FORM 10-Q
---------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2000
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ______ to ______
Commission file number 0-26380
______________________________________________________
PIXTECH, INC.
(Exact name of registrant as specified in its charter)
Delaware 04-3214691
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
Avenue Olivier Perroy, 13790 Rousset, France
2700 Augustine Drive, Suite 255, Santa Clara, CA 95054
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(Address of principal executive offices) (Zip code)
011-33-4-42-29-10-00
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
The number of shares outstanding of each of the issuer's classes of Common Stock
as of
Class Outstanding at August 10, 2000
---------------------------- ------------------------------
Common Stock, $.01 par value 54,873,712
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PIXTECH, INC.
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TABLE OF CONTENTS
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PART I FINANCIAL INFORMATION
ITEM 1 Financial Statements
Condensed Consolidated Balance Sheets as of June 30, 2000
and December 31, 1999 3
Condensed Consolidated Statements of Comprehensive Operations
for the Three Months Ended June 30, 2000 and 1999, for the Six
Months Ended June 30, 2000 and 1999, and the period from
June 18, 1992 (date of inception) through June 30, 2000 4
Condensed Consolidated Statements of Cash Flows for the Six
Months ended June 30, 2000 and 1999, and the period from June 18,
1992 (date of inception) through June 30, 2000 5
Condensed Consolidated Statements of Stockholders' Equity 6
Notes to Condensed Consolidated Financial Statements 7 - 10
ITEM 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations 11 - 14
ITEM 3 Quantitative and Qualitative Disclosures Regarding Market Risk 14
PART II OTHER INFORMATION
ITEM 2 Changes in Securities 15
ITEM 4 Submission of Matters to a Vote of Security Holders 16
ITEM 6 Exhibits and Reports on Form 8-K 16
Signature 17
Exhibit Index 18
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2
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<CAPTION>
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
JUNE 30, DECEMBER 31,
2000 1999
------------ --------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets :
Cash and cash equivalents available $ 24,130 $ 14,663
Restricted cash - short term 833 1,667
Accounts receivable:
Trade 173 57
Other 1,281 709
Inventory 1,163 1,109
Other 1,209 651
------------ --------------
Total current assets 28,789 18,856
Restricted cash - long term 833 5,833
Property, plant and equipment, net 21,982 24,933
Goodwill, net 42 78
Deferred tax assets -- 1,255
Deferred offering costs -- --
Other assets - long term 49 214
------------ --------------
Total assets $ 51,695 $ 51,169
============ ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities :
Current portion of long term debt $ 1,211 $ 8,128
Current portion of capital lease obligations 255 2,455
Accounts payable 7,176 7,548
Accrued expenses 2,256 2,135
------------ --------------
Total current liabilities 10,898 20,266
Deferred revenue 397 248
Long term debt, less current portion 3,217 3,075
Capital lease obligation, less current portion 5,802 7,644
Other long term liabilities, less current portion 38 52
------------ --------------
Total liabilities 20,352 31,285
============ ==============
STOCKHOLDERS' EQUITY
Convertible preferred stock Series E, $0.01 par value, authorized
shares-1,000,000 ; issued and outstanding shares-22,095 and 297,269
respectively 1 3
Common Stock, $0.01 par value, authorized shares-100,000,000
and 60,000,000 respectively; issued and outstanding shares-54,873,712
and 37,351,283 respectively . 548 373
Additional paid-in capital . 130,555 105,081
Cumulative other comprehensive income . (3,804) (2,988)
Deficit accumulated during development stage . (95,957) (82,585)
------------ --------------
Total stockholders' equity . . . . . . . . . . . . . . . . . 31,343 19,884
------------ --------------
Total liabilities and stockholders' equity . . . . . . . . . $ 51,695 $ 51,169
============ ==============
</TABLE>
See accompanying notes.
3
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<CAPTION>
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Period from
June 18, 1992
(date of
Three Months Six Months inception)
Ended June 30, Ended June 30, through
------------------ -------------------- June 30,
2000 1999 2000 1999 2000
-------- -------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Revenues
Cooperation and license revenues $ -- $ -- $ -- $ -- $ 26,449
Product sales 131 178 217 339 3,527
Other revenues 2,009 314 3,913 2,314 14,727
-------- -------- --------- --------- ----------
Total revenues 2,140 492 4,130 2,653 44,703
-------- -------- --------- --------- ----------
Cost of revenues
License fees and royalties (94) (85) (182) (172) (2,059)
-------- -------- --------- --------- ----------
Gross margin 2,046 407 3,948 2,481 42,644
-------- -------- --------- --------- ----------
Operating expenses
Research and development:
Acquisition of intellectual property
rights -- -- (57) -- (5,022)
Other (7,920) (6,616) (15,714) (12,203) (115,423)
-------- -------- --------- --------- ----------
(7,920) (6,616) (15,771) (12,203) (120,445)
Marketing and sales (258) (329) (571) (680) (8,457)
Administrative and general (684) (772) (1,497) (1,502) (17,296)
-------- -------- --------- --------- ----------
expenses
(8,862) (7,717) (17,839) (14,385) (146,198)
-------- -------- --------- --------- ----------
Loss from operations (6,816) (7,310) (13,892) (11,904) (103,555)
Other income / (expense)
Interest income 274 297 612 471 4,260
Interest expense (134) (395) (443) (835) (4,854)
Foreign exchange gains / (losses) (27) (621) 332 (1,137) 282
Other expenses / (revenues) 17 -- 17 -- 17
-------- -------- --------- --------- ----------
130 (719) 518 (1,501) (295)
Loss before income tax benefit (6,686) (8,029) (13,373) (13,405) (103,849)
Income tax benefit -- -- -- -- 7,893
-------- -------- --------- --------- ----------
Net loss $(6,686) $(8,029) $(13,373) $(13,405) $ (95,956)
======== ======== ========= ========= ==========
Dividends accrued to holders of
Preferred Stock (8) (165) (97) (299) (622)
-------- -------- --------- --------- ----------
Net loss to holders of Common Stock $(6,694) $(8,194) $(13,470) $(13,704) $ (96,578)
======== ======== ========= ========= ==========
Net loss per share of Common $ (0.13) $ (0.43) $ (0.29) $ (0.80)
Stock ======== ======== ========= =========
Shares of Common Stock used in
computing net loss per share 51,718 18,462 46,140 16,816
Net loss $(6,686) $(8,029) $(13,373) $(13,405) $ (95,956)
Change in other comprehensive (66) (116) (812) (787) (3,804)
-------- -------- --------- --------- ----------
income
Comprehensive net loss $(6,752) $(8,145) $(14,185) $(14,192) $ (99,760)
======== ======== ========= ========= ==========
</TABLE>
See accompanying notes.
4
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
PERIOD FROM
JUNE 18, 1992
SIX MONTHS ENDED (DATE OF
JUNE 30, INCEPTION)
THROUGH
JUNE 30,
-------------------- ---------
2000 1999 2000
--------- --------- ---------
<S> <C> <C> <C>
Net loss $(13,373) $(13,405) $(95,956)
Total adjustments to net loss 5,175 5,131 37,802
--------- --------- ---------
(8,198) (8,274) (58,154)
Net cash used in operating activities
INVESTING ACTIVITIES
Additions to property plant and equipment (1,327) (396) (21,882)
Reclassification of restricted cash as cash available 5,833 1,299 (1,815)
Additions to intangible assets -- -- (130)
--------- --------- ---------
Net cash provided by / (used in) investing activities 4,506 903 (23,827)
FINANCING ACTIVITIES
Stock issued 18,212 4,198 110,821
Proceeds from long-term borrowings -- -- 18,301
Proceeds from sale leaseback transactions -- -- 2,731
Payments for equipment purchases financed by accounts payable -- -- (3,706)
Repayments of long term borrowing and capital lease obligations (4,290) (360) (18,132)
--------- --------- ---------
Net cash provided by financing activities 13,922 3,838 110,015
Effect of exchange rates on cash (763) 384 (3,904)
--------- --------- ---------
Net (decrease) / increase in cash and cash equivalents 9,467 (3,149) 24,130
Cash and cash equivalents beginning of period 14,663 10,166 --
--------- --------- ---------
$ 24,130 $ 7,017 $ 24,130
========= ========= =========
Cash and cash equivalents end of period
</TABLE>
See accompanying notes.
5
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CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
Series E Common Stock
--------- ----------------
Additional
Shares Shares Paid-in
Issued Amount Issued Amount Capital
--------- ---- ---------- ---- ---------
<S> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1996 8,141,146 $ 81 $ 34,085
Common Stock issued in public offering, net of issuance costs -- $796 5,570,819 56 22,958
Issuance of Common Stock under stock option plan 50,767 1 25
Translation adjustment
Net loss-Year ended Dec. 31, 1997
BALANCE AT DECEMBER 31, 1997 13,762,732 $138 $ 57,067
Common Stock issued in private placements, net of issuance costs -- $44 1,236,222 12 4,493
Issuance of Series E convertible preferred stock, net of issuance costs -- $822 367,269 4 7,449
Issuance of Common Stock under stock option plan 1,375 1
Translation adjustment
Net loss-Year ended Dec. 31, 1998
BALANCE AT DECEMBER 31, 1998 367,269 $ 4 15,000,329 151 69,012
Common Stock issued in private placements 150,000 1 350
Issuance costs and dividends accrued in relation to Series E convertible (36)
preferred stock issued in December 1998
Conversion of Series E preferred stock (70,000) (1) 1,114,220 11 (10)
Issuance of Common Stock in connection with the acquisition of certain assets
of Micron Display, net of issuance costs -- $511 7,133,562 71 14,134
Issuance of warrants 297
Issuance of Common Stock following conversion of Sumitomo convertible loan 750,000 7 1,081
Issuance of Common Stock under stock option plan 137,217 1 72
Issuance of Common Stock in connection with Equity Line Kings-bridge, 624,809 6 818
net of issuance costs -- $176
Issuance of Common Stock in connection with private placement, 12,427,146 124 19,839
net of issuance costs -- $36
Issuance of Common Stock in connection with Coloray 14,000 1 50
Translation adjustment
Net loss-Year ended Dec. 31, 1999
BALANCE AT DECEMBER 31, 1999 297,269 $ 3 37,351,283 $373 $105,606
Dividends accrued in relation to Series E convertible preferred stock issued
in December 1998 (unaudited)
Conversion of Series E preferred stock (unaudited) (275,174) (3) 4,195,254 42 (36)
Issuance of Common Stock following conversion of Sumitomo 2,126,246 21 3,890
convertible loan (unaudited)
Issuance of Common Stock following conversion of Sumitomo straight loan (unaudited) 385,549 4 2,496
Issuance of Common Stock in connection with Kingsbridge Equity Line, 1,204,191 12 3,391
net of issuance costs $(unaudited))
Issuance of Common Stock in connection with Coloray (unaudited) 16,000 0 57
Issuance of Common Stock in connection with private placement, 9,320,359 93 14,857
net of issuance costs -- $50 (unaudited)
Issuance of Common Stock under stock option plan (unaudited) 274,830 3 350
Translation adjustment (unaudited)
Net loss-Six Months ended June 30, 2000 ( unaudited)
BALANCE AT JUNE 30, 2000 (UNAUDITED) 22,095 $ 1 54,873,712 $549 $130,609
==================================================================================== ========= ==== ========== ==== =========
Dividends Deficit
accrued to Other accumu-
holders of Compre- lated during
Preferred hensive develop-
Stock Income ment stage Total
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<S> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1996 $ (438) $(21,629) $ 12,099
Common Stock issued in public offering, net of issuance costs -- $796 23,014
Issuance of Common Stock under stock option plan 25
Translation adjustment (1,694) (1,694)
Net loss-Year ended Dec. 31, 1997 (14,664) (14,664)
BALANCE AT DECEMBER 31, 1997 (2,132) (36,293) 18,780
Common Stock issued in private placements, net of issuance costs -- $44 4,506
Issuance of Series E convertible preferred stock, net of issuance costs -- $822 (12) 7,440
Issuance of Common Stock under stock option plan 1
Translation adjustment 392 392
Net loss-Year ended Dec. 31, 1998 (17,863) (17,863)
BALANCE AT DECEMBER 31, 1998 (12) (1,740) (54,156) 13,257
Common Stock issued in private placements 352
Issuance costs and dividends accrued in relation to Series E convertible (512) (548)
preferred stock issued in December 1998
Conversion of Series E preferred stock
Issuance of Common Stock in connection with the acquisition of certain assets
of Micron Display, net of issuance costs -- $511 14,205
Issuance of warrants 297
Issuance of Common Stock following conversion of Sumitomo convertible loan 1,088
Issuance of Common Stock under stock option plan 73
Issuance of Common Stock in connection with Equity Line Kings-bridge, 824
net of issuance costs -- $176
Issuance of Common Stock in connection with private placement, 19,963
net of issuance costs -- $36
Issuance of Common Stock in connection with Coloray 51
Translation adjustment (1,249) (1,249)
Net loss-Year ended Dec. 31, 1999 (28,428) (28,428)
BALANCE AT DECEMBER 31, 1999 $(525) $(2,989) $(82,584) $ 19,884
Dividends accrued in relation to Series E convertible preferred stock issued (98) (98)
in December 1998 (unaudited)
Conversion of Series E preferred stock (unaudited) 568 571
Issuance of Common Stock following conversion of Sumitomo 3,911
convertible loan (unaudited)
Issuance of Common Stock following conversion of Sumitomo straight loan (unaudited) 2,500
Issuance of Common Stock in connection with Kingsbridge Equity Line, 3,403
net of issuance costs $(unaudited))
Issuance of Common Stock in connection with Coloray (unaudited) 57
Issuance of Common Stock in connection with private placement, 14,950
net of issuance costs -- $50 (unaudited)
Issuance of Common Stock under stock option plan (unaudited) 353
Translation adjustment (unaudited) (815) (815)
Net loss-Six Months ended June 30, 2000 ( unaudited) (13,373) (13,373)
BALANCE AT JUNE 30, 2000 (UNAUDITED) $ (55) $(3,804) $(95,957) $ 31,343
==================================================================================== ====== ======== ========= =========
</TABLE>
See accompanying notes
6
<PAGE>
PIXTECH, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(ALL AMOUNTS IN THOUSANDS EXCEPT SHARE AMOUNTS)
NOTE A - BASIS OF PRESENTATION
The financial information as of June 30, 2000, and for the three-month and
six-month periods ended June 30, 2000 and 1999 is unaudited but includes all
adjustments, which are of a normal recurring nature and, in the opinion of
management, necessary for a fair presentation of the financial position and
results of operations for the periods presented. The accompanying unaudited
condensed consolidated financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
Operating results of the three-month and six months periods ending June 30, 2000
are not necessarily indicative of the results that may be expected for the year
ending December 31, 2000. For further information, refer to the consolidated
financial statements and footnotes thereto for the year ended December 31, 1999
included in our Annual Report on Form 10-K filed with the Security and
Exchange Commission on March 28, 2000.
NOTE B - RESTRICTED CASH
In August 1997, we provided Unipac Optoelectronics Corp. ("Unipac"), our Asian
manufacturing partner, with a written bank guaranty in the amount of $10,000
pursuant to the display foundry agreement (the "Foundry Agreement") signed in
May 1997 between Unipac and us in order to implement volume production of field
emission displays at Unipac's manufacturing facility. We granted the issuing
banks a security interest in cash and cash equivalents for the same amount. The
pledged cash and cash equivalents have been recorded as short-term and long-term
restricted cash on the balance sheet.
In March 2000, pursuant to an agreement dated December 17, 1999 signed with
Unipac, the guaranty was reduced by $5,000 in consideration of a payment in cash
of same amount to Unipac. Pursuant to the terms of this agreement, this $5,000
payment will be considered as a prepayment against our future payments to Unipac
concerning the equipment leased by Unipac to us. Consequently, the amount of
the security interest to the banks was reduced to $1,666 at June 30, 2000 (see
Note D - Capital Leases).
NOTE C - PROPERTY, PLANT AND EQUIPMENT
Pursuant to the Foundry Agreement, volume FED production equipment was installed
at Unipac's facility. That equipment was purchased and funded by Unipac, and a
portion of it is leased to us. This portion amounted to $10,886 at June 30,
2000. According to Financial Accounting Standard 13, "Accounting for Leases",
this equipment was recorded as assets under the caption "Property, Plant and
Equipment" in the net amount of $7,444 at June 30, 2000. Depreciation of $899
was recorded during the six-month period ended June 30, 2000. As of June 30,
2000, the related capital lease obligation amounted to $5,494, all recorded as
long term portion.
NOTE D - CAPITAL LEASES
We are party to certain sale-leaseback transactions for equipment used in our
pilot production plant in Montpellier and, pursuant to the Foundry Agreement, a
portion of volume field emission displays production equipment installed at
Unipac's facility is leased to us. According to Financial Accounting Standard
13, "Accounting for Leases", a capital lease obligation was recorded in 1998.
During the six-month period ended June 30, 2000, the related capital lease
obligation was reduced by $5,000 following the prepayment of the same amount
made in cash to Unipac and amounted to $5,494 at June 30, 2000 (See Note
B-Restricted Cash and Note C-Property, Plant and Equipment).
7
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PIXTECH, INC.
(A DEVELOPMENT STAGE COMPANY)
Future minimum payments under capital lease obligations at June 30, 2000 are as
follows:
YEARS ENDING DECEMBER 31,
2000 . . . . . . . . . . . . . . . . . . . . . . . . . $ 305
2001 . . . . . . . . . . . . . . . . . . . . . . . . . 541
2002 . . . . . . . . . . . . . . . . . . . . . . . . . 298
2003 .. . . . . . . . . . . . . . . . . . . . . . . . 3,352
2004 .. . . . . . . . . . . . . . . . . . . . . . . . 2,299
-------
Total minimum payments .. . . . . . . . . . . . . . . 6,795
Less amount representing interest . . . . . . . . . . (738)
-------
Present value of minimum capitalized lease payments . $6,057
=======
NOTE E - LONG TERM DEBT
During the six-month period ended June 30, 2000, long term debt was reduced
by $6,775. The reduction was mainly due to the conversion into shares of our
Common Stock. The shares were converted from a convertible note and a note
payable issued to Sumitomo Corporation in 1997. The principal amounts due on
December 31, 1999 were $3,912 and $2,500 respectively (See Note G-Stockholders'
equity).
Long-term debt consists of certain loans payable under which future minimum
payments, at June 30, 2000, are as follows:
YEARS ENDING DECEMBER 31,
2000. . . . . . . . . . $1,014
2001. . . . . . . . . . 634
2002. . . . . . . . . . 1,156
2003. . . . . . . . . . 189
2004. . . . . . . . . . 184
2005. . . . . . . . . . 1,251
------
Total minimum payments $4,428
======
NOTE F - MICRON TRANSACTION
On March 19, 1999, we entered into a definitive agreement to purchase
certain assets of Micron Technology, Inc. relating to field emission displays
including equipment and other tangible assets, certain contract rights and cash
(the "Micron Transaction"). We closed the Micron Transaction on May 19, 1999 and
we accounted for it as an acquisition of assets.
The financial statements as of June 30, 2000 reflect the acquisition of
assets for a cost of $17,932 and the assumption of certain liabilities in the
amount of $2,958. In consideration of the Micron Transaction, we issued
7,133,562 shares of our Common Stock, representing a total amount of $14,205,
and a warrant to purchase 310,000 shares of our Common Stock to Micron
Technology, Inc. The Black-Scholes model was used to compute the fair value of
the warrant. The fair value was estimated to $257.
The estimated fair value of net assets acquired in the Micron Transaction
was approximately $9,157 in excess of the cost of net assets acquired.
Consequently, the estimated fair value of property, plant and equipment of
$22,473 was proportionally reduced to represent the actual cost. In addition, we
received cash in the amount of $4,350. Therefore, of the assets acquired for
$17,932, $13,316 was reflected under the caption "Property, Plant and
Equipment", and $4,350 under the caption "Cash and Cash equivalents available ".
8
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PIXTECH, INC.
(A DEVELOPMENT STAGE COMPANY)
The following unaudited pro forma financial information presents the combined
results of operations for the six-months ended June 30, 2000 and June 30, 1999,
as if the transaction had been completed as of January 1, 1999, after giving
effect to certain adjustments, including additional personnel costs and
depreciation expenses. The pro forma financial information does not necessarily
reflect the results of operations that would have occurred if the transaction
been completed at the beginning of the period indicated.
<TABLE>
<CAPTION>
SIX MONTHS ENDED SIX MONTHS ENDED
------------------ ------------------
JUNE 30, 2000 JUNE 30, 1999
------------------ ------------------
<S> <C> <C>
Net loss $ (13,380) $ (17,083)
Net loss to holders of Common Stock $ (13,477) $ (17,870)
Net loss per share of Common Stock $ (0.29) $ (0.77)
</TABLE>
NOTE G - STOCKHOLDERS' EQUITY
Common Stock :
In January and February 2000, we issued 2,126,246 shares of our Common Stock to
Sumitomo Corporation upon the conversion in full of $3,912 then outstanding
under a $5,000 convertible note issued in 1997. This note, with a principal due
of $3,912 at December 31, 1999, was convertible at Sumitomo Corporation's option
into shares of our Common Stock at a conversion price equal to 80% of the market
price of the Common Stock at the conversion date.
In March 2000, we converted the entire outstanding amount of a loan by Sumitomo
Corporation previously payable in two settlements of $1,250 each in May 2000 and
November 2000 through the issuance of 385,549 shares of our Common Stock at a
price of $6.48 per share of Common Stock, for an aggregate consideration of
$2,500.
In March 2000, in connection with an agreement signed with Coloray Display
Corporation, we issued 16,000 shares of our Common Stock, valued at a price of
$3.57 per share, representing a total amount of $57 in consideration for the
transfer to us of the rights and obligations of Micron Technology, Inc. under
the license agreement dated as of April 8, 1992 between Coloray Display
Corporation and Micron Technology, Inc.
On August 9, 1999, we secured a $15,000 equity-based line of credit with
Kingsbridge Capital Ltd. Under the terms of the equity line, we can draw up to
$15,000 cash in exchange for our Common Stock, in increments over a two-year
period. The decision to draw on any of the funds and the timing and account of
any such draw are at our sole discretion, subject to certain conditions. Such
conditions include limitations depending on the volume and the market price of
our Common Stock. During the six months ended June 30, 2000, we issued 1,204,191
shares of Common Stock, representing $3,403 ($3,500, less issuance costs of
$97). Through June 30, 2000, out of the maximum amount of $15,000, we have drawn
a total amount of $ 4,500.
In April 2000, pursuant to an amendment, signed in February 2000, to the Common
Stock Purchase Agreement dated October 6, 1999 with Unipac, we received $15,000
upon the completion of an equity private placement to United Microelectronics
Corporation, approved by the stockholders during a special meeting held on
January 18, 2000. In consideration for this investment, United Microelectronics
Corporation received 9,320,359 shares at a purchase price of $1.6094 per share
of Common Stock.
Convertible Preferred Stock:
In the six-month period ended June 30, 2000, we issued an aggregate of 4,195,254
shares of Common Stock upon the conversion of an aggregate of 275,174 shares of
Series E Preferred Stock at an average conversion price of $1.60938. At June
30, 2000, there were 22,095 shares of Series E Preferred Stock outstanding.
These shares of Series E Preferred Stock were convertible into shares of Common
Stock using a conversion price equal to the lesser of approximately $1.60938 per
share of Common Stock or the average closing price of our Common Stock over the
ten trading days immediately preceding the notice of conversion.
9
<PAGE>
PIXTECH, INC.
(A DEVELOPMENT STAGE COMPANY)
The holders of Series E Preferred Stock are entitled to cumulative dividends. At
June 30, 2000 a dividend of $55 was accrued and recorded against stockholders'
equity.
In addition, we are required to reserve, out of the authorized but unissued
shares, 150% of the number of shares of Common Stock that the Series E Stock are
convertible into. As of June 30, 2000, the Series E Stock would have been
convertible into 343,541 shares of Common Stock, thus requiring us to reserve
515,312 shares of the remaining authorized but unissued shares.
NOTE H - LITIGATION
We have received correspondence from Futaba Corporation and its legal counsel
since January 1998 alleging the following; (i) PixTech is infringing one or more
patents owned by Futaba relating to the construction and manufacture of its
displays that are not expressly included under the license agreement between
Futaba and PixTech, (ii) PixTech's use of terms such as "alliance" and
"partners" in describing the nature of its contractual relationships with
Motorola, Raytheon and Futaba in reports filed with the SEC is misleading and
(iii) certain provisions in the Foundry Agreement with Unipac constitute an
impermissible sublicense of Futaba technology. Futaba has also claimed that we
improperly supplied certain Futaba proprietary information to Unipac, and that
Unipac has in turn disclosed such information to a third party vendor. We have
accepted an offer of settlement from Futaba, reflected in correspondence dated
December 15, 1999 and December 30, 1999, pursuant to which Futaba has waived
these claims against us. We are currently preparing a definitive written
settlement agreement with Futaba.
To our knowledge, there are no other exceptional facts or litigation that could
have or that have in the recent past had any significant impact on our business,
results, financial situation, or assets and liabilities.
NOTE I - FINANCIAL POSITION
During the six-month period ended June 30, 2000, we have continued to experience
losses and have used cash in operating activities of $8,198. As of June 30,
2000, we had a net working deficit of $7,072 and a deficit accumulated during
development stage of $95,957. During the six month period ended June 30, 2000,
we reduced both (i) our long term debt by $6,775, essentially with the
completion of the conversion into shares of our Common Stock of the Sumitomo
Corporation notes issued in 1997, and (ii) our capital lease obligation mainly
in connection with the prepayment of $5,000 made to Unipac out of our restricted
cash. We also received $3,403 from the Kingsbridge equity line. In addition, we
have significantly improved our liquidity and financial position with the
completion, in April 2000, of a $15,000 equity private placement with United
Microelectronics. We expect that cash available at June 30, 2000, with the
anticipated proceeds from the Kingsbridge equity-based line of credit, and cash
from various grants and loans, and from research and development tax credits,
will be sufficient to meet our cash requirements for the near future. We intend
to continue improving our liquidity and financial position through capital
increases. There can, however, be no assurance that additional funds will be
available through capital increases when needed or on terms acceptable to us.
NOTE J -SIGNIFICANT CONTRACT
On April 3rd, 2000, we announced that we have been awarded a development
contract by DARPA (Defense Advanced Research Projects Agency). Under the terms
of the contract, PixTech will receive approximately $6.3 million for the
development and demonstration of a full color, full video rate, 12.1-inch Field
Emission Display. After delivery the displays will undergo testing and
evaluation for use in U.S. military vehicles.
This funding is in addition to and a continuation of the existing contract,
which was transferred from Micron Technology, Inc. to PixTech in August of 1999.
10
<PAGE>
PIXTECH, INC.
(A DEVELOPMENT STAGE COMPANY)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
This Management Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements reflecting management's current
expectation regarding our future financial performance. Such expectations are
based on certain assumptions and involve risks and uncertainties. These
uncertainties include, but are not limited to, the risk associated with
transitioning to high volume manufacturing of field emission display at Unipac,
product demand and market acceptance risks, the commitment of Unipac and/or of
our licensees, our ability to grant other licenses under field emission display
technology, the validity and enforceability of our patent rights, possible
infringement by us of patent rights of others, the impact of competitive
products and prices, product development risks, commercialization or
technological delays or difficulties, trade risks, legal risks, and social and
economic risks. See also "Important Factors Regarding Future Results" described
more fully in Exhibit 99.1 to our Quarterly Report on Form 10-Q filed with the
Securities and Exchange Commission on May 15, 2000.
RESULTS OF OPERATIONS
Product Sales. We recognized product sales of $217,000 in the six-month
period ended June 30, 2000, as compared to $339,000 in the six-month period
ended June 30, 1999. During the second quarter of 2000, the revenues were
$131,000 against $178,000 during the same period last year. In the six-month
periods ended June 30, 1999 and 2000, product revenues primarily consisted of
shipments of displays sold at volume prices to Zoll Medical. Since the last
quarter of 1998, we have begun shipping our field emission displays manufactured
by our contract manufacturer, Unipac, to our customers in limited quantities.
During the six-month period ended June 30, 2000, unit shipments from Taiwan
represented 54% of total shipments, as compared to 21% during the six-month
period ended June 30, 1999. We expect an increase of product shipments from
Taiwan in the second half of 2000.
Other Revenues. Other revenues consist of funding under various public
development contracts and other miscellaneous revenues. We recognized other
revenues of $2,009,000 and $3,913,000 for the second quarter and first half of
2000, respectively, as compared to $314,000 and $2,314,000 in the same periods
of 1999. Of these revenues, in the six-month period ended June 30, 2000,
$3,860,000 was related to a development contract awarded to us by DARPA (Defense
Advanced Research Projects Agency) in August 1999. Under the terms of this
DARPA contract, we recognized and received a total amount of $4.7 million, which
represented the entire amount of this DARPA contract. In April 2000, we began
development efforts on a 12.1-inch color field emission display under the same
DARPA contract of which we have received $512,000 at June 30, 2000. The
aggregate DARPA funding for year 2000, that we are entitled to receive is
approximately $6.3 million.
Other Research and Development Expenses. We expensed $7.9 million and
$15.7 million for research and development costs during the second quarter ended
June 30, 2000 and the first half of 2000, respectively, which represented an
increase of 20% and 30% when compared to the same periods of 1999. The increase
spending for both periods in 2000 include salaries and associated expenses for
in-house research and development activities conducted both in our pilot plant
and our research and development facility in Boise, Idaho, the cost of staffing
and operating our pilot manufacturing facility and the cost of supporting the
transfer and adaptation of our field emission displays technology to Unipac, as
well as obligations to Commissariat l'Energie Atomique under the LETI Research
Agreement dated September 17, 1992, and miscellaneous contract consulting fees.
This increase was due to the costs associated with the research and development
activities conducted in Boise following the Micron Transaction signed at the end
of May 1999, as the prior year period does not include such costs for the entire
period and the transfer of field emission displays manufacturing start up at
Unipac.
11
<PAGE>
PIXTECH, INC.
(A DEVELOPMENT STAGE COMPANY)
Sales and Marketing Expenses. Sales and marketing expenses decrease
21% from $329,000 in the quarter ended June 30, 1999 to $258,000 in the quarter
ended June 30, 2000. We expensed $571,000 for sales and marketing during the
six-month period ended June 30, 2000, as compared to $680,000 during the same
period last year. This variance in sales and marketing expenses reflects
employee reallocation from Marketing and Sales to other departments. However, we
believe sales and marketing expenses may increase in the future, reflecting the
expansion of our sales and marketing organization both in the United States and
in Europe.
General and Administrative Expenses. We expensed $684,000 and $1.4
million in general and administrative during the second quarter ended June 30,
2000, and first half of 2000, respectively, as compared to $772,000 and $1.5
million during the same periods in 1999. The decrease of 16% between the
quarters ended June 30, 1999 and 2000 was attributable to a reduction in
consulting expenses from the previous year.
Interest Income (Expense), Net. Interest income is comprised of
interest on available and restricted cash. Interest expense is comprised of
interest payable on long-term obligations. Net interest income was $140,000 in
the three-month period ended June 30, 2000 and $169,000 in the six-month period
ended June 30, 2000, as compared to a net expense of $98,000 and $364,000 in the
same periods of 1999, reflecting the decrease in long-term liabilities, the
increase in cash available and improved cash management for short term
investments on the money market.
Currency Fluctuations. Although a significant portion of our
revenues are denominated in U.S. dollars, a substantial portion of our operating
expenses are denominated in Euros. Gains and losses on the conversion to U.S.
dollars of assets and liabilities denominated in Euros may contribute to
fluctuations in our results of operations, which are reported in U.S. dollars.
Most of our capital lease obligations are expressed in Taiwanese dollars. In
the past, fluctuations of the parity of the Taiwanese dollar versus the Euro
caused significant foreign exchange gains or losses and may continue to do so in
the future. We recorded a net foreign exchange loss of $27,000 in the second
quarter of 2000 and a gain of $332,000 in the six-month period ended June 30,
2000, as compared to a net foreign exchange loss of $621,000 and $1,137,000
during the same periods last year. We cannot predict the effect of exchange
rate fluctuations on future operating results. To date, we have not undertaken
hedging transactions to cover our currency exposure, but we may do so in the
future.
LIQUIDITY AND CAPITAL RESOURCES
Cash used in operations was $8.1 million during the six-month period ended June
30, 2000, as compared to $8.2 million in the six-month period ended June 30,
1999. This decrease is a result of significant revenues received from DARPA
(Defense Advanced Research Projects Agency), offset by an increase in expenses
incurred by our research and development team in Boise, Idaho.
We have used $58.1 million in cash to fund our operations since inception
through June 30, 2000 and have incurred $23.8 million in capital expenditures
and investments.
Capital expenditures were $1,327,000 during the six-month period ended June 30,
2000 as compared to $396,000 during the same period in 1999. These capital
expenditures exclude assets acquired under capital lease obligations. During
the six-month period ended June 30, 2000, capital expenditures remained focused
on capacity expansion in the Boise, Idaho manufacturing facility. Implementing
volume production at Unipac's manufacturing plant required significant capital
expenditures. Pursuant to the Foundry Agreement, Unipac funded a $14.7 million
capital expenditure for equipment. A portion of that equipment is leased to us
and the gross amount of this equipment is $10.9 million as of June 30, 2000. We
expect that additional capital expenditures will be required in the second half
of 2000 and in 2001 to increase capacity at Unipac and to complete
implementation of manufacturing processes, for both monochrome and color
products.
During the six-month period ended June 30, 2000, restricted cash was
reclassified as cash available in the amount of $5.8 million. Restricted cash
was related to the security interest corresponding to the guaranty granted to
Unipac in connection with the purchase and funding by Unipac of volume field
emission displays production equipment. In March 2000, pursuant to an agreement
dated December 17, 1999 signed with Unipac, the guaranty was reduced by $5.0
million in consideration of a payment in cash of same amount to Unipac. Pursuant
to the terms of this agreement, this $5.0 million payment will be considered as
a prepayment against our future payments to Unipac concerning the equipment
leased by Unipac to us. Consequently, the amount of the security interest to
the banks was reduced by the same amount and amounted to $1,666,000 at June 30,
2000.
12
<PAGE>
PIXTECH, INC.
(A DEVELOPMENT STAGE COMPANY)
Cash flows generated by financing activities were $13.9 million in the six-month
period ended June 30, 2000, as compared to $3.8 million generated in the
six-month period ended June 30, 1999. This net cash flow in the first half of
2000 consisted of sales of shares of Common Stock, resulting in net proceeds of
$18.2 million, while repayment of long term liabilities amounted to $4.3
million, including the $5.0 million prepayment made to Unipac. Cash flows used
in financing activities in the six-month period ended June 30, 2000 excluded
non-cash transactions related to (i) the conversion into shares of our Common
Stock of the convertible loan with Sumitomo Corporation in the amount of $3.9
million, (ii) the conversion into shares of our Common Stock of the loan with
Sumitomo Corporation in the amount of $2.5 million, both resulting in a decrease
of our long term liabilities. Cash flows generated from financing activities
included (i) the sales of shares of Common Stock under the Kingsbridge equity
line, resulting in net proceeds of $3.4 million, (ii) the sale of shares of
Common Stock to Unipac, in April 2000, resulting in net proceeds of $15.0
million and (iii) the exercise of options under the 1993 stock option plan,
resulting in net proceeds of $350,000, but excluded non-cash transactions
related to the conversion of 275,174 Series E Convertible Preferred Stock in
March and April 2000.
Since our inception, we have funded our operations and capital expenditures
primarily from the proceeds of equity financings aggregating $110.0 million and
from proceeds aggregating $21.0 million from borrowings and sale-leaseback
transactions.
In 1997 and January 1999, we entered into two research and development
agreements with French authorities. Under these agreements, we expect to
benefit from zero-interest loans totaling approximately $3.0 million, of which
we received $482,000 in April, 2000 and $2.0 million in 1999.
In November 1998, we entered into an research and development agreement with
French authorities. Under this agreement, we expect to receive a total grant of
approximately $679,000, of which we received $196,000 in 1999, $202,000 in the
six-month period ended June 30, 2000, and $281,000 in July 2000. The $196,000
and $202,000 collected in 1999 and in the six-month period ended June 30, 2000,
respectively, were not recognized as income as all conditions stipulated in the
agreement were not met.
On August 5, 1999, we were awarded a development contract by DARPA. Under
the terms of the contract, we will receive approximately $4.7 million to develop
a color field emission display. During the six-month period ended June 30,
2000, $3.9 million were recognized as income under this contract. On April 3,
2000, a new contract, as a continuation of the existing contract, was signed
with DARPA for $6.3 million for the development and demonstration of a full
color, full video rate, 12.1-inch field emission display.
We have recognized French income tax benefits of $7.9 million since inception.
These income tax benefits represent tax credits for research and development
activities conducted in France, which are paid in cash to us if it is not
possible to credit them against future income tax liabilities within three
fiscal years. In 1998, we collected $2.8 million, representing R&D tax credits
recorded in 1993 and 1994. In April 1999, we collected $3.0 million from R&D
tax credit recorded in 1995. We collected $1.1 million in June 2000, in relation
with the R&D tax credit recorded in 1996.
On August 9, 1999, we secured a $15.0 million equity-based line of credit with
Kingsbridge Capital Ltd. Under the terms of the equity line, we can draw up to
$15.0 million cash in exchange for our Common Stock, in increments over a
two-year period. The decision to draw on any of the funds and the timing and
account of any such draw are at our sole discretion, subject to certain
conditions. Such conditions include limitations depending on the volume and the
market price of our Common Stock. During the six-month period ended June 30,
2000, we issued 1,204,191 shares of Common Stock, representing $3,403,000 ($3.5
million less issuance costs of $97,000). Through June 30, 2000, out of the
maximum amount of $15.0 million, we have drawn a total amount of $4.5 million.
On January 25, 2000, we signed an agreement with Audi and other partners to
jointly design, develop, test and deliver a 7-inch color field emission display
for automotive applications. This agreement is part of the European Commission
IST program. Under the terms of this agreement, we will receive funding of
approximately $1.7 million, of which $600,000 are expected in 2000.
13
<PAGE>
PIXTECH, INC.
(A DEVELOPMENT STAGE COMPANY)
In April 2000, we completed a $15.0 million equity private placement with United
Microelectronics Corporation. United Microelectronics Corporation received
9,320,359 million shares at a purchase price of $1.6094 per share, pursuant to
an amendment, signed in February 2000, to the Common Stock Purchase Agreement
dated October 6, 1999 with Unipac.
Cash available at June 30, 2000 amounted to $24.1 million as compared to $14.7
million at December 31, 1999. We expect that cash available at June 30, 2000,
with the anticipated proceeds from the Kingsbridge equity-based line of credit,
and cash from various grants and loans described above and from R&D tax credits,
will be sufficient to meet our cash requirements, including repayment of the
current portion of our long-term obligations in the amount of $10.8 million at
June 30, 2000, for the near future.
We 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. Our capital
requirements will depend on many factors, including the rate at which we can
develop our 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 our
products. We cannot make assurances that funds for these purposes, whether from
equity or debt financing, or other sources, will be available when needed or on
terms acceptable to us.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The market risk exposure inherent to our international operations creates
potential for losses arising from adverse changes in foreign currency exchange
rates. We are exposed to such foreign currency exchange rate risk in two main
areas: (i) a substantial portion of our operating expenses are, and are expected
to be, denominated in Euros, (ii) most of our capital lease obligations are
expressed in Taiwanese dollars. Fluctuations of the parity of the Taiwanese
dollar versus the Euro or the U.S. dollar may cause significant foreign exchange
gains or losses. In addition, gains and losses arising from the conversion to
U.S. dollars of assets and liabilities denominated in Euros or in Taiwanese
dollars may contribute to fluctuations in our results of operations, which are
reported in U.S. dollars. To date, we have not undertaken hedging transactions
to cover its currency exposure. We are also exposed to interest rate risks in
connection with certain long-term debt. We do not, however, enter into market
sensitive instruments for trading purposes.
14
<PAGE>
PIXTECH, INC.
(A DEVELOPMENT STAGE COMPANY)
PIXTECH, INC.
PART II Other Information
ITEM 2 Changes in Securities:
(a) Not applicable
(b) Not applicable
(c) In April 2000, 8,877 shares of Series E Convertible
Preferred Stock were converted into 136,276 shares of Common
Stock at a conversion price of $1.60938. After this
transaction, the Series E Stock, including accrued dividends,
is convertible into 343,541 shares of Common Stock using a
conversion price of $1.60938. As of August 1st, 2000, there
were 22,095 shares of Series E Preferred Stock outstanding.
This conversion listed above was exempt from registration
under the Securities Act of 1933, as amended (the
"Securities Act") pursuant to Section 3(a)(9) of the
Securities Act.
During the six-month period ended June 30, 2000 we issued
270,566 shares in connection with the $15 million Kingsbridge
equity line of credit secured in August 1999, as private
placement exempt from registration under Section 4(2) of the
Securities Act. These 270,566 shares of Common Stock
represented an amount of $485,000 ($500,000 less issuance costs
of $15,000).
Pursuant to the Amendment dated February 29, 2000 to the
Common Stock Purchase Agreement dated October 6, 1999 by and
between PixTech and Unipac (the "Amendment"), in April 2000 we
issued 9,320,359 shares of Common Stock to United
Microelectronics Corporation in a private placement exempt
From registration under Section 4(2) of the Securities Act.
15
<PAGE>
PIXTECH, INC.
(A DEVELOPMENT STAGE COMPANY)
ITEM 4 Submission of Matters to a Vote of Security Holders:
At the Annual Meeting of Stockholders held on April 18, 2000,
our stockholders voted:
<TABLE>
<CAPTION>
TOTAL VOTE TOTAL VOTE TOTAL VOTE TOTAL VOTE
"FOR" "WITHHELD" "AGAINST" "ABSTAINING"
<S> <C> <C> <C> <C>
1. To elect a Director; Nominee:
John A. Hawkins . . . . . . . . . 35,996,498 56,805 -- --
2. To amend the Company's
Amended and Restated 1993
Stock Option Plan to increase the
number of shares available under
such Plan from 5,156,372 shares
to 11,156,372 shares. . . . . . . 28,589,254 -- 255,413 23,750
</TABLE>
ITEM 6 Exhibits and reports on Form 8-K:
(a) Exhibits :
10.1 Amendment, dated February 29, 2000, to Common Stock
Purchase Agreement by and between PixTech, Inc. and Unipac
Optoelectronics Corporation dated as of October 6, 1999.
Filed as Exhibit 2.1 to the PixTech, Inc. Current Report on
Form 8-K filed on May 8, 2000 and incorporated herein by
reference.
27. Financial Data Schedule
(b) Reports on Form 8-K:
A report on Form 8-K was filed on May 2, 2000, reporting under
Item 5, the completion of a development contract with DARPA
(Defense Advanced Research Projects Agency) to develop a
12.1-inch color field emission display, in consideration for a
funding of approximately $6.3 million from the U.S. government.
A report on Form 8-K was filed on May 8, 2000, reporting under
Item 1, the completion of the private placement of 9,320,359
Shares of Common Stock with United Microelectronics
Corporation in consideration for $15.0 million, which
transaction may be viewed as a change in control.
16
<PAGE>
PIXTECH, INC.
(A DEVELOPMENT STAGE COMPANY)
PIXTECH, INC.
June 30, 2000
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PIXTECH, INC.
Date: August 10, 200 BY: /s/ Marie Boem
---------------------------
Marie Boem,
Principal Financial Officer
17
<PAGE>
PIXTECH, INC.
(A DEVELOPMENT STAGE COMPANY)
PIXTECH, INC.
June 30, 2000
EXHIBIT INDEX
Exhibit No.
10.1 Amendment, dated February 29, 2000, to Common Stock
Purchase Agreement by and between PixTech, Inc. and
Unipac Optoelectro
27 Financial Data Schedule
18
<PAGE>
