<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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, 1999 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 March 1, 2000 was: $174,338,134.
There were 41,323,543 shares of the registrant's Common Stock outstanding
as of March 1, 2000.
----------------------
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive proxy statement of the Registrant for the
Registrant's 2000 Annual Meeting of Shareholders to be held on or about April
18, 2000 which definitive proxy statement will be filed with the Securities and
Exchange Commission not later than 120 days after the end of the registrant's
fiscal year ended December 31, 1999, are incorporated by reference into Part III
of this Form 10-K.
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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. Our principal
executive offices are located at Avenue Olivier Perroy, 13790, Rousset, France
and at 2700 Augustine Drive, Suite 255, Santa Clara, California. Our main
telephone numbers are 011-33-(0)442-29-10-00 and (408) 986-8868, respectively.
We are dedicated to commercializing our field emission displays, a new type
of flat panel displays. We expect that field emission displays will provide
higher viewing quality, lower manufacturing costs and more efficient power
consumption than current flat panel display technologies.
In 1992, we exclusively licensed key patents from an electronics research
institute, Laboratoire d'Electronique, de Technologie et d'Instrumentation, and
since then, have focused on advancing field emission display technology toward
high volume manufacturing and wide market acceptance.
Since PixTech's inception, our strategy has been to collaborate with other
parties in order to accelerate the development of field emission display
technology and to optimize financial and employee resources to achieve our
objective. Initially we applied this strategy to the area of fundamental
research and product development by licensing our technology to certain display
manufacturers, including Futaba Corporation and Motorola, Inc. After completing
the development and initial commercialization of our first product, we applied
this collaboration strategy towards our manufacturing efforts. We have
established a manufacturing relationship with Unipac, a Taiwanese liquid crystal
display manufacturer. This has accelerated the time to manufacturing as well as
reduced the investment costs needed for the volume manufacturing activities of
field emission displays. During 1999, we concentrated our efforts on
establishing a volume manufacturing process at this facility.
The Montpellier team was instrumental in successfully transferring the
technology from the pilot facility in Montpellier to the production facility in
Taiwan by providing experienced individuals and the basic "know-how". Extensive
collaboration between the two facilities was critical and necessary to achieve
the overall set goal, which enabled the Unipac facility to produce fully
qualified products. At the same time, our Montpellier organization continued its
low volume display production. Since the fourth quarter of 1999, we have been
shipping fully qualified products to our customers (manufactured 100 % in
Taiwan). To date no other company has been able to reach this level of
commercialization of field emission technology.
In August 1999, an existing DARPA (Defense Advanced Research Projects
Agency) contract from the U.S. Department of Defense was transferred from Micron
Technology, Inc. to PixTech. In November 1999, three months after the contract
was transferred to PixTech we were able to complete the development of 12.1-inch
monochrome displays and delivered two of them to the responsible U.S. Government
agency for initial testing. The displays were cooperatively manufactured at our
pilot line in Montpellier and at our new facility in Boise, Idaho.
We are currently focused on:
. increasing production yields at the Unipac facility;
. expanding our customer base and product offering; and
. continuing our larger size display development for various future
applications.
The Flat Panel Display Market
According to Stanford Resources, Inc., a display market research
organization, the market for flat panel displays is expanding rapidly and
projected to grow from $15 billion in 1999 to $35 billion in 2005, this
represents a compounded growth rate of 13% per year.
Driving forces for this growth include existing applications, such as
laptop computers, handheld computers, handheld organizer products, and
industrial equipment. New applications, such as flat TV's, automotive
applications and desktop computer terminals, are expected to see high growth as
well as new emerging applications such as wireless web appliances.
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The "information age" is not only driving computer and communication technology
but also the human interface to those technologies.
As viewing quality improves and cost decreases, we expect flat panel
displays to capture more and more of the total display market. Field emission
technology has the potential to successfully penetrate major parts of this
market.
Currently, cathode ray tubes have a majority of the total display market
with over 58% of the total display market in dollar terms (source Stanford
Resources, Inc.). Despite the fact that cathode ray tubes offer the lowest cost
per display today, limitation on weight, size and power dissipation is expected
to reduce their market position to 43% by 2005 (source Stanford Resources,
Inc.). Today, active matrix liquid crystal displays are the technology of choice
for the applications where we believe field emission displays will have a
successful entry. After many years of continuous development with hundreds of
millions of dollars research and development expenses, active matrix liquid
crystal displays still have viewing quality deficiencies compared to cathode ray
tubes and field emission displays.
The following table summarizes some of the differentiating characteristics
of cathode ray tube, active matrix liquid crystal display and field emission
display technologies (1):
<TABLE>
<CAPTION>
Characteristics CRT* AMLCD* FED*
<S> <C> <C> <C>
Viewing angle Very wide horizontal and Wide horizontal, Very wide horizontal
vertical limited vertical and vertical
Video speed High speed over full Adequate speed over High speed over full
temperature range limited temperature temperature range
range
Brightness range From low to very From low to From low to very
high, easy to dim medium, limited high, easy to dim
dimming capabilities
Dynamic range High Limited High
Operating temperature Wide range Limited range due to Wide range and instant-on at
liquid crystal low temperature
behavior
Power consumption High Current industry Comparable to
standard current industry
standard
Manufacturability Mature process Complex process Early stage of manufacturing
offering lowest cost development;
Fewer process steps
than AMLCD
</TABLE>
. Dynamic range results from a combination of contrast and peak
brightness.
*CRT = cathode ray tubes
*AMLCD = active matrix liquid crystal displays
*FED = field emission displays
- ------------------------------
/1/ The information set forth in this table is based upon our assessment of
existing cathode ray tube and active matrix liquid crystal display products when
compared to field emission display products and prototypes manufactured at our
pilot plant. We cannot assure you that field emission displays, if manufactured
in commercial quantities, will achieve such performance characteristics on a
cost-effective basis.
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Technology
The basic principle used in field emission displays is the same as in
conventional cathode ray tubes. In both technologies, negatively charged
electrons are extracted from a source (the ''cathode'') and collected by a
phosphor-coated screen (the ''anode''), which is held at a positive voltage to
accelerate electrons. The electrons travel in a vacuum between the cathode and
the anode. The phosphor coating is a cathodoluminescent material, meaning that
it 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.
In a field emission display, 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 field emission color display needs three "sub pixels" for each "pixel" to
compose the color. In order to achieve the luminance value required, a higher
anode voltage is needed when compared to monochrome displays. The potential
additional technology issues to be mastered by using a higher anode voltage
require different sealing and spacer technologies. Our cathode technology can be
used for both, low and high anode voltage technologies. Our originally developed
cathode and low anode voltage technology combined with the technology acquired
from Micron gives us a base foundation of technologies which we can implement
into a wide variety of future products.
Strategy
Our strategy is to develop, manufacture and market flat panel displays
using field emission technology as the key product attribute compared to our
competition.
Market Entry
Our market entry strategy is to focus on niche applications where the
unique performance of our field emission displays, such as wide viewing angles,
high contrast ratio and low power consumption are highly valued by the customer
and have not yet been equaled by other display technologies. Applications such
as portable medical devices, industrial equipment, and applications where
cathode ray tubes are still used due to viewing quality requirements, have
display costs that represent a small percentage of the total equipment cost. In
addition, these applications generally have small to medium volume requirements
that we will be able to serve from our manufacturing partner in Taiwan. We
expect that 4 to 8-inch (diagonal), monochrome field emission displays for
industrial usage will provide the majority of product revenues for the next two
years.
Increase market penetration
To increase market penetration, product revenues and profitability, we
intend to launch additional products with larger volumes, and capture consumer
oriented market segments. We have targeted the various applications in the
automobile market sector, which are currently using a variety of display
technologies. This market is expected to grow very fast with major car
manufacturers adopting an aggressive strategy to incorporate flat panel displays
in their respective applications. Field emission displays' wide operating
temperature range, wide viewing angle and environmental friendly technology will
play a major role in penetrating this large market segments. We are currently
participating with a large automotive manufacturer and several other companies
in an European supported development program to develop a specific 7-inch field
emission displays for an automotive application. If successful during the
development phase, we will have positioned ourselves with a system integrator
and automotive manufacturer with high volume needs.
Research and Development effort
The development of field emission display manufacturing processes and
products require a significant ongoing effort. Since inception, we have
leveraged the development activities of Laboratoire d'Electronique, de
Technologie et d'Instrumentation, where we have obtained an exclusive license of
many key patents. With increased development efforts and a shift of our
priorities to volume manufacturing our relationship with Laboratoire
d'Electronique, de Technologie et d'Instrumentation remains vital.
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Our Montpellier team will concentrate activities on cathode development,
process architecture, process flow and product development. Our Boise team will
focus on its strengths: anode, sealing and spacer technology, and will
concentrate on the back-end part of the color and large display process
development programs.
Our licensing program
Between 1993 and 1995, we entered into bilateral cooperation and license
agreements with Motorola, Futaba, Raytheon and Texas Instruments to advance
field emission displays technology. These agreements provided each of these
companies with a license, subject to certain limitations, to all field emission
displays technology owned by PixTech, Laboratoire d'Electronique, de Technologie
et d'Instrumentation and the other parties. These agreements gave us a royalty-
free license to any field emission displays technology held within the group at
the term of the agreements, with certain rights to sublicense. In addition, we
received milestone revenues during the cooperation phase. The agreement with
Texas Instruments was terminated in March 1996, but the license to Texas
Instruments' field emission display technology was maintained. We believe that
one of our existing licensees, Raytheon Company, may have suspended its internal
program to develop field emission displays.
Although the cooperation phases of these agreements have all ended, we are
granted royalty-free licenses to all field emission display technology held by
each party at the end of each respective cooperation period, with certain rights
to sublicense. We are also entitled to royalties on future sales by any of these
licensees of any field emission display products, which are based on our
technology.
Micron
In May 1999, we purchased certain assets and liabilities of Micron
Technology's Display Division in Boise, Idaho. At the same time, we hired 44
Micron employees who have continue to work in the Boise facility. Since that
time additional development personnel from Santa Clara have been relocated to
Boise, and the integrated team will continue to focus on color products and
large displays.
In connection with our acquisition, we were granted a ten-year, worldwide
royalty-free license to Micron's field emission display-related patents and
patent applications, and lease Micron's facility which had been used by Micron's
Display Division.
Manufacturing
Our present strategy is to outsource volume manufacturing. In 1997, we
entered into a contract manufacturing agreement with Unipac, a Taiwanese liquid
crystal displays manufacturer and an affiliate of United Microelectronics
Corporation, Taiwan's second largest semiconductor manufacturer. This
relationship, using existing clean room facilities, existing infrastructures and
some of the equipment commonly used in liquid crystal displays and the field
emission displays process, and was determined to be the fastest way to volume
manufacturing maximizing the lowest equipment investment costs. Under this
agreement, we will purchase displays from Unipac on a cost plus basis after the
field emission display process is installed and certain production criteria are
met. During the start-up phase, PixTech will bear all costs associated with this
activity. After the production phase is reached, Unipac has the responsibility
to take care of volume expansion investments to meet PixTech's demand of field
emission display products. We intend to install a profit sharing mechanism to
motivate Unipac to work on yield improvements and other cost reduction programs.
In 1998, we installed all of the field emission display specific equipment
at the Unipac facility and started to transfer the process from the pilot line
in Montpellier. This task was more complicated than originally expected due to
the fact that key equipment was different and they each required specific
process calibration programs. In 1999, we needed to change a key piece of
equipment. After completion of this activity, the quality of the manufactured
displays improved to a level, which is comparable to the quality of the products
manufactured in our pilot line in Montpellier. Since the fourth quarter 1999, we
have been able to ship fully qualified products to our customer in the U.S. on a
weekly basis.
In 2000, we will concentrate on yield improvements, cycle time reduction
and increased production line loading. At the present time, we do not expect to
meet our manufacturing cost objectives on a per unit base before 2001.
Presently, it is our intention that we produce our 7-inch color product at
Unipac as soon as the development in Montpellier is completed and the market
demand supports this activity.
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Large Display development activity
In 1998, we were able to demonstrate the world's first 15-inch color field
emission display. This was a program to understand the technology requirements
for a large field emission display. Since that time, we have started a
development program with a major Japanese cathode ray tubes manufacturer with
the goal to develop a 17-0 inch XGA display for the desktop computing market.
After the transfer of the DARPA contract from Micron to PixTech, we
developed a 12.1-inch monochrome display and are in the final development phase
of a same size color display. We believe that the requirements for future
desktop computing, include full motion video, wide viewing angle, fast response
for computer games, can be met with field emission technology. We also believe
that the emerging market of wireless web appliances requires the same kind of
display performance characteristics.
Products
Our current available product is a 5.2-inch monochrome display. This
display has 320 lines and 240 columns (1/4 Video Graphic Adapter (VGA) format),
a pixel pitch of 0.33 millimeters, and a viewing angle or more than 160 degrees
both horizontally and vertically. Its brightness varies over a range from 120 to
240 candelas per square meter (cd/m2). Its power consumption is approximately
2.4 watts, depending on the content of the image, and its weight is less than
200 grams.
We expect to sell the first samples of our full color 5.6-inch display,
which is currently under development, during the first half of 2000 to customers
in the automotive industry. In addition, we intend to expand our product range
within the 4 to 8-inch display market segment.
Marketing and Sales
Target Segments We are currently marketing our displays (5.2-inch
monochrome) directly to original equipment manufacturers in the instrumentation;
medical and military market segments where the benefits of our products are
highly valued. We have not targeted high volume consumer application market
segments yet, which are large but extremely price competitive. Furthermore,
these market segments require volume commitments, which are beyond our present
capabilities.
Pricing We believe that field emission displays will provide significant
quality and operational advantages compared with competing flat panel displays.
Therefore, we believe that we can achieve premium pricing for the near future.
This allows us to reach more economical production levels at a time we have to
compete on both pricing and features.
Distribution and Sales We intend to achieve sales coverage through a
combination of the following three areas:
. Direct sales and marketing force which will address major original
equipment manufacturing customers in the US and Europe;
. a network of sales representatives to expand coverage mainly in the
U.S.;
. a network of distributors to address specific areas of the worldwide
market and to offer technical and commercial customer support.
We have granted exclusive distribution rights to Sumitomo in Japan to cover the
Japanese market.
Customers To date, we have sold samples of our displays to more than one
hundred customers, mostly based in the United States and in Europe. Since early
1998, a large percentage of our products were shipped to Zoll Medical
Corporation, a U.S. medical equipment manufacturer, which markets a portable
defibrillator incorporating our field emission displays. We received a purchase
order to deliver 50,000 displays to Zoll Medical over a 5-year period. Zoll
Medical uses the screens as a key differentiator against competing products
using liquid crystal display screens, emphasizing some of the key
characteristics of field emission displays, including brightness and viewing
angle. We are negotiating with potential new customers, and we believe that we
can book new orders when the units' shipments from Unipac exceed the units'
deliveries to Zoll Medical.
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Our marketing strategy for our color and large screen products will
initially differ from the above-described strategy. We believe that the
uniqueness of the field emission display requires a close cooperation with
potential customers at the development phase. Therefore, our initial products
aimed for volume manufacturing will be developed with a leading customer in the
target market such as a major cathode ray tubes manufacturer in Japan for the
17-inch XGA product, Audi in Germany for the initial 7-inch product. We have not
selected a potential partner for the emerging 10 to 12 inch web appliance market
yet.
Competition
The flat panel display market is intensely competitive in all product sizes
and applications. It is currently dominated by liquid crystal technology. Liquid
crystal display manufacturers, such as Sharp, NEC and Hitachi, have greater
brand and name recognition than we have and they have substantially more
financial, technological and marketing resources. Substantial investments are
still being made by these companies to improve liquid crystal display
technologies. Liquid crystal displays manufacturers have focused on enhancing
their manufacturing processes, built more manufacturing facilities and developed
new equipment for larger size substrates, ultimately increasing their display
outputs resulting in an overall increase in flat panel display manufacturing
capacities. This coupled with the entrance of new competitors and other flat
panel display technologies can cause an `over-supply' situation leading to
reductions in the average selling price of flat panel displays. To effectively
compete, we may be required to continuously increase the performance of our
products and reduce prices. In the event of price reductions, our ability to
maintain gross margins would depend on our ability to effectively reduce our
cost of sales.
There are a number of domestic and international companies developing and
marketing display devices using alternative technologies. These terminilogies
include:
. Passive matrix liquid crystal displays;
. Active matrix liquid crystal displays;
. Vacuum fluorescent displays;
. Electroluminescent panels; and
. Plasma panels.
Our cooperation phase with Futaba concluded in January 1997 and June 1998,
with Motorola. However, both of them continue their development and investments
in field emission display technology. In the future, we expect to face
competition from both Futaba as well as Motorola. In addition, some of the basic
field emission display technology is now in the public domain and, as a result,
we have a number of additional potential direct competitors developing field
emission displays.
We are aware of several other companies, which are developing field
emission display technologies similar to ours, including but not limited to:
. Sony;
. Fujitsu;
. Samsung;
. Candescent;
. FED Corporation; and
. SI Diamond Technology Incorporated.
Many of these companies have made, and may continue to make, significant
advancements to their respective field emission display technologies.
Patents and Trade Secrets
Our fundamental technology was developed by Laboratoire d'Electronique, de
Technologie et d'Instrumentation and licensed to PixTech in 1992. Under this
license agreement, which has a term of twenty years, Commissariat a l'Energie
Atomique granted us an exclusive, worldwide, royalty-bearing license, with right
to sublicense all of field emission display
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technologies developed by Commissariat a l'Energie Atomique (including
Laboratoire d'Electronique, de Technologie et d'Instrumentation).
Taking into account PixTech's own patent portfolio and license agreements
signed with Commissariat a l'Energie Atomique, Motorola, Texas Instruments,
Futaba, Raytheon, Coloray and Micron, we hold or had licensed to 1,545 patents
and pending patent applications as of December 31, 1999. This represents a total
of 784 original patents and pending patent applications, of which 401 are U.S.
patents, 290 are U.S. pending patent applications and 93 are foreign patents or
pending patent applications. As further development continues, we expect to
file additional patent applications as appropriate.
Employees
As of December 31, 1999, we had approximately 190 employees worldwide, of
whom 61 were in research and development, 94 in process development and
production, 4 in marketing and sales, and 31 in administrative positions.
In addition, as of December 31, 1999, Laboratoire d'Electronique, de
Technologie et d'Instrumentation had 10 full-time employees working exclusively
for our research and development program. And Unipac had 68 full-time employees
working exclusively on the start-up of our field emission display manufacturing
process while relying on other manufacturing employees to perform a significant
portion of the manufacture of field emission displays.
We believe that our future success will depend, in part, on our ability to
attract and retain highly skilled technical, marketing and management personnel.
Management believes that its employee relations are good.
Item 1A. Business Executive Officers of the Registrant
As of December 31, 1999, our executive officers were as follows:
<TABLE>
<CAPTION>
Name Age Position held with us
---- --- ---------------------
<S> <C> <C>
Jean-Luc Grand-Clement 60 Chairman of the Board of Directors
Dieter Mezger 56 President, Chief Executive Officer and Director
Francis G. Courreges /(1)/ 46 Executive Vice President, Development Chief Technology Officer
James J. Cathey 35 Vice President, Marketing and Sales
Donald E. Crim 57 Vice President, Manufacturing, Taiwan
Michel Garcia 52 Vice President, Industrial Partners
Jean-Jacques Louart 50 Vice President, Operations
Yves Morel /(2)/ 33 Chief Financial Officer
Marie Boem /(3)/ 49 Interim Chief Financial Officer
</TABLE>
/(1)/ Francis Courreges resigned from PixTech on January 5, 2000.
/(2)/ Yves Morel resigned from PixTech on December 10, 2000.
/(3)/ Marie Boem was elected an executive officer on February 22, 2000.
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 founder of PixTech, has been our Chairman of the
Board of Directors since our inception in 1992. Mr. Grand-Clement was our
President through March 1998 and our Chief Executive Officer through January
1999. Prior to founding PixTech, Mr. Grand-Clement co-founded European Silicon
Structures, a European applications specific integrated circuit supplier for
cell based and full custom semiconductor products, and served as Chief Executive
Officer and then as Chairman of the Board of Directors of European Silicon
Structures 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 metal-oxide semiconductor
design and fabrication joint venture between National Semiconductor and Saint-
Gobain. Mr. Grand-Clement graduated from Ecole Nationale Superieure des
Telecommunications in Paris.
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Dieter Mezger joined PixTech in March 1998 as President and was elected
Chief Executive Officer in January 1999. Between 1996 and 1998, Mr. Mezger
worked as a marketing consultant in California. Between 1990 and 1996, Mr.
Mezger was President of Compass Design Automation, a wholly owned subsidiary of
VLSI Technology, Inc. which develops and markets computer assisted design
software tools for integrated circuits designs. From 1984 to 1990, Mr. Mezger
established VLSI's European presence in Munich, building the European marketing
and sales organizations, design centers, research and development operations, as
well as its finance and human resources departments. Mr. Mezger simultaneously
built VLSI's wireless and Global System for mobile communication businesses.
Prior to joining VLSI, Mr. Mezger career included fifteen years with Texas
Instruments, where he rose to the position of Manager, Sales and Marketing,
Europe. He holds a BS in engineering from the University of Stuttgart.
James J. Cathey has been our Vice President, Marketing and Sales since May
1999. Mr. Cathey served as Vice President Sales and Marketing for the Display
Division of Micron Technology, Inc., from 1994 to 1999. From 1991 to 1994 Mr.
Cathey was Vice President Sales and Marketing for G2, Inc., a software
development company. From 1989 to 1991 he was key accounts manager for Micron
Technology's Memory applications group. Mr. Cathey holds a BA in Marketing from
Boise State University.
Francis G. Courreges had served as our Executive Vice-President,
Development since July 1995. He was promoted to Chief Technology Officer in May
1999. From July 1993 to July 1995, he was our Vice-President of Marketing and
Development. Prior to joining PixTech, Mr. Courreges was a co-founder of
European Silicon Structures, and served as Manager of direct write technology
for metal-oxide semiconductors and gate array products from 1985 to 1991 and
Vice-President of Marketing from 1991 to 1992. Prior to joining European Silicon
Structures, 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. Mr. Courreges
resigned PixTech on January 5, 2000.
Donald E. Crim has been our Vice President, Manufacturing, Taiwan since
April 1999. From June 1988 to December 1995, Mr. Crim was senior vice president
wafer fabrication and technology at Silicon Systems, Inc. Over that period, he
grew the manufacturing activities to support sales growth from $100 million to
$400 million. His responsibilities included overseeing all semiconductor wafer
manufacturing, technology development and wafer foundry services. Additional
responsibilities included establishing outside foundry suppliers in Taiwan,
Japan, Korea, Singapore and USA. Since June 1998 and in 1996, Mr. Crim was a
consultant for several companies. His customers included IBM, Dallas
Semiconductor, Tower Semiconductor and others.
Michel Garcia, a founder of PixTech, has served as our Vice President,
Industrial Partners since August 1995. From inception to August 1995, he had
served as Vice-President of Equipment Engineering. 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; 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.
Jean-Jacques Louart joined PixTech in May 1997 as Vice-President of
Operations. Mr. Louart served as Quality Director of LX Management, a consultant
agency, 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, holding process and manufacturing management positions. Mr. Louart
graduated from Ecole de l'Air and holds a management degree from CPA, Paris.
Yves Morel joined PixTech in April 1994 as Director of Finance and
Administration. He was promoted to Chief Financial Officer in March 1997 and to
Vice President in March 1998. 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. Mr. Morel resigned from
PixTech as of December 10, 1999.
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Marie Boem was appointed Chief Financial Officer in February 2000. Prior to
joining PixTech, Mrs. Boem served as Director of Finance of Compass Design
Automation, a wholly owned subsidiary of VLSI Technology, Inc. which develops
and markets computer assisted design software tools for IC designs from 1991 to
1998. She has also held the positions of International and European Controller
for Compass. Mrs. Boem joined Compass from VLSI Technology, Inc. where she was
the Financial Controller for the Western Europe organization and for the
European Research and Development Center from 1987 to 1991. Prior to joining
VLSI, Mrs. Boem was Finance Controller with National Semiconductor, from 1984 to
1987. Mrs. Boem holds a Master of Professional Accountancy and a Bachelor Degree
in Business Administration from Toulouse University.
Item 2. Properties
Montpellier, France: We rent 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 2000,
with an option to renew. The lease is renewable for an additional three-year
term.
Boise, Idaho: We lease a total of approximately 58,000 square feet (5,388
square meters) of space in Boise, Idaho, including a clean room, devoted to our
research and development activities, under a three-year lease from Micron
expiring in May, 2002. The lease is renewable for an additional three-year term.
Santa Clara, California: We lease a total of approximately 2,570 square
feet (250 square meters) of space in Santa Clara, California, for our sales
offices, under a lease, which terminates in 2001. The lease is renewable for an
additional term of three years.
Rousset, France: Our corporate offices are located in an approximately
11,000 square foot (1,000 square meters) facility located in Rousset, France. We
own the facility and occupy 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 June 2002.
Item 3. Legal Proceedings
We have received correspondence from Futaba Corporation and its legal
counsel beginning in February 1998 alleging the following:
. we are infringing one or more patents owned by Futaba relating to the
construction and manufacture of our displays that are not expressly
included under the license agreement between us and Futaba;
. our use of terms such as "alliance" and "partners" in describing the
nature of our contractual relationships with Motorola, Raytheon and
Futaba in reports filed with the SEC is misleading; and
. certain provisions in our agreement with Unipac constitute an
impermissible sublicense of Futaba technology.
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. Futaba
and PixTech are currently preparing a definitive written settlement agreement.
Item 4. Submission of Matters to a Vote of Security Holders
On January 18, 2000, we held a Special Meeting of Shareholders. The tabulation
of the voting is as follows
Page 10
<PAGE>
<TABLE>
<CAPTION>
For Against Abstentions
--- ------- -----------
<S> <C> <C> <C>
1. Increase the number of authorized shares of our 27,546,899 300 793,656
Capital Stock from 61,000,000 to 101,000,000 shares.
2. Proposal to issue up to 9,320,359 shares of our 23,118,817 300 793,656
Common Stock to UMC
</TABLE>
PART II
Item 5. Market for the Registrant's Common Stock and Related Stockholder
Matters
Our 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".
The foregoing bid quotations reflect inter-dealer prices, without retail
mark-ups, mark-downs or commissions, and may not represent actual transactions.
As of December 31, 1999, there were approximately 80 holders of record of our
Common Stock.
The following table sets the high and low sales price for the Common Stock
for each calendar quarter in the two year period ended December 31, 1999, as
listed on Nasdaq.
Stock Prices ($)
<TABLE>
Year ended Dec. 31, 1998 Year ended Dec. 31, 1999 2000*
------------------------ ------------------------ -----
High Low High Low High Low
<S> <C> <C> <C> <C> <C> <C>
First Quarter 6 1/5 2 5/16 3 5/16 1 1/2 11 5/8 1 3/4
Second Quarter 7 3/4 4 1/2 2 5/8 1 11/32
Third Quarter 5 1/2 2 3/4 2 1/4 1 15/32
Fourth Quarter 3 15/16 1 3/8 2 5/8 1 1/2
</TABLE>
* For the period for January 1st, 2000 to March 1st, 2000
We have never paid or declared any cash dividends on our Common Stock. We
currently intend to retain any future earnings for our business and, therefore,
do not anticipate paying cash dividends in the foreseeable future. Future
dividends, if any, will depend on, among other things, our results of
operations, capital requirements, restrictions in loan agreements and on such
other factors as our board of directors, in our discretion, may consider
relevant.
In October, November and December 1999, we issued 50,000, 300,000, and
300,000 shares, respectively, of our Common Stock upon conversion of portions of
a promissory note held by Sumitomo [see Note 7(a) - Long Term Debt], resulting
in net decrease of our obligation of $943,000.
In November 1999, we sold 624,809 shares of our Common Stock in relation
with the equity private line agreement with Kingsbridge Capital Ltd. (the
"Kingsbridge agreement"), resulting in net proceeds of $824,000.
In December 1999, we issued 14,000 shares of our Common Stock in relation
with the Coloray Agreement, valued at $3.57 per share, representing a total
amount of $50,000.
In October, 1999, we completed a $20 million equity private placement with
Unipac Optoelectronics Corporation. Under the term of this agreement, Unipac
received 12.4 million shares of Common Stock.
Page 11
<PAGE>
Item 6. Selected Financial Data
The selected financial data set forth below as of December 31, 1999 and
1998, and for each of the three years in the period ended December 31, 1999 are
derived from PixTech's consolidated financial statements included elsewhere in
this Report, which have been audited by Ernst & Young, independent auditors. The
selected financial data set forth below as of December 31, 1997, 1996 and 1995
and for the years ended December 31, 1996 and 1995 are derived from audited
consolidated financial statements not included in this Report. This data should
be read in conjunction with PixTech'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
-------------------------------------------------------------------
1995 1996 1997 1998 1999
----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
(in thousands, except per share)
Operations
Total revenues........................................... $11,513 $ 7,644 $ 3,819 $ 3,652 $ 5,392
Loss from operations..................................... (9,278) (12,041) (15,774) (19,686) (26,487)
Net loss................................................. (6,305) (11,719) (14,664) (17,863) (28,940)
Net loss per share....................................... (0.82) (1.44) (1.12) (1.23) (1.26)
Shares used in computing net loss per share.............. 7,697 8,137 13,140 14,548 22,948
Balance Sheet
Working deficit / capital................................ 15,919 (859) 9,290 145 (17,740)
Total assets............................................. 45,379 29,565 41,648 47,394 51,169
Total assets, less current assets........................ 18,569 19,701 24,058 32,592 32,313
Total long term debt /(1)/............................... 6,263 4,709 13,428 22,389 21,302
Long term liabilities, less current portion.............. 9,958 6,743 14,568 19,480 11,019
Stockholders' equity..................................... 24,530 12,099 18,780 13,257 19,884
</TABLE>
(1) including capital leases and current portion
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Overview
PixTech was founded in June 1992 to develop and commercialize field
emission displays. Since inception, we have been a development stage company and
our operating activities related primarily to raising capital, conducting
research and development activities, concluding cooperation and license
agreements with certain displays manufacturers, including Motorola, Inc. and
Futaba Corporation, and establishing manufacturing capabilities for our field
emission displays.
Pursuant to a contract manufacturing agreement signed with Unipac in May
1997, and after the adaptation of Unipac's plant, including addition of certain
equipment and the transfer of our manufacturing processes, we are producing
fully qualified displays at Unipac. While current shipments of field emission
displays are still minimal, we expect to increase significantly the production
volumes throughout the year 2000. However, we do not anticipate generating
positive gross margins on our sales of products in year 2000.
In March 1999, we acquired certain assets of Micron Technology, Inc.
relating to field emission displays including equipment and other tangible
assets, certain contract rights and cash. The accompanying financial statements
reflect the acquisition of assets for a cost of $17,932,000 and the assumption
of certain liabilities in the amount of $2,958,000 in consideration of the
issuance of 7,133,562 shares of common stock and a warrant to purchase 310,000
shares of common stock.
Our revenues from 1999 have relied mainly on cooperation and license
revenue from funding under grants from the French Government and the European
Union. Also, in 1999, we had significant revenue from the DARPA contract.
Page 12
<PAGE>
Under a license agreement with the French Atomic Energy Commission, we are
obligated to make royalty payments on our product sales and to pass-through a
portion of royalties on sales of royalty-bearing products by our sublicensees.
Under an amendment to the Laboratoire d'Electronique, de Technologie et
d'Instrumentation license agreement signed in 1997, the royalty rates and
minimum payments payable to French Atomic Energy Commission were temporarily
increased for a period of three years. Royalty amounts accrued under this
agreement were:
Year Royalty Amount
---- --------------
1996.......... $ 45,000
1997.......... $109,000
1998.......... $308,000
1999.......... $364,000
(See Notes to Consolidated Financial Statements--Note 16--Related Party
Transactions).
All of our expenses to date, except royalties and pass-through expenses
payable to French Atomic Energy Commission and tax expenses directly associated
with revenues from cooperation and license agreements have been recorded as
operating expenses, since we have not shipped enough products to determine a
meaningful cost of products sold category.
We have incurred cumulative losses of $83.1 million from inception to
December 31, 1999. We have recorded operating losses every quarter since 1996,
and we expect to incur additional operating losses. The magnitude and duration
of our future losses will depend on a number of factors within and outside of
our control, including the rate at which we can successfully manufacture and
commercialize our field emission displays, if at all, and the related costs of
such efforts. Successful commercialization of our displays will in turn depend
on a number of factors, including the successful development of sufficient
market demand for our products.
Results of Operations
Cooperation and license revenues: We recognized revenues under cooperation
and license agreements of $1.9 million in 1997 and $1.2 million in 1998; we
recognized no cooperation and license agreement revenues in 1999. The
significant decrease in cooperation and license revenues in 1997 and 1998 over
1996 reflects the achievement at the end of 1996 of most of our contractual
milestones. The cooperation phase of these agreements, which had generated
milestone revenues for us, expired in June 1998. In the future, we may derive
royalty revenues only under existing cooperation and license agreements. These
royalty revenues will be based on licensees' sales, if any, of royalty-bearing
products.
We may grant royalty-bearing licenses to third parties to the field
emission display technology cross-licensed to us from our licensees, subject to
certain restrictions. Royalties payable to us under these third-party licenses
would be shared with the existing licensees.
In 1997, we entered into a cooperation agreement with a major Japanese
cathode ray tube manufacturer to demonstrate a 15-inch field emission display.
Revenues generated under this agreement in 1997 and 1998 were included in
Cooperation and License Revenues. In February 1999, we entered into a subsequent
cooperation agreement with our cathode ray tube partner. We will not record any
significant revenues under this agreement.
Product Sales: We recognized product sales of $745,000 in 1997, $445,000
in 1998 and $484,000 in 1999. Through 1997, these product sales primarily
represented the shipment of a few high-priced field emission display displays
and cathodes to customers for evaluation and product development purposes. In
1999, product revenues remained relatively constant compared to 1998, and
primarily reflected the shipment of displays to our first volume customer, Zoll
Medical.
Other Revenues: Other revenues consist of funding under European
development contracts, our DARPA contract and other miscellaneous revenues.
Other revenues were $1.1 million in 1997, $1.9 million in 1998 and $4.9 million
in 1999. Of these revenues, $663,000 in 1997 and $1.2 million in 1998 relate to
a development contract granted in December 1994 from the French Ministry of
Industry to support manufacturing of field emission displays. There were no
revenues under this contract in 1999. We successfully completed this development
contract in 1998 and will not derive any additional revenue
Page 13
<PAGE>
from it. We received $2.0 million from DARPA in 1999. In addition, we expect to
earn development-contract related revenues in 2000, primarily following expected
recognition as income of certain amounts which we collected before December 31,
1999, and previously recorded as deferred revenues (See Notes to Consolidated
Financial Statements--Note 12--Other and Deferred Revenues).
Research and Development Expenses--Acquisition of Intellectual Property
Rights: Since inception, we have expensed $4.9 million for the acquisition of
intellectual property rights from our licensees and other third parties. In
1999, we expensed $75,000 in connection with a license agreement with Coloray
Display Corporation, a California corporation, providing us with a worldwide,
non-exclusive royalty-free license on certain technologies related to field
emission displays.
Other Research and Development Expenses
These expenses 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 display technology to Unipac, as
well as obligations to Commissariat a l'Energie Atomique under the Laboratoire
d'Electronique, de Technologie et d'Instrumentation research agreement, and
miscellaneous contract consulting fees. As part of the acquisition of Micron
Display's assets in May 1999, we hired 44 employees to continue research and
development work in the Boise facility, thus reinforcing our field emission
display technology development efforts. In addition, the development team
located in Santa Clara was moved to Boise with an aim to focus our efforts on
the expansion of the large display effort.
As a result, other research and development expenses increased from $15.4
million in 1997 and $19.2 million in 1998 to $27.2 million in 1999. The increase
primarily reflected the costs associated with the research and development
activities conducted in Boise following the Micron Transaction signed at the end
of May 1999 and the cost of supporting the manufacturing start-up at Unipac.
Sales and Marketing Expenses: We incurred sales and marketing expenses of
$1.4 million in 1997, $1.4 million in 1998 and $1.2 million in 1999. 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, in
order to achieve a successful commercialization phase for our products.
General and Administrative Expenses: General and administrative expenses
amounted to $2.9 million in 1999, an increase of 19% over general and
administrative expenses incurred in 1998, which amounted to $2.5 million. The
increase primarily reflected the cost associated with the new facility in Boise.
General and administrative expenses amounted to $2.4 million in 1997.
Interest Income (Expense), Net: Interest income consists of interest on
available and restricted cash. Interest expense consists of interest payable on
long-term obligations. Net interest expense was $864,000 in 1999, compared to
$708,000 in 1998 and $470,000 in 1997, reflecting the increase in long-term
liabilities.
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 obligation is expressed in Taiwanese dollars. Since 1998,
fluctuations of the parity of the Taiwanese dollar versus the Euro caused
significant foreign exchange gains or losses. We incurred net foreign exchange
gains of $54,000 in 1997 and $372,000 in 1998 and net foreign exchange loss of
$1,076,000 in 1999. We cannot predict the effect of exchange rate fluctuations
on future operating results. To date, we have not yet undertaken hedging
transactions to cover our currency exposure.
Income tax: We have recognized French income tax benefits of $8.1 million
since our inception, including $797,000 in 1997, $758,000 in 1998 and $43,000 in
1999. These income tax benefits represent tax credits for research and
development activities we conducted in France and the benefit of net operating
loss carry forward, net of valuation allowance. As of December 31, 1999, we
provided for a valuation allowance of $1.5 million against a net deferred tax
asset of $2.8 million. We will collect the tax credits for research and
development in cash if we are not able to credit them against future income tax
Page 14
<PAGE>
liabilities within three fiscal years. We collected $29,000 in 1997 for our 1992
income tax benefits, $2.8 million in 1998 for our 1993 and 1994 income tax
benefits and $2.8 million in 1999 for our 1995 income tax benefits.
In the future, we may not record significant additional tax credit for
research and development activities in France, 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, 1999, our net operating loss carried forward in France
were approximately $60.0 million of which $4.8 million will expire in 2000, $5.1
million in 2001, $9.1 million in 2002, $13.3 million in 2003 and $15 million in
2004 if they are not utilized.
Quarterly Results of Operations
The following table presents certain unaudited quarterly financial
information for each quarter in 1998 and 1999. In the opinion of our 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. Our 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,
--------- --------- ---------- --------- --------- --------- ---------- ---------
1998 1998 1998 1998 1999 1999 1999 1999
--------- --------- ---------- --------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Cooperation and license
revenues.................... $ -- $ 1,001 $ 238 $ -- $ -- $ -- $ -- $ --
Product sales................ 21 66 135 223 161 178 71 74
Other revenues............... 1,232 311 225 200 2,000 314 877 1,717
------- ------- ------- ------- ------- ------- ------- -------
1,253 1,378 598 423 2,161 492 948 1,791
Cost of revenues:
License fees and royalties... (79) (122) (80) 305 (87) (85) (82) (107)
------- ------- ------- ------- ------- ------- ------- -------
Gross margin: 1,174 1,256 518 728 2,074 407 866 1,684
Operating expenses:
Research and development..... 3,925 4,553 5,107 5,829 5,587 6,616 7,210 7,843
Sales and marketing.......... 339 354 371 369 351 329 338 261
General and administrative... 637 586 639 653 730 772 787 694
------- ------- ------- ------- ------- ------- ------- -------
Total operating expenses 4,901 5,493 6,117 6,851 6,668 7,717 8,335 8,798
------- ------- ------- ------- ------- ------- ------- -------
Loss from operations.......... (3,727) (4,237) (5,599) (6,123) (4,594) (7,310) (7,469) (7,114)
Interest income (expense), (80) (174) (208) (246) (266) (98) (244) (256)
net
Foreign exchange gain (loss) 285 424 844 (1,181) (516) (621) 112 (51)
------- ------- ------- ------- ------- ------- ------- -------
Loss before income tax
benefit...................... (3,522) (3,987) (4,963) (7,550) (5,376) (8,029) (7,601) (7,421)
Income tax benefit............ -- -- 1,047 1,112 -- -- -- --
------- ------- ------- ------- ------- ------- ------- -------
Net income (loss)............. $(3,522) $(3,987) $(3,916) $(6,438) $(5,376) $(8,029) $(7,601) $(7,421)
======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
Liquidity and Capital Resources
Since inception through December 31, 1999, we have used $49.9 million in
cash to fund our operations, and $28.3 million in capital expenditures and
investments. Through December 31, 1999, we have funded our operations and
capital expenditures primarily from sales of $92.6 million of equity securities
and $21.0 million of proceeds from borrowings and sale-leaseback transactions.
In 1999, we used $17.9 million in cash and $1.2 million in capital
expenditures and investments to fund our operations. This increase was caused by
the increase in operating expenses associated with Taiwan start-up costs and
with the funding of the operations in Boise.
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<PAGE>
As of December 31, 1999, we had commitments for capital expenditures of
approximately $840,000. Capital expenditures were $1.1 million in 1997, $1.8
million in 1998, and $1.2 million in 1999. Capital expenditures exclude the
assets acquired pursuant to the Micron transaction as those assets were acquired
for the issuance of our Common Stock. Capital expenditures also exclude assets
acquired under capital lease obligations.
Implementing volume production at Unipac's manufacturing plant required
significant capital expenditures. Under the Foundry agreement with Unipac,
Unipac acquired and funded $14.9 million of capital expenditures for equipment
only. Unipac leases a portion of that equipment to us, which amounted to $11.2
million as of December 31, 1999.
Restricted cash amounted to $10.1 million in 1998 and to $7.5 million in
1999. Restricted cash is related to the security interest that we granted to
Unipac pursuant to the Foundry agreement, in relation to the purchase and
funding by Unipac of volume field emission displays production equipment. The
bank guaranty that we provided to Unipac is expected to decrease to match the
net amount of equipment leased by Unipac to us. Both the amounts of this bank
guaranty and the corresponding security interest to the banks are expected to
continue decreasing in the future.
We have existing contracts with French authorities providing for the
payment of grants totaling approximately $4.0 million, which were fully paid to
us as of December 31, 1998. 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 $2.0 million during 1999, and of which we
expect to receive $1.0 million in 2000.
In February 1997, we entered into a research and development agreement with
the European Union and other European industrial companies. The contribution of
the European Union to our costs under this agreement amounted to $941,000 over
the period. We received $423,000 in 1997, $293,000 in 1998 and $216,000 in 1999
from this contribution.
In November 1998, we entered into a research and development agreement with
French authorities. Under this agreement, we expect to benefit from a grant
totaling approximately $857,000, of which we collected $248,000 in 1999, and
expect to collect $546,000 in 2000.
Since inception, we recognized French income tax benefits of $8.1 million.
These income tax benefits represent tax credits for research and development
activities conducted in France, which are paid in cash if we are not able to
credit them against future income tax liabilities within three fiscal years. In
1998, we collected $2.5 million, representing research and development tax
credits recorded in 1993 and 1994. In April 1999, we collected $2.7 million from
research and development tax credits recorded in 1995.
On August 5, 1999, DARPA awarded a development contract to us. Under the
terms of the contract, we may receive approximately $4.7 million to develop a
color field emission display, of which we have already received $1.5 million in
1999.
We generated $21.0 million in cash flows from financing activities in 1999,
as compared to $9.4 million in 1998. These financing consisted primarily of
sales of shares of Common Stock, resulting in net proceeds us of $25.1 million
(net of issuance costs). Cash flow generated from financing activities exclude
non-cash transactions related to (i) the issuance of 14,000 shares of our Common
Stock to Coloray Display Corporation with a value of $50,000 (See "Notes to
Consolidated Financial Statements - Note 11 -- Stockholders' Equity") and (ii)
the dividends attached to the shares of Convertible Preferred Stock in the
amount of $512,000 (See "Notes to Consolidated Financial Statements - Note 11 --
Stockholders' Equity"). In consideration of the 7,133,562 shares of Common Stock
and 310,000 warrants issued pursuant to the Micron Transaction, we received
certain assets, assumed certain liabilities, and collected $4.3 million in cash.
Cash flows generated from financing activities in 1999 excluded non-cash
transactions related to the acquisition of these assets and the assumption of
these liabilities, and resulted in net proceeds to PixTech of $3.8 million (net
of issuance costs). In addition, cash flows generated from financing activities
included the sales of shares of Common Stock in a private placement in January
1999, resulting in net proceeds of $352,000.
On August 9, 1999, we entered into a private equity line agreement with
Kingsbridge Capital Ltd. Under the terms of the equity line agreement, we have
the irrevocable right, subject to certain conditions to draw up to $15 million
cash in exchange
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<PAGE>
for Common Stock, in increments over a two-year period. We began to draw off the
equity line agreement in 1999, resulting in net proceeds of $824,000.
On October 15, 1999, we completed a $20 million equity private placement
with Unipac Optoelectronics Corporation. Under the term of this agreement,
Unipac received 12.4 million shares of Common Stock.
Long-term liabilities increased by $2.0 million in 1999, representing two
zero-interest loans granted to PixTech by French local authorities. Of the
repayments occurring in 1999, $2.5 million were related to the repayment of the
$5.0 million note granted to PixTech in 1997 by Sumitomo Corporation.
We believe that cash available December 31, 1999, which amounted to $14.6
million, together with the anticipated proceeds during 2000 from research and
development tax credits and from the various grants and loans described above
will be sufficient to meet our cash requirements for the upcoming year.
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 levels we currently anticipate 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 our products, the levels of
promotion and advertising required to launch our products and attain a
competitive position in the marketplace and the response of competitors to our
products. Funds for these purposes, whether from equity or debt financing, or
other sources, may not be available when needed or on terms acceptable to us.
Outlook: Issues and Risks
We are currently focused on the following activities, which we believe are
necessary to the success of our business:
. successfully implementing the manufacture of field emission displays
by our Taiwanese contract manufacturer, Unipac;
. improving our manufacturing processes and yields, both in our pilot
plant and at Unipac;
. expanding our customer base and product offering, and;
. continuing the development of our field emission display technology,
including the development of large field emission displays.
You should carefully consider the following risks and issues, among others
that are common among development stage companies such as ours. It is especially
important to keep these risk factors in mind when reading "forward-looking
statements." These are statements that relate to future periods and include
discussions relating to market opportunities, acquisition opportunities, stock
price and our ability to compete. Generally, the words "anticipate," "believe,"
"expect," "intend" and similar expressions identify such forward-looking
statements. Forward-looking statements involve risks and uncertainties, and our
actual results could differ materially from the results discussed in the
forward-looking statements because of these and other factors. We do not have
any obligation to disclose if forward-looking statements, or the circumstances
they are based on, change.
We Have A History of Losses and Accumulated Deficit That May Continue In The
Future.
We have a history of losses as follows:
<TABLE>
<CAPTION>
Loss to Common
Operating Net Losses Stockholders
--------------------------- ----------------------------
<S> <C> <C>
Year Ended December 31, 1999 $26.5 million $29.9 million
Year Ended December 31, 1998 $19.7 million $17.9 million
Year Ended December 31, 1997 $15.8 million $14.7 million
</TABLE>
The losses were due in part to limited revenues and to various
expenditures, including expenditures associated with:
. research and development activities;
. pilot production activities; and
Page 17
<PAGE>
. Start-up costs to improve volume manufacturing in Taiwan, at Unipac.
We expect to incur operating losses in the future due primarily to:
. continuing research and development activities to develop field
emission displays larger than 15 inch in diagonal and color displays;
. manufacturing start-up costs in Taiwan; and
. expansion of our sales and marketing activities.
As a result of these losses, as of December 31, 1999, we had an accumulated
deficit of $82.6 million.
Our ability to achieve and maintain profitability is highly dependent upon
the successful commercialization of our monochrome and color displays. We cannot
assure you that we will ever be able to successfully commercialize our products
or that we will ever achieve profitability.
We Will Need Additional Capital In The Future.
We have incurred negative cash flows from operations since inception, and
have expended, and will need to expend, substantial funds to complete our
planned technology and product development efforts, including:
. continuous improvement of our manufacturing processes in order to
achieve yields that will lead to an acceptable cost of products;
. continuous product development activities in order to develop color
displays that meet market requirements and to develop a range of
products offered for sales;
. continuous research and development activities in order to develop
displays larger than 15 inch in diagonal; and
. expansion of our marketing, sales and distribution activities.
In addition to the above requirements, we expect that we will require
additional capital either in the form of debt or equity, regardless of whether
and when we reach profitability, for the following activities:
. working capital;
. acquisition of manufacturing equipment to expand manufacturing
capacity; and
. further product development.
Our future capital requirements and the adequacy of our available funds depend
on numerous factors, including:
. the rate of increase in manufacturing yields by Unipac, in Taiwan;
. the magnitude, scope and results of our product development efforts;
. the costs of filing, prosecuting, defending and enforcing patent
claims and other intellectual property rights;
. competing technological and market developments; and
. expansion of strategic alliances for the development, manufacturing,
sale, marketing and distribution of our products.
Page 18
<PAGE>
Due To the Conversion Of Series E Preferred Stock, Holders of Common Stock May
Face Significant Dilution.
In December 1998, we issued 367,269 shares of series E stock, at a price of
$1.60938 per share, to certain institutional investors. The series E stock is
generally convertible into our Common Stock at a rate equal to the lesser of (a)
$1.60938, and (b) the average closing price of our Common Stock over the ten
trading day ending period ending on the day immediately preceding the day upon
conversion. When our Common Stock price falls below $1.60938, the conversion of
the series E stock may result in the issuance of a significant number of
additional shares of Common Stock, and may cause significant dilution to current
holders of our Common Stock. Even before the shares of series E stock are
converted, the holders of the series E stock vote on the basis of the number of
shares of Common Stock that the series E stock can be converted into. Therefore,
a large drop in our stock price may result in a large amount of voting control
being held by a small number of stockholders. As of March 1st, 2000, there were
230,694 shares of series E Stock outstanding that would have been convertible
into 3,517,293 shares of our Common Stock, giving the holders of the series E
stock 8% of the vote of the issued and outstanding Common Stock.
Holders Of Our Series E Preferred Stock Could Engage In Short Selling To Reduce
Their Conversion Price.
A decrease in the price of our Common Stock below the $1.60938 maximum
conversion price could result in the series E preferred stock being convertible
into more shares of Common Stock. Increased sales volume of our Common Stock
could put downward pressure on the market price of the shares. This fact could
encourage holders of series E preferred stock to sell short our Common Stock
prior to conversion of the series E preferred stock, thereby potentially causing
the market price to decline. The selling stockholders could then convert their
series E preferred stock and use the share of Common Stock received upon
conversion to cover their short position. The selling stockholders could thereby
profit by the decline in the market price of the Common Stock caused by their
short selling.
If We Fail To Continue To Meet Nasdaq's Listing Maintenance Requirement, Nasdaq
May Delist Our Common Stock.
There is a possibility that our Common Stock could be delisted from the
Nasdaq National Market. While our Common Stock is currently quoted on the
Nasdaq National Market, in order to remain quoted on the Nasdaq National Market,
we must meet certain requirements with respect to:
. market capitalization (the market value of all outstanding shares of
our Common Stock);
. public float (the number of outstanding shares of Common Stock held by
those not affiliated with us);
. market value of public float;
. market price of the Common Stock;
. number of market makers;
. number of shareholders; and
. net tangible assets (total assets minus total liabilities and
intangible assets).
If the price of our Common Stock were to fall significantly below our
current trading range, Nasdaq may approach us regarding our continued listing on
the Nasdaq National Market. This situation could result from the rights
contained in the series E stock, which is convertible into Common Stock at a
conversion price based on a future price of our Common Stock. If Nasdaq were to
begin delisting proceedings against us, it could reduce the level of liquidity
currently available to our stockholders. With regard to future priced securities
such as our series E stock, Nasdaq is concerned with the following, among other
things:
. disproportionate voting rights;
. minimum bid price of a company's Common Stock;
. public interest concerns; and
. change in control.
Page 19
<PAGE>
The holders of our series E stock may vote their series E stock as if they
were holders of Common Stock and are entitled to the number of votes equal to
the number of shares of Common Stock that the series E stock is convertible into
at the time of voting. If our Common Stock price were to fall significantly,
this right may be deemed to violate a Nasdaq maintenance requirement due to the
disproportionate voting right, when compared to our Common Stock, which each
share of series E stock would have.
Moreover, in order to continue to be listed on Nasdaq, the minimum bid
price of our Common Stock must stay above $1.00. In addition to the fluctuations
of the market in general and our Common Stock in particular, a decrease in our
Common Stock price that causes the number of shares of Common Stock issuable
upon conversion of the series E stock to increase may exert downward pressure on
the price of our Common Stock. This may drive the minimum bid price of our
Common Stock below $1.00, thus violating a Nasdaq maintenance requirement. On
March 1st, 2000, the minimum bid price on our Common Stock was $9.125. Nasdaq
has also stated that in egregious situations, future priced securities, such as
our series E stock, may raise public interest concerns that may result in the
delisting of our Common Stock, if Nasdaq deems the delisting necessary to
prevent fraudulent and manipulative acts and practices.
If our Common Stock is delisted from the Nasdaq National Market, we could
apply to have the Common Stock quoted on the Nasdaq SmallCap Market. The Nasdaq
SmallCap Market has a similar set of criteria for initial and continued
quotation. We may not, however, meet the requirements for initial or continued
quotation on the Nasdaq SmallCap Market. If we were not able to meet the
requirements of the Nasdaq SmallCap Market, trading of our Common Stock could be
conducted on an electronic bulletin board established for securities that do not
meet the Nasdaq SmallCap Market listing requirements, in what is commonly
referred to as the "pink sheets."
Because the series E stock converts into a greater number of shares of our
Common Stock as the market price declines, the issuance of the series E stock
could be deemed by Nasdaq to be both a change in control and a change in our
financial structure. If Nasdaq were to make such a determination, we could be
required to re-apply for initial inclusion in the Nasdaq National Market. The
requirements for initial inclusion are greater than the requirements for
continued listing and we may not be able to meet the higher standards.
In addition, if our Common Stock were delisted from the Nasdaq National
Market, we may not have the right to obtain funds under the equity line
agreement and it could be more difficult for us to obtain future financing. In
addition, if our Common Stock is delisted, investors' interest in our Common
Stock would be reduced, which would materially and adversely affect trading in,
and the price of, our Common Stock.
Because We Use a Single Contract Manufacturer To Manufacture Our Field emission
displays We May Be Unable To Obtain An Adequate Supply Of Products And We May
Have Less Control Of Price.
Unipac, a liquid crystal display manufacturer and an affiliate of United
Microelectronics Corporation, is our only contract manufacturer. In the future,
we expect that the products that will be manufactured at Unipac and sold to our
customers will represent the majority of our revenues. If we are not able to
implement our manufacturing plans with Unipac as soon as we expect, we will not
be able to ship medium to large volumes of field emission display products.
Moreover, we will have less control over the price of the finished products, the
timeliness of their delivery and their reliability and quality. Finally, we will
not be able to obtain an acceptable cost for our field emission displays through
high volume manufacturing, as compared to manufacturing field emission displays
at our pilot production facility. This situation would materially adversely
affect our revenues and costs of producing products.
Expectations about the final timing of this manufacturing plan with Unipac
are forward-looking statements that still involve risks and uncertainties,
including the ease or difficulty of the transfer of the field emission display
technology to Unipac.
Our failure to adequately manage this contract manufacturing relationship
or any delays in the shipment of our products would adversely affect us.
Our Manufacturing Processes Are Still Under Development And We Still Need To
Obtain Commercially Acceptable Yields And Acceptable Costs Of Products Or Our
Costs To Produce Our Displays Will Be Too High for Us To Be Profitable.
Page 20
<PAGE>
In order for us to succeed, we must continue to develop and produce a range
of products incorporating our field emission display technology. At this time,
we have successfully developed only one monochrome field emission display
product that has been incorporated into a commercial end-user application and
that is being targeted at various markets. We will need to complete the
development of additional field emission display products to enlarge our market
opportunity, and there is no guaranty that we will succeed in these development
efforts. If we do not develop these new products, we will need to rely on sales
of a single product to be successful.
We have used our manufacturing facility in Montpellier, France to develop
manufacturing processes but it has produced only a limited number of products
suitable for sale. Additionally, to date, we have not completed testing of our
manufacturing processes at Unipac. In order for us to be successful, we must
improve our manufacturing yields in order to demonstrate the low cost potential
of our field emission display technology. Even if we succeed in completing the
development and testing of our manufacturing processes, we can not be sure that
the favorable characteristics demonstrated by our current displays manufactured
at our pilot manufacturing facility will be reproduced on a cost-effective basis
in commercial production.
We have, at this time, encountered a number of delays in the development of
our products and processes, and it is possible that further delays will occur.
Any significant delays could cause us to miss certain market opportunities and
could reduce our product sales.
We Need to Further Enhance Our Display Performance of Our Color Displays Or Our
Displays May Never Be Accepted By A Large Number Of Potential Customers.
We may never improve the performance characteristics of our color displays
to a level that is commercially acceptable or we may fail to do so on a timely
basis. Neither of which could result in potential customers not buying our
products. Key elements of display performance are brightness, power efficiency
and stability over time (lifetime and reliability). We are seeking to balance
brightness with power efficiency to produce bright and low power-consumption
displays. Display reliability depends on a large number of factors, including
the manufacturing process used in assembling the displays as well as the
characteristics of the materials, including phosphors, used in the display. In
order to produce color displays that will provide the product life and other
characteristics necessary for most applications, we need to make further
advances in our manufacturing processes and in the selection of the materials we
use.
We May Never Be Able To Fund The Research And Development Activities Needed To
Develop Large Displays.
We need to conduct a significant research and development effort in order
to bring our current 15-inch field emission display prototype to a stage where
it can be manufactured in volume at an acceptable cost. We may never be able to
fund that effort. Even if we were able to develop a product that could be
manufactured, we would have to locate or build a manufacturing facility to
produce our displays. Currently, Unipac has a facility and equipment to build
small displays only. We may not be able to fund the amount needed in order to
acquire or build a manufacturing facility for our large displays. If we are
unable to develop or manufacture large displays, we will miss large market
opportunities for flat panel displays.
We Face Intense Competition And Need To Compete With Current And Future
Competing Technologies That May Outperform Our Displays Thus Making Our Display
Undesirable.
Our competitors may succeed in developing products that outperform our
displays or that are more cost effective. If our competitors develop products
that offer significant advantages over our products and we are unable to improve
our technology, or develop or acquire alternative technology that is more
competitive, we may not be able to sell our displays.
Products utilizing liquid crystal display technology currently dominate the
market for flat panel display products. Certain liquid crystal display
manufacturers, such as Canon, Sharp, NEC, Hitachi, Samsung and Toshiba have
substantially greater name recognition and financial, technological, marketing
and other resources than us. Presently liquid crystal displays are in short
demand and independent forecasts predict that this may continue over a certain
period of time. However, liquid crystal display manufacturers have made, and
continue to make, substantial investments in increasing capacity as well as
product performance. We believe that, over time, this, combined with new
competitors entering the flat panel displays market, may
Page 21
<PAGE>
cause over-supply conditions and may have the effect of reducing average selling
prices of flat panel displays. To effectively compete, we could be required to
increase the performance of our products or reduce prices. In the event of price
reductions, we will not be able to maintain gross margins unless we reduce our
cost of sales.
There are a number of domestic and international companies developing and
marketing display devices using alternative technologies to liquid crystal
display technology, such as vacuum fluorescent displays, electro-luminescent
panels and plasma panels. Additionally, some of the basic field emission display
technology is in the public domain and, as a result, we have a number of
potential direct competitors developing field emission displays or developing
fundamental field emission displays technology. These companies, including
Canon, Futaba, Motorola, Sony, Fujitsu, Samsung and Toshiba, as well as smaller
companies, including Candescent, and Silicon Diamond Technology. Although we own
the rights to significant technological advances in field emission display
technology, potential competitors may have developed or may soon develop
comparable or superior field emission display technology. Many of the developers
of alternative flat panel display and competing field emission display
technologies have substantially greater name recognition and financial, research
and development, manufacturing and marketing resources than us, and have made
and continue to make substantial investments in improving their technologies and
manufacturing processes.
Because Potential Customers May Not Accept Our Products We May Never Sell The
Number Of Displays Required To Make Our Business Profitable.
We are uncertain about the potential size and timing of our target market
opportunities. We anticipate marketing our displays to original equipment
manufacturer customers, which are customers that will incorporate our product
into their final product. It is possible that demand for any particular product
by these customers will not last or that new markets will fail to develop as we
expect, or at all. Our ability to have consumer products sold that incorporate
our displays will depend, in part, on the following factors:
. whether original equipment manufacturers select our products for
incorporation into their products;
. the successful introduction of such products by the original equipment
manufacturers; and
. the successful commercialization of products developed by parties
incorporating our products.
It takes a long time for any product to achieve market success, and any
success is never certain. The introduction of new products is often delayed by
the need to have the products selected by an original equipment manufacturer and
designed into the original equipment manufacturer's products. For certain
products, the delay attributable to a manufacturer's design cycle may be a year
or longer. Factors affecting the length of these delays include:
. the size of the manufacturer;
. the type of application; and
. whether the displays are being designed into new products or fitted into
existing applications.
If volume production of such products is delayed for any reason, our
competitors may introduce new technologies or refine existing technologies that
could diminish the commercial acceptance of our products.
We Have Limited Sales, Marketing And Distribution Capabilities.
We have limited internal sales, marketing and distribution experience and
capabilities. Until recently, we were a development stage company with no
products or product sales. Consequently, we had not established significant
sales, marketing, or distribution operations within our company. Recently,
however, we have begun sales of our displays to customers. We will not be able
to develop significant revenues from the sales of our products unless we can
attract and retain highly qualified employees to market and oversee the
distribution of our products. If we are unable to establish and maintain
significant sales, marketing and distribution efforts, either internally or
through arrangements with third parties, we may be adversely affected.
We May Have Difficulty Protecting Patents And Other Proprietary Rights To Our
Technology And May therefore Be Unable To Prevent Competitors From Using Our
Technology.
Page 22
<PAGE>
We have been granted, have filed applications for, and have been licensed
under a number of patents in the United States and other countries. We rely on
these patents and licenses for an advantage in our industry and any infringement
of these patents and licenses will lessen our advantage. However, rights granted
under patents may not provide us with any competitive advantage over competitors
with similar technology, and any issued patents may not contain claims
sufficiently broad to protect against these competitors.
We have not conducted an independent review of patents issued to other
companies. We cannot be certain that we were the first creator of inventions
covered by pending patent applications or the first to file patent applications
on such inventions because patent applications in the United States are
maintained in secrecy until patents issue and the publication of discoveries in
scientific or patent literature tends to lag behind actual discoveries by
several months. Competitors in both the United States and other countries may
have applied for or obtained, or may in the future apply for and obtain, patents
that will prevent, limit or interfere with our ability to make and sell our
products.
We also rely on unpatented, proprietary technology, which is significant to
the development and manufacture of our displays. Others may independently
develop the same or similar technology or obtain access to our unpatented
technology. If we are unable to maintain the proprietary nature of our
technologies, our competitors may develop products using our technology.
Moreover, claims that our products infringe on the proprietary rights of
others are more likely to be asserted after we begin commercial sales of
products using our technology. It is possible that competitors will infringe our
patents. Even the successful defense and prosecution of patent suits is costly
and time consuming. The adverse outcome of a patent suit could subject us to
significant liabilities to other parties, require disputed rights to be licensed
from third parties or require us to stop selling our products.
We have received correspondence from Futaba Corporation and its legal
counsel beginning in February 1998 alleging the following:
. we are infringing one or more patents owned by Futaba relating to the
construction and manufacture of our displays that are not expressly
included under the license agreement between us and Futaba;
. our use of terms such as "alliance" and "partners" in describing the
nature of our contractual relationships with Motorola, Raytheon and
Futaba in reports filed with the SEC is misleading; and
. certain provisions in our agreement with Unipac constitute an
impermissible sublicense of Futaba technology.
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. Futaba
and PixTech are currently preparing a definitive written settlement agreement.
Because A Large Percentage Of Our Net Assets And Our Costs Is Expressed In
Euros, Currency Fluctuations May Cause Gains Or Losses.
A large percentage of our net assets and of our costs is expressed in
Euros, but our financial statements are stated in U.S. dollars. In 1998, 50% of
our assets and 60% of our costs were expressed in Euros. In 1999, 37% of our
assets and 69% of our costs were expressed in Euros. Fluctuations of the value
of the U.S. dollar versus the Euro may cause significant gains or losses. Most
of our capital lease obligation is expressed in Taiwanese dollars and thus
fluctuations of the value of the Taiwanese dollar versus the Euro may also cause
significant foreign exchange gains or losses.
Certain Anti-Takeover Provisions That We Have Instituted May Limit Our Stock
Price.
Certain provisions of our restated certificate of incorporation and by-laws
may discourage a third party from offering to purchase our Company and may also
adversely affect the market price of our Common Stock. These provisions,
therefore, inhibit actions that would result in a change in control of our
Company, including an action that may give the holders of the Common Stock the
opportunity to realize a premium over the then-prevailing market price of their
stock.
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<PAGE>
In addition, under our restated certificate of incorporation we can issue
preferred stock with such designations, rights and preferences as our board of
directors determines from time to time. This type of preferred stock could be
used as a method of discouraging, delaying or preventing a change in control of
We. In addition, the series E stock issued by us in December 1998 and any
additional shares of preferred stock that we may issue in the future may
adversely affect the voting and dividend rights, rights upon liquidation and
other rights of the holders of Common Stock. We do not currently intend to issue
any additional shares of preferred stock, but we retain the right to do so in
the future.
Furthermore, we are subject to Section 203 of the Delaware General
Corporation Law, which may discourage takeover attempts.
Our Business May Suffer If We Are Unable To Attract or Retain Key Personnel.
We are highly dependent on the principal members of our management and
staff, the loss of whose services might significantly delay or prevent the
achievement of research, development or strategic objectives. Our success
depends on our ability to retain key employees and to attract additional
qualified employees. Competition for such personnel is intense, and we may not
be able to retain existing personnel and to attract, assimilate or retain
additional highly qualified employees in the future.
Year 2000 compliance
We undertook various initiative to ensure that our computer systems and
manufacturing equipment would function properly with respect to dates in the
year 2000 and thereafter. Our computer system and manufacturing equipment
successfully transitioned to year 2000. However, there may be latent problems
that surface at key dates or events in the future. We have not experienced, and
does not anticipate, any significant problems related to the transition to the
year 2000. Furthermore, we do not anticipate any significant expenditure in the
future related to year 2000 compliance.
Item 7 A. 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 obligation is
expressed in Taiwanese dollars. Fluctuations of the parity of the Taiwanese
dollar versus the Euro or the US 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.
Page 24
<PAGE>
Item 8. Financial Statements and Supplementary Data
Index to Financial Statements
<TABLE>
<CAPTION>
Page(s)
--------------
<S> <C>
Report of Independent Auditors......................................................................... 25
Consolidated Balance Sheets............................................................................ 26
Consolidated Statements of Comprehensive Operations.................................................... 27
Consolidated Statements of Stockholders' Equity (Deficit).............................................. 28-29
Consolidated Statements of Cash Flows.................................................................. 30
Notes to Consolidated Financial Statements............................................................ 41-55
</TABLE>
Financial statement schedules have been omitted
since they are not required or are inapplicable
Page 25
<PAGE>
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, 1998 and 1999 and the
related consolidated statements of operations, shareholders' equity, and cash
flows for the period from June 18, 1992 (date of inception) through December 31,
1999, and for each of the three years in the period ended December 31, 1999.
These financial statements are the responsibility of our management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. 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) as of December 31, 1998 and 1999 and
the consolidated results of its operations and its cash flows for the period
June 18, 1992 (date of inception) through December 31, 1999 and for each of the
three years in the period ended December 31, 1999 in conformity with accounting
principles generally accepted in the United States.
Ernst & Young AUDIT
Represented by : Christine Blanc-Patin
Marseilles
March 06, 2000
Page 26
<PAGE>
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
December 31, December 31,
1998 1999
---------------- ----------------
<S> <C> <C>
ASSETS
Current assets :
Cash & cash equivalent available...................................... $ 10,166 $ 14,663
Restricted cash - short term.......................................... 1,685 1,667
Accounts receivable :
Trade............................................................... 456 57
Other............................................................... 161 709
Inventory............................................................. 980 1,109
Other................................................................. 1,354 651
---------------- ----------------
Total current assets................................................ 14,802 18,856
Restricted cash - long term............................................. 8,427 5,833
Property, plant and equipment, net...................................... 18,826 24,933
Goodwill, net........................................................... 150 78
Deferred tax assets..................................................... 4,643 1,255
Other assets - long term................................................ 546 214
---------------- ----------------
Total assets........................................................ $ 47,394 $ 51,169
================ ================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities :
Current portion of long term debt..................................... $ 3,410 $ 8,128
Current portion of capital lease obligations.......................... 2,189 2,455
Accounts payable...................................................... 7,514 7,548
Accrued expenses...................................................... 1,544 2,135
---------------- ----------------
Total current liabilities........................................... 14,657 20,266
Deferred revenue........................................................ 2,162 248
Long term debt, less current portion.................................... 8,391 3,075
Capital lease obligation, less current portion.......................... 8,399 7,644
Other long term liabilities, less current portion....................... 528 52
---------------- ----------------
Total liabilities................................................... 34,137 31,285
================ ================
Stockholders' equity
Convertible preferred stock Series E, $0.01 par value, authorized
shares--1,000,000; issued and outstanding shares--367,269 and
297,269 respectively 4 3
Common Stock, $0.01 par value, authorized shares--60,000,000;
issued and outstanding shares--15,000,329 and 37,351,283 150 373
respectively.........................................................
Additional paid-in capital............................................ 68,999 105,081
Cumulative translation adjustment..................................... (1,740) (2,988)
Deficit accumulated during development stage.......................... (54,156) (82,585)
---------------- ----------------
Total stockholders' equity......................................... 13,257 19,884
---------------- ----------------
Total liabilities and stockholders' equity . $ 47,394 $ 51,169
================ ================
</TABLE>
See accompanying notes.
Page 27
<PAGE>
CONSOLIDATED STATEMENTS OF COMPREHENSIVE OPERATIONS
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Year Ended Period from
December 31, June 18, 1992
--------------------------------- (date of
inception)
through Dec.
31,
1997 1998 1999 1999
--------- --------- --------- --------------
<S> <C> <C> <C> <C>
Revenues
Cooperation & license revenues....................... $ 1,932 $ 1,239 -- $ 26,449
Product sales........................................ 745 445 484 3,310
Other revenues....................................... 1,142 1,968 4,908 10,814
--------- --------- --------- --------------
Total revenues.................................... 3,819 3,652 5,392 40,573
--------- --------- --------- --------------
Cost of revenues
License fees and royalties........................... (181) 24 (361) (1,877)
--------- --------- --------- --------------
Gross margin........................................... 3,638 3,676 5,031 38,696
--------- --------- --------- --------------
Operating expenses
Research and development:
Acquisition of intellectual property rights........ -- (125) (75) (4,965)
Other.............................................. (15,497) (19,289) (27,181) (99,709)
--------- --------- --------- --------------
(15,497) (19,414) (27,256) (104,674)
Marketing & sales.................................... (1,496) (1,433) (1,279) (7,886)
Administrative & general expenses.................... (2,419) (2,515) (2,983) (15,799)
--------- --------- --------- --------------
(19,412) (23,362) (31,518) (128,359)
--------- --------- --------- --------------
Loss from operations................................... (15,774) (19,686) (26,487) (89,663)
Other income / (expense)
Interest income...................................... 759 828 800 3,648
Interest expense..................................... (289) (1,536) (1,664) (4,411)
Foreign exchange gains / (losses).................... 54 372 (1,076) (50)
--------- --------- --------- --------------
524 (336) (1,940) (813)
Loss before income tax benefit......................... (15,250) (20,022) (28,427) (90,476)
Income tax benefit..................................... 586 2,159 -- 7,893
--------- --------- --------- --------------
Net loss............................................... $(14,664) $(17,863) $(28,427) $ (82,583)
--------- --------- --------- --------------
Dividend accrued to holders of Preferred Stock......... -- (12) (513) (525)
--------- --------- --------- --------------
Net loss to holders of Common Stock.................... $(14,664) $(17,875) $(28,940) $ (83,108)
========= ========= ========= ==============
Net loss per share of Common Stock................... $ (1.12) $ (1.23) $(1.26)
========= ========= =========
Shares of Common Stock used in computing net loss 13,140 14,548 22,948
per share...........................................
Net loss............................................... $(14,664) $(17,863) $(28,427) $ (82,583)
Change in cumulative translation adjustment............ (1,694) 392 (1,249) (2,989)
Comprehensive net loss................................. $(16,358) $(17,471) $(29,676) $ (85,572)
</TABLE>
See accompanying notes.
Page 28
<PAGE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands, except share amounts)
<TABLE>
<CAPTION>
Convertible Preferred Stock
---------------------------------------------------------------------------------
Series A Series B Series C Series D Series E
-------------- -------------- -------------- -------------- -----------------
Shares Shares Shares Shares Shares
------ ------ ------ ------ ------
issued Amount issued Amount issued Amount issued Amount issued Amount
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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
Common Stock issued in private placements,
net of issuance costs -- $44.................
Issuance of Series E convertible preferred
stock, net of issuance costs -- $ 822........ 367,269 $4
Issuance of Common Stock under stock option
plan.........................................
Translation adjustment........................
Net loss--Year ended December 31, 1998........
- ---------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1998 367,269 $4
Common Stock issued in private placements.....
Issuance costs and dividends accrued in
relation to Series E convertible preferred
stock issued.................................
Conversion of Series E preferred stock........ (70,000) $1
Issuance of Common Stock in connection with
the acquisition of certain assets of Micron
Display, net of issuance costs -- $511.......
Issuance of warrants..........................
Issuance of Common Stock following conversion
of Sumitomo convertible loan.................
Issuance of Common Stock under stock option
plan.........................................
Issuance of Common Stock in connection with
Equity Line Kingsbridge, net of issuance
costs --$176.................................
Issuance of Common Stock in connection with
private placement, net of issuance cost --
$36..........................................
Issuance of Common Stock in connection with
Coloray......................................
Translation adjustment........................
Net loss-- Year ended December 31, 1999
- ---------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1999 -- -- -- -- -- -- -- -- (297,269) $3
====== ====== ====== ====== ====== ====== ====== ====== ======== ======
</TABLE>
See accompanying notes.
Page 29
<PAGE>
Consolidated Statement of Stockholders' Equity
(in thousands, except share amounts)
<TABLE>
<CAPTION>
Common Stock
-------------------------------
Additional Dividends Other
----------- accrued to ---------------
Shares Paid-in holders of Comprehensive
---------- ----------- Preferred ---------------
issued Amount Capital Stock Income
---------- ------ ----------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1996 8,141,146 $ 81 $ 34,085 $ (438)
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.......................... (1,694)
Net loss--Year ended December 31, 1997..........
----------------------------------------------------------------------
Balance at December 31, 1997 13,762,732 $138 $ 57,067 (2,132)
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.......... 7,449 (12)
Issuance of Series E convertible preferred
stock in December, net of issuance costs -- $
822............................................
Issuance of Common Stock under stock
option plan.................................... 1,375 1
Translation adjustment.......................... 392
Net loss--Year ended December 31, 1998
----------------------------------------------------------------------
Balance at December 31, 1998 15,000,329 151 69,012 (12) (1,740)
Common Stock issued in private placements....... 150,000 2 350
Issuance costs and dividends accrued in
relation to Series E convertible preferred
stock issued in December 1998.................. (36) (512)
Conversion of Series E preferred stock.......... 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 8 1,081
Issuance of Common Stock under stock option
plan........................................... 137,217 1 72
Issuance of Common Stock in connection with
Equity Line Kingsbridge, net of issuance
costs -- $176.................................. 624,809 6 818
Issuance of Common Stock in connection with
private placement, net of issuance
costs -- $36.................................... 12,427,146 124 19,839
Issuance of Common Stock in connection with
Coloray........................................ 14,000 1 50
Translation adjustment.......................... (1,249)
Net loss--Year ended December 31, 1999..........
----------------------------------------------------------------------
Balance at December 31, 1999 37,351,283 $376 $105,606 $(525) $(2,989)
============ ====== =========== ============== ===============
</TABLE>
<TABLE>
<CAPTION>
Deficit
------------
accumulated
------------
during
------------
development Treasury
------------ --------
stage stock Total
------------ -------- ---------
<S> <C> <C> <C>
Balance at December 31, 1996 $ (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)
Net loss--Year ended December 31, 1997.......... (14,664) (14,644)
---------------------------------
Balance at December 31, 1997 (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.......... 7,440
Issuance of Series E convertible preferred
stock in December, net of issuance costs -- $
822............................................
Issuance of Common Stock under stock option
plan........................................... 1
Translation adjustment.......................... 392
Net loss--Year ended December 31, 1998 (17,863) (17,863)
---------------------------------
Balance at December 31, 1998 (54,156) 13,257
Common Stock issued in private placements....... 352
Issuance costs and dividends accrued in
relation to Series E convertible preferred
stock issued in December 1998.................. (548)
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 Kingsbridge, net of issuance
costs -- $176.................................. 824
Issuance of Common Stock in connection with
private placement, net of issuance
costs -- $36.................................... 19,963
Issuance of Common Stock in connection with
Coloray........................................ 51
Translation adjustment.......................... (1,249)
Net loss--Year ended December 31, 1999.......... (28,428) (28,428)
---------------------------------
Balance at December 31, 1999 $ (82,584) -- $ 19,885
============ ======== =========
</TABLE>
See accompanying notes.
Page 30
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Period from
--------------
June 18, 1992
--------------
Year Ended (date of
---------------------------------- --------------
December 31st, inception)
---------------------------------- --------------
through
--------------
Dec. 31st,
--------------
1997 1998 1999 1999
---------- ---------- ---------- --------------
<S> <C> <C> <C> <C>
Operating activities
Net loss................................................................ $(14,664) $(17,863) $(28,427) $(82,583)
Adjustments to reconcile net loss to net cash (used) by
operating activities:
Depreciation and amortization........................................... 3,741 4,359 6,999 22,924
Gain on disposal of fixed assets........................................ -- (12) -- (43)
Deferred taxes.......................................................... -- 680 2,854 (1,629)
''In kind'' transactions................................................ -- -- -- 1,420
Change in assets and liabilities
Accounts receivable--Trade............................................. 672 337 398 54
Accounts receivable--Other............................................. 102 (75) (574) (254)
Inventory.............................................................. (28) (223) (19) (1,037)
Other assets........................................................... 115 996 841 273
Accounts payable, accrued expenses and other assets and
liabilities............................................................ 983 2,948 1,797 10,444
Deferred revenue....................................................... (297) (490) (1,814) 476
-------- -------- -------- --------
Net cash used in operating activities................................... (9,376) (9,343) (17,945) (49,955)
-------- -------- -------- --------
Investing activities
Additions to property, plant, and equipment............................. (1,165) (1,860) (1,235) (20,555)
Reclassification of cash equivalents as restricted cash.............. (10,080) (32) 2,464 (7,648)
Additions to patents.................................................... -- -- -- (130)
-------- -------- -------- --------
Net cash used in investing activities................................... (11,245) (1,892) 1,229 (28,333)
Financing activities
Stock issued............................................................ 21,639 11,906 25,105 92,609
Proceeds from long-term borrowings...................................... 10,000 -- 2,014 18,301
Proceeds from sale leaseback transactions............................... -- -- -- 2,731
Payments for equipment purchases financed by accounts
payable................................................................ -- -- -- (3,706)
Repayment of long-term borrowings....................................... (787) (739) (4,038) (7,853)
Repayment of capital lease obligations.................................. (576) (1,695) (1,987) (5,989)
-------- -------- -------- --------
Net cash provided by (used in) financing activities..................... 30,276 9,472 21,094 96,093
Effect of exchange rates on cash........................................ (1,493) (499) 119 (3,142)
-------- -------- -------- --------
Net increase / (decrease) in cash equivalents........................... 8,162 (2,262) 4,497 14,663
Cash and cash equivalents beginning of period............................ 4,266 12,428 10,166 --
-------- -------- -------- --------
Cash and cash equivalents end of period.................................. $ 12,428 $ 10,166 $ 14,663 $ 14,663
======== ======== ======== ========
Supplemental disclosures of non cash activities:
Equipment acquired under capitalized leases.............................. -- $ 12,048 $ 688 $ 13,945
Equipment purchases financed by accounts payable......................... -- -- -- $ 920
Long term debt assumed following Micron Transaction...................... -- -- $ 2 875 $ 2 875
Property, plant and equipment acquired by issuance of Common Stock....... -- -- $ 13,375 $ 13,375
Licenses acquired payable over two or three years........................ -- -- -- $ 3,765
Acquisitions of intangible by issuance of warrants....................... -- -- -- $ 230
Fixed assets disposed of in like-kind exchange........................... -- -- -- $ 468
Fixed assets acquired through like-kind exchange......................... -- -- -- $ 499
Supplemental disclosures of cash flow information:.......................
Interest paid............................................................ $ 184 $ 729 $ 994 $ 1,919
</TABLE>
See accompanying notes.
Page 31
<PAGE>
Notes to Consolidated Financial Statements
(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, ''we'' refers to PixTech, Inc. and PixTech S.A.
We are dedicated to improving, utilizing and licensing certain background
technology developed by Laboratoire Electronique de Technologie et
d'Instrumentation, a French government-owned research and development laboratory
in the field of flat panel displays using electron emitters, known as field
emission displays.
We have devoted substantially all our efforts to raising capital,
conducting research and development activities, concluding cooperation and
license agreements with certain displays manufacturers, and establishing
manufacturing capabilities for our field emission displays. Revenues from
principal planned operations will mainly consist of product sales. As these
revenues have not commenced, we are still in a development stage and fall under
the provisions of FAS No. 7, ''Accounting and Reporting by Development Stage
Enterprises''.
2. Summary of the Significant Accounting Policies
Basis of presentation
The accompanying consolidated financial statements were prepared in
accordance with generally accepted accounting principles in the United States.
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.
Principles of consolidation
The consolidated financial statements include the accounts of PixTech, Inc.
and its wholly owned subsidiary PixTech S.A. Inter-company accounts and
transactions have been eliminated in consolidation.
Fiscal Year
We end our fiscal year on December 31.
Revenue recognition--Cooperation and license agreements
We have entered into cooperation and license agreements with certain
display manufacturers. Under these contracts, we share technology with such
members through cross licensing provisions. Each contract provides for certain
fees and royalties to be paid to us. We believe 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 us to partially
recognize the revenue under those contracts. Certain fees payable to us under
these agreements were milestone-related and were due upon the achievement of
milestones. In accordance with the terms of the agreements, such fees are
irrevocable when paid. We recognized this milestone-related revenue only when
each milestone had been fully performed, as agreed by the parties. Costs
incurred under these contracts were considered costs in the period incurred,
regardless of when related revenue is recognized.
Texas Instruments: We entered into a cooperation and license agreement with
Texas Instruments Incorporated on June 29, 1993. This agreement was terminated
on July 15, 1996. In 1996, we recognized cooperation and license revenues under
this terminated agreement in the amount of $1,336.
Page 32
<PAGE>
Futaba Corporation: We 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 us 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 us in
three installments upon the achievement 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 we
licensed. At that time, we will recognize royalty revenues.
In order to reach certain specified milestones under the Futaba agreement,
we performed certain services in the field of technology development. In
accordance with the terms of the Futaba agreement, the milestone-related
revenues were recognized when certain milestones were achieved. The cooperation
period with Futaba expired in January 1997 and we will not record any additional
milestone based revenues in the future.
Raytheon Company: We 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 us 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 we licensed.
In June 1997, the cooperation period with Raytheon was extended for a
period of two years but no revenue was associated with such extension. To the
extent that Raytheon successfully incorporates the cross-licensed technology
into its own products, we will recognize royalty revenues as Raytheon sells the
products. We believe that Raytheon Company may have suspended its internal
program to develop field emission displays.
Motorola, Inc.: We 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 us 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 us 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 we licensed.
In order to reach certain of the specified milestones under the Motorola
agreement, we performed services in the field of technology development. In
accordance with the Motorola agreement, the milestone-related payments were
irrevocable when paid. Cash milestone-related revenues were recognized when
certain milestones were achieved.
The cooperation period with Motorola expired in June 1998 and we will not
record any additional milestone based revenues in the future.
To the extent that Motorola successfully incorporates the cross-licensed
technology into its own products, we will recognize royalty revenues as Motorola
sells the products.
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.
Revenue Recognition--Grants
We recognize 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.
Page 33
<PAGE>
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 inter-company transactions. 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
required by the Statement of Financial Accounting Standards No 52, ''Foreign
currency translation'' ("SFAS 52").
Net Income (Loss) Per Share
On December 31, 1997, we 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 No 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. 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 our initial public offering.
Pursuant to SFAS 128, we are 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, 1997, 1998 or 1999. As net
losses have been reported in these periods, the dilutive effects of stock
options, preferred stock and warrants were excluded from the calculation of net
loss per share under APB 15.
Comprehensive Income
We adopted Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income", ("SFAS 130"), effective for us for the first quarter of
1998. SFAS 130 requires that items defined as other comprehensive income, such
as foreign currency translation adjustments, be separately classified in the
financial statements and that the accumulated balance of other comprehensive
income be reported separately from retained earnings and additional paid-in
capital in the equity section of the balance sheet. The components of
comprehensive income for the years ended December 31, 1997, 1998 and 1999
consist solely of foreign currency translation adjustments.
Cash and Cash Equivalents
We consider all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents.
Investments
We account for investments in accordance with Statement of Financial
Accounting Standards No 115, ''Accounting for Certain Investments in Debt and
Equity Securities''. We had no investments at December 31, 1998 or December 31,
1999, other than pledged cash (See Note 6--Short Term and Long Term Restricted
Cash). There were no realized gains or losses on sales of investments in 1997,
1998 or 1999.
Inventory
Inventory is valued at the lower of cost (first-in, first-out basis) or
market. Inventory consists of raw material and spare parts.
Page 34
<PAGE>
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 pilot production equipment and six
years for Unipac volume production 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.
Impairment of Long-Lived Assets
In January 1996, we adopted Statement of Financial Accounting Standard No.
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 our financial
position or results of operations.
Patents and Other Intangible Assets
Patent application and establishment costs are expensed as incurred.
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 our 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, our carrying
value of the goodwill is reduced by the estimated shortfall of discounted cash
flows.
Employee Stock Option Plans
In 1996, we adopted the disclosure provisions of Statement of Financial
Accounting Standards No 123 ("SFAS 123"), "Accounting for Stock Based
Compensation". As permitted by SFAS 123, we have 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 No 25
"Accounting for Stock Issued to Employees" ("APB 25"). Under APB 25, when the
exercise price of our employee stock options is less than the market price of
the underlying shares of the date of grant, compensation expense is recognized.
Accounting for Income Taxes
We use 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.
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, 1998 and December 31, 1999 is $85 and $76, respectively. Pension expense
incurred was $14 in 1997, $35 in 1998 and $3 in 1999.
Recent pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement No.
133, Accounting for Derivative Instruments and Hedging Activities, as amended,
which is required to be adopted in years beginning after June 15, 2000. Because
of our minimal use of derivatives, management does not anticipate that the
adoption of the new Statements will have a significant effect on earnings or on
our financial position.
Page 35
<PAGE>
3. Other current assets
The components of other current assets are as follows:
December 31,
----------------------
1998 1999
---------- ----------
Value added tax refundable....................... $1,141 $ 507
Other............................................ 213 144
---------- ----------
$1,354 $ 651
========== ==========
4. Property, Plant and Equipment
The components of Property, Plant and Equipment are as follows:
<TABLE>
<CAPTION>
December 31,
--------------------------------
1998 1999
--------------- ---------------
<S> <C> <C>
Land......................................... $ 232 $ 199
Buildings and improvements................... 2,714 2,350
Machinery and equipment...................... 29,503 38,922
Furniture and fixtures....................... 1,163 1,224
-------------- --------------
33,612 42,695
Less accumulated depreciation................ (14,786) (17,762)
-------------- --------------
$ 18,826 $ 24,933
============== ==============
</TABLE>
In 1994, we entered into capital lease agreements for production equipment.
The gross and net book values of equipment financed under capital leases
amounted $4,107 and $350, respectively, at December 31, 1998 and $2,353 and
$342, respectively, at December 31, 1999.
Land and buildings with a net book value of $1,123 and $924 at December 31,
1998 and December 31, 1999, respectively, have been pledged to guarantee a
$10,000 loan received from Sumitomo Corporation in November 1997. See Note 7--
Long-Term Debt.
Pursuant to the Display Foundry Agreement signed in 1997 with Unipac,
volume field emission displays production equipment was installed at Unipac's
facility. That equipment was purchased and funded by Unipac, and a portion of it
is leased to PixTech, which amounts to $12,048 and $11,023 as of December 31,
1998 and 1999, respectively. According to Financial Accounting Standard 13,
((Accounting for Leases)), PixTech's share of equipment was recorded as assets
under the caption ((Property, Plant and Equipment)), in the net amount of
$11,061 and $8,607 as of December 31, 1998 and 1999. Depreciation of $988 was
recorded during 1998 and $1,936 during 1999. As of December 31, 1999, the
related capital lease obligation amounts to $9,686 compared to $10,125 as of
December 31, 1998, of which $2,193 and $1,869 respectively has been recorded as
current portion. (See Note 8--Capital Leases). In connection with the Micron
Transaction (see "Note 20 -- Micron Transaction"), we acquired the production
equipment located in Boise, Idaho, in May 1999. This acquisition was recorded in
the amount of $13,375. The fair value of net assets acquired in the Micron
Transaction was approximately $9,098 in excess of the cost of these assets. The
fair value of property, plant and equipment of $22,473 was proportionally
reduced to the extent that the fair value of net assets exceeded cost, resulting
in property plant and equipment of $13,375 (see "Note 20 -- Micron
Transaction").
5. Goodwill
On February 20, 1996, we 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 our Common Stock at an exercise
price of $11.67 per share. See Note 11--Stockholders' Equity - Warrants.
Page 36
<PAGE>
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 amortized over 5 years.
6. Short-term and long-term restricted cash
In August 1997, we provided Unipac Optoelectronics Corp. ("Unipac"), our
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 us and Unipac in order to implement volume production
of field emission displays at Unipac's manufacturing line. 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 in the balance sheet. Under certain conditions of
the Foundry agreement, Unipac can sell us 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 is expected to decrease to match the net amount
of equipment leased by Unipac to us.
7. Long-term debt
Long-term debt consists of the following :
<TABLE>
<CAPTION>
December 31,
----------------------------------
1998 1999
---------------- ----------------
<S> <C> <C>
Loan payable (a)....................................... $10,000 $ 6,412
Non interest bearing loan from ANVAR (b)............... 1,601 1,868
Equipment purchase loans (c)........................... 93 --
Loan payable (d)....................................... 107 30
R&D agreement with French Local authorities (e)........ -- 1,469
Loan payable (f)....................................... -- 1,329
Loan payable (g)....................................... -- 94
---------------- ----------------
11,801 11,202
Less: current portion.................................. (3,410) (8,128)
---------------- ----------------
Total long-term debt, less current portion............. $ 8,391 $ 3,075
================ ================
</TABLE>
(a) In November 1997, Sumitomo Corporation ("Sumitomo") granted us 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 April 7, 1999, 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 PixTech at a conversion price equal to 80% of the market price on the
conversion date. This option became exercisable starting April 1999 and expires
November 2000. As part of the Sumitomo agreement, the loan is partially secured
as follows: (i) we 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, has guaranteed certain
contingent payment obligations towards Sumitomo in case of default by PixTech.
See Note 16-- Related Parties Transactions. In addition, should we default on
the repayment of the loan, we will remit to Sumitomo two thirds of any royalty
amount received from any licensee until all obligations to Sumitomo are
satisfied.
During 1999, Sumitomo converted 750,000 shares of Common Stock for $1,088. As of
December 31, 1999 the principal due on the convertible loan is $3,912.
(b) We entered into a development contract with a French Public agency
ANVAR in 1993. Under this agreement, we received a non-interest-bearing loan.
Repayment of this loan started in 1997.
(c) In 1994, we were 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. As of December
31, 1999, this loan was totally repaid.
Page 37
<PAGE>
(d) In 1995, we were 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.
(e) 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 $3,000, of which $1,469 was
received in April 1999.
(f) (g) In connection with the Micron Transaction (see "Note 20 -- Micron
Transaction"), we assumed two equipment loans from Micron.
The first one (f), with Bank of Boston, including interest at 7.63%, was
recorded for $2,040 in May. The principal due as at December 31, 1999 is $1,329.
This loan is repayable (approximately $94 per month) until February 2001.
The second one (g), with Heller, interest at 7.47%, was recorded for $835, the
principal due as at December 31, 1999 is $94. The last repayment will be in
January 2000.
Future minimum payments under these obligations are as follows:
<TABLE>
<CAPTION>
Year ending December 31,
<S> <C>
2000................................................................ 8,128
2001................................................................ 657
2002................................................................ 1,215
2003................................................................ 199
2004................................................................ 193
2005................................................................ 811
-------
Total minimum payments $11,203
=======
</TABLE>
8. Capital leases
December 31,
--------------------------
1998 1999
------------ ------------
Capital lease obligations............... $10,588 $10,099
Less: current portion................... (2,189) (2,455)
----------- -----------
$ 8,399 $ 7,644
----------- -----------
In December 1994, we 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, 1999,
the net book value of this equipment was $342. (See Note 4--Property, Plant and
Equipment).
Pursuant to the Display Foundry agreement signed in 1997 with Unipac,
PixTech's share of volume field emission displays production installed at
Unipac's facility is leased to us. As of December 31, 1999, the related capital
lease obligation amounts to $9,686, of which $2,193 has been recorded as current
portion. (See Note 4--Property, Plant and Equipment).
Future minimum payments under capital lease obligations are as follows:
<TABLE>
<CAPTION>
Year ending December 31,
<S> <C>
2000................................................................. $ 3,057
2001................................................................. 2,779
2002................................................................. 2,475
2003................................................................. 2,223
2004................................................................. 929
-------
Total minimum payments............................................... 11,463
Less amount representing interest.................................... (1,364)
-------
Present value of minimum capitalized lease payments.................. $10,099
-------
</TABLE>
Page 38
<PAGE>
9. Commitments and contingencies
Operating leases
We are obligated under operating lease agreements for equipment and
manufacturing and office facilities.
We leased 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. At
the end of September 1999, the equipment became our property.
We lease our main manufacturing and office facilities under a non-
cancelable operating lease, which expires September 2000, with an option to
renew.
Minimum annual rental commitments under non-cancelable leases at December
31, 1999 are as follows:
Year ending December 31,
2000................................................ $1,380
2001................................................ 1,249
2002................................................ 952
2003................................................ 604
------
Total minimum payments $4,167
======
Rental expense for all operating leases consisted of the following:
<TABLE>
<CAPTION>
1997 1998 1999
---------- ----------- -----------
<S> <C> <C> <C>
Rent expense for operating leases $1,245 $1,188 $1,454
========== =========== ===========
</TABLE>
License agreement and research and development agreement with Commissariat a
l'Energie Atomique
See Note 16--Related Party Transactions
10. Fair Value of Financial Instruments
At December 31, 1998 and 1999, 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, 1998 and 1999, the fair values of long-term debt and other
long-term liabilities, with book value of $22,917 and $21,354 were $16,081 and
$15,043, 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.
Page 39
<PAGE>
Common Stock
On July 18, 1995, we sold 2,500,000 shares of Common Stock for net proceeds
of $20,998 in our initial public offering on Nasdaq.
On February 7, 1997, we sold 3,333,000 shares of Common Stock in a public
offering in Europe resulting in net proceeds of $15,927.
In February 1997, we sold 463,708 and 1,111,111 shares of our Common Stock
to Motorola, Inc. and to United Microelectronics Corporation, the parent company
of Unipac Optoelectronics Corporation, respectively, in private placements
resulting in net proceeds of $2,086 and $5,000, respectively.
In March 1998, we sold 1,000,000 shares of our Common Stock to The Kaufmann
Fund Inc., in a private placement at a price of $4.00 per share, resulting in
net cash proceeds of $4,000 before expenses payable by us, which amounted to
$44.
In March 1998, we entered into a license agreement with Coloray Display
Corporation, a California corporation ("Coloray"), providing us with a
worldwide, non-exclusive royalty-free license on certain technologies related to
field emission displays. In consideration of the license and rights granted to
us, we paid an amount of $75 and issued 14,000 shares of our Common Stock,
valued at a price of $3.57 per share, representing a total amount of $50.
In December 1998, we sold 222,222 shares of our Common Stock in a private
placement at a price of $2.25 per share, resulting in net proceeds of $500.
In January 1999, we sold 150,000 shares of our Common Stock in a private
placement at a price of $2.35 per share, resulting in net proceeds of $352. In
consideration of the Micron Transaction (See "Note 20 -- Micron Transaction"),
we issued in May 1999 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
at an exercise price of approximately $2.25 per share. The fair value of the
310,000 warrants was computed using the Black-Scholes model and was estimated at
$257. In consideration of the 7,133,562 shares of Common Stock and 310,000
warrants issued pursuant to the Micron Transaction, we were granted certain
assets, assumed certain liabilities, and received $4.3 million in cash.
In August 1999, we secured a $15 million equity-based line of credit with
Kingsbridge Capital Limited, an institutional investor specializing in equity
lines. Under the terms of the equity line, we can draw up to $15 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 amount of any such draw
are at our sole discretion, subject to certain conditions. Such conditions
include limitations depending on the volume and the price of our Common Stock.
Also the minimum amount we have to draw is $5M within the two-year period. These
shares will be issued at a 10% or 12% discount to the market price at the time
of any draw. In November 1999, we issued 624,809 shares of Common Stock,
representing $ 824 ($1,000 less issuance costs of $176).
In October 1999, we completed a $20 million equity private placement with
Unipac Optoelectronics Corporation ("Unipac"). Under the terms of the agreement,
Unipac, an active matrix liquid crystal display manufacturer based in Taiwan
received 12.4 million shares of our Common Stock at a purchase price of $1.61
per share. With this transaction, Unipac becomes our largest shareholder, and
combined with its parent company United Microelectronic Corporation (UMC), owns
approximately 34.5 percent of our shares of Common Stock outstanding. The net
cash of this transaction was $19,963 (net of issuance costs of $36).
In relation with the Sumitomo loan (see "Note 7 (a) -- Long Term Debt"), we
issued, starting July 23, 1999 750,000 shares of our Common Stock in 1999,
representing a decrease of our obligation of $1,089.
In December 1999, in relation with the Coloray agreement, we paid an amount
of $25 and issued 14,000 shares of our Common Stock, valued at a price of $3.57
per share, representing a total amount of $50.
There were 37,351,283 shares of Common Stock outstanding at December 31,
1999.
Page 40
<PAGE>
Preferred Stock
Our Board of Directors has the authority to issue up to 1,000,000 shares of
Preferred Stock and to fix the relative rights thereof. In December 1998,
500,000 shares of Preferred Stock were reserved for the issuance of "Series E
Convertible Preferred Stock".
Convertible preferred stock
Series A to D shares of Convertible Preferred Stock automatically converted
into shares of Common Stock upon the closing of our initial public offering in
1995.
In December 1998, we issued 367,269 Series E shares of Convertible Preferred
Stock. The Preferred Stock was sold in a private placement at a price of
approximately $22.53 per share, resulting in net proceeds of $8,275, before
expenses payable by PixTech, which amounted to $822. The amount representing
Preferred Stock we sold is generally convertible into shares of Common Stock
starting from June 21, 1999 at a conversion price equal to the lesser of
approximately $1.60938 per share of Common Stock or the average of the closing
price of the Common Stock over the ten trading days immediately preceding the
notice of conversion. In addition to the conversion feature, the Preferred
Stock has a liquidation preference equal to the purchase price of the preferred
stock and a cumulative dividend. The Preferred Stock will automatically convert
into Common Stock on December 22, 2003. The Preferred Stock is redeemable at the
option of PixTech at the issue price upon certain events. The holders of shares
of Series E Preferred Stock are entitled to the number of votes equal to the
number of shares of Common Stock into which the shares of Series E Preferred
Stock held by such holder are convertible.
The holders of Series E Preferred Stock are entitled to receive cumulative
dividends. At December 31, 1999 a dividend of $525 was accrued and recorded
against Stockholders' Equity.
In addition, we agreed to reserve, out of the authorized but unissued
shares, 150% of the number of shares of Common Stock that the Series E Stock is
convertible into. As of December 31, 1999, the Series E Stock would have been
convertible into 4,487,711 shares of Common Stock thus requiring us to reserve
6,731,567 shares of the remaining authorized but unissued shares.
Stock Options
1993 Stock Option Plan
We adopted a stock option plan on November 30, 1993, the "1993 Stock Option
Plan" (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 our key
employees and consultants. The plan provides that the Compensation Committee of
the Board of Directors shall determine the option price 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, 1999, become exercisable within a certain
period of time or when specific milestones are completed.
Page 41
<PAGE>
The activity under the option plan was as follows:
<TABLE>
<CAPTION>
Shares Options Weighted
---------------- ----------------- Average
available outstanding Option Price
---------------- ----------------- -------------
per Share
-------------
<S> <C> <C> <C>
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
========== =========
Options granted.................................... (444,960) 444,960 $4.626
Options exercised.................................. -- (1,375) 0.656
Options terminated unexercised..................... 362,535 (362,535) 4.632
---------- ---------
Balance at December 31, 1998......................... 339,474 2,149,192
========== =========
Additional shares reserved......................... 2,500,000 --
Options granted.................................... (2,167,505) 2,167,505 $1.949
Options exercised.................................. -- (137,217) 0.535
Options terminated unexercised..................... 376,655 (376,655) 3.490
---------- ---------
Balance at December 31, 1999......................... 1,048,624 3,802,825
========== =========
</TABLE>
Options to purchase 1,125,434 shares and 1,776,081 shares were exercisable
at weighted-average exercise prices of $1.186 and $2.10 at December 31, 1998 and
December 31, 1999, respectively.
Exercise prices for options outstanding as of December 31, 1999 ranged from
$0.375 to $9.750. The weighted average remaining contractual life of those
options is 8.020 years.
The following is additional information related to options outstanding as of
December 31, 1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------- -------------------
Weighted
Exercise Average Weighted Weighted
Price Number Remaining Average Number Average
Range Outstanding Contractual Life Exercise Price Exercisable Exercise Price
- ----------------- ------------------- ---------------- ---------------- ------------------ ------------------
<S> <C> <C> <C> <C> <C>
$ 0.375 - $ 3.500 3,185,530 7 years 1.687 1,594,146 0.879
$ 3.510 - $ 6.500 591,145 7 years 5.151 667,125 5.355
$ 6.510 - $ 9.750 26,150 6 years 8.896 392,786 8.397
</TABLE>
Pro forma information regarding net loss and loss per share is required by
SFAS 123, and has been determined as if we had accounted for our 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:
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
1999 1998 1997
-------------------------- -------------------------- --------------------------
Expected Stock option term: 4 years 4 years 4 years
<S> <C> <C> <C>
Interest rate 3% 3% 3%
Volatility 0.922 0.74 0.30
Dividends 0% 0% 0%
</TABLE>
Page 42
<PAGE>
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the option's vesting period. Our pro forma
information follows (in thousands except for loss per share information) :
<TABLE>
<CAPTION>
1997 1998 1999
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Pro forma net loss $(14,865) $(18,690) $(29,893)
Pro forma loss per share $ (1.13) $ (1.29) $ (1.30)
- ----------------------------------------------------------------------------------
</TABLE>
The weighted-average fair value of options granted during 1997, 1998 and
1999 were $2.52, $2.82 and $1.39, respectively.
Director Stock Option Plan
In May 1995, we adopted the 1995 Director Stock Option Plan (the "Director
Stock Plan''), which provides for the issuance of up to 50,000 shares of our
stock. The Director Stock Plan provides for an automatic grant of options to
purchase our stock at its fair market value to our non-employee directors upon
election or re-election to the Board of Directors.
The activity under the option plan was as follows:
<TABLE>
<CAPTION>
Shares Options Weighted
---------------- -------------- Average Option
available outstanding Price
---------------- -------------- ----------------
per Share
----------------
<S> <C> <C> <C>
Balance at December 31, 1996......................... 44,000 6,000
Options granted.................................... (12,000) 12,000 $3.910
------- -------
Balance at December 31, 1997......................... 32,000 18,000
======= =======
Options granted.................................... (12,000) 12,000 $4.646
Options terminated unexercised..................... 14,000 (14,000) $5.962
------- -------
Balance at December 31, 1998......................... 34,000 16,000
======= =======
Options granted.................................... (6,000) 6,000 $1.843
Balance at December 31, 1999......................... 28,000 22,000
======= =======
</TABLE>
As at December 31, 1999 and at the date of grant, the exercise prices of
each stock option grant under the Director Stock Plan was above our stock price.
Therefore, no compensation expense was incurred.
Warrants
In December 1994, in connection with various equipment leases, we entered
into a warrant agreement. Under this agreement, we granted a right to purchase
62,500 shares of Common Stock of PixTech, 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, we granted 150,000 warrants to purchase shares of our 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 our
Common Stock, Motorola received warrants to purchase an additional 463,708
shares of our Common Stock at a price of $5.50 per share, which expired
unexercised on December 31, 1998.
In May 1999, we issued a warrant to Micron to purchase an aggregate of
310,000 shares of our Common Stock at $2.25313 per share.
Page 43
<PAGE>
We are obligated to issue a warrant to purchase 35,000 shares of our Common
Stock to Needham & Company, Inc., in connection with an agreement for financial
advisory services, which is exercisable at a price of $2.26 per share and
expires on May 10, 2004.
We are obligated to issue a warrant to purchase 75,000 shares of our Common
Stock to Josephthal and Co, in connection with an agreement for financial
advisory services, which is exercisable at a price of $2.26 per share and
expires on June 17, 2004.
In addition, we have issued a warrant to Kingsbridge to purchase 100,000
shares of our Common Stock at $2.30 per share that expires on February 6, 2003.
Employee Stock Purchase Plan
In May 1995, we 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.
Shares available for issuance
At December 31, 1999, out of the 60,000,000 authorized shares of Common
Stock, no shares were available for issuance by PixTech. On January 18, 2000 the
stockholders approved the increase of authorized shares of Common Stock from
60,000,000 to 100,000,000 shares.
12. Other and deferred revenues
Other revenues and deferred revenues include the following:
<TABLE>
<CAPTION>
December 31,
----------------------------------------------------------------------
1997 1998 1999
---------------------- ---------------------- ----------------------
Other Deferred Other Deferred Other Deferred
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Grant from French Ministry of Industry (a)........ $ 663 $1,210 $1,211 $ - $ - $ -
Grant from French local authorities (b)........... 144 913 290 1,396 1,344 -
Grant from European Union, Esprit Program (c)..... - 423 96 766 962 -
Grant from DARPA (d).............................. - - - - 2,092 -
Grant from French Ministry of Research (e)........ - - - - - 248
Other............................................. 335 - 371 - 510 -
---------- ---------- ---------- ---------- ---------- ----------
TOTAL............................................. $1,142 $2,546 $1,968 $2,162 $4,908 $248
========== ========== ========== ========== ========== ==========
</TABLE>
(a) In December 1994, we were awarded a grant from the French Ministry of
Industry to support manufacturing of field emission displays. The total
contribution of the French Ministry of Industry amounted to $2,674. We
recognized as income $800 in 1996, $663 in 1997, $1,211 in 1998. No revenue
was recognized in 1999, as all conditions of the grant were met by December
31, 1998.
Page 44
<PAGE>
(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 1999, revenue recognized in the amount of $87 was related to
various incentives granted by French local authorities. In April 1995, we
signed a grant agreement with DATAR (Delegation a l'Amenagement du
Territoire et a l'Action Regionale), an agency of French Home Office. The
obligations related to the recognition of the associated revenue were
reached in 1999 for $1,257.
(c) In February 1997, we entered into an research and development agreement
with the European Union. The total contribution of the European Union to
the costs we incurred amounts to $962. We received prepayments in 1997,
1998 and 1999 but revenues were recognized as income in 1999, as all
conditions stipulated in the agreement have been met and we recognized the
entire revenue.
(d) On August 5, 1999 we were awarded a development contract by DARPA (Defense
Advanced Research Projects Agency). Under the terms of the contract, we
will receive approximately $4,700 to develop and produce a "Low-Power, Wide
Angle of View, Spatial Color Field emission display for Rapid Information
Update Applications." In 1999, we received $2,092. Milestone related
revenue is recognized upon the achievement of such milestones as defined by
the contract. Costs incurred under this contract are recognized in the
period incurred as research and development expenses.
(e) In December 1998 we were awarded a grant of the French Ministry of Research
for certain research and development tasks. We received in 1999 $248 which
were not recognized as revenues and we expect to receive $600 until
December 2000.
13. Income Taxes
Loss before income tax benefit consists of the following:
<TABLE>
<CAPTION>
December 31,
----------------------------------------------
1997 1998 1999
-------------- -------------- --------------
<S> <C> <C> <C>
France.................................................. $(13,567) $(16,614) $(21,003)
Rest of world........................................... (1,683) (3,408) (7,424)
-------------- -------------- --------------
Loss before income tax benefit....................... $(15,250) $(20,022) $(28,427)
============== ============== ==============
</TABLE>
The income tax benefit consists of $586, $2,159 and $0 as of December 31,
1997, 1998 and 1999 respectively, which relate to operations in France.
A reconciliation of income taxes computed at the French statutory rate (40%)
to the income tax benefit is as follows :
<TABLE>
<CAPTION>
December 31,
-------------------------------------------
1997 1998 1999
------------- ------------- -------------
<S> <C> <C> <C>
Income taxes computed at the French statutory rate........ $ 6,354 $ 7,341 $ 11,771
Operating losses not utilized............................. (6,354) (7,341) (11,771)
Research credits.......................................... 586 2,159 --
------------- ------------- -------------
Total..................................................... $ 586 $ 2,159 --
============= ============= =============
</TABLE>
No U.S. income tax expense was realized and no U.S. income taxes were paid
in years ended December 31, 1997, 1998 and 1999.
Page 45
<PAGE>
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 our deferred
taxes consist of the following:
<TABLE>
<CAPTION>
December 31,
-------------------------------------------
1997 1998 1999
------------- ------------- -------------
<S> <C> <C> <C>
Deferred tax assets:
Net operating loss carryforwards........................ $ 12,058 $ 18,108 $ 24,032
Deferred revenue........................................ 355 75 (3)
Research credit carryforwards........................... 8,000 6,448 2,849
------------- ------------- -------------
20,413 24,631 26,878
Deferred tax liabilities:
Deferred revenue........................................ (412) (760) (1)
Deferred expense........................................ (165) (53) (8)
------------- ------------- -------------
Total deferred tax assets.............................. 19,835 23,818 26,869
Valuation allowance....................................... (14,777) (19,175) (25,614)
------------- ------------- -------------
Deferred tax assets....................................... $ 5,058 $ 4,643 $ 1,255
============= ============= =============
</TABLE>
Net operating loss carryforwards can be credited against future income in
France. Net operating loss carryforward of: $4,809 expire in 2000, $5,124 in
2001, $9,176 in 2002, $13,304 in 2003, $15,045 in 2004 and $12,619 can be
carried forward indefinitely.
Research credit carryforwards derive from our subsidiary PixTech SA. In
France, research credit carryforwards are calculated following certain rules
defined by the Tax administration. We are 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. We
collected $2,840 and $2,913 in 1998 and 1999 respectively.
14. Industry and Geographic Information
We adopted Statement of Financial Accounting Standards No. 131, "Disclosures
about Segments of an Enterprise and Related Information", ("SFAS 131"),
effective for our fiscal years beginning after December 15, 1997. SFAS 131
requires that public business enterprises report certain information about
operating segments in their financial statements, and about their products and
services, the geographic area in which they operate, and their major customers.
As we operate in one single reportable segment, the development, manufacturing
and licensing of flat panel displays using electron emitters, the adoption of
SFAS 131 has no effect on our consolidated operating results or financial
condition.
Our long lived-assets may be summarized as follow:
<TABLE>
<CAPTION>
December 31,
-------------------------------------
1997 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
United States........................................... $ 424 $ 227 $11,570
France.................................................. 8,929 7,282 4,756
Taiwan.................................................. -- 11,317 8,607
----------- ----------- -----------
$9,353 $18,826 $24,933
</TABLE>
15. Significant Customers and Vendors
Historically, we derived our revenues principally from cooperation and
license agreements with certain display manufacturers. Net revenues from
cooperation and license agreements represented approximately 50%, 34% and none
of our net revenues for the fiscal years 1997, 1998 and 1999, respectively. We
do not expect any significant additional milestone related revenues to be
directly derived from existing cooperation and license agreements.
In 1998 and 1999, product sales primarily reflected the shipment of displays
to our first volume customer, Zoll Medical Inc.
Page 46
<PAGE>
Service fees paid to our single manufacturer to manufacture its field
emission displays represent 30% and 36% of total of its operation activity in
1998 and 1999, respectively. In addition, the obligations resulting from the
research and development agreement with the Commissariat a l'Energie Atomique
(See " Note 16- Related Party Transactions ") represent 18 % of our operations
in 1999.
16. Related Party Transactions
Commissariat a l'Energie Atomique license agreement
In September 1992, we entered into a license agreement with Commissariat a
l'Energie Atomique. Commissariat a l'Energie Atomique holds a controlling
interest in Commissariat a l'Energie Atomique Industrie, a shareholder of
PixTech. Under this agreement, Commissariat a l'Energie Atomique granted to us a
royalty bearing, worldwide, exclusive license to all patents held by
Commissariat a l'Energie Atomique in the field of field emission displays, 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 our sales
and the license fees and royalties we collected.. No expense was recorded in
1993 and 1994 with respect to license fees and royalties due to Commissariat a
l'Energie Atomique. In 1995, $1,000 was accrued in respect of license fees and
royalties due to Commissariat a l'Energie Atomique in 1996. In order for us to
maintain an exclusive license, it was required to make minimum royalty payments
beginning in 1996. An amount of $45 payable to Commissariat a l'Energie Atomique
in 1997 was accrued in 1996. By paying the remaining amount due to Laboratoire
d'Electronique, de Technologie et d'Instrumentation, we will fulfill the minimum
royalty obligations to Laboratoire d'Electronique, de Technologie et
d'Instrumentation through 1999.
In 1997, an amendment to the Laboratoire d'Electronique, de Technologie et
d'Instrumentation license agreement was signed between the Commissariat a
l'Energie Atomique and us (the "1997 Commissariat a l'Energie Atomique
Amendment") for a period of three years, in return for Commissariat a l'Energie
Atomique guarantying certain contingent payment obligations towards Sumitomo.
See Note 7-- Long term debt. The royalty rates and minimum payments from us to
Commissariat a l'Energie Atomique were increased for a period of three years. In
addition, we gave a security interest to Commissariat a l'Energie Atomique on
all its patents during the term of the amendment. An amount of $308 and $364 was
accrued respectively in 1998 and in 1999, which included a minimum royalty
obligation of $288 and $357, respectively pursuant to the 1997 Commissariat a
l'Energie Atomique Amendment.
Commissariat a l'Energie Atomique research and development agreement
In September 1992, we entered into a three-year renewable research and
development agreement with Commissariat a l'Energie Atomique, under which
Commissariat a l'Energie Atomique, through its laboratory "Laboratoire
d'Electronique, de Technologie et d'Instrumentation" performs certain research
and development activities for our benefit. This program is expected to be
extended for a third three-year period ending on January 1, 2002, subject to
further extension by mutual agreement of the parties. The consideration received
by the Commissariat a l'Energie Atomique for this research and development
activity in 1999 amounted to approximately $1,083.
In connection with the above research and development agreement with
Commissariat a l'Energie Atomique, we incurred $637, $848 and $1,043 in 1997,
1998 and 1999, respectively, of research and development costs.
17. License
In connection with our license of our technology to a display manufacturer,
we acquired a worldwide, non-exclusive royalty-free license to such licensee's
background field emission display technology, as well as a right to grant
royalty-free sublicenses to certain other companies. We were obligated to pay
certain license fees in connection with the acquisition of these rights from
such licensee; these payments to the licensee were $650 in 1995 and $650 in
1996. In 1997, we recorded cooperation and license revenues in the amount of
$707, in consideration of the cancellation of same amount that had been included
in accounts payable in relation to accrued license fees due this licensee.
Page 47
<PAGE>
In connection with the license of our technology to another display
manufacturer, we also acquired a worldwide, non-exclusive license, without the
right to sublicense, to certain technology of such licensee. We were obligated
to pay certain license fees in connection with the acquisition of these rights;
these payments to the licensee were $1,000 in 1995, $1,000 in 1996. The
remaining license fees payable to this licensee in the amount of $1,400 were
canceled in 1997, as consideration for the purchase by such licensee of shares
of our Common Stock in February 1997.
In March 1998, we entered into a license agreement with Coloray, providing
PixTech with a worldwide, non-exclusive royalty-free license on certain
technologies related to field emission displays. In 1998, in consideration of
the license and rights granted to PixTech, we paid an amount of $75 and issued
14,000 shares of our Common Stock, valued at a price of $3.57 per share,
representing a total amount of $50. In 1999, we paid an amount of $25 and
issued 14,000 shares of our Common Stock, representing a total amount of $50
(See Note 11--Stockholders' Equity).
18. 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. Futaba and PixTech are currently preparing a definitive
written settlement agreement.
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 its
business, results, financial situation, or assets and liabilities.
19. Financial position
During 1999, we have incurred losses in the amount of $28,427 and used cash
in operating activities of $17,945, which has adversely affected our liquidity.
At December 31,1999, we had net working capital of $17,740 and a deficit
accumulated during the development stage of $82,583. In 1999, we significantly
improved our liquidity and financial position with the completion of $20.0
million equity private placement with Unipac. We expect that cash available at
December 1999 together with the anticipated proceeds from Kingsbridge agreement,
from various grants and loans and from research and development tax credits,
will be sufficient to meet our cash requirements until at least December 2000.
We intent to continue improving our liquidity and financial position through
capital increases expected to take place in 2000. There can be however no
assurance that additional funds will be available through capital increase when
needed or on terms acceptable to us.
20. 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"). The Micron Transaction was closed on May 19, 1999
between PixTech and Micron and was accounted for as an acquisition of assets.
The financial statements as of June 30, 1999 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 issuance of 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. The fair value of the 310,000 warrants was computed
using the Black-Scholes model and was estimated at $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
the extent that the fair value of net assets acquired exceeded cost resulting in
property plant and equipment of $13,316. 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 available".
Page 48
<PAGE>
The following unaudited pro forma financial information presents the
combined results of operations for the year ended December 31, 1998 and 1999 as
if the transaction had been completed at the beginning of the periods indicated,
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, had the
transaction been completed at the beginning of the periods indicated, and may
not be indicative of the future results.
<TABLE>
<CAPTION>
Year ended December 31,
----------------------------------------------------
1998 1999
---------------------------- ----------------------
<S> <C> <C>
Net loss $(26,986) $(32,105)
Net loss to holders of common stock $(26,998) $(32,617)
Net loss per share of common stock $ (1.25) $ (1.27)
</TABLE>
21. Subsequent events
In January and February 2000, we issued to Sumitomo 2,126,246 shares of our
Common Stock, for a total conversion price of $ 3,911, representing the
outstanding balance of our convertible loan as of December 31, 1999 (see "Note 7
(a) -- Long Term Debt").
In February 2000, we signed an amendment to the Common Stock Purchase Agreement
dated October 6, 1999 with Unipac Optoelectronics Corporation ("Unipac"). Under
the terms of this amendment, PixTech will, upon the satisfaction of certain
conditions, issue 9.3 million shares of its Common Stock at a purchase of $1.61
per share to United Microelectronics Corporation.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures
Not Applicable
PART III
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 our Proxy Statement relating to our
Annual Meeting of Stockholders scheduled for April 18, 2000 (the ''Proxy
Statement'').
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.
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.
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.
Page 49
<PAGE>
PART IV
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
A report on Form 8-K has been filed on October 28, 1999, reporting under
Item 5 a Common Stock Purchase agreement with Unipac Optoelectronics Corporation
(see exhibit 2.1) for a private placement of $20 million of PixTech's common
stock, par value $0.01 per share. The private placement closed on October 15,
1999 with the issuance of approximately 12.4 million shares of Common Stock at
approximately $1.61 per share.
A report on Form 8-K has been filed during the first quarter of 2000, on
January 25, 2000, reporting under Item 5 an agreement with Audi A.G. and other
parties to jointly design, develop, test and deliver a 7-inch color field
emission display for automotive applications(see exhibit 99.1 ), and
consequently the funding to PixTech of 1.78 million Euro from the European
Commission.
Page 50
<PAGE>
(C) EXHIBITS
<TABLE>
<CAPTION>
Number Footnote Description
- ---------- ------------ -----------------------------------------------------------------------------------------
<C> <C> <S>
2.1 15 Acquisition agreement between Micron Technology, Inc. and the Registrant dated March 19,
1999.
2.2 15 Amendment Number 1 to Acquisition agreement between Micron Technology, Inc. and the
Registrant dated April 23, 1999.
2.3 15 Amendment Number 2 to Acquisition agreement between Micron Technology, Inc. and the
Registrant dated May 17, 1999.
3.1 1 Restated Certificate of Incorporation of Registrant.
3.2 2 Restated By-Laws of Registrant.
3.3 14 Certificate of Designations of PixTech, Inc.
3.4 18 Certificate of Amendment of Restated Certificate of Incorporation of Registrant.
3.5 17 Certificate of Amendment of Restated Certificate of Incorporation of Registrant, dated
January 18, 2000.
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.
4.3 6 Warrant to purchase 150,000 shares of Common Stock of the Registrant issued to PanoCorp
Display Systems, Inc.
4.4 8 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.
4.6 19 Warrant to purchase 310,000 shares of Common Stock of the Registrant issued to Micron
Technology, Inc.
4.7 21 Warrant to purchase 100,000 shares of Common Stock of the Registrant issued to
Kingsbridge Capital Limited.
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, 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 Commissariat a l'Energie Atomique.
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
</TABLE>
Page 51
<PAGE>
<TABLE>
<CAPTION>
<C> <C> <S>
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 17 Amended and Restated 1993 Stock Option Plan.
10.15 3 1995 Director Stock Option Plan.
10.16 3 1995 Employee Stock Purchase Plan.
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 license 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 9 Distribution and Financing agreement between Sumitomo Corporation, PixTech Inc. and
</TABLE>
Page 52
<PAGE>
<TABLE>
<CAPTION>
<C> <C> <S>
PixTech S.A. dated as of July 21, 1997.
10.31 9 Cross-Licensing Period Extension between Raytheon Company and Pixel International, S.A.
(now PixTech S.A.) dated as of September 4, 1997.
10.32 9 Amendment No 14 to the license agreement on the Microtips Display between PixTech, Inc.
and the Commissariat a l'Energie Atomique.
10.33 9 Credit agreement between Sumitomo Corporation and PixTech, Inc. dated as of July 21,
1997.
10.34 10 License agreement, dated March 16, 1998, between the Registrant and Coloray Display
Corporation.
10.35 11 Stock Issuance agreement, dated March 16, 1998, between the Registrant and Standard
Energy Company.
10.36 12 Stock Purchase agreement, dated March 27, 1998, between the Registrant and Kaufmann Fund
Inc.
10.37 13 Preferred Stock Purchase agreement among PixTech Inc., The Kaufmann Fund, Inc., Wingate
Capital Ltd., Fisher Capital Ltd., The Atherton Co. And Banque Generale de Luxembourg,
fonds Interselex Equity Easdaq dated as of December 22, 1998.
10.38 15 Employment agreement of Jean-Luc Grand-Clement dated January 19, 1999.
10.39 15 Employment agreement of Michel Garcia dated September 9, 1992.
10.40 15 Employment agreement of Francis Courreges dated June 28, 1993.
10.41 15 Amendment No. 1 to Employment agreement of Francis Courreges dated September 27, 1996.
10.42 15 Employment agreement of Yves Morel dated March 16, 1994.
10.43 15 Employment agreement of Jean-Jacques Louart dated April 7, 1997.
10.44 16 Lease agreement, dated as of May 19, 1999, between the Registrant and Micron Technology,
Inc.
10.45 16 Employment agreement of James J. Cathey dated May 20, 1999.
10.46 18 Patent cross license agreement dated May 19, 1999 between the Registrant and Micron
Technology, Inc.
10.47 20 Investor Rights agreement dated as of May 19, 1999 between the Registrant and Micron
Technology, Inc.
10.48 21 Private Equity Line agreement by and between Kingsbridge Capital Limited and PixTech,
Inc. dated as of August 9, 1999.
10.49 21 Registration Rights agreement dated as of August 9, 1999 by and between PixTech, Inc.
and Kingsbridge Capital Limited.
10.50 22 Common Stock Purchase Agreement by and between PixTech, Inc. Unipac Optroelectronics
Corporation dated as of October 6, 1999.
10.51 17 Employment Agreement of Dieter Mezger dated February 2nd, 2000.
21.1 3 Subsidiaries of the Registrant.
23.1 17 Consent of Ernst & Young.
27 17 Financial Data Schedule.
</TABLE>
Page 53
<PAGE>
(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 an Exhibit with the same number to the PixTech, Inc. Form 10-K for
the fiscal year ended December 31, 1997 and incorporated herein by reference.
(10) Filed as Exhibit 10.1 to the PixTech, Inc. Form 10-Q for the fiscal
quarter ended March 31, 1998 and incorporated herein by reference.
(11) Filed as Exhibit 10.2 to the PixTech, Inc. Form 10-Q for the fiscal
quarter ended March 31, 1998 and incorporated herein by reference.
(12) Filed as Exhibit 10.13 to the PixTech, Inc. Form 10-Q for the fiscal
quarter ended March 31, 1998 and incorporated herein by reference.
(13) Filed as Exhibit 1.1 to the PixTech, Inc. Current Report on Form 8-K filed
January 7, 1999 and incorporated herein by reference.
(14) Filed as Exhibit 2.1 to the PixTech, Inc. Current Report on Form 8-K filed
January 7, 1999 and incorporated herein by reference.
(15) Filed as an Exhibit with the same number to the PixTech, Inc. Form 10-Q
for the fiscal quarter ended March 31, 1999 and incorporated herein by
reference.
(16) Filed as an Exhibit with the same number to the PixTech, Inc. Form 10-Q
for the fiscal quarter ended June 30, 1999 and incorporated herein by reference.
(17) Filed herewith.
(18) Filed as an Exhibit with the same number to the PixTech, Inc. Form 10-Q/A
for the fiscal quarter ended June 30, 1999 filed with the Commission on August
24, 1999 and incorporated herein by reference.
(19) Filed as Exhibit 3 to Micron Technology, Inc.'s Schedule 13D filed with
the Commission on May 28, 1999 and incorporated herein by reference.
Page 54
<PAGE>
(20) Filed as Exhibit 2 to Micron Technology, Inc.'s Schedule 13D filed with the
Commission on May 28, 1999 and incorporated herein by reference.
(21) Filed as an Exhibit with the same number to the PixTech, Inc. Registration
Statement on Form S-1 (Commission File No. 333-87001) and incorporated herein by
reference.
(22) Filed as an Exhibit with the same number to the PixTech, Inc. Form 10-K for
the fiscal quarter ended September 30, 1999 and incorporated herein by
reference.
Page 55
<PAGE>
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
By: /s/ DIETER MEZGER
-------------------------------
March 28, 2000:
Dieter Mezger
President
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ DIETER MEZGER Chief Executive Officer, President and Director March 28, 2000
- ---------------------------------- (Principal Executive Officer)
Dieter Mezger
/s/ Jean-Luc Grand-Clment Chairman of the Board March 28, 2000
- ----------------------------------
Jean-Luc Grand-Clement
/s/ Marie Boem Chief Financial Officer March 28, 2000
- ---------------------------------- (Principal Financial Officer)
Marie Boem
/s/ John A. Hawkins Director March 28, 2000
- ----------------------------------
John A. Hawkins
/s/ Ronald RITCHIE Director March 28, 2000
- ----------------------------------
Ronald Ritchie
/s/ ANDRE BORREL Director March 28, 2000
- ----------------------------------
Andre Borrel
</TABLE>
Page 56
<PAGE>
Stockholder and Other Information
Trademarks Investor Relations Contacts
PixTech(R) is a registered trademark.
PixTech - Boise, Idaho USA
Tel: 208 333-7500
Fax: 208 333-7505
Auditors
Ernst & Young
408 avenue du Prado
BP 116 U.S. Agency
13267 Marseilles--France Lillian Armstrong
011-33-4-91-23-66-66 Kris Otridge
Lippert/Heilshorn & Assc.
Tel: 415 433-3777
Legal Counsel Fax: 415 433-5577
Palmer & Dodge LLP
One Beacon Street European Agency
Boston, Massachusetts 02108 Actus
(617) 573-0100 Tel: 33 (0)1 53 67 3636
Fax: 33 (0)1 53 67 3637
Transfer Agent & Registrar
American Stock Transfer & Trust Company
40 Wall Street--46th floor
New York, NY 10005
(718) 921-8275
Annual Meeting of Stockholders
The Annual Meeting of Stockholders of PixTech, Inc. will be held on Tuesday,
April 18, 2000 at 4 p.m. local time at the East Side Marriot, 525 Lexington
Avenue in New-York, New-York.
Market for Common Stock
NASDAQ National Symbol: PIXT
EASDAQ Market Symbol : PIXT
<TABLE>
<S>
Year ended Dec. 31, 1998 Year ended Dec. 31, 1999 2000*
------------------------ ------------------------ --------------
<S> <C> <C> <C> <C> <C> <C>
High Low High Low High Low
First Quarter 6 1/5 2 5/16 3 5/16 1 1/2 11 5/8 1 3/4
Second Quarter 7 3/4 4 1/2 2 5/8 1 11/32
Third Quarter 5 1/2 2 3/4 2 1/4 1 15/32
Fourth Quarter 3 15/16 1 3/8 2 5/8 1 1/2
</TABLE>
* For the period for January 1st, 2000 to March 1st, 2000
On December 31, 1999, there were approximately 80 stockholders of record. We
has never declared or paid any cash dividends on its Common Stock and does not
anticipate doing so in the foreseeable future.
Page 57
<PAGE>
Exhibit 3.5
CERTIFICATE OF AMENDMENT OF
RESTATED CERTIFICATE OF INCORPORATION
OF
PIXTECH, INC.
PixTech, Inc. (hereinafter called the "Corporation"), organized and existing
under and by virtue of the General Corporation Law of the State of Delaware,
does hereby certify as follows:
Pursuant to a meeting of the Board of Directors of the Corporation, a resolution
was duly adopted, pursuant to Sections 141 and 242 of the General Corporation
Law of the State of Delaware, setting forth an amendment to the Restated
Certificate of Incorporation of the Corporation and declaring said amendment to
be advisable. The stockholders of the Corporation duly approved said proposed
amendment pursuant to a meeting in accordance with Sections 212 and 242 of the
General Corporation Law of the State of Delaware. The resolution setting forth
the amendment is as follows:
RESOLVED: That the first paragraph of Article FOURTH of the Restated
Certificate of Incorporation of the Corporation be, and hereby is,
amended and restated to read in its entirety as follows:
FOURTH: The Corporation shall be authorized to issue one hundred and one
million (101,000,000) shares of capital stock, which shall be
divided into one hundred million (100,000,000) shares of Common
Stock, par value $0.01 per share and one million (1,000,000)
shares of Preferred Stock, par value $0.01 per share.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to be signed by its President this 18th day of January, 2000.
PIXTECH, INC.
/s/ Dieter Mezger
-----------------
Dieter Mezger
President and Chief Executive Officer
<PAGE>
Exhibit 10.14
PixTech, Inc.
Amended and Restated 1993 Stock Option Plan
As adopted by the Board of Directors on May 9, 1995,
approved by the Stockholders on May 19, 1995.
As amended by the Board of Directors on February , 1997,
approved by the Stockholders on March 24, 1997.
As amended by the Board of Directors on February 3, 1999,
approved by the Stockholders on April 27, 1999.
This 1993 Stock Option Plan (the "Plan") is intended to encourage ownership
of Common Stock, $.01 par value (the "Stock") of Pixtech, Inc. (the "Company")
by its officers, employees and consultants so as to provide additional
incentives to promote the success of the Company through the grant of Incentive
Stock Options and Nonstatutory Stock Options (as such terms are defined in
Section 3(a) below (collectively, "Options").
1. Administration of the Plan.
--------------------------
The administration of the Plan shall be under the general supervision of any
committee of the Board appointed by the Board to administer the Plan, the
members of which are `Non-Employee Directors' within the meaning of Rule 16b-3
under the Securities Exchange Act of 1934, as amended, or any successor
provision (the "Rule") to the extent necessary to comply with the Rule (the
"Compensation Committee"). Within the limits of the Plan, the Compensation
Committee shall determine the individuals to whom, and the times at which,
Options shall be granted, the type of Option to be granted, the duration of each
Option, the price and method of payment for each Option, and the time or times
within which (during its term) all or portions of each Option may be exercised.
The Compensation Committee may establish such rules as it deems necessary for
the proper administration of the Plan, make such determinations and
interpretations with respect to the Plan and Options granted under it as may be
necessary or desirable and include such further provisions or conditions in
Options granted under the Plan as it deems advisable. To the extent permitted
by law, the Compensation Committee may delegate its authority under the Plan to
a sub-committee of the Compensation Committee.
2. Shares Subject to the Plan.
--------------------------
(a) Number and Type of Shares. The aggregate number of shares of Stock of
the Company which may be optioned under the Plan is 5,156,372 shares. In the
event that the Compensation Committee in its discretion determines that any
stock dividend, split-up, combination or reclassification of shares,
recapitalization or other similar capital change affects the Stock such that
adjustment is required in order to preserve the benefits or potential benefits
of the Plan or any Option granted under the Plan, the maximum aggregate number
and kind of shares or securities of the Company as to which Options may be
granted under the Plan and as to which Options then outstanding shall be
exercisable, and the option price of such Options, shall be appropriately
adjusted by the Compensation Committee (whose determination shall be conclusive)
so that the proportionate number of shares or other securities as to which
Options
<PAGE>
may be granted and the proportionate interest of holders of outstanding
Options shall be maintained as before the occurrence of such event.
(b) Effect of Certain Transactions. In the event of a consolidation or
merger of the Company with another corporation, or the sale or exchange of all
or substantially all of the assets of the Company, or a reorganization or
liquidation of the Company, each holder of an outstanding Option shall be
entitled to receive upon exercise and payment in accordance with the terms of
the Option the same shares, securities or property as he would have been
entitled to receive upon the occurrence of such event if he had been,
immediately prior to such event, the holder of the number of shares of Stock
purchasable under his Option; provided, however, that in lieu of the foregoing
the Board of Directors of the Company (the "Board") may upon written notice to
each holder of an outstanding Option provide that such Option shall terminate on
a date not less than 20 days after the date of such notice unless theretofore
exercised. In connection with such notice, the Board may in its discretion
accelerate or waive any deferred exercise period.
(c) Restoration of Shares. If any Option expires or is terminated
unexercised or is forfeited for any reason or settled in a manner that results
in fewer shares outstanding than were initially awarded, including without
limitation the surrender of shares in payment of the Option exercise price or
any tax obligation thereon, the shares subject to such Option or so surrendered,
as the case may be, to the extent of such expiration, termination, forfeiture or
decrease, shall again be available for granting Options under the Plan, subject,
however, in the case of Incentive Stock Options, to any requirements under the
Code (as defined below).
(d) Reservation of Shares. The Company shall at all times while the Plan
is in force reserve such number of shares of Stock as will be sufficient to
satisfy the requirements of the Plan. Shares issued under the Plan may consist
in whole or in part of authorized but unissued shares or treasury shares.
3. Grant of Options; Eligible Persons
----------------------------------
(a) Types of Options. Options shall be granted under the Plan either as
incentive stock options ("Incentive Stock Options"), as defined in Section 422
of the Internal Revenue Code of l986, as amended (the "Code") or as Options
which do not meet the requirements of Section 422 ("Nonstatutory Stock
Options"). Options may be granted from time to time by the Compensation
Committee, within the limits set forth in Sections l and 2 of the Plan, to all
employees of the Company or of any parent corporation or subsidiary corporation
of the Company (as defined in Sections 424(e) and (f), respectively, of the
Code), and, with regard to Nonstatutory Stock Options, to all employees and
consultants of the Company or of any such parent corporation or subsidiary
corporation.
(b) Date of Grant. The date of grant for each Option shall be the date on
which it is approved by the Compensation Committee, or such later date as the
Compensation Committee may specify. No Options shall be granted hereunder after
ten years from the date on which the Plan was approved by the Board.
(c) Automatic Awards. The Compensation Committee may provide for the
automatic award of an Option upon the delivery of shares to the Company in
payment of an Option for up to the number of shares so delivered.
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<PAGE>
4. Form of Options.
---------------
Options granted hereunder shall be evidenced by a writing delivered to the
optionee specifying the terms and conditions thereof and containing such other
terms and conditions not inconsistent with the provisions of the Plan as the
Compensation Committee considers necessary or advisable to achieve the purposes
of the Plan or comply with applicable tax and regulatory laws and accounting
principles. The form of such Options may vary among optionees.
5. Option Price.
------------
In the case of Incentive Stock Options, the price at which shares may from
time to time be optioned shall be determined by the Compensation Committee,
provided that such price shall not be less than the fair market value of the
Stock on the date of granting as determined in good faith by the Compensation
Committee; and provided further that no Incentive Stock Option shall be granted
to any individual who is ineligible to be granted an Incentive Stock Option
because his ownership of stock of the Company or its parent or subsidiary
corporations exceeds the limitations set forth in Section 422(b)(6) of the Code
unless such option price is at least ll0% of the fair market value of the Stock
on the date of grant.
In the case of Nonstatutory Stock Options, the price at which shares may from
time to time be optioned shall be determined by the Compensation Committee.
The Compensation Committee may in its discretion permit the option price to be
paid in whole or in part by a note or in installments or with shares of Stock of
the Company or such other lawful consideration as the Compensation Committee may
determine.
6. Term of Option and Dates of Exercise.
------------------------------------
(a) Exercisability. The Compensation Committee shall determine the term
of all Options, the time or times that Options are exercisable and whether they
are exercisable in installments; provided, however, that the term of each non-
statutory stock option granted under the Plan shall not exceed a period of
eleven years from the date of its grant and the term of each Incentive Stock
Option granted under the Plan shall not exceed a period of ten years from the
date of its grant, provided that no Incentive Stock Option shall be granted to
any individual who is ineligible to be granted such Option because his ownership
of stock of the Company or its parent or subsidiary corporations exceeds the
limitations set forth in Section 422(b)(6) of the Code unless the term of his
Incentive Stock Option does not exceed a period of five years from the date of
its grant. In the absence of such determination, the Option shall be exercisable
at any time or from time to time, in whole or in part, during a period of ten
years from the date of its grant or, in the case of an Incentive Stock Option,
the maximum term of such Option.
(b) Effect of Disability, Death or Termination of Employment. The
Compensation Committee shall determine the effect on an Option of the
disability, death, retirement or other termination of employment of an optionee
and the extent to which, and during the period which, the optionee's estate,
legal representative, guardian, or beneficiary on death may exercise rights
thereunder. Any beneficiary on death shall be designated by the optionee, in
the manner determined by the Compensation Committee, to exercise rights of the
optionee in the case of the optionee's death.
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<PAGE>
(c) Other Conditions. The Compensation Committee may impose such
conditions with respect to the exercise of Options, including conditions
relating to applicable federal or state securities laws, as it considers
necessary or advisable.
(d) Withholding. The optionee shall pay to the Company, or make provision
satisfactory to the Compensation Committee for payment of, any taxes required by
law to be withheld in respect of any Options under the Plan no later than the
date of the event creating the tax liability. In the Compensation Committee's
discretion, such tax obligations may be paid in whole or in part in shares of
Stock, including shares retained from the exercise of the Option creating the
tax obligation, valued at the fair market value of the Stock on the date of
delivery to the Company as determined in good faith by the Compensation
Committee. The Company and any parent corporation or subsidiary corporation of
the Company (as defined in Sections 424(e) and (f), respectively, of the Code)
may, to the extent permitted by law, deduct any such tax obligations from any
payment of any kind otherwise due to the optionee.
(e) Amendment of Options. The Compensation Committee may amend, modify or
terminate any outstanding Option, including substituting therefor another Option
of the same or different type, changing the date of exercise or realization and
converting an Incentive Stock Option to a Nonstatutory Stock Option, provided
that the optionee's consent to such action shall be required unless the
Compensation Committee determines that the action, taking into account any
related action, would not materially and adversely affect the optionee.
7. Limitations on Transferability.
------------------------------
Options granted under the Plan shall not be transferable by the recipient
otherwise than by will or the laws of descent and distribution, and are
exercisable, during such person's lifetime, only by such person or by such
person's guaradian or legal representative; provided that the Compensation
Committee may in its discretion waive such restrictions in any particular case.
8. No Right to Employment.
----------------------
No persons shall have any claim or right to be granted an Option, and the
grant of an Option shall not be construed as giving an optionee the right to
continued employment. The Company expressly reserves the right at any time to
dismiss an optionee free from any liability or claim under the Plan, except as
specifically provided in the applicable Option.
9. No Rights as a Shareholder.
--------------------------
Subject to the provisions of the applicable Option, no optionee or any person
claiming through an optionee shall have any rights as a shareholder with respect
to any shares of Stock to be distributed under the Plan until he or she becomes
the holder thereof.
10. Amendment or Termination.
------------------------
The Board may amend or terminate the Plan at any time, provided that no
amendment shall be made without stockholder approval if such approval is
necessary to comply with any applicable tax or regulatory requirement.
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<PAGE>
11. Stockholder Approval.
--------------------
The Plan is subject to approval by the stockholders of the Company by the
affirmative vote of the holders of a majority of the shares of capital stock of
the Company entitled to vote thereon and present or represented at a meeting
duly held in accordance with the laws of the State of Delaware, or by any other
action that would be given the same effect under the laws of such jurisdiction,
which action in either case shall be taken within twelve (12) months from the
date the Plan was adopted by the Board. In the event such approval is not
obtained, all Options granted under the Plan shall be void and without effect.
12. Governing Law.
-------------
The provisions of the Plan shall be governed by and interpreted in accordance
with the laws of Delaware.
Page 5
<PAGE>
Exhibit 10.51
EMPLOYMENT AGREEMENT
--------------------
EMPLOYMENT AGREEMENT dated as of February 2nd, 2000 (the "Execution Date")
by and between PixTech, Inc., a Delaware corporation (the "Company") with its
principal offices at 2700 Augustine Drive, Suite 255, Santa Clara, CA 95954, and
Dieter Mezger (the "Executive").
WHEREAS, the Executive served as President of the Company between April 1,
1998 and January 15, 1999, and has served as President and Chief Executive
officer of the Company since January 15, 1999, and the Company and the Executive
wish to describe this relationship in a written Agreement embodying the terms of
such employment (the "Agreement"); and
WHEREAS, the Executive desires to enter into such an Agreement;
NOW, THEREFORE, in consideration of the premises, and the mutual covenants
and agreements contained herein and for other good and valuable consideration,
the receipt, adequacy and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
1. Term of Employment. The Company hereby acknowledges and agrees that the
Executive is employed by the Company, and the Executive hereby acknowledges and
agrees that he has been employed by the Company, upon the terms and subject to
the conditions set forth in this Agreement, for a period which commenced on
April 1, 1998 (the "Effective Date") and shall continue until terminated in
accordance with the provisions of Section 5 (the "Employment Term").
2. Title; Duties. The Executive has served as President of the Company
between April 1, 1998 and January 15, 1999, and has served as President and
Chief Executive officer of the Company beginning on January 15, 1999 and during
the Employment Term shall continue to serve as the President and Chief Executive
Officer of the Company. In such position, the Executive has such duties and
authority as designated from time to time by the Board of Directors of the
Company (the "Board") or its designee. The Executive hereby agrees to undertake
the duties and responsibilities inherent in such position and such other duties
and responsibilities as the Board or its designee shall from time to time
reasonably assign to him.
3. No Conflict. During the Employment Term, the Executive has devoted and
shall continue to devote substantially all of his business time and best efforts
to the performance of his duties hereunder and shall not, directly or
indirectly, engage in any other business, profession or occupation for
compensation or otherwise which would conflict with the rendition of such duties
without the prior written consent of the Board, which consent shall not
unreasonably be withheld, delayed or conditioned. The Executive represents and
warrants that Schedule A attached hereto states all current business
relationships, including, but not limited to, consulting agreements,
confidentiality agreements and non-competition agreements that the Executive is
currently a party to.
4. Compensation and Benefits.
-------------------------
4.1 Base Salary. During the Employment Term, the Company shall pay the
Executive for his services hereunder a base salary (the "Base Salary") at
the initial annual rate of $180,000, payable in regular
<PAGE>
installments in accordance with the Company's usual payment practices and
subject to annual review and adjustment by the Compensation Committee of
the Board in its sole discretion.
4.2 Acceleration of Stock Options. Upon a Change of Control (as hereinafter
defined), all options to purchase equity securities of the Company which
have been or shall be granted to the Executive shall immediately accelerate
and vest. The terms of this Section 4.2 shall amend and supersede the terms
of any existing stock option agreement to which the Executive is a party
with the Company.
For purposes of this Section 4.2, "Common Stock" shall mean the Company's
common stock, $0.01 par value per share, and any security of the Company
convertible into common stock, on an as converted basis.
For purposes of this Section 4.2, the occurrence of any one of the
following shall be deemed a "Change of Control":
(i) the acquisition by United Microelectronics Corporation, its subsidiaries
or affiliates (collectively, "UMC") of any amount of the Company's Common
Stock so that the aggregate shares held or controlled by UMC constitute
all or substantially all of the Company's Common Stock, or the acquisition
by UMC or all or substantially all of the assets of the Company;
(ii) the acquisition by any "person" (as such term is defined in Section
3(a)(9) of the Securities Exchange Act of 1934), other than UMC, of any
amount of the Company's Common Stock so that it holds or controls fifty
percent (50%) or more of the Company's Common Stock, or the sale of all or
substantially all of the assets of the Company to a person;
(iii) a merger, consolidation or similar transaction after which fifty percent
(50%) or more of the voting stock of the surviving corporation is held by
persons who where not stockholders of the Company immediately prior to
such merger or combination; or
(iv) a merger, consolidation or similar transaction after which fifty percent
(50%) or more of the board of directors of the surviving corporation were
not members of the Board prior to such merger or combination.
4.3 Bonus. As further compensation for his services hereunder, the Company may,
from time to time and in accordance with the Company's policies, pay the
Executive a bonus.
4.4 Executive Benefits. During the Employment Term and subject to any
contributions therefor generally required of senior executives of the
Company, the Executive has been and shall continue to be entitled to
receive such employee benefits (including fringe benefits, 401(k) plan
participation, and life, health, accident and disability insurance, if any)
which the Company may, in its sole and absolute discretion, make available
generally to its senior executives, or for personnel similarly situated;
provided, however, that it is hereby acknowledged and agreed that any such
employee benefit plans may be altered, modified or terminated by the
Company at any time in its sole discretion without recourse by the
Executive.
4.5 Vacation. The Executive has been and shall continue to be entitled to 3
weeks (15 business days) of paid vacation per annum during the Employment
Term, to accrue in accordance with the Company's
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<PAGE>
policy and to be taken at such time or times as shall be mutually
convenient for the Company and the Executive. Unused vacation time will be
allocated pursuant to the Company's existing policies and practices.
4.6 Business Expenses and Perquisites. The Executive has been and shall
continue to be entitled to reimbursement by the Company during the
Employment Term for reasonable travel, entertainment and other business
expenses incurred by the Executive in the performance of his duties
hereunder in accordance with such policies as the Company may from time to
time have in effect.
4.7 Automobile. The Executive has been and shall continue to be given use of an
automobile or be entitled to reimbursement by the Company during the
Employment Term for reasonable expenses incurred by the Executive in
maintaining an automobile for the Executive's use.
4.8 Indemnification. The Company shall, to the fullest extent permitted by the
General Corporation Law of the State of Delaware, as amended from time to
time and in accordance with the Company's Certificate of Incorporation, as
amended from time to time, and By-laws, as amended from time to time,
indemnify the Executive if the Executive is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, by
reason of the fact that he is or was an officer of the Company, against
expenses (including attorney's fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him or on his behalf in
connection with such action, suit or proceeding and any appeal therefrom.
In addition, the Executive shall be covered by the Company's standard
director and officer insurance.
5. Termination.
-----------
5.1 Without Cause by the Company. The Executive's employment hereunder may be
terminated by the Company at any time without Cause upon not less than
thirty (30) days prior written notice from the Company to the Executive
(the date of such notice is the "Termination Date"). If the Executive's
employment is terminated by the Company without Cause, including without
limitation by reason of the Executive's failure to achieve stated goals or
milestones, on the Termination Date (i) the Company shall pay the Executive
a lump sum amount equal to two years Base Salary plus any accompanying
benefits to which the Executive would be entitled during such two year
period under Sections 4.3 and 4.4 of this Agreement (to the extent
permitted by the then-current terms of the applicable benefit plans and
subject to any employee contribution requirements applicable to the
Executive on the date of termination) and (ii) all stock options granted to
the Executive prior to the Termination Date shall immediately vest in the
Executive. The payment to the Executive of any other benefits following the
termination of the Executive's employment pursuant to this Section 5.1
shall be determined by the Board in its sole discretion in accordance with
the policies and practices of the Company.
5.2 For Cause by the Company. Notwithstanding any other provision of this
Agreement, the Executive's employment hereunder may be terminated by the
Company at any time for Cause. For purposes of this Agreement, "Cause"
shall mean (i) the Executive's dishonesty in the performance of his duties
hereunder, (ii) an act or acts on the Executive's part constituting a
felony under the laws of the United States or any state thereof, or (iii)
the Executive's material breach of his obligations under Section 6 and 7
hereof, which breach shall remain uncured by the Executive for thirty (30)
days following receipt
Page 3
<PAGE>
of notice from the Company specifying such breach. If the Executive's
employment is terminated by the Company for Cause, the Company shall pay
the Executive a lump sum amount equal to the accrued and unpaid portion of
the Base Salary through the last day of his actual employment by the
Company. The payment to the Executive of any other benefits following the
termination of the Executive's employment pursuant to this Section 5.2
shall be determined by the Board in its sole discretion in accordance with
the policies and practices of the Company.
5.3 Disability. The Executive's employment hereunder may be terminated by the
Company at any time in the event of the Disability of the Executive. For
purposes of this Agreement, "Disability" shall mean the inability of the
Executive to substantially perform his duties hereunder due to physical or
mental disablement which continues for a period of six (6) consecutive
months during the Employment Term, as determined by an independent
qualified physician mutually acceptable to the Company and the Executive
(or his personal representative) or, if the Company and the Executive (or
such representative) are unable to agree on an independent qualified
physician, as determined by a panel of three physicians, one designated by
the Company, one designated by the Executive (or his personal
representative) and one designated by the two physicians so designated. If
the Executive's employment is terminated by the Company for Disability, the
Company shall pay the Executive an amount equal to the Base Salary plus any
benefits to which the Executive is entitled under Section 4.4 of this
Agreement (to the extent permitted by the then-current terms of the
applicable benefit plans and subject to any employee contribution
requirements applicable to the Executive on the date of termination)
through the date on which the Executive is first eligible to receive
payment of disability benefits in lieu of Base Salary under the Company's
employee benefit plans as then in effect. The payment to the Executive of
any other benefits following the termination of the Executive's employment
pursuant to this Section 5.3 shall be determined by the Board in its sole
discretion in accordance with the policies and practices of the Company.
5.4 Death. The Executive's employment hereunder shall automatically terminate
in the event of the Executive's death. If the Executive's employment is
terminated by the death of the Executive, the Company shall pay to the
Executive's estate or legal representative an amount equal to the Base
Salary at the rate in effect at the time of the Executive's death through
the day on which his death occurs. The payment to the Executive of any
other benefits following the termination of the Executive's employment
pursuant to this Section 5.4 shall be determined by the Compensation
Committee of the Board in its sole discretion in accordance with the
policies and practices of the Company.
5.5 Termination by the Executive. The Executive's employment hereunder may be
terminated by the Executive at any time upon not less than ninety (90) days
prior written notice from the Executive to the Company. If the Executive
terminates his employment with the Company pursuant to this Section 5.5,
the Company shall pay the Executive an amount equal to the Base Salary
through the last day of his actual employment by the Company; provided,
however, if such voluntary termination is by reason of a demotion of the
Executive from his position as President and Chief Executive Officer or a
decrease in the Base Salary of the Executive, the Company shall pay the
Executive a lump sum amount equal to the prior Base Salary plus any
benefits to which the Executive is entitled under Section 4.4 of this
Agreement (to the extent permitted by the then-current terms of the
applicable to the Executive on the date of termination) through the
conclusion of a period of two years from the date of such termination.
Page 4
<PAGE>
5.6 Notice of Termination. Any purported termination of employment by the
Company or by the Executive shall be communicated by written Notice of
Termination to the other party hereto in accordance with Section 9 hereof.
For purposes of this Agreement, a "Notice of Termination" shall mean a
notice which shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of employment
under the provision so indicated.
5.7 Survival. The provisions of Sections 6 and 7 shall survive the termination
of this Agreement.
6. Non-Competition. The Executive acknowledges and recognizes the highly
---------------
competitive nature of the businesses of the Company and accordingly agrees that
during the Employment Term and for a period of one (1) year after expiration or
termination of the Executive's employment hereunder:
6.1 The Executive will not engage in any activity including without limitation
becoming an employee, investor (except for passive investments of not more
than one percent (1%) of the outstanding shares of, or any other equity
interest in, a company or entity listed or traded on a national securities
exchange or in an over-the-counter securities market), officer, agent,
partner or director of, or other participant in, any firm, person or other
entity in any geographic area which is engaged in any activities in the
field of the development, manufacturing, marketing, sale, distribution or
commercialization of field emission displays ("FEDs"). Notwithstanding any
provision of this Agreement to the contrary, upon the occurrence of any
breach of this Section 6.1, if the Executive is employed by the Company,
the Company may immediately terminate the employment of the Executive for
Cause in accordance with the notice provisions contained in Sections 5.6
and 9, and, whether or not the Executive is employed by the Company, the
Company shall immediately cease to have any obligations to make payments to
the Executive under this Agreement.
6.2 The Executive will not directly or indirectly assist others in engaging in
any of the activities in which the Executive is prohibited to engage by
clause 6.1 above.
6.3 The Executive will not directly or indirectly (a) induce any employee of
the Company to engage in any activity in which the Executive is prohibited
from engaging by clause 6.1 above or to terminate his or her employment
with the Company, or (b) employ or offer employment to any person who was
employed by the Company unless such person shall have ceased to be employed
by the Company for a period of at least one (1) year.
6.4 It is expressly understood and agreed that (a) although the Executive and
the Company consider the restrictions contained in this Section 6 to be
reasonable, if a final judicial determination is made by a court of
competent jurisdiction that the time or territory or any other restriction
contained in this Agreement is unenforceable, this Agreement shall not be
rendered void but shall be deemed to be enforceable to such maximum extent
as such court may judicially determine or indicate to be enforceable and
(b) if any restriction contained in this Agreement is determined to be
unenforceable and such restriction cannot be amended so as to make it
enforceable, such finding shall not affect the enforceability of any of the
other restrictions contained herein.
7. Confidentiality. The Executive will not at any time (whether during or
---------------
after his employment with the Company) disclose or use for his own benefit or
purposes or the benefit or purposes of any other
Page 5
<PAGE>
person, firm, partnership, joint venture, association, corporation or other
organization, entity or enterprise other than the Company, any Confidential
Information. As used herein, the term "Confidential Information" shall mean,
without limitation, all Proprietary Materials (as defined below), any and all
information about inventions, improvements, modifications, discoveries, costs,
profits, markets, sales, products, key personnel, pricing policies, operational
methods, concepts, technical processes and applications, and other business
affairs and methods of the Company and of its affiliates, licensees,
collaborators, consultants, suppliers, and customers, as well as any other
information not readily available to the public, including without limitation
any information supplied by third parties to the Company under an obligation of
confidence. As used in this Agreement "Proprietary Materials" shall include,
without limitation, the following materials: any and all materials used in
construction of FEDs and completed FED samples as well as any and all
derivatives or replications derived from or relating to such materials.
Confidential Information may be contained in various media, including without
limitation patent applications, computer programs in object and/or source code,
flow charts and other program documentation, manuals, plans, drawings, designs,
technical specifications, laboratory notebooks, supplier and customer lists,
internal financial data, and other documents and records of the Company, whether
or not in written form and whether or not labeled or identified as confidential
or proprietary. The Executive further agrees that (a) upon termination or
expiration of his employment hereunder, the Executive will return immediately to
the Company any Proprietary Materials and any materials containing Confidential
Information then in the Executive's possession or under the Executive's control
and (b) he will not retain or use for his account at any time any trade name,
trademark or other proprietary business designation used or owned in connection
with the business of the Company.
8. Specific Performance. The Executive acknowledges and agrees that the
--------------------
Company's remedies at law for a breach or threatened breach of any of the
provisions of Section 6 or Section 7 would be inadequate and, in recognition of
this fact, the Executive agrees that, in the event of such a breach or
threatened breach, in addition to any remedies at law, the Company, without
posting any bond, shall be entitled to obtain equitable relief in the form of
specific performance, temporary restraining orders, temporary or permanent
injunctions or any other equitable remedy which may then be available.
9. Notices. Any notice hereunder by either party to the other shall be
-------
given in writing by personal delivery, overnight mail via a reputable overnight
courier, facsimile or registered mail, return receipt requested, addressed, if
to the Company, to the attention of the Chairman of the Board at the Company's
executive offices or to such other address as the Company may designate in
writing at any time or from time to time to the Executive, and if to the
Executive, to his most recent address on file with the Company. Notice shall be
deemed given, if by personal delivery, on the date of such delivery or, if by
overnight mail, on the next business day after delivery of the notice to the
overnight courier, if by facsimile, on the business day following receipt of
answer back or facsimile information or, if by registered mail, on the date
shown on the applicable return receipt.
10. Assignment. This Agreement may not be assigned by either party without
----------
the prior written consent of the other party. The Company shall require any
persons, firm or corporation succeeding to all or substantially all of the
business or assets of the Company whether by purchase, merger or consolidation
to expressly assume and agree to perform this Agreement.
11. Entire Agreement. Except for the 1998 agreement evidencing the grant
----------------
to the Executive of options to purchase 300,000 shares of the Company's common
stock, this Agreement contains the entire
Page 6
<PAGE>
agreement between the Company and the Executive with respect to the subject
matter hereof and there have been no oral or other agreements of any kind
whatsoever as a condition precedent or inducement to the signing of this
Agreement or otherwise concerning this Agreement or the subject matter hereof.
12. Expenses. Each party shall pay its own expenses incident to the
--------
performance or enforcement of this Agreement, including all fees and expenses of
its counsel for all activities of such counsel undertaken pursuant to this
Agreement, except as otherwise herein specifically provided. If any action at
law or equity is necessary to enforce or interpret the terms of this Agreement,
the prevailing party shall be entitled to reimbursement of reasonable attorney's
fees and other costs incurred by such party in connection with such action, in
addition to any other relief to which such party is entitled.
13. Arbitration. In the event any dispute shall arise between the Company
-----------
and the Executive with respect to any of the terms and conditions of this
Agreement, then such dispute shall be submitted and finally settled by
arbitration under the rules of the American Arbitration Association. The award
rendered by the arbitrator shall be final and binding upon the parties hereto,
and judgment upon the award rendered may be entered by either party in any court
that would ordinarily have jurisdiction over the parties or the subject matter
of the controversy or claim. Each party shall pay its own expenses incident to
such arbitration, including attorneys' fees. The parties agree not to institute
any litigation or proceedings against each other in connection with this
Agreement except as provided in this Section 13.
14. Waivers and Further Agreements. Any waiver of any terms or conditions
------------------------------
of this Agreement shall not operate as a waiver of any other breach of such
terms or conditions or any other term or condition, nor shall any failure to
enforce any provision hereof operate as a waiver of such provision or of any
other provision hereof; provided, however, that no such written wavier, unless
it, by its own terms, explicitly provides to the contrary, shall be construed to
effect a continuing waiver of the provision being waived and no such waiver in
any instance shall constitute a waiver in any other instance or for any other
purpose or impair the right of the party against whom such waiver is claimed in
all other instances or for all other purposes to require full compliance with
such provision. Each of the parties hereto agrees to execute all such further
instruments and documents and to take all such further action as the other party
may reasonably require in order to effectuate the terms and purposes of this
Agreement.
15. Amendments. This Agreement may not be amended, nor shall any waiver,
----------
change, modification, consent or discharge be effected except by an instrument
in writing executed by or on behalf of the party against whom enforcement of any
waiver, change, modification, consent or discharge is sought.
16. Severability. If any provision of this Agreement shall be held or
------------
deemed to be, or shall in fact be, invalid, inoperative or unenforceable as
applied to any particular case in any jurisdiction or jurisdictions, or in all
jurisdictions or in all cases, because of the conflict of any provision with any
constitution or statute or rule of public policy or for any other reason, such
circumstance shall not have the effect of rendering the provision or provisions
in question invalid, inoperative or unenforceable in any other jurisdiction or
in any other case or circumstance or of rendering any other provision or
provisions herein contained invalid, inoperative or unenforceable to the extent
that such other provisions are not themselves actually in conflict with such
constitution, statute or rule of public policy, but this Agreement shall be
reformed and construed in any such jurisdiction or case as if such invalid,
inoperative or
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<PAGE>
unenforceable provision had never been contained herein and such provision
reformed so that it would be valid, operative and enforceable to the maximum
extent permitted in such jurisdiction or in such case.
17. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument, and in pleading or
proving any provision of this Agreement, it shall not be necessary to produce
more than one of such counterparts.
18. Section Headings. The headings contained in this Agreement are for
----------------
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
19. Governing Law. This Agreement shall be governed by and construed and
-------------
enforced in accordance with the law (other than the law governing conflict of
law questions) of the state of Delaware.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed or caused to be executed this
Agreement as of the date first written above.
PIXTECH, INC.
By: /s/ J.L. Grand Clement
-------------------------------
Name: Jean-Luc Grand-Clement
Title: Chairman of the Board
DIETER MEZGER
/s/ Dieter Mezger
-----------------------------------
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<PAGE>
SCHEDULE A
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Business Relationships
----------------------
Page 10
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements on
Form S-8 (Nos. 333-52651, 333-4502, 33-98386 and 333-81357) pertaining to the
Amended and Restated 1993 Stock Option Plan of PixTech, Inc. and on Form S-3
(Nos. 333-52789 and 333-70927) of our current report dated March 6, 2000, with
respect to the consolidated financial statements of PixTech, Inc. included in
the Annual Report (Form 10-K) for the year ended December 31, 1999.
Ernst & Young AUDIT
Ernst & Young AUDIT
Represented by: Christine Blanc patin
/s/ Christine Blanc Patin
Marseilles, France
March 17, 2000
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