UniPixel's CEO Discusses Q3 2013 Results - Earnings Call Transcript

Nov. 7.13 | About: Uni-Pixel, Inc. (UNXL)

UniPixel, Inc. (NASDAQ:UNXL)

Q3 2013 Earnings Conference Call

November 7, 2013 4:30 PM ET

Executives

Reed J. Killion – President and Chief Executive Officer

Jeffrey W Tomz – Chief Financial Officer

Analysts

Cody Acree – Williams Financial

Mike Malouf – Craig-Hallum Capital

Jon R. Hickman – Ladenburg Thalmann Securities

Gavin Richey – Rockwood Investment Partners

Tony P. Stringer –Target Capital

Nathan R. Jones – Emerald Advisors

Operator

Good afternoon, everyone and thank you participating in today’s Conference Call to discuss UniPixel’s Third Quarter ended September 30, 2013.

Joining us today are Reed Killion, President and CEO of UniPixel and Jeff Tomz, the company’s CFO. Following their remarks, we will open it up the call for question. Then before we conclude today’s call, I will provide company’s Safe Harbor statements with important cautions regarding forward-looking statements made during this call.

Before we begin, I would like to remind everyone that this call is being recorded and will be available for a replay through December 7, 2013. Starting later this evening via the link provided in today’s press release as well as on the company’s website.

Now I would like to turn the call over to the President and CEO of Unipixel, Mr. Reed Killion. Please go ahead sir.

Reed J. Killion

Thank you, Matt. Good afternoon, everyone. Thanks for joining the call today. On today’s call we’re going to talk about the progress we made for the third quarter of 2013 towards worldwide commercialization of our performance Engineered Films Technology, particularly InTouch screen sensors, our recently rebranded touch screen sensor product.

As most of you know our roll-to-roll flexible printed electronics sensor is a disruptive entrant to a touch module market. Market DisplaySearch expects to more than double to 32 billion in revenue over the next five years.

Before I begin discussing our operational progress including today’s news about our purchase orders for InTouch sensors, I would like to turn the call over to our CFO, Jeff Tomz who will take us briefly through the financial details of the quarter. Jeff?

Jeffrey W Tomz

Thank you, Reed. Earlier today we filed our Form-10 Q with the SEC as well we released our third quarter financial results in the press release; both of these are available for download from the Investors Section of our website at www.unipixel.com.

In the third quarter of 2013 did not generate revenues as we focus on advancing the manufacturing build-out at the market introduction of our in-touch sensors. In the first nine months of 2013 revenue totaled $5.1 million as compared to $74,000 in the same year ago period. The increase for the nine months of 2013 was primarily due to $5 million payment received by our PC OEM licensing.

Our SG&A expenses in the third quarter of 2013 totaled $2.5 million as compared to $800,000 in the same year ago quarter. SG&A expenses in the first nine months of 2013 totaled $6.8 million as compared to $2.6 million in the same year ago period. The increase of SG&A in both periods was primarily due to an increase in salary benefits partially driven by increase in restricted stock expense the number of employees and stock compensation expense, as well as increase in New York expenses and depreciation expenses with the increase of employee performance bonus expense occurring in the first nine months of 2013.

Our research and development expenses in the third quarter of 2013 totaled $2.8 million as compared $1.2 million in the same year ago quarter. Research and development expenses in the first nine months of 2013 totaled $7.3 million as compared to $3.5 million in the same year ago period. The increase in both periods was primarily due to increased salaries and benefits as well as that expense related to prototype developments of products based on the company’s performance engineering films.

Net loss was $5.3 million or $0.44 per share in the third quarter of 2013 as compared to a net loss of $2 million or $0.24 per share in the same year ago quarter. Net loss was $9 million or $0.80 per share in the first nine months of 2013 as compared to a net loss of $6.1 million or $0.80 per share in the same year-ago period.

Our cash and cash equivalents totaled $46.6 million at September 30, 2013, as compared to $13 million at December 31, 2012. We believe our existing cash resources are adequate to finance our operations for the foreseeable future as we continue to make prudent use of these resources, as well as SG&A revenue from a preferred price and capacity license agreement.

Now with that, I would like to turn the call back over to our CEO and President, Reed Killion. Reed?

Reed J. Killion

Thanks, Jeff. During the quarter we made significant progress towards the worldwide market introduction of our InTouch Sensors. We remain laser focused on ramping up the equipment capacity, production level qualification and data collection for ISO 9000 and 14000 certifications.

Our preferred pricing and capacity license model has been an exceptional vehicle to build our equipment capacity and bring the InTouch Sensors to market. We have benefited immensely from many years of operational and technical expertise, contributed by our preferred pricing capacity licensee, our PC OEM and our ecosystem partner, Intel, as well as our manufacturing partner, Kodak. We will continue to pursue licensing opportunities and focus on delivering the best price/performance solution in the touch sensor market segment.

Together with Kodak we are building out equipment capacity at our state-of-the-art manufacturing and testing facility at the Eastman Business Park. This facility bodes more than 100,000 square feet of manufacturing space. The build out of the printing and mastering floor of Kodak Eastman’s Business Park facility is complete and we are making good progress towards completion of the plating floor. As I previously stated, the business relationship with Kodak allows us to execute a vertically integrated manufacturing model. It also provides us access to world-class lab resources for the ink formulation, deconstructive analysis, processing, testing and metrology.

We continue to advance our production level processes qualification and data collection capability in order to achieve ISO 9000 and 14000 certification. We’ve installed semi-automated seat testers at both our Kodak Rochester facility and our Texas facility. These testers are designed for high mix, low volume applications. The testers give us more throughput and precision then we would see doing it by hand. We have designed and currently testing our automated roll-to-roll testers at the manufacturer.

Two roll-to-roll automatic testers have been built and are currently being calibrated in preparation for delivery. We expect to have the automatic roll-to-roll electronic tester installed at both manufacturing facilities by the end of the current quarter. In addition to the two testers we have placed orders for two more that would be delivered to the Rochester facility in Q1.

As part of the equipment capacity ramp, the four plating lines that were delivered to the Kodak Rochester facility during the third quarter are currently being installed and commission for our high-volume roll-to-roll manufacturing process. In terms of equipment capacity, as these become operational, we expect to achieve our equipment capacity milestone of 1.3 million square feet per month in the first quarter of 2014.

We will continue to build out capacity as needed throughout 2014. The current plan and complete build out of the Rochester facility would give us 15 plating lines. Our capacity model estimates that will give us over 3 million square feet a month.

Our sensor rebranding aligns with the ramp-up of equipment capacity to meet licensing agreement milestones and anticipated demand for InTouch Sensors to be used in a wide variety of devices. We believe the brand InTouch Sensors will become synonymous with quality, price and performance. We have further co-branded this new name as InTouch Sensors with the tag line Powered by Kodak. This reflects the important role Kodak is playing with this touch screen sensors introduction and manufacturing.

In collaboration with Kodak we are also exploring two additional manufacturing partners in Korea and China. We have begun discussions with several manufacturing companies in Asia that have expressed strong interest in setting up manufacturing capabilities for InTouch Sensors in their respective countries. We have discussed the entire process being under roof, including the front-end mastering, printing, plating, testing, and back-end integration with module assembly. The terms and conditions of any potential agreements will depend on the volume commitments, geography, strategic contribution of any other partners, all of which will impact the funding and exclusivity of the relationship.

As we expand, we plan to maintain a relatively small footprint. We believe this will create a tremendous amount of value for our shareholders, which we believe allows us to put the front-end into existing infrastructures to add significant value. As many of you saw this morning, we achieved another major milestone towards the successful global market introduction of our InTouch Sensors; we are first – with our first order from our PC OEM partner.

This is a strong validation of our technology and the price performance advantages that we offer to the expanding touch module market. InTouch Sensors offer the unique advantages of metal mesh sensors based on our additive roll-to-roll, flexible electronics process, as compared to the traditional subtractive ITO-based and subtractive-ITO replacement based touch sensor solutions. These advantages include high touch sensitivity, improved distinction, better durability and significantly higher conductivity, it scales and size to a greater number of form factors and supports faster sensing speeds.

We expect to ship an initial commercial run of InTouch Sensors in the fourth quarter of 2013. The multimillion dollar milestone payment UniPixel received under its preferred pricing capacity license agreement has helped to fund the build-out of InTouch Sensor production lines and allowed us to leverage our PC OEM’s world-class resources around supply chain management, operations, engineering and production core competencies.

UniPixel continues to benefit from its relationship with one of the GECO System partners in Intel, a leading designer and manufacturer of essential technologies; it certainly is the foundation for the world’s computing devices. This relationship allows access to the well established global infrastructure, supply chain management as well as their exceptional engineering and operational expertise. Aligning with world-class multi-national companies along with the price and performance curve of our performance engineered films has helped to drive this strong interest we are receiving from potential customers.

We have more than 20 active customer engagements. The potential customers’ touch applications include everything from smartphones to all-in-one computers. Several companies that have sampled our technology and manufacturing processes have demonstrated their high interest by asking for – request for quotes whereas others have signed MDA agreements with us, seven major companies have requested prototypes and these have been delivered. We have also collected two more purchase orders from companies outside the preferred price and capacity licenses. The orders are for 15-inch diagonal pro-cap solution and a 23-inch pro-cap solution. These are initial orders that can lead to full production in Q1 of 2014.

Based on interest in meetings with partners and potential customers as well as our first purchase orders, we continue to expect the start of production revenue in the current quarter and ramping up in the first quarter of 2014. Although our primary focus is on InTouch Sensors, our Diamond Guard Hard Coat resin has got much attention for its characteristics. As most of you know, Diamond Guard is a low cost alternative to glass on touch screen devices.

It is super hard rated 6h scratch resistant, making Diamond Guard hardly resistant to scratching, abrasion and shattering. This film is also very light and flexible with a glass equivalent gloss finish. The implementation of Diamond Guard as glass replacement is also less labor intensive, and unlike glass, it can be made available in large rolls, which can be die cut or laser cut to size.

The large roll format can save manufacturing cost by allowing the roll-to-roll printing of graphics or tied directly on the Diamond Guard film. And unlike glass this would not require pre or post-processing steps for inks to adhere.

These characteristics have attract this strong interest for Diamond Guard Hard Coat Resin in response to the customer interest our Diamond Guard Resin business model enable these customers to apply functional hard coats to flat services such as films as well as three dimensional applications like cell phone cases and closures et cetera, we have proceed to sell our Diamond Guard Hard Coat Resin for using three dimensional applications like molded cases, lenses as well as on films.

We have had a successful trial one with major phone manufacturer for coding Diamond Guard on their hardware. We are working with multiple downstream integrators and have established a technology transition team to help support the multiple coding processes under consideration for the Resin.

Part of the now 42 employees we have grown to over the year our chemist working out of our new lab facility to support the effort. We believe the introduction of Diamond Guard Resin business allows us to support many more applications than we could as just a hard coat film only supplier.

We also believe we can reach more customers with Diamond Guard technology and to do so more quickly and easily, we still believe that uniboss-touch-sensors will drive the adoption of Diamond Guard hard coat films and Resins, our Resin business is picking up and we expect our first sale in the first quarter of 2014.

As a developer of disruptive new technology like Diamond Guard, UniBoss and InTouch Sensors we continue to work to protect our innovations by strengthening our IP portfolio with new patent and patent applications during the quarter we expanded our IP portfolio with the new patents as of today we have now three patents issued with 95 patent application submitted as well as more being prepared for submissions that covered the performance engineered film segment.

We continue to receive strong interest in our InTouch sensors, we received a lot of interest and positive feedback from our partnership at industry conferences and the results of our sales and marketing efforts in the Far East. We look forward to participating in industry events and conferences such as Needham Growth Conference, international CES and Stifel’s Technology Internet Media Conference. That these conference event strong year we will provide further details in press releases and closing I would like to say how excited I am about Uni-Pixel’s future and shaping the touch screen market I am also tremendously proud of our employee as a management team and continue to execute and support the introduction of our InTouch Sensor and Diamond Guard product lines.

We certainly come a long way securing two preferred pricing capacity licenses with two world class global companies that supported our potential and capabilities with multi million dollar license payments, we’ve made an enormous amount of progress ramping our equipment capacity and building out as well as continuing to qualify our world class manufacturing capability with the help of Kodak.

Our operational platform in terms of Uni-Pixel employees has grown to 42 employees with the 40 plus Kodak employees supporting our efforts. Now with that I would like to open up the call for questions.

Question-and-Answer Session

Operator

Thank you we will now begin the question-and-answer session. (Operator Instructions) Your first question comes from the line of Cody Acree of Williams Financial. Please go ahead sir.

Cody Acree – Williams Financial

Thank you and congratulations on the order I guess – orders. Fleet on the order enhancements can you provide anymore color regarding the rollup of fleets, volume expectations or so even the time for products are that on the retail shelf and may be just clarify if you will shift the production revenue this quarter can you recognize production revenues this quarter is that actually you’re looking at in Q1.

Reed J. Killion

Certainly thank you Cody. As far as recognizing revenue we will recognize revenue when we shift the product as far as we invoice the product and at least our dark. As far as what we’re going to recognize as far as revenue, that’s confidential, we’re not going to discuss that until that’s completed. As far as the volume and the commitments, we’re not going to discuss those as either as they’re company confidential and you’ll be able to see that when we release our numbers.

Cody Acree – Williams Financial

Previously expect it to be able disclose through the PC partner is, you both accept to do or is that something…

Reed J. Killion

We expect to be able to do that in the future. They have a corporate policy that doesn’t necessarily allow them to do something until the product is released in on the market.

Cody Acree – Williams Financial

And you had initially talked about receiving a qualification to waver in your PC partnering in order to get this order. And now that you’re running production film through your testament foot length on site, on your sites on there. In fact was that waivers necessarily in the end?

Reed J. Killion

Yes, absolutely, we’re not fully – you’re not qualified until you go through the entire audit process and we’re still bringing in equipment. We’re still building out the data collection systems to be able support that. And so we don’t really get that completed, we’ll be able to pass the audit without a waiver.

Cody Acree – Williams Financial

And so you help me to understand what is left to be done differently – just by data collection or is there more equipment to the inside?

Reed J. Killion

There is more equipment to be installed and we’re building up a facility in New York as we speak.

Cody Acree – Williams Financial

So this is not a qualification but its qualification for facility that needs to – qualified prior to or separate from…

Reed J. Killion

Those can be qualified the printing facility would be out of New York and the [indiscernible] facility from a plating standpoint would be qualified as well.

Cody Acree – Williams Financial

And then as we look at 2014 I would say the initial orders – and that’s been there relatively small. But I just look at 2014 that’s linearity from that partner. And can you give us any sense on what we might be able to expect at least kind of quarterly impact or there piece that you expect the back end loaded, front end loaded?

Reed J. Killion

Obviously as we roll into 2014 there is some transition platforms that are targeted and there is new products that are going to be developed and delivered. So we’ll participate in the RFQ and we’ll go in that business, hopefully.

Cody Acree – Williams Financial

I guess you some things asking is, is there much of a seasonal component of what you’re doing, given the way that your customers are going to start rolling out products. Our if the amount of view can be involved regardless of the typical consumer…

Reed J. Killion

No that the groups that we’re talking to have transition platform so that’s as seasonal as some people would look at it. We’re starting from zero from the standpoint of ramp. So anything that we pick up is incremental and one of the things that we’ve looked at is to be able to transition in to existing platforms as well as win designs on new platforms as well.

Cody Acree – Williams Financial

Hopefully I think you have million recognize when you have 16 million to fully recognize and can you just help us on when [indiscernible] that could be recognized….

Reed J. Killion

And we expect to recognize hopefully in the fourth quarter. It depends on qualification of the equipment and as we move forward to that, we’ll have better visibility as to when we get that down.

Cody Acree – Williams Financial

Okay, the possibly all, the remaining 15, is that correct?

Reed J. Killion

Not necessarily the number, but how we will recognize the revenue.

Cody Acree – Williams Financial

I see, okay. And then lastly, the perception of the fee profitable season side, profit went down all the way from printing through [indiscernible] to make, it sounds the deep control of the quality to see the process, it sounds like the almost the former competitors being the module [indiscernible] and is that because some of the affection that may or may not be happening at the module to move up?

Reed J. Killion

Yes, when you look at total vertical integration coding, you look at shipping cost, you look at packaging cost, and if you can contain this process from the front-end all the way through the back-end obviously many counts. So it’s a way to ensure total vertical integration and then at margins at the end of the day.

Cody Acree – Williams Financial

Okay. Thank you.

Operator

(Operator instructions) Your next question comes from the line of Mike Malouf of Craig-Hallum. Please go ahead, sir.

Mike Malouf – Craig-Hallum Capital

Yes. Thank you guys for taking my question.

Reed J. Killion

Hi, Mike.

Mike Malouf – Craig-Hallum Capital

Hey, Reed. Reed, can you talk a little bit about pricing in the industry, we’ve been hearing a lot of chatter from some of the trade racks about some pretty significant competition coming in from China. And I’m just wondering if that $20 that you’ve quoted so many times in the past, if that’s going to come down a little bit when you look out into 2014 and then into 2015?

Reed J. Killion

Certainly, I’d be more than happy to comment on it. We expected that there would be some price pressure and a lot of these companies are seeing the price pressure today. We thinks that the – it’s a variable relative to your square foot cost as it relates to largest form factor, smaller form factor.

The larger form factor is still holding pretty good at the $20 square foot range and that is something that we certainly anticipate playing in. But as far as the overall market itself OGS, the capacity for OGS has come on line and the cost drivers associated was going to film based solutions over OGS and going not to a direct bond, but to an air gap solution has driven the cost down anywhere from 20% to 30% depending on what size variable you are looking at. So a lot of these companies are looking at red relative to their balance sheet.

We still feel extremely confident that we can meet expectations in pricing as move forward with this due to our cost model. And we still believe that we are the lower-cost solution in the industry, the low-cost provider I should say, manufacturer and we will price our sensors accordingly.

Mike Malouf – Craig-Hallum Capital

Okay, great. So pricing has come down, but you will be able to move your pricing down to sort of price that pressure?

Reed J. Killion

Yes. I think with the infrastructures that you’re looking at for OGS and some of these other subtracted processes with photo lift at the front end. We’ve probably got a 10 to one advantage on infrastructure burden over those companies. So you’re not going to see people building a lot of infrastructure with the fact that there’s obviously infrastructure available that has been built down already. So if you’re looking at putting a new front-end in, a new facility in, our technology plays very well.

Mike Malouf – Craig-Hallum Capital

Right. And now that you have the purchase order, will you be basically turning on your lines right now with that purchase order or is there something that you need to do before you get that Cody was talking about with regards to getting this some of the ISO-9,000, ISO-14,000, you have to get that in place before you start turning these on and manufacturing product?

Reed J. Killion

No, the complete audit, we won’t have to finish now before we start manufacturing the product. But what we will have to do is to make sure that we’re shipping 100% tested product and we’re working very closely with the back-end supply chain to ensure that we do that testing and be able to push these products through.

Mike Malouf – Craig-Hallum Capital

So now that you have the temporary testing in place, is that enough to get you the 100% test or do you have to add…

Reed J. Killion

We can do with what we have in place and we expect to be able to do that. Obviously getting the roll testers and we’ll dictate how quickly we ramp the lines up.

Mike Malouf – Craig-Hallum Capital

So is it safe to say that you’re starting the production right now?

Reed J. Killion

The design is ongoing and yes, we’re going to start running products here very soon.

Mike Malouf – Craig-Hallum Capital

Great, thanks.

Reed J. Killion

So that we finalized the design.

Mike Malouf – Craig-Hallum Capital

That has to be finalized, okay. And then I know you don’t specifically talk about yields, but given the testing that you’ve done, are you happy with the yields right now?

Reed J. Killion

What I’m going to discuss yield, we’re going to focus on continuous process improvement. I’ll be happy when we’re close to 100%.

Mike Malouf – Craig-Hallum Capital

Okay. And then on the Eastman Kodak f revenue share, can you give us any – are you ready to or can you give us any kind of sense of looking into 2014, sort of using that $20 as an example to sell whether 20, 18 or 16. On that per unit basis, how does it flow from $20 from PC OEM, how does that $20 flow.

Reed J. Killion

No, you’ve got cost associated with the design, the manufacturing and once you get through all the costs that you’ve got a revenue share.

Mike Malouf – Craig-Hallum Capital

Revenue share is what you talked about let’s say equitable split if this is correct.

Reed J. Killion

That’s correct sir.

Mike Malouf – Craig-Hallum Capital

That’s what I have. Thank you so much.

Reed J. Killion

Thank you, Mike.

Operator

So our next question comes from the line of Jon Hickman of Ladenburg. Please go ahead, sir.

Jon R. Hickman – Ladenburg Thalmann Securities

Hi, Reed. Congratulations on the quarter. Could you discuss, I mean you kind of ramped through these two additional orders pretty quickly and they’re away from your preferred pricing partnership. Can you elaborate on those a little bit? It seems like kind of a big deal?

Reed J. Killion

Yes. I mean it is great for us. I think most people were in interested in the fact that we would get a release from our licensees. There is a lot of customers that are looking at this technology and we have samples and products and the response has been very good. So these are outside of the extremely high volume run rate, but they are for different segments and we are excited to have these products that we are going to be rolling out with them.

Jon R. Hickman – Ladenburg Thalmann Securities

Still not as high volume as if like a laptop?

Reed J. Killion

I mean, some of these in the 100,000 to 150,000 units a year type thing. It’s not a 150,000 units a month.

Jon R. Hickman – Ladenburg Thalmann Securities

Okay. So this is a device that’s not, doesn’t have an attached keyboard?

Reed J. Killion

Well, the 23 inches is an all-in-one and the 15 inches, it looks like it’s going to be in a monitor.

Jon R. Hickman – Ladenburg Thalmann Securities

Okay. And like can you give us an idea of how soon you can – you said in the first quarter of 2014 that you will deliver it?

Reed J. Killion

We could potentially deliver some in Q4, and again, it’s not going to be a high volume, but it will start to ramp.

Jon R. Hickman – Ladenburg Thalmann Securities

Okay. So could you just also – as far as metal mesh go and it’s positioning in the market in total, do you still believe that that’s going to be the kind of replacement for IPO as we go into next year and beyond?

Reed J. Killion

Yeah, I will go into a little bit more detail. You basically have got six replacement candidates for ITO. Metal mesh, we think is going to be the winner, that’s copper-based metal mesh. You’ve got silver nanowires, conductive polymers, IPO ink, graphing, carbon nanotubes, graphing that are out there, carbon nanotubes are better out for ever, but not necessarily getting the conductivity that they need. Silver nanowires, anytime you are dealing with silver, you are looking at having to deal with electro migration issues and that’s challenging, but there is a lot of smart people and large companies that are focused on silver and we think that there is certainly a spot for silver, but at the end of the day, we feel really based on price performance curve and we think metal mesh wins, carbon metal mesh.

Jon R. Hickman – Ladenburg Thalmann Securities

Okay. Thank you, guys. That’s it for me.

Reed J. Killion

Thank you. I appreciate it.

Operator

Your next question comes from the line of Robert Merrill of [indiscernible]. Please go ahead sir.

Unidentified Analyst

Hey, Reed. Thanks for taking my question.

Reed J. Killion

Hey, Robert.

Unidentified Analyst

Just two quick ones I guess. First, how active has Intel been with you as an inconsistent partner and how instrumental has it been to earning new customers?

Reed J. Killion

Well, Intel has a significant effort in the touch space and supporting our ecosystem. We’ve been a player in that and we have enjoyed the relationship. We think that we have got a solution that will benefit the Intel ecosystem and they are supporting not only us, but a lot of different players in this marketplace and we are just to be happy to be one of them.

Unidentified Analyst

Okay, great. Synaptics also has continued to have positive [indiscernible] UniPixel can you discuss that relationship where you might be working together your positioning with other controller suppliers as well and in both domestic and those in Asia?

Reed J. Killion

We think Synaptics they are the number one controller company in the world right now I believe. They are doing a great job in leading needs and requirements from everything from smartphones to larger form factors. We enjoyed working with them and hope that the future brings a lot more opportunities to do so. We are controller agnostic. We obviously working with intrigue and we does some prototypes with the Atmel chip and we got Elan and EETI and a host of others are looking to work with us, so we feel pretty confident that we will able to support multiple players, but there is a limited amount of resources, so the more resources we get from the groups the controller manufactures that work with us the easier it is us for us to adopt those platforms.

Unidentified Analyst

Okay great, I think that answers my questions. I appreciate it guys.

Reed J. Killion

Thank you.

Operator

(Operator Instructions) Your next question comes from the line of Gavin Richey of Rockwood Investment Partners. Please go ahead.

Gavin Richey – Rockwood Investment Partners

I had couple of quick question, early you talked about a 15-inhc monitor, on a laptop or is that – assuming that it’s monitor like desktop monitor?

Reed J. Killion

It’s a stand alone application I don’t want to get into too much more detailed but it’s not part of the laptop.

Gavin Richey – Rockwood Investment Partners

Okay, and then on the China and Korea, I mentioned in press release is there any timing or CapEx requirements for that?

Reed J. Killion

We are in discussions at this stage based on business circumstances and how we potentially could navigate and negotiate a deal structure. I’m think it’s at least go through Q4 and to Q1, yes we.

Gavin Richey – Rockwood Investment Partners

Will make a decision?

Reed J. Killion

No right now we don’t want – right now was are just exploring it.

Gavin Richey – Rockwood Investment Partners

No idea how much cash it would take thought?

Reed J. Killion

Yeah, to put in an infracture depending on the what the backend infrastructure if you are just looking at our infrastructure the capital equipment cost is such are about 10 of what a subtractive process run infrastructure would look like, so instead of $300 million for an OGS facility you are looking it above $30 million

Gavin Richey – Rockwood Investment Partners

Okay, then I have little trouble here incurred earlier? Was there any timing on when a end product PO would be on the shelf?

Reed J. Killion

That’s up to the customer and it’s not released yet so we’re not going to comment on it.

Gavin Richey – Rockwood Investment Partners

Thank you

Reed J. Killion

Thank you.

Operator

Your next question comes from the line of Steve Stringer of Target Capital. Please go ahead.

Tony P. Stringer –Target Capital

Clearly the press release that you released today and the commentary that you’ve given on this call are uniformly positive as far as the outlook for the companies business is concerned. Nevertheless the stock is currently trading at $16.35, up 3.09% on the day and its felling down in aftermarket on while it is not your job to monitor at the stock market.

There is a clear disconnect between the market valuation of this company and what we believe to be the reality the earnings estimates out there $3 plus for next year you just received a commercial order from what everyone believes to be Dell, you have received millions of dollar from Intel. And there is a serious disconnect and I am wondering what you, if you have a strategy to do anything about that, what can we do to expect that and investment that we have we own over 200,000 shares of this company. We would like to see a fair valuation. Is there any strategy that you have in mind to try to achieve that?

Reed J. Killion

Good. Focus on what we’re doing and do it well, continue to build out customer relationships taking new purchase orders and deliver product.

Tony P. Stringer –Target Capital

Well I understand that and that’s a very sound strategy however we’re not dealing with a market environment where we have ethical people on the short side not all of them but many of them they will put out any kind of rumor that suits their interest and it hurts us. And I just wonder I mean I placed I call us to your investor relations people, they don’t call me back, I wonder what the quality of the investor relations operation that you have this?

Reed J. Killion

We’ve had a good relationship with them so far and there is a tremendous amount of short interest in the start today and they’re going to do everything that they can to try to pull it down, we’re just going to continue to execute. And as we continue to execute and continue to not, they’re running out of stories to tell. And the only thing that we can do is work with we’re bringing up a new website we’re going to do better on the messaging side of it. I think getting these order shift in the fourth quarter and continuing to build the customer base and the backlog we’re close to building out the New York facility I think potentially in Analyst Day out there where they can walk through what is absolutely a world class facility and see what we’re doing will help support the company as we move forward.

Tony P. Stringer –Target Capital

I hope you’re right. I would appreciate some greater transparency from the company and I would appreciate some greater professionalism by the investor relations company that we have retained.

Reed J. Killion

I appreciate your concern and thank you for your inputs.

Operator

Gentlemen we have time for one last question. Question comes from the line of [indiscernible]. Please go ahead.

Unidentified Analyst

Hey, Reed

Reed J. Killion

Hello Mark how are you doing?

Unidentified Analyst

Good.

Reed J. Killion

Good, thank you.

Unidentified Analyst

Little bit of a similar line of question into the close today, we saw another online bar coast basically cleaning up the yields in the process for anywhere from 30% to 50%, which obviously will be well below what’s needed to kind of be starting the operations that you’re starting and to have anything in terms of our high capacity production going forward. So I know it’s not your policy to comment on yield specifically, but I was hoping to just get a little bit of color from you in terms of ballpark area where yields are and within that there is 30% to 50% is realistic, the realistic assumption thanks.

Reed J. Killion

We’re not going to discuss yields, but I will say that is somebody believes that the back end is 30% that’s not true. So wherever that came from that the lamination and the bonding to our technology as is good as ITL films are better. The film itself is more rugged, more realizable and we have not had any lamination issues to date with our back end support. So I think that was probably taken out of context.

I said one of the reasons for testing is to make sure that we’re in control of our own destiny and when start shipping these to the downstream converters, if we don’t know exactly what we are shipping and have it tested in March and put in the data files where we can go back and track a sensor, an individual sensor from the time it was printed it puts us in a situation where we have to rely on the downstream conversion partners for that information and that’s not the way you want to go to market. So the context was that, I said – I don’t know if was at the Oppenheimer Conference. I was asked the question why do you need the testers, and I said, well, if there is a yield problem and run into 30% or 50% yield and you think you’re shipping 100% tested product you need to find out where that is happening.

Unidentified Analyst

Right. So I think the context in which you said it was some hypothetical of just not having good yield and I think it’s important to clarify that when you said you’re shipping 30% or 50% yield, but that wasn’t indicative of what you saw your current yields were on the process. That just a random number that was throw out, less than 100%.

Reed J. Killion

Yes, absolutely. And basically you stated that it was – I haven’t read the piece, but somebody said that it stated that the backend module yields were 30% and we are not having with the issue with backend guys.

Unidentified Analyst

And then just one quick question. I know that you had indicated before that over the last month or so you guys had been running a couple lines a week in order to stockpile product in the event that you would get a purchase order. Now that you do have that purchase order, are you going to start dedicating more alignments to that or you are still going to stay at the same pace and leave the remaining lines more for testing and getting those yields up.

Reed J. Killion

No. The throughput on the line, just pretty significant. So we can continue down the path that we’re on relative to complete qualification and that’s where our focus is.

Unidentified Analyst

Okay. Great. Thank you.

Reed J. Killion

Thank you. I appreciate it.

Operator

Gentlemen, we have time for one last question. The question comes from line of Mr. Nathan Jones of Emerald Advisors. Please go ahead, sir.

Nathan R. Jones – Emerald Advisors

Hi, Reed. Congrats on the orders today.

Reed J. Killion

Thank you, Nathan. I appreciate it.

Nathan R. Jones – Emerald Advisors

So I know said that 15-inch and 23-inch, it sounds like those orders maybe of the lower volume variety. Is it safe to assume – I know you have not given specific guidance, but is it safe to assume the design that you’re designed into with your PC partner are higher volume?

Reed J. Killion

The design that we are looking at could be – it’s substantially higher. Yes.

Nathan R. Jones – Emerald Advisors

Okay. Thank you. That’s all.

Reed J. Killion

Thank you.

Operator

I would now turn conference back over to Mr. Killion. Killion, please proceed.

Reed J. Killion

Thank you, Matt. I’d like to thank the continued support of our staff, partners, shareholders and we look forward to speaking you on the next call.

Operator

Before we conclude today’s call I will take a moment to read the Company’s Safe Harbor statement. All statements made by management during this call that are not based on historical fact are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and our provision to the Section 27A, the Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934 as amended.

Such forward-looking statements include but are not limited to those made by Mr. Killion regarding anticipated demand of InTouch Sensors, UniBoss, the Diamond Guard base products and solutions, expectations of revenue, ramp with product and solutions, equipment capacity and volume production with UniBoss based products and solutions, expectations with the joint sales and marketing efforts and anticipated product launches.

Our management has based any forward-looking statements made during this call on its current expectations, the information on which such expectations were based may change.

These forward-looking statements rely on a number of assumptions concerning future events and are subject to a number or risks uncertainties and other factors many of which are outside of the company’s control that could cause actual results to materially differ from such statements. Such risks and uncertainties and other factors include but are not necessarily limited to those set forth under Item 1A Risk Factors in the company’s annual report on Form 10-K for the year ended December 31, 2012.

We operate in a highly competitive and rapidly changing environment, thus new or unforeseen risks may arise. Accordingly, you should not place any reliance on forward-looking statements as a prediction of actual results. The company disclaims any intention to and undertake no obligation to update, or revise any forward-looking statements.

You are also urged to carefully review and consider the other various disclosures in the company's Annual Report on Form 10-K for the year ended December 31, 2012 as well as other public filings with the SEC to such date.

Now again I'd like to remind everyone this call will be available for replay through December 07, starting later this evening via the link provided in today’s press release as well as available on the Investor Relations section of the company's website.

Thank you ladies and gentlemen for joining for today’s presentation. You may now disconnect.

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UniPixel (UNXL): Q3 EPS of -$0.44 misses by $0.22. No revenue, as company prepares to start commercial production of InTouch sensors. Cash/equivalents totaled $46.6M at end of Q3. Shares unchanged AH. CC at 4:30PM ET. (PR)