What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-11-13 compared with 2023-08-14 · 55 added, 49 removed, 79 unchanged (57% of the section changed)

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We are seeking to reshape the world of electronics with our disruptive organic thin-film transistors (OTFTs) that have the potential to drive the next generation of displays.

Our patented TRUFLEX® semiconductor and dielectric inks, or liquid electronic polymers, are used to make a new type of transistor that could potentially revolutionize the display industry.

Our inks enable low temperature printing processes that are compatible with existing manufacturing infrastructure to deliver low-cost displays that outperform existing models.

Our patented TRUFLEX® semiconductor and dielectric inks, or electronic polymers, are used to make a new type of transistor that could potentially revolutionize the display industry.

Our inks enable low temperature printing processes that are compatible with existing manufacturing infrastructure to deliver low-cost displays that outperform existing technologies.

Our electronic polymer platform can be used in a number of display technologies including microLED, miniLED and AMOLED displays for next generation televisions, laptops, augmented reality (AR) and virtual reality (VR) headsets, smartwatches, and smartphones.

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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 $2.0 million and $3.7 million for the three months ended June 30, 2023 and 2022, and $4.1 million and $6.5 million for the six months ended June 30, 2023 and 2022, respectively.

As of June 30, 2023, our accumulated deficit was $90.6 million.

Our loss before income taxes was $3.0 million and $4.0 million for the three months ended September 30, 2023 and 2022, and $7.1 million and $10.4 million for the nine months ended September 30, 2023 and 2022, respectively.

As of September 30, 2023, our accumulated deficit was $93.7 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.

Results of Operations for the three and six months ended June 30, 2023

Three months ended June 30, 2023 compared with three months ended June 30, 2022

Results of Operations for the three and nine months ended September 30, 2023

Three months ended September 30, 2023 compared with three months ended September 30, 2022

Revenue and Cost of revenue

Revenues were $8.0 thousand in the three months ended June 30, 2023, compared with $4.0 thousand in the same period of 2022.

Cost of revenue was $6.0 thousand in the three months ended June 30, 2023, compared with $2.0 thousand in the same period of 2022.

Both revenues and related cost of revenue for the three months ended June 30, 2023 and 2022 are a result of sales of organic thin-film transistor ( OTFT) backplanes and TRUFLEX® materials for customer assessment and development purposes.

Revenues were $3.0 thousand in the three months ended September 30, 2023, compared with $26.0 thousand in the same period of 2022.

Cost of revenue was $1.0 thousand in the three months ended September 30, 2023, compared with $26.0 thousand in the same period of 2022.

The decrease is mainly the results of less unit sales in 2023 compared to 2022.

Both revenues and related cost of revenue for the three months ended September 30, 2023 and 2022 are a result of sales of organic thin-film transistor ( OTFT) backplanes and TRUFLEX® materials for customer assessment and development purposes.

Other operating income

Other operating income was $0.2 million in the three months ended June 30, 2023, compared to $0.3 million in the same period of 2022.

Other operating income was $0.3 million in the three months ended September 30, 2023, compared to $0.3 million in the same period of 2022.

The primary source of the income is related to a research grant and research and development tax credits.

Operating expenses

Operating expenses were $2.5 million for the three months ended June 30, 2023, compared to $2.7 million in the same period of 2022, a decrease of $0.2 million.

Operating expenses were $3.0 million for the three months ended September 30, 2023, compared to $2.7 million in the same period of 2022, an increase of $0.3 million.

Research and development expenses are incurred for the development of TRUFLEX® inks to make OTFT circuits and consists primarily of payroll and technical development costs.

The research and development expenses represent 49.5% and 49.5% of the total operating expenses for the three months ended June 30, 2023 and 2022, respectively.

For the three months ended June 30, 2023 research and development expenses remained constant for the quarter for each respective year.

The research and development expenses represent 53.1% and 49.2% of the total operating expenses for the three months ended September 30, 2023 and 2022, respectively.

Research and development expenses increased $0.2 million for the three months ended September 30, 2023 compared to the same period for the prior year.

This increase was mainly due personnel severance expenses and technical service fees.

Selling, general and administrative expenses consist primarily of payroll and professional services such as accounting, legal services and investor relations .

These expenses represent 52.2% and 50.5% of our total operating expenses for the three months ended June 30, 2023 and 2022, respectively.

Selling, general and administrative expenses of $1.3 million for the quarter, decrease by $0.0 million from the prior year period, primarily as a result of decreases in investor relations expenses.

These expenses represent 42.9% and 50.8% of our total operating expenses for the three months ended September 30, 2023 and 2022, respectively.

Selling, general and administrative expenses decreased by $0.1 million for the three months ended September 30, 2023 compared to the same period for the prior year.

This decrease was primarily a result of a reductions in investor relations expenses.

Non-Operating income/(expense)

Issuance costs of $0.2 million allocated to the warrant liability were expensed in full during the three months ended June 30, 2023.

The majority of costs were legal, placement and consulting fees specifically related to the private placement transaction.

Gains on foreign currency transactions related to intercompany loans were $0.5 million for the three months ended June 30, 2023 compared to the losses of $1.3 million for the three months ended June 30, 2022.

The increase of $1.8 million is related to favorable changes in the exchange rates.

Six months ended June 30, 2023 compared with six months ended June 30, 2022

We recorded a gain of $0.5 million related to the valuation of the warrant liability for the three months ended September 30, 2023.

There were no similar gains or losses during the same period of the prior year.

We recorded losses on foreign currency transactions related to intercompany loans of $0.8 million for the three months ended September 30, 2023 compared to the losses of $1.5 million for the three months ended September 30, 2022.

The decrease of $0.7 million is related to favorable changes in the exchange rates.

Nine months ended September 30, 2023 compared with nine months ended September 30, 2022

Revenue and Cost of revenue

Revenues were $24.0 thousand in the six months ended June 30, 2023, compared with $34.0 thousand in the same period of 2022.

Cost of revenue was $22.0 thousand in the six months ended June 30, 2023, compared with $25.0 thousand in the same period of 2022.

Both revenues and related cost of revenue for the six months ended June 30, 2023 and 2022 are a result of sales of organic thin-film transistor ( OTFT) backplanes and TRUFLEX® materials for customer assessment and development purposes.

Revenues were $27.0 thousand in the nine months ended September 30, 2023, compared with $60.0 thousand in the same period of 2022.

Cost of revenue was $23.0 thousand in the nine months ended September 30, 2023, compared with $50.0 thousand in the same period of 2022.

The decrease is mainly the results of less unit sales in 2023 compared to 2022.

Both revenues and related cost of revenue for the nine months ended September 30, 2023 and 2022 are a result of sales of organic thin-film transistor ( OTFT) backplanes and TRUFLEX® materials for customer assessment and development purposes.

Other operating income

Other operating income was $0.4 million and $0.6 million the six months ended June 30, 2023 and 2022.

The primary source of the income is related to a research grant and research and development tax credits.

Other operating income was $0.7 million and $0.9 million the nine months ended September 30, 2023 and 2022.

The primary source of the other operating income is related to a research grant and research and development tax credits.

Operating expenses

Operating expenses for the six months ended June 30, 2023 were $5.4 million compared to $5.4 million in the same period of 2022.

Operating expenses for the nine months ended September 30, 2023 were $8.3 million compared to $8.2 million in the same period of 2022.

Research and development expenses are incurred for the development of TRUFLEX® inks to make OTFT circuits and consists primarily of payroll and technical development costs.

Research and development expenses were $2.5 million and $2.8 million for the six months ended June 30, 2023 and 2022.

Research and development expenses were $4.1 million and $4.2 million for the nine months ended September 30, 2023 and 2022.

The decrease of $0.1 million is primarily due to the reduction of personnel and professional service fee expenses.

The research and development expenses represents 47.3% and 51.8% of total operating expenses for the six months ended June 30, 2023 and 2022, respectively.

Selling, general and administrative expenses consist primarily of payroll and professional services such as accounting, legal services and investor relations , These expenses represent 51.4% and 48.2% of our total operating expenses for the six months ended June 30, 2023 and 2022, respectively.

Selling, general and administrative expenses were $2.8 million for the six months ended June 30, 2023, as compared to $2.6 million for the six months ended June 30, 2022 an increase $0.1 million of primarily due to the result of increase in personnel expense related to bonus accruals.

Losses on foreign currency transactions related to operating expense were $0.1 million for the six months ended June 30, 2023.

The research and development expenses represents 49.4% and 50.9% of total operating expenses for the nine months ended September 30, 2023 and 2022, respectively.

Selling, general and administrative expenses consist primarily of payroll and professional services such as accounting, legal services and investor relations , These expenses represent 48.4% and 49.1% of our total operating expenses for the nine months ended September 30, 2023 and 2022, respectively.

Selling, general and administrative expenses were $4.0 million for the nine months ended September 30, 2023, as compared to $4.0 million for the nine months ended September 30, 2022.

Losses on foreign currency transactions related to operating expense were $0.2 million for the nine months ended September 30, 2023.

Non-Operating income/(expense)

Issuance costs of $0.2 million allocated to the warrant liability were expensed in full during the six months ended June 30, 2023.

Issuance costs of $0.2 million allocated to the warrant liability were expensed in full during the nine months ended September 30, 2023.

The majority of costs were legal, placement and consulting fees specifically related to the private placement transaction.

Gains on foreign currency transactions related to intercompany loans were $1.0 million for the six months ended June 30, 2023 compared to the losses of $1.6 million for the six months ended June 30, 2022.

We recorded a gain of $0.5 million related to the valuation of the warrant liability for the nine months ended September 30, 2023.

There were no similar gains or losses during the same period of the prior year.

We recorded gains on foreign currency transactions related to intercompany loans of $0.2 million for the nine months ended September 30, 2023 compared to the losses of $3.1 million for the nine months ended September 30, 2022.

The increase of $3.3 million is related to the favorable changes in the exchange rates.

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To date, we have funded our liquidity and capital requirements primarily with proceeds from the private sale of our equity and debt securities and borrowing against our research and development credits.

As of June 30, 2023, our cash and cash equivalents were $13.8 million compared with $4.2 million as of December 31, 2022.

As of September 30, 2023, our cash and cash equivalents were $11.2 million compared with $4.2 million as of December 31, 2022.

The increase of $7.0 million is due to net proceeds of $12.7 million received related to the June 2023 PIPE financing and was offset by cash usage of $5.6 million related to operating activities.

We believe that our existing cash as of June 30, 2023 will be sufficient to fund our operations through for the next twelve months if we continue to spend to our forecast, and that we may require additional capital funding to continue our operations and research and development activity thereafter.

The Company’s capital commitments over the next twelve months include (a) $1.5 million to satisfy accounts payable and accrued expenses and (b) $0.2 million to satisfy the lease liabilities.

We believe that our existing cash as of September 30, 2023 will be sufficient to fund our operations through for the next twelve months if we continue to spend to our forecast, and that we may require additional capital funding to continue our operations and research and development activity thereafter.

Our capital commitments over the next twelve months include (a) $1.5 million to satisfy accounts payable and accrued expenses and (b) $0.2 million to satisfy the lease liabilities.

Additional capital commitments beyond the next twelve months include $0.1 million of lease liabilities.

Critical Accounting Estimates

The Company allocated part of the proceeds of private placement of the Company’s preferred A-1 and A-2 shares to warrant liability issued in connection with the transaction.

The valuations of the warrants were determined using option pricing models.

These models use inputs such as the underlying price of the shares

issued at the measurement date, volatility, risk free interest rate and expected life of the instrument.

The Company has classified the warrants as a long-term liability due to certain provisions relating to the holders’ ability to exercise the warrants beyond twelve months of the reporting date and has accounted for them as derivative instruments in accordance with ASC 815, adjusting the fair value at the end of each reporting period.

We allocated part of the proceeds of private placement of the Series A-1 and Series A-2 Preferred Stock to warrant liability relating to the warrants issued in connection with the transaction.

The valuations of the

warrants were determined using option pricing models.

These models use inputs such as the underlying price of the shares issued at the measurement date, volatility, risk free interest rate and expected life of the instrument.

We have classified the warrants as a long-term liability due to certain provisions relating to the holders’ ability to exercise the warrants beyond twelve months of the reporting date and has accounted for them as derivative instruments in accordance with ASC 815, adjusting the fair value at the end of each reporting period.

Our financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim reporting.

Other than the accounting for the valuation of warrant liability, during the three and six months ended June 30, 2023, there were no material changes to our critical accounting policies as reported in the 10-K.

Other than the accounting for the valuation of warrant liability, during the three and nine months ended September 30, 2023, there were no material changes to our critical accounting policies as reported in the 10-K.

A description of certain accounting policies that may have a significant impact on amounts reported in the financial statements is disclosed in Note 3 to the audited consolidated financial statements contained in the 10-K.

Warrant Liability

The Company accounts for warrants in accordance with the guidance contained in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 815-40, Derivatives and Hedging, under which warrants that do not meet the criteria for equity treatment and must be recorded as liabilities.

Accordingly, the Company will classify those warrants as liabilities at their fair value and adjusts the warrants to fair value in respect of each reporting period.

The valuation of the warrant liability was determined using an option pricing model.

We account for our outstanding warrants in accordance with the guidance contained in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 815-40, Derivatives and Hedging, under which warrants that do not meet the criteria for equity treatment must be recorded as liabilities.

In accordance with that guidance, we have classified our outstanding warrants as liabilities at their fair value and adjust the warrants to fair value in respect of each reporting period.

The valuation of the warrant liability is determined using an option pricing model.

This model uses inputs such as the underlying price of the shares issued at the measurement date, expected volatility, risk free interest rate and expected life of the instrument.

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Accordingly, we have used an expected volatility based on historical common stock volatility of our peers.

In addition, the Company used the probability of uplisting as an input in the model to determine the fair value of the warrant liability.

The Company will adjust the fair value of the warranty liability at the end of each reporting period.

In addition, we have used the probability of uplisting as an input in the model to determine the fair value of the warrant liability as certain features of the warrants will be eliminated or adjusted upon an uplisting.

We will adjust the fair value of the warranty liability at the end of each reporting period.

Issuance Costs

The Company assessed the issuance cost in connection with the issuance of an equity offering.

We have assessed the issuance cost in connection with the issuance of an equity offering.

ASC 340-10-S99-1 states that specific incremental costs directly attributable to a proposed or actual offering of equity securities may properly be deferred and charged against the gross proceeds of the offering.

Analogizing to that guidance, specific incremental costs directly attributable to the issuance of an equity contract to be classified in equity should generally be recorded as a reduction in equity.

However, issuance costs for equity contracts that are classified as a liability should be expensed immediately.

However, issuance costs for equity contracts that are classified as a liability are required to be expensed immediately.

The issuance costs are allocated to the equity and liability components of the underlying transaction on a basis of the allocated fair value of the gross proceeds in the overall transactions.

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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