<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 March 31, 1997
--------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ______ to ______
Commission file number 0-26380
_________________________________
PIXTECH, INC.
(Exact name of registrant as specified in its charter)
Delaware 04-3214691
- ---------------------------------------------------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
Avenue Olivier Perroy, 13790 Rousset, France
- ---------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
011-33-4-42-29-10-00
- ---------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
- -
The number of shares outstanding of each of the issuer's classes of common stock
as of
Class Outstanding at April 30, 1997
----- -----------------------------
Common Stock, $.01 par value 13,747,303
<PAGE>
PIXTECH, INC.
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TABLE OF CONTENTS
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<TABLE>
<CAPTION>
PAGE NO.
<S> <C>
PART I FINANCIAL INFORMATION
ITEM 1 Financial Statements
Balance Sheets as of March 31, 1997
and December 31, 1996........................ 3
Statements of Operations for the Three Months
Ended March 31, 1997 and 1996,
and the period from June 18, 1992 through
March 31, 1997............................... 4
Statements of Cash Flows for the Three Months
ended March 31, 1997 and 1996, and the period
from June 18, 1992 through March 31, 1997.... 5
Statement of Stockholders' Equity............ 6 - 7
Notes to Financial Statements................ 8
ITEM 2 Management's Discussion and Analysis
of Financial Condition and Results of
Operations................................... 9 - 11
PART II OTHER INFORMATION
ITEM 1 Legal Proceedings............................ 12
ITEM 2 Changes in Securities........................ 12
ITEM 3 Default upon Senior Securities............... 12
ITEM 4 Submission of matters to a vote of
security holders............................. 12
ITEM 5 Other Information............................ 12
ITEM 6 Exhibits and Reports on Form 8-K............. 12
Signature 13
</TABLE>
2
<PAGE>
PIXTECH, INC.
(A DEVELOPMENT STAGE COMPANY)1
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
--------- ------------
ASSETS (UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents........................................................ $ 23,931 $ 4,266
Accounts receivable:
Trade.......................................................................... 364 1,655
Other.......................................................................... 13 198
Inventory........................................................................ 660 770
Other............................................................................ 1,713 2,975
-------- --------
Total current assets........................................................... 26,681 9,864
Property, plant and equipment, net................................................... 11,652 13,409
Goodwill, net........................................................................ 280 298
Deferred tax assets.................................................................. 4,757 5,167
Other assets - long term............................................................. 339 342
Deferred offering costs.............................................................. -- 485
-------- --------
Total assets................................................................... $ 43,709 $ 29,565
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long term debt................................................ $ 920 $ 990
Current portion of capital lease obligations..................................... 903 921
Current portion of long term liabilities......................................... -- 1,890
Accounts payable (including amounts due to related parties of $35 and
$39 as at March 31, 1997 and December 31, 1996 respectively)..................... 3,738 5,132
Accrued expenses................................................................. 1,305 1,773
Other............................................................................ 127 17
-------- --------
Total current liabilities...................................................... 6,993 10,723
Deferred revenue..................................................................... 2,640 3,226
Long term debt, less current portion................................................. 1,959 2,146
Capital lease obligation, less current portion....................................... 559 833
Other long term liabilities, less current portion (including amounts due
to related parties of $6 and $7 as at March 31, 1997 and December 31, 1996 respectively) 631 538
-------- --------
Total liabilities.............................................................. 12,782 17,466
======== ========
STOCKHOLDERS' EQUITY
Common stock..................................................................... 137 81
Other stockholders' equity....................................................... 56,133 33,647
Deficit accumulated during development stage..................................... (25,343) (21,629)
Total stockholders' equity..................................................... 30,927 12,099
-------- --------
Total liabilities and stockholders' equity..................................... $ 43,709 $ 29,565
======== ========
</TABLE>
3
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
PERIOD FROM
JUNE 18, 1992
THREE MONTHS ENDED (DATE OF
MARCH 31, INCEPTION)
--------------------- THROUGH
MARCH 31,
1997 1996 1997
------- ------- -----------
<S> <C> <C> <C>
Revenues:
Cooperation & license revenues................................ $ 707 $ 1,890 $ 23,985
Product sales................................................. 173 183 1,809
Other revenues................................................ 673 934 3,469
------- ------- --------
1,553 3,007 29,263
Cost of revenues ------- ------- --------
License fees and royalties.................................... -- -- (1,359)
------- ------- --------
Gross margin...................................................... 1,553 3,007 27,904
------- ------- --------
Operating expenses:
Research and development:
Acquisition of intellectual property rights................. -- -- 4,765
Other (of which $161 and $178 to related parties
in the three-month periods ended March 31, 1997
and 1996, respectively)..................................... 4,174 3,501 41,916
------- ------- --------
4,174 3,501 46,681
Sales and marketing........................................... 380 232 4,058
General and administrative expenses........................... 606 688 8,488
------- ------- --------
5,160 4,421 59,227
------- ------- --------
Loss from operations.............................................. (3,607) (1,414) (31,323)
Other income / (expense)
Interest income / (expense)................................... 131 97 470
Foreign exchange gains / (losses)............................. (238) 26 362
------- ------- --------
(107) 123 832
Loss before income tax benefit.................................... (3,714) (1,291) (30,491)
Income tax benefit................................................ -- -- 5,148
------- ------- --------
Net loss.......................................................... $(3,714) $(1,291) (25,343)
======= ======= ========
Net loss per share: $(.33) $(.16)
======= =======
Shares used in computing net loss per share....................... 11,144 8,122
======= =======
</TABLE>
4
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
PERIOD FROM
JUNE 18, 1992
THREE MONTHS ENDED DATE OF
MARCH 31, INCEPTION)
THROUGH
MARCH 31,
--------------------------------------------------
1997 1996 1997
---------- ---------- -----------
<S> <C> <C> <C>
Net loss............................................................. $ (3,714) $ (1,291) $ (25,343)
Total adjustments to net loss........................................ 2,689 1,671 11,027
---------- ---------- ----------
Net cash (used in) / provided by operating activities................ (1,025) 380 (14,316)
INVESTING ACTIVITIES
Additions to property plant and equipment............................. (113) (583) (16,408)
Additions to intangible assets........................................ -- (130) (130)
---------- ---------- ----------
Net cash used in investing activities................................. (113) (713) (16,538)
FINANCING ACTIVITIES
Stock issued.......................................................... 21,617 7 55,540
Proceeds from long-term borrowings.................................... -- -- 6,287
Proceeds from sale leaseback transactions............................. -- -- 2,731
Payments for equipment purchases financed by accounts payable........ -- -- (3,706)
Repayment of long term borrowing and capital lease obligations........ (628) (256) (4,648)
---------- ---------- ----------
Net cash (used in) / provided by financing activities................. 20,989 (249) 56,204
---------- ---------- ----------
Effect of exchange rates on cash...................................... (186) (236) (1,419)
---------- ---------- ----------
Net (decrease) / increase in cash and cash equivalents................ 19,665 (818) 23,931
Cash and cash equivalents beginning of period......................... 4,266 17,563 --
---------- ---------- ----------
Cash and cash equivalents end of period............................... $ 23,931 $ 16,745 $ 23,931
========== ========== ==========
</TABLE>
5
<PAGE>
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--$8 in June............... 211,681 $ 130
Issuance of Series B convertible 57,522 $ 38
preferred stock in June................
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 issuance costs
-- $ 1,080
Conversion of preferred stock........... (1,557,003) (2,368) (363,447) (589) (3,044,846) (8,615) (430,208) (1,224)
Translation adjustment..................
Net loss--Year ended December 31, 1995..
--------- -------- -------- ------- --------- ------- ------- ---------
BALANCE AT DECEMBER 31, 1995
Issuance of Common stock under stock
option plan............................
Issuance of warrants in connection with
acquisition of the assets of
Panocorp...........,,,,,...............
Translation adjustment
Net loss--Year ended December 31, 1996.
--------- -------- -------- ------- --------- ------- ------- ---------
BALANCE AT DECEMBER 31, 1996
Common stock issued in public offering
and private placements, net
of issuance costs -- $ 806
(unaudited)..........................
Issuance of Common stock under stock
option plan (unaudited)................
Translation adjustment (unaudited)......
Net loss--Three months ended March 31,
1997 (unaudited).......................
--------- -------- -------- ------- --------- ------- ------- ---------
BALANCE AT MARCH 31, 1997 -- -- -- -- -- -- -- --
========= ======== ======== ======= ========= ======= ======= =========
</TABLE>
See accompanying notes
6
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON STOCK
------------------
DEFICIT
--------
ADDITIONAL CUMULATIVE ACCUMULATED
---------- ---------- -----------
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 stock, net of issuance $ 130
costs--$8 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........... 121
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 stock in January............. 181
Issuance of Common stock in January..... 17,256 21 21
Issuance of Series A convertible
preferred stock in March1.............. 1481
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 issuance costs
-- $ 1,080...................... 2,500,000 25 20,973 20,998
Conversion of preferred stock........... 5,395,504 54 12,742
Translation adjustment.................. 334 334
Net loss--Year ended December 31, 1995.. (6,305) (6,305)
---------- ------ ------- ----- ------- ------ ------
BALANCE AT DECEMBER 31, 1995 8,112,063 81 33,844 515 (9,910) 24,530
Issuance of Common stock under stock
option plan............................ 29,083 0 11 11
Issuance of warrants in connection with
acquisition of the assets of Panocorp.. 230 230
Translation adjustment.................. (953) (953)
Net loss--Year ended December 31, 1996 (11,719) (11,719)
---------- ------ ------- ----- ------- ------ ------
BALANCE AT DECEMBER 31, 1996 8,141,146 81 34,085 (438) (21,629) 12,099
Common stock issued in public offering
and private placements, net
of issuance costs -- $ 806
(unaudited)................... 5,570,819 56 22,951 23,007
Issuance of Common stock under stock
option plan (unaudited)................ 34,187 0 13 13
Translation adjustment (unaudited)...... (478) (478)
Net loss--Three months ended March 31,
1997 (unaudited)....................... (3,714) (3,714)
---------- ------ ------- ----- -------- ------ -------
BALANCE AT MARCH 31, 1997 13,746,152 $137 $57.049 $(916) $(25,343) $30,927
========== ====== ======= ===== ======== ====== =======
</TABLE>
See accompanying notes
7
<PAGE>
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 period ending March 31, 1997
are not necessarily indicative of the results that may be expected for the year
ending December 31, 1997. For further information, refer to the consolidated
financial statements and footnotes thereto for the year ended December 31, 1996
(the "1996 Financial Statements"), included in the Company's Annual Report on
Form 10-K for the year ended December 31, 1996.
NOTE B -- INVENTORIES
Inventory consists of raw material and spare parts.
NOTE C -- PUBLIC OFFERING
On February 7, 1997, the Company sold 3,333,000 shares of Common Stock (the
"Shares") in a public offering in Europe at a price of $4.50 per share,
resulting in net proceeds of $13,949 before expenses payable by the Company,
which are estimated at $806. The Company granted the Underwriters a 30-day
option to purchase up to 663,000 Shares, and the Underwriters exercised such
option and purchased such Shares on February 12, 1997. Including the sale of
such Shares, the total price to public, underwriting discount, and proceeds to
the Company before expenses were $17,982, $1,259, and $16,723, respectively.
NOTE D -- PRIVATE PLACEMENTS
In February 1997, the Company sold 463,708 shares of the Company's Common
Stock to Motorola, Inc., in a private placement at a price of $4.50 per share,
resulting in net proceeds of $2,086. As consideration for this stock purchase,
an amount of $686 was received in cash and the remaining $1,400 was in the form
of forgiveness of $1,400 of obligations from PixTech S.A. to Motorola. In
connection with such private placement, Motorola received warrants to purchase
an additional 463,708 shares of the Common Stock of the Company at a price of
$5.50 per share, which warrants expire on December 31, 1998.
In February 1997, the Company sold 1,111,111 shares of the Company's Common
Stock to United Microelectronics Corporation, the parent company of Unipac
Optoelectronics Corporation, in a private placement at a price of $4.50 per
share resulting in net proceeds of $5,000 in cash.
NOTE E -- NET LOSS PER SHARE
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings par Share", which is required to be adopted on December 31,
1997. At that time, the Company will be required to change the method currently
used to compute earnings per share and to restate all prior periods. Under the
new requirements for calculating primary earnings per share, the dilutive
effects of stock options and warrants will be excluded.
There is no impact of Statement 128 on the calculation of earnings per share
for the three-month periods ended March 31, 1996 and 1997. As net losses have
been reported in these quarters, the dilutive effects of stock options and
warrants have been excluded from the calculation of net loss per share under the
current method of calculating net loss per share.
8
<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 Field Emission Display ("FED") Alliance agreements of
$707,000 in the three-month period ending March 31, 1997, as compared to $1.9
million in the three-month period ending March 31, 1996. These revenues
represented in 1996 the achievement by the Company of contractual milestones
with FED Alliance members. The Company has now recorded most of the expected
revenues associated with the achievement of contractual milestones with existing
FED Alliance members and future FED Alliance milestone revenues are mostly
subject to expansion of the FED Alliance. Pursuant to a memorandum agreement
signed with Futaba Corporation, the Company recorded cooperation and license
revenues in the amount of $707,000 during the three-month period ended March 31,
1997, in consideration of the cancellation of same amount which had been
included in accounts payable in relation to accrued license fees due to Futaba.
Product sales. The Company recognized product sales of $173,000 in the three-
month period ending March 31, 1997, as compared to $183,000 in the three-month
period ending March 31, 1996. 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.
Other revenues. The Company recognized other revenues of $673,000 in the three-
month period ending March 31, 1997 as compared to other revenues of $934,000 in
the three-month period ended March 31, 1996. Other revenues are derived
principally from government funded development contracts. Of these revenues,
$663,000 and $800,000 are related to a development contract from the French
Ministry of Industry to support manufacturing of Field Emission Displays, in the
three-month periods ended March 31, 1997 and 1996, respectively.
Research and Development Expenses. The Company expensed $4.2 million for
research and development costs during the three-month period ending March 31,
1997, an increase of 19% over the $3.5 million of research and development
expenses incurred in the three-month period ending March 31, 1996. These
expenses included obligations to the French atomic energy agency ("CEA") under
the "LETI" Research Agreement (Laboratoire d'Electronique, de Technologie et
d'Instrumentation), contract consulting fees, salaries and associated operating
expenses for in-house research and development activities and the cost of
staffing and operating the Company's pilot manufacturing facility. Part of the
increase is also related to the launching of a new research and development
effort in Santa Clara since March 1996, with a view to developing large-size
FEDs. The increase also reflects the continued development of the Company's FED
technology and manufacturing processes.
Sales and Marketing Expenses. The Company expensed $380,000 for sales and
marketing during the three-month period ending March 31, 1997, compared to
$232,000 during the three-month period ending March 31, 1996. This increase
reflected the expansion of the Company's sales and marketing organization both
in the United States and in Europe, and the increasing support of marketing
efforts through trade show attendance and advertising. The Company believes
sales and marketing expenses may increase in the future, as contact with
potential customers and anticipated shipments of FED displays develop.
General and Administrative Expenses. General and administrative expenses
amounted to $606,000 in the three-month period ending March 31, 1997, a decrease
of 12% over general and administrative expenses incurred in the three-month
period ending March 31, 1996, which amounted to $688,000, reflecting a decrease
in consulting fees.
9
<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, the successful implementation of contract manufacturing of
FEDs with its asian partner, Unipac, and the reliability testing of new products
which the Company expects will lead to the shipment of commercial products in
the near future. In evaluating this outlook, the following risks and issues,
among others, which are common with development stage companies, should be
considered.
Revenues from FED Alliance members. To date, the Company has recorded most of
the expected revenues associated with the achievement of contractual milestones
under existing FED Alliance agreements, and most future FED Alliance milestone
revenues are subject to expansion of the Alliance or to renewal of cooperation
periods with existing members at their respective expiration dates. Expansion of
the FED Alliance and renewal of cooperation periods by existing FED Alliance
members are subject, in part, to matters beyond the Company's control. Failure
to expand the FED Alliance or to obtain renewals of the cooperation periods
could adversely affect the Company.
Products and manufacturing processes under development, Need to increase Yields,
Costs of Products. The Company's products and its manufacturing processes are in
the development stage. The Company has to date encountered a number of delays in
the development of its products and manufacturing processes. No assurance can be
given that further delays will not occur. The Company does not plan to increase
production from its pilot facility beyond low volume levels. The Company
believes that contract manufacturing with its asian partner (see "Risks
Associated with Contract Manufacturing of FEDs") will make it possible to
manufacture volume quantities of FEDs at commercially acceptable costs. However,
moving from pilot production to volume production involves a number of steps and
challenges. In particular, in order to demonstrate the low cost potential of its
FED technology, the Company will need to improve its manufacturing yields. There
can be no assurance that the Company will be able to implement processes for the
manufacture of volume quantities of FED products at commercially viable cost
levels or on a timely basis. If such processes are not successfully implemented,
the Company would be materially adversely affected.
Risks Associated with Contract Manufacturing of FEDs. The Company believes
that its ability to commercialize medium to large volumes of FEDs is highly
dependent on its ability to have FEDs manufactured by a major manufacturer in
the AMLCD industry. To date, the Company has executed a Memorandum of
Understanding with Unipac, an AMLCD manufacturer based in Taiwan, and has
initiated field work with this manufacturer, but the Company has not yet signed
a definitive Display Foundry Agreement. If such contract manufacturing agreement
is not entered into on favorable terms, or on a timely basis, the Company will
not be able to ship medium to large volumes of FED products, or to obtain a
commercially acceptable cost for its FED displays.
In addition, significant capital expenditure will be required in order to
install, at the contract manufacturers' facility, equipment that is not common
to the AMLCD manufacturing process. PixTech will have to fund a minimum of $10
million of the capital expenditures required. There can be no assurance that the
Company will have sufficient resources to fund such costs. The amount actually
expended on capital expenditures could vary significantly depending upon
numerous factors, including the success or failure of the Company in
establishing such an arrangement, the terms of such an arrangement, the initial
level and compatibility of the manufacturing capability of the third party to
such an arrangement, and the inherent unpredictability of the total amount of a
large scale capital expenditure program. Further, there can be no assurance that
such investment will be recovered by the Company, especially in the event such
manufacturing partnership is not successful.
Should the Company be successful in establishing a contract manufacturing
relationship, the Company's reliance on a single contract manufacturer will
involve several risks, including a potential inability to obtain an adequate
supply of required products, and reduced control over the price, timeliness of
delivery, reliability and quality of finished products.
Any inability to manage this contract manufacturing relationship or any
circumstance that would cause the Company to delay the shipment of its products
would have a material adverse effect on the Company.
Competition and Competing Technologies. The market for flat panel display
products is intensely competitive and is expected to remain intensely
competitive. The market is currently dominated by products utilizing liquid
crystal display ("LCD") technology. LCD technology has continued to improve, and
there can be no assurance that advances in LCD technology will not overcome its
current limitations. In addition, as some of the basic FED technology is in the
public domain, the Company has a number of potential direct competitors
developing FED displays. In the event that efforts by the Company's competitors
result in the development of products that offer significant advantages over the
Company's products, the Company could be materially adversely affected.
10
<PAGE>
No Assurance of Market Acceptance. The potential size and timing of market
opportunities targeted by PixTech and the members of the FED Alliance are
uncertain. The Company anticipates marketing its displays to original equipment
manufacturers (''OEMs''), and its success will depend on whether OEMs select the
Company's products for incorporation into their products and upon their
successful introduction of such products, as well as the successful
commercialization of products developed by members of the FED Alliance.
Patents and Protection of Proprietary Technology. The Company's ability to
compete effectively with other companies will depend, in part, on the ability of
the Company to maintain the proprietary nature of its technology. Although the
Company has been granted, has filed applications for and has been licensed under
a number of patents in the United States and foreign countries, there can be no
assurance as to the degree of protection offered by these patents, as to the
likelihood that pending patents will be issued or as to the validity or
enforceability of any issued patents.
Foreign exchange. A large percentage of the Company's net assets and of the
Company's costs is expressed in French Francs. Fluctuations of the parity of the
U.S. dollar versus the French Franc may cause significant foreign exchange gains
or losses.
FINANCIAL CONDITION
Cash used in operations was $1.0 million for the three-month period ended March
31, 1997, as compared to cash generated by operations of $380,000 for the three-
month period ended March 31, 1996, mainly resulting from significant collections
of 1995 receivables from FED Alliance members.
The Company has used $14.3 million in cash to fund its operations from inception
through March 31, 1997 and has incurred $16.5 million in capital expenditures.
Cash flows generated from financing activities were $20.9 million in the three-
month period ended March 31, 1997, as compared to $249,000 used in financing
activities in the three-month period ended March 31, 1996. These financings
consisted primarily of sales of shares of Common Stock in a public offering in
Europe and in private placements, resulting in net proceeds to the Company of
$15.9 million (net of issuance costs) and $5.7 million, respectively, while long
term liabilities decreased by $628,000. Cash flow generated from financing
activities exclude non-cash transactions related to the sale of 463,708 shares
of the Company's Common Stock to Motorola, Inc (See "Notes to Condensed
Consolidated Financial Statements - Note D -- Private placements"). As
consideration for this stock purchase, an amount of $686,000 has been received
in cash and the remaining $1.4 million was in the form of forgiveness of $1.4
million of obligations from PixTech S.A. to Motorola.
Since its inception, the Company has funded its operations and capital
expenditures primarily from the proceeds of equity financing aggregating $55.5
million and from proceeds aggregating $9.0 million from borrowings and sale-
leaseback transactions.
Capital expenditures were $113,000 during the three-month period ended March 31,
1997 as compared to $713,000 during the same period of 1996. In 1997, capital
expenditures were mainly related to the purchase of miscellaneous tooling for
the Company's pilot production line.
The three-month period ended March 31, 1997 generated positive cash flows of
$19.7 million as compared to negative cash flows of $0.8 million for the three-
month period ended March 31, 1996.
Cash available at the end of March 1997 amounted to $23.9 million as compared to
$4.2 million at the end of December 1996. The Company expects that cash
available at March 31, 1997 will be sufficient to meet its cash requirements for
at least 12 months.
The Company's expectations regarding the sufficiency of its sources of cash over
a future period is a forward-looking statement. The rate of expenditures by the
Company will be affected by numerous factors including the rate of development
of the Company's products and manufacturing capabilities, as well as market
demand for such products. In the future, the Company will require substantial
funds to conduct research, development and testing, to develop and expand
commercial-scale manufacturing systems and to market any resulting products.
Changes in technology or a growth of sales beyond currently anticipated levels
will also require further investments. There can be no assurance that funds for
these purposes, whether from equity or debt financing, or other sources, will be
available when needed or on terms acceptable to the Company.
11
<PAGE>
PIXTECH, INC.
March 31, 1997
PART II Other Information
ITEM 1 Legal Proceedings:
Not applicable.
ITEM 2 Changes in Securities:
(a) Not applicable
(b) Not applicable
(c) In February 1997, the Registrant sold 463,708 and 1,111,111
shares of its Common Stock to Motorola, Inc. ("Motorola") and
United Microelectronics Corporation ("UMC"), respectively, in
private placements exempt from registration pursuant to Section
4(2) of the Securities Act of 1933, as amended. The offering
price was $4.50 per share, and these offerings resulted in net
proceeds to the Registrant of $7,086,000. As consideration for
the Common Stock, Motorola and UMC paid $686,000 and $5,000,000
in cash, respectively, and an additional $1,400,000 due from
Motorola was paid by the forgiveness of obligations in such
amount from PixTech, S.A. to Motorola. Motorola additionally
received warrants to purchase 463,708 shares of the
Registrant's Common Stock at a price of $5.50 per share, which
warrants expire on December 31, 1998.
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 : A report on Form 8-K has been filed
during the first quarter of 1997, on February 7, 1997,
reporting under Item 9 the completion of the Registrant's
public offering in Europe for which the Registrant relied on
the exemption provided by Regulation S under the Securities Act
of 1933, as amended.
12
<PAGE>
PIXTECH, INC.
March 31, 1997
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PIXTECH, INC.
Date: May 7 , 1997 BY: /s/ Yves Morel
----------------------
Yves Morel
Chief Financial Officer
13
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