SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

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

   For the fiscal year ended December 31, 1998 Commission File Number: 0-26380

                                  PIXTECH, INC.
             (exact name of registrant as specified in its charter)

                               Delaware 04-3214691
                (State or other jurisdiction of (I.R.S. Employer
              incorporation or organization) Identification Number)


                  Avenue Olivier Perroy, 13790 Rousset, France
           (Address of principal executive offices including zip code)

               Registrant's telephone number, including area code:

                            011-33- (0) 4-42-29-10-00

Securities registered pursuant to Section 12(b) of the Act:

     Title of each class                            Name of each exchange
                                                     on which registered
  --------------------------------------------------------------------------
            None                                             None

Securities registered pursuant to Section 12(g) of the Act:

                          Common Stock, $.01 Par Value

     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 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___

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.

     The aggregate  market value of voting stock held by  non-affiliates  of the
registrant as of March 1st, 1999 was: $28,522,891.

     There were 15,150,329  shares of the registrant's  Common Stock outstanding
as of March 1st, 1999.

                                  ------------
                       DOCUMENTS INCORPORATED BY REFERENCE

     Portions  of the  definitive  proxy  statement  of the  Registrant  for the
Registrant's  1999 Annual Meeting of  Shareholders  to be held on or about April
27, 1999 which  definitive proxy statement will be filed with the Securities and
Exchange  Commission not later than 120 days after the registrant's  fiscal year
of December 31, 1998, are  incorporated  by reference into Part III of this Form
10-K.


                                                                          Page 1
<PAGE>


Item 1. Business

General

     PixTech,  Inc. was  incorporated in Delaware in November 1993 as the parent
company of PixTech S.A., a French corporation formed in June 1992. The Company's
principal  executive  offices  are  located  at Avenue  Olivier  Perroy,  13790,
Rousset, France. The Company's main telephone numbers are 011-33-(0)442-29-10-00
and (408) 986-8868.

     PixTech  is  dedicated  to  commercializing  its  field  emission  displays
("FED").  The company  expects that FEDs will provide  higher  viewing  quality,
lower manufacturing costs and more efficient power consumption than current flat
panel display technologies.

     In 1992, the Company  exclusively  licensed key patents from an electronics
research   institute,    Laboratoire    d'Electronique,    de   Technologie   et
d'Instrumentation ("LETI"), and, since then, focused on advancing FED technology
toward high volume manufacturing and wide market acceptance.

     Since the Company was  established,  its  strategy has been to minimize the
commitment of its financial  resources by leveraging the expertise and resources
of  other  parties.  Initially,  this  strategy  was  applied  to  the  area  of
fundamental research, manufacturing process and product development. The Company
licensed its technology to some display manufacturers,  including Motorola, Inc.
("Motorola")  and  Futaba  Corporation  (Japan)  ("Futaba").   With  the  market
introduction of its first commercial displays,  the Company is now employing the
same strategy for manufacturing and distributing its products.

     During 1998, the Company  succeeded in achieving a significant  increase in
pilot manufacturing  yields, thus leading to increased shipments of its products
from its pilot plant.  The Company also advanced the transfer and  adaptation of
its  manufacturing  processes to its  Taiwanese  manufacturing  partner,  Unipac
Optoelectronics  Corporation (<< Unipac >>), and was able to initiate  shipments
from Unipac to its  customers in the later part of the year.  During  1998,  the
Company  supplied more than 1,000 FED displays to its main customer Zoll Medical
Inc. ("Zoll Medical"), a manufacturer of portable medical equipment. To date, no
other FED competitor's  product has yet reached the stage of being  incorporated
in an end-user product. In addition,  the Company successfully  demonstrated the
world's  first 15-inch  color FED display  prototype,  thus keeping a leadership
position in FED technology development.

     The Company is currently  focused on (i) increasing  production  yields and
capacities  with Unipac,  (ii) expanding its customer base and product  offering
and (iii) further developing large-size displays based on FED technology.


The Flat Panel Display Market

     According  to  Stanford  Resources,  Inc.  (<< SRI >>),  a market  research
organization,  the  market for flat panel  displays  (<< FPD s >>) is  expanding
rapidly  and  projected  to grow from $13.8 bn in 1998 to $20.6 bn in 2002.  The
Company  expects  FEDs to penetrate  the existing FPD market by offering  better
viewing quality than existing technologies, such as active matrix liquid crystal
displays ("AMLCDs"), at similar manufacturing costs.

     The  strong  growth  of the FPD  market  is  expected  to be  driven by the
continued proliferation of products requiring FPDs, including desktop computers,
car navigation systems,  hand-held computers,  and instrumentation.  The Company
expects advanced display  applications  requiring full color and video to become
more  prevalent  over the next few  years.  FEDs may also  offer an  alternative
technology  in markets  which are  currently  only  served by cathode  ray tubes
("CRTs")  due to  performance  requirements  such  as  brightness  or  range  of
operating  temperature.  Thus the Company  believes the CRT  replacement  market
should also be considered as an opportunity for its FEDs.

     Laptop  computers  constitute the largest single market for FPDs.  However,
much of the  growth in the  computer  FPD market  will be driven by desktop  and
handheld computers.


                                                                          Page 2
<PAGE>


     The Company  believes  that  emerging FED  technology  has the potential to
address many of the shortcomings of AMLCDs.

     The following table summarizes some of the differentiating  characteristics
of CRT, AMLCD and FED technologies(1):

<TABLE>
<CAPTION>
   Characteristics                  CRT                        AMLCD                            FED
   <S>                      <C>                           <C>                           <C>
   Viewing angle            Very wide horizontal          Wide horizontal,              Very wide horizontal
                            and vertical                  limited vertical              and vertical



   Video speed              High speed over full          Adequate speed over           High speed over full
                            temperature range             limited temperature           temperature range
                                                          range



   Brightness range         From low to very              From low to                   From low to very
                            high, easy to dim             medium, limited               high, easy to dim
                                                          dimming capabilities



   Dynamic range *          High                          Limited                       High



   Operating                Wide range                    Limited range due to          Wide range and instant-on at low temperature
       temperature                                        liquid crystal
                                                          behavior



   Power consumption        High                          Current industry              Comparable to
                                                          standard                      current industry
                                                                                        standard



   Manufacturability        Mature process                Complex process               Early stage of manufacturing development
                            offering lowest cost                                        Fewer process steps
                                                                                        than AMLCD
</TABLE>

     * Dynamic range results from a combination of contrast and peak brightness.


--------
(1) The  information  set  forth  in this  table is  based  upon  the  Company's
assessment of existing CRT and AMLCD  products when compared to FED products and
prototypes manufactured at PixTech's pilot plant. No assurance can be given that
FEDs, if manufactured in commercial  quantities,  will achieve such  performance
characteristics on a cost-effective basis.


                                                                          Page 3
<PAGE>


Strategy

     The Company  has adopted a unique  growth  strategy  to  commercialize  its
proprietary FED technology. Key elements of this strategy include:

     Manufacturing:  the short path to high volume. As the shortest path to high
volume production,  the PixTech  manufacturing  strategy relies on a high-volume
manufacturing source in Taiwan.

     PixTech  entered into a  contract-manufacturing  agreement with Unipac,  an
AMLCD  manufacturer  based in Taiwan in 1997. During 1998, the Company installed
FED specific equipment required to complement Unipac's AMLCD manufacturing plant
and  transferred   and  started   adjustment  of  all  of  its  proprietary  FED
manufacturing processes, leading, in October 1998, to the successful delivery to
PixTech's  customers of the first FED  displays  manufactured  in Taiwan.  While
current shipments by Unipac of FEDs are still minimal,  the Company expects that
Unipac will be successful in  increasing  manufacturing  yields in 1999 and that
therefore  display  shipments from Unipac will exceed several thousand units per
month by the end of 1999.

     Marketing:  from  monochrome to color  products.  With the delivery of more
than 1,000 of its monochrome  displays to its customers in 1998, PixTech reached
a new stage  toward  wide  market  acceptance  of Field  Emission  Displays.  As
products  manufactured by Unipac become more available,  PixTech  anticipates to
receive volume orders for high-margin low to medium volume  applications  mostly
in the medical and industrial  market segments to initiate growth of its product
revenues. To significantly increase its market penetration, PixTech designed its
first color product, targeted for high-growth high-volume market segments, where
FED benefits are expected to bring high performance,  cost competitive  products
to end-users.  These  segments will include  navigation  and video  displays for
transportation  markets, as well as handheld personal computers ("HPCs"),  where
display performance is a recognized bottleneck to market expansion.

     Research and  development:  a vision  towards  large  screens.  The Company
believes that its proprietary technology can evolve toward displays of 15 inches
and larger,  offering  CRT-like  viewing quality and  competitive  manufacturing
costs. In 1998, the Company  demonstrated  the world's first 15-inch color field
emission display  prototype,  which it developed  together with a major Japanese
CRT manufacturer.  The Company actively seeks additional cooperation partners to
accelerate the program and bring large screen products to the market.

     Intellectual Property: a comprehensive patent portfolio.  Shortly after the
company was founded,  PixTech  spearheaded the creation of a cooperative program
between PixTech,  Motorola,  Raytheon,  Texas  Instruments and Futaba (Japan) to
advance FED technology.  Due to this program,  as of December 1998, PixTech held
or had a license to  approximately  1,022 patents and pending  applications,  of
which  approximately  628 patents are  counterparts in various  jurisdictions of
originally filed patents.

Manufacturing

     Outsourcing  high-volume  manufacturing.  In  1997,  the  Company  chose to
partner with Unipac, because much of the equipment used for FED manufacturing is
common to the AMLCD  manufacturing  process.  In doing  so,  PixTech  is able to
leverage  both  Unipac's  installed  base of  equipment  as  well  as  extensive
expertise in the production of displays.

     In 1998, the Company installed all of the FED-specific  equipment needed to
complement Unipac's AMLCD  manufacturing  plant. The Company currently transfers
its FED manufacturing processes, and started qualification of the first displays
manufactured  in Taiwan.  While  current  shipments  by Unipac of FEDs are still
minimal,   the  Company  expects  that  it  will  be  successful  in  increasing
manufacturing  yields in 1999 and therefore  that display  shipments from Unipac
will exceed several  thousand units per month by the end of 1999.  However,  the
Company does not expect to generate  positive  gross  margins on the sale of its
displays by the end of 1999.


                                                                          Page 4
<PAGE>


     Under the foundry  agreement  with Unipac,  PixTech will purchase  displays
from Unipac on a cost plus basis during the initial production period. After the
startup phase of  manufacturing,  PixTech and Unipac will determine a unit price
per display on a  quarterly  basis,  which is expected to decrease  over time to
take into  account  yield and  process  improvements.  The  Company  intends  to
implement  profit-sharing  mechanisms  with  Unipac,  so  that  Unipac  will  be
motivated to seek continuous manufacturing improvement to reduce cost.

     Manufacturing  Engineering.  PixTech's pilot production line in Montpellier
currently  supports  early  deliveries to customers  ahead of volume  production
requirements.  It is also  being  used to  streamline  manufacturing  processes,
develop  new  products  and  refine FED  technology.  After  start-up  of volume
production at Unipac,  the pilot  production line will be used to support market
introduction  of color  displays and  development  of large  displays using high
voltage technology.

     The Company's  pilot facility has  approximately  31,100 square feet (2,900
square  meters) of space and contains  approximately  10,900  square feet (1,000
square meters) of clean room ranging from class 10 to class 1000. As of December
31, 1998, the Company had 136 employees engaged in process development and pilot
production at this facility.

Products

     PixTech's  current product is a 5.2-inch  monochrome  display.  The Company
expects to sell the first samples of its full color 5.6-inch  display during the
first half of 1999. In addition, the Company intends to expand its product range
within the 4 to 8 inch display market segment.

Marketing and sales

     Target segments:  The Company is currently  marketing its displays directly
to  original  equipment  manufacturers  ("OEM")  and system  integrators  in the
instrumentation,  medical, and transportation market segments where the benefits
of the  Company's  products  are highly  valued.  The Company  has not  targeted
certain  segments of the market,  such as the computer  laptop  display  market,
which are large but  extremely  price  competitive,  and consumer  markets.  The
Company believes that as it is still early in FED manufacturing  learning curve,
it would not be able to compete  effectively on price with well  established LCD
manufacturers.

     Pricing:  The Company  believes  that FED screens will provide  significant
quality and operational  advantages compared with competing flat panel displays.
To allow fast market  penetration,  the Company's  current pricing  strategy is,
however,  to offer its displays with better viewing quality at similar prices to
competing products.

     Distribution and Sales: PixTech intends to achieve sales coverage through a
combination of the following:  (i) its own sales and marketing  force which will
address  major OEM  customers  in the US and in Europe,  (ii) a network of sales
representatives  to expand  coverage  mainly in the US,  and (iii) a network  of
distributors  to address  specific  areas of the  worldwide  market and to offer
technical and commercial  customer  support.  The Company has granted  exclusive
distribution rights to Sumitomo Corporation  ("Sumitomo") in Japan. In 1999, the
Company   intends  to  progress  on  its  efforts  to  conclude  non   exclusive
distribution  agreements  for both the  United  States and  Europe,  in order to
expand market reach in a cost effective manner.

     Customers:  To date,  the Company has sold  samples of its displays to more
than one hundred  customers,  mostly  based in the United  states and in Europe.
During  1998,  the Company  shipped a large part of its products to Zoll Medical
Corporation,  a US  medical  equipment  manufacturer  which  markets a  portable
defibrillator  incorporating  PixTech's  FEDs.  The Company  received a purchase
order to deliver 50,000 displays to Zoll Medical over 5 years. Zoll Medical uses
the  screens  as a key  differentiator  against  competing  products  using  LCD
screens,  emphasizing  some  of  the  key  characteristics  of  FEDs,  including
brightness and viewing angle. The Company has started  negotiations with targets
for customer base  expansion and believes that it can book new orders when units
shipments from Taiwan exceed deliveries to Zoll Medical.


                                                                          Page 5
<PAGE>


Technology

     The basic  principle used in FEDs is the same as in  conventional  CRTs. In
both  technologies,  electrons are extracted  from a source (the  "cathode") and
collected by a phosphor-coated  screen (the "anode") held at positive voltage to
accelerate  electrons.  The electrons travel in a vacuum between the cathode and
the anode. The phosphor coating is a cathodoluminescent  material,  meaning that
it emits  light  when hit by  electrons.  Color is  created  by using  different
colored  phosphors  and by  directing  the  electrons  so that they address each
different color phosphor separately.

     In an FED,  each  picture  element (a "pixel")  on the screen has  multiple
electron  sources  from an array of  electron-emitting  microtips.  The emitting
cathode surface, organized into a matrix of rows and columns, is held closely to
the receiving  anode.  Selection of cathode row and column  voltages  determines
which pixel will be illuminated.

     An FED color  display  can be designed  using  either a low voltage or high
voltage  structure  between anode and cathode.  The advantages of a high voltage
anode structure are that well characterized CRT phosphors can be used, with high
luminous  efficiency.   The  potential  drawbacks  are  that  the  use  of  high
voltage--at  least  5,000  volts--between  cathode  and  anode  may  lead to the
occurrence  of  uncontrolled  flash-over,  limiting the useful life of such high
voltage devices.  Furthermore,  spacer  materials,  glass sealing  manufacturing
steps and driving electronics may be more costly for high-voltage FEDs.

     PixTech's cathode technology can be incorporated with equal performance and
cost  effectiveness  in the  design  of  high  voltage  FEDs  for  large  screen
applications  or low  voltage  FEDs for  smaller  screen  applications.  PixTech
believes  that  the low  voltage  switched-anode  technology  is the  most  cost
effective  solution for displays of 12 inches or less, and that high voltage FED
technology,   with  further   development,   could  address  larger  performance
requirements.

Research and Development

     The Company is focusing  its  research  and  development  programs in three
areas: (i) display  performance  enhancement (ii)  manufacturing  efficiency and
(iii) scaling-up of the technology to 15-inch and larger displays.

     Display  Performance  Enhancement.  Key elements of display performance are
brightness,  lifetime,  and power  efficiency.  PixTech  is  seeking  to balance
luminous   efficiency  with  power   efficiency  to  produce  bright,   but  low
power-consumption  displays.  Display  reliability is heavily dependent upon the
manufacturing  process  used in  assembling  the  displays  as well as upon  the
characteristics  of the phosphors  used on the anode.  The Company is working to
make further advances in phosphors and related manufacturing technologies.

     Manufacturing   efficiency  and  costs.   Improvements   in   manufacturing
efficiency can be obtained by simplifying  manufacturing  processes and reducing
specific equipment costs.  PixTech has recently been focusing on simplifying the
assembly  process to achieve  equipment and material cost  reduction  associated
with these steps.

     Large Display  Development.  The Company conducts a development  program to
demonstrate the large display (15-inch and larger)  capability of FED technology
with the goal of addressing the desktop monitor  replacement market. The Company
has strengthened  this program through  collaboration  with a major Japanese CRT
manufacturer.

     A portion of the Company's  research and development  activities is carried
out at LETI, a laboratory under the CEA. The Research and Development  Agreement
between  Commissariat  a  l'Energie  Atomique  ("CEA")  and  PixTech  (the "LETI
Research   Agreement")  provides  for  the  Company  and  CEA  to  fund  equally
FED-related  research and development  activities at LETI. in the FED field (the
"Program").  The  LETI  Research  Agreement  provides  for CEA to  perform  this
research and development work exclusively for PixTech.


                                                                          Page 6
<PAGE>


     The Company's  research and  development  expenses in the fiscal year ended
December 31, 1998 were $19.4 million, as compared to $15.5 million in 1997.

PixTech's licensing program

     Between 1993 and 1995,  PixTech  entered  into  bilateral  cooperation  and
license  agreement  with  Motorola,  Futaba,  Raytheon and Texas  Instruments to
advance FED technology. These agreements provided each of these companies with a
license, subject to certain limitations, to all FED technology owned by PixTech,
LETI and the other parties. These agreements gave PixTech a royalty-free license
to any FED technology held within the group at the term of the agreements,  with
certain rights to sublicense.  In addition,  PixTech received milestone revenues
under these  agreements  during the cooperation  phase. The agreement with Texas
Instruments  was terminated in March 1996, but PixTech  maintains its license to
Texas Instruments' FED technology. The Company believes that one of its existing
licensees,  Raytheon Company, may have suspended its internal program to develop
FEDs.

     Although the cooperation phases of these agreements have all ended, PixTech
is granted royalty-free  licenses to all FED technology held by each other party
at the end of  each  respective  cooperation  period,  with  certain  rights  to
sublicense.  PixTech is also  entitled to  royalties  on future  sales by any of
these licensees of any FED products which are based on PixTech's technology.

     Futaba and Motorola are  currently  operating  their own FED  manufacturing
plant in Mobara (Japan) and Tempe, Arizona, respectively, and publicly announced
their intention to introduce FED products in the market.

Competition

     The market for flat panel display products is intensely competitive.  It is
currently dominated by LCD technology. LCD manufacturers, such as Sharp, NEC and
Hitachi,   have   substantially   greater  name   recognition   and   financial,
technological,  marketing and other resources than PixTech, and continue to make
substantial investments in improving LCD technology, manufacturing processes and
in  manufacturing  facilities.  The recent increase in world-wide  manufacturing
capacity  of FPDs and the  entrance  of new  competitors  in the FPD market have
caused  over-supply  conditions  leading to dramatic  reductions in the price of
FPDs over the last few years. In order to effectively compete,  PixTech could be
required to continuously  increase the performance of its products and to reduce
prices.  In the event of price  reductions,  the  Company's  ability to maintain
gross margins would depend on its ability to reduce its cost of sales.

     There are a number of domestic and international  companies  developing and
marketing  display  devices  using  alternative  technologies,  such as  PMLCDs,
AMLCDs,  vacuum  fluorescent  displays,  electroluminescent  panels,  and plasma
panels.

     The Company has ended its  cooperation  phase with both Futaba and Motorola
in  January  1997  and June  1998,  respectively  and is  aware  of  significant
continued  investments  in FED  technology  development  by each of them. In the
future,  the Company expects to face competition from both of them. In addition,
some of the basic FED  technology is in the public domain and, as a result,  the
Company has a number of potential  direct  competitors  developing FED displays.
The  Company  is aware of  several  other  companies  which are  developing  FED
technologies similar to that of the Company, including but not limited to, Sony,
Fujitsu, and Samsung as well as smaller organizations, including Candescent, FED
Corporation,  Micron Display Division,  a division of Micron Display Technology,
and SI Diamond Technology  Incorporated.  Many of these companies have made, and
may continue to make, significant advancements to their FED technology.


                                                                          Page 7
<PAGE>


     Although the Company has  proprietary  rights to significant  technological
advances in FED technology, its technology and products are still in development
stage.  There can be no  assurance  that  such  potential  competitors  have not
developed or will not develop  comparable  or superior FED  technology.  Many of
these  developers  of  alternative  FPD  and  competing  FED  technologies  have
substantially greater name recognition and financial,  research and development,
manufacturing  and  marketing  resources  than the  Company,  and have  made and
continue to make  substantial  investments in improving their  technologies  and
manufacturing  processes.  In the event  efforts  by the  Company's  competitors
result in the development of products that offer significant advantages over the
Company's  products,  and the  Company is unable to improve  its  technology  or
develop or acquire alternative technology that is more competitive,  the Company
would be adversely affected.

Patents and Trade Secrets

     As of  December  31,  1998,  the  Company  held or had  license to 217 U.S.
patents and 92 pending  U.S.  patent  applications.  The Company  also  actively
pursues foreign patent protection in countries of interest to the Company. As of
December  31, 1998,  the Company had filed,  or was  licensed  under,  85 patent
applications in foreign countries.

     The Company's fundamental  technology was developed by LETI and licensed to
PixTech in 1992.  Under the LETI License  Agreement,  which has a term of twenty
years, CEA granted the Company an exclusive, worldwide, royalty-bearing license,
with right to  sub-license,  of all FED  technology  developed by CEA (including
LETI).

     In addition to the payment of royalties on sales of products  incorporating
the licensed  technology,  the Company must pass through to CEA a percentage  of
any royalties on licensed product sales by PixTech's sub-licensees.

Employees

     As of December 31, 1998,  the Company had 152 full-time  employees,  and 20
part-time employees. The average number of employees was 143, 144 and 164 during
1996,  1997 and 1998  respectively.  At December  31, 1998,  36  employees  were
engaged  in  research  and  development,  111  in  process  development,   pilot
production and support of the transfer and adjustment of PixTech's manufacturing
processes  to  Unipac,   5  in  marketing  and  sales  and  20  in  general  and
administrative functions. The Company's success will depend in large part on its
ability to attract and retain  skilled and  experienced  employees.  The Company
considers its relations with its employees to be good.

     In  addition,  as of December 31,  1998,  LETI had 10  full-time  employees
working exclusively for PixTech's R&D program. Unipac had 33 full-time employees
working  exclusively on the start-up of the FED  manufacturing and relies on its
manufacturing  employees to perform a significant  portion of the manufacture of
FEDs. The number of the employees  working on the FED  manufacturing is expected
to increase significantly in the next 12 months.


                                                                          Page 8
<PAGE>


Item 1A. Executive Officers of the Registrant

     As of December 31, 1998, the current executive officers of the Company were
as follows:

         Name            Age        Position held with the Company
------------------------ ---        ------------------------------
Jean-Luc Grand-Clement..  59  Chief Executive Officer, Chairman of the Board (1)
Dieter Mezger...........  55  President                                      (1)
Francis G. Courreges....  46  Executive Vice President, Development
Michel Garcia...........  52  Vice President, Industrial Partners
Thomas M. Holzel........  58  Vice President of Marketing and Sales
Jean-Jacques Louart.....  49  Vice President, Operations
Yves Morel..............  32  Vice President, Chief Financial Officer
                                       
     (1) In January 1999,  Dieter Mezger was elected Chief Executive Officer and
President of the Company.  Jean-Luc  Grand-Clement remains Chairman of the Board
of Directors.

     Each  officer's term of office extends until the first meeting of the Board
of  Directors  following  the next annual  meeting of  stockholders  and until a
successor is elected and qualified.

     Jean-Luc Grand-Clement, a co-founder of the Company, has served as Chairman
of the Board of Directors  since the  Company's  inception in 1992 and served as
President  and Chief  Executive  Officer  through  March 1998 and January  1999,
respectively.  Prior to  founding  the  Company,  Mr.  Grand-Clement  co-founded
European Silicon Structures ("ES2"), a European applications specific integrated
circuit  supplier  for cell based and full custom CMOS  products,  and served as
Chief  Executive  Officer and then as Chairman of the Board of  Directors of ES2
from its  founding in 1985 until 1991.  From 1967 to 1978 and from 1982 to 1985,
Mr.  Grand-Clement held various positions with Motorola,  Inc., most recently as
Vice-President   and  Assistant   General  Manager  of  the  Motorola   European
Semiconductor Group from 1983 to 1985. From 1978 to 1982, Mr.  Grand-Clement was
the  Managing  Director  of  Eurotechnique,   a  MOS  semiconductor  design  and
fabrication joint venture between National  Semiconductor and Saint-Gobain.  Mr.
Grand-Clement  graduated from Ecole Nationale Superieure des  Telecommunications
in Paris.

     Dieter  Mezger  joined  PixTech in March 1998 as President  and was elected
Chief  Executive  Officer in January  1999.  Between 1996 and 1998,  Mr.  Mezger
worked as a marketing  consultant  in  California.  Between  1990 and 1996,  Mr.
Mezger was President of Compass Design Automation,  a wholly-owned subsidiary of
VLSI  Technology,  Inc.  which  develops and markets  computer  assisted  design
software tools for IC designs.  From 1984 to 1990, Mr. Mezger established VLSI's
European  presence  in  Munich,   building  the  European  marketing  and  sales
organizations,  design centers, R&D operations, as well as its finance and human
resources  departments.  Mr. Mezger simultaneously built VLSI's wireless and GSM
businesses. Prior to joining VLSI, Mr. Mezger career included fifteen years with
Texas  Instruments,  where  he  rose  to the  position  of  Manager,  Sales  and
Marketing,  Europe.  He  holds  a BS  in  engineering  from  the  University  of
Stuttgart.

     Francis G. Courreges was appointed Executive  Vice-President of the Company
in July  1995.  Before  that,  he  served as  Vice-President  of  Marketing  and
Development  of the Company since July 1993.  Prior to joining the Company,  Mr.
Courreges  was a  co-founder  of ES2,  and  served as  Manager  of direct  write
technology for MOS and gate array products from 1985 to 1991 and  Vice-President
of Marketing from 1991 to 1992.  Prior to joining ES2, Mr. Courreges was product
engineering  manager at Sierra  Semiconductor from 1984 to 1985. He held various
process and product  engineering  positions  at  Electronic  Arrays from 1977 to
1979, at National  Semiconductor,  from 1979 to 1980 and at Eurotechnique,  from
1980 to 1984. Mr. Courreges  graduated from Ecole Nationale  Superieure des Arts
et Metiers and holds M.S. and Ph.D.  degrees in Materials  Science from Stanford
University.

     Michel  Garcia  is a  co-founder  of the  Company  and was  appointed  Vice
President,  Industrial  Partners in August 1995.  Before that,  he had served as
Vice-President of Equipment Engineering since the Company's inception.  In 1986,
Mr. Garcia founded  Microsolve,  a semiconductor  processing  equipment company,
which he managed  for five  years.  From 1981 to 1985,  he served as  operations
manager at  Eurotechnique  ; from 1979 to 1981, he served as fab process manager
at  Eurotechnique;  and from 1977 to 1979 he served  as a  process  engineer  at
Motorola.  In  1970,  Mr.  Garcia  graduated  from  Ecole  Nationale  Superieure
d'Electronique et de Radioelectricite  de Grenoble,  and he received a degree of
Doctor of Microelectronics from Grenoble University.


                                                                          Page 9
<PAGE>


     Thomas M. Holzel was appointed Vice President of Marketing and Sales of the
Company in July 1995. Mr. Holzel served as Marketing  Manager of Display Devices
at Raytheon  Company from 1988 to 1995.  In 1981, he founded  Arcturus,  Inc., a
company that developed the first computer compatible large screen displays,  and
was  president  of Arcturus  from 1981 to 1988.  Prior to that,  Mr.  Holzel was
Director of  Industrial  Marketing at Advent  Corporation.  Mr.  Holzel holds an
economics degree from Dartmouth College.

     Jean-Jacques  Louart  joined  PixTech  in May  1997  as  Vice-President  of
Operations. Mr. Louart served as Quality Director of LX Management, a consultant
agency,  from  1995 to 1997.  From 1993 to 1995,  he was  president  of SIP,  an
equipment  engineering  company.  Prior to that,  Mr. Louart spent 18 years with
IBM,  holding  process  and  manufacturing   management  positions.  Mr.  Louart
graduated  from << Ecole de l'Air >> and  holds a  management  degree  from CPA,
Paris.

     Yves Morel  joined the  Company in April 1994 as  Director  of Finance  and
Administration.  He was promoted to Chief Financial Officer in March 1997 and to
Vice President in March 1998.  From 1993 to 1994, Mr. Morel was Finance  Manager
of  International  Software  Enterprise,  a hardware and  software  distribution
group.  From 1992 to 1993,  Mr. Morel served as  Controller  at Genoyer  S.A., a
manufacturing and distribution company in the industrial valve and piping field.
From 1989 to 1992,  Mr.  Morel  was  employed  at Price  Waterhouse.  Mr.  Morel
graduated  from the Ecole des  Hautes  Etudes  Commerciales  and he  obtained  a
Diplome d'Etudes Superieures Comptables et Financieres.

Item 2. Properties

     The Company's corporate offices are in an approximately  11,000 square foot
(1,000 square meter) facility located in Rousset,  France.  The Company owns the
facility and  occupies  approximately  5,500 square feet (500 square  meters) of
floor  space.  A third  party  rents  the rest of the area  under a lease  which
terminates in June 1999. The Company  leases a facility  including a clean room,
office area, and engineering laboratories in Montpellier,  France, having 31,100
square feet (2,900 square meters) of space. The Montpellier  lease terminates in
2000, with an option to renew.

     Also, the company  leases an 8,000 square foot (750 square meter)  facility
including  an  office  area and  engineering  laboratory  area in  Santa  Clara,
California. The lease on this facility terminates in 1999.

Item 3. Legal Proceedings

     The Company has received  correspondence  from Futaba  Corporation  and its
legal  counsel  since  January  1998  alleging  the  following  : (i) Pixtech is
infringing one or more patents owned by Futaba relating to the  construction and
manufacture  of its displays that are not expressly  included  under the license
agreement  between  Futaba  and  Pixtech,  (ii)  PixTech's  use of terms such as
"alliance"  and   "partners"  in  describing  the  nature  of  its   contractual
relationships  with Motorola,  Raytheon and Futaba in reports filed with the SEC
is misleading and (iii) certain  provisions in the Foundry Agreement with Unipac
constitute an impermissible  sublicense of Futaba  technology.  PixTech does not
believe  such claims have any merit and has denied  each of the  allegations  in
correspondences  with Futaba and its counsel and is in  discussions  with Futaba
concerning  their  allegations.   Futaba  has  also  claimed  that  the  Company
improperly  supplied certain Futaba proprietary  information to Unipac, and that
Unipac has in turn disclosed such information to a third party vendor. If Futaba
were to prevail on all of these  claims,  PixTech may be  required,  among other
adverse consequences, to modify the construction and manufacture of its displays
and may, as a result, be materially adversely affected.

     To the  Company's  knowledge,  there  are no  other  exceptional  facts  or
litigation  that could have or that have in the recent past had any  significant
impact on its business, results, financial situation, or assets and liabilities.


                                                                         Page 10
<PAGE>


Item 4. Submission of Matters to a Vote of Security Holders

     None

                                     PART II

Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters

     The Company's Common Stock commenced trading on July 18, 1995 on the Nasdaq
National  Market and has been listed on the European  Association  of Securities
Dealers Automated Quotation ("Easdaq") system since February 12, 1997, under the
symbol  "PIXT".  As of March 1st,  1999,  there were 74 holders of record of the
Company's common stock.

     The following table sets forth, for the fiscal periods indicated, the range
of high and low  closing  prices for the  Company's  Common  Stock on the Nasdaq
National Market.


                                                    High           Low
                                                    --------       -------
Year ended December 31, 1997
     First Quarter..............................    $ 6 3/8        $4 1/8   
     Second Quarter.............................    $ 4 3/4        $3 3/8   
     Third Quarter..............................    $ 4 1/4        $3 1/8   
     Fourth Quarter.............................    $ 3 7/8        $2       
Year ended December 31, 1998
     First Quarter..............................    $ 6 9/32       $2 7/16  
     Second Quarter.............................    $ 7 1/16       $4 9/16  
     Third Quarter..............................    $ 4 29/32      $2 3/4   
     Fourth Quarter.............................    $ 3 1/2        $1 15/16 


     The Company has never  declared or paid any cash  dividends  on its capital
stock.  The  Company  currently  anticipates  that it  will  retain  all  future
earnings,  if any, to fund the  development  and growth of its business and does
not anticipate  paying any cash dividends on its Common Stock in the foreseeable
future.

     On December 22, 1998,  the Company  sold  367,269  shares of the  Company's
Series E Preferred Stock to certain investors at a price of approximately $22.53
per share and an aggregate  offering price of $8,275,000.  These securities were
exempt from  registration  pursuant to Rule 506 of the Securities Act of 1933 as
amended (the "Securities Act") as there were less than 35 investors, all of whom
were  "accredited  investors" as that term is used in Rule 501 of the Securities
Act. The terms of conversion of these securities are described in Note 11 to the
Company's Financial Statements.

     In addition,  on December 22, 1998,  the Company sold 222,222 shares of its
Common Stock to certain investor at a price of approximately $2.25 per share and
an aggregate offering price of $500,000. These securities were sold in a private
transaction pursuant to Rule 506 of the Securities Act.

     In January 1999,  the Company sold 150,000  shares of the Company's  Common
Stock in a private  placement  at a price of $2.35 per share,  resulting  in net
proceeds of $352.


                                                                         Page 11
<PAGE>


Item 6. Selected Financial Data

     The  selected  financial  data set forth below as of December  31, 1998 and
1997,  and for each of the three years in the period ended December 31, 1998 are
derived from the Company's  consolidated financial statements included elsewhere
in this Report, which have been audited by Ernst & Young , independent auditors.
The selected  financial  data set forth below as of December 31, 1996,  1995 and
1994 and for the years ended  December 31, 1996,  1995 and 1994 are derived from
audited consolidated financial statements not included in this Report. This data
should  be  read  in  conjunction  with  the  Company's  consolidated  financial
statements and related notes thereto and  "Management's  Discussion and Analysis
of Financial Condition and Results of Operations" under Item 7 of this report.

<TABLE>
<CAPTION>
                                                                                          Fiscal Year
                                                                                  --------------------------
                                                               1994           1995           1996           1997           1998
                                                              ------         ------         ------         ------         ------
                                                                               (in thousands, except per share) 
Operations
<S>                                                           <C>          <C>            <C>            <C>            <C>     
Total revenues ..........................................      6,225       $ 11,513       $  7,644       $  3,819       $  3,652
Loss from operations ....................................     (4,940)        (9,278)       (12,041)       (15,774)       (19,686)
Net loss ................................................     (2,979)        (6,305)       (11,719)       (14,664)       (17,863)
Net loss per share ......................................      (0.51)         (0.82)         (1.44)         (1.12)         (1.23)
Shares used in computing net loss per share .............      5,840          7,697          8,137         13,140         14,548

Balance Sheet
Working deficit / capital ...............................        813         15,919           (859)         9,290            145
Total assets, less current assets .......................     15,300         18,569         19,701         24,058         32,592
Long term liabilities, less current portion .............      6,626          9,958          6,743         14,568         19,480
Stockholders' equity ....................................      9,487         24,530         12,099         18,780         13,257
</TABLE>


Item 7. Management's  Discussion and Analysis of Financial Condition and Results
     of Operations

Overview

     The Company was founded in June 1992 to develop and commercialize its field
emission displays. Since its inception, the Company has been a development stage
company  devoting a majority of its  resources  to raising  capital,  conducting
research  and  development   activities,   concluding  cooperation  and  license
agreements  with  certain  displays   manufacturers,   including  Motorola  Inc.
("Motorola") and Futaba Corporation ("Futaba"),  and establishing  manufacturing
capabilities  for its FEDs. To date,  most of the  Company's  revenues have been
cooperation and license revenues under these cooperation and license  agreements
and  revenues  from  funding  under  grants from the French  government  and the
European  Union.  In the  future,  the Company  expects to generate  its revenue
primarily  from the sale of  products  manufactured  by Unipac  under a contract
manufacturing  arrangement  signed in May 1997.  After  adaptation  of  Unipac's
plant,  including  addition  of certain  equipment  and  extensive  transfer  of
PixTech's proprietary manufacturing processes,  Unipac successfully manufactured
FED samples in June 1998.  While  current  shipments by Unipac of FEDs are still
minimal,  the  Company  expects  that Unipac will be  successful  in  increasing
manufacturing  yields in 1999 and therefore  that display  shipments from Unipac
will exceed several  thousand units per month by the end of 1999.  However,  the
Company does not expect to generate  positive  gross  margins on the sale of its
products in 1999.

     In view of the  development  stage of the Company and the completion of the
cooperation phase of existing  cooperation and license  agreements,  the Company
expects  to rely  mainly  on  product  sales to  generate  revenues  in 1999 and
believes that historical  financial results are not meaningful and should not be
relied upon as an indication of future performance.


                                                                         Page 12
<PAGE>


     The  Company's  expectations  regarding  its sources of future  revenue are
forward-looking  statements.  The amount,  time and source of revenue generation
will be affected by numerous  matters  including  the  availability  of funds to
finance its activities  until volume  shipments of products begin; the continued
development of the Company's products,  including the enhancement of the display
performance and the cost-effective reproduction of the favorable characteristics
demonstrated  by the Company's  current  prototypes in the context of commercial
production;  the successful transition of the Company's prototype  manufacturing
processes to commercial  manufacturing  processes to achieve commercially viable
yields;  the  successful  development  of a volume supply of FED products  under
contract  manufacturing,  the  successful  commercialization  of FEDs  by  other
members of the Company's licensees, and the successful development of sufficient
market demand for the Company's products.

     The  Company's  products and its  manufacturing  processes are still in the
early stages of development  and testing.  To date, the Company has only shipped
limited quantities of products incorporating FED technology.  The Company's only
commercially  available display is a 5.2-inch  monochrome  display which to date
has been sold in limited quantities to more than a hundred customers.

     Pursuant to a license agreement with the CEA, the French atomic agency, the
Company is  obligated  to make  royalty  payments  on its  product  sales and to
pass-through a portion of royalties on sales of royalty-bearing  products by the
Company's  sublicensees.  Pursuant to an amendment to the LETI License Agreement
signed in 1997  (the  "1997  CEA  Amendment"),  the  royalty  rates and  minimum
payments  from the  Company to CEA were  temporarily  increased  for a period of
three years. A royalty  amount of $45,000,  $109,000 and $308,000 was accrued in
1996, in 1997 and in 1998,  respectively  (See Notes to  Consolidated  Financial
Statements--Note 16--Related Party transactions).

     All of the Company's  expenses to date,  except  royalties and pass-through
expenses payable to CEA and tax expenses directly  associated with revenues from
cooperation and license  agreements,  have been recorded as operating  expenses,
since the Company has not shipped products in quantities sufficient to determine
a meaningful cost of products sold category.

     The Company has incurred  cumulative losses of $54.1 million from inception
to December 31, 1998. The Company has incurred operating losses every quarter in
1996 , 1997 and 1998,  and expects to incur  additional  operating  losses.  The
magnitude  and  duration  of the  Company's  losses  will  depend on a number of
factors within and outside of the Company's control, including the rate at which
it can successfully  manufacture and  commercialize its FEDs, if at all, and the
related costs of such  efforts.  Successful  commercialization  of such displays
will in turn depend on a number of factors, including the successful development
of sufficient market demand for the Company's products.

Results of Operations

     Cooperation and License  Revenues.  The Company  recognized  revenues under
cooperation and license agreements of $5.4 million in 1996, $1.9 million in 1997
and $1.2 million in 1998. The  significant  decrease in cooperation  and license
revenues in 1997 and 1998 over 1996 reflects the  achievement  by the Company at
the end of 1996 of most of its contractual milestones.  The cooperation phase of
these  agreements,  which had  generated  milestone  revenues  for the  Company,
expired in June 1998.  In the  future,  the  Company  expects to derive  royalty
revenues only under existing  cooperation and license  agreements.  Such royalty
revenues will be based on licensees' sales, if any, of royalty-bearing products.

     The Company may grant  royalty-bearing  licenses to the FED  cross-licensed
technology to third parties subject to certain  restrictions.  Royalties payable
to PixTech  under such  third-party  licenses  will be shared with the  existing
licensees.

     In 1997,  the Company  entered into a  cooperation  agreement  with a major
Japanese  CRT  manufacturer  to  demonstrate  a 15-inch  FED  display.  Revenues
generated under this agreement in 1997 and 1998 were included in Cooperation and
License  Revenues.  In February  1999,  the Company  entered  into a  subsequent
cooperation  agreement  with its CRT  partner.  The Company  does not expect any
significant revenues to be associated with such agreement.


                                                                         Page 13
<PAGE>


     Product Sales.  The Company  recognized  product sales of $791,000 in 1996,
$745,000  in 1997 and  $445,000  in 1998.  Through  1997,  these  product  sales
primarily  represented  the  shipment  of a limited  number of  high-priced  FED
displays  and  cathodes to  customers  for  evaluation  and product  development
purposes. In 1998, product revenues primarily reflected the shipment of displays
to the  Company's  first  volume  customer,  Zoll  Medical.  While the number of
displays shipped increased  significantly in 1998 over 1997, the average selling
price was reduced,  reflecting commercially priced sales. The Company expects to
increase  product  shipments  in 1999,  mainly from its  contract  manufacturer,
Unipac.

     Other   Revenues.   Other  revenues   consist  of  funding  under  European
development contracts and other miscellaneous revenues. Other revenues were $1.4
million  in  1996,  $1.1  million  in 1997 and $2.0  million  in 1998.  Of these
revenues,  $800,000,  $663,000 and $1.2  million  were related to a  development
contract  granted in  December  1994 from the French  Ministry  of  Industry  to
support manufacturing of FEDs, in 1996, 1997 and 1998 respectively.  The Company
successfully  completed  this  development  contract  and  will not  derive  any
additional   revenue  from  it.  In  addition,   the  Company  expects  to  earn
development-contract  related  revenues in 1999,  primarily  following  expected
recognition  as  income of  certain  amounts  collected  by the  Company  before
December 31, 1998,  and previously  recorded as Deferred  Revenues (See Notes to
Consolidated Financial Statements--Note 12--Other and deferred revenues).

     Research and Development  Expenses--Acquisition  of  Intellectual  Property
Rights.  Since  its  inception,  the  Company  expensed  $4.9  million  for  the
acquisition of  intellectual  property rights from its licensees and other third
parties.  In 1998,  the  Company  expensed  $125,000  in  relation  to a license
agreement with Coloray Display Corporation, a California corporation (<< Coloray
>>), providing PixTech with a worldwide,  nonexclusive  royalty-free  license on
certain technologies related to field emission displays.

     Other Research and  Development  Expenses.  Other research and  development
expenses  include  salaries and  associated  expenses for in-house  research and
development  activities  conducted  both in its pilot plant and its research and
development  facility in Santa  Clara,  the cost of staffing and  operating  the
Company's  pilot  manufacturing  facility and since 1997, the cost of supporting
the transfer of the  Company's  FED  technology  to Unipac.  Other  research and
development  expenses  also include  obligations  to CEA under the LETI Research
Agreement, and miscellaneous contract consulting fees.

     Other research and  development  expenses  increased from $15.8 million and
$15.5  million in 1996 and 1997  respectively  to $19.2  million  in 1998.  This
increase  reflected the continued  development of the Company's FED  technology,
the cost of  supporting  the transfer and  adjustment  of its FED  manufacturing
processes  to Unipac,  as well as the  significant  increase in the level of its
pilot  manufacturing  activities to support early  deliveries of its displays to
customers.

     Sales and  Marketing  Expenses.  The Company  incurred  sales and marketing
expenses of $1.1 million in 1996, $1.5 million in 1997 and $1.4 million in 1998.
The Company  believes  sales and marketing  expenses may increase in the future,
reflecting the expansion of the Company's sales and marketing  organization both
in the United States and in Europe. The Company signed  distribution  agreements
of its FED products respectively with Sumitomo for the Japanese and Asian market
areas in 1997.  In 1999,  the  Company  intends to  progress  on its  efforts to
conclude similar distribution  agreements for both the United States and Europe,
in order to expand market reach in a cost effective manner.

     Such  expectation   regarding  increased  product  shipments  and  customer
contracts is a forward-looking  statement, the fulfillment of which is dependent
on numerous factors. See Item 1. Business - Strategy.  In addition,  in order to
achieve its objectives, the Company will need to expand its business rapidly and
add sales, marketing, manufacturing, administrative and management personnel, as
well as establish and manage its international operations.

     General and Administrative  Expenses.  General and administrative  expenses
amounted  to  $2.5  million  in  1998,  an  increase  of  4%  over  general  and
administrative  expenses  incurred  in 1997,  which  amounted  to $2.4  million,
reflecting an increase in staff expenses.  General and  administrative  expenses
amounted to $2.7 million in 1996.


                                                                         Page 14
<PAGE>


     Interest Income (Expense), Net. Interest income is comprised of interest on
available and restricted cash. Interest expense is comprised of interest payable
on long-term  obligations.  Net interest expense was $708,000 in 1998, while the
Company  recorded a net interest  income of $470,000 in 1997,  and of $66,000 in
1996, reflecting the increase in long-term liabilities.

     Currency  Fluctuations.  Although a  significant  portion of the  Company's
revenues are denominated in U.S. dollars, a substantial portion of the Company's
operating  expenses are denominated in Euros. Gains and losses on the conversion
to U.S. dollars of assets and liabilities denominated in Euros may contribute to
fluctuations in the Company's results of operations,  which are reported in U.S.
dollars.  Most  of the  Company's  capital  lease  obligation  is  expressed  in
Taiwanese dollars.  In 1998,  fluctuations of the parity of the Taiwanese dollar
versus the Euro  caused  significant  foreign  exchange  gains or losses and may
continue to do so in the future. The Company recorded net foreign exchange gains
of  $256,000  in 1996,  $54,000  in 1997 and $372 in 1998.  The  Company  cannot
predict the effect of exchange rate fluctuations on future operating results. To
date, the Company has not undertaken hedging  transactions to cover its currency
exposure, but it may do so in the future.

     Income tax. The Company has  recognized  French income tax benefits of $7.9
million since  inception,  including  $586,000 in 1997 and $2.2 million in 1998.
These income tax  benefits  represent  tax credits for research and  development
activities   conducted  in  France  and  the  benefits  of  net  operating  loss
carryforwards,  net of valuation allowance. As of December 31, 1998, a valuation
allowance  of $19.2  million was  provided  against a net  deferred tax asset of
$23.8 million.  The tax credits for research and development  activities will be
paid in cash to the Company if the  Company is not able to credit  them  against
future income tax liabilities  within three fiscal years. The Company  collected
$29,000 and $2.8 million in 1997 and 1998 respectively,  representing income tax
benefits recorded in 1992, and in 1993 and 1994, respectively.

     The Company does not expect to record  significant  additional  tax credits
for research and development  activities,  if any, in the foreseeable future, as
the benefit is based on increases in eligible research and development  expenses
in a given year over the two previous fiscal years.

     As of December 31, 1998, the Company had net operating  loss  carryforwards
in France of  approximately  $49.4 million of which $5.6 million,  $5.9 million,
$10.7  million  and 15.5  million  will  expire  in 2000,  2001,  2002 and 2003,
respectively, if they are not utilized.


                                                                         Page 15
<PAGE>


Quarterly Results of Operations

     The  following  table  presents  certain  unaudited   quarterly   financial
information  for each quarter in 1997 and 1998.  In the opinion of the Company's
management,  this information has been prepared on the same basis as the audited
consolidated  financial  statements  appearing  elsewhere  in  this  report  and
includes  all  adjustments  (consisting  only of normal  recurring  adjustments)
necessary to present  fairly the unaudited  quarterly  results set forth herein.
The  Company's  quarterly  results are  subject to  fluctuations  and thus,  the
operating results for any quarter are not necessarily  indicative for any future
period.


<TABLE>
<CAPTION>
                                                                                Three Months Ended
    (amounts in thousands)                                          ------------------------------------------
                                               Mar. 31,   June 30,  Sept. 30,   Dec. 31,   Mar. 31,   June 30,  Sept. 30,   Dec. 31,
                                               --------   --------  ---------   --------   --------   --------  ---------   --------
                                                 1997       1997       1997       1997       1998       1998       1998       1998
                                               -------    -------    -------    -------    -------    -------    -------    -------
<S>                                            <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>     
Revenues:
    Cooperation and license
        revenues ...........................   $   707    $ 1,011    $  --      $   214    $  --      $ 1,001    $   238    $  --   
    Product sales ..........................       173        255        152        165         21         66        135        223
    Other revenues .........................       673         47        284        138      1,232        311        225        200
                                               -------    -------    -------    -------    -------    -------    -------    -------
                                                 1,553      1,313        436        517      1,253      1,378        598        423
Cost of revenues:
    License fees and royalties .............      --          (61)      --         (120)       (79)      (122)       (80)       305
                                               -------    -------    -------    -------    -------    -------    -------    -------
Gross margin: ..............................     1,553      1,252        436        397      1,174      1,256        518        728
    Operating expenses:
    Research and development: ..............     4,174      3,904      3,227      4,192      3,925      4,553      5,107      5,829
    Sales and marketing ....................       380        402        369        345        339        354        371        369
    General and administrative .............       606        682        611        520        637        586        639        653
                                               -------    -------    -------    -------    -------    -------    -------    -------
            Total operating expenses .......     5,160      4,988      4,207      5,057      4,901      5,493      6,117      6,851
                                               -------    -------    -------    -------    -------    -------    -------    -------
Loss from operations .......................    (3,607)    (3,736)    (3,771)    (4,660)    (3,727)    (4,237)    (5,599)    (6,123)
Interest income (expense), net .............       131        211         82         46        (80)      (174)      (208)      (246)
Foreign exchange gain (loss) ...............      (238)        67         32        193        285        424        844     (1,181)
                                               -------    -------    -------    -------    -------    -------    -------    -------
Loss before income tax benefit .............    (3,714)    (3,458)    (3,657)    (4,421)    (3,522)    (3,987)    (4,963)    (7,550)
Income tax benefit .........................      --         --         --          586       --         --        1,047      1,112
                                               -------    -------    -------    -------    -------    -------    -------    -------
Net income (loss) ..........................   $(3,714)   $(3,458)   $(3,657)   $(3,835)   $(3,522)   $(3,987)   $(3,916)   $(6,438)
                                               =======    =======    =======    =======    =======    =======    =======    =======
</TABLE>


     The Company expects that it will continue to experience fluctuations in its
quarterly operating results. In the past, these fluctuations have been caused by
a variety of factors, including the rate of growth of the Company's research and
development activities,  the rate of growth of the costs related to the transfer
and adaptation of the Company's  manufacturing process to Unipac, and the extent
of foreign exchange gains or losses.

Liquidity and Capital Resources

     The  Company  has used $32.0  million in cash to fund its  operations  from
inception  through December 31, 1998, and $29.6 million in capital  expenditures
and  investments.  Through  December  31,  1998,  the  Company  has  funded  its
operations  and capital  expenditures  primarily  from sales of $67.5 million of
equity   securities   and  $19.0  million  of  proceeds  from   borrowings   and
sale-leaseback  transactions.  In 1998, the Company used $9.3 million in cash to
fund its operations and $1.9 million in capital expenditures and investments.


                                                                         Page 16
<PAGE>


     Capital  expenditures  were $5.9 million in 1996,  $1.2 million in 1997 and
$1.9 million in 1998. In 1996, capital expenditures were primarily for leasehold
improvements,   facility  expansion,   and  equipment  installed  in  its  pilot
manufacturing  facility,  while  1997 and  1998  capital  expenditures  remained
focused on  limited  capacity  expansion  in the  Company's  pilot  line.  As of
December 31,  1998,  the Company had  commitments  for capital  expenditures  of
approximately $100,000. Implementing volume production at Unipac's manufacturing
plant required significant capital  expenditures.  An amount of $14.2 million of
capital  expenditures  for equipment  only was required  which,  pursuant to the
Foundry  Agreement,  was  purchased  and  funded by  Unipac.  A portion  of that
equipment  is leased to PixTech and amounts to $12.0  million as of December 31,
1998. The Company expects that additional  capital  expenditure will be required
in 1999 to  increase  capacity  at  Unipac  and to  complete  implementation  of
manufacturing processes, both for monochrome and for color products.

     Restricted  cash  amounted to $10.1  million in 1997 and was related to the
security interest granted by the Company to its Taiwanese manufacturing partner,
Unipac,  pursuant to the Foundry  Agreement  signed in 1997,  in relation to the
purchase and funding by Unipac of volume FEDs production equipment.  The written
bank guaranty provided by the Company to Unipac is expected to decrease to match
the net amount of equipment leased by Unipac to the Company.

     The Company has existing  contracts with French  authorities  providing for
the payment of grants to the Company totaling  approximately $4.0 million, which
were fully paid to the  Company as of  December  31,  1998.  In 1997 and January
1999, the Company entered into two R&D agreements with French authorities. Under
these  agreements,  the  Company  expects to benefit  from  zero-interest  loans
totaling  approximately $3.4 million,  of which 50% are expected to be collected
in 1999.

     In  February  1997,  the Company  entered  into an R&D  agreement  with the
European Union and other European  industrial  companies for 18 months  starting
February 1, 1997. The  contribution  of the European Union to the costs incurred
by the  Company  amounts to  $800,000  over the  period.  The  Company  received
$423,000 and $293,000 from this  contribution  respectively in 1997 and in 1998,
which  were  not  recognized  as  income  as all  conditions  stipulated  in the
agreement were not met.

     In 1998, the Company  received $96,000 in relation to another R&D agreement
entered  into in 1993 with the  European  Union and  other  European  industrial
companies.  The total  contribution  of the European Union amounted to $546,000.
The Company received $330,000 in 1994, $120,000 in 1995 and $96,000 in 1998 from
this contribution.  The Company does not expect to derive any additional revenue
from this contract.

     The Company  recognized  French  income tax benefits of $7.9 million  since
inception.  These  income tax  benefits  represent  tax credits for research and
development  activities  conducted  in  France,  which  are  paid in cash to the
Company if it is not able to credit them against  future income tax  liabilities
within  three  fiscal  years.  In 1998,  the  Company  collected  $2.8  million,
representing  R&D tax credits  recorded in 1993 and 1994.  In 1999,  the Company
expects to collect up to $3.2 million from R&D tax credits recorded in 1995.

     Cash flows  generated from financing  activities were $9.5 million in 1998,
as compared to $30.3 million in 1997.  These financings  consisted  primarily of
sales of shares of Common Stock and of  Convertible  Preferred  Stock in private
placements,  resulting  in net  proceeds to the Company of $4.5  million (net of
issuance  costs)  and $7.5  million,  respectively.  Cash  flow  generated  from
financing  activities exclude non-cash  transactions related respectively to (i)
the issuance of 14,000 shares of the Company's  Common Stock to Coloray  Display
Corporation  with a value of  $50,000  (See  "Notes  to  Consolidated  Financial
Statements - Note 11 -- Stockholders'  Equity") and (ii) the dividends  attached
to the shares of  Convertible  Preferred  Stock in the  amount of  $12,000  (See
"Notes to Consolidated Financial Statements - Note 11 -- Stockholders' Equity").

     The Company believes that cash available at December 31, 1998 together with
the anticipated  increase in product sales in 1999 and the anticipated  proceeds
during 1999 from R&D tax credits and from the various grants and loans described
above will be sufficient to meet its cash requirements,  including  repayment of
the current  portion of its long term  obligations in the amount of $5.6 million
at December  31,  1998,  until at least June 30,  1999.  The Company  intends to
improve its liquidity and financial  position through capital increases expected
to take place in 1999.


                                                                         Page 17
<PAGE>


     The Company will require substantial funds to conduct research, development
and testing, to develop and expand commercial-scale manufacturing systems and to
market any resulting products. Changes in technology or a growth of sales beyond
currently anticipated levels will also require further investment. The Company's
capital  requirements  will depend on many factors,  including the rate at which
the Company can develop its products,  the market  acceptance of such  products,
the levels of promotion  and  advertising  required to launch such  products and
attain a competitive position in the marketplace and the response of competitors
to the  Company's  products.  There  can be no  assurance  that  funds for these
purposes,  whether  from equity or debt  financing,  or other  sources,  will be
available when needed or on terms acceptable to the Company.

Outlook: Issues and Risks

The Company is currently  focused on the following  activities which it believes
are necessary to the success of its business:

     .    successfully  implementing  the  manufacture  of FEDs by its Taiwanese
          contract manufacturer, Unipac;
     .    improving its  manufacturing  processes and yields,  both in its pilot
          plant and at Unipac;
     .    expanding its customer base and product offering, and
     .    continuing  the  development  of its  FED  technology,  including  the
          development of large FED displays.

In evaluating its outlook,  the following risks and issues should be considered,
among others which are common among  development stage companies such as its. It
is  especially  important  to keep  these  risk  factors  in mind  when  reading
"forward-looking statements." These are statements that relate to future periods
and  include  discussions  relating  to  the  Company's  market   opportunities,
acquisition  opportunities,  ability to compete; and stock price. Generally, the
words  "anticipates,"  "believes,"  "expects," "intends" and similar expressions
identify such  forward-looking  statements.  Forward-looking  statements involve
risks and  uncertainties,  and their actual results could differ materially from
the results  discussed in the  forward-looking  statements  because of these and
other  factors.  Forward-looking  statements  are current only as of the date of
this  Prospectus.  The  Company  does not have any  obligation  to  disclose  if
forward-looking statements, or the circumstances they are based on, change.

The Company May Not Have Operating Income or Net Income in the Future and It May
Have Problems Raising the Money It Needs in the Future

Since the Company inception,  the Company has had significant  operating losses.
During the year ended  December 31, 1998,  its net  operating  loss  amounted to
$19.7  million,  as compared to $15.8 million during the year ended December 31,
1997.

In the  future,  the  Company  expects  that it will need to obtain  money  from
sources outside the Company,  as it has done in the past.  There is no guarantee
that any of the outside  sources  will  provide the Company  with the money when
needed.  In addition,  even if the Company is able to find outside sources which
will  provide  it with the money when  needed,  in order to raise this money the
Company may be required to issue  securities  with better rights than the rights
of its common stock or it may be required to take other actions which lessen the
value of its current common stock,  including  borrowing money on terms that are
not favorable to it.

There  are  Risks  Associated  with  Using a  Single  Contract  Manufacturer  to
Manufacture its FEDs.

The Company believes that its ability to  commercialize  medium to large volumes
of FEDs depends on its ability to have Unipac  manufacture  FEDs. If the Company
is not able to implement its  manufacturing  plans with Unipac as expected,  the
Company  will not be able to ship  medium  to  large  volumes  of FED  products.
Furthermore,  the Company will not be able to obtain an acceptable  cost for its
FED displays  through high volume  manufacturing,  as compared to  manufacturing
FEDs at its pilot production facility. This situation would materially adversely
affect its operations.  In May 1997, the Company signed a Foundry Agreement with
Unipac,  a liquid  crystal  display  manufacturer  based in  Taiwan.  Under  the
agreement,  Unipac has installed volume production  equipment to produce FEDs at
its manufacturing  plant, and has begun production for exclusive delivery of FED
displays  to  the  Company.   Expectations   about  the  final  timing  of  this
manufacturing plan with Unipac are forward-looking statements that still involve
risks and uncertainties, including the ease or difficulty of the transfer of the
FED technology to Unipac.


                                                                         Page 18
<PAGE>


The Company's  reliance on a single contract  manufacturer  will involve several
risks. For example,  the Company could be unable to obtain an adequate supply of
required  products  if Unipac  did not supply  enough  products.  Moreover,  the
Company  will have less control  over the price of the  finished  products,  the
timeliness of their delivery and their  reliability  and quality.  The Company's
failure to adequately  manage this contract  manufacturing  relationship  or any
delays in the shipment of its products would adversely effect the Company.

The Company's  Products and Manufacturing  Processes are Still under Development
and The  Company  Still  Needs to  Obtain  Commercially  Acceptable  Yields  and
Acceptable Costs of Products.

In order for the Company to succeed,  it must  continue to develop and produce a
range of products  incorporating  its FED technology.  At this time, the Company
has successfully  developed only one product that has been  incorporated  into a
commercial  end-user  application.   The  Company  will  need  to  complete  the
development  of additional  FED products  before they can be sold to the public,
and there is no guaranty  that the  Company  will  succeed in these  development
efforts.  If the Company  does not develop  these new  products,  it will not be
successful.

The Company has used its pilot manufacturing facility in Montpellier,  France to
produce only a limited number of products suitable for sale.  Additionally,  the
Company has not completed testing of its  manufacturing  processes at Unipac. In
order for the Company to be successful, it must make certain improvements to its
manufacturing processes. In particular, it must improve its manufacturing yields
in order to demonstrate  the low cost potential of its FED  technology.  Even if
the  Company   succeeds  in  completing  the  development  and  testing  of  its
manufacturing  processes, it can not be sure that the favorable  characteristics
demonstrated by its current  displays  manufactured  at its pilot  manufacturing
facility will be reproduced on a cost-effective basis in commercial production.

The Company has, at this time, encountered a number of delays in the development
of its  products and  processes,  and it is possible  that  further  delays will
occur.  Any  significant  delays could cause the Company to miss certain  market
opportunities and could have a material adverse effect on its business.

The Company Needs to Further Enhance its Display Performance.

The Company may never improve the performance  characteristics of its color FEDs
to a level that is  commercially  acceptable or fail to do so on a timely basis,
either of which could  adversely  affect its  business.  Key elements of display
performance are brightness,  power efficiency and stability over time (life time
and  reliability).  The  Company is seeking  to  balance  brightness  with power
efficiency  to  produce  bright  and  low  power-consumption  displays.  Display
reliability depends heavily on the manufacturing  process used in assembling the
displays as well as the characteristics of the phosphors used in the display. In
order to produce  color  displays  that will  provide the product life and other
characteristics  necessary  for most  applications,  the  Company  needs to make
further advances in its manufacturing processes.

The Company  face  Intense  Competition  and Needs to Compete  with  Current and
Future Competing Technologies.

The Company's competitors may succeed in developing products that outperform its
displays or that are more cost effective.  If its competitors  develop  products
that offer significant advantages over its products and if the Company is unable
to improve its technology,  or develop or acquire alternative technology that is
more competitive, it would be adversely affected.


                                                                         Page 19
<PAGE>


The market for "flat panel display," or "FPD",  products is currently  dominated
by products  utilizing "liquid crystal display," or "LCD",  technology.  Certain
LCD manufacturers,  such as Sharp, NEC and Hitachi,  have substantially  greater
name  recognition  and financial,  technological,  marketing and other resources
than us.  Furthermore,  LCD  manufacturers  have  made,  and  continue  to make,
substantial  investments in improving LCD technology and manufacturing processes
and in the  construction of manufacturing  facilities for displays.  The Company
believes that, over time, this will have the effect of reducing  average selling
prices of FPDs. In addition,  recently there have been substantial  increases in
the worldwide  manufacturing  capacity of FPDs, and new competitors have entered
the FPD  market.  Such  changes  may cause  over-supply  conditions  leading  to
dramatic reductions in the price of FPDs. In order to effectively  compete,  The
Company could be required to increase the  performance of its products or reduce
prices.  In the  event  of price  reductions,  the  Company  will not be able to
maintain gross margins unless it reduces its cost of sales.

There  are a number of  domestic  and  international  companies  developing  and
marketing display devices using alternative technologies to LCD technology, such
as vacuum fluorescent displays, electro-luminescent panels and plasma panels. In
addition,  the  Company  has ended its  cooperation  phase with both  Futaba and
Motorola  in  January  1997  and  June  1998,  respectively,  and  is  aware  of
significant continued investments in FED technology development by each of them.
In the  future,  the  Company  expects  to face  competition  from both of them.
Additionally, some of the basic FED technology is in the public domain and, as a
result, the Company has a number of potential direct competitors  developing FED
displays.  The Company is aware of several other  companies which are developing
FED technologies similar to its technology, including Sony, Fujitsu, and Samsung
as well as smaller companies,  including Candescent, FED Corporation, and Micron
Display Division, a division of Micron Display Technology.  Although the Company
owns  the  rights  to  significant  technological  advances  in FED  technology,
potential  competitors  may have  developed  or may soon develop  comparable  or
superior FED technology. Many of the developers of alternative FPD and competing
FED  technologies  have  substantially  greater name  recognition and financial,
research  and  development,  manufacturing  and  marketing  resources  than  the
Company, and have made and continue to make substantial investments in improving
their technologies and manufacturing processes.

Potential Customers may not Accept the Company's Products.

The  Company  is  uncertain  about the  potential  size and timing of its target
market  opportunities.  It  anticipates  marketing  its  displays  to  "original
equipment  manufacturer" or "OEM" customers Its success will depend, in part, on
the following factors:

     .    whether  OEMs  select  its  products  for  incorporation   into  their
          products;
     .    the successful introduction of such products by the OEMs; and
     .    the  successful  commercialization  of products  developed  by parties
          incorporating its products.

It is possible that demand for any particular  product will not last or that new
markets will fail to develop as the Company expects,  or at all. Such deviations
would materially and adversely effect the Company.

It takes a long time for any product to achieve market success, and such success
is never certain.  The introduction of new products is often delayed by the need
to have the products  selected by an OEM and designed  into the OEM's  products.
For certain products,  the delay  attributable to a manufacturer's  design cycle
may be a year or longer. Factors affecting the length of these delays include:

     .    the size of the manufacturer;
     .    the type of application; and
     .    whether the  displays are being  designed  into new products or fitted
          into existing applications.


                                                                         Page 20
<PAGE>


If volume  production of such products is delayed for any reason,  the Company's
competitors may introduce new technologies or refine existing technologies which
could diminish the commercial  acceptance of its products.  The Company has made
efforts to design its products to be  compatible  with the  electronic  products
with which they will be used and has targeted  smaller  markets where the design
cycle may be  shorter.  However,  unforeseen  difficulty  in  incorporating  the
Company's products and technology, would lessen the commercial acceptance of its
products.  Furthermore,  its OEMs will probably require the Company to implement
certain manufacturing quality control procedures as well as prove its ability to
manufacture  the number of displays they require on a timely and reliable basis.
The Company's failure to meet these requirements could have an adverse impact on
its  relationships  with  these  OEMs and  could  prevent  it from  establishing
relationships with other OEMs.

Future Cooperation and License Revenues May Decrease.

The Company has entered into various license  agreements under which the Company
was paid money for achieving certain  milestones.  At this time, the Company has
recorded all expected revenues associated with these milestone payments.  If the
Company  fails  to  conclude  new   royalty-bearing   licenses  or   cooperation
agreements,  it could be adversely  affected.  The Company must execute  further
cooperation  and/or license  agreements with third parties that are not existing
licensees  before it will receive any future  cooperation  or license  revenues.
Should the Company successfully enter such agreements, a portion of the revenues
from such contracts may need to be shared with the existing licensees.

In addition,  the Company will only recognize royalty revenues under cooperation
and license  agreements with existing or future licenses if any of its licensees
incorporate   licensed   technology   into   products   that  are   successfully
commercialized.  The Company can not guarantee  that any of its  licensees  will
successfully  develop or  commercialize  any FED products.  The Company believes
that one of its existing  licensees,  Raytheon  Company,  may have suspended its
internal program to develop FEDs.

The Company May Have Difficulty  Protecting Patents and other Proprietary Rights
to its Technology.

The Company has been granted,  has filed applications for, and has been licensed
under a number of  patents in the United  States and other  countries.  However,
rights  granted under  patents may not provide the Company with any  competitive
advantage over competitors with similar  technology,  and any issued patents may
not contain claims sufficiently broad to protect against these competitors.

The Company has not conducted an  independent  review of patents issued to other
companies.  The  Company  cannot be  certain  that it was the first  creator  of
inventions  covered by pending patent  applications  or the first to file patent
applications on such inventions because patent applications in the United States
are maintained in secrecy until patents issue and the publication of discoveries
in scientific or patent  literature  tends to lag behind actual  discoveries  by
several  months.  Competitors in both the United States and other  countries may
have applied for or obtained, or may in the future apply for and obtain, patents
that will  prevent,  limit or  interfere  with its  ability to make and sell its
products.

Moreover,  claims that its products infringe on the proprietary rights of others
are more likely to be  asserted  after the Company  begins  commercial  sales of
products using its technology.  Although the Company  believes that its products
do not infringe the patents or other proprietary rights of third parties,  it is
possible that third parties will assert  infringement claims against us and that
such  claims will be  successful.  It is also  possible  that  competitors  will
infringe its patents.  Even the  successful  defense and  prosecution  of patent
suits is costly and time  consuming.  The adverse outcome of a patent suit could
subject us to significant liabilities to other parties,  require disputed rights
to be licensed from third parties or require us to stop selling its products.

The  Company  also  relies  on  unpatented,   proprietary  technology  which  is
significant  to the  development  and  manufacture  of its displays.  Others may
independently  develop the same or similar  technology  or obtain  access to its
unpatented  technology.  To  protect  its trade  secrets  and other  proprietary
information,   the  Company  requires  employees,   consultants,   advisors  and
collaborators to enter into confidentiality  agreements. It is possible that the
agreements may be breached,  that the Company would not be fully compensated for
any such breach,  or that its trade  secrets will  otherwise  become known or be
independently  developed or discovered by competitors.  If the Company is unable
to maintain the proprietary  nature of its  technologies,  its business could be
adversely affected.


                                                                         Page 21
<PAGE>


The Company has received  correspondence  from Futaba  Corporation and its legal
counsel beginning in February 1998 alleging the following:

     .    the Company is infringing one or more patents owned by Futaba relating
          to the  construction  and  manufacture  of its  displays  that are not
          expressly included under the license agreement between the Company and
          Futaba;

     .    its use of terms such as "alliance"  and  "partners" in describing the
          nature of its contractual  relationships  with Motorola,  Raytheon and
          Futaba in reports filed with the SEC is misleading; and

     .    certain  provisions in the Foundry Agreement with Unipac constitute an
          impermissible sublicense of Futaba technology.

The Company  does not believe such claims have any merit and have denied each of
the allegations in correspondences with Futaba and its counsel.  Futaba has also
claimed  that  the  Company  improperly   supplied  certain  Futaba  proprietary
information to Unipac, and that Unipac has, in turn,  disclosed such information
to a third party vendor. If Futaba prevails on any of these claims,  the Company
may be required,  among other adverse  consequences,  to modify the construction
and  manufacture of its displays and may, as a result,  be materially  adversely
affected.

Currency Fluctuations May Cause Gains or Losses.

A large  percentage of its net assets and of the Company's costs is expressed in
Euros.  Fluctuations  of the value of the U.S.  dollar versus the Euro may cause
significant  foreign  exchange  gains or losses.  Most of the Company's  capital
lease obligation is expressed in Taiwanese dollars. Fluctuations of the value of
the  Taiwanese  dollar  versus the Euro or the US dollar  may cause  significant
foreign exchange gains or losses.

The Company May be Affected by Year 2000 Errors in Computer Systems.

There is a significant  uncertainty  regarding the effect of the Year 2000 issue
because  computer  systems  which  do  not  properly  recognize  date  sensitive
information  when the year  changes to 2000  could  generate  erroneous  data or
altogether  fail.  The Company is in the process of  conducting a  comprehensive
review  of  its  computer  systems  and  manufacturing   equipment  to  identify
applications that could be affected by the inability of certain computer systems
to format and  manipulate  data  containing  dates  including  the year 2000 and
subsequent years. Although management does not expect that costs associated with
modifying  existing  computer  systems and  manufacturing  equipment will have a
significant impact on its financial position or result of operations,  there can
be no assurance that such modifications will be successfully implemented or that
these costs will not be  significant.  The Company  currently has no contingency
plans in place in the  event it does not  complete  all  phases of the year 2000
review.  The Company plans to evaluate the status of completion  during 1999 and
determine whether such a plan is necessary.  In addition, the Company depends on
a limited group of  suppliers.  There can be no assurance  that those  suppliers
will not be significantly  impacted by the "Year 2000" issue. If those suppliers
are  significantly  impacted by the "Year 2000" issue, such suppliers may not be
able to continue their supply of parts to the Company without interruption.  The
Company is in the process of  identifying  third party vendors that are non-Year
2000 compliant and of assessing the following consequences.  In particular,  the
Company requested from Unipac, its Taiwanese  manufacturing  partner,  to assess
whether its computer  systems and  manufacturing  equipment could be affected by
the "Year 2000" issue and, if so, to present a  contingency  plan.  To implement
its large volume  manufacturing  strategy,  the Company is dependent on Unipac's
ability to be  successful  in  addressing  the "Year 2000" issue.  The Company's
continued use of a vendor which is not Year 2000 compliant or the failure of the
Company's own computer systems or manufacturing  equipment to be fully Year 2000
compliant could materially  adversely affect the Company's  business,  financial
position and results of operations.


                                                                         Page 22
<PAGE>


Holders of Common Stock May face  Significant  Dilution  from the  Conversion of
Series E Preferred Shares.

In December 1998, the Company issued 367,269 shares of Series E Preferred  Stock
(the  "Series  E  Stock"),  at  a  price  of  $22.5313  per  share,  to  certain
institutional  investors. The Series E Stock is generally convertible after June
21, 1999 into Common  Stock at a rate equal to the lesser of (a)  $2.25313,  and
(b) the  average  closing  price  Common  Stock over the ten  trading day ending
period ending on the day immediately  preceding the day upon  conversion.  As of
March 1st, 1999, the Series E Stock would have been  convertible  into 3,715,334
shares of Common Stock.  Should the Company's  stock price fall below  $2.25313,
conversion  of Series E stock may  result  into the  issuance  of a  significant
additional number of shares of Common Stock, and may cause significant  dilution
to current holders of Common Stock.

Certain Anti-Takeover Provisions May Limit the Company's Stock Price

Certain provisions of the Company's certificate of incorporation and by-laws may
discourage  a  third  party  from  offering  to  purchase  the  Company.   These
provisions,  therefore, inhibit actions that would result in a change in control
of the  company,  including  an action  that may give the  holders of the common
stock the opportunity to realize a premium over the then-prevailing market price
of their stock.

These provisions may also adversely affect the market price of the Common Stock.
For  example,  under its  certificate  of  incorporation,  the Company can issue
"blank check" Preferred Stock with such designations,  rights and preferences as
determined by its Board of Directors  from time to time.  This type of Preferred
Stock could be used as a method of discouraging, delaying or preventing a change
in control of the  Company.  In  addition,  the  Preferred  Stock  issued by the
company in December 1998 and any additional  shares of Preferred  Stock that the
Company  may issue in the future may  adversely  affect the voting and  dividend
rights, rights upon liquidation and other rights of the holders of common stock.
The  Company  does not  currently  intend  to issue  any  additional  shares  of
preferred stock, but it retains the right to do so in the future.

Furthermore,  the  Company is subject to  Section  203 of the  Delaware  General
Corporation Law, which may discourage takeover attempts.

Item 7 A. Quantitative and Qualitative Disclosures About Market Risk

     The market risk exposure inherent to the Company's international operations
creates  potential for losses arising from adverse  changes in foreign  currency
exchange rates.  The Company is exposed to such foreign  currency  exchange rate
risk in two main areas : (i) a substantial  portion of the  Company's  operating
expenses  are and are  expected  to be  denominated  in Euros,  (ii) most of the
Company's   capital  lease   obligation  is  expressed  in  Taiwanese   dollars.
Fluctuations  of the parity of the  Taiwanese  dollar  versus the Euro or the US
dollar may cause  significant  foreign  exchange  gains or losses.  In addition,
gains and  losses  arising  from the  conversion  to U.S.  dollars of assets and
liabilities  denominated  in Euros or in  Taiwanese  dollars may  contribute  to
fluctuations in the Company's results of operations,  which are reported in U.S.
dollars.  To date, the Company has not undertaken hedging  transactions to cover
its currency exposure.


                                                                         Page 23
<PAGE>


Item 8. Financial Statements and Supplementary Data


                          Index to Financial Statements

                                                                      Page(s)
                                                                      -------
Report of Independent Auditors ......................................   25

Balance Sheets ......................................................   26

Statements of Comprehensive Operations ..............................   27

Statements of Stockholders' Equity (Deficit) ........................   28 - 29

Statements of Cash Flows ............................................   30

Notes to Financial Statements .......................................   31 - 47



                 Financial statement schedules have been omitted
                 since they are not required or are inapplicable


                                                                         Page 24
<PAGE>


                           INDEPENDENT AUDITORS REPORT


The Board of Directors and Shareholders
PixTech, Inc.


     We have audited the  accompanying  consolidated  balance sheets of PixTech,
Inc. (a  development  stage  company)  as of December  31, 1997 and 1998 and the
related consolidated  statements of operations,  shareholders'  equity, and cash
flows for the period from June 18, 1992 (date of inception) through December 31,
1998,  and for each of the three years in the period  ended  December  31, 1998.
These financial  statements are the responsibility of the Company's  management.
Our responsibility is to express an opinion on these financial  statements based
on our audits.

     We conducted our audits in accordance  with  auditing  standards  generally
accepted in the United States.  Those standards require that we plan and perform
the audit to obtain reasonable  assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.  An
audit also includes  assessing the accounting  principles  used and  significant
estimates  made by  management,  as well as  evaluating  the  overall  financial
statement  presentation.  We believe that our audits provide a reasonable  basis
for our opinion.

     In our opinion,  the consolidated  financial  statements  referred to above
present fairly, in all material respects, the consolidated financial position of
PixTech, Inc. (a development stage company) as of December 31, 1997 and 1998 and
the  consolidated  results of its  operations  and its cash flows for the period
June 18, 1992 (date of inception)  through December 31, 1998 and for each of the
three years in the period ended December 31, 1998 in conformity  with accounting
principles generally accepted in the United States.

     The accompanying  financial statements have been prepared assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in note 19 to the
Financial Statements,  the Company has suffered recurring losses from operations
and its  financial  position  raises  substantial  doubt  about its  ability  to
continue  as a  going  concern.  As  discussed  in  note  19  to  the  Financial
Statements,  the Financial  Statements do not include any adjustments that might
result from the outcome of this uncertainty.


                                           ERNST & YOUNG AUDIT
                                           REPRESENTED BY: CHRISTINE BLANC-PATIN

Marseilles, France
February 03, 1999


                                                                         Page 25
<PAGE>


                           CONSOLIDATED BALANCE SHEETS
                    (in thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                                                 December       December
                                                                                    31,            31,
                                                                                   1997           1998
                                                                                 --------       --------
<S>                                                                              <C>            <C>     
                                     ASSETS
Current assets :
        Cash & cash equivalent available ...................................     $ 12,428       $ 10,166
        Restricted cash - short term .......................................        1,259          1,685
        Accounts receivable :
               Trade .......................................................          953            456
               Other .......................................................           82            161
        Inventory ..........................................................          702            980
        Other ..............................................................        2,166          1,354
                                                                                 --------       --------
                 Total current assets ......................................       17,590         14,802
Restricted cash - long term ................................................        8,816          8,427
Property, plant and equipment, net .........................................        9,353         18,826
Goodwill, net ..............................................................          226            150
Deferred tax assets ........................................................        5,058          4,643
Other assets - long term ...................................................          605            546
                                                                                 --------       --------
                 Total assets ..............................................     $ 41,648       $ 47,394
                                                                                 ========       ========
                      LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities :
        Current portion of long term debt ..................................     $  1,364       $  3,410
        Current portion of capital lease obligations .......................          599          2,189
        Accounts payable ...................................................        5,053          7,514
        Accrued expenses ...................................................        1,284          1,544
                                                                                 --------       --------
                 Total current liabilities .................................        8,300         14,657
Deferred revenue ...........................................................        2,546          2,162
Long term debt, less current portion .......................................       11,024          8,391
Capital lease obligation, less current portion .............................          441          8,399
Other long term liabilities, less current portion ..........................          557            528
                                                                                 --------       --------
                 Total liabilities .........................................       22,868         34,137
                                                                                 ========       ========
Stockholders' equity
         Convertible  preferred  stock  Series E, $0.01 par value,
authorized shares--500,000 ; issued and outstanding shares--
none; 367,269 respectively  ................................................         --                4
         Common stock, $0.01 par value, authorized shares--
30,000,000;  issued and outstanding shares--13,762,732;
15,000,329 respectively ....................................................          138            150
         Additional paid-in capital ........................................       57,067         68,999
         Cumulative translation adjustment .................................       (2,132)        (1,740)
         Deficit accumulated during development stage ......................      (36,293)       (54,156)
                                                                                 --------       --------
                    Total stockholders' equity .............................       18,780         13,257
                    Total liabilities and stockholders' equity .............     $ 41,648       $ 47,394
                                                                                 ========       ========
</TABLE>


                             See accompanying notes.


                                                                         Page 26
<PAGE>

               CONSOLIDATED STATEMENTS OF COMPREHENSIVE OPERATIONS
                    (in thousands, except per share amounts)


<TABLE>
<CAPTION>
                                                                                            Year Ended                  Period from
                                                                                           December 31,                   June 18,
                                                                                                                       1992 (date of
                                                                              --------------------------------------     inception)
                                                                                                                        through Dec.
                                                                                                                            31,
                                                                                 1996          1997          1998          1998
                                                                              ----------    ----------    ----------   ------------
<S>                                                                            <C>           <C>           <C>           <C>     
  Revenues
         Cooperation & license revenues ...................................    $  5,440      $  1,932      $  1,239      $ 26,449
         Product sales ....................................................         791           745           445         2,826
         Other revenues ...................................................       1,413         1,142         1,968         5,906
                                                                               --------      --------      --------      --------
                    Total revenues ........................................       7,644         3,819         3,652        35,181
                                                                               --------      --------      --------      --------
  Cost of revenues
         License fees and royalties .......................................         (45)         (181)           24        (1,516)
                                                                               --------      --------      --------      --------
  Gross margin ............................................................       7,599         3,638         3,676        33,665
                                                                               --------      --------      --------      --------
  Operating expenses
         Research and development:
                 Acquisition of intellectual property rights ..............        --            --            (125)       (4,890)
                 Other ....................................................     (15,848)      (15,497)      (19,289)      (72,528)
                                                                               --------      --------      --------      --------
                                                                                (15,848)      (15,497)      (19,414)      (77,418)
         Marketing & sales ................................................      (1,089)       (1,496)       (1,433)       (6,607)
         Administrative & general expenses ................................      (2,703)       (2,419)       (2,515)      (12,816)
                                                                               --------      --------      --------      --------
                                                                                (19,640)      (19,412)      (23,362)      (96,841)
                                                                               --------      --------      --------      --------

  Loss from operations ....................................................     (12,041)      (15,774)      (19,686)      (63,176)

  Other income / (expense)
         Interest income ..................................................         428           759           828         2,848
         Interest expense .................................................        (362)         (289)       (1,536)       (2,747)
         Foreign exchange gains / (losses) ................................         256            54           372         1,026 
                                                                               --------      --------      --------      --------
                                                                                    322           524          (336)        1,127
  Loss before income tax benefit ..........................................     (11,719)      (15,250)      (20,022)      (62,049)
  Income tax benefit ......................................................        --             586         2,159         7,893
                                                                               --------      --------      --------      --------
  Net loss ................................................................    $(11,719)     $(14,664)     $(17,863)     $(54,156)
                                                                               ========      ========      ========      ========
  Dividend accrued to holders of Preferred Stock ..........................        --            --             (12)          (12)
                                                                               --------      --------      --------      --------
  Net loss to holders of Common Stock .....................................    $(11,719)     $(14,664)     $(17,875)     $(54,168)
                                                                               ========      ========      ========      ========

         Net loss per share of Common Stock ...............................    $  (1.44)     $  (1.12)     $  (1.23)
                                                                               ========      ========      ========

         Shares of Common Stock used in computing net loss per share ......       8,137        13,140        14,548

  Net loss ................................................................    $(11,719)     $(14,664)     $(17,863)     $(54,156)
  Change in cumulative translation adjustment .............................        (953)       (1,694)          392        (1,740)
  Comprehensive net loss ..................................................    $(12,672)     $(16,358)     $(17,471)     $(55,896)
</TABLE>


                             See accompanying notes.


                                                                         Page 27
<PAGE>


                 Consolidated Statement of Stockholders' Equity
                      (in thousands, except share amounts)


<TABLE>
<CAPTION>
                                                                               Convertible Preferred Stock
                                                                             ------------------------------
                                                                             Series A               Series B          
                                                                             --------               --------          

                                                                        Shares                  Shares                
                                                                        issued      Amount      issued      Amount    
                                                                      ----------   --------  ----------   ----------
<S>                                                                    <C>             <C>       <C>             <C>  
Balance at June 18, 1992
   Issuance of convertible preferred stock, net of issuance .......    1,557,003       2,368     363,447         589  
  costs in 1992, 1993 and 1994
   Issuance of Common stock in 1992 and 1993
   Issuance of Common stock under stock  option plan in 1994
   Purchase of 28,761
   shares of Common stock-- Treasury
  stock in 1994
   Translation adjustment
   Net loss from June 18, 1992 (date of inception) through
  December 31, 1994
                                                                      ----------  ----------  ----------  ----------  

Balance at December 31, 1994 ......................................    1,557,003       2,368     363,447         589  
    Reissuance of 28,761 shares of Common stock held in
   treasury
    Issuance of Common stock under stock option plan
    Common stock issued in initial public offering, net of issuance
   costs -- $ 1,080
    Conversion of preferred stock .................................   (1,557,003)     (2,368)   (363,447)       (589) 
    Translation adjustment
    Net loss--Year ended December 31, 1995
                                                                      ----------  ----------  ----------  ----------  

Balance at December 31, 1995
   Issuance of Common stock under stock option plan
   Issuance of warrants in connection with acquisition of the
  assets of Panocorp
   Translation adjustment
   Net loss--Year ended  December 31, 1996
                                                                      ----------  ----------  ----------  ----------  

Balance at December 31, 1996
   Common stock issued in public offering, net of issuance
  costs -- $ 796
   Issuance of Common stock under stock option plan
   Translation adjustment
   Net loss--Year ended December 31, 1997
                                                                      ----------  ----------  ----------  ----------  

Balance at December 31, 1997
   Common stock issued in private placements, net of issuance
  costs -- $ 44

   Issuance of Series E convertible preferred stock, ..............                                                   
  net of issuance costs -- $ 822
   Issuance of Common stock under stock option plan
   Translation adjustment
   Net loss--Year ended December 31, 1998
                                                                      ----------  ----------  ----------  ----------  

Balance at December 31, 1998 ......................................         --          --          --          --    
                                                                      ==========  ==========  ==========  ==========  




<CAPTION>
                                                                                       Convertible Preferred Stock
                                                                                -----------------------------------------
                                                                            Series C             Series D             Series E
                                                                            --------             --------             --------
                                                                       Shares                Shares               Shares
                                                                       issued     Amount     issued     Amount    issued     Amount
                                                                      --------   --------   --------   --------  --------   --------
<S>                                                                   <C>           <C>       <C>         <C>       <C>         <C>
Balance at June 18, 1992
   Issuance of convertible preferred stock, net of issuance .......   3,044,846     8,615     430,208     1,224
  costs in 1992, 1993 and 1994
   Issuance of Common stock in 1992 and 1993
   Issuance of Common stock under stock  option plan in 1994
   Purchase of 28,761
   shares of Common stock-- Treasury
  stock in 1994
   Translation adjustment
   Net loss from June 18, 1992 (date of inception) through
  December 31, 1994
                                                                     ----------  --------  ----------  --------  ---------- ------

Balance at December 31, 1994 ......................................   3,044,846     8,615     430,208     1,224
    Reissuance of 28,761 shares of Common stock held in
   treasury
    Issuance of Common stock under stock option plan
    Common stock issued in initial public offering, net of issuance
   costs -- $ 1,080
    Conversion of preferred stock .................................  (3,044,846)   (8,615)   (430,208)   (1,224)
    Translation adjustment
    Net loss--Year ended December 31, 1995
                                                                     ----------  --------  ----------  --------  ---------- ------

Balance at December 31, 1995
   Issuance of Common stock under stock option plan
   Issuance of warrants in connection with acquisition of the
  assets of Panocorp
   Translation adjustment
   Net loss--Year ended  December 31, 1996
                                                                     ----------  --------  ----------  --------  ---------- ------

Balance at December 31, 1996
   Common stock issued in public offering, net of issuance
  costs -- $ 796
   Issuance of Common stock under stock option plan
   Translation adjustment
   Net loss--Year ended December 31, 1997
                                                                     ----------  --------  ----------  --------  ---------- ------

Balance at December 31, 1997
   Common stock issued in private placements, net of issuance
  costs -- $ 44

   Issuance of Series E convertible preferred stock, ..............                                                 367,269     $4
  net of issuance costs -- $ 822
   Issuance of Common stock under stock option plan
   Translation adjustment
   Net loss--Year ended December 31, 1998
                                                                     ----------  --------  ----------  --------  ---------- ------

Balance at December 31, 1998 ......................................        --        --          --        --       367,269     $4
                                                                     ==========  ========  ==========  ========  ========== ======
</TABLE>


                             See accompanying notes.


                                                                         Page 28
<PAGE>


                 Consolidated Statement of Stockholders' Equity
                      (in thousands, except share amounts)

<TABLE>
<CAPTION>
                                                                 Common Stock
                                                                                                          Deficit
                                                                                                        accumulated
                                                                                Additional  Cumulative    during
                                                                 Shares          Paid-in    translation development  Treasury
                                                                 issued  Amount  Capital    adjustment     stage      stock    Total
                                                                 ------  ------  -------    ----------     -----      -----    -----
<S>                                                           <C>         <C>    <C>        <C>         <C>          <C>    <C>    
Balance at June 18, 1992
   Issuance of convertible preferred stock, net of issuance .                                                               $12,796
  costs in 1992, 1993 and 1994
   Issuance of Common stock in 1992 and 1993 ................    132,301  $  1    $  96                                          97
   Issuance of Common stock under stock option plan in  1994      77,356     1       28                                          29
   Purchase of 28,761 shares of Common stock--  Treasury
  stock in 1994 .............................................                                                        $(11)      (11)
      Translation adjustment ................................                                  $181                             181
      Net loss from June 18, 1992 (date of inception) through
   December 31, 1994 ........................................                                            $(3,605)            (3,605)

Balance at December 31, 1994 ................................    209,657     2      123         181       (3,605)     (11)    9,487
    Reissuance of 28,761 shares of Common stock held in
   treasury
                                                                                      3                                11        14
   Issuance of Common stock under stock option plan .........      6,902     0        3                                           3
   Common stock issued in initial public offering, net of
  issuance costs -- $ 1,080 .................................  2,500,000    25   20,973                                      20,998
   Conversion of preferred stock ............................  5,395,504    54   12,742
   Translation adjustment ...................................                                   334                             334
   Net loss--Year ended December 31, 1995 ...................                                             (6,305)            (6,305)

Balance at December 31, 1995 ................................  8,112,063    81   33,844         515       (9,910)            24,530
   Issuance of Common stock under stock option plan .........     29,083     0       11                                          11
   Issuance of warrants in connection with acquisition of the
  assets of Panocorp
                                                                                    230                                         230
   Translation adjustment ...................................                                  (953)                           (953)
   Net loss--Year ended  December 31, 1996 ..................                                            (11,719)           (11,719)

Balance at December 31, 1996 ................................  8,141,146    81   34,085        (438)     (21,629)            12,099
   Common stock issued in public offering, net of issuance
  costs -- $ 796 ............................................  5,570,819    56   22,958                                      23,014
   Issuance of Common stock under stock option plan .........     50,767     1       25                                          25
   Translation adjustment ...................................                                (1,694)                         (1,694)
   Net loss--Year ended December 31, 1997 ...................                                            (14,664)           (14,664)

Balance at December 31, 1997 ................................ 13,762,732  $138  $57,067     $(2,132)    $(36,293)           $18,780
   Common stock issued in private placements, net of issuance
  costs -- $ 44 .............................................  1,236,222    12    4,493                                       4,506
   Issuance of Series E convertible preferred stock,
  net of issuance costs -- $ 822 ............................                     7,437                                       7,440
   Issuance of Common stock under stock option plan
                                                                   1,375              1                                           1
   Translation adjustment ...................................                                   392                             392
   Net loss--Year ended December 31, 1998
                                                                                                         (17,863)           (17,863)

Balance at December 31, 1998 ................................ 15,000,329  $150  $68,999     $(1,740)    $(54,156)           $13,257
</TABLE>


                             See accompanying notes.


                                                                         Page 29
<PAGE>


                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                    (in thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                                                                               Period
                                                                                                                from
                                                                                                              June 18,
                                                                                                                1992
                                                                                Year Ended                    (date of
                                                                              December 31st,                  inception)
                                                                              -------------                    through
                                                                                                              Dec. 31st,
                                                                                                              ----------
                                                                             1996        1997        1998        1998
                                                                           --------    --------    --------   ----------
<S>                                                                        <C>         <C>         <C>         <C>      
Operating activities
     Net loss ..........................................................   $(11,719)   $(14,664)   $(17,863)   $(54,156)
     Adjustments to reconcile net loss to net cash (used) by
          operating activities:
     Depreciation and amortization .....................................      3,934       3,741       4,359      15,925
     Gain on disposal of fixed assets ..................................        (31)       --           (12)        (43)
     Deferred taxes ....................................................        (53)       --           680      (4,483)
      "in kind"  transactions ..........................................       --          --          --         1,420
     Change in assets and liabilities
          Accounts receivable--Trade ...................................      3,749         672         337        (344)
          Accounts receivable--Other ...................................        (21)        102         (75)        320
          Inventory ....................................................       (393)        (28)       (223)     (1,018)
          Other assets .................................................       (280)        115         996        (568)
          Accounts payable, accrued expenses and other assets and
          liabilities ..................................................       (634)        983       2,948       8,647
          Deferred revenue .............................................        300        (297)       (490)      2,290
                                                                           --------    --------    --------    --------
     Net cash used in operating activities .............................     (5,148)     (9,376)     (9,343)    (32,010)
                                                                           --------    --------    --------    --------
Investing activities
     Additions to property, plant, and equipment .......................     (5,866)     (1,165)     (1,860)    (19,320)
    Reclassification of cash equivalents as restricted cash ............       --       (10,080)        (32)    (10,112)
     Additions to patents ..............................................       (130)       --          --          (130)
                                                                           --------    --------    --------    --------
     Net cash used in investing activities .............................     (5,996)    (11,245)     (1,892)    (29,562)
Financing activities
     Stock issued ......................................................          3      21,639      11,906      67,504
     Proceeds from long-term borrowings ................................         97      10,000        --        16,287
     Proceeds from sale leaseback transactions .........................       --          --          --         2,731
     Payments for equipment purchases financed by accounts
          payable ......................................................       (997)       --          --        (3,706)
     Repayment of long-term borrowings .................................       (215)       (787)       (739)     (3,815)
     Repayment of capital lease obligations ............................       (876)       (576)     (1,695)     (4,002)
                                                                           --------    --------    --------    --------
     Net cash provided by (used in) financing activities ...............     (1,988)     30,276       9,472      74,999
     Effect of exchange rates on cash ..................................       (165)     (1,493)       (499)     (3,261)
                                                                           --------    --------    --------    --------
     Net increase / (decrease) in cash equivalents .....................    (13,297)      8,162      (2,262)     10,166
Cash and cash equivalents beginning of period ..........................     17,563       4,266      12,428        --
                                                                           --------    --------    --------    --------
Cash and cash equivalents end of period ................................   $  4,266    $ 12,428    $ 10,166    $ 10,166
                                                                           ========    ========    ========    ========
Supplemental disclosures of non cash activities:
Equipment acquired under capitalized leases ............................       --          --      $ 12,048    $ 13,257
Equipment purchases financed by accounts payable .......................       --          --          --      $    920
Licenses acquired payable over two or three years ......................       --          --          --      $  3,765
Acquisitions of intangible by issuance of warrants .....................   $    230        --          --      $    230
Fixed assets disposed of in like-kind exchange .........................   $    468        --          --      $    468
Fixed assets acquired through like-kind exchange .......................   $    499        --          --      $    499
Supplemental disclosures of cash flow information:
Interest paid ..........................................................   $     52    $    184    $    729    $    925
</TABLE>


                             See accompanying notes.


                                                                         Page 30
<PAGE>


                   Notes to Consolidated Financial Statements
                (all amounts in thousands except share amounts)

1.   Organization and Business Activity

     PixTech,  Inc. was  incorporated  under the laws of Delaware on October 27,
1993. On November 30, 1993, PixTech,  Inc. acquired 100% beneficial ownership of
PixTech S.A., through a share exchange agreement.  PixTech S.A. was incorporated
under  the laws of  France  on June  18,  1992.  For  accounting  purposes,  the
acquisition  has been  treated as a  recapitalization  of PixTech  S.A.  As used
herein, "the Company" refers to PixTech, Inc. and PixTech S.A.

     The Company was founded to improve,  utilize and license certain background
technology   developed   by   Laboratoire   Electronique   de   Technologie   et
d'Instrumentation  ("LETI"), a French government-owned  research and development
laboratory in the field of flat panel displays using electron emitters, known as
field emission displays ("FEDs").

     The Company has devoted  substantially  all its efforts to raising capital,
conducting  research and  development  activities,  concluding  cooperation  and
license  agreements  with  certain  displays  manufacturers,   and  establishing
manufacturing  capabilities  for  its  FEDs.  Revenues  from  principal  planned
operations  will mainly  consist of product  sales.  As these  revenues have not
commenced,  PixTech,  Inc. is still in a  development  stage and falls under the
provisions  of  FAS  No.  7  "Accounting  and  Reporting  by  Development  Stage
Enterprises".

2.   Summary of the Significant Accounting Policies

Basis of presentation

     The  accompanying   consolidated  financial  statements  were  prepared  in
accordance with generally accepted  accounting  principles in the United States.
The preparation of financial  statements  requires  management to make estimates
and assumptions that affect the reported amounts of assets and liabilities,  and
disclosure of contingent  assets and  liabilities,  at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.

Principles of consolidation

     The consolidated financial statements include the accounts of PixTech, Inc.
and  its  wholly  owned  subsidiary  PixTech  S.A.   Intercompany  accounts  and
transactions have been eliminated in consolidation.

Fiscal Year

     The Company ends its fiscal year on December 31.

Revenue recognition--Cooperation and License Agreements

     The Company has  entered  into  cooperation  and  license  agreements  with
certain  displays  manufacturers.  Under these  contracts,  the  Company  shares
technology with such members through cross licensing  provisions.  Each contract
provides for certain fees and  royalties to be paid to the Company.  The Company
believes  that each of the  cooperation  and license  agreements  are  long-term
construction/production  contracts  pursuant  to SOP 81-1 and that the  criteria
have been  satisfied to entitle the Company to partially  recognize  the revenue
under  those  contracts.  Certain  fees  payable  to  the  Company  under  these
agreements were  milestone-related  and were due in accordance with the terms of
each  agreement  when the  milestone  is  achieved.  Once  paid,  such  fees are
irrevocable.  The Company  recognized this  milestone-related  revenue only when
each  milestone  had been  fully  performed,  as  agreed by the  parties.  Costs
incurred under these  contracts were  considered  costs in the period  incurred,
regardless of when related revenue is recognized.


                                                                         Page 31
<PAGE>


     Texas  Instruments.  The Company  entered  into a  Cooperation  and License
Agreement with Texas  Instruments  Incorporated on June 29, 1993. This Agreement
was terminated on July 15, 1996. In 1996, the Company  recorded  cooperation and
license revenues under this terminated agreement in the amount of $1,336.

     Futaba  Corporation.  The Company  entered into a  Cooperation  and License
Agreement with Futaba  Corporation  ("Futaba") on November 27, 1993 (the "Futaba
Agreement").  Pursuant to the Futaba Agreement, Futaba agreed to pay the Company
a license fee upon signing the agreement, which was recognized upon execution of
the agreement.  Futaba also agreed to a technology  transfer fee, payable to the
Company in three installments upon the occurrence of certain milestones,  and an
additional  fee  payable  annually  upon  the  achievement  of  further  product
development  milestones.   Finally,  to  the  extent  that  Futaba  successfully
incorporates the  cross-licensed  technology into its own products,  Futaba must
make royalty payments in connection with the sale of products  incorporating the
technology  licensed by the Company.  At that time,  the Company will  recognize
royalty revenues.

     In order to reach certain specified  milestones under the Futaba Agreement,
the Company performed  certain services in the field of technology  development.
In accordance with the Futaba  Agreement,  the  milestone-related  revenues were
recognized when certain milestone were achieved.  The cooperation period between
the Company and Futaba  expired in January  1997 and the Company will not record
any additional milestone based revenues in the future.

     Raytheon  Company.  The  Company  entered  into a  Cooperation  and License
Agreement  with Raytheon  Company  ("Raytheon")  on June 1, 1994 (the  "Raytheon
Agreement").  Pursuant to the  Raytheon  Agreement,  Raytheon  agreed to pay the
Company a license fee payable in part upon the signing of the  agreement and for
a specified  number of months  thereafter.  Such license fee was recognized when
due.  Raytheon  also  agreed  to  make  two  additional  payments  based  on the
achievement of certain  milestones.  Raytheon also must make royalty payments in
connection with the sale of products incorporating  technology licensed to it by
the Company.

     In June 1997, the  cooperation  period between the Company and Raytheon was
extended  for a period of two  years but no  revenue  was  associated  with such
extension.   To  the  extent  that  Raytheon   successfully   incorporates   the
cross-licensed  technology  into its own  products,  the Company will  recognize
royalty  revenues as Raytheon  sells the  products.  The Company  believes  that
Raytheon Company may have suspended its internal program to develop FEDs.

     Motorola, Inc. The Company entered into a Cooperation and License Agreement
with Motorola,  Inc.  ("Motorola") on June 13, 1995 (the "Motorola  Agreement").
Pursuant to the Motorola Agreement, Motorola agreed to pay the Company a license
fee upon  signing the  agreement,  which was  recognized  upon  execution of the
agreement.  Motorola also agreed to a technology  transfer  fee,  payable to the
Company upon the occurrence of certain milestones,  and an additional technology
update fee payable annually over a period of three years. Finally, Motorola must
make  royalty  payments  in  connection  with  the  sale  of  its  own  products
incorporating the technology licensed by the Company.

     In order to reach  certain of the specified  milestones  under the Motorola
Agreement,   the  Company   performed   services  in  the  field  of  technology
development.  In accordance with the Motorola Agreement,  the  milestone-related
payments  were  irrevocable  when  paid.  Cash  milestone-related  revenues  was
recognized when certain milestones were achieved.

     The  cooperation  period  between the Company and Motorola  expired in June
1998 and the Company will not record any additional  milestone based revenues in
the future.

     To the extent that Motorola  successfully  incorporates the  cross-licensed
technology into its own products, the Company will recognize royalty revenues as
Motorola sells the products.


                                                                         Page 32
<PAGE>


Revenue Recognition--Product Revenue

     Product  revenue  is  recognized  upon  shipment  in the  case of  standard
deliveries, and upon acceptance by the customer in the case of first delivery of
a specified product.

Revenue Recognition--Grants

     The Company  recognizes  revenue from  unconditional  grants  received from
governmental  agencies in the period granted.  Revenue from  conditional  grants
received are recognized when all conditions outlined in the grant have been met.

Foreign Currency Translation

     Assets and  liabilities  of PixTech S.A. are  translated  into U.S.  dollar
equivalents at the rate of exchange in effect on the balance sheet date;  income
and expenses are translated at the average rates of exchange  prevailing  during
the period. The related  translation  adjustments are reflected in stockholders'
equity.  Foreign  currency  gains or  losses  resulting  from  transactions  are
included  in results of  operations,  except  for  transaction  gains and losses
attributable to intercompany transactions, and for foreign currency transactions
or cash balances that hedge foreign currency commitments;  such transactions and
cash  balances are recorded in the same manner as  translation  adjustments,  as
recommended by the Statement of Financial  Accounting  Standards No 52, "Foreign
currency translation" ("SFAS 52").

Net Income (Loss) Per Share

     On December 31, 1997, the Company adopted Statement of Financial Accounting
Standards No 128, "Earnings per Share", ("SFAS 128").

     Prior to the  adoption  of SFAS 128,  net income  (loss) per share has been
calculated in accordance  with the  provisions  of Accounting  Principles  Board
Opinion No 15,  "Earnings per Share" (APB 15), using the weighted average number
of shares, convertible preferred shares assuming conversion at date of issuance,
and  dilutive  equivalent  shares  from stock  options  and  warrants  using the
treasury stock method. Net income (loss) per share also reflects for all periods
presented a 2 for 3 reverse  stock split which was  effective  at the closing of
the Company's initial public offering.

     Pursuant  to SFAS  128,  the  Company  is  required  to change  the  method
currently  used to compute  earnings per share and to restate all prior periods.
SFAS 128  replaced the  calculation  of primary and fully  diluted  earnings per
share with basic and diluted  earnings per share.  Unlike  primary  earnings per
share,  basic  earnings  per share  exclude  any  dilutive  effects of  options,
warrants and convertible securities.

     There is no impact of Statement 128 on the previous calculation of loss per
share for the  financial  years ended  December 31,  1996,  December 31, 1997 or
December  31,  1998.  As net losses  have been  reported in these  periods,  the
dilutive  effects of stock options,  preferred  stock and warrants were excluded
from the calculation of net loss per share under APB 15.


                                                                         Page 33
<PAGE>


Comprehensive Income

The  Company  adopted  Statement  of  Financial  Accounting  Standards  No. 130,
<< Reporting  Comprehensive  Income  >>,  (<<  SFAS 130 >>),  effective  for the
Company for the first  quarter of 1998.  SFAS 130 requires that items defined as
other comprehensive income, such as foreign currency translation adjustments, be
separately  classified  in the  financial  statements  and that the  accumulated
balance of other  comprehensive  income be  reported  separately  from  retained
earnings and  additional  paid-in  capital in the equity  section of the balance
sheet. The components of  comprehensive  income for the years ended December 31,
1996 , 1997 and 1998 are as follows :

Comprehensive loss :                               Years ended December 31,
                                                   ------------------------
                                                 1996        1997        1998
                                               --------    --------    --------
Net loss                                       $(11,719)   $(14,664)   $(17,863)
Change in cumulative translation adjustment        (953)     (1,694)        392
                                               --------    --------    --------
Comprehensive net loss                         $(12,672)   $(16,358)   $(17,471)
                                               ========    ========    ========


Cash and Cash Equivalents

     The Company  considers  all highly  liquid  investments  purchased  with an
original maturity of three months or less to be cash equivalents.

Investments

     The Company  accounts  for  investments  in  accordance  with  Statement of
Financial  Accounting  Standards No 115,  "Accounting for Certain Investments in
Debt and Equity Securities". The Company had no investments at December 31, 1997
or December 31, 1998,  other than pledged cash (See Note  6--Short term and long
term  restricted  cash).  There  were no  realized  gains or  losses on sales of
investments in 1996, 1997 or 1998.

Inventory

     Inventory  is valued at the lower of cost  (first-in,  first-out  basis) or
market. Inventory consists of raw material and spare parts.

Property, Plant and Equipment

     Property,  plant and  equipment  are  recorded  at cost.  Depreciation  and
amortization  are provided on a  straight-line  basis over the estimated  useful
lives of the assets, generally five years for pilot production equipment and six
years  for  Unipac  volume   production   equipment,   ten  years  for  building
improvements  and twenty years for buildings.  Equipment  financed under capital
leases are  depreciated  over the  shorter of the  estimated  useful life or the
lease term. Amortization expense is included within depreciation expense.

Impairment of Long-Lived Assets

     In January  1996,  the Company  adopted  Statement of Financial  Accounting
Standard No. 121,  "Accounting  for the Impairment of Long-Lived  Assets and for
Long-Lived Assets to be Disposed Of" ("SFAS 121"),  which  establishes  criteria
for  the   recognition  and  measurement  of  impairment  loss  associated  with
long-lived  assets.  Adoption of SFAS 121 did not have a material  impact on the
Company's financial position or results of operations.


                                                                         Page 34
<PAGE>


Patents and Other Intangible Assets

     Patent  application  and  establishment  costs are  expensed as incurred as
research and development costs.

     Other intangible assets include primarily  goodwill.  The carrying value of
goodwill  is reviewed  on an ongoing  basis to assess if facts or  circumstances
suggest that the Company's  goodwill may be impaired.  If this review  indicates
that goodwill will not be  recoverable,  based on the expected future cash flows
to be generated by these assets over their remaining  amortization  period,  the
Company's  carrying value of the goodwill is reduced by the estimated  shortfall
of discounted cash flows.

Employee Stock Option Plans

     In 1996,  the Company  adopted the  disclosure  provisions  of Statement of
Financial Accounting Standards No 123 ("SFAS 123"),  "Accounting for Stock Based
Compensation".  As permitted by SFAS 123, the Company has elected to continue to
account for its employee  stock option  plans and the  Employee  Stock  Purchase
Plans in accordance  with the  provisions  of the  Accounting  Principles  Board
Opinion No 25 "Accounting for Stock Issued to Employees"  ("APB 25").  Under APB
25, when the exercise price of the Company's employee stock options is less than
the market  price of the  underlying  shares of the date of grant,  compensation
expense is recognized.

Accounting for Income Taxes

     The Company uses the liability method in accounting for income taxes. Under
this  method,  deferred  tax  assets and  liabilities  are  determined  based on
differences  between financial reporting and tax bases of assets and liabilities
and are  measured  using the  enacted  tax rates and laws that will be in effect
when the differences are expected to reverse.

Pension Costs

     In France,  legislation  requires that lump sum  retirement  indemnities be
paid to  employees  based upon  their  years of  services  and  compensation  at
retirement.  The actuarial  liability of this unfunded obligation as of December
31, 1997 and December  31, 1998 is $46 and $85,  respectively.  Pension  expense
incurred was $14 in 1996, $14 in 1997 and $35 in 1998.


3.   Other current assets
     The components of other current assets are as follows :

                                                            December 31,
                                                        -------------------
                                                         1997         1998
                                                        ------       ------
   Value added tax refundable ...................       $  882       $1,141
   Grants receivable ............................        1,210         --   
   Other ........................................           74          213
                                                        ------       ------
                                                        $2,166       $1,354
                                                        ======       ======


                                                                         Page 35
<PAGE>


4.   Property, Plant and Equipment

     The components of Property, Plant and Equipment are as follows:

                                                          December 31,
                                                     -----------------------
                                                       1997           1998
                                                     --------       --------
    Land .......................................     $    218       $    232
    Buildings and improvements .................        2,532          2,714
    Machinery and equipment ....................       14,941         29,503
    Furniture and fixtures .....................        1,089          1,163
                                                     --------       --------
                                                       18,780         33,612
    Less accumulated depreciation ..............       (9,427)       (14,786)
                                                     --------       --------
                                                     $  9,353       $ 18,826
                                                     ========       ========

     In 1994, the Company  entered into capital lease  agreements for production
equipment.  The gross and net book values of equipment  financed  under  capital
leases amounted $3,857 and $947,  respectively,  at December 31, 1997 and $4,107
and $350, respectively, at December 31, 1998.

     Land and  buildings  with a net book value of $1,100 and $1,123 at December
31, 1997 and December 31, 1998,  respectively,  have been pledged to guarantee a
$10,000 loan received  from  Sumitomo  Corporation  in November  1997.  See note
7--Long-term debt.

     Pursuant  to the  Display  Foundry  Agreement  signed in 1997 with  Unipac,
volume FEDs  production  equipment  was  installed  at Unipac's  facility.  That
equipment was  purchased and funded by Unipac,  and a portion of it is leased to
PixTech,  which  amounts  to $12,048  as of  December  31,  1998.  According  to
Financial  Accounting  Standard 13, << Accounting for leases >>, PixTech's share
of equipment  was  recorded as assets  under the caption << Property,  Plant and
Equipment >>, in the net amount of $11,061.  A depreciation of $988 was recorded
during 1998.  As of December  31, 1998,  the related  capital  lease  obligation
amounts to $10,125,  of which $1,869 has been recorded as current portion.  (See
Note 8--Capital leases).

5.   Goodwill

     On February 20, 1996, the Company acquired  substantially all the assets of
PanoCorp,  Inc.  ("Panocorp"),  a research and  development  company  located in
California,  in a  transaction  accounted  for  as a  purchase.  The  assets  of
PanoCorp,  Inc.,  principally  including  fixed  assets  valued  at  $120,  were
purchased  for $250 in cash plus  150,000  warrants  to  purchase  shares of the
Company's  common  stock at an  exercise  price of $11.67  per  share.  See Note
11--Stockholders' Equity - Warrants.

     The fair value of the 150,000 warrants was computed using the Black-Scholes
model.  Pursuant to APB Opinion 16, the value of such  warrants was estimated at
$230 and the entire  transaction  generated  goodwill of $360.  This goodwill is
being amortized over 5 years.

     The  purchase  agreement  also  calls  for the  issuance  of up to  600,000
additional  warrants  to the  shareholders  of  PanoCorp,  contingent  upon  the
achievement  by the  Company of  specified  technical  milestones  before end of
February  1999.  No such  warrants have been issued at December 31, 1998 and, at
that date,  no more than 200,000  warrants to purchase  shares of the  Company's
common stock, at an exercise price of $16.67 per share,  may be issued under the
purchase agreement.


                                                                         Page 36
<PAGE>


6.   Short-term and long-term restricted cash

     In  August  1997,  the  Company  provided  Unipac   Optoelectronics   Corp.
("Unipac"),  its Asian manufacturing partner, with a written bank guaranty in an
amount of $10,000  pursuant  to the  display  foundry  agreement  (the  "Foundry
Agreement")  signed  in May 1997  between  the  Company  and  Unipac in order to
implement volume production of FEDs at Unipac's  manufacturing line. The Company
granted the issuing banks a security  interest in its cash and cash  equivalents
for the same amount. The pledged cash and cash equivalents have been recorded as
short-term and long-term  restricted  cash in the balance  sheet.  Under certain
conditions of the Foundry  Agreement,  Unipac can sell certain  equipment to the
Company.  The payment for such  equipment  will be secured by Unipac through the
exercise of the bank guaranty. Both the amount of the guaranty to Unipac and the
amount of the  security  interest  to the banks is expected to decrease to match
the net amount of equipment leased by Unipac to the Company.

7.   Long-term debt

          Long-term debt consists of the following :

                                                             December 31,
                                                         --------------------
                                                           1997        1998
                                                         --------    --------
  Loan payable (a) ...................................   $ 10,000    $ 10,000
  Non interest bearing loan from ANVAR (b) ...........      2,004       1,601
  Equipment purchase loans (c) .......................        172          93
  Loan payable (d) ...................................         45        --   
  Loan payable (e) ...................................        167         107
                                                         --------    --------
                                                           12,388      11,801
  Less: current portion ..............................     (1,364)     (3,410)
                                                         --------    --------
  Total long-term debt, less current portion .........   $ 11,024    $  8,391
                                                         ========    ========

     (a) In November 1997, Sumitomo  Corporation  ("Sumitomo") granted PixTech a
$10,000 loan  repayable  over a period of three years.  Of this $10,000  amount,
$5,000  represents a straight  loan payable in four equal  installments  every 6
months  starting  April 7, 1999,  bearing  interest at prime rate plus 0.75% per
annum. The remaining  amount of $5,000  represents a convertible loan payable in
November  2000,  bearing  interest  at prime  rate  plus  0.75% per  annum,  and
partially or totally  convertible,  at Sumitomo's option,  into shares of Common
Stock of the Company at a  conversion  price equal to 80% of the market price on
the conversion  date.  This option becomes  exercisable  starting April 1999 and
expires November 2000. As part of the Sumitomo Agreement,  the loan is partially
secured  as  follows:  - the  Company  pledged  certain  PixTech  S.A.  land and
constructions located in Rousset. See Note 4-- Property,  plant and equipment. -
the French atomic energy agency,  Commissariat a l'Energie Atomique ("CEA"), has
guaranteed certain contingent  payment  obligations  towards Sumitomo in case of
default by PixTech.  See Note 16-- Related  parties  transactions.  In addition,
should the Company  default on the repayment of the loan, the Company will remit
to Sumitomo two thirds of any royalty  amount  received from any licensee  until
all obligations to Sumitomo are satisfied.

     (b) The Company  entered into a  development  contract with a French Public
agency ANVAR in 1993. Under this agreement,  the Company received a non-interest
bearing loan. Repayment of this loan started in 1997.

     (c) In 1994, the Company was granted a $686 loan from a supplier of a piece
of  particular  equipment.  This  loan  is  payable  in 8  installments  of $77,
including interest at 6.50%, over a period of 4 years starting in May 1996.

     (d) In 1994, the Company was granted a loan, which bears interest at 5% and
is repayable in 8 installments of  approximately  $17 over two years starting in
December 1996. As at December 31, 1998, this loan was totally repaid.

     (e) In 1995,  the Company was granted a bank loan,  which bears interest at
6.37% and is  repayable in 20  installments  of  approximately  $20 over 5 years
starting in July 1995.


                                                                         Page 37
<PAGE>


     Future minimum payments under these obligations are as follows:

     Year ending December 31,
     1999 .................................        3,410
     2000 (f) .............................        8,391
                                                 -------
     Total minimum payments ...............      $11,801
                                                 =======

     (f) Includes the $5,000  convertible  loan  repayable in November 2000, and
partially  or totally  convertible  into  shares of Common  Stock of the Company
after April 7, 1999. See note (a) above.

8.   Capital leases

                                                     December 31,
                                                ---------------------
                                                  1997         1998
                                                --------     --------
     Capital lease obligations .............    $  1,040     $ 10,588
     Less: current portion .................        (599)      (2,189)
                                                --------     --------
                                                $    441     $  8,399
                                                --------     --------

     In December 1994, the Company completed several sale-leaseback transactions
whereby  equipment with a net book value of $4,219 was financed through three to
five-year capital lease  obligations,  effective  December 1994. At December 31,
1998, the net book value of this equipment was $ 350.

     Pursuant  to the  Display  Foundry  Agreement  signed in 1997 with  Unipac,
PixTech's  share of volume FEDs  production  installed  at Unipac's  facility is
leased to PixTech. As of December 31, 1998, the related capital lease obligation
amounts to $10,125,  of which $1,869 has been recorded as current portion.  (See
Note 4--Property, Plant and Equipment).

     Future minimum payments under these obligations are as follows:

     Year ending December 31,
     1999  .............................................      2,880
     2000  .............................................      2,511
     2001  .............................................      2,233
     2002  .............................................      2,110
     2003  .............................................      1,987
     2004  .............................................        792
                                                           --------
     Total minimum payments ............................     12,513
     Less amount representing interest .................     (1,925)
                                                           --------
     Present value of minimum capitalized lease payments   $ 10,588
                                                           --------

9.   Commitments and contingencies

Operating leases

     The Company is obligated under operating lease agreements for equipment and
manufacturing and office facilities.

     The Company leases certain  equipment  under a cancelable  operating  lease
with terms of 60 months through 1999. The total amount of the base rent payments
has been charged as an expense on the straight  line method over the term of the
lease.

     The Company leases its main  manufacturing  and office  facilities  under a
non-cancelable operating lease which expires September 2000.


                                                                         Page 38
<PAGE>


     Minimum annual rental  commitments  under non cancelable leases at December
31, 1998, are as follows :

     Year ending December 31,
     1999 .......................................................   $1,113
     2000 .......................................................      768
     2001 .......................................................       46
     2002 .......................................................       15
     2003 .......................................................       14
     2004 .......................................................        7
                                                                    ------
     Total minimum payments .....................................   $1,963
                                                                    ======

     Rental expense for all operating leases consisted of the following:

                                              1996        1997        1998
                                              ----        ----        ----
     Rent expense for operating leases        $1,439      $1,245      $1,188
                                              ======      ======      ======

License Agreement and Research and Development Agreement with CEA

     See Note 16--Related Party Transactions

10.  Fair Value of Financial Instruments

     At December 31, 1997 and 1998, the carrying values of financial instruments
such as cash and cash equivalents,  short term investments,  accounts receivable
and payable,  other receivables and accrued  liabilities and the current portion
of long-term  debt  approximated  their market  values,  based on the short-term
maturities of these instruments.

     At December 31, 1998, the long-term  portion of restricted cash, with total
book value of $8,427 was $6,949.

     At December 31, 1997 and 1998,  the fair values of long-term debt and other
long-term  liabilities,  with book value of $13,984 and $22,917 were $12,463 and
$16,081, respectively.

     Fair value is determined based on expected future cash flows, discounted at
market interest rates, and other appropriate valuation methodologies.

11.  Stockholders' Equity

     The share amounts and per share dollar amounts  included herein reflect the
effect of the 2 for 3 reverse stock split which was effective on July 18, 1995.

Common Stock

     On July 18, 1995, the Company sold 2,500,000 shares of common stock for net
proceeds of $20,998 in its initial public offering on Nasdaq.

     On February 7, 1997, the Company sold 3,333,000 shares of Common Stock in a
public offering in Europe resulting in net proceeds of $15,927.

     In February  1997,  the Company  sold 463,708 and  1,111,111  shares of the
Company's  Common  Stock  to  Motorola,  Inc.  and  to  United  Microelectronics
Corporation,   the  parent  company  of  Unipac   Optoelectronics   Corporation,
respectively,  in private  placements  resulting  in net  proceeds of $2,086 and
$5,000 respectively.


                                                                         Page 39
<PAGE>


     In March 1998,  the Company sold 1,000,000  shares of the Company's  Common
Stock to The Kaufmann Fund Inc., in a private  placement at a price of $4.00 per
share,  resulting in net cash proceeds of $4,000 before expenses  payable by the
Company, which amounted to $44.

     In March 1998,  the Company  entered into a license  agreement with Coloray
Display Corporation,  a California  corporation  ("Coloray"),  providing PixTech
with a  worldwide,  nonexclusive  royalty-free  license on certain  technologies
related to field emission  displays.  In consideration of the license and rights
granted to PixTech,  the Company paid an amount of $75 and issued  14,000 shares
of  the  Company's  Common  Stock,  valued  at  a  price  of  $3.57  per  share,
representing a total amount of $50.

     In December 1998,  the Company sold 222,222 shares of the Company's  Common
Stock in a private  placement  at a price of $2.25 per share,  resulting  in net
proceeds of $500.

     There were  15,000,329  shares of Common Stock  outstanding at December 31,
1998.

Preferred Stock

     The Company's Board of Directors has the authority to issue up to 1,000,000
shares of Preferred Stock and to fix the relative  rights  thereof.  In December
1998,  500,000  shares of  Preferred  Stock were  reserved  for the  issuance of
"Series E Convertible Preferred Stock".

Convertible preferred stock

     The  Company's  Series  A  to  D  shares  of  Convertible  Preferred  Stock
automatically  converted  into  shares of Common  Stock upon the  closing of the
Company's initial public offering in 1995.

     In December 1998, the Company issued 367,269 Series E shares of Convertible
Preferred Stock. The Preferred Stock was sold in a private  placement at a price
of approximately $22.53 per share,  resulting in net proceeds of $8,275,  before
expenses payable by the Company, which amounted to $822. The amount representing
Preferred  Stock sold by the  Company is  generally  convertible  into shares of
Common  Stock  starting  from June 21, 1999 at a  conversion  price equal to the
lesser of  approximately  $2.25 per share of Common  Stock or the average of the
closing  price  of the  Common  Stock  over  the ten  trading  days  immediately
preceding the notice of conversion.  In addition to the conversion feature,  the
Preferred Stock has a liquidation  preference equal to the purchase price of the
preferred   stock  and  a  cumulative   dividend.   The  Preferred   Stock  will
automatically  convert into Common Stock on December  22,  2003.  The  Preferred
Stock is redeemable at the option of the Company at the issue price upon certain
events.  The holders of shares of Series E Preferred  Stock are  entitled to the
number of votes  equal to the  number of shares of Common  Stock  into which the
shares of Series E Preferred Stock held by such holder are convertible.

     The holders of Series E Preferred Stock are entitled to receive  cumulative
dividends.  At December  31,  1998 a dividend  of $12 was  accrued and  recorded
against Stockholders' Equity.

     In  addition,  the Company  agreed to reserve,  out of the  authorized  but
unissued shares,  150% of the number of shares of Common Stock that the Series E
Stock is  convertible  into.  As of December 31, 1998,  the Series E Stock would
have been  convertible  into 3,678,199 shares of Common Stock thus requiring the
Company to reserve  5,517,299  shares of the remaining  authorized  but unissued
shares.


                                                                         Page 40
<PAGE>


Stock Options

1993 Stock Option Plan

     The Company  adopted a stock option plan on November  30,  1993,  the "1993
Stock  Option  Plan"  (which was amended  and  restated in May 1995 and in April
1997),  under which options to purchase shares of common stock may be granted to
key employees and consultants of the Company.  The plan provides that the option
price  shall  be  determined  by the  Compensation  Committee  of the  Board  of
Directors  and that no portion of the option may be  exercised  beyond ten years
from the date of grant.  Options  which are  outstanding  at December  31, 1998,
become exercisable  within a certain period of time or when specific  milestones
are completed.

     The activity under the option plan was as follows:

                                           Shares        Options     Weighted
                                         available     outstanding    Average
                                         ---------     -----------  Option Price
                                                                     per Share  
                                                                    ------------

Balance at December 31, 1995 ..........     544,039     1,228,074
                                         ==========    ==========
     Options granted ..................    (365,850)      365,850      $8.018
     Options exercised ................        --         (29,083)      0.375
     Options terminated unexercised ...     100,567      (100,567)      2.859
                                         ----------    ----------
Balance at December 31, 1996 ..........     278,756     1,464,274
                                         ==========    ==========
     Additional shares reserved .......     800,000
     Options granted ..................  (1,121,050)    1,121,050      $4.300
     Options exercised ................        --         (52,989)      0.506
     Options terminated unexercised ...     464,193      (464,193)      7.875
                                         ----------    ----------
Balance at December 31, 1997 ..........     421,899     2,068,142
                                         ==========    ==========
     Options granted ..................    (444,960)      444,960      $4.626
     Options exercised ................        --          (1,375)      0.656
     Options terminated unexercised ...     362,535      (362,535)      4,632
                                         ----------    ----------
Balance at December 31, 1998 ..........     339,474     2,149,192
                                         ==========    ==========


     Options to purchase 748,667 shares and 1,125,434 shares were exercisable at
weighted-average  exercise  prices of $1.110 and $1.886 at December 31, 1997 and
December 31,1998, respectively.

     Exercise prices for options outstanding as of December 31, 1998 ranged from
$0.375 to $9.750.  The  weighted  average  remaining  contractual  life of those
options is 7.369 years.

     Pro forma information  regarding net loss and loss per share is required by
SFAS 123,  and has been  determined  as if the  Company  had  accounted  for its
employee  stock  options under the fair value method of SFAS 123. The fair value
for these  options  was  estimated  at the date of grant  using a  Black-Scholes
option  pricing model with the following  average  assumptions  for both years :
risk-free interest rates of 3%; dividend yields of 0%; volatility factors of the
expected  market price of the  Company's  shares of Common Stock of 0.74 ; and a
weighted-average expected life of the option of 4 years.

     For  purposes of pro forma  disclosures,  the  estimated  fair value of the
options is amortized to expense over the option's vesting period.  The Company's
pro  forma  information   follows  (in  thousands  except  for  loss  per  share
information) :

      --------------------------------------------------------------------
                                           1996        1997        1998
      --------------------------------------------------------------------
      Pro forma net loss                 $(11,869)   $(14,865)   $(18,690)
      Pro forma loss per share             $(1.46)     $(1.13)     $(1.29)
      --------------------------------------------------------------------

     The  weighted-average  fair value of options  granted during 1996, 1997 and
1998 were $3.84, $2.52 and $2.82, respectively.


                                                                         Page 41
<PAGE>


Director Stock Option Plan

     In May 1995,  the Company  adopted the 1995 Director Stock Option Plan (the
"Director  Stock Plan"),  which provides for the issuance of up to 50,000 shares
of the Company's  stock. The Director Stock Plan provides for an automatic grant
of options to  purchase  the  Company's  stock at its fair  market  value to the
non-employee  directors of the Company upon election or re-election to the Board
of Directors.

     The activity under the option plan was as follows:

                                       Shares       Options        Weighted
                                      available   outstanding   Average Option
                                      ---------   -----------       Price
                                                                  per Share
                                                                --------------
Balance at December 31, 1995            50,000         --
                                       =======
     Options granted                    (6,000)       6,000        $8.625
                                       -------      -------
Balance at December 31, 1996            44,000        6,000
                                       =======      =======
     Options granted                   (12,000)      12,000        $3.910
                                       -------      -------
Balance at December 31, 1997            38,000       12,000
                                       =======      =======
     Options granted                   (12,000)      12,000        $4.646
     Options terminated unexercised     14,000      (14,000)       $5.962
                                       -------      -------
Balance at December 31, 1998            34,000       14,000
                                       =======      =======


As at December 31, 1998 and at the date of grant , the  exercise  prices of each
stock option grant under the Director  Stock Plan was above the Company's  stock
price. Therefore, no compensation expense was incurred.

Warrants

     In December 1994, in connection with various equipment leases,  the Company
entered into a warrant  agreement.  Under this agreement,  the Company granted a
right to  purchase  62,500  shares of Common  Stock of the Company at a purchase
price of $2.88 per share.  No value was  ascribed to the  warrant.  This warrant
expires on July 18, 2000.

     In February  1996,  in order to finance  partially the purchase of PanoCorp
assets, the Company granted 150,000 warrants to purchase shares of the Company's
common stock at an exercise price of $11.67 per share. See Note 5--Goodwill.

     In February 1997, in connection  with the purchase of 463,708 shares of the
Company's  Common Stock,  Motorola  received  warrants to purchase an additional
463,708 shares of the Common Stock of the Company at a price of $5.50 per share,
which have expired unexercised on December 31, 1998.


Employee Stock Purchase Plan

     In May 1995,  the Company  adopted an  employee  stock  purchase  plan (the
"Purchase  Plan") under which employees may purchase shares of Common Stock at a
discount from fair market value. 100,000 shares of Common Stock are reserved for
issuance  under the Purchase Plan. To date, no shares have been issued under the
Purchase  Plan.  Rights to purchase  Common  Stock under the  Purchase  Plan are
granted at the discretion of the  Compensation  Committee,  which determines the
frequency and duration of individual offerings under the Plan and the dates when
the stock may be purchased.  Eligible  employees,  which represent all full-time
employees (as defined by the Purchase  Plan),  participate  voluntarily  and may
withdraw  from any  offering  at any time  before  the stock is  purchased.  The
purchase  price per share of Common Stock in an offering is 85% of the lesser of
its  fair  market  value  at the  beginning  of the  offering  period  or on the
applicable  exercise date and may be paid through payroll  deductions,  periodic
lump sum payments or a combination of both. The Purchase Plan  terminates on May
9, 2005.


                                                                         Page 42
<PAGE>


Shares available for issuance

     At December  31,  1998,  2,851,166  shares of Common Stock are reserved for
shares  issuable  under the Purchase  Plan or upon exercise of stock options and
warrants. In addition,  5,517,299 shares of Common Stock are reserved for shares
issuable upon  conversion of the  Convertible  Preferred  Stock.  Therefore,  on
December 31, 1998,  out of the  30,000,000  authorized  shares of Common  Stock,
6,631,206 shares were available for issuance by the Company.

12.  Other and deferred revenues

     Other revenues and deferred revenues include the following:

                                                         December 31,
                                                       ---------------
                                                    1997              1998
                                                  --------          --------

                                                Other  Deferred  Other  Deferred
                                                -----  --------  -----  --------

Grant from French Ministry of Industry (a) .... $  663  $1,210   $1,211  $ --   
Grant from French local authorities (b) .......    144     913      290   1,396
Grant from European Union, Esprit Program (c) .   --       423       96     766
Insurance refund (d) ..........................    292    --       --      --   
Other(e) ......................................     43    --        371    --
                                                ------  ------   ------  ------
TOTAL ......................................... $1,142  $2,546   $1,968  $2,162
                                                ======  ======   ======  ======

(a)  In December 1994, the Company was awarded a grant from the French  Ministry
     of Industry to support manufacturing of Field Emission Displays.  The total
     contribution  of the French  Ministry of Industry  amounted to $2,674.  The
     Company recognized as income $800 in 1996, $663 in 1997,and $1,211 in 1998,
     as all conditions of the grant were met.

(b)  PixTech SA was awarded  certain  incentives to establish its  manufacturing
     facilities in Montpellier,  France.  These incentives are partially subject
     to maintaining an operating  facility in this location for a certain period
     of  time.  In  1998,  no  revenue  was  recognized  in  relation  to  these
     incentives.  Revenue is  deferred  until all  conditions  are met. In 1998,
     revenue  recognized in the amount of $290 was related to various incentives
     granted by French local authorities.

(c)  In  February  1997,  the Company  entered  into an R&D  agreement  with the
     European Union for 18 months starting February 1, 1997. The contribution of
     the  European  Union to the costs  incurred by the Company  amounts to $800
     over the period.  The Company received $423 and $293 from this contribution
     in 1997 and in 1998, respectively.  This contribution was not recognized as
     income in 1997 nor in 1998 as all  conditions  stipulated  in the agreement
     were not met. In 1998,  revenue  recognized in the amount of $96 is related
     to another R&D agreement  entered into in 1993 with the European Union. The
     total  contribution  of the European  Union  amounted to $546.  The Company
     received $330 in 1994, $120 in 1995 and $96 in 1998 from this contribution.
     This contribution was recognized as income ratably over the contract period
     as required  costs were incurred to meet the  conditions  of the grant,  at
     which point such portion of the  contribution  is irrevocable as stipulated
     in the agreement.

(d)  In September 1997, the Company collected an amount of $620 in payment under
     its  business  insurance  policy to cover  losses  incurred  after  certain
     physical damages suffered in the Company's pilot manufacturing  facility in
     April 1997. An amount of $328  representing  reimbursement  of direct costs
     was  recorded  as  reduction  in research  and  development  expenses.  The
     remaining  amount of $292  covering  consequential  losses was reflected as
     other revenues in 1997.

(e)  Amounts  relating  to  payments  received  by  the  Company  from  entities
     primarily for the performance of miscellaneous services,  including $200 in
     1998 related to the favorable settlement of a tax dispute.


                                                                         Page 43
<PAGE>


13.  Income Taxes

     Income (loss) before income tax benefit consists of the following :

                                                           December 31,
                                                       -------------------
                                                     1996      1997      1998
                                                   --------  --------  --------
France ..........................................  $(10,556) $(13,567) $(16,614)
Rest of world ...................................    (1,161)   (1,683)   (3,408)
                                                   --------  --------  --------
   Income (loss) before income tax benefit ......  $(11,719) $(15,250) $(20,022)
                                                   ========  ========  ========

     The income tax benefit consists of the following:

                                             December 31,
                                        ---------------------
                                      1996       1997       1998
                                     ------     ------     ------
Deferred:
France .........................       --       $  586     $2,159
Rest of world ..................       --         --         --
                                     ------     ------     ------
                                       --       $  586     $2,159
                                     ======     ======     ======


     A  reconciliation  of income taxes  computed at the French  statutory  rate
(36.66%) to the income tax benefit is as follows :

                                                             December 31,
                                                          ------------------
                                                       1996     1997     1998
                                                      -------  -------  -------
Income taxes computed at the French statutory rate .. $ 4,297  $ 6,354  $ 7,341
Operating losses not utilized .......................  (4,297)  (6,354)  (7,341)
Research credits ....................................    --        586    2,159
                                                      -------  -------  -------
Total ...............................................    --        586    2,159
                                                      =======  =======  =======

     No U.S.  income tax expense was realized and no U.S. income taxes were paid
in periods ended December 31, 1996, December 31, 1997 and December 31, 1998.

     Deferred taxes reflect the net tax effects of temporary differences between
the carrying amounts of assets and liabilities for financial  reporting purposes
and the amounts  used for income tax  purposes.  Significant  components  of the
Company's deferred taxes consist of the following:

                                                         December 31,
                                                     --------------------
                                                 1996        1997        1998
                                               --------    --------    --------
Deferred tax assets:
     Net operating loss carryforwards ......   $  6,788    $ 12,058    $ 18,108
     Deferred revenue ......................      1,201         355          75
     Research credit carryforwards .........      8,193       8,000       6,448
                                               --------    --------    --------
                                                 16,181      20,413      24,631
Deferred tax liabilities:
     Revenue not currently taxable .........       --          --          --   
     Deferred revenue ......................       --          (412)       (760)
     Deferred expense ......................       (145)       (165)        (53)
                                               --------    --------    --------
          Total deferred tax assets ........     16,039      19,835      23,818
Valuation allowance ........................    (10,869)    (14,777)    (19,175)
                                               --------    --------    --------
Deferred tax assets ........................   $  5,167    $  5,058    $  4,643
                                               ========    ========    ========

     Net operating loss  carryforwards  can be credited against future income in
France.  Net operating loss  carryforward  of: $5,585 expire in 2000,  $5,951 in
2001,  $10,658 in 2002,  $15,451  in 2003 and  $11,735  can be  carried  forward
indefinitely.


                                                                         Page 44
<PAGE>


     Research credit  carryforwards derive from the Company's subsidiary PixTech
SA. In France,  research credit  carryforwards are calculated  following certain
rules defined by the Tax administration. The Company is entitled to full payment
by the Tax administration of these research credit carryforwards if they are not
credited  against  income  tax  liabilities  within a period of three  financial
years.  The Company  collected $29  representing  income tax benefit recorded in
1992, and $2,840  representing  income tax benefit recorded in 1993 and 1994, in
1997 and 1998 respectively.

14.  Industry and Geographic information

     The Company adopted  Statement of Financial  Accounting  Standards No. 131,
"Disclosures  about Segments of an Enterprise and Related  Information",  ("SFAS
131"),  effective for the Company for fiscal years  beginning after December 15,
1997.  SFAS  131  requires  that  public  business  enterprises  report  certain
information about operating  segments in their financial  statements,  and about
their  products and services,  the  geographic  area in which they operate,  and
their major customers. As the Company operates in one single reportable segment,
the  development,  manufacturing  and  licensing  of flat panel  displays  using
electron  emitters,  the  adoption  of SFAS 131 has no effect  on the  Company's
consolidated operating results or financial condition.

15.  Significant customers

     Historically, the Company derived its revenues principally from cooperation
and license  agreements  with certain display  manufacturers.  Net revenues from
cooperation and license agreements represented approximately 75%, 50% and 34% of
the  Company's  net  revenues  for  the  fiscal  years  1996,   1997  and  1998,
respectively.  The Company does not expect any significant  additional milestone
related  revenues to be directly  derived from existing  cooperation and license
agreements.

     In 1998, product revenues  primarily  reflected the shipment of displays to
the Company's first volume customer, Zoll Medical Inc.

16.  Related Party transactions

     CEA License Agreement

     In September 1992, the Company  entered into a license  agreement with CEA.
CEA holds a controlling interest in CEA Industrie, a shareholder of the Company.
Under this agreement,  CEA granted to the Company a royalty bearing,  worldwide,
exclusive  license to all patents held by CEA in the field of FEDs, with a right
to sublicense these patents under certain conditions. The consideration for this
license is a payment of license fees and royalties  based on the Company's sales
and the license fees and  royalties  collected  by the  Company.  No expense was
recorded in 1993 and 1994 with respect to license fees and royalties due to CEA.
In 1995,  $1,000 was accrued in respect of license fees and royalties due to CEA
in 1996.  In order for the  Company to  maintain an  exclusive  license,  it was
required to make minimum  royalty  payments  beginning in 1996. An amount of $45
payable to CEA in 1997 was accrued in 1996. By paying the  remaining  amount due
to LETI,  the  Company  will  fulfill the minimum  royalty  obligations  to LETI
through 1998.

     In 1997, an amendment to the LETI License  Agreement was signed between the
CEA and the Company (the "1997 CEA  Amendment")  for a period of three years, in
return  for CEA  guarantying  certain  contingent  payment  obligations  towards
Sumitomo.  See Note 7-- Long term debt.  The royalty rates and minimum  payments
from the Company to CEA were increased for a period of three years. In addition,
the Company gave a security  interest to CEA on all its patents  during the term
of the amendment.  An amount of $109 and $308 was accrued  respectively  in 1997
and in 1998,  which  included  a  minimum  royalty  obligation  of $100 and $288
respectively pursuant to the 1997 CEA Amendment.


                                                                         Page 45
<PAGE>


     CEA R&D Agreement

     In September  1992,  the Company  entered into a three-year  renewable  R&D
agreement  with CEA,  under which CEA,  through its  laboratory  LETI,  performs
certain research and development activities for the benefit of the Company. This
program is expected  to be  extended  for a third  three-year  period  ending on
January  1,  2002,  subject  to further  extension  by mutual  agreement  of the
parties.  The  consideration  received by the CEA for this R&D  activity in 1998
amounted to approximately $848.

     In connection  with the above R&D agreement with CEA, the Company  expensed
$644 ,$637 and $848 in 1996, 1997 and 1998,  respectively,  included in research
and development costs.

17.  License

     In  connection  with the Company's  license of its  technology to a display
manufacturer,  the  Company  acquired a  worldwide,  non-exclusive  royalty-free
license to such  licensee's  background  FED  technology,  as well as a right to
grant  royalty-free  sublicenses  to certain  other  companies.  The Company was
obligated to pay certain  license fees in  connection  with the  acquisition  of
these rights from such  licensee;  these  payments to the licensee  were $650 in
1995 and $650 in 1996. In 1997,  the Company  recorded  cooperation  and license
revenues in the amount of $707, in  consideration  of the  cancellation  of same
amount  which had been  included  in  accounts  payable in  relation  to accrued
license fees due this licensee.

     In  connection  with the  Company's  license of its  technology  to another
display  manufacturer,  the Company  also  acquired a  worldwide,  non-exclusive
license,  without  the  right  to  sublicense,  to  certain  technology  of such
licensee.  The Company was  obligated to pay certain  license fees in connection
with the acquisition of these rights; these payments to the licensee were $1,000
in 1995,  $1,000 in 1996. The remaining license fees payable to this licensee in
the amount of $1,400 were canceled in 1997, as consideration for the purchase by
such licensee of shares of the Company's Common Stock in February 1997.

     In March 1998, the Company  entered into a license  agreement with Coloray,
providing PixTech with a worldwide, nonexclusive royalty-free license on certain
technologies related to field emission displays. In consideration of the license
and rights  granted to  PixTech,  the  Company  paid an amount of $75 and issued
14,000  shares of the  Company's  Common  Stock,  valued at a price of $3.57 per
share, representing a total amount of $50 (See Note 11--Stockholders' Equity).

18.  Litigation

     The Company has received  correspondence  from Futaba  Corporation  and its
legal  counsel  since  January  1998  alleging  the  following  : (i) Pixtech is
infringing one or more patents owned by Futaba relating to the  construction and
manufacture  of its displays that are not expressly  included  under the license
agreement  between  Futaba  and  Pixtech,  (ii)  PixTech's  use of terms such as
"alliance"  and   "partners"  in  describing  the  nature  of  its   contractual
relationships  with Motorola,  Raytheon and Futaba in reports filed with the SEC
is misleading and (iii) certain  provisions in the Foundry Agreement with Unipac
constitute an impermissible  sublicense of Futaba  technology.  PixTech does not
believe  such claims have any merit and has denied  each of the  allegations  in
correspondences  with Futaba and its counsel and is in  discussions  with Futaba
concerning  their  allegations.   Futaba  has  also  claimed  that  the  Company
improperly  supplied certain Futaba proprietary  information to Unipac, and that
Unipac has in turn disclosed such information to a third party vendor. If Futaba
were to prevail on all of these  claims,  PixTech may be  required,  among other
adverse consequences, to modify the construction and manufacture of its displays
and may, as a result, be materially adversely affected.

     To the  Company's  knowledge,  there  are no  other  exceptional  facts  or
litigation  that could have or that have in the recent past had any  significant
impact on its business, results, financial situation, or assets and liabilities.


                                                                         Page 46
<PAGE>


19.  Financial position

During 1998, the Company has incurred losses in the amount of $17,875,  and used
cash in  operating  activities  of  $9,343,  which has  adversely  affected  the
Company's  liquidity.  At December 31, 1998, the Company had net working capital
of $145 and a deficit accumulated during the development stage of $54,156. These
conditions  raise  substantial  doubt  about its  ability to continue as a going
concern.  The Company  intends to improve its liquidity  and financial  position
through  capital  increases  expected  to take  place in 1999.  There  can be no
assurance that funds will be available  through capital increases when needed or
on terms acceptable to the Company.  The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

20.  Subsequent events

In January 1999, the Company sold 150,000  shares of the Company's  Common Stock
in a private placement at a price of $2.35 per share,  resulting in net proceeds
of $352.

Item 9.  Changes  in  and  Disagreements  with  Accountants  on  Accounting  and
     Financial Disclosures

     Not Applicable


                                    PART III

Item 10. Directors and Executive Officers of the Registrant

     The response to this item is contained in part under the caption "Executive
Officers  of the  Registrant"  in Part I, Item 1A hereof  and the  remainder  is
incorporated  herein by reference from the discussion  responsive  thereto under
the caption "Election of Directors" in the Company's Proxy Statement relating to
its Annual  Meeting of  Stockholders  scheduled  for April 27,  1999 (the "Proxy
Statement").

Item 11. Executive Compensation

     The  response to this item is  incorporated  herein by  reference  from the
discussion responsive thereto under the caption "Executive  Compensation" in the
Proxy Statement.

Item 12. Security Ownership of Certain Beneficial Owners and Management

     The  response to this item is  incorporated  herein by  reference  from the
discussion  responsive  thereto under the caption "Share Ownership" in the Proxy
Statement.

Item 13. Certain Relationships and Related Transactions

     The  response to this item is  incorporated  herein by  reference  from the
discussion  responsive  thereto  under  the  caption,   "Compensation  Committee
Interlocks and Insider Participation" in the Proxy Statement and from Note 16 to
the Financial Statements included herein.


                                     PART IV

Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K

(A)  1. FINANCIAL STATEMENTS

     The financial statements are listed under Item 8 of this report.

     2. FINANCIAL STATEMENT SCHEDULES

     The financial statement schedules are listed under Item 8 of this report.


                                                                         Page 47
<PAGE>


(B)  REPORTS ON FORM 8-K

     No reports on Form 8-K were filed during the fourth quarter of 1998.

     A report on Form 8-K has been filed  during the first  quarter of 1999,  on
January 7, 1999,  reporting  under Item 5 the  completion by the Registrant of a
Preferred Stock Purchase  Agreement (see exhibit  10.37),  and the nomination by
the Board of Directors,  of Mr. Dieter Mezger, the Company's President, as Chief
Executive Officer to succeed Jean-Luc Grand-Clement.


(C)  EXHIBITS

<TABLE>
<CAPTION>
Number      Footnote                   Description
------      --------                   -----------
<S>           <C>          <C>
  3.1           1          Restated Certificate of Incorporation of Registrant.

  3.2           2          Restated By-Laws of Registrant.

  3.3          14          Certificate of Designations of the Company

  4.1           3          Specimen certificate for shares of Common Stock of the Registrant.

  4.2           3          Warrant to purchase 62,500 shares of Common Stock of the Registrant issued to Comdisco,
                           Inc.

  4.3           6          Warrant to purchase 150,000 shares of Common Stock of the Registrant issued to PanoCorp
                           Display Systems, Inc.

  4.4                      Warrant to purchase 463,708 shares of Common Stock of the Registrant issued to Motorola, Inc.

  4.5          10          Convertible Note issued by Pixtech, Inc. to Sumitomo Corporation dated October 27, 1997

  10.1        3,4,5        License Agreement in the Field of Flat Microtip Screens dated as of September 17, 1992
                           between the Registrant and the Commissariat a l'Energie Atomique (the  "CEA "), as
                           amended.

  10.2        3,4,5        Research and Development Agreement in the Field of Flat Microtip Screens dated
                           September 17, 1992 between the Registrant and the CEA.

  10.3         3,5         Cooperation and License Agreement dated June 29, 1993 between the Registrant and Texas
                           Instruments Incorporated.

  10.4         3,5         Cooperation and License Agreement dated November 27, 1993 between the Registrant and
                           Futaba Corporation.

  10.5         3,5         License Agreement dated November 27, 1993 between the Registrant and Futaba
                           Corporation.

  10.6         3,5         Cooperation and License Agreement dated June 1, 1994 between the Registrant and
                           Raytheon Company.

  10.7          3          ESPRIT Project: 8730 Active Interest for Multimedia with Field Emission Display dated
                           December 1, 1993 among the Registrant and other project participants.

  10.8          3          Master Lease Agreement dated December 12, 1994 between COMDISCO France S.A. and
                           PixTech France.
</TABLE>


                                                                         Page 48
<PAGE>

<TABLE>
<CAPTION>
<S>           <C>          <C>
  10.9          3          Purchase Agreement dated December 23, 1994 between COMDISCO France S.A. and
                           PixTech France.

  10.10         3          Guarantee dated November 29, 1994 between the Registrant and COMDISCO.

  10.11         3          Leaseback Agreement dated April 5, 1995 between COMDISCO France S.A. and PixTech
                           France.

  10.12        3,4         Contract between L'Agence Nationale de Valorisation de la Recherche and PixTech France
                           dated March 3, 1993.

  10.13        3,4         Loan agreement between the Banque Worms and PixTech France dated December 13, 1994,
                           as amended.

  10.14         3          Amended and Restated 1993 Stock Option Plan.

  10.15         3          1995 Director Stock Option Plan.

  10.16         3          1995 Employee Stock Purchase Plan.

  10.17         3          Amended and Restated Investor Rights and Stockholder Voting Agreement dated as of
                           December 24, 1993, as amended, among the Registrant and certain of its stockholders.

  10.18        3,4         Real Estate Agreement between PixTech France and IBM France dated February 15, 1994
                           for space located in Montpellier, France.

  10.19       3,4,5        Agreement of State Support of Technical Development and Research dated December 30,
                           1994 between PixTech France and the Ministry of Industry, Postal Services and
                           Telecommunications and Foreign Trade.

  10.20         3          Form of Indemnification Agreement between the Registrant and each of its directors.

  10.21        3,5         Cooperation and License Agreement dated as of June 12, 1995 between the Registrant and
                           Motorola, Inc.

  10.22         6          Lease dated as of July 31, 1995 between the Registrant, as Lessee, and Pecton Court
                           Associates as Lessor.

  10.23         6          Lease dated as of March 1, 1996, between the Registrant, as Lessee, and Frank Deverse as
                           Lessor.

  10.24         6          Registration Rights Agreement between the Registrant and Panocorp Display Systems, Inc.
                           dated February 20, 1996.

  10.25        5,7         Termination Agreement dated July, 15, 1996 between the Registrant and Texas Instrument
                           Incorporated

  10.26         5          Amendment No. 1, dated February 6, 1997, to the Cooperation and License Agreement
                           between the Registrant and Motorola.

  10.27         8          Stock Purchase Agreement dated February 14, 1997, between the Registrant and United
                           Microelectronics Corporation

  10.28         8          Stock and Warrant Purchase Agreement dated February 6, 1997 between the Registrant and
                           Motorola, Inc.

  10.29         9          Foundry Agreement between PixTech, S.A. and Unipac Optoelectronics Corporation dated
                           May 22, 1997.
</TABLE>

                                                                         Page 49
<PAGE>

<TABLE>
<CAPTION>
<S>           <C>          <C>
  10.30         9          Distribution and Financing Agreement between Sumitomo Corporation, PixTech Inc.
                           and PixTech S.A. dated as of July 21, 1997

  10.31         9          Cross-Licensing Period Extension between Raytheon Company and Pixel International, S.A.
                           (now PixTech S.A.) dated as of September 4, 1997.

  10.32         9          Amendment No 14 to the License Agreement on the Microtips Display between Pixtech, Inc.
                           and the Commissariat a l'Energie Atomique (the "CEA")

  10.33         9          Credit Agreement between Sumitomo Corporation and PixTech, Inc. dated as of July 21, 1997

  10.34        10          License Agreement, dated March 16, 1998, between the Registrant and Coloray Display Corporation

  10.35        11          Stock Issuance Agreement, dated March 16, 1998, between the Registrant and Standard Energy Company

  10.36        12          Stock Purchase Agreement, dated March 27, 1998, between the Registrant and Kaufmann Fund Inc.

  10.37        13          Preferred Stock Purchase Agreement among PixTech Inc., The Kaufmann Fund, Inc.,
                           Wingate Capital Ltd., Fisher Capital Ltd., The Atherton Co. And Banque Generale de
                           Luxembourg, fonds Interselex Equity Easdaq dated as of December 22, 1998

  11.1          3          Statement re: computation of per share earnings--Pro Forma.

  12.1          3          Statement re: computation of ratios

  21.1          3          Subsidiaries of the Registrant.

  23.1                     Consent of Ernst & Young.

  27                       Financial Data Schedule
</TABLE>


(1)  Filed as Exhibit 3.2 to the PixTech,  Inc.  Registration  Statement on Form
     S-1 (Commission File No. 33-93024) and incorporated herein by reference.

(2)  Filed as Exhibit 3.4 to the PixTech,  Inc.  Registration  Statement on Form
     S-1 (Commission File No. 33-93024) and incorporated herein by reference.

(3)  Filed as an exhibit with the same number to the PixTech,  Inc. Registration
     Statement  on Form S-1  (Commission  File No.  33-93024)  and  incorporated
     herein by reference.

(4)  English translation filed

(5)  Certain  confidential  material  contained in the document has been omitted
     and filed separately with the Securities and Exchange  Commission  pursuant
     to Rule 406 of the Securities Act of 1933, as amended.

(6)  Filed as an exhibit with the same number to the PixTech, Inc. Form 10-K for
     the  fiscal  year  ended  December  31,  1995 and  incorporated  herein  by
     reference.

(7)  Filed as Exhibit 10 to the PixTech,  Inc. Form 10-Q for the fiscal  quarter
     ended June 30, 1996 and incorporated herein by reference.

(8)  Filed as an Exhibit with the same number to the PixTech, Inc. Form 10-K for
     the  fiscal  year  ended  December  31,  1996 and  incorporated  herein  by
     reference.

(9)  Filed as an Exhibit with the same number to the PixTech, Inc. Form 10-K for
     the  fiscal  year  ended  December  31,  1997 and  incorporated  herein  by
     reference.

(10) Filed as Exhibit 10.1 to the PixTech, Inc. Form 10-Q for the fiscal quarter
     ended March 31, 1998 and incorporated herein by reference.

(11) Filed as Exhibit 10.2 to the PixTech, Inc. Form 10-Q for the fiscal quarter
     ended March 31, 1998 and incorporated herein by reference.

(12) Filed as  Exhibit  10.13 to the  PixTech,  Inc.  Form  10-Q for the  fiscal
     quarter ended March 31, 1998 and incorporated herein by reference.


                                                                         Page 50
<PAGE>


(13) Filed as Exhibit 1.1 to the PixTech,  Inc. Current Report on Form 8-K filed
     January 7, 1999 and incorporated herein by reference.

(14) Filed as Exhibit 2.1 to the PixTech,  Inc. Current Report on Form 8-K filed
     January 7, 1999 and incorporated herein by reference.


                                                                         Page 51
<PAGE>


                                   SIGNATURES

     Pursuant to the  requirements  of Section 13 or 15(d) of the  Securities of
1934,  the  Registrant has duly caused this report to be signed on its behalf by
the undersigned.

                                               PIXTECH



                                               By:    /S/ DIETER MEZGER
Dated:   March 9, 1999
                                                          Dieter Mezger
                                                            President


         Signature                Title                              Date
         ---------                -----                              ----

/S/  DIETER MEZGER

Dieter Mezger                     Chief Executive Officer,
                                  President and Director
                                  (Principal Executive
                                  Officer)                       March 9, 1999

/S/   JEAN-LUC GRAND-CLEMENT

Jean-Luc Grand-Clement            Chairman of the Board          March 9, 1999

/S/   YVES MOREL

Yves Morel                        Vice President,
                                  Chief Financial Officer
                                  (Principal Financial Officer)  March 9, 1999
/S/   CATHIE TOMAO

Cathie Tomao                      Chief Accounting Officer       March 9, 1999


/S/   WILLIAM C. SCHMIDT

William C. Schmidt                Director                       March 9, 1999

/S/   JOHN A. HAWKINS

John A. Hawkins                   Director                       March 9, 1999


                                                                         Page 52
<PAGE>


                        Stockholder and Other Information

Trademarks
PixTech(R) is a registered trademark of the Company.

Auditors
Ernst & Young
408 avenue du Prado
BP 116
13267 Marseilles--France  
011-33-4-91-23-66-66

Legal Counsel
Palmer & Dodge LLP
One Beacon Street
Boston, Massachusetts 02108
(617) 573-0100

Transfer Agent & Registrar
American Stock Transfer & Trust Company
40 Wall Street--46th floor
New York, NY 10005
(718) 921-8275

Annual Meeting of Stockholders
The Annual Meeting of Stockholders of PixTech, Inc. will be held on
Tuesday, April 27, 1999 at 3 p.m. local time at the Grand Hyatt,
Park Avenue, Grand Central, in New-York, New-York.

Investor Relations Contact

Yves Morel
Vice President, Chief Financial Officer
PixTech
Avenue Olivier Perroy--Zone Industrielle de Rousset
13790 Rousset--France  
Phone: 011-33-4-42-29-10-00
Fax: 011-33-4-42-29-05-09
 E-mail: ymorel@pixtech.com

Lillian B. Armstrong
Lippert/Heilshorn & Associates
300 Montgomery Street, Suite 1140
San Francisco, CA 94104 
Phone: (415) 433-37 77
Fax: (415) 433-5577
 E-mail: lillian@lha-sf.com

Laurence Kipfer-Delprat
Actus Finance & Communication
11, rue Quentin Bauchart
75 008 Paris France
Phone: 011-33-1-53- 67-36-36
Fax: 011-33-1-53-67- 36-37
E-mail: lkipfer@actus.fr


                                                                         Page 53
<PAGE>


Market for Common Stock
NASDAQ National Market Symbol: PIXT
EASDAQ Market Symbol : PIXT

Stock Prices

                                 FY 1999                       FY 1998
                                ---------                     ---------

                            High           Low           High             Low

First Quarter (*)        $ 3 5/16       $ 2 3/16       $ 6 9/32         $2 7/16

Second Quarter               --            --          $ 7 1/16         $4 9/16

Third Quarter                --            --          $ 4 29/32        $2 3/4

Fourth Quarter               --            --          $ 3 1/2          $1 15/16

(*) for the period from January 1, 1999 to March 1st , 1999.

On March 1st, 1999,  there were  approximately  74 stockholders  of record.  The
Company has never  declared or paid any cash  dividends  on its Common Stock and
does not anticipate doing so in the foreseeable future.


Corporate Information

================================================================================

Directors                               Executive Officers

Jean-Luc Grand-Clement                  Dieter Mezger
Chairman of the Board of Directors      CEO and President

Dieter Mezger (3)                       Francis G. Courreges
CEO and President                       Executive vice President

William Schmidt (1) (2)                 Michel Garcia
Vice President                          Vice President, Industrial Partners
Advent International
                                        Tom M. Holzel
John Hawkins (1) (2)                    Vice President, Marketing & Sales
Managing Partner
Generation Partners                     Jean-Jacques Louart
                                        Vice President, Operations

                                        Yves Morel
                                        Vice President, Chief Financial Officer


(1)  Member of the Compensation Committee

(2)  Member of the Audit Committee

(3)  Director Nominee


                                                                         Page 54