SEC: Tech Company Misled Investors About Key Product
The Securities and Exchange Commission today announced that a developer of technologies for touchscreen devices has agreed to pay $750,000 to settle charges that it misled investors about the production status and sales agreements for a key product.
Two former company executives face related charges in an SEC complaint filed today in U.S. District Court for the Southern District of Texas. The SEC entered into a deferred prosecution agreement with the company’s former chairman of the board, who has agreed to cooperate and be barred from serving as an officer and director for five years.
The SEC alleges that Uni-Pixel Inc. began publicly touting sales of a touchscreen sensor product supposedly in speedy high-volume commercial production when in fact only a few samples had been manually completed. The misrepresentations caused Uni-Pixel’s stock price to more than double, enabling then-CEO Reed Killion and then-CFO Jeffrey Tomz to make more than $2 million in personal profits from selling their own shares of company stock. Killion and Tomz allegedly knew the company’s statements were untrue and Uni-Pixel’s manufacturing process was still incapable of mass producing commercial quantities of sensors.
“We allege that Uni-Pixel and top executives portrayed a company whose technology had arrived when in truth it was still in the developmental stage,” said Shamoil T. Shipchandler, Director of the SEC’s Fort Worth Regional Office. “Tech companies and their officers must be honest with investors about the state of their products and cannot portray them as something they are not.”
According to the SEC’s complaint:
- Uni-Pixel announced “multi-million dollar” sales agreements in 2012 and 2013 that highlighted potential revenues but omitted material conditions the company had to meet to actually receive those revenues.
- Uni-Pixel announced in April 2013 that its high-volume production line was “qualified and production ready” and its capacity “started at fifty moving to hundreds and then thousands over the next several months.” At the time, Uni-Pixel had yet to produce any functional sensors through its high-speed process.
- Uni-Pixel issued a press release in November 2013 touting a “purchase order” for its sensors that expected to ship an initial “commercial run” of sensors by year-end. The company concealed that the order was for a mere $10 worth of sensors for the customer to review as samples.
Without admitting or denying the SEC’s charges, Uni-Pixel consented to entry of a final judgment permanently enjoining it from violating Section 17(a) of the Securities Act of 1933 and Sections 10(b), 13(a), and 13(b) of the Securities and Exchange Act of 1934 as well as Rules 10b-5, 12b-20, 13a-1, 13a-11, and 13a-13. The settlement is subject to court approval. The SEC’s litigation continues against Killion and Tomz.
The deferred prosecution agreement with former board chairman Bernard T. Marren alleges that he became aware that information in Uni-Pixel’s press releases was inaccurate but failed to ensure that the company corrected the releases. The agreement requires him to cooperate with the SEC’s continuing case while complying with certain undertakings in order to avoid civil charges against him.
The SEC’s investigation was conducted by David Whipple, Carol Hahn, and David King, and the case was supervised by Jessica Magee in the SEC’s Fort Worth Regional Office. The SEC’s litigation will be led by Matt Gulde.