** **

**UNITEDSTATESSECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, D.C. 20549**

 

**FORM 10-QSB**

 
| **ý**                                        | ** ** | **QUARTERLY REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**                                                                                                                                                                                                                                                      |
|---------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** **                                        | ** ** | ** **                                                                                                                                                                                                                                                                                                                                        |
| **For the Quarterly Period Ended March 31, 2005** |
|                                              |       |                                                                                                                                                                                                                                                                                                                                              |
| **or**                                            |
| ** **                                        | ** ** | ** **                                                                                                                                                                                                                                                                                                                                        |
| **o**                                             | ** ** | **TRANSITION  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**                                                                                                                                                                                                                                                     |
| ** **                                        | ** ** | ** **                                                                                                                                                                                                                                                                                                                                        |
|                                              |       | **For the  Transition Period from                         to                         ** |
|                                              |       |                                                                                                                                                                                                                                                                                                                                              |
|                                              |       | **COMMISSION FILE NUMBER: 0-49737**                                                                                                                                                                                                                                                                                                               |

 

**UNI-PIXEL, INC.**

**(Exact Name ofSmall Business Issuer as Specified in Its Charter)**

 
| **DELAWARE**                                                    | ** ** | **75-2926437**                        |
|-----------------------------------------------------------------|------------|---------------------------------------|
| (State or Other Jurisdiction of  Incorporation or Organization) |       | (I.R.S. Employer  Identification No.) |

** **
| **11940 Jollyville Rd., Suite 200N**                  |
|------------------------------------------------------------|
| **Austin,  Texas 78759**                                   |
| **(Address of Principal Executive  Offices)**              |
| ** **                                                 |
| **(512)  610-9700**                                        |
| **(Issuer’s Telephone Number,  Including Area Code)** |

 

Check whether the issuer: (1) filed all reports required to be filed bySection 13 or 15(d) of the Exchange Act during the past 12 months (or for suchshorter period that the registrant was required to file such reports), and (2)has been subject to such filing requirements for the past 90 days.   o Yes ý No

 

As of May 13, 2005, the issuer had 12,800,580 shares of issued andoutstanding common stock, par value $0.001 per share.

 

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

 

 

----

 

**TABLEOF CONTENTS**

 
| Part I.  | Financial Information                                                                                                                                                                   |   |
|----------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|     |                                                                                                                                                                                    |   |
| Item 1.  | Financial Statements                                                                                                                                                                    |   |
|     |                                                                                                                                                                                    |   |
|     | Consolidated Balance Sheets  March 31, 2005 (unaudited) and December 31, 2004                                                                                                           |   |
|     |                                                                                                                                                                                    |   |
|     | Consolidated Statements of Operations  Three months ended March 31, 2005 (unaudited) and March 31, 2004 (unaudited)  and cumulative period from inception to March 31, 2005 (unaudited) |   |
|     |                                                                                                                                                                                    |   |
|     | Consolidated Statements of Shareholders’  Equity  From inception to March 31, 2005 (unaudited)                                                                                     |   |
|     |                                                                                                                                                                                    |   |
|     | Consolidated Statements of Cash Flows  Three months ended March 31, 2005 (unaudited) and March 31, 2004 (unaudited)  and cumulative period from inception to March 31, 2005 (unaudited) |   |
|     |                                                                                                                                                                                    |   |
|     | Notes to Unaudited Consolidated Financial  Statements                                                                                                                                   |   |
|     |                                                                                                                                                                                    |   |
| Item 2.  | Management’s Discussion and Analysis of  Financial Condition and Results of Operations                                                                                             |   |
|     |                                                                                                                                                                                    |   |
| Item 3.  | Controls and Procedures                                                                                                                                                                 |   |
|     |                                                                                                                                                                                    |   |
| Part II. | Other Information                                                                                                                                                                       |   |
|     |                                                                                                                                                                                    |   |
| Item 2.  | Unregistered Sales of Equity Securities and  Use of Proceeds                                                                                                                            |   |
|     |                                                                                                                                                                                    |   |
| Item 4.  | Submission of Matters to a Vote of Security  Holders                                                                                                                                    |   |
|     |                                                                                                                                                                                    |   |
| Item 6.  | Exhibits                                                                                                                                                                                |   |

 

----

 

**PART I - FINANCIAL INFORMATION**

 

**ITEM 1. FINANCIAL STATEMENTS.**

 

Uni-Pixel, Inc.

(A Development Stage Company)

 Consolidated Balance Sheets

 
| ** **                                                       | ** ** | **March 31,  2005** | ** ** | **December 31,  2004** | ** ** |
|------------------------------------------------------------------|------------|---------------------|------------|------------------------|------------|
| ** **                                                       | ** ** | **(unaudited)**     | ** ** | **(audited)**          | ** ** |
| **ASSETS**                                                       |       |                |       |                   |       |
| Current assets                                                   |       |                |       |                   |       |
| Cash and cash equivalents                                        |       | $                   | 6,973,602  |                   | $          | 5,342,641 |   |
| Employee advances                                                |       | 2,000               |       | —                 |       |
| Prepaid expenses                                                 |       | 33,372              |       | 18,163                 |       |
|                                                             |       |                |       |                   |       |
| Total current assets                                             |       | 7,007,974           |       | 5,360,804              |       |
|                                                             |       |                |       |                   |       |
| Property and equipment, net                                      |       | 369,594             |       | 12,474                 |       |
| Intangible assets                                                |       | 12,136              |       | 13,520                 |       |
|                                                             |       |                |       |                   |       |
| Total assets                                                     |       | $                   | 7,389,704  |                   | $          | 5,386,798 |   |
|                                                             |       |                |       |                   |       |
| **LIABILITIES  AND SHAREHOLDERS’ EQUITY**                   |       |                |       |                   |       |
| ** **                                                       |       |                |       |                   |       |
| Current liabilities                                              |       |                |       |                   |       |
| Accounts payable                                                 |       | $                   | 297,670    |                   | $          | 33,213 |   |
| Accrued expenses                                                 |       | 1,705               |       | 27,185                 |       |
| Deferred revenue                                                 |       | 200,000             |       | 200,000                |       |
| Current portion of note payable                                  |       | 73,065              |       | 75,000                 |       |
|                                                             |       |                |       |                   |       |
| Total current liabilities                                        |       | 572,440             |       | 335,398                |       |
|                                                             |       |                |       |                   |       |
| Note payable, less current portion                               |       | 23,100              |       | 69,328                 |       |
|                                                             |       |                |       |                   |       |
| Total liabilities                                                |       | 595,540             |       | 404,726                |       |
|                                                             |       |                |       |                   |       |
| Shareholders’ equity                                        |       |                |       |                   |       |
| Preferred stock, $0.001 par value;  10,000,000 shares authorized |       | 3,752               |       | 2,822                  |       |
| Common stock, $0.001 par value; 40,000,000  shares authorized    |       | 12,801              |       | 12,801                 |       |
| Additional paid-in capital                                       |       | 16,540,814          |       | 13,742,444             |       |
| Accumulated deficit during development  stage                    |       | (9,763,203          | )          | (8,775,995             | )          |
|                                                             |       |                |       |                   |       |
| Total shareholders’ equity                                  |       | 6,794,164           |       | 4,982,072              |       |
|                                                             |       |                |       |                   |       |
| Total liabilities and shareholders’ equity                  |       | $                   | 7,389,704  |                   | $          | 5,386,798 |   |

 

*The accompanying notes are an integral part of these consolidatedfinancial statements.*

 

1

----

 

Uni-Pixel, Inc.

(A Development Stage Company)

Consolidated Statements of Operations

(unaudited)

 
| ** **                                                              | ** ** | **Three Months Ended  March 31,** | ** ** | **Cumulative  Period from  February 17, 1998  (date of inception)  to March 31,** | ** ** |
|-------------------------------------------------------------------------|------------|-----------------------------------|------------|-----------------------------------------------------------------------------------|------------|
| ** **                                                              | ** ** | **2005**                          | ** ** | **2004**                                                                          | ** ** | **2005** | ** ** |
|                                                                    |       |                              |       |                                                                              |       |   |   |
| Revenues                                                                |       |                              |       |                                                                              |       |   |   |
| Development contract revenue                                            |       | $                                 | 18,219     |                                                                              | $          | — |   | $ | 956,731 |   |
|                                                                    |       |                              |       |                                                                              |       |   |   |
| Total revenues                                                          |       | 18,219                            |       | —                                                                            |       | 956,731 |   |
|                                                                    |       |                              |       |                                                                              |       |   |   |
| Cost of revenues                                                        |       | 9,109                             |       | —                                                                            |       | 455,913 |   |
|                                                                    |       |                              |       |                                                                              |       |   |   |
| Gross margin                                                            |       | 9,110                             |       | —                                                                            |       | 500,818 |   |
|                                                                    |       |                              |       |                                                                              |       |   |   |
| Selling, general and administrative  expenses                           |       | 512,381                           |       | 333,272                                                                           |       | 4,971,798 |   |
| Research and development                                                |       | 507,543                           |       | 427,211                                                                           |       | 4,799,587 |   |
|                                                                    |       |                              |       |                                                                              |       |   |   |
| Operating loss                                                          |       | (1,010,814                        | )          | (760,483                                                                          | )          | (9,270,567 | ) |
|                                                                    |       |                              |       |                                                                              |       |   |   |
| Other income (expense)                                                  |       |                              |       |                                                                              |       |   |   |
| Other income                                                            |       | —                            |       | —                                                                            |       | 886,886 |   |
| Debt issuance expense                                                   |       | —                            |       | (125,000                                                                          | )          | (500,000 | ) |
| Interest income (expense), net                                          |       | 23,606                            |       | (64,075                                                                           | )          | (879,522 | ) |
|                                                                    |       |                              |       |                                                                              |       |   |   |
| Net loss                                                                |       | $                                 | (987,208   | )                                                                                 | $          | (949,558 | ) | $ | (9,763,203 | ) |
|                                                                    |       |                              |       |                                                                              |       |   |   |
| Preferred stock dividends                                               |       | (185,853                          | )          | —                                                                            |       | (221,568 | ) |
| Net loss attributable to common  shareholders                           |       | $                                 | (1,173,061 | )                                                                                 | $          | (949,558 | ) | $ | (9,984,771 | ) |
|                                                                    |       |                              |       |                                                                              |       |   |   |
| Per share information                                                   |       |                              |       |                                                                              |       |   |   |
| Net loss – basic and diluted                                       |       | $                                 | (0.08      | )                                                                                 | $          | (0.18 | ) | $ | (1.89 | ) |
| Preferred stock dividends                                               |       | (0.01                             | )          | —                                                                            |       | (0.04 | ) |
| Net loss attributable to common  shareholders – basic and diluted  |       | $                                 | (0.09      | )                                                                                 | $          | (0.18 | ) | $ | (1.93 | ) |
|                                                                    |       |                              |       |                                                                              |       |   |   |
| Weighted average number of basic and  diluted common shares outstanding |       | 12,800,580                        |       | 5,153,093                                                                         |       | 5,169,540 |   |

 

*The accompanying notes are an integral part of these consolidatedfinancial statements.*

 

2

----

 

Uni-Pixel, Inc.

(A Development Stage Company)

Consolidated Statements of Shareholders’ Equity

(unaudited)

 
|                                                                      |   | **Series A  Preferred Stock** |   |       |   |                   |       |           |   |                 |   | **Accumulated  Deficit**      |       | **Total**              |   |
|---------------------------------------------------------------------------|--------|-------------------------------|--------|------------|--------|------------------------|------------|----------------|--------|----------------------|--------|-------------------------------|------------|------------------------|--------|
|                                                                      |   | **Number**                    |   |       |   | **Common  Stock**      |       | **Additional** |   | **Deferred**         |   | **During**                    |       | **Shareholders’** |   |
|                                                                      |   | **of  Shares**                |   | **Amount** |   | **Number  of  Shares** |       | **Amount**     |   | **Paid-In  Capital** |   | **Stock-Based  Compensation** |       | **Development  Stage** |   | **Equity  (Deficit)** |   |
| Founder shares  issued at inception at  2/17/98                           |   | —                        |   | $          | — |                   | 4,500,000  |           | $      | 4,500                |   | $                             | (500       | )                      | $      | — |   | $ | — |   | $ | 4,000 |   |
| Stock issued  during 1999 (prices ranging from $0.50 - $0.62 per share)   |   | —                        |   | —     |   | 180,000                |       | 180            |   | 183,820              |   | —                        |       | —                 |   | 184,000 |   |
| Stock issued  during 2000 (prices ranging from $11.34 - $17.00 per share) |   | —                        |   | —     |   | 63,750                 |       | 64             |   | 956,186              |   | —                        |       | —                 |   | 956,250 |   |
| Stock issued  during 2001 (prices ranging from $10.00 - $17.00 per share) |   | —                        |   | —     |   | 28,176                 |       | 28             |   | 404,227              |   | —                        |       | —                 |   | 404,255 |   |
| Stock issued  during 2002 (prices ranging from $2.00 - $10.00 per share)  |   | —                        |   | —     |   | 157,327                |       | 157            |   | 353,783              |   | —                        |       | —                 |   | 359,940 |   |
| Deferral of  stock-based compensation                                     |   | —                        |   | —     |   | —                 |       | —         |   | 1,100,000            |   | (1,100,000                    | )          | —                 |   | — |   |
| Amortization of  stock-based compensation                                 |   | —                        |   | —     |   | —                 |       | —         |   | —               |   | 206,250                       |       | —                 |   | 206,250 |   |
| Net loss                                                                  |   | —                        |   | —     |   | —                 |       | —         |   | —               |   | —                        |       | (3,968,540             | )      | (3,968,540 | ) |
| Balance, 12/31/02                                                         |   | —                        |   | $          | — |                   | 4,929,253  |           | $      | 4,929                |   | $                             | 2,997,516  |                   | $      | (893,750 | ) | $ | (3,968,540 | ) | $ | (1,859,845 | ) |
| Stock issued  during 2003 (prices ranging from $1.00 - $2.00 per share)   |   | —                        |   | —     |   | 210,827                |       | 211            |   | 263,943              |   | —                        |       | —                 |   | 264,154 |   |
| Amortization of  stock-based compensation                                 |   | —                        |   | —     |   | —                 |       | —         |   | —               |   | 275,000                       |       | —                 |   | 275,000 |   |
| Warrants issued                                                           |   | —                        |   | —     |   | —                 |       | —         |   | 500,000              |   | —                        |       | —                 |   | 500,000 |   |
| Net loss                                                                  |   | —                        |   | —     |   | —                 |       | —         |   | —               |   | —                        |       | (2,492,123             | )      | (2,492,123 | ) |
| Balance, 12/31/03                                                         |   | —                        |   | $          | — |                   | 5,140,080  |           | $      | 5,140                |   | $                             | 3,761,459  |                   | $      | (618,750 | ) | $ | (6,460,663 | ) | $ | (3,312,814 | ) |
| Issuance of  common stock for services                                    |   | —                        |   | —     |   | 738,309                |       | 738            |   | 316,975              |   | —                        |       | —                 |   | 317,713 |   |
| Conversion of  note payable for common stock                              |   | —                        |   | —     |   | 51,008                 |       | 51             |   | 95,052               |   | —                        |       | —                 |   | 95,103 |   |
| Exercise of stock  options                                                |   | —                        |   | —     |   | 1,490,000              |       | 1,490          |   | 28,310               |   | —                        |       | —                 |   | 29,800 |   |
| Exercise of  warrants                                                     |   | —                        |   | —     |   | 512,500                |       | 513            |   | 34,488               |   | —                        |       | —                 |   | 35,000 |   |
| Amortization of  stock-based compensation                                 |   | —                        |   | —     |   | —                 |       | —         |   | —               |   | 618,750                       |       | —                 |   | 618,750 |   |
| Conversion of  bridge loans                                               |   | 256,643                       |   | 257        |   | 850,625                |       | 851            |   | 1,834,242            |   | —                        |       | —                 |   | 1,835,350 |   |
| Issuance of  preferred stock                                              |   | 2,565,000                     |   | 2,565      |   | —                 |       | —         |   | 7,646,765            |   | —                        |       | —                 |   | 7,649,330 |   |
| Issuance of  common stock for net assets of REFL                          |   | —                        |   | —     |   | 1,100,808              |       | 1,101          |   | (1,101               | )      | —                        |       | —                 |   | — |   |
| Issuance of  common stock for net assets of Gemini                        |   | —                        |   | —     |   | 2,917,250              |       | 2,917          |   | 26,255               |   | —                        |       | —                 |   | 29,172 |   |
| Net loss                                                                  |   | —                        |   | —     |   | —                 |       | —         |   | —               |   | —                        |       | (2,315,332             | )      | (2,315,332 | ) |
| Balance, 12/31/04                                                         |   | 2,821,643                     |   | $          | 2,822  |                   | 12,800,580 |           | $      | 12,801               |   | $                             | 13,742,444 |                   | $      | — |   | $ | (8,775,995 | ) | $ | 4,982,072 |   |
| Issuance of preferred  stock                                              |   | 930,000                       |   | 930        |   | —                 |       | —         |   | 2,798,370            |   | —                        |       | —                 |   | 2,799,300 |   |
| Net loss                                                                  |   | —                        |   | —     |   | —                 |       | —         |   | —               |   | —                        |       | (987,208               | )      | (987,208 | ) |
| Balance, 3/31/05                                                          |   | 3,751,643                     |   | $          | 3,752  |                   | 12,800,580 |           | $      | 12,801               |   | $                             | 16,540,814 |                   | $      | — |   | $ | (9,763,203 | ) | $ | 6,794,164 |   |

 

*The accompanying notes are an integral partof these consolidated financial statements.*

 

3

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Uni-Pixel, Inc.

(A Development Stage Company)

Consolidated Statements of Cash Flows

(unaudited)

 
| ** **                                                                   | ** ** | **Three Months Ended  March 31,** | ** ** | **Cumulative Period  from February 18,  1998 (date of  inception) to  March 31,** | ** ** |
|------------------------------------------------------------------------------|------------|-----------------------------------|------------|-----------------------------------------------------------------------------------|------------|
| ** **                                                                   | ** ** | **2005**                          | ** ** | **2004**                                                                          | ** ** | **2005** | ** ** |
| Cash flows from operating activities                                         |       |                              |       |                                                                              |       |   |   |
| Net loss                                                                     |       | $                                 | (987,208   | )                                                                                 | $          | (949,558 | ) | $ | (9,763,203 | ) |
| Adjustments to reconcile net loss to net cash  used in operating activities: |       |                              |       |                                                                              |       |   |   |
| Interest forgiven                                                            |       | —                            |       | —                                                                            |       | (91,421 | ) |
| Employee compensation notes payable  forgiven                                |       | —                            |       | —                                                                            |       | 795,465 |   |
| Depreciation and amortization                                                |       | 18,104                            |       | 2,384                                                                             |       | 99,426 |   |
| Stock issued for services                                                    |       | —                            |       | 80,000                                                                            |       | 460,062 |   |
| Non-cash compensation expense                                                |       | —                            |       | 68,750                                                                            |       | 1,100,000 |   |
| Amortization of debt issuance costs                                          |       | —                            |       | 125,000                                                                           |       | 500,000 |   |
| Change in operating assets and liabilities:                                  |       |                              |       |                                                                              |       |   |   |
| (Increase) decrease in related party  receivables                            |       | (2,000                            | )          | 2,866                                                                             |       | (2,000 | ) |
| (Increase) in prepaid expenses and other  current assets                     |       | (14,209                           | )          | —                                                                            |       | (33,372 | ) |
| Increase in accounts payable                                                 |       | 264,457                           |       | 95,730                                                                            |       | 297,670 |   |
| Increase (decrease) in accrued interest  payable                             |       | (7,635                            | )          | 18,000                                                                            |       | 180,943 |   |
| Increase (decrease) in accrued expenses and  other liabilities               |       | (17,844                           | )          | 138,100                                                                           |       | 797,171 |   |
| Increase in deferred revenue                                                 |       | —                            |       | —                                                                            |       | 200,000 |   |
| Net cash used in operating activities                                        |       | (746,335                          | )          | (418,728                                                                          | )          | (7,029,189 | ) |
|                                                                         |       |                              |       |                                                                              |       |   |   |
| Cash flows from investing activities                                         |       |                              |       |                                                                              |       |   |   |
| Purchase of property and equipment                                           |       | (373,841                          | )          | —                                                                            |       | (441,201 | ) |
| Proceeds from the sale of property and  equipment                            |       | —                            |       | —                                                                            |       | 27,792 |   |
| Purchases of patents, trademarks and  organization costs                     |       | —                            |       | —                                                                            |       | (67,748 | ) |
| Net cash used in investing activities                                        |       | (373,841                          | )          | —                                                                            |       | (481,157 | ) |
|                                                                         |       |                              |       |                                                                              |       |   |   |
| Cash flows from financing activities                                         |       |                              |       |                                                                              |       |   |   |
| Proceeds from notes payable to related  party                                |       | —                            |       | —                                                                            |       | 115,103 |   |
| Payments on notes payable to related party                                   |       | (48,163                           | )          | — —                                                                     |       | (68,163 | ) |
| Proceeds from convertible notes payable                                      |       | —                            |       | 435,000                                                                           |       | 3,390,000 |   |
| Payments on convertible notes payable                                        |       | —                            |       | —                                                                            |       | (1,470,672 | ) |
| Proceeds from the issuance of preferred  stock, net                          |       | 2,799,300                         |       | —                                                                            |       | 10,448,630 |   |
| Proceeds from the issuance of common stock,  net                             |       | —                            |       | —                                                                            |       | 2,089,050 |   |
| Net cash provided by financing activities                                    |       | 2,751,137                         |       | 435,000                                                                           |       | 14,503,948 |   |
|                                                                         |       |                              |       |                                                                              |       |   |   |
| Net increase in cash and cash equivalents                                    |       | 1,630,961                         |       | 16,272                                                                            |       | 6,973,602 |   |
| Cash and cash equivalents, beginning of  period                              |       | 5,342,641                         |       | 19,760                                                                            |       | — |   |
| Cash and cash equivalents, end of period                                     |       | $                                 | 6,973,602  |                                                                              | $          | 36,032 |   | $ | 6,973,602 |   |
|                                                                         |       |                              |       |                                                                              |       |   |   |
| Supplemental disclosures of cash flow  information:                          |       |                              |       |                                                                              |       |   |   |
| Cash paid for interest                                                       |       | $                                 | 12,458     |                                                                              | $          | 46,074 |   | $ | 734,643 |   |
| Interest capitalized into notes payable                                      |       | $                                 | —     |                                                                              | $          | — |   | $ | 8,250 |   |
| Debt issuance cost for warrant issued                                        |       | $                                 | —     |                                                                              | $          | 500,000 |   | $ | 500,000 |   |
| Preferred stock dividend                                                     |       | $                                 | 185,853    |                                                                              | $          | — |   | $ | 221,568 |   |
| Conversion of notes payable for preferred  stock                             |       | $                                 | —     |                                                                              | $          | — |   | $ | 898,250 |   |
| Conversion of notes payable for common  stock                                |       | $                                 | —     |                                                                              | $          | — |   | $ | 980,103 |   |
| Stock issued for services                                                    |       | $                                 | —     |                                                                              | $          | 80,000 |   | $ | 1,560,062 |   |
| Stock issued for interest                                                    |       | $                                 | —     |                                                                              | $          | — |   | $ | 81,272 |   |

 

*The accompanying notes are an integral part of these consolidatedfinancial statements.*

 

4

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Uni-Pixel, Inc.

(A Development Stage Company)

Notes to Unaudited Consolidated FinancialStatements

 

**Note 1 –Basis of Presentation, Business and Organization**

 

Uni-Pixel, Inc.,a Delaware corporation, is the parent company of our wholly-owned operatingsubsidiary, Uni-Pixel Displays, Inc. As used herein, “Uni-Pixel,” “we,” “us,” and “our” refer to Uni-Pixel, Inc.and our wholly-owned consolidated subsidiary, Uni-PixelDisplays, Inc.   Our common stock,par value $0.001 per share, is quoted on the Over the Counter – Pink Sheets (“OTC.PK”)under the ticker symbol “UNXL.”

 

Uni-Pixel, Inc. is a development stagecompany that has developed, patented and demonstrated a new color displaytechnology which we call Time Multiplexed Optical Shutter (“TMOS”).  We intend to be a leader in the research,development and commercialization of new flat panel displays using TMOS in avariety of applications, such as mobile phones, digital cameras, notebookcomputers, televisions and other consumer electronic devices. As ofMarch 31, 2005, we had accumulated a total deficit of $9,763,203 fromoperations in pursuit of this objective.

 

We anticipate that our TMOS displays will bethin, lightweight, and power-efficient devices, which are highly suitable foruse in full-color display applications. We believe TMOS displays will be able to capture a share of the growing$60+ billion flat panel display market due to the significant advantagesit should provide over competing displays with respect to manufacturing andmaterials cost, brightness, power efficiency, viewing angle, video responsetime and image quality.  We believe thatour technology leadership and intellectual property position will enable us togenerate revenues initially from TMOS displays for existing vertical marketsegments such as the military, avionics, and automotive segments, and thensubsequently from consumer electronics markets (i.e., TVs, monitors, personalcomputers, cameras, games, etc.).

 

Our strategy is to develop further ourproprietary TMOS technology to the point of initially manufacturing smallvolumes of high performance displays for military applications.  We intend to utilize contract manufacturingfor product fabrication to augment our internal capabilities in the shortterm.  We also plan to enter into jointventures in certain vertical market segments to exploit the existingmanufacturing and distribution channels of our targeted partners.  We further plan to license our technology todisplay manufacturers for use in applications such as mobile phones, digitalcameras, laptop computers, and other consumer electronic devices. Through ourinternal research and development efforts we have established a portfolio ofTMOS-related patents and patent applications and other intellectual propertyrights that support these joint venture and licensing strategies.  We currently have seven issued patents and fifteenpending patent applications worldwide and contemplate obtaining exclusivefield-of-use licenses, with the right to sublicense, to complementarytechnologies from targeted strategic partners and U.S. national laboratories.

 

Through March 31, 2005, we have beenprimarily engaged in developing our initial product technology, recruitingpersonnel, commencing our U.S. operations and raising capital. In the course ofour development activities, we have sustained losses and expect such losses tocontinue through at least 2005. We will finance our operations primarilythrough our existing cash and future financing.

 

Our ability to operate profitably under ourcurrent business plan is largely contingent upon our success in developing andmanufacturing for sale our products and upon our successful development ofmarkets for our products and profitable manufacturing processes.  We may be required to obtain additionalcapital in the future to expand our operations. No assurance can be given thatwe will be able to develop our products, successfully develop the markets forour products or profitable manufacturing methods, or any such additionalcapital as we might need, either through equity or debt financing, onsatisfactory terms or at all. Additionally, no assurance can be given that anysuch financing, if obtained, will be adequate to meet our ultimate capitalneeds and to support our growth. If adequate capital cannot be obtained onsatisfactory terms, our operations could be negatively impacted.

 

If we achieve growth in our operations in thenext few years, such growth could place a strain on our management,administrative, operational and financial infrastructure. Our ability to manageour current operations and future growth requires the continued improvement ofoperational, financial and management controls, reporting systems andprocedures. In addition, we may find it necessary to hire additionalmanagement, financial and sales and marketing personnel to manage our expandingoperations. If we are unable to manage this growth effectively andsuccessfully, our business, operating results and financial condition may bematerially adversely affected.

 

As of March 31, 2005, we had cash and cashequivalents of $6.9 million.  We believethat our existing capital resources are adequate to finance our operationsuntil December 31, 2006, however our long-term viability is dependent

 

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upon successful operation ofour business, our ability to develop our manufacturing process, the developmentof our products and our ability to raise additional debt and equity to meet ourbusiness objectives.

 

*Acquisition and merger and basis ofpresentation*

 

Uni-Pixel, Inc. was originallyincorporated in the State of Nevada as Super Shops, Inc. OnNovember 15, 1999, Super Shops and its sister companies filed an amendedpetition under Chapter 11 of the United States Bankruptcy Code. OnJuly 31, 2000, the court approved Super Shops’ Amended Joint Plan ofReorganization. On October 13, 2000, and in accordance with the Plan ofReorganization, the management of Super Shops changed its state ofincorporation from Nevada to Delaware by merging with and into NEV AcquisitionCorp., a Delaware corporation formed solely for the purpose of effecting the reincorporation.On June 13, 2001, NEV Acquisition Corp. changed its corporate name toReal-Estateforlease.com, Inc., as a result of the merger transactiondiscussed in the following paragraph.

 

Real-Estateforlease.com, Inc. wasincorporated on May 24, 2001, in the State of Delaware to serve as abusiness-to-business internet information intermediary providing turnkeymarketing services to facilitate the leasing of commercial real estateproperties. On June 13, 2001, the management of NEV Acquisition Corp. enteredinto an Agreement and Plan of Merger with Real-Estateforlease.com, Inc.pursuant to which the sole stockholder and founder ofReal-Estateforlease.com, Inc. exchanged his equity ownership interest inReal-Estateforlease.com, Inc. for 9,500,000 shares (or approximately 96%)of NEV Acquisition Corp.’s common stock. At the time of the merger betweenReal-Estateforlease.com, Inc. and NEV Acquisition Corp.,Real-Estateforlease.com, Inc. had no operations and essentially no assets.Efforts by Real-Estateforlease.com, Inc. to implement its business planceased in June 2002. Prior to Real-Estateforlease.com, Inc.’s mergerwith Uni-Pixel Displays, Inc., as described in the next paragraph,Real-Estateforlease.com, Inc. had no operations and no material assets orliabilities.

 

Our wholly-owned subsidiary, Uni-PixelDisplays, Inc., was originally incorporated as TralasTechnologies, Inc., a Texas corporation, on February 17, 1998. TralasTechnologies, Inc. changed its name to Uni-Pixel Displays, Inc. during2001. On December 7, 2004, Real-Estateforlease.com, Inc. entered intoa merger agreement with Uni-Pixel Displays, Inc. and certain other partiespursuant to which Uni-Pixel Displays, Inc. became a wholly-ownedsubsidiary of Real-Estateforlease.com, Inc. Pursuant to the merger, wechanged our name to “Uni-Pixel, Inc.” at the annual meeting of ourstockholders held in January 2005.

 

The financial statements presented in thisquarterly report include Uni-Pixel, Inc. and our wholly-owned subsidiary,Uni-Pixel Displays, Inc. All significant intercompany transactions and balanceshave been eliminated. Uni-Pixel Displays, Inc. was, for accounting purposes,the surviving entity of the merger, and accordingly for the periods prior tothe merger, the financial statements reflect the financial position, results ofoperations and cash flows of Uni-Pixel Displays, Inc.  The assets, liabilities, operations and cashflows of Real-Estateforlease.com, Inc. and Gemini V, Inc. are included in theconsolidated financial statements from December 10, 2004 onward.

 

**Note 2 -****                  Summaryof Significant Accounting Policies**

 

*Interim financial information*

 

The financial statements included herein,which have not been audited pursuant to the rules and regulations of theSecurities and Exchange Commission, reflect all adjustments which, in theopinion of management, are necessary for a fair presentation of financialposition, results of operations and cash flows for the interim periods on abasis consistent with the annual audited statements. All such adjustments areof a normal recurring nature. The results of operations for interim periods arenot necessarily indicative of the results that may be expected for any otherinterim period of a full year. Certain information, accounting policies and footnotedisclosures normally included in financial statements prepared in accordancewith accounting principles generally accepted in the United States of Americahave been omitted pursuant to such rules and regulations, although we believethat the disclosures are adequate to make the information presented notmisleading. These financial statements should be read in conjunction with ouraudited financial statements included in our Form 10-SB, as amended, includingthe year ended December 31, 2004, filed with the Securities and ExchangeCommission on April 27, 2005.

 

*Use of estimates*

 

The preparation of financial statements inconformity with accounting principles generally accepted in the United Statesof America requires us to make estimates and assumptions that affect thereported amounts of assets and liabilities,

 

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disclosures of contingentassets and liabilities at the date of the financial statements and the reportedamounts of revenues and expenses during the reporting period. Examples includeprovisions for bad debts, useful lives of property and equipment and intangibleassets, impairment of property and equipment and intangible assets, deferredtaxes, and the provision for and disclosure of litigation and losscontingencies. Actual results may differ materially from those estimates.

 

*Statement of cash flows*

 

For purposes of the statements of cash flows,we consider all highly liquid investments (i.e., investments which, whenpurchased, have original maturities of three months or less) to be cashequivalents.

 

*Concentration of credit risk*

 

We maintain our cash primarily with majorU.S. domestic banks. The amounts held in these banks exceed the insured limitof $100,000 from time to time and exceeded that balance at March 31, 2005 andDecember 31, 2004. The terms of these deposits are on demand to minimizerisk.  We have not incurred lossesrelated to these deposits.

 

*Property and equipment*

 

Property and equipment, consisting primarilyof lab equipment, computer equipment, software, leasehold improvements, andoffice furniture and fixtures is carried at cost less accumulated depreciationand amortization. Depreciation and amortization for financial reportingpurposes is provided by the straight-line method over the estimated usefullives of three to five years. Leasehold improvements are amortized using thestraight-line method over the remaining lease term or the life of the asset,whichever is shorter. The cost of repairs and maintenance is charged as an expenseas incurred.

 

*Intangible assets*

 

Our intangible assets represent patentapplications which are recorded at cost. We have filed applications for patents in connection with technologiesbeing developed. The patent applications and any patents issued as a result ofthese applications are important to the protection of our technologies that mayresult from our research and development efforts. Costs associated with patentapplications and maintaining patents are capitalized and will be amortized overthe life of the patents.  We review thevalue recorded for intangibles to assess recoverability from future operationsusing undiscounted cash flows. Impairments are recognized in operating resultsto the extent the carrying value exceeds fair value determined based on the netpresent value of estimated future cash flows.

 

*Revenue recognition*

 

We recognize revenue over the period theservice is performed in accordance with SEC Staff Accounting BulletinNo. 104, “Revenue Recognition in Financial Statements” (“SAB 104”).In general, SAB 104 requires that four basic criteria must be met beforerevenue can be recognized: (1) persuasive evidence that an arrangementexists, (2) delivery has occurred or services rendered, (3) the feeis fixed and determinable, and (4) collectibility is reasonably assured.

 

Revenue from licenses and other up front feesare recognized on a ratable basis over the term of the respective agreement.

 

*Research and development expenses*

 

Research and development costs are expensedas incurred and include salaries and benefits, costs paid to third-partycontractors for research, development and manufacturing of materials anddevices, and a portion of facilities cost. Prototype development costs are asignificant component of research and development expenses and include costsassociated with third-party contractors. Invoicing from third-party contractorsfor services performed can lag several months. We accrue the costs of services rendered in connection with third-partycontractor activities based on our estimate of management fees, site managementand monitoring costs and data management costs. Actual costs may differ fromestimated costs in some cases and are adjusted for in the period in which theybecome known.

 

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*Stock-based compensation*

 

We may, from time to time, issue commonstock, stock options or common stock warrants to acquire services or goods fromnon-employees. Common stock, stock options and common stock warrants issued topersons other than employees or directors are recorded on the basis of theirfair value, as required by SFAS No. 123, which is measured as of the daterequired by EITF Issue 96-18, *“Accountingfor Equity Instruments That Are Issued to Other Than Employees for Acquiring,or in Conjunction with Selling, Goods or Services”*. In accordancewith EITF 96-18, the stock options or common stock warrants are valuedusing the Black-Scholes model on the basis of the market price of theunderlying common stock on the “valuation date”, which for options and warrantsrelated to contracts that have substantial disincentives to non-performance, isthe date of the contract, and for all other contracts is the vesting date.Expense related to the options and warrants is recognized on a straight-linebasis over the shorter of the period over which services are to be received orthe vesting period. Where expense must be recognized prior to a valuation date,the expense is computed under the Black-Scholes model on the basis of themarket price of the underlying common stock at the end of the period, and anysubsequent changes in the market price of the underlying common stock throughthe valuation date is reflected in the expense recorded in the subsequentperiod in which that change occurs.

 

Had compensation costs for our stock optionplan been determined based on the fair value at the grant date for the threemonths ended March 31, 2005, consistent with the provisions of SFASNo. 123 and SFAS 148, our net loss and net loss per share would have increasedto the pro forma amounts indicated below:

 
| ** **                                                                                                                                                             | ** ** | **Three Months Ended  March 31,** | ** ** |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------|------------|
| ** **                                                                                                                                                             | ** ** | **2005**                          | ** ** | **2004** | ** ** |
|                                                                                                                                                                   |       |                              |       |   |   |
| Net loss attributable to common  shareholders- as reported                                                                                                             |       | $                                 | (1,173,061 | ) | $ | (949,558 | ) |
| Add: Stock-based employee compensation expense  included in reported net loss, net of related tax effects of $0                                                        |       | N/A                               |       | N/A |   |
| Less: total stock-based employee  compensation expense determined under fair value based method for all awards  granted to employees, net of related tax effects of $0 |       | (30,159                           | )          | (— | ) |
| Net loss - pro forma                                                                                                                                                   |       | $                                 | (1,203,220 | ) | $ | (949,558 | ) |
|                                                                                                                                                                   |       |                              |       |   |   |
| Net loss per share – as reported                                                                                                                                  |       |                              |       |   |   |
| Basic and diluted                                                                                                                                                      |       | $                                 | (0.09      | ) | $ | (0.18 | ) |
| Net loss per share– pro forma                                                                                                                                     |       |                              |       |   |   |
| Basic and diluted                                                                                                                                                      |       | $                                 | (0.09      | ) | $ | (0.18 | ) |

 

As required under SFAS 123 andSFAS 148, the pro forma effects of stock-based compensation on net lossper share have been estimated at the date of grant using the Black Scholesoption-pricing model based on the following weighted average assumptions:

 
| ** **            | ** ** | **Three Months  ended  March 31, 2005** | ** ** | **Three Months  ended  March 31, 2004** | ** ** |
|-----------------------|------------|-----------------------------------------|------------|-----------------------------------------|------------|
| Expected life (years) |       | 5 years                            |       | N/A                                     |       |
| Interest rate         |       | 4                                       | %          | N/A                                     |       |
| Dividend yield        |       | —                                  |       | N/A                                     |       |
| Volatility            |       | 40.05                                   | %          | N/A                                     |       |

 

*Income taxes*

 

An asset and liability approach is used forfinancial accounting and reporting for income taxes. Deferred income taxesarise from temporary differences between income tax and financial reporting andprincipally relate to recognition of revenue and expenses in different periodsfor financial and tax accounting purposes and are measured using currentlyenacted tax rates and laws. In addition, a deferred tax asset can be generatedby net operating loss carryforwards (“NOLs”). If it is more likely than notthat some portion or all of a deferred tax asset will not be realized, avaluation allowance is recognized.

 

No benefit has been recognized on the netloss as the realization of the net operating loss carryforward cannot beassured.

 

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*Loss per share data*

 

Basic loss per share is calculated based onthe weighted average common shares outstanding during the period, after givingeffect to the manner in which the merger was accounted for as described inNote 1. Diluted earnings per share also gives effect to the dilutiveeffect of stock options, warrants (calculated based on the treasury stockmethod) and convertible notes and convertible preferred stock. The Company doesnot present diluted earnings per share for years in which it incurred netlosses as the effect is antidilutive.

 

At March 31, 2005, options and warrants topurchase 2,098,500 shares of common stock at exercise prices ranging from $1.75to $4.00 per share were outstanding, but were not included in the computationof diluted earnings per share as their effect would be antidilutive.

 

*Fair Value of Financial Instruments*

 

Our financial instruments consist of accountsreceivable and accounts payable. The fair values of our accounts receivable andaccounts payable, in our opinion, reflect their respective carrying amounts.

 

*Recent accounting pronouncements*

 

In December 2004, the FASB issued SFASNo. 123 (Revised 2004), *“Share BasedPayment,”* which eliminates the use of APB Opinion No. 25 andwill require us to measure the cost of employee services received in exchangefor an award of equity instruments based on the grant-date fair value of theaward. That cost will be recognized over the period during which an employee isrequired to provide service in exchange for the reward—the requisite serviceperiod. No compensation cost is recognized for equity instruments for whichemployees do not render the requisite service. The grant-date fair value ofemployee share options and similar instruments will be estimated using option-pricingmodels adjusted for the unique characteristics of those instruments. SFASNo. 123 (Revised 2004) is effective for the first interim or annualreporting period that begins after June 15, 2005 (the quarter beginningJuly 1, 2005 for us) and must be applied to all options granted ormodified after its effective date and also to recognize the cost associatedwith the portion of any option awards made before its effective date for whichthe associated service has not been rendered as of its effective date.  We are still studying the requirements ofSFAS No. 123 (Revised 2004) and have not yet determined what impact itwill have on our results of operations and financial position.  On April 14, 2005, the U.S. Securitiesand Exchange Commission announced a deferral of the effective date of FAS123(R) for calendar year companies until the beginning of 2006.

 

**Note 3 -****                  Commitments and Contingencies**

 

None.

 

**Note 4 -****                  Equity,Stock Plan and Warrants**

 

*Equity instruments issued to non-employees*

 

From time to time, in order to preserve cashand to fund our operating activities, common stock or other equity instrumentsmay be issued for cash or in exchange for goods or services. Equity instrumentsissued for goods or services are recorded at the fair value of the goods orservices received or the fair value of the equity instruments issued, whicheveris more reliably measurable.

 

*Common Stock*

 

During the three months ended March 31, 2005,we issued no shares of common stock for cash in connection with the exercise ofstock options and issued no shares of common stock in exchange for cashlessexercise of warrants.

 

*2005 Stock Incentive Plan*

 

Effective January 27, 2005, we adopted theUni-Pixel, Inc. 2005 Stock Incentive Plan. The Stock Incentive Plan isdiscretionary and allows for an aggregate of up to 2,000,000 shares of ourcommon stock to be awarded through incentive and non-qualified stock optionsand stock appreciation rights. The Stock Incentive Plan is administered by ourBoard of Directors, which has exclusive discretion to select participants whowill receive the awards and to determine the type, size and terms of each awardgranted.

 

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In thefirst quarter of 2005, we issued under the Stock Incentive Plan a total of1,050,000 options to purchase our common stock with an exercise price of $4.00 pershare to two employees.  The options vestover periods of a maximum of 36 to 46 months, respectively,  from the date of grant.

 

**ITEM2.  MANAGEMENT’S DISCUSSION AND ANALYSISOF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.**

** **

The following discussion and analysis should be read in conjunctionwith the consolidated financial statements including the notes thereto.

 

**Forward-Looking Information**

 

Thisreport contains certain “forward-looking statements” within the meaning ofSection 27A of the Securities Act of 1933, as amended, and Section 21E of theSecurities Exchange Act of 1934, as amended, as well as information relating tous that is based on our exercise of business judgment and assumptions made byand information currently available to us. When used in this document and other documents, releases and reportsreleased by us, the words “anticipate,” “believe,” “estimate,” “expect,” and “intend”and words of similar import, are intended to identify any forward-lookingstatements. You should not place undue reliance on these forward-lookingstatements.  These statements reflect ourcurrent view of future events and are subject to certain risks anduncertainties as noted below. Should one or more of these risks or uncertaintiesmaterialize, or should underlying assumptions prove incorrect, our actualresults could differ materially from those anticipated in these forward-lookingstatements.  Actual events, transactionsand results may differ materially from the anticipated events, transactions orresults described in such statements. The discovery and development ofapplications of our business are subject to substantial risks anduncertainties. There can be no assurance that our business plan can beconducted within the timeframe that we expect. These and other factors, some of which are described below, could causefuture results to differ materially from the expectations expressed in thisreport.    Although we believe that ourexpectations are based on reasonable assumptions, we can give no assurance thatour expectations will materialize. Many factors could cause actual results todiffer materially from our forward looking statements.  Several of these factors include, withoutlimitation:

 

•                  ourability to develop our flat panel display technology into marketable products;

•                  ourability to finance our business;

•                  ourability to improve our current pricing model;

•                  ourability to service the demand for our product;

•                  astable interest rate market in the world, and specifically the countries inwhich we are doing business or plan to do business;

•                  astable currency rate environment in the world, and specifically the countriesin which we are doing business or plan to do business;

•                  continuedavailability of supplies at satisfactory prices;

•                  nonew entrance of competitive products in our markets;

•                  noadverse publicity related to our products or the Company itself;

•                  noadverse claims relating to our intellectual property;

•                  theadoption of new, or changes in, accounting principles; and/or legalproceedings;

•                  ourability to maintain compliance for continued listing of our common stock;

•                  thecosts inherent with complying with new statutes and regulations applicable topublic reporting companies, such as the Sarbanes-Oxley Act of 2002;

•                  ourability to efficiently integrate future acquisitions, if any;

•                  othernew lines of business that we may enter in the future; and

•                  otherrisks referenced from time to time elsewhere in this report and in our filingswith the Securities and Exchange Commission.

 

These factors are not necessarily all of the important factors thatcould cause actual results of operations to differ materially from thoseexpressed in these forward-looking statements. Other unknown or unpredictablefactors also could have material adverse effects on our future results.  We undertake no obligation anddo not intend to update, revise or otherwise publicly release any revisions tothese forward-looking statements to reflect events or circumstances after thedate hereof or to reflect the occurrence of any unanticipated events. We cannot assure you that projected results willbe achieved.

 

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*CRITICAL ACCOUNTING POLICIES*

 

The following discussion and analysis offinancial condition and results of operations are based upon our consolidatedfinancial statements, which have been prepared in conformity with accountingprinciples generally accepted in the United States of America. Our significantaccounting policies are more fully described in Note 2 of Notes to theConsolidated Financial Statements. However, certain accounting policies andestimates are particularly important to the understanding of our financialposition and results of operations and require the application of significantjudgment by our management or can be materially affected by changes from periodto period in economic factors or conditions that are outside of ourcontrol.  As a result, they are subjectto an inherent degree of uncertainty. In applying these policies, ourmanagement uses their judgment to determine the appropriate assumptions to beused in the determination of certain estimates. Those estimates are based onour historical operations, our future business plans and projected financialresults, the terms of existing contracts, our observance of trends in theindustry, information provided by our customers and information available fromother outside sources, as appropriate. The following discusses our significantaccounting policies and estimates.

 

*Revenue Recognition:*  We recognize revenue over the period theservice is performed in accordance with SEC Staff Accounting BulletinNo. 104, “Revenue Recognition in Financial Statements” (“SAB 104”). Ingeneral, SAB 104 requires that four basic criteria must be met before revenuecan be recognized: (1) persuasive evidence that an arrangement exists,(2) delivery has occurred or services rendered, (3) the fee is fixedand determinable, and (4) collectibility is reasonably assured.

 

Advance payments are deferred until shipment.The amount of the revenue deferred represents the fair value of the remainingundelivered products measured in accordance with Emerging Issues Task ForceIssue (“EITF”) 00-21, *“Accounting forRevenue Arrangements with Multiple Deliverables,”* which addressesthe issue of accounting for arrangements that involve the delivery of multipleproducts or services.

 

Revenue from licenses and other upfront feesare recognized on a ratable basis over the term of the respective agreement.

 

*Cost of Sales andSelling, General and Administrative Expenses and Research and DevelopmentExpenses:*  Theprimary purpose of our Austin, Texas facility is to conduct research on thedevelopment, testing and delivery of our prototype devices, and thecommercialization of our products so the costs incurred in operating ourAustin, Texas facility have been classified as research and developmentexpenses.

 

If, in the future, the purposes for which weoperate our Austin, Texas, facility, or any new facilities we open, changes,the allocation of the costs incurred in operating that facility between cost ofsales and research and development expenses could change to reflect suchoperational changes.

 

*Research andDevelopment Expenses:* Research and development costs are expensed as incurred and include salariesand benefits, costs paid to third-party contractors for research, developmentand manufacturing of materials and devices, and a portion of facilities cost.Prototype development costs are a significant component of research anddevelopment expenses and include costs associated with third-party contractors.Invoicing from third-party contractors for services performed can lag severalmonths. We accrue the costs of services rendered in connection with third-partycontractor activities based on our estimate of management fees, site managementand monitoring costs and data management costs. Actual costs may differ in somecases from estimated costs and are adjusted for in the period in which theybecome known.

 

*Intangible Assets:*  Our intangible assets represent patentapplications which are recorded at cost. We have filed applications for patentsin connection with technologies being developed. The patent applications andany patents issued as a result of these applications are important to theprotection of our technologies that may result from our research anddevelopment efforts. Costs associated with patent applications and maintainingpatents are capitalized and will be amortized over the life of the patents. Wereview the value recorded for intangibles to assess recoverability from futureoperations using undiscounted cash flows. Impairments are recognized inoperating results to the extent the carrying value exceeds fair valuedetermined based on the net present value of estimated future cash flows. Theprojection of future cash flows requires us to make estimates about whenproduct approvals may be obtained, and the amount of future revenues. Theactual future results could differ significantly from these estimates, andresulting changes in the estimates of future cash flows could be significantand could affect the recoverability of intangible assets.

 

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*Stock-BasedCompensation:* We account for our stock-based compensation under the provisions of Statementof Financial Accounting Standards (“SFAS”) No. 123—”Accounting for StockBased Compensation.” Under SFAS No. 123, we are permitted to either recordexpenses for stock options and other employee compensation plans based on theirfair value at the date of grant or to continue to apply the provisions ofAccounting Principles Board Opinion No. 25 “Accounting for Stock Issued toEmployees,” (“APB No. 25”), and recognize compensation expense, if any,based on the intrinsic value of the equity instrument at the measurement date.We have elected to continue following the provisions of APB No. 25. Stockoptions issued to persons other than employees or directors are recorded on thebasis of their fair value as required by SFAS No. 123.

 

Beginning in the quarter beginning January 1, 2006, we will be requiredto adopt SFAS No. 123 (Revised 2004), *“ShareBased Payment,”* which eliminates the use of APB Opinion No. 25and we will be required to measure the cost of employee services received inexchange for an award of equity instruments based on the grant-date fair valueof the award. That cost will be recognized over the period during which anemployee is required to provide service in exchange for the reward—therequisite service period. No compensation cost will be recognized for equityinstruments for which employees do not render the requisite service. Thegrant-date fair value of employee share options and similar instruments will beestimated using option-pricing models adjusted for the unique characteristics ofthose instruments. SFAS No. 123 (Revised 2004) must be applied to alloptions granted or modified after its effective date and also to recognize thecost associated with the portion of any option awards made before its effectivedate for which the associated service has not been rendered as of its effectivedate. We are still studying the requirements of SFAS No. 123 (Revised2004) and have not yet determined what impact it will have on our results ofoperations and financial position.  OnApril 14, 2005, the U.S. Securities and Exchange Commission announced adeferral of the effective date of FAS 123(R) for calendar year companies untilthe beginning of 2006.

 

*RESULTS OF OPERATIONS*

 

Comparison of the three months ending March 31, 2005 and 2004

 

REVENUES.  Revenues increased to $18,219 for the threemonths ended March 31, 2005, as compared to $0 for the three months endedMarch 31, 2004, due to the revenues recognized from the work specific to anSBIR contract with the U.S. Air Force.

 

COST OF REVENUES.  Cost of revenues include all direct expensesassociated with the delivery of services including internal labor costs. Costof revenues for the three months ended March 31, 2005 increased to $9,109as compared to $0 for the three months ended March 31, 2004 due to the increasein contract engineering revenue.

 

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.Selling, general and administrative expenses increased by 54% or$179,109, to $512,381 for the three months ended March 31, 2005 from$333,272 for the three months ended March 31, 2004.  The major components of the approximately$179,000 increase in selling, general and administrative expense are asfollows:

 

a)  Salaries and benefitsincreased by approximately $87,000 to $260,000 for the three months ended March31, 2005 compared to $173,000 for the three months ended March 31, 2004 due toan increase in the number of employees;

 

b) Legal expense decreased by approximately $1,000 to $136,000 for thethree months ended March 31, 2005 compared to $137,000 for the three monthsended March 31, 2004;

 

c) Accounting expense increased by approximately $18,000 to $22,000 forthe three months ended March 31, 2005 compared to $4,000 for the three monthsended March 31, 2004 due to an increase in accounting expenses related toaudits and reporting required for the preparation of the Form 10-SB, asamended, filed with the Securities and Exchange Commission on April 27, 2005;

 

d) Office expense increased by approximately $14,000 to $20,000 for thethree months ended March 31, 2005 compared to $6,000 for the three months endedMarch 31, 2004;

 

e) Travel expense increased by approximately $17,000 to $20,000 for thethree months ended March 31, 2005 compared to $3,000 for the three months endedMarch 31, 2004; and

 

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f) Depreciation and amortization expense increased by approximately$16,000 to $18,000 for the three months ended March 31, 2005 compared to $2,000for the three months ended March 31, 2004 as a result of an increase inproperty and equipment during the three months ended March 31, 2005.

 

RESEARCH AND DEVELOPMENT. Research and development expenses increasedby approximately $80,332 during the three months ended March 31, 2005 to$507,543 from $427,211 for the three months ended March 31, 2004. Themajor components of the approximately $80,000 increase in research anddevelopment expense are as follows:

 

a) Salaries and benefits attributable to research and developmentdecreased by approximately $5,000 to $344,000 for the three months ended March31, 2005 compared to $349,000 for the three months ended March 31, 2004;

 

b) Consulting expense attributable to research and developmentincreased by approximately $32,000 to $90,000 for the three months ended March31, 2005 compared to $58,000 for the three months ended March 31, 2004primarily due to increased services related to prototype development;

 

c) Lab expense increased by approximately $3,000 to $5,000 for thethree months ended March 31, 2005 compared to $2,000 for the three months endedMarch 31, 2004; and

 

d) Travel expense attributable to research and development increased byapproximately $29,000 to $39,000 for the three months ended March 31, 2005compared to $10,000 for the three months ended March 31, 2004.

 

OTHER INCOME (EXPENSE).  Debt issuance expense decreased to $0 for thethree months ended March 31, 2005 as compared to $125,000 during the threemonths ended March 31, 2004, due to the finalization of debt utilizationfor funding in 2004.

 

INTEREST INCOME (EXPENSE).** **Interestincome increased to $23,606 for the three months ended March 31, 2005 ascompared to an expense of $64,075 for the three months ended March 31, 2004primarily due to the investment of proceeds from the sale of shares of ourSeries A Preferred Stock during the first quarter of 2005 compared to theimpact of debt expenses during the first quarter of 2004, which was generatedby loans that were repaid in 2004 with the proceeds from the sale of our SeriesA Preferred Stock.

 

NET LOSS.**  **Netloss increased to $987,208 for the three months ended March 31, 2005, ascompared to $949,558 for the three months ended March 31, 2004. We computeour net loss per share on the basis of net loss attributable to commonstockholders, which included the effects of certain items not included in thedetermination of net loss. Net loss attributable to common stockholders for thethree months ended March 31, 2005 was $1,173,061 as compared to a net lossattributable to common stockholders of $949,558 for the three months endedMarch 31, 2004. The net loss attributable to common stockholders for the threemonths ended March 31, 2005 includes $185,853 of accrued but unpaid preferredstock dividends.

 

**Off-Balance Sheet Transactions**

 

We do not engage in material off-balance sheet transactions.

 

*LIQUIDITY AND CAPITAL RESOURCES*

 

OperatingActivities

 

Cash used in operating activities during the three months endedMarch 31, 2005 increased to $746,335 as compared to $418,728 used for thethree months ended March 31, 2004. The increase is primarily a result ofincreases in the first quarter of 2005 in research and development spending andgeneral and administrative expenses resulting from additional employee salaryand related employee costs.

 

Investing Activities

 

Cash used for investing activities during the three months endedMarch 31, 2005 amounted to $373,841, as compared to $0 used for investingactivities for the three months ended March 31, 2004 due to our increasedspending on computers, furniture, laboratory, metrology and testing equipmentin the three months ended March 31, 2005.

 

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Financing Activities

 

We have financed our operating and investing activities primarily fromthe proceeds of private placements of common stock, convertible investor notes,and a preferred stock offering. During the three months ended March 31,2005, we realized $2,799,300 net from cash sales of shares of our Series APreferred Stock. During the three months ended March 31, 2005, we paid out$48,163 to retire notes payable. The total net cash provided by financingactivities was $2,751,137 for the three months ended March 31, 2005. Thesefigures compare to the $435,000 received from cash sales of convertibleinvestor notes provided by financing activities for the three months endedMarch 31, 2004.

 

Working Capital

 

As of March 31, 2005, we had a cash balance of $6.9 million.  We project that current cash reserves willsustain our operations at least through December 31, 2006, and we are not awareof any trends or potential events that are likely to impact our short termliquidity through this term.

 

We are a development stage company and have not experienced significantoperations since our formation. We have reached a positive working capitalposition as of the first quarter of 2005 as a result of our financingactivities. We have incurred significant operating losses during the yearsended December 31, 2002, 2003, and 2004 and during the three-month periodended March 31, 2005. We intend to utilize a proprietary methodology fordevelopment of our displays. Our principal activities, from the beginning ofthe development stage, have been organizational matters, issuance of stock,product research and development, fund raising, and market research.

 

We are subject to many risks associated with early-stage businesses inthe electronics industry, including our loss history, the absence of revenuesand revenue producing agreements and products, our ability to raise capital,our reliance on key persons, competition, uncertainties surrounding the abilityto develop our products and ultimately market acceptance of our products.

 

To date, we have experienced losses from our operations. We anticipatethat we will require additional capital resources, including the net proceedsfrom additional equity and debt financing transactions, to generate revenue andachieve positive cash flows from operations. Our ability to generate positivecash flows depends upon a variety of factors, including the acceptance in themarket of our products and various other factors, some of which may be beyondour control. There can be no assurance that such financing transactions will beconsummated or that such revenue will be generated.

 

To date, we have had only a few revenue-generating services ordevelopment contracts.  These include aprototype development agreement with a large personal computer company, and aSmall Business Innovation Research (SBIR) Phase One agreement with the U.S. AirForce for $98,214 and a follow-on Phase Two agreement for $686,966.  We also entered into a prototype developmentagreement with Lockheed Martin, a large military contractor, inOctober 2004, for which we have fulfilled our obligations and receivedfull payment from Lockheed Martin.  Ourimmediate customer prospects are limited to Lockheed Martin, with which weexpect to form a strategic relationship, but with which we currently haveno legally binding commitments or agreements. There can be no assurance that our current discussions with LockheedMartin will result in any binding commitments or agreements, or even if theydo, that such binding commitments or agreements will be material to ourbusiness.  See “Risk Factors” included inour Form 10-SB, as amended,  filed withthe Securities and Exchange Commission on April 27, 2005.

 

Management will work to establish specific applications for our displaytechnology that will generate significant revenues, and cash flows to supportoperations. Our ability to continue as a going concern will be dependent uponachieving profitable operations, and obtaining additional funding from currentshareholders and new investors.

 

**ITEM3.  CONTROLS AND PROCEDURES.**

 

Disclosure Controls and Procedures

 

*Interim financial information*

 

The financial statements included herein, which have not been auditedpursuant to the rules and regulations of the Securities and ExchangeCommission, reflect all adjustments which, in the opinion of management, arenecessary for

 

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a fair presentation offinancial position, results of operations and cash flows for the interimperiods on a basis consistent with the annual audited statements. All suchadjustments are of a normal recurring nature. The results of operations forinterim periods are not necessarily indicative of the results that may beexpected for any other interim period of a full year. Certain information,accounting policies and footnote disclosures normally included in financialstatements prepared in accordance with accounting principles generally acceptedin the United States of America have been omitted pursuant to such rules andregulations, although we believe that the disclosures are adequate to make theinformation presented not misleading. These financial statements should be readin conjunction with our audited financial statements included in our Form10-SB, as amended, including the year ended December 31, 2004, filed withthe Securities and Exchange Commission on April 27, 2005.

 

*Use of Estimates*

 

The preparation of financial statements inconformity with accounting principles generally accepted in the United Statesof America requires us to make estimates and assumptions that affect thereported amounts of assets and liabilities, disclosures of contingent assets andliabilities at the date of the financial statements and the reported amounts ofrevenues and expenses during the reporting period. Examples include provisionsfor bad debts, useful lives of property and equipment and intangible assets,impairment of property and equipment and intangible assets, deferred taxes, andthe provision for and disclosure of litigation and loss contingencies. Actualresults may differ materially from those estimates.

 

*Statement of cash flows*

 

For purposes of the statements of cash flows,we consider all highly liquid investments (i.e., investments which, whenpurchased, have original maturities of three months or less) to be cashequivalents.

 

*Concentration of credit risk*

 

We maintain our cash primarily with major U.S. domestic banks. Theamounts held in these banks exceed the insured limit of $100,000 from time totime. The terms of these deposits are on demand to minimize risk.  We have not incurred losses related to thesedeposits.

 

We have evaluated, under the supervision and with the participation ofmanagement, including our President and Chief Financial Officer, theeffectiveness of the design and operation of our disclosure controls andprocedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act,as of the end of the period covered by this report.  Based upon that evaluation, our President andour Chief Financial Officer concluded that, as of the end of the period coveredby this report, our disclosure controls and procedures are effective in timelyproviding each of them with material information relating to us (including ourconsolidated subsidiary) required to be included in our Exchange Act filings.

 

Changes in Internal Control Over Financial Reporting

 

There were no changes in our internal controls over financial reportingthat occurred during our most recent fiscal quarter that have materiallyaffected, or are reasonably like to materially affect, our internal controlover financial reporting.

 

**PART II - OTHER INFORMATION**

 

**ITEM 2. UNREGISTERED SALES OFEQUITY SECURITIES AND USE OF PROCEEDS.**

 

On January 10, 2005, we sold and issued an aggregate of 562,500shares of our Series A Preferred Stock to accredited investors at theprice of $3.50 per share for cash in the total amount of $1,968,750 in aprivate offering exempt from registration under the Securities Act pursuant toRegulation D under the Securities Act (which was the second issuance andsale of the offering in which we had issued and sold 2,565,000 shares of ourSeries A Preferred Stock on December 9, 2004). The Company’s exclusiveplacement agent in the offering was Fordham Financial Management, Inc. andthe total commission paid to the placement agent was $275,625.

 

On January 10, 2005, we issued to Fordham FinancialManagement, Inc. a warrant to purchase 168,750 shares of our common stock,par value $0.001 per share, in connection with the closing on the sale of562,500 shares of our Series A Preferred Stock. Each warrant expires fiveyears after the closing of the offering and will have an exercise price

 

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of $1.75 per share. Theissuance was made without registration under the Securities Act in relianceupon the exemption from registration afforded by Section 4(2) under theSecurities Act.

 

On January 26, 2005, we sold and issued an aggregate of 367,500shares of our Series A Preferred Stock to accredited investors at theprice of $3.50 per share for cash in the total amount of $1,286,250 in aprivate offering exempt from registration under the Securities Act pursuant toRegulation D under the Securities Act (which was the final issuance andsale of the offering in which we had issued and sold 2,565,000 shares of ourSeries A Preferred Stock on December 9, 2004 and 562,500 shares of ourSeries A Preferred Stock on January 10, 2005). The Company’s exclusiveplacement agent in the offering was Fordham Financial Management, Inc. andthe total commission paid to the placement agent was $180,075.

 

On January 26, 2005, we issued to Fordham Financial Management, Inc.a warrant to purchase 110,250 shares of our common stock in connection with theclosing on the sale of 367,500 shares of our Series A Preferred Stock.Each warrant expires five years after the closing of the offering and will havean exercise price of $1.75 per share. The issuance was made withoutregistration under the Securities Act in reliance upon the exemption fromregistration afforded by Section 4(2) under the Securities Act.

 

On March 5, 2005, we issued to Frank M. DeLape and Reed J. Killionnon-qualified stock options for the purchase of 600,000 and 450,000 shares,respectively, of our common stock at an exercise price of $4.00 per share.  The options are exercisable for a term of tenyears.  The issuance was exempt fromregistration under the Securities Act pursuant to Regulation D thereunder.

 

**ITEM 4. SUBMISSION OF MATTERS TOA VOTE OF SECURITY HOLDERS.**

 

The annual meeting of our stockholders was held onJanuary 27, 2005.  The matters submittedto our stockholders for a vote included:

 

**•**                  Electionof directors to serve on our Board of Directors until our 2006 Annual Meetingof Stockholders, or until their successors are duly elected and qualified.

 
| **NAME**        | ** ** | **VOTED FOR** | ** ** | **VOTED AGAINST** | ** ** | **VOTES WITHHELD** | ** ** |
|-----------------|------------|---------------|------------|-------------------|------------|--------------------|------------|
| ** **      | ** ** | ** **    | ** ** | ** **        | ** ** | ** **         | ** ** |
| Reed J. Killion |       | 10,713,525    |       | —            |       | —             |       |
| Frank M. DeLape |       | 10,713,525    |       | —            |       | —             |       |

** **

**•**                  Approvalof our Amended and Restated Certificate of Incorporation, which includedchanging our name to “Uni-Pixel, Inc.”

 
| **VOTED FOR**  | ** ** | **VOTED AGAINST** | ** ** | **VOTES WITHHELD** | ** ** | **BROKER NON-VOTE** | ** ** |
|----------------|------------|-------------------|------------|--------------------|------------|---------------------|------------|
| **10,713,525** | ** ** | **—**        | ** ** | **—**         | ** ** | **—**          | ** ** |

 

**•**                  Approvalof the Uni-Pixel, Inc. 2005 Stock Incentive Plan (the “Plan”) pursuant to whichthe Company may reserve for issuance over the term of the Plan 2,000,000 sharesof the Company’s Common Stock, for issuance as incentive options, non-qualifiedoptions and restricted stock to employees, consultants and non-employeedirectors.

 
| **VOTED FOR**  | ** ** | **VOTED AGAINST** | ** ** | **VOTES WITHHELD** | ** ** | **BROKER NON-VOTE** | ** ** |
|----------------|------------|-------------------|------------|--------------------|------------|---------------------|------------|
| **10,713,525** | ** ** | **—**        | ** ** | **—**         | ** ** | **—**          | ** ** |

 

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**ITEM 6. EXHIBITS.**

 
| **Exhibit  No.** | ** ** | **Description** |
|------------------|------------|-----------------|
|             | 3.1        |            | Amended and Restated Certificate of  Incorporation of Real-Estateforlease.com, Inc.  (1) |
|             | 3.2        |            | Amended and Restated Bylaws of Uni-Pixel,  Inc.  (1) |
|             | 10.1       |            | Uni-Pixel, Inc. 2005 Stock Incentive Plan (2) |
|             | 10.2       |            | Uni-Pixel, Inc. 2005 Stock Incentive Plan —  Notice of Stock Option Award (1) |
|             | 10.3       |            | Employment Agreement — Frank M. DeLape  (2) |
|             | 10.4       |            | Employment Agreement — Reed J. Killion  (2) |
|             | 31.1       |            | Certification of the President of  Uni-Pixel, Inc., pursuant to Section 302 of the Sarbanes-Oxley Act of 2002** |
|             | 31.2       |            | Certification of the Chief Financial  Officer of Uni-Pixel, Inc., pursuant to Section 302 of the Sarbanes-Oxley Act  of 2002** |
|             | 32.1       |            | Certification of the President of  Uni-Pixel, Inc., pursuant to Section 906 of the Sarbanes-Oxley Act of 2002** |
|             | 32.2       |            | Certification of the Chief Financial  Officer of Uni-Pixel, Inc., pursuant to Section 906 of the Sarbanes-Oxley Act  of 2002** |

 

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(1)                                  Filedas an exhibit to Uni-Pixel.’s Form 10-SB filed with the SEC on February 18,2005 and incorporated by reference herein

(2)                                  Filedas an exhibit to Uni-Pixel.’s Form 10-SB/A filed with the SEC on April 1, 2005and incorporated by reference herein

**                                  Filedherewith

 

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**SIGNATURES**

 

Inaccordance with the requirements of the Exchange Act, the registrant causedthis report to be signed on its behalf by the undersigned, thereunto dulyauthorized.

 
|         | **UNI-PIXEL, INC.** |
|--------------|---------------------|
|         |                |   |
|         |                |   |
| May 13, 2005 |                | By: | /s/ James A. Tassone |   |
| Date         |                | James A. Tassone, Chief Financial Officer |
|              |                     |  |  |  |

 

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