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
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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.
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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
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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.
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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.
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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.
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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.
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