FORM 10-Q
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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 June 30, 1997
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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.
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(Exact name of registrant as specified in its charter)
Delaware 04-3214691
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
Avenue Olivier Perroy, 13790 Rousset, France
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(Address of principal executive offices) (Zip code)
011-33-4-42-29-10-00
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(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 August 7, 1997
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Common Stock, $.01 par value 13,763,654
PIXTECH, INC.
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TABLE OF CONTENTS
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PAGE NO.
PART I FINANCIAL INFORMATION
ITEM 1 Financial Statements
Balance Sheets as of June 30, 1997
and December 31, 1996 ................................................... 3
Statements of Operations for the Three Months and Six Months
Ended June 30, 1997 and 1996, and the period from June 18,
1992 through June 30, 1997 .............................................. 4
Statements of Cash Flows for the Six Months ended June 30, 1997
and 1996, and the period from June 18, 1992 through June 30, 1997 ....... 5
Statement of Stockholders' Equity ....................................... 6 - 7
Notes to Financial Statements ........................................... 8
ITEM 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations ................................................... 9 - 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
Signature ................................................................................ 13
Exhibit Index ............................................................................ 14
2
PIXTECH, INC.
(A DEVELOPMENT STAGE COMPANY)
PIXTECH, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
JUNE 30, DECEMBER 31,
1997 1996
------------- ------------
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents............... $ 18,353 $ 4,266
Accounts receivable:
Trade.................................. 1,479 1,655
Other.................................. 12 198
Inventory............................... 651 770
Other.................................. 1,649 2,975
------------- ------------
Total current assets.................. 22,144 9,864
Property, plant and equipment, net....... 10,422 13,409
Goodwill, net............................ 272 298
Deferred tax assets...................... 4,567 5,167
Other assets - long term................. 972 342
Deferred offering costs.................. -- 485
------------- ------------
Total assets $ 38,377 $ 29,565
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long term debt....... $ 889 $ 990
Current portion of capital lease
obligations............................ 785 921
Current portion of long term
liabilities........................... -- 1,890
Accounts payable....................... 2,963 5,132
Accrued expenses....................... 1,165 1,773
Other.................................. 167 17
------------- ------------
Total current liabilities............. 5,969 10,723
Deferred revenue......................... 2,594 3,226
Long term debt, less current portion..... 1,815 2,146
Capital lease obligation, less current
portion................................. 428 833
Other long term liabilities, less
current portion......................... 793 538
------------- ------------
Total liabilities 11,599 17,466
============= ============
STOCKHOLDERS' EQUITY
Common stock............................ 137 81
Other stockholders' equity............. 55,442 33,647
Deficit accumulated during
development stage..................... (28,801) (21,629)
Total stockholders' equity............ 26,778 12,099
------------- ------------
Total liabilities and stockholders'
equity............................... $ 38,377 $ 29,565
3
PIXTECH, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
PERIOD FROM
JUNE 18, 1992
THREE MONTHS ENDED SIX MONTHS ENDED (DATE OF
JUNE 30, JUNE 30, INCEPTION)
THROUGH
------------------ ------------------ JUNE 30,
1997 1996 1997 1996 1996
--------- ------ ------ ------ ------------
Revenues:
Cooperation & license revenues........ $ 1,011 $ 2,636 $ 1,718 $ 4,526 $ 24,996
Product sales......................... 255 178 428 361 2,064
Other revenues........................ 47 47 720 981 3,516
------ ------- ------- ------ -------
1,313 2,861 2,866 5,868 30,576
------ ------- ------- ------ -------
Cost of revenues
License fees and royalties........... 61 -- 61 -- 1,420
------ ------- ------- ------ -------
Gross margin.......................... 1,252 2,861 2,805 5,868 29,156
------ ------- ------- ------ -------
Operating expenses:
Research and development:
Acquisition of intellectual property
rights............................. -- -- -- -- 4,765
Other............................... 3,904 3,721 8,078 7,222 45,820
------ ------- ------- ------ -------
3,904 3,721 8,078 7,222 50,585
Sales and marketing................. 402 214 782 446 4,460
General and administrative.......... 682 787 1,288 1,475 9,170
------ ------- ------- ------ -------
Total operating expenses......... 4,988 4,722 10,148 9,143 64,215
------ ------- ------- ------ -------
Loss from operations.................. (3,736) (1,861) (7,343) (3,275) (35,059)
Other income / (expense)
Interest income / (expense).......... 211 (9) 342 88 681
Foreign exchange gains / (losses).... 67 316 (171) 342 429
------ ------- ------- ------ -------
278 307 171 430 1,110
Loss before income tax benefit........ (3,458) (1,554) (7,172) (2,845) (33,949)
Income tax benefit.................... -- -- -- -- 5,148
------ ------- ------- ------ -------
Net loss.............................. $(3,458) $(1,554) $(7,172) $(2,845) (28,801)
======= ======= ======= ======= =======
Net loss per share: $(.25) $(.19) $(.57) $(.35)
======= ======= ======= =======
Shares used in computing net loss per
share................................ 13,750 8,139 12,468 8,131
======= ======= ======= =======
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)
SIX MONTHS ENDED THROUGH
JUNE 30, JUNE 30,
-------------------- -------------
1997 1996 1997
--------- ------- ------------
Net loss................................ $(7,172) $(2,845) $(28,801)
Total adjustments to net loss........... 1,686 259 10,024
------- ------ -------
Net cash used in operating activities... (5,486) (2,586) (18,777)
------- ------ -------
INVESTING ACTIVITIES
Additions to property plant and
equipment.............................. (257) (2,196) (16,552)
Additions to intangible assets.......... -- (130) (130)
------- ------ -------
Net cash used in investing activities... (257) (2,326) (16,682)
FINANCING ACTIVITIES
Stock issued............................ 21,635 4 55,558
Proceeds from long-term borrowings...... -- -- 6,287
Proceeds from sale leaseback
transactions........................... -- -- 2,731
Payments for equipment purchases
financed by accounts payable........... -- -- (3,706)
Repayment of long term borrowing and
capital lease obligations.............. (718) (535) (4,738)
------- ------ -------
Net cash (used in) / provided by
financing activities................... 20,917 (531) 56,132
------- ------ -------
Effect of exchange rates on cash........ (1,087) (416) (2,320)
------- ------ -------
Net (decrease) / increase in cash and
cash equivalents....................... 14,087 (5,859) 18,353
Cash and cash equivalents beginning of
period................................. 4,266 17,563 --
------- ------ -------
Cash and cash equivalents end of period. $18,353 $11,704 $ 18,353
======= ======= ========
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 convertible preferred 534,587 $ 706 123,005 $ 159
stock, net of issuance costs...........
Issuance of Common stock in June........
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 convertible preferred
stock, net of issuance costs........... 1,022,416 1,662 240,442 430 1,999,011 $ 5,686 430,208 $ 1,224
Issuance of Common stock in January.....
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 convertible preferred
stock, net of issuance costs........... 1,045,835 2,929
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 issuance costs --
$ 1,080................................
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--Year ended December 31, 1995..
---------- ------- -------- ------ ---------- ------- -------- --------
BALANCE AT DECEMBER 31, 1995
Issuance of Common stock under stock
option plan............................
Issuance of warrants in connection with
acquisition of the assets of Panocorp..
Translation adjustment..................
Net loss--Year ended
December 31, 1996......................
---------- ------- -------- ------ ---------- ------- -------- --------
BALANCE AT DECEMBER 31, 1996
Common stock issued in public offering
and private placements, net of
issuance costs -- $ 796 (unaudited)....
Issuance of Common stock under stock
option plan (unaudited)................
Translation adjustment (unaudited)......
Net loss--Six months ended June 30,
1997 (unaudited)........................
---------- ------- -------- ------ ---------- ------- -------- --------
BALANCE AT JUNE 30, 1997 -- -- -- -- -- -- -- --
========== ======= ======== ====== ========== ======= ======== ========
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 convertible preferred
stock, net of issuance costs.......... $ 865
Issuance of Common stock in June....... 115,045 $ 1 $ 75 76
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 convertible preferred 9,002
stock, net of issuance costs..........
Issuance of Common stock in January.... 17,256 21 21
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 $(11) (11)
stock--Treasury stock in April....
Issuance of convertible preferred 2,929
stock, net of issuance costs..........
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 issuance costs --
$ 1,080............................... 2,500,000 25 20,973 20,998
Conversion of preferred stock.......... 5,395,504 54 12,742
Translation adjustment................. 334 334
Net loss--Year 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........................... 29,083 0 11 11
Issuance of warrants in connection with
acquisition of the assets of
Panocorp.............................. 230 230
Translation adjustment (953) (953)
Net loss--Year ended December 31, 1996 (11,719) (11,719)
---------- ---- ------- ------- -------- -------- --------
BALANCE AT DECEMBER 31, 1996 8,141,146 81 34,085 (438) (21,629) 12,099
Common stock issued in public offering
and private placements, net of 5,570,819 56 22,958 23,014
issuance costs -- $ 796 (unaudited)
Issuance of Common stock under stock
option plan (unaudited) 46,055 0 22 22
Translation adjustment (unaudited) (1,185) (1,185)
Net loss--Six months ended June 30, (7,172) (7,172)
1997 (unaudited)......................
---------- ---- ------- ------- -------- -------- --------
BALANCE AT JUNE 30, 1997 13,758,020 $137 $57.065 $(1,623) $(28,801) $ 26,778
========== ==== ======= ======= ======== ======== ========
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 six-month periods ending
June 30, 1997 are not necessarily indicative of the results that may be expected
for the year ending December 31, 1997. For further information, refer to the
consolidated financial statements and footnotes thereto for the year ended
December 31, 1996 (the "1996 Financial Statements"), included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1996.
NOTE B -- INVENTORIES
Inventory consists of raw material and spare parts.
NOTE C -- PUBLIC OFFERING
On February 7, 1997, the Company sold 3,333,000 shares of Common Stock in a
public offering in Europe at a price of $4.50 per share, resulting in net
proceeds of $13,949 before expenses payable by the Company, which are estimated
at $806. The Company granted the Underwriters a 30-day option to purchase up to
663,000 shares, and the Underwriters exercised such option and purchased such
shares on February 12, 1997. Including the sale of such shares, the total price
to the public, underwriting discount, and proceeds to the Company before
expenses were $17,982, $1,259, and $16,723, respectively.
NOTE D -- PRIVATE PLACEMENTS
In February 1997, the Company sold 463,708 shares of the Company's Common
Stock to Motorola, Inc., in a private placement at a price of $4.50 per share,
resulting in net proceeds of $2,086. As consideration for this stock purchase,
an amount of $686 was received in cash and the remaining $1,400 was in the form
of forgiveness of $1,400 of obligations from PixTech S.A. to Motorola. In
connection with such private placement, Motorola received warrants to purchase
an additional 463,708 shares of the Common Stock of the Company at a price of
$5.50 per share, which warrants expire on December 31, 1998. As of June 30,
1997, these warrants have not been exercised.
In February 1997, the Company sold 1,111,111 shares of the Company's Common
Stock to United Microelectronics Corporation, the parent company of Unipac
Optoelectronics Corporation, in a private placement at a price of $4.50 per
share resulting in net cash proceeds of $5,000.
NOTE E -- NET LOSS PER SHARE
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings par Share", which is required to be adopted on December 31,
1997. At that time, the Company will be required to change the method currently
used to compute earnings per share and to restate all prior periods. Under the
new requirements for calculating primary earnings per share, the dilutive
effects of stock options and warrants will be excluded.
There is no impact of Statement 128 on the calculation of earnings per share
for the three-month periods ended June 30, 1996 and 1997. As net losses have
been reported in these quarters, the dilutive effects of stock options and
warrants have been excluded from the calculation of net loss per share under the
current method of calculating net loss per share.
8
MANAGEMENT'S 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 Field Emission Display ("FED") Alliance agreements of $1.0
million in the three-month period ended June 30, 1997, as compared to $2.6
million in the three-month period ended June 30, 1996. These revenues represent
the achievement by the Company of contractual milestones with FED Alliance
members.
The Company recognized cooperation and license revenues under the FED Alliance
agreements of $1.7 million in the six-month period ended June 30, 1997, as
compared to $4.5 million in the six-month period ended June 30, 1996. The
Company has now recorded most of the expected revenues associated with the
achievement of contractual milestones with existing FED Alliance members and
future FED Alliance milestone revenues are mostly subject to expansion of the
FED Alliance.
Product sales. The Company recognized product sales of $428,000 in the six-month
period ended June 30, 1997, as compared to $361,000 in the six-month period
ended June 30, 1996. These product sales represented the shipment of FED
displays and FED cathodes in limited quantities to members of the FED Alliance
and the shipment of FED displays for evaluation by original equipment
manufacturer ("OEM") customers.
Other revenues. The Company recognized other revenues of $47,000 in each of the
three-month periods ended June 30, 1997 and 1996. Other revenues amounted to
$720,000 in the six-month period ended June 30, 1997, as compared to $981,000
during the same period in 1996. Other revenues are derived principally from
government funded development contracts. Of these revenues $663,000 and $800,000
are related to a development contract from the French Ministry of Industry to
support manufacturing of FEDs, in the six -month periods ended June 30, 1997 and
1996, respectively.
Research and Development Expenses. The Company expensed $3.9 million for
research and development costs during the three-month period ended June 30,
1997, an increase of 5% over the $3.7 million of research and development
expenses incurred in the three-month period ended June 30, 1996. These expenses
included obligations to the French atomic energy agency ("CEA") under the "LETI"
Research Agreement (Laboratoire d'Electronique, de Technologie et
d'Instrumentation), 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. The increase
reflects the continued development of the Company's FED technology and
manufacturing processes. Research and development expenses amounted to $8.1
million for the six-month period ended June 30, 1997 as compared to $7.2 million
during the six-month period ended June 30, 1996.
Sales and Marketing Expenses. The Company expensed $402,000 for sales and
marketing during the three-month period ended June 30, 1997, compared to
$214,000 during the three-month period ended June 30, 1996. This increase
reflected the expansion of the Company's sales and marketing organization both
in the United States and in Europe, and the increasing support of marketing
efforts through trade show attendance and advertising. The Company believes
sales and marketing expenses may increase in the future, as potential customers
and anticipated shipments of FED displays develop. Sales and marketing expenses
amounted to $782,000 for the six-month period ended June 30, 1997 as compared to
$446,000 during the six-month period ended June 30, 1996.
General and Administrative Expenses. General and administrative expenses
amounted to $682,000 in the three-month period ended June 30, 1997, a decrease
of 13% over general and administrative expenses incurred in the three-month
period ended June 30, 1996, which amounted to $787,000, reflecting a decrease in
staff expenses. General and administrative expenses amounted to $1.3 million for
the six-month period ended June 30, 1997 as compared to $1.5 million during the
six-month period ended June 30, 1996.
9
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, the successful implementation of contract manufacturing of
FEDs with its Asian partner, Unipac, and the reliability testing of new products
which the Company expects will lead to the shipment of commercial products in
the near future. In evaluating this outlook, the following risks and issues,
among others, which are common with development stage companies, should be
considered.
Revenues from FED Alliance members. To date, the Company has recorded most of
the expected revenues associated with the achievement of contractual milestones
under existing FED Alliance agreements, and most future FED Alliance milestone
revenues are subject to expansion of the Alliance or to renewal of cooperation
periods with existing members at their respective expiration dates. Expansion of
the FED Alliance and renewal of cooperation periods by existing FED Alliance
members are subject, in part, to matters beyond the Company's control. Failure
to expand the FED Alliance or to obtain renewals of the cooperation periods
could adversely affect the Company.
Products and Manufacturing Processes under Development, Need to increase Yields,
Costs of Products. The Company's products and its manufacturing processes are in
the development stage. The Company has to date encountered a number of delays in
the development of its products and manufacturing processes. No assurance can be
given that further delays will not occur. The Company does not plan to increase
production from its pilot facility beyond low volume levels. The Company
believes that contract manufacturing with its Asian partner (see "Risks
Associated with Contract Manufacturing of FEDs") will make it possible to
manufacture volume quantities of FEDs at commercially acceptable costs. However,
moving from pilot production to volume production involves a number of steps and
challenges. In particular, in order to demonstrate the low cost potential of its
FED technology, the Company will need to improve its manufacturing yields. There
can be no assurance that the Company will be able to implement processes for the
manufacture of volume quantities of FED products at commercially viable cost
levels or on a timely basis. If such processes are not successfully implemented,
the Company would be adversely affected.
Risks Associated with Contract Manufacturing of FEDs. The Company believes that
its ability to commercialize medium to large volumes of FEDs is highly dependent
on its ability to have FEDs manufactured by a major manufacturer in the AMLCD
industry. On May 22, 1997, the Company signed a display foundry agreement
(the"Foundry Agreement") with Unipac Optoelectronics Corp., an AMLCD
manufacturer based in Taiwan. Under the agreement, Unipac will install volume
production equipment to produce FEDs at its manufacturing line, and will begin
production for exclusive delivery of FED displays to PixTech. Expectations about
the timing of this manufacturing plan with Unipac are forward-looking statements
that involve risks and uncertainties, including the ease or difficulty of the
transfer of the FED technology to Unipac. If such contract manufacturing
agreement is not implemented on a timely basis, the Company will not be able to
ship medium to large volumes of FED products, or to obtain a commercially
acceptable cost for its FED displays. Significant capital expenditure will be
required in order to install, at the contract manufacturers' facility, equipment
that is not common to the AMLCD manufacturing process. A minimum of $15 million
of capital expenditures will be required. Pursuant to the Foundry Agreement,
Unipac will purchase and fund equipment within a $15 million limit, with PixTech
providing a bank guaranty in favor of Unipac on the value of a majority of the
required equipment. The equipment value covered by such bank guaranty will
decrease over time. To date, there can be no assurance that the Company will be
able to provide such a guaranty. Should the Company fail in obtaining this bank
guaranty, the entire implementation of the contract manufacturing could be
threatened, unless the Company is successful in providing alternative financings
to fund the capital expenditures required. In addition, the amount actually
expended on capital expenditures could vary significantly depending upon
numerous factors, including the inherent unpredictability of the total amount of
a large scale capital expenditure program. Should the Company be successful in
implementing this contract manufacturing relationship, the Company's reliance on
a single contract manufacturer will involve several risks, including a potential
inability to obtain an adequate supply of required products, and reduced control
over the price, timeliness of delivery, reliability and quality of finished
products. Any inability to manage this contract manufacturing relationship or
any circumstance that would cause the Company to delay the shipment of its
products would have an adverse effect on the Company.
Display Performance Enhancement. Key elements of display performance are
brightness, and the display's stability over time (display reliability), as well
as power efficiency. PixTech is seeking to balance luminous efficiency with
power efficiency to produce bright and low power-consumption displays. Display
reliability is heavily dependent upon the manufacturing process used in
assembling the displays as well as upon the characteristics of the phosphors
used on the anode. In order to produce color displays that will provide the
product life necessary for most applications, the Company believes it will need
to make further advances in phosphors and related manufacturing technologies.
10
Competition and Competing Technologies. The market for flat panel display
products is intensely competitive and is expected to remain so. The market is
currently dominated by products utilizing liquid crystal display ("LCD")
technology. LCD technology has continued to improve, and there can be no
assurance that advances in LCD technology will not overcome its current
limitations. In addition, as some of the basic FED technology is in the public
domain, the Company has a number of potential direct competitors developing FED
displays. In the event that efforts by the Company's competitors result in the
development of products that offer significant advantages over the Company's
products, the Company could be adversely affected.
No Assurance of Market Acceptance. The potential size and timing of market
opportunities targeted by the Company and the members of the FED Alliance are
uncertain. The Company anticipates marketing its displays to OEMs, and its
success will depend on whether OEMs select the Company's products for
incorporation into their products and upon their successful introduction of such
products, as well as the successful commercialization of products developed by
members of the FED Alliance.
Patents and Protection of Proprietary Technology. The Company's ability to
compete effectively with other companies will depend, in part, on the ability of
the Company to maintain the proprietary nature of its technology. Although the
Company has been granted, has filed applications for and has been licensed under
a number of patents in the United States and other countries, there can be no
assurance as to the degree of protection offered by these patents, as to the
likelihood that pending patents will be issued or as to the validity or
enforceability of any issued patents.
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
U.S. dollar versus the French Franc may cause significant foreign exchange gains
or losses.
FINANCIAL CONDITION
Cash used in operations was $5.5 million for the six-month period ended June 30,
1997, as compared to cash used in operations of $2.6 million for the six-month
period ended June 30, 1996.
The Company has used $18.8 million in cash to fund its operating activities from
inception through June 30, 1997 and has incurred $16.7 million in capital
expenditures.
Cash flows generated from financing activities were $20.9 million in the six-
month period ended June 30, 1997, as compared to $531,000 used in financing
activities in the six-month period ended June 30, 1996. These financings
consisted primarily of sales of shares of Common Stock in a public offering in
Europe and in private placements, resulting in net proceeds to the Company of
$15.9 million (net of issuance costs) and $5.7 million, respectively, while long
term liabilities decreased by $718,000. Cash flow generated from financing
activities exclude non-cash transactions related to the sale of 463,708 shares
of the Company's Common Stock to Motorola, Inc (See "Notes to Condensed
Consolidated Financial Statements - Note D -- Private placements"). As
consideration for this stock purchase, an amount of $686,000 has been received
in cash and the remaining $1.4 million was in the form of forgiveness of $1.4
million of obligations due from PixTech S.A. to Motorola.
Since its inception, the Company has funded its operations and capital
expenditures primarily from the proceeds of equity financing aggregating $55.5
million and from proceeds aggregating $9.0 million from borrowings and sale-
leaseback transactions.
Capital expenditures were $257,000 during the six-month period ended June 30,
1997 as compared to $2,326,000 during the same period of 1996. In 1997, capital
expenditures were mainly related to the purchase of miscellaneous tooling for
the Company's pilot production line.
The six-month period ended June 30, 1997 generated positive cash flows of $14.1
million as compared to negative cash flows of $5.9 million for the six-month
period ended June 30, 1996.
Cash available at June 30, 1997 amounted to $18.4 million as compared to $4.2
million at December 31, 1996. The Company expects that cash available at June
30, 1997 will be sufficient to meet its cash requirements for at least 12
months.
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 factors 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.
11
PIXTECH, INC.
June 30, 1997
PART II Other Information
ITEM 1 Legal Proceedings:
Not applicable.
ITEM 2 Changes in Securities:
(a) Not applicable
(b) Not applicable
(c) Not applicable
ITEM 3 Defaults upon Senior Securities:
Not applicable.
ITEM 4 Submission of matters to a vote of
security holders:
At the Annual Meeting of Stockholders held on April 18, 1997,
the Company's Stockholders voted as follows:
(a) To reelect Messrs. Pierre-Michel Piccino and John A.
Hawkins to the Board of Directors each for a three-year
term.
NOMINEES TOTAL VOTE "FOR" TOTAL VOTE "AGAINST"
-------- ---------------- -------------------
Pierre-Michel Piccino 9,276,774 27,920
John A. Hawkins 9,276,774 27,920
The terms in office of Jean-Luc Grand-Clement, Jean-Pierre
Noblanc and William C. Schmidt continued after the meeting.
(b) To amend the Company's 1993 Stock Option Plan to increase
the number of shares available under such Plan from
1,856,372 shares to 2,656,372 shares.
Total Vote for the Proposal: 7,964,852
Total Vote Against the Proposal: 118,088
Abstentions: 4,812
ITEM 5 Other Information:
None.
ITEM 6 Exhibits and reports on Form 8-K:
(a) Exhibits :
10. Foundry Agreement between PixTech S.A.
and Unipac Optoelectronics Corporation
dated May 22, 1997.
27. Financial Data Schedule
(b) Reports on Form 8-K : None
12
PIXTECH, INC.
June 30, 1997
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: August 12, 1997 BY: /s/ Yves Morel
--------------
Yves Morel
Chief Financial Officer
13
PIXTECH, INC.
June 30, 1997
EXHIBIT INDEX
Exhibit No.
- -----------
10/++/ Foundry Agreement between PixTech, S.A. and Unipac
Optoelectronics Corporation dated May 22, 1997.
27 Financial Data Schedule
/++/ Confidential treatment has been requested for
certain portions of this Exhibit pursuant to Rule
24b-2 of the Securities Exchange Act of 1934, as
amended.
14