Uni-pixel, Inc - Indicate by check mark whether the registrant is a...

Uni-pixel, Inc - Recent Material Event

Item 405 of Regulation S-B contained in this form, and no disclosure will 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-KSB or any amendment to this Form 10-KSB. x

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

The registrant’s revenue for its most recent fiscal year were: $0

As of February 20, 2008, the aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant based upon the price at which such common equity was sold on the Over-the-Counter Bulletin Board Exchange as of such date was $10,670,485.

As of February 20, 2008, the registrant had 22,897,418 shares of common stock, par value $0.001, outstanding.

Documents incorporated by Reference: None

Transitional Small Business Disclosure Format (Check One): Yes o No x

TABLE OF CONTENTS

	PART I
ITEM 1.	DESCRIPTION OF BUSINESS
ITEM 2.	DESCRIPTION OF PROPERTY
ITEM 3.	LEGAL PROCEEDINGS
ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

	PART II
ITEM 5.	MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
ITEM 6.	MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
ITEM 7.	FINANCIAL STATEMENTS
ITEM 8.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
ITEM 8A.	CONTROLS AND PROCEDURES
ITEM 8B.	OTHER INFORMATION

	PART III
ITEM 9.	DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
ITEM 10.	EXECUTIVE COMPENSATION
ITEM 11.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
ITEM 12.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ITEM 13.	EXHIBITS
ITEM 14.	PRINCIPAL ACCOUNTANT FEES AND SERVICES

FORWARD LOOKING STATEMENTS

This annual report contains forward-looking statements about our business, financial condition and prospects that reflect our management’s assumptions and beliefs based on information currently available. You can identify these statements by the fact that they do not related strictly to historic or current facts and often use words such as “anticipate,” “believe,” “plan,” “expect,” “future,” “intend,” “may,” “will,” “should,” “estimate,” “predict,” “potential,” “continue,” and other words and expressions of similar meaning.

No assurance can be given that the results in any forward-looking statement will be achieved and actual results could be affected by one or more factors, which could cause them to differ materially. If any of our assumptions should prove incorrect, or if any of the risks and uncertainties underlying such expectations should materialize, the Company’s actual results may differ materially from those indicated by the forward-looking statements.

You should also consider carefully the statements under “Description of Business - Risk Factors”, which address factors that could cause our actual results to differ from those set forth in the forward-looking statements.

PART I

ITEM 1. DESCRIPTION OF BUSINESS

OVERVIEW

Uni-Pixel, Inc. is a development stage company that has patented a next generation color display technology it calls Time Multiplexed Optical Shutter (“TMOS”). The Company is the leader in the research, development and future commercialization of new flat panel displays using TMOS for a variety of applications including:

·	Mobile phones	·	Televisions
·	Consumer electronic devices	·	Dot Matrix and Segment display devices
·	Notebook computers	·	Digital Signage

Uni-Pixel’s TMOS technology offers significant advantages over existing alternatives including:

· Significantly lower manufacturing cost;

· Greater power efficiency;

· Improved picture quality;

· Increased brightness for daylight readability;

· Versatile production to include a broad range of sizes; and

· Flexible, shapeable and transparent displays.

We expect our advantages in reduced manufacturing costs, enhanced viewing quality, unique design attributes, and improved performance of the TMOS display architecture over current non-TMOS Flat Panel Display alternatives to motivate partners to engage with Uni-Pixel in development, commercialization, or incorporation of TMOS displays in their products. These partners should collectively serve to create the supply and to drive the demand for TMOS-based products.

Uni-Pixel’s technology leadership and intellectual property position is expected to enable it to generate revenues in two phases. The initial phase is expected to generate revenue from partners through funded development efforts, and/or up-front license fees. The second phase is expected to include royalties from licensees that produce TMOS panels or incorporate them into applications for automotive, active signage, medical and consumer electronics (i.e., TVs, monitors, personal computers, cameras, games, etc.). Additionally, the Company expects to supply a key material component, its Opcuity™ Active Layer films, to its panel manufacturing partners that will also be a revenue source.

Through its research and development efforts, the Company has established a portfolio of TMOS-related patents, patent applications and other intellectual property rights. Uni-Pixel currently has 14 issued, 1 allowed and 50 pending patent applications worldwide providing a defensible strategy that will support:

· Further developing proprietary TMOS technology;

· Utilizing contract manufacturing and external partners for prototype and product fabrication transitioning to the manufacture of high performance displays for military and commercial applications;

· Entering into joint ventures in specific vertical market segments to exploit existing manufacturing and distribution channels of its targeted partners; and

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

Through December 31, 2007 we have been primarily engaged in research and development efforts that have expanded our portfolio of intellectual property, building prototype devices that demonstrate the technology, recruiting key personnel, engaging various strategic partners, and raising capital consistent with our strategy. As of December 31, 2007 we had accumulated a total deficit of $32.9 million and expect similar losses to continue through at least 2008. We will finance our continuing efforts and operations primarily through our existing cash, license fees being pursued from strategic partners and additional fund raising activities.

During 2007, Uni-Pixel accomplished a number of milestones in both its technical and business advancement. This included successfully raising $22.0 million in new funding, completing joint development agreements with a variety of development partners, advancing subsystem designs for testing within prototype devices, licensing applicable know-how relative to the assembly of prototype systems, and the successful assembly and demonstration of prototype systems.

Formation History

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

On June 13, 2001, Real-Estateforlease.com, Inc., a Delaware corporation, merged with and into NEV Acquisition Corp. Following the merger, NEV Acquisition Corp. changed its name to Real-Estateforlease.com, Inc. Real-Estateforlease.com, Inc. was incorporated on May 24, 2001, in the State of Delaware to serve as a business-to-business internet information intermediary providing turnkey marketing services to facilitate the leasing of commercial real estate properties.

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

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

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

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

INDUSTRY OVERVIEW

The Flat Panel Display Market

History

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

Replacement of Older CRT Technology by FPDs

Although flat panel displays (FPDs) were initially adopted in the mobile consumer electronics market and in notebook computers, they are displacing cathode ray tube (CRT) displays in larger product applications such as desktop computer monitors and televisions. FPD’s unique form factor and digital interface is enabling the delivery and accurate display of video, telecommuting, information, data, analysis and instructions in both mobile and fixed environments previously unsuitable to CRTs. This transition is being driven by consumer preferences for appliances that are thinner and lighter, particularly in larger display sizes. For example, according to industry research company DisplaySearch, an independent market research firm tracking the FPD industry, the 2002 revenues from the sale of FPD computer monitors exceeded the revenues from the sale of CRT computer monitors for the first time and, in 2004, unit shipments of FPD computer monitors exceeded unit shipments of CRT computer monitors for the first time. In the third quarter of 2007, DisplaySearch reported that FPD computer monitors accounted for 95.5% of display shipments while CRT monitors accounted for only 4.5%.

Proliferation of Mobile Consumer Electronics Devices

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

The overall FPD industry is currently experiencing significant growth. According to DisplaySearch, the worldwide FPD market grew from $43.9 billion in 2003 to $74.8 billion in 2006. DisplaySearch expects this market to grow to an estimated $114.4 billion in 2009. In addition to the rapid replacement of CRT applications such as monitors and TVs, the FPD industry growth is being driven by a number of other market forces including:

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

· Steady growth in usage of notebook computers;

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

· Decreasing cost economics, increasing throughput and improving efficiency of FPD production as newer generation LCD and plasma fabs 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 paced evolution of the form in which it appears. No longer a two-dimensional, text-only experience, online content is being delivered in graphic rich, animated and video formats. As the sophistication of the user continues to heighten, and bandwidth continues to increase, there will be a demand for a superior, high resolution visual experience that only FPDs will be able to deliver – particularly in mobile wireless devices. Flowing from this, new types of applications and functionality will evolve, that in turn will enhance existing markets and create new ones.

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

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

Global FPD consumption has grown by the ongoing replacement of CRT monitors and TV’s, as well as by the increasing popularity of notebook computers and portable handheld devices. In summary, the FPD industry is currently being driven by 5 major trends:

· Increasing acceptance and penetration of FPD TV’s;

· Rapid replacement of CRT monitors and TV’s;

· Steady growth of notebook computers;

· Movement to larger screen areas in FPD TV’s, computer monitors and notebook computers; and

· Migration to video capable color screens in mobile phones and other handheld devices.

The FPD market is currently dominated by LCDs, which accounted for an estimated 91% of total FPD sales in 2007 and demand is increasing across multiple applications with FPD formats generating industry-wide momentum.

Below is a display technology continuum which illustrates the pros and cons of various technologies. As a disruptive technology entering the FPD landscape, we believe TMOS has strong technological advantages when compared against the competition.

CRT

LCD

PLASMA

OLED

DLP / LCoS

TMOS

Pros

+ Inexpensive

+ Proven technology with long lifetime

+ Thin form-
factor

+ Large industry base from PC segment

+ Large size
+ Brightness
+ Viewing angle

+ Superior image: viewing angle, contrast ratio, fast response time

+ Thinnest form factor

+ Potential cost advantage

+ Thinner than CRT, but thicker than LCD or plasma

+ Vivid Color
+ Readability
+ Resolution

+ Energy Efficiency

+ Ruggedness
+ Size
+ Thin

Con

– Thickness, weight, bulky form-factor

– Brightness drops as screen size increases

– Ghosting effect with moving images

– Higher price relative to plasma and rear projection

– Lifespan issues, dimming with age

– High power consumption relative to others

– Only in small form factors in commercial production

– Brightness

– Material lifetime

– Limited viewing angle

– Rear projection technique limits form factors and size

– Not yet in commercial production

TECHNOLOGY

Overview: Uni-Pixel has developed a new color display technology it calls Time Multiplexed Optical Shutter (“TMOS”). A TMOS display is constructed by the addition of a single thin film layer positioned above the planar surface of a light guide constructed of glass or a polycarbonate substrate. This positioning and bonding of the thin film forms a drum type of structure at each individual pixel. The drum structure places two conductors parallel to each other with a dielectric air gap separation. The light guide’s conductor at each pixel is either driven by local transistors (in the form of Thin Film Transistors, TFTs) or through connection to transistors that are off the light guide. The thin film layer comprising the drum head is targeted to be composed of a base substrate layer of polyester film, or PET film, the addition of surface micro-optic features, and a conductor.

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

Reduced Complexity: In contrast to plasma or LCD, a TMOS single pixel shutter emits the three primary colors (red, green, and blue) without the use of three separate sub-pixels. Because TMOS displays have one-third the number of features for the same number of pixels, they benefit from reduced manufacturing complexity.

LCD and plasma complexity is also driven through their use of TFTs. Currently LCD or plasma displays require each individual sub-pixel to be driven by a single TFT, (three TFTs per each pixel) which increases the necessity of additional electrical traces from the control mechanism.

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

Uni-Pixel’s TMOS technology will offer significant advantages over existing flat panel display technologies including:

· Proprietary technology protected by Uni-Pixel’s patent portfolio;

· Significantly lower manufacturing costs when compared to existing technologies;

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

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

· Future displays capable of being flexible, shapeable and transparent;

· Increased durability and reliability; and

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

Uni-Pixel’s advantages in its TMOS technology over LCD or plasma are derived from the relative simplicity of the architecture and material make up. This advantage will translate into a more economical manufacturing process requiring less capital investment for the construction of a plant and significantly lower cost for raw materials.

Currently, LCD or plasma panel displays can take over 100 individual steps in the manufacturing process. This process is necessary to yield intricately developed, small and tightly packed features. However, these manufacturing processes are difficult to manage and are prone to defects.

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

Light Efficiency: LCD display technologies function by emitting light from a back plane (a back light) and then screening, masking, polarizing, and filtering the light until it is emitted from the front of the panel in the appropriate color

intensity. This method yields a maximum efficiency of light of less than 10%. This means that if 1000 nits (a measure of brightness) are created by the backlight, less than 100 nits are displayed out the front.

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

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

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

Successful Prototypes: Uni-Pixel has built prototypes that have demonstrated proof of concept, technical viability, and the operation of the sub-systems within its TMOS technology. The Company’s current prototyping efforts are focused on the process of optimizing the materials and assembly of the display to advance to manufacturability and then on to commercialization.

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

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

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

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

Through 2008, Uni-Pixel expects to align itself with several development partners that will assist in advancing TMOS towards commercialization. The Company believes that it will reach agreements that will generate its first meaningful revenues to augment the development work investments and move the Company forward in its commercialization strategy.

STRATEGY

Uni-Pixel’s business strategy is to penetrate existing display applications with its TMOS technology for widespread use in all varieties of color displays and other related display applications. The Company is presently focused on the following steps to implement its business strategy:

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

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

· Develop Prototypes Suitable to Military Requirements. Working with Lockheed Martin, Uni-Pixel plans to produce prototypes that will demonstrate the Company’s ability to meet the most demanding military requirements with a superior performing display system. Uni-Pixel plans to find partners to engage a small volume pilot production line that will provide limited quantities of displays to meet Lockheed’s demand for existing military applications.

· Finalize a Transferable, Licensable Manufacturing Process. Uni-Pixel plans to complete the development of the core and foundation of its manufacturing processes and protect the intellectual property in the developed processes; and establish a technology transfer team to enable transition of the Company’s manufacturing processes to targeted manufacturing partners and licensees.

· Target Leading Manufacturers. Uni-Pixel plans to target leading display, materials and electronics manufacturers as potential partners and/or licensees of its TMOS technology. The Company will provide extensive technical assistance and support to manufacturers who are early evaluators, developers, or users of its TMOS technology and materials. Uni-Pixel believes that successful incorporation of its technology into the first military or commercial applications will place competitive pressure on other industry participants to adopt a TMOS display technology solution. Uni-Pixel believes that this approach will also encourage potential new market entrants as licensees seek to capture or defend original equipment manufacturer supply contracts. Uni-Pixel will support “pull through” of its TMOS technology by actively marketing its advantages to end product original equipment manufacturers (OEMs) that incorporate display technology into their devices. This will allow UniPixel’s production partners to gain access to the original equipment manufacturer supply chain driven by end OEMs seeking the competitive product advantages offered by the Company’s TMOS technology. This group is targeted to construct TMOS panel packages for incorporation into OEM products.

· Drive Adoption by End-Product Original Equipment Manufacturers. Uni-Pixel plans to use prototype devices to demonstrate its technology to original equipment manufacturers that produce end user products. The Company believes that the significant advantages that Uni-Pixel’s displays will offer in performance and

packaging design can position it to be a “plug and play” replacement for existing LCD displays and will induce original equipment manufacturers to request production of TMOS displays from their existing display suppliers. This is considered a “pull-through” approach to gaining market acceptance and entry of TMOS displays into end-user products and applications. This group will acquire and integrate the panel packages into end user products.

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

Uni-Pixel’s contemplated TMOS future initiatives include applications involving flexible displays, transparent displays and unique military applications. Uni-Pixel also plans to conduct research on the use of a variety of different thin-film technology in TMOS applications and the construction of TMOS displays. The Company’s focus on next-generation technologies is designed to extend Uni-Pixel’s position as the leading provider of TMOS solutions as new markets and applications emerge.

MILESTONES TO COMMERCIALIZATION

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

· Finalization of display pixel mechanism materials;

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

· Completion of supporting drive control circuitry;

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

· Assembly and testing of multiple format prototype devices; and

· Finalization of specifications for retrofitting existing LCD manufacturing plants to TMOS.

Specifically this includes:

High Level Milestones

6 Months		12 Months		18 Months		24 Months
·	Finalize potential materials for inclusion in thin film stacks	·	Complete development agreements and partnering efforts for thin film materials	·	Complete assembly and testing of pilot line	·	Refine and test pilot line procedures

·	Engage leading semiconductor partners to provide design and development services for controller chips	·	Complete design and implementation of proprietary drive control circuitry	·	Refine specifications manufacturing system with the help of partnerships with system specialists	·	Implement Manufacturing system

·	Advance targeted partnerships with TFT Manufacturers to begin efforts to develop TMOS technology for commercialization	·	Engage contractors and partners for implementation of Manufacturing Systems	·	Form partnerships with OEM firms to implement TMOS technology in their end user products	·	Form partnerships with OEM firms to implement TMOS technology in their end user products

Uni-Pixel’s senior management team will work with various targeted strategic partners in each step of the process to provide certain market and technical support resources. Over time, Uni-Pixel expects it will pursue discussions with a variety of potential assembly and manufacturing partners. Uni-Pixel will seek to leverage access to potential partner pilot lines in exploring and growing a continuous flow manufacturing system. It is expected that this pilot line will be the initial platform for the finalization of the specifications to be included in the continuous flow manufacturing system.

CUSTOMERS AND PARTNERS

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

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