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                       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, 1997      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 February 9, 1998 was: $26,161,279.

     There were 13,762,732  shares of the registrant's  Common Stock outstanding
as of February 9, 1998.

                                   ----------

                       DOCUMENTS INCORPORATED BY REFERENCE

     Portions  of the  definitive  proxy  statement  of the  Registrant  for the
Registrant's  1997 Annual Meeting of  Shareholders  to be held on March 25, 1998
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, 1997,  are  incorporated  by reference  into Part III of this Form
10-K.


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<PAGE>

o PART I

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  high-quality  field emission
displays  ("FED").  The  company  expects  FEDs will be the most cost  effective
portable alternative to traditional cathode ray tube ("CRT") display and today's
liquid crystal display ("LCD")  technologies.  In 1992, the Company  exclusively
licensed  key  patents  from  Laboratoire  d'Electronique,   de  Technologie  et
d'Instrumentation  ("LETI"), a French public research laboratory, and since then
has deployed a unique  cooperative  strategy to rapidly  advance FED  technology
toward high-volume manufacturing and wide market acceptance.  PixTech's efforts,
along with those of FED Alliance partners Motorola, Inc. ("Motorola"),  Raytheon
Corp.  ("Raytheon")  and Futaba  (Japan)  ("Futaba"),  are  expected  to come to
fruition in 1998 with the  anticipated  manufacture of the first  commercial FED
products on high-volume equipment.

     Since 1996,  PixTech has been seeding the market with  5.2-inch  monochrome
FEDs,   making   deliveries  to  more  than  one  hundred   original   equipment
manufacturers ("OEMs") in the military, instrumentation, medical, industrial and
transportation  markets  for  evaluation  purposes.  In July 1997,  the  Company
received a purchase order to provide 50,000 of its FED displays over a five-year
period to a US medical  equipment  manufacturer,  and has  subsequently  started
deliveries  of  commercial  quantities  under  this  order.  The  Company  is in
negotiation  with several  customers to provide FED products over a several-year
period.

     In addition to direct  sales to OEMs from its sales  offices in the U.S and
in Europe,  the Company  intends to develop a network of dedicated  distribution
companies.  In November 1997, PixTech  established a partnership with Sumitomo's
Electronics  and Aerospace  division to distribute its FED products to the Asian
market. The Company intends to select more distributors in 1998.

     The Company currently operates a pilot production  facility in Montpellier,
France, for technology and product  development.  In addition,  in May 1997, the
Company   entered   into  a   contract-manufacturing   agreement   with   Unipac
Optoelectronics  Corporation ("Unipac"),  an AMLCD manufacturer based in Taiwan.
The Company  expects to ship FED displays  manufactured at Unipac before the end
of 1998.

     The  Company  believes  that FED  technology  could  serve the needs of the
fast-emerging  market for flat panel  displays  with a diagonal of 15 inches and
above.  In 1996, the Company  commenced  development of large-size FEDs suitable
for use in desktop monitor  applications,  and initiated technology  cooperation
with a Japanese CRT-manufacturer in that area. The Company publicly demonstrated
a 10.5-inch VGA color FED in 1996 and expects to  demonstrate a 15-inch  display
in 1998.

The Flat Panel Display Industry

     Growth in the market for flat panel  displays  ("FPD") has been driven by a
number of  market  forces,  including  the  increasing  popularity  of  portable
computer  and  other  electronic  devices,   the  wide  spread  availability  of
information   and  visual   content   available  in  electronic   formats,   the
proliferation of graphical user interfaces and emerging multimedia applications.

     Flat panel  displays are typically  evaluated on their ability to match the
image quality of traditional cathode ray tube displays, such as those in desktop
computer monitors and televisions.  Performance  characteristics used to compare
FPD technologies  include viewing quality (viewing angle,  video speed,  dynamic
range and full color), range of brightness,  resolution,  weight and size, power
usage, reliability and operating temperature range.

   - LCD Technologies.  The FPD market is currently  dominated by liquid crystal
displays (LCDs).  The first  commercialized  LCD technology,  passive matrix LCD
("PMLCD") technology, is widely used in calculators,  watches and low-end laptop
computers.  However,  PMLCDs  exhibit  relatively  low  image  quality  and slow
response  time,  making  them  inadequate  for many  commercial  and  industrial
applications, especially those requiring video speed and a wide viewing angle.

     Active  matrix LCDs  ("AMLCDs")  incorporate  a  transistor  at every pixel
location,  which increases image quality and response time. However, AMLCDs must
incorporate  high  intensity  backlights,  which,  together  with  the  required
transistors, result in significant power consumption and manufacturing costs. In
addition,  while  AMLCDs  have  improved  horizontal  viewing  angles  and color
quality,  they fall short of CRT  viewing  quality.  Both PMLCDs and AMLCDs also
suffer from an inability  to provide the wide  effective  operating  temperature
range required by certain transportation and military applications.

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


                           PixTech 1997 Annual Report
                                       2


<PAGE>


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

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

Video speed            High speed over full     Unable to display        Adequate speed        High speed over full
                       temperature range        video images with        overlimited           temperature range
                                                good quality             temperature range

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

Dynamic range (2)      High                     Very limited             Limited               High

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

Power consumption      High                     Current industry         Current industry      Comparable to
                                                standard                 standard              current industry
                                                                                               standard

Manufacturability      Mature process           Fewer process steps      Complex process       Fewer process steps
                       offering lowest cost     than AMLCD                                     than AMLCD
---------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)  The  information  set  forth  in this  table is  based  upon the  Company's
     assessment of existing CRT, PMLCD,  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.

(2)  Dynamic range results from a combination of contrast and peak brightness.

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, PixTech's manufacturing strategy relies on a combination of a
pilot line oriented towards  engineering  excellence and a manufacturing  source
focused on productivity.

     PixTech has established a pilot production facility in Montpellier, France,
dedicated to developing  manufacturing  processes  and products,  and low volume
production to support market  introduction.  Product sampling and early customer
deliveries are being completed from this pilot line.

     PixTech  entered  into  a  contract-manufacturing   agreement  with  Unipac
Optoelectronics Corporation ("Unipac"), an AMLCD manufacturer based in Taiwan in
1997. To date,  the Company has already  successfully  transferred a significant
portion of its proprietary FED  manufacturing  processes to Unipac and, by early
1998, most of the FED-specific  equipment required to complement  Unipac's AMLCD
manufacturing  plant was  delivered.  The Company  expects to ship FED  displays
manufactured  at Unipac in 1998,  once full process  start-up and  comprehensive
product quality testing have been completed.

     Marketing: from monochrome to color products. After seeding the market with
sample  deliveries of its monochrome  products,  PixTech  anticipates to receive
volume  orders for low to medium  volume  applications  in medical,  industrial,
transportation  and military  market  segments to initiate growth of its product
revenues. To significantly  increase its market penetration,  PixTech intends to
launch its color products toward 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  mapping 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 above,  offering  CRT-like  viewing  quality and  competitive  manufacturing
costs.  To that end,  PixTech  initiated a research and  development  program in
1996.  That year, it publicly  demonstrated  the world's first 10.4 inch VGA FED
display and entered  into a  cooperation  agreement  with a major  Japanese  CRT
manufacturer to develop  large-size  displays.  The expected  demonstration of a
15-inch FED prototype in 1998 represents a major milestone in this program.  The
Company actively seeks additional cooperation partners to accelerate the program
and bring large screen products to the market.


                           PixTech 1997 Annual Report
                                       3


<PAGE>


     Intellectual  Property:  a dominant  patent  portfolio.  Shortly  after the
Company was founded,  PixTech spearheaded the creation of the "FED Alliance",  a
cooperative  program between PixTech,  Motorola,  Raytheon and Futaba (Japan) to
advance FED technology.  Alliance partners share manufacturing  know-how as well
as a portfolio of more than 350 patents, thus creating a substantial competitive
advantage.

Manufacturing

     Pilot Line Facility.  The mission of PixTech's  pilot line is excellence in
FED  technology  and product  development.  From an initial  focus of converting
laboraty recipes transfered from LETI into manufacturing processes, the emphasis
then shifted to the demonstration of high yields, a prerequisite to the transfer
of  manufacturing  processes  to a  high-volume  fabrication  environment.  This
experience  now results into a well-honed  team capable of efficient  concurrent
engineering  in process  development  and  product  design,  aimed at  enhancing
PixTech's FED performance while reducing  manufacturing costs. Current output of
the pilot line supports early  deliveries to prospective  customers months ahead
of volume production requirements.

     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,  1997,  the Company had 113  employees  engaged in process  development  and
operations at this facility.

     Outsourcing high-volume  manufacturing.  By developing a partnership with a
large volume manufacturer of AMLCDs,  PixTech expects to be able to leverage the
high  productivity  tools  and  manufacturing   know-how   established  for  LCD
production,  and draw the cost benefits of its simpler FED process. In May 1997,
the Company signed a Display  Foundry  Agreement  with Unipac,  a Taiwanese high
volume AMLCD manufacturer.

     Throughout  1997, the Company's first priority was to successfully  develop
and start implementation of its high-volume  manufacturing plans at Unipac. This
involved   definition  and  ordering  of  FED-specific   equipment  required  to
complement Unipac's AMLCD manufacturing equipment, and transfer of manufacturing
processes to Unipac.

     The equipment  needed to install a  manufacturing  capacity of 10,000 4- to
8-inch  displays per month was valued at $16.5  million.  Most of this equipment
was ordered by  September  1997 and all major  pieces were  delivered by January
1998.  The Company  expects to  manufacture  its first displays at Unipac by mid
1998.

     The transfer of FED manufacturing processes to Unipac was conducted through
intense  cross-validation  of each single process step on PixTech's and Unipac's
manufacturing  equipment.  By the end of 1997, the Company was able to fabricate
"hybrid displays", i.e. displays for which manufacturing was initiated at Unipac
and  completed at the PixTech's  pilot plant in France.  The hybrid FED displays
demonstrated  successful  transfer  of a  significant  portion of the  PixTech's
manufacturing process to the Unipac's facility in Taiwan.

     Manufacturing FEDs in a production  environment that directly benefits from
high-productivity AMLCD manufacturing equipment and know-how is expected to lead
to high  yields  and low fixed  cost per  display,  two  prerequisites  to serve
price-sensitive, high-volume markets. The Company expects to be able to ship FED
displays manufactured at Unipac by the end of 1998. However, because of start-up
costs,  the Company does not expect to generate  positive  gross  margins on the
sale of its displays before 1999.

Products

     PixTech's  first  commercial  product,  FE532M,  was  a  5.2-inch  1/4  VGA
monochrome  display.  In May 1997,  the  Company  introduced  a  high-brightness
version,  FE532HB,  which it has shipped to a number of customers for evaluation
purposes.

     The  Company  is  currently   introducing  the  second  generation  of  its
monochrome  display,  the FE524M,  which has been optimized for smaller outline,
higher  ruggedness,  and lower cost. PixTech is also developing a color 5.7-inch
1/4 VGA display,  which  incorporates  key advances on PixTech's FED  technology
currently utilized in FE524M. In this product, custom driver integrated circuits
designed by Texas Instruments Japan are expected to fully reveal the performance
of PixTech's FED technology.

Sales and Distribution

     PixTech is currently  selling its FE524M  monochrome  5.2-inch  displays in
sample and pre-production quantities. The Company's product offerings consist of
fully integrated display modules. The Company is marketing its displays directly
to  OEMs  and  system   integrators  in  the   instrumentation,   medical,   and
transportation market segments.

     To date,  the Company  has  shipped  its  displays to more than one hundred
customers,  mostly based in the United States and in Europe.  In July 1997,  the
Company received a purchase order to provide 50,000 of its monochrome FEDs, over
five years, to a United States  manufacturer of portable medical equipment.  The
Company has already made first  deliveries under this purchase order and expects
this customer to market the portable medical equipment  incorporating  PixTech's
FEDs within the first half of 1998.


                           PixTech 1997 Annual Report
                                       4


<PAGE>


     The  Company  plans to  develop  a  network  of sales  representatives  and
distributors  to address  specific  areas of the  worldwide  market and to offer
customer support. In November 1997, PixTech partnered with Sumitomo Corporation,
which became distributor of PixTech's products to Asia with exclusive rights for
Japan.  PixTech  believes  that its  strategy to penetrate  volume  markets will
strongly  benefit  from a long-term  relationship  with such a  well-established
trading company.

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,  which 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.

     The Company's proprietary technology represents advances developed by LETI,
the  Company  and other FED  Alliance  members on the basic  Spindt  Cathode FED
technology.  In a 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.

     A FED color  display  can be  designed  using  either a low voltage or high
voltage  structure  between the anode and the cathode.  The advantages of a high
voltage anode structure are that well  characterized  CRT phosphors can be used,
with  high  luminous  efficiency.  The  drawbacks  are  that  the  use  of  high
voltage--at least 6,000 volts--between  cathode and anode,  requires development
of a spacer and assembly  technology before production of such high voltage FEDs
can be contemplated.  By using LETI's patented  "switched anode"  technology,  a
low-voltage  design  significantly  decreases  the  complexity  and  cost of the
manufacturing  process  of the  device.  In  addition,  this  design  results in
improved color purity and potentially higher resolution.  However, as the result
of the low voltage,  there is an inherent  limitation to the size of the display
that can be produced.

     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. Within the FED
Alliance,  members are working  both on high voltage and low voltage FED product
introduction  programs.  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 two areas:
display performance  enhancement and scaling-up of the technology to 15-inch and
larger displays.

     Display  Performance  Enhancement.  Key elements of display performance are
brightness,  the display's  stability  over time (display  lifetime),  and power
efficiency.  PixTech  is  seeking  to  balance  luminous  efficiency  with power
efficiency  to  produce  bright,  and 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.  In order to produce  color  displays  that will  provide the
product life necessary for most applications,  the Company believes it will need
to make further advances in phosphors and related manufacturing technologies.

     Large  Screen  Development.  PixTech  has  begun a  technology  development
program in cooperation with a major Japanese CRT manufacturer to demonstrate the
large  display  (15-inch  and  larger)  capability  of FED  technology.  Under a
contract  with a CRT  manufacturer,  specific  demonstration  displays  will  be
jointly developed integrating processes and components from the CRT manufacturer
and PixTech. In February 1996, the Company acquired certain patents and know-how
in high voltage  display  construction  which,  combined  with  PixTech  cathode
technology, establish a solid foundation for this development program.

     The  Company's  partners in these  development  tasks are primarily the FED
Alliance members and LETI. In certain specific areas, however, such as materials
and equipment development, the Company is developing technical partnerships with
laboratories   and  companies   that  have  the  ability  to  accelerate   these
developments.

     A significant portion of the Company's research and development  activities
are  carried  out at  LETI,  a  laboratory  under  the  CEA.  The  Research  and
Development   Agreement   between  the  CEA  and  PixTech  (the  "LETI  Research
Agreement")  provides for the Company and the CEA to fund  equally  research and
development  activities  at LETI in the FED  field  (the  "Program").  The  LETI
Research Agreement provides for the CEA to perform this research and development
work  exclusively for PixTech.  Under the LETI Research  Agreement,  the CEA and
PixTech jointly own FED technology  developed by both parties under the Program,
and the CEA and  PixTech  are  obligated  to license  to each  


                           PixTech 1997 Annual Report
                                       5


<PAGE>


other technology  developed solely by either party under the Program.  The CEA's
rights in such  technology  have been  exclusively  licensed to PixTech  under a
License  Agreement (the "LETI License  Agreement").  The Program has resulted in
the filing of numerous additional patent applications, which include a number of
improvements  over the original FED  technology  developed by LETI.  The Program
began on January 1, 1993 and was extended for a second  three-year period ending
on January 1, 1999,  subject to further  extension  by mutual  agreement  of the
parties.

     The Company's  research and  development  expenses in the fiscal year ended
December 31, 1997 were $15.5 million, as compared to $15.8 million in 1996.

The FED Alliance

     Shortly after the Company was founded,  PixTech spearheaded the creation of
the FED Alliance,  a cooperative effort between select display  manufacturers to
advance  FED  technology.  The  Alliance  currently  includes  PixTech,  Futaba,
Raytheon, and Motorola.

     Each  agreement  signed  between  the  Company  and a FED  Alliance  member
provides the member with a license to all FED technology from LETI, PixTech, and
other FED Alliance partners, a transfer of know-how from the Company, as well as
access to  PixTech's  pilot line.  Each FED  Alliance  agreement  also  provides
PixTech with licensing and royalty  revenues,  as well as a royalty free license
to the FED Alliance  member's  background  technology and  improvements  in such
technology  occurring  for a period  of three  years  following  the date of the
agreement, with rights to sub-license.  Following the three-year period, the FED
Alliance member has the option to extend its cooperation within the Alliance.

     To date, the FED Alliance is serving its strategic  purposes:  FED Alliance
members  share a portfolio  of more than 350  patents  and patent  applications,
effectively creating a subtantial competitive  advantage;  FED Technology is now
widely  accepted as an  alternative to LCD  technology;  Futaba and Motorola are
currently  operating  their own FED  manufacturing  plant in Mobara  (Japan) and
Tempe, Arizona, respectively,  with the intention of introducing products in the
market.  Futaba has been sampling its products to customers for over a year, and
Motorola  publicly  demonstrated  its FED displays in an industry  conference in
February 1998.

Competition

     The market for flat panel display products is intensely  competitive and is
expected to remain so in the future.

     The market 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.

     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.

     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, outside of
the  FED  Alliance,  are  developing  FED  technologies  similar  to that of the
Company,  including  but not limited to, Sony,  Fujitsu,  and Samsung as well as
smaller companies,  including  Candescent,  FED Corporation,  and Micron Display
Technology.  While  these  companies  have  made,  and  may  continue  to  make,
significant advancements to their FED technology, the Company believes that none
of  theses  FED  competitors  have,  to  date,  built  a  patent  position  or a
manufacturing expertise comparable to that of the Company.

Patents and Trade Secrets

     As of  December  31,  1997,  the  Company  held or had  license to 127 U.S.
patents and 117 pending U.S.  patent  applications.  The Company  also  actively
pursues foreign patent protection in countries of interest to the Company. As of
December 31, 1997,  the Company had filed,  or was  licensed  under,  105 patent
applications in foreign countries.

     The Company  believes  that this  dominant  patent  portfolio is creating a
substantial competitive advantage for the members of the FED Alliance.

     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,  the CEA  granted the Company an  exclusive,  worldwide,  royalty-bearing
license, with the right to sub-license, of all FED technology developed by LETI.


                           PixTech 1997 Annual Report
                                       6


<PAGE>


     In addition to the payment of royalties on its sales, the Company must pass
through  to CEA a  percentage  of any lump sum  sub-license  fees  earned in the
future and royalties on the licensed product sales by the sub-licensees.

Employees

     As of December 31, 1997,  the Company had 133 full-time  employees,  and 15
part-time employees.  The average number of employees was 90, 143 and 144 during
1995,  1996 and 1997,  respectively.  As of December 31, 1997, 16 employees were
engaged in research and development,  113 in process development and operations,
5 in marketing  and sales and 14 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.

Item 1A.   Executive Officers of the Registrant

     As of December 31, 1997, the current executive officers of the Company were
as follows:

<TABLE>
<CAPTION>
===========================================================================================================================
          Name                 Age                               Position held with the Company
===========================================================================================================================
<S>                            <C>             <C>                                                                       
Jean-Luc Grand-Clement         58              President, Chairman of the Board, Chief Executive Officer and President
---------------------------------------------------------------------------------------------------------------------------
Richard Rodriguez              53              Executive Vice President, Chief Operating Officer
---------------------------------------------------------------------------------------------------------------------------
Francis G. Courreges           45              Executive Vice President
---------------------------------------------------------------------------------------------------------------------------
Jean-Jacques Louart            48              Vice President, Operations
---------------------------------------------------------------------------------------------------------------------------
Michel Garcia                  50              Vice President, Industrial Partners
---------------------------------------------------------------------------------------------------------------------------
Thomas M. Holzel               57              Vice President, Marketing and Sales
---------------------------------------------------------------------------------------------------------------------------
Yves Morel                     32              Chief Financial Officer
---------------------------------------------------------------------------------------------------------------------------
</TABLE>

     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
President,  Chief Executive Officer and Chairman of the Board of Directors since
the  Company's   inception  in  1992.   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.

     Richard   Rodriguez  joined  PixTech  in  May  1996  as  Vice-President  of
Operations  and was promoted to  Executive  Vice-President  and Chief  Operating
Officer in March 1997.  Prior to joining the  Company,  Mr.  Rodriguez  spent 22
years  with  IBM.  He  was  Director  of  Operations,  managing  three  advanced
semiconductor  lines at IBM  France's  Corbeil  Plant from 1991 to 1994,  before
directing the reengineering program of the plant since early 1994. Prior to such
positions,  Mr. Rodriguez held a number of senior  manufacturing and engineering
management positions as Director of a 500 person CMOS facility, US based program
manager,  process  and  test  engineering,   quality  assurance.  Mr.  Rodriguez
graduated  from Ecole  Superieure  de  Mecanique  et  d'Electricite,  received a
postgraduate degree in Electronics from Orsay University and holds a degree from
Institut d'Administration des Entreprises.

     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.


                           PixTech 1997 Annual Report
                                       7


<PAGE>


     Jean-Jacques  Louart  joined  Pixtech  in May  1997  as  Vice-President  of
Operations.  Prior to joining  the  company,  Mr.  Louart was  Director of total
quality at LX Management  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. He was program manager at IBM Eurocoordination from 1990 to1992.
Prior  to such  positions,  Mr.  Louart  held a number  of  senior  process  and
equipment engineering management positions.  Mr. Louart graduated from "Ecole de
l'Air" and holds a management  degree from the "Centre de  Perfectionnement  aux
Affaires".

     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,  which  became known as Thomson  Microelectronics  in
1983; 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.

     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.

     Yves Morel  joined the  Company in April 1994 as  Director  of Finance  and
Administration.  He was promoted to Chief Financial  Officer in March 1997. 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 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 2003,
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

     To the best of the Company's  knowledge,  there are no claims or litigation
which could have an adverse material impact on the assets, financial conditions,
results or the activity of the Company.

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

     None.


                           PixTech 1997 Annual Report
                                       8


<PAGE>


o 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 February 9, 1998,  there were 69 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.

<TABLE>
<CAPTION>
=====================================================================================================
                                                            High                            Low
Year ended December 31, 1996
=====================================================================================================
<S>                                                        <C>                             <C>  
     First Quarter                                         $14                             $8 1/4
-----------------------------------------------------------------------------------------------------
     Second Quarter                                        $10 3/8                         $6 5/8
-----------------------------------------------------------------------------------------------------
     Third Quarter                                         $ 7 1/4                         $4 5/8
-----------------------------------------------------------------------------------------------------
     Fourth Quarter                                        $ 6 3/4                         $3 3/8
-----------------------------------------------------------------------------------------------------
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    
=====================================================================================================
</TABLE>

     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.

Item 6.   Selected Financial Data

     The  selected  financial  data set forth below as of December  31, 1997 and
1996,  and for each of the three years in the period ended December 31, 1997 are
derived from the Company's  consolidated financial statements included elsewhere
in this  Report,  which  have been  audited  by Ernst & Young  LLP,  independent
auditors.  The selected  financial data set forth below as of December 31, 1995,
1994 and 1993 and for the  years  ended  December  31,  1995,  1994 and 1993 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
                                                     1997          1996         1995         1994          1993
==================================================================================================================
                                                                  (in thousands, except per share)
==================================================================================================================
<S>                                               <C>           <C>           <C>           <C>           <C>   
Operations
------------------------------------------------------------------------------------------------------------------
Total revenues                                     $3,819        $7,644       $11,513       $6,225        $2,328
------------------------------------------------------------------------------------------------------------------
Loss from operations                              (15,774)      (12,041)       (9,278)      (4,940)         (906)
------------------------------------------------------------------------------------------------------------------
Net loss                                          (14,664)      (11,719)       (6,305)      (2,979)         (120)
------------------------------------------------------------------------------------------------------------------
Net loss per share                                  (1.12)        (1.44)        (0.82)       (0.51)
------------------------------------------------------------------------------------------------------------------
Shares used in computing net loss per share        13,140         8,137         7,697        5,840
------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------
Balance Sheet
------------------------------------------------------------------------------------------------------------------
Working deficit / capital                           9,290          (859)       15,919          813         7,967
------------------------------------------------------------------------------------------------------------------
Total assets, less current assets                  24,058        19,701        18,569       15,300         1,663
------------------------------------------------------------------------------------------------------------------
Long term liabilities, less current portion        14,568         6,743         9,958        6,626           341
------------------------------------------------------------------------------------------------------------------
Stockholders' equity                               18,780        12,099        24,530        9,487         9,289
------------------------------------------------------------------------------------------------------------------
</TABLE>


                           PixTech 1997 Annual Report
                                       9


<PAGE>


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  FEDs.
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,  forming an alliance of  industrial  partners (the "FED
Alliance") and  establishing  manufacturing  capabilities for its FEDs. To date,
most of the Company's  revenues have been cooperation and license revenues under
agreements  with members of the FED Alliance  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  Optoelectronics  Corp.  ("Unipac")  under  a  contract
manufacturing  arrangement  signed in May 1997.  The Company does not anticipate
receiving  any  significant  revenues  from the sale of its  products  until the
commencement of volume  production  which is not expected before the second half
of 1998.

     In view of the development stage of the Company and the current  transition
from  revenues  solely from the FED  Alliance to the  addition of product  sales
revenues,  the  Company  believes  that  historical  financial  results  are not
meaningful and should not be relied upon as an indication of future performance.

     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 FED Alliance, 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 one hundred customers. To date,
among  the  members  of  the  FED  Alliance,   only  Futaba  has  announced  the
availability of commercial products in limited quantities.

     Pursuant to a license agreement with the Commissariat a l'Energie  Atomique
("CEA"),  the French  atomic  agency,  the Company is  obligated to make royalty
payments on its product sales and to pass-through a portion of certain  up-front
license fees earned after 1993 and royalties on sales of products by the Company
and such sublicensees (the "LETI License  Agreement").  Pursuant to an amendment
to the LETI License Agreement signed in October 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.  An amount of $1.0  million,  reflected
under the caption "Cost of revenues,  license fees and royalties" was accrued in
1995 with respect to such royalties and pass-through  expenses payable to CEA. A
royalty  amount  of  $45,000  and  $109,000  was  accrued  in 1996  and in 1997,
respectively (See Notes to Consolidated  Financial  Statements--Note  16NRelated
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
FED  Alliance  members,  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 $36.3 million from inception
to December 31, 1997.  The Company has incurred  operating  losses every quarter
since inception,  except during the three-month period ending December 31, 1995,
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  Company's  ability  to expand  the FED
Alliance and 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  cooperation and
license revenues under the FED Alliance agreements of $9.9 million in 1995, $5.4
million in 1996 and $1.9  million  in 1997.  The  decrease  in  cooperation  and
license  revenues  reflects the achievement by the Company at the end of 1996 of
most of the contractual  milestones with FED Alliance members.  The Company does


                           PixTech 1997 Annual Report
                                       10




<PAGE>


not expect any significant  additional milestone related revenues to be directly
derived  from FED  existing  Alliance  members.  In 1996,  the Company  recorded
cooperation  and  license  revenues  in the  amount  of $1.3  million  under the
Cooperation and License  Agreement with Texas  Instruments  executed on June 29,
1993 and  terminated  on July 15,  1996.  To the extent  the  members of the FED
Alliance  successfully  incorporate the  cross-licensed  technology in their own
products,  the Company will recognize  royalty revenues as such members sell the
products.

     Product Sales.  The Company  recognized  product sales of $808,000 in 1995,
$791,000 in 1996 and  $745,000 in 1997.  These  product  sales  represented  the
shipment of FED displays and FED  cathodes in limited  quantities  to members of
the FED Alliance and the  shipment of FED  displays for  evaluation  by original
equipment  manufacturer ("OEM") customers.  While the number of displays shipped
significantly  increased  between 1996 and 1997,  the average  selling price was
reduced,  reflecting a different mix between high valued prototypes and cathodes
revenues  and  displays  revenues.  The  Company  expects  to  increase  product
shipments in 1998, both from products manufactured at its pilot production plant
in France and from its expected volume source of manufacturing by Unipac,  which
is not expected to begin until the second half of 1998.

     Other  Revenues.  Other  revenues is comprised  of funding  under French or
European Union development  contracts and other  miscellaneous  revenues.  Other
revenues were $840,000 in 1995, $1.4 million in 1996 and $1.1 million in 1997.

     Of these  revenues,  $800,000  and  $663,000  are related to a  development
contract  granted in  December  1994 from the French  Ministry  of  Industry  to
support manufacturing of FEDs, in 1996 and 1997,  respectively.  Total potential
funding  under  this  contract  is  approximately  $2.8  million.   The  Company
recognizes  portions  of this  revenue as  contractual  conditions  are met.  At
December 31, 1996 and 1997,  deferred revenues in the amount of $2.1 million and
$1.2 million, respectively,  were included in non-current liabilities under this
agreement.

     Other  revenues  recorded in 1997 also included an insurance  refund in the
amount of $292,000 covering lost revenue after certain physical damages occurred
in the Company's pilot manufacturing facility in April 1997.

     Research and Development  Expenses--Acquisition  of  Intellectual  Property
Rights.  The  Company  expensed  $3.1  million  in 1995 for the  acquisition  of
intellectual  property rights from certain members of the FED Alliance.  No such
expenses were recorded in 1997.

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

     Other  research and  development  expenses  decreased from $15.8 million in
1996 to $15.5  million  in 1997.  This  decrease  in  research  and  development
expenses  reflected  the  increase of the parity of the U.S.  dollar  versus the
French  franc  in  1997  versus  1996,  as most of the  Company's  research  and
development  costs is incurred in French francs.  After excluding the effects of
currency fluctuation, research and development expenses increased by 10% in 1997
as compared to 1996,  reflecting  the  continued  development  of the  Company's
research and development efforts and FED technology and manufacturing processes.
Other research and development expenses amounted to $12.5 million in 1995. Other
research and  development  expenses  included  expenses  recorded under the LETI
Research  Agreement of $1.3 million in 1995,  $644,000 in 1996,  and $637,000 in
1997.

     Sales and Marketing  Expenses.  Sales and marketing expenses increased from
$1.1 million in 1996 to $1.5 million in 1997.  This 37% increase  reflected  the
expansion of the Company's sales and marketing  organization  both in the United
States and in Europe,  and the increasing  support of marketing  efforts through
trade show attendance and advertising.  Sales and marketing expenses amounted to
$1.1  million in 1996,  a decrease of 41% on 1995 sales and  marketing  expenses
which amounted to $1.7 million,  reflecting the reallocation of a limited number
of engineers from sales and marketing to research and  development.  The Company
believes sales and marketing  expenses may increase in the future,  as potential
customers and anticipated  shipments of FED displays develop.  In July 1997, the
Company  signed a  distribution  agreement  of its FED  products  with  Sumitomo
Corporation  ("Sumitomo")  for the Japanese and Asian market areas. In 1998, 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.


                           PixTech 1997 Annual Report
                                       11


<PAGE>


     General and Administrative  Expenses.  General and administrative  expenses
amounted  to  $2.4  million  in  1997,  a  decrease  of  10%  over  general  and
administrative  expenses  incurred  in 1996,  which  amounted  to $2.7  million,
reflecting the effects of currency  fluctuation and a decrease in staff expenses
and discretionary expenses. General and administrative expenses amounted to $2.1
million in 1995.

     Interest Income (Expense), Net. Interest income is comprised of interest on
cash and short term  investments.  Interest  expense is  comprised  of  interest
payable on  long-term  obligations.  Net  interest  expense was $27,000 in 1995,
while the Company recorded a net interest income of $66,000 in 1996, as compared
to $470,000 in 1997, as the effect of increasing  cash balances  outweighed  the
effect of 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 French  francs.  Gains and losses on the
conversion  to U.S.  dollars of assets  and  liabilities  denominated  in French
francs may contribute to  fluctuations  in the Company's  results of operations,
which are reported in U.S.  dollars.  The Company  recorded net foreign exchange
gains of  $280,000 in 1995,  $256,000  in 1996 and $54,000 in 1997.  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 $5.7
million since  inception,  including  $2.7 million in 1995 and $586,000 in 1997.
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, 1997, a valuation
allowance  of $14.8  million was  provided  against a net  deferred tax asset of
$19.8 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. In 1997, the Company
collected  $29,000,  representing  income tax benefit recorded in 1992. In 1998,
the Company  expects to receive $2.8 million,  representing  income tax benefits
recorded in 1993 and 1994.

     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, 1997, the Company had net operating  loss  carryforwards
in France of  approximately  $28.9 million of which $5.2 million,  $5.6 million,
$10.0 million will expire in 2000, 2001 and 2002, respectively,  if they are not
utilized.


                           PixTech 1997 Annual Report
                                       12


<PAGE>


Quarterly Results of Operations

     The  following  table  presents  certain  unaudited   quarterly   financial
information  for each quarter in 1996 and 1997.  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>
====================================================================================================================================
     (amounts in thousands)                                                       Three Months Ended
                                               Mar. 31,   June 30,   Sept. 30,  Dec. 31,   Mar. 31,  June 30,   Sept. 30,   Dec. 31,
                                                 1996       1996       1996      1996        1997      1997       1997        1997
====================================================================================================================================
<S>                                            <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>     
Revenues:
------------------------------------------------------------------------------------------------------------------------------------
Cooperation and license
------------------------------------------------------------------------------------------------------------------------------------
  revenues                                     $ 1,890    $ 2,636    $   707    $   207    $   707    $ 1,011    $    --    $   214
------------------------------------------------------------------------------------------------------------------------------------
Product sales                                      183        178         67        363        173        255        152        165
------------------------------------------------------------------------------------------------------------------------------------
Other revenues                                     934         47         11        421        673         47        284        138
====================================================================================================================================
                                                 3,007      2,861        785        991      1,553      1,313        436        517
====================================================================================================================================
Cost of revenues:
------------------------------------------------------------------------------------------------------------------------------------
License fees and royalties                          --         --         --        (45)        --        (61)        --       (120)
====================================================================================================================================
Gross margin:                                    3,007      2,861        785        946      1,553      1,252        436        397
====================================================================================================================================

Operating expenses:
------------------------------------------------------------------------------------------------------------------------------------
Research and development                         3,501      3,721      4,269      4,356      4,174      3,904      3,227      4,192
------------------------------------------------------------------------------------------------------------------------------------
Sales and marketing                                232        214        309        333        380        402        369        345
------------------------------------------------------------------------------------------------------------------------------------
General and administrative                         688        787        630        599        606        682        611        520
====================================================================================================================================
Total operating expenses                         4,421      4,722      5,208      5,288      5,160      4,988      4,207      5,057
====================================================================================================================================
Loss from operations                            (1,414)    (1,861)    (4,423)    (4,342)    (3,607)    (3,736)    (3,771)    (4,660)
====================================================================================================================================
Interest income (expense), net                      97         (9)         3        (25)       131        211         82         46
------------------------------------------------------------------------------------------------------------------------------------
Foreign exchange gain (loss)                        26        316       (137)        51       (238)        67         32        193
------------------------------------------------------------------------------------------------------------------------------------
Loss before income tax benefit                  (1,291)    (1,554)    (4,557)    (4,316)    (3,714)    (3,458)    (3,657)    (4,421)
------------------------------------------------------------------------------------------------------------------------------------
Income tax benefit                                  --         --         --         --         --         --         --        586
====================================================================================================================================
NET INCOME (LOSS)                              $(1,291)   $(1,554)   $(4,557)   $(4,316)   $(3,714)   $(3,458)   $(3,657)   $(3,835)
====================================================================================================================================
</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 success of the Company in entering into new
FED Alliance Agreements,  achieving  revenue-producing  milestones under the FED
Alliance  agreements,  and the rate of  growth  of the  Company's  research  and
development activities.

Liquidity and Capital Resources

     The  Company  has used $22.7  million in cash to fund its  operations  from
inception  through December 31, 1997, and $27.7 million in capital  expenditures
and  investments.  Through  December  31,  1997,  the  Company  has  funded  its
operations  and capital  expenditures  primarily  from sales of $55.6 million of
equity   securities   and  $19.0  million  of  proceeds  from   borrowings   and
sale-leaseback  transactions.  In 1997, the Company used $9.4 million in cash to
fund its operations.

     Capital expenditures were $5.9 million in 1996 and $1.2 million in 1997. In
1996, capital expenditures were primarily for leasehold  improvements,  facility
expansion,  and equipment installed in its pilot manufacturing  facility,  while
1997 capital expenditures remained focused on limited capacity expansion.  As of
December 31,  1997,  the Company had  commitments  for capital  expenditures  of
approximately $200,000.

     Investments  amounted  to  $10.1  million  in 1997 and are  related  to the
security interest granted by the Company to its Asian partner,  Unipac, 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.
Implementing  volume  production  at Unipac's  manufacturing  plant will require
significant  capital  expenditures.  An  amount  of  $16.5  million  of  capital
expenditures  is  expected  to  be  required  which,  pursuant  to  the  Foundry
Agreement,  is expected to be purchased  and funded by Unipac.  The written bank
guaranty  provided by the Company to Unipac is  expected  to be  increased  from
$10.0 million to $13.5 million.

     The Company has existing  contracts  with two different  French  ministries
providing for the payment of grants to the Company totaling  approximately  $5.0
million,  of which the Company has collected an aggregate amount of $2.2 million


                           PixTech 1997 Annual Report
                                       13


<PAGE>


through  December 31, 1997 and for which the Company has recognized  revenues to
date in the aggregate amount of $1.5 million.

     In 1997, the Company entered into a research and development agreement with
the  European  Union  and  other  European   industrial   companies  for  an  18
month-period,  which began in February  1997. The  contribution  of the European
Union to the costs incurred by the Company  amounts to $840,000 over the period.
The Company  received  $423,000 in 1997 from this  contribution,  which were not
recognized as income in 1997 as all conditions  stipulated in the agreement were
not met.

     Cash flows generated from financing  activities were $30.3 million in 1997,
as  compared  to $1.9  million  used in  financing  activities  in  1996.  These
financings  consisted  primarily  of sales of shares of Common Stock in a public
offering in Europe and in private  placements,  resulting in net proceeds to the
Company of $15.9 million (net of issuance costs) and $5.7 million, respectively,
while long term  liabilities  increased  by $10.0  million,  as the  Company was
granted a $10.0 million loan by the Japanese firm Sumitomo in November 1997 (see
"Notes to Consolidated Financial Statements Note 7 - Long term debt"). Cash flow
generated from financing activities exclude non-cash transactions related to the
sale of 463,708  shares of the  Company's  Common Stock to Motorola,  Inc.  (See
"Notes to Consolidated  Financial Statements Note 11 -- Stockholders'  Equity").
As  consideration  for this  stock  purchase,  an  amount of  $686,000  has been
received in cash and the remaining  $1.4 million was in the form of  forgiveness
of obligations due from the Company to Motorola.

     The Company believes that cash available at December 31, 1997 together with
anticipated proceeds during 1998 from the various grants described above and the
anticipated  increase  in  product  sales  will be  sufficient  to meet its cash
requirements,  including  repayment  of the  current  portion  of its long  term
obligations  in the amount of $1.9 million at December 31, 1997, for at least 12
months.

     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 focused on the continued  development of the FED technology,
the  strengthening  and  expansion  of the  FED  Alliance,  the  improvement  of
manufacturing yields, the successful implementation of contract manufacturing of
FEDs with its Asian partner, Unipac, and the reliability testing of new products
which the Company  expects will lead to the shipment of  commercial  products in
the near future.  In evaluating  this outlook,  the following  risks and issues,
among  others,  which are common with  development  stage  companies,  should be
considered.

     Risks Associated with Contract  Manufacturing of FEDs. The Company believes
that its  ability  to  commercialize  medium to large  volumes of FEDs is highly
dependent on its ability to have FEDs  manufactured  by a major  manufacturer in
the AMLCD industry.  In May 1997, the Company signed the Foundry  Agreement with
Unipac, an AMLCD manufacturer based in Taiwan.  Under the agreement,  Unipac has
installed  volume  production  equipment  to produce  FEDs at its  manufacturing
plant,  and will begin  production  for  exclusive  delivery of FED  displays to
PixTech.  Expectations  about the timing of this  manufacturing plan with Unipac
are forward-looking  statements that involve risks and uncertainties,  including
the ease or difficulty of the transfer of the FED technology to Unipac.  If such
manufacturing  plans are not implemented on a timely basis, the Company will not
be able to ship  medium  to  large  volumes  of FED  products,  or to  obtain  a
commercially  acceptable cost for its FED displays.  If the Company is unable to
have its FED  manufactured  in a cost  effective  manner,  the Company  would be
materially  adversely  affected.  Significant capital expenditure is required in
order to install, at the contract manufacturers' facility, equipment that is not
common to the AMLCD  manufacturing  process.  A total amount of $16.5 million of
capital  expenditures is expected to be required which,  pursuant to the Foundry
Agreement, is expected to be purchased and funded by Unipac. The amount actually
expended  on  capital  expenditures  could  vary  significantly  depending  upon
numerous factors, including the inherent unpredictability of the total amount of
a large scale capital expenditure  program.  Should the Company be successful in
implementing this contract manufacturing relationship, the Company's reliance on
a single contract manufacturer will involve several risks, including a potential
inability to obtain an adequate supply of required products, and reduced control
over the price,  timeliness  of  delivery,  reliability  and quality of finished
products.  Any inability to manage this contract  manufacturing  relationship or
any  circumstance  that would  cause the  Company to delay the  shipment  of its
products would have an adverse effect on the Company.


                           PixTech 1997 Annual Report
                                       14


<PAGE>


     Products and  Manufacturing  Processes  under  Development,  Need to Obtain
Commercial   Yields,   Costs  of  Products.   The  Company's  products  and  its
manufacturing  processes are in the development  stage.  The Company has to date
encountered  a  number  of  delays  in  the  development  of  its  products  and
manufacturing  processes. No assurance can be given that further delays will not
occur. The Company does not plan to increase  production from its pilot facility
beyond low volume levels. The Company believes that contract  manufacturing with
Unipac (see "Risks Associated with Contract Manufacturing of FEDs") will make it
possible to manufacture  volume  quantities of FEDs at  commercially  acceptable
costs.  However,  moving from pilot production to volume  production  involves a
number of steps and challenges.  In particular,  in order to demonstrate the low
cost  potential  of its FED  technology,  the  Company  will need to improve its
manufacturing yields. There can be no assurance that the Company will be able to
implement  processes for the manufacture of volume quantities of FED products at
commercially  viable cost levels or on a timely basis. If such processes are not
successfully implemented, the Company would be adversely affected.

     Display  Performance  Enhancement.  Key elements of display performance are
brightness,  and  stability  over time (life time and  reliability),  as well as
power efficiency.  PixTech is seeking to balance luminous  efficiency with power
efficiency  to  produce  bright  and  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.  In order to produce  color  displays  that will  provide the
product life necessary for most applications,  the Company needs to make further
advances in manufacturing processes.  There can be no assurance that the Company
will be able to  improve  the  reliability  and life time of its  color  FEDs to
achieve  commercially  acceptable  performance,  or on a timely  basis.  If such
displays performance  enhancements are not successfully  completed,  the Company
could be adversely affected.

     Revenues from FED Alliance members.  To date, the Company has recorded most
of  the  expected  revenues  associated  with  the  achievement  of  contractual
milestones under existing FED Alliance agreements,  and most future FED Alliance
milestone  revenues are subject to expansion of the  Alliance.  Expansion of the
FED  Alliance is subject,  in part,  to matters  beyond the  Company's  control.
Failure to expand the FED Alliance could adversely affect the Company.

     Competition and Competing  Technologies.  The market for flat panel display
products is  intensely  competitive  and is expected to remain so in the future.
The market is currently  dominated by products  utilizing liquid crystal display
("LCD") technology. LCD technology has continued to improve, and there can be no
assurance  that  advances  in LCD  technology  will  not  overcome  its  current
limitations.  In addition,  as some of the basic FED technology is in the public
domain, the Company has a number of potential direct competitors  developing FED
displays.  In the event that efforts by the Company's  competitors result in the
development  of products that offer  significant  advantages  over the Company's
products, the Company could be adversely affected.

     No Assurance of Market Acceptance.  The potential size and timing of market
opportunities  targeted by the Company and the members of the FED  Alliance  are
uncertain.  The Company  anticipates  marketing  its  displays to OEMs,  and its
success  will  depend  on  whether  OEMs  select  the  Company's   products  for
incorporation into their products and upon their successful introduction of such
products,  as well as the successful  commercialization of products developed by
members of the FED Alliance.

     Patents and Protection of Proprietary Technology.  The Company's ability to
compete effectively with other companies will depend, in part, on the ability of
the Company to maintain the proprietary  nature of its technology.  Although 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,  there can be no
assurance as to the degree of  protection  offered by these  patents,  as to the
likelihood  that  pending  patents  will  be  issued  or as to the  validity  or
enforceability of any issued patents.

     In addition, because of the developmental stage of the Company, claims that
the Company's  products  infringe on the  proprietary  rights of others are more
likely to be asserted after  commencement of commercial sales  incorporating the
Company's  technology.  Although the Company  believes  that its products do not
infringe the patents or other proprietary rights of third parties,  there can be
no  assurance  that other  third  parties  will not assert  infringement  claims
against the Company or that such claims will not be  successful.  There can also
be no assurance that competitors will not infringe the Company's  patents.  Even
successful  defense  and  prosecution  of  patent  suits  are  both  costly  and
time-consuming.  An adverse  outcome in a suit in which the Company  asserts its
patent  rights could result in the loss of such  rights,  and could  subject the
Company to substantial costs and diversion of Company resources.


                           PixTech 1997 Annual Report
                                       15


<PAGE>


     Foreign exchange. A large percentage of the Company's net assets and of the
Company's costs is expressed in French Francs. Fluctuations of the parity of the
U.S. dollar versus the French Franc may cause significant foreign exchange gains
or losses.

     Impact of Year 2000.  The Company has conducted a  comprehensive  review of
its  computer  systems to  identify  applications  that could be affected by the
"Year 2000"  issue,  and has  developed  an  implementation  plan to resolve the
issue.  Management  does not expect these costs to have a significant  impact on
its financial position or results of operations.

     Other important factors which may impact upon the achievement of such goals
and forward-looking  statements are set forth in Exhibit 99.1 to this Form 10-K,
all of which are  incorporated  herein by  reference.  No assurance may be given
that  the  Company's  strategic  goals  and  other  forward-looking   statements
discussed in this section and elsewhere in this Form 10-K will be achieved.


                           PixTech 1997 Annual Report
                                       16


<PAGE>










                      [THIS PAGE INTENTIONALLY LEFT BLANK]










                           PixTech 1997 Annual Report
                                       17



<PAGE>


Item 8. Financial Statements and Supplementary Data


                          Index to Financial Statements

                                                                       Page(s)
Report of Independent Auditors .....................................        19
                                                                 
Balance Sheets .....................................................        20
                                                                 
Statements of Operations ...........................................        21
                                                                 
Statements of Stockholders' Equity (Deficit) .......................   22 - 23
                                                                 
Statements of Cash Flows ...........................................        24
                                                                 
Notes to Financial Statements ......................................   25 - 38
                                                          


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


                                       18
<PAGE>


                          [LETTERHEAD OF ERNST & YOUNG]

                           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, 1996 and 1997 and the
related consolidated  statements of operations,  stockholder's  equity, and cash
flows for the period from June 18, 1992 (date of inception) through December 31,
1997,  and for each of the three years in the period  ended  December  31, 1997.
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  generally  accepted  auditing
standards.  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) at December 31, 1996 and 1997, and
the  consolidated  results of its  operations  and its cash flows for the period
June 18, 1992 (date of inception)  through December 31, 1997 and for each of the
three years in the period ended December 31, 1997, in conformity  with generally
accepted accounting principles.



                                                  /s/ Ernst & Young LLP

                                                  ERNST & YOUNG LLP

New York, New York
February 9, 1998


                           PixTech 1997 Annual Report

                                       19
<PAGE>


                                  PixTech, Inc.
                          (a development stage company)

                          Consolidated balance sheets

<TABLE>
<CAPTION>
(in thousands, except per share amounts)
================================================================================================================
                                                                                             December 31,
                                                                                       1996                1997
================================================================================================================
ASSETS
----------------------------------------------------------------------------------------------------------------
<S>                                                                                 <C>                 <C>     
Current assets:
----------------------------------------------------------------------------------------------------------------
     Cash and cash equivalents                                                      $  4,266            $ 12,428
----------------------------------------------------------------------------------------------------------------
   Short term investments                                                               --                 1,259
----------------------------------------------------------------------------------------------------------------
   Accounts receivable:
----------------------------------------------------------------------------------------------------------------
       Trade                                                                           1,655                 953
----------------------------------------------------------------------------------------------------------------
       Other                                                                             198                  82
----------------------------------------------------------------------------------------------------------------
   Inventory                                                                             770                 702
----------------------------------------------------------------------------------------------------------------
   Other                                                                               2,975               2,166
================================================================================================================
       Total current assets                                                            9,864              17,590
================================================================================================================
Investments -- long term                                                                --                 8,816
----------------------------------------------------------------------------------------------------------------
Property, plant and equipment, net                                                    13,409               9,353
----------------------------------------------------------------------------------------------------------------
Goodwill, net                                                                            298                 226
----------------------------------------------------------------------------------------------------------------
Deferred tax assets                                                                    5,167               5,058
----------------------------------------------------------------------------------------------------------------
Other assets -- long term                                                                342                 605
----------------------------------------------------------------------------------------------------------------
Deferred offering costs                                                                  485                --
================================================================================================================
TOTAL ASSETS                                                                        $ 29,565            $ 41,648
================================================================================================================

================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
----------------------------------------------------------------------------------------------------------------
Current liabilities:
----------------------------------------------------------------------------------------------------------------
     Current portion of long term debt                                              $    990            $  1,364
----------------------------------------------------------------------------------------------------------------
     Current portion of capital lease obligations                                        921                 599
----------------------------------------------------------------------------------------------------------------
     Current portion of long term liabilities                                          1,890                --
----------------------------------------------------------------------------------------------------------------
     Accounts payable                                                                  5,132               5,053
----------------------------------------------------------------------------------------------------------------
     Accrued expenses                                                                  1,790               1,284
================================================================================================================
       Total current liabilities                                                      10,723               8,300
================================================================================================================
Deferred revenue                                                                       3,226               2,546
----------------------------------------------------------------------------------------------------------------
Long term debt, less current portion                                                   2,146              11,024
----------------------------------------------------------------------------------------------------------------
Capital lease obligation, less current portion                                           833                 441
----------------------------------------------------------------------------------------------------------------
Other long term liabilities, less current portion                                        538                 557
================================================================================================================
       Total liabilities                                                              17,466              22,868
================================================================================================================
Stockholders' equity
----------------------------------------------------------------------------------------------------------------
     Common stock, $0.01 par value, authorized shares--30,000,000;
    issued and outstanding shares--8,141,146; 13,762,732 respectively                     81                 138
----------------------------------------------------------------------------------------------------------------
     Additional paid-in capital                                                       34,085              57,067
----------------------------------------------------------------------------------------------------------------
     Cumulative translation adjustment                                                  (438)             (2,132)
----------------------------------------------------------------------------------------------------------------
     Deficit accumulated during development stage                                    (21,629)            (36,293)
================================================================================================================
       Total stockholders' equity                                                     12,099              18,780
================================================================================================================
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                          $ 29,565            $ 41,648
================================================================================================================
</TABLE>
See accompanying notes.


                           PixTech 1997 Annual Report



                                       20
<PAGE>




                                  PixTech, Inc.
                          (a development stage company)

                          Consolidated balance sheets

<TABLE>
<CAPTION>
(in thousands, except per share amounts)
==============================================================================================================
                                                              Year Ended                        Period from
                                                              December 31,                     June 18, 1992
                                                                                            (date of inception)
                                                                                                   through
                                                                                               Dec. 31, 1997
--------------------------------------------------------------------------------------------------------------
                                                      1995           1996            1997             1997
==============================================================================================================
<S>                                               <C>             <C>              <C>               <C>      
Revenues                                                                                        
==============================================================================================================
   Cooperation and license revenues               $  9,865         $  5,440         $  1,932          $ 25,210
--------------------------------------------------------------------------------------------------------------
   Product sales                                       808              791              745             2,381
--------------------------------------------------------------------------------------------------------------
   Other revenues                                      840            1,413            1,142             3,938
==============================================================================================================
      Total Revenues                                11,513            7,644            3,819            31,529
==============================================================================================================
Cost of revenues                                                                                
--------------------------------------------------------------------------------------------------------------
   License fees and royalties                       (1,314)             (45)            (181)           (1,540)
==============================================================================================================
Gross margin                                        10,199            7,599            3,638            29,989
==============================================================================================================
                                                                                                
--------------------------------------------------------------------------------------------------------------
Operating expenses                                                                              
--------------------------------------------------------------------------------------------------------------
   Research, development:                                                                       
--------------------------------------------------------------------------------------------------------------
      Acquisition of intellectual property rights   (3,111)            --               --              (4,765)
--------------------------------------------------------------------------------------------------------------
      Other                                        (12,527)         (15,848)         (15,497)          (53,239)
--------------------------------------------------------------------------------------------------------------
                                                   (15,638)         (15,848)         (15,497)          (58,004)
--------------------------------------------------------------------------------------------------------------
   Marketing and sales                              (1,688)          (1,089)          (1,496)           (5,174)
--------------------------------------------------------------------------------------------------------------
   Administrative and general expenses              (2,151)          (2,703)          (2,419)          (10,301)
--------------------------------------------------------------------------------------------------------------
                                                   (19,477)         (19,640)         (19,412)          (73,479)
==============================================================================================================
Loss from operations                                (9,278)         (12,041)         (15,774)          (43,490)
==============================================================================================================
Other income / (expense)                                                                        
--------------------------------------------------------------------------------------------------------------
   Interest income                                     466              428              759             2,020
--------------------------------------------------------------------------------------------------------------
   Interest expense                                   (493)            (362)            (289)           (1,211)
--------------------------------------------------------------------------------------------------------------
   Foreign exchange gains                              280              256               54               654
--------------------------------------------------------------------------------------------------------------
                                                       253              322              524             1,463
==============================================================================================================
Loss before income tax benefit                      (9,025)         (11,719)         (15,250)          (42,027)
==============================================================================================================
Income tax benefit                                   2,720             --                586             5,734
==============================================================================================================
NET LOSS                                          $ (6,305)        $(11,719)        $(14,664)         $(36,293)
==============================================================================================================
                                                                                                
--------------------------------------------------------------------------------------------------------------
   Net loss per share                             $   (.82)        $  (1.44)        $  (1.12)   
--------------------------------------------------------------------------------------------------------------
                                                                                                
--------------------------------------------------------------------------------------------------------------
   Shares used in computing net loss per share       7,697            8,137           13,140    
==============================================================================================================
</TABLE>                                                                        
                                                                                
See accompanying notes.


                           PixTech 1997 Annual Report



                                       21
<PAGE>




                                  PixTech, Inc.
                          (a development stage company)

                 Consolidated Statement of Stockholders' Equity

<TABLE>
<CAPTION>
(in thousands, except per share amounts)
====================================================================================================================================
                                                                             Convertible Preferred Stock
                                                      Series A              Series B             Series C             Series D
------------------------------------------------------------------------------------------------------------------------------------
                                                  Shares                 Shares              Shares               Shares
                                                  issued     Amount      issued   Amount     issued     Amount    issued    Amount
====================================================================================================================================
<S>                                             <C>          <C>         <C>      <C>       <C>          <C>      <C>        <C>    
Balance at June 18, 1992                      
------------------------------------------------------------------------------------------------------------------------------------
Issuance of convertible preferred stock,
net of issuance costs in 1992, 1993 
and 1994                                        1,557,003    $ 2,368     363,447  $ 589     3,044,846    8,615    430,208    $ 1,224
------------------------------------------------------------------------------------------------------------------------------------
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     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                 (1,557,003)    (2,368)   (363,447)  (589)   (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                        --         --          --     --            --       --         --         --
====================================================================================================================================
</TABLE>

See accompanying notes.


                           PixTech 1997 Annual Report



                                       22
<PAGE>




                                  PixTech, Inc.
                          (a development stage company)

                 Consolidated Statement of Stockholders' Equity

<TABLE>
<CAPTION>
(in thousands, except per share amounts)
====================================================================================================================================
                                                       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 costs in 1992, 1993 and 1994                                                                                       $12,796
-----------------------------------------------------------------------------------------------------------------------------------
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
===================================================================================================================================
</TABLE>

See accompanying notes.


                           PixTech 1997 Annual Report



                                       23
<PAGE>


                                  PixTech, Inc.
                          (a development stage company)

                      Consolidated statement of cash flows

<TABLE>
<CAPTION>
(in thousands, except per share amounts)
====================================================================================================================================
                                                                            Year Ended                         Period from
                                                                            December 31,                      June 18, 1992
                                                                                                           (date of inception)
                                                                                                                through
                                                                                                             Dec. 31, 1997
------------------------------------------------------------------------------------------------------------------------------------
                                                                        1995            1996             1997             1997
====================================================================================================================================
<S>                                                                 <C>               <C>             <C>               <C>      
Operating activities
------------------------------------------------------------------------------------------------------------------------------------
     Net loss                                                       $ (6,305)         $(11,719)       $(14,664)         $(36,293)
------------------------------------------------------------------------------------------------------------------------------------
     Adjustments to reconcile net loss to net cash                                                                     
    (used) by operating activities:                                                                                    
------------------------------------------------------------------------------------------------------------------------------------
     Depreciation and amortization                                     3,488             3,934           3,741            11,566
------------------------------------------------------------------------------------------------------------------------------------
     Gain on disposal of fixed assets                                   --                 (31)           --                 (31)
------------------------------------------------------------------------------------------------------------------------------------
     Deferred taxes                                                   (2,721)              (53)           --              (5,163)
------------------------------------------------------------------------------------------------------------------------------------
     Revenues receivable  "in kind"                                     --                --              --                (312)
------------------------------------------------------------------------------------------------------------------------------------
     Expenses payable  "in kind"                                          24              --              --               1,420
------------------------------------------------------------------------------------------------------------------------------------
     Deferred  "in kind"  revenues                                      --                --              --                 312
------------------------------------------------------------------------------------------------------------------------------------
     Change in assets and liabilities                                                                                  
------------------------------------------------------------------------------------------------------------------------------------
       Accounts receivable--Trade                                     (4,825)            3,749             672              (681)
------------------------------------------------------------------------------------------------------------------------------------
       Accounts receivable--Other                                        504               (21)            102               395
------------------------------------------------------------------------------------------------------------------------------------
       Inventory                                                        (148)             (393)            (28)             (795)
------------------------------------------------------------------------------------------------------------------------------------
       Other assets                                                     (793)             (280)            115            (1,564)
------------------------------------------------------------------------------------------------------------------------------------
       Accounts payable, accrued expenses                                                                              
       and other assets and liabilities                                2,287              (634)            983             5,722
------------------------------------------------------------------------------------------------------------------------------------
       Deferred revenue                                                2,572               300            (297)            2,780
------------------------------------------------------------------------------------------------------------------------------------
       Taxes, other than income                                         (275)             --              --                 (23)
====================================================================================================================================
     Net cash used in operating activities                            (6,192)           (5,148)         (9,376)          (22,667)
====================================================================================================================================
Investing activities                                                                                                   
------------------------------------------------------------------------------------------------------------------------------------
     Additions to property, plant, and equipment                      (2,452)           (5,866)         (1,165)          (17,460)
------------------------------------------------------------------------------------------------------------------------------------
     Reclassification of cash equivalents as investments                --                --           (10,080)          (10,080)
------------------------------------------------------------------------------------------------------------------------------------
     Additions to patents                                               --                (130)           --                (130)
====================================================================================================================================
     Net cash used in investing activities                            (2,452)           (5,996)        (11,245)          (27,670)
====================================================================================================================================
Financing activities                                                                                                   
------------------------------------------------------------------------------------------------------------------------------------
     Stock issued                                                     20,998                 3          21,639            55,598
------------------------------------------------------------------------------------------------------------------------------------
     (Purchase) sale of treasury stock                                    11              --              --                --
------------------------------------------------------------------------------------------------------------------------------------
     Proceeds from long-term borrowings                                4,161                97          10,000            16,287
------------------------------------------------------------------------------------------------------------------------------------
     Proceeds from sale leaseback transactions                         2,731              --              --               2,731
------------------------------------------------------------------------------------------------------------------------------------
     Payments for equipment purchases financed by accounts payable    (2,709)             (997)           --              (3,706)
------------------------------------------------------------------------------------------------------------------------------------
     Repayment of long-term borrowings                                (2,074)             (215)           (787)           (3,076)
------------------------------------------------------------------------------------------------------------------------------------
     Repayment of capital lease obligations                             (855)             (876)           (576)           (2,307)
====================================================================================================================================
     Net cash provided by (used in) financing activities               22,263           (1,988)         30,276            65,527    
====================================================================================================================================
     Effect of exchange rates on cash                                   (792)             (165)         (1,493)           (2,762)
====================================================================================================================================
     Net increase / (decrease) in cash equivalents                    12,827           (13,297)          8,162            12,428
====================================================================================================================================
Cash and cash equivalents beginning of period                          4,736            17,563           4,266              --
====================================================================================================================================
Cash and cash equivalents end of period                             $ 17,563          $  4,266        $ 12,428          $ 12,428
====================================================================================================================================
Supplemental disclosures of non-cash activities:                                                                       
------------------------------------------------------------------------------------------------------------------------------------
Equipment acquired under capitalized leases                             --                --              --            $  1,209
------------------------------------------------------------------------------------------------------------------------------------
Equipment purchases financed by accounts payable                        --                --              --            $    920
------------------------------------------------------------------------------------------------------------------------------------
Licenses acquired payable over two or three years                   $  2,111              --              --            $  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
------------------------------------------------------------------------------------------------------------------------------------
Repayment of long term borrowing                                        --            $    394        $    363          $    757
------------------------------------------------------------------------------------------------------------------------------------
Supplemental disclosures of cash flow information:                                                                     
------------------------------------------------------------------------------------------------------------------------------------
Interest paid                                                       $    668          $     52        $    184          $    925
====================================================================================================================================
</TABLE>

See accompanying notes.

                           PixTech 1997 Annual Report


                                       24
<PAGE>



                                  PixTech, Inc.
                          (a development stage company)

             Notes to Consolidated Financial Statements (continued)
                 (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,   forming  an  alliance  of
industrial   partners  (the  "FED  Alliance")  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 7
"Accounting and Reporting by Development Stage Enterprises".

2. Summary of the Significant Accounting Policies

o Basis of presentation

The accompanying  consolidated  financial statements were prepared in accordance
with generally  accepted  accounting  principles.  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.

o 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.

o Fiscal Year

The Company ends its fiscal year on December 31.

o Revenue recognition--Cooperation and License Agreements

The Company has entered into Cooperation and License  agreements with members of
the FED Alliance. 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 are milestone-related
and are due in accordance with the terms of each agreement when the milestone is
achieved.  Once paid,  such fees are  irrevocable.  The Company  recognizes this
milestone-related  revenue only when each milestone has been fully performed, as
agreed by the parties. Costs incurred under these contracts are considered costs
in the period incurred, regardless of when related revenue is recognized.

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, and the Company  recorded in 1996  cooperation  and
license revenues under this terminated agreement in the amount of $1,336.


                           PixTech 1997 Annual Report



                                       25
<PAGE>



                                  PixTech, Inc.
                          (a development stage company)

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


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   revenue  was
recognized when the milestone was 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  is  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.

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 performs services in the field of technology development.
In accordance with the Motorola Agreement,  the  milestone-related  payments are
irrevocable  when paid.  Cash  milestone-related  revenue is recognized when the
milestone is achieved. As of December 1997, most of the revenues associated with
the achievement of the  contractually  specified  milestones  under the Motorola
Agreement have been recorded by the Company.

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.

o 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.


                           PixTech 1997 Annual Report



                                       26
<PAGE>



                                  PixTech, Inc.
                          (a development stage company)

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


o 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.

o 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  52,  "Foreign
currency translation" ("SFAS 52").

o 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 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.  Pursuant to the Securities and Exchange Commission Staff
Accounting  Bulletins,  shares and  equivalent  shares  issued by the Company at
prices below the assumed public  offering price during the  twelve-month  period
prior to the proposed  offering have been included in the calculation as if they
were  outstanding  for all  periods  presented  through  the period in which the
initial public offering took place (using the treasury stock method and assuming
an initial public offering price). 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,  1995,  December 31, 1996 or
December  31,  1997.  As net losses  have been  reported in these  periods,  the
dilutive   effects  of  stock  options  and  warrants  were  excluded  from  the
calculation of net loss per share under APB 15.

o 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.

o Investments

The Company  accounts for  investments in accordance with Statement of Financial
Accounting Standards 115, "Accounting for Certain Investments in Debt and Equity
Securities". The Company had no investments at December 31, 1996 or December 31,
1997,   other  than  pledged  cash  (See  Note   6--Short  term  and  long  term
investments).  There were no realized gains or losses on sales of investments in
1995, 1996 or 1997.


                           PixTech 1997 Annual Report



                                       27
<PAGE>



                                  PixTech, Inc.
                          (a development stage company)

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


o Inventory

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

o 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 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.

o Impairment of Long-Lived Assets

In January 1996, the Company adopted Statement of Financial  Accounting Standard
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.

o 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.

o Employee Stock Option Plans

In 1996, the Company adopted the disclosure provisions of Statement of Financial
Accounting   Standards   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 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.

o 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. A valuation  allowance is recorded if it is
more likely than not that some portion or all of the deferred tax asset will not
be realized.

o 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, 1996 and
December 31, 1997 is $32 and $46, respectively. Pension expense incurred was $13
in 1995, $14 in 1996 and $14 in 1997.


                           PixTech 1997 Annual Report



                                       28
<PAGE>



                                  PixTech, Inc.
                          (a development stage company)

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



3. Other current assets

The components of other current assets are as follows:

================================================================================
                                                               December 31,
                                                          1996             1997
================================================================================
Value added tax refundable                               $  720           $  882
Grants receivable                                         2,091            1,210
Other                                                       164               74
================================================================================
                                                         $2,975           $2,166
================================================================================


4. Property, Plant and Equipment

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

================================================================================
                                                             December 31,
                                                       1996               1997
================================================================================
Land                                                 $    249          $    218
Buildings and improvements                              2,843             2,532
Machinery and equipment                                16,566            14,941
Furniture and fixtures                                  1,099             1,089
--------------------------------------------------------------------------------
                                                       20,757            18,780
--------------------------------------------------------------------------------
Less accumulated depreciation                          (7,348)           (9,427)
================================================================================
                                                     $ 13,409          $  9,353
================================================================================

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 $4,409 and $2,207, respectively, at December 31, 1996 and $3,857
and $947, respectively, at December 31, 1997.

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


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 depreciated 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  over the  next 3  years.  No such
warrants have been issued at December 31, 1997.


                           PixTech 1997 Annual Report



                                       29
<PAGE>



                                  PixTech, Inc.
                          (a development stage company)

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



6. Short-term and long-term investment

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 its  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  investments  in the balance  sheet.  Under certain  conditions of the
Foundry Agreement, Unipac can sell to the Company certain equipment. 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 will be reduced by 1/24th of the initial  amount
at the end of each quarter, starting June 1998.

7. Long-term debt

Long-term debt consists of the following :

================================================================================
                                                              December 31,
                                                           1996          1997
================================================================================
Loan payable (a)                                             --        $ 10,000
Non interest-bearing loan from ANVAR (b)                 $  2,482         2,004
Equipment purchase loans (c)                                  269           172
Loan payable (d)                                              118            45
Loan payable (e)                                              267           167
--------------------------------------------------------------------------------
                                                            3,136        12,388
--------------------------------------------------------------------------------
Less: current portion                                        (990)       (1,364)
--------------------------------------------------------------------------------
Total long-term debt, less current portion               $  2,146      $ 11,024
================================================================================

(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  18 months  after  funding,  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 is exercisable starting 1999 and expires November 2000. As part
     of the Sumitomo  Agreement,  the loan is partially secured as follows:  (i)
     the Company pledged certain PixTech S.A. land and constructions  located in
     Rousset. See Note 4-- Property, plant and equipment; (ii) 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.

(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.


                           PixTech 1997 Annual Report



                                       30
<PAGE>



                                  PixTech, Inc.
                          (a development stage company)

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



Future minimum payments under these obligations are as follows:

================================================================================
Year ending December 31,
================================================================================
1998                                                                     $ 1,364
1999                                                                       5,990
2000 (f)                                                                   5,034
================================================================================
Total minimum payments                                                   $12,388
================================================================================

(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,
                                                        1996              1997
================================================================================
Capital lease obligations                             $ 1,753           $ 1,040
Less: current portion                                    (921)             (599)
================================================================================
                                                      $   833           $   441
================================================================================

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,
1997, the net book value of this equipment was $ 947.

Future minimum payments under these obligations are as follows:

================================================================================
Year ending December 31,
================================================================================
1998                                                                    $   746
1999                                                                        377
2000                                                                        146
================================================================================
Total minimum payments                                                    1,269
--------------------------------------------------------------------------------
Less: amount representing interest                                         (229)
--------------------------------------------------------------------------------
Present value of minimum capitalized lease payments                     $ 1,040
================================================================================


9. Commitments and contingencies

o 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.


                           PixTech 1997 Annual Report



                                       31
<PAGE>



                                  PixTech, Inc.
                          (a development stage company)

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



Minimum annual rental  commitments  under non cancelable  leases at December 31,
1997, are as follows :

================================================================================
Year ending December 31,
================================================================================
1998                                                                       1,222
1999                                                                       1,069
2000                                                                         717
2001                                                                           3
2002                                                                           1
================================================================================
Total minimum payments                                                    $3,012
================================================================================


Rental expense for all operating leases consisted of the following:
--------------------------------------------------------------------------------
                                              1995         1996          1997
--------------------------------------------------------------------------------
Rent expense for operating leases           $1,237       $1,439         $1,245
--------------------------------------------------------------------------------
                                      
o License Agreement and Research and Development Agreement with CEA

See Note 16 -- Related Party Transactions


10. Fair Value of Financial Instruments

At December 31, 1996 and 1997, 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,  1997,  the fair  value of
long-term  investments,  with total book value of $8,816 was $7,222. At December
31,  1996 and 1997,  the fair  values  of  long-term  debt and  other  long-term
liabilities,  with book  value of $3,517  and $6,455  were  $3,128  and  $5,739,
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.

o 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  at a price of $4.50 per  share,  resulting  in net
proceeds of $13,949 before  expenses  payable by the Company,  which amounted to
$796.  The Company  granted the  Underwriters  a 30-day option to purchase up to
663,000 shares,  and the  Underwriters  exercised such option and purchased such
shares on February 12, 1997.  Including the sale of such shares, the total price
to the  public,  underwriting  discount,  and  proceeds  to the  Company  before
expenses were $17,982, $1,259, and $16,723, respectively.


                           PixTech 1997 Annual Report



                                       32


<PAGE>



                                 PixTech, Inc.
                         (a development stage company)

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



In February 1997, the Company sold 463,708 shares of the Company's  Common Stock
to  Motorola,  Inc.,  in a  private  placement  at a price of $4.50  per  share,
resulting in net proceeds of $2,086, of which $686 was in cash and $1,400 was in
the form of forgiveness of amounts owed to Motorola.

In February  1997,  the Company sold  1,111,111  shares of the Company's  Common
Stock to United  Microelectronics  Corporation,  the  parent  company  of Unipac
Optoelectronics  Corporation,  in a  private  placement  at a price of $4.50 per
share resulting in net cash proceeds of $5,000.

At December 31, 1997, all outstanding shares of the Company are shares of Common
Stock.

o Convertible preferred stock

All of the Company's issued shares of Convertible  Preferred Stock automatically
converted into shares of Common Stock upon the closing of the Company's  initial
public offering. There is no longer any Convertible Preferred Stock outstanding.

o 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.


o Stock Options

The Company  adopted a stock option plan on November 30, 1993 (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, 1997, become exercisable within a certain period
of time or when specific milestones are completed.

The activity under the option plan was as follows:

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
                                               Shares        Options       Weighted
                                              available     outstanding    Average
                                                                         Option Price
                                                                           per Share
-------------------------------------------------------------------------------------
<S>                                              <C>           <C>             <C>  
Balances at December 31, 1994                  607,642        638,041
  Additional shares reserved                   533,333           --
  Options granted                             (604,936)       604,936         $2.554
  Options exercised                               --           (6,903)         0.375
  Options terminated unexercised                 8,000         (8,000)         0.609
-------------------------------------------------------------------------------------
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
=====================================================================================
</TABLE>

                           PixTech 1997 Annual Report


                                       33
<PAGE>


                                 PixTech, Inc.
                         (a development stage company)

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


Options to purchase  450,556  shares and  748,667  shares  were  exercisable  at
weighted-average  exercise  prices of $0.789 and $1.110 at December 31, 1996 and
December 31,1997, respectively.

Exercise  prices for options  outstanding  as of  December  31, 1997 ranged from
$0.375 to $9.750.  The  weighted  average  remaining  contractual  life of those
options is 7.94 years.

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.  Under the  Director  Stock Plan,  a director  was granted  6,000
options at an exercise  price of $8.625 in April 1996,  and two  directors  were
both  granted  6,000  options at an  exercise  price of $3.91 per share in April
1997.  As the  exercise  price was equal to market  price on the grant date,  no
compensation expense was incurred.

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 0.30 ; 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) :

================================================================================
                                          1995           1996            1997
================================================================================
Pro forma net loss                      $(6,352)       $(12,073)       $(15,026)
Pro forma loss per share                $  (.83)       $  (1.48)       $  (1.14)
================================================================================

The  weighted-average  fair value of options  granted during 1995, 1996 and 1997
were $0.84, $3.95 and $0.18, respectively.

o 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 expire on December 31, 1998. As of December 31, 1997,  these warrants have
not been exercised.

                           PixTech 1997 Annual Report

                                       34
<PAGE>


                                 PixTech, Inc.
                         (a development stage company)

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


o 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.

At December 31, 1997,  3,316,249  shares of Common Stock are reserved for shares
issuable under the Purchase Plan or upon exercise of stock options and warrants.


12. Other and deferred revenues

Other revenues and deferred revenues include the following:

<TABLE>
<CAPTION>
====================================================================================
                                                          December 31,
                                                     1996               1997
                                                 Other   Deferred    Other  Deferred
====================================================================================
<S>                                             <C>      <C>      <C>      <C>   
Grant from French Ministry of Industry (a)      $  800   $2,091   $  663   $1,210
Grant from French local authorities (b)            117    1,044      144      913
Grant from European Union, Esprit Program (c)       --       --       --      423
Insurance refund (d)                                --       --      292       --
Other (e)                                          496       91       43       --
====================================================================================
TOTAL                                           $1,413   $3,226   $1,142   $2,546
====================================================================================
</TABLE>



(a) In December  1994, the Company was awarded a grant of $2,800 from the French
Ministry of  Industry to support  manufacturing  of FEDs.  This grant  covered a
period of two years.  In 1996 and 1997,  the  Company  collected  $800 and $663,
respectively.  Such payments were recognized as income  respectively in 1996 and
in 1997, as all conditions have been 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 1997, no revenue was recognized in relation to these  incentives.  Revenue is
deferred until all conditions are met. In 1997, revenue recognized in the amount
of $144 is 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 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 $840 over the period.  The Company  received  $423 in
1997 from this  contribution.  This contribution was not recognized as income in
1997 as all conditions stipulated in the agreement were not met.

(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.

                           PixTech 1997 Annual Report

                                       35
<PAGE>




                                 PixTech, Inc.
                         (a development stage company)

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


13. Income Taxes

Income (loss) before income tax benefit consists of the following:
================================================================================
                                                     December 31,
                                           1995         1996         1997
================================================================================
France                                    $ (9,792)   $(10,556)   $(13,567)
Rest of world                                  767      (1,161)     (1,683)
================================================================================
Income (loss) before income tax benefit   $ (9,025)   $(11,719)   $(15,250)
================================================================================


The income tax benefit consists of the following:
================================================================================
                                                     December 31,
                                           1995         1996         1997
================================================================================
Deferred:
     France                               $  2,720          --    $    586
     Rest of world                              --          --          --
================================================================================
Total                                     $  2,720          --    $    586
================================================================================


A reconciliation  of income taxes computed at the French statutory rate (41.67%)
to the income tax benefit is as follows:
================================================================================
                                                     December 31,
                                           1995         1996         1997
================================================================================
Income taxes computed at the French 
 statutory rate                           $  3,309    $  4,297    $  6,354
Operating losses not utilized               (3,309)     (4,297)     (6,354)
Research credits                             2,720          --         586
================================================================================
Total                                     $  2,720          --    $    586
================================================================================

No U.S.  income tax expense was realized  and no U.S.  income taxes were paid in
periods ended December 31, 1995, December 31, 1996 and December 31, 1997.

                           PixTech 1997 Annual Report

                                       36
<PAGE>


                                 PixTech, Inc.
                         (a development stage company)

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


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,
                                             1995        1996         1997
================================================================================
Deferred tax assets:
     Net operating loss carryforwards       $4,357      $6,788     $12,058
     Deferred revenue                        1,263       1,201         355
     Research credit carryforwards           7,087       8,193       8,000
--------------------------------------------------------------------------------
                                            12,707      16,181      20,413
Deferred tax liabilities:
     Revenue not currently taxable            (741)         --          --
     Deferred revenue                           --          --        (412)
     Deferred expense                         (272)       (145)       (165)
--------------------------------------------------------------------------------
       Total deferred tax assets            11,694      16,039      19,835
Valuation allowance                         (6,225)    (10,869)    (14,777)
--------------------------------------------------------------------------------
Deferred tax assets                         $5,469      $5,167      $5,058
================================================================================

Net  operating  loss  carryforwards  can be credited  against  future  income in
France.  Net operating loss  carryforward  of: $5,244 expire in 2000,  $5,588 in
2001, $10,005 in 2002 and $8,099 can be carried forward indefinitely.

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.  In 1997,  the  Company  collected  $29  representing  income tax benefit
recorded in 1992.


14. Industry and Geographic information

The Company operates in one industry segment, the development, manufacturing and
licensing  of flat  panel  displays  using  electron  emitters.  Operations  are
conducted in France.  Revenues are principally  derived from  relationships with
companies in the United States and Japan,  and grant revenue from authorities in
France.


15. Significant customers

Historically,  the Company derived its revenues  principally from members of the
FED  Alliance.   Net  revenues  from  the  FED  Alliance  customers  represented
approximately  90%,  75% and 50% of the  Company's  net  revenues for the fiscal
years 1995, 1996 and 1997, respectively.

Revenues derived from FED Alliance members are of a non-recurring nature.

                           PixTech 1997 Annual Report

                                       37
<PAGE>


                                 PixTech, Inc.
                         (a development stage company)

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


16. Related Party transactions

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.

On  October 22 1997,  an  amendment  to the LETI  License  Agreement  was signed
between  the CEA and the  Company  for a period of three  years  (the  "1997 CEA
Amendment"),   in  return  for  CEA  guarantying   certain   contingent  payment
obligations towards Sumitomo Corporation  ("Sumitomo").  See Note 7 -- Long term
debt.  The  royalty  rates and  minimum  payments  from the  Company  to CEA are
temporarily increased. In addition, the Company will give a security interest to
CEA on all its  patents  during  the term of the  amendment.  An  amount of $109
payable to CEA in 1998 was  accrued in 1997,  which  included a minimum  royalty
obligation of $100 pursuant to the 1997 CEA Amendment.

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
was extended for a second three-year  period ending on January 1, 1999,  subject
to further  extension  by mutual  agreement of the  parties.  The  consideration
received  by the CEA for this R&D  activity in 1997  amounted  to  approximately
$640.

In  connection  with the above R&D  agreement  with CEA,  the  Company  expensed
$1,700,  $644 and $637 in 1995,  1996 and 1997,  respectively,  of which $1,300,
$644 and $637 is included in research and  development  costs in 1995,  1996 and
1997,  respectively.  The balance primarily  represents  purchases of equipment,
less recoverable value added tax.

17. License

In connection  with the Company's  license of its  technology to an FED Alliance
member, the Company acquired a worldwide,  non-exclusive royalty-free license to
such FED Alliance  member's  background  FED  technology,  as well as a right to
grant  royalty-free  sublicenses to the other FED Alliance members.  The Company
was obligated to pay certain  license fees in connection with the acquisition of
these rights from such FED Alliance  member;  these payments to the FED Alliance
member  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 FED Alliance member.

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

                           PixTech 1997 Annual Report

                                       38
<PAGE>


                                 PixTech, Inc.
                         (a development stage company)


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

Not Applicable

# PART III

o 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 March 25,  1998 (the "Proxy
Statement").

o 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.

o 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.

o 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

o 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.

(B) REPORTS ON FORM 8-K

No reports on Form 8-K were filed during the fourth quarter of 1997.


(C) EXHIBITS

--------------------------------------------------------------------------------
Number   Footnote   Description
--------------------------------------------------------------------------------
3.1        1        Restated Certificate of Incorporation of Registrant.
                 
3.2        2        Restated By-Laws of Registrant.
                 
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.


                           PixTech 1997 Annual Report

                                       39
<PAGE>


                                 PixTech, Inc.
                         (a development stage company)


--------------------------------------------------------------------------------
Number   Footnote   Description
--------------------------------------------------------------------------------

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.

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.


                           PixTech 1997 Annual Report

                                       40
<PAGE>


                                 PixTech, Inc.
                         (a development stage company)

--------------------------------------------------------------------------------
Number   Footnote   Description
--------------------------------------------------------------------------------
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 Licence 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.

10.30      11       Distribution  and  Financing   Agreement   between  Sumitomo
                    Corporation,  PixTech Inc. and PixTech S.A. dated as of July
                    21, 1997

10.31      12       Cross-Licensing  Period  Extension  between Raytheon Company
                    and Pixel International, S.A. (now PixTech S.A.) dated as of
                    September 4, 1997.

10.32      13       Amendment  No 4 to the License  Agreement  on the  Microtips
                    Display  between  Pixtech,   S.A.  and  the  Commissariat  a
                    l'Energie Atomique (the "CEA")


                           PixTech 1997 Annual Report

                                       41
<PAGE>


                                 PixTech, Inc.
                         (a development stage company)


--------------------------------------------------------------------------------
Number   Footnote   Description
--------------------------------------------------------------------------------

10.33      14       Credit Agreement  between Sumitomo  Corporation and PixTech,
                    Inc. dated as of July 21, 1997

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

99.1                Important Factors Regarding Forward-Looking Statements.
--------------------------------------------------------------------------------


(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 Exhibit 10 to the PixTech,  Inc. Form 10-Q for the fiscal  quarter
     ended June 30, 1997 and incorporated herein by reference.

(10) Filed as Exhibit 9.1 to the PixTech,  Inc. Form 10-Q for the fiscal quarter
     ended September 30, 1997 and incorporated herein by reference.

(11) Filed as Exhibit 10.1 to the PixTech, Inc. Form 10-Q for the fiscal quarter
     ended September 30, 1997 and incorporated herein by reference.

(12) Filed as Exhibit 10.3 to the PixTech, Inc. Form 10-Q for the fiscal quarter
     ended September 30, 1997 and incorporated herein by reference.

(13) Filed as Exhibit 10.4 to the PixTech, Inc. Form 10-Q for the fiscal quarter
     ended September 30, 1997 and incorporated herein by reference.

(14) Filed as Exhibit 10.2 to the PixTech, Inc. Form 10-Q for the fiscal quarter
     ended September 30, 1997 and incorporated herein by reference.


                           PixTech 1997 Annual Report

                                       42
<PAGE>


                                 PixTech, Inc.
                         (a development stage company)

                                   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


                                                                            
Dated: February 18, 1998                     By: /S/ JEAN-LUC GRAND-CLEMENT
------------------------                         -------------------------------
                                                     Jean-Luc Grand-Clement,
                                                           President
<TABLE>
<CAPTION>
      Signature                               Title                                     Date
-----------------------------------------------------------------------------------------------------
<S>                                <C>                                             <C> 
/S/ JEAN-LUC GRAND-CLEMENT
------------------------------
    Jean-Luc Grand-Clement         President, Chief Executive Officer              February 18, 1998
                                   and Chairman of the Board
                                   of Directors (Principal Executive Officer)


/S/ YVES MOREL
------------------------------
    Yves Morel                     Chief Financial Officer                         February 18, 1998
                                   (Principal Financial Officer)


/S/ JEAN-PIERRE NOBLANC
------------------------------
    Jean-Pierre Noblanc            Director                                        February 18, 1998


/S/ PIERRE-MICHEL PICCINO
------------------------------
    Pierre-Michel Piccino          Director                                        February 18, 1998


/S/ WILLIAM C. SCHMIDT
------------------------------
    William C. Schmidt             Director                                        February 18, 1998


/S/ JOHN A. HAWKINS
------------------------------
    John A. Hawkins                Director                                        February 18, 1998
</TABLE>

                           PixTech 1997 Annual Report

                                       43
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                           PixTech 1997 Annual Report


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<PAGE>



                                  PixTech, Inc.
                          (a development stage company)

                        Stockholder and Other Information



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


o Auditors
Ernst & Young LLP
787 Seventh Avenue
New York, New York, US 10019
(212) 773- 3000


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


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


o Annual Meeting of Stockholders

The Annual  Meeting of  Stockholders  of
PixTech, Inc. will be held on Wednesday,
March 25,  1998 at 3 p.m.  local time at
the  Grand  Hyatt,  Park  Avenue,  Grand
Central, in New York, New York.


o Investor Relations Contact

Yves Morel
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@compuserve.com

Lippert/Heilshorn & Associates
300 Montgomery Street, Suite 1140
San Fancisco, CA 94104
Phone: (415) 433-3777
Fax: (415) 433-5577
E-mail: lillian@lhai.com

Actus Finance & Communication
11, rue Quentin Bauchart
75008 Paris, France
Phone : 011-33-1-53-67-36-36
Fax : 011-33-1-53-67-36-37
E-mail: agorddard@actigroup.com


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


o Stock Prices

================================================================================
                            FY 1998                       FY 1997
                        High       Low                High       Low
================================================================================

Fourth Quarter          --         --                $3 7/8      $2    

Third Quarter           --         --                $4 1/4      $3 1/8

Second Quarter          --         --                $4 3/4      $3 3/8

First Quarter (*)      $3 3/4    $2 7/16             $6 3/8      $4 1/8
================================================================================
(*) for the period from January 1,1998 to February 9, 1998.

On February 9, 1998,  there were  approximately  69 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.


<PAGE>


                                  PixTech, Inc.
                          (a development stage company)

                              Corporate Information

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

o Directors                               o Executive Officers                 
                                                                               
Jean-Luc Grand-Clement (3)                Jean-Luc Grand-Clement               
Chairman, CEO and President               Chairman, CEO and President          
                                                                               
William Schmidt (2)(3)                    Richard Rodriguez                    
Vice President                            Executive Vice President             
Advent International                      Chief Operating Officer              
                                                                               
Pierre-Michel Piccino (1)                 Francis G. Courreges                 
Senior Partner                            Executive Vice President             
Baring Venture Partners Ltd                                                    
                                          Jean-Jacques Louart                  
Jean-Pierre Noblanc (2)                   Vice President, Operations           
Director of Electronics Components                                             
CEA industrie                             Michel Garcia                        
                                          Vice President, Industrial Partners  
John Hawkins (1)                                                               
Managing Partner                          Thomas Holzel                        
Generation Partners                       Vice President, Sales and Marketing  
                                                                               
                                          Yves Morel                           
(1) Member of the Compensation Committee  Chief Financial Officer              
                                          
(2) Member of the Audit Committee

(3) Director Nominee

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