10-Q 1 unipixel10q033113.htm unipixel10q033113.htm


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

 
FORM 10-Q 
 

 
x
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the Quarterly Period Ended March 31, 2013
 
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
(Issuer’s Telephone Number, Including Area Code)
 
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x  No o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§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). Yes x   No o
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes o   No x
 
As of April 26, 2013, the issuer had 12,024,487 shares of issued and outstanding common stock, par value $0.001 per share.
 
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 definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer o
 
Accelerated filer o
     
Non-accelerated filer o
 
Smaller reporting company x
(Do not check if a smaller reporting company)
   
 
 
TABLE OF CONTENTS
 
Part I.
Financial Information
3
     
Item 1.
3
     
 
   March 31, 2013 (unaudited) and December 31, 2012
3
     
 
  Three months ended March 31, 2013 (unaudited) and March 31, 2012 (unaudited)
4
     
 
   From December 31, 2011 to March 31, 2013 (unaudited)
5
     
 
   Three months ended March 31, 2013 (unaudited) and March 31, 2012 (unaudited)
6
     
 
7
     
Item 2.
13
     
Item 3.
16
     
Item 4.
16
     
Part II.
Other Information
17
     
Item 6.
17
 
 
PART I - FINANCIAL INFORMATION
 
ITEM 1.  FINANCIAL STATEMENTS.
 
Uni-Pixel, Inc.
Condensed Consolidated Balance Sheets
 
   
March 31,
2013
   
December 31,
2012
 
   
(unaudited)
       
ASSETS
           
Current assets
           
Cash and cash equivalents
 
$
15,707,956
   
$
13,000,372
 
Prepaid expenses
   
     
160,320
 
                 
Total current assets
   
15,707,956
     
13,160,692
 
                 
Property and equipment, net of accumulated depreciation of $2,750,788 and $2,531,917,
   at March 31, 2013 and December 31, 2012, respectively
   
3,681,847
     
1,536,658
 
Restricted cash
   
17,439
     
17,439
 
                 
Total assets
 
$
19,407,242
   
$
14,714,789
 
                 
LIABILITIES AND SHAREHOLDERS’ EQUITY
               
                 
Current liabilities
               
Accounts payable
 
$
419,518
   
$
348,683
 
    Bonus accrual
   
273,675
     
 
                 
Total current liabilities
   
693,193
     
348,683
 
                 
Total liabilities
   
693,193
     
348,683
 
                 
Commitments and contingencies (Note 3)
   
     
 
                 
Shareholders’ equity
               
Common stock, $0.001 par value; 100,000,000 shares authorized, 10,385,386 shares issued and outstanding at
   March 31, 2013 and 9,854,268 shares issued and outstanding at December 31, 2012
   
10,385
     
9,854
 
Additional paid-in capital
   
89,069,799
     
85,669,802
 
Accumulated deficit
   
(70,366,135
)
   
(71,313,550
)
                 
Total shareholders’ equity
   
18,714,049
     
14,366,106
 
                 
Total liabilities and shareholders’ equity
 
$
19,407,242
   
$
14,714,789
 
 
See accompanying notes to these condensed consolidated financial statements.
 
 
Uni-Pixel, Inc.
Condensed Consolidated Statements of Operations
(unaudited)
 
   
Three Months Ended
March 31,
 
   
2013
   
2012
 
             
Revenue
 
$
5,069,416
   
$
3,564
 
                 
Cost of revenues
   
3,036
     
1,373
 
                 
Gross margin
   
5,066,380
     
2,191
 
                 
Selling, general and administrative expenses
   
2,180,067
     
929,069
 
Research and development
   
1,939,888
     
1,120,078
 
                 
Operating income (loss)
   
946,425
     
(2,046,956
)
                 
Other income
               
   Interest income, net
   
990
     
1,571
 
                 
Net income (loss)
 
$
947,415
   
$
(2,045,385
)
                 
Per share information
               
   Net income (loss) - basic
 
$
0.09
   
$
(0.29
)
   Net income (loss) - diluted
   
0.07
     
(0.29
)
                 
Weighted average number of basic common shares outstanding
   
10,068,092
     
7,142,307
 
Weighted average number of diluted common shares outstanding
   
12,865,361
     
7,142,307
 
 
See accompanying notes to these condensed consolidated financial statements.
 
 
Uni-Pixel, Inc.
Condensed Consolidated Statements of Shareholders’ Equity
 
   
Common Stock
                   
   
Number
         
Additional
         
Total
 
   
of
Shares
   
Amount
   
Paid-In
Capital
   
Accumulated
Deficit
   
Shareholders’
Equity
 
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
 
Stock compensation expense
   
     
     
631,414
     
     
631,414
 
Exercise of warrants
   
159,400
     
159
     
115,823
     
     
115,982
 
Exercise of stock options
   
371,718
     
372
     
2,430,867
     
     
2,431,239
 
Issuance of restricted stock
   
     
     
221,893
     
     
221,893
 
Net income
   
     
     
     
947,415
     
947,415
 
Balance, March 31, 2013 (unaudited)
   
10,385,386
   
$
10,385
   
$
89,069,799
   
$
(70,366,135
)
 
$
18,714,049
 
 
See accompanying notes to these condensed consolidated financial statements
 
 
Uni-Pixel, Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited)
 
   
Three Months Ended
March 31,
 
   
2013
   
2012
 
Cash flows from operating activities
           
Net income (loss)
 
$
947,415
   
$
(2,045,385
)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
               
Depreciation and amortization
   
218,871
     
126,866
 
Restricted stock issuance
   
221,893
     
 
Stock compensation expense
   
631,414
     
615,619
 
Change in operating assets and liabilities:
               
Decrease in accounts receivable
   
     
4,550
 
Decrease in prepaid assets and other current assets
   
160,320
     
 
Increase in accounts payable
   
70,835
     
14,226
 
Increase in bonus accrual
   
273,675
     
 
Net cash provided by (used in) operating activities
   
2,524,423
     
(1,284,124
)
                 
Cash flows from investing activities
               
Purchase of property and equipment
   
(2,364,060
)
   
(14,071
)
Net cash used in investing activities
   
(2,364,060
)
   
(14,071
)
                 
Cash flows from financing activities
               
    Proceeds from exercise of warrants, net
   
115,982
     
 
    Proceeds from exercise of stock options, net
   
2,431,239
     
 
Net cash provided by financing activities
   
2,547,221
     
 
                 
Net increase (decrease) in cash and cash equivalents
   
2,707,584
     
(1,298,195
)
Cash and cash equivalents, beginning of period
   
13,000,372
     
7,216,663
 
Cash and cash equivalents, end of period
 
$
15,707,956
   
$
5,918,468
 
                 
Supplemental disclosures of cash flow information:
               
Cash paid for interest
 
$
   
$
 
Cash paid for income taxes
 
$
   
$
 
                 
Supplemental disclosures of non-cash financing information:
               
Issuance of 137,778 shares of common stock in exchange for the cashless
exercise of warrants to purchase 198,721 shares of common stock
 
$
771,253
   
$
 
 
See accompanying notes to these condensed consolidated financial statements.
 
 
Uni-Pixel, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
 
Note 1 — Basis of Presentation, Business and Organization
 
Uni-Pixel, Inc., a Delaware corporation, is the parent company of Uni-Pixel Displays, Inc., its wholly-owned operating subsidiary.  As used herein, “Uni-Pixel,” “the Company,” “we,” “us,” and “our” refer to Uni-Pixel, Inc. and Uni-Pixel Displays, Inc.  Our common stock, par value $0.001 per share, is quoted on The NASDAQ Capital Market under the ticker symbol “UNXL.”

Uni-Pixel produces Clearly Superior™ Performance Engineered Film™ to the lighting & display and flexible electronics market segments. The Company has 2 patents issued and 79 patent applications filed covering its Performance Engineered Film™ development and manufacturing platforms.
 
Uni-Pixel’s UniBoss™ is a roll-to-roll or continuous flow printed electronics manufacturing process that offers high fidelity replication of surface micro structures, advanced micro-optic structures, and conductive elements on thin film.  Our roll-to-roll production capabilities result in low production costs which allow us to competitively price our product at or below the price of other products in the market today.
 
Uni-Pixel’s strategy is to develop proprietary Performance Engineered Film™ for applications in large established markets that are susceptible to technology disruption and can potentially deliver Uni-Pixel high profit growth. The Company plans to sell its printed films for applications such as protective cover film, antennas, touch panel sensors, custom circuitry, etc.  A key focus for Uni-Pixel is developing electronic conductive films for use in electronic sensors for consumer and industrial applications.  Uni-Pixel is currently shipping protective cover films for personal devices. The Company sells its protective cover film under the Clearly Superior™ or Diamond Guard™ brand.  Our strategy is to sell our printed film-based products under the Uni-Pixel label, private labels, and through Original Equipment Manufacturers’ (“OEM”) brands.
 
Uni-Pixel is exploring the business potential within key application markets and pursuing those markets that offer profitable opportunities either through licensing or partnerships and/or direct sales.  Uni-Pixel anticipates that its initial film capabilities and partner funded product development capabilities will allow the Company to fund and support further technology development and market expansion. Uni-Pixel has and will continue to utilize contract manufacturing for prototype fabrication to augment its internal capabilities in the short term. Through Uni-Pixel’s internal research and development efforts, the Company has established an extensive portfolio of patents and patent applications, as well as other intellectual property rights that support these joint venture, licensing and manufacturing strategies.

As of March 31, 2013, Uni-Pixel had accumulated a total deficit of $70.4 million from operations in pursuit of these objectives.
 
Since our inception, we have been primarily engaged in developing our initial product technologies, recruiting personnel, commencing our operations and obtaining sufficient capital to meet our working capital needs. In the course of our development activities, we have sustained losses through December 31, 2012. We will finance our operations primarily through our existing cash and possible future financing transactions.
 
As of March 31, 2013, we had cash and cash equivalents of $15.7 million.  We believe that our existing capital resources are adequate to finance our operations until at least December 31, 2013 based on our current long-term business plan.  However, our long-term viability is dependent upon our ability to successfully operate our business, develop our manufacturing process, sign partnership agreements, develop our products and raise additional capital through offerings of our debt or equity securities to meet our business objectives.
 
The Company is subject to a number of risks, including the financial performance of its current products; the potential need for additional financings; its ability to successfully commercialize its product candidates; the uncertainty of the Company’s research and development efforts resulting in future successful commercial products; significant competition from larger organizations; reliance on the proprietary technology of others; dependence on key personnel; uncertain patent protection; dependence on corporate partners and collaborators;  as well as other changes in the electronic market industry.

Basis of Presentation
 
The condensed consolidated financial statements presented in this quarterly report include Uni-Pixel, Inc. and our wholly-owned subsidiary, Uni-Pixel Displays, Inc. All significant intercompany transactions and balances have been eliminated.


Note 2 — Summary of Significant Accounting Policies
 
Interim financial information
 
The condensed consolidated financial statements included herein, which have not been audited pursuant to the rules and regulations of the Securities and Exchange Commission, reflect all adjustments which, in the opinion of management, are necessary for a fair presentation of financial position, results of operations and cash flows for the interim periods on a basis consistent with the annual audited statements. All such adjustments are of a normal recurring nature. The results of operations for interim periods are not necessarily indicative of the results that may be expected for any other interim period or for a full year. Certain information, accounting policies and footnote disclosures normally included in condensed consolidated financial statements prepared in conformity with accounting principles generally accepted in the United States of America have been omitted pursuant to such rules and regulations, although we believe that the disclosures are adequate to make the information presented not misleading. These condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements included in our Form 10-K, for the year ended December 31, 2012, filed with the Securities and Exchange Commission on February 26, 2013.

The accounting and reporting policies of the Company conform to U.S. generally accepted accounting principles (GAAP) and to the practices within the technology industry.  There have been no significant changes in the Company’s significant accounting policies during the three months ended March 31, 2013 compared to what was previously disclosed in the Company’s Annual Report on 10-K for the year ended December 31, 2012. The consolidated financial information as of December 31, 2012 included herein has been derived from the Company’s audited consolidated financial statements as of, and for the fiscal year ended, December 31, 2012.
 
The Company has evaluated events and transactions subsequent to the balance sheet date. Based on this evaluation, the Company is not aware of any events or transactions that occurred subsequent to the balance sheet date but prior to filing this Quarterly Report on Form 10-Q that would require recognition or disclosure in the condensed consolidated financial statements.

Significant Accounting Policies
 
There have been no material changes to the Company’s significant accounting policies during the three months ended March 31, 2013, as compared to the significant accounting policies disclosed in Note 2 of the Company’s consolidated financial statements in the Annual Report on Form 10-K for the year ended December 31, 2012.
 
Use of estimates
 
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Examples include provisions for bad debts, useful lives of property and equipment and intangible assets, impairment of property and equipment and intangible assets, deferred taxes, and the provision for and disclosure of litigation and loss contingencies, derivative liabilities and stock based compensation. Actual results may differ materially from those estimates.
 
Statement of cash flows
 
For purposes of the statements of cash flows, we consider all highly liquid investments (i.e., investments which, when purchased, have original maturities of three months or less) to be cash equivalents.

Concentration of credit risk
 
We maintain our cash with major U.S. domestic banks.   The amounts held in interest bearing accounts periodically exceed the Federal Deposit Insurance Corporation (“FDIC”) insured limit of $250,000.  The amounts held in these banks exceeded the insured limit of $250,000 as of March 31, 2013 and December 31, 2012.   We have not incurred losses related to these deposits.
 
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 rendered, (3) the fee is fixed and determinable, and (4) collectability is reasonably assured.
 

Advance payments are deferred until shipment or the service has been completed.
 
Revenue from licenses and other up-front fees are recognized on a ratable basis over the term of the respective agreement.

Income (loss) per share data
 
Basic income (loss) per share is calculated based on the weighted average common shares outstanding during the period.  Diluted earnings per share also gives effect to the dilutive effect of stock options, warrants (calculated based on the treasury stock method), convertible notes and convertible preferred stock. The Company does not present diluted earnings per share for years in which it incurred net losses as the effect is antidilutive.
            
At March 31, 2013, 38,000 restricted shares and options and warrants to purchase 2,759,269 shares of common stock at exercise prices ranging from $5.00 to $23.91 per share were outstanding, and were included in the computation of diluted earnings per share.
 
Recently issued accounting pronouncements
 
During January 2012, the Company adopted new accounting guidance related to convergence between GAAP and International Financial Reporting Standards (“IFRS”). The new guidance changes the wording used to describe many of the requirements in GAAP for measuring fair value and for disclosing information about fair value measurements to ensure consistency between GAAP and IFRS. The new guidance also expands the disclosures for fair value measurements that are estimated using significant unobservable (Level 3) inputs. The adoption had no impact on the Company’s financial condition or results of operations.
 
During January 2012, the Company adopted new accounting guidance related to the presentation of comprehensive income. The new guidance required the presentation of components of net income and other comprehensive income either as one continuous statement or as two consecutive statements and eliminated the option to present components of other comprehensive income as part of the statement of changes in stockholders’ equity. There is no change to the items that we must report in other comprehensive income or when the Company must reclassify an item of other comprehensive income to net income. This new guidance could effect future reporting requirements.  Because the guidance impacts presentation only, it had no effect on the Company’s financial condition or results of operations.

Accounting Guidance Not Yet Effective
 
Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies are not expected to have a material impact on the Company’s financial position, results of operations and cash flows.

Note 3 — Commitments and Contingencies
 
Leases
 
The Company has entered into a lease for office, warehouse and laboratory facilities in The Woodlands, Texas under a third party non-cancelable operating lease through April 30, 2016. Future minimum lease commitments as of March 31, 2013 are as follows:

Year Ending December 31
     
Nine months ending 2013
 
$
166,757
 
2014
 
206,267
 
2015
 
208,992
 
2016
 
76,294
 
2017
 
--
 
2018
 
--
 
Thereafter
 
--
 
Total
 
$
658,310
 
 
This lease provides the Company with a right to extend the lease term for two additional five year terms or one term of ten years, at the Company’s option.  
 

Litigation

On or around December 12, 2012, we were served with notice of two lawsuits filed by Conductive Inkjet Technology Limited (“CIT”) in the Patent Courts in the United Kingdom.  The two cases are respectively claim nos. HC12E02467 and HC12F02468 (the “UK Actions”).  The first action, 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 action, which is case number HC12E02467, asserts that we included CIT’s confidential information in two PCT patent applications that we filed.  The UK Actions seek a finding that we violated a duty of confidence to CIT, an order that confidential materials be returned to CIT, an order that we change the inventorship on the two PCT applications to include CIT, an inquiry into damages, other forms of injunctive and declaratory relief, and the award of attorney fees and costs.  On January 3, 2013, we filed an Acknowledgement of Service with the court and indicated that we intended to contest the jurisdiction of the United Kingdom court over these matters. A hearing date on our contest of jurisdiction took place on April 22-23, 2013.  A decision on jurisdiction is expected in a few months.   

On January 18, 2013, we filed a verified petition and applications for temporary and permanent injunction against CIT in the 284th Judicial District in Montgomery County, Texas (the “Texas Action”).  The case was assigned cause number 13-01-00561.  In the Texas Action, we asked the court to provide the following relief: issue a preliminary ruling that Montgomery County, Texas is the exclusive venue for the UK Actions, issue a preliminary ruling that CIT violated the terms of an agreement with us by filing the UK Actions, enter a judgment that we did not violate any duty of confidentiality to CIT, enter a judgment against CIT for breach of contract and 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 temporary injunction application had been set for January 31, 2013.
 
On January 25, 2013, CIT removed the Texas Action 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, we filed a motion to remand the Texas Action back to state court.  On February 8, 2013, CIT filed a motion to dismiss the Texas Action followed on February 11, 2013 with a response to our motion to remand.  On February 14, 2013, we filed a reply to CIT's response to the motion to remand.  As of April 16, 2013, the motion to remand is pending.  A response to CIT’s motion to dismiss was filed on March 1, 2013.  As of April 16, 2013, CIT’s motion to dismiss is also pending.

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.
 
Note 4 — Equity, Stock Plan and Warrants
 
Common Stock

During the three months ended March 31, 2013, (1) we issued 371,718 shares of common stock for cash in connection with the exercise of stock options; (2) issued 21,622 shares of common stock for cash in connection with the exercise of warrants; and (3) issued 137,778 shares of common stock as a result of the cashless exercise of warrants.

Stock Incentive Plans

The Company has adopted four stock incentive plans: the 2005 Stock Incentive Plan, the 2007 Stock Incentive Plan, the 2010 Stock Incentive Plan and the 2011 Stock Incentive Plan (collectively, the “Stock Incentive Plans”).  The Stock Incentive Plans allow for an aggregate of up to 2,300,001 shares of our common stock to be awarded through incentive and non-qualified stock options, stock appreciation rights, restricted stock, performance shares and other types of awards.

Our Stock Incentive Plans are administered by our Board of Directors, which has the sole discretion to select participants who will receive the awards and to determine the type, size and terms of each award granted.  As of March 31, 2013, there were 3,071 shares available for issuance under the Stock Incentive Plans.

The following disclosures provide information regarding the Company’s stock-based compensation awards, all of which are classified as equity awards:

The Company grants stock options to employees that allow them to purchase shares of the Company’s common stock. Options are also granted to members of the Board of Directors.  The Company determines the fair value of stock options at the date of grant using the Black-Scholes valuation model.  Most options vest annually over a three-year service period.  The Company will issue shares from its authorized but unissued common stock upon the exercise of stock options.
 

Total compensation expense recognized for options was approximately $0.6 million and $0.6 million for the three months ended March 31, 2013 and March 31, 2012, respectively.  The Company has recorded approximately $0.3 million of stock compensation expense in selling, general and administrative expenses and approximately $0.3 million in research and development expense for the three months ended March 31, 2013 and approximately $0.3 million of stock compensation expense in selling, general and administrative expenses and approximately $0.3 million in research and development expense for the three months ended March 31, 2012.

A summary of the changes in the total stock options outstanding during the three months ended March 31, 2013 follows:
 
           
Weighted
 
         
Average
 
   
Options
   
Exercise Price
 
Outstanding at December 31, 2012
   
2,254,514
   
$
7.08
 
Granted
   
47,000
   
$
14.57
 
Forfeited or expired
   
--
   
$
--
 
Exercised
   
(371,718
)  
$
6.97
 
Outstanding at March 31, 2013
   
1,929,796
   
$
7.28
 
Vested and exercisable at March 31, 2013
   
1,338,258
   
$
7.20
 
 
The fair values of the Company’s options were estimated on the date of grant using the Black-Scholes valuation model with the following weighted-average assumptions:
 
   
Three Months
Ended
March 31,
2013
   
Three Months
Ended
March 31,
2012
 
Expected life (years)
       
5 years
         
5 years
 
Interest rate
   
0.76
to
0.85
 %
   
0.85
to
0.90
%
Dividend yield
       
         
 
Volatility
   
57.26
to
76.35
%
       
63.63
%
Forfeiture rate
       
         
 
Weighted average fair value of options granted
 
$
   
14.57
   
$
   
6.00
 
 
At March 31, 2013, there was $2.4 million of total unrecognized compensation cost related to non-vested stock option awards which is expected to be recognized over a weighted-average period of 0.81 years.  There were approximately 0.4 million options that became vested during the three months ended March 31, 2013.

Common Stock Warrants

As of March 31, 2013, the Company has 829,473 common stock warrants outstanding with a weighted average exercise price of $6.56 per share.  Information regarding outstanding warrants as of March 31, 2013 is as follows:
 
Grant date
 
Warrants
Outstanding
    Exercisable    
Weighted
Exercise
Price
   
Remaining
Life (Years)
 
December 9, 2004
    68,127       68,127     $ 20.70       1.67  
June 10, 2009
    17,464       17,464     $ 7.50       6.18  
August 31, 2009
    26,602       26,602     $ 7.50       6.18  
October 2, 2009
    606,218       606,218     $ 5.00       6.58  
March 15, 2010
    8,337       8,337     $ 7.50       6.75  
March 15, 2010
    10,000       10,000     $ 5.00       6.75  
April 5, 2010
    930       930     $ 7.50       6.75  
December 15, 2010
    91,795       91,795     $ 6.00       2.67  
                                 
Total                      
    829,473       829,473                  
 

Note 5 — Property and Equipment

A summary of the components of property and equipment at March 31, 2013 and December 31, 2012 are as follows:
 

 
Estimated
Useful
Lives
 
March 31,
2013
   
December 31,
2012
 
Research and development equipment
3
to
5 years
 
$
3,984,606
   
$
3,542,045
 
Leasehold improvements
   
5 years
   
362,455
     
333,646
 
Computer equipment
   
5 years
   
97,740
     
97,740
 
Office equipment
3
to
5 years
   
95,144
     
95,144
 
Work-in-progress
     
1,892,690
     
 
       
6,432,635
     
4,068,575
 
Accumulated depreciation
     
(2,750,788
)
   
(2,531,917
)
Property and equipment, net
   
$
3,681,847
   
$
1,536,658
 
 
Depreciation and amortization expense of property and equipment for the three months ended March 31, 2013 and March 31, 2012 was approximately $218,871 and $126,866, respectively.
 
Note 6 — Fair Value Measurements
 
The Company accounts for its financial assets and liabilities that are remeasured and reported at fair value at each reporting period and non-financial assets and liabilities that are remeasured and reported at fair value at least annually.

In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities. Fair values determined by Level 2 inputs utilize observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities. Fair values determined by Level 3 inputs are unobservable data points for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability. The Company’s financial assets consist solely of cash and cash equivalents and accounts receivable.
 
Note 7 — Revenue and Credit Concentrations
 
During the three months ended March 31, 2013 and 2012, revenues by customers with more than 10% of revenue were as follows:

   
Three months ended
March 31, 2013
   
Three months ended
March 31, 2012
 
   
Amount
   
%
   
Amount
   
%
 
Company A
 
$
5,000,000
     
99
%
 
$
-
     
-
%
Company B
   
-
     
-
%
   
3,500
     
98
%
Total
 
$
5,000,000
     
99
%
 
$
3,500
     
98
%
 
As of March 31, 2013 and December 31, 2012, there were no accounts receivable balances.

Note 8 — Subsequent Event

On April 15, 2013, Eastman Kodak Company and Uni-Pixel, Inc. entered into a manufacturing and supply agreement to produce next-generation touch sensors based on Uni-Pixel’s UniBoss™ multi-touch sensor film.
 
On April 23, 2013, the Company completed the sale of 1,374,250 shares of its common stock in an underwritten public offering.  Each share of common stock sold in this offering was sold to the public for $32.00 per share.  The offering resulted in net proceeds of approximately $41.2 million to the Company, after deducting the underwriters’ discounts and other estimated offering expenses payable by the Company.
 
On April 26, 2013, the shareholders of the Company approved an increase to the 2011 Stock Incentive Plan of 800,000 shares of common stock.
 

ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
Forward Looking Statements
 
This report, including the documents that we incorporate by reference, may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

Forward-looking statements in or incorporated by reference in this report include, without limitation, statements related to our plans, strategies, objectives, expectations, intentions and adequacy of resources.  Investors are cautioned that such forward-looking statements involve risks and uncertainties.  Important factors that could cause actual results to differ materially from those indicated in the forward-looking statements include, but are not limited to, the rate and degree of market acceptance of our products, our ability to develop and market new and enhanced products, our ability to obtain financing as and when we need it, competition from existing and new products and our ability to effectively react to other risks and uncertainties described from time to time in our SEC filings, such as fluctuation of quarterly financial results, reliance on third party manufacturers and suppliers, litigation or other proceedings, government regulation and stock price volatility.

In some cases, you can identify forward-looking statements by terminology such as ‘‘may,’’ ‘‘will,’’ ‘‘should,’’ ‘‘could,’’ ‘‘expects,’’ ‘‘plans,’’ ‘‘intends,’’ ‘‘anticipates,’’ ‘‘believes,’’ ‘‘estimates,’’ ‘‘predicts,’’ ‘‘potential,’’ or ‘‘continue’’ or the negative of such terms or other comparable terminology.  Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.  Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date such statements are made.  We do not undertake any obligation to publicly update or revise any forward-looking statement.

Critical Accounting Policies and Estimates
 
In preparing our condensed consolidated financial statements in accordance with accounting principles generally accepted in the U.S. and pursuant to the rules and regulations promulgated by the SEC, we make assumptions, judgments and estimates that can have a significant impact on our net income/(loss) and affect the reported amounts of certain assets, liabilities, revenue and expenses, and related disclosures. We base our assumptions, judgments and estimates on historical experience and various other factors that we believe to be reasonable under the circumstances. Actual results could differ materially from these estimates under different assumptions or conditions. On a regular basis, we evaluate our assumptions, judgments and estimates. We also discuss our critical accounting policies and estimates with the Audit Committee of our Board of Directors.
 
We believe that the assumptions, judgments and estimates involved in the accounting for revenue recognition, income taxes, and long-lived assets, have the greatest impact on our condensed consolidated financial statements, so we consider these to be our critical accounting policies. Historically, our assumptions, judgments and estimates relative to our critical accounting policies have not differed materially from actual results.
 
There have been no significant changes to our critical accounting policies and estimates during the three months ended March 31, 2013, as compared to the critical accounting policies and estimates disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2012, which was filed with the SEC on February 26, 2013.
 
Recent Accounting Pronouncements
 
See Note 2 of our accompanying condensed consolidated financial statements for a full description of recent accounting pronouncements and our expectation of their impact, if any, on our results of operations and financial condition.
 
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, or the service has been completed.
 
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 to pursue 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.
 
RESULTS OF OPERATIONS
 
Comparison of the three months ending March 31, 2013 and 2012
 
REVENUES.  During the first quarter of 2010, we began to manufacture, market and sell our thin film product.

Revenues were $5,069,416 for the three months ended March 31, 2013 as compared to $3,564 for the three months ended March 31, 2012, an increase of $5,065,852.  $5.0 million of revenue from a PC manufacturer was recognized in the three months ended March 31, 2013 as non-recurring engineering revenue.  We anticipate that, as we further develop and improve upon UniBoss, we will earn additional non-recurring engineering revenue in the remaining quarters of 2013.  We expect to sell the finished products to OEMs in 2013.
 
COST OF REVENUES.  Cost of revenues include all direct expenses associated with the delivery of services including internal labor costs. Cost of revenues was $3,036 for the three months ended March 31, 2013 and $1,373 for the three months ended March 31, 2012.   Cost of revenues increased as a result of the increase in revenues.
 
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative expenses increased by 135% or approximately $1,251,000, to $2,180,067 for the three months ended March 31, 2013 from $929,069 for the three months ended March 31, 2012.  The major changes to selling, general and administrative expenses are as follows:
 
a)  Salaries and benefits increased by approximately $415,000 to $966,000 for the three months ended March 31, 2013 compared to $551,000 for the three months ended March 31, 2012 due to the following: an increase in salaries to $310,000 for the three months ended March 31, 2013 compared to $203,000 for the three months ended March 31, 2012 due to an increase in the number of employees; an increase in stock compensation expense to $317,000 for the three months ended March 31, 2013 compared to $316,000 for the three months ended March 31, 2012; an increase in restricted stock expense to $152,000 for the three months ended March 31, 2013 compared to $0 for the three months ended March 31, 2012; and an increase in bonus accrual to $134,000 for the three months ended March 31, 2013 compared to $0 for the three months ended March 31, 2012;

b) Contract labor expense decreased by approximately $13,000 to $21,000 for the three months ended March 31, 2013 compared to $34,000 for the three months ended March 31, 2012;
 
c) Legal expense increased by approximately $687,000 to $734,000 for the three months ended March 31, 2013 compared to $47,000 for the three months ended March 31, 2012 primarily due to legal fees related to the UK Action and the Texas Action and an increase in patent related legal work;
 
d) Accounting expense increased by approximately $2,000 to $27,000 for the three months ended March 31, 2013 compared to $25,000 for the three months ended March 31, 2012; 
 

e) Office expense increased by approximately $2,000 to $3,000 for the three months ended March 31, 2013 compared to $1,000 for the three months ended March 31, 2012; 

f) Travel expense increased by approximately $49,000 to $65,000 for the three months ended March 31, 2013 compared to $16,000 for the three months ended March 31, 2012; 
 
g) Depreciation and amortization expense increased by approximately $92,000 to $219,000 for the three months ended March 31, 2013 compared to $127,000 for the three months ended March 31, 2012.
 
RESEARCH AND DEVELOPMENT. Research and development expenses increased by approximately $820,000, or 73%, during the three months ended March 31, 2013 to $1,939,888 from $1,120,078 for the three months ended March 31, 2012. The primary reason for the increase in research and development expense is due to increased lab expense related to prototype development.  The major changes to research and development expenses are as follows:
 
a) Salaries and benefits attributable to research and development increased by approximately $289,000 to $1,030,000 for the three months ended March 31, 2013 compared to $741,000 for the three months ended March 31, 2012 due to the following: an increase in salaries to $424,000 for the three months ended March 31, 2013 compared to $369,000 for the three months ended March 31, 2012 due to increased number of employees; an increase in stock compensation expense to $314,000 for the three months ended March 31, 2013 compared to $300,000 for the three months ended March 31, 2012; an increase in restricted stock expense to $70,000 for the three months ended March 31, 2013 compared to $0 for the three months ended March 31, 2012; and an increase in bonus accrual to $139,000 for the three months ended March 31, 2013 compared to $0 for the three months ended March 31, 2012;

b) Consulting expense attributable to research and development decreased by approximately $26,000 to $0 for the three months ended March 31, 2013 compared to $26,000 for the three months ended March 31, 2012;
 
c) Lab expense increased by approximately $538,000 to $834,000 for the three months ended March 31, 2013 compared to $296,000 for the three months ended March 31, 2012 primarily due to increased services related to prototype development; and
 
d) Travel expense increased by approximately $8,000 to $21,000 for the three months ended March 31, 2013 compared to $13,000 for the three months ended March 31, 2012.

OTHER INCOME (EXPENSE).  

Interest income, net, decreased to income of $990 for the three months ended March 31, 2013 as compared to income of $1,571 for the three months ended March 31, 2012, primarily due to a decrease in the average cash on hand during the three months ended March 31, 2013.
 
NET INCOME (LOSS).   Net income was $947,415 for the three months ended March 31, 2013, as compared to a net loss of $2,045,385 for the three months ended March 31, 2012.  
 
Off-Balance Sheet Transactions
 
We do not engage in material 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. Until our products begin to earn enough revenue to support our operations, which may never happen, we will continue to be highly dependent on financing from third parties.  On April 23, 2013 we sold 1,374,250 shares of our common stock, raising net proceeds of approximately $41.2 million.  Barring unanticipated expenses, we expect the proceeds from this offering, together with our cash on hand and collaborative agreements with corporate partners, to support our operations through December 31, 2013.

Operating Activities
 
Cash provided by operating activities during the three months ended March 31, 2013 was $2,524,423 as compared to cash used in operating activities during the three months ended March 31, 2012 was $1,284,124.
 

Investing Activities
 
Cash used for investing activities during the three months ended March 31, 2013 was $2,364,060 as compared to $14,071 of cash used for the three months ended March 31, 2012.  The increase in the use of cash for investing activities during the three months ended March 31, 2013 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 $2,547,221 for the three months ended March 31, 2013, which includes:
·  
     $115,982 of net proceeds from the exercise of warrants; and
·  
     $2,431,239 of net proceeds from the exercise of stock options.

During the three months ended March 31, 2012, the total net cash provided by financing activities was $0.

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 March 31, 2013, we had a cash balance of approximately $15.7 million and working capital of $15.0 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.  As noted above, we raised net proceeds of approximately $41.2 million in April 2013 through the sale of our common stock. Barring unanticipated expenses, we expect the proceeds from this offering, together with our cash on hand and collaborative agreements with corporate partners, to support our operations through December 31, 2013.

Through December 31, 2013, 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.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
 
Not applicable.
 
ITEM 4.  CONTROLS AND PROCEDURES.
 
Disclosure Controls and Procedures
 
As of March 31, 2013, management, including our Chief Executive Officer and Chief Financial Officer, performed an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934.  Based on their evaluation, management concluded that, as of March 31, 2013, our disclosure controls and procedures are effective to ensure that material information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that it is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
 
Changes in Internal Control Over Financial Reporting
 
We maintain a system of internal control over financial reporting that is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with accounting principles generally accepted in the United States.  Based on the most recent evaluation, our Chief Executive Officer and Chief Financial Officer have determined that no significant changes in our internal control over financial reporting occurred during our most recent fiscal quarter that have materially affected, or are reasonably like to materially affect, our internal control over financial reporting.
 

PART II - OTHER INFORMATION
 
ITEM 6.  EXHIBITS.
 
Exhibit No.
 
 Description of Document
3.1
 
Composite Certificate of Incorporation of Uni-Pixel, Inc. (1)
3.2
 
Amended and Restated Bylaws of Uni-Pixel, Inc. (2)
31.1
 
31.2
 
32.1
 
32.2
 
101.INS
 
XBRL Instance Document (4)
101.SCH
 
XBRL Taxonomy Extension Schema (4)
101.CAL
 
XBRL Taxonomy Extension Calculation Linkbase (4)
101.DEF
 
XBRL Taxonomy Extension Definition Linkbase (4)
101.LAB
 
XBRL Taxonomy Extension Label Linkbase (4)
101.PRE
 
XBRL Taxonomy Extension Presentation Linkbase (4)
     
(1) Previously filed as an exhibit to Post-Effective Amendment No. 1 to the Company’s S-1 registration statement, number 333-169279 which was filed with the SEC on December 10, 2010 and incorporated by reference hereto.
(2) Previously filed as an exhibit to the Company’s Form 10-SB, filed on February 18, 2005, and incorporated by reference hereto.
(3) Filed herewith
(4) Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability.
 
 
SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
UNI-PIXEL, INC.
     
     
April 30, 2013
 
By:
/s/ Reed J. Killion
Date
 
Reed J. Killion, Chief Executive Officer and President
       
   
By:
/s/ Jeffrey W. Tomz
     
Jeffrey W. Tomz, Chief Financial Officer