FORM 10-Q
---------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2000
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ______ to ______
Commission file number 0-26380
_______________________________________
PIXTECH, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 04-3214691
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
Avenue Olivier Perroy, 13790 Rousset, France
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(Address of principal executive offices) (Zip code)
011-33-4-42-29-10-00
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No _
-
The number of shares outstanding of each of the issuer's classes of Common Stock
as of
Class Outstanding at May 10, 2000
----- -------------------------------
Common Stock, $.01 par value 54,601,841
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<CAPTION>
PIXTECH, INC.
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TABLE OF CONTENTS
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PAGE NO.
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<S> <C>
PART I FINANCIAL INFORMATION
ITEM 1 Financial Statements
Condensed Consolidated Balance Sheets as of March 31, 2000
and December 31, 1999 . . . . . . . . . . . . . . . . . . . . . 3
Condensed Consolidated Statements of Comprehensive Operations
for the Three Months Ended March 31, 2000 and 1999, and the
period from June 18, 1992 through March 31, 2000. . . . . . . . 4
Condensed Consolidated Statements of Cash Flows for the Three
Months ended March 31, 2000 and 1999, and the period
from June 18, 1992 through March 31, 2000 . . . . . . . . . . . 5
6
Condensed Consolidated Statement of Stockholders' Equity
Notes to Financial Statements . . . . . . . . . . . . . . . . . 7 - 10
ITEM 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations . . . . . . . . . . . . . . . . . . . . . 11 - 14
ITEM 3 Quantitative and Qualitative Disclosures About Market Risk. . . 14
PART II OTHER INFORMATION
ITEM 1 Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . 15
ITEM 2 Changes in Securities . . . . . . . . . . . . . . . . . . . . . 15
ITEM 3 Default upon Senior Securities. . . . . . . . . . . . . . . . . 15
ITEM 4 Submission of Matters to a Vote of Security Holders . . . . . . 16
ITEM 5 Other Information . . . . . . . . . . . . . . . . . . . . . . . 16
ITEM 6 Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . . 17
Signature. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Exhibit Index. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
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<TABLE>
<CAPTION>
PIXTECH, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
MARCH 31, DECEMBER 31,
2000 1999
------------ --------------
<S> <C> <C>
(UNAUDITED)
ASSETS
Current assets :
Cash and cash equivalents available . . . . . . . . . . . . . . . . $ 12,336 $ 14,663
Restricted cash - short term. . . . . . . . . . . . . . . . . . . . 833 1,667
Accounts receivable:
Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79 57
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 813 709
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,230 1,109
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 541 651
------------ --------------
Total current assets. . . . . . . . . . . . . . . . . . . . . . 15,832 18,856
Restricted cash - long term . . . . . . . . . . . . . . . . . . . . . 1,042 5,833
Property, plant and equipment, net. . . . . . . . . . . . . . . . . . 23,293 24,933
Goodwill, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 78
Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . 1,200 1,255
Deferred offering costs . . . . . . . . . . . . . . . . . . . . . . . 49 --
Other assets - long term. . . . . . . . . . . . . . . . . . . . . . . 47 214
------------ --------------
Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . $ 41,523 $ 51,169
============ ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities :
Current portion of long term debt . . . . . . . . . . . . . . . . . $ 1,508 $ 8,128
Current portion of capital lease obligations. . . . . . . . . . . . 2,459 2,455
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . 7,258 7,548
Accrued expenses. . . . . . . . . . . . . . . . . . . . . . . . . . 1,992 2,135
------------ --------------
Total current liabilities . . . . . . . . . . . . . . . . . . . 13,217 20,266
Deferred revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . 399 248
Long term debt, less current portion. . . . . . . . . . . . . . . . . 2,753 3,075
Capital lease obligation, less current portion. . . . . . . . . . . . 2,444 7,644
Other long term liabilities, less current portion . . . . . . . . . . 38 52
------------ --------------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . 18,851 31,285
============ ==============
STOCKHOLDERS' EQUITY
Convertible preferred stock Series E, $0.01 par value, authorized
shares-500,000 ; issued and outstanding shares-30,972 and 297,269
respectively. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 3
Common Stock, $0.01 par value, authorized shares-100,000,000
and 60,000,000 respectively; issued and outstanding shares-45,145,206
and 37,351,283 respectively .. . . . . . . . . . . . . . . . . . . . 451 373
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . 115,229 105,081
Cumulative other comprehensive income .. . . . . . . . . . . . . . (3,738) (2,988)
Deficit accumulated during development stage . . . . . . . . . . . (89,271) (82,585)
------------ --------------
Total stockholders' equity . . . . . . . . . . . . . . . . . . 22,672 19,884
------------ --------------
Total liabilities and stockholders' equity . . . . . . . . . . $ 41,523 $ 51,169
============ ==============
</TABLE>
See accompanying notes.
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<TABLE>
<CAPTION>
PIXTECH, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Period
from
June 18,
1992
(date of
inception)
Three Months through
Ended March 31, March 31,
------------------
2000 1999 2000
-------- -------- ----------
<S> <C> <C> <C>
Revenues
Cooperation and license revenues . . . . . . . . $ -- $ -- $ 26,449
Product sales. . . . . . . . . . . . . . . . . . 86 161 3,396
Other revenues . . . . . . . . . . . . . . . . . 1,904 2,000 12,718
-------- -------- ----------
Total revenues . . . . . . . . . . . . . . . 1,990 2,161 42,563
-------- -------- ----------
Cost of revenues
License fees and royalties . . . . . . . . . . . (88) (87) (1,965)
-------- -------- ----------
Gross margin . . . . . . . . . . . . . . . . . . . 1,902 2,074 40,598
-------- -------- ----------
Operating expenses
Research and development:
Acquisition of intellectual property rights (57) -- (5,022)
Other. . . . . . . . . . . . . . . . . . . . . . (7,794) (5,587) (107,503)
-------- -------- ----------
(7,851) (5,587) (112,525)
Marketing and sales. . . . . . . . . . . . . . . (313) (351) (8,199)
Administrative and general expenses. . . . . . . (813) (730) (16,612)
-------- -------- ----------
(8,977) (6,667) (137,336)
-------- -------- ----------
Loss from operations . . . . . . . . . . . . . . . (7,075) (4,594) (96,738)
Other income / (expense)
Interest income. . . . . . . . . . . . . . . . . 338 174 3,986
Interest expense . . . . . . . . . . . . . . . . (309) (440) (4,720)
Foreign exchange gains / (losses). . . . . . . . 359 (516) 309
-------- -------- ----------
388 (782) (425)
Loss before income tax benefit . . . . . . . . . . (6,687) (5,376) (97,163)
Income tax benefit . . . . . . . . . . . . . . . . -- -- 7,893
-------- -------- ----------
Net loss . . . . . . . . . . . . . . . . . . . . . $(6,687) $(5,376) $ (89,271)
======== ======== ==========
Dividends accrued to holders of Preferred Stock. (89) (134) (614)
-------- -------- ----------
Net loss to holders of Common Stock. . . . . . . . $(6,776) $(5,510) $ (89,885)
======== ======== ==========
Net loss per share of Common Stock . . . . . . . $ (0.16) $ (0.35)
======== ========
Shares of Common Stock used in computing
net loss per share . . . . . . . . . . . . . . . 40,562 15,143
Net loss $(6,687) $(5,376) $ (89,271)
Change in other comprehensive income . . . . . . (748) (671) (3,738)
-------- -------- ----------
Comprehensive net loss . . . . . . . . . . . . . (7,435) $(6,047) (93,009)
======== ======== ==========
</TABLE>
See accompanying notes.
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<TABLE>
<CAPTION>
PIXTECH, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
PERIOD FROM
JUNE 18, 1992
(DATE OF
INCEPTION)
THREE MONTHS ENDED THROUGH
MARCH 31, MARCH 31,
------------------ ---------
2000 1999 2000
-------- -------- ---------
<S> <C> <C> <C>
Net loss $(6,687) $(5,376) $(89,271)
Total adjustments to net loss 2,717 (747) 35,346
-------- -------- ---------
Net cash used in operating activities (3,970) (6,123) (53,925)
-------- -------- ---------
INVESTING ACTIVITIES
Additions to property plant and equipment (761) (40) (21,316)
Reclassification of restricted cash as cash available 5,625 49 (2,023)
Additions to intangible assets -- -- (130)
-------- -------- ---------
Net cash provided by / (used in) investing activities 4,864 9 (23,469)
FINANCING ACTIVITIES
Stock issued 3,296 325 95,905
Proceeds from long-term borrowings -- -- 18,301
Proceeds from sale leaseback transactions -- -- 2,731
Payments for equipment purchases financed by accounts payable -- -- (3,706)
Repayments of long term borrowing and capital lease obligations (5,832) (250) (19,674)
-------- -------- ---------
Net cash provided by / (used in) financing activities
(2,536) 75 93,557
-------- -------- ---------
Effect of exchange rates on cash (685) 28 (3,827)
-------- -------- ---------
Net (decrease) / increase in cash and cash equivalents (2,327) (6,011) 12,336
Cash and cash equivalents beginning of period 14,663 10,166 --
-------- -------- ---------
Cash and cash equivalents end of period $12,336 $ 4,155 $ 12,336
======== ======== =========
</TABLE>
See accompanying notes.
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<TABLE>
<CAPTION>
PIXTECH, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
Series E Common Stock
-------- ------------
Dividends
accrued to
Additional holders of
Shares Shares Paid-in Preferred
issued Amount issued Amount Capital Stock
--------- -------- ---------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1996. . . . . . . . . . 8,141,146 $ 81 $ 34,085
Common Stock issued in public
offering, net of issuance costs -- $796 . . . 5,570,819 56 22,958
Issuance of Common Stock under
stock option plan . . . . . . . . . . . . . . . 50,767 1 25
Translation adjustment . . . . . . . . . . . .
Net loss-Year ended Dec. 31, 1997 . . . . . .
- ---------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1997. . . . . . . . . . 13,762,732 $ 138 $ 57,067
Common Stock issued in private
placements, net of issuance costs $44. . . . . 1,236,222 12 4,493
Issuance of Series E convertible
preferred stock, net of issuance costs -- $822. 367,269 4 7,449 (12)
Issuance of Common Stock under
stock option plan . . . . . . . . . . . . . . . 1,375 1
Translation adjustment
Net loss-Year ended Dec. 31, 1998. . . . . . .
- ---------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1998. . . . . . . . . . 367,269 $ 4 15,000,329 151 69,012 (12)
Common Stock issued in private
Placements. . . . . . . . . . . . . . . . . . . 150,000 1 350
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 . . . . . . . . . . . . . . . . (70,000) 1 1,114,220 11 (10)
Issuance of Common Stock in
connection with the acquisition of
certain assets of Micron Display, net
of issuance costs -- $511 . . . . . . . . . . . 7,133,562 71 14,134
Issuance of warrants . . . . . . . . . . . . . 297
Issuance of Common Stock
following conversion of Sumitomo
convertible loan. . . . . . . . . . . . . . . . 750,000 7 1,081
Issuance of Common Stock under
stock option plan . . . . . . . . . . . . . . . 137,217 1 72
Issuance of Common Stock in
connection with Equity Line Kings-
bridge, 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 . . . . . . . . . . . .
Net loss-Year ended Dec. 31, 1999. . . . . . .
- ---------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1999. . . . . . . . . . 297,269 $ 3 37,351,283 $ 373 $ 105,606 $ (525)
Dividends accrued in relation to
Series E convertible preferred stock
issued in December 1998 (unaudited) . . . . . . (89)
Conversion of Series E preferred
stock (unaudited) . . . . . . . . . . . . . . . (266,297) (3) 4,058,978 41 (38) 548
Issuance of Common Stock following
conversion of Sumitomo convertible
loan (unaudited). . . . . . . . . . . . . . . . 2,126,246 21 3,890
Issuance of Common Stock following
conversion of Sumitomo straight loan
(unaudited) . . . . . . . . . . . . . . . . . . 385,549 4 2,496
Issuance of Common Stock in connec-
tion with Equity Line Kingsbridge, net
of issuance costs $54 (unaudited) . . . . . . . 933,625 9 2,936
Issuance of Common Stock in
connection with Coloray (unaudited) . . . . . . 16,000 0 57
Issuance of Common Stock under
stock option plan (unaudited) . . . . . . . . . 273,525 3 347
Translation adjustment (unaudited) . . . . . .
Net loss-Three Months ended
March 31, 2000 ( unaudited) . . . . . . . . . .
- ---------------------------------------------------------------------------------------------------------------------
BALANCE AT MARCH 31, 2000 (UNAUDITED). . . . . 30,972 $ 1 45,145,206 $ 451 $ 115,295 $ (66)
=============================================== ========= ======== ========== ======= ============ ============
Deficit
accumulated
Other during
Comprehensive development
Income stage Total
--------------- ------------- ---------
<S> <C> <C> <C>
BALANCE AT DECEMBER 31, 1996. . . . . . . . . . $ (438) $ (21,629) $ 12,099
Common Stock issued in public
offering, net of issuance costs -- $796 . . . 23,014
Issuance of Common Stock under
stock option plan . . . . . . . . . . . . . . . 25
Translation adjustment (1,694) (1,694)
Net loss-Year ended Dec. 31, 1997 . . . . . . (14,664) (14,664)
- ------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1997. . . . . . . . . . (2,132) (36,293) 18,780
Common Stock issued in private
placements, net of issuance costs $44. . . . . 4,506
Issuance of Series E convertible
preferred stock, net of issuance costs -- $822. 7,440
Issuance of Common Stock under
stock option plan . . . . . . . . . . . . . . . 1
Translation adjustment . . . . . . . . . . . . 392 392
Net loss-Year ended Dec. 31, 1998. . . . . . . (17,863) (17,863)
- ------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1998. . . . . . . . . . (1,740) (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 Kings-
bridge, 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) (1,249)
Net loss-Year ended Dec. 31, 1999. . . . . . . (28,428) (28,428)
- ------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1999. . . . . . . . . . $ (2,989) $ (82,584) $ 19,885
Dividends accrued in relation to
Series E convertible preferred stock
issued in December 1998 (unaudited) . . . . . . (89)
Conversion of Series E preferred
stock (unaudited) . . . . . . . . . . . . . . . 548
Issuance of Common Stock following
conversion of Sumitomo convertible
loan (unaudited). . . . . . . . . . . . . . . . 3,912
Issuance of Common Stock following
conversion of Sumitomo straight loan
(unaudited) . . . . . . . . . . . . . . . . . . 2,500
Issuance of Common Stock in connec-
tion with Equity Line Kingsbridge, net
of issuance costs $54 (unaudited) . . . . . . . 2,945
Issuance of Common Stock in
connection with Coloray (unaudited) . . . . . . 57
Issuance of Common Stock under
stock option plan (unaudited) . . . . . . . . . 350
Translation adjustment (unaudited) . . . . . . (748) (748)
Net loss-Three Months ended
March 31, 2000 ( unaudited) . . . . . . . . . . (6,687) (6,687)
- ------------------------------------------------------------------------------------------
BALANCE AT MARCH 31, 2000 (UNAUDITED). . . . . $ (3,738) $ (89,271) $ 22,672
=============================================== =============== ============= =========
</TABLE>
See accompanying notes.
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<PAGE>
PIXTECH, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(ALL AMOUNTS IN THOUSANDS EXCEPT SHARE AMOUNTS)
NOTE A - BASIS OF PRESENTATION
The financial information as of March 31, 2000, and for the three months ended
March 31, 2000 and 1999 is unaudited but includes all adjustments, which are of
a normal recurring nature and, in the opinion of management, necessary for a
fair presentation of the financial position and results of operations for the
periods presented. The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. Operating results of the
three-month period ending March 31, 2000 is not necessarily indicative of the
results that may be expected for the year ending December 31, 2000. For further
information, refer to the consolidated financial statements and footnotes
thereto for the year ended December 31, 1999 included in our Annual Report on
Form 10-K filed with the Security and Exchange Commission on March 28, 2000.
All information presented herein is in thousands, except share data.
NOTE B - INVENTORIES
Inventory consists of raw material, spare parts and finished goods.
NOTE C - RESTRICTED CASH
In August 1997, we provided Unipac Optoelectronics Corp. ("Unipac"), our Asian
manufacturing partner, with a written bank guaranty in the amount of $10,000
pursuant to the display foundry agreement (the "Foundry Agreement") signed in
May 1997 between Unipac and us in order to implement volume production of field
emission displays at Unipac's manufacturing facility. We granted the issuing
banks a security interest in cash and cash equivalents for the same amount. The
pledged cash and cash equivalents have been recorded as short-term and long-term
restricted cash in the balance sheet.
In March 2000, pursuant to an agreement dated December 17, 1999 signed with
Unipac, the guaranty to Unipac was reduced by $5,000 in consideration of a
payment in cash of same amount to Unipac. Pursuant to the terms of this
agreement, this $5,000 payment will be considered as a prepayment against our
future payments to Unipac concerning the equipment leased by Unipac to us.
Consequently, the amount of the security interest to the banks was reduced by
the same amount and amounted to $1,875 at March 31, 2000 (see Note E - Capital
Leases).
NOTE D - PROPERTY, PLANT AND EQUIPMENT
Pursuant to the Foundry Agreement, volume FED production equipment was installed
at Unipac's facility. That equipment was purchased and funded by Unipac, and a
portion of it is leased to us. This portion amounted to $10,793 at March 31,
2000. According to Financial Accounting Standard 13, "Accounting for Leases",
this equipment was recorded as assets under the caption "Property, Plant and
Equipment" in the net amount of $7,783 at March 31, 2000. Depreciation of $450
was recorded during the three-month period ended March 31, 2000. As of March
31, 2000, the related capital lease obligation amounted to $4,607, of which
$1,106 was recorded as current portion.
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<PAGE>
PIXTECH, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTE E - CAPITAL LEASES
We are party to certain sale-leaseback transactions for equipment used in our
pilot production plant in Montpellier and, in addition, pursuant to the Foundry
Agreement, a portion of volume field emission displays production equipment
installed at Unipac's facility is leased to us. According to Financial
Accounting Standard 13, "Accounting for Leases", a capital lease obligation was
recorded in 1998. During the three-month period ended March 31, 2000, the
related capital lease obligation was reduced by $5,000 following the prepayment
of same amount made in cash to Unipac and amounted to $4,607 at March 31, 2000
(See Note C-Restricted Cash and Note D-Property, Plant and Equipment).
Future minimum payments under capital lease obligations at March 31, 2000, are
as follows:
<TABLE>
<CAPTION>
YEARS ENDING DECEMBER 31,
<S> <C>
2000 . . . . . . . . . . . . . . . . . . . . . . . . . $1,201
2001 . . . . . . . . . . . . . . . . . . . . . . . . . 1,458
2002 . . . . . . . . . . . . . . . . . . . . . . . . . 1,243
2003 .. . . . . . . . . . . . . . . . . . . . . . . . 1,173
2004 .. . . . . . . . . . . . . . . . . . . . . . . . 469
-------
Total minimum payments .. . . . . . . . . . . . . . . 5,544
Less amount representing interest . . . . . . . . . . (641)
-------
Present value of minimum capitalized lease payments . $4,903
=======
</TABLE>
NOTE F - LONG TERM DEBT
During the three-month period ended March 31, 2000, long term debt was
reduced by $6,412 in connection with the conversion into shares of our Common
Stock of a convertible note and another note issued to Sumitomo Corporation in
1997, which principal due on December 31, 1999 were $3,912 and $2,500
respectively (See Note H-Stockholders' equity).
Long-term debt consists of certain loans payable under which future minimum
payments, at March 31, 2000, are as follows:
<TABLE>
<CAPTION>
YEARS ENDING DECEMBER 31,
<S> <C>
2000 . . . . . . . . . . $1,311
2001 . . . . . . . . . . 636
2002 . . . . . . . . . . 1,162
2003 . . . . . . . . . . 190
2004 . . . . . . . . . . 185
2005 . . . . . . . . . . 777
------
Total minimum payments . $4,261
======
</TABLE>
NOTE G - MICRON TRANSACTION
On March 19, 1999, we entered into a definitive agreement to purchase
certain assets of Micron Technology, Inc. relating to field emission displays
including equipment and other tangible assets, certain contract rights and cash
(the "Micron Transaction"). We closed the Micron Transaction on May 19, 1999 and
we accounted for the Micron Transaction as an acquisition of assets. The
financial statements as of March 31, 2000 reflect the acquisition of assets for
a cost of $17,932 and the assumption of certain liabilities in the amount of
$2,958, in consideration of the 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. We computed the fair value of the warrant to
purchase 310,000 shares of our Common Stock as an estimated $257 using the
Black-Scholes model. 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 and
Cash equivalents available ".
-8-
<PAGE>
PIXTECH, INC.
(A DEVELOPMENT STAGE COMPANY)
The following unaudited pro forma financial information presents the
combined results of operations for the three months ended March 31, 2000 and
March 31, 1999, respectively, as if the transaction had been completed as of
January 1, 1999, after giving effect to certain adjustments, including
additional personnel costs and depreciation expenses. The pro forma financial
information does not necessarily reflect the results of operations that would
have occurred had the transaction been completed at the beginning of the period
indicated.
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, 2000 MARCH 31, 1999
-------------------- --------------------
<S> <C> <C>
Net loss. . . . . . . . . . . . . . $ (6,229) $ (7,891)
Net loss to holders of Common Stock $ (6,687) $ (7,757)
Net loss per share of Common Stock. $ (0.16) $ (0.35)
</TABLE>
NOTE H - STOCKHOLDERS' EQUITY
Common Stock:
In January and February 2000, we issued 2,126,246 shares of our Common Stock to
Sumitomo Corporation upon the conversion in full of $3,912 then outstanding
under a $5,000 convertible note issued in 1997 to Sumitomo Corporation. This
note, with a principal due of $3,912 at December 31, 1999, was convertible at
Sumitomo Corporation's option into shares of our Common Stock at a conversion
price equal to 80% of the market price of the Common Stock at the conversion
date.
In March 2000, we converted the entire outstanding amount of a loan by Sumitomo
Corporation previously payable in two settlements of $1,250 each in May 2000 and
November 2000 through the issuance of 385,549 shares of our Common Stock at a
price of $6.48 per share of Common Stock for an aggregate consideration of
$2,500.
In March 2000, in connection with an agreement signed with Coloray Display
Corporation, we issued 16,000 shares of our Common Stock, valued at a price of
$3.57 per share, representing a total amount of $57 in consideration for the
transfer to us of the rights and obligations of Micron Technology, Inc. under
the license agreement dated as of April 8, 1992 between Coloray Display
Corporation and Micron Technology, Inc.
On August 9, 1999, we secured a $15,000 equity-based line of credit with
Kingsbridge Capital Ltd. Under the terms of the equity line, we can draw up to
$15,000 cash in exchange for our Common Stock, in increments over a two-year
period. The decision to draw on any of the funds and the timing and account of
any such draw are at our sole discretion, subject to certain conditions. Such
conditions include limitations depending on the volume and the market price of
our Common Stock. During the three months ended March 31, 2000, we issued
933,625 shares of Common Stock, representing $2,946 ($3,000, less issuance costs
of $54). Through March 31, 2000, out of the maximum amount of $15,000, we have
drawn a total amount of $ 4,000.
Convertible Preferred Stock:
In February 2000 and March 2000, we issued an aggregate of 4,058,978 shares of
Common Stock upon the conversion of an aggregate of 266,297 shares of Series E
Preferred Stock at an average conversion price of $1.60938. At March 31, 2000,
there were 30,972 shares of Series E Preferred Stock outstanding. These shares
of Series E Preferred Stock were convertible into shares of Common Stock using a
conversion price equal to the lesser of approximately $1.60938 per share of
Common Stock or the average closing price of our Common Stock over the ten
trading days immediately preceding the notice of conversion.
The holders of Series E Preferred Stock are entitled to cumulative dividends. At
March 31, 2000 a dividend of $66 was accrued and recorded against stockholders'
equity.
In addition, we are required to reserve, out of the authorized but unissued
shares, 150% of the number of shares of Common Stock that the Series E Stock are
convertible into. As of March 31, 2000, the Series E Stock would have been
convertible into 474,746 shares of Common Stock thus requiring us to reserve
712,119 shares of the remaining authorized but unissued shares.
-9-
<PAGE>
PIXTECH, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTE I - LITIGATION
We have received correspondence from Futaba Corporation and its legal counsel
since January 1998 alleging the following; (i) PixTech is infringing one or more
patents owned by Futaba relating to the construction and manufacture of its
displays that are not expressly included under the license agreement between
Futaba and PixTech, (ii) PixTech's use of terms such as "alliance" and
"partners" in describing the nature of its contractual relationships with
Motorola, Raytheon and Futaba in reports filed with the SEC is misleading and
(iii) certain provisions in the Foundry Agreement with Unipac constitute an
impermissible sublicense of Futaba technology. Futaba has also claimed that we
improperly supplied certain Futaba proprietary information to Unipac, and that
Unipac has in turn disclosed such information to a third party vendor. We have
accepted an offer of settlement from Futaba, reflected in correspondence dated
December 15, 1999 and December 30, 1999, pursuant to which Futaba has waived
these claims against us. We are currently preparing a definitive written
settlement agreement with Futaba.
To our knowledge, there are no other exceptional facts or litigation that could
have or that have in the recent past had any significant impact on our business,
results, financial situation, or assets and liabilities.
NOTE J - DERIVATIVE INSTRUMENTS
In June 1998, the Financial Accounting Standard Board issued SFAS No. 1333,
"Accounting for Derivative Instruments and Hedging Activities", as amended,
which is required to be adopted after June 15, 2000. This statement requires
that derivatives be measured at fair value and recognized as either assets or
liabilities in the balance sheet. Because of our minimal use of derivatives, the
adoption of this new statement did not have any significant effect on earnings
and on our financial position.
NOTE K - FINANCIAL POSITION
During the three-month period ended March 31, 2000, we have continued to
experience losses and have used cash in operating activities of $3,970. As of
March 31, 2000, we had a net working deficit of $10,544 and a deficit
accumulated during development stage of $89,271. During the three month period
ended March 31, 2000, we reduced both (i) our long term debt by $6,412 in
connection with the completion of the conversion into shares of our Common Stock
of the Sumitomo Corporation notes issued in 1997, and (ii) our capital lease
obligation mainly in connection with the prepayment of $5,000 made to Unipac out
of our restricted cash. We also received $2,946 from the Kingsbridge equity
line. In addition, we have significantly improved our liquidity and financial
position with the completion, in April 2000, of a $15,000 equity private
placement with United Microelectronics Corporation not reflected in the March
31, 2000 balance sheet. We expect that cash available at March 31, 2000,
together with the $15,000 received from the private placement, the anticipated
proceeds from the Kingsbridge equity-based line of credit, and cash from various
grants and loans, and from research and development tax credits, will be
sufficient to meet our cash requirements for the near future. We intend to
continue improving our liquidity and financial position through capital
increases. There can be, however, no assurance that additional funds will be
available through capital increases when needed or on terms acceptable to us.
NOTE L - SUBSEQUENT EVENT
In April 2000, pursuant to an amendment, signed in February 2000, to the Common
Stock Purchase Agreement dated October 6, 1999 with Unipac, we received $15,000
upon the completion of an equity private placement to United Microelectronics
Corporation, approved by the stockholders during a special meeting held on
January 18, 2000. This subsequent $15,000 investment is in addition to, and is
not reflected in, the March 31, 2000 balance sheet. In consideration for this
investment, United Microelectronics Corporation received 9,320,359 shares at a
purchase price of $1.6094 per share of Common Stock.
In April 2000, we issued 136,276 shares of Common Stock following the
conversion of 8,877 shares of Series E Convertible Preferred Stock at a
conversion price of $1.60938 per share. After this transaction, the remaining
Series E Convertible Preferred Stock, including accrued dividends, is
convertible into 340,224 shares of Common Stock using a conversion price of
$1.60938.
-10-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
This Management Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements reflecting management's current
expectation regarding our future financial performance. Such expectations are
based on certain assumptions and involve risks and uncertainties. These
uncertainties include, but are not limited to, the risk associated with
transitioning to high volume manufacturing of field emission display at Unipac,
product demand and market acceptance risks, the commitment of Unipac and/or of
PixTech licensees, the ability of the company to grant other licenses under
field emission display technology, the validity and enforceability of PixTech's
patent rights, possible infringement by PixTech of patent rights of others, the
impact of competitive products and prices, product development risks,
commercialization or technological delays or difficulties, trade risks, legal
risks, and social and economic risks. See also "Important factors Regarding
Future Results" described more fully in Exhibit 99.1 to this Quarterly Report on
10-Q.
RESULTS OF OPERATIONS
Product Sales. We recognized product sales of $86,000 in the three-month
period ended March 31, 2000, as compared to $161,000 in the three-month period
ended March 31, 1999. In the three-month periods ended March 31, 1999 and 2000,
product revenues primarily consisted of shipments of displays sold at volume
prices to Zoll Medical. Since the last quarter of 1998, we have begun shipping
our field emission displays manufactured by our contract manufacturer, Unipac,
to our customers in limited quantities. During the three-month period ended
March 31, 2000, unit shipments from Taiwan represented 50% of total shipments,
as compared to 45% during the three-month period ended December 31, 1999. We
expect an increase of product shipments from Taiwan in the second half of 2000.
Other Revenues. Other revenues consist of funding under various public
development contracts and other miscellaneous revenues. We recognized other
revenues of $1,904,000 in the three-month period ended March 31, 2000, as
compared to $2,000,000 in the same period in 1999. Of these revenues, in the
three-month period ended March 31, 2000, $1,868,000 was related to a development
contract awarded to us by DARPA (Defense Advanced Research Projects Agency) in
August 1999. Under the terms of this DARPA contract, we will receive a total
amount of approximately $4.7 million to develop a color field emission display
of which $3.9 million has been received as of March 31, 2000. In addition to the
existing contract, we entered into a second contract with DARPA in April 2000.
Under the terms of this contract, we will be entitled to receive approximately
$6.3 million for the development and demonstration of a 12.1-inch color field
emission display.
Other Research and Development Expenses. We expensed $7.8 million for
research and development costs during the three-month period ended March 31,
2000, an increase of 39% over the $5.6 million incurred in the three-month
period ended March 31, 1999. 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 displays technology
to Unipac, as well as obligations to Commissariat l'Energie Atomique under the
LETI Research Agreement dated September 17, 1992, and miscellaneous contract
consulting fees. This increase 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 transfer of field emission
displays manufacturing start up at Unipac.
Sales and Marketing Expenses. We expensed $313,000 for sales and
marketing during the three-month period ended March 31, 2000, as compared to
$351,000 during the three-month period ended March 31, 1999. We believe sales
and marketing expenses may increase in the future, reflecting the expansion of
our sales and marketing organization both in the United States and in Europe.
General and Administrative Expenses. General and administrative expenses
amounted to $813,000 in the three-month period ended March 31, 2000, an increase
of 11% over general and administrative expenses incurred in the three-month
period ended March 31, 1999, which amounted to $730,000, reflecting an increase
in consulting expenses.
-11-
<PAGE>
Interest Income (Expense), Net. Interest income is comprised of interest
on available and restricted cash. Interest expense is comprised of interest
payable on long-term obligations. Net interest income was $29,000 in the
three-month period ended March 31, 2000, as compared to an expense of $266,000
in the three-month period ended March 31, 1999, reflecting the decrease in
long-term liabilities and improved cash management for short term investments on
the money market.
Currency Fluctuations. Although a significant portion of our revenues are
denominated in U.S. dollars, a substantial portion of our operating expenses are
denominated in Euros. Gains and losses on the conversion to U.S. dollars of
assets and liabilities denominated in Euros may contribute to fluctuations in
our results of operations, which are reported in U.S. dollars. Most of our
capital lease obligations are expressed in Taiwanese dollars. In the past,
fluctuations of the parity of the Taiwanese dollar versus the Euro caused
significant foreign exchange gains or losses and may continue to do so in the
future. We recorded net foreign exchange gain of $359,000 in the three-month
period ended March 31, 2000, as compared to a net foreign exchange loss of
$516,000 in the three-month period ended March 31, 1999. We cannot predict the
effect of exchange rate fluctuations on future operating results. To date, we
have not undertaken hedging transactions to cover our currency exposure, but we
may do so in the future.
LIQUIDITY AND CAPITAL RESOURCES
Cash used in operations was $3.9 million during the three-month period ended
March 31, 2000, as compared to $6.1 million in the three-month period ended
March 31, 1999. This decrease is a result of significant revenues received from
DARPA, offset by an increase in expenses incurred by our research and
development team in Boise, Idaho. We also had a decrease in deferred offering
costs and deferred revenues.
We have used $53.9 million in cash to fund our operations since inception
through March 31, 2000 and have incurred $23.4 million in capital expenditures
and investments.
Capital expenditures were $761,000 during the three-month period ended March 31,
2000 as compared to $40,000 during the same period in 1999. These capital
expenditures exclude assets acquired under capital lease obligations. During
the three-month period ended March 31, 2000, capital expenditures remained
focused on limited capacity expansion in the Boise, Idaho manufacturing
facility. Implementing volume production at Unipac's manufacturing plant
required significant capital expenditures. Pursuant to the Foundry Agreement,
Unipac funded a $14.7 million capital expenditure for equipment. A portion of
that equipment is leased to us and amounted to $10.7 million as of March 31,
2000. We expect that additional capital expenditures will be required in 2000
and in 2001 to increase capacity at Unipac and to complete implementation of
manufacturing processes, both for monochrome and color products.
During the three-month period ended March 31, 2000, restricted cash was
reclassified as cash available in the amount of $5.6 million. Restricted cash
was related to the security interest corresponding to the guaranty granted to
Unipac in relation to the purchase and funding by Unipac of volume field
emission displays production equipment. In March 2000, pursuant to an agreement
dated December 17, 1999 signed with Unipac, the guaranty to Unipac was reduced
by $5.0 million in consideration of a payment in cash of same amount to Unipac.
Pursuant to the terms of this agreement, this $5.0 million payment will be
considered as a prepayment against our future payments to Unipac concerning the
equipment leased by Unipac to us. Consequently, the amount of the security
interest to the banks was reduced by the same amount and amounted to $1,875,000
at March 31, 2000.
Cash flows used by financing activities were $2.5 million in the three-month
period ended March 31, 2000, as compared to $75,000 generated in the three-month
period ended March 31, 1999. This net cash flow in the first quarter of 2000
consisted of sales of shares of Common Stock, resulting in net proceeds of $3.3
million, while repayment of long term liabilities amounted to $5.8 million,
including the $5.0 million prepayment made to Unipac. Cash flows used in
financing activities in the three-month period ended March 31, 2000 excluded
non-cash transactions related to (i) the conversion into shares of our Common
Stock of the convertible loan with Sumitomo Corporation in the amount of $3.9
million, (ii) the conversion into shares of our Common Stock of the loan with
Sumitomo Corporation in the amount of $2.5 million, both resulting in a decrease
of our long term liabilities. Cash flows generated from financing activities
included (i) the sales of shares of Common Stock under the Kingsbridge equity
line, resulting in net proceeds of $2.9 million, and (ii) the exercise of
options under the 1993 stock option plan, resulting in net proceeds of $350,000,
but excluded non-cash transactions related to the conversion of 266,297 Series E
Convertible Preferred Stock in March 2000.
-12-
<PAGE>
Since our inception, we have funded our operations and capital expenditures
primarily from the proceeds of equity financing aggregating $95.9 million and
from proceeds aggregating $21.0 million from borrowings and sale-leaseback
transactions.
In 1997 and January 1999, we entered into two research and development
agreements with French authorities. Under these agreements, we expect to
benefit from zero-interest loans totaling approximately $3.0 million, of which
$2.0 million were received in 1999, and $482,000 were received in April 2000.
In November 1998, we entered into an research and development agreement with
French authorities. Under this agreement, we expect to receive a total grant of
approximately $679,000, of which $196,000 was received in 1999, $202,000 was
collected in the three-month period ended March 31, 2000, and $280,000 are
expected to be collected in September 2000. The $196,000 and $202,000 collected
in 1999 and in the three-month period ended March 31, 2000, respectively, were
not recognized as income as all conditions stipulated in the agreement were not
met.
On August 5, 1999, we were awarded a development contract by DARPA (Defense
Advanced Research Projects Agency). Under the terms of the contract, we will
receive approximately $4.7 million to develop a color field emission display.
During the three-month period ended March 31, 2000, $1.8 million was recognized
as income under this contract. On April 3, 2000, a new contract, as a
continuation of the existing contract, was signed with DARPA for $6.3 million
for the development and demonstration of a full color, full video rate,
12.1-inch field emission display.
We recognized French income tax benefits of $7.9 million since inception. These
income tax benefits represent tax credits for research and development
activities conducted in France, which are paid in cash to us if it is not
possible to credit them against future income tax liabilities within three
fiscal years. In 1998, we collected $2.8 million, representing R&D tax credits
recorded in 1993 and 1994. In April 1999, we collected $3.0 million from R&D
tax credit recorded in 1995. We expect to collect $1.1 million in the second
quarter of 2000, in relation with the R&D tax credit recorded in 1996.
On August 9, 1999, we secured a $15.0 million equity-based line of credit with
Kingsbridge Capital Ltd. Under the terms of the equity line, we can draw up to
$15.0 million cash in exchange for our Common Stock, in increments over a
two-year period. The decision to draw on any of the funds and the timing and
account of any such draw are at our sole discretion, subject to certain
conditions. Such conditions include limitations depending on the volume and the
market price of our Common Stock. During the three-month period ended March 31,
2000, we issued 933,625 shares of Common Stock, representing $2,946,000
(3,000,000 less issuance costs of $54,000). Through March 31, 2000, out of the
maximum amount of $15.0 million, we have drawn a total amount of $4.0 million.
On January 25, 2000, we signed an agreement with Audi and other partners to
jointly design, develop, test and deliver a 7-inch color field emission display
for automotive applications. This agreement is part of the European Commission
IST program. Under the terms of this agreement, we will receive funding of
approximately $1.7 million, of which $600,000 are expected in 2000.
In April 2000, we completed a $15.0 million equity private placement with United
Microelectronics Corporation. United Microelectronics Corporation received
9,320,359 million shares at a purchase price of $1.6094 per share, pursuant to
an amendment, signed in February 2000, to the Common Stock Purchase Agreement
dated October 6, 1999 with Unipac.
Cash available at March 31, 2000 amounted to $12.3 million as compared to $14.6
million at December 31, 1999. We expect that cash available at March 31, 2000,
together with the $15.0 million received from the private placement with United
Microelectronics Corporation, and not reflected in the March 31, 2000 balance
sheet, the anticipated proceeds from the Kingsbridge equity-based line of
credit, and cash from various grants and loans described above and from R&D tax
credits, will be sufficient to meet our cash requirements, including repayment
of the current portion of our long-term obligations in the amount of $2.7
million at March 31, 2000, for the near future.
We will require substantial funds to conduct research, development and testing,
to develop and expand commercial-scale manufacturing systems and to market any
resulting products. Changes in technology or a growth of sales beyond currently
anticipated levels will also require further investment. Our capital
requirements will depend on many factors, including the rate at which we can
develop our products, the market acceptance of such products, the levels of
promotion and advertising required to launch such products and attain a
competitive position in the marketplace and the response of competitors to our
products. There can be no assurance that funds for these purposes, whether from
equity or debt financing, or other sources, will be available when needed or on
terms acceptable to us.
-13-
<PAGE>
STRATEGIC ISSUES AND RISKS
We are currently focused on the following activities which we believe are
necessary to the success of our business: (i) successfully implementing the
manufacture of field emission displays by our Taiwanese contract manufacturer,
Unipac; (ii) improving our manufacturing processes and yields, both in our pilot
plant and at Unipac; (iii) expanding our customer base and product offering, and
(iv) continuing the development of our field emission display technology,
including the development of large field emission displays. In evaluating our
outlook, certain risks and issues filed as exhibit 99.1 to this quarterly report
on form 10-Q should be considered.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The market risk exposure inherent to our international operations creates
potential for losses arising from adverse changes in foreign currency exchange
rates. We are exposed to such foreign currency exchange rate risk in two main
areas: (i) a substantial portion of our operating expenses are, and are expected
to be, denominated in Euros, (ii) most of our capital lease obligations are
expressed in Taiwanese dollars. Fluctuations of the parity of the Taiwanese
dollar versus the Euro or the U.S. dollar may cause significant foreign exchange
gains or losses. In addition, gains and losses arising from the conversion to
U.S. dollars of assets and liabilities denominated in Euros or in Taiwanese
dollars may contribute to fluctuations in our results of operations, which are
reported in U.S. dollars. To date, we have not undertaken hedging transactions
to cover its currency exposure. We are also exposed to interest rate risks in
connection with certain long-term debt. We do not, however, enter into market
sensitive instruments for trading purposes.
-14-
<PAGE>
PIXTECH, INC.
PART II Other Information
ITEM 1 Legal Proceedings:
Not applicable.
Changes in Securities:
(a) Not applicable
(b) Not applicable
(c) In March 2000, 266,297 shares of Series E Convertible Preferred
Stock were converted into shares of Common Stock, resulting in the issuance of
4,058,978 shares of our Common Stock. In April 2000, 8,877 shares of Series E
Convertible Preferred Stock were converted into 136,276 shares of Common Stock
at a conversion price of $1.60938. After this transaction, the Series E Stock,
including accrued dividends, is convertible into 340,224 shares of Common Stock
using a conversion price of $1.60938. As of May 11, 2000, there were 22,095
shares of Series E Preferred Stock outstanding.
In January and February 2000, we issued 2,126,246 shares of our
Common Stock to Sumitomo Corporation following the conversion into shares of
Common Stock of the entire outstanding principal amount of $3.9 million due on a
$5.0 million convertible note issued in 1997 to Sumitomo Corporation.
In March 2000, we issued 385,549 shares of our Common Stock to
Sumitomo Corporation following the conversion into shares of Common Stock of the
$2.5 million principal due on a $5.0 million note issued in 1997 to Sumitomo
Corporation.
Each of the conversion listed above was exempt from registration
under the Securities Act of 1933, as amended (the "Securities Act") pursuant to
Section 3 (0) (9) of the Securities Act.
During the three-month period ended March 31, 2000 we issued
933,625 shares in connection with the $15 million Kingsbridge equity line of
credit secured in August 1999, as private placement exempt from registration
under Section 4 (2) of the Securities Act. These 933,625 shares of Common Stock
represented an amount of $2.9 million ($3,000,000 less issuance costs of
$54,000).
In February 2000, we entered into an Amendment dated February 29,
2000 to the Common Stock Purchase Agreement dated October 6, 1999 by and between
PixTech and unipac (the "Amendment"). Pursuant to the Amendment, in April 2000,
we issued 9,320,359 shares of Common Stock to United Microelectronics
Corporation in a private placement exempt from registration under Section 4 (2)
of the Securities Act.
In March 2000, in connection with the Coloray agreement, we issued
16,000 shares of our Common Stock, valued at a price of $3.57 per share,
representing a total amount of $57,000 in a private placement exempt from
registration under Section 4 (2) of the Securities Act.
ITEM 3 Defaults upon Senior Securities:
Not applicable.
-15-
<PAGE>
Submission of matters to a Vote of Security Holders:
ITEM 4 At the Special Meeting of Stockholders held on January 18, 2000,
our stockholders voted:
<TABLE>
<CAPTION>
TOTAL VOTE TOTAL VOTE TOTAL VOTE
"FOR" "AGAINST" "ABSTAINING"
<S> <C> <C> <C>
1. To amend our Restated
Certificate of Incorporation to
increase the authorized shares
of our capital stock
from 61,000,000 shares
to 101,000,000 . . . . . . . . . 27,546,899 300 793,656
2. To approve the issuance of up
to 9,320,359 shares of our
Common Stock to United
Microelectronics Corporation . . 23,118,817 300 793,656
</TABLE>
ITEM 5 Other Information:
None.
-16-
<PAGE>
Exhibits and reports on Form 8-K:
(a) Exhibits:
3.1 Restated Certificate of Incorporation of Registrant. 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.
3.2 Certificate of Designations of PixTech, Inc. Filed as Exhibit 2.1
to the PixTech, Inc. Current Report on Form 8-K file January 7, 1999 and
incorporated herein by reference.
3.3 Certificate of Amendment of Restated Certificate of Incorporation
of Registrant. Filed as Exhibit 3.4 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.
3.4 Certificate of Amendment of Restated Certificate of Incorporation
of Registrant, dated January 18, 2000. Filed as Exhibit 3.5 to the PixTech, Inc.
Annual Report on Form 10-K for the year ended December 31, 1999 filed with the
commission on March 28, 2000 and incorporated herein by reference.
10.1 Amendment, dated February 29, 2000, to Common Stock Purchase
Agreement by and between PixTech, Inc. and Unipac Optoelectronics Corporation
dated as of October 6, 1999. Filed as Exhibit 2.1 to the PixTech, Inc. Current
Report on Form 8-K filed on May 8, 2000 and incorporated herein by reference.
99.1 Important Factors Regarding Future Results
27. Financial Data Schedule
(b) Reports on Form 8-K:
A report on Form 8-K was filed on February 8, 2000, reporting under
Item 5, the completion of an agreement with AUDI and other partners to jointly
develop a 7-inch color field emission display, in consideration for a 1.78
million euros funding from the European Commission.
A report on Form 8-K was filed on May 2, 2000, reporting under Item
5, the completion of a development contract with DARPA (Defense Advanced
Research Projects Agency) to develop a 12.1-inch color field emission display,
in consideration for a funding of approximately $6.3 million from the U.S.
government.
ITEM 6 A report on Form 8-K was filed on May 8, 2000, reporting under
Item 1, the completion of the private placement of 9,320,359 shares of Common
Stock with united Microelectronics Corporation in consideration for $15.0
million, which transaction may be viewed as a change in control.
-17-
<PAGE>
PIXTECH, INC.
March 31, 2000
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PIXTECH, INC.
Date: 05/15/2000 BY: /s/ Marie Boem
---------- ------------------
Marie Boem,
Principal Financial Officer
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<PAGE>
PIXTECH, INC.
March 31, 2000
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No.
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<C> <S>
3.1 Restated Certificate of Incorporation of Registrant. 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.
3.2 Certificate of Designations of PixTech, Inc. Filed as Exhibit 2.1 to the PixTech,
Inc. Current Report on Form 8-K file January 7, 1999 and incorporated
herein by reference.
3.3 Certificate of Amendment of Restated Certificate of Incorporation of Registrant.
Filed as Exhibit 3.4 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.
3.4 Certificate of Amendment of Restated Certificate of Incorporation of
Registrant, dated January 18, 2000. Filed as Exhibit 3.5 to the PixTech, Inc.
Annual Report on Form 10-K for the year ended December 31, 1999 filed with
the commission on March 28, 2000 and incorporated herein by reference.
10.1 Amendment, dated February 29, 2000, to Common Stock Purchase Agreement
by and between PixTech, Inc. and Unipac Optoelectronics Corporation dated as
of October 6, 1999. Filed as Exhibit 2.1 to the PixTech, Inc. Current Report on
Form 8-K filed on May 8, 2000 and incorporated herein by reference.
27 Financial Data Schedule
99.1 Important Factors Regarding Future Results
</TABLE>
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0
1
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EXHIBIT 99.1 IMPORTANT FACTORS REGARDING FUTURE RESULTS
You should carefully consider the following risk factors, in addition to other
publicly available information in deciding whether to invest in PixTech stock.
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>
Operating Net Losses Loss to Common Stockholders
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<S> <C> <C>
Three Month Ended March 31, 2000 $6.6 million $6.7 million
Year Ended December 31, 1999 $26.4 million $28.9 million
Year Ended December 31, 1998 $19.6 million $17.8 million
Year Ended December 31, 1997 $15.7 million $14.6 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
- 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 March 31, 2000, we had an accumulated
deficit of $89.2 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.
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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. 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 and
- public interest concerns; and
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 National Market, 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 April 10, 2000, the minimum bid price on our Common Stock was
$4.438. 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."
In addition, if our Common Stock were delisted from the Nasdaq National
Market, we may not have the right to obtain funds under the Kingsbridge 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
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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.
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 THE 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 market
opportunities for large flat panel displays.
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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 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.
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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.
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 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.
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. 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.
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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.
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