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