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 WHICH MAY CONTINUE IN THE
FUTURE.
We have a history of losses as follows:
Loss to Common
Operating Net Losses Stockholders
--------------------- ---------------
Nine Months ended September 30, 1999 $ 21.0 million $ 21.3 million
Year Ended December 31, 1998 $ 19.7 million $ 17.9 million
Year Ended December 31, 1997 $ 15.8 million $ 14.7 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
- - preparation and start-up of volume manufacturing in Taiwan, at Unipac.
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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 September 30, 1999, we had an
accumulated deficit of approximately $75.2 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.
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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.
We currently expect to run out of money in December 2000. We have entered
into an equity line agreement with Kingsbridge which provides that we may issue
and sell, from time to time, up to an aggregate of $15,000,000 of our common
stock, subject to the satisfaction of certain conditions. We cannot assure you
that we will meet all of the conditions required to obtain financing under the
equity line agreement. Even if we were able to meet the required conditions, we
may have to raise additional money from other sources in order to continue to
fund our operations.
WE MAY HAVE PROBLEMS RAISING MONEY WE NEED IN THE FUTURE.
In the future, we expect that we will need to obtain additional money from
sources outside our company, as we have done in the past. If we cannot obtain
money when we need it, we may need to reduce our production of products and
development of new products. There is no guarantee that any of the outside
sources will provide us with money when we need it. In addition, even if we are
able to find outside sources which will provide us with money when we need it,
in order to raise this money we may be required to issue securities with better
rights than the rights of our common stock or we may be required to take other
actions which lessen the value of our current common stock, including borrowing
money on terms that are not favorable to us.
Our ability to raise capital from Kingsbridge through the equity line
agreement is subject to the satisfaction of certain conditions at the time of
each sale of common stock to Kingsbridge (none of which is within the control of
Kingsbridge). These conditions include, but are not limited to, the following:
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- - the registration statement we have filed to register the common stock
purchased by Kingsbridge under the equity line agreement for resale must be
effective;
- - our representations and warranties to Kingsbridge set forth in the equity
line agreement must be accurate as of the date of each put of our common stock;
- - no statue, rule, regulation, executive order, decree, ruling or injunction
shall be in effect which prohibit or directly and adversely affects any of the
transactions contemplated by the equity line agreement;
- - at the time we put our common stock to Kingsbridge, there cannot have been
any material adverse change in our business, operations, properties, prospects
or financial condition since the date of filing of our most recent report with
the SEC pursuant to the Securities Exchange Act of 1934;
- - the number of shares already held by Kingsbridge, together with those
shares we are proposing to put, cannot exceed 9.9% of the total amount of our
common stock that would be outstanding upon completion of the put;
- - our common stock must meet certain price and trading volume guidelines
including those on Annex A of the equity line agreement; and
- - at least 15 trading days must have elapsed since the date of the last put
notice.
We may not satisfy all of these conditions, and therefore may not be able
to sell shares to Kingsbridge pursuant to the equity line agreement.
DUE TO THE CONVERSION OF SERIES E PREFERRED STOCK, HOLDERS OF COMMON STOCK MAY
FACE SIGNIFICANT DILUTION.
In December 1998, we issued 367,269 shares of series E stock, at a price of
$22.5313 per share, to certain institutional investors. The series E stock is
generally convertible into our common stock at a rate equal to the lesser of (a)
$1.60938, and (b) the average closing price of our common stock over the ten
trading day ending period ending on the day immediately preceding the day upon
conversion. When our common stock price falls below $1.60938, the conversion of
the series E stock may result in the issuance of a significant number of
additional shares of common stock, and may cause significant dilution to current
holders of our common stock. Even before the shares of series E stock are
converted, the holders of the series E stock vote on the basis of the number of
shares of common stock that the series E stock can be converted into.
Therefore, a large drop in our stock price may result in a large amount of
voting control being held by a small number of stockholders.
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HOLDERS OF OUR SERIES E PREFERRED STOCK COULD ENGAGE IN SHORT SELLING TO REDUCE
THEIR CONVERSION PRICE.
A decrease in the price of our common stock below the $1.60938 maximum
conversion price could result in the series E preferred stock being convertible
into more shares of common stock. Increased sales volume of our common stock
could put downward pressure on the market price of the shares. This fact could
encourage holders of series E preferred stock to sell short our common stock
prior to conversion of the series E preferred stock, thereby potentially causing
the market price to decline. The selling stockholders could then convert their
series E preferred stock and use the share of common stock received upon
conversion to cover their short position. The selling stockholders could
thereby profit by the decline in the market price of the common stock caused by
their short selling.
QUALIFICATIONS IN THE REPORT OF OUR INDEPENDENT PUBLIC ACCOUNTANTS MAY AFFECT
OUR ABILITY TO CONTINUE AS A GOING CONCERN.
In their audit report on the consolidated financial statements for the year
ended December 31, 1998 contained in our Annual Report and elsewhere in this
prospectus, our independent public accountants, Ernst & Young, included an
explanatory paragraph indicating their view that we would require additional
funding to continue operations which raised substantial doubt about our ability
to continue as a going concern. We cannot assure you that Ernst & Young's
opinion on future financial statements will not include a similar explanatory
paragraph if we are unable to raise sufficient funds or generate sufficient cash
flow from operations to cover the cost of our operations. The continued
inclusion of this paragraph could raise concerns about our ability to fulfill
our contractual obligations, may adversely affect our relationships with third
parties, and we may not be able to complete future financings.
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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. This situation could result from the rights
contained in the series E stock, which is convertible into common stock at a
conversion price based on a future price of our common stock. 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.
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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, that each
share of series E stock would have.
Moreover, in order to continue to be listed on Nasdaq, 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 October 29, 1999 the minimum bid price on our common stock was
$1.969. 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."
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In addition, if our common stock were delisted from the Nasdaq National
Market, we may not have the right to obtain funds under the 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 UMC,
Taiwan's second largest Semiconductor manufacturer, 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 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.
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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.
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WE NEED TO FURTHER ENHANCE OUR 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 fail to do so on a timely basis,
either of which could result in potential customers not buying our products.
Key elements of display performance are brightness, power efficiency and
stability over time (life time 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 large market
opportunities for flat panel displays.
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WE MAY REDUCE RESEARCH OR DEVELOPMENT PROGRAMS TO CONSERVE CAPITAL, INCREASING
OUR DEPENDENCE ON REMAINING PROGRAMS.
We are constantly reviewing and prioritizing programs, and we may reduce
some programs to conserve capital. Any cut would increase our dependence on our
remaining programs, and would increase the risk from those programs to our
business as a whole, which could materially and adversely affect our chances of
obtaining profitability. While we plan to allocate our resources to those
programs with the greatest potential to contribute to a sound financial and
operating position, we may fail to do so.
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.
The market for flat panel display products is currently dominated by
products utilizing liquid crystal display technology. 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. In order 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.
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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, 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 which
could diminish the commercial acceptance of our products.
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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.
FUTURE COOPERATION AND LICENSE REVENUES MAY DECREASE.
From 1993 to 1995, we entered into various cooperation and license
agreements under which we were paid money for achieving certain milestones. At
this time, we have received all expected revenues associated with these
milestone payments. If we fail to enter into new royalty-bearing licenses or
cooperation agreements, we could be adversely affected as we have relied on
these revenues in the past and revenues from product sales may not increase as
we expect. For instance, we must execute further cooperation and/or license
agreements with third parties that are not existing licensees before we will
receive any future cooperation or license revenues. Should we successfully
enter such agreements, a portion of the revenues from these contracts may need
to be shared with our existing licensees. Cooperation and license revenues
accounted for approximately 34% of our revenues in 1998.
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In addition, we will only recognize royalty revenues under cooperation and
license agreements with existing or future licenses if any of our licensees
incorporate licensed technology into products that are successfully
commercialized. We can not guarantee that any of our licensees will
successfully develop or commercialize any field emission display products. We
believe that one of our existing licensees, Raytheon Company, may have suspended
our internal program to develop field emission displays.
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.
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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.
We do not believe such claims have any merit and have denied each of the
allegations in correspondences with Futaba and our counsel. 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. If Futaba prevails on any of these claims, we may be required to
modify the construction and manufacture of our displays and may, as a result, be
materially adversely affected.
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 1998, 50% of
our assets and 60% of our costs were expressed in Euros. In the nine month
period ended September 30, 1999, 20% of our assets and 48% 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.
15
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 the 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 the
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 of
the company. In addition, the series E stock issued by the company 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.
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.
SHARES OF OUR COMMON STOCK ELIGIBLE FOR FUTURE SALE MAY ADVERSELY AFFECT THE
MARKET PRICE OF OUR COMMON STOCK.
A large number of shares of common stock already outstanding, or issuable
upon exercise of options and warrants, are eligible for resale, which may
adversely affect the market price of the common stock. As of November 5, 1999,
we had 36,044,284 shares of common stock outstanding. An additional 4,705,605
shares of common stock are issuable upon the exercise of outstanding options and
warrants. Substantially all of the shares subject to outstanding options and
warrants will, when issued upon exercise, be available for immediate resale in
the public market pursuant to currently effective registration statements under
the Securities Act, or pursuant to Rule 701 promulgated thereunder.
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THE EQUITY LINE AGREEMENT AND CONVERTIBLE NOTE MAY HAVE A DILUTIVE IMPACT ON OUR
SHAREHOLDERS.
The sale of shares pursuant to the equity line agreement or conversion of
the note held by Sumitomo will have a dilutive impact on our stockholders. As a
result, our net income or loss per share could be materially decreased in future
periods, and the market price of our common stock could be materially and
adversely affected. In addition, the common stock to be issued under the equity
line agreement and upon conversion of the Sumitomo note will be issued at a
discount to the then-prevailing market price of the common stock. These
discounted sales could have an immediate adverse effect on the market price of
the common stock. We also issued to Kingsbridge a warrant for 100,000 shares of
common stock exercisable until February 6, 2003 at an exercise price of $2.30
per share. The issuance or resale of such shares and the shares issuable upon
exercise of these warrants may have a further dilutive effect on our common
stock and could adversely affect our price.
WE MAY NOT SUCCESSFULLY INTEGRATE MICRON'S DISPLAY DIVISION OPERATIONS, AND THE
INTEGRATION OF THE BUSINESSES MAY BE COSTLY.
In May 1999, we purchased certain assets of Micron Technology, Inc.
relating to field emission displays including equipment and other tangible
assets, contract rights related to the tangible assets and $4.35 million in
cash.
The continued integration of our operations may temporarily distract
management's attention from the day-to-day business. While the current process
of integrating Micron's operations has showed good progress, if we fail to
integrate Micron's operations quickly and efficiently, our business and results
of operations may be impaired.
Some of the things we must accomplish in order to integrate Micron's
operations include:
- - educate previous and new employees about our technologies and platforms;
- - coordinate or combine research and development efforts;
- - manage prior and new relationships with suppliers and customers; and
- - align the strategic plans of two previously independent management teams.
These integration efforts may be costly. If we have underestimated these
initial costs of integration, our initial results will be worse than
anticipated.
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