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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997 Commission File Number: 0-26380
PIXTECH, INC.
(exact name of registrant as specified in its charter)
Delaware 04-3214691
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification Number)
Avenue Olivier Perroy, 13790 Rousset, France
(Address of principal executive offices including zip code)
Registrant's telephone number, including area code:
011-33- (0) 4-42-29-10-00
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange
on which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 Par Value
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 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 ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
The aggregate market value of voting stock held by non-affiliates of the
registrant as of February 9, 1998 was: $26,161,279.
There were 13,762,732 shares of the registrant's Common Stock outstanding
as of February 9, 1998.
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DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive proxy statement of the Registrant for the
Registrant's 1997 Annual Meeting of Shareholders to be held on March 25, 1998
which definitive proxy statement will be filed with the Securities and Exchange
Commission not later than 120 days after the registrant's fiscal year of
December 31, 1997, are incorporated by reference into Part III of this Form
10-K.
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<PAGE>
o PART I
Item 1. Business
General
PixTech, Inc. was incorporated in Delaware in November 1993 as the parent
company of PixTech S.A., a French corporation formed in June 1992. The Company's
principal executive offices are located at Avenue Olivier Perroy, 13790,
Rousset, France. The Company's main telephone numbers are 011-33-(0)442-29-10-00
and (408) 986-8868.
PixTech is dedicated to commercializing its high-quality field emission
displays ("FED"). The company expects FEDs will be the most cost effective
portable alternative to traditional cathode ray tube ("CRT") display and today's
liquid crystal display ("LCD") technologies. In 1992, the Company exclusively
licensed key patents from Laboratoire d'Electronique, de Technologie et
d'Instrumentation ("LETI"), a French public research laboratory, and since then
has deployed a unique cooperative strategy to rapidly advance FED technology
toward high-volume manufacturing and wide market acceptance. PixTech's efforts,
along with those of FED Alliance partners Motorola, Inc. ("Motorola"), Raytheon
Corp. ("Raytheon") and Futaba (Japan) ("Futaba"), are expected to come to
fruition in 1998 with the anticipated manufacture of the first commercial FED
products on high-volume equipment.
Since 1996, PixTech has been seeding the market with 5.2-inch monochrome
FEDs, making deliveries to more than one hundred original equipment
manufacturers ("OEMs") in the military, instrumentation, medical, industrial and
transportation markets for evaluation purposes. In July 1997, the Company
received a purchase order to provide 50,000 of its FED displays over a five-year
period to a US medical equipment manufacturer, and has subsequently started
deliveries of commercial quantities under this order. The Company is in
negotiation with several customers to provide FED products over a several-year
period.
In addition to direct sales to OEMs from its sales offices in the U.S and
in Europe, the Company intends to develop a network of dedicated distribution
companies. In November 1997, PixTech established a partnership with Sumitomo's
Electronics and Aerospace division to distribute its FED products to the Asian
market. The Company intends to select more distributors in 1998.
The Company currently operates a pilot production facility in Montpellier,
France, for technology and product development. In addition, in May 1997, the
Company entered into a contract-manufacturing agreement with Unipac
Optoelectronics Corporation ("Unipac"), an AMLCD manufacturer based in Taiwan.
The Company expects to ship FED displays manufactured at Unipac before the end
of 1998.
The Company believes that FED technology could serve the needs of the
fast-emerging market for flat panel displays with a diagonal of 15 inches and
above. In 1996, the Company commenced development of large-size FEDs suitable
for use in desktop monitor applications, and initiated technology cooperation
with a Japanese CRT-manufacturer in that area. The Company publicly demonstrated
a 10.5-inch VGA color FED in 1996 and expects to demonstrate a 15-inch display
in 1998.
The Flat Panel Display Industry
Growth in the market for flat panel displays ("FPD") has been driven by a
number of market forces, including the increasing popularity of portable
computer and other electronic devices, the wide spread availability of
information and visual content available in electronic formats, the
proliferation of graphical user interfaces and emerging multimedia applications.
Flat panel displays are typically evaluated on their ability to match the
image quality of traditional cathode ray tube displays, such as those in desktop
computer monitors and televisions. Performance characteristics used to compare
FPD technologies include viewing quality (viewing angle, video speed, dynamic
range and full color), range of brightness, resolution, weight and size, power
usage, reliability and operating temperature range.
- LCD Technologies. The FPD market is currently dominated by liquid crystal
displays (LCDs). The first commercialized LCD technology, passive matrix LCD
("PMLCD") technology, is widely used in calculators, watches and low-end laptop
computers. However, PMLCDs exhibit relatively low image quality and slow
response time, making them inadequate for many commercial and industrial
applications, especially those requiring video speed and a wide viewing angle.
Active matrix LCDs ("AMLCDs") incorporate a transistor at every pixel
location, which increases image quality and response time. However, AMLCDs must
incorporate high intensity backlights, which, together with the required
transistors, result in significant power consumption and manufacturing costs. In
addition, while AMLCDs have improved horizontal viewing angles and color
quality, they fall short of CRT viewing quality. Both PMLCDs and AMLCDs also
suffer from an inability to provide the wide effective operating temperature
range required by certain transportation and military applications.
- FED Technology. The Company believes that emerging FED technology has the
potential to address many of the shortcomings of AMLCDs.
PixTech 1997 Annual Report
2
<PAGE>
The following table summarizes some of the differentiating characteristics
of CRT, PMLCD, AMLCD and FED technologies (1):
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Characteristics CRT PMLCD AMLCD FED
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Viewing angle Very wide horizontal Limited horizontal Wide horizontal, Very wide horizontal
and vertical and vertical limited vertical and vertical
Video speed High speed over full Unable to display Adequate speed High speed over full
temperature range video images with overlimited temperature range
good quality temperature range
Brightness range From low to very From low to medium From low to medium From low to very
high, easy to dim limited dimming limited dimming high, easy to dim
capabilities capabilities
Dynamic range (2) High Very limited Limited High
Operating temperature Wide range Very limited range Limited range due to Wide range and instant-
due to liquid crystal liquid crystal on at low temperature
Power consumption High Current industry Current industry Comparable to
standard standard current industry
standard
Manufacturability Mature process Fewer process steps Complex process Fewer process steps
offering lowest cost than AMLCD than AMLCD
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The information set forth in this table is based upon the Company's
assessment of existing CRT, PMLCD, and AMLCD products when compared to FED
products and prototypes manufactured at PixTech's pilot plant. No assurance
can be given that FEDs, if manufactured in commercial quantities, will
achieve such performance characteristics on a cost-effective basis.
(2) Dynamic range results from a combination of contrast and peak brightness.
Strategy
The Company has adopted a unique growth strategy to commercialize its
proprietary FED technology. Key elements of this strategy include:
Manufacturing: the short path to high volume. As the shortest path to high
volume production, PixTech's manufacturing strategy relies on a combination of a
pilot line oriented towards engineering excellence and a manufacturing source
focused on productivity.
PixTech has established a pilot production facility in Montpellier, France,
dedicated to developing manufacturing processes and products, and low volume
production to support market introduction. Product sampling and early customer
deliveries are being completed from this pilot line.
PixTech entered into a contract-manufacturing agreement with Unipac
Optoelectronics Corporation ("Unipac"), an AMLCD manufacturer based in Taiwan in
1997. To date, the Company has already successfully transferred a significant
portion of its proprietary FED manufacturing processes to Unipac and, by early
1998, most of the FED-specific equipment required to complement Unipac's AMLCD
manufacturing plant was delivered. The Company expects to ship FED displays
manufactured at Unipac in 1998, once full process start-up and comprehensive
product quality testing have been completed.
Marketing: from monochrome to color products. After seeding the market with
sample deliveries of its monochrome products, PixTech anticipates to receive
volume orders for low to medium volume applications in medical, industrial,
transportation and military market segments to initiate growth of its product
revenues. To significantly increase its market penetration, PixTech intends to
launch its color products toward high-growth high-volume market segments, where
FED benefits are expected to bring high performance, cost competitive products
to end-users. These segments will include mapping and video displays for
transportation markets, as well as handheld personal computers (HPCs), where
display performance is a recognized bottleneck to market expansion.
Research and development: a vision towards large screens. The Company
believes that its proprietary technology can evolve toward displays of 15 inches
and above, offering CRT-like viewing quality and competitive manufacturing
costs. To that end, PixTech initiated a research and development program in
1996. That year, it publicly demonstrated the world's first 10.4 inch VGA FED
display and entered into a cooperation agreement with a major Japanese CRT
manufacturer to develop large-size displays. The expected demonstration of a
15-inch FED prototype in 1998 represents a major milestone in this program. The
Company actively seeks additional cooperation partners to accelerate the program
and bring large screen products to the market.
PixTech 1997 Annual Report
3
<PAGE>
Intellectual Property: a dominant patent portfolio. Shortly after the
Company was founded, PixTech spearheaded the creation of the "FED Alliance", a
cooperative program between PixTech, Motorola, Raytheon and Futaba (Japan) to
advance FED technology. Alliance partners share manufacturing know-how as well
as a portfolio of more than 350 patents, thus creating a substantial competitive
advantage.
Manufacturing
Pilot Line Facility. The mission of PixTech's pilot line is excellence in
FED technology and product development. From an initial focus of converting
laboraty recipes transfered from LETI into manufacturing processes, the emphasis
then shifted to the demonstration of high yields, a prerequisite to the transfer
of manufacturing processes to a high-volume fabrication environment. This
experience now results into a well-honed team capable of efficient concurrent
engineering in process development and product design, aimed at enhancing
PixTech's FED performance while reducing manufacturing costs. Current output of
the pilot line supports early deliveries to prospective customers months ahead
of volume production requirements.
The Company's pilot facility has approximately 31,100 square feet (2,900
square meters) of space and contains approximately 10,900 square feet (1,000
square meters) of clean room ranging from class 10 to class 1000. As of December
31, 1997, the Company had 113 employees engaged in process development and
operations at this facility.
Outsourcing high-volume manufacturing. By developing a partnership with a
large volume manufacturer of AMLCDs, PixTech expects to be able to leverage the
high productivity tools and manufacturing know-how established for LCD
production, and draw the cost benefits of its simpler FED process. In May 1997,
the Company signed a Display Foundry Agreement with Unipac, a Taiwanese high
volume AMLCD manufacturer.
Throughout 1997, the Company's first priority was to successfully develop
and start implementation of its high-volume manufacturing plans at Unipac. This
involved definition and ordering of FED-specific equipment required to
complement Unipac's AMLCD manufacturing equipment, and transfer of manufacturing
processes to Unipac.
The equipment needed to install a manufacturing capacity of 10,000 4- to
8-inch displays per month was valued at $16.5 million. Most of this equipment
was ordered by September 1997 and all major pieces were delivered by January
1998. The Company expects to manufacture its first displays at Unipac by mid
1998.
The transfer of FED manufacturing processes to Unipac was conducted through
intense cross-validation of each single process step on PixTech's and Unipac's
manufacturing equipment. By the end of 1997, the Company was able to fabricate
"hybrid displays", i.e. displays for which manufacturing was initiated at Unipac
and completed at the PixTech's pilot plant in France. The hybrid FED displays
demonstrated successful transfer of a significant portion of the PixTech's
manufacturing process to the Unipac's facility in Taiwan.
Manufacturing FEDs in a production environment that directly benefits from
high-productivity AMLCD manufacturing equipment and know-how is expected to lead
to high yields and low fixed cost per display, two prerequisites to serve
price-sensitive, high-volume markets. The Company expects to be able to ship FED
displays manufactured at Unipac by the end of 1998. However, because of start-up
costs, the Company does not expect to generate positive gross margins on the
sale of its displays before 1999.
Products
PixTech's first commercial product, FE532M, was a 5.2-inch 1/4 VGA
monochrome display. In May 1997, the Company introduced a high-brightness
version, FE532HB, which it has shipped to a number of customers for evaluation
purposes.
The Company is currently introducing the second generation of its
monochrome display, the FE524M, which has been optimized for smaller outline,
higher ruggedness, and lower cost. PixTech is also developing a color 5.7-inch
1/4 VGA display, which incorporates key advances on PixTech's FED technology
currently utilized in FE524M. In this product, custom driver integrated circuits
designed by Texas Instruments Japan are expected to fully reveal the performance
of PixTech's FED technology.
Sales and Distribution
PixTech is currently selling its FE524M monochrome 5.2-inch displays in
sample and pre-production quantities. The Company's product offerings consist of
fully integrated display modules. The Company is marketing its displays directly
to OEMs and system integrators in the instrumentation, medical, and
transportation market segments.
To date, the Company has shipped its displays to more than one hundred
customers, mostly based in the United States and in Europe. In July 1997, the
Company received a purchase order to provide 50,000 of its monochrome FEDs, over
five years, to a United States manufacturer of portable medical equipment. The
Company has already made first deliveries under this purchase order and expects
this customer to market the portable medical equipment incorporating PixTech's
FEDs within the first half of 1998.
PixTech 1997 Annual Report
4
<PAGE>
The Company plans to develop a network of sales representatives and
distributors to address specific areas of the worldwide market and to offer
customer support. In November 1997, PixTech partnered with Sumitomo Corporation,
which became distributor of PixTech's products to Asia with exclusive rights for
Japan. PixTech believes that its strategy to penetrate volume markets will
strongly benefit from a long-term relationship with such a well-established
trading company.
Technology
The basic principle used in FEDs is the same as in conventional CRTs. In
both technologies, electrons are extracted from a source (the "cathode") and
collected by a phosphor-coated screen (the "anode") held at positive voltage to
accelerate electrons. The electrons travel in a vacuum between the cathode and
the anode. The phosphor coating is a cathodoluminescent material, which emits
light when hit by electrons. Color is created by using different colored
phosphors and by directing the electrons so that they address each different
color phosphor separately.
The Company's proprietary technology represents advances developed by LETI,
the Company and other FED Alliance members on the basic Spindt Cathode FED
technology. In a FED, each picture element (a "pixel") on the screen has
multiple electron sources from an array of electron-emitting microtips. The
emitting cathode surface, organized into a matrix of rows and columns, is held
closely to the receiving anode. Selection of cathode row and column voltages
determines which pixel will be illuminated.
A FED color display can be designed using either a low voltage or high
voltage structure between the anode and the cathode. The advantages of a high
voltage anode structure are that well characterized CRT phosphors can be used,
with high luminous efficiency. The drawbacks are that the use of high
voltage--at least 6,000 volts--between cathode and anode, requires development
of a spacer and assembly technology before production of such high voltage FEDs
can be contemplated. By using LETI's patented "switched anode" technology, a
low-voltage design significantly decreases the complexity and cost of the
manufacturing process of the device. In addition, this design results in
improved color purity and potentially higher resolution. However, as the result
of the low voltage, there is an inherent limitation to the size of the display
that can be produced.
PixTech's cathode technology can be incorporated with equal performance and
cost effectiveness in the design of high voltage FEDs for large screen
applications or low voltage FEDs for smaller screen applications. Within the FED
Alliance, members are working both on high voltage and low voltage FED product
introduction programs. PixTech believes that the low voltage switched-anode
technology is the most cost effective solution for displays of 12 inches or
less, and that high voltage FED technology, with further development, could
address larger performance requirements.
Research and Development
The Company is focusing its research and development programs in two areas:
display performance enhancement and scaling-up of the technology to 15-inch and
larger displays.
Display Performance Enhancement. Key elements of display performance are
brightness, the display's stability over time (display lifetime), and power
efficiency. PixTech is seeking to balance luminous efficiency with power
efficiency to produce bright, and low power-consumption displays. Display
reliability is heavily dependent upon the manufacturing process used in
assembling the displays as well as upon the characteristics of the phosphors
used on the anode. In order to produce color displays that will provide the
product life necessary for most applications, the Company believes it will need
to make further advances in phosphors and related manufacturing technologies.
Large Screen Development. PixTech has begun a technology development
program in cooperation with a major Japanese CRT manufacturer to demonstrate the
large display (15-inch and larger) capability of FED technology. Under a
contract with a CRT manufacturer, specific demonstration displays will be
jointly developed integrating processes and components from the CRT manufacturer
and PixTech. In February 1996, the Company acquired certain patents and know-how
in high voltage display construction which, combined with PixTech cathode
technology, establish a solid foundation for this development program.
The Company's partners in these development tasks are primarily the FED
Alliance members and LETI. In certain specific areas, however, such as materials
and equipment development, the Company is developing technical partnerships with
laboratories and companies that have the ability to accelerate these
developments.
A significant portion of the Company's research and development activities
are carried out at LETI, a laboratory under the CEA. The Research and
Development Agreement between the CEA and PixTech (the "LETI Research
Agreement") provides for the Company and the CEA to fund equally research and
development activities at LETI in the FED field (the "Program"). The LETI
Research Agreement provides for the CEA to perform this research and development
work exclusively for PixTech. Under the LETI Research Agreement, the CEA and
PixTech jointly own FED technology developed by both parties under the Program,
and the CEA and PixTech are obligated to license to each
PixTech 1997 Annual Report
5
<PAGE>
other technology developed solely by either party under the Program. The CEA's
rights in such technology have been exclusively licensed to PixTech under a
License Agreement (the "LETI License Agreement"). The Program has resulted in
the filing of numerous additional patent applications, which include a number of
improvements over the original FED technology developed by LETI. The Program
began on January 1, 1993 and was extended for a second three-year period ending
on January 1, 1999, subject to further extension by mutual agreement of the
parties.
The Company's research and development expenses in the fiscal year ended
December 31, 1997 were $15.5 million, as compared to $15.8 million in 1996.
The FED Alliance
Shortly after the Company was founded, PixTech spearheaded the creation of
the FED Alliance, a cooperative effort between select display manufacturers to
advance FED technology. The Alliance currently includes PixTech, Futaba,
Raytheon, and Motorola.
Each agreement signed between the Company and a FED Alliance member
provides the member with a license to all FED technology from LETI, PixTech, and
other FED Alliance partners, a transfer of know-how from the Company, as well as
access to PixTech's pilot line. Each FED Alliance agreement also provides
PixTech with licensing and royalty revenues, as well as a royalty free license
to the FED Alliance member's background technology and improvements in such
technology occurring for a period of three years following the date of the
agreement, with rights to sub-license. Following the three-year period, the FED
Alliance member has the option to extend its cooperation within the Alliance.
To date, the FED Alliance is serving its strategic purposes: FED Alliance
members share a portfolio of more than 350 patents and patent applications,
effectively creating a subtantial competitive advantage; FED Technology is now
widely accepted as an alternative to LCD technology; Futaba and Motorola are
currently operating their own FED manufacturing plant in Mobara (Japan) and
Tempe, Arizona, respectively, with the intention of introducing products in the
market. Futaba has been sampling its products to customers for over a year, and
Motorola publicly demonstrated its FED displays in an industry conference in
February 1998.
Competition
The market for flat panel display products is intensely competitive and is
expected to remain so in the future.
The market is currently dominated by LCD technology. LCD manufacturers,
such as Sharp, NEC and Hitachi, have substantially greater name recognition and
financial, technological, marketing and other resources than PixTech, and
continue to make substantial investments in improving LCD technology,
manufacturing processes and in manufacturing facilities. The recent increase in
world-wide manufacturing capacity of FPDs and the entrance of new competitors in
the FPD market have caused over-supply conditions leading to dramatic reductions
in the price of FPDs over the last few years. In order to effectively compete,
PixTech could be required to continuously increase the performance of its
products and to reduce prices.
There are a number of domestic and international companies developing and
marketing display devices using alternative technologies, such as PMLCDs,
AMLCDs, vacuum fluorescent displays, electroluminescent panels, and plasma
panels.
In addition, some of the basic FED technology is in the public domain and,
as a result, the Company has a number of potential direct competitors developing
FED displays. The Company is aware of several other companies which, outside of
the FED Alliance, are developing FED technologies similar to that of the
Company, including but not limited to, Sony, Fujitsu, and Samsung as well as
smaller companies, including Candescent, FED Corporation, and Micron Display
Technology. While these companies have made, and may continue to make,
significant advancements to their FED technology, the Company believes that none
of theses FED competitors have, to date, built a patent position or a
manufacturing expertise comparable to that of the Company.
Patents and Trade Secrets
As of December 31, 1997, the Company held or had license to 127 U.S.
patents and 117 pending U.S. patent applications. The Company also actively
pursues foreign patent protection in countries of interest to the Company. As of
December 31, 1997, the Company had filed, or was licensed under, 105 patent
applications in foreign countries.
The Company believes that this dominant patent portfolio is creating a
substantial competitive advantage for the members of the FED Alliance.
The Company's fundamental technology was developed by LETI and licensed to
PixTech in 1992. Under the LETI License Agreement, which has a term of twenty
years, the CEA granted the Company an exclusive, worldwide, royalty-bearing
license, with the right to sub-license, of all FED technology developed by LETI.
PixTech 1997 Annual Report
6
<PAGE>
In addition to the payment of royalties on its sales, the Company must pass
through to CEA a percentage of any lump sum sub-license fees earned in the
future and royalties on the licensed product sales by the sub-licensees.
Employees
As of December 31, 1997, the Company had 133 full-time employees, and 15
part-time employees. The average number of employees was 90, 143 and 144 during
1995, 1996 and 1997, respectively. As of December 31, 1997, 16 employees were
engaged in research and development, 113 in process development and operations,
5 in marketing and sales and 14 in general and administrative functions. The
Company's success will depend in large part on its ability to attract and retain
skilled and experienced employees. The Company considers its relations with its
employees to be good.
Item 1A. Executive Officers of the Registrant
As of December 31, 1997, the current executive officers of the Company were
as follows:
<TABLE>
<CAPTION>
===========================================================================================================================
Name Age Position held with the Company
===========================================================================================================================
<S> <C> <C>
Jean-Luc Grand-Clement 58 President, Chairman of the Board, Chief Executive Officer and President
- ---------------------------------------------------------------------------------------------------------------------------
Richard Rodriguez 53 Executive Vice President, Chief Operating Officer
- ---------------------------------------------------------------------------------------------------------------------------
Francis G. Courreges 45 Executive Vice President
- ---------------------------------------------------------------------------------------------------------------------------
Jean-Jacques Louart 48 Vice President, Operations
- ---------------------------------------------------------------------------------------------------------------------------
Michel Garcia 50 Vice President, Industrial Partners
- ---------------------------------------------------------------------------------------------------------------------------
Thomas M. Holzel 57 Vice President, Marketing and Sales
- ---------------------------------------------------------------------------------------------------------------------------
Yves Morel 32 Chief Financial Officer
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
Each officer's term of office extends until the first meeting of the Board
of Directors following the next annual meeting of stockholders and until a
successor is elected and qualified.
Jean-Luc Grand-Clement, a co-founder of the Company, has served as
President, Chief Executive Officer and Chairman of the Board of Directors since
the Company's inception in 1992. Prior to founding the Company, Mr.
Grand-Clement co-founded European Silicon Structures ("ES2"), a European
applications specific integrated circuit supplier for cell based and full custom
CMOS products, and served as Chief Executive Officer and then as Chairman of the
Board of Directors of ES2 from its founding in 1985 until 1991. From 1967 to
1978 and from 1982 to 1985, Mr. Grand-Clement held various positions with
Motorola, Inc., most recently as Vice-President and Assistant General Manager of
the Motorola European Semiconductor Group from 1983 to 1985. From 1978 to 1982,
Mr. Grand-Clement was the Managing Director of Eurotechnique, a MOS
semiconductor design and fabrication joint venture between National
Semiconductor and Saint-Gobain. Mr. Grand-Clement graduated from Ecole Nationale
Superieure des Telecommunications in Paris.
Richard Rodriguez joined PixTech in May 1996 as Vice-President of
Operations and was promoted to Executive Vice-President and Chief Operating
Officer in March 1997. Prior to joining the Company, Mr. Rodriguez spent 22
years with IBM. He was Director of Operations, managing three advanced
semiconductor lines at IBM France's Corbeil Plant from 1991 to 1994, before
directing the reengineering program of the plant since early 1994. Prior to such
positions, Mr. Rodriguez held a number of senior manufacturing and engineering
management positions as Director of a 500 person CMOS facility, US based program
manager, process and test engineering, quality assurance. Mr. Rodriguez
graduated from Ecole Superieure de Mecanique et d'Electricite, received a
postgraduate degree in Electronics from Orsay University and holds a degree from
Institut d'Administration des Entreprises.
Francis G. Courreges was appointed Executive Vice-President of the Company
in July 1995. Before that, he served as Vice-President of Marketing and
Development of the Company since July 1993. Prior to joining the Company, Mr.
Courreges was a co-founder of ES2, and served as Manager of direct write
technology for MOS and gate array products from 1985 to 1991 and Vice-President
of Marketing from 1991 to 1992. Prior to joining ES2, Mr. Courreges was product
engineering manager at Sierra Semiconductor from 1984 to 1985. He held various
process and product engineering positions at Electronic Arrays from 1977 to
1979, at National Semiconductor, from 1979 to 1980 and at Eurotechnique, from
1980 to 1984. Mr. Courreges graduated from Ecole Nationale Superieure des Arts
et Metiers and holds M.S. and Ph.D. degrees in Materials Science from Stanford
University.
PixTech 1997 Annual Report
7
<PAGE>
Jean-Jacques Louart joined Pixtech in May 1997 as Vice-President of
Operations. Prior to joining the company, Mr. Louart was Director of total
quality at LX Management from 1995 to 1997. From 1993 to 1995 he was president
of SIP, an equipment engineering company. Prior to that, Mr. Louart spent 18
years with IBM. He was program manager at IBM Eurocoordination from 1990 to1992.
Prior to such positions, Mr. Louart held a number of senior process and
equipment engineering management positions. Mr. Louart graduated from "Ecole de
l'Air" and holds a management degree from the "Centre de Perfectionnement aux
Affaires".
Michel Garcia is a co-founder of the Company and was appointed Vice
President, Industrial Partners in August 1995. Before that, he had served as
Vice-President of Equipment Engineering since the Company's inception. In 1986,
Mr. Garcia founded Microsolve, a semiconductor processing equipment company,
which he managed for five years. From 1981 to 1985, he served as operations
manager at Eurotechnique, which became known as Thomson Microelectronics in
1983; from 1979 to 1981, he served as fab process manager at Eurotechnique; and
from 1977 to 1979 he served as a process engineer at Motorola. In 1970, Mr.
Garcia graduated from Ecole Nationale Superieure d'Electronique et de
Radioelectricite de Grenoble, and he received a degree of Doctor of
Microelectronics from Grenoble University.
Thomas M. Holzel was appointed Vice President of Marketing and Sales of the
Company in July 1995. Mr. Holzel served as Marketing Manager of Display Devices
at Raytheon Company from 1988 to 1995. In 1981, he founded Arcturus, Inc., a
company that developed the first computer compatible large screen displays, and
was president of Arcturus from 1981 to 1988. Prior to that, Mr. Holzel was
Director of Industrial Marketing at Advent Corporation. Mr. Holzel holds an
economics degree from Dartmouth College.
Yves Morel joined the Company in April 1994 as Director of Finance and
Administration. He was promoted to Chief Financial Officer in March 1997. From
1993 to 1994, Mr. Morel was Finance Manager of International Software
Enterprise, a hardware and software distribution group. From 1992 to 1993, Mr.
Morel served as Controller at Genoyer S.A., a manufacturing and distribution
company in the industrial valve and piping field. From 1989 to 1992, Mr. Morel
was employed at Price Waterhouse. Mr. Morel graduated from the Ecole des Hautes
Etudes Commerciales and he obtained a Diplome d'Etudes Superieures Comptables et
Financieres.
Item 2. Properties
The Company's corporate offices are in an approximately 11,000 square foot
(1,000 square meter) facility located in Rousset, France. The Company owns the
facility and occupies approximately 5,500 square feet (500 square meters) of
floor space. A third party rents the rest of the area under a lease which
terminates in 1999. The Company leases a facility including a clean room, office
area, and engineering laboratories in Montpellier, France, having 31,100 square
feet (2,900 square meters) of space. The Montpellier lease terminates in 2003,
with an option to renew.
Also, the company leases an 8,000 square foot (750 square meter) facility
including an office area and engineering laboratory area in Santa Clara,
California. The lease on this facility terminates in 1999.
Item 3. Legal Proceedings
To the best of the Company's knowledge, there are no claims or litigation
which could have an adverse material impact on the assets, financial conditions,
results or the activity of the Company.
Item 4. Submission of Matters to a Vote of Security Holders
None.
PixTech 1997 Annual Report
8
<PAGE>
o PART II
Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters
The Company's Common Stock commenced trading on July 18, 1995 on the Nasdaq
National Market and has been listed on the European Association of Securities
Dealers Automated Quotation ("Easdaq") system since February 12, 1997, under the
symbol "PIXT". As of February 9, 1998, there were 69 holders of record of the
Company's common stock. The following table sets forth, for the fiscal periods
indicated, the range of high and low closing prices for the Company's Common
Stock on the Nasdaq National Market.
<TABLE>
<CAPTION>
=====================================================================================================
High Low
Year ended December 31, 1996
=====================================================================================================
<S> <C> <C>
First Quarter $14 $8 1/4
- -----------------------------------------------------------------------------------------------------
Second Quarter $10 3/8 $6 5/8
- -----------------------------------------------------------------------------------------------------
Third Quarter $ 7 1/4 $4 5/8
- -----------------------------------------------------------------------------------------------------
Fourth Quarter $ 6 3/4 $3 3/8
- -----------------------------------------------------------------------------------------------------
Year ended December 31, 1997
- -----------------------------------------------------------------------------------------------------
First Quarter $ 6 3/8 $4 1/8
- -----------------------------------------------------------------------------------------------------
Second Quarter $ 4 3/4 $3 3/8
- -----------------------------------------------------------------------------------------------------
Third Quarter $ 4 1/4 $3 1/8
- -----------------------------------------------------------------------------------------------------
Fourth Quarter $ 3 7/8 $2
=====================================================================================================
</TABLE>
The Company has never declared or paid any cash dividends on its capital
stock. The Company currently anticipates that it will retain all future
earnings, if any, to fund the development and growth of its business and does
not anticipate paying any cash dividends on its Common Stock in the foreseeable
future.
Item 6. Selected Financial Data
The selected financial data set forth below as of December 31, 1997 and
1996, and for each of the three years in the period ended December 31, 1997 are
derived from the Company's consolidated financial statements included elsewhere
in this Report, which have been audited by Ernst & Young LLP, independent
auditors. The selected financial data set forth below as of December 31, 1995,
1994 and 1993 and for the years ended December 31, 1995, 1994 and 1993 are
derived from audited consolidated financial statements not included in this
Report. This data should be read in conjunction with the Company's consolidated
financial statements and related notes thereto and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" under Item 7 of this
report.
<TABLE>
<CAPTION>
==================================================================================================================
Fiscal Year
1997 1996 1995 1994 1993
==================================================================================================================
(in thousands, except per share)
==================================================================================================================
<S> <C> <C> <C> <C> <C>
Operations
- ------------------------------------------------------------------------------------------------------------------
Total revenues $3,819 $7,644 $11,513 $6,225 $2,328
- ------------------------------------------------------------------------------------------------------------------
Loss from operations (15,774) (12,041) (9,278) (4,940) (906)
- ------------------------------------------------------------------------------------------------------------------
Net loss (14,664) (11,719) (6,305) (2,979) (120)
- ------------------------------------------------------------------------------------------------------------------
Net loss per share (1.12) (1.44) (0.82) (0.51)
- ------------------------------------------------------------------------------------------------------------------
Shares used in computing net loss per share 13,140 8,137 7,697 5,840
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
Balance Sheet
- ------------------------------------------------------------------------------------------------------------------
Working deficit / capital 9,290 (859) 15,919 813 7,967
- ------------------------------------------------------------------------------------------------------------------
Total assets, less current assets 24,058 19,701 18,569 15,300 1,663
- ------------------------------------------------------------------------------------------------------------------
Long term liabilities, less current portion 14,568 6,743 9,958 6,626 341
- ------------------------------------------------------------------------------------------------------------------
Stockholders' equity 18,780 12,099 24,530 9,487 9,289
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
PixTech 1997 Annual Report
9
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Overview
The Company was founded in June 1992 to develop and commercialize FEDs.
Since its inception, the Company has been a development stage company devoting a
majority of its resources to raising capital, conducting research and
development activities, forming an alliance of industrial partners (the "FED
Alliance") and establishing manufacturing capabilities for its FEDs. To date,
most of the Company's revenues have been cooperation and license revenues under
agreements with members of the FED Alliance and revenues from funding under
grants from the French government and the European Union. In the future, the
Company expects to generate its revenue primarily from the sale of products
manufactured by Unipac Optoelectronics Corp. ("Unipac") under a contract
manufacturing arrangement signed in May 1997. The Company does not anticipate
receiving any significant revenues from the sale of its products until the
commencement of volume production which is not expected before the second half
of 1998.
In view of the development stage of the Company and the current transition
from revenues solely from the FED Alliance to the addition of product sales
revenues, the Company believes that historical financial results are not
meaningful and should not be relied upon as an indication of future performance.
The Company's expectations regarding its sources of future revenue are
forward-looking statements. The amount, time and source of revenue generation
will be affected by numerous matters including the availability of funds to
finance its activities until volume shipments of products begin; the continued
development of the Company's products, including the enhancement of the display
performance and the cost-effective reproduction of the favorable characteristics
demonstrated by the Company's current prototypes in the context of commercial
production; the successful transition of the Company's prototype manufacturing
processes to commercial manufacturing processes to achieve commercially viable
yields; the successful development of a volume supply of FED products under
contract manufacturing, the successful commercialization of FEDs by other
members of the FED Alliance, and the successful development of sufficient market
demand for the Company's products.
The Company's products and its manufacturing processes are still in the
early stages of development and testing. To date, the Company has only shipped
limited quantities of products incorporating FED technology. The Company's only
commercially available display is a 5.2-inch monochrome display which to date
has been sold in limited quantities to more than one hundred customers. To date,
among the members of the FED Alliance, only Futaba has announced the
availability of commercial products in limited quantities.
Pursuant to a license agreement with the Commissariat a l'Energie Atomique
("CEA"), the French atomic agency, the Company is obligated to make royalty
payments on its product sales and to pass-through a portion of certain up-front
license fees earned after 1993 and royalties on sales of products by the Company
and such sublicensees (the "LETI License Agreement"). Pursuant to an amendment
to the LETI License Agreement signed in October 1997 (the "1997 CEA Amendment"),
the royalty rates and minimum payments from the Company to CEA were temporarily
increased for a period of three years. An amount of $1.0 million, reflected
under the caption "Cost of revenues, license fees and royalties" was accrued in
1995 with respect to such royalties and pass-through expenses payable to CEA. A
royalty amount of $45,000 and $109,000 was accrued in 1996 and in 1997,
respectively (See Notes to Consolidated Financial Statements--Note 16NRelated
Party transactions).
All of the Company's expenses to date, except royalties and pass-through
expenses payable to CEA and tax expenses directly associated with revenues from
FED Alliance members, have been recorded as operating expenses, since the
Company has not shipped products in quantities sufficient to determine a
meaningful cost of products sold category.
The Company has incurred cumulative losses of $36.3 million from inception
to December 31, 1997. The Company has incurred operating losses every quarter
since inception, except during the three-month period ending December 31, 1995,
and expects to incur additional operating losses. The magnitude and duration of
the Company's losses will depend on a number of factors within and outside of
the Company's control, including the Company's ability to expand the FED
Alliance and the rate at which it can successfully manufacture and commercialize
its FEDs, if at all, and the related costs of such efforts. Successful
commercialization of such displays will in turn depend on a number of factors,
including the successful development of sufficient market demand for the
Company's products.
Results of Operations
Cooperation and License Revenues. The Company recognized cooperation and
license revenues under the FED Alliance agreements of $9.9 million in 1995, $5.4
million in 1996 and $1.9 million in 1997. The decrease in cooperation and
license revenues reflects the achievement by the Company at the end of 1996 of
most of the contractual milestones with FED Alliance members. The Company does
PixTech 1997 Annual Report
10
<PAGE>
not expect any significant additional milestone related revenues to be directly
derived from FED existing Alliance members. In 1996, the Company recorded
cooperation and license revenues in the amount of $1.3 million under the
Cooperation and License Agreement with Texas Instruments executed on June 29,
1993 and terminated on July 15, 1996. To the extent the members of the FED
Alliance successfully incorporate the cross-licensed technology in their own
products, the Company will recognize royalty revenues as such members sell the
products.
Product Sales. The Company recognized product sales of $808,000 in 1995,
$791,000 in 1996 and $745,000 in 1997. These product sales represented the
shipment of FED displays and FED cathodes in limited quantities to members of
the FED Alliance and the shipment of FED displays for evaluation by original
equipment manufacturer ("OEM") customers. While the number of displays shipped
significantly increased between 1996 and 1997, the average selling price was
reduced, reflecting a different mix between high valued prototypes and cathodes
revenues and displays revenues. The Company expects to increase product
shipments in 1998, both from products manufactured at its pilot production plant
in France and from its expected volume source of manufacturing by Unipac, which
is not expected to begin until the second half of 1998.
Other Revenues. Other revenues is comprised of funding under French or
European Union development contracts and other miscellaneous revenues. Other
revenues were $840,000 in 1995, $1.4 million in 1996 and $1.1 million in 1997.
Of these revenues, $800,000 and $663,000 are related to a development
contract granted in December 1994 from the French Ministry of Industry to
support manufacturing of FEDs, in 1996 and 1997, respectively. Total potential
funding under this contract is approximately $2.8 million. The Company
recognizes portions of this revenue as contractual conditions are met. At
December 31, 1996 and 1997, deferred revenues in the amount of $2.1 million and
$1.2 million, respectively, were included in non-current liabilities under this
agreement.
Other revenues recorded in 1997 also included an insurance refund in the
amount of $292,000 covering lost revenue after certain physical damages occurred
in the Company's pilot manufacturing facility in April 1997.
Research and Development Expenses--Acquisition of Intellectual Property
Rights. The Company expensed $3.1 million in 1995 for the acquisition of
intellectual property rights from certain members of the FED Alliance. No such
expenses were recorded in 1997.
Other Research and Development Expenses. Other research and development
expenses include obligations to the French atomic energy agency under the LETI
Research Agreement, contract consulting fees, salaries and associated operating
expenses for in-house research and development activities conducted both in its
pilot plant in Montpellier and its research and development facility in Santa
Clara, the cost of staffing and operating the Company's pilot manufacturing
facility and the cost of supporting the transfer of the FED technology to
Unipac.
Other research and development expenses decreased from $15.8 million in
1996 to $15.5 million in 1997. This decrease in research and development
expenses reflected the increase of the parity of the U.S. dollar versus the
French franc in 1997 versus 1996, as most of the Company's research and
development costs is incurred in French francs. After excluding the effects of
currency fluctuation, research and development expenses increased by 10% in 1997
as compared to 1996, reflecting the continued development of the Company's
research and development efforts and FED technology and manufacturing processes.
Other research and development expenses amounted to $12.5 million in 1995. Other
research and development expenses included expenses recorded under the LETI
Research Agreement of $1.3 million in 1995, $644,000 in 1996, and $637,000 in
1997.
Sales and Marketing Expenses. Sales and marketing expenses increased from
$1.1 million in 1996 to $1.5 million in 1997. This 37% 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. Sales and marketing expenses amounted to
$1.1 million in 1996, a decrease of 41% on 1995 sales and marketing expenses
which amounted to $1.7 million, reflecting the reallocation of a limited number
of engineers from sales and marketing to research and development. The Company
believes sales and marketing expenses may increase in the future, as potential
customers and anticipated shipments of FED displays develop. In July 1997, the
Company signed a distribution agreement of its FED products with Sumitomo
Corporation ("Sumitomo") for the Japanese and Asian market areas. In 1998, the
Company intends to progress on its efforts to conclude similar distribution
agreements for both the United States and Europe, in order to expand market
reach in a cost effective manner.
Such expectation regarding increased product shipments and customer
contracts is a forward-looking statement, the fulfillment of which is dependent
on numerous factors. See Item 1. Business - Strategy. In addition, in order to
achieve its objectives, the Company will need to expand its business rapidly and
add sales, marketing, manufacturing, administrative and management personnel, as
well as establish and manage its international operations.
PixTech 1997 Annual Report
11
<PAGE>
General and Administrative Expenses. General and administrative expenses
amounted to $2.4 million in 1997, a decrease of 10% over general and
administrative expenses incurred in 1996, which amounted to $2.7 million,
reflecting the effects of currency fluctuation and a decrease in staff expenses
and discretionary expenses. General and administrative expenses amounted to $2.1
million in 1995.
Interest Income (Expense), Net. Interest income is comprised of interest on
cash and short term investments. Interest expense is comprised of interest
payable on long-term obligations. Net interest expense was $27,000 in 1995,
while the Company recorded a net interest income of $66,000 in 1996, as compared
to $470,000 in 1997, as the effect of increasing cash balances outweighed the
effect of the increase in long-term liabilities.
Currency Fluctuations. Although a significant portion of the Company's
revenues are denominated in U.S. dollars, a substantial portion of the Company's
operating expenses are denominated in French francs. Gains and losses on the
conversion to U.S. dollars of assets and liabilities denominated in French
francs may contribute to fluctuations in the Company's results of operations,
which are reported in U.S. dollars. The Company recorded net foreign exchange
gains of $280,000 in 1995, $256,000 in 1996 and $54,000 in 1997. The Company
cannot predict the effect of exchange rate fluctuations on future operating
results. To date, the Company has not undertaken hedging transactions to cover
its currency exposure, but it may do so in the future.
Income tax. The Company has recognized French income tax benefits of $5.7
million since inception, including $2.7 million in 1995 and $586,000 in 1997.
These 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. As of December 31, 1997, a valuation
allowance of $14.8 million was provided against a net deferred tax asset of
$19.8 million. The tax credits for research and development activities 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. In 1997, the Company
collected $29,000, representing income tax benefit recorded in 1992. In 1998,
the Company expects to receive $2.8 million, representing income tax benefits
recorded in 1993 and 1994.
The Company does not expect to record significant additional tax credits
for research and development activities, if any, in the foreseeable future, as
the benefit is based on increases in eligible research and development expenses
in a given year over the two previous fiscal years.
As of December 31, 1997, the Company had net operating loss carryforwards
in France of approximately $28.9 million of which $5.2 million, $5.6 million,
$10.0 million will expire in 2000, 2001 and 2002, respectively, if they are not
utilized.
PixTech 1997 Annual Report
12
<PAGE>
Quarterly Results of Operations
The following table presents certain unaudited quarterly financial
information for each quarter in 1996 and 1997. In the opinion of the Company's
management, this information has been prepared on the same basis as the audited
consolidated financial statements appearing elsewhere in this report and
includes all adjustments (consisting only of normal recurring adjustments)
necessary to present fairly the unaudited quarterly results set forth herein.
The Company's quarterly results are subject to fluctuations and thus, the
operating results for any quarter are not necessarily indicative for any future
period.
<TABLE>
<CAPTION>
====================================================================================================================================
(amounts in thousands) Three Months Ended
Mar. 31, June 30, Sept. 30, Dec. 31, Mar. 31, June 30, Sept. 30, Dec. 31,
1996 1996 1996 1996 1997 1997 1997 1997
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
- ------------------------------------------------------------------------------------------------------------------------------------
Cooperation and license
- ------------------------------------------------------------------------------------------------------------------------------------
revenues $ 1,890 $ 2,636 $ 707 $ 207 $ 707 $ 1,011 $ -- $ 214
- ------------------------------------------------------------------------------------------------------------------------------------
Product sales 183 178 67 363 173 255 152 165
- ------------------------------------------------------------------------------------------------------------------------------------
Other revenues 934 47 11 421 673 47 284 138
====================================================================================================================================
3,007 2,861 785 991 1,553 1,313 436 517
====================================================================================================================================
Cost of revenues:
- ------------------------------------------------------------------------------------------------------------------------------------
License fees and royalties -- -- -- (45) -- (61) -- (120)
====================================================================================================================================
Gross margin: 3,007 2,861 785 946 1,553 1,252 436 397
====================================================================================================================================
Operating expenses:
- ------------------------------------------------------------------------------------------------------------------------------------
Research and development 3,501 3,721 4,269 4,356 4,174 3,904 3,227 4,192
- ------------------------------------------------------------------------------------------------------------------------------------
Sales and marketing 232 214 309 333 380 402 369 345
- ------------------------------------------------------------------------------------------------------------------------------------
General and administrative 688 787 630 599 606 682 611 520
====================================================================================================================================
Total operating expenses 4,421 4,722 5,208 5,288 5,160 4,988 4,207 5,057
====================================================================================================================================
Loss from operations (1,414) (1,861) (4,423) (4,342) (3,607) (3,736) (3,771) (4,660)
====================================================================================================================================
Interest income (expense), net 97 (9) 3 (25) 131 211 82 46
- ------------------------------------------------------------------------------------------------------------------------------------
Foreign exchange gain (loss) 26 316 (137) 51 (238) 67 32 193
- ------------------------------------------------------------------------------------------------------------------------------------
Loss before income tax benefit (1,291) (1,554) (4,557) (4,316) (3,714) (3,458) (3,657) (4,421)
- ------------------------------------------------------------------------------------------------------------------------------------
Income tax benefit -- -- -- -- -- -- -- 586
====================================================================================================================================
NET INCOME (LOSS) $(1,291) $(1,554) $(4,557) $(4,316) $(3,714) $(3,458) $(3,657) $(3,835)
====================================================================================================================================
</TABLE>
The Company expects that it will continue to experience fluctuations in its
quarterly operating results. In the past, these fluctuations have been caused by
a variety of factors, including the success of the Company in entering into new
FED Alliance Agreements, achieving revenue-producing milestones under the FED
Alliance agreements, and the rate of growth of the Company's research and
development activities.
Liquidity and Capital Resources
The Company has used $22.7 million in cash to fund its operations from
inception through December 31, 1997, and $27.7 million in capital expenditures
and investments. Through December 31, 1997, the Company has funded its
operations and capital expenditures primarily from sales of $55.6 million of
equity securities and $19.0 million of proceeds from borrowings and
sale-leaseback transactions. In 1997, the Company used $9.4 million in cash to
fund its operations.
Capital expenditures were $5.9 million in 1996 and $1.2 million in 1997. In
1996, capital expenditures were primarily for leasehold improvements, facility
expansion, and equipment installed in its pilot manufacturing facility, while
1997 capital expenditures remained focused on limited capacity expansion. As of
December 31, 1997, the Company had commitments for capital expenditures of
approximately $200,000.
Investments amounted to $10.1 million in 1997 and are related to the
security interest granted by the Company to its Asian partner, Unipac, pursuant
to the display foundry agreement (the "Foundry Agreement") signed in May 1997
between the Company and Unipac in order to implement volume production of FEDs.
Implementing volume production at Unipac's manufacturing plant will require
significant capital expenditures. An amount of $16.5 million of capital
expenditures is expected to be required which, pursuant to the Foundry
Agreement, is expected to be purchased and funded by Unipac. The written bank
guaranty provided by the Company to Unipac is expected to be increased from
$10.0 million to $13.5 million.
The Company has existing contracts with two different French ministries
providing for the payment of grants to the Company totaling approximately $5.0
million, of which the Company has collected an aggregate amount of $2.2 million
PixTech 1997 Annual Report
13
<PAGE>
through December 31, 1997 and for which the Company has recognized revenues to
date in the aggregate amount of $1.5 million.
In 1997, the Company entered into a research and development agreement with
the European Union and other European industrial companies for an 18
month-period, which began in February 1997. The contribution of the European
Union to the costs incurred by the Company amounts to $840,000 over the period.
The Company received $423,000 in 1997 from this contribution, which were not
recognized as income in 1997 as all conditions stipulated in the agreement were
not met.
Cash flows generated from financing activities were $30.3 million in 1997,
as compared to $1.9 million used in financing activities in 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 increased by $10.0 million, as the Company was
granted a $10.0 million loan by the Japanese firm Sumitomo in November 1997 (see
"Notes to Consolidated Financial Statements Note 7 - Long term debt"). 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 Consolidated Financial Statements Note 11 -- Stockholders' Equity").
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 obligations due from the Company to Motorola.
The Company believes that cash available at December 31, 1997 together with
anticipated proceeds during 1998 from the various grants described above and the
anticipated increase in product sales will be sufficient to meet its cash
requirements, including repayment of the current portion of its long term
obligations in the amount of $1.9 million at December 31, 1997, for at least 12
months.
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 investment. The Company's
capital requirements will depend on many factors, including the rate at which
the Company can develop its products, the market acceptance of such products,
the levels of promotion and advertising required to launch such products and
attain a competitive position in the marketplace and the response of competitors
to the Company's products. 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.
Outlook: 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.
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. In May 1997, the Company signed the Foundry Agreement with
Unipac, an AMLCD manufacturer based in Taiwan. Under the agreement, Unipac has
installed volume production equipment to produce FEDs at its manufacturing
plant, and will begin production for exclusive delivery of FED displays to
PixTech. Expectations about the timing of this manufacturing plan with Unipac
are forward-looking statements that involve risks and uncertainties, including
the ease or difficulty of the transfer of the FED technology to Unipac. If such
manufacturing plans are not implemented on a timely basis, the Company will not
be able to ship medium to large volumes of FED products, or to obtain a
commercially acceptable cost for its FED displays. If the Company is unable to
have its FED manufactured in a cost effective manner, the Company would be
materially adversely affected. Significant capital expenditure is required in
order to install, at the contract manufacturers' facility, equipment that is not
common to the AMLCD manufacturing process. A total amount of $16.5 million of
capital expenditures is expected to be required which, pursuant to the Foundry
Agreement, is expected to be purchased and funded by Unipac. The amount actually
expended on capital expenditures could vary significantly depending upon
numerous factors, including the inherent unpredictability of the total amount of
a large scale capital expenditure program. Should the Company be successful in
implementing this contract manufacturing relationship, the Company's reliance on
a single contract manufacturer will involve several risks, including a potential
inability to obtain an adequate supply of required products, and reduced control
over the price, timeliness of delivery, reliability and quality of finished
products. Any inability to manage this contract manufacturing relationship or
any circumstance that would cause the Company to delay the shipment of its
products would have an adverse effect on the Company.
PixTech 1997 Annual Report
14
<PAGE>
Products and Manufacturing Processes under Development, Need to Obtain
Commercial 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
Unipac (see "Risks Associated with Contract Manufacturing of FEDs") will make it
possible to manufacture volume quantities of FEDs at commercially acceptable
costs. However, moving from pilot production to volume production involves a
number of steps and challenges. In particular, in order to demonstrate the low
cost potential of its FED technology, the Company will need to improve its
manufacturing yields. There can be no assurance that the Company will be able to
implement processes for the manufacture of volume quantities of FED products at
commercially viable cost levels or on a timely basis. If such processes are not
successfully implemented, the Company would be adversely affected.
Display Performance Enhancement. Key elements of display performance are
brightness, and stability over time (life time and reliability), as well as
power efficiency. PixTech is seeking to balance luminous efficiency with power
efficiency to produce bright and low power-consumption displays. Display
reliability is heavily dependent upon the manufacturing process used in
assembling the displays as well as upon the characteristics of the phosphors
used on the anode. In order to produce color displays that will provide the
product life necessary for most applications, the Company needs to make further
advances in manufacturing processes. There can be no assurance that the Company
will be able to improve the reliability and life time of its color FEDs to
achieve commercially acceptable performance, or on a timely basis. If such
displays performance enhancements are not successfully completed, the Company
could be adversely affected.
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. Expansion of the
FED Alliance is subject, in part, to matters beyond the Company's control.
Failure to expand the FED Alliance could adversely affect the Company.
Competition and Competing Technologies. The market for flat panel display
products is intensely competitive and is expected to remain so in the future.
The market is currently dominated by products utilizing liquid crystal display
("LCD") technology. LCD technology has continued to improve, and there can be no
assurance that advances in LCD technology will not overcome its current
limitations. In addition, as some of the basic FED technology is in the public
domain, the Company has a number of potential direct competitors developing FED
displays. In the event that efforts by the Company's competitors result in the
development of products that offer significant advantages over the Company's
products, the Company could be adversely affected.
No Assurance of Market Acceptance. The potential size and timing of market
opportunities targeted by the Company and the members of the FED Alliance are
uncertain. The Company anticipates marketing its displays to OEMs, and its
success will depend on whether OEMs select the Company's products for
incorporation into their products and upon their successful introduction of such
products, as well as the successful commercialization of products developed by
members of the FED Alliance.
Patents and Protection of Proprietary Technology. The Company's ability to
compete effectively with other companies will depend, in part, on the ability of
the Company to maintain the proprietary nature of its technology. Although the
Company has been granted, has filed applications for and has been licensed under
a number of patents in the United States and other countries, there can be no
assurance as to the degree of protection offered by these patents, as to the
likelihood that pending patents will be issued or as to the validity or
enforceability of any issued patents.
In addition, because of the developmental stage of the Company, claims that
the Company's products infringe on the proprietary rights of others are more
likely to be asserted after commencement of commercial sales incorporating the
Company's technology. Although the Company believes that its products do not
infringe the patents or other proprietary rights of third parties, there can be
no assurance that other third parties will not assert infringement claims
against the Company or that such claims will not be successful. There can also
be no assurance that competitors will not infringe the Company's patents. Even
successful defense and prosecution of patent suits are both costly and
time-consuming. An adverse outcome in a suit in which the Company asserts its
patent rights could result in the loss of such rights, and could subject the
Company to substantial costs and diversion of Company resources.
PixTech 1997 Annual Report
15
<PAGE>
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.
Impact of Year 2000. The Company has conducted a comprehensive review of
its computer systems to identify applications that could be affected by the
"Year 2000" issue, and has developed an implementation plan to resolve the
issue. Management does not expect these costs to have a significant impact on
its financial position or results of operations.
Other important factors which may impact upon the achievement of such goals
and forward-looking statements are set forth in Exhibit 99.1 to this Form 10-K,
all of which are incorporated herein by reference. No assurance may be given
that the Company's strategic goals and other forward-looking statements
discussed in this section and elsewhere in this Form 10-K will be achieved.
PixTech 1997 Annual Report
16
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
PixTech 1997 Annual Report
17
<PAGE>
Item 8. Financial Statements and Supplementary Data
Index to Financial Statements
Page(s)
Report of Independent Auditors ..................................... 19
Balance Sheets ..................................................... 20
Statements of Operations ........................................... 21
Statements of Stockholders' Equity (Deficit) ....................... 22 - 23
Statements of Cash Flows ........................................... 24
Notes to Financial Statements ...................................... 25 - 38
Financial statement schedules have been omitted
since they are not required or are inapplicable
18
<PAGE>
[LETTERHEAD OF ERNST & YOUNG]
Independent auditors report
The Board of Directors and Shareholders
PixTech, Inc.
We have audited the accompanying consolidated balance sheets of PixTech,
Inc. (a development stage company) as of December 31, 1996 and 1997 and the
related consolidated statements of operations, stockholder's equity, and cash
flows for the period from June 18, 1992 (date of inception) through December 31,
1997, and for each of the three years in the period ended December 31, 1997.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
PixTech, Inc. (a development stage company) at December 31, 1996 and 1997, and
the consolidated results of its operations and its cash flows for the period
June 18, 1992 (date of inception) through December 31, 1997 and for each of the
three years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
New York, New York
February 9, 1998
PixTech 1997 Annual Report
19
<PAGE>
PixTech, Inc.
(a development stage company)
Consolidated balance sheets
<TABLE>
<CAPTION>
(in thousands, except per share amounts)
================================================================================================================
December 31,
1996 1997
================================================================================================================
ASSETS
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Current assets:
- ----------------------------------------------------------------------------------------------------------------
Cash and cash equivalents $ 4,266 $ 12,428
- ----------------------------------------------------------------------------------------------------------------
Short term investments -- 1,259
- ----------------------------------------------------------------------------------------------------------------
Accounts receivable:
- ----------------------------------------------------------------------------------------------------------------
Trade 1,655 953
- ----------------------------------------------------------------------------------------------------------------
Other 198 82
- ----------------------------------------------------------------------------------------------------------------
Inventory 770 702
- ----------------------------------------------------------------------------------------------------------------
Other 2,975 2,166
================================================================================================================
Total current assets 9,864 17,590
================================================================================================================
Investments -- long term -- 8,816
- ----------------------------------------------------------------------------------------------------------------
Property, plant and equipment, net 13,409 9,353
- ----------------------------------------------------------------------------------------------------------------
Goodwill, net 298 226
- ----------------------------------------------------------------------------------------------------------------
Deferred tax assets 5,167 5,058
- ----------------------------------------------------------------------------------------------------------------
Other assets -- long term 342 605
- ----------------------------------------------------------------------------------------------------------------
Deferred offering costs 485 --
================================================================================================================
TOTAL ASSETS $ 29,565 $ 41,648
================================================================================================================
================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
- ----------------------------------------------------------------------------------------------------------------
Current liabilities:
- ----------------------------------------------------------------------------------------------------------------
Current portion of long term debt $ 990 $ 1,364
- ----------------------------------------------------------------------------------------------------------------
Current portion of capital lease obligations 921 599
- ----------------------------------------------------------------------------------------------------------------
Current portion of long term liabilities 1,890 --
- ----------------------------------------------------------------------------------------------------------------
Accounts payable 5,132 5,053
- ----------------------------------------------------------------------------------------------------------------
Accrued expenses 1,790 1,284
================================================================================================================
Total current liabilities 10,723 8,300
================================================================================================================
Deferred revenue 3,226 2,546
- ----------------------------------------------------------------------------------------------------------------
Long term debt, less current portion 2,146 11,024
- ----------------------------------------------------------------------------------------------------------------
Capital lease obligation, less current portion 833 441
- ----------------------------------------------------------------------------------------------------------------
Other long term liabilities, less current portion 538 557
================================================================================================================
Total liabilities 17,466 22,868
================================================================================================================
Stockholders' equity
- ----------------------------------------------------------------------------------------------------------------
Common stock, $0.01 par value, authorized shares--30,000,000;
issued and outstanding shares--8,141,146; 13,762,732 respectively 81 138
- ----------------------------------------------------------------------------------------------------------------
Additional paid-in capital 34,085 57,067
- ----------------------------------------------------------------------------------------------------------------
Cumulative translation adjustment (438) (2,132)
- ----------------------------------------------------------------------------------------------------------------
Deficit accumulated during development stage (21,629) (36,293)
================================================================================================================
Total stockholders' equity 12,099 18,780
================================================================================================================
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 29,565 $ 41,648
================================================================================================================
</TABLE>
See accompanying notes.
PixTech 1997 Annual Report
20
<PAGE>
PixTech, Inc.
(a development stage company)
Consolidated balance sheets
<TABLE>
<CAPTION>
(in thousands, except per share amounts)
==============================================================================================================
Year Ended Period from
December 31, June 18, 1992
(date of inception)
through
Dec. 31, 1997
- --------------------------------------------------------------------------------------------------------------
1995 1996 1997 1997
==============================================================================================================
<S> <C> <C> <C> <C>
Revenues
==============================================================================================================
Cooperation and license revenues $ 9,865 $ 5,440 $ 1,932 $ 25,210
- --------------------------------------------------------------------------------------------------------------
Product sales 808 791 745 2,381
- --------------------------------------------------------------------------------------------------------------
Other revenues 840 1,413 1,142 3,938
==============================================================================================================
Total Revenues 11,513 7,644 3,819 31,529
==============================================================================================================
Cost of revenues
- --------------------------------------------------------------------------------------------------------------
License fees and royalties (1,314) (45) (181) (1,540)
==============================================================================================================
Gross margin 10,199 7,599 3,638 29,989
==============================================================================================================
- --------------------------------------------------------------------------------------------------------------
Operating expenses
- --------------------------------------------------------------------------------------------------------------
Research, development:
- --------------------------------------------------------------------------------------------------------------
Acquisition of intellectual property rights (3,111) -- -- (4,765)
- --------------------------------------------------------------------------------------------------------------
Other (12,527) (15,848) (15,497) (53,239)
- --------------------------------------------------------------------------------------------------------------
(15,638) (15,848) (15,497) (58,004)
- --------------------------------------------------------------------------------------------------------------
Marketing and sales (1,688) (1,089) (1,496) (5,174)
- --------------------------------------------------------------------------------------------------------------
Administrative and general expenses (2,151) (2,703) (2,419) (10,301)
- --------------------------------------------------------------------------------------------------------------
(19,477) (19,640) (19,412) (73,479)
==============================================================================================================
Loss from operations (9,278) (12,041) (15,774) (43,490)
==============================================================================================================
Other income / (expense)
- --------------------------------------------------------------------------------------------------------------
Interest income 466 428 759 2,020
- --------------------------------------------------------------------------------------------------------------
Interest expense (493) (362) (289) (1,211)
- --------------------------------------------------------------------------------------------------------------
Foreign exchange gains 280 256 54 654
- --------------------------------------------------------------------------------------------------------------
253 322 524 1,463
==============================================================================================================
Loss before income tax benefit (9,025) (11,719) (15,250) (42,027)
==============================================================================================================
Income tax benefit 2,720 -- 586 5,734
==============================================================================================================
NET LOSS $ (6,305) $(11,719) $(14,664) $(36,293)
==============================================================================================================
- --------------------------------------------------------------------------------------------------------------
Net loss per share $ (.82) $ (1.44) $ (1.12)
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
Shares used in computing net loss per share 7,697 8,137 13,140
==============================================================================================================
</TABLE>
See accompanying notes.
PixTech 1997 Annual Report
21
<PAGE>
PixTech, Inc.
(a development stage company)
Consolidated Statement of Stockholders' Equity
<TABLE>
<CAPTION>
(in thousands, except per share amounts)
====================================================================================================================================
Convertible Preferred Stock
Series A Series B Series C Series D
- ------------------------------------------------------------------------------------------------------------------------------------
Shares Shares Shares Shares
issued Amount issued Amount issued Amount issued Amount
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at June 18, 1992
- ------------------------------------------------------------------------------------------------------------------------------------
Issuance of convertible preferred stock,
net of issuance costs in 1992, 1993
and 1994 1,557,003 $ 2,368 363,447 $ 589 3,044,846 8,615 430,208 $ 1,224
- ------------------------------------------------------------------------------------------------------------------------------------
Issuance of Common stock
in 1992 and 1993
- ------------------------------------------------------------------------------------------------------------------------------------
Issuance of Common stock
under stock option plan in 1994
- ------------------------------------------------------------------------------------------------------------------------------------
Purchase of 28,761 shares of Common
stock--Treasury stock in 1994
- ------------------------------------------------------------------------------------------------------------------------------------
Translation adjustment
- ------------------------------------------------------------------------------------------------------------------------------------
Net loss from June 18, 1992 (date
of inception) through 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
- ------------------------------------------------------------------------------------------------------------------------------------
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, net of issuance costs--$ 796
- ------------------------------------------------------------------------------------------------------------------------------------
Issuance of Common stock
under stock option plan
- ------------------------------------------------------------------------------------------------------------------------------------
Translation adjustment
- ------------------------------------------------------------------------------------------------------------------------------------
Net loss--Year ended December 31, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1997 -- -- -- -- -- -- -- --
====================================================================================================================================
</TABLE>
See accompanying notes.
PixTech 1997 Annual Report
22
<PAGE>
PixTech, Inc.
(a development stage company)
Consolidated Statement of Stockholders' Equity
<TABLE>
<CAPTION>
(in thousands, except per share amounts)
====================================================================================================================================
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 convertible preferred stock, net of
issuance costs in 1992, 1993 and 1994 $12,796
- -----------------------------------------------------------------------------------------------------------------------------------
Issuance of Common stock
in 1992 and 1993 132,301 $ 1 $ 96 97
- -----------------------------------------------------------------------------------------------------------------------------------
Issuance of Common stock
under stock option plan in 1994 77,356 1 28 29
- -----------------------------------------------------------------------------------------------------------------------------------
Purchase of 28,761 shares of Common
stock--Treasury stock in 1994 $ (11) (11)
- -----------------------------------------------------------------------------------------------------------------------------------
Translation adjustment $ 181 181
- -----------------------------------------------------------------------------------------------------------------------------------
Net loss from June 18, 1992 (date
of inception) through December 31, 1994 $(3,605) (3,605)
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1994 209,657 2 123 181 (3,605) (11) 9,487
- -----------------------------------------------------------------------------------------------------------------------------------
Reissuance of 28,761 shares
of Common stock held in treasury 3 11 14
- -----------------------------------------------------------------------------------------------------------------------------------
Issuance of Common stock
under stock option plan 6,902 0 3 3
- -----------------------------------------------------------------------------------------------------------------------------------
Common stock issued in initial public
offering, net of issuance costs--$ 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, net of issuance costs--$796 5,570,819 56 22,958 23,014
- -----------------------------------------------------------------------------------------------------------------------------------
Issuance of Common stock
under stock option plan 50,767 1 25 25
- -----------------------------------------------------------------------------------------------------------------------------------
Translation adjustment (1,694) (1,694)
- -----------------------------------------------------------------------------------------------------------------------------------
Net loss--Year ended December 31, 1997 (14,664) (14,664)
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1997 13,762,732 $ 138 $57,067 $ (2,132) $ (36,293) -- $18,780
===================================================================================================================================
</TABLE>
See accompanying notes.
PixTech 1997 Annual Report
23
<PAGE>
PixTech, Inc.
(a development stage company)
Consolidated statement of cash flows
<TABLE>
<CAPTION>
(in thousands, except per share amounts)
====================================================================================================================================
Year Ended Period from
December 31, June 18, 1992
(date of inception)
through
Dec. 31, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
1995 1996 1997 1997
====================================================================================================================================
<S> <C> <C> <C> <C>
Operating activities
- ------------------------------------------------------------------------------------------------------------------------------------
Net loss $ (6,305) $(11,719) $(14,664) $(36,293)
- ------------------------------------------------------------------------------------------------------------------------------------
Adjustments to reconcile net loss to net cash
(used) by operating activities:
- ------------------------------------------------------------------------------------------------------------------------------------
Depreciation and amortization 3,488 3,934 3,741 11,566
- ------------------------------------------------------------------------------------------------------------------------------------
Gain on disposal of fixed assets -- (31) -- (31)
- ------------------------------------------------------------------------------------------------------------------------------------
Deferred taxes (2,721) (53) -- (5,163)
- ------------------------------------------------------------------------------------------------------------------------------------
Revenues receivable "in kind" -- -- -- (312)
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses payable "in kind" 24 -- -- 1,420
- ------------------------------------------------------------------------------------------------------------------------------------
Deferred "in kind" revenues -- -- -- 312
- ------------------------------------------------------------------------------------------------------------------------------------
Change in assets and liabilities
- ------------------------------------------------------------------------------------------------------------------------------------
Accounts receivable--Trade (4,825) 3,749 672 (681)
- ------------------------------------------------------------------------------------------------------------------------------------
Accounts receivable--Other 504 (21) 102 395
- ------------------------------------------------------------------------------------------------------------------------------------
Inventory (148) (393) (28) (795)
- ------------------------------------------------------------------------------------------------------------------------------------
Other assets (793) (280) 115 (1,564)
- ------------------------------------------------------------------------------------------------------------------------------------
Accounts payable, accrued expenses
and other assets and liabilities 2,287 (634) 983 5,722
- ------------------------------------------------------------------------------------------------------------------------------------
Deferred revenue 2,572 300 (297) 2,780
- ------------------------------------------------------------------------------------------------------------------------------------
Taxes, other than income (275) -- -- (23)
====================================================================================================================================
Net cash used in operating activities (6,192) (5,148) (9,376) (22,667)
====================================================================================================================================
Investing activities
- ------------------------------------------------------------------------------------------------------------------------------------
Additions to property, plant, and equipment (2,452) (5,866) (1,165) (17,460)
- ------------------------------------------------------------------------------------------------------------------------------------
Reclassification of cash equivalents as investments -- -- (10,080) (10,080)
- ------------------------------------------------------------------------------------------------------------------------------------
Additions to patents -- (130) -- (130)
====================================================================================================================================
Net cash used in investing activities (2,452) (5,996) (11,245) (27,670)
====================================================================================================================================
Financing activities
- ------------------------------------------------------------------------------------------------------------------------------------
Stock issued 20,998 3 21,639 55,598
- ------------------------------------------------------------------------------------------------------------------------------------
(Purchase) sale of treasury stock 11 -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Proceeds from long-term borrowings 4,161 97 10,000 16,287
- ------------------------------------------------------------------------------------------------------------------------------------
Proceeds from sale leaseback transactions 2,731 -- -- 2,731
- ------------------------------------------------------------------------------------------------------------------------------------
Payments for equipment purchases financed by accounts payable (2,709) (997) -- (3,706)
- ------------------------------------------------------------------------------------------------------------------------------------
Repayment of long-term borrowings (2,074) (215) (787) (3,076)
- ------------------------------------------------------------------------------------------------------------------------------------
Repayment of capital lease obligations (855) (876) (576) (2,307)
====================================================================================================================================
Net cash provided by (used in) financing activities 22,263 (1,988) 30,276 65,527
====================================================================================================================================
Effect of exchange rates on cash (792) (165) (1,493) (2,762)
====================================================================================================================================
Net increase / (decrease) in cash equivalents 12,827 (13,297) 8,162 12,428
====================================================================================================================================
Cash and cash equivalents beginning of period 4,736 17,563 4,266 --
====================================================================================================================================
Cash and cash equivalents end of period $ 17,563 $ 4,266 $ 12,428 $ 12,428
====================================================================================================================================
Supplemental disclosures of non-cash activities:
- ------------------------------------------------------------------------------------------------------------------------------------
Equipment acquired under capitalized leases -- -- -- $ 1,209
- ------------------------------------------------------------------------------------------------------------------------------------
Equipment purchases financed by accounts payable -- -- -- $ 920
- ------------------------------------------------------------------------------------------------------------------------------------
Licenses acquired payable over two or three years $ 2,111 -- -- $ 3,765
- ------------------------------------------------------------------------------------------------------------------------------------
Acquisitions of intangible by issuance of warrants -- $ 230 -- $ 230
- ------------------------------------------------------------------------------------------------------------------------------------
Fixed assets disposed of in like-kind exchange -- $ 468 -- $ 468
- ------------------------------------------------------------------------------------------------------------------------------------
Fixed assets acquired through like-kind exchange -- $ 499 -- $ 499
- ------------------------------------------------------------------------------------------------------------------------------------
Repayment of long term borrowing -- $ 394 $ 363 $ 757
- ------------------------------------------------------------------------------------------------------------------------------------
Supplemental disclosures of cash flow information:
- ------------------------------------------------------------------------------------------------------------------------------------
Interest paid $ 668 $ 52 $ 184 $ 925
====================================================================================================================================
</TABLE>
See accompanying notes.
PixTech 1997 Annual Report
24
<PAGE>
PixTech, Inc.
(a development stage company)
Notes to Consolidated Financial Statements (continued)
(all amounts in thousands except share amounts)
1. Organization And Business Activity
PixTech, Inc. was incorporated under the laws of Delaware on October 27, 1993.
On November 30, 1993, PixTech, Inc. acquired 100% beneficial ownership of
PixTech S.A., through a share exchange agreement. PixTech S.A. was incorporated
under the laws of France on June 18, 1992. For accounting purposes, the
acquisition has been treated as a recapitalization of PixTech S.A. As used
herein, "the Company" refers to PixTech, Inc. and PixTech S.A.
The Company was founded to improve, utilize and license certain background
technology developed by Laboratoire Electronique de Technologie et
d'Instrumentation ("LETI"), a French government-owned research and development
laboratory in the field of flat panel displays using electron emitters, known as
field emission displays ("FEDs").
The Company has devoted substantially all its efforts to raising capital,
conducting research and development activities, forming an alliance of
industrial partners (the "FED Alliance") and establishing manufacturing
capabilities for its FEDs. Revenues from principal planned operations will
mainly consist of product sales. As these revenues have not commenced, PixTech,
Inc. is still in a development stage and falls under the provisions of FAS 7
"Accounting and Reporting by Development Stage Enterprises".
2. Summary of the Significant Accounting Policies
o Basis of presentation
The accompanying consolidated financial statements were prepared in accordance
with generally accepted accounting principles. The preparation of financial
statements requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, and disclosure of contingent assets
and liabilities, at the date of the financial statements and the reported
amounts of revenue and expenses during the reporting period. Actual results
could differ from those estimates.
o Principles of consolidation
The consolidated financial statements include the accounts of PixTech, Inc. and
its wholly owned subsidiary PixTech S.A. Intercompany accounts and transactions
have been eliminated in consolidation.
o Fiscal Year
The Company ends its fiscal year on December 31.
o Revenue recognition--Cooperation and License Agreements
The Company has entered into Cooperation and License agreements with members of
the FED Alliance. Under these contracts, the Company shares technology with such
members through cross-licensing provisions. Each contract provides for certain
fees and royalties to be paid to the Company. The Company believes that each of
the cooperation and license agreements are long-term construction/production
contracts pursuant to SOP 81-1 and that the criteria have been satisfied to
entitle the Company to partially recognize the revenue under those contracts.
Certain fees payable to the Company under these agreements are milestone-related
and are due in accordance with the terms of each agreement when the milestone is
achieved. Once paid, such fees are irrevocable. The Company recognizes this
milestone-related revenue only when each milestone has been fully performed, as
agreed by the parties. Costs incurred under these contracts are considered costs
in the period incurred, regardless of when related revenue is recognized.
Texas Instruments. The Company entered into a Cooperation and License Agreement
with Texas Instruments Incorporated on June 29, 1993. This agreement was
terminated on July 15, 1996, and the Company recorded in 1996 cooperation and
license revenues under this terminated agreement in the amount of $1,336.
PixTech 1997 Annual Report
25
<PAGE>
PixTech, Inc.
(a development stage company)
Notes to Consolidated Financial Statements (continued)
(all amounts in thousands except share amounts)
Futaba Corporation. The Company entered into a Cooperation and License Agreement
with Futaba Corporation ("Futaba") on November 27, 1993 (the "Futaba
Agreement"). Pursuant to the Futaba Agreement, Futaba agreed to pay the Company
a license fee upon signing the agreement, which was recognized upon execution of
the agreement. Futaba also agreed to a technology transfer fee, payable to the
Company in three installments upon the occurrence of certain milestones, and an
additional fee payable annually upon the achievement of further product
development milestones. Finally, to the extent that Futaba successfully
incorporates the cross-licensed technology into its own products, Futaba must
make royalty payments in connection with the sale of products incorporating the
technology licensed by the Company. At that time, the Company will recognize
royalty revenues.
In order to reach certain specified milestones under the Futaba Agreement, the
Company performed certain services in the field of technology development. In
accordance with the Futaba Agreement, the milestone-related revenue was
recognized when the milestone was achieved. The cooperation period between the
Company and Futaba expired in January 1997 and the Company will not record any
additional milestone based revenues in the future.
Raytheon Company. The Company entered into a Cooperation and License Agreement
with Raytheon Company ("Raytheon") on June 1, 1994 (the "Raytheon Agreement").
Pursuant to the Raytheon Agreement, Raytheon agreed to pay the Company a license
fee payable in part upon the signing of the agreement and for a specified number
of months thereafter. Such license fee was recognized when due. Raytheon also
agreed to make two additional payments based on the achievement of certain
milestones. Raytheon also must make royalty payments in connection with the sale
of products incorporating technology licensed to it by the Company.
In June 1997, the cooperation period between the Company and Raytheon was
extended for a period of two years but no revenue is associated with such
extension.
To the extent that Raytheon successfully incorporates the cross-licensed
technology into its own products, the Company will recognize royalty revenues as
Raytheon sells the products.
Motorola, Inc. The Company entered into a Cooperation and License Agreement with
Motorola, Inc. ("Motorola") on June 13, 1995 (the "Motorola Agreement").
Pursuant to the Motorola Agreement, Motorola agreed to pay the Company a license
fee upon signing the agreement, which was recognized upon execution of the
agreement. Motorola also agreed to a technology transfer fee, payable to the
Company upon the occurrence of certain milestones, and an additional technology
update fee payable annually over a period of three years. Finally, Motorola must
make royalty payments in connection with the sale of its own products
incorporating the technology licensed by the Company.
In order to reach certain of the specified milestones under the Motorola
Agreement, the Company performs services in the field of technology development.
In accordance with the Motorola Agreement, the milestone-related payments are
irrevocable when paid. Cash milestone-related revenue is recognized when the
milestone is achieved. As of December 1997, most of the revenues associated with
the achievement of the contractually specified milestones under the Motorola
Agreement have been recorded by the Company.
To the extent that Motorola successfully incorporates the cross-licensed
technology into its own products, the Company will recognize royalty revenues as
Motorola sells the products.
o Revenue Recognition--Product Revenue
Product revenue is recognized upon shipment in the case of standard deliveries,
and upon acceptance by the customer in the case of first delivery of a specified
product.
PixTech 1997 Annual Report
26
<PAGE>
PixTech, Inc.
(a development stage company)
Notes to Consolidated Financial Statements (continued)
(all amounts in thousands except share amounts)
o Revenue Recognition--Grants
The Company recognizes revenue from unconditional grants received from
governmental agencies in the period granted. Revenue from conditional grants
received are recognized when all conditions outlined in the grant have been met.
o Foreign Currency Translation
Assets and liabilities of PixTech S.A. are translated into U.S. dollar
equivalents at the rate of exchange in effect on the balance sheet date; income
and expenses are translated at the average rates of exchange prevailing during
the period. The related translation adjustments are reflected in stockholders'
equity. Foreign currency gains or losses resulting from transactions are
included in results of operations, except for transaction gains and losses
attributable to intercompany transactions, and for foreign currency transactions
or cash balances that hedge foreign currency commitments; such transactions and
cash balances are recorded in the same manner as translation adjustments, as
recommended by the Statement of Financial Accounting Standards 52, "Foreign
currency translation" ("SFAS 52").
o Net Income (Loss) Per Share
On December 31, 1997, the Company adopted Statement of Financial Accounting
Standards No 128, "Earnings per Share", ("SFAS 128").
Prior to the adoption of SFAS 128, net income (loss) per share has been
calculated in accordance with the provisions of Accounting Principles Board
Opinion 15, "Earnings per Share" (APB 15), using the weighted average number of
shares, convertible preferred shares assuming conversion at date of issuance,
and dilutive equivalent shares from stock options and warrants using the
treasury stock method. Pursuant to the Securities and Exchange Commission Staff
Accounting Bulletins, shares and equivalent shares issued by the Company at
prices below the assumed public offering price during the twelve-month period
prior to the proposed offering have been included in the calculation as if they
were outstanding for all periods presented through the period in which the
initial public offering took place (using the treasury stock method and assuming
an initial public offering price). Net income (loss) per share also reflects for
all periods presented a 2 for 3 reverse stock split which was effective at the
closing of the Company's initial public offering.
Pursuant to SFAS 128, the Company is required to change the method currently
used to compute earnings per share and to restate all prior periods. SFAS 128
replaced the calculation of primary and fully diluted earnings per share with
basic and diluted earnings per share. Unlike primary earnings per share, basic
earnings per share exclude any dilutive effects of options, warrants and
convertible securities.
There is no impact of Statement 128 on the previous calculation of loss per
share for the financial years ended December 31, 1995, December 31, 1996 or
December 31, 1997. As net losses have been reported in these periods, the
dilutive effects of stock options and warrants were excluded from the
calculation of net loss per share under APB 15.
o Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents.
o Investments
The Company accounts for investments in accordance with Statement of Financial
Accounting Standards 115, "Accounting for Certain Investments in Debt and Equity
Securities". The Company had no investments at December 31, 1996 or December 31,
1997, other than pledged cash (See Note 6--Short term and long term
investments). There were no realized gains or losses on sales of investments in
1995, 1996 or 1997.
PixTech 1997 Annual Report
27
<PAGE>
PixTech, Inc.
(a development stage company)
Notes to Consolidated Financial Statements (continued)
(all amounts in thousands except share amounts)
o Inventory
Inventory is valued at the lower of cost (first-in, first-out basis) or market.
Inventory consists of raw material and spare parts.
o Property, Plant and Equipment
Property, plant and equipment are recorded at cost. Depreciation and
amortization are provided on a straight-line basis over the estimated useful
lives of the assets, generally five years for equipment, ten years for building
improvements and twenty years for buildings. Equipment financed under capital
leases are depreciated over the shorter of the estimated useful life or the
lease term. Amortization expense is included within depreciation expense.
o Impairment of Long-Lived Assets
In January 1996, the Company adopted Statement of Financial Accounting Standard
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of" ("SFAS 121"), which establishes criteria for the
recognition and measurement of impairment loss associated with long-lived
assets. Adoption of SFAS 121 did not have a material impact on the Company's
financial position or results of operations.
o Patents and Other Intangible Assets
Patent application and establishment costs are expensed as incurred as research
and development costs.
Other intangible assets include primarily goodwill. The carrying value of
goodwill is reviewed on an ongoing basis to assess if facts or circumstances
suggest that the Company's goodwill may be impaired. If this review indicates
that goodwill will not be recoverable, based on the expected future cash flows
to be generated by these assets over their remaining amortization period, the
Company's carrying value of the goodwill is reduced by the estimated shortfall
of discounted cash flows.
o Employee Stock Option Plans
In 1996, the Company adopted the disclosure provisions of Statement of Financial
Accounting Standards 123 ("SFAS 123"), "Accounting for Stock Based
Compensation". As permitted by SFAS 123, the Company has elected to continue to
account for its employee stock option plans and the Employee Stock Purchase
Plans in accordance with the provisions of the Accounting Principles Board
Opinion 25 "Accounting for Stock Issued to Employees" ("APB 25"). Under APB 25,
when the exercise price of the Company's employee stock options is less than the
market price of the underlying shares of the date of grant, compensation expense
is recognized.
o Accounting for Income Taxes
The Company uses the liability method in accounting for income taxes. Under this
method, deferred tax assets and liabilities are determined based on differences
between financial reporting and tax bases of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse. A valuation allowance is recorded if it is
more likely than not that some portion or all of the deferred tax asset will not
be realized.
o Pension Costs
In France, legislation requires that lump sum retirement indemnities be paid to
employees based upon their years of services and compensation at retirement. The
actuarial liability of this unfunded obligation as of December 31, 1996 and
December 31, 1997 is $32 and $46, respectively. Pension expense incurred was $13
in 1995, $14 in 1996 and $14 in 1997.
PixTech 1997 Annual Report
28
<PAGE>
PixTech, Inc.
(a development stage company)
Notes to Consolidated Financial Statements (continued)
(all amounts in thousands except share amounts)
3. Other current assets
The components of other current assets are as follows:
================================================================================
December 31,
1996 1997
================================================================================
Value added tax refundable $ 720 $ 882
Grants receivable 2,091 1,210
Other 164 74
================================================================================
$2,975 $2,166
================================================================================
4. Property, Plant and Equipment
The components of Property, Plant and Equipment are as follows:
================================================================================
December 31,
1996 1997
================================================================================
Land $ 249 $ 218
Buildings and improvements 2,843 2,532
Machinery and equipment 16,566 14,941
Furniture and fixtures 1,099 1,089
- --------------------------------------------------------------------------------
20,757 18,780
- --------------------------------------------------------------------------------
Less accumulated depreciation (7,348) (9,427)
================================================================================
$ 13,409 $ 9,353
================================================================================
In 1994, the Company entered into capital lease agreements for production
equipment. The gross and net book values of equipment financed under capital
leases amounted $4,409 and $2,207, respectively, at December 31, 1996 and $3,857
and $947, respectively, at December 31, 1997.
Land and buildings with a net book value of $1,100 at December 31, 1997 have
been pledged to guarantee a $10,000 loan received from Sumitomo Corporation in
November 1997. See note 7--Long-term debt.
5. Goodwill
On February 20, 1996, the Company acquired substantially all the assets of
PanoCorp, Inc. ("Panocorp"), a research and development company located in
California, in a transaction accounted for as a purchase. The assets of
PanoCorp, Inc., principally including 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 per share. See Note
11--Stockholders' Equity Warrants.
The fair value of the 150,000 warrants was computed using the Black-Scholes
model. Pursuant to APB Opinion 16, the value of such warrants was estimated at
$230 and the entire transaction generated goodwill of $360. This goodwill is
being depreciated over 5 years.
The purchase agreement also calls for the issuance of up to 600,000 additional
warrants to the shareholders of PanoCorp, contingent upon the achievement by the
Company of specified technical milestones over the next 3 years. No such
warrants have been issued at December 31, 1997.
PixTech 1997 Annual Report
29
<PAGE>
PixTech, Inc.
(a development stage company)
Notes to Consolidated Financial Statements (continued)
(all amounts in thousands except share amounts)
6. Short-term and long-term investment
In August 1997, the Company provided Unipac Optoelectronics Corp. ("Unipac"),
its Asian manufacturing partner, with a written bank guaranty in an amount of
$10,000 pursuant to the display foundry agreement (the "Foundry Agreement")
signed in May 1997 between the Company and Unipac in order to implement volume
production of FEDs at its manufacturing line. The Company granted the issuing
banks a security interest in its cash and cash equivalents for the same amount.
The pledged cash and cash equivalents have been recorded as short-term and
long-term investments in the balance sheet. Under certain conditions of the
Foundry Agreement, Unipac can sell to the Company certain equipment. The payment
for such equipment will be secured by Unipac through the exercise of the bank
guaranty. Both the amount of the guaranty to Unipac and the amount of the
security interest to the banks will be reduced by 1/24th of the initial amount
at the end of each quarter, starting June 1998.
7. Long-term debt
Long-term debt consists of the following :
================================================================================
December 31,
1996 1997
================================================================================
Loan payable (a) -- $ 10,000
Non interest-bearing loan from ANVAR (b) $ 2,482 2,004
Equipment purchase loans (c) 269 172
Loan payable (d) 118 45
Loan payable (e) 267 167
- --------------------------------------------------------------------------------
3,136 12,388
- --------------------------------------------------------------------------------
Less: current portion (990) (1,364)
- --------------------------------------------------------------------------------
Total long-term debt, less current portion $ 2,146 $ 11,024
================================================================================
(a) In November 1997, Sumitomo Corporation ("Sumitomo") granted PixTech a
$10,000 loan repayable over a period of three years. Of this $10,000
amount, $5,000 represents a straight loan payable in four equal
installments every 6 months starting 18 months after funding, bearing
interest at prime rate plus 0.75% per annum. The remaining amount of $5,000
represents a convertible loan payable in November 2000, bearing interest at
prime rate plus 0.75% per annum, and partially or totally convertible, at
Sumitomo's option into shares of Common Stock of the Company at a
conversion price equal to 80% of the market price on the conversion date.
This option is exercisable starting 1999 and expires November 2000. As part
of the Sumitomo Agreement, the loan is partially secured as follows: (i)
the Company pledged certain PixTech S.A. land and constructions located in
Rousset. See Note 4-- Property, plant and equipment; (ii) the French atomic
energy agency, Commissariat a l'Energie Atomique ("CEA"), has guaranteed
certain contingent payment obligations towards Sumitomo in case of default
by PixTech. See Note 16-- Related parties transactions. In addition, should
the Company default on the repayment of the loan, the Company will remit to
Sumitomo two thirds of any royalty amount received from any licensee until
all obligations to Sumitomo are satisfied.
(b) The Company entered into a development contract with a French Public agency
ANVAR in 1993. Under this agreement, the Company received a non-interest
bearing loan. Repayment of this loan started in 1997.
(c) In 1994, the Company was granted a $686 loan from a supplier of a piece of
particular equipment. This loan is payable in 8 installments of $77,
including interest at 6.50%, over a period of 4 years starting in May 1996.
(d) In 1994, the Company was granted a loan, which bears interest at 5% and is
repayable in 8 installments of approximately $17 over two years starting in
December 1996.
(e) In 1995, the Company was granted a bank loan, which bears interest at 6.37%
and is repayable in 20 installments of approximately $20 over 5 years
starting in July 1995.
PixTech 1997 Annual Report
30
<PAGE>
PixTech, Inc.
(a development stage company)
Notes to Consolidated Financial Statements (continued)
(all amounts in thousands except share amounts)
Future minimum payments under these obligations are as follows:
================================================================================
Year ending December 31,
================================================================================
1998 $ 1,364
1999 5,990
2000 (f) 5,034
================================================================================
Total minimum payments $12,388
================================================================================
(f) Includes the $5,000 convertible loan repayable in November 2000, and
partially or totally convertible into shares of Common Stock of the Company
after April 7, 1999. See note (a) above.
8. Capital leases
================================================================================
December 31,
1996 1997
================================================================================
Capital lease obligations $ 1,753 $ 1,040
Less: current portion (921) (599)
================================================================================
$ 833 $ 441
================================================================================
In December 1994, the Company completed several sale-leaseback transactions
whereby equipment with a net book value of $4,219 was financed through three to
five-year capital lease obligations, effective December 1994. At December 31,
1997, the net book value of this equipment was $ 947.
Future minimum payments under these obligations are as follows:
================================================================================
Year ending December 31,
================================================================================
1998 $ 746
1999 377
2000 146
================================================================================
Total minimum payments 1,269
- --------------------------------------------------------------------------------
Less: amount representing interest (229)
- --------------------------------------------------------------------------------
Present value of minimum capitalized lease payments $ 1,040
================================================================================
9. Commitments and contingencies
o Operating leases
The Company is obligated under operating lease agreements for equipment and
manufacturing and office facilities.
The Company leases certain equipment under a cancelable operating lease with
terms of 60 months through 1999. The total amount of the base rent payments has
been charged as an expense on the straight line method over the term of the
lease.
The Company leases its main manufacturing and office facilities under a
non-cancelable operating lease which expires September 2000.
PixTech 1997 Annual Report
31
<PAGE>
PixTech, Inc.
(a development stage company)
Notes to Consolidated Financial Statements (continued)
(all amounts in thousands except share amounts)
Minimum annual rental commitments under non cancelable leases at December 31,
1997, are as follows :
================================================================================
Year ending December 31,
================================================================================
1998 1,222
1999 1,069
2000 717
2001 3
2002 1
================================================================================
Total minimum payments $3,012
================================================================================
Rental expense for all operating leases consisted of the following:
- --------------------------------------------------------------------------------
1995 1996 1997
- --------------------------------------------------------------------------------
Rent expense for operating leases $1,237 $1,439 $1,245
- --------------------------------------------------------------------------------
o License Agreement and Research and Development Agreement with CEA
See Note 16 -- Related Party Transactions
10. Fair Value of Financial Instruments
At December 31, 1996 and 1997, the carrying values of financial instruments such
as cash and cash equivalents, short term investments, accounts receivable and
payable, other receivables and accrued liabilities and the current portion of
long-term debt approximated their market values, based on the short-term
maturities of these instruments. At December 31, 1997, the fair value of
long-term investments, with total book value of $8,816 was $7,222. At December
31, 1996 and 1997, the fair values of long-term debt and other long-term
liabilities, with book value of $3,517 and $6,455 were $3,128 and $5,739,
respectively. Fair value is determined based on expected future cash flows,
discounted at market interest rates, and other appropriate valuation
methodologies.
11. Stockholders' Equity
The share amounts and per share dollar amounts included herein reflect the
effect of the 2 for 3 reverse stock split which was effective on July 18, 1995.
o Common Stock
On July 18, 1995, the Company sold 2,500,000 shares of common stock for net
proceeds of $20,998 in its initial public offering on Nasdaq.
On February 7, 1997, the Company sold 3,333,000 shares of Common Stock in a
public offering in Europe at a price of $4.50 per share, resulting in net
proceeds of $13,949 before expenses payable by the Company, which amounted to
$796. The Company granted the Underwriters a 30-day option to purchase up to
663,000 shares, and the Underwriters exercised such option and purchased such
shares on February 12, 1997. Including the sale of such shares, the total price
to the public, underwriting discount, and proceeds to the Company before
expenses were $17,982, $1,259, and $16,723, respectively.
PixTech 1997 Annual Report
32
<PAGE>
PixTech, Inc.
(a development stage company)
Notes to Consolidated Financial Statements (continued)
(all amounts in thousands except per share amounts)
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, of which $686 was in cash and $1,400 was in
the form of forgiveness of amounts owed to Motorola.
In February 1997, the Company sold 1,111,111 shares of the Company's Common
Stock to United Microelectronics Corporation, the parent company of Unipac
Optoelectronics Corporation, in a private placement at a price of $4.50 per
share resulting in net cash proceeds of $5,000.
At December 31, 1997, all outstanding shares of the Company are shares of Common
Stock.
o Convertible preferred stock
All of the Company's issued shares of Convertible Preferred Stock automatically
converted into shares of Common Stock upon the closing of the Company's initial
public offering. There is no longer any Convertible Preferred Stock outstanding.
o Preferred Stock
The Company's Board of Directors has the authority to issue up to 1,000,000
shares of Preferred Stock and to fix the relative rights thereof.
o Stock Options
The Company adopted a stock option plan on November 30, 1993 (which was amended
and restated in May 1995 and in April 1997), under which options to purchase
shares of common stock may be granted to key employees and consultants of the
Company. The plan provides that the option price shall be determined by the
Compensation Committee of the Board of Directors and that no portion of the
option may be exercised beyond ten years from the date of grant. Options which
are outstanding at December 31, 1997, become exercisable within a certain period
of time or when specific milestones are completed.
The activity under the option plan was as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
Shares Options Weighted
available outstanding Average
Option Price
per Share
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balances at December 31, 1994 607,642 638,041
Additional shares reserved 533,333 --
Options granted (604,936) 604,936 $2.554
Options exercised -- (6,903) 0.375
Options terminated unexercised 8,000 (8,000) 0.609
- -------------------------------------------------------------------------------------
Balance at December 31, 1995 544,039 1,228,074
=====================================================================================
Options granted (365,850) 365,850 8.018
Options exercised -- (29,083) 0.375
Options terminated unexercised 100,567 (100,567) 2.859
- -------------------------------------------------------------------------------------
Balance at December 31, 1996 278,756 1,464,274
=====================================================================================
Additional shares reserved 800,000 --
Options granted (1,121,050) 1,121,050 4.300
Options exercised -- (52,989) 0.506
Options terminated unexercised 464,193 (464,193) 7.875
- -------------------------------------------------------------------------------------
Balance at December 31, 1997 421,899 2,068,142
=====================================================================================
</TABLE>
PixTech 1997 Annual Report
33
<PAGE>
PixTech, Inc.
(a development stage company)
Notes to Consolidated Financial Statements (continued)
(all amounts in thousands except per share amounts)
Options to purchase 450,556 shares and 748,667 shares were exercisable at
weighted-average exercise prices of $0.789 and $1.110 at December 31, 1996 and
December 31,1997, respectively.
Exercise prices for options outstanding as of December 31, 1997 ranged from
$0.375 to $9.750. The weighted average remaining contractual life of those
options is 7.94 years.
In May 1995, the Company adopted the 1995 Director Stock Option Plan (the
"Director Stock Plan"), which provides for the issuance of up to 50,000 shares
of the Company's stock. The Director Stock Plan provides for an automatic grant
of options to purchase the Company's stock at its fair market value to the
non-employee directors of the Company upon election or re-election to the Board
of Directors. Under the Director Stock Plan, a director was granted 6,000
options at an exercise price of $8.625 in April 1996, and two directors were
both granted 6,000 options at an exercise price of $3.91 per share in April
1997. As the exercise price was equal to market price on the grant date, no
compensation expense was incurred.
Pro forma information regarding net loss and loss per share is required by SFAS
123, and has been determined as if the Company had accounted for its employee
stock options under the fair value method of SFAS 123. The fair value for these
options was estimated at the date of grant using a Black-Scholes option pricing
model with the following average assumptions for both years : risk-free interest
rates of 3%; dividend yields of 0%; volatility factors of the expected market
price of the Company's shares of Common Stock of 0.30 ; and a weighted-average
expected life of the option of 4 years.
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the option's vesting period. The Company's pro
forma information follows (in thousands except for loss per share information) :
================================================================================
1995 1996 1997
================================================================================
Pro forma net loss $(6,352) $(12,073) $(15,026)
Pro forma loss per share $ (.83) $ (1.48) $ (1.14)
================================================================================
The weighted-average fair value of options granted during 1995, 1996 and 1997
were $0.84, $3.95 and $0.18, respectively.
o Warrants
In December 1994, in connection with various equipment leases, the Company
entered into a warrant agreement. Under this agreement, the Company granted a
right to purchase 62,500 shares of Common Stock of the Company at a purchase
price of $2.88 per share. No value was ascribed to the warrant. This warrant
expires on July 18, 2000.
In February 1996, in order to finance partially the purchase of PanoCorp assets,
the Company granted 150,000 warrants to purchase shares of the Company's common
stock at an exercise price of $11.67 per share. See Note 5--Goodwill.
In February 1997, in connection with the purchase of 463,708 shares of the
Company's Common Stock, 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 expire on December 31, 1998. As of December 31, 1997, these warrants have
not been exercised.
PixTech 1997 Annual Report
34
<PAGE>
PixTech, Inc.
(a development stage company)
Notes to Consolidated Financial Statements (continued)
(all amounts in thousands except per share amounts)
o Employee Stock Purchase Plan
In May 1995, the Company adopted an employee stock purchase plan (the "Purchase
Plan") under which employees may purchase shares of Common Stock at a discount
from fair market value. 100,000 shares of Common Stock are reserved for issuance
under the Purchase Plan. To date, no shares have been issued under the Purchase
Plan. Rights to purchase Common Stock under the Purchase Plan are granted at the
discretion of the Compensation Committee, which determines the frequency and
duration of individual offerings under the Plan and the dates when the stock may
be purchased. Eligible employees, which represent all full-time employees (as
defined by the Purchase Plan), participate voluntarily and may withdraw from any
offering at any time before the stock is purchased. The purchase price per share
of Common Stock in an offering is 85% of the lesser of its fair market value at
the beginning of the offering period or on the applicable exercise date and may
be paid through payroll deductions, periodic lump sum payments or a combination
of both. The Purchase Plan terminates on May 9, 2005.
At December 31, 1997, 3,316,249 shares of Common Stock are reserved for shares
issuable under the Purchase Plan or upon exercise of stock options and warrants.
12. Other and deferred revenues
Other revenues and deferred revenues include the following:
<TABLE>
<CAPTION>
====================================================================================
December 31,
1996 1997
Other Deferred Other Deferred
====================================================================================
<S> <C> <C> <C> <C>
Grant from French Ministry of Industry (a) $ 800 $2,091 $ 663 $1,210
Grant from French local authorities (b) 117 1,044 144 913
Grant from European Union, Esprit Program (c) -- -- -- 423
Insurance refund (d) -- -- 292 --
Other (e) 496 91 43 --
====================================================================================
TOTAL $1,413 $3,226 $1,142 $2,546
====================================================================================
</TABLE>
(a) In December 1994, the Company was awarded a grant of $2,800 from the French
Ministry of Industry to support manufacturing of FEDs. This grant covered a
period of two years. In 1996 and 1997, the Company collected $800 and $663,
respectively. Such payments were recognized as income respectively in 1996 and
in 1997, as all conditions have been met.
(b) PixTech SA was awarded certain incentives to establish its manufacturing
facilities in Montpellier, France. These incentives are partially subject to
maintaining an operating facility in this location for a certain period of time.
In 1997, no revenue was recognized in relation to these incentives. Revenue is
deferred until all conditions are met. In 1997, revenue recognized in the amount
of $144 is related to various incentives granted by French local authorities.
(c) In February 1997, the Company entered into an R&D agreement with the
European Union and other European industrial companies for 18 months starting
February 1, 1997. The contribution of the European Union to the costs incurred
by the Company amounts to $840 over the period. The Company received $423 in
1997 from this contribution. This contribution was not recognized as income in
1997 as all conditions stipulated in the agreement were not met.
(d) In September 1997, the Company collected an amount of $620 in payment under
its business insurance policy to cover losses incurred after certain physical
damages suffered in the Company's pilot manufacturing facility in April 1997. An
amount of $328 representing reimbursement of direct costs was recorded as
reduction in research and development expenses. The remaining amount of $292
covering consequential losses was reflected as other revenues in 1997.
(e) Amounts relating to payments received by the Company from entities primarily
for the performance of miscellaneous services.
PixTech 1997 Annual Report
35
<PAGE>
PixTech, Inc.
(a development stage company)
Notes to Consolidated Financial Statements (continued)
(all amounts in thousands except per share amounts)
13. Income Taxes
Income (loss) before income tax benefit consists of the following:
================================================================================
December 31,
1995 1996 1997
================================================================================
France $ (9,792) $(10,556) $(13,567)
Rest of world 767 (1,161) (1,683)
================================================================================
Income (loss) before income tax benefit $ (9,025) $(11,719) $(15,250)
================================================================================
The income tax benefit consists of the following:
================================================================================
December 31,
1995 1996 1997
================================================================================
Deferred:
France $ 2,720 -- $ 586
Rest of world -- -- --
================================================================================
Total $ 2,720 -- $ 586
================================================================================
A reconciliation of income taxes computed at the French statutory rate (41.67%)
to the income tax benefit is as follows:
================================================================================
December 31,
1995 1996 1997
================================================================================
Income taxes computed at the French
statutory rate $ 3,309 $ 4,297 $ 6,354
Operating losses not utilized (3,309) (4,297) (6,354)
Research credits 2,720 -- 586
================================================================================
Total $ 2,720 -- $ 586
================================================================================
No U.S. income tax expense was realized and no U.S. income taxes were paid in
periods ended December 31, 1995, December 31, 1996 and December 31, 1997.
PixTech 1997 Annual Report
36
<PAGE>
PixTech, Inc.
(a development stage company)
Notes to Consolidated Financial Statements (continued)
(all amounts in thousands except per share amounts)
Deferred taxes reflect the net tax effects of temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and
the amounts used for income tax purposes. Significant components of the
Company's deferred taxes consist of the following:
================================================================================
December 31,
1995 1996 1997
================================================================================
Deferred tax assets:
Net operating loss carryforwards $4,357 $6,788 $12,058
Deferred revenue 1,263 1,201 355
Research credit carryforwards 7,087 8,193 8,000
- --------------------------------------------------------------------------------
12,707 16,181 20,413
Deferred tax liabilities:
Revenue not currently taxable (741) -- --
Deferred revenue -- -- (412)
Deferred expense (272) (145) (165)
- --------------------------------------------------------------------------------
Total deferred tax assets 11,694 16,039 19,835
Valuation allowance (6,225) (10,869) (14,777)
- --------------------------------------------------------------------------------
Deferred tax assets $5,469 $5,167 $5,058
================================================================================
Net operating loss carryforwards can be credited against future income in
France. Net operating loss carryforward of: $5,244 expire in 2000, $5,588 in
2001, $10,005 in 2002 and $8,099 can be carried forward indefinitely.
Research credit carryforwards derive from the Company's subsidiary PixTech SA.
In France, research credit carryforwards are calculated following certain rules
defined by the Tax administration. The Company is entitled to full payment by
the Tax administration of these research credit carryforwards if they are not
credited against income tax liabilities within a period of three financial
years. In 1997, the Company collected $29 representing income tax benefit
recorded in 1992.
14. Industry and Geographic information
The Company operates in one industry segment, the development, manufacturing and
licensing of flat panel displays using electron emitters. Operations are
conducted in France. Revenues are principally derived from relationships with
companies in the United States and Japan, and grant revenue from authorities in
France.
15. Significant customers
Historically, the Company derived its revenues principally from members of the
FED Alliance. Net revenues from the FED Alliance customers represented
approximately 90%, 75% and 50% of the Company's net revenues for the fiscal
years 1995, 1996 and 1997, respectively.
Revenues derived from FED Alliance members are of a non-recurring nature.
PixTech 1997 Annual Report
37
<PAGE>
PixTech, Inc.
(a development stage company)
Notes to Consolidated Financial Statements (continued)
(all amounts in thousands except per share amounts)
16. Related Party transactions
In September 1992, the Company entered into a license agreement with CEA. CEA
holds a controlling interest in CEA Industrie, a shareholder of the Company.
Under this agreement, CEA granted to the Company a royalty bearing, worldwide,
exclusive license to all patents held by CEA in the field of FEDs, with a right
to sublicense these patents under certain conditions. The consideration for this
license is a payment of license fees and royalties based on the Company's sales
and the license fees and royalties collected by the Company. No expense was
recorded in 1993 and 1994 with respect to license fees and royalties due to CEA.
In 1995, $1,000 was accrued in respect of license fees and royalties due to CEA
in 1996. In order for the Company to maintain an exclusive license, it was
required to make minimum royalty payments beginning in 1996. An amount of $45
payable to CEA in 1997 was accrued in 1996. By paying the remaining amount due
to LETI, the Company will fulfill the minimum royalty obligations to LETI
through 1998.
On October 22 1997, an amendment to the LETI License Agreement was signed
between the CEA and the Company for a period of three years (the "1997 CEA
Amendment"), in return for CEA guarantying certain contingent payment
obligations towards Sumitomo Corporation ("Sumitomo"). See Note 7 -- Long term
debt. The royalty rates and minimum payments from the Company to CEA are
temporarily increased. In addition, the Company will give a security interest to
CEA on all its patents during the term of the amendment. An amount of $109
payable to CEA in 1998 was accrued in 1997, which included a minimum royalty
obligation of $100 pursuant to the 1997 CEA Amendment.
In September 1992, the Company entered into a three-year renewable R&D agreement
with CEA, under which CEA, through its laboratory LETI, performs certain
research and development activities for the benefit of the Company. This program
was extended for a second three-year period ending on January 1, 1999, subject
to further extension by mutual agreement of the parties. The consideration
received by the CEA for this R&D activity in 1997 amounted to approximately
$640.
In connection with the above R&D agreement with CEA, the Company expensed
$1,700, $644 and $637 in 1995, 1996 and 1997, respectively, of which $1,300,
$644 and $637 is included in research and development costs in 1995, 1996 and
1997, respectively. The balance primarily represents purchases of equipment,
less recoverable value added tax.
17. License
In connection with the Company's license of its technology to an FED Alliance
member, the Company acquired a worldwide, non-exclusive royalty-free license to
such FED Alliance member's background FED technology, as well as a right to
grant royalty-free sublicenses to the other FED Alliance members. The Company
was obligated to pay certain license fees in connection with the acquisition of
these rights from such FED Alliance member; these payments to the FED Alliance
member were $650 in 1995 and $650 in 1996. In 1997, the Company recorded
cooperation and license revenues in the amount of $707, in consideration of the
cancellation of same amount which had been included in accounts payable in
relation to accrued license fees due this FED Alliance member.
In connection with the Company's license of its technology to another FED
Alliance member, the Company also acquired a worldwide, non-exclusive license,
without the right to sublicense, to certain technology of such FED Alliance
member. The Company was obligated to pay certain license fees in connection with
the acquisition of these rights; these payments to the FED Alliance member were
$1,000 in 1995, $1,000 in 1996. The remaining license fees payable to this FED
Alliance member in the amount of $1,400 were canceled in 1997, as consideration
for the purchase by such FED Alliance member of shares of the Company's Common
Stock in February 1997.
PixTech 1997 Annual Report
38
<PAGE>
PixTech, Inc.
(a development stage company)
o Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures
Not Applicable
# PART III
o Item 10. Directors and Executive Officers of the Registrant
The response to this item is contained in part under the caption "Executive
Officers of the Registrant" in Part I, Item 1A hereof and the remainder is
incorporated herein by reference from the discussion responsive thereto under
the caption "Election of Directors" in the Company's Proxy Statement relating to
its Annual Meeting of Stockholders scheduled for March 25, 1998 (the "Proxy
Statement").
o Item 11. Executive Compensation
The response to this item is incorporated herein by reference from the
discussion responsive thereto under the caption "Executive Compensation" in the
Proxy Statement.
o Item 12. Security Ownership of Certain Beneficial Owners and Management
The response to this item is incorporated herein by reference from the
discussion responsive thereto under the caption "Share Ownership" in the Proxy
Statement.
o Item 13. Certain Relationships and Related Transactions
The response to this item is incorporated herein by reference from the
discussion responsive thereto under the caption, "Compensation Committee
Interlocks and Insider Participation" in the Proxy Statement and from Note 16 to
the Financial Statements included herein.
# PART IV
o Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K
(A) 1. FINANCIAL STATEMENTS
The financial statements are listed under Item 8 of this report.
2. FINANCIAL STATEMENT SCHEDULES
The financial statement schedules are listed under Item 8 of this report.
(B) REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the fourth quarter of 1997.
(C) EXHIBITS
- --------------------------------------------------------------------------------
Number Footnote Description
- --------------------------------------------------------------------------------
3.1 1 Restated Certificate of Incorporation of Registrant.
3.2 2 Restated By-Laws of Registrant.
4.1 3 Specimen certificate for shares of Common Stock of the
Registrant.
4.2 3 Warrant to purchase 62,500 shares of Common Stock of the
Registrant issued to Comdisco, Inc.
PixTech 1997 Annual Report
39
<PAGE>
PixTech, Inc.
(a development stage company)
- --------------------------------------------------------------------------------
Number Footnote Description
- --------------------------------------------------------------------------------
4.3 6 Warrant to purchase 150,000 shares of Common Stock of the
Registrant issued to PanoCorp Display Systems, Inc.
4.4 Warrant to purchase 463,708 shares of Common Stock of the
Registrant issued to Motorola, Inc.
4.5 10 Convertible Note issued by Pixtech, Inc. to Sumitomo
Corporation dated October 27, 1997
10.1 3,4,5 License Agreement in the Field of Flat Microtip Screens
dated as of September 17, 1992 between the Registrant and
the Commissariat a l'Energie Atomique (the "CEA"), as
amended.
10.2 3,4,5 Research and Development Agreement in the Field of Flat
Microtip Screens dated September 17, 1992 between the
Registrant and the CEA.
10.3 3,5 Cooperation and License Agreement dated June 29, 1993
between the Registrant and Texas Instruments Incorporated.
10.4 3,5 Cooperation and License Agreement dated November 27, 1993
between the Registrant and Futaba Corporation.
10.5 3,5 License Agreement dated November 27, 1993 between the
Registrant and Futaba Corporation.
10.6 3,5 Cooperation and License Agreement dated June 1, 1994 between
the Registrant and Raytheon Company.
10.7 3 ESPRIT Project: 8730 Active Interest for Multimedia with
Field Emission Display dated December 1, 1993 among the
Registrant and other project participants.
10.8 3 Master Lease Agreement dated December 12, 1994 between
COMDISCO France S.A. and PixTech France.
10.9 3 Purchase Agreement dated December 23, 1994 between COMDISCO
France S.A. and PixTech France.
10.10 3 Guarantee dated November 29, 1994 between the Registrant and
COMDISCO.
10.11 3 Leaseback Agreement dated April 5, 1995 between COMDISCO
France S.A. and PixTech France.
10.12 3,4 Contract between L'Agence Nationale de Valorisation de la
Recherche and PixTech France dated March 3, 1993.
10.13 3,4 Loan agreement between the Banque Worms and PixTech France
dated December 13, 1994, as amended.
10.14 3 Amended and Restated 1993 Stock Option Plan.
10.15 3 1995 Director Stock Option Plan.
10.16 3 1995 Employee Stock Purchase Plan.
PixTech 1997 Annual Report
40
<PAGE>
PixTech, Inc.
(a development stage company)
- --------------------------------------------------------------------------------
Number Footnote Description
- --------------------------------------------------------------------------------
10.17 3 Amended and Restated Investor Rights and Stockholder Voting
Agreement dated as of December 24, 1993, as amended, among
the Registrant and certain of its stockholders.
10.18 3,4 Real Estate Agreement between PixTech France and IBM France
dated February 15, 1994 for space located in Montpellier,
France.
10.19 3,4,5 Agreement of State Support of Technical Development and
Research dated December 30, 1994 between PixTech France and
the Ministry of Industry, Postal Services and
Telecommunications and Foreign Trade.
10.20 3 Form of Indemnification Agreement between the Registrant and
each of its directors.
10.21 3,5 Cooperation and License Agreement dated as of June 12, 1995
between the Registrant and Motorola, Inc.
10.22 6 Lease dated as of July 31, 1995 between the Registrant, as
Lessee, and Pecton Court Associates as Lessor.
10.23 6 Lease dated as of March 1, 1996, between the Registrant, as
Lessee, and Frank Deverse as Lessor.
10.24 6 Registration Rights Agreement between the Registrant and
Panocorp Display Systems, Inc. dated February 20, 1996.
10.25 5,7 Termination Agreement dated July, 15, 1996 between the
Registrant and Texas Instrument Incorporated
10.26 5 Amendment No. 1, dated February 6, 1997, to the Cooperation
and Licence Agreement between the Registrant and Motorola.
10.27 8 Stock Purchase Agreement dated February 14, 1997, between
the Registrant and United Microelectronics Corporation
10.28 8 Stock and Warrant Purchase Agreement dated February 6, 1997
between the Registrant and Motorola, Inc.
10.29 9 Foundry Agreement between PixTech, S.A. and Unipac
Optoelectronics Corporation dated May 22, 1997.
10.30 11 Distribution and Financing Agreement between Sumitomo
Corporation, PixTech Inc. and PixTech S.A. dated as of July
21, 1997
10.31 12 Cross-Licensing Period Extension between Raytheon Company
and Pixel International, S.A. (now PixTech S.A.) dated as of
September 4, 1997.
10.32 13 Amendment No 4 to the License Agreement on the Microtips
Display between Pixtech, S.A. and the Commissariat a
l'Energie Atomique (the "CEA")
PixTech 1997 Annual Report
41
<PAGE>
PixTech, Inc.
(a development stage company)
- --------------------------------------------------------------------------------
Number Footnote Description
- --------------------------------------------------------------------------------
10.33 14 Credit Agreement between Sumitomo Corporation and PixTech,
Inc. dated as of July 21, 1997
11.1 3 Statement re: computation of per share earnings--Pro Forma.
12.1 3 Statement re: computation of ratios.
21.1 3 Subsidiaries of the Registrant.
23.1 Consent of Ernst & Young.
27 Financial Data Schedule
99.1 Important Factors Regarding Forward-Looking Statements.
- --------------------------------------------------------------------------------
(1) Filed as Exhibit 3.2 to the PixTech, Inc. Registration Statement on Form
S-1 (Commission File No. 33-93024) and incorporated herein by reference.
(2) Filed as Exhibit 3.4 to the PixTech, Inc. Registration Statement on Form
S-1 (Commission File No. 33-93024) and incorporated herein by reference.
(3) Filed as an exhibit with the same number to the PixTech, Inc. Registration
Statement on Form S-1 (Commission File No. 33-93024) and incorporated
herein by reference.
(4) English translation filed
(5) Certain confidential material contained in the document has been omitted
and filed separately with the Securities and Exchange Commission pursuant
to Rule 406 of the Securities Act of 1933, as amended.
(6) Filed as an exhibit with the same number to the PixTech, Inc. Form 10-K for
the fiscal year ended December 31, 1995 and incorporated herein by
reference.
(7) Filed as Exhibit 10 to the PixTech, Inc. Form 10-Q for the fiscal quarter
ended June 30, 1996 and incorporated herein by reference.
(8) Filed as an Exhibit with the same number to the PixTech, Inc. Form 10-K for
the fiscal year ended December 31, 1996 and incorporated herein by
reference.
(9) Filed as Exhibit 10 to the PixTech, Inc. Form 10-Q for the fiscal quarter
ended June 30, 1997 and incorporated herein by reference.
(10) Filed as Exhibit 9.1 to the PixTech, Inc. Form 10-Q for the fiscal quarter
ended September 30, 1997 and incorporated herein by reference.
(11) Filed as Exhibit 10.1 to the PixTech, Inc. Form 10-Q for the fiscal quarter
ended September 30, 1997 and incorporated herein by reference.
(12) Filed as Exhibit 10.3 to the PixTech, Inc. Form 10-Q for the fiscal quarter
ended September 30, 1997 and incorporated herein by reference.
(13) Filed as Exhibit 10.4 to the PixTech, Inc. Form 10-Q for the fiscal quarter
ended September 30, 1997 and incorporated herein by reference.
(14) Filed as Exhibit 10.2 to the PixTech, Inc. Form 10-Q for the fiscal quarter
ended September 30, 1997 and incorporated herein by reference.
PixTech 1997 Annual Report
42
<PAGE>
PixTech, Inc.
(a development stage company)
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned.
PIXTECH
Dated: February 18, 1998 By: /S/ JEAN-LUC GRAND-CLEMENT
- ------------------------ -------------------------------
Jean-Luc Grand-Clement,
President
<TABLE>
<CAPTION>
Signature Title Date
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
/S/ JEAN-LUC GRAND-CLEMENT
- ------------------------------
Jean-Luc Grand-Clement President, Chief Executive Officer February 18, 1998
and Chairman of the Board
of Directors (Principal Executive Officer)
/S/ YVES MOREL
- ------------------------------
Yves Morel Chief Financial Officer February 18, 1998
(Principal Financial Officer)
/S/ JEAN-PIERRE NOBLANC
- ------------------------------
Jean-Pierre Noblanc Director February 18, 1998
/S/ PIERRE-MICHEL PICCINO
- ------------------------------
Pierre-Michel Piccino Director February 18, 1998
/S/ WILLIAM C. SCHMIDT
- ------------------------------
William C. Schmidt Director February 18, 1998
/S/ JOHN A. HAWKINS
- ------------------------------
John A. Hawkins Director February 18, 1998
</TABLE>
PixTech 1997 Annual Report
43
<PAGE>
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PixTech 1997 Annual Report
45
<PAGE>
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PixTech 1997 Annual Report
46
<PAGE>
PixTech, Inc.
(a development stage company)
Stockholder and Other Information
o Trademarks
PixTech(R) is a registered trademark of
the Company.
o Auditors
Ernst & Young LLP
787 Seventh Avenue
New York, New York, US 10019
(212) 773- 3000
o Legal Counsel
Palmer & Dodge LLP
One Beacon Street
Boston, Massachusetts 02108
(617) 573-0100
o Transfer Agent & Registrar
American Stock Transfer & Trust Company
40 Wall Street--46th floor
New York, NY 10005
(718) 921-8275
o Annual Meeting of Stockholders
The Annual Meeting of Stockholders of
PixTech, Inc. will be held on Wednesday,
March 25, 1998 at 3 p.m. local time at
the Grand Hyatt, Park Avenue, Grand
Central, in New York, New York.
o Investor Relations Contact
Yves Morel
Chief Financial Officer
PixTech
Avenue Olivier Perroy--Zone Industrielle de Rousset
13790 Rousset--France
Phone: 011-33-4-42-29-10-00
Fax: 011-33-4-42-29-05-09
E-mail: [email protected]
Lippert/Heilshorn & Associates
300 Montgomery Street, Suite 1140
San Fancisco, CA 94104
Phone: (415) 433-3777
Fax: (415) 433-5577
E-mail: [email protected]
Actus Finance & Communication
11, rue Quentin Bauchart
75008 Paris, France
Phone : 011-33-1-53-67-36-36
Fax : 011-33-1-53-67-36-37
E-mail: [email protected]
o Market for Common Stock
NASDAQ National Market Symbol: PIXT
EASDAQ Market Symbol : PIXT
o Stock Prices
================================================================================
FY 1998 FY 1997
High Low High Low
================================================================================
Fourth Quarter -- -- $3 7/8 $2
Third Quarter -- -- $4 1/4 $3 1/8
Second Quarter -- -- $4 3/4 $3 3/8
First Quarter (*) $3 3/4 $2 7/16 $6 3/8 $4 1/8
================================================================================
(*) for the period from January 1,1998 to February 9, 1998.
On February 9, 1998, there were approximately 69 stockholders of record. The
Company has never declared or paid any cash dividends on its Common Stock and
does not anticipate doing so in the foreseeable future.
<PAGE>
PixTech, Inc.
(a development stage company)
Corporate Information
================================================================================
o Directors o Executive Officers
Jean-Luc Grand-Clement (3) Jean-Luc Grand-Clement
Chairman, CEO and President Chairman, CEO and President
William Schmidt (2)(3) Richard Rodriguez
Vice President Executive Vice President
Advent International Chief Operating Officer
Pierre-Michel Piccino (1) Francis G. Courreges
Senior Partner Executive Vice President
Baring Venture Partners Ltd
Jean-Jacques Louart
Jean-Pierre Noblanc (2) Vice President, Operations
Director of Electronics Components
CEA industrie Michel Garcia
Vice President, Industrial Partners
John Hawkins (1)
Managing Partner Thomas Holzel
Generation Partners Vice President, Sales and Marketing
Yves Morel
(1) Member of the Compensation Committee Chief Financial Officer
(2) Member of the Audit Committee
(3) Director Nominee
================================================================================
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement on
Form S-8 pertaining to the 1995 Director Stock Option Plan of PixTech, Inc. of
our report dated February 9, 1998, with respect to the consolidated financial
statements of PixTech, Inc. included in the Annual Report (Form 10-K) for the
year ended December 31, 1997.
ERNST & YOUNG LLP
New York, New York
February 17, 1998
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<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 12,428
<SECURITIES> 0
<RECEIVABLES> 953
<ALLOWANCES> 0
<INVENTORY> 702
<CURRENT-ASSETS> 17,590
<PP&E> 9,353
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<TOTAL-ASSETS> 41,648
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<BONDS> 0
0
0
<COMMON> 138
<OTHER-SE> 54,935
<TOTAL-LIABILITY-AND-EQUITY> 41,648
<SALES> 745
<TOTAL-REVENUES> 3,819
<CGS> 0
<TOTAL-COSTS> 19,412
<OTHER-EXPENSES> 0
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<INTEREST-EXPENSE> 470
<INCOME-PRETAX> (15,250)
<INCOME-TAX> 586
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