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Table of Contents

 

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-K

 

x

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

 

For the fiscal year ended December 31, 2009

 

 

or

 

 

o

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: 0-49737

 

UNI-PIXEL, INC.

(Exact Name of Registrant as Specified in Its Charter)

 

DELAWARE

 

75-2926437

(State or Other Jurisdiction of
Incorporation or Organization)

 

(I.R.S. Employer
Identification No.)

 

8708 Technology Forest Place, Suite 100
The Woodlands, Texas 77381

(Address of Principal Executive Offices)

 

(281) 825-4500

(Registrant’s Telephone Number, Including Area Code)

 

Securities Registered Pursuant to Section 12(b) of the Act: None

 

 

Securities Registered Pursuant to Section 12(g) of the Act:

 

COMMON STOCK, PAR VALUE $0.001 PER SHARE

(Title of Class)

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Exchange Act  Yes o No x

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes o No x

 

Indicate by check mark whether 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 registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) 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 o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one):

 

Large Accelerated Filer o

 

Accelerated Filer o

Non-Accelerated Filer o

 

Smaller reporting company x

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o  No x

 

The aggregate market value of the common stock held by non-affiliates of the registrant was approximately $9,303,214 on June 30, 2009, based on the last reported sales price of the registrant’s common stock on the Over-the-Counter Bulletin Board on such date. All executive officers, directors and 10% or more beneficial owners of the registrant’s common stock have been deemed, solely for the purpose of the foregoing calculation, “affiliates” of the registrant.

 

As of February 28, 2010, there were 52,100,535 shares of the registrant’s common stock, $0.001 par value, issued and outstanding.

 

 

 



Table of Contents

 

TABLE OF CONTENTS

 

 

PART I

 

ITEM 1.

BUSINESS

3

ITEM 1A.

RISK FACTORS

16

ITEM 1B.

UNRESOLVED STAFF COMMENTS

22

ITEM 2.

PROPERTIES

22

ITEM 3.

LEGAL PROCEEDINGS

22

ITEM 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

22

 

 

 

 

PART II

 

ITEM 5.

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

22

ITEM 6.

SELECTED FINANCIAL DATA

25

ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPEATION

25

ITEM 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

31

ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

31

ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

31

ITEM 9A.

CONTROLS AND PRODECURES

31

ITEM 9B.

OTHER INFORMATION

32

 

 

 

 

PART III

 

ITEM 10.

DIRECTORS AND EXECUTIVE OFFICERS AND CORPORATE GOVERANCE

32

ITEM 11.

EXECUTIVE COMPENSATION

35

ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

37

ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

38

ITEM 14.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

39

 

 

 

 

PART IV

 

ITEM 15.

EXHIBITS, FINANCIAL STATEMENT SCHEDULES

40

 

 

 

 

SIGNATURES

43

 

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PART I

 

ITEM 1.  BUSINESS

 

Cautionary Note About Forward-Looking Statements

 

Certain matters discussed herein may constitute forward-looking statements and as such may involve risks and uncertainties.  In this Annual Report on Form 10-K, the words “anticipates,” “believes,” “expects,” “intends,” “future” and similar expressions identify certain forward-looking statements.  These forward-looking statements relate to, among other things, expectations of the business environment in which we operate, projections of future performance, perceived opportunities in the market and statements regarding our mission and vision.  Our actual results, performance, or achievements may differ significantly from the results, performance or achievements expressed or implied in such forward-looking statements.  For discussion of the factors that might cause such a difference, see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operation.”  We undertake no obligation to update or revise such forward-looking statements.  We urge readers to review carefully the risk factors described in this Annual Report found in Item 1A. and the other documents that we file with the Securities and Exchange Commission (“SEC”). These documents can be read at www.sec.gov.

 

OVERVIEW

 

Uni-Pixel, Inc. is a development stage company that has patented a next generation color display technology it calls Time Multiplexed Optical Shutter (“TMOS”). The Company believes it is the leader in the research, development and future commercialization of new flat panel displays using TMOS architecture and techniques as the means to improve the performance and reduce the bill of materials costs realized in the production of flat panel display systems.  It is envisioned that TMOS displays will be designed to be consistent in form and fit with current Liquid Crystal Display (LCD) technology in order to allow TMOS based display panels to be used in the same display applications that currently use LCD display panels.

 

TMOS is a display system that uses Field Sequential Color (FSC) as the means to generate images and the full color spectrum.   UniPixel’s research into TMOS has generated a wealth of knowledge in systems and technology that leverage this unique approach.  This has yielded Intellectual Property and know-how that are both directly applicable to other systems including LCD display panels that similarly use FSC.  In the past, LCD systems have faced limitations that prevented effective implementation of FSC.  UniPixel believes that its advances and technology can overcome these hurdles and allow LCD to leverage FSC and TMOS sub-system developments as an interim step to the introduction of TMOS in the future.

 

TMOS is also a polymer thin film based Micro-Electronic Mechanical System (MEMS) display architecture. UniPixel’s research into TMOS has further generated a wealth of knowledge in thin films and the creation of precision geometric micro-structures on the surface of these films.  The unique developments in MEMS and the mastering of supporting micro-structural technology that leverage the unique structures and their production has also yielded Intellectual Property and know-how that is broadly applicable to other applications including a number of applications for LCD display based devices.

 

We expect the advantages in reduced manufacturing costs, enhanced viewing quality, unique design attributes, and improved performance of the TMOS display architecture and TMOS derived FSC sub-systems over current non-FSC Flat Panel Display alternatives to motivate partners to engage us in development, commercialization, or incorporation of FSC-LCD and TMOS sub-components and displays in their products.  These partners should collectively serve to create supply and to drive demand for FSC-LCD and TMOS-based products based on licensable Intellectual Property from UniPixel.

 

Uni-Pixel’s technology leadership and intellectual property position is expected to enable it to generate revenues from its various technologies in two phases.  For technologies that are licensed, the initial phase is expected to generate revenue from partners through funded development efforts, and/or up-front licensing fees. The second phase is expected to include royalties from licensees that produce FSC-LCD or TMOS panels or incorporate them into applications for automotive, active signage, and medical and consumer electronics (i.e., TVs, monitors, personal computers, cameras, games, etc.).  For technologies that will be produced and supplied, specifically the Company’s Opcuity Performance Engineered films, the Company expects to generate revenues initially from joint development activities with contracted partners.  The second phase is expected to generate sales revenues from customer orders for manufactured film products.  In the case of TMOS targeted film, the Company will supply a key material component, its Opcuity™ Active Layer film, to its TMOS panel manufacturing partners that will be a revenue source.

 

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Through its research and development efforts, the Company has established a portfolio of TMOS, FSC-LCD and Opcuity film related know-how, patents, patent applications and other intellectual property rights. Uni-Pixel currently has 38 issued, 1 allowed and 44 pending patent applications worldwide providing a strong foundation that will support:

 

·                  Further developing proprietary FSC-LCD and TMOS technology;

·                  Entering into joint development efforts  in specific vertical market or production arrangements to exploit existing manufacturing and distribution channels of its targeted partners;

·                  Actively licensing technology to display manufacturers, supply chain participants, and device providers for use in applications such as mobile phones, digital cameras, laptop computers, and other consumer electronic devices; and

·                  Actively licensing film designs and production processes to manufacturing partners, or establishing film production capabilities to meet customer demand for finished film products.

 

Uni-Pixel’s work developing its TMOS display technology has created a core competency in the development and production of performance engineered thin films. The first of these films developed specifically for TMOS is the Opcuity Active Layer film.  The capabilities developed by Uni-Pixel to create the Opcuity Active Layer film have opened opportunities to broader applications and markets for film products other than just TMOS.  This has allowed Uni-Pixel to expand its pursuit of performance engineered film products.

 

Beyond TMOS, Uni-Pixel’s performance engineered film designs include finger print resistant protective film covers for touch screen display devices and other performance enhancement films.  Uni-Pixel expects that its finger print resistant (FPR) film, “Opcuity FPR”, will be its first product to enter the market.  The basis for the unique aspects of the FPR product is the use of precision geometric micro-structures to make the film functional.  UniPixel has developed the capability to create structures in sizes between two and ten microns with precision edges and surfaces that have not been accomplished in the industry previously.  This unique capability became the basis for the FPR discovery and recognition of several other functional uses of a micro-structured surface on a thin film.

 

Uni-Pixel will continue to pursue development of its other performance engineered film designs to follow that can leverage the micro-structuring capability and surface energy modification techniques.  In pursuing these film designs, each advancing version employs common elements and builds in further unique capabilities that Uni-Pixel engineers into the film.  Ultimately these capabilities will culminate in the Opcuity Active Layer Film for TMOS.    In this way, it is an objective of the Company to augment its TMOS specific efforts with a resulting family of Opcuity performance engineered films that leverage common production processes and techniques initially developed for TMOS.

 

Through December 31, 2009 we have been primarily engaged in research and development efforts that have expanded our portfolio of intellectual property, building prototype devices that demonstrate our technologies, recruiting key personnel, engaging various strategic partners, and raising capital consistent with our strategy.  As of December 31, 2009 we had accumulated a total deficit of $49.9 million and expect similar losses to continue through at least 2010. We will finance our continuing efforts and operations primarily through our existing cash, licensing fees being pursued from strategic partners and additional fundraising activities.

 

During 2009, Uni-Pixel accomplished a number of milestones in both its technical and business advancement.  This included the completion of agreements for TMOS development, the completion of development agreements for unique versions of our finger print resistant films, the successful development of conductor patterning processes that have been recognized as leading edge by the industry, completing a supply agreement with our first distribution partner, advancing subsystem designs for testing within prototype devices, completion of MOU’s and production agreements with manufacturing partners, and demonstration of prototype systems and films.

 

Formation History

 

Uni-Pixel was originally incorporated in the State of Nevada as Super Shops, Inc. On November 15, 1999, Super Shops and its sister companies filed an amended petition under Chapter 11 of the United States Bankruptcy Code. On July 31, 2000, the court approved Super Shops’ Amended Joint Plan of Reorganization. On October 13, 2000, and in accordance with the Plan of Reorganization, the management of Super Shops changed its state of incorporation from Nevada to Delaware by merging with and into NEV Acquisition Corp., a Delaware corporation formed solely for the purpose of effecting the reincorporation.

 

On June 13, 2001, Real-Estateforlease.com, Inc., a Delaware corporation, merged with and into NEV Acquisition Corp.  Following the merger, NEV Acquisition Corp. changed its name to Real-Estateforlease.com, Inc.  Real-

 

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Estateforlease.com, Inc. was incorporated on May 24, 2001, in the State of Delaware to serve as a business-to-business internet information intermediary providing turnkey marketing services to facilitate the leasing of commercial real estate properties.

 

Pursuant to the Agreement and Plan of Merger between NEV Acquisition Corp. and Real-Estateforlease.com, Inc., the sole stockholder and founder of Real-Estateforlease.com, Inc. exchanged his equity ownership interest in Real-Estateforlease.com, Inc. for 9,500,000 shares (or approximately 96%) of NEV Acquisition Corp.’s common stock. At the time of the merger between Real-Estateforlease.com, Inc. and NEV Acquisition Corp., Real-Estateforlease.com, Inc. had no operations and essentially no assets. Efforts by Real-Estateforlease.com, Inc. to implement its business plan ceased in June 2002.

 

Our wholly owned subsidiary, Uni-Pixel Displays, Inc. was originally incorporated as Tralas Technologies, Inc., a Texas corporation, on February 17, 1998. Tralas Technologies, Inc. changed its name to Uni-Pixel Displays, Inc. during 2001. On December 7, 2004, Real-Estateforlease.com, Inc. entered into a merger agreement with Uni-Pixel Displays, Inc. and certain other parties pursuant to which Uni-Pixel Displays, Inc. became a wholly-owned subsidiary of Real-Estateforlease.com, Inc. At the time of this merger, Real-Estateforlease.com, Inc. had no operations and no material assets or liabilities.  Pursuant to the merger, we changed our name from Real-Estateforlease.com, Inc. to Uni-Pixel, Inc. at the annual meeting of our stockholders held in January 2005.

 

Uni-Pixel, Inc. is now the parent company of our wholly-owned operating subsidiary, Uni-Pixel Displays, Inc. As used in this document, “Uni-Pixel,” “we,” “us,” and “our” refer to Uni-Pixel, Inc. and our wholly-owned consolidated subsidiary, Uni-Pixel Displays, Inc.

 

The common stock, par value $0.001 per share, of Uni-Pixel is quoted on the Bulletin Board since January 18, 2006 under the ticker symbol “UNXL.OB”.

 

INDUSTRY OVERVIEW

 

The Flat Panel Display Market

 

History

 

The commercialization of the liquid crystal display (LCD) began in 1973, with the launch of the world’s first electronic calculator, incorporating a segmented, black-and-white (monochrome) display.  The technology was quickly adopted in applications such as watches, and evolved into more complex dot matrix displays using passive addressing — or passive matrix (PM) — systems.  In time, the emergence of passive Super Twisted Nematic (STN) PM-LCDs and the development of color STN (CSTN) PM-LCDs, facilitated new applications such as notebook PCs.  Eventually, the demand for higher resolution, full-color video images and faster refresh rates, saw the commercialization of active matrix (AM) amorphous, (a-Si) Thin-Film-Transistor (TFT) LCDs.  This technology quickly gained acceptance in the notebook PC market, where it completely replaced the incumbent CSTN technology.  Similarly, there has been rapid, supply driven penetration of TFT-LCDs in all forms of display applications specifically as demonstrated in desktop monitors and large flat panel TVs as a substitute for the traditional cathode ray tube (CRT) screen.

 

Replacement of Older CRT Technology by FPDs

 

Although flat panel displays (FPDs) were initially adopted in the mobile consumer electronics market and in notebook computers, they have increasingly displaced cathode ray tube (CRT) displays in larger product applications such as desktop computer monitors and televisions. FPD’s unique form factor and digital interface is enabling the delivery and accurate display of video, telecommunications, information, data, analysis and instructions in both mobile and fixed environments previously unsuitable to CRTs.  In today’s market, the CRT is no longer a viable technology for any consumer based application and has all but disappeared from the market.

 

Proliferation of Mobile Consumer Electronics Devices

 

Consumers throughout the world are rapidly adopting mobile consumer electronics devices such as mobile phones, personal digital assistants, or PDAs, MP3 players, portable DVD players, mobile gaming devices and digital cameras and camcorders. Advances in component technology are driving down the cost of these products and expanding their functionality. Early mobile devices were equipped with simple, small monochrome displays with limited functionality. As the cost of color displays decreased and quality improved, consumers began rapidly adopting mobile devices with color displays.

 

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This trend towards greater display functionality in mobile devices continues with the introduction of new phones with dual displays, embedded cameras and television tuner video functionality.

 

The overall FPD industry is continuing to experience significant growth.  In addition to the rapid replacement of CRT applications such as monitors and TVs, the FPD industry growth is being driven by a number of other market forces including:

 

·                  Increased demand for large format high resolution TV’s and computer monitors;

·                  Steady growth in usage of notebook and newer “netbook” computers;

·                  A migration to color screens for mobile phones and other handheld devices; and

·                  Decreasing costs economics, increasing throughput and improving efficiency of FPD production as newer generation LCD fabrication plants are increasing production.

 

These factors in combination with additional market forces are driving overall growth and shifting the mix of product applications within the FPD industry.

 

Applications

 

With the proliferation of the Internet, there has not only been an explosion in the amount of available content, but a rapid evolution of the form in which it appears.  No longer is information a two-dimensional, text-only experience; online content is now being delivered in graphic rich, animated and video formats.  As the sophistication of the user base continues to heighten and bandwidth continues to increase, there will be a demand for a superior, high resolution visual experiences that only FPDs will be able to deliver — particularly in mobile wireless devices.  Flowing from this, new types of applications and functionality will evolve that, in turn, will enhance existing markets and create new ones.

 

Industry drivers such as new content explosion, high resolution capability, increased bandwidth and improved manufacturing efficiencies are driving new functionality in existing applications, as well as enabling the creation of new application markets that will drive the FPD industry through high volumes.

 

With the emergence of new technologies such as MP3 Players, TV Tuners and Bluetooth, new functionality in existing applications will should fuel demand growth in what have become relatively mature markets.  For instance, while the mobile phone market has seen relatively slow growth rates, a large pool of sophisticated users now exists who are providing the demand for new technologies such as Phone Cameras and Phone TVs.  These enhanced devices will incorporate high performance, next generation displays that will see a move away from Passive Matrix-LCDs towards Active Matrix-LCDs, as well as other emerging display types such as organic light emitting diodes (OLEDs). Additionally, FPD technology is increasingly taking forms beyond consumer electronic devices.  FPDs are increasingly used in emerging applications including retail signage, car navigation systems, instrumentation, and household appliances.

 

The FPD market is currently dominated by LCDs, which accounted for well over 90% of total FPD sales in 2008, and demand is increasing across multiple applications with FPD formats generating industry-wide momentum.

 

Films in Displays

 

Glass and plastics are the principal materials being used as first surfaces for display systems.  As displays are incorporated into devices that are used extensively and transportably on daily basis, the displays are subject to damage and the effects of use.  A large and growing business has developed in films that are designed to provide protection and other functional uses on top of the display surface.  UniPixel has found that the technologies that it has developed can be applied to a variety of functional uses in films for display products.  Its Opcuity FPR product can protect a touch screen device from damage while also preventing fingerprints and smudges from obscuring the viewing experience.  Incorporating patterned conductors into the film also offers unique functional uses to the film as material for touch screen control.  Engineering the structures to specific patterns and distributions can control light output and reflectance.  UniPixel’s Opcuity performance engineered films have demonstrated that they can be applied to solutions for all of these aspects.

 

TECHNOLOGY

 

Overview: Uni-Pixel has developed a new color display technology it calls Time Multiplexed Optical Shutter (“TMOS”). A TMOS display is constructed by the addition of a single thin film layer positioned above the planar surface of a light guide constructed of glass or a polycarbonate substrate.  This positioning and bonding of the thin film forms a drum type

 

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of structure at each individual pixel.  The drum structure places two conductors parallel to each other with a dielectric air gap separation.  The light guide’s conductor at each pixel is either driven by local transistors (in the form of Thin Film Transistors, TFTs) or through connection to transistors that are off the light guide. The thin film layer comprising the drum head is targeted to be composed of a base substrate layer of polyester film, or PET film, the addition of surface micro-optic features, and a conductor.

 

The implementation of the thin film layer of material creates a matrix of optical shutters on the surface that are opened or closed as controlled by the TFTs.  This opening and closing process is the oscillation of the thin film in and out of contact with the light guide allowing the frustration of totally internally reflected (TIR) light.  Once the TIR light is frustrated, the micro-optic structures couple and direct the light to the viewer.  The panel unit should be simpler to manufacture than Plasma or Liquid Crystal Displays (“LCD”) as the single PET film included in the system replaces several other materials and steps required for the production of Plasma or LCD.

 

Reduced Complexity: In contrast to standard LCD, an FSC-LCD or TMOS single pixel shutter emits the three primary colors (red, green, and blue) without the use of three separate sub-pixels. This color generation technique is called Field Sequential Color.  Because FSC-LCD and TMOS displays have one-third the number of features for the same number of pixels, they benefit from reduced manufacturing complexity.

 

LCD complexity is largely driven through its use of TFTs. Currently LCD displays require each individual sub-pixel to be driven by a single TFT, (three TFTs per each pixel) which increases the necessity of additional electrical traces from the control mechanism.  Therefore a reduction in the number of features by elimination of sub-pixels reduces complexity.  This is also the case when Field Sequential Color is leveraged in an LCD system.

 

Additionally, a TMOS panel features a single TFT per pixel which will control the voltage differential between the parallel conductive planes created by the capacitor structure/optical shutter (also known as the pixel). This architecture advancement radically improves manufacturing tolerances and reduces the numbers of steps in the manufacturing process.

 

Uni-Pixel’s FSC-LCD and TMOS technology both offer significant advantages over existing standard LCD flat panel display technologies including:

 

·                  Proprietary technologies and know-how protected by Uni-Pixel’s patent portfolio;

·                  Significantly lower manufacturing costs when compared to standard LCD technologies;

·                  Significantly better power efficiency over existing technologies (i.e., resulting in longer battery life);

·                  Picture quality that is daylight readable in portable devices (i.e., cell phones, PDAs, and notebook computers);

·                  Increased durability and reliability; and

·                  Ability to be manufactured in a wide range of sizes spanning from cell phone screens to television displays.

 

Uni-Pixel’s advantages in its FSC LCD and TMOS technology over standard LCD are derived from the relative reduction of the complexity of the architecture and material make up. This advantage will translate into a more economical manufacturing process requiring lower costs for production and lower costs for raw materials.

 

Currently, standard LCD panel displays can take over 100 individual steps in the manufacturing process. This process is necessary to yield intricately developed, small and tightly packed features. However, these manufacturing processes are difficult to manage and are prone to defects.  A reduction in feature density and removal of the color filter process can significantly impact these areas.

 

Uni-Pixel anticipates that the FSC-LCD and TMOS manufacturing processes will have fewer steps.  Benefiting from larger features and less tightly packed construction, the manufacturing process will have significantly fewer yield detractors or failure elements, and an enhanced potential for longer life and resilience over standard LCD panels.

 

Light Efficiency: LCD display technologies function by emitting light from a back plane (a back light) and then screening, masking, polarizing, and filtering the light until it is emitted from the front of the panel in the appropriate color intensity. This method yields a maximum efficiency of light transmission of around 5%. This means that if 1000 nits (a measure of brightness) are created by the backlight, approximately 50 nits are displayed out the front of the display.

 

An FSC-LCD panel removes the color filter from the material stack of a standard LCD panel and opens the individual pixel aperture significantly.  One FSC-LCD pixel is the equivalent area of all three sub-pixels in a standard LCD pixel.  By removing the color filter and leveraging greater aperture, up to 20% of the light can be transmitted from the

 

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backlight doubling the efficiency of transmission.  This approach thus yields up to four times the transmission or 200 nits of 1000 created by the backlight.

 

A TMOS panel uses light injected into the edge of the glass panel much the same way a fiber optic cable works. Light is injected into one edge of the TMOS panel, with mirrors on the other three opposing sides/edges. Light goes into the guide and travels uninhibited bouncing throughout the plane creating a “photon cloud”. TMOS optical shutters then open and close on the surface of the panel to let the light escape. The ratio of light injected into the panel to light released from the surface is tunable. Uni-Pixel’s modeling and experimentation has shown that a panel tuned to 61% efficiency provides the most uniform release of light across the entire display surface. Therefore if one were to inject 1000 nits of light into a TMOS display panel, at a tuned 61% efficiency, 610 nits will be displayed out of the front of the display panel.

 

Power Efficiency: Plasma display technology functions by using high voltage electricity to excite encapsulated gases that emit electrons. These electrons excite phosphors that emit photons, which are the light elements that are seen by the viewer. This process of continued materials excitement requires significant amounts of energy that is converted to photonic light.

 

LCD technology uses a high power backlight system to create a flat uniform backplane of light that transmits through the LCD panel.  Therefore LCD power efficiency is directly tied to the amount of light that can transmit through the panel itself to the viewer.  Since the backlight is always on during use, an LCD’s power use is relatively stable and its efficiency is tied to the transmissivity of the panel.  This is why an FSC-LCD system is so much more power efficient than standard LCD as it increases panel transmission of light through by up to four times.

 

TMOS technology uses a series of industry standard light emitting diodes, or LEDs, attached to one edge of the panel to inject light into the system. LEDs require very little power to create light and have a very high efficiency in converting power to light. Therefore, very little power translates into a very high light output for Uni-Pixel’s TMOS displays.

 

Successful Prototypes: Uni-Pixel has built prototypes that have demonstrated proof of concept, technical viability, and the operation of the sub-systems within its TMOS technology. During 2008, the Company debuted fully functional TMOS display prototypes at the Society for Informational Display (SID) conference in Los Angeles.  The Company’s current prototyping efforts have been focused on the process of optimizing the materials and assembly of the display to advance to manufacturability and then on to commercialization. In February of 2009, UniPixel and Samsung entered into a joint development agreement to advance TMOS technology and prototypes.

 

Technology Progress: In early 2004, Uni-Pixel delivered its first proof of concept prototype device under a development contract.  In mid 2004, Uni-Pixel was awarded a Phase II SBIR contract by the US Air force to advance its designs as modeled during its Phase I contract in an effort to solve image break-up issues traditionally encountered in Field Sequential Color display systems.  In December 2004, Uni-Pixel closed its first significant funding round and began work on opening its own development laboratories including metrology capabilities.  These efforts continued into 2005 and resulted in the first recognition of the viability of our TMOS invention by external partners and the first opportunity for Uni-Pixel to materially implement its display architecture design.

 

In 2005, Uni-Pixel built its development platform capability, advanced its display prototypes, and signed its first development partner and commercialization agreements.  During early 2005, Uni-Pixel advanced its development efforts through its small advanced materials laboratory in Albuquerque, New Mexico, which was adjacent to Sandia National Laboratory.  In July of 2005, Uni-Pixel moved into new facilities including electronics labs, clean room space, and machining systems in The Woodlands, Texas.  During the course of this time, the initial 8x8 pixel prototypes were significantly improved and advanced in their operation, optical system models were built, electronic control designs completed and implemented, and the prototypes were scaled up to a fully operational, full color, 32x32 pixel device.  Uni-Pixel has successfully constructed and tested the sub-systems in the display architecture and is in position to advance the display materials and the assembly techniques.

 

Through 2006, Uni-Pixel continued its research and development efforts within varying display prototypes that expanded both the size of the panels and the pixel counts, demonstrated multiple pixel pitches in prototypes, and completed the design and implementation of the micro-optics that will optimize the optical performance of the TMOS pixels.  These efforts resulted in designs for the final materials implementation of the architecture that will advance display performance and manufacturability.  During 2006, Uni-Pixel engaged the Palo Alto Research Center (PARC) division of Xerox Corporation to provide suitable electronic backplanes for TMOS prototypes to prove the ability to drive a TMOS system with a TFT implementation.

 

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In 2007, Uni-Pixel completed two rounds of funding which provided additional funds to advance the development of TMOS.  In April of 2007, Uni-Pixel ended its work with PARC and contracted with Philips Research Labs MiPlaza Open Innovation Center in Eindhoven, Netherlands to provide electronic backplane development.  Sub-system advances were made in all areas including the light injection system design, Opcuity™ Active Layer materials and implementation requirements, and drive control algorithms and electronics.  In November of 2007, Uni-Pixel expanded its relationship with Philips by entering into a know-how licensing arrangement specific to the assembly of display systems.  In December of 2007, Uni-Pixel completed the successful assembly of prototype devices leveraging the collaborative work conducted in the Eindhoven center.

 

In May of 2008, Uni-Pixel demonstrated its first 128x160 prototype devices at the Society for Informational Display (SID) Industry conference in Los Angeles, CA.  Uni-Pixel progressed through the remainder of the year improving the performance characteristics of each new prototype system built.  Uni-Pixel further investigated various factors effecting performance that have been demonstrated in its prototypes and engaged efforts and partners in addressing and improving on these factors.  In early 2008, an unexpected by-product of Uni-Pixel’s TMOS development efforts yielded a discovery specific to Uni-Pixel’s thin film capabilities.  The development led to Uni-Pixel’s Finger Print Resistant (FPR) film technology and further to the Opcuity FPR film product for touch screen displays.  By year end, the Company had developed a number of film designs based on its common set of core thin film competencies in optics, mastering and micro-replication.  These capabilities developed for creating precision surface modifications have been successfully combined with techniques to pattern conductors using industry standard ink-jetting techniques.  The resulting micro-optic film designs leveraging precision patterned conductors capable of being produced in roll to roll systems have become the basis of the Company’s enhanced business development efforts around performance engineered optical thin films.  By the end of December 2008, the Company had executed two Memorandums of Understanding with partnering firms to produce Opcuity films in high volume.

 

In February of 2009, Uni-Pixel aligned itself with several development and production partners that have assisted in the application of TMOS developed technology to FSC-LCD implementations and thus advancing TMOS towards commercialization.  The Company reached an initial agreement with Samsung and believes that it will reach further agreements that will generate its first meaningful revenues which will help to augment the development work investments it has made and will make and move the Company forward in its commercialization strategy for FSC-LCD systems and TMOS based technologies.  Additionally, the Company entered an agreement with Targus, Inc. to market its first film product, Opcuity FPR.

 

STRATEGY

 

Uni-Pixel’s business strategy is to penetrate existing display applications with its TMOS developed technologies including FSC-LCD systems and thin film products and supporting technology for widespread use in all varieties of color displays and other related display applications. This has been demonstrated by our progress in penetrating direct film product markets leveraging the capabilities and competencies achieved in the development of its Opcuity family of performance engineered films as functional application specific films. The Company is presently focused on the following steps to implement its business strategy:

 

·                  Develop Strategic Relationships.  Uni-Pixel plans to target strategic partners to further the Company’s efforts in the development and commercialization of FSC-LCD and TMOS displays and Opcuity films. Uni-Pixel believes that if these efforts are successful, they could result in FSC-LCD flat panel displays reaching commercial markets in products within two years.  Uni-Pixel’s display solutions leverage the application of existing materials and optical technologies in new ways that have previously been mastered by other companies in other applications.  Uni-Pixel’s management understands that gaining the assistance of some of these various technology leaders in the deployment of FSC-LCD and TMOS is required to support the commercialization effort.  As a result, Uni-Pixel will seek to build relationships that will allow it to leverage existing knowledge, scale, infrastructure, manufacturing and expertise in thin films, optics, control circuitry, assembly, and logistics.

 

·                  Enhance the Company’s Existing TMOS and Opcuity film Technology.  Uni-Pixel believes that continuing development and enhancement of its TMOS technology is critical to the Company’s success in the display industry. Consequently, Uni-Pixel will continually seek to enhance its competitive technology position through internal development efforts that expand our intellectual property portfolio, collaborative relationships, and other strategic opportunities. Uni-Pixel’s primary focus is to expand our intellectual property through development of additional prototypes and materials that enhance and extend the Company’s product capabilities or the processes by which the systems are produced, thereby allowing them to be used in a broader array of display applications and to maintain performance and market leadership over time.

 

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·                  Develop Prototypes Suitable for Industry Demonstration.  Uni-Pixel plans to produce prototypes that will demonstrate the Company’s ability to meet the most demanding military requirements with a superior performing display system and superior performing film products.  Uni-Pixel has developed partners that provide a small volume pilot production line that provides limited quantities of films to meet demonstrate our production solutions for all applications.

 

·                  Finalize a Transferable, Licensable Manufacturing Process.  Uni-Pixel has completed the development of the core and foundation of its film manufacturing processes and has endeavored to protect the know-how and intellectual property in the developed processes.  The Company has establishes a technology transfer team to enable the transition of the Company’s manufacturing processes to targeted manufacturing partners and licensees.

 

·                  Target Leading Manufacturers.  Uni-Pixel plans to target leading display, materials and electronics manufacturers as potential partners and/or licensees of its TMOS and Opcuity Performance Engineered film technologies. The Company will provide extensive technical assistance and support to manufacturers who are early evaluators, developers, or users of its TMOS technology and film materials. Uni-Pixel believes that successful incorporation of its technology into the first military or commercial applications will place competitive pressure on other industry participants to adopt our technology solutions. Uni-Pixel will support “pull through” of its technologies by actively marketing its advantages to end product original equipment manufacturers (OEMs) that incorporate display or film technology into their devices.  This will allow Uni-Pixel’s production partners to gain access to the original equipment manufacturer supply chain driven by end OEMs seeking the competitive product advantages offered by the Company’s FSC-LCD, TMOS, and Opcuty film technologies.  Uni-Pixel will also target Original Design Manufacturers (ODMs) targeted to assemble its sub-components and films into OEM products.

 

·                  Drive Adoption by End-Product Original Equipment Manufacturers.  Uni-Pixel plans to use prototype devices and films to demonstrate its technology to original equipment and design manufacturers that produce end user products. The Company believes that the significant advantages that Uni-Pixel’s displays and films will offer in performance and protection can position it to be the standard for existing LCD based displays and will induce original equipment manufacturers to request UniPixel solutions from their existing display suppliers. This is considered a “pull-through” approach to gaining market acceptance and entry of FSC-LCD, TMOS, and Opcuity films for displays into end-user products and applications.

 

·                  Build the Company’s Revenue Sources.  Uni-Pixel believes that it will be able to produce revenues from four distinct sources, consisting of licensing revenues (initial licensing fees and royalties), subcontracted manufacturing revenues (from the Company’s low volume military and commercial production, joint ventures, or products produced by third party contract manufacturers), materials and film revenues (from the materials Uni-Pixel plans to supply to prospective partners, contract manufacturers, and licensees), and funded research revenues.

 

Uni-Pixel’s has previously contemplated TMOS initiatives include applications involving flexible displays, transparent displays and unique military applications which are conceptually possible. Uni-Pixel also plans to conduct research on the use of a variety of different thin-film technology in surface modification applications and the construction of multi-layer stacks where micro-structures can play unique functional roles. The Company’s focus on next-generation technologies is designed to extend Uni-Pixel’s position as the leading provider of FSC-LCD, TMOS solutions and Opcuity Performance Engineered Films as new markets and applications emerge.

 

MILESTONES TO COMMERCIALIZATION

 

Uni-Pixel will continue to focus on technical and business development milestones. The execution of its overall business plan includes a planned push (targeting panel manufacturers) and pull (targeting end device OEMs) strategy for accelerating product development, supporting market entry, and the expansion of production capability and capacity.  Over the course of the last two years, Uni-Pixel has pursued a technical development roadmap specific to TMOS and FSC-LCD technology that includes:

 

·                  Finalization of display pixel mechanics and materials;

·                  Optimization of the light management system (light injection and micro-optics designs);

 

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·                  Completion of supporting drive control circuitry;

·                  Finalized bonding techniques for completion of the active layer structure;

·                  Assembly and testing of multiple format prototype devices; and

·                  Finalization of specifications for retrofitting existing LCD manufacturing plants for FSC-LCD and TMOS production.

 

Specific to Opcuity Performance Engineered films we have pursued:

·                  Completion of designs for marketable products

·                  Completion of production processes that are transferable

·                  Completion of Distribution and Sales Agreements

·                  Completion of Supply and Manufacturing Agreements

 

Uni-Pixel’s senior management team will work with various targeted strategic partners in each step of the process to provide certain market and technical support resources.  Uni-Pixel has established the leverage of access to partner pilot lines in launching and growing a continuous flow manufacturing system.  This pilot line has been the initial platform for the finalization of the specifications to be included in the continuous flow manufacturing system.

 

CUSTOMERS AND PARTNERS

 

The future customers for the TMOS panel “packages” will be the OEMs that currently use existing display technologies such as LCD, Plasma, and OLED in their final products.  Therefore, the end customer for a Uni-Pixel TMOS panel package will be an integrator, assembler, ODM or the OEM itself.  Initially, Uni-Pixel’s strategic partners will be its primary customers through the commercialization process.  This will include its development partners such as Lockheed Martin, its manufacturing partners, and its other vertical market partners.

 

Uni-Pixel expects that it will pursue discussions with a variety of potential assembly and manufacturing partners as it achieves its technical milestones.  This will include the demonstration of panel packages that can either directly displace alternative technologies, or allow for unique new design implementations.  Once design wins for its panels are secured, Uni-Pixel will leverage these OEM customers for product unit demand to target potential manufacturing partners to expand production capacity.  Uni-Pixel has completed development work within several contracts and with partners that provide comprehensive validation of TMOS technology and that will serve as a basis for future customer growth.

 

The Company’s future Opcuity Performance Engineered Films customers should include a variety of companies from device OEMs to channel distribution partners.  Uni-Pixel will seek to sell rolls of film in uncut format as well as films that are die-cut and packaged as direct to market products.  The type and variety of film sales will depend on the nature of the specific buyer and target application for the film.

 

Current Partners

 

·                  Targus, Inc.: Uni-Pixel engaged Targus, Inc. as an exclusive distribution partner for its Opcutiy FPR product for certain target device markets.

 

·                  Avery Dennision: UniPixel engaged Avery Dennison as an exclusive production partner for specific varieties of its Opcuity FPR film products.  Avery provides assistance in the development and manufacturing of its thin film designs.  Implementation of the Opcutiy performance engineered films can be accomplished using a variety of materials that can achieve the required properties’ and characteristics.  No new or unique materials will be required, rather just the optimization of existing materials as implemented within the Avery process and system.  Initially Uni-Pixel engaged for development work with the objective of reaching a production agreement or joint venture with one or more thin film manufacturers.  During the course of 2009, Uni-Pixel secured a subcontracted manufacturing capacity for its initial thin film production and also signed two separate Memorandums of Understanding with production partners to provide alternative manufacturing capacity.

 

·                  FlexTech Alliance: UniPixel secured a grant contract from the FlexTech Alliance to bring its uniquely developed conductor patterning technology to the industry.  Developed for TMOS, UniPixel has demonstrated its technique to support the production of printed flexible circuitry and printed electronics.  The FlexTech has provided a grant of funds to transition this capability to the Center for Advanced Microelectronic Manufacturing in New York state.

 

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Targeted Partners

 

·                  Drive Control Circuitry: Uni-Pixel is seeking partners for assistance in the development and manufacturing of its unique drive control circuitry.  Uni-Pixel has developed unique intellectual property that will be implemented through a “fab-less” semiconductor model.  This may include potential development of new intellectual property, cross licensing, and the use of certain existing semiconductor capabilities from one or more partners.  Uni-Pixel has developed a means to use off the shelf parts for certain drive control requirements that will allow it to produce prototypes in the short term, as well as leveraging the enhancements that its own unique drive control provides over the longer term.

 

·                  Manufacturing and Assembly Partners: Uni-Pixel is seeking strategic partners that are currently manufacturing  LCD display technologies or incorporating LCD display technologies into end user products.

 

Target Customers

 

·                  Large Computer OEM and ODM: Uni-Pixel has demonstrated unique proof of concept prototype devices and film products to large computer system OEMs under non-disclosure agreements to advance the evaluation of the technologies.  The initial prototypes established the first products for testing and evaluation and performance characterization for gathering direct performance feedback.  Additional work continues specific to advancing the prototypes to implementation within an end user product.

 

·                  Static and Active Signage OEM: Uni-Pixel is seeking potential partners in the vertical market of Graphic Signage.  Two dominant technologies exist in this vertical market, plasma displays for indoor applications and LED displays for outdoor applications.  Uni-Pixel’s technology offers unique and new capabilities that strongly differentiate it from both of these, and can potentially open a market not currently able to be targeted by either.  In the Static Signage Market, UniPixel believes that its TMOS display system principals as demonstrated by its Opcuity performance engineered films mounted in either a dynamic or static manner can provide low power high performance signage solutions.  This approach has been presented to targeted partners and is under consideration.

 

·                  Consumer Electronics Manufacturers (OEMs): Uni-Pixel has held initial exploratory meetings with a variety of consumer electronics OEMs that have all expressed a desire to leverage FSC-LCD, TMOS, and Opcuity FPR films for their unique attributes in their products.  This includes cell phone manufacturers, a computer OEM, and a television system producer.  Each of these interactions has resulted in an invitation to return for further engineering specific meetings as product development advances at Uni-Pixel.

 

SALES AND MARKETING

 

Uni-Pixel is seeking end user product OEMs that desire to integrate FSC-LCD flat panels, or TMOS developed sub-systems into their products once available and demonstrating their superior performance.  Uni-Pixel believes that some portion of the OEMs that have been engaged in these discussions will be interested in pursuing the advantages of FSC-LCD and TMOS flat panels as a significant differentiator for their products relative to their competition in their individual market segments over time.   Uni-Pixel believes that the proven entry into a single vertical market or application will drive the demand for expanded applications of FSC-LCD and thenTMOS flat panels to other product markets.

 

Uni-Pixel’s sales strategy intends to build a diverse revenue base that will derive revenues from multiple sources:

 

·                  Licensing revenues — Strategic manufacturing partners that license Uni-Pixel manufacturing processes for a manufacturing operation, cross licensed partners that produce portions of the materials or technology incorporated into FSC-LCD or TMOS subsystems or displays, and a silicon foundry partner that produces the display controller semiconductors.

·                  Product revenues — Proceeds from the sales of Opcuity performance engineered film products.

·                  Critical materials — Integrators or manufacturers that produce or assemble display panel packages.  For integrators this can include control driver chips from Uni-Pixel’s foundry partner.  For manufacturers this can include materials such as its Opcuity™ thin films featuring micro-optics and transparent conductors to be used in the display panel or sub-systems.

·                  Research contracts — Integrators that are seeking to leverage unique attributes that FSC-LCD, TMOS, or unique Opcuity performance engineered films can potentially provide.  Uni-Pixel expects that initially the US Government

 

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will be a principal source of this variety having secured an initial contract with the FlexTech Alliance/United States Display Consortium.

 

The Company plans to continue to create demand for its products by utilizing a “pull through” strategy with specific targeted OEMs in various market segments.  Uni-Pixel will actively pursue OEMs by using its prototypes to demonstrate the advantages that FSC-LCD, TMOS, and Opcuity performance engineered films can provide in the form of improved efficiencies and performance. Uni-Pixel expects to create OEM “pull” by gaining design wins for integration of FSC-LCD systems, TMOS sub-component technology, and Opcuity films into established end user devices and applications.

 

Uni-Pixel will advance its “Simply Superior” and “Clearly Superior” tag lines and actively demonstrate the elegance and performance advantages of its unique solutions within the industry in support of its direct sales work with OEMs.  Once the initial products reach the market featuring Opcuity film technology, FSC-LCD systems, all based on TMOS developed display prototypes and Uni-Pixel begins to build momentum and manufacturing capacity within the industry, a marketing program will be launched to drive awareness of Uni-Pixel’s technology as a component “brand” within the end user products.  This can currently be seen on packaging developed by Targus, Inc. where UniPixel is a co-owner of the “Clear View Technology” trademark.  This marketing program will be designed to drive awareness and education among end users supporting UniPixel’s unique capabilities and enhanced performance.  Uni-Pixel believes that it will be able to promote its brand as a valued component brand included within the OEM products as a part of its relationship with the end product OEMs.  Ultimately the goal of this marketing program will be to establish Uni-Pixel and its unique technologies independently as a differentiating factor in end user products and to help promote the UniPixel component value proposition through its partner OEMs that implement FSC-LCD, or displays with TMOS developed technology in their products similar to what has been done in the PC industry by certain semiconductor companies.

 

RESEARCH AND DEVELOPMENT

 

From inception through December 31, 2009, Uni-Pixel has spent approximately $24.5 million on research and development activities, with $2.8 million and $7.5 million invested in 2009 and 2008, respectively. Uni-Pixel continues conducting research and development both internally and externally and anticipates significantly higher investments going forward.

 

As of December 31, 2009, Uni-Pixel has one principal location conducting internal research.  The Company’s headquarters and primary development site are located in The Woodlands, Texas.  The headquarters location includes a Class 100 clean room where display materials testing and assembly is conducted, an electronics lab, optical testing facilities, test and measurement equipment, and electronics development systems.

 

Currently, Uni-Pixel is engaged in the development of next generation prototypes to further demonstrate the full functionality of the TMOS technology across multiple pixel sizes and a variety of implementations. The Company has consolidated its vendors to a small group that assist Uni-Pixel’s prototype efforts.  Working with its strategic partners, Uni-Pixel hopes to advance to the Company’s next generation working prototype devices.

 

Uni-Pixel prototype devices have demonstrate the image and color generation capabilities of the Company’s TMOS displays in multiple pixel sizes, including 0.25mm, 0.5mm, and 1mm. These devices have been used to identify the specific issues related to performance optimization and to their integration into unique end-product applications.

 

The next phase prototypes should serve to support a product roadmap that targets the production of viable commercial display panels within 24 months. The development process is intended to also include selecting and completing the preferable manufacturing processes that will be transferable to joint venture partner operations or licensees.

 

Uni-Pixel plans to complete the development of the preferred manufacturing process for its film products within the Company’s laboratory environment and has engaged a small-scale pilot production line that has been the research and development proving ground for a continuous flow manufacturing process followed potentially by a roll to roll manufacturing process for all of its Opcuity performance engineered films.

 

Research and development costs are expensed as incurred and include salaries and benefits, costs to third party contractors to perform research or other activities related to the Company’s research, professional fees related to intellectual property work, and a portion of facilities costs.

 

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COMPETITION

 

The display industry in which Uni-Pixel operates is highly competitive. While existing flat panel display technologies such as LCD, OLED, and Plasma currently dominate the marketplace, Uni-Pixel will be more specifically competing against other emerging technologies that also seek to improve the performance of display systems.  It is Uni-Pixel’s objective to enable the existing LCD manufacturing infrastructure to evolve forward first into FSC-LCD systems followed by TMOS production both as a forward extensions of current operations.  In this way, FSC-LCD and TMOS compete with inertia within the LCD industry and the resistance to change.  However, given the potentially compelling advantages that FSC-LCD and TMOS offer, the Company believes that this can be overcome.

 

Compared to its competition, Uni-Pixel believes it follows a more broadly developed business model allowing the Company to benefit from the following factors:

 

·                  A wide range of opportunity to enter the market;

·                  The flexibility to pursue multiple entry points to multiple market segments;

·                  The ability to be a supplier of key materials;

·                  The ability to profitably produce small volumes of products; and

·                  The ability to enable localized manufacturing and to leverage established infrastructures.

 

At the same time Uni-Pixel’s competitors typically follow only one or a subset of these factors providing a strategic advantage to Uni-Pixel.

 

Existing Technologies:

 

·                  Traditional Liquid Crystal Display (LCD) Competitors: Standard LCD is currently the dominant technology in the FPD sector with 95% market share. Samsung Electronics and LG Philips LCD Co. Ltd. are market leaders while additional competitors include:  Sharp Electronics Corp., NEC Corp., Hitachi Ltd., AU Optronics Corp., Chi Mei Optoelectronics Corp., Chunghwa Picture Tubes Ltd., Quanta Corp. and HannStar Display Corp.

 

·                  Plasma Competitors: Plasma technology has been losing market share steadily and exists only in large format TVs.

 

·                  Digital Light Processing (DLP) Competitors: Texas Instruments pioneered the DLP technology, which is a micro-mechanical structure of moving mirrors on a silicon backplane. Texas Instruments initial success selling its DLP products to its customers in the business front projector market maintains however its rear projection television market has collapsed.  Its customers are limited to Mitsubishi Digital Electronics and Samsung Electronics.

 

·                  OLED Competitors: Samsung SDI has moved to the leader having launched production of OLED displays in a relationship leveraging licenses from UDC.  Another OLED industry participant, Cambridge Display Technology (CDT), Ltd., was acquired by Sumitomo for its patent portfolio following the creation of a CDT joint venture with Sumitomo Chemicals to produce and manufacture polymer OLEDs.

 

·                  Other Technologies Competitors: There are a number of other technologies have reached the market in unique applications.  These include “electronic paper” implementations from E-Ink (acquired by Prime View International) primarily in eReader devices like the “Kindle” by Amazon. Additionally a silicon based MEMs system from Qualcomm called “Mirasol” has found niches in MP3 players and low cost cell phones and an alternative MEMS system has been in development by a company called Pixtronix.

 

INTELLECTUAL PROPERTY

 

Starting in 2004, Uni-Pixel began a significant expansion of its Intellectual Property (IP) portfolio.  As a pioneer in the arena of near field optics applied to micro electronic mechanical systems (MEMS) -based display technology, Uni-Pixel often creates a new invention when solving a technology issue.  Uni-Pixel has engaged one of the industry’s largest and most experienced IP firms to assist in the prosecution of our patent filings.  TMOS represents a “green field” technology in that it is a new approach to displays leveraging well known concepts in new ways.  This has created an unexplored arena for Uni-Pixel to innovate and generate IP on a continuing basis.

 

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Relating to TMOSTM technology, the Company currently owns 38 issued, 1 allowed and 44 pending patent applications worldwide, in the following patent families:

 

Optical Display

Field Sequential Color Efficiency

Enhancing a Field Sequential Color Palette in an Optical Display

Airgap Autogenesis Method

Extending the Gamut Color Generation in a Display

Visible Plus Non-Visible Field Sequential Color

Curved Screen Display Mechanism

Enhancements to Optical Flat Panel Displays   (Common Ground Plane)

Double-Electret MEMS Actuator

Z-Axis Redundant Display/Multilayer Display

Simple Matrix Addressing in a Display

Enhanced Bandwidth Data Encoding Method

Reducing Light Leakage and Improving Contrast Ratio Performance in FTIR Display Devices

Electromechanical Dynamic Force Profile Articulating Mechanism

Optical Microstructures for Light Extraction and Control

Mechanism to Mitigate Color Breakup Artifacts in Field Sequential Color Display Systems

Corner-Cube Retroreflectors for Displays

Backside Reflection Optical Display

Line-At-A-Time Foil Display

Display Device Comprising a Light Guide

Display Device Comprising a Light Guide with Electrode Voltages Dependent on Previously Applied Electrode Voltages

Display Device Comprisng a Light Guide

Display Device Comprising an Optical Waveguide Plate and Method of Operating for the Same

Field Sequential Color Encoding for Displays

Light Injection System and Method for Uniform Luminosity of Waveguide-Based Displays

Apparatus and Method for Reducing Pixel Operational Voltage in MEMS-based Optical Displays

Microstructures to Reduce the Appearance of Fingerprints on Surfaces

A Normally Emitting Pixel Architecture for Frustrated Total Internal Reflection Displays

Cavity Reflector Light Injection for Flat Panel Displays

Thin Film Transistor-Driven Frustrated Internal Reflection Optical Display

Privacy Film Mounting Apparatus

Fingerprint Resistant Privacy Films

Static Signage Display System

Selectable Light Source for Common Backlight Systems

Address-Selectable Charging of Capacitive Devices

Method of Forming Electrically Conductive Lines and Patterns by Surface Energy Modification

Interdigitated Backlight for Optical Displays

 

EMPLOYEES

 

As of March 1, 2010, we have 10 full-time employees and no part-time employees. None of these employees are covered by a collective bargaining agreement, and we believe our relationship with our employees is good. We also employ consultants on an as-needed basis to supplement existing staff.

 

OUR COMPLIANCE WITH ENVIRONMENTAL PROTECTION LAWS

 

We are not aware of any current federal, state or local environmental compliance regulations that have a material effect on our business activities. We have not expended material amounts to comply with any environmental protection statutes and do not anticipate having to do so in the foreseeable future.

 

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ITEM 1A. RISK FACTORS

 

Set forth below are certain risks and uncertainties relating to our business.

 

You should carefully consider the following information about risks described below, together with the other information contained in this Annual Report on Form 10-K and in our other filings with the SEC, before you decide to buy or maintain an investment in our common stock. We believe the risks described below are the risks that are material to us as of the filing date of this Annual Report on Form 10-K.  If any of the following risks actually occur, our business financial condition, operating results and future growth prospects would likely be materially and adversely affected. In these circumstances, the market price of our common stock could decline, and you may lose all or part of the money you paid to buy our common stock.

 

Risks Related to our Business and Industry

 

Our independent registered public accounting firm has issued an unqualified opinion with an explanatory paragraph, to the effect that there is substantial doubt about our ability to continue as a going concern.

 

Our independent registered public accounting firm has issued an unqualified opinion with an explanatory paragraph, to the effect that there is substantial doubt about our ability to continue as a going concern. This unqualified opinion with an explanatory paragraph could have a material adverse effect on our business, financial condition, results of operations and cash flows. See “Liquidity and Capital Resources” in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 2 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

 

We have no committed sources of capital and do not know whether additional financing will be available when needed on terms that are acceptable, if at all. The addition of this going concern statement from our independent registered public accounting firm may discourage some investors from purchasing our stock or providing alternative capital financing. The failure to satisfy our capital requirements will adversely affect our business, financial condition, results of operations and prospects.

 

Unless we raise additional funds, either through the sale of equity securities or one or more collaborative arrangements, we will not have sufficient funds to continue operations. Even if we take these actions, they may be insufficient, particularly if our costs are higher than projected or unforeseen expenses arise.

 

We are a development stage company with limited operating history and our future profitability is uncertain and we anticipate future losses and negative cash flow, which may limit or delay our ability to become profitable.

 

We are attempting to obtain the necessary working capital for operations, but there can be no assurance we will obtain such financing. We have not yet demonstrated our ability to generate revenue, and there is no assurance that we will produce any material revenues for ourselves or our stockholders, or that we will operate on a profitable basis. As of December 31, 2009, we had an accumulated total deficit during development stage of $49.9 million.

 

We are a development stage company with a limited operating history and no significant revenues to date. To date, we have had only a few revenue-generating services and development contracts.  We expect to expend significant resources on consultants, intellectual property protection, research and development, advertising, hiring of personnel and startup costs. As a result, we have incurred losses since our inception and expect to experience operating losses and negative cash flow for the foreseeable future. We anticipate our losses will continue to increase from current levels because we expect to incur additional costs and expenses related to prototype development, consulting costs, laboratory development costs, marketing and other promotional activities, the addition of engineering and manufacturing personnel, and the continued development of relationships with strategic business partners.

 

Since inception, we have generated limited revenues while incurring significant losses. We expect to incur losses for the foreseeable future and until such time, if ever, as we are able to achieve sufficient levels of revenue from the commercial exploitation of our TMOS technology and materials to support our operations. However, planned products based upon our TMOS technology may never become commercially viable. Markets for flat panel displays utilizing our proprietary TMOS technology may be limited. We may never generate sufficient revenues from the commercial exploitation of our TMOS technology and materials to become profitable. Even if we find commercially viable applications for our TMOS technology and materials, we may never recover our research and development expenses.

 

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If we do not receive additional financing when and as needed in the future, we may not be able to continue the research, development and commercialization of our TMOS technology and materials.

 

Our capital requirements have been and will continue to be significant. We will likely require substantial additional funds in excess of our current financial resources in the future for research, development and commercialization of our TMOS technology and materials, to obtain and maintain patents and other intellectual property rights in these technologies and materials, and for working capital and other purposes, the timing and amount of which are difficult to ascertain. Our cash on hand will likely not be sufficient to meet all of our future needs. When and as we need additional funds, such funds may not be available on commercially reasonable terms or at all. If we cannot obtain additional funding when and as needed, our business might fail. Additionally, if we attempt to raise funds in a future offering of shares of our common stock, preferred stock, warrants or depositary shares, or if we engage in acquisitions involving the issuance of such securities, the issuance of these shares could, subject to any anti-dilution provisions, dilute the ownership of our then-existing stockholders.

 

Our brand name and technology may not be recognized in our marketplace, so our results of operations and financial condition may suffer.

 

Our brand name and technology are new and unproven. If we are unable to effectively develop and timely promote our brand and technology and establish a leading position in our marketplace, our results of operations and financial condition will suffer. We believe that the importance of brand recognition and technology will increase over time. In order to gain brand recognition, we may increase our marketing and advertising budgets to create and maintain brand loyalty.

 

We may fail to protect adequately our proprietary technology, which would allow our competitors to take advantage of our research and development efforts.

 

Our long-term success largely depends on our ability to market technologically competitive processes and products. We rely on a combination of patent, trade secret and other intellectual property laws, confidentiality and security procedures and contractual provisions to establish and protect our proprietary rights in our technology, products and processes. If we fail to obtain or maintain these protections, we may not be able to prevent third parties from using our proprietary technologies. Our currently pending or future patent applications may not result in issued patents. In addition, our issued patents may not contain claims sufficiently broad to protect us against third parties with similar technologies or products or from third parties infringing our patents or misappropriating our trade secrets or provide us with any competitive advantage. In addition, effective patent and other intellectual property protection may be unenforceable or limited in foreign countries. If a third party initiates litigation regarding the validity of our patents, and is successful, a court could revoke our patents or limit the scope of coverage for those patents.

 

We also rely upon trade secrets, proprietary know-how and continuing technological innovation to remain competitive. We protect this information with reasonable security measures, including the use of confidentiality and invention assignment agreements with our employees and consultants and confidentiality agreements with strategic partners. It is possible that these individuals or companies will breach these agreements and that any remedies for a breach will be insufficient to allow us to recover our costs. Furthermore, our trade secrets, know-how and other technology may otherwise become known or be independently discovered by our competitors.

 

If we fail to enter cooperative research agreements, we might not succeed in commercializing our TMOS technology and materials.

 

Research and development of commercially viable applications for our TMOS technology and materials may at some point depend substantially on the success of the work conducted by and with our present and future research partners. We cannot be certain that these research partners will make the additional advances in the research and development of these technologies and materials that may be essential to successfully commercialize our TMOS technology and materials. Moreover, although we fund TMOS technology research, the scope and technical aspects of this research and the resources and efforts directed to this research currently are and may remain in large part subject to the control of our research partners.

 

If we cannot form and maintain lasting business relationships with flat panel display manufacturers or other targeted partners, or if we cannot obtain proprietary TMOS materials, our business strategy could suffer or fail.

 

Our business strategy includes some dependence upon our development and maintenance of commercial licensing and material supply relationships with high-volume manufacturers of flat panel displays. All of our current relationship discussions with display manufacturers are limited to technology exploration and the evaluation of our TMOS technology and materials for possible use in commercial display applications. Some or all of these relationships may not succeed or, even

 

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if they are successful, may not result in the display manufacturers’ entering into commercial licensing and material supply relationships with us.

 

Under our planned technology development and evaluation agreements, we intend to work with strategic partners to incorporate their technologies into our products for the commercial production of TMOS displays. However, many of these technology development and evaluation agreements may last for limited periods of time, such that our relationships with these partners could expire unless they are continually renewed. Our partners may not agree to renew their relationships with us on a continuing basis. In addition, we may continue working with certain strategic partners in evaluating our TMOS technology and materials after our existing agreements with them have expired while we are attempting to negotiate contract extensions or new agreements with them. Should our relationships with these partners not materialize, or once in place, not continue to be renewed, our business could suffer.

 

Our ability to enter into commercial licensing and material supply relationships, or to maintain our existing technology development and evaluation relationships, may require us to make financial or other commitments. We might not be able, for financial or other reasons, to enter into or continue these relationships on commercially acceptable terms, or at all. Failure to do so will likely harm our business strategy, operating results and long-term business prospects.

 

Our business prospects depend significantly on our ability to obtain or produce proprietary materials for our own use and for potential sale to display manufacturers.  A previously proposed development and license agreement with a national laboratory was terminated in 2007 after it was determined that the targeted material was no longer applicable to the function it was evaluated to provide, and, therefore, there was no need to conclude a further agreement.  Our inability to reach agreements to obtain certain other materials from other sources could have a materially adverse effect on our ability to generate revenues from sales of these materials, as well as on our ability to perform research and development work. Further, failure to complete long term agreements could preclude our ability to support display manufacturers that would choose to license our TMOS technology and materials for possible commercial use.  Also, a license with a national laboratory or government agency may be subject to significant United States government rights and restrictions that may reduce the Company’s ability to enter into overseas manufacturing agreements and licenses.

 

The United States government will have certain rights to our TMOS technology that might prevent us from realizing the benefits of these technologies.

 

The United States government, through various government agencies, has provided and continues to provide funding to us for research activities related to certain applications of our TMOS technology. Because we have been provided with this funding, the government has rights to certain applications of our technology that could restrict our ability or our licenses to market products to the government for military and other applications, or to third parties for commercial applications. Moreover, if the government determines that we have not taken effective steps to achieve practical application of our patented inventions that were funded by the government in any field-of-use in a reasonable time, the government could require us to grant licenses to other parties in that field of use. Any of these occurrences would limit our ability to obtain the full benefits of our TMOS technology.

 

We may incur substantial costs as a result of litigation or other proceedings relating to patent and other intellectual property rights.

 

A third party may sue us or one of our strategic collaborators for infringing its intellectual property rights. Likewise, we may need to resort to litigation to enforce our patent rights or to determine the scope and validity of third-party intellectual property rights.

 

The cost to us of any litigation or other proceeding relating to intellectual property rights, even if resolved in our favor, could be substantial, and the litigation would divert our efforts. Some of our competitors may be able to sustain the costs of complex patent litigation more effectively than we can because they have substantially greater resources. If we do not prevail in this type of litigation, we or our strategic collaborators may be required to pay monetary damages; stop commercial activities relating to the affected products or services; obtain a license in order to continue manufacturing or marketing the affected products or services; or compete in the market with a substantially similar product.

 

Uncertainties resulting from the initiation and continuation of any litigation could limit our ability to continue some of our operations. In addition, a court may require that we pay expenses or damages, and litigation could disrupt our commercial activities.

 

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If we are unable to keep up with rapid technological changes, our processes, products or services may become obsolete.

 

The flat panel display market is characterized by significant and rapid technological change. Although we will continue to expand our technological capabilities in order to remain competitive, research and discoveries by others may make our processes, products or services less attractive or even obsolete. If we cannot compete effectively in the marketplace, our potential for profitability and financial position will suffer.

 

If our TMOS technology and materials are not technically and commercially feasible for broad-based product applications, we may never generate revenues sufficient to support ongoing operations.

 

To generate revenues sufficient to support ongoing operations, our business strategy ultimately requires the development and maintenance of commercial licensing and material supply relationships with high-volume display manufacturers. Before display manufacturers will agree to utilize our TMOS technology and materials for wide-scale commercial production, they will likely require us to demonstrate to their satisfaction that our TMOS technology and materials are feasible for broad-based product applications of which there can be no assurances given. This, in turn, will require substantial advances in our research and development efforts in a number of areas, including manufacturability the development of feasible TMOS materials for TMOS displays and issues related to scalability and cost-effective fabrication technologies for product applications.

 

Our efforts may never demonstrate the feasibility of our TMOS technology and materials for broad-based product applications.

 

Our research and development efforts remain subject to all of the risks associated with the development of new products based on emerging and innovative technologies, including, without limitation, unanticipated technical or other problems and the possible insufficiency of funds for completing development of these products. Technical problems may result in delays and cause us to incur additional expenses that would increase our losses. If we cannot complete, or if we experience significant delays in completing, research and development of our TMOS technology and materials for use in potential commercial applications, particularly after incurring significant expenditures, our business may fail.

 

Even if our TMOS technology is technically feasible, it may not be adopted by display manufacturers.

 

The potential size, timing and viability of market opportunities targeted by us are uncertain at this time. Market acceptance of our TMOS technology and materials will depend, in part, upon the technology’s providing benefits greater than or comparable to cathode ray tubes, or CRT, plasma display and LCD technologies (the current standard display technologies) at an appropriate cost, and the adoption of our TMOS technology by consumers and manufacturers, neither of which has been achieved. Also, many potential licensees of our TMOS technology currently manufacture flat panel displays utilizing competing technologies, and may, therefore, be reluctant to redesign their products or manufacturing processes to incorporate our TMOS technology. Moreover, there may be a number of additional technologies that display manufacturers need to utilize in production or may need to be used in conjunction with our TMOS technology in order to bring TMOS displays and products containing them to the market. If display manufacturers are unable to obtain access to these additional technologies, they may not utilize our TMOS technology.

 

The flat panel display market is currently, and we believe will likely continue to be for some time, dominated by displays based on LCD technology. Numerous companies are making substantial investments in, and conducting research to improve characteristics of LCDs. Additionally, several other flat panel display technologies have been, or are being, developed, including technologies for the production of field emission, inorganic electroluminescence, gas plasma and vacuum fluorescent displays. Of particular note, competing OLED technologies have entered the marketplace prior to TMOS and may become entrenched in the flat panel industry before our TMOS technology has a chance to become widely utilized. In each case, advances in LCD, OLED, or other flat panel display technologies could result in technologies that are more cost-effective, have fewer display limitations, or can be brought to market faster than our TMOS technology. These advances in competing technologies might cause display manufacturers to avoid entering into commercial relationships with us, or not renew planned or existing relationships with us.

 

We believe that TMOS display technologies ultimately may be able to overcome certain existing limitations of LCD and other flat panel display technologies, such as high power consumption, costly manufacturing methods, poor contrast ratios and limited viewing angles. However, other companies may succeed in improving these competing display technologies, or in developing new display technologies, that are superior to our TMOS display technology in various respects. We cannot predict the timing or extent to which such improvements or developments may occur. If our TMOS

 

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technology is unable to capture a substantial portion of the overall display market for these competitive reasons, our business strategy may fail.

 

Many of our competitors have greater resources, and it may be difficult to compete against them.

 

The flat panel display industry is characterized by intense competition. Many of our competitors have better name recognition and substantially greater financial, technical, manufacturing, marketing, personnel and/or research capabilities than we do. They have made and continue to make substantial investments in improving their technologies and manufacturing processes. In addition, we believe that at times in the past some plasma and LCD display panel manufacturers have priced their products below the marginal cost of production in an attempt to establish, retain or increase market share. Because of these circumstances, it may be difficult to compete successfully in the display market.

 

The loss of the services of our key management and personnel or the failure to attract additional key personnel could adversely affect our ability to operate our business.

 

A loss of one or more of our current officers or key employees could severely and negatively impact our operations. Specifically, the loss of services of Reed J. Killion, CEO and President, Jim Tassone, Chief Financial Officer, Dan Van Ostrand, Executive Vice President or Robert Petcavich, Vice President & General Manager Opcuity Films, none of whom has an employment agreement with us, could significantly harm our business. We have no present intention of obtaining key-man life insurance on any of our executive officers or management. Additionally, competition for highly skilled technical, managerial and other personnel is intense. As our business develops, we might not be able to attract, hire, train, retain and motivate the highly skilled managers and employees we need to be successful. If we fail to attract and retain the necessary technical and managerial personnel, our business will suffer and might fail.

 

Uni-Pixel is receiving limited indemnification from certain current and former principals of our predecessor company, Real-Estateforlease.com, Inc.

 

Although the predecessor company to Uni-Pixel and Real-Estateforlease.com, Inc., Super Shops, Inc., filed for bankruptcy and received plan confirmation for its plan of reorganization on July 31, 2000, Uni-Pixel, Inc. has never filed nor been a party to any reorganization, liquidation or other proceeding under the Federal Bankruptcy Code and may therefore have liabilities of which we are currently unaware. Uni-Pixel received typical representations and warranties from the former principals of Real-Estateforlease.com, Inc. pursuant to the merger agreement by and among Real-Estateforlease.com, Inc., Uni-Pixel Displays, Inc., Gemini V, Inc. and Uni-Pixel Merger Sub, Inc. However, Uni-Pixel will only receive the following indemnification protection from the former principals of Real-Estateforlease.com, Inc. for its liabilities and claims: (i) for the period of July 31, 2000 (the confirmation date of Super Shops, Inc.’s plan of reorganization) through June 13, 2001 from Halter Financial Group, Inc., a stockholder of Real-Estateforlease.com, Inc.; (ii) for the period of June 14, 2001 through November 14, 2004 from David DiSalvo, the former President, Secretary, Treasurer and sole board member for Real-Estateforlease.com, Inc.; and (iii) for the period of November 15, 2004 going forward from Frank M. DeLape, the former Chairman of the Board of Uni-Pixel, Inc.

 

The indemnification protection provided by Halter Financial Group, Inc., David DiSalvo and Frank M. DeLape is further limited, in the aggregate, to the value of our Common Stock received by each of the indemnitors in the merger transaction with Real-Estateforlease.com, Inc. determined by multiplying the number of shares of Common Stock received by each pursuant to the merger by $1.75. Frank M. DeLape received approximately 1,812,800 shares of Common Stock, Halter Financial Group received approximately 380,000 shares of Common Stock and David DiSalvo received approximately 75,000 shares of Common Stock. Therefore, the highest dollar amount that any one of these parties will indemnify us for during his or its indemnification period as described in the preceding paragraph, is $3,172,400.

 

If indemnification claims do arise with respect to any liabilities or claims of or against Real-Estateforlease.com, Inc., and either (i) Messrs. DiSalvo, Halter and DeLape are unable to satisfy their indemnification obligations to us, or (ii) such liabilities or claims exceed $3,172,400, we would suffer a loss, which loss would impact our financial condition and the value of our Common Stock and our Preferred Stock. If the liability or claim is substantially in excess of $3,172,400, we might be forced to seek bankruptcy protection.

 

The flat panel display industry has historically experienced significant downturns, which may adversely affect the demand for and pricing of our TMOS technology and materials.

 

The flat panel display industry has experienced significant periodic downturns, often in connection with, or in anticipation of, declines in general economic conditions. These downturns have been characterized by lower product demand,

 

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production overcapacity and erosion of average selling prices. Our business strategy to some degree is dependent on display manufacturers building and selling displays that incorporate our TMOS technologies and materials. Industry-wide fluctuations and downturns in the demand for flat panel displays, and low power consumption or high performance displays in particular, would likely affect the demand for and pricing of our TMOS technologies and materials and could cause significant harm to our business.

 

Risks Related to Owning Our Securities

 

Our Common Stock has traded only sporadically and is expected to experience significant price and volume volatility in the future which substantially increases the risk of loss to persons owning our Common Stock.

 

There was no public market for our Common Stock prior to February 3, 2005. At best, only a limited market has developed and is expected to continue to develop in the foreseeable future for our Common Stock. Because of the limited trading market for our Common Stock, and the possible price volatility, you may not be able to sell your shares of Common Stock when you desire to do so. The inability to sell your shares in a rapidly declining market may substantially increase your risk of loss because of such illiquidity and because the price for our Common Stock may suffer greater declines because of its price volatility.

 

We cannot predict the extent to which investor interest in our stock will create or sustain an active and orderly trading market. If such a market were to develop, the market price of our Common Stock may continue to be highly volatile. The sale of a large block of shares could depress the price of our Common Stock to a greater degree than a company that typically has a higher volume of trading in its securities. The value of your investment could decline due to the impact of any of the following factors upon the market price of our Common Stock:

 

·                  Disappointing results from our development efforts;

·                  Failure to meet our revenue or profit goals or operating budget;

·                  Decline in demand for our Common Stock;

·                  Downward revisions in securities analysts’ estimates or changes in general market conditions;

·                  Technological innovations by competitors or in competing technologies;

·                  Investor perception of our industry or our prospects;

·                  General economic trends;

·                  Variations in our quarterly operating results;

·                  Our inability to increase revenues:

·                  Announcement of new customer relationships by our competitors;

·                  Departures of our executive officers;

·                  General conditions in the worldwide economy, including fluctuations in interest rates;

·                  Developments in patents or other intellectual property rights and litigation;

·                  Developments in our relationships with our customers and suppliers;

·                  Any significant acts of terrorism against the United States; and

·                  Our currently limited public float.

 

Our Common Stock has traded as low as $0.23 and as high as $5.50 during a period from February 3, 2005 through December 31, 2009. In addition to volatility associated with Bulletin Board securities in general, the markets for high technology stocks have experienced extreme volatility that has often been unrelated to the operating performance of the particular companies. These broad market fluctuations may adversely affect the trading price of our common shares.

 

We are not required to meet or maintain any listing standards for our Common Stock to be quoted on the OTC Bulletin Board, which could affect our stockholders’ ability to access trading information about our Common Stock.

 

The OTC Bulletin Board is separate and distinct from the NASDAQ Stock Market. Although the OTC Bulletin Board is a regulated quotation service operated by the National Association of Securities Dealers, Inc. (“NASD”) that displays real-time quotes, last sale prices, and volume information in over-the-counter equity securities like our Common Stock, we are not required to meet or maintain any qualitative or quantitative listing standards for our Common Stock to be quoted on the OTC Bulletin Board. Our Common Stock does not presently meet the minimum listing standards for listing on the NASDAQ Stock Market or any national securities exchange which could affect our stockholders’ ability to access trading information about our Common Stock.

 

The OTC Bulletin Board is generally considered to be a less efficient market than the established exchanges or the NASDAQ markets. While we anticipate seeking to be listed on the NASDAQ Stock Market or a national exchange at some

 

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time in the future, it is impossible at this time to predict when, if ever, such application will be made or whether such application will be successful.

 

Our Common Stock may be subject to penny stock rules, which make it more difficult for our stockholders to sell their Common Stock.

 

Our Common Stock is subject to certain rules and regulations relating to “penny stocks” (generally defined as any equity security that is not quoted on the NASDAQ Stock Market and that has a price less than $5.00 per share, subject to certain exemptions). Broker-dealers who sell penny stocks are subject to certain “sales practice requirements” for sales in certain non-exempt transactions (i.e., sales to persons other than established customers and institutional “accredited investors”), including requiring delivery of a standardized risk disclosure document relating to the penny stock market and monthly statements disclosing recent bid and offer quotations for the penny stock held in the account, and certain other restrictions. If the broker-dealer is the sole market maker, the broker-dealer must disclose this, as well as the fact that the broker-dealer has presumed control over the market. In addition, the penny stock rules generally require that prior to a transaction in a penny stock the broker-dealer make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for a stock that becomes subject to the penny stock rules. For as long as our securities are subject to the rules on penny stocks, the liquidity of our Common Stock could be significantly limited. This lack of liquidity may also make it more difficult for us to raise capital in the future.

 

We do not expect to pay dividends in the foreseeable future.

 

We have never paid cash dividends on our shares of Common Stock, and have no plans to do so in the foreseeable future. We intend to retain earnings, if any, to develop and expand our business operations.

 

ITEM 1B. UNRESOLVED STAFF COMMENTS

 

None

 

ITEM 2. PROPERTIES

 

Our main corporate offices and research and development facility are located at 8708 Technology Forest Place, Suite 100, The Woodlands, Texas 77381. We currently lease approximately 13,000 square feet of space at this facility.

 

ITEM 3. LEGAL PROCEEDINGS

 

The Company from time to time may be involved in litigation relating to claims arising out of its ordinary course of business. Management believes that there are no claims or actions pending or threatened against the Company, the ultimate disposition of which would have a material impact on the Company’s financial position, results of operations or cash flows.

 

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

 

No matters were submitted to a vote of security holders during the fourth quarter of 2009.

 

PART II

 

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

 

Market Information

 

Since January 18, 2006, our Common Stock has been traded on the OTC Bulletin Board under the symbol “UNXL”. From February 3, 2005 to January 18, 2006, our Common Stock was quoted on the “pink sheets” published by the Pink Sheets LLC under the symbol “UNXL.” Prior to February 3, 2005, our shares of Common Stock were traded under the symbol “REFL.” We changed our name to “Uni-Pixel, Inc.” from “Real-Estateforlease.com, Inc.” at the annual meeting of our stockholders held in January 2005. The market for our common stock is limited and volatile. The following table sets forth the range of high and low bid quotations or high and low closing prices, as applicable, for our Common Stock for each of the periods indicated as reported by the Pink Sheets or the OTC Bulletin Board. The prices for the Pink Sheets and the

 

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OTC Bulletin Board reflect inter-dealer prices, without retail mark-up, mark-down or commissions. The OTC Bulletin Board and Pink Sheet prices listed below may not represent actual transaction prices.

 

 

 

Year Ended
December 31, 2009

 

Year Ended
December 31, 2008

 

 

 

High

 

Low

 

High

 

Low

 

First Quarter

 

$

0.88

 

$

0.55

 

$

1.00

 

$

0.47

 

Second Quarter

 

0.60

 

0.35

 

1.45

 

0.77

 

Third Quarter

 

0.46

 

0.33

 

1.20

 

0.50

 

Fourth Quarter

 

0.63

 

0.30

 

0.70

 

0.38

 

 

The above quotations reflect inter-dealer prices, without retail mark-up, markdown or commission and may not necessarily represent actual transactions. As of February 28, 2010, we had eleven broker dealers making a market in our common stock.

 

Holders

 

As of February 28, 2010, we had approximately 1,100 stockholders of record of our Common Stock.

 

Dividends

 

The Company has never paid dividends on its Common Stock. Currently, the Company anticipates that it will retain earnings, if any, to support operations and to finance the growth and development of its business and does not anticipate paying cash dividends on the Common Stock in the foreseeable future.

 

The holders of Series A Preferred Stock received cumulative annual dividends, payable in shares of Series A Preferred Stock or cash, at the option of the Board of Directors, at an annual rate of 6% ($0.21 per share), payable on December 31 of each year commencing December 31, 2005 through December 31, 2007. Unpaid dividends will accumulate and be payable prior to the payment of dividends on shares of Common Stock. Cash dividends will only be payable from funds legally available therefore, when and as declared by the Board of Directors of the Company, and unpaid dividends will accumulate until the Company can legally pay the dividends. In 2007, the Company paid accumulated dividends to the holders of Series A Preferred Stock in the amount of 262,846 shares of Common Stock.  In 2006, the Company paid accumulated dividends to the holders of Series A Preferred Stock in the amount of 134,117 shares of Series A Preferred Stock, as well as 16,282 shares of Common Stock.  All shares of Series A Preferred Stock had been redeemed by the Company as of December 31, 2007.

 

The holders of Series B Preferred Stock will receive cumulative annual dividends.  Dividends shall accrue, whether or not declared and paid, on the Series B Preferred Stock at the rate per annum of 8%, and shall be cumulative as to any dividends not declared and paid in any year, compounding annually at the same rate.  Each share of Series B Preferred Stock may, at the option of the holder, be converted at any time into a number of fully paid and non-assessable shares of common stock of the Company equal to the quotient obtained by dividing the original issue price of $3.75 for the Series B Preferred Shares, plus all accrued and unpaid Series B Preferred Stock dividends and any other declared and unpaid dividends, by the initial Series B Preferred Stock conversion price, which is $0.75 but is subject to adjustment from time to time in accordance with the Certificate of Designations. As of December 31, 2008 and 2007, there were 3,200,000 shares of Series B Preferred Stock outstanding, with cumulative unpaid dividends of approximately 481,140 and 255,140 shares of Series B Preferred Stock, respectively. In 2009, the Company paid accumulated dividends to the holders of Series B Preferred Stock in the amount of 4,485,298 shares of Common Stock upon conversion in October 2009.  All shares of Series B Preferred Stock had been redeemed by the Company as of October 2, 2009.

 

The holders of Series C Preferred Stock will receive cumulative annual dividends.  Dividends shall accrue, whether or not declared and paid, on the Series C Preferred Stock at the rate per annum of 8%, and shall be cumulative as to any dividends not declared and paid in any year, compounding annually at the same rate.  Each share of Series C Preferred Stock may, at the option of the holder, be converted at any time into a number of fully paid and non-assessable shares of common stock of the Company equal to the quotient obtained by dividing the original issue price of $11.20 for the Series C Preferred Shares, plus all accrued and unpaid Series C Preferred Stock dividends and any other declared and unpaid dividends, by the initial Series C Preferred Stock conversion price, which is $1.40 but is subject to adjustment from time to time in accordance with the Certificate of Designations. As of December 31, 2008 and 2007, there were 892,858 shares of Series C Preferred Stock outstanding, with cumulative unpaid dividends of approximately 89,824 and 18,395 shares of Series C Preferred Stock, respectively. In 2009, the Company paid accumulated dividends to the holders of Series C Preferred Stock in the amount of

 

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1,574,955 shares of Common Stock upon conversion in October 2009.  All shares of Series C Preferred Stock had been redeemed by the Company as of October 2, 2009.

 

Securities Authorized For Issuance Under Equity Compensation Plans

 

The following table provides information about shares of Common Stock that may be issued upon the exercise of options under all of the Company’s existing equity compensation plans as of December 31, 2009.

 

Plan Category

 

Number of shares of
Common Stock to be
issued upon exercise of
outstanding options

 

Weighted-average
exercise price of
outstanding
options ($)

 

Number of shares of
Common Stock remaining
available for future issuance
under equity compensation
plans

 

Equity compensation plans approved by stockholders

 

4,551,119

 

$

1.64

 

1,448,881

 

 

 

 

 

 

 

 

 

Equity compensation plans not approved by stockholders

 

1,300,000

 

1.24

 

 

 

 

 

 

 

 

 

 

Total

 

5,851,119

 

$

1.55

 

1,448,881

 

 

Summary Stock Option and Warrant Information

 

Information regarding the options and warrants granted in 2009 and 2008 is as follows:

 

 

 

Options
Year Ended December 31,

 

Warrants
Year Ended December 31,

 

 

 

2009

 

2008

 

2009

 

2008

 

Outstanding, beginning of year

 

5,602,014

 

4,712,500

 

13,846,468

 

13,846,468

 

Granted

 

575,000

 

1,145,625

 

13,413,568

 

 

Exercised

 

 

 

 

 

Expired or cancelled

 

325,895

 

256,111

 

10,053,568

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding, end of year

 

5,851,119

 

5,602,014

 

17,206,468

 

13,846,468

 

 

 

 

 

 

 

 

 

 

 

Exercisable, end of year

 

5,124,435

 

3,808,030

 

17,206,468

 

13,846,468

 

 

 

 

 

 

 

 

 

 

 

Available for grant, end of year

 

1,448,881

 

1,697,986

 

 

 

 

 

 

The weighted average option and warrant exercise price information for 2009 and 2008 is as follows:

 

 

 

Options
Year Ended December 31,

 

Warrants
Year Ended December 31,

 

 

 

2009

 

2008

 

2009

 

2008

 

Outstanding, beginning of year

 

$

1.56

 

$

1.65

 

$

1.62

 

$

1.28

 

Granted during the year

 

$

1.45

 

$

1.45

 

$

0.50

 

$

 

Exercised during the year

 

$

 

$

 

$

 

$

 

Expired or cancelled during the year

 

$

1.45

 

$

1.56

 

$

1.29

 

$

 

Outstanding at end of year

 

$

1.55

 

$

1.56

 

$

0.66

 

$

1.28

 

Exercisable at end of year

 

$

1.57

 

$

1.62

 

$

0.66

 

$

1.28

 

 

Significant option and warrant groups outstanding at December 31, 2009 and related weighted average exercise price and life information is as follows:

 

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Grant date

 

Options
Outstanding

 

Warrants
Outstanding

 

Exercisable

 

Weighted
Exercise
Price

 

Remaining
Life
(Years)

 

December 9, 2004

 

 

769,500

 

769,500

 

$

1.38

 

4.92

 

January 10, 2005

 

 

168,750

 

168,750

 

$

1.38

 

4.92

 

January 26, 2005

 

 

110,250

 

110,250

 

$

1.38

 

4.92

 

March 5, 2005

 

600,000

 

 

600,000

 

$

2.00

 

2.67

 

March 5, 2005

 

450,000

 

 

450,000

 

$

2.00

 

5.17

 

April 19, 2005

 

400,000

 

 

400,000

 

$

2.00

 

5.33

 

April 19, 2005

 

150,000

 

 

150,000

 

$

2.00

 

1.58

 

May 23, 2006

 

1,000,000

 

 

1,000,000

 

$

1.25

 

6.58

 

May 24, 2006

 

 

1,500,000

 

1,500,000

 

$

1.25

 

1.58

 

September 12, 2006

 

 

194,400

 

194,400

 

$

1.25

 

1.67

 

February 13, 2008

 

 

1,050,000

 

1,050,000

 

$

1.10

 

0.13

 

March 16, 2007

 

300,000

 

 

279,167

 

$

1.19

 

7.21

 

September 13, 2007

 

1,487,187

 

 

1,163,715

 

$

1.45

 

7.71

 

January 7, 2008

 

500,000

 

 

333,333

 

$

1.45

 

8.02

 

January 16, 2008

 

60,000

 

 

39,167

 

$

1.45

 

8.04

 

April 18, 2008

 

248,932

 

 

150,442

 

$

1.45

 

8.30

 

May 20, 2008

 

100,000

 

 

54,167

 

$

1.45

 

8.38

 

June 2, 2008

 

40,000

 

 

13,333

 

$

1.45

 

8.42

 

October 20, 2008

 

40,000

 

 

16,111

 

$

1.45

 

8.80

 

January 30, 2009

 

475,000

 

 

475,000

 

$

1.45

 

9.08

 

June 10, 2009

 

 

480,000

 

480,000

 

$

0.50

 

9.42

 

June 30, 2009

 

 

40,000

 

40,000

 

$

0.50

 

9.42

 

August 31, 2009

 

 

460,000

 

460,000

 

$

0.50

 

9.67

 

September 30, 2009

 

 

560,000

 

560,000

 

$

0.50

 

9.83

 

October 2, 2009

 

 

120,000

 

120,000

 

$

0.50

 

9.83

 

October 2, 2009

 

 

11,553,568

 

11,553,568

 

$

0.50

 

9.83

 

December 31, 2009

 

 

200,000

 

200,000

 

$

0.50

 

10.00

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

5,851,119

 

17,206,468

 

22,330,903

 

 

 

 

 

 

Recent Sales of Unregistered Securities

 

None.

 

Issuer Purchases of Equity Securities

 

None.

 

ITEM 6. SELECTED FINANCIAL DATA

 

Not Applicable

 

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

 

The following discussion of our financial condition and results of operation should be read in conjunction with the financial statements and related notes that appear elsewhere in this prospectus. This discussion contains forward-looking statements and information relating to our business that reflect our current views and assumptions with respect to future events and are subject to risks and uncertainties, including the risks in the section entitled “Risk Factors”, that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.

 

These forward-looking statements speak only as of the date of this report. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, or achievements. Except as required by applicable law, including the securities laws of the United States, we expressly disclaim any obligation or undertaking to disseminate any update or revisions of any of the forward-looking statements to reflect any change in our expectations with regard thereto or to conform these statements to actual results.

 

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Our financial statements are stated in United States Dollars (US$) and are prepared in accordance with accounting principles generally accepted in the United States.

 

Overview

 

Uni-Pixel is a development stage company that has developed, patented and demonstrated a new color display technology in the form of proof of concept prototypes, which we call Time Multiplexed Optical Shutter (“TMOS”).  We intend to be a leader in the research, development and commercialization of new flat panel displays using TMOS in a variety of applications, such as mobile phones, digital cameras, notebook computers, televisions and other consumer electronic devices. Our work developing TMOS has led to advances in the thin film arena that have other marketable applications.  We intend to explore the business potential within these applications and pursue those thin film markets that offer profitable opportunities either through licensing or direct production and sales.  As of December 31, 2009, we had accumulated a total deficit of $49.9 million from operations in pursuit of these objectives.

 

We anticipate that our TMOS displays will be thin, lightweight, and power-efficient devices, which are highly suitable for use in full-color display applications.  We believe TMOS displays will be able to capture a share of the growing $90+ billion flat panel display market due to the significant advantages it should provide over competing displays with respect to manufacturing and materials cost, brightness, power efficiency, viewing angle, video response time and image quality.  We believe that our technology leadership and intellectual property position will enable us to generate revenues initially from TMOS displays for existing vertical market segments such as the military, avionics, and automotive segments, and then subsequently from consumer electronics markets (i.e., TVs, monitors, personal computers, cameras, games, etc.).

 

Our strategy is to further develop our proprietary TMOS technology to the point of being able to transition the technology to manufacturing partners.  We have and will continue to utilize contract manufacturing for prototype fabrication to augment our internal capabilities in the short term.  We also plan to be a supplier of our key thin film component and to enter into joint ventures in certain vertical market segments to exploit the existing manufacturing and distribution channels of our targeted partners.  We plan to license our technology to display manufacturers and supporting partner companies for use in applications such as mobile phones, digital cameras, laptop computers, and other consumer electronic devices. Through our internal research and development efforts, we have established a portfolio of TMOS-related patents and patent applications and other intellectual property rights that support these joint venture and licensing strategies.  We currently have 38 issued patents, 1 allowed patents, and 44 pending patent applications filed in key venues worldwide including regionally in Europe, Asia Pacific, South Americaand North America.  We also contemplate obtaining exclusive field-of-use licenses, (which would include the right to sublicense) to complementary technologies from targeted, strategic partners and U.S. national laboratories.

 

During the course of 2008, we developed our first independent thin film product opportunity.  This unique variation of the thin film developed for TMOS can be applied to a variety of touch screen product devices as a protective cover.  We intend to market this thin film product under our brand Opcuity™ to various potential distribution and channel partners.

 

Through December 31, 2009, we have been primarily engaged in developing our initial product technologies, recruiting personnel, commencing our U.S. operations and raising capital. In the course of our development activities, we have sustained losses and expect such losses to continue through at least 2010. We will finance our operations primarily through our existing cash and possible future financing transactions.

 

Our ability to operate profitably under our current business plan is largely contingent upon our success in developing our products beyond proof of concept to final prototypes, supporting transferable manufacturing processes to partners to produce our products and successfully developing markets and manufacturing relationships for our products.  We may be required to obtain additional capital in the future to expand our operations. No assurance can be given that we will be able to develop our products, successfully develop the markets or profitable manufacturing methods for our products, or raise any such additional capital as we might need, either through equity or debt financing, on satisfactory terms or at all. Additionally, no assurance can be given that any such financing, if obtained, will be adequate to meet our ultimate capital needs or to support our growth. If adequate capital cannot be obtained on satisfactory terms, our operations could be negatively impacted.

 

If we achieve growth in our operations in the next few years, such growth could place a strain on our management, administrative, operational and financial infrastructure. Our ability to manage our current operations and future growth requires the continued improvement of operational, financial and management controls, reporting systems and procedures. In addition, we may find it necessary to hire additional management, financial and sales and marketing personnel to manage our

 

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expanding operations. If we are unable to manage this growth effectively, our business, operating results and financial condition may be materially adversely affected.

 

As of December 31, 2009, we had cash and cash equivalents of $0.3 million.  We believe that our existing capital resources are adequate to finance our operations until March 2010.  Our working capital may not be sufficient to meet all of the needs of our business objectives through the end of 2010.  We would be able to sustain operations for a reasonable period of time (12 months), but it would require significant reductions in our operating expenditures and product development activities, if we did not receive additional funding.  Management has instituted a cost reduction program that included a reduction in labor and operating costs.  However, our long-term viability is dependent upon our ability to successfully operate our business, develop our manufacturing process, sign partnership agreements, develop our products and raise additional debt and equity to meet our business objectives.

 

The financial statements presented in this annual report include Uni-Pixel, Inc. and our wholly-owned subsidiary, Uni-Pixel Displays, Inc. All significant intercompany transactions and balances have been eliminated. Uni-Pixel Displays, Inc. was, for accounting purposes, the surviving entity of the merger, and accordingly for the periods prior to the merger, the financial statements reflect the financial position, results of operations and cash flows of Uni-Pixel Displays, Inc.  The assets, liabilities, operations and cash flows of Real-Estateforlease.com, Inc. are included in the consolidated financial statements from December 10, 2004 onward. The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern, as further discussed in Note 2. This basis of accounting contemplates the recovery of the Company’s assets and the satisfaction of liabilities in the normal course of business but does not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

Critical Accounting Policies

 

The following discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in conformity with accounting principles generally accepted in the United States of America. Our significant accounting policies are more fully described in Note 3 of Notes to the audited Consolidated Financial Statements. However, certain accounting policies and estimates are particularly important to the understanding of our financial position and results of operations and require the application of significant judgment by our management or can be materially affected by changes from period to period in economic factors or conditions that are outside of our control.  As a result, they are subject to an inherent degree of uncertainty. In applying these policies, our management uses their judgment to determine the appropriate assumptions to be used in the determination of certain estimates. Those estimates are based on our historical operations, our future business plans and projected financial results, the terms of existing contracts, our observance of trends in the industry, information provided by our customers and information available from other outside sources, as appropriate. The following discusses our significant accounting policies and estimates.

 

Revenue Recognition:  We recognize revenue over the period the service is performed in accordance with FASB ASC Topic 605 Revenue Recognition (“Topic 605”), previously SEC Staff Accounting Bulletin No. 104, “Revenue Recognition in Financial Statements” (“SAB 104”). In general, four basic criteria must be met before revenue can be recognized: (1) persuasive evidence that an arrangement exists, (2) delivery has occurred or services rendered, (3) the fee is fixed and determinable, and (4) collectability is reasonably assured.

 

Advance payments are deferred until shipment. The amount of the revenue deferred represents the fair value of the remaining undelivered products measured Topic 605, previously Emerging Issues Task Force (“EITF”) 00-21, “Accounting for Revenue Arrangements with Mutliple Deliverablables,” which addresses the issue of accounting for arrangements that involve the delivery of multiple products or services..

 

Revenue from licenses and other up-front fees are recognized on a ratable basis over the term of the respective agreement.

 

Cost of Sales and Selling, General and Administrative Expenses and Research and Development Expenses:  In an effort to consolidate our executive management team, we moved our headquarters from Austin, Texas to The Woodlands, Texas during the third quarter of 2005.  The primary purpose of our facility in The Woodlands, Texas is to conduct research on the development, testing and delivery of our prototype devices and to take the steps necessary for the commercialization of our products.  Therefore, the costs incurred in operating our facility in The Woodlands, Texas have been classified as research and development expenses.

 

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If, in the future, the purposes for which we operate our facility in The Woodlands, Texas, or any new facilities we open, changes, the allocation of the costs incurred in operating that facility between cost of sales and research and development expenses could change to reflect such operational changes.

 

Research and Development Expenses:  Research and development costs are expensed as incurred and include salaries and benefits, costs paid to third-party contractors for research, development and manufacturing of materials and devices, and a portion of facilities cost. Prototype development costs are a significant component of research and development expenses and include costs associated with third-party contractors. Invoicing from third-party contractors for services performed can lag several months. We accrue the costs of services rendered in connection with third-party contractor activities based on our estimate of management fees, site management and monitoring costs and data management costs. Actual costs may differ in some cases from estimated costs and are adjusted for in the period in which they become known.

 

Intangible Assets:  Our intangible assets represent patents and patent applications, acquired from third parties, which are recorded at cost and amortized over the life of the patent.  We review the value recorded for intangible assets to assess recoverability from future operations using undiscounted cash flows. Impairments are recognized in operating results to the extent the carrying value exceeds fair value determined based on the net present value of estimated future cash flows.

 

Stock-Based Compensation:  We recognize the cost of stock options and restricted stock with in accordance with FASB ASC Topic 718 Compensation — Stock Compensation (“Topic 718”), previously SFAS No. 123 (Revised 2004) (“SFAS No. 123(R)”), “Share Based Payment.”  Topic 718 requires us to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award.  That cost will be recognized over the period during which an employee is required to provide service in exchange for the reward—known as the requisite service period. No compensation cost is recognized for equity instruments for which employees do not render the requisite service. The grant-date fair value of employee share options and similar instruments will be estimated using option-pricing models adjusted for the unique characteristics of those instruments. Topic 718  must be applied to all options granted or modified after its effective date and also to recognize the cost associated with the portion of any option awards made before its effective date for which the associated service has not been rendered as of its effective date.

 

Results of Operations

 

Comparison of Fiscal Years Ending December 31, 2009 and 2008

 

REVENUES.  We are a development stage company that has developed, patented and demonstrated a new color display technology in the form of proof of concept prototypes which we call Time Multiplexed Optical Shutter (“TMOS”).  We intend to be a leader in the research, development and commercialization of new flat panel displays using TMOS in a variety of applications, such as mobile phones, digital cameras, notebook computers, televisions and other consumer electronic devices. From inception, we have had a limited amount of revenue, all of which has been derived from development contracts.

 

Revenues stayed constant at $0 for the year ended December 31, 2009, as compared to the year ended December 31, 2008.

 

COST OF REVENUES.  Cost of revenues include all direct expenses associated with the delivery of products or services including internal labor costs. Cost of revenues for the year ended December 31, 2009 and December 31, 2008 was $0.

 

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative expenses decreased by 28% or $927,749, to $2,365,613 for the year ended December 31, 2009 from $3,293,362 for the year ended December 31, 2008. The major components of the decrease are as follows:

 

a)  Salaries and benefits decreased by approximately $357,000 to $1,236,000 for the year ended December 31, 2009 from $1,593,000 for the year ended December 31, 2008, due to a) stock compensation expense increased to $617,000 for the twelve months ended December 31, 2009 from $602,000 for the twelve months ended December 31, 2008 and b) bonus expense decreased to ($201,000) for the twelve months ended December 31, 2009 from $44,000 for the twelve months ended December 31, 2008;

 

b) Contract labor decreased by approximately $8,000 to $0 for the year ended December 31, 2009 from $8,000 for the year ended December 31, 2008;

 

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c) Legal expense decreased by approximately $186,000 to $280,000 for the year ended December 31, 2009 from $466,000 for the year ended December 31, 2008 as a result of decreased patent work;

 

d) Accounting expense decreased by approximately $11,000 to $70,000 for the year ended December 31, 2009 from $81,000 for the year ended December 31, 2008;

 

e) Office expense decreased by approximately $55,000 to $14,000 for the year ended December 31, 2009 from $69,000 for the year ended December 31, 2008;

 

f) Travel expense decreased by approximately $23,000 to $20,000 for the year ended December 31, 2009 from $43,000 for the year ended December 31, 2008;

 

g) Depreciation and amortization expense increased by approximately $32,000 to $332,000 for the year ended December 31, 2009 from $300,000 for the year ended December 31, 2008 as a result of an  increase in the amortization of intangible assets during the twelve months ended December 31, 2009; and

 

RESEARCH AND DEVELOPMENT. Research and development expenses decreased by $4,709,871 during the year ended December 31, 2009 to $2,765,658 from $7,475,529 for the year ended December 31, 2008. The major components of the decrease are as follows:

 

a) Salaries and benefits attributable to research and development decreased by approximately $894,000 to $1,972,000 for the year ended December 31, 2009 from $2,866,000 for the year ended December 31, 2008 due to a) a decrease in the number of research and development employees in 2009, b) stock compensation expense increased to $618,000 for the twelve months ended December 31, 2009 from $436,000 for the twelve months ended December 31, 2008, and c) bonus expense decreased to ($182,000) for the twelve months ended December 31, 2009 from $84,000 for the twelve months ended December 31, 2008;

 

b) Consulting expense attributable to research and development decreased by approximately $878,000 to $205,000 for the year ended December 31, 2009 from $1,083,000 for the year ended December 31, 2008 primarily due to decreased services related to prototype development;

 

c) Lab expense decreased by approximately $2,669,000 to $273,000 for the year ended December 31, 2009 from $2,942,000 for the year ended December 31, 2008 primarily due to decreased services related to prototype development; and

 

d) Travel expense attributable to research and development decreased by approximately $202,000 to $117,000 for the year ended December 31, 2008 from $319,000 for the year ended December 31, 2007.

 

OTHER INCOME (EXPENSE).

 

a) Debt issuance expense increased to $164,960 for the year ended December 31, 2009 due to the debt raised in 2009.

 

c) Interest expense, net decreased to an expense of $76,607 for the year ended December 31, 2009 as compared to an interest income, net of $184,475 for the year ended December 31, 2008 primarily due to interest expense associated with the debt raised in 2009.

 

NET LOSS.  Net loss decreased to $5,372,838 for the year ended December 31, 2009, as compared to $10,584,416 for the year ended December 31, 2008. We compute our net loss per share on the basis of net loss attributable to common stockholders, which included the effects of certain items not included in the determination of net loss. Net loss attributable to common stockholders for the year ended December 31, 2009 was $10,002,269 as compared to a net loss attributable to common stockholders of $15,354,514 for the year ended December 31, 2008. The net loss attributable to common stockholders for the twelve months ended December 31, 2009 includes $3,569,136 preferred stock dividends and amortization of preferred stock discount and $1,060,295 for additional warrants and dividends issued to Series B and C Preferred Stock holders to induce conversion to common stock. The net loss attributable to common stockholders for the twelve months ended December 31, 2008, includes $4,770,098 of accrued but unpaid preferred stock dividends and amortization of preferred stock discount.

 

Off-Balance Sheet Transactions

 

We do not engage in material off-balance sheet transactions.

 

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Liquidity and Capital Resources

 

Operating Activities

 

Cash used in operating activities during the year ended December 31, 2009 decreased to $3,747,280 as compared to $9,039,712 used for the year ended December 31, 2008. The decrease is primarily a result of decreases in research and development spending.

 

Investing Activities

 

Cash used for investing activities during the year ended December 31, 2009 amounted to $0, as compared to $622,166 used for investing activities for the year ended December 31, 2008. This is primarily attributable to the acquisition of patents and patent applications in the second quarter of 2008 in the amount of approximately $197,000 and the acquisition of approximately $426,000 of property and equipment during the year ended December 31, 2008.

 

Financing Activities

 

We have financed our operating and investing activities primarily from the proceeds of private placements of common stock, convertible investor notes, and a preferred stock offering which we closed in December 2004, January 2005, February 2007, September 2007, June 2009, August 2009, September 2009, October 2009, and December 2009.

 

The total net cash provided by financing activities was $2,019,583 for the year ended December 31, 2009, which includes:

 

·                  $2,325,000 proceeds from convertible notes payable: and

·                  $305,417 payment of deferred loan costs.

 

The total net cash provided by financing activities was $0 for the year ended December 31, 2008.

 

Working Capital

 

As of December 31, 2009, we had a cash balance of $0.3 million. In the 4th quarter of 2008, the Company’s management began to reduce operating expenses and delay planned expenditures to preserve the Company’s working capital.  We project that current cash reserves will sustain our operations at least through March 2010. Our working capital may not be sufficient to meet all of the needs of our business objectives through the end of 2010.  We would be able to sustain operations for a reasonable period of time (12 months), but it would require significant reductions in our operating expenditures and product development activities, if we did not receive additional funding.  Management has instituted a cost reduction program that included a reduction in labor and operating costs.  This program included the termination of 10 employees which we expect will reduce operating cost by approximately $60,000 per month.

 

We are a development stage company and have not experienced significant operations since our formation. We reached a positive working capital position as of the first quarter of 2005 as a result of our financing activities. We have incurred significant operating losses during the years ended December 31, 2002, 2003, 2004, 2005, 2006, 2007, 2008 and 2009. We intend to utilize a proprietary methodology for development of our displays. Our principal activities, from the beginning of the development stage, have been organizational matters, capital raising activities including issuance of stock, product research and development, fund raising, and market research.

 

To date, we have had only a few revenue-generating services or development contracts.  These include a prototype development agreement with a large personal computer company, and a Small Business Innovation Research (SBIR) Phase One agreement with the U.S. Air Force for $98,214 and a follow-on Phase Two agreement for $686,966.  We also entered into a prototype development agreement with Lockheed Martin, a large military contractor, in October 2005, for which we have received full payment.  Our immediate customer prospects are limited to Lockheed Martin, with which we entered into a License and Strategic Business Agreement dated October 5, 2005.

 

Management will work to establish specific applications for our display technology that we believe will generate significant revenues and cash flows to support operations.

 

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ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Exchange Rate, Interest Rate and Supply Risks

 

The Company has no exchange rate risks as we conduct 100% of our operations in the United States of America, and we conduct our transactions in US dollars.  The Company is exposed to extensive market risk in the areas of financing and interest cost.  Please refer to Item 1A.  Risk Factors for additional disclosure about risk.  Increases in our borrowing rates, as small as 100 basis points, could significantly increase our losses and hinder our ability to generate sufficient working capital.  The slightest disruption in our supply chain could also significantly increase our losses and hinder our ability to purchase our products for resale and application.  The Company has no protection against interest rate risk or supply disruptions.

 

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 

Our consolidated financial statements and the related notes thereto called for by this item appear under the caption “Financial Statements” beginning on page F-1 of this Annual Report on Form 10-K.

 

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 

None.

 

ITEM 9A. CONTROLS AND PROCEDURES

 

(a) Evaluation of Disclosure Controls and Procedures

 

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer, who serves as our principal executive officer and our Chief Financial Officer, who servers as our principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

 

Our Chief Executive Officer and Chief Financial Officer reviewed and evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined by Rule 240.13a-15(e) or 15d-15(e)) as of the end of the period covered by this report.  Based upon this evaluation, our interim Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective as of the end of the fiscal year covered by this Form 10-K.

 

(b) Management’s Annual Report on Internal Control over Financial Reporting

 

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act and for assessing the effectiveness of internal control over financial reporting.

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluation of effectiveness of internal control over financial reporting to future periods are subject to the risk that controls may become inadequate because of changes in conditions or a deterioration in the level of compliance with the policies or procedures.

 

Management has assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2009.  In making its assessment, management used the criteria established in Internal Control — Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission.  This assessment included an evaluation of the design of the Company’s internal control over financial reporting and testing of the operational effectiveness of those controls.  Based on the results of this assessment, management has concluded that the Company’s internal control over financial reporting was effective as of December 31, 2009.

 

This Annual Report on Form 10-K does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting.  Management’s report was not subject to attestation by the

 

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Company’s registered public accounting firm pursuant to temporary rules of the SEC that permit the Company to provide only management’s report in this Annual Report on Form 10-K.

 

(c) Changes in Internal Control over Financial Reporting

 

There were no changes in the Company’s internal control over financial reporting that occurred during the fourth quarter of the year ended December 31, 2009 that have materially affected, or that are reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

ITEM 9B. OTHER INFORMATION

 

None

 

PART III

 

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

 

The following table sets forth the names and ages of all of our directors and executive officers as of February 28, 2010. Our officers are appointed by, and serve at the pleasure of, the Board of Directors.

 

Name

 

Age

 

Title

Reed J. Killion

 

47

 

Chief Executive Officer, President, Principal Executive Officer and Director

James A. Tassone

 

46

 

Chief Financial Officer

Dan Van Ostrand

 

51

 

Vice President Research & Development

Robert J. Petcavich

 

55

 

Vice President and General Manager Opcuity Films

Carl J. Yankowski

 

61

 

Director

Bernard Marren

 

74

 

Chairman

Bruce Berkoff

 

49

 

Director

Ross Young

 

44

 

Director

 

Biographical information with respect to our executive officers and directors is provided below. There are no family relationships between any of our executive officers or directors.

 

Reed J. Killion, Chief Executive Officer, President, Principal Executive Officer and DirectorMr. Killion is a member of Uni-Pixel’s board of directors and has served as the President and Principal Executive Officer of the Company since September 2004. As of May 1, 2008, Mr. Killion was promoted to Chief Executive Officer.  Mr. Killion is also the Chairman of the Board for Animal Innovations. Mr. Killion is an active Board Member and Trustee of the Texas A&M Research Foundation. Previously Mr. Killion served as Uni-Pixel’s Executive Vice President of Business Development and has been a member of its Board of Directors since April 2002.  Prior to joining Uni-Pixel, Mr. Killion was Vice President of Business Development for LogiCom from 1999 until 2002.  HP/Compaq, Dell, DEC, Siemens, NVIDIA, Vanguard, Atmel, Foxconn, Seiko (SMOS) and DCM Technologies are among the companies Mr. Killion has represented and consulted with over his 20 years in the high tech industry.  Mr. Killion holds a Bachelors Degree in Finance from the University of Mississippi.

 

James A. Tassone, Chief Financial OfficerMr. Tassone has been the Chief Financial Officer of Uni-Pixel since he joined the Company in August 2003. Mr. Tassone served as a part-time consultant to the Company from June 2002 to August 2003. Mr. Tassone was appointed Secretary of the Company in January 2005. From June 1999 to August 2003, Mr. Tassone was the Managing Director and Chief Financial Officer of Mindwave Research, Inc., a company he founded in June 1999, and for which he continues to serve on the board of directors. Mindwave Research is a primary market research and consulting company for high technology clients. From 1997 until June 1999, Mr. Tassone was the Director of Research for Reality Research, a subsidiary of CMP Media (a high tech industry-focused publishing company). Prior to Reality Research, Mr. Tassone held management positions at IntelliQuest, Gartner Group, Dataquest, and Comdisco, Inc.  Mr. Tassone has a Bachelors Degree in Finance and Engineering Management from the University of Texas at Austin.

 

Dan Van Ostrand, Vice President Research & Development — Mr. Van Ostrand is a co-founder of Uni-Pixel and has served in a Sr. Executive position since its inception in February of 1998.  Mr. Van Ostrand has many years of experience in corporate operations, project management, systems engineering and systems design and has been involved in the establishment, funding and management of Uni-Pixel.  Since 2004, he has been leading corporate R&D activities, including

 

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microstructure mastering and Intellectual Property development.  In 2009 he also took over responsibility for all Engineering activities in the company.  As co-owner from 1984 through 1992 of a closely-held company that designed ruggedized VME-based tactical computer systems for the United States Army, he was exposed to and became interested in the design, development and engineering principles of flat panel display technology.  Mr. Van Ostrand was a Systems Engineer from 1980 until 1992 for Informatics General, Magnavox, Teledyne and the Jet Propulsion Laboratory.  He has a BA with a double major in Math and Computer Science from Mid-America Nazarene University.

 

Robert J. Petcavich, Vice President and General Manager — Dr. Petacavich has been the Vice President and General Manager of Uni-Pixel since he joined the Company in January 2008.  Dr Petcavich was also the cofounder of Health Beacons Inc. in Kirkland, Washington a company developing leading edge implantable RFID technology for the medical surgical cancer field. Dr Petcavich was Senior Vice President and Chief Technology Officer of Lumera Corporation (NASDAQ:LMRA) in Bothell, Washington, a publicly traded nanotechnology polymer platform bioscience and molecular photonics technology company. Dr. Petcavich has been the Chairman, CEO and CTO of several advanced materials and medical informatics technology companies. Dr. Petcavich was Vice President of Deposition Technologies Inc. from 1982 to 1988, an advanced materials company involved in electro optic and aerospace thin film materials development and manufacturing which was subsequently acquired by Brunswick Defense (NYSE:BC) and Material Sciences Corporation (NYSE:MSC) in 1986. From August 1988 until September 1995, Dr. Petcavich was President and CEO of Alphascribe Express Inc., an electronic medical records service enterprise, which was subsequently sold to Rodeer Systems.  Dr. Petcavich was also founder, Chairman and CTO of Planet Polymer Technologies Inc. (Nasdaq:POLY now PLNT) from 1992 until 2002, an advanced materials intellectual property development company which merged with Allergy Free Inc. of Houston, TX.  Dr. Petcavich was also founder, CEO and Chairman from 1996 until 2001 of Alife Medical Inc a Natural Language Processing software services provider for the medical billing industry now majority owned by Medquist (NASDAQ:MEDQ) a subsidiary of Philips Electronics. Dr. Petcavich was also founder and Board member of Molecular Reflections Inc., a MEMS based biotech design and discovery Platform Company as well as Polytronix Inc., a custom LCD manufacturer of Richardson, Texas. Dr Petcavich has a Ph.D. degree in Polymer Science, a Master of Science Degree in Solid State Science, and a B.S. degree in Chemistry from the Pennsylvania State University, and completed the PMD executive management degree program at Harvard.  Dr. Petcavich holds 24 issued United States patents in fields such as electro optic LCD displays, biotechnology MEMS devices, time released animal neutraceuticals, fruit shelf life extension technology, and handheld wireless devices. Dr. Petcavich is also on the Board of Directors of the College of Science and College of Material Science and Engineering at the Pennsylvania State University and Carbon Nanoprobes Inc. in Seattle, Washington.

 

Carl J. Yankowski, Director — Mr. Yankowski has served as a Uni-Pixel Director since March 16, 2007.  Mr. Yankowski is the CEO of Ambient Devices, Inc. since August 2007.  Mr. Yankowski was named as Palm, Inc. CEO in December 1999, three months before its $1 Billion + IPO.  He profitably grew the Company to a $2 Billion sales rate, drove unaided awareness to over 65%, and then executed a restructuring after the spring 2001 global economic downturn.  Immediately prior to joining Palm, Mr. Yankowski was CEO of the Reebok Brand, where he led the worldwide Reebok-brand business, a multibillion dollar enterprise that recently merged with Adidas.  During his tenure at Reebok, Mr. Yankowski successfully reorganized the Company for growth, significantly streamlined operations, and improved profitability.  Mr. Yankowski spent over four years at Sony Electronics, Inc. as President and COO where he was responsible for the development and launch of numerous successful products in growing markets and new business categories for Sony, including DVD, CDMA, digital imaging, and VAIO personal computers.  He also oversaw the initial U.S. launch of PlayStation.  Mr. Yankowski led Sony to profitable U.S. revenue growth from $6+ Billion to over $10 Billion, and oversaw a dramatic expansion of U.S. manufacturing.  In an earlier position as Chairman of Polaroid’s Asia Pacific Region, Mr. Yankowski led growth in the business imaging market globally and set up the Company’s Asia Pacific headquarters.  Mr. Yankowski has held marketing and strategic leadership positions in several other prestigious technology and consumer-products companies, including General Electric Co., Pepsi, Memorex and Procter & Gamble.  Mr. Yankowski earned simultaneous bachelors of Science degrees in electrical engineering materials science and management from Massachusetts Institute of Technology (“MIT”).  He is a Director of Informatica, Avidyne, and several other firms.  He serves or has served on the visiting committee of MIT Media Lab, and on the Boards of the Boston College Carroll School of Business and MIT Sloan School.

 

Bernard Marren, Director — Mr. Marren has served as a Uni-Pixel Director since March 16, 2007 and has been Chairman of the Board since May 1, 2008.  Mr. Marren is currently the President and CEO of OPTi, Inc., a company that licenses intellectual property for logic chips. He is also a Director of Microtune, Inc. and InFocus Corporation.  In a career that spans more than 40 years, Mr. Marren was both a founder of and the top executive with multiple companies that pioneered new semiconductor technologies. He also served as chief executive with a number of high-tech firms, and is widely regarded for his leadership in sales and marketing, engineering and operations. He has been associated in his career with Western Micro Technology, Inc., Silicon Engineering, Inc., INNO COMM Wireless, American MicroSystems, Inc., and

 

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Fairchild Semiconductor.  Extending his executive leadership to the electronics industry as a whole, Mr. Marren was a founder and the first President of the Semiconductor Industry Association. He is also a past President and Chairman of the National Electronic Distributors Association and a past President of the Electronic Industry Show Corporation.  Mr. Marren is a graduate of the Illinois Institute of Technology (BSEE).

 

Bruce Berkoff, Director — Mr. Berkoff has served as a Uni-Pixel Director since March 16, 2007. Mr. Berkoff is the Chairman of the LCD TV Association which is a global not-for-profit marketing trade association to help “inform, promote, improve, and connect” the entire supply chain involved with the large and growing multibillion dollar LCD TV industry.  Mr. Berkoff is also a Director of LG Display.  Previously, Mr. Berkoff was the CEO and later Chairman of Enuclia Semiconductor, a fab-less semiconductor startup in the HDTV video processor space, and prior to that for 6 years in Seoul Korea he was the Executive Vice-President and Chief Marketing Officer (CMO) of LG.Philips LCD, one of the world’s leading TFT-LCD manufacturers. Before that, Mr. Berkoff served as general manager of Philips Flat Display Systems’ software and electronics business unit in Silicon Valley. He has also held executive management positions at several technology companies, including UMAX Computer Corporation, Radius, and SuperMac Technologies.  Mr. Berkoff is well-known for his visionary keynote addresses, panel chairmanships and other roles at display and electronics industry events, including the Symposium on Information Displays (SID) Business & Investor Conferences, USDC (US Display Consortium) Conferences, DisplayForum Europe, HDTV Forum, Asia SID (ASID), EuroDisplays (ESID), the U.S. Flat Panel Display (US FPD) Conference, the Flat Information Display (FID) Conference and the Consumer Electronics Show (CES) in Las Vegas.  Mr. Berkoff holds undergraduate and graduate degrees in physics and biophysics from Princeton and the University of California, Berkeley, respectively, and also has display-related patents both granted and pending in the U.S. and China.

 

Ross Young, Director — Mr. Young has served as a Uni-Pixel Director since May 20, 2008.  Mr. Young founded DisplaySearch, the leading provider of market intelligence on displays and related technology, in 1996 and is credited with building the firm to what it is today. Mr. Young has made multiple appearances on television, including NBC’s The Today Show as a display industry expert, and has been an invited speaker at over 30 different conferences worldwide. Mr. Young received The NPD Group’s prestigious John Byington Award for outstanding creativity and innovation in November 2006, was appointed to the Board of Directors at Westar Display Technologies in February 2005 and was named to the VLSI Research Executive All-Star Team in 1994. Prior to founding DisplaySearch in 1996, he served in senior marketing positions at OWL Displays, Brooks Automation, Fusion Semiconductor and GCA in the driver IC, flat panel automation, etch and strip and lithography markets. He is also a published author, having written a book on U.S. - Japanese competition titled Silicon Sumo: U.S.-Japan Competition and Industrial Policy in the Semiconductor Equipment Industry. As of September 2008, Mr. Young is currently a Vice President at Samsung Electronics. Mr. Young holds a Bachelor Degree in economics from the University of California at San Diego.

 

The Board members serve for a period of one year.

 

Our executive officers are appointed by our board of directors and hold office until removed by the board.

 

Audit Committee Financial Expert

 

We are not currently a listed company within the meaning of Rule 10A-3 of the Exchange Act and, therefore, are not required to have an audit committee or, accordingly, an audit committee financial expert. Nevertheless, our Board of Directors performs the functions of an audit committee and Carl Yankowski, one of our directors, serves in a capacity similar to that of an audit committee financial expert.

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

Section 16(a) of the Exchange Act requires the Company’s directors and executive officers and persons who beneficially own more than 10% of the registered class of the Company’s equity securities to file with the SEC reports of ownership and changes in ownership of the Company’s Common Stock. Directors, executive officers and greater than 10% beneficial stockholders are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms they file. Based solely on a review of the copies of these reports furnished, management believes that the directors, executive officers and greater than 10% stockholders filed, on a timely basis, all reports required by Section 16(a) of the Exchange Act with respect to the year ended December 31, 2009.

 

Code of Ethics Disclosure

 

We have adopted a Code of Ethics, a copy of which is filed as an exhibit to our 2005 Annual Report on Form 10-KSB, for our principal executive, financial and accounting officers or persons performing similar functions.

 

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ITEM 11. EXECUTIVE COMPENSATION

 

Executive Officer Compensation.

 

The table below summarizes the total compensation paid to or earned by our principal executive officer, our principal financial officer and each of our three most highly compensated executive officers other than our principal executive officer and principal financial officer.  The amounts represented in the “Option Awards” column reflect the stock compensation expense recorded by the company pursuant to Topic 718 and does not necessarily equate to the income that will ultimately be realized by the named executive officers for such awards.  For a description of the employment agreements between the company and Messrs. Killion and Tassone, see “Employment Agreements” below.

 

Summary Compensation Table

 

Name and
Principal Position

 

Year

 

Salary (1)

 

Bonus (2)

 

Option
Awards
(3)

 

Non-Equity
Incentive Plan
Compensation

 

Nonqualified
Deferred
Compensation
Earnings

 

All Other
Compensation
(4)

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reed J. Killion

 

2009

 

$

213,542

 

$

 

$

323,143

 

 

 

$

11,500

 

$

548,185

 

Chief Executive Officer, President (Principal Executive Officer) & Director

 

2008

 

238,937

 

 

330,152

 

 

 

12,000

 

581,089

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

James A. Tassone

 

2009

 

150,875

 

 

57,986

 

 

 

11,500

 

220,361

 

Chief Financial Officer

 

2008

 

171,175

 

 

80,337

 

 

 

12,000

 

263,512

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dan Van Ostrand

 

2009

 

136,667

 

 

18,494

 

 

 

 

155,161

 

Vice President Research & Development

 

2008

 

155,000

 

 

 

 

 

 

155,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Robert Petcavich

 

2009

 

167,963

 

 

143,569

 

 

 

 

311,532

 

Vice President & General Manager Opcuity Films

 

2008

 

188,250

 

 

125,075

 

 

 

 

313,325

 

 


(1)                                  Effective September 16, 2007, the Board of Directors approved an increase to the base salaries of each of Reed J. Killion, Chief Executive Officer, President and Director, from $195,000 to $250,000, James A. Tassone, Chief Financial Officer, from $145,000 to $180,000 and Dan Van Ostrand, Vice President Research & Development, from $130,000 to $160,000.

 

(2)                                  Amounts reflect the aggregate annual cash bonus earned by each of our named executive officers for fiscal years 2009 and 2008.  There were no cash bonus paid for fiscal years 2009 and 2008.

 

(3)                                  For 2009 and 2008, the amounts reflect the compensation cost recognized in 2009 and 2008, respectively, for stock options in accordance with FAS 123R, which reflects the fair value of all stock-based compensation in earnings based on the related vesting schedule.  For additional information relating to the assumptions made by us in connection with the valuation of these awards for 2009, refer to Note 3 of our financial statements herein.  For additional information relating to the assumptions made by us in connection with the valuation of these awards for 2008, refer to Note 3 of our financial statements in our Annual Report on Form 10-KSB for the year ended December 31, 2008.

 

(4)                                  Excludes perquisites and other personal benefits unless such compensation was greater than $10,000.  For Mr. Killion and Mr. Tassone, amounts include a car allowance.

 

401(k) Plan

 

Effective February 2007, the Company created an employee benefit plan available to all full-time employees under Section 401(k) of the Internal Revenue Code (“401(k) plan”). Employees may make contributions up to a specified percentage of their compensation, as defined. The Company is not obligated to make contributions under the 401(k) plan. In addition, the Company did not make any matching employer contribution to the 401(k) Plan in 2009 or 2008.

 

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Employment Agreements

 

As of December 31, 2009, the Company does not have any employment agreements outstanding.

 

Outstanding Equity Awards at December 31, 2009

 

 

 

Option Awards

 

Stock Awards

 

Name

 

Number of
Securities
Underlying
Unexercised
Options
Exercisable

 

Number of
Securities
Underlying
Unexercised
Options
Unexercisable

 

Option
Exercise
Price

 

Option
Expiration
Date

 

Number
of Shares
or Units
of Stock
That
Have Not
Vested

 

Market
Value of
Shares or
Units of
Stock
That
Have Not
Vested

 

Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights
That Have
Not Vested

 

Equity Incentive
Plan Awards:
Market or
Payout Value of
Unearned
Shares, Units or
Other Rights
That Have Not
Vested

 

Reed J. Killion

 

450,000

 

 

$

2.00

 

3/15/2015

 

 

 

 

 

 

 

618,750

(a)

191,250

(a)

1.45

 

9/13/2017

 

 

 

 

 

 

 

115,313

(b)

87,187

(b)

1.45

 

4/18/2018

 

 

 

 

 

 

 

25,000

 

 

1.45

 

1/30/2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

James A. Tassone

 

200,000

 

 

2.00

 

4/19/2015

 

 

 

 

 

 

 

80,208

(a)

24,792

(a)

1.45

 

9/13/2017

 

 

 

 

 

 

 

14,948

(b)

11,302

(b)

1.45

 

4/18/2018

 

 

 

 

 

 

 

25,000

 

 

1.45

 

1/30/2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dan Van Ostrand

 

25,000

 

 

1.45

 

1/30/2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Robert Petcavich

 

333,333

(c)

166,667

(c)

1.45

 

1/7/2018

 

 

 

 

 

 

 

25,000

 

 

1.45

 

1/30/2019

 

 

 

 

 

 

 

 

 

 


(a)          vests monthly over 36 months beginning September 13, 2007

(b)         vests monthly over 36 months beginning April 18, 2008

(c)          vests monthly over 36 months beginning January 7, 2008

 

Director Compensation

 

The table below summarizes the total compensation paid to or earned by our directors during 2009. The amounts represented in the “Option Awards” column reflects the stock compensation expense recorded by the company and does not necessarily equate to the income that will ultimately be realized by the director for such awards.   The table does not include Mr. Killion whose compensation is described in the Summary Compensation Table above.

 

Director Summary Compensation Table

 

Name

 

Fees Earned or
Paid in Cash

 

Stock
Awards

 

Option
Awards

 

Non-Equity
Incentive Plan
Compensation

 

Nonqualified
Deferred
Compensation
Earnings

 

All Other
Compensation

 

Total

 

Bruce Berkoff

 

$

 

 

$

27,184

 

 

 

 

$

27,184

 

Bernard Marren

 

 

 

27,184

 

 

 

 

27,184

 

Carl Yankowski

 

 

 

27,184

 

 

 

 

27,184

 

Ross Young

 

 

 

30,574

 

 

 

 

30,574

 

 

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Overview

 

Uni-Pixel’s director compensation program consists of cash-based as well as equity-based compensation. The Board of Directors recognizes that cash compensation is an integral part of the compensation program and has instituted a fixed fee structure to provide compensation relative to the required time commitment of each director. The equity component of Uni-Pixel’s director compensation program is designed to build an ownership stake in the Company while conveying an incentive to directors relative to the returns recognized by our shareholders.

 

Cash-Based Compensation

 

Company non-employee directors receive an annual stipend of $40,000 paid monthly.   All directors are reimbursed ordinary and reasonable expenses incurred in exercising their responsibilities in accordance the Company’s Travel and Entertainment Expense Reimbursement policy applicable to all employees of the Company.  The non-employee directors waived their cash compensation fees in November 2008 and December 2008 and for all of fiscal 2009.

 

Equity-Based Compensation

 

Under provisions adopted by the Board of Directors, each non-employee director receives an option to purchase 100,000 shares of our common stock issued upon his first election to the Board of Directors.  These options vest monthly over three years. Stock options granted under the plan are priced at the closing market price of the Company’s stock on the day of grant, but in no case lower than $1.45 per share.

 

Pension and Benefits

 

The non-employee directors are not eligible to participate in the Company’s benefits plans, including the 401(k) plan.

 

Indemnification Agreements

 

The Company’s certificate of incorporation requires the Company to indemnify both the directors and officers of the Company to the fullest extent permitted by Delaware state law.

 

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

 

We have set forth in the following table certain information regarding our common stock, on an as converted basis, beneficially owned as of February 28, 2010 for (i) each stockholder we know to be the beneficial owner of 5% or more of our outstanding Common Stock, (ii) each of our directors and named executive officers, and (iii) all executive officers and directors as a group. Generally, a person is deemed to be a “beneficial owner” of a security if that person has or shares the power to dispose or to direct the disposition of such security. A person is also deemed to be a beneficial owner of any securities of which the person has the right to acquire beneficial ownership within 60 days pursuant to options, warrants, conversion privileges or similar rights. At February 28, 2010, we had 52,100,535 issued and outstanding shares of Common Stock and no preferred stock outstanding.

 

Name and
Address of Beneficial Owner

 

Amount of Beneficial
Ownership(1)

 

Percent of Class

 

Directors and Officers:

 

 

 

 

 

Reed J. Killion

 

2,121,563

(2)

4.0

%

James A. Tassone

 

960,990

(3)

1.8

%

Dan Van Ostrand

 

977,500

(4)

1.9

%

Robert J. Petcavich

 

713,889

(5)

1.4

%

Carl J. Yankowski

 

1,155,000

(6)

2.2

%

Bernard Marren

 

175,000

(7)

0.3

%

Bruce Berkoff

 

155,000

(8)

0.3

%

Ross Young

 

120,278

(9)

0.2

%

All Directors and Executive Officers as a Group (8 persons)

 

6,379,220

 

12.0

%

5% Stockholders:

 

 

 

 

 

The Raptor Global Portfolio Ltd.
50 Rowes Wharf
6
th Floor
Boston, MA 02110

 

21,359,770

(10)

36.8

%

The Altar Rock Fund Liquidating Trust
50 Rowes Wharf
6
th Floor
Boston, MA 02110

 

181,719

(11)

0.3

%

The Tudor BVI Global Portfolio, L.P.
1275 King Street
Greenwich, CT 06831

 

6,825,606

(12)

12.6

%

Merrill Lynch Pierce, Fenner & Smith Incorporated
Bank of America, 15
th Floor
600 Montgomery Street
San Francisco, CA 94111

 

12,389,590

(13)

22.2

%

 

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(1)                          Beneficial ownership is determined in accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as amended, and is generally determined by voting powers and/or investment powers with respect to securities. Unless otherwise noted, all of such shares of Common Stock listed above are owned of record by each individual named as beneficial owner and such individual has sole voting and dispositive power with respect to the shares of Common Stock owned by each of them.

 

(2)                          Includes options to purchase 1,571,563 shares of Common Stock exercisable within 60 days from February 28, 2010.

 

(3)                          Includes options to purchase 584,740 shares of Common Stock exercisable within 60 days from February 28, 2010.

 

(4)                          Includes options to purchase 150,000 shares of Common Stock exercisable within 60 days from February 28, 2010.

 

(5)                          Includes options to purchase 713,889 shares of Common Stock exercisable within 60 days from February 28, 2010.

 

(6)                          Includes options to purchase 1,155,000 shares of Common Stock exercisable within 60 days from February 28, 2010.

 

(7)                          Includes options to purchase 175,000 shares of Common Stock exercisable within 60 days from February 28, 2010.

 

(8)                          Includes options to purchase 155,000 shares of Common Stock exercisable within 60 days from February 28, 2010.

 

(9)                          Includes options to purchase 120,278 shares of Common Stock exercisable within 60 days from February 28, 2010.

 

(10)                    Includes warrants to purchase 5,934,812 shares of Common Stock exercisable within 60 days from February 28, 2010.

 

(11)                    Includes warrants to purchase 50,490 shares of Common Stock exercisable within 60 days from February 28, 2010.

 

(12)                    Includes warrants to purchase 1,896,495 shares of Common Stock exercisable within 60 days from February 28, 2010.

 

(13)                    Includes warrants to purchase 3,671,771 shares of Common Stock exercisable within 60 days from February 28, 2010.

 

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

 

The Merger Agreement

 

The Agreement. We entered into a Merger Agreement with Uni-Pixel Displays, Inc., Uni-Pixel Merger Sub, Inc. (“Merger Sub”), Gemini V, Inc. (“Gemini V”) and certain of our principal stockholders, which was effective on December 8, 2004 (the “Merger”). Pursuant to the Merger, Merger Sub and Gemini V were merged with and into Uni-Pixel Displays, Inc. with Uni-Pixel Displays, Inc. as the surviving corporation, and Uni-Pixel Displays, Inc. became a wholly-owned subsidiary of the Company. Prior to the Merger, we had no operations and no material assets or liabilities. Pursuant to the Merger, of the total number of shares of our Common Stock outstanding immediately subsequent to the Merger (12,800,580), former Uni-Pixel stockholders owned approximately 68.6% of our Common Stock, former Gemini V stockholders owned approximately 22.8% of our Common Stock, and the stockholders of the Company owned approximately 8.6% of our Common Stock.

 

Indemnification. The Merger Agreement provides for limited indemnification of Uni-Pixel Displays, Inc. and its officers, directors, employees, attorneys, representatives, stockholders, controlling persons and affiliates (the “Uni-Pixel Indemnitees”) from certain of the Company’s stockholders for possible liabilities and claims in connection with the operation

 

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and ownership of the Company including (i) from and including June 14, 2001 through and including November 14, 2004 from David DiSalvo, the former President, Secretary, Treasurer and sole board member for the Company; and (ii) from and including November 15, 2004 going forward from Frank M. DeLape, the current Chairman of the Board of the Company. Frank M. DeLape will also indemnify the Uni-Pixel Indemnitees for inaccuracies or breaches of certain terms of the Merger Agreement by the Company, for breaches of covenants or obligations of the Merger Agreement by the Company, for costs and expenses incurred in connection with any stockholder suit challenging the validity of the Merger Agreement, and for any claims by brokers or finders for fees or commissions alleged to be due from the Company in connection with the Merger.

 

The indemnification protection provided by David DiSalvo and Frank M. DeLape is further limited, in the aggregate, to the value of the our common stock received by each of the indemnitors as merger consideration in the proposed Merger, determined by multiplying the number of shares of our common stock received by each by $1.75. As consideration in the Merger, Frank M. DeLape beneficially owns approximately 1,812,800 shares of our common stock and David DiSalvo beneficially owns approximately 75,000 shares of our common stock. Therefore, the highest dollar amount that any one of these parties will indemnify the Uni-Pixel Indemnitees for during his or its indemnification period as described in the preceding paragraph, is $3,172,400. None of the parties shall be entitled to indemnification unless and until the aggregate amount of all of their damages subject to indemnification exceeds $50,000.

 

Placement Agent Agreements

 

In connection with the private offering of up to 3,495,000 shares of our Series A Preferred, we entered into a Placement Agent Agreement, dated November 22, 2004, with Fordham Financial Management, Inc., the Company’s exclusive placement agent in connection with the offering and the beneficial owner of more than 5% of our outstanding capital stock. As consideration for the placement agent’s services in connection with the offering, the placement agent received a warrant to purchase 4,500 shares of our common stock for every 15,000 shares of Series A Preferred sold in the offering. Each warrant will expire five years after the respective closing of the offering and will have an exercise price of $1.75 per share. The offering was fully subscribed for 3,495,000 shares of our Series A Preferred (gross proceeds of $12,232,500) and we issued to the placement agent warrants to purchase 1,048,500 shares of our common stock.

 

In addition, the placement agent received a commission equal to 10%, or $5,250 per 15,000 shares of Series A Preferred sold, a non-accountable expense allowance equal to 3% or $1,575 per 15,000 shares of Series A Preferred sold and a financial consulting fee, pursuant to the consulting agreement described below, of 1% or $525 per 15,000 shares of Series A Preferred sold, payable in advance at each closing of the offering. Pursuant to the placement agent agreement, the placement agent was also entitled to receive reimbursement for travel and travel-related expenses on an accountable basis up to a maximum of $10,000. In connection with the sale of 3,495,000 shares of our Series A Preferred, we paid to the placement agent a total of $1,714,050 pursuant to the placement agent agreement ($1,223,250 in commissions, $366,975 as a non-accountable expense allowance, $122,325 in consulting fees, and $1,500 in travel reimbursement).

 

In accordance with the terms and provisions of the placement agent agreement, we agreed to indemnify and hold harmless the placement agent and each person who controls the placement agent against any and all losses, claims, damages or liabilities resulting from any untrue statement in or omission from the offering memorandum.

 

Director Independence

 

The Over-the-Counter Bulletin Board does not have rules regarding director independence.  Our determination of independence of directors is made using the definition of “independent director” contained in the Marketplace Rules of the NASDAQ Stock Market (“NASDAQ”), even though such definitions do not currently apply to us because we are not listed on NASDAQ.  We have determined that Mr. Yankowski, Mr. Marren, Mr. Berkoff and Mr. Young are “independent” within the meaning of such rules. Mr. Killion is not “independent” under these rules, due to his position as an executive officer of our Company.

 

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

 

Audit Fees

 

The aggregate fees billed by PMB Helin Donovan, LLP (“PMBHD”) for professional services rendered for the audit of our annual consolidated financial statements during the fiscal year ended December 31, 2009, and for the reviews of the consolidated financial statements included in our quarterly reports on Form 10-Q for that fiscal year were $51,975.  The aggregate fees billed by PMBHD for professional services rendered for the audit of our annual consolidated financial statements and for the reviews of the consolidated financial statements included in our quarterly reports on Form 10-QSB

 

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during the fiscal year ended December 31, 2008, were $57,600.  These fees include fees billed for professional services rendered by PMBHD for the review of registration statements or services that are normally provided in connection with statutory and regulatory filings or engagements for those fiscal years.

 

Audit Related Fees

 

PMBHD did not bill us for any professional services that were reasonably related to the performance of the audit or review of financial statements for either the fiscal year ended December 31, 2009, or the fiscal year ended December 31, 2008, that are not included under Audit Fees above.

 

Tax Fees

 

PMBHD billed $4,950 and $5,150 for the fiscal years ended December 31, 2009 and 2008, respectively, for professional services rendered for tax compliance, tax advice, and tax planning.

 

All Other Fees

 

PMBHD did not perform any services for us or charge any fees other than the services described above for either the fiscal year ended December 31, 2009, or the fiscal year ended December 31, 2008.

 

PART IV

 

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

 

Exhibit
No.

 

Description

3.1

 

Amended and Restated Certificate of Incorporation of Real-Estateforlease.com, Inc. (1)

3.2

 

Amended and Restated Bylaws of Uni-Pixel, Inc. (1)

3.3

 

Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Uni-Pixel, Inc. (10)

4.1

 

Certificate of Designations of Real-Estateforlease.com, Inc. Series A Convertible Preferred Stock (1)

4.2

 

Junior Subordinated Unsecured Promissory Note (1)

4.3

 

Common Stock Purchase Warrant No. 1 (1)

4.4

 

Common Stock Purchase Warrant No. 2 (1)

4.5

 

Common Stock Purchase Warrant No. 3 (1)

4.6

 

Form of Common Stock certificate (6)

4.7

 

Uni-Pixel, Inc. 12% Senior Secured Convertible Debenture No. 1 issued to Trident Growth Fund, L.P., dated May 24, 2006. (7)

4.8

 

Uni-Pixel, Inc. 12% Senior Secured Convertible Debenture No. 1 issued to CapSource Fund, L.P., dated May 24, 2006. (7)

4.9

 

Common Stock Purchase Warrant No. 1 issued to Trident Growth Fund, L.P., dated May 24, 2006. (7)

4.10

 

Common Stock Purchase Warrant No. 1 issued to CapSource Fund, L.P., dated May 24, 2006. (7)

4.11

 

Uni-Pixel, Inc. 10% Senior Unsecured Convertible Debenture dated September 12, 2006. (8)

4.12

 

Common Stock Purchase Warrant dated September 12, 2006. (8)

4.13

 

Certificate of Designations of the Series B Preferred Stock (Par Value $0.001 Per Share) of Uni-Pixel, Inc., as filed on February 13, 2007. (11)

4.14

 

Certificate of Designations of the Series C Preferred Stock (Par Value $0.001 Per Share) of Uni-Pixel, Inc., as filed on September 28, 2007. (13)

4.15

 

Amended and Restated Certificate of Designations of the Series B Preferred Stock (Par Value $0.001 Per Share) of Uni-Pixel, Inc., as filed on September 28, 2007. (13)

10.1

 

Cancellation and Transfer Agreement (1)

10.2

 

Placement Agent Agreement (1)

10.3

 

Uni-Pixel Display, Inc. Lock-Up Agreement (1)

10.4

 

Consulting Agreement (1)

10.5

 

Office Lease Agreement for Synergy North By and Between First Metro Limited Partnership (“Landlord”) and Uni-Pixel Displays, Inc. (“Tenant”) (1)

10.6

 

Employee Intellectual Property Assignment and Nondisclosure Agreement (1) (5)

10.7

 

Uni-Pixel, Inc. 2005 Stock Incentive Plan (1) (5)

10.8

 

Uni-Pixel, Inc. 2005 Stock Incentive Plan — Notice of Stock Option Award (1) (5)

10.9

 

Agreement and Plan of Merger and Reorganization Among Real-Estateforlease.com, Inc., Uni-Pixel Merger Sub,

 

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Inc., Gemini V, Inc., Uni-Pixel Displays, Inc. and those Stockholders of Real-Estateforlease.com, Inc. Listed on Exhibit “A” as “Company Stockholders” (1)

10.10

 

Employment Agreement — Frank M. DeLape (2) (5)

10.11

 

Employment Agreement — Reed J. Killion (2) (5)

10.12

 

Lockheed Martin Purchase Order (2) (portions of this exhibit have been omitted pursuant to a request for confidential treatment)

10.13

 

Small Business Innovation Research Phase I Contract (3)

10.14

 

Small Business Innovation Research Phase II Contract (3)

10.15

 

License and Strategic Business Agreement between Uni-Pixel Displays, Inc. and Lockheed Martin Corporation, acting by and through Lockheed Martin Systems Integration-Owego, dated as of October 5, 2005.(4) (The portions of this Exhibit marked “******” have been omitted and confidentially filed with the Securities and Exchange Commission pursuant to Rule 24b-2 promulgated under the Securities Exchange Act of 1934, as amended.)

10.16

 

Employment Agreement — James A. Tassone (5) (6)

10.17

 

Securities Purchase Agreement dated May 24, 2006, by and between Uni-Pixel, Inc., Uni-Pixel Displays, Inc., Trident Growth Fund, L.P. and CapSource Fund, L.P. (7)

10.18

 

Security Agreement dated May 24, 2006, by and between Uni-Pixel, Inc., Uni-Pixel Displays, Inc., Trident Growth Fund, L.P. and CapSource Fund, L.P. (7)

10.19

 

Securities Purchase Agreement dated September 12, 2006 (8)

10.20

 

Employment Agreement — Carl Yankowski (5) (9)

10.21

 

Securities Purchase Agreement dated as of February 13, 2007, by and among Uni-Pixel, Inc., The Raptor Global Portfolio Ltd., The Tudor BVI Global Portfolio Ltd., Tudor Proprietary Trading, L.L.C. and The Altar Rock Fund L.P. (11)

10.22

 

Investors’ Rights Agreement dated as of February 13, 2007, by and among Uni-Pixel, Inc., The Raptor Global Portfolio Ltd., The Tudor BVI Global Portfolio Ltd., Tudor Proprietary Trading, L.L.C. and The Altar Rock Fund L.P. (11)

10.23

 

Form of Warrant dated as of February 13, 2007. (11)

10.24

 

Severance Agreement between Uni-Pixel, Inc. and Frank DeLape dated September 11, 2007. (5) (12)

10.25

 

Securities Purchase Agreement dated as of September 28, 2007, by and among Uni-Pixel, Inc. and Merrill Lynch Pierce, Fenner & Smith Incorporated. (13)

10.26

 

Investors’ Rights Agreement dated as of September 28, 2007, by and among Uni-Pixel, Inc. and Merrill Lynch Pierce, Fenner & Smith Incorporated. (13)

10.27

 

Form of Warrant dated as of September 28, 2007. (13)

14

 

Code of Ethics (6)

21

 

Subsidiaries (6)

31.1

 

Certification of the Chief Executive Officer, President and Principal Executive Officer of Uni-Pixel, Inc., pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (14)

31.2

 

Certification of the Chief Financial Officer of Uni-Pixel, Inc., pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (14)

32.1

 

Certification of the Chief Executive Officer, President and Principal Executive Officer of Uni-Pixel, Inc., pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (14)

32.2

 

Certification of the Chief Financial Officer of Uni-Pixel, Inc., pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (14)

 


(1)                                  Previously filed as an exhibit to the Company’s Form 10-SB, filed on February 18, 2005, and incorporated by reference hereto.

(2)                                  Previously filed as an exhibit to the Company’s Amendment #1 Form 10-SB, filed on April 1, 2005, and incorporated by reference hereto.

(3)                                  Previously filed as an exhibit to the Company’s Amendment #2 Form 10-SB, filed on April 27, 2005, and incorporated by reference hereto.

(4)                                  Previously filed as an exhibit to the Company’ Form 10-QSB, filed on November 10, 2005, and incorporated by reference hereto.

(5)                                  Management contract or compensation plan or arrangement

(6)                                  Previously filed as an exhibit to the Company’ Form 10-KSB, filed on March 28, 2006, and incorporated by reference hereto

(7)                                  Previously filed as an exhibit to the Company’ Form 10-QSB, filed on August 14, 2006, and incorporated by reference hereto.

(8)                                  Previously filed as an exhibit to the Company’ Form 10-QSB, filed on November 13, 2006, and incorporated by reference hereto.

 

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(9)                                  Previously filed as an exhibit to the Company’s Form 8-K, filed on May 31, 2006, and incorporate by reference hereto.

(10)                            Previously filed as an exhibit to the Company’s Form 8-K, filed on February 6, 2007, and incorporate by reference hereto.

(11)                            Previously filed as an exhibit to the Company’s Form 8-K, filed on February 16, 2007, and incorporate by reference hereto.

(12)                            Previously filed as an exhibit to the Company’s Form 8-K, filed on September 20, 2007, and incorporate by reference hereto.

(13)                            Previously filed as an exhibit to the Company’s Form 8-K, filed on October 2, 2007, and incorporate by reference hereto.

(14)                            Filed herewith

 

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SIGNATURES

 

In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

UNI-PIXEL, INC.

 

 

By:

/s/  JAMES A. TASSONE

 

 

James A. Tassone, Chief Financial Officer and
Principal Accounting Officer

 

 

 

 

Date:  

March 12, 2010

 

 

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

 

Signature

 

Title

 

Date

 

 

 

 

 

/s/ REED J. KILLION

 

President, Principal Executive Officer and Director

 

March 12, 2010

Reed J. Killion

 

 

 

 

 

 

 

 

 

/s/ JAMES A. TASSONE

 

Chief Financial Officer

 

March 12, 2010

James A. Tassone

 

 

 

 

 

 

 

 

 

/s/  DAN VAN OSTRAND

 

Vice President Research & Development

 

March 12, 2010

Dan Van Ostrand

 

 

 

 

 

 

 

 

 

/s/  ROBERT J. PETCAVICH

 

Vice President and General Manager

 

March 12, 2010

Robert J. Petcavich

 

 

 

 

 

 

 

 

 

/s/  CARL J. YANKOWSKI

 

Director

 

March 12, 2010

Carl J. Yankowski

 

 

 

 

 

 

 

 

 

/s/  BERNARD MARREN

 

Chairman of the Board

 

March 12, 2010

Bernard Marren

 

 

 

 

 

 

 

 

 

/s/  BRUCE BERKOFF

 

Director

 

March 12, 2010

Bruce Berkoff

 

 

 

 

 

 

 

 

 

/s/  ROSS YOUNG

 

Director

 

March 12, 2010

Ross Young

 

 

 

 

 

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Report of Independent Registered Public Accounting Firm

 

The Board of Directors and Shareholders of

Uni-Pixel, Inc.

 

We have audited the accompanying consolidated balance sheets of Uni-Pixel, Inc. (the Company) (a development stage company) as of December 31, 2009 and 2008, and the related consolidated statements of operations, shareholders’ equity (deficit), and cash flows for the years ended December 31, 2009 and 2008, and the period from inception (February 17, 1998) through December 31, 2009. The Company’s management is responsible for these consolidated financial statements.  Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated 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 Uni-Pixel, Inc. as of December 31, 2009 and 2008, and the results of its operations and its cash flows for the years ended December 31, 2009 and 2008, and the period from inception (February 17, 1998) through December 31, 2009, in conformity with accounting principles generally accepted in the United States of America.

 

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.  As discussed in Note 2 to the consolidated financial statements, the Company has sustained losses and negative cash flows from operations for the period from inception (February 17, 1998) through December 31, 2009, whereby its accumulated deficit during the development stage is approximately $49.9 million.  The Company’s ability to meet its obligations in the ordinary course of business is dependent upon its ability to establish profitable operations, raise additional financing through public or private equity financings, enter into collaborative or other arrangements with corporate sources, or secure other sources of financing to fund operations.  These matters raise substantial doubt about the Company’s ability to continue as a going concern.  The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

PMB Helin Donovan, LLP

 

 

 

/s/ PMB Helin Donovan, LLP

 

 

 

March 12, 2010

 

Houston, Texas

 

 

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Uni-Pixel, Inc.

(A Development Stage Company)

Consolidated Balance Sheets

 

 

 

December 31,
2009

 

December 31,
2008

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

Current assets

 

 

 

 

 

Cash and cash equivalents

 

$

307,850

 

$

2,035,547

 

Restricted cash

 

34,877

 

 

Deferred loan costs

 

385,549

 

 

Prepaid expenses

 

3,400

 

3,400

 

 

 

 

 

 

 

Total current assets

 

731,676

 

2,038,947

 

 

 

 

 

 

 

Property and equipment, net of accumulated depreciation of $1,328,662 and $1,013,967, at December 31, 2009 and 2008, respectively

 

277,361

 

592,056

 

Restricted cash

 

 

34,877

 

Intangible assets

 

168,250

 

185,252

 

 

 

 

 

 

 

Total assets

 

$

1,177,287

 

$

2,851,132

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)

 

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

Accounts payable

 

$

927,641

 

$

731,022

 

Accrued expenses

 

 

383,039

 

Deferred revenue

 

33,333

 

33,333

 

Current portion of convertible note payable, net of unamortized discounts of $41,807 and $0 at December 31, 2009 and December 31, 2008, respectively

 

2,283,193

 

 

Interest payable

 

61,317

 

 

 

 

 

 

 

 

Total current liabilities

 

3,305,484

 

1,147,394

 

 

 

 

 

 

 

Total liabilities

 

3,305,484

 

1,147,394

 

 

 

 

 

 

 

Commitments and contingencies (Note 7)

 

 

 

 

 

 

 

 

 

Redeemable convertible Series B Preferred stock, $0.001 par value; $3.75 liquidation preference; 3,200,000 shares authorized, 0 shares issued and outstanding at December 31, 2009 and 3,200,000 shares issued and outstanding at December 31, 2008, less unamortized discount of $0 and $4,644,502 at December 31, 2009 and December 31, 2008, respectively.

 

 

9,159,771

 

 

 

 

 

 

 

Redeemable convertible Series C Preferred stock, $0.001 par value; $11.20 liquidation preference; 892,858 shares authorized, 0 shares issued and outstanding at December 31, 2009 and 892,858 shares issued and outstanding at December 31, 2008, less unamortized discount of $0 and $5,714,466 at December 31, 2009 and December 31, 2008, respectively.

 

 

5,210,901

 

 

 

 

 

 

 

Shareholders’ equity (deficit)

 

 

 

 

 

Preferred stock, Series A, $0.001 par value; $3.50 liquidation preference; 10,000,000 shares authorized, 0 issued and outstanding at December 31, 2009 and 2008

 

 

 

Common stock, $0.001 par value; 100,000,000 shares authorized, 52,100,535 shares and 22,897,418 shares issued and outstanding at December 31, 2009 and 2008, respectively

 

52,101

 

22,897

 

Additional paid-in capital

 

47,728,226

 

30,785,560

 

Accumulated deficit during development stage

 

(49,908,524

)

(43,475,391

)

 

 

 

 

 

 

Total shareholders’ equity (deficit)

 

(2,128,197

)

(12,666,934

)

 

 

 

 

 

 

Total liabilities and shareholders’ equity (deficit)

 

$

1,177,287

 

$

2,851,132

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

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Uni-Pixel, Inc.

(A Development Stage Company)

Consolidated Statements of Operations

 

 

 

Year Ended
December 31,

 

Cumulative
Period from
February 17, 1998
(date of inception)
to December 31,

 

 

 

2009

 

2008

 

2009

 

 

 

 

 

 

 

 

 

Development contract revenue

 

$

 

$

 

$

1,158,201

 

 

 

 

 

 

 

 

 

Cost of development contract revenue

 

 

 

456,648

 

 

 

 

 

 

 

 

 

Gross margin

 

 

 

701,553

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

2,365,613

 

3,293,362

 

22,007,582

 

Research and development

 

2,765,658

 

7,475,529

 

24,533,536

 

 

 

 

 

 

 

 

 

Operating loss

 

(5,131,271

)

(10,768,891

)

(45,839,565

)

 

 

 

 

 

 

 

 

Other income (expense)

 

 

 

 

 

 

 

Net decrease in fair value of derivative liability

 

 

 

845,079

 

Other income

 

 

 

886,886

 

Debt issuance expense

 

(164,960

)

 

(809,306

)

Interest income (expense), net

 

(76,607

)

184,475

 

(2,164,597

)

 

 

 

 

 

 

 

 

Net loss

 

$

(5,372,838

)

$

(10,584,416

)

$

(47,081,503

)

 

 

 

 

 

 

 

 

Preferred stock dividends and amortization of discount

 

(4,629,431

)

(4,770,098

)

(13,899,111

)

Net loss attributable to common shareholders

 

$

(10,002,269

)

$

(15,354,514

)

$

(60,980,614

)

 

 

 

 

 

 

 

 

Per share information

 

 

 

 

 

 

 

Net loss — basic and diluted

 

$

(0.18

)

$

(0.46

)

$

(4.18

)

Preferred stock dividends and amortization of discount

 

(0.15

)

(0.21

)

(1.23

)

Net loss attributable to common shareholders — basic and diluted

 

$

(0.33

)

$

(0.67

)

$

(5.41

)

 

 

 

 

 

 

 

 

Weighted average number of basic and diluted common shares outstanding

 

30,098,187

 

22,897,418

 

11,270,399

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

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Uni-Pixel, Inc.

(A Development Stage Company)

Consolidated Statements of Shareholders’ Equity (Deficit)

 

 

 

Series A
Preferred Stock

 

 

 

 

 

 

 

 

 

Accumulated
Deficit

 

Total