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  • Unipixel's Questionnable Accounting Q1 2013 6 comments
    Jul 8, 2013 4:54 PM | about stocks: UNXL

    Unipixel's Questionnable Accounting Q1 2013

    We have recently read several articles that say they will soon reveal problems with Unipixel's accounting. We decided to carefully analyze the q1 2013 financial statements and indeed found a number of very alarming signs that demonstrate that the results were contrived to show earnings of almost $1,000,000 as well as an increase of cash on the cash flow statement. This likely was a critical prerequisite to Unixpixel's closing a $42,000,000 share offering at that time. The following points on the q1 statements are the most striking.

    Here is how it appears to have been done:

    Capitalize instead of Expensing Salaries thus Inflating the P&L

    1) R&D expenses for the first quarter dropped by almost $2.7 million dollars on annualized basis. Through out 2012 R&D expenses were going up every quarter but suddenly they inexplicably dropped in Q1 2013. On the cash flow investing activities CAPEX went up to $6,400,000 which was an increase of $2,300,000 from the previous quarter. However of this $2,300,000 increase $1,900,000 of this is "work in progress" instead of the normal purchase of property and equipment. We suspect that some of this "work in progress" if not all of it is capitalizing the R&D salaries and possibly other salaries instead of expensing them thereby inflating the P&L results.

    Mini Share offering in order to show net positive change in Cash

    2) During Q1 UNXL sells $2,500.000 worth of shares even though they were in the midst of a $42,000,000 share offering. This appears to the company give the company an illusion of positive cash-flow in addition to a profitable P&L.

    $5,000,000 "non recurring engineering revenue" with only $3,000 prorated as a cost of goods sold

    3) During the quarter the company records $5,000,000 non recurring engineering revenue with no cost of good sold against it. Are we to assume that Unipixel's margins are almost 100% and that they pay their engineers no salaries? Or do companies simply hand Unipixel a gift for $5,000,000 with no expectation of anything in return. The next $5,000,000 deal that UNXL reports is suddenly deemed to be deferred revenue.

    In our opinion the Q1 2013 statements appear to be nothing less then a massive fraud that were contrived to give the appearance of a profitable entity with positive cash flow and a nice even $1,000,000 profit per quarter.

    Disclosure: I have no positions in any stocks mentioned, but may initiate a short position in UNXL over the next 72 hours.

    Themes: Technology, Accounting, $UNXL Stocks: UNXL
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Comments (6)
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  • Chris Hofmann
    , contributor
    Comments (756) | Send Message
     
    I am not an accountant and therefore will not speak to points 1 and 2.

     

    However, your point 3 is way off and shows that you have done little research in the company itself.

     

    The $5M received is (was) a milestone payment previously discussed as part of their partnership with the "PC Manufacturer". The partner is expected to pay them multiple $5M payments to help facilitate the build out of capacity. This is why the margins are 100%. Uni-Pixel didn't do anything specific for this payment (no goods were sold).

     

    The second $5M was previously discussed as being deferred until Q4 when an additional $5-10M is expected to be received. Both of these payments are from the "Ecosystem Partner".
    9 Jul 2013, 05:04 PM Reply Like
  • kcchris
    , contributor
    Comments (60) | Send Message
     
    Number 1 makes no sense at all. What are you looking at. 2013 Q1 R&D expense was $1.9 mil compared to $1.2 million in 2012. An increase of $700,000. the full year R&D expense for 2102 was $5.1 million. That is $1.3 mill a qtr on average. So no R&D wasn't decreased.

     

    Number 2 is worse than number 1. The proceeds you are discussing is from the exercize of options and warrants. If insiders exercise their options the company gets the proceeds of $2.5 million it isn't anything the company has done. So your point of trying to make it appear they have cash flow is not accurate.

     

    Number 3 is a partnership payment. It is perfectly legal and approriate to take this as revenue in the qtr.

     

    Not one of these is improper in any way. If Seeking Alpha allows you to publish this they are in no way a reputable organization.
    9 Jul 2013, 06:26 PM Reply Like
  • JBird61
    , contributor
    Comments (285) | Send Message
     
    This instablog appears to be an completely unprofessional and speculative attempt to attack Uni-Pixel accounting practices.

     

    The author(s) should present his/her/their accounting credentials to do forensic accounting. It is obvious, as noted in the comments above, that the author(s) did no meaningful research into Uni-Pixel business and resulted in gross inaccuracies.

     

    I use the word speculative to describe this document because, along with the lack of research, virtually every point is made as:
    "We suspect that .."
    "This appears to .."
    "Are we to assume that .."
    "In our opinion .."
    Every point is a carefully hedged attack statement to imply the worst, while not actually saying anything of substance for which the author(s) can be held accountable.
    10 Jul 2013, 09:13 AM Reply Like
  • MarketSite11
    , contributor
    Comments (32) | Send Message
     
    Concerning your comments of R&D, I am not sure where you got your figures from. I got mine from the SEC 10Q and 10K.

     

    In them you can see that R&D increased by more than $800,000 1st Quarter 2013 compared to 1st Quarter 2012. The average R&D expense per quarter for all of 2012 was less than $1.3 million compared to Q1 2013 R&D expense of $1.9 million.

     

    Further, cash flow from investing activities showed a decrease of $2.4 million, not an increase of $6.4 million. Also, you refer to "work in progress" which is a term that refers to inventory, not property or equipment. In UNXLs case, there is no inventory as can be easily seen on the balance sheet. The reason why it has no inventory is because as of March 31, no products were manufactured for sale to a customer.

     

    As to your comment that R&D salaries are being capitalized instead of being expensed, you might want to give thought as to why the officers of the company and their certified public accountants would want to put themselves in legal jeopardy by including this statement in the SEC 10Q and 10K: "Research and development costs are expensed as incurred and include salaries and benefits, costs paid to third-party contractors for research, development and manufacturing of materials and devices, and a portion of facilities cost."

     

    You further said, "During the quarter the company records $5,000,000 non recurring engineering revenue with no cost of good sold against it"

     

    Cost of goods sold is only recognized as an expense when some tangible product is actually shipped and sold. The $5 million NRE was a milestone payment. In other words it was money received for achieving a goal, not for shipping a completed product.

     

    You concluded by saying, "In our opinion the Q1 2013 statements appear to be nothing less then a massive fraud that were contrived to give the appearance of a profitable entity with positive cash flow and a nice even $1,000,000 profit per quarter."

     

    Only certified public accountants have the legal authority to opine on a company's financial statements, and your opinion is starkly at odds with the expert conclusions reached by the certified public accountants for the company, PMB Helin Donovan, LLP of Houston, TX who said in part concerning the 2012 financial results, "We have audited the accompanying consolidated balance sheets of Uni-Pixel, Inc……In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Uni-Pixel, Inc……. and the results of operations and its cash flows….."

     

    And in order to provide continuity from the audited statements of 2012 to the March 31, 2013 the 10Q for Unipixel said, "There have been no significant changes to our critical accounting policies and estimates during the three months ended March 31, 2013, as compared to the critical accounting policies and estimates disclosed “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2012, which was filed with the SEC on February 26, 2013."
    10 Jul 2013, 12:28 PM Reply Like
  • Brian Coleman
    , contributor
    Comments (62) | Send Message
     
    You also spelled "questionable" wrong, one 'n' not two. You're not very good at this financial analysis/blogging thing are you?
    11 Jul 2013, 03:05 PM Reply Like
  • chkecheze
    , contributor
    Comments (194) | Send Message
     
    My 10 yr old nephew could have written a better article. Thanks for the laugh at the expense of your pathetic attempt to continue to smear UNXL. Look at UNXL's price rise since this piece of trash was written.
    15 Jul 2013, 07:42 AM Reply Like
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