-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NxdrvQfPjoGwNsN+bmkmXyUNqdZnv8GJkOV0+RFArAMUARnoS9HXtoX4ThLsypwV qOujgCZ0oDYbWiYSo4otpQ== 0000927016-96-001710.txt : 19961115 0000927016-96-001710.hdr.sgml : 19961115 ACCESSION NUMBER: 0000927016-96-001710 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961113 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: PIXTECH INC /DE/ CENTRAL INDEX KEY: 0000946144 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER TERMINALS [3575] IRS NUMBER: 043214691 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-26380 FILM NUMBER: 96660947 BUSINESS ADDRESS: STREET 1: AVENUE VICTOIRE 13790 CITY: ROUSSET FRANCE STATE: I0 10-Q 1 FORM 10-Q FORM 10-Q --------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1996 ------------------ 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 0-26380 --------------------------------- PIXTECH, INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 04-3214691 - -------------------------------------------------------------------------------- (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) Avenue Olivier Perroy, 13790 Rousset, France - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) 011-33-4-42-29-10-00 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No - - The number of shares outstanding of each of the issuer's classes of common stock as of Class Outstanding at September 30, 1996 ----- --------------------------------- Common Stock, $.01 par value 8,141,146 PIXTECH, INC. ------------- TABLE OF CONTENTS ----------------- PAGE NO. PART I FINANCIAL INFORMATION ITEM 1 Financial Statements Balance Sheets as of September 30, 1996 and December 31, 1995................................. 3 Statements of Operations for the Three Months and Nine Months Ended September 30, 1996 and 1995, and the period from June 18, 1992 Ended September 30, 1996.................................... 4 Statements of Cash Flows for the Nine Months ended September 30, 1996 and 1995, and the period from June 18, 1992 Ended September 30, 1996........... 5 Statement of Stockholders' Equity..................... 6-7 Notes to Financial Statements......................... 8-9 ITEM 2 Management's Discussion and Analysis of Financial Condition and Results of Operations............................................ 10-11 PART II OTHER INFORMATION ITEM 1 Legal Proceedings..................................... 12 ITEM 2 Changes in Securities................................. 12 ITEM 3 Default upon Senior Securities........................ 12 ITEM 4 Submission of matters to a vote of security holders...................................... 12 ITEM 5 Other Information..................................... 12 ITEM 6 Exhibits and Reports on Form 8-K...................... 12 Signatures........................................................... 13 -2- PixTech, Inc. (a development stage company) CONDENSED CONSOLIDATED BALANCE SHEET (in thousands, except per share amounts)
September 30, December 31, 1996 1995 ---------------- --------------- ASSETS (unaudited) Current assets: Cash and cash equivalents....................................... $ 8,391 $ 17,563 Accounts receivable: Trade......................................................... 1,287 5,420 Other......................................................... 57 187 Inventory....................................................... 648 411 Other........................................................... 3,020 3,229 ----------- ----------- Total current assets 13,403 26,810 Property, plant and equipment, net................................ 13,927 12,608 Goodwill, net..................................................... 316 -- Deferred tax assets............................................... 5,232 5,469 Other assets - long term.......................................... 318 492 ----------- ----------- Total assets................................................ $ 33,196 $ 45,379 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long term debt............................... $ 638 $ 623 Current portion of capital lease obligations.................... 916 907 Current portion of long term liabilities........................ 2,350 1,650 Accounts payable................................................ 3,687 6,140 Accrued expenses................................................ 1,600 1,290 Other........................................................... 85 281 ----------- ----------- Total current liabilities................................... 9,276 10,891 Deferred revenue - long term...................................... 3,222 3,093 Long term debt, less current portion.............................. 2,930 3,268 Capital lease obligation, less current portion.................... 1,075 1,825 Other long term liabilities, less current portion................. 125 1,772 ----------- ----------- Total liabilities........................................... 16,628 20,849 =========== =========== Stockholders' equity Convertible preferred stock..................................... -- -- Common stock.................................................... 81 81 Other stockholders' equity...................................... 33,799 34,359 Deficit accumulated during development stage.................... (17,312) (9,910) Total stockholders' equity.................................. 16,568 24,530 ----------- ----------- Total liabilities and stockholders' equity.................. $ 33,196 $ 45,379 =========== ===========
See accompanying notes. -3- PixTech, Inc. (a development stage company) CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) (unaudited)
Period from Three Months Ended Nine Months Ended June 18, 1992 September 30, September 30, (date of inception) through --------------------------- ------------------------------ September 30, 1996 1995 1996 1995 1996 ------------- ------------- -------------- --------------- --------------- Revenues: Cooperation & license revenues................... $ 707 $ 1,859 $ 5,233 $ 4,859 $ 23,071 Product sales.................................... 67 44 428 146 1,273 Other revenues................................... 11 136 992 645 2,375 -------- ---------- ---------- ---------- --------- 785 2,039 6,653 5,650 26,719 -------- ---------- ---------- ---------- --------- Cost of revenues License fees and royalties....................... -- -- -- 600 1,314 -------- ---------- ---------- ---------- --------- Gross margin...................................... 785 2,039 6,653 5,050 25,405 -------- ---------- ---------- ---------- --------- Operating expenses: Research and development: Acquisition of intellectual property rights -- -- -- 3,111 4,765 Other........................................... 4,269 3,091 11,491 8,486 33,385 -------- ---------- ---------- ---------- --------- 4,269 3,091 11,491 11,597 38,150 Sales and marketing............................. 309 476 755 1,026 3,344 General and administrative...................... 630 607 2,105 1,520 7,284 -------- ---------- ---------- ---------- --------- Total operating expenses..................... 5,208 4,174 14,351 14,143 48,778 -------- ---------- ---------- ---------- --------- Loss from operations.............................. (4,423) (2,135) (7,698) (9,093) (23,373) Other income/(expense) Interest income/(expense)....................... 3 109 91 (163) 364 Foreign exchange gains/(losses)................. (137) (343) 205 258 549 -------- ---------- ---------- ---------- --------- (134) (234) 296 95 913 Loss before income tax benefit.................... (4,557) (2,369) (7,402) (8,998) (22,460) Income tax benefit................................ -- 408 -- 1,115 5,148 -------- ---------- ---------- ---------- --------- Net Loss.......................................... $(4,557) $ (1,961) $ (7,402) $ (7,883) (17,312) ======== ========== ========== ========== ========= Net Loss per share: $(.56) $(.26) $(.91) $(1.22) ======= ========= ======== ========= Shares used in computing net loss per share....... 8,141 7,612 8,133 6,479 ======= ========= ======== =========
See accompanying notes. -4- PixTech, Inc. (a development stage company) CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands, except per share amounts) (unaudited)
Period from June 18, 1992 (date of inception) Nine Months Ended through September 30, September 30, ------------------------- ------------- 1996 1995 1996 ----------- ------------- ------------- Net loss........................................................... $ (7,402) $ (7,884) $ (17,312) Total adjustments to net loss...................................... 5,037 2,737 6,804 --------- --------- ---------- Net cash used in operating activities.............................. (2,365) (5,147) (10,508) --------- --------- ---------- Investing activities Additions to property plant and equipment.......................... (4,560) (1,670) (14,989) Additions to intangible assets..................................... (130) -- (130) --------- --------- ---------- Net cash used in investing activities.............................. (4,690) (1,670) (15,119) Financing activities Stock issued....................................................... 5 21,024 33,925 Sale of treasury stock............................................. -- 11 -- Proceeds from long-term borrowings................................. -- 4,161 6,190 Proceeds from sale leaseback transactions.......................... -- 2,731 2,731 Payments for equipment purchases financed by accounts payable...... -- (2,364) (2,709) Repayment of long term borrowing and capital lease obligations..... (1,773) (2,330) (4,702) --------- --------- ---------- Net cash (used in)/provided by financing activities................ (1,768) 23,233 35,435 --------- --------- ---------- Effect of exchange rates on cash................................... (349) (897) (1,417) --------- --------- ---------- Net (decrease)/increase in cash and cash equivalents............... (9,172) 15,519 8,391 Cash and cash equivalents beginning of period...................... 17,563 4,736 -- --------- --------- ---------- Cash and cash equivalents end of period............................ $ 8,391 $ 20,255 $ 8,391 ========== ========== ===========
See accompanying notes. -5- PixTech, Inc. (a development stage company) Condensed Consolidated Statements of Stockholders' Equity (in thousands, except share amounts)
Convertible Preferred Stock ------------------------------------------------- Series A Series B Series C Series D Shares Shares Shares Shares issued Amount issued Amount issued Amount issued Amount ------ ------ ------ ------ ------ ------ ------ ------ Balance at June 18, 1992 Issuance of Series A convertible preferred stock, net of issuance costs--$9 in June..... 211,681 $ 130 Issuance of Series B convertible preferred stock in June................................ 57,522 $ 38 Issuance of Common stock in June............... Issuance of Series A convertible preferred stock in August.............................. 29,451 32 Issuance of Series A convertible preferred stock in September........................... 293,455 544 Issuance of Series B convertible preferred stock in September........................... 65,483 121 Translation adjustment......................... Net loss from June 18, 1992 (date of inception) through December 31, 1992......... -------- ------- ------- ------ ------ ------ ------ ------ Balance at December 31, 1992 534,587 706 123,005 159 Issuance of Series A convertible preferred stock in January............................. 145,600 181 Issuance of Common stock in January............ Issuance of Series A convertible preferred stock in March............................... 876,816 1,481 Issuance of Series B convertible preferred stock in March............................... 240,442 430 Issuance of Series C convertible preferred stock, net of issuance costs--$71 in December..................................... 1,999,011 $5,686 Issuance of Series D convertible preferred stock, net of issuance costs--$15 in December..................................... 430,208 $1,224 Translation adjustment......................... Net loss--Year ended December 31, 1993......................................... -------- ------- ------- ------ -------- ------- -------- ------- Balance at December 31, 1993 1,557,003 2,368 363,447 589 1,999,011 5,686 430,208 1,224 Issuance of Common stock under stock option plan in April......................... Purchase of 28,761 shares of Common stock--Treasury stock in April............... Issuance of Series C convertible preferred stock, net of issuance costs--$37 in April... 472,918 1,324 Issuance of Series C convertible preferred stock, net of issuance costs--$45 in June.... 572,917 1,605 Translation adjustment......................... Net loss--Year ended December 31, 1994......... --------- ------- ------- ------ --------- ------- -------- ------- Balance at December 31, 1994 1,557,003 2,368 363,447 589 3,044,846 8,615 430,208 1,224 Reissuance of 28,761 shares of Common stock held in treasury in January............ Issuance of Common stock under stock option plan.................................. Common stock issued in initial public offering, net of insuance costs -- $ 1,090 Conversion of preferred stock..................(1,557,003) (2,368)(363,447) (589)(3,044,846) (8,615) (430,208) (1,224) Translation adjustment......................... Net loss--Twelve months ended December 31, 1995 ------ ------ ------ ------ ------ ------ ------ ------ Balance at December 31, 1995 Issuance of Common stock under stock option plan (unaudited)...................... Issuance of warrants in connection with acquisition of the assets of Panocorp (unaudited) Translation adjustment (unaudited).............. Net loss--Nine months ended September 30, 1996 (unaudited).............................. ------ ------ ------ ------ ------ ------ ------ ------ Balance at September 30, 1996 -- -- -- -- -- -- -- -- ====== ====== ====== ====== ====== ====== ====== ======
See accompanying notes -6- PixTech, Inc. (a development stage company) Condensed Consolidated Statements of Stockholders' Equity (in thousands, except share amounts)
Common Stock ------------ Deficit ------- accumulated ----------- Additional Cumulative during ---------- ---------- ------ Shares Paid-in translation development Treasury ------ ------- ----------- ----------- -------- issued Amount Capital adjustment stage stock Total ------ ------ ------- ---------- ----- ----- ----- Balance at June 18, 1992 Issuance of Series A convertible preferred $ 130 stock, net of issuance costs--$9 in June.... Issuance of Series B convertible preferred stock in June............................... 38 Issuance of Common stock in June.............. 115,045 $ 1 $ 75 76 Issuance of Series A convertible preferred stock in August............................. 32 Issuance of Series A convertible preferred stock in September.......................... 544 Issuance of Series B convertible preferred stock in September.......................... 21 Translation adjustment $ 1 1 Net loss from June 18, 1992 (date of inception) through December 31, 1992........ $ (506) (506) --------- ------- -------- ------ -------- ------ -------- Balance at December 31, 1992 115,045 1 75 1 (506) 436 Issuance of Series A convertible preferred 181 stock in January............................ Issuance of Common stock in January........... 17,256 21 21 Issuance of Series A convertible preferred stock in March..................... 1,481 Issuance of Series B convertible preferred stock in March.............................. 430 Issuance of Series C convertible preferred stock, net of issuance costs--$71 in December.................................... 5,686 Issuance of Series D convertible preferred stock, net of issuance costs--$15 in December.................................... 1,224 Translation adjustment (50) (50) Net loss--Year ended December 31, 1993........ (120) (120) --------- ------- -------- ------ -------- ------ -------- Balance at December 31, 1993 132,301 1 96 (49) (626) 9,289 Issuance of Common stock under stock option plan in April........................ 77,356 1 28 29 Purchase of 28,761 shares of Common stock--Treasury stock in April.............. $(11) (11) Issuance of Series C convertible preferred stock, net of issuance costs--$37 in April.. 1,324 Issuance of Series C convertible preferred stock, net of issuance costs--$45 in June... 1,605 Translation adjustment........................ 230 230 Net loss--Year ended December 31, 1994........ (2,979) (2,979) --------- ------- -------- ------ -------- ------ -------- Balance at December 31, 1994 209,657 2 123 181 (3,605) (11) 9,487 Reissuance of 28,761 shares of Common stock held in treasury in January........... 3 11 14 Issuance of Common stock under stock option plan................................. 6,902 0 3 3 Common stock issued in initial public offering, net of insuance costs--$1,090............... 2,500,000 25 20,973 20,998 Conversion of preferred stock................. 5,395,504 54 12,742 Translation adjustment........................ 334 334 Net loss--Twelve months ended December 31, 1995 (6,305) (6,305) --------- ------- -------- ------ -------- ------ -------- Balance at December 31, 1995 8,112,063 $81 $33,844 $515 $(9,910) $ -- $ 24,530 Issuance of Common stock under stock option plan (unaudited) 29,083 0 11 11 Issuance of warrants in connection with acquisition of the assets of Panocorp (unaudited) 230 230 Translation adjustment (unaudited) (801) (801) Net loss--Nine months ended September 30, 1996 (unaudited) (7,402) (7,402) --------- ------- -------- ------ -------- ------ -------- Balance at September 30, 1996 8,141,146 $ 81 $ 34,085 $ (286) $ (17,312) $ -- $ 16,568 ========= ======= ======== ====== ========= ====== ========
See accompanying notes -7- PIXTECH, INC. (a development stage company) Notes to Condensed Consolidated Financial Statements (all amounts in thousands except share amounts) (unaudited) Note A -- Basis of presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results of the three-month or nine-month periods ending September 30, 1996 are not necessarily indicative of the results that may be expected for the year ending December 31, 1996. For further information, refer to the consolidated financial statements and footnotes thereto for the year ending December 31, 1995 (the "1995 Financial Statements"), included in the Company's Annual Report on Form 10-K for the year ended December 31, 1995. Note B -- Inventories Inventory consists of raw material and spare parts. Note C -- Purchase of PanoCorp assets On February 20, 1996, the Company acquired substantially all the assets of PanoCorp, Inc., a research and development company located in Fremont, California, in a transaction accounted for as a purchase. The assets of PanoCorp, Inc., including principally fixed assets valued at $120, were purchased for $250 in cash plus 150,000 warrants to purchase shares of the Company's common stock at an exercise price of $11.67. The fair value of the 150,000 warrants was computed using the price of stock, the exercise price of the warrants, the expected dividend yield of the stock price, the expected volatility of stock, the expected life of the warrants and the risk-free interest rate, using the Black-Scholes model. Pursuant to the APB Statement 16, the value of such warrants was estimated at $230 and the global transaction generated a goodwill of $360. This goodwill will be depreciated over 5 years. The purchase agreement also calls for the issuance of additional warrants to the shareholders of PanoCorp, Inc., contingent upon the achievement by the Company of specified technical milestones over the next 3 years. Note D -- Termination of Cooperation and License Agreement with Texas Instruments On March 21, 1996, the Company was informed by Texas Instruments of its intention to suspend its development of FEDs. Discussions then began on the effect of this decision on the Cooperation and License Agreement with Texas Instruments Incorporated dated June 29, 1993 ("the TI Agreement"). These discussions resulted in the execution of a Termination Agreement dated July 15, 1996. Under this agreement, Texas Instruments acknowledged that all payments heretofore made in kind to the Company with respect to technology transfer from the Company to Texas Instruments are and shall remain the property of the Company. Included in accounts payable at December 31, 1995 and as of the date of the Termination Agreement was $1,336 representing goods delivered and services rendered by Texas Instruments as in-kind technology transfer payments pursuant to the Cooperation and License Agreement (see note 6. Accounts payable of the 1995 Financial Statements). -8- Following Texas Instruments' decision to suspend their FED efforts, and following the subsequent confirmation that the in-kind liability to Texas Instruments would not be payable, the Company recorded cooperation and license revenues in the amount of $1,336 during the three-month period ended June 30, 1996, and canceled the in-kind liability of same amount included in accounts payable. Note E: Property and Equipment At December 31, 1995 and March 31, 1996, machinery and equipment included $671 and $719 respectively on which the Company and LETI (Laboratoire Electronique de Technologie et d'Instrumentation) each had a 50% title. This equipment was recorded by the Company at 50% of its cost and was depreciated based on this acquisition value (see note 5 - Property, Plant and Equipment Accounts payable of the 1995 Financial Statements). On March 22, 1996, the Company entered into an agreement with LETI under which (i) certain pieces of equipment, with an acquisition value and a net value in the Company's books of $380 and $240 at March 31, 1996, respectively, became the sole property of the Company; these assets were recorded at April 1, 1996 in the Company's books with an acquisition value of $509, and are now depreciated over their remaining expected lifetime ; and (ii) certain pieces of equipment with an acquisition value and a net value in PixTech's books of $336 and $238, respectively, became the sole property of LETI. -9- MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of operations Cooperation and License revenues. The Company recognized cooperation and license revenues under the FED Alliance agreements of $0.7 million in the three-month period ending September 30, 1996, as compared to $1.8 million in the three-month period ending September 30, 1995. These revenues represent the achievement by the Company of contractual milestones with FED Alliance members. The decrease in revenues from FED Alliance agreements follows the achievement by the Company, earlier this year, of a majority of the technical milestones agreed upon with existing partners. The Company may not be able to maintain the level of cooperation and license revenues that has been achieved historically if the Company does not succeed in expanding the FED Alliance. The Company recognized cooperation and license revenues under the FED Alliance agreements of $5.2 million in the nine-month period ending September 30, 1996, as compared to $4.8 million in the nine-month period ending September 30, 1995. Product sales. The Company recognized product sales of $67,000 in the three- month period ending September 30, 1996, as compared to $44,000 in the three- month period ending September 30, 1995. These product sales represented the shipment of FED displays for evaluation by OEM customers and FED cathodes to members of the FED Alliance in limited quantities. The Company recognized product sales of $428,000 in the nine-month period ending September 30, 1996 and $146,000 in the nine-month period ending September 30, 1995. Other revenues. The Company recognized other revenues of $11,000 in the three- month period ending September 30, 1996 as compared to other revenues of $136,000 in the three-month period ended September 30, 1995. Other revenues are principally government grant funding. Other revenues amounted to $992 in the nine-month period ending September 30, 1996 as compared to $645 during the nine- month period ending September 30, 1995. Of the revenues recorded in 1996, $800 are related to a grant from the French Ministry of Industry to support manufacturing of Field Emission Displays. Research and Development Expenses - The Company expensed $4.3 million for research and development costs during the three-month period ending September 30, 1996, an increase of 38% over R&D expenses incurred in the three-month period ending September 30, 1995, which amounted to $3.1 million. These expenses included contract consulting fees, salaries and associated operating expenses for in-house research and development activities and the cost of staffing and operating the Company's pilot manufacturing facility. Part of the increase is related to launching of a new R&D effort in Santa Clara, with a view to developing large-size FEDs. The increase also reflects the continued development of the Company's FED technology and manufacturing processes. R&D expenses amounted to $11.5 million for the nine-month period ending September 30, 1996 as compared to $8.5 million during the nine-month period ending September 30, 1995, excluding acquisition of intellectual property rights. Sales and Marketing Expenses. The Company expensed $309 for sales and marketing during the three-month period ending September 30, 1996, compared to $476 during the three-month period ending September 30, 1995. Sales and marketing expenses amounted to $755 for the nine-month period ending September 30, 1996 as compared to $1.0 million during the nine-month period ending September 30, 1995. The decrease follows the reallocation of a limited number of engineers from Sales & Marketing to Research & Development. General and Administrative Expenses. General and administrative expenses remained almost stable, with an increase of 4% only, from $607 in three-month period ending September 30, 1995 to $630 in the three-month period ending September 30, 1996. General and administrative expenses amounted to $2.1 million for the nine-month period ending September 30, 1996 as compared to $1.5 million during the nine-month period ending September 30, 1995, reflecting the increase in the number of full time employees. Income tax. Income tax benefits represent tax credits for research and development activities conducted in France and the benefits of net operating loss carryforwards, net of valuation allowance. Research and development tax credits will be paid in cash to the Company if the Company is not able to credit them against future income tax liabilities within three fiscal years. The Company did not recognize any income tax benefit during the nine-month period ending September 30, 1996, as compared to $1.1 million for the nine-month period ending September 30, 1995. The Company does not expect to record significant additional tax credits for research and development activities, if any, as the benefit is based on increases in eligible research and development expenses in a given year over the two previous fiscal years. -10- Strategic issues and risks The Company is focused on the continued development of the FED technology, the strengthening and expansion of the FED Alliance, the improvement of manufacturing yields, and the reliability testing of new products which the Company expects will lead to the shipment of an increased quantity of commercial products in the near future. In evaluating this strategy, the following risks and issues, among others, should be considered. Revenues from FED Alliance members. The Company primarily recognizes its revenues when it has achieved certain milestones which are contractually defined with FED Alliance members. Failure to achieve a specific technical milestone in a given quarter could result in significant unexpected fluctuations in revenues. To date, the Company has recorded a significant portion of the expected revenues associated with the achievement of contractual milestones with existing FED Alliance members and may not be able to maintain the level of cooperation and license revenues that has been achieved historically. Consequently, future FED Alliance milestone revenues are mostly subject to expansion of the Alliance. There can be no assurance that the Company will be successful in entering into any new FED Alliance agreements with other companies that have proprietary display-related technology. Failure to expand the FED Alliance could adversely affect the Company. Products and manufacturing processes under development. The Company's products and its manufacturing processes are in the development stage and delays in the development of its products and processes could occur, which could adversely affect the Company. Limited Manufacturing Capability: To date, the Company has only used its facilities for the production of low volumes of prototypes and FEDs and has not produced FEDs in commercial quantities or at commercially viable yields. The Company will need to acquire additional capital equipment to support additional volume. In addition, the Company's pilot manufacturing facility located in Montpellier, France, may not be able to produce volume quantities of FEDs at acceptable cost levels. Cost of products. The Company currently produces only limited quantities of FED prototypes at its pilot manufacturing production line in Montpellier. Until the Company has shipped products in quantities, it is not considered meaningful to determine a cost of product sold. Product cost will depend on the level of yields achieved. Foreign exchange. A large percentage of the Company's net assets and of the Company's costs is expressed in French Francs. Fluctuations of the parity of the US dollar versus French Franc may cause significant foreign exchange gains or losses. Financial Condition Cash used in operations was $2.4 for the nine-month period ended September 30, 1996, as compared to cash used in operations of $5.1 million for the nine-month period ended September 30, 1995. The Company has used $10.5 million in cash to fund its operations from inception through September 30, 1996 and has incurred $15.1 million in capital expenditures. To date, the Company has funded its operations and capital expenditures primarily from the proceeds of equity financing aggregating $33.9 million and from proceeds aggregating $8.9 million from borrowings and sale- leaseback transactions. Capital expenditures were $4.7 million during the nine-month period ended September 30, 1996 as compared to $1.7 million during the same period of 1995. In 1996, capital expenditures included the purchase of production equipment for the Company's pilot production line, amounting to $3.4 million, and the construction of a 11,000 square foot office facility, amounting to $1.3 million. In addition, on February 20, 1996, the Company acquired, the assets of PanoCorp Inc., as described in Note C of the condensed consolidated financial statements. The cash flows relating to this acquisition amounted to $130,000 for intangible assets and $120,000 for equipment. The nine-month period ended September 30, 1996 generated negative cash flows of $9.2 million as compared to positive cash flows of $15.5 million for the nine- month period ended September 30, 1995. Cash available at the end of September 1996 amounted to $8.4 million as compared to $17.6 million at the end of December 1995. The Company expects that cash available at September 30, 1996 will be sufficient to meet its cash requirements for at least 6 months. -11- The Company's expectations regarding the sufficiency of its sources of cash over a future period is a forward-looking statement. The rate of expenditures by the Company will be affected by numerous matters including the rate of development of the Company's products and manufacturing capabilities as well as market demand for such products. In the future, the Company will require substantial funds to conduct research, development and testing, to develop and expand commercial-scale manufacturing systems and to market any resulting products. Changes in technology or a growth of sales beyond currently anticipated levels will also require further investments. There can be no assurance that funds for these purposes, whether from equity or debt financing, or other sources, will be available when needed or on terms acceptable to the Company. Recent Developments Research and Development. The Company has begun a technology development program in cooperation with a major Japanese CRT manufacturer to demonstrate the large display (15-inch and above) capability of FED technology. Under a contract with the CRT manufacturer, specific demonstration displays will be jointly developed integrating processes and components from the CRT manufacturer and the Company. In order to address these important large display markets, the Company believes it will need to make further advances in its product technologies and manufacturing processes. In February 1996, the Company acquired from Panocorp, Inc. certain patents and know-how in high voltage display construction which, combined with PixTech's cathode technology, establish a solid foundation for this development program. The test vehicle for this program is a 15-inch XGA panel having equivalent viewing quality and multimedia performance to a 17-inch CRT. Manufacturing Partnership. The Company is negotiating with a large volume active matrix LCD ("AMLCD") manufacturer to establish a manufacturing partnership that would enable the Company to rapidly leverage the high productivity tools and manufacturing know-how established for LCD production. To date, the Company has not signed any agreement with an AMLCD manufacturer. Although the Company believes many FED manufacturing process steps can be carried out with similar equipment as that used by AMLCD manufacturers, in particular in the area of cathode and anode manufacturing, significant capital expenditure will be required in order to install at the contract manufacturer's facility equipment that are not common to the AMLCD manufacturing process. In addition, the amount of the capital expenditures required to adapt to FED manufacturing has not been quantified. There can be no assurance that the Company will have sufficient resources to fund such costs, once known. Further, in the event that the Company funds such capital expenditures to adapt an AMLCD manufacturer's equipment to FED manufacturing, there can be no assurance that such investment will be recovered by the Company, especially in the event such manufacturing partnership is not successful. -12- PIXTECH, INC. September 30, 1996 PART II Other Information ITEM 1 Legal Proceedings: Not applicable. ITEM 2 Changes in Securities: Not applicable. ITEM 3 Defaults upon Senior Securities: Not applicable. ITEM 4 Submission of matters to a vote of security holders: None ITEM 5 Other Information: None. ITEM 6 Exhibits and reports on Form 8-K: (a) Exhibits - None (b) Reports on Form 8-K - None -13- PIXTECH, INC. September 30, 1996 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PIXTECH, INC. Date: November 8th, 1996 BY: /s/ Yves Morel --------------- Yves Morel Duly Authorized Officer and Director of Finance and Administration -14- EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS DEC-31-1995 JUL-01-1996 SEP-30-1996 8,391 0 1,287 0 648 13,403 13,927 (6,174) 33,196 9,276 0 0 0 81 33,799 33,196 67 785 0 5,208 0 0 3 (4,557) 0 0 0 0 0 (4,557) (0.56) 0
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