What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-11-14 compared with 2022-08-22 · 67 added, 76 removed, 190 unchanged (43% of the section changed)

47 unchanged sentences

Since our inception in 2009, we have devoted substantial resources to the research and development of materials and production processes for the manufacture of organic thin film transistors and the enhancement of our intellectual property.

Our loss before income taxes was $3.7 million and $2.4 million for the three months ended June 30, 2022 and 2021, respectively and $6.5 million and $11.8 million for the six months ended June 30, 2022 and 2021, respectively.

As of June 30, 2022, our accumulated deficit was $81.5 million.

Our loss before income taxes was $4.0 million and $2.7 million for the three months ended September 30, 2022 and 2021, respectively and $10.4 million and $14.4 million for the nine months ended September 30, 2022 and 2021, respectively.

As of September 30, 2022, our accumulated deficit was $85.5 million.

Substantially all our operating losses have resulted from expenses incurred in connection with research and development activities and from general and administrative costs associated with our operations.

Recent Developments

Octopus Share Purchase

On January 27, 2022, we sold an aggregate of 1,000,000 shares of our common stock at a purchase price of $2.00 per share to Octopus Titan VCT plc and Octopus Investments Nominees Limited in accordance with the Letter Agreement, dated as of February 23, 2021, between the Company and Octopus Titan VCT plc and certain related parties.

Joint Development Agreements

In February 2022, we entered into a joint development agreement with Nanosys Inc., a leader in developing and delivering quantum dot and micro-LED technology.

Under this agreement the two parties will work together on a new generation of low-cost solution printed micro-LED and quantum dot materials for advanced displays.

In April 2022, we entered into a joint development agreement with a leading LED manufacturer to develop prototype mini-LED and micro-LED displays driven by OTFTs made from our TRUFLEX® inks.

Key Factors Affecting Our Performance

7 unchanged sentences

Many companies have made significant investments in product development and production equipment.

To remain competitive, market participants must continuously increase product performance, reduce costs and develop improved ways to serve their customers.

To remain competitive, market participants must continuously

increase product performance, reduce costs and develop improved ways to serve their customers.

To address these competitive pressures, we have invested in research and development activities to support new product development, improve ease of use, lower product costs and deliver higher levels of performance to differentiate our products in the market.

15 unchanged sentences

The following tables set forth our results of operations for the periods presented.

The information in the tables below should be read in conjunction with our unaudited interim condensed consolidated financial statements and

related notes included in Part I, Item 1 of this Form 10-Q.

The information in the tables below should be read in conjunction with our unaudited interim condensed consolidated financial statements and related notes included in Part I, Item 1 of this Form 10-Q.

The period-to-period comparisons of financial results in the tables below are not necessarily indicative of future results.

The following information has been adjusted to reflect the restatement of our financial statements as described under the heading Restatement of Previously Issued Financial Statements in Note 1 Business and Basis of Preparation in the Notes to Financial Statements of this Quarterly Report.

Comparison of Loss from Operations for the three month-periods ended June 30, 2022 and 2021

Our results of operations for the three month-periods ended June 30, 2022 and 2021 are as follows:

Three Months Ended June 30,

Comparison of Loss from Operations for the three month-periods ended September 30, 2022 and 2021

Our results of operations for the three month-periods ended September 30, 2022 and 2021 are as follows:

Three Months Ended September 30,

Increase (Decrease)

8 unchanged sentences

Revenue and Cost of revenue

Revenues were $4 thousand in the three months ended June 30, 2022, compared with none in the same period of 2021.

Revenue in the first quarter of 2022 resulted from the sale of TRUFLEX® materials.

Cost of revenue was $2 thousand in the three months ended June 30, 2022, compared with none in the same period of 2021.

Cost of revenue resulted from the sale of the materials described above.

Revenues were $26 thousand in the three months ended September 30, 2022, compared with none in the same period of 2021.

Revenue in the third quarter of 2022 resulted from the sale of OTFT backplanes and TRUFLEX® materials for customer assessment and development purposes.

Cost of revenue was $26 thousand in the three months ended September 30, 2022, compared with none in the same period of 2021.

Cost of revenue resulted from the sale of the OTFT backplanes and materials described above.

Other operating income

Three Months Ended June 30,

Three Months Ended September 30,

Increase (Decrease)

Research & development tax credit

Research & development grants

Sale of fixed assets

Total other operating income

Other Operating Income was $294 thousand in the three months ended June 30, 2022, compared to $256 thousand in the same period of 2021, an increase of $38 thousand, or 15%.

The increase resulted primarily from an increase in research and development tax credits resulting from a higher level of eligible expenditure compared to the comparable period of 202

Other operating income was $277 thousand in the three months ended September 30, 2022, compared to $447 thousand in the same period of 2021, a decrease of $170 thousand, or 38%.

The decrease resulted primarily from a decrease in research and development tax credits resulting from a lower level of eligible expenditure and the impact of adverse exchange rate movements compared to the comparable period of 2021.

Operating expenses

Three Months Ended June 30,

Three Months Ended September 30,

Increase (Decrease)

3 unchanged sentences

Total operating expenses

Operating expenses of $2.7 million for the three months ended June 30, 2022 are consistent with those for the equivalent period of 2021.

Research and development expense, which represents 50% and 50% of our total operating expenses for the three months ended June 30, 2022 and 2021, respectively, remained at $1.3 million for the quarter as we further developed core materials and fabricated demonstrator devices to promote our technology to prospective customers and partners.

Selling, general and administrative expense, which represents 50% and 50% of our total operating expenses for the three months ended June 30, 2022 and 2021, respectively, remained at $1.4 million for the quarter.

Operating expenses of $2.7 million for the three months ended September 30, 2022 are consistent with those for the equivalent period of 2021.

Research and development expense, which represents 49% and 50% of our total operating expenses for the three months ended September 30, 2022 and 2021, respectively, decreased by $0.1 million compared to the comparable period of 2021 to $1.3 million due to the impact of movements in exchange rates offsetting $0.2 million higher expenditure as we further developed core materials and fabricated demonstrator devices to promote our technology to prospective customers and partners.

Selling, general and administrative expense, which represents 51% and 50% of our total operating expenses for the three months ended September 30, 2022 and 2021, respectively, remained at $1.4 million for the quarter as increased expenditure of $0.2 million was offset by the impact of movements in exchange rates.

Non-operating (expense)/income

Three Months Ended June 30,

Three Months Ended September 30,

Increase (Decrease)

7 unchanged sentences

Income tax expense

Non-operating expenses for the three months ended June 30, 2022 increased $1.3 million, or 2,275%, to $1.3 million, compared to income of $59 thousand for the three months ended June 30, 2021, as a result of higher losses on foreign currency transactions due to fluctuations in U.S.

pound value arising from transactions denominated in foreign currencies and the translation of foreign currency denominated balances on intra-group loans.

Loss before income taxes was $3.7 million for the three months ended June 30, 2022, an increase of $1.3 million, or 54%, compared to $2.4 million for the three months ended June 30, 2021.

The increase in loss before income taxes was attributable to the higher non-operating expenses as described in the preceding paragraphs.

Comparison of Loss from Operations for the six month-periods ended June 30, 2022 and 2021

Our results of operations for the six month-periods ended June 30, 2022 and 2021 are as follows:

Six Months Ended

Non-operating expenses for the three months ended September 30, 2022 increased $1.1 million, or 288%, to $1.5 million, compared to $0.4 million for the three months ended September 30, 2021, as a result of higher losses on foreign currency transactions due to fluctuations in U.S.

pound value arising from the translation of foreign currency denominated balances on intra-group loans and other intra-group balances.

Loss before income taxes was $4.0 million for the three months ended September 30, 2022, an increase of $1.3 million, or 48%, compared to $2.7 million for the three months ended September 30, 2021.

The increase in loss before income taxes was attributable to the $0.2 million lower other operating income and the $1.1 million higher non-operating expenses as described in the preceding paragraphs.

Comparison of Loss from Operations for the nine month-periods ended September 30, 2022 and 2021

Our results of operations for the nine month-periods ended September 30, 2022 and 2021 are as follows:

Nine Months Ended September 30,

Increase (Decrease)

7 unchanged sentences

Revenue and Cost of revenue

Revenues were $34 thousand in the six months ended June 30, 2022, compared with none in the same period of 2021.

Revenue in the first quarter of 2022 resulted from sales of TRUFLEX® materials.

Cost of revenue was $25 thousand in the six months ended June 30, 2022, compared with none in the same period of 2021.

Cost of revenue resulted from the sale of the materials described above.

Revenues were $60 thousand in the nine months ended September 30, 2022, compared with none in the same period of 2021.

Revenue in the first three quarters of 2022 resulted from sales of OTFT backplanes and TRUFLEX® materials for customer assessment and development purposes.

Cost of revenue was $50 thousand in the nine months ended September 30, 2022, compared with none in the same period of 2021.

Cost of revenue resulted from the sale of the OTFT backplanes and materials described above.

Other operating income

Six Months Ended June 30,

Nine Months Ended September 30,

Increase (Decrease)

1 unchanged sentence

Research & development grants

Sale of fixed assets

Total other operating income

Other Operating Income was $578 thousand in the six months ended June 30, 2022, compared to $688 thousand in the same period of 2021, a decrease of $110 thousand, or 16%.

The decrease resulted primarily from the absence of research and development grants in the first three months of 2022, partially offset by an increase in research and development tax credits.

In the first quarter of 2021, we received $179 thousand in research and development funding for our work on the “SmartLight” project that successfully demonstrated OTFT mini-LED backlights for displays with improved light uniformity and lower defects.

The increase in research and development tax credits in the two quarters of 2022 resulted from a higher level of eligible expenditure compared to the comparable period of 2021.

Other operating income was $855 thousand in the nine months ended September 30, 2022, compared to $1,135 thousand in the same period of 2021, a decrease of $280 thousand, or 25%.

The decrease resulted primarily from the absence of research and development grants in the first nine months of 2022, and the adverse impact of exchange rate movements on research and development tax credits recognized compared to the prior period.

In the first three quarters of 2021, we received $181 thousand in research and development funding for our work on the “SmartLight” project that successfully demonstrated OTFT mini-LED backlights for displays with improved light uniformity and lower defects.

Operating expenses

Six Months Ended June 30,

Nine Months Ended September 30,

Increase (Decrease)

3 unchanged sentences

Total operating expenses

Operating expenses decreased $6.6 million, or 55%, to $5.4 million for the six months ended June 30, 2022, compared to $12.0 million for the comparable period of 2021.

Research and development expense, which represents 52% and 45% of our total operating expenses for the six months ended June 30, 2022 and 2021, respectively, decreased by $2.6 million to $2.8 million for the period, primarily due to a $2.9 million decrease in stock compensation expense, partially offset by a $0.3 million increase in expenses incurred in further developing core materials and in fabricating demonstrator devices to promote our technology to prospective customers and partners.

Selling, general and administrative expense, which represents 48% and 44% of our total operating expenses for the six months ended June 30, 2022 and 2021, respectively decreased by $2.7 million to $2.6 million for the period.

This decrease was mainly due to a $3.0 million decrease in stock compensation expense offset by $0.3 million additional expense from the additional legal, accounting and insurance expenses of operating as a public company and from increased marketing and related expenses promoting our products.

Transaction costs of $1.3 million associated with the Exchange were incurred in the six-month period ended June 30, 2021.

Operating expenses decreased $6.6 million, or 45%, to $8.2 million for the nine months ended September 30, 2022, compared to $14.7 million for the comparable period of 2021.

Research and development expense, which represents 51% and 46% of our total operating expenses for the nine months ended September 30, 2022 and 2021, respectively, decreased by $2.6 million to $4.2 million for the period, primarily due to a $2.7 million decrease in stock compensation expense, a $0.4 million reduction from the effect of exchange rate movement compared to the prior year, partially offset by a $0.5 million increase in expenses incurred in further developing core materials and in fabricating demonstrator devices to promote our technology to prospective customers and partners.

Selling, general and administrative expense, which represents 49% and 45% of our total operating expenses for the nine months ended September 30, 2022 and 2021, respectively decreased by $2.7 million to $4.0 million for the period.

This decrease was mainly due to a $3.0 million decrease in stock compensation expense, a $0.2 million reduction from the effect of exchange rate movements compared to the prior period, offset by $0.5 million additional expense from the additional legal, accounting and insurance expenses of operating as a public company and from increased marketing and related expenses promoting our products.

Transaction costs of $1.3 million associated with the Exchange were incurred in the nine-month period ended September 30, 2021.

The Exchange was consummated during the first quarter of 2021 and no significant additional Exchange-related expenses were recorded thereafter.

Non-operating (expense)/income

Six Months Ended

Nine Months Ended September 30,

Increase (Decrease)

7 unchanged sentences

Income tax expense

Non-operating expenses for the six months ended June 30, 2022 increased by $1.2 million, or 282%, to $1.6 million, compared to $429 thousand for the six months ended June 30, 2021, as a result of higher losses on foreign currency transactions due to fluctuations in U.S.

Non-operating expenses for the nine months ended September 30, 2022 increased by $2.3 million, or 284%, to $3.1 million, compared to $815 thousand for the nine months ended September 30, 2021, as a result of higher losses on foreign currency transactions due to fluctuations in U.S.

pound value arising from transactions denominated in foreign currencies and the translation of foreign currency denominated balances on intra-group loans.

Loss before income taxes was $6.5 million for the six months ended June 30, 2022, a decrease of $5.3 million, or 45%, compared to $11.8 million for the six months ended June 30, 2021.

Loss before income taxes was $10.4 million for the nine months ended September 30, 2022, a decrease of $4.0 million, or 28%, compared to $14.4 million for the nine months ended September 30, 2021.

The decrease in loss before income taxes was attributable to the lower research and development expense and the lower selling, general and administrative expense, offset by higher non-operating expense as described in the preceding paragraphs.

2 unchanged sentences

On January 27, 2022, we sold an aggregate of 1,000,000 shares of our common stock to existing investors at a price of $2.00 per share for total gross proceeds of $2.0 million.

As of June 30, 2022, our cash and cash equivalents were $7.8 million compared with $12.2 million as of December 31, 2021.

We believe that our existing cash as of June 30, 2022 will be sufficient to fund our operations through to April 2023 if we continue to spend as forecasted to, and that we will require additional capital to continue our operations and research and development activity thereafter.

There can be no assurance, however, that such financing will be available when needed, if at all, or on acceptable terms and conditions.

The precise amount and timing of the funding needs cannot be determined accurately at this time, and will depend on a number of factors, including the market demand for our products, the quality of product development efforts, management of working capital, and the continuation of normal payment terms and conditions for purchase of services.

As of September 30, 2022, our cash and cash equivalents were $6.3 million compared with $12.2 million as of December 31, 2021.

We believe that our existing cash as of September 30, 2022 will be sufficient to fund our operations through to April 2023 if we continue to spend as forecasted to, and that we will require additional capital funding to continue our operations and research and development activity thereafter.

There can be no assurance, however, that such financing will be available by April 2023, if at all, or on acceptable terms and conditions.

The precise amount and timing of the funding needs cannot be determined accurately at this time, and will depend on a number of factors, including the market demand for our products, the quality of product development efforts including potential joint collaborations, management of working capital, and the continuation of normal payment terms and conditions for purchase of services.

In order to address our capital needs, including our planned research and development activities and other expenditures, we are assessing options for financing our working capital requirements through a combination of equity offerings, debt financings, collaborations, strategic alliances and marketing, distribution or licensing arrangements.

Adequate financing opportunities might not be available to us, when and if needed, on acceptable terms or at all.

The following table shows a summary of our cash flows for the six months ended June 30, 2022 and 2021:

Six Months Ended

The following table shows a summary of our cash flows for the nine months ended September 30, 2022 and 2021:

Nine Months Ended September 30,

Increase (Decrease)

7 unchanged sentences

Operating Activities

Net cash used in operating activities was $5.6 million for the six months ended June 30, 2022, compared to $6.0 million for the six months ended June 30, 2021, a decrease of $0.4 million, or 6%.

The decrease resulted primarily from lower supplier payments as transaction expenses were largely settled in the six months ended June 30, 2021 offset by higher payroll payments in 2022 reflecting increases in headcount to support our sales and marketing activities and to operate as a public company.

Net cash used in operating activities was $6.8 million for the nine months ended September 30, 2022, compared to $7.3 million for the nine months ended September 30, 2021, a decrease of $0.5 million, or 6%.

The decrease resulted primarily from $1.0 million lower supplier payments as transaction expenses were largely settled in the nine months ended September 30, 2021 and a $0.2m favorable impact from changes in exchange rates compared to the prior period, partially offset by $0.6 million higher payroll payments in 2022 reflecting increases in headcount to support our sales and marketing activities and to operate as a public company.

Investing Activities

Net cash used in investing activities was $58 thousand for the six months ended June 30, 2022, compared to $121 thousand in the corresponding period of 2021.

Net cash used in investing activities was $67 thousand for the nine months ended September 30, 2022, compared to $282 thousand in the corresponding period of 2021.

Net cash used in investing activities in the 2022 period resulted from purchase of laboratory and capital equipment to support our increasing research and development activity.

1 unchanged sentence

Financing Activities

Net cash provided by financing activities was $1.8 million for the six months ended June 30, 2022, compared to $22.2 million in the corresponding period of 2021, a decrease of $20.4 million, or 92%.

Net cash provided by financing activities was $1.8 million for the nine months ended September 30, 2022, compared to $22.2 million in the corresponding period of 2021, a decrease of $20.4 million, or 92%.

During the first half of 2022, we consummated a private placement of our common stock resulting in net proceeds of $1.8 million.

4 unchanged sentences

Payments Due by Period

Operating lease obligations

Operating lease liabilities

Purchase obligations

6 unchanged sentences

A summary of our critical accounting policies is presented in Note 2 Summary of Significant Accounting Policies to our unaudited interim condensed consolidated financial statements (Part I, Item 1 of this Form 10-Q).

There were no material changes to our critical accounting policies during the three and six months ended June 30, 2022.

There were no material changes to our critical accounting policies during the three and nine months ended September 30, 2022.

A summary of our critical accounting estimates was presented in our management’s discussion and analysis of financial condition and results of operations contained in our Annual Report on Form 10-K for the year ended December 31, 2021.

There were no material changes to our critical accounting estimates during the three and six months ended June 30, 2022.

There were no material changes to our critical accounting estimates during the three and nine months ended September 30, 2022.

Going Concern Evaluation

2 unchanged sentences

We have experienced recurring losses since inception and expect to incur additional losses in the future in connection with research and development activities.

In the six months ended June 30, 2022, we raised net proceeds of $1.8 million through the sale of our common stock.

As of June 30, 2022 we had $7.8 million of cash after funding net cash used in operations for the six month period ended June 30, 2022 of $5.6 million, $2.4 million of which was used in operation for the three months ended June 30, 2022.

We believe that our existing cash as of June 30, 2022 will be sufficient to fund our operations through to April 2023 and that we will require additional capital to continue our operations and research and development activity thereafter.

There can be no assurance, however, that such financing will be available when needed, if at all, or on acceptable terms and conditions.

The precise amount and timing of the funding needs cannot be determined accurately at this time, and will depend on a number of factors, including the market demand for our products, the

quality of product development efforts, management of working capital, and the continuation of normal payment terms and conditions for purchase of services.

In the nine months ended September 30, 2022, we raised net proceeds of $1.8 million through the sale of our common stock.

As of September 30, 2022 we had $6.3 million of cash after funding net cash used in operations for the nine-month period ended September 30, 2022 of $6.8 million, $1.2 million of which was used in operation for the three months ended September 30, 2022.

We believe that our existing cash as of September 30, 2022 will be sufficient to fund our operations through to April 2023 and that we will require additional capital funding to continue our operations and research and development activity thereafter.

There can be no assurance, however, that such financing will be available by April 2023, if at all, or on acceptable terms and conditions.

The precise amount and timing of the funding needs cannot be determined accurately at this time, and will depend on a number of factors, including the market demand for our products, the quality of product development efforts including potential collaborations, management of working capital, and the continuation of normal payment terms and conditions for purchase of services.

Adequate financing opportunities might not be available to us, when and if needed, on acceptable terms or at all.

If we are unable to obtain additional financing in sufficient amounts or on acceptable terms, we will be forced to delay, reduce or eliminate some or all of its research and development programs and product portfolio expansion, which could adversely affect our operating results or business prospects.

Although management continues to pursue these plans, there is no assurance that we will be successful in obtaining sufficient funding on terms acceptable to us to fund continuing operations, if at all.

If we are unable to obtain additional financing in sufficient amounts or on acceptable terms, manage working capital, or secure variation to the normal payment terms and conditions, we will be forced to delay, reduce or eliminate some or all of its research and development programs and product portfolio expansion, which could adversely affect our operating results or business prospects.

Although management continues to pursue these plans for additional financing, there is no assurance that we will be successful in obtaining sufficient funding on terms acceptable to us to fund continuing operations by April 2023, if at all.

After considering the uncertainties, management consider it is appropriate to continue to adopt the going concern basis in preparing the consolidated financial statements.

2 unchanged sentences

Changes in our financial results include the impact of changes in foreign currency exchange rates.

For the three and six-month periods ended June 30, 2022 and 2021, we did not include the impact of constant currency within this Quarterly Report on Form 10-Q as foreign exchange did not have a significant impact on our reported USD amounts for these periods.

For the three and nine-month periods ended September 30, 2022 and 2021, we did not include the impact of constant currency within this Quarterly Report on Form 10-Q as foreign exchange did not have a significant impact on our reported USD amounts for these periods.

JOBS Act Accounting Election

7 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis