10-K 1 unipixel10k123112.htm unipixel10k123112.htm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 

 
FORM 10-K
 

 
ý
 
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
     
   
For the fiscal year ended December 31, 2012
     
   
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:

Title of Each Class
Name of Each Exchange on which Registered
Common Stock, par value $0.001 per share
The NASDAQ Capital Market

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

 (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¨ Nox

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¨ Nox

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. Yesx No¨
 
Indicate by checkmark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yesx No¨

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 ¨

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 ¨
  
Accelerated Filer                   ¨
Non-Accelerated Filer   ¨
  
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  ¨       No  x
 
The aggregate market value of the common stock held by non-affiliates of the registrant was approximately $39,680,928 on June 30, 2012, based on the last reported sales price of the registrant’s common stock on The NASDAQ Capital Market 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 January 31, 2013, there were 9,977,352 shares of the registrant’s common stock, $0.001 par value, issued and outstanding.
 
 
 
TABLE OF CONTENTS

PART I
 
ITEM 1.
4
ITEM 1A.
12
ITEM 1B.
18
ITEM 2.
18
ITEM 3.
19
ITEM 4.
19
     
PART II
 
ITEM 5.
20
ITEM 6.
21
ITEM 7.
21
ITEM 7A.
25
ITEM 8.
25
ITEM 9.
25
ITEM 9A.
25
ITEM 9B.
26
     
PART III
 
ITEM 10.
27
ITEM 11.
31
ITEM 12.
35
ITEM 13.
37
ITEM 14.
37
     
PART IV
 
ITEM 15.
38
     
 
39

 
 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

We are a production stage company delivering our Performance Engineered Film™ (PEF) products to the display, touch screen and flexible electronics market segments.

We are making ITO-less touch films and flexible electronic films based on our proprietary UniBoss™ manufacturing process for high volume, roll to roll printing, of flexible thin-film conductor patterns. The UniBoss™ process offers precision micro-electronic circuit patterning and modification of surface characteristics over a large area on a ultra-thin, clear, flexible, plastic substrate. We will sell our touch screen films as sub-components of a touch sensor module.  

In addition to flexible electronic films, our past work in developing Time Multiplexed Optical Shutter (TMOS), which we sold in May 2010, led to advances in the thin-film advanced optics arenas that can be leveraged for other marketable applications, such as low cost LCD backlights and general lighting films. We intend to explore the business potential within these applications and pursue those markets that offer profitable opportunities either through licensing or direct production and sales.  We are currently shipping our Diamond Guard™ hard coat protective films for use with multiple types of devices either as protective cover films or as a cover lens replacement. We sell our hard coat and optical films under the Diamond Guard™ brand.

We anticipate that our licensing and initial film sales will allow us to fund and support further technology developments in the touch sensor, flexible electronics, and lighting & display light management films.

Our strategy is to further develop our proprietary Performance Engineered Film™ technology around the vertical markets that we have identified as high growth profitable market opportunities.  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 enter into licensing arrangements, joint developments or ventures in key market segments to exploit the manufacturing and distribution channels of our targeted partners.

Formation History

We were 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-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 633,334 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 currently quoted on The NASDAQ Capital Market under the ticker symbol “UNXL.” From January 18, 2006 until December 9, 2010, our common stock was quoted on the OTC Bulletin Board under the ticker symbol “UNXL”.

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.

Proliferation of Mobile Consumer Electronics Devices.  Consumers throughout the world are rapidly adopting mobile consumer electronics devices such as smartphones, tablet computers, touch enabled notebook computers, 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. This trend towards greater display functionality in mobile devices continues with the introduction of new phones with ultra-high resolution displays, embedded cameras and high-speed data networking capability.

The overall Flat Panel Display (FPD) industry is continuing to experience significant growth.  The FPD industry growth is being driven by a number of market forces including:

 
·
Increased demand for large format high resolution televisions and computer monitors;
 
·
Steady growth in usage of notebook, netbook, and tablet computers;
 
·
A migration to larger color screens, which are multi-touch enabled, for smartphones 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 increasing demand for superior, high-resolution visual experiences.  Flowing from this demand, new types of applications and functionality will evolve that, in turn, will enhance existing markets and create new ones. The continued evolution of technologies such as touch enabled notebook computers, tablet computers, smartphones, MP3 Players, and the ability to connect all of these devices through mobile high-speed 4G data networks, will likely fuel significant demand and, therefore, growth in what have become relatively mature markets.  The devices that deliver this rich user experience will generally have two things in common:  high resolution displays and touch interfaces.  We believe that UniPixel is well situated to take advantage of these growing markets with our Diamond Guard™ cover film and UniBoss™ flexible printed touch sensors.
 
 
Films for Displays.  Glass and plastics are the principal materials being used as first surfaces for display systems.  Because displays are incorporated into devices that are used extensively and are transportable, the displays are subject to damage and the effects of use in challenging environments.  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.  The technologies that Uni-Pixel has developed can be applied to a variety of functional uses in films for display products. The Company’s Diamond Guard™ FPR product can protect a touch screen device from damage while also preventing fingerprints and smudges from obscuring the viewing experience.  Its Diamond Guard™ Anti-Scratch protective cover film product is used to protect touch screen devices from scratches while providing a transparency and gloss equivalent to glass.  In other embodiments, our Diamond Guard™ coating can be applied to substrates that can be used as the first surface of hand held electronic devices.  In these cases, the Diamond Guard™ coating can be used to replace the current cover glass.  It will be less expensive to manufacture and install in addition to being lighter and more break resistant.

Comparing Touch Screen Technologies

The touch screen is one of the easiest PC interfaces to use, making it the interface of choice for a wide variety of applications.  Accordingly, there are several technologies that compete to capitalize on this market.  The following are some examples of these technologies:

Resistive. A resistive touchscreen panel comprises several layers, the most important of which are two thin, transparent electrically-resistive layers separated by a thin space. These layers face each other with a thin gap between. The top screen (the screen that is touched) has a coating on the underside surface of the screen. Just beneath it is a similar resistive layer on top of its substrate. One layer has conductive connections along its sides, the other along top and bottom. A voltage is applied to one layer, and sensed by the other. When an object, such as a fingertip or stylus tip, presses down on the outer surface, the two layers touch to become connected at that point: The panel then behaves as a pair of voltage dividers, one axis at a time. By rapidly switching between each layer, the position of a pressure on the screen can be read.

Resistive touch is used in restaurants, factories and hospitals due to its high resistance to liquids and contaminants. A major benefit of resistive touch technology is its low cost. Additionally, as only sufficient pressure is necessary for the touch to be sensed, they may be used with gloves on, or by using anything rigid as a finger/stylus substitute. Disadvantages include the need to press down, and a risk of damage by sharp objects. Resistive touchscreens also suffer from poorer contrast, due to having additional reflections from the extra layer of material placed over the screen.

Surface acoustic wave. Surface acoustic wave (SAW) technology uses ultrasonic waves that pass over the touchscreen panel. When the panel is touched, a portion of the wave is absorbed. This change in the ultrasonic waves registers the position of the touch event and sends this information to the controller for processing. Surface wave touchscreen panels can be damaged by outside elements. Contaminants on the surface can also interfere with the functionality of the touchscreen.

Capacitive.  A capacitive touchscreen panel consists of an insulator such as glass, coated with a transparent conductor such as indium tin oxide (ITO). As the human body is also an electrical conductor, touching the surface of the screen results in a distortion of the screen's electrostatic field, measurable as a change in capacitance. Different technologies may be used to determine the location of the touch. The location is then sent to the controller for processing.

Unlike a resistive touchscreen, one cannot use a capacitive touchscreen through most types of electrically insulating material, such as gloves. This disadvantage especially affects usability in consumer electronics, such as touch tablet PCs and capacitive smartphones in cold weather. It can be overcome with a special capacitive stylus, or a special-application glove with an embroidered patch of conductive thread passing through it and contacting the user's fingertip.

The largest capacitive display manufacturers continue to develop thinner and more accurate touchscreens, with touchscreens for mobile devices now being produced with “in-cell” technology that eliminates a layer, such as Samsung's Super AMOLED screens, by building the capacitors inside the display itself. This type of touchscreen reduces the visible distance (within millimetres) between the user's finger and what the user is touching on the screen, creating a more direct contact with the content displayed and enabling taps and gestures to be even more responsive.

Surface capacitance.  In this basic technology, only one side of the insulator is coated with a conductive layer. A small voltage is applied to the layer, resulting in a uniform electrostatic field. When a conductor, such as a human finger, touches the uncoated surface, a capacitor is dynamically formed. The sensor's controller can determine the location of the touch indirectly from the change in the capacitance as measured from the four corners of the panel. As it has no moving parts, it is moderately durable but has limited resolution, is prone to false signals from parasitic capacitive coupling, and needs calibration during manufacture. It is therefore most often used in simple applications such as industrial controls and kiosks.
 
 
Projected capacitance.  Projected Capacitive Touch (PCT; also PCAP) technology is a variant of capacitive touch technology. All PCT touch screens are made up of a matrix of rows and columns of conductive material, layered on sheets of glass. This can be done either by etching a single conductive layer to form a grid pattern of electrodes, or by etching two separate, perpendicular layers of conductive material with parallel lines or tracks to form a grid. Voltage applied to this grid creates a uniform electrostatic field, which can be measured. When a conductive object, such as a finger, comes into contact with a PCT panel, it distorts the local electrostatic field at that point. This is measurable as a change in capacitance. If a finger bridges the gap between two of the "tracks," the charge field is further interrupted and detected by the controller. The capacitance can be changed and measured at every individual point on the grid (intersection). Therefore, this system is able to accurately track touches. Due to the top layer of a PCT being glass, it is a more robust solution than less costly resistive touch technology. Additionally, unlike traditional capacitive touch technology, it is possible for a PCT system to sense a passive stylus or gloved fingers. However, moisture on the surface of the panel, high humidity, or collected dust can interfere with the performance of a PCT system. There are two types of PCT: mutual capacitance and self-capacitance.

Mutual capacitance.  This is the common PCT approach, which makes use of the fact that most conductive objects are able to hold a charge if they are very close together. In mutual capacitive sensors, there is a capacitor at every intersection of each row and each column. A 16-by-14 array, for example, would have 224 independent capacitors. A voltage is applied to the rows or columns. Bringing a finger or conductive stylus close to the surface of the sensor changes the local electrostatic field which reduces the mutual capacitance. The capacitance change at every individual point on the grid can be measured to accurately determine the touch location by measuring the voltage in the other axis. Mutual capacitance allows multi-touch operation where multiple fingers, palms or styli can be accurately tracked at the same time.

Self-capacitance. Self-capacitance sensors can have the same X-Y grid as mutual capacitance sensors, but the columns and rows operate independently. With self-capacitance, the capacitive load of a finger is measured on each column or row electrode by a current meter. This method produces a stronger signal than mutual capacitance, but it is unable to resolve accurately more than one finger, which results in "ghosting", or misplaced location sensing.

Infrared grid.  An infrared touchscreen uses an array of X-Y infrared LED and photodetector pairs around the edges of the screen to detect a disruption in the pattern of LED beams. These LED beams cross each other in vertical and horizontal patterns. This helps the sensors pick up the exact location of the touch. A major benefit of such a system is that it can detect essentially any input including a finger, gloved finger, stylus or pen. It is generally used in outdoor applications and point of sale systems which can not rely on a conductor (such as a bare finger) to activate the touchscreen. Unlike capacitive touchscreens, infrared touchscreens do not require any patterning on the glass which increases durability and optical clarity of the overall system. Infrared touchscreens are sensitive to dirt/dust that can interfere with the IR beams, and suffer from parallax in curved surfaces and accidental press when the user hovers his/her finger over the screen while searching for the item to be selected.

Infrared acrylic projection.  A translucent acrylic sheet is used as a rear projection screen to display information. The edges of the acrylic sheet are illuminated by infrared LEDs, and infrared cameras are focused on the back of the sheet. Objects placed on the sheet are detectable by the cameras. When the sheet is touched by the user the deformation results in leakage of infrared light, which peaks at the points of maximum pressure indicating the user's touch location. Microsoft's PixelSense tables use this technology.

 Optical imaging. Optical touchscreens are a relatively modern development in touchscreen technology, in which two or more image sensors are placed around the edges (mostly the corners) of the screen. Infrared back lights are placed in the camera's field of view on the other side of the screen. A touch shows up as a shadow and each pair of cameras can then be pinpointed to locate the touch or even measure the size of the touching object (see visual hull). This technology is growing in popularity, due to its scalability, versatility, and affordability, especially for larger units.

Dispersive signal technology.  Introduced in 2002 by 3M, this system uses sensors to detect the piezoelectricity in the glass that occurs due to a touch. Complex algorithms then interpret this information and provide the actual location of the touch. The technology claims to be unaffected by dust and other outside elements, including scratches. Since there is no need for additional elements on screen, it also claims to provide excellent optical clarity. Also, since mechanical vibrations are used to detect a touch event, any object can be used to generate these events, including fingers and stylus. A downside is that after the initial touch the system cannot detect a motionless finger.

Acoustic pulse recognition.  In this system, introduced by Tyco International's Elo division in 2006, the key to the invention is that a touch at each position on the glass generates a unique sound. Four tiny transducers attached to the edges of the touchscreen glass pick up the sound of the touch. The sound is then digitized by the controller and compared to a list of prerecorded sounds for every position on the glass. The cursor position is instantly updated to the touch location. APR is designed to ignore extraneous and ambient sounds, since they do not match a stored sound profile. APR differs from other attempts to recognize the position of touch with transducers or microphones, in using a simple table lookup method rather than requiring powerful and expensive signal processing hardware to attempt to calculate the touch location without any references. The touchscreen itself is made of ordinary glass, giving it good durability and optical clarity. It is usually able to function with scratches and dust on the screen with good accuracy. The technology is also well suited to displays that are physically larger. Similar to the dispersive signal technology system, after the initial touch, a motionless finger cannot be detected. However, for the same reason, the touch recognition is not disrupted by any resting objects.
 
 
UNI-PIXEL’S TECHNOLOGY

Overview: UniPixel manufactures high-performance flexible electronic film products. The patent pending UniBoss™ process uses a high-fidelity manufacturing process to create complex micro-electronic patterns that enable revolutionary new electronic printed circuits, such as projected capacitive touch sensors.  UniPixel can dramatically simplify and reduce the complexity, cost and risk of manufacturing touch sensors and other electronic circuit applications. The UniBoss™ production process enables the printing of fine line conductor patterns on flexible film substrates. This process can produce ultra-fine line (~5µm width) conductive lines and patterns that can be used for many printed circuit applications. With our process we can also print pads for connectors along with our circuits, and depending on the design we may be able to eliminate the need for adding separate flex-connectors directly to the film. Our UniBoss  process has many advantages over competing processes for making fine-line conductor patterns.  These advantages include

·  
No photo etching process required
·  
Additive patterning, not subtractive like photolithography - uses fewer materials
·  
Room temperature processing
·  
Roll-to-roll for high speed/volume
·  
Single and double sided printing on film
·  
Fast mastering for quick turn around

Successful Prototypes: We have built prototypes that have demonstrated proof of concept, technical viability, and the operation of the UniBoss touch sensor technology. During 2012, we debuted several fully functional UniBoss touch sensor prototypes.  Our prototyping efforts were focused on the process of optimizing the materials, manufacturing processes and assembly of touch sensor modules.

Spin-off Products:  During our history of development of the TMOS display technology, we developed key core technology and know-how in many different areas that were necessary for the successful development of TMOS displays.  Through these efforts, we gained a significant understanding of thin polymer films and coatings for thin films.  Additionally, we had to develop the technology to make large area, high fidelity masters of our optical micro-structures and then replicate those optical micro-structures on a large area thin polymer film.  Subsequently, we developed the ability to make large quantities of these large area micro-structured films.  The first product, developed as a spin-off from the core TMOS developed technology, was our FingerPrint Resistant (FPR) film.  Our UniBoss™ platform enables the highly efficient manufacturing of flexible printed electronic patterns, such as transparent touch screens.  We also have other spin-off products under development, such as LCD backlights, general lighting films and 3D films.

STRATEGY

Our business strategy is to penetrate existing applications markets with our family of Performance Engineered Film™ technologies including UniBoss™ produced touch panels and our protective cover films. We have already made significant progress in penetrating direct film product markets by leveraging the capabilities and competencies achieved in the development of our functional application specific films. We are presently focused on the following steps to implement our business strategy:

 
·
Develop Strategic Relationships.  We plan to target strategic partners to further our efforts in the development and commercialization of UniBoss™ produced touch panel films and our protective cover films. We believe that if these efforts are successful, they could result in UniBoss™ based touch panels reaching commercial markets in products within the next 12 months.  We are already selling our protective cover films.  We believe that gaining the assistance of technology leading OEMs in the deployment of UniBoss™ produced touch panel films for their products is a significant step for our commercialization effort of this product.  As a result, we will seek to build relationships that will allow us to leverage our existing knowledge, scale, infrastructure, manufacturing and expertise in thin films, optics, fine line printed conductors, assembly, and logistics.

 
·
Enhance the Company’s Existing Performance Engineered Film™ Technology. We believe that continuing development and enhancement of our PEF technology is critical to our success. We enhance our competitive technology position through internal development efforts that expand our intellectual property portfolio, collaborative relationships, and other strategic opportunities. Our primary focus is to expand our intellectual property through development of additional prototypes and materials that enhance and extend our product capabilities or the processes by which the systems are produced, thereby allowing them to be used in a broader array of applications and to maintain performance and market leadership over time.

 
·
Develop Prototypes Suitable for Industry Demonstration.  We have produced prototypes that we believe demonstrate our ability to meet the most demanding requirements with a superior performing system and superior performing film products.  We have developed partners that provide a small volume pilot production line that provides limited quantities of films to demonstrate our production solutions for all applications.
 
 
 
·
Finalize a Manufacturing Process. We have completed the development of the core and foundation of our film manufacturing processes and have endeavored to protect the know-how and intellectual property in the developed processes.  While we use toll coaters to manufacture the protective cover films, we intend to acquire all necessary equipment to manufacture the UniBoss™ films internally.

 
·
Target Leading Manufacturers. We are targeting leading display, materials and electronics manufacturers as potential partners and/or integrators of our Performance Engineered Film™ products. We will provide extensive technical assistance and support to manufacturers who are early evaluators, developers, or users of our protective cover and UniBoss™ touch screen films. We also employ a pull strategy (targeting end device OEMs), or “pull through” strategy, of our technologies by actively marketing their advantages to these manufacturers that incorporate touch screen technology into their devices.  This would allow our production partners to gain access to the OEM supply chain driven by end OEMs seeking the competitive product advantages offered by our Performance Engineered Film™ technologies.  We also target Original Design Manufacturers (ODMs) targeted to assemble our sub-components and films into OEM products.

 
·
Drive Adoption by End-Product Original Equipment Manufacturers. We plan to employ a “pull through” strategy by using prototype devices and films to demonstrate our technology to OEMs and ODMs that produce end user products. We believe that the significant advantages that our films will offer in performance and protection can position us to be the standard and will induce OEMs to request our solutions from their existing suppliers.

 
·
Build the Company’s Revenue Sources. We believe that we will be able to produce revenues from three distinct sources: product or production licenses, film sales (UniBoss™, protective cover films, and other optical film sales), and funded engineering services (in support of one of our products, paid for by a customer).

We plan 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. Our focus on next-generation technologies is designed to establish and extend our position as the leading provider of Performance Engineered Film™ as new markets and applications emerge.

MILESTONES TO COMMERCIALIZATION

We will continue to focus on technical and business development milestones. The execution of our overall business plan includes a planned push (targeting computer component 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, we have pursued a technical development roadmap specific to protective cover films and UniBoss™ technology that seeks to accomplish the following:

 
·
Finalization of micro-structure design and film materials for protective cover films (such as, FPR, Hard Coat, etc.);
 
·
Characterization of protective cover film performance across numerous touch screen devices;
 
·
Implementation of high volume production of protective cover film;
 
·
Establishment of numerous sales channels for protective cover film;
 
·
Development of the UniBoss™ process; and
 
·
Finalization of specifications for the production of UniBoss™  films for use in touch and multi touch sensors

Specific to other Performance Engineered films, we have pursued:

 
·
Completion of designs for marketable products
 
·
Completion of production processes for those products
 
·
Completion of Joint Development and Supply and Manufacturing Agreements

Our senior management team will work with various targeted strategic partners in each step of the process to provide certain market and technical support resources.  We intend to leverage partner resources in launching and growing a continuous flow manufacturing system.  

CUSTOMERS AND PARTNERS

We believe the future customers for the protective cover films and UniBoss™ printed electronic film will be the device manufacturers and OEMs that currently use touch screens with the LCD and OLED displays in their products. Initially, our strategic partners will be our primary customers through the commercialization process, including our development partners, manufacturing partners, and other vertical market partners.
 
 
We expect that we will pursue discussions with a variety of potential assembly and manufacturing partners as we achieve our technical milestones for our UniBoss™ printed electronic film for touch sensors.  These discussions will include the demonstration of touch sensor film that can either directly displace alternative technologies, or allow for unique new design implementations.  If design contracts for our films are secured, we will leverage these OEM customers for product unit demand to target potential manufacturing partners to expand production capacity.  We have completed development work within several contracts and with partners that provide comprehensive validation of our Performance Engineered Film™ technology and we believe that will serve as a basis for future customer growth.

Our future protective cover film customers should include a variety of companies from device OEMs to channel distribution partners.  We 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

 
·
Carestream (Film Manufacturing Partner): We engaged a production partner for specific varieties of our protective cover film products.  They provide assistance in the development and manufacturing of coated films.  Manufacturing of our protective cover films can be accomplished using proprietary resins that Uni-Pixel will provide.  They will support the manufacturing, warehousing and sales of our protective cover film line of products.

 
·
Undisclosed PC OEM: We have signed a preferred pricing and reserved capacity license agreement with this PC OEM.  We intend to utilize the license fee to expand our production capacity and believe that we will sell significant quantities of UniBoss™ touch sensors through this relationship.

Targeted Partners

 
·
Touch Screen Controller Manufacturers: Although not material to our business plans, we will continue working with touch screen drive controller manufacturers to expand the market for our UniBoss touch sensors.  We believe that, while UniBoss touch sensors will work with existing touch controllers, the touch controllers can be modified to maximize the performance advantages that UniBoss touch sensors offer.

 
·
Manufacturing and Assembly Partners: We are seeking strategic partners that are currently manufacturing or integrating touch screen panels into end user products.

Target Customers

 
·
Large OEM and ODM for UniBoss touch screens and protective cover films: We have 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, evaluation and performance characterization necessary to gather direct performance feedback.  Additional work continues specifically to advancing the prototypes to implementation within an end user product.

 
·
Consumer Electronics Manufacturers: We have held initial exploratory meetings with a variety of consumer electronics OEMs, including cell phone, computer and television system manufacturers, that have all expressed a desire to possibly leverage UniBoss touch screen films and protective cover films for their unique attributes in their products.  Each of these interactions has resulted in an invitation to return for further engineering specific meetings and significant sample exchange and evaluations, as our product development advances.

SALES AND MARKETING

We are seeking end user product OEMs that desire to integrate UniBoss touch screens and Diamond Guard™ protective cover films and cover glass replacement offerings into their products once available and demonstrating its superior performance.  We believe that some of the OEMs that have been engaged in these discussions will be interested in pursuing the advantages of UniBoss touch screens and Diamond Guard films as a differentiator for their products relative to their competition in their individual market segments over time.  We believe that the proven entry into a single vertical market or application will drive the demand for that product for expanded applications to other product markets.
 
 
Our sales strategy intends to build a diverse revenue base that will derive revenues from multiple sources:

 
·
Product revenues — Proceeds from the sales of Performance Engineered Film™ products from retail, wholesale and OEM sales channels.
 
·
Critical materials — Proceeds from the sales of Performance Engineered Film™ products to integrators or manufacturers that produce or assemble devices with touch screens.
 
·
Engineering support contracts — Integrators that are seeking to differentiate their products by leveraging the unique attributes that our Performance Engineered Film™ can potentially provide.

We are introducing our products to OEMs in various market segments.  We do this by using our prototypes to demonstrate the advantages that our Performance Engineered Film™ can provide in the form of improved efficiencies and performance. We expect to create OEM interest in our products by gaining design wins for integration of protective cover films and UniBoss printed electronic film into established end user devices and applications.
 
We will advance our brand and trademarks to actively demonstrate the elegance and performance advantages of our unique solutions within the industry in support of our direct sales work with OEMs.  If our initial products reach the market and we begin to build momentum and manufacturing capacity within the industry, we may launch a marketing program to drive awareness of our technology as a component “brand” within the end user products.   We expect that this marketing program will be designed to drive awareness and education among OEMs, wholesale and retail channels supporting our unique capabilities and enhanced performance.  We believe that we will be able to promote our brand as a valued component brand included within the OEM products as a part of our relationship with the end product OEMs.  Ultimately the goal of this marketing program will be to establish us and our unique technologies independently as a differentiating factor in end user products and to help promote our component value proposition through our partner OEMs that implement our Performance Engineered Film™ technology in their products similar to what has been done in the PC industry by certain semiconductor companies.

RESEARCH AND DEVELOPMENT

For the twelve months ended December 31, 2012 and 2011, we have spent approximately $5.1 million and $4.5 million, respectively, on research and development activities.  We continue conducting research and development both internally and externally and anticipate investments going forward.

As of December 31, 2012, we had one principal location conducting internal research.  Our headquarters and primary development site are located in The Woodlands, Texas.  The headquarters location includes a Class 100 clean room where UniBoss™, Diamond Guard™ and all PEF materials development and testing is conducted.  Our headquarters also includes a roll-to-roll prototype and initial production line, mastering equipment, an electronics lab, optical testing facilities, test and measurement equipment, and electronics development systems.

Currently, we are engaged in the development of next generation products and prototypes to further demonstrate the full functionality of the PEF technology across multiple applications and markets in a variety of implementations. We have consolidated our vendors to a small group that assist our prototype efforts.  Working with our strategic partners, we hope to advance to our next generation working prototype devices.

The next phase prototypes should serve to support a product roadmap that targets the production of viable commercial UniBoss touch screens within six to twelve months. The development process is intended to also include selecting and completing the preferable manufacturing processes.

We plan to complete the installation and optimization of the manufacturing process for our UniBoss film products and have engaged a small-scale pilot production line that has been the research and development proving ground for a continuous flow manufacturing process followed by a roll-to-roll manufacturing process for all of our Performance Engineered Film™. We believe that our internal pilot production equipment will have adequate capacity to supply potential customer needs for the foreseeable future.

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 our research, professional fees related to intellectual property work, and a portion of facilities costs.
 
 
COMPETITION

The industry in which we operate is highly competitive. While existing touch screen technologies based on the use of Indium Tin Oxide (ITO) currently dominate the marketplace, we will be more specifically competing against other emerging technologies that also seek to improve the performance of touch screen systems.  It is our objective to enable the existing touch module assembly infrastructure to incorporate the use of UniBoss touch screen films into their current manufacturing and assembly operations.  In this way, we believe UniBoss touch screen products can penetrate the touch screen industry quicker and overcome the resistance to change.  Given the potentially compelling advantages that UniBoss touch screen films offer, we believe that this should be a relatively quick, inexpensive and profitable process for these manufacturers.

Compared to our competition, we believe we follow a more broadly developed business model allowing us 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 relatively small volumes of products; and
 
·
The ability to leverage established infrastructures.

We currently do not yet represent a significant competitive presence in our industry.

EMPLOYEES

As of February 4, 2013, we have 27 full-time employees and no part-time employees. None of these employees is 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.

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. 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.

Risks Related to Our Business
 
We are a company with a limited operating history, 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 a 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.  We are attempting to obtain the necessary working capital for operations, but we may not be able to obtain financing in a sufficient amount or at all.  We have not yet demonstrated our ability to generate revenue, and we may never be able to produce material revenues or operate on a profitable basis.  As a result, we have incurred losses since our inception and expect to experience operating losses and negative cash flow for the foreseeable future.  As of December 31, 2012, we had an accumulated total deficit of $71.3 million.

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.  Moreover, planned products based upon our Performance Engineered Film™ technology may never become commercially viable and thus may never generate any revenues. Even if we find commercially viable applications for our Performance Engineered Film™ technology and materials, we may never recover our research and development expenses.
 
 
Current worldwide economic conditions may adversely affect our business, operating results and financial condition.

The United States economy continues to experience a financial downturn, with some financial and economic analysts predicting that the world economy may be entering into a prolonged economic downturn characterized by high unemployment, limited availability of credit, increased rates of default and bankruptcy, and decreased consumer and business spending.  These developments could negatively affect our business, operating results and financial condition in a number of ways.  For example, current or potential customers may delay or decrease spending with us or may not pay us, or may delay paying us for previously purchased products. In addition, this downturn has had, and may continue to have, an unprecedented negative impact on the global credit markets.  Credit has tightened significantly in the last several years, resulting in financing terms that are less attractive to borrowers, and in many cases, the unavailability of certain types of debt financing.  If this crisis continues or worsens, and if we are required to obtain financing in the near term to meet our working capital or other business needs, we may not be able to obtain that financing.  Further, even if we are able to obtain the financing we need, it may be on terms that are not favorable to us, with increased financing costs and restrictive covenants.

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 not be able to increase, or maintain, an advertising budget 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 agreements may not be sufficient or that these individuals or companies may breach these agreements and that any remedies for a breach will be insufficient to allow us to recover our costs and damages.  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 technology and materials.

Research and development of commercially viable applications for our Performance Engineered Film™ 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 these technologies and materials that may be essential to successfully commercialize our Performance Engineered Film™ technology and materials. Moreover, although we fund Performance Engineered Film™ 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 targeted partners, or if we cannot obtain proprietary 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. All of our current relationship discussions with product manufacturers are limited to technology exploration and the evaluation of our Performance Engineered Film™ technology and materials for possible use in commercial applications. Some or all of these relationships may not succeed or, even if they are successful, may not result in the 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 our technologies into their products. 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, or may do so on terms that are less favorable to us. In addition, we may continue working with certain strategic partners in evaluating our Performance Engineered Film™ 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 also depend significantly on our ability to obtain proprietary materials for our own use and for potential sale to display manufacturers and OEMs that incorporate displays in their products.  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 these manufacturers and OEMs that would choose to license our Performance Engineered Film™ technology and materials for possible commercial use.
 
Our potential for rapid growth and our entry into new markets make it difficult for us to evaluate our current and future business prospects, and we may be unable to effectively manage any growth associated with these new markets, which may increase the risk of your investment and could harm our business, financial condition, results of operations and cash flow.

Our recent development of the UniBoss™ process enables us to enter a large and growing market for transparent touch screens. We believe this technology is a superior replacement to ITO as the transparent conducting layer in a touch screen device. Because this UniBoss™ process is relatively new and we have recently entered new markets in connection therewith, we may be unable to evaluate its relative success and future prospects, particularly in light of our goals to continually grow our existing and new customer base, expand our product offerings, integrate complementary businesses and enter additional new markets.

In addition, our potential growth, recent product introductions and entry into new markets may place a significant strain on our resources and increase demands on our executive management, personnel and systems, and our operational, administrative and financial resources may be inadequate. We may also not be able to effectively manage any expanded operations, or achieve planned growth on a timely or profitable basis, particularly if the number of customers using our products and services significantly increase or their demands and needs change as our business expands. If we are unable to manage expanded operations effectively, we may experience operating inefficiencies, the quality of our products and services could deteriorate, and our business and results of operations could be materially adversely affected.
 
We may be required to raise additional financing by issuing new securities with terms or rights superior to those of our shares of common stock, which could adversely affect the market price of our shares of common stock and our business.

We will require additional financing to fund future operations, including expansion in current and new markets, development and acquisition, capital costs and the costs of any necessary implementation of technological innovations or alternative technologies. We may not be able to obtain financing on favorable terms, if at all. If we raise additional funds by issuing equity securities, the percentage ownership of our current stockholders will be reduced, and the holders of the new equity securities may have rights superior to those of the holders of shares of common stock, which could adversely affect the market price and the voting power of shares of our common stock. If we raise additional funds by issuing debt securities, the holders of these debt securities would similarly have some rights senior to those of the holders of shares of common stock, and the terms of these debt securities could impose restrictions on operations and create a significant interest expense for us which could have a materially adverse affect on our business.

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 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 Performance Engineered Film™ 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 convertible promissory notes, or if we engage in acquisitions involving the issuance of such securities, the issuance of these securities could dilute the ownership of our then-existing stockholders.
 
 
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 time away from our business operations.   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 attempt to 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.
 
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.

Our efforts may never demonstrate the feasibility of our Performance Engineered Film™ 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 Performance Engineered Film™ technology and materials for use in potential commercial applications, particularly after incurring significant expenditures, our business 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 certain 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, Robert J. Petcavich, Senior Vice President and General Manager, Daniel K. Van Ostrand, Senior Vice President Research & Development, or Jeffrey W. Tomz, Chief Financial Officer & Secretary, 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.

The flat panel display industry has historically experienced significant downturns, which may adversely affect the demand for and pricing of our 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, production overcapacity and erosion of average selling prices. Industry-wide fluctuations and downturns in the demand for flat panel displays would likely affect the demand for and pricing of our Performance Engineered Film™ technologies and materials and could cause significant harm to our business.
 
 
The reliability of market data included in our public filings is uncertain.

Since we operate in a rapidly changing market, we have in the past, and may from time to time in the future, include market data from industry publications and our own internal estimates in some of the documents we file with the SEC.  This data may be inaccurate, incomplete or unreliable. Industry publications generally state that the information contained in these publications has been obtained from sources believed to be reliable, but that its accuracy and completeness is not guaranteed.  Although we believe that the market data used in our filings with the SEC is and will be reliable, it has not been and will not be independently verified.  Similarly, internal company estimates, while believed by us to be reliable, have not been and will not be verified by any independent sources.

Risks Related to Owning Our Common Stock

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.  Prior to December 10, 2010, our common stock was quoted on the OTC Bulletin Board, where the shares of our common stock have historically been sporadically or “thinly-traded”, meaning that the number of persons interested in purchasing our common shares at or near bid prices at any given time may be relatively small or non-existent. On December 10, 2010, our common stock began listing on The NASDAQ Capital Market, but there can be no assurances that our common stock will be actively traded.  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 on the OTC Bulletin Board as low as $2.25 and as high as $22.50 during a period from January 1, 2008 through December 9, 2010.  Our common stock has traded on The NASDAQ Capital Market as low as $3.98 and as high at $16.33 during the period from December 10, 2010 through December 31, 2012. In addition, 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 shares our common stock.

We have a significant number of outstanding warrants and options, and future sales of the underlying shares of common stock could adversely affect the market price of our common stock.

As of December 31, 2012, we had outstanding warrants and options exercisable for an aggregate of 3,304,330 shares of common stock at a weighted average exercise price of $6.86 per share. The holders may sell these shares in the public markets from time to time, without limitations on the timing, amount or method of sale.  As our stock price rises, the holders may exercise their warrants and options and sell a large number of shares.  This could cause the market price of our common stock to decline.

Our common shares are thinly traded and you may be unable to sell at or near ask prices or at all if you need to sell your shares to raise money or otherwise desire to liquidate your shares.

We cannot predict the extent to which an active public market for our common stock will develop or be sustained. Our common stock became listed on The NASDAQ Capital Market on December 10, 2010, but we cannot assure you that we will be able to meet the requirements for continued listing going forward. 

Our common shares have historically been sporadically or “thinly-traded”, meaning that the number of persons interested in purchasing our common shares at or near bid prices at any given time may be relatively small or non-existent. This situation is attributable to a number of factors, including the fact that we are a small company which is relatively unknown to stock analysts, stock brokers, institutional investors and others in the investment community that generate or influence sales volume, and that even if we came to the attention of such persons, they tend to be risk-averse and would be reluctant to follow an unproven company such as ours or purchase or recommend the purchase of our shares until such time as we became more seasoned and viable. As a consequence, there may be periods of several days or more when trading activity in our shares is minimal or non-existent, as compared to a seasoned issuer which has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on share price. It is possible that a broader or more active public trading market for our common stock will not develop or be sustained, or that current trading levels will be sustained.

The market price for our common stock is particularly volatile given our status as a relatively small company with a small and thinly traded “float” and lack of current revenues that could lead to wide fluctuations in our share price. The price at which you purchase our common stock may not be indicative of the price that will prevail in the trading market. You may be unable to sell your common stock at or above your purchase price if at all, which may result in substantial losses to you.

The market for our common shares is characterized by significant price volatility when compared to seasoned issuers, and we expect that our share price will continue to be more volatile than a seasoned issuer for the indefinite future. The volatility in our share price is attributable to a number of factors. First, as noted above, our common shares are sporadically and/or thinly traded. As a consequence of this lack of liquidity, the trading of relatively small quantities of shares by our shareholders may disproportionately influence the price of those shares in either direction. The price for our shares could, for example, decline precipitously in the event that a large number of our common shares are sold on the market without commensurate demand, as compared to a seasoned issuer which could better absorb those sales without adverse impact on its share price. Secondly, we are a speculative or “risky” investment due to our lack of revenues or profits to date and uncertainty of future market acceptance for our current and potential products. As a consequence of this enhanced risk, more risk-adverse investors may, under the fear of losing all or most of their investment in the event of negative news or lack of progress, be more inclined to sell their shares on the market more quickly and at greater discounts than would be the case with the stock of a seasoned issuer.

The following factors may add to the volatility in the price of our common shares: actual or anticipated variations in our quarterly or annual operating results; adverse outcomes, additions or departures of our key personnel, as well as other items discussed under this “Risk Factors” section, as well as elsewhere in this report. Many of these factors are beyond our control and may decrease the market price of our common shares, regardless of our operating performance. We cannot make any predictions or projections as to what the prevailing market price for our common shares will be at any time, including as to whether our common shares will sustain their current market prices, or as to what effect that the sale of shares or the availability of common shares for sale at any time will have on the prevailing market price.
 
 
There is no guarantee that our shares will continue to be listed on The NASDAQ Capital Market.

Shares of our common stock became listed on The NASDAQ Capital Market on December 10, 2010. We may not be able to meet the requirements for continued listing on The NASDAQ Capital Market, or there may not be enough brokers interested in making a market for our stock to allow us to continue to list thereon. Therefore, it may be difficult to sell your shares of common stock if you desire or need to sell them.  It is possible that an active and liquid trading market in our securities may never develop or, if one does develop, that the market will continue.
 
Shares eligible for future sale may adversely affect the market.

From time to time, certain of our stockholders may be eligible to sell all or some of their shares of common stock by means of ordinary brokerage transactions in the open market pursuant to Rule 144, promulgated under the Securities Act, subject to certain limitations. In general, pursuant to Rule 144, non-affiliate stockholders may sell freely after six months subject only to the current public information requirement (which disappears after one year). Affiliates may sell after six months subject to the Rule 144 volume, manner of sale (for equity securities), current public information and notice requirements. Of the 9,854,268 shares of our common stock outstanding as of December 31, 2012, approximately 9.6 million shares are held by non- “affiliates” and are, or will be, freely tradable without restriction, and the remaining shares are held by our “affiliates”, as of such date.  Any substantial sale of our common stock pursuant to Rule 144 or pursuant to any resale prospectus (including sales by investors of securities acquired in connection with this offering) may have a material adverse effect on the market price of our common stock.
 
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.

Our charter documents and Delaware law may inhibit a takeover that stockholders consider favorable.

Provisions of our amended and restated certificate of incorporation and amended and restated bylaws and applicable provisions of Delaware law may delay or discourage transactions involving an actual or potential change in our control or change in our management, including transactions in which stockholders might otherwise receive a premium for their shares, or transactions that our stockholders might otherwise deem to be in their best interests. These provisions:

 
·
authorize our board of directors to issue preferred stock without stockholder approval and to designate the rights, preferences and privileges of each class; if issued, such preferred stock would increase the number of outstanding shares of our capital stock and could include terms that may deter an acquisition of us;

 
·
establish advance notice requirements for nominations to the board of directors or for proposals that can be acted on at stockholder meetings;

 
·
limit who may call stockholder meetings;

 
·
do not provide for cumulative voting rights; and

 
·
provide that all vacancies, including newly created directorships, may, except as otherwise required by law, be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum.

In addition, Section 203 of the Delaware General Corporation Law generally limits our ability to engage in any business combination with certain persons who own 15% or more of our outstanding voting stock or any of our associates or affiliates who at any time in the past three years have owned 15% or more of our outstanding voting stock. These provisions may have the effect of entrenching our management team and may deprive you of the opportunity to sell your shares to potential acquirers at a premium over prevailing prices. This potential inability to obtain a control premium could reduce the price of our common stock.

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, which we believe is adequate for our operations at this stage of our development.
 
 
ITEM 3. LEGAL PROCEEDINGS

On or around December 12, 2012, the Company was served with notice of two lawsuits filed by Conductive Inkjet Technology Limited (“CIT”) in the Patent Courts in the United Kingdom.  The suits were served by a representative of the Her Majesties Courts & Tribunal Service. The two cases are respectively claim nos. HC12E02467 and HC12F02468 (the “UK suits”).  The first suit, which is case number HC12F02468, seeks relief for (1) breach of contract, (2) causing loss by unlawful means, and (3) breach of confidence.  The second suit, which is case number HC12E02467, asserts that Uni-Pixel included Defendant’s confidential information in two PCT patent applications filed by Uni-Pixel.  The UK suits seek a finding that the company violated a duty of confidential to CIT, orders that confidential materials be returned to CIT, an order that the Company change the inventorship on the two PCT applications to include CIT, an inquiry into damages, other forms of injunctive and declaratory relief against the company, and the award of attorney fees and costs.  In response to the UK suits, the Company retained counsel within the United Kingdom.  Through that counsel, on January 3, 2013, the Company filed its Acknowledgement of Service with the UK court and indicated that it intended to contest the jurisdiction of the UK court over this matter.  A hearing date on the Company’s contest of jurisdiction has been set for between March 13th and 15th 2013.
 
On January 18, 2013, the Company filed a verified petition and applications for temporary and permanent injunction against CIT in the 284th Judicial District in Montgomery County, Texas (the “Texas Suit”).  The case was assigned cause number 13-01-00561.  In the Texas suit, the Company asked the Court to provide the following relief: issue a preliminary ruling that Montgomery County, Texas is the exclusive venue for UK cases, issue a preliminary ruling that CIT violated the terms of an agreement with the Company by filing the UK suits, enter a judgment that the Company did not violate any duty of confidentiality to CIT, enter a judgment against CIT for breach of contract, award additional relief as set forth in the verified petition, including costs, pre and post judgment interest, and attorney’s fees.  A hearing on the Company’s temporary injunction application has been set for January 31, 2013. 
 
On January 25, 2013, CIT removed the Texas suit from state court to federal court in the Southern District of Texas based on CIT’s non-Texas resident status.  The case was assigned to Federal Judge Sim Lake.  On February 4, 2013, the Company filed a motion to remand the Texas Suit back to state court.  On February 8, 2013, CIT filed a motion to dismiss the Texas Suit followed on February 11 with a response to the Company’s motion to remand.  On February 14, 2013, the Company filed a reply to its motion to remand.  As of February 15, 2013, the motion to remand is pending.  A response to CIT’s motion to dismiss is due on March 1, 2013. 
 
We believe these allegations to be without merit and intend to vigorously defend this action.  The potential impact of this action, which seeks unspecified damages, attorneys’ fees and expenses, is uncertain.
 
ITEM 4. MINE SAFETY DISCLOSURES

Not applicable
 
 
PART II

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

Market Information

Effective December 10, 2010, our common stock became listed on The NASDAQ Capital Market under the symbol “UNXL”.  Prior to that date, our common stock was quoted on the OTC Bulletin Board under the symbol “UNXL” The following table sets forth, for the quarters shown, the range of high and low sales information of our common stock, reported on the website of The NASDAQ Capital Market.  

Quarter Ended
 
High
   
Low
 
             
2012
           
Fourth Quarter
 
$
16.33
   
$
5.27
 
Third Quarter
 
$
6.70
   
$
5.50
 
Second Quarter
 
$
7.29
   
$
5.15
 
First Quarter
 
$
6.68
   
$
4.74
 
2011
               
Fourth Quarter
 
$
7.49
   
$
4.54
 
Third Quarter
 
$
8.85
   
$
3.98
 
Second Quarter
 
$
9.20
   
$
6.10
 
First Quarter
 
$
8.44
   
$
6.40
 

Holders

As of January 31, 2013, we had approximately 2,800 stockholders of record of our Common Stock.

Dividends

We have never paid dividends on our Common Stock. Currently, we anticipate that we will retain earnings, if any, to support operations and to finance the growth and development of our business and do not anticipate paying cash dividends on the Common Stock in the foreseeable future.

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 our existing equity compensation plans as of December 31, 2012.

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
 
2,167,846
 
$
7.06
 
88,071
             
Equity compensation plans not approved by stockholders
 
86,668
 
7.50
 
             
Total
 
2,254,514
 
$
7.08
 
88,071
 
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 report. 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.

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

We are a production stage company delivering its Performance Engineered Film™ to the display, touch screen and flexible electronics market segments. Our newly developed thin film high volume roll to roll or continuous flow manufacturing process offers high fidelity replication of advanced micro-optic structures and surface characteristics over a large area, combined with the option of a thin film conductive element. We will sell our films as sub-components for use in liquid crystal display (LCD) as a back light film and active film sub-component.  We are currently shipping our Diamond Guard™ Finger Print Resistant and Hard Coat (Anti-Scratch) protective cover films for multiple touch enabled devices. We sell our films under the Diamond Guard™ brand as well as private label to original equipment manufacturers (OEMs).

We are making ITO-less touch films and flexible electronic films based on our newly-developed UniBoss™ manufacturing process for high volume roll to roll printing of flexible thin-film conductor patterns. In addition, our work in developing Time Multiplexed Optical Shutter (TMOS), which we sold in May 2010, led to advances in the thin-film advanced optics arenas that can be leveraged for other marketable applications, such as low cost LCD backlights and general lighting films. We intend to explore the business potential within these applications and pursue those markets that offer profitable opportunities either through licensing or direct production and sales.  As of December 31, 2012, we had accumulated a total deficit of $71.3 million from operations in pursuit of these objectives.

We anticipate that our initial film sales will allow us to fund and support further technology developments in the lighting & display, 3D displays, avionics and flexible electronics market segments.

Our strategy is to further develop our proprietary Performance Engineered Film™ technology around the five vertical markets that we have identified as high growth profitable market opportunities.  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 supply our key thin film components and enter into joint developments or ventures in key vertical market segments to exploit the existing manufacturing and distribution channels of our targeted partners.

In 2013, we will remain focused on balancing the longer-term needs of our business while remaining agile and prudent with our spending in the short term.  We believe in the underlying fundamentals of our core business strategy and we are focused on addressing the market trends of mobile devices.  We believe our strategy aligns well with the driving forces of the portable device manufacturers.  With our strategy, our product pipeline, and the deeper penetration in the various markets, we plan to address our challenges in the following manner:

·  
Assume continued uncertainty in the near-term US economic recovery;
·  
Grow faster than the markets we serve by focusing on new product introductions to accelerate growth as we enter 2013; and
·  
Maintain investments that deliver innovation and product development.
 
 
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.

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 the Notes to the Consolidated Financial Statements.  However, certain accounting policies and estimates are particularly important to the understanding of our consolidated 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 or when the product is delivered, depending on shipping method. In general, this requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence that an arrangement exists, (2) delivery has occurred or services have been rendered, (3) the fee is fixed and determinable, and (4) collectability is reasonably assured.

Advance payments are deferred until shipment.

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

Cost of Revenues, Selling, General and Administrative Expenses and Research and Development Expenses:  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 the commercialization of our products.

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.

Stock-Based Compensation:  We measure stock-based compensation expense for all share-based awards granted based on the estimated fair value of those awards at grant-date. The fair values of stock option awards are estimated using a Black-Scholes valuation model. The compensation costs are recognized net of any estimated forfeitures on a straight-line basis over either the employee’s requisite service period, or other such vesting requirements as are stipulated in the stock option award agreements.  No compensation cost is recognized for equity instruments for which employees do not render the requisite service.  Forfeiture rates are estimated at grant date based on historical experience and adjusted in subsequent periods for any differences in actual forfeitures from those estimates.

Recent Accounting Pronouncements

See Note 2, Summary of Significant Accounting Policies, in Notes to the Consolidated Financial Statements in Item 8  of Part II of this Annual Report on Form 10-K for a full description of recent accounting pronouncements, including the expected dates of adoption and estimated effects on financial condition and results of operations, which is incorporated herein by reference.

 
Results of Operations

Comparison of Fiscal Years Ending December 31, 2012 and 2011

REVENUES.  During the first quarter of 2010, we began to manufacture, market and sell our thin film product.

Revenues decreased to $76,154 for the year ended December 31, 2012, as compared to $195,237 for the year ended December 31, 2011.  The revenue for these periods was primarily related to engineering services and the sale of our thin film product.  The primary reason for the decrease in revenue is due to a decrease in engineering services revenue.  We anticipate that, as we further develop and improve upon UniBoss, we will earn additional non-recurring engineering revenue in 2013. We expect to sell the finished products to OEMs in 2013.  We do not believe that our research and development fixed assets are impaired or that the useful lives of these assets should be adjusted.

COST OF REVENUES.  Cost of revenues include all direct expenses associated with the delivery of services including internal labor costs. Cost of revenues were $26,292 for the year ended December 31, 2012 and $46,985 for the year ended December 31, 2011.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative expenses decreased by 5%, or approximately $225,000, to $3,961,667 for the year ended December 31, 2012 from $4,186,927 for the year ended December 31, 2011.  The major components of the decrease are as follows:

a)  Salaries and benefits decreased by approximately $227,000 to $2,458,000 for the year ended December 31, 2012 compared to $2,685,000 for the year ended December 31, 2011.  This decrease was due largely to a decrease in stock compensation expenses to $1,270,000 for the year ended December 31, 2012 compared to $2,014,000 for the year ended December 31, 2011, while restricted stock compensation expenses increased to $200,000 for the year ended December 31, 2012 compared to $0 for the year ended December 31, 2011, and while salaries increased to $877,000 for the year ended December 31, 2012 compared to $568,000 for the year ended December 31, 2011;

b) Contract labor decreased by approximately $120,000 to $74,000 for the year ended December 31, 2012 compared to $194,000 for the year ended December 31, 2011;

c) Legal expense increased by approximately $120,000 to $349,000 for the year ended December 31, 2012 compared to $229,000 for the year ended December 31, 2011;
 
d) Accounting expense increased by approximately $12,000 to $79,000 for the year ended December 31, 2012 compared to $67,000 for the year ended December 31, 2011;

e) Office expense decreased by approximately $6,000 to $11,000 for the year ended December 31, 2012 compared to $17,000 for the year ended December 31, 2011;

f) Travel expense decreased by approximately $20,000 to $68,000 for the year ended December 31, 2012 compared to $88,000 for the year ended December 31, 2011;

g) Depreciation and amortization expense increased by approximately $122,000 to $555,000 for the year ended December 31, 2012 compared to $433,000 for the year ended December 31, 2011.

RESEARCH AND DEVELOPMENT. Research and development expenses increased by 13% or approximately $570,000 during the year ended December 31, 2012 to $5,112,855 from $4,542,735 for the year ended December 31, 2011. The major components of the increase are as follows:

a) Salaries and benefits attributable to research and development decreased by approximately $520,000 to $3,016,000 for the year ended December 31, 2012 from $3,536,000 for the year ended December 31, 2011.  The decrease was due largely to a decrease in stock compensation expenses to $1,214,000 for the year ended December 31, 2012 compared to $1,995,000 for the year ended December 31, 2011, while restricted stock compensation expenses increased to $29,000 for the year ended December 31, 2012 compared to $0 for the year ended December 31, 2011, and while salaries increased to $1,518,000 for the year ended December 31, 2012 compared to $1,315,000 for the year ended December 31, 2011;

b) Consulting expense attributable to research and development decreased by approximately $51,000 to $78,000 for the year ended December 31, 2012 from $129,000 for the year ended December 31, 2011;
 
 
c) Lab expense increased by approximately $1,086,000 to $1,689,000 for the year ended December 31, 2012 from $603,000 for the year ended December 31, 2011 primarily due to increased services related to prototype development; and

d) Travel expense attributable to research and development increased by approximately $34,000 to $99,000 for the year ended December 31, 2012 from $65,000 for the year ended December 31, 2011.

OTHER INCOME (EXPENSE)

Interest income, net decreased to income of $6,852 for the year ended December 31, 2012 as compared to income of $11,986 for the year ended December 31, 2011, primarily due to a decrease in the average cash on hand during the twelve months ended December 31, 2012.

NET LOSS. Net loss increased to $9,017,808 for the year ended December 31, 2012, as compared to net loss of $8,569,424 for the year ended December 31, 2011.

Off-Balance Sheet Transactions

We do not engage in off-balance sheet transactions.

Liquidity and Capital Resources

We have historically financed our operations primarily through the issuance of equity and debt securities and by relying on other commercial financing. During the remainder of 2013, and for the foreseeable future, we will be highly dependent on our net product revenue to supplement our current liquidity and fund our operations and highly dependent on financing from third parties.  We may in the future elect to supplement this with further debt or equity offerings or commercial borrowing.

Operating Activities

Cash used in operating activities during the year ended December 31, 2012 increased to $5,646,617 as compared to $4,393,600 used for the year ended December 31, 2011. The increase is primarily a result of increases in research and development expenses.

Investing Activities

Cash used in investing activities during the year ended December 31, 2012 decreased to $941,679 as compared to $1,512,322 used for the year ended December 31, 2011.  The significant use of cash for investing activities during the 2012 and 2011 was primarily attributable to the purchase of equipment related to our research and development activities and for anticipated production.     

Financing Activities

Historically, we have financed our operating and investing activities primarily from the proceeds of private placements and public offerings of common stock, convertible investor notes, and a preferred stock offering.

The total net cash provided by financing activities was $12,372,005 for the year ended December 31, 2012, which includes:
 
·  
   $12,271,995 net proceeds from the issuance of 2,520,585 shares of common stock;
·  
     $87,507 net proceeds from exercise of warrants; and
·  
     $12,503 net proceeds from exercise of stock options.

The total net cash provided by financing activities was $73,139 for the year ended December 31, 2011, which we realized from the exercise of stock options.
 
 
Working Capital

Our primary sources of liquidity have been short-term loans from private placements of convertible notes, private placements of equity securities, the sale of certain intellectual property and the issuance of shares of common stock.

As of December 31, 2012, we had a cash balance of approximately $13.0 million and working capital of $12.8 million.  We project that current cash reserves will sustain our operations through at least December 31, 2013, and we are not aware of any trends or potential events that are likely to adversely impact our short term liquidity through this term.  We expect to fund our operations with our net product revenues from our commercial products, cash and cash equivalents supplemented by proceeds from equity or debt financings, and loans or collaborative agreements with corporate partners, each to the extent necessary.
 
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 has minimal market risk in the areas of financing and interest cost. Please refer to Item 1A.  Risk Factors for additional disclosure about risk.   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 serves 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 Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective as of the end of the period 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 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, 2012.  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, 2012.
 
 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 Company’s registered public accounting firm pursuant to 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, 2012 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 January 31, 2013. Our officers are appointed by, and serve at the pleasure of, the Board of Directors.

Name
 
Age
 
Title
Reed J. Killion
 
50
 
Chief Executive Officer, President, Principal Executive Officer and Director
Seong S. Shin
 
62
 
Chief Operating Officer
Robert J. Petcavich
 
58
 
Senior Vice President and General Manager
Daniel K. Van Ostrand 
 
54
 
Senior Vice President Research & Development
Jeffrey W. Tomz    
 
41
 
Chief Financial Officer and Secretary
Bernard T. Marren
 
77
 
Chairman
Carl J. Yankowski
 
64
 
Director
Bruce I. Berkoff
 
52
 
Director
Ross A. Young
 
47
 
Director
William Wayne Patterson
 
68
 
Director
Anthony J. LeVecchio
 
66
 
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 Director — Mr. Killion is a member of our Board of Directors and has served as our President and Principal Executive Officer 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, Inc. Mr. Killion is a past Board Member and Trustee of the Texas A&M Research Foundation. Previously Mr. Killion served as our Executive Vice President of Business Development and has been a member of our 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. Mr. Killion’s eight years of leadership with us makes him highly qualified to be a member of our board.  He has a comprehensive understanding of our company and management, operations, financial requirements and technologies.  Mr. Killion’s management experience and active involvement in various industries enable him to guide our business strategy in an increasingly complex business environment.

Seong S. Shin, Chief Operating Officer — Mr. Shin has been the Chief Operating Officer of Uni-Pixel since he joined us in September 2011.  Mr. Shin brings to Uni-Pixel more than 30 years of experience in IP and business development, engineering and business management, global marketing and sales, and research and design. Mr. Shin’s background includes LCD panel technology and fabrication, process and architecture development, OEM/ODM product development for display and notebook systems, and major application device launches.  From February 2008 to August 2011, Mr. Shin helped guide Glonet Systems, Inc., a marketer and manufacturer of networking equipment, in the development of its new TCON IC technology, helping to create design flexibility and adoption of its high-speed interface application.  From December 2002 to January 2008, Mr. Shin held numerous senior management positions at Samsung Electronics Co., lastly serving as a senior vice president of research and development, where he led breakthroughs in new display technology, nano imprinting technology, roll-to-roll process architecture, flexible display development with low temperature process, and low power consumption/high color gamut devices. He was responsible for developing Samsung’s next generation panel technology and LED backlight systems, and was noted for innovations such as reducing the number of panel production steps.  Earlier in his career at Samsung, Mr. Shin was vice president of strategic marketing and sales, where he led Samsung’s $3 billion NB LCD Panel business, selling to major customers like Dell, HP, IBM, Apple, Acer, Gateway, Toshiba, Sony, NEC, Fujitsu, and Siemens. Mr. Shin was responsible for introducing new products, and he maintained the highest profit in the history of Samsung’s LCD business among all product groups. Mr. Shin also previously served as the vice president of Samsung’s notebook LCD panel development team, where he optimized gate IC integration, color filter on array, for thin & light, high color gamut/high resolution, and low power consumption. Before Samsung Electronics, Mr. Shin was founder, president and CEO of Photonage, a developer and manufacturer of a high speed, zero-EMI interface. Prior to Photonage, Mr. Shin served as vice president of the computer technology center at Samsung Information Systems America, where he was responsible for portable systems R&D, from concept to new technology, as well as related business development. Mr. Shin also previously served as a director of engineering at Texas Instruments’ PPP division, as well as served in an executive capacity with a successful Silicon Valley startup and mobile system R&D center. Mr. Shin earned his Bachelor of Science in Electrical Engineering from Seoul National University, and his Master of Science in Electrical Engineering from San Jose State University.
 
 
Robert J. Petcavich, Senior Vice President and General Manager — Dr. Petcavich has been the Senior Vice President and General Manager of Uni-Pixel since he joined us in January 2008.  Dr. Petcavich was also the cofounder of Health Beacons Inc. in Kirkland, Washington, a company that develops 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, Texas.  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 was one of the fasting growing companies in the United States in 2010 according to Red Herring, and was recently acquired by Ingenix, Inc.  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 28 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 at the Pennsylvania State University and the Harvard Business School Alumni Club in the Houston area.

Daniel K. Van Ostrand, Senior Vice President Research & Development — Mr. Van Ostrand is one of our founders and has served in a Senior Executive position since our 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 our establishment, funding and management.  Since 2004, he has been leading our corporate R&D activities, including microstructure mastering and Intellectual Property development.  In 2009 he also took over responsibility for all of our Engineering activities.  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.

Jeffrey W.  Tomz, Chief Financial Officer and Secretary — On March 14, 2010, Jeffrey W. Tomz became our principal financial officer and on July 1, 2010, the board of directors formally designated Mr. Tomz as our Chief Financial Officer and Secretary. Since June 2005, Mr. Tomz has been our VP of Finance. From August 2001 to April 2005, Mr. Tomz was the Chief Financial Officer of Isolagen, Inc. (AMEX:ILE) and was instrumental in raising over $190 million in equity and debt for Isolagen. From October 1999 to August 2001, Mr. Tomz was a Principal at Benchmark Equity Group, Inc. Mr. Tomz has served on the board of directors of various companies, including InfoHighway Communication Corp., a private communication company from September 1998 to September 2000. Prior to joining Benchmark in the fall of 1997, Mr. Tomz began his career with Arthur Andersen Worldwide. Mr. Tomz is licensed as a Certified Public Accountant in Texas and received his MPA from The University of Texas at Austin.
 
Bernard T. Marren, Chairman— Mr. Marren has served as a director since March 16, 2007 and has been Chairman of our Board of Directors since May 1, 2008.  Mr. Marren is currently the President and CEO of OPTi, Inc., a company that licenses intellectual property for logic chips. 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 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).
 
 
Mr. Marren’s technology industry experience, particularly as it relates to our industry, makes him highly qualified to lead our Board.  His business experience and educational background, Mr. Marren is well-versed in the review and evaluation of financial statements of publicly traded companies, give him the qualifications and skills to serve as a Director of Uni-Pixel, Inc.
 
Carl J. Yankowski, Director— Mr. Yankowski has served as a director since March 16, 2007.  Mr. Yankowski has served as the CEO of Westerham Group since 2001. Mr. Yankowski also served as the CEO of Ambient Devices, Inc. and helped capitalize Ambient.   Mr. Yankowski was named CEO of Palm, Inc. in December 1999, three months before its initial public offering that raised in excess of $1 billion.  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 serves or has served on the visiting committee of the MIT Media Lab, and the Boards of Informatica, Avidyne, and many other public and private firms, plus the Boston College Carroll School of Business and the MIT Sloan School of Business.
 
Mr. Yankowski’s leadership roles in numerous fortune 500 companies make him a valuable member of our Board of Directors and Audit Committee.  The extensive management experience he has acquired in these roles provide him with the knowledge to deal with financial, accounting, regulatory and administrative matters.  Mr. Yankowski is well-versed in accounting principles and financial reporting rules and regulations, and is equipped to evaluate financial results and lead our Audit Committee.
 
Bruce I. Berkoff, Director— Mr. Berkoff has served as a 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 the CMO (Chief Marketing Officer) of CBRITE, a Santa Barbara based leader in metal oxide back plane technology for FPDs (flat panel displays). Currently he is based in Singapore, and has been helping CBRITE since March 2011. He was also a Director of LG Display from 2007 until 2009.  Mr. Berkoff was the Chief Marketing Officer of Energy and Display Systems, working at Applied Materials, Inc. from October 2009 through January 2011.   Previously, Mr. Berkoff was the CMO of Ascent Solar, and also 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 based in Seoul, Seoul Korea, he was the Executive Vice-President and Chief Marketing Officer 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.
 
Mr. Berkoff’s technology industry experience, particularly as it relates to our industry, makes him highly qualified to serve as a member of our board of directors and other board committee.  With his business experience and educational background, Mr. Berkoff is well-versed in new technologies to help lead our company and is well-versed in the review and evaluation of financial statements of publicly traded companies.  He provides valuable insight to our board of directors and other board committees.
 
 
  Ross A. Young, Director— Mr. Young has served as a director since May 20, 2008. Mr. Young founded DisplaySearch, the leading provider of market intelligence on displays and related technology, in 1996, sold it to The NPD Group in 2005 and is credited with building the firm to what it is today. After leaving DisplaySearch in 2008, he served as VP at Samsung LCD before joining IMS Research in late 2009 as SVP of Displays, LEDs and Lighting. After more than two years in this position, he is currently an independent consultant.   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 was appointed to the Board of Directors of semiconductor start-up Akhan Technologies in 2010 and the Advisory Board of Illumitex, an LED start-up in 2009. 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. Mr. Young holds a Bachelor Degree in economics from the University of California at San Diego.
 
Mr. Young’s technology industry experience, particularly as it relates to our industry, makes him highly qualified to serve as a member of our board of directors and other board committees.  With his business experience and educational background, Mr. Young is well-versed in new technologies to help lead our company and is well-versed in the review and evaluation of financial statements of publicly traded companies.  He provides valuable insight to our board of directors and other board committees.

William Wayne Patterson, Director Mr. Patterson has served as a director since May 9, 2011. Mr. Patterson is a Principal in Dos Rios Partners, a Private Equity Fund, and is an experienced entrepreneurial manager who has demonstrated success in building businesses through innovative growth and cost containment strategies. Mr. Patterson spent much of his career with Keystone International, Inc., where he served as CFO and then as COO. During his time with Keystone, it grew from $15 million in revenues to more than $1 billion. Keystone was sold in 1996 to Tyco International for $1.7 billion. Mr. Patterson was also a co-founder and CEO of Texas Micro (a NASDAQ-traded company) and of Briskheat Corporation. Since the sale of Keystone, Mr. Patterson has participated in more than 20 private equity transactions and has served as interim CEO of Integrated Graphics/Earthcolor and of Vector Global Services. Mr. Patterson is also currently the non-executive chairman of Ashbrook Simon-Hartley and of Controlled Recover. Patterson graduated with honors from the University of Texas in Austin and has a Law Degree from the University of Texas Law School. Patterson is also a CPA.
 
Mr. Patterson’s leadership roles in numerous companies make him a valuable member of our board of directors and audit committee.  The extensive management experience he has acquired in these roles provide him with the knowledge to deal with financial, accounting, regulatory and administrative matters.  Mr. Patterson is well-versed in accounting principles and financial reporting rules and regulations, and is equipped to evaluate financial results and participate in our audit committee.
 
Anthony J. LeVecchio, Director Mr. LeVecchio has served as a director since May 9, 2011. Mr. LeVecchio has been the president and owner of The James Group, a general business consulting firm that has advised clients across a range of industries, since 1988. Prior to forming The James Group, Mr. LeVecchio was the senior vice president and chief financial officer for VHA Southwest, Inc., a regional healthcare system. Mr. LeVecchio currently serves as director, advisor and executive of private and public companies in a variety of industries.  Mr. LeVecchio also currently serves on the Board of Directors of ViewPoint Financial Group, a community bank based in Plano, Texas that is listed on The NASDAQ Global Select Market and as chairman of its Audit Committee. Mr. LeVecchio holds a Bachelor of Economics and a M.B.A. in Finance from Rollins College.
 
Mr. LeVecchio’s leadership roles in numerous companies make him a valuable member of our board of directors and audit committee.  The extensive management experience he has acquired in these roles provide him with the knowledge to deal with financial, accounting, regulatory and administrative matters.  Mr. LeVecchio is well-versed in accounting principles and financial reporting rules and regulations, and is equipped to evaluate financial results and participate in our audit committee.
 
 
The Board members serve for the latter of a period of one year or until the next annual meeting of stockholders.  We have established procedures by which security holders may recommend nominees to our board of directors and those procedures have not changed.

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

Audit Committee Financial Expert

Carl J. Yankowski and Anthony J. LeVecchio, members of our Board, serve in a capacity 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, 2012.

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.

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 other executive officers other than our principal executive officer and principal financial officer.  Collectively, we refer to these officers as the “named executive officers”.  The amounts represented in the “Option Awards” column reflect the stock compensation expense recorded by the Company pursuant to ASC Topic 718 and does not necessarily equate to the income that will ultimately be realized by the named executive officers for such awards.
 

 
Summary Compensation Table
 
Name and Principal Position
 
Year
 
Salary (1)
   
Bonus (2)
   
Stock Awards (3)
   
Option Awards(4)
   
Non-Equity Incentive Plan Compensation
   
Nonqualified Deferred Compensation Earnings
   
All Other Compensation(5)
   
Total
 
                                                     
Reed J. Killion
 
2012
  $ 250,000     $ 5,000     $     $ 419,241                 $ 12,000     $ 686,241  
Chief Executive Officer, President (Principal Executive Officer) & Director
 
2011
    250,000       1,000             725,580                   12,000       988,580  
                                                                     
Seong S. Shin (6)
 
2012
    180,000       5,000             101,772                         286,772  
 Chief Operating Officer
 
2011
    57,591       1,000             33,503                         92,094  
 
                                                                   
Robert J. Petcavich
 
2012
    195,000       5,000       28,520       385,560                         614,080  
Senior Vice President & General Manager
 
2011
    195,000       1,000             633,703                         829,703  
 
                                                                   
Daniel K. Van Ostrand
 
2012
    180,000       5,000             255,368                         440,368  
Senior Vice President Research & Development
 
2011
    180,000       1,000             443,167                         624,167  
 
                                                                   
Jeffrey W. Tomz
 
2012
    180,000       5,000       28,520       291,796                   12,000       517,316  
Chief Financial Officer & Secretary
 
2011
    180,000       1,000             480,856                   12,000       673,856  
——–––––––––—

 (1)  
Effective September 16, 2007, the base salary of Reed J. Killion is $250,000.  Effective January 7, 2008, the base salary of Robert Petcavich is $195,000.  Effective July 1, 2010, the base salary of Dan Van Ostrand and Jeffrey W. Tomz is $180,000.  Effective September 8, 2011, the base salary of Mr. Shin is $180,000.

(2)  
Amounts reflect the aggregate annual cash bonus earned by each of our named executive officers for fiscal years 2012 and 2011.  There was a $5,000 cash bonus paid to each of the named executive officers in fiscal year 2012. There was a $1,000 cash bonus paid to each of the named executive officers in fiscal year 2011.
 
(3)  
Amounts reflect restricted stock awards granted for each of fiscal years 2012 and 2011. The amounts represent the aggregate grant date fair value of the awards granted to each named executive officer computed in accordance with stock-based accounting rules (Financial Standards Accounting Board (“FASB”) ASC Topic 718).  The restricted stock awards granted on November 27, 2012 vested immediately on the day of grant.
 
(4)  
For 2012 and 2011, the amounts reflect the compensation cost recognized in 2012 and 2011, respectively, for stock options in accordance with FASB ASC Topic 718, 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 2012, refer to Note 2 of our financial statements herein.  For additional information relating to the assumptions made by us in connection with the valuation of these awards for 2011, refer to Note 2 of our financial statements in our Annual Report on Form 10-K for the year ended December 31, 2011.

(5)  
Excludes perquisites and other personal benefits unless such compensation was greater than $10,000.  For Mr. Killion and Mr. Tomz, amounts include a car allowance.

(6)  
Mr. Shin started working for the Company effective September 8, 2011. Mr. Shin's annual salary is $180,000.  The amount included in the Salary column for fiscal year 2011 reflects the portion of his salary that was paid during the 2011 fiscal year.
 

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 2012 or 2011.

Employment Agreements

  As of December 31, 2012, the Company does not have any employment agreements outstanding. 

Executive Officer Equity Awards Outstanding

   
Outstanding Equity Awards at December 31, 2012
   
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
   
30,000
     
--
   
$
7.50
 
3/15/2015
   
--
 
--
   
--
 
--
     
54,000
     
--
     
7.50
 
9/13/2017
   
--
 
--
   
--
 
--
     
13,500
     
--
     
7.50
 
4/18/2018
   
--
 
--
   
--
 
--
     
1,667
     
--
     
7.50
 
1/30/2019
   
--
 
--
   
--
 
--
     
50,000
(a)
   
16,667
(a)
   
7.50
 
1/28/2020
   
--
 
--
   
--
 
--
     
125,000
(b)
   
125,000
(b)
   
6.93
 
1/21/2021
   
--
 
--
   
--
 
--
     
333
(e)
   
3,667
(e)
   
7.13
 
11/27/2022
   
--
 
--
   
--
 
--
                                               
Seong S. Shin
   
25,000
     
50,000
 (c)
   
6.00
 
9/8/2021
   
--
 
--
   
--
 
--
     
333
(e)
   
3,667
(e)
   
7.13
 
11/27/2022
   
--
 
--
   
--
 
--
                                               
Robert J. Petcavich
   
33,334
     
--
     
7.50
 
1/7/2018
   
--
 
--
   
--
 
--
     
1,667
     
--
     
7.50
 
1/30/2019
   
--
 
--
   
--
 
--
     
60,000
(a)
   
20,000
(a)
   
7.50
 
1/28/2020
   
--
 
--
   
--
 
--
     
105,000
(b)
   
105,000
(b)
   
6.93
 
1/21/2021
   
--
 
--
   
--
 
--
                                               
Daniel K. Van Ostrand
   
1,667
     
--
     
7.50
 
1/30/2019
   
--
 
--
   
--
 
--
     
25,001
(a)
   
8,333
(a)
   
7.50
 
1/28/2020
   
--
 
--
   
--
 
--
     
80,000
(b)
   
80,000
(b)
   
6.93
 
1/21/2021
   
--
 
--
   
--
 
--
     
333
(e)
   
3,667
(e)
   
7.13
 
11/27/2022
   
--
 
--
   
--
 
--
                                               
Jeffrey W. Tomz
   
13,334
     
--
     
7.50
 
4/19/2015
   
--
 
--
   
--
 
--
     
3,334
     
--
     
7.50
 
9/13/2017
   
--
 
--
   
--
 
--
     
1,667
     
--
     
7.50
 
1/30/2019
   
--
 
--
   
--
 
--
     
16,001
(a)
   
5,333
(a)
   
7.50
 
1/28/2020
   
--
 
--
   
--
 
--
     
25,001
(d)
   
8,333
(d)
   
7.50
 
5/19/2020
   
--
 
--
   
--
 
--
     
80,000
(b)
   
80,000
(b)
   
6.93
 
1/21/2021
   
--
 
--
   
--
 
--
 
(a)  
25% vest on 1/28/2010; 25% vest on 1/28/2011; 25% vest on 1/28/2012; and 25% vest on 1/28/2013.
(b)  
25% vest on 1/21/2011; 25% vest on 1/21/2012; 25% vest on 1/21/2013; and 25% vest on 1/21/2014.
(c)  
33.34% vest on 9/8/2012; 33.33% vest on 9/8/2013; and 33.33% vest on 9/8/2014.
(d)  
25% vest on 5/19/2010; 25% vest on 5/19/2011; 25% vest on 5/19/2012; and 25% vest on 5/19/2013.
(e)
vests monthly over 12 months beginning 11/27/2012.
 
 
Director Compensation

The table below summarizes the total compensation paid to or earned by our directors during 2012. 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 (1)
   
Option Awards
   
Non-Equity Incentive Plan Compensation
   
Nonqualified Deferred Compensation Earnings
   
All Other Compensation
   
Total
 
Bernard T. Marren
 
$
--
   
$
28,520
   
$
125,394
     
--
     
--
     
--
   
$
153,914
 
Carl J. Yankowski
   
--
     
28,520
     
21,058
     
--
     
--
     
--
     
49,578
 
Bruce I. Berkoff
   
--
     
28,520
     
79,065
     
--
     
--
     
--
     
107,585
 
Ross A. Young
   
--
     
28,520
     
79,065
     
--
     
--
     
--
     
107,585
 
William Wayne Patterson
   
--
     
28,520
     
27,765
     
--
     
--
     
--
     
56,285
 
Anthony J. LeVecchio
   
--
     
28,520
     
27,765
     
--
     
--
     
--
     
56,285
 

(1)  
Amounts reflect restricted stock awards granted for fiscal year 2012. The amounts represent the aggregate grant date fair value of the awards granted to each named director computed in accordance with stock-based accounting rules (Financial Standards Accounting Board (“FASB”) ASC Topic 718).  The restricted stock awards granted on November 27, 2012 vested immediately on the day of grant.

Overview
 
Uni-Pixel’s director compensation program consists of equity-based compensation. 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 currently do not receive an annual stipend. All directors are reimbursed for 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.  

Equity-Based Compensation
 
Under provisions adopted by the Board of Directors, each non-employee director receives an option to purchase 6,667 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.  Further grants of stock options and/or restricted stock are issued to the Board of Directors at the discretion of the Board of Directors for continuing service to the Company.

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 January 31, 2013 for (i) each stockholder we know to be the beneficial owner of more than 5% 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 January 31, 2013, we had 9,977,352 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
    399,334   (2 )     3.9 %
Seong S. Shin
    36,333   (3 )     0.4 %
Robert J. Petcavich
    298,501   (4 )     2.9 %
Daniel K. Van Ostrand
    217,501   (5 )     2.1 %
Jeffrey W. Tomz
    205,784   (6 )     2.0 %
Bernard T. Marren
    180,296   (7 )     1.8 %
Carl J. Yankowski
    94,001   (8 )     0.9 %
Bruce I. Berkoff
    61,084   (9 )     0.6 %
Ross A. Young
    61,084   (10 )     0.6 %
William Wayne Patterson
    17,981   (11 )     0.2 %
Anthony J. LeVecchio
    19,481   (12 )     0.2 %
All Directors and Executive Officers as a Group (11 persons)
    1,591,380           15.6 %
5% Stockholders:
                   
Kevin Douglas and affiliates
125 E. Sir Francis Drake Blvd., Ste 400
Larkspur, CA 94939
    750,000   (13 )     7.5 %
Merrill Lynch Pierce, Fenner & Smith Incorporated
Bank of America, 15th Floor
600 Montgomery Street
San Francisco, CA 94111
    899,524   (14 )     8.8 %
Columbus Capital Management, LLC
1 Market Street,
Spear Tower, Suite 3790
San Francisco, CA 94105
    637,023   (15 )     6.4 %
FMR LLC
82 Devonshire St.
Boston MA, 02109
    595,030           6.0 %
Wellington Trust Company, NA
c/o Wellington Management Company, LLP
280 Congress Street
Boston, MA 02210
    497,100           5.0 %
Goldberg Capital Management
27 Stagecoach Road
Avon, CT 06001
    621,968           6.2 %
 
 

(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 power and/or investment power 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 8,000 shares of restricted stock that vests 100% on August 16, 2013.  The restricted stock may not be sold or transferred until vested.  Includes options to purchase 354,667 shares of common stock exercisable within 60 days from January 31, 2013.

(3)
Includes options to purchase 26,333 shares of common stock exercisable within 60 days from January 31, 2013.

(4)
Includes 6,000 shares of restricted stock that vests 100% on August 16, 2013.  The restricted stock may not be sold or transferred until vested.  Includes options to purchase 272,501 shares of common stock exercisable within 60 days from January 31, 2013.

(5)
Includes 6,000 shares of restricted stock that vests 100% on August 16, 2013.  The restricted stock may not be sold or transferred until vested.  Includes options to purchase 156,334 shares of common stock exercisable within 60 days from January 31, 2013.

(6)
Includes 6,000 shares of restricted stock that vests 100% on August 16, 2013.  The restricted stock may not be sold or transferred until vested.  Includes options to purchase 184,670 shares of common stock exercisable within 60 days from January 31, 2013.

(7)
Includes 2,000 shares of restricted stock that vests 100% on August 16, 2013.  The restricted stock may not be sold or transferred until vested.  Includes options to purchase 82,917 shares of common stock exercisable within 60 days from January 31, 2013.

(8)
Includes 2,000 shares of restricted stock that vests 100% on August 16, 2013.  The restricted stock may not be sold or transferred until vested.  Includes options to purchase 88,001 shares of common stock exercisable within 60 days from January 31, 2013.

(9)
Includes 2,000 shares of restricted stock that vests 100% on August 16, 2013.  The restricted stock may not be sold or transferred until vested.  Includes options to purchase 55,084 shares of common stock exercisable within 60 days from January 31, 2013.

(10)
Includes 2,000 shares of restricted stock that vests 100% on August 16, 2013.  The restricted stock may not be sold or transferred until vested.  Includes options to purchase 55,084 shares of common stock exercisable within 60 days from January 31, 2013.

(11)
Includes 2,000 shares of restricted stock that vests 100% on August 16, 2013.  The restricted stock may not be sold or transferred until vested.  Includes options to purchase 11,481 shares of common stock exercisable within 60 days from January 31, 2013.

(12)
Includes 2,000 shares of restricted stock that vests 100% on August 16, 2013.  The restricted stock may not be sold or transferred until vested.  Includes options to purchase 11,481 shares of common stock exercisable within 60 days from January 31, 2013.

(13)
Kevin Douglas and his wife, Michelle Douglas, jointly hold, and have voting and investment power over, 225,000 shares of common stock, as the beneficiaries and co-trustees of the K&M Douglas Trust.  In addition, Kevin Douglas and Michelle Douglas are co-trustees of the James Douglas and Jean Douglas Irrevocable Descendants’ Trust which holds 375,000 shares of common stock over which they have voting and investment power.  Kevin Douglas also has dispositive power with respect to 150,000 shares of Common Stock held by the Douglas Family Trust.
 
(14)
Includes warrants to purchase 254,785 shares of common stock exercisable within 60 days from January 31, 2013.

(15)  
Columbus Capital Partners, L.P. holds 348,600 shares of common stock.  Columbus Capital QP Partners, L.P. holds 226,100 shares of common stock.  Columbus Capital Offshore Fund, Ltd. holds 62,323 shares of common stock.  Columbus Capital Management, LLC is the general partner of Columbus Capital Partners, LP and Columbus Capital QP Partners, L.P., and the investment manager to Columbus Capital Offshore Fund, Ltd. Columbus Capital Management, LLC has voting and investment power of the securities owned by the entities described herein.
 
 
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Related Party Transactions

Our practice has been that any transaction which would require disclosure under Item 404(a) of Regulation S-K of the rules and regulations of the Securities and Exchange Commission, with respect to a director or executive officer, must be reviewed and approved, or ratified, by our audit committee pursuant to the audit committee charter. The audit committee reviews and investigates any matters pertaining to the integrity of management and directors, including conflicts of interest, or adherence to standards of business conduct required by our policies. We are currently not a party to any such related party transactions.

Director Independence

Our common stock is currently listed on The NASDAQ Capital Market under the symbol “UNXL,” and therefore, our determination of the independence of directors is made using the definition of “independent” contained in the listing standards of The NASDAQ Capital Market.  On the basis of information solicited from each director, the board has determined that each of Mr. Marren, Mr. Yankowski, Mr. Berkoff, Mr. Young, Mr. Patterson and Mr. LeVecchio has no material relationship with the Company and is independent within the meaning of such rules.  Our audit committee consists of Mr. Yankowski (Chairman), Mr. Patterson and Mr. LeVecchio; our compensation committee consists of Mr. Marren (Chairman), Mr. Berkoff and Mr. Young; and our nomination and governance committee consists of Mr. Berkoff (Chairman), Mr. Young and Mr. Patterson, each of whom the board has determined has no material relationship with the company and is independent, as provided above.

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, 2012, and for the reviews of the consolidated financial statements included in our quarterly reports on Form 10-Q for that fiscal year were $82,410.  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-Q during the fiscal year ended December 31, 2011, were $54,615.  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, 2012, or the fiscal year ended December 31, 2011, that are not included under Audit Fees above.

Tax Fees

PMBHD billed $7,275 and $5,450 for the fiscal years ended December 31, 2012 and 2011, 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, 2012, or the fiscal year ended December 31, 2011.
 

 
PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

Exhibit
No.
 
Description of Document
3.1
 
Amended and Restated Certificate of Incorporation of Uni-Pixel, Inc. (9)
3.2
 
Form of Certificate of Amendment to Amended and Restated Certificate of Incorporation of Uni-Pixel, Inc. (9)
3.3
 
Amended and Restated Bylaws of Uni-Pixel, Inc. (1)
4.1
 
Common Stock Purchase Warrant No. 1 (1)
4.2
 
Common Stock Purchase Warrant No. 2 (1)
4.3
 
Common Stock Purchase Warrant No. 3 (1)
4.4
 
Form of common stock certificate (3)
4.5
 
Common Stock Purchase Warrant dated September 12, 2006. (4)
10.1
 
Office Lease Agreement for Synergy North By and Between First Metro Limited Partnership (“Landlord”) and Uni-Pixel Displays, Inc. (“Tenant”) (1)
10.2
 
Employee Intellectual Property Assignment and Nondisclosure Agreement (1) (2)
10.3
 
Uni-Pixel, Inc. 2005 Stock Incentive Plan (1) (2)
10.4
 
Uni-Pixel, Inc. 2005 Stock Incentive Plan — Notice of Stock Option Award (1) (2)
10.5
 
Agreement and Plan of Merger and Reorganization Among Real-Estateforlease.com, Inc., Uni-Pixel Merger Sub, Inc., Gemini V, Inc., Uni-Pixel Displays, Inc. and those Stockholders of Real-Estateforlease.com, Inc. Listed on Exhibit “A” as “Company Stockholders” (1)
10.6
 
Form of Warrant dated as of February 13, 2007. (5)
10.7
 
Uni-Pixel, Inc. 2007 Stock Incentive Plan (6) (2)
10.8
 
Form of Warrant dated as of September 28, 2007. (7)
10.9
 
Uni-Pixel, Inc. 2010 Stock Incentive Plan (8) (2)
10.10
 
Form of Warrant to be granted to MDB Capital Group LLC (9)
10.11
 
Uni-Pixel, Inc. 2011 Stock Incentive Plan (10) (2)
14
 
Code of Ethics (3)
21
 
Subsidiaries (3)
31.1
 
31.2
 
32.1
 
32.2
 
101
 
The following financial information from this Annual Report on Form 10-K for the fiscal year ended December 31, 2012, formatted in XBRL (Extensible Business Reporting Language) and furnished electronically herewith: (i) the Condensed Balance Sheets; (ii) the Condensed Statements of Operations; (iii) the Condensed Statements of Cash Flows; and (iv) the Notes to Financial Statements, tagged as blocks of text and in detail (11)
 
 
 
(1)
Previously filed as an exhibit to the Company’s Form 10-SB, filed on February 18, 2005, and incorporated by reference hereto.
 
(2)
Management contract or compensation plan or arrangement.
 
(3)
Previously filed as an exhibit to the Company’ Form 10-KSB, filed on March 28, 2006, and incorporated by reference hereto.
 
(4)
Previously filed as an exhibit to the Company’ Form 10-QSB, filed on November 13, 2006, and incorporated by reference hereto.
 
(5)
Previously filed as an exhibit to the Company’s Form 8-K, filed on February 16, 2007, and incorporated by reference hereto.
 
(6)
Previously filed as an exhibit to the Company’s Form 8-K, filed on September 20, 2007, and incorporated by reference hereto.
 
(7)
Previously filed as an exhibit to the Company’s Form 8-K, filed on October 2, 2007, and incorporated by reference hereto.
 
(8)
Previously filed as an exhibit to the Company’s Form S-8, filed on June 4, 2010, and incorporated by reference hereto.
 
(9)
Previously filed as an exhibit to the Company’s Form S-1, Amendment #3, filed on December 1, 2010, and incorporated by reference hereto.
 
(10)
Previously filed as an exhibit to the Company’s Form S-8, filed on September 15, 2011, and incorporated by reference hereto.
 
(11)
Filed herewith.

 
 

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.
 
       
Date: February 26, 2013
By:
/s/ REED J. KILLION
 
   
Reed J. Killion
 
   
Chief Executive Officer, President, Principal Executive Officer and Director
 
       
Date: February 26, 2013
By:
/s/ JEFFREY W. TOMZ
 
   
Jeffrey W. Tomz
 
   
Chief Financial Officer, Secretary and Principal Accounting Officer
 
       
 
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
 
Chief Executive Officer, President, Principal Executive Officer and Director
 
February 26, 2013
Reed J. Killion
       
         
/s/ SEONG S. SHIN
 
Chief Operating Officer
 
February 26, 2013
Seong S. Shin
       
         
/s/ ROBERT J. PETCAVICH
 
Senior Vice President and General Manager
 
February 26, 2013
Robert J. Petcavich
       
         
/s/  DANIEL K. VAN OSTRAND
 
Senior Vice President Research & Development
 
February 26, 2013
Daniel K. Van Ostrand
       
         
/s/  JEFFREY W. TOMZ
 
Chief Financial Officer, Principal Financial Officer and Secretary
 
February 26, 2013
Jeffrey W. Tomz
       
         
/s/  BERNARD T. MARREN
 
Chairman of the Board
 
February 26, 2013
Bernard T. Marren
       
         
/s/  CARL J. YANKOWSKI
 
Director
 
February 26, 2013
Carl J. Yankowski
       
         
/s/  BRUCE I. BERKOFF
 
Director
 
February 26, 2013
Bruce I. Berkoff
       
         
/s/  ROSS A. YOUNG
 
Director
 
February 26, 2013
Ross A. Young
       
         
/s/  WILLIAM WAYNE PATTERSON
 
Director
 
February 26, 2013
William Wayne Patterson
       
         
/s/  ANTHONY J. LEVECCHIO
 
Director
 
February 26, 2013
Anthony J. LeVecchio
       


 
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
OF UNI-PIXEL, INC.



 

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) as of December 31, 2012 and 2011, and the related consolidated statements of operations, shareholders’ equity, and cash flows for the years ended December 31, 2012 and 2011.  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, 2012 and 2011, and the results of its operations and its cash flows for the years ended December 31, 2012 and 2011, in conformity with accounting principles generally accepted in the United States of America.

PMB Helin Donovan, LLP
 
/s/ PMB Helin Donovan, LLP
 
 
February 26, 2013
Houston, Texas
 

 

Uni-Pixel, Inc.
Consolidated Balance Sheets
 
   
December 31,
2012
   
December 31,
2011
 
             
ASSETS
           
Current assets          
           
Cash and cash equivalents
 
$
13,000,372
   
$
7,216,663
 
Accounts receivable, net
   
     
4,550
 
Prepaid expenses
   
160,320
     
 
                 
Total current assets
   
13,160,692
     
7,221,213
 
                 
Property and equipment, net of accumulated depreciation of $2,531,917 and $1,977,241, at December 31, 2012 and 2011, respectively
   
1,536,658
     
1,149,654
 
Restricted cash
   
17,439
     
17,439
 
                 
Total assets
 
$
14,714,789
   
$
8,388,306
 
                 
LIABILITIES AND SHAREHOLDERS’ EQUITY
               
                 
Current liabilities
               
Accounts payable
 
$
348,683
   
$
87,468
 
                 
Total current liabilities
   
348,683
     
87,468
 
                 
Total liabilities
   
348,683
     
87,468
 
                 
Commitments and contingencies (Note 5)
   
     
 
                 
Shareholders’ equity
               
Common stock, $0.001 par value; 100,000,000 shares authorized, 9,854,268 shares and 7,142,307 shares issued and outstanding at December 31, 2012 and 2011, respectively
   
9,854
     
7,142
 
Additional paid-in capital
   
85,669,802
     
70,589,438
 
Accumulated deficit
   
(71,313,550
)
   
(62,295,742
)
                 
Total shareholders’ equity
   
14,366,106
     
8,300,838
 
                 
Total liabilities and shareholders’ equity
 
$
14,714,789
   
$
8,388,306
 

The accompanying notes are an integral part of these consolidated financial statements.
 
 
Uni-Pixel, Inc.
Consolidated Statements of Operations
 
   
Year Ended December 31,
 
   
2012
   
2011
 
             
Revenue
 
$
76,154
   
$
195,237
 
                 
Cost of revenues
   
26,292
     
46,985
 
                 
Gross margin
   
49,862
     
148,252
 
                 
Selling, general and administrative expenses
   
3,961,667
     
4,186,927
 
Research and development
   
5,112,855
     
4,542,735
 
                 
Operating loss
   
(9,024,660
)
   
(8,581,410
)
                 
Other income
               
Interest income, net
   
6,852
     
11,986
 
                 
Net loss
 
$
(9,017,808
)
 
$
(8,569,424
)
                 
                 
Per share information
               
Net loss - basic
 
$
(1.11
)
 
$
(1.20
)
     Net loss - diluted
   
(1.11
)
   
(1.20
)
                 
Weighted average number of basic common shares outstanding
   
8,150,890
     
7,138,426
 
Weighted average number of diluted common shares outstanding
   
8,150,890
     
7,138,426
 

The accompanying notes are an integral part of these consolidated financial statements.
 
 
Uni-Pixel, Inc.
Consolidated Statements of Shareholders’ Equity

   
Common Stock
                   
   
Number of
Shares
   
Amount
   
Additional
Paid-In
Capital
   
Accumulated
Deficit
   
Total
Shareholders’
 Equity
 
Balance, December 31, 2010
   
7,131,890
   
$
7,132
   
$
66,507,247
   
$
(53,726,318
)
 
$
12,788,061
 
Stock compensation expense
   
     
     
4,009,062
     
     
4,009,062
 
Exercise of stock options
   
10,417
     
10
     
73,129
     
     
73,139
 
       Net loss
   
     
     
     
(8,569,424
)
   
(8,569,424
)
Balance, December 31, 2011
   
7,142,307
   
$
7,142
   
$
70,589,438
   
$
(62,295,742
)
 
$
8,300,838
 
Stock compensation expense
   
     
     
2,482,911
     
     
2,482,911
 
Exercise of warrants
   
157,709
     
157
     
87,350
     
     
87,507
 
Exercise of stock options
   
1,667
     
2
     
12,501
     
     
12,503
 
Issuance of restricted stock
   
32,000
     
32
     
228,128
     
     
228,160
 
Issuance of common stock, net of issuance costs
   
2,520,585
     
2,521
     
12,269,474
     
     
12,271,995
 
       Net loss
   
     
     
     
(9,017,808
)
   
(9,017,808
)
Balance, December 31, 2012
   
9,854,268
   
$
9,854
   
$
85,669,802
   
$
(71,313,550
)
 
$
14,366,106
 

The accompanying notes are an integral part of these consolidated financial statements.
 
 
Uni-Pixel, Inc.
Consolidated Statements of Cash Flows
 
   
Year Ended December 31,
 
   
2012
   
2011
 
Cash flows from operating activities                                                                                    
           
Net loss
 
$
(9,017,808
)
 
$
(8,569,424
)
Adjustments to reconcile net loss to net cash used in operating activities:
               
Depreciation and amortization
   
554,675
     
433,402
 
Restricted stock issuance
   
228,160
     
 
Stock compensation expense
   
2,482,911
     
4,009,062
 
Bad debt expense
   
     
33,774
 
Change in operating assets and liabilities:
               
Decrease in accounts receivable
   
4,550
     
39,565
 
Increase in prepaid expenses
   
(160,320
)
   
 
Increase (decrease) in accounts payable
   
261,215
     
(254,073
)
Decrease in deferred revenue
   
     
(85,906
)
Net cash used in operating activities
   
(5,646,617
)
   
(4,393,600
)
                 
Cash flows from investing activities                                                                                    
               
Purchase of property and equipment
   
(941,679
)
   
(1,512,322
)
Net cash used in investing activities
   
(941,679
)
   
(1,512,322
)
                 
Cash flows from financing activities                                                                                    
               
Proceeds from exercise of warrants, net
   
87,507
     
 
Proceeds from exercise of stock options, net
   
12,503
     
73,139
 
Proceeds from the issuance of common stock, net
   
12,271,995
     
 
Net cash provided by financing activities
   
12,372,005
     
73,139
 
                 
Net increase (decrease) in cash and cash equivalents                                                            
   
5,783,709
     
(5,832,783
)
Cash and cash equivalents, beginning of period                                                                                    
   
7,216,663
     
13,049,446
 
Cash and cash equivalents, end of period                                                                                    
 
$
13,000,372
   
$
7,216,663
 
                 
Supplemental disclosures of cash flow information:
               
Cash paid for interest
 
$
   
$
 
Cash paid for income taxes
 
$
   
$
 
                 
Supplemental disclosures of non-cash financing information:
               
Issuance of 143,333 shares of common stock in exchange for the cashless
exercise of warrants to purchase 286,329 shares of common stock
 
$
898,265
   
$
 

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


UNI-PIXEL, INC.
Notes to the Audited Consolidated Financial Statements

Note 1 – Basis of Presentation, Business and Organization