useful Lives	5 years
Property, and Equipment	$ 23	23
Computer Equipment [Member]
Property and Equipment, Estimated Useful Lives	5 years
Property, and Equipment	$ 98	98
Office Equipment [Member]
Property, and Equipment	$ 20	20
Office Equipment [Member] | Minimum [Member]
Property and Equipment, Estimated Useful Lives	3 years
Office Equipment [Member] | Maximum [Member]
Property and Equipment, Estimated Useful Lives	5 years
Construction in Progress [Member]
Property, and Equipment	$ 351	$ 176

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Property and Equipment and Inventory - Schedule of Inventory (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015	Jun. 30, 2015
Property, Plant and Equipment [Abstract]
Raw materials	$ 312		$ 419
Work-in-progress	193		328
Finish Goods	13		22
Inventory	$ 518	$ 769	$ 769

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Senior Secured Convertible Notes and Warrants (Details Narrative) $ / shares in Units, $ in Thousands		1 Months Ended	6 Months Ended
	Apr. 16, 2015 USD ($) Investor $ / shares shares	Nov. 30, 2015 USD ($) Investor $ / shares shares	Jun. 30, 2016 USD ($) shares	Dec. 31, 2015 USD ($)	Nov. 23, 2015
Debt instrument, face amount	$ 15,000	$ 500	$ 15,000
Class of warrant or rights, granted, shares | shares		38,371
Warrants exercise price per share | $ / shares	$ 9.63	$ 1.50
Class of warrant or right, outstanding | shares	1,151,121	1,189,492	9,475,360
Restricted cash and cash equivalents				$ 4,098
Convertible notes payable			3,050
Debt instrument, convertible, beneficial conversion feature			$ 5,970
Atmel Corporation X Touch [Member]
Debt interest rate percentage	4.00%
Debt payment terms	Interest accrues on the unpaid principal amount at a rate equal to 2% per annum compounded semi-annually and is to be paid in arrears semi-annually, commencing with the six-month anniversary of the closing date
Atmel Corporation X Touch [Member] | Convertible Debt [Member]
Debt instrument, face amount	$ 15,000	$ 500
Class of warrant or rights, granted, shares | shares	1,151,121	38,371
Number of investers | Investor	2	1
Equity method investment, ownership percentage	65.00%
Debt interest rate percentage	9.00%				4.00%
Debt maturity date	Apr. 16, 2016
Debt convertible, conversion price per share | $ / shares	$ 8.47
Debt convertible, terms of conversion feature	subject to adjustment as set forth in the Convertible Notes for stock splits, dividends, recapitalizations and similar events, which equaled 110% of the last closing price of our common stock prior to the execution and delivery of the Securities Purchase Agreement and 85% of the lowest closing sale price during the prior 30 trading day period.
Debt payment terms	The Investors have the right to accelerate payment on each monthly redemption date of up to two monthly redemption amounts upon written notice to us, and the Investors have the option to be paid such accelerated amount in common stock as if it were a Company Conversion. The Investors also have the right to defer payment of a monthly redemption amount.
Debt default, description of violation or event of default	Following an Event of Default, as defined in the Convertible Notes, the Investors may require us to redeem all or any portion of the Convertible Notes. The redemption amount may be paid in cash or with shares of our common stock, at the election of the Investor, at a price equal to the Event of Default Redemption Price, as defined in the Convertible Notes.
Warrants, term of warrants	5 years
Warrants exercise price per share | $ / shares	$ 9.63	$ 1.50
Percentage of warrants equals to common stock price	125.00%
Warrant exercise price of warrants or rights, description	If, after the Effective Date, we issue or sell, or are deemed to have issued or sold, any shares of common stock (with the exception of certain Excluded Securities, as those are defined in the Warrants) for a consideration per share less than a price equal to the exercise price of the Warrants in effect immediately prior to such issue or sale (or deemed issuance or sale) (a “Dilutive Issuance”), then immediately after the Dilutive Issuance, (x) if the Dilutive Issuance occurs prior to the one year anniversary of the Effective Date, then the exercise price then in effect will be reduced to an amount equal to the product of (A) the exercise price in effect immediately prior to the Dilutive Issuance and (B) the quotient determined by dividing (1) the sum of (I) the product derived by multiplying the exercise price in effect immediately prior to the Dilutive Issuance and the number of Common Shares Deemed Outstanding (as defined in the Warrants) immediately prior to the Dilutive Issuance plus (II) the consideration, if any, received by us on such Dilutive Issuance, by (2) the product derived by multiplying (I) the exercise price in effect immediately prior to the Dilutive Issuance by (II) the number of Common Shares Deemed Outstanding immediately after the Dilutive Issuance and (y) if the Dilutive Issuance occurs after the one year anniversary of the Effective Date but within five years of the Effective Date, the exercise price then in effect will be reduced to an amount equal to the price of the shares of common stock issued in the Dilutive Issuance. The Warrants will be exercisable for cash, but if a prospectus covering the shares of common stock underlying the Warrants is not available, the Investors may exercise the Warrants using a cashless exercise provision. The Warrants may not be exercised if, after giving effect to the exercise, the Investor would beneficially own in excess of 4.99% or 9.99% of the outstanding shares of common stock, depending on the Investor. At the Investor’s option, the cap applicable to the exercise of the Warrants may be raised or lowered to any other percentage not in excess of 9.99%, except that any increase will only be effective upon 61-days’ prior notice to us.
Class of warrant or right, outstanding | shares		1,189,492
Registration rights agreement, description	In conjunction with the issuance of the Convertible Notes and the Warrants, we entered into a Registration Rights Agreement pursuant to which we agreed to file a registration statement covering the sum of (i) 200% of the maximum number of shares underlying the Convertible Notes and (ii) the maximum number of shares underlying the Warrants (the “Registrable Securities”). We have agreed to keep any registration statement we file pursuant to the Registration Rights Agreement effective until the earlier of (i) the date as of which the Investors may sell all of the Registrable Securities covered by the Registration Statement without restriction or limitation pursuant to Rule 144 and without the requirement to be in compliance with Rule 144(c)(1) (or any successor thereto) or (ii) the date on which the Investors shall have sold all of the securities covered by such Registration Statement. We were to use our reasonable best efforts to have the registration statement declared effective within 90 days after the Effective Date (the “Registration Statement Effective Date”). If we failed to register the Registrable Securities or the registration statement is not declared effective by the SEC before the Registration Statement Effective Date, or if on any day after the Registration Statement Effective Date, sales of the Registrable Securities required to be included on the Registration Statement cannot be made (collectively, a “Registration Default”), we will pay to each Investor an amount in cash equal to 1% of the aggregate Purchase Price (as that term is defined in the Securities Purchase Agreement) of the Investor’s Registrable Securities, whether or not the Registrable Securities were included in the registration statement, and 1% per month (or a portion thereof pro rata) that the Registration Default continues to exist. We are not required to make these payment if, when a Registration Default occurs, the Investors can freely sell our common stock pursuant to Rule 144 without restriction or limitation.
Secruities purchase agreement, investor rights	Investors in the offering have the right to participate for no less than 35% of any future offering of our equity or equity equivalent securities until the second anniversary of the Effective Date when the Convertible Notes were purchased.
Restricted cash and cash equivalent item, agreement	We agreed to keep at least $6.0 million of restricted cash on our balance sheet at all times until the Maturity Date or until the outstanding principal amount of the Convertible Notes is less than $6.0 million, at which time the amount of restricted cash we are required to keep on our balance sheet will be adjusted downward, dollar for dollar. As of March 31, 2016 and December 31, 2015, the restricted cash was $0 and $4.1 million, respectively.
Restricted cash and cash equivalents	$ 6,000
Payments of stock issuance costs	1,700
Convertible notes payable	3,100
Warrants, fair value of warrants, granted	6,000
Debt instrument, convertible, beneficial conversion feature	$ 6,000
Debt conversion, converted instrument, shares issued | shares			13,984,411
Atmel Corporation X Touch [Member] | Convertible Debt [Member] | Principal [Member]
Debt conversion, original debt, amount			$ 11,600
Atmel Corporation X Touch [Member] | Convertible Debt [Member] | Interest [Member]
Debt conversion, original debt, amount			$ 300

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Senior Secured Convertible Notes and Warrants - Schedule of Convertible Debt (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2016	Nov. 30, 2015	Apr. 16, 2015
Debt Disclosure [Abstract]
Convertible notes	$ 15,000	$ 500	$ 15,000
Discount attributable to warrants	(5,980)
Discount attributable to BCF	(5,970)
Carrying amount of Notes	$ 3,050

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Senior Secured Convertible Notes and Warrants - Schedule of Interest, Amortization and Other Expenses Related to Debt (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Debt Disclosure [Abstract]
Interest expense on convertible notes			$ 9
Accretion of convertible note discount		$ 3,122	$ 1,291	$ 3,122

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Agreements with Atmel Corporation and CIT Technology LTD.(Details) - USD ($)		1 Months Ended	6 Months Ended
	Apr. 16, 2015	Apr. 30, 2016	Jun. 30, 2016	Jun. 30, 2015
Payments to acquire property, plant, and equipment			$ 208,000	$ 449,000
Repayment of promissory note plus interest			$ 2,867,000
Atmel Corporation [Member]
Repayment of promissory note plus interest		$ 450,000
Atmel Corporation [Member] | Licensing Agreements [Member]
Transition services agreement, description	In conjunction with the above-described transaction, Displays and Atmel entered into a Transition Services Agreement. Pursuant to the Transition Services Agreement, Atmel agreed to provide the following services for the periods described: (i) quality assurance and failure analysis services for the XTouch Touch Sensors for a period of six months starting from the Effective Date, (ii) operations services for a period of 30 days starting from the Effective Date and (iii) other services, as those are defined in the Transition Services Agreement, for a period of three months starting from the Effective Date. In exchange for the services, Displays has agreed to pay reasonable and documented direct costs incurred by Atmel in performing the services together with actual out-of-pocket third-party expenses reasonably incurred by Atmel in providing the services. The service fees include, but are not limited to, (a) the actual out-of-pocket employment costs (base salary, payroll taxes and out-of-pocket medical benefits) for the individuals performing the services (based on the actual time expended by such individuals in performing the services), (b) costs of materials, (c) the actual out-of-pocket third-party expenses reasonably incurred by Atmel in providing the services, and (d) direct supervisory and management expenses incurred by Atmel in providing the services.
Payment of transition services	$ 400,000
Atmel Corporation [Member] | Machinery and Equipment [Member]
Payments to acquire property, plant, and equipment	$ 450,000
Debt instrument, maturity date, description	the second anniversary of the Effective Date or (ii) the sale of equity and/or debt securities after the Effective Date pursuant to which Displays or any affiliate of our receives gross proceeds of no less than $5 million.
Debt instrument, interest rate, stated percentage	2.00%
Debt instrument, payment terms	compounded semi-annually and is to be paid in arrears semi-annually, commencing with the six-month anniversary of the Effective Date.
Atmel Corporation [Member] | Building 2 And 4 [Member]
Lessee leasing arrangements, operating leases, term of contract			18 months
Description of lessee leasing arrangements, operating leases			The term of each lease may be extended for two additional six month periods.
Operating leases, rent expense, minimum rentals			$ 100
Atmel Corporation [Member] | Building 2 First Renewal Term [Member]
Operating leases, rent expense, minimum rentals	$ 5,625
Atmel Corporation [Member] | Building 2 Second Renewal Term [Member]
Operating leases, rent expense, minimum rentals	8,437
Atmel Corporation [Member] | Building 4 First Renewal Term [Member]
Operating leases, rent expense, minimum rentals	39,375
Atmel Corporation [Member] | Building 4 Second Renewal Term [Member]
Operating leases, rent expense, minimum rentals	$ 59,062
Atmel Corporation X Touch [Member]
Debt instrument, interest rate, stated percentage	4.00%
Debt instrument, payment terms	Interest accrues on the unpaid principal amount at a rate equal to 2% per annum compounded semi-annually and is to be paid in arrears semi-annually, commencing with the six-month anniversary of the closing date
Atmel Corporation X Touch [Member] | Licensing Agreements [Member]
Patent license agreement, term	5 years
Patent license agreement, royalty fee, description	greater of $3.25 million or 3.33% of the total net sales (as defined in the Patent License Agreement) of the Touch Sensors during the Initial Term.
Atmel Corporation X Touch [Member] | Licensing Agreements [Member] | License Agreement Renewal Terms [Member]
Patent license agreement, term	10 years
Patent license agreement, royalty fee, description	If Displays exercises this right, the annual royalty fee will consist of 2.5% of the total net sales of the Touch Sensors until it reaches a total of $16.75 million, at which time no further annual royalty fees will be due. Upon execution of the Patent License Agreement, Displays paid a non-refundable, non-returnable prepayment of minimum annual royalty fees of $9.33 million (the “Royalty Prepayment”). The Royalty Prepayment will be applied to the annual royalty fees Displays owes under the Patent License Agreement. If, during the Initial Term, Displays’ cash balances as of the quarter end immediately prior to the date of the royalty period to which an unpaid annual royalty relates is less than $30 million, it may pay the annual royalty fee with a secured promissory note. Atmel has agreed that it will not enter into a license agreement for the licensed patents that is effective prior to the second anniversary of the Effective Date.
CIT Technology Ltd [Member] | Manufacturing Agreement [Member]
Other commitments, description	The Manufacturing Agreement had a term of six months, where Displays agreed that for a period of 16 consecutive weeks it will order, on a weekly basis, 11,500 linear meters of coated film manufactured by CIT at a cost of $7.90 per linear meter. The agreement had been completed and the process was transferred to the Colorado Springs facility in fiscal year 2015.
Long-term purchase commitment, period	6 months
CIT Technology Ltd [Member] | Licensing Agreements [Member]
Patent license agreement, term	5 years
Patent license agreement, royalty fee, description	greater of $1.65 million or 1.67% of the total net sales (as defined in the CIT Patent License Agreement) of the Licensed Products during the Initial License Term.
CIT Technology Ltd [Member] | Licensing Agreements [Member] | License Agreement Renewal Terms [Member]
Patent license agreement, term	10 years
Patent license agreement, royalty fee, description	annual royalty fee will consist of 1.67% of the total net sales of the Licensed Products until it reaches a total of $8.25 million, at which time no further annual royalty fees will be due. Further, the total royalty fees payable for the initial 5 year term and the subsequent 10 year term is capped at $30 million. Upon execution of the CIT Patent License Agreement, Displays paid a non-refundable, non-returnable prepayment of minimum annual royalty fees of $4.67 million (the “CIT Royalty Prepayment”). The CIT Royalty Prepayment will be applied to the annual royalty fees Displays owes under the CIT Patent License Agreement. If, during the Initial License Term, Displays’ cash balances as of the quarter end immediately prior to the date of the royalty period to which an unpaid annual royalty relates is less than $30 million, Displays may pay the annual royalty fee with a secured promissory note. CIT has agreed that it will not enter into a license agreement for the licensed patents as they relate to the Licensed Products that is effective prior to the second anniversary of the Effective Date.

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Loss on Discontinued Operations (Details Narrative) $ in Thousands	6 Months Ended
	Jun. 30, 2015 USD ($)
Discontinued Operations and Disposal Groups [Abstract]
Write down on equipment	$ 7,600

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Fair Value Measurements (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands	1 Months Ended	6 Months Ended
	Nov. 30, 2015	Jun. 30, 2016	Apr. 16, 2015
Fair Value Disclosures [Abstract]
Warrant outstanding, shares	1,189,492	9,475,360	1,151,121
Debt instrument, face amount	$ 500	$ 15,000	$ 15,000
Warrant exercise price per share	$ 1.50		$ 9.63
Warrant granted, shares	38,371
Fair value of warrants		6,000
Other expense		$ 700

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Fair Value Measurements - Fair Value, Liabilities Measured on Recurring Basis (Details) $ in Thousands	Jun. 30, 2016 USD ($)
Note 10 - Fair Value Measurements (Details) - Fair Value, Liabilities Measured on Recurring Basis [Line Items]
Derivative liability	$ 1,140
Fair Value, Inputs, Level 1 [Member]
Note 10 - Fair Value Measurements (Details) - Fair Value, Liabilities Measured on Recurring Basis [Line Items]
Derivative liability
Fair Value, Inputs, Level 2 [Member]
Note 10 - Fair Value Measurements (Details) - Fair Value, Liabilities Measured on Recurring Basis [Line Items]
Derivative liability	1,140
Fair Value, Inputs, Level 3 [Member]
Note 10 - Fair Value Measurements (Details) - Fair Value, Liabilities Measured on Recurring Basis [Line Items]
Derivative liability
Derivative Liability [Member]
Note 10 - Fair Value Measurements (Details) - Fair Value, Liabilities Measured on Recurring Basis [Line Items]
Derivative liability	1,140
Derivative Liability [Member] | Fair Value, Inputs, Level 1 [Member]
Note 10 - Fair Value Measurements (Details) - Fair Value, Liabilities Measured on Recurring Basis [Line Items]
Derivative liability
Derivative Liability [Member] | Fair Value, Inputs, Level 2 [Member]
Note 10 - Fair Value Measurements (Details) - Fair Value, Liabilities Measured on Recurring Basis [Line Items]
Derivative liability	1,140
Derivative Liability [Member] | Fair Value, Inputs, Level 3 [Member]
Note 10 - Fair Value Measurements (Details) - Fair Value, Liabilities Measured on Recurring Basis [Line Items]
Derivative liability

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Revenue and Credit Concentrations (Details Narrative)	6 Months Ended
	Jun. 30, 2016 Segments
Risks and Uncertainties [Abstract]
Number of Operating Segments	1

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Revenue and Credit Concentrations - Schedules of Customer Concentration Risk (Details) - Customer Concentration Risk [Member] - Sales Revenue, Goods, Net [Member] - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
Revenue	$ 1,737	$ 1,280
Percentage of Revenue	96.00%	94.00%
Customer A [Member]
Revenue	$ 1,111	$ 842
Percentage of Revenue	62.00%	62.00%
Customer B [Member]
Revenue	$ 626	$ 438
Percentage of Revenue	35.00%	32.00%

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Revenue and Credit Concentrations - Schedules of Customer Concentration Risk (Details) (Parenthetical) - Customers [Member]	6 Months Ended		12 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Dec. 31, 2015
Percentage of concentration risk	10.00%		10.00%
Sales Revenue, Goods, Net [Member]
Percentage of concentration risk	10.00%	10.00%

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Revenue and Credit Concentrations - Schedules of Credit Concentration Risk (Details) - Credit Concentration Risk [Member] - Accounts Receivable [Member] - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
Concentration Risk [Line Items]
Accounts Receivable	$ 266	$ 297
Percentage of Accounts Receivable	84.00%	89.00%
Customer A [Member]
Concentration Risk [Line Items]
Accounts Receivable	$ 57	$ 133
Percentage of Accounts Receivable	18.00%	40.00%
Customer B [Member]
Concentration Risk [Line Items]
Accounts Receivable	$ 209	$ 164
Percentage of Accounts Receivable	66.00%	49.00%

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Revenue and Credit Concentrations - Schedules of Credit Concentration Risk (Details) (Parenthetical)	6 Months Ended	12 Months Ended
	Jun. 30, 2016	Dec. 31, 2015
Customers [Member]
Percentage of concentration risk	10.00%	10.00%