-----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, OvhAiHcQIxj/H3JQNH9m9Y4mBCVUGfF5oDoU23E1plJBxwds8IAIwdozmOfDXEH5 Fz38Gs4L0KGgm+t2KoVZZQ== 0001015402-00-001338.txt : 20000516 0001015402-00-001338.hdr.sgml : 20000516 ACCESSION NUMBER: 0001015402-00-001338 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 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: SEC FILE NUMBER: 000-26380 FILM NUMBER: 634929 BUSINESS ADDRESS: STREET 1: AVENUE OLIVIER PERROY 13790 CITY: ROUSSET FRANCE STATE: I0 10-Q 1 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 March 31, 2000 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 May 10, 2000 ----- ------------------------------- Common Stock, $.01 par value 54,601,841
PIXTECH, INC. ------------- TABLE OF CONTENTS ----------------- PAGE NO. -------- PART I FINANCIAL INFORMATION ITEM 1 Financial Statements Condensed Consolidated Balance Sheets as of March 31, 2000 and December 31, 1999 . . . . . . . . . . . . . . . . . . . . . 3 Condensed Consolidated Statements of Comprehensive Operations for the Three Months Ended March 31, 2000 and 1999, and the period from June 18, 1992 through March 31, 2000. . . . . . . . 4 Condensed Consolidated Statements of Cash Flows for the Three Months ended March 31, 2000 and 1999, and the period from June 18, 1992 through March 31, 2000 . . . . . . . . . . . 5 6 Condensed Consolidated Statement of Stockholders' Equity Notes to Financial Statements . . . . . . . . . . . . . . . . . 7 - 10 ITEM 2 Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . 11 - 14 ITEM 3 Quantitative and Qualitative Disclosures About Market Risk. . . 14 PART II OTHER INFORMATION ITEM 1 Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . 15 ITEM 2 Changes in Securities . . . . . . . . . . . . . . . . . . . . . 15 ITEM 3 Default upon Senior Securities. . . . . . . . . . . . . . . . . 15 ITEM 4 Submission of Matters to a Vote of Security Holders . . . . . . 16 ITEM 5 Other Information . . . . . . . . . . . . . . . . . . . . . . . 16 ITEM 6 Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . . 17 Signature. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Exhibit Index. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
PIXTECH, INC. (A DEVELOPMENT STAGE COMPANY) CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) MARCH 31, DECEMBER 31, 2000 1999 ------------ -------------- (UNAUDITED) ASSETS Current assets : Cash and cash equivalents available . . . . . . . . . . . . . . . . $ 12,336 $ 14,663 Restricted cash - short term. . . . . . . . . . . . . . . . . . . . 833 1,667 Accounts receivable: Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79 57 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 813 709 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,230 1,109 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 541 651 ------------ -------------- Total current assets. . . . . . . . . . . . . . . . . . . . . . 15,832 18,856 Restricted cash - long term . . . . . . . . . . . . . . . . . . . . . 1,042 5,833 Property, plant and equipment, net. . . . . . . . . . . . . . . . . . 23,293 24,933 Goodwill, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 78 Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . 1,200 1,255 Deferred offering costs . . . . . . . . . . . . . . . . . . . . . . . 49 -- Other assets - long term. . . . . . . . . . . . . . . . . . . . . . . 47 214 ------------ -------------- Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . $ 41,523 $ 51,169 ============ ============== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities : Current portion of long term debt . . . . . . . . . . . . . . . . . $ 1,508 $ 8,128 Current portion of capital lease obligations. . . . . . . . . . . . 2,459 2,455 Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . 7,258 7,548 Accrued expenses. . . . . . . . . . . . . . . . . . . . . . . . . . 1,992 2,135 ------------ -------------- Total current liabilities . . . . . . . . . . . . . . . . . . . 13,217 20,266 Deferred revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . 399 248 Long term debt, less current portion. . . . . . . . . . . . . . . . . 2,753 3,075 Capital lease obligation, less current portion. . . . . . . . . . . . 2,444 7,644 Other long term liabilities, less current portion . . . . . . . . . . 38 52 ------------ -------------- Total liabilities . . . . . . . . . . . . . . . . . . . . . . . 18,851 31,285 ============ ============== STOCKHOLDERS' EQUITY Convertible preferred stock Series E, $0.01 par value, authorized shares-500,000 ; issued and outstanding shares-30,972 and 297,269 respectively. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 3 Common Stock, $0.01 par value, authorized shares-100,000,000 and 60,000,000 respectively; issued and outstanding shares-45,145,206 and 37,351,283 respectively .. . . . . . . . . . . . . . . . . . . . 451 373 Additional paid-in capital . . . . . . . . . . . . . . . . . . . . 115,229 105,081 Cumulative other comprehensive income .. . . . . . . . . . . . . . (3,738) (2,988) Deficit accumulated during development stage . . . . . . . . . . . (89,271) (82,585) ------------ -------------- Total stockholders' equity . . . . . . . . . . . . . . . . . . 22,672 19,884 ------------ -------------- Total liabilities and stockholders' equity . . . . . . . . . . $ 41,523 $ 51,169 ============ ==============
See accompanying notes. -3-
PIXTECH, INC. (A DEVELOPMENT STAGE COMPANY) CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED) Period from June 18, 1992 (date of inception) Three Months through Ended March 31, March 31, ------------------ 2000 1999 2000 -------- -------- ---------- Revenues Cooperation and license revenues . . . . . . . . $ -- $ -- $ 26,449 Product sales. . . . . . . . . . . . . . . . . . 86 161 3,396 Other revenues . . . . . . . . . . . . . . . . . 1,904 2,000 12,718 -------- -------- ---------- Total revenues . . . . . . . . . . . . . . . 1,990 2,161 42,563 -------- -------- ---------- Cost of revenues License fees and royalties . . . . . . . . . . . (88) (87) (1,965) -------- -------- ---------- Gross margin . . . . . . . . . . . . . . . . . . . 1,902 2,074 40,598 -------- -------- ---------- Operating expenses Research and development: Acquisition of intellectual property rights (57) -- (5,022) Other. . . . . . . . . . . . . . . . . . . . . . (7,794) (5,587) (107,503) -------- -------- ---------- (7,851) (5,587) (112,525) Marketing and sales. . . . . . . . . . . . . . . (313) (351) (8,199) Administrative and general expenses. . . . . . . (813) (730) (16,612) -------- -------- ---------- (8,977) (6,667) (137,336) -------- -------- ---------- Loss from operations . . . . . . . . . . . . . . . (7,075) (4,594) (96,738) Other income / (expense) Interest income. . . . . . . . . . . . . . . . . 338 174 3,986 Interest expense . . . . . . . . . . . . . . . . (309) (440) (4,720) Foreign exchange gains / (losses). . . . . . . . 359 (516) 309 -------- -------- ---------- 388 (782) (425) Loss before income tax benefit . . . . . . . . . . (6,687) (5,376) (97,163) Income tax benefit . . . . . . . . . . . . . . . . -- -- 7,893 -------- -------- ---------- Net loss . . . . . . . . . . . . . . . . . . . . . $(6,687) $(5,376) $ (89,271) ======== ======== ========== Dividends accrued to holders of Preferred Stock. (89) (134) (614) -------- -------- ---------- Net loss to holders of Common Stock. . . . . . . . $(6,776) $(5,510) $ (89,885) ======== ======== ========== Net loss per share of Common Stock . . . . . . . $ (0.16) $ (0.35) ======== ======== Shares of Common Stock used in computing net loss per share . . . . . . . . . . . . . . . 40,562 15,143 Net loss $(6,687) $(5,376) $ (89,271) Change in other comprehensive income . . . . . . (748) (671) (3,738) -------- -------- ---------- Comprehensive net loss . . . . . . . . . . . . . (7,435) $(6,047) (93,009) ======== ======== ==========
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) THREE MONTHS ENDED THROUGH MARCH 31, MARCH 31, ------------------ --------- 2000 1999 2000 -------- -------- --------- Net loss $(6,687) $(5,376) $(89,271) Total adjustments to net loss 2,717 (747) 35,346 -------- -------- --------- Net cash used in operating activities (3,970) (6,123) (53,925) -------- -------- --------- INVESTING ACTIVITIES Additions to property plant and equipment (761) (40) (21,316) Reclassification of restricted cash as cash available 5,625 49 (2,023) Additions to intangible assets -- -- (130) -------- -------- --------- Net cash provided by / (used in) investing activities 4,864 9 (23,469) FINANCING ACTIVITIES Stock issued 3,296 325 95,905 Proceeds from long-term borrowings -- -- 18,301 Proceeds from sale leaseback transactions -- -- 2,731 Payments for equipment purchases financed by accounts payable -- -- (3,706) Repayments of long term borrowing and capital lease obligations (5,832) (250) (19,674) -------- -------- --------- Net cash provided by / (used in) financing activities (2,536) 75 93,557 -------- -------- --------- Effect of exchange rates on cash (685) 28 (3,827) -------- -------- --------- Net (decrease) / increase in cash and cash equivalents (2,327) (6,011) 12,336 Cash and cash equivalents beginning of period 14,663 10,166 -- -------- -------- --------- Cash and cash equivalents end of period $12,336 $ 4,155 $ 12,336 ======== ======== =========
See accompanying notes. -5-
PIXTECH, INC. (A DEVELOPMENT STAGE COMPANY) CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (IN THOUSANDS, EXCEPT SHARE AMOUNTS) Series E Common Stock -------- ------------ Dividends accrued to Additional holders of Shares Shares Paid-in Preferred issued Amount issued Amount Capital Stock --------- -------- ---------- ------- ------------ ------------ BALANCE AT DECEMBER 31, 1996. . . . . . . . . . 8,141,146 $ 81 $ 34,085 Common Stock issued in public offering, net of issuance costs -- $796 . . . 5,570,819 56 22,958 Issuance of Common Stock under stock option plan . . . . . . . . . . . . . . . 50,767 1 25 Translation adjustment . . . . . . . . . . . . Net loss-Year ended Dec. 31, 1997 . . . . . . - --------------------------------------------------------------------------------------------------------------------- BALANCE AT DECEMBER 31, 1997. . . . . . . . . . 13,762,732 $ 138 $ 57,067 Common Stock issued in private placements, net of issuance costs $44. . . . . 1,236,222 12 4,493 Issuance of Series E convertible preferred stock, net of issuance costs -- $822. 367,269 4 7,449 (12) Issuance of Common Stock under stock option plan . . . . . . . . . . . . . . . 1,375 1 Translation adjustment Net loss-Year ended Dec. 31, 1998. . . . . . . - --------------------------------------------------------------------------------------------------------------------- BALANCE AT DECEMBER 31, 1998. . . . . . . . . . 367,269 $ 4 15,000,329 151 69,012 (12) Common Stock issued in private Placements. . . . . . . . . . . . . . . . . . . 150,000 1 350 Issuance costs and dividends accrued in relation to Series E convertible preferred stock issued in December 1998 . . . . . . . . . . . . . . . . . (36) (512) Conversion of Series E preferred stock . . . . . . . . . . . . . . . . (70,000) 1 1,114,220 11 (10) Issuance of Common Stock in connection with the acquisition of certain assets of Micron Display, net of issuance costs -- $511 . . . . . . . . . . . 7,133,562 71 14,134 Issuance of warrants . . . . . . . . . . . . . 297 Issuance of Common Stock following conversion of Sumitomo convertible loan. . . . . . . . . . . . . . . . 750,000 7 1,081 Issuance of Common Stock under stock option plan . . . . . . . . . . . . . . . 137,217 1 72 Issuance of Common Stock in connection with Equity Line Kings- bridge, net of issuance costs -- $176 . . . . . 624,809 6 818 Issuance of Common Stock in connection with private placement, net of issuance costs -- $36. . . . . . . . . . . . 12,427,146 124 19,839 Issuance of Common Stock in connection with Coloray . . . . . . . . . . . . 14,000 1 50 Translation adjustment . . . . . . . . . . . . Net loss-Year ended Dec. 31, 1999. . . . . . . - --------------------------------------------------------------------------------------------------------------------- BALANCE AT DECEMBER 31, 1999. . . . . . . . . . 297,269 $ 3 37,351,283 $ 373 $ 105,606 $ (525) Dividends accrued in relation to Series E convertible preferred stock issued in December 1998 (unaudited) . . . . . . (89) Conversion of Series E preferred stock (unaudited) . . . . . . . . . . . . . . . (266,297) (3) 4,058,978 41 (38) 548 Issuance of Common Stock following conversion of Sumitomo convertible loan (unaudited). . . . . . . . . . . . . . . . 2,126,246 21 3,890 Issuance of Common Stock following conversion of Sumitomo straight loan (unaudited) . . . . . . . . . . . . . . . . . . 385,549 4 2,496 Issuance of Common Stock in connec- tion with Equity Line Kingsbridge, net of issuance costs $54 (unaudited) . . . . . . . 933,625 9 2,936 Issuance of Common Stock in connection with Coloray (unaudited) . . . . . . 16,000 0 57 Issuance of Common Stock under stock option plan (unaudited) . . . . . . . . . 273,525 3 347 Translation adjustment (unaudited) . . . . . . Net loss-Three Months ended March 31, 2000 ( unaudited) . . . . . . . . . . - --------------------------------------------------------------------------------------------------------------------- BALANCE AT MARCH 31, 2000 (UNAUDITED). . . . . 30,972 $ 1 45,145,206 $ 451 $ 115,295 $ (66) =============================================== ========= ======== ========== ======= ============ ============ Deficit accumulated Other during Comprehensive development Income stage Total --------------- ------------- --------- BALANCE AT DECEMBER 31, 1996. . . . . . . . . . $ (438) $ (21,629) $ 12,099 Common Stock issued in public offering, net of issuance costs -- $796 . . . 23,014 Issuance of Common Stock under stock option plan . . . . . . . . . . . . . . . 25 Translation adjustment (1,694) (1,694) Net loss-Year ended Dec. 31, 1997 . . . . . . (14,664) (14,664) - ------------------------------------------------------------------------------------------ BALANCE AT DECEMBER 31, 1997. . . . . . . . . . (2,132) (36,293) 18,780 Common Stock issued in private placements, net of issuance costs $44. . . . . 4,506 Issuance of Series E convertible preferred stock, net of issuance costs -- $822. 7,440 Issuance of Common Stock under stock option plan . . . . . . . . . . . . . . . 1 Translation adjustment . . . . . . . . . . . . 392 392 Net loss-Year ended Dec. 31, 1998. . . . . . . (17,863) (17,863) - ------------------------------------------------------------------------------------------ BALANCE AT DECEMBER 31, 1998. . . . . . . . . . (1,740) (54,156) 13,257 Common Stock issued in private placements. . . . . . . . . . . . . . . . . . . 352 Issuance costs and dividends accrued in relation to Series E convertible preferred stock issued in December 1998 . . . . . . . . . . . . . . . . . (548) Conversion of Series E preferred stock Issuance of Common Stock in connection with the acquisition of certain assets of Micron Display, net of issuance costs -- $511 . . . . . . . . . . . 14,205 Issuance of warrants . . . . . . . . . . . . . 297 Issuance of Common Stock following conversion of Sumitomo convertible loan. . . . . . . . . . . . . . . . 1,088 Issuance of Common Stock under stock option plan . . . . . . . . . . . . . . . 73 Issuance of Common Stock in connection with Equity Line Kings- bridge, net of issuance costs -- $176 . . . . . 824 Issuance of Common Stock in connection with private placement, net of issuance costs -- $36. . . . . . . . . . . . 19,963 Issuance of Common Stock in connection with Coloray . . . . . . . . . . . . 51 Translation adjustment . . . . . . . . . . . . (1,249) (1,249) Net loss-Year ended Dec. 31, 1999. . . . . . . (28,428) (28,428) - ------------------------------------------------------------------------------------------ BALANCE AT DECEMBER 31, 1999. . . . . . . . . . $ (2,989) $ (82,584) $ 19,885 Dividends accrued in relation to Series E convertible preferred stock issued in December 1998 (unaudited) . . . . . . (89) Conversion of Series E preferred stock (unaudited) . . . . . . . . . . . . . . . 548 Issuance of Common Stock following conversion of Sumitomo convertible loan (unaudited). . . . . . . . . . . . . . . . 3,912 Issuance of Common Stock following conversion of Sumitomo straight loan (unaudited) . . . . . . . . . . . . . . . . . . 2,500 Issuance of Common Stock in connec- tion with Equity Line Kingsbridge, net of issuance costs $54 (unaudited) . . . . . . . 2,945 Issuance of Common Stock in connection with Coloray (unaudited) . . . . . . 57 Issuance of Common Stock under stock option plan (unaudited) . . . . . . . . . 350 Translation adjustment (unaudited) . . . . . . (748) (748) Net loss-Three Months ended March 31, 2000 ( unaudited) . . . . . . . . . . (6,687) (6,687) - ------------------------------------------------------------------------------------------ BALANCE AT MARCH 31, 2000 (UNAUDITED). . . . . $ (3,738) $ (89,271) $ 22,672 =============================================== =============== ============= =========
See accompanying notes. -6- PIXTECH, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (ALL AMOUNTS IN THOUSANDS EXCEPT SHARE AMOUNTS) NOTE A - BASIS OF PRESENTATION The financial information as of March 31, 2000, and for the three months ended March 31, 2000 and 1999 is unaudited but includes all adjustments, which are of a normal recurring nature and, in the opinion of management, necessary for a fair presentation of the financial position and results of operations for the periods presented. 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. Operating results of the three-month period ending March 31, 2000 is not necessarily indicative of the results that may be expected for the year ending December 31, 2000. For further information, refer to the consolidated financial statements and footnotes thereto for the year ended December 31, 1999 included in our Annual Report on Form 10-K filed with the Security and Exchange Commission on March 28, 2000. All information presented herein is in thousands, except share data. NOTE B - INVENTORIES Inventory consists of raw material, spare parts and finished goods. NOTE C - RESTRICTED CASH In August 1997, we provided Unipac Optoelectronics Corp. ("Unipac"), our Asian manufacturing partner, with a written bank guaranty in the amount of $10,000 pursuant to the display foundry agreement (the "Foundry Agreement") signed in May 1997 between Unipac and us in order to implement volume production of field emission displays at Unipac's manufacturing facility. We granted the issuing banks a security interest in cash and cash equivalents for the same amount. The pledged cash and cash equivalents have been recorded as short-term and long-term restricted cash in the balance sheet. In March 2000, pursuant to an agreement dated December 17, 1999 signed with Unipac, the guaranty to Unipac was reduced by $5,000 in consideration of a payment in cash of same amount to Unipac. Pursuant to the terms of this agreement, this $5,000 payment will be considered as a prepayment against our future payments to Unipac concerning the equipment leased by Unipac to us. Consequently, the amount of the security interest to the banks was reduced by the same amount and amounted to $1,875 at March 31, 2000 (see Note E - Capital Leases). NOTE D - PROPERTY, PLANT AND EQUIPMENT Pursuant to the Foundry Agreement, volume FED production equipment was installed at Unipac's facility. That equipment was purchased and funded by Unipac, and a portion of it is leased to us. This portion amounted to $10,793 at March 31, 2000. According to Financial Accounting Standard 13, "Accounting for Leases", this equipment was recorded as assets under the caption "Property, Plant and Equipment" in the net amount of $7,783 at March 31, 2000. Depreciation of $450 was recorded during the three-month period ended March 31, 2000. As of March 31, 2000, the related capital lease obligation amounted to $4,607, of which $1,106 was recorded as current portion. -7- PIXTECH, INC. (A DEVELOPMENT STAGE COMPANY) NOTE E - CAPITAL LEASES We are party to certain sale-leaseback transactions for equipment used in our pilot production plant in Montpellier and, in addition, pursuant to the Foundry Agreement, a portion of volume field emission displays production equipment installed at Unipac's facility is leased to us. According to Financial Accounting Standard 13, "Accounting for Leases", a capital lease obligation was recorded in 1998. During the three-month period ended March 31, 2000, the related capital lease obligation was reduced by $5,000 following the prepayment of same amount made in cash to Unipac and amounted to $4,607 at March 31, 2000 (See Note C-Restricted Cash and Note D-Property, Plant and Equipment). Future minimum payments under capital lease obligations at March 31, 2000, are as follows:
YEARS ENDING DECEMBER 31, 2000 . . . . . . . . . . . . . . . . . . . . . . . . . $1,201 2001 . . . . . . . . . . . . . . . . . . . . . . . . . 1,458 2002 . . . . . . . . . . . . . . . . . . . . . . . . . 1,243 2003 .. . . . . . . . . . . . . . . . . . . . . . . . 1,173 2004 .. . . . . . . . . . . . . . . . . . . . . . . . 469 ------- Total minimum payments .. . . . . . . . . . . . . . . 5,544 Less amount representing interest . . . . . . . . . . (641) ------- Present value of minimum capitalized lease payments . $4,903 =======
NOTE F - LONG TERM DEBT During the three-month period ended March 31, 2000, long term debt was reduced by $6,412 in connection with the conversion into shares of our Common Stock of a convertible note and another note issued to Sumitomo Corporation in 1997, which principal due on December 31, 1999 were $3,912 and $2,500 respectively (See Note H-Stockholders' equity). Long-term debt consists of certain loans payable under which future minimum payments, at March 31, 2000, are as follows:
YEARS ENDING DECEMBER 31, 2000 . . . . . . . . . . $1,311 2001 . . . . . . . . . . 636 2002 . . . . . . . . . . 1,162 2003 . . . . . . . . . . 190 2004 . . . . . . . . . . 185 2005 . . . . . . . . . . 777 ------ Total minimum payments . $4,261 ======
NOTE G - MICRON TRANSACTION On March 19, 1999, we entered into a definitive agreement to purchase certain assets of Micron Technology, Inc. relating to field emission displays including equipment and other tangible assets, certain contract rights and cash (the "Micron Transaction"). We closed the Micron Transaction on May 19, 1999 and we accounted for the Micron Transaction as an acquisition of assets. The financial statements as of March 31, 2000 reflect the acquisition of assets for a cost of $17,932 and the assumption of certain liabilities in the amount of $2,958, in consideration of the issuance of 7,133,562 shares of our Common Stock, representing a total amount of $14,205, and a warrant to purchase 310,000 shares of our Common Stock. We computed the fair value of the warrant to purchase 310,000 shares of our Common Stock as an estimated $257 using the Black-Scholes model. at $257. The estimated fair value of net assets acquired in the Micron Transaction was approximately $9,157 in excess of the cost of net assets acquired. Consequently, the estimated fair value of property, plant and equipment of $22,473 was proportionally reduced to the extent that the fair value of net assets acquired exceeded cost resulting in property plant and equipment of $13,316. In addition, we received cash in the amount of $4,350. Therefore, of the assets acquired for $17,932, $13,316 was reflected under the caption "Property, Plant and Equipment", and $4,350 under the caption "Cash and Cash equivalents available ". -8- PIXTECH, INC. (A DEVELOPMENT STAGE COMPANY) The following unaudited pro forma financial information presents the combined results of operations for the three months ended March 31, 2000 and March 31, 1999, respectively, as if the transaction had been completed as of January 1, 1999, after giving effect to certain adjustments, including additional personnel costs and depreciation expenses. The pro forma financial information does not necessarily reflect the results of operations that would have occurred had the transaction been completed at the beginning of the period indicated.
THREE MONTHS ENDED THREE MONTHS ENDED MARCH 31, 2000 MARCH 31, 1999 -------------------- -------------------- Net loss. . . . . . . . . . . . . . $ (6,229) $ (7,891) Net loss to holders of Common Stock $ (6,687) $ (7,757) Net loss per share of Common Stock. $ (0.16) $ (0.35)
NOTE H - STOCKHOLDERS' EQUITY Common Stock: In January and February 2000, we issued 2,126,246 shares of our Common Stock to Sumitomo Corporation upon the conversion in full of $3,912 then outstanding under a $5,000 convertible note issued in 1997 to Sumitomo Corporation. This note, with a principal due of $3,912 at December 31, 1999, was convertible at Sumitomo Corporation's option into shares of our Common Stock at a conversion price equal to 80% of the market price of the Common Stock at the conversion date. In March 2000, we converted the entire outstanding amount of a loan by Sumitomo Corporation previously payable in two settlements of $1,250 each in May 2000 and November 2000 through the issuance of 385,549 shares of our Common Stock at a price of $6.48 per share of Common Stock for an aggregate consideration of $2,500. In March 2000, in connection with an agreement signed with Coloray Display Corporation, we issued 16,000 shares of our Common Stock, valued at a price of $3.57 per share, representing a total amount of $57 in consideration for the transfer to us of the rights and obligations of Micron Technology, Inc. under the license agreement dated as of April 8, 1992 between Coloray Display Corporation and Micron Technology, Inc. On August 9, 1999, we secured a $15,000 equity-based line of credit with Kingsbridge Capital Ltd. Under the terms of the equity line, we can draw up to $15,000 cash in exchange for our Common Stock, in increments over a two-year period. The decision to draw on any of the funds and the timing and account of any such draw are at our sole discretion, subject to certain conditions. Such conditions include limitations depending on the volume and the market price of our Common Stock. During the three months ended March 31, 2000, we issued 933,625 shares of Common Stock, representing $2,946 ($3,000, less issuance costs of $54). Through March 31, 2000, out of the maximum amount of $15,000, we have drawn a total amount of $ 4,000. Convertible Preferred Stock: In February 2000 and March 2000, we issued an aggregate of 4,058,978 shares of Common Stock upon the conversion of an aggregate of 266,297 shares of Series E Preferred Stock at an average conversion price of $1.60938. At March 31, 2000, there were 30,972 shares of Series E Preferred Stock outstanding. These shares of Series E Preferred Stock were convertible into shares of Common Stock using a conversion price equal to the lesser of approximately $1.60938 per share of Common Stock or the average closing price of our Common Stock over the ten trading days immediately preceding the notice of conversion. The holders of Series E Preferred Stock are entitled to cumulative dividends. At March 31, 2000 a dividend of $66 was accrued and recorded against stockholders' equity. In addition, we are required to reserve, out of the authorized but unissued shares, 150% of the number of shares of Common Stock that the Series E Stock are convertible into. As of March 31, 2000, the Series E Stock would have been convertible into 474,746 shares of Common Stock thus requiring us to reserve 712,119 shares of the remaining authorized but unissued shares. -9- PIXTECH, INC. (A DEVELOPMENT STAGE COMPANY) NOTE I - LITIGATION We have received correspondence from Futaba Corporation and its legal counsel since January 1998 alleging the following; (i) PixTech is infringing one or more patents owned by Futaba relating to the construction and manufacture of its displays that are not expressly included under the license agreement between Futaba and PixTech, (ii) PixTech's use of terms such as "alliance" and "partners" in describing the nature of its contractual relationships with Motorola, Raytheon and Futaba in reports filed with the SEC is misleading and (iii) certain provisions in the Foundry Agreement with Unipac constitute an impermissible sublicense of Futaba technology. Futaba has also claimed that we improperly supplied certain Futaba proprietary information to Unipac, and that Unipac has in turn disclosed such information to a third party vendor. We have accepted an offer of settlement from Futaba, reflected in correspondence dated December 15, 1999 and December 30, 1999, pursuant to which Futaba has waived these claims against us. We are currently preparing a definitive written settlement agreement with Futaba. To our knowledge, there are no other exceptional facts or litigation that could have or that have in the recent past had any significant impact on our business, results, financial situation, or assets and liabilities. NOTE J - DERIVATIVE INSTRUMENTS In June 1998, the Financial Accounting Standard Board issued SFAS No. 1333, "Accounting for Derivative Instruments and Hedging Activities", as amended, which is required to be adopted after June 15, 2000. This statement requires that derivatives be measured at fair value and recognized as either assets or liabilities in the balance sheet. Because of our minimal use of derivatives, the adoption of this new statement did not have any significant effect on earnings and on our financial position. NOTE K - FINANCIAL POSITION During the three-month period ended March 31, 2000, we have continued to experience losses and have used cash in operating activities of $3,970. As of March 31, 2000, we had a net working deficit of $10,544 and a deficit accumulated during development stage of $89,271. During the three month period ended March 31, 2000, we reduced both (i) our long term debt by $6,412 in connection with the completion of the conversion into shares of our Common Stock of the Sumitomo Corporation notes issued in 1997, and (ii) our capital lease obligation mainly in connection with the prepayment of $5,000 made to Unipac out of our restricted cash. We also received $2,946 from the Kingsbridge equity line. In addition, we have significantly improved our liquidity and financial position with the completion, in April 2000, of a $15,000 equity private placement with United Microelectronics Corporation not reflected in the March 31, 2000 balance sheet. We expect that cash available at March 31, 2000, together with the $15,000 received from the private placement, the anticipated proceeds from the Kingsbridge equity-based line of credit, and cash from various grants and loans, and from research and development tax credits, will be sufficient to meet our cash requirements for the near future. We intend to continue improving our liquidity and financial position through capital increases. There can be, however, no assurance that additional funds will be available through capital increases when needed or on terms acceptable to us. NOTE L - SUBSEQUENT EVENT In April 2000, pursuant to an amendment, signed in February 2000, to the Common Stock Purchase Agreement dated October 6, 1999 with Unipac, we received $15,000 upon the completion of an equity private placement to United Microelectronics Corporation, approved by the stockholders during a special meeting held on January 18, 2000. This subsequent $15,000 investment is in addition to, and is not reflected in, the March 31, 2000 balance sheet. In consideration for this investment, United Microelectronics Corporation received 9,320,359 shares at a purchase price of $1.6094 per share of Common Stock. In April 2000, we issued 136,276 shares of Common Stock following the conversion of 8,877 shares of Series E Convertible Preferred Stock at a conversion price of $1.60938 per share. After this transaction, the remaining Series E Convertible Preferred Stock, including accrued dividends, is convertible into 340,224 shares of Common Stock using a conversion price of $1.60938. -10- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This Management Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements reflecting management's current expectation regarding our future financial performance. Such expectations are based on certain assumptions and involve risks and uncertainties. These uncertainties include, but are not limited to, the risk associated with transitioning to high volume manufacturing of field emission display at Unipac, product demand and market acceptance risks, the commitment of Unipac and/or of PixTech licensees, the ability of the company to grant other licenses under field emission display technology, the validity and enforceability of PixTech's patent rights, possible infringement by PixTech of patent rights of others, the impact of competitive products and prices, product development risks, commercialization or technological delays or difficulties, trade risks, legal risks, and social and economic risks. See also "Important factors Regarding Future Results" described more fully in Exhibit 99.1 to this Quarterly Report on 10-Q. RESULTS OF OPERATIONS Product Sales. We recognized product sales of $86,000 in the three-month period ended March 31, 2000, as compared to $161,000 in the three-month period ended March 31, 1999. In the three-month periods ended March 31, 1999 and 2000, product revenues primarily consisted of shipments of displays sold at volume prices to Zoll Medical. Since the last quarter of 1998, we have begun shipping our field emission displays manufactured by our contract manufacturer, Unipac, to our customers in limited quantities. During the three-month period ended March 31, 2000, unit shipments from Taiwan represented 50% of total shipments, as compared to 45% during the three-month period ended December 31, 1999. We expect an increase of product shipments from Taiwan in the second half of 2000. Other Revenues. Other revenues consist of funding under various public development contracts and other miscellaneous revenues. We recognized other revenues of $1,904,000 in the three-month period ended March 31, 2000, as compared to $2,000,000 in the same period in 1999. Of these revenues, in the three-month period ended March 31, 2000, $1,868,000 was related to a development contract awarded to us by DARPA (Defense Advanced Research Projects Agency) in August 1999. Under the terms of this DARPA contract, we will receive a total amount of approximately $4.7 million to develop a color field emission display of which $3.9 million has been received as of March 31, 2000. In addition to the existing contract, we entered into a second contract with DARPA in April 2000. Under the terms of this contract, we will be entitled to receive approximately $6.3 million for the development and demonstration of a 12.1-inch color field emission display. Other Research and Development Expenses. We expensed $7.8 million for research and development costs during the three-month period ended March 31, 2000, an increase of 39% over the $5.6 million incurred in the three-month period ended March 31, 1999. These expenses include salaries and associated expenses for in-house research and development activities conducted both in our pilot plant and our research and development facility in Boise, Idaho, the cost of staffing and operating our pilot manufacturing facility and the cost of supporting the transfer and adaptation of our field emission displays technology to Unipac, as well as obligations to Commissariat l'Energie Atomique under the LETI Research Agreement dated September 17, 1992, and miscellaneous contract consulting fees. This increase primarily reflected the costs associated with the research and development activities conducted in Boise following the Micron Transaction signed at the end of May 1999 and the transfer of field emission displays manufacturing start up at Unipac. Sales and Marketing Expenses. We expensed $313,000 for sales and marketing during the three-month period ended March 31, 2000, as compared to $351,000 during the three-month period ended March 31, 1999. We believe sales and marketing expenses may increase in the future, reflecting the expansion of our sales and marketing organization both in the United States and in Europe. General and Administrative Expenses. General and administrative expenses amounted to $813,000 in the three-month period ended March 31, 2000, an increase of 11% over general and administrative expenses incurred in the three-month period ended March 31, 1999, which amounted to $730,000, reflecting an increase in consulting expenses. -11- Interest Income (Expense), Net. Interest income is comprised of interest on available and restricted cash. Interest expense is comprised of interest payable on long-term obligations. Net interest income was $29,000 in the three-month period ended March 31, 2000, as compared to an expense of $266,000 in the three-month period ended March 31, 1999, reflecting the decrease in long-term liabilities and improved cash management for short term investments on the money market. Currency Fluctuations. Although a significant portion of our revenues are denominated in U.S. dollars, a substantial portion of our operating expenses are denominated in Euros. Gains and losses on the conversion to U.S. dollars of assets and liabilities denominated in Euros may contribute to fluctuations in our results of operations, which are reported in U.S. dollars. Most of our capital lease obligations are expressed in Taiwanese dollars. In the past, fluctuations of the parity of the Taiwanese dollar versus the Euro caused significant foreign exchange gains or losses and may continue to do so in the future. We recorded net foreign exchange gain of $359,000 in the three-month period ended March 31, 2000, as compared to a net foreign exchange loss of $516,000 in the three-month period ended March 31, 1999. We cannot predict the effect of exchange rate fluctuations on future operating results. To date, we have not undertaken hedging transactions to cover our currency exposure, but we may do so in the future. LIQUIDITY AND CAPITAL RESOURCES Cash used in operations was $3.9 million during the three-month period ended March 31, 2000, as compared to $6.1 million in the three-month period ended March 31, 1999. This decrease is a result of significant revenues received from DARPA, offset by an increase in expenses incurred by our research and development team in Boise, Idaho. We also had a decrease in deferred offering costs and deferred revenues. We have used $53.9 million in cash to fund our operations since inception through March 31, 2000 and have incurred $23.4 million in capital expenditures and investments. Capital expenditures were $761,000 during the three-month period ended March 31, 2000 as compared to $40,000 during the same period in 1999. These capital expenditures exclude assets acquired under capital lease obligations. During the three-month period ended March 31, 2000, capital expenditures remained focused on limited capacity expansion in the Boise, Idaho manufacturing facility. Implementing volume production at Unipac's manufacturing plant required significant capital expenditures. Pursuant to the Foundry Agreement, Unipac funded a $14.7 million capital expenditure for equipment. A portion of that equipment is leased to us and amounted to $10.7 million as of March 31, 2000. We expect that additional capital expenditures will be required in 2000 and in 2001 to increase capacity at Unipac and to complete implementation of manufacturing processes, both for monochrome and color products. During the three-month period ended March 31, 2000, restricted cash was reclassified as cash available in the amount of $5.6 million. Restricted cash was related to the security interest corresponding to the guaranty granted to Unipac in relation to the purchase and funding by Unipac of volume field emission displays production equipment. In March 2000, pursuant to an agreement dated December 17, 1999 signed with Unipac, the guaranty to Unipac was reduced by $5.0 million in consideration of a payment in cash of same amount to Unipac. Pursuant to the terms of this agreement, this $5.0 million payment will be considered as a prepayment against our future payments to Unipac concerning the equipment leased by Unipac to us. Consequently, the amount of the security interest to the banks was reduced by the same amount and amounted to $1,875,000 at March 31, 2000. Cash flows used by financing activities were $2.5 million in the three-month period ended March 31, 2000, as compared to $75,000 generated in the three-month period ended March 31, 1999. This net cash flow in the first quarter of 2000 consisted of sales of shares of Common Stock, resulting in net proceeds of $3.3 million, while repayment of long term liabilities amounted to $5.8 million, including the $5.0 million prepayment made to Unipac. Cash flows used in financing activities in the three-month period ended March 31, 2000 excluded non-cash transactions related to (i) the conversion into shares of our Common Stock of the convertible loan with Sumitomo Corporation in the amount of $3.9 million, (ii) the conversion into shares of our Common Stock of the loan with Sumitomo Corporation in the amount of $2.5 million, both resulting in a decrease of our long term liabilities. Cash flows generated from financing activities included (i) the sales of shares of Common Stock under the Kingsbridge equity line, resulting in net proceeds of $2.9 million, and (ii) the exercise of options under the 1993 stock option plan, resulting in net proceeds of $350,000, but excluded non-cash transactions related to the conversion of 266,297 Series E Convertible Preferred Stock in March 2000. -12- Since our inception, we have funded our operations and capital expenditures primarily from the proceeds of equity financing aggregating $95.9 million and from proceeds aggregating $21.0 million from borrowings and sale-leaseback transactions. In 1997 and January 1999, we entered into two research and development agreements with French authorities. Under these agreements, we expect to benefit from zero-interest loans totaling approximately $3.0 million, of which $2.0 million were received in 1999, and $482,000 were received in April 2000. In November 1998, we entered into an research and development agreement with French authorities. Under this agreement, we expect to receive a total grant of approximately $679,000, of which $196,000 was received in 1999, $202,000 was collected in the three-month period ended March 31, 2000, and $280,000 are expected to be collected in September 2000. The $196,000 and $202,000 collected in 1999 and in the three-month period ended March 31, 2000, respectively, were not recognized as income as all conditions stipulated in the agreement were not met. On August 5, 1999, we were awarded a development contract by DARPA (Defense Advanced Research Projects Agency). Under the terms of the contract, we will receive approximately $4.7 million to develop a color field emission display. During the three-month period ended March 31, 2000, $1.8 million was recognized as income under this contract. On April 3, 2000, a new contract, as a continuation of the existing contract, was signed with DARPA for $6.3 million for the development and demonstration of a full color, full video rate, 12.1-inch field emission display. We recognized French income tax benefits of $7.9 million since inception. These income tax benefits represent tax credits for research and development activities conducted in France, which are paid in cash to us if it is not possible to credit them against future income tax liabilities within three fiscal years. In 1998, we collected $2.8 million, representing R&D tax credits recorded in 1993 and 1994. In April 1999, we collected $3.0 million from R&D tax credit recorded in 1995. We expect to collect $1.1 million in the second quarter of 2000, in relation with the R&D tax credit recorded in 1996. On August 9, 1999, we secured a $15.0 million equity-based line of credit with Kingsbridge Capital Ltd. Under the terms of the equity line, we can draw up to $15.0 million cash in exchange for our Common Stock, in increments over a two-year period. The decision to draw on any of the funds and the timing and account of any such draw are at our sole discretion, subject to certain conditions. Such conditions include limitations depending on the volume and the market price of our Common Stock. During the three-month period ended March 31, 2000, we issued 933,625 shares of Common Stock, representing $2,946,000 (3,000,000 less issuance costs of $54,000). Through March 31, 2000, out of the maximum amount of $15.0 million, we have drawn a total amount of $4.0 million. On January 25, 2000, we signed an agreement with Audi and other partners to jointly design, develop, test and deliver a 7-inch color field emission display for automotive applications. This agreement is part of the European Commission IST program. Under the terms of this agreement, we will receive funding of approximately $1.7 million, of which $600,000 are expected in 2000. In April 2000, we completed a $15.0 million equity private placement with United Microelectronics Corporation. United Microelectronics Corporation received 9,320,359 million shares at a purchase price of $1.6094 per share, pursuant to an amendment, signed in February 2000, to the Common Stock Purchase Agreement dated October 6, 1999 with Unipac. Cash available at March 31, 2000 amounted to $12.3 million as compared to $14.6 million at December 31, 1999. We expect that cash available at March 31, 2000, together with the $15.0 million received from the private placement with United Microelectronics Corporation, and not reflected in the March 31, 2000 balance sheet, the anticipated proceeds from the Kingsbridge equity-based line of credit, and cash from various grants and loans described above and from R&D tax credits, will be sufficient to meet our cash requirements, including repayment of the current portion of our long-term obligations in the amount of $2.7 million at March 31, 2000, for the near future. We 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 investment. Our capital requirements will depend on many factors, including the rate at which we can develop our products, the market acceptance of such products, the levels of promotion and advertising required to launch such products and attain a competitive position in the marketplace and the response of competitors to our products. 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 us. -13- STRATEGIC ISSUES AND RISKS We are currently focused on the following activities which we believe are necessary to the success of our business: (i) successfully implementing the manufacture of field emission displays by our Taiwanese contract manufacturer, Unipac; (ii) improving our manufacturing processes and yields, both in our pilot plant and at Unipac; (iii) expanding our customer base and product offering, and (iv) continuing the development of our field emission display technology, including the development of large field emission displays. In evaluating our outlook, certain risks and issues filed as exhibit 99.1 to this quarterly report on form 10-Q should be considered. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The market risk exposure inherent to our international operations creates potential for losses arising from adverse changes in foreign currency exchange rates. We are exposed to such foreign currency exchange rate risk in two main areas: (i) a substantial portion of our operating expenses are, and are expected to be, denominated in Euros, (ii) most of our capital lease obligations are expressed in Taiwanese dollars. Fluctuations of the parity of the Taiwanese dollar versus the Euro or the U.S. dollar may cause significant foreign exchange gains or losses. In addition, gains and losses arising from the conversion to U.S. dollars of assets and liabilities denominated in Euros or in Taiwanese dollars may contribute to fluctuations in our results of operations, which are reported in U.S. dollars. To date, we have not undertaken hedging transactions to cover its currency exposure. We are also exposed to interest rate risks in connection with certain long-term debt. We do not, however, enter into market sensitive instruments for trading purposes. -14- PIXTECH, INC. PART II Other Information ITEM 1 Legal Proceedings: Not applicable. Changes in Securities: (a) Not applicable (b) Not applicable (c) In March 2000, 266,297 shares of Series E Convertible Preferred Stock were converted into shares of Common Stock, resulting in the issuance of 4,058,978 shares of our Common Stock. In April 2000, 8,877 shares of Series E Convertible Preferred Stock were converted into 136,276 shares of Common Stock at a conversion price of $1.60938. After this transaction, the Series E Stock, including accrued dividends, is convertible into 340,224 shares of Common Stock using a conversion price of $1.60938. As of May 11, 2000, there were 22,095 shares of Series E Preferred Stock outstanding. In January and February 2000, we issued 2,126,246 shares of our Common Stock to Sumitomo Corporation following the conversion into shares of Common Stock of the entire outstanding principal amount of $3.9 million due on a $5.0 million convertible note issued in 1997 to Sumitomo Corporation. In March 2000, we issued 385,549 shares of our Common Stock to Sumitomo Corporation following the conversion into shares of Common Stock of the $2.5 million principal due on a $5.0 million note issued in 1997 to Sumitomo Corporation. Each of the conversion listed above was exempt from registration under the Securities Act of 1933, as amended (the "Securities Act") pursuant to Section 3 (0) (9) of the Securities Act. During the three-month period ended March 31, 2000 we issued 933,625 shares in connection with the $15 million Kingsbridge equity line of credit secured in August 1999, as private placement exempt from registration under Section 4 (2) of the Securities Act. These 933,625 shares of Common Stock represented an amount of $2.9 million ($3,000,000 less issuance costs of $54,000). In February 2000, we entered into an Amendment dated February 29, 2000 to the Common Stock Purchase Agreement dated October 6, 1999 by and between PixTech and unipac (the "Amendment"). Pursuant to the Amendment, in April 2000, we issued 9,320,359 shares of Common Stock to United Microelectronics Corporation in a private placement exempt from registration under Section 4 (2) of the Securities Act. In March 2000, in connection with the Coloray agreement, we issued 16,000 shares of our Common Stock, valued at a price of $3.57 per share, representing a total amount of $57,000 in a private placement exempt from registration under Section 4 (2) of the Securities Act. ITEM 3 Defaults upon Senior Securities: Not applicable. -15- Submission of matters to a Vote of Security Holders: ITEM 4 At the Special Meeting of Stockholders held on January 18, 2000, our stockholders voted:
TOTAL VOTE TOTAL VOTE TOTAL VOTE "FOR" "AGAINST" "ABSTAINING" 1. To amend our Restated Certificate of Incorporation to increase the authorized shares of our capital stock from 61,000,000 shares to 101,000,000 . . . . . . . . . 27,546,899 300 793,656 2. To approve the issuance of up to 9,320,359 shares of our Common Stock to United Microelectronics Corporation . . 23,118,817 300 793,656
ITEM 5 Other Information: None. -16- Exhibits and reports on Form 8-K: (a) Exhibits: 3.1 Restated Certificate of Incorporation of Registrant. Filed as Exhibit 3.2 to the PixTech, Inc. Registration Statement on Form S-1 (Commission File No. 33-93024) and incorporated herein by reference. 3.2 Certificate of Designations of PixTech, Inc. Filed as Exhibit 2.1 to the PixTech, Inc. Current Report on Form 8-K file January 7, 1999 and incorporated herein by reference. 3.3 Certificate of Amendment of Restated Certificate of Incorporation of Registrant. Filed as Exhibit 3.4 to the PixTech, Inc. Form 10-Q/A for the fiscal quarter ended June 30, 1999 filed with the commission on August 24, 1999 and incorporated herein by reference. 3.4 Certificate of Amendment of Restated Certificate of Incorporation of Registrant, dated January 18, 2000. Filed as Exhibit 3.5 to the PixTech, Inc. Annual Report on Form 10-K for the year ended December 31, 1999 filed with the commission on March 28, 2000 and incorporated herein by reference. 10.1 Amendment, dated February 29, 2000, to Common Stock Purchase Agreement by and between PixTech, Inc. and Unipac Optoelectronics Corporation dated as of October 6, 1999. Filed as Exhibit 2.1 to the PixTech, Inc. Current Report on Form 8-K filed on May 8, 2000 and incorporated herein by reference. 99.1 Important Factors Regarding Future Results 27. Financial Data Schedule (b) Reports on Form 8-K: A report on Form 8-K was filed on February 8, 2000, reporting under Item 5, the completion of an agreement with AUDI and other partners to jointly develop a 7-inch color field emission display, in consideration for a 1.78 million euros funding from the European Commission. A report on Form 8-K was filed on May 2, 2000, reporting under Item 5, the completion of a development contract with DARPA (Defense Advanced Research Projects Agency) to develop a 12.1-inch color field emission display, in consideration for a funding of approximately $6.3 million from the U.S. government. ITEM 6 A report on Form 8-K was filed on May 8, 2000, reporting under Item 1, the completion of the private placement of 9,320,359 shares of Common Stock with united Microelectronics Corporation in consideration for $15.0 million, which transaction may be viewed as a change in control. -17- PIXTECH, INC. March 31, 2000 SIGNATURES 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: 05/15/2000 BY: /s/ Marie Boem ---------- ------------------ Marie Boem, Principal Financial Officer -18- PIXTECH, INC. March 31, 2000 EXHIBIT INDEX
Exhibit No. - ----------- 3.1 Restated Certificate of Incorporation of Registrant. Filed as Exhibit 3.2 to the PixTech, Inc. Registration Statement on Form S-1 (Commission File No. 33-93024) and incorporated herein by reference. 3.2 Certificate of Designations of PixTech, Inc. Filed as Exhibit 2.1 to the PixTech, Inc. Current Report on Form 8-K file January 7, 1999 and incorporated herein by reference. 3.3 Certificate of Amendment of Restated Certificate of Incorporation of Registrant. Filed as Exhibit 3.4 to the PixTech, Inc. Form 10-Q/A for the fiscal quarter ended June 30, 1999 filed with the commission on August 24, 1999 and incorporated herein by reference. 3.4 Certificate of Amendment of Restated Certificate of Incorporation of Registrant, dated January 18, 2000. Filed as Exhibit 3.5 to the PixTech, Inc. Annual Report on Form 10-K for the year ended December 31, 1999 filed with the commission on March 28, 2000 and incorporated herein by reference. 10.1 Amendment, dated February 29, 2000, to Common Stock Purchase Agreement by and between PixTech, Inc. and Unipac Optoelectronics Corporation dated as of October 6, 1999. Filed as Exhibit 2.1 to the PixTech, Inc. Current Report on Form 8-K filed on May 8, 2000 and incorporated herein by reference. 27 Financial Data Schedule 99.1 Important Factors Regarding Future Results
-19- EX-27 2
5 1000 3-MOS DEC-31-2000 JAN-01-2000 MAR-31-2000 12336 0 892 0 1230 15832 23293 0 41523 13217 0 0 1 451 22220 41523 86 1990 (88) (8977) 0 0 29 (6687) 0 0 0 0 0 (6687) (.16) 0
EX-99 3 EXHIBIT 99.1 IMPORTANT FACTORS REGARDING FUTURE RESULTS You should carefully consider the following risk factors, in addition to other publicly available information in deciding whether to invest in PixTech stock. WE HAVE A HISTORY OF LOSSES AND ACCUMULATED DEFICIT THAT MAY CONTINUE IN THE FUTURE. We have a history of losses as follows:
Operating Net Losses Loss to Common Stockholders -------------------- --------------------------- Three Month Ended March 31, 2000 $6.6 million $6.7 million Year Ended December 31, 1999 $26.4 million $28.9 million Year Ended December 31, 1998 $19.6 million $17.8 million Year Ended December 31, 1997 $15.7 million $14.6 million
The losses were due in part to limited revenues and to various expenditures, including expenditures associated with: - research and development activities; - pilot production activities; and - start-up costs to improve volume manufacturing in Taiwan at Unipac. We expect to incur operating losses in the future due primarily to: - continuing research and development activities to develop field emission displays larger than 15-inch in diagonal and color displays; - manufacturing start-up costs in Taiwan; and - expansion of our sales and marketing activities. As a result of these losses, as of March 31, 2000, we had an accumulated deficit of $89.2 million. Our ability to achieve and maintain profitability is highly dependent upon the successful commercialization of our monochrome and color displays. We cannot assure you that we will ever be able to successfully commercialize our products or that we will ever achieve profitability. WE WILL NEED ADDITIONAL CAPITAL IN THE FUTURE. We have incurred negative cash flows from operations since inception, and have expended, and will need to expend, substantial funds to complete our planned technology and product development efforts, including: - continuous improvement of our manufacturing processes in order to achieve yields that will lead to an acceptable cost of products; - continuous product development activities in order to develop color displays that meet market requirements and to develop a range of products offered for sales; - continuous research and development activities in order to develop displays larger than 15-inch in diagonal; and - expansion of our marketing, sales and distribution activities. In addition to the above requirements, we expect that we will require additional capital either in the form of debt or equity, regardless of whether and when we reach profitability, for the following activities: - working capital; - acquisition of manufacturing equipment to expand manufacturing capacity; and - further product development. Our future capital requirements and the adequacy of our available funds depend on numerous factors, including: - the rate of increase in manufacturing yields by Unipac in Taiwan; - the magnitude, scope and results of our product development efforts; - the costs of filing, prosecuting, defending and enforcing patent claims and other intellectual property rights; - competing technological and market developments; and - expansion of strategic alliances for the development, manufacturing, sale, marketing and distribution of our products. -20- IF WE FAIL TO CONTINUE TO MEET NASDAQ'S LISTING MAINTENANCE REQUIREMENT, NASDAQ MAY DELIST OUR COMMON STOCK. There is a possibility that our Common Stock could be delisted from the Nasdaq National Market. While our Common Stock is currently quoted on the Nasdaq National Market, in order to remain quoted on the Nasdaq National Market, we must meet certain requirements with respect to: - market capitalization (the market value of all outstanding shares of our Common Stock); - public float (the number of outstanding shares of Common Stock held by those not affiliated with us); - market value of public float; - market price of the Common Stock; - number of market makers; - number of shareholders; and - net tangible assets (total assets minus total liabilities and intangible assets). If the price of our Common Stock were to fall significantly below our current trading range, Nasdaq may approach us regarding our continued listing on the Nasdaq National Market. If Nasdaq were to begin delisting proceedings against us, it could reduce the level of liquidity currently available to our stockholders. With regard to future priced securities such as our series E stock, Nasdaq is concerned with the following, among other things: - disproportionate voting rights; - minimum bid price of a company's Common Stock and - public interest concerns; and The holders of our series E stock may vote their series E stock as if they were holders of Common Stock and are entitled to the number of votes equal to the number of shares of Common Stock that the series E stock is convertible into at the time of voting. If our Common Stock price were to fall significantly, this right may be deemed to violate a Nasdaq maintenance requirement due to the disproportionate voting right, when compared to our Common Stock, which each share of series E stock would have. Moreover, in order to continue to be listed on Nasdaq National Market, the minimum bid price of our Common Stock must stay above $1.00. In addition to the fluctuations of the market in general and our Common Stock in particular, a decrease in our Common Stock price that causes the number of shares of Common Stock issuable upon conversion of the series E stock to increase may exert downward pressure on the price of our Common Stock. This may drive the minimum bid price of our Common Stock below $1.00, thus violating a Nasdaq maintenance requirement. On April 10, 2000, the minimum bid price on our Common Stock was $4.438. Nasdaq has also stated that in egregious situations, future priced securities, such as our series E stock, may raise public interest concerns that may result in the delisting of our Common Stock, if Nasdaq deems the delisting necessary to prevent fraudulent and manipulative acts and practices. If our Common Stock is delisted from the Nasdaq National Market, we could apply to have the Common Stock quoted on the Nasdaq SmallCap Market. The Nasdaq SmallCap Market has a similar set of criteria for initial and continued quotation. We may not, however, meet the requirements for initial or continued quotation on the Nasdaq SmallCap Market. If we were not able to meet the requirements of the Nasdaq SmallCap Market, trading of our Common Stock could be conducted on an electronic bulletin board established for securities that do not meet the Nasdaq SmallCap Market listing requirements, in what is commonly referred to as the "pink sheets." In addition, if our Common Stock were delisted from the Nasdaq National Market, we may not have the right to obtain funds under the Kingsbridge equity line agreement and it could be more difficult for us to obtain future financing. In addition, if our Common Stock is delisted, investors' interest in our Common Stock would be reduced, which would materially and adversely affect trading in, and the price of, our Common Stock. BECAUSE WE USE A SINGLE CONTRACT MANUFACTURER TO MANUFACTURE OUR FIELD EMISSION DISPLAYS WE MAY BE UNABLE TO OBTAIN AN ADEQUATE SUPPLY OF PRODUCTS AND WE MAY HAVE LESS CONTROL OF PRICE. Unipac, a liquid crystal display manufacturer and an affiliate of United Microelectronics Corporation, is our only contract manufacturer. In the future, we expect that the products that will be manufactured at Unipac and sold to our customers will represent the majority of our revenues. If we are not able to implement our manufacturing plans with Unipac as soon as we expect, we will not be able to ship medium to large volumes of field emission display products. Moreover, we will have less control over the price of the finished products, the timeliness of their delivery and their reliability and quality. Finally, we will not be able to obtain -21- an acceptable cost for our field emission displays through high volume manufacturing, as compared to manufacturing field emission displays at our pilot production facility. This situation would materially adversely affect our revenues and costs of producing products. Expectations about the final timing of this manufacturing plan with Unipac are forward-looking statements that still involve risks and uncertainties, including the ease or difficulty of the transfer of the field emission display technology to Unipac. Our failure to adequately manage this contract manufacturing relationship or any delays in the shipment of our products would adversely affect us. OUR MANUFACTURING PROCESSES ARE STILL UNDER DEVELOPMENT AND WE STILL NEED TO OBTAIN COMMERCIALLY ACCEPTABLE YIELDS AND ACCEPTABLE COSTS OF PRODUCTS OR OUR COSTS TO PRODUCE OUR DISPLAYS WILL BE TOO HIGH FOR US TO BE PROFITABLE. In order for us to succeed, we must continue to develop and produce a range of products incorporating our field emission display technology. At this time, we have successfully developed only one monochrome field emission display product that has been incorporated into a commercial end-user application and that is being targeted at various markets. We will need to complete the development of additional field emission display products to enlarge our market opportunity, and there is no guaranty that we will succeed in these development efforts. If we do not develop these new products, we will need to rely on sales of a single product to be successful. We have used our manufacturing facility in Montpellier, France to develop manufacturing processes but it has produced only a limited number of products suitable for sale. Additionally, to date, we have not completed testing of our manufacturing processes at Unipac. In order for us to be successful, we must improve our manufacturing yields in order to demonstrate the low cost potential of our field emission display technology. Even if we succeed in completing the development and testing of our manufacturing processes, we can not be sure that the favorable characteristics demonstrated by our current displays manufactured at our pilot manufacturing facility will be reproduced on a cost-effective basis in commercial production. We have, at this time, encountered a number of delays in the development of our products and processes, and it is possible that further delays will occur. Any significant delays could cause us to miss certain market opportunities and could reduce our product sales. WE NEED TO FURTHER ENHANCE THE DISPLAY PERFORMANCE OF OUR COLOR DISPLAYS OR OUR DISPLAYS MAY NEVER BE ACCEPTED BY A LARGE NUMBER OF POTENTIAL CUSTOMERS. We may never improve the performance characteristics of our color displays to a level that is commercially acceptable or we may fail to do so on a timely basis. Neither of which could result in potential customers not buying our products. Key elements of display performance are brightness, power efficiency and stability over time (lifetime and reliability). We are seeking to balance brightness with power efficiency to produce bright and low power-consumption displays. Display reliability depends on a large number of factors, including the manufacturing process used in assembling the displays as well as the characteristics of the materials, including phosphors, used in the display. In order to produce color displays that will provide the product life and other characteristics necessary for most applications, we need to make further advances in our manufacturing processes and in the selection of the materials we use. WE MAY NEVER BE ABLE TO FUND THE RESEARCH AND DEVELOPMENT ACTIVITIES NEEDED TO DEVELOP LARGE DISPLAYS. We need to conduct a significant research and development effort in order to bring our current 15-inch field emission display prototype to a stage where it can be manufactured in volume at an acceptable cost. We may never be able to fund that effort. Even if we were able to develop a product that could be manufactured, we would have to locate or build a manufacturing facility to produce our displays. Currently, Unipac has a facility and equipment to build small displays only. We may not be able to fund the amount needed in order to acquire or build a manufacturing facility for our large displays. If we are unable to develop or manufacture large displays, we will miss market opportunities for large flat panel displays. -22- WE FACE INTENSE COMPETITION AND NEED TO COMPETE WITH CURRENT AND FUTURE COMPETING TECHNOLOGIES THAT MAY OUTPERFORM OUR DISPLAYS THUS MAKING OUR DISPLAY UNDESIRABLE. Our competitors may succeed in developing products that outperform our displays or that are more cost effective. If our competitors develop products that offer significant advantages over our products and we are unable to improve our technology, or develop or acquire alternative technology that is more competitive, we may not be able to sell our displays. Products utilizing liquid crystal display technology currently dominate the market for flat panel display products. Certain liquid crystal display manufacturers, such as Canon, Sharp, NEC, Hitachi, Samsung and Toshiba have substantially greater name recognition and financial, technological, marketing and other resources than us. Presently, liquid crystal displays are in short demand and independent forecasts predict that this may continue over a certain period of time. However, liquid crystal display manufacturers have made, and continue to make, substantial investments in increasing capacity as well as product performance. We believe that, over time, this, combined with new competitors entering the flat panel displays market, may cause over-supply conditions and may have the effect of reducing average selling prices of flat panel displays. To effectively compete, we could be required to increase the performance of our products or reduce prices. In the event of price reductions, we will not be able to maintain gross margins unless we reduce our cost of sales. There are a number of domestic and international companies developing and marketing display devices using alternative technologies to liquid crystal display technology, such as vacuum fluorescent displays, electro-luminescent panels and plasma panels. Additionally, some of the basic field emission display technology is in the public domain and, as a result, we have a number of potential direct competitors developing field emission displays or developing fundamental field emission displays technology. These companies, including Canon, Futaba, Motorola, Sony, Fujitsu, Samsung and Toshiba, as well as smaller companies, including Candescent, and Silicon Diamond Technology. Although we own the rights to significant technological advances in field emission display technology, potential competitors may have developed or may soon develop comparable or superior field emission display technology. Many of the developers of alternative flat panel display and competing field emission display technologies have substantially greater name recognition and financial, research and development, manufacturing and marketing resources than us, and have made and continue to make substantial investments in improving their technologies and manufacturing processes. BECAUSE POTENTIAL CUSTOMERS MAY NOT ACCEPT OUR PRODUCTS WE MAY NEVER SELL THE NUMBER OF DISPLAYS REQUIRED TO MAKE OUR BUSINESS PROFITABLE. We are uncertain about the potential size and timing of our target market opportunities. We anticipate marketing our displays to original equipment manufacturer customers, which are customers that will incorporate our product into their final product. It is possible that demand for any particular product by these customers will not last or that new markets will fail to develop as we expect, or at all. Our ability to have consumer products sold that incorporate our displays will depend, in part, on the following factors: - whether original equipment manufacturers select our products for incorporation into their products; - the successful introduction of such products by the original equipment manufacturers; and - the successful commercialization of products developed by parties incorporating our products. It takes a long time for any product to achieve market success, and any success is never certain. The introduction of new products is often delayed by the need to have the products selected by an original equipment manufacturer and designed into the original equipment manufacturer's products. For certain products, the delay attributable to a manufacturer's design cycle may be a year or longer. Factors affecting the length of these delays include: - the size of the manufacturer; - the type of application; and - whether the displays are being designed into new products or fitted into existing applications. If volume production of such products is delayed for any reason, our competitors may introduce new technologies or refine existing technologies that could diminish the commercial acceptance of our products. WE HAVE LIMITED SALES, MARKETING AND DISTRIBUTION CAPABILITIES. We have limited internal sales, marketing and distribution experience and capabilities. Until recently, we were a development stage company with no products or product sales. Consequently, we had not established significant sales, marketing, or distribution operations within our company. Recently, however, we have begun sales of our displays to customers. We will not be able to develop significant revenues from the sales of our products unless we can attract and retain highly qualified employees to market and oversee the distribution of our products. If we are unable to establish and maintain significant sales, marketing and distribution efforts, either internally or through arrangements with third parties, we may be adversely affected. -23- WE MAY HAVE DIFFICULTY PROTECTING PATENTS AND OTHER PROPRIETARY RIGHTS TO OUR TECHNOLOGY AND MAY THEREFORE BE UNABLE TO PREVENT COMPETITORS FROM USING OUR TECHNOLOGY. We have been granted, have filed applications for, and have been licensed under a number of patents in the United States and other countries. We rely on these patents and licenses for an advantage in our industry and any infringement of these patents and licenses will lessen our advantage. However, rights granted under patents may not provide us with any competitive advantage over competitors with similar technology, and any issued patents may not contain claims sufficiently broad to protect against these competitors. We have not conducted an independent review of patents issued to other companies. We cannot be certain that we were the first creator of inventions covered by pending patent applications or the first to file patent applications on such inventions because patent applications in the United States are maintained in secrecy until patents issue and the publication of discoveries in scientific or patent literature tends to lag behind actual discoveries by several months. Competitors in both the United States and other countries may have applied for or obtained, or may in the future apply for and obtain, patents that will prevent, limit or interfere with our ability to make and sell our products. We also rely on unpatented, proprietary technology, which is significant to the development and manufacture of our displays. Others may independently develop the same or similar technology or obtain access to our unpatented technology. If we are unable to maintain the proprietary nature of our technologies, our competitors may develop products using our technology. Moreover, claims that our products infringe on the proprietary rights of others are more likely to be asserted after we begin commercial sales of products using our technology. It is possible that competitors will infringe our patents. Even the successful defense and prosecution of patent suits is costly and time consuming. The adverse outcome of a patent suit could subject us to significant liabilities to other parties, require disputed rights to be licensed from third parties or require us to stop selling our products. We have received correspondence from Futaba Corporation and its legal counsel beginning in February 1998 alleging the following: - we are infringing one or more patents owned by Futaba relating to the construction and manufacture of our displays that are not expressly included under the license agreement between us and Futaba; - our use of terms such as "alliance" and "partners" in describing the nature of our contractual relationships with Motorola, Raytheon and Futaba in reports filed with the SEC is misleading; and - certain provisions in our agreement with Unipac constitute an impermissible sublicense of Futaba technology. Futaba has also claimed that we improperly supplied certain Futaba proprietary information to Unipac, and that Unipac has, in turn, disclosed such information to a third party vendor. We have accepted an offer of settlement from Futaba, reflected in correspondence dated December 15, 1999 and December 30, 1999, pursuant to which Futaba has waived these claims against us. Futaba and PixTech are currently preparing a definitive written settlement agreement. BECAUSE A LARGE PERCENTAGE OF OUR NET ASSETS AND OUR COSTS IS EXPRESSED IN EUROS, CURRENCY FLUCTUATIONS MAY CAUSE GAINS OR LOSSES. A large percentage of our net assets and of our costs is expressed in Euros, but our financial statements are stated in U.S. dollars. In 1999, 37% of our assets and 69% of our costs were expressed in Euros. Fluctuations of the value of the U.S. dollar versus the Euro may cause significant gains or losses. Most of our capital lease obligation is expressed in Taiwanese dollars and thus fluctuations of the value of the Taiwanese dollar versus the Euro may also cause significant foreign exchange gains or losses. CERTAIN ANTI-TAKEOVER PROVISIONS THAT WE HAVE INSTITUTED MAY LIMIT OUR STOCK PRICE. Certain provisions of our restated certificate of incorporation and by-laws may discourage a third party from offering to purchase our company and may also adversely affect the market price of our Common Stock. These provisions, therefore, inhibit actions that would result in a change in control of our Company, including an action that may give the holders of the Common Stock the opportunity to realize a premium over the then-prevailing market price of their stock. In addition, under our restated certificate of incorporation we can issue preferred stock with such designations, rights and preferences as our board of directors determines from time to time. This type of preferred stock could be used as a method of discouraging, delaying or preventing a change in control. In addition, the series E stock issued by us in December 1998 and any additional shares of preferred stock that we may issue in the future may adversely affect the voting and dividend rights, rights upon liquidation and other rights of the holders of Common Stock. We do not currently intend to issue any additional shares of preferred stock, but we retain the right to do so in the future. Furthermore, we are subject to Section 203 of the Delaware General Corporation Law, which may discourage takeover attempts. -24- OUR BUSINESS MAY SUFFER IF WE ARE UNABLE TO ATTRACT OR RETAIN KEY PERSONNEL. We are highly dependent on the principal members of our management and staff, the loss of whose services might significantly delay or prevent the achievement of research, development or strategic objectives. Our success depends on our ability to retain key employees and to attract additional qualified employees. Competition for such personnel is intense, and we may not be able to retain existing personnel and to attract, assimilate or retain additional highly qualified employees in the future. YEAR 2000 COMPLIANCE We undertook various initiative to ensure that our computer systems and manufacturing equipment would function properly with respect to dates in the year 2000 and thereafter. Our computer system and manufacturing equipment successfully transitioned to year 2000. However, there may be latent problems that surface at key dates or events in the future. We have not experienced, and does not anticipate, any significant problems related to the transition to the year 2000. Furthermore, we do not anticipate any significant expenditure in the future related to year 2000 compliance. -25- -----END PRIVACY-ENHANCED MESSAGE-----