10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023

Or

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 For the transition period from   to

Commission file number 001-15751 

eMAGIN CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	56-1764501
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

700 South Drive, Suite 201, Hopewell Junction, NY 12533

(Address of principal executive offices) (Zip Code)

(845) 838-7900

(Registrant’s telephone number, including area code)

 Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $.001 Par Value Per Share	EMAN	NYSE American

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes þ     No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes þ     No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  ¨	Smaller Reporting Company  þ
Accelerated filer           ¨	Emerging growth company    ¨
Non-accelerated Filer    þ

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)    Yes ¨     No þ

As of April 30, 2023 there were 83,041,694 common shares at $0.001 par value per share of the registrant outstanding.

Table of Contents

		Page
PART I - FINANCIAL INFORMATION
Item 1	Condensed Consolidated Financial Statements
	Condensed Consolidated Balance Sheets as of March 31, 2023 (unaudited) and December 31, 2022	5
	Condensed Consolidated Statements of Operations for the three months ended March 31, 2023 and 2022 (unaudited)	6
	Condensed Consolidated Statements of Changes in Shareholders’ Equity for the three months ended March 31, 2023 and 2022 (unaudited)	7
	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2023 and 2022 (unaudited)	8
	Notes to Condensed Consolidated Financial Statements (unaudited)	9
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3	Quantitative and Qualitative Disclosures About Market Risk	27
Item 4	Controls and Procedures	27
PART II - OTHER INFORMATION
Item 1	Legal Proceedings	29
Item 1A	Risk Factors	29
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	29
Item 3	Defaults Upon Senior Securities	29
Item 4	Mine Safety Disclosures	29
Item 5	Other Information	29
Item 6	Exhibits	30
SIGNATURES		32

2

STATEMENT REGARDING FORWARD-LOOKING INFORMATION

This Quarterly Report on Form 10-Q, or Report, contains forward-looking statements that are based on our management’s belief and assumptions and on information currently available to our management. Although we believe that the expectations reflected in these forward-looking statements are reasonable, these statements relate to future events or our future financial performance, and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.

In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue” or the negative of these terms or other comparable terminology. You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties and other factors, which are, in some cases, beyond our control and which could materially affect our results. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed in the section entitled “Risk Factors” in this Report, in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 and in our other filings with the SEC. If one or more of these risks or uncertainties occur, or if our underlying assumptions prove to be incorrect, actual events or results may vary significantly from those implied or projected by the forward-looking statements. No forward-looking statement is a guarantee of future performance. You should read this Report and the documents that we reference in this Report and have filed with the Securities and Exchange Commission, or the SEC, as exhibits to this Report, completely and with the understanding that our actual future results may be materially different from any future results expressed or implied by these forward-looking statements.

Important factors, among others, that may affect the future results expressed or implied by forward-looking statements in this Report include:

our ability to generate sufficient cash flows and obtain the additional financing we need in order to continue as a going concern;

our ability to generate additional revenue or secure additional financing when required, in order to continue our current operations;

our ability to manufacture our products on a timely basis and at a competitive cost;

our ability to successfully remediate manufacturing issues that have resulted in production delays and successfully integrate new equipment on our manufacturing line;

our ability to achieve our yield improvement initiatives and successfully manage any variations in our production yields;

our ability to meet our obligations as they become due over the next twelve months;

our ability to retain employees and recruit additional employees needed to staff and operate our expanded production facilities and equipment;

the impact of expenses to qualify the additional government funded equipment, and ongoing additional operating costs on our results of operations;

our needs for additional financing, and our ability to obtain such additional financing on reasonable terms, the interest rate and expense we incur on any debt financing and our ability to pursue strategic transaction;

the potential impact of semiconductor industry supply chain shortages and increased demand on the availability of the raw materials we need for production;

the potential impact of prolonged inflation and supply chain disruptions on our revenues, cost of goods and margins;

our ability to maintain our operations as a result of potential employee, customer and supplier disruptions caused by the COVID-19 pandemic or any resurgences and quarantine restrictions;

any impacts related to the war in Ukraine;

our anticipated cash needs and our estimates regarding our capital requirements;

our ability to repay our indebtedness pursuant to the asset based lending, or ABL, facility, the impact of the covenants contained in our ABL facility on our ability to operate our business, and our ability to extend or renew our ABL facility;

our ability to maintain our relationships with customers and vendors;

our ability to protect our intellectual property;

our ability to successfully develop and market our products to customers;

our ability to generate customer demand for our products in our target markets and successfully balance such demand with capacity;

the development of our target markets and market opportunities, including the consumer market;

technological developments in our target markets and the development of alternate, competing technologies in them;

the rate of acceptance of augmented reality/virtual reality, or AR/VR, systems and products in the consumer and commercial marketplace;

our ability to maintain and protect our information technology systems and prevent security breaches and other disruptions that could compromise our information technology systems or expose us to liability;

our potential exposure to product liability claims;

whether amounts included in our backlog result in actual revenue or translate into profits for us;

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our ability to meet customers’ delivery schedules;

market pricing for our products and for competing products;

the impact of the majority holder of our Series B convertible stock, being able to prevent us from entering into significant corporate transactions, including certain capital raising transactions;

changes in demand by original equipment manufacturer, or OEM, customers for advanced microdisplays, limited availability of suppliers and foundries, high costs of raw materials, pricing pressure brought by the marketplace or governmental customers and other factors that impact the commercial, military and consumer markets in which we operate;

changes in federal budget priorities and the timing of government funding and its potential impact on customer buying decision

increasing competition;

our ability to satisfy the requirements and milestones imposed as conditions to the receipt of the government awards we have received and to otherwise comply with the terms of government awards we receive;

our ability to reproduce the favorable impact of reclaimed displays on our 2022 and 2023 total gross profit and total gross margin in future periods;

our ability to maintain effective internal controls, including internal control over financial reporting;

the impact of any significant congressional delays or reductions in appropriations for programs our military customers participate in; and

provisions in certain of our organizational documents, commercial agreements, government awards, and our military contracts that may prevent or delay an acquisition of, partnership with, or investment in us and our ability to develop original equipment manufacturer and mass production partnerships.

The forward-looking statements in this Report represent our views as of the date of this Report. We anticipate that subsequent events and developments may cause our views to change. However, while we may elect to update these forward-looking statements at some point in the future, we have no current intention of doing so except to the extent required by applicable law. Therefore, these forward-looking statements do not represent our views as of any date other than the date of this Report.

In this Report, references to “eMagin Corporation,” “eMagin,” “we,” “us,” and “our company” refer to eMagin Corporation and our wholly owned subsidiary, Virtual Vision, Inc.

eMagin® is a registered trademark of eMagin Corporation. dPd^TM is an unregistered trademark of eMagin. All other trademarks used in this Report are the property of their respective owners.

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ITEM 1.  Financial Statements 

eMAGIN CORPORATION 

CONDENSED CONSOLIDATED BALANCE SHEETS 

(In thousands, except share data)

(unaudited) 

	March 31,		December 31,
	2023		2022
ASSETS
Current assets:
Cash and cash equivalents	$	3,849	$	4,346
Restricted cash		303		303
Accounts receivable, net		5,513		7,035
Account receivable-due from government awards		—		501
Unbilled accounts receivable		2,665		2,438
Inventories		8,804		8,709
Prepaid expenses and other current assets		688		594
Total current assets		21,822		23,926
Property, plant and equipment, net		51,171		49,099
Operating lease right - of - use assets		37		53
Intangibles and other assets		27		29
Total assets	$	73,057	$	73,107
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1,199	$	2,077
Accrued compensation		1,856		1,662
Revolving credit facility, net		—		1,037
Other accrued expenses		961		659
Deferred revenue		12		12
Operating lease liability - current		38		54
Finance lease liability - current		1,229		1,229
Other current liabilities		471		231
Total current liabilities		5,766		6,961
Other liability - long term		14		14
Deferred income - government awards - long term		31,136		28,729
Finance lease liability - long term		13,545		13,608
Total liabilities		50,461		49,312
Commitments and contingencies (Note 8)
Shareholders’ equity:
Preferred stock, $0.001 par value: authorized 10,000,000 shares:
Series B Convertible Preferred stock, (liquidation preference of $5,356) stated value $1,000 per share, $0.001 par value: 10,000 shares designated and 5,356 issued and outstanding as of March 31, 2023 and 5,356 issued and outstanding as of December 31, 2022.		—		—
Common stock, $0.001 par value: authorized 200,000,000 shares, issued 82,530,660 shares, outstanding 82,368,594 shares as of March 31, 2023 and issued 81,241,516 shares, outstanding 81,079,450 shares as of December 31, 2022.		82		80
Additional paid-in capital		284,002		282,582
Accumulated deficit		(260,988)		(258,367)
Treasury stock, 162,066 shares as of March 31, 2023 and December 31, 2022.		(500)		(500)
Total shareholders’ equity		22,596		23,795
Total liabilities and shareholders’ equity	$	73,057	$	73,107

See notes to Condensed Consolidated Financial Statements.
‎

5

eMAGIN CORPORATION 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS 

(In thousands, except share and per share data) 

(unaudited) 

	Three Months Ended
	March 31,
	2023		2022
Revenues:
Product	$	6,368	$	7,027
Contract		227		331
Total revenues, net		6,595		7,358
Cost of revenues:
Product		5,004		4,787
Contract		117		82
Total cost of revenues		5,121		4,869
Gross profit		1,474		2,489
Operating expenses:
Research and development		1,203		1,484
Selling, general and administrative		2,805		2,170
Total operating expenses		4,008		3,654
Loss from operations		(2,534)		(1,165)
Other (expense) income:
Change in fair value of common stock warrant liability		—		1,146
Interest expense, net		(207)		(214)
Other income, net		120		96
Total other (expense) income		(87)		1,028
Loss before provision for income taxes		(2,621)		(137)
Income taxes		—		—
Net Loss	$	(2,621)	$	(137)
Loss per share, basic and diluted	$	(0.03)	$	—
Weighted average number of shares outstanding:
Basic and diluted		81,993,294		72,835,629

See notes to Condensed Consolidated Financial Statements.

6

eMAGIN CORPORATION 

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDER’S EQUITY

(In thousands, except share data) 

(unaudited)

	Preferred Shares		Preferred Stock		Common Shares		Common Stock		Additional Paid-in Capital		Accumulated Deficit		Treasury Stock		Total Shareholders’ Equity
Balance, December 31, 2022		5,356	$	—		81,241,516	$	80	$	282,582	$	(258,367)	$	(500)	$	23,795
Vesting of RSUs		—		—		30,148		—		—		—		—		—
Stock based compensation		—		—		—		—		256		—		—		256
Public offering of common shares, net of offering costs		—		—		1,208,996		2		1,164		—		—		1,166
Exercise of common stock warrants		—		—		50,000		—		—		—		—		—
Net Loss		—		—		—		—		—		(2,621)		—		(2,621)
Balance, March 31, 2023		5,356	$	—		82,530,660	$	82	$	284,002	$	(260,988)	$	(500)	$	22,596

	Preferred Shares		Preferred Stock		Common Shares		Common Stock		Additional Paid-in Capital		Accumulated Deficit		Treasury Stock		Total Shareholders’ Equity
Balance, December 31, 2021		5,659	$	—		72,931,490	$	72	$	275,936	$	(257,264)	$	(500)	$	18,244
Stock based compensation		—		—		—		—		165		—		—		165
Public offering of common shares, net of offering costs		—		—		405,086		—		460		—		—		460
Net Loss		—		—		—		—		—		(137)		—		(137)
Balance, March 31, 2022		5,659	$	—		73,336,576	$	72	$	276,561	$	(257,401)	$	(500)	$	18,732

See notes to Condensed Consolidated Financial Statements.

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7

eMAGIN CORPORATION 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 

(In thousands) 

(unaudited)

	Three Months Ended
	March 31,
	2023		2022
Cash flows from operating activities:
Net loss	$	(2,621)	$	(137)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		734		722
Change in fair value of common stock warrant liability		—		(1,146)
Stock-based compensation		256		165
Amortization of operating lease right-of-use assets		16		14
Changes in operating assets and liabilities:
Accounts receivable		2,023		(1,220)
Unbilled accounts receivable		(227)		(289)
Inventories		(95)		(535)
Prepaid expenses and other current assets		(94)		(252)
Deferred revenues		—		(42)
Operating lease liabilities		(16)		(15)
Accounts payable, accrued expenses, and other current liabilities		(143)		2,607
Net cash used in operating activities		(167)		(128)
Cash flows from investing activities:
Purchase of equipment		(411)		(474)
Purchase of equipment, government grant		(2,392)		(6,599)
Net cash used in investing activities		(2,803)		(7,073)
Cash flows from financing activities:
Repayments under revolving line of credit, net		(1,037)		(468)
Proceeds from public offering, net		1,166		460
Change in finance lease liabilities		(63)		(74)
Proceeds from government grant		2,407		5,485
Net cash provided by financing activities		2,473		5,403
Net decrease in cash, cash equivalents, and restricted cash		(497)		(1,798)
Cash, cash equivalents, and restricted cash, beginning of period		4,649		6,530
Cash, cash equivalents, and restricted cash, end of period	$	4,152	$	4,732
Cash, cash equivalents, end of period		3,849		3,857
Restricted cash, end of period		303		875
Supplementary Cash Flow Information
Cash paid for interest	$	207	$	214
Cash paid for income taxes	$	—	$	—
Non-cash activities:
Right-of-use assets obtained in exchange for finance lease liabilities	$	—	$	69

See notes to Condensed Consolidated Financial Statements.

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8

eMAGIN CORPORATION 

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 

Note 1 – Description of the Business and Summary of Significant Accounting Policies 

The Business 

eMagin Corporation, or the Company, designs, develops, manufactures and markets Active Matrix organic light emitting diode, or OLED, -on-silicon microdisplays used in military and commercial AR/VR devices and other near-eye imaging products which utilize OLED microdisplays. The Company’s products are sold mainly in North America, Asia, and Europe.

Basis of Presentation 

In the opinion of management, the accompanying unaudited interim Condensed Consolidated Financial Statements of eMagin Corporation and its subsidiary reflect all adjustments, including normal recurring accruals, necessary for a fair presentation. All significant intercompany balances and transactions have been eliminated in consolidation. The Company manages its operations on a consolidated, integrated basis in order to optimize its equipment and facilities and to effectively service its global customer base and concludes that it operates in a single business segment. Certain information and footnote disclosure normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States, or GAAP, have been condensed or omitted pursuant to instructions, rules and regulations prescribed by the SEC. These unaudited Condensed Consolidated Financial Statements, and related disclosures, should be read in conjunction with the audited Consolidated Financial Statements contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 Form 10-K”). The results of operations for the periods ended March 31, 2023 are not necessarily indicative of the results to be expected for the full year. The Consolidated Financial Statements as of December 31, 2022 are derived from audited financial statements included in the Company’s 2022 Form 10-K.

Use of estimates

In accordance with GAAP, management utilizes certain estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments related to, among others, allowance for doubtful accounts, warranty reserves, inventory reserves, stock-based compensation expense, percentage of completion of contracts, deferred tax asset valuation allowances, litigation and other loss contingencies. Management bases its estimates and judgments on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates. 

Intangible Assets – Patents

Acquired patents are recorded at purchase price as of the date acquired and amortized over the expected useful life which is generally the remaining life of the patent.

The total intangible amortization expense was approximately $2 thousand for the three months ended March 31, 2023 and 2022, respectively.

Product warranty

The Company generally offers a one year product replacement warranty. The standard policy is to repair or replace the defective products. The Company accrues for estimated returns of defective products at the time revenue is recognized based on historical activity as well as for specific known product issues. The determination of these accruals requires the Company to make estimates of the frequency and extent of warranty activity and estimate future costs to replace the products under warranty. If the actual warranty activity and/or repair and replacement costs differ significantly from these estimates, adjustments to cost of revenue may be required in future periods.

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The following table provides a summary of the activity related to the Company's warranty liability included in other current liabilities, during the three months ended March 31, 2023 and 2022 (in thousands):

	Three Months Ended
	March 31,
	2023		2022
Beginning balance	$	214	$	519
Warranty accruals and adjustments		245		(100)
Warranty claims		(2)		(3)
Ending balance	$	457	$	416

Earnings per Common Share

Basic earnings per share is computed using the weighted average number of common shares outstanding during the period, and excludes any dilutive effects of common stock equivalent shares such as stock options, warrants, restricted stock units and convertible preferred stock. Diluted earnings per share is computed using the weighted average number of common shares outstanding and potentially dilutive common stock equivalent shares outstanding during the period. Common stock equivalent shares are excluded from the computation if their effect is anti-dilutive. 

The Company’s Series B Convertible Preferred stock, or Preferred Stock – Series B, is considered a participating security as the preferred stock participates in dividends with the common stock, which requires the use of the two-class method when computing basic earnings per share. Diluted earnings per share must be calculated under both the treasury stock and two-class method, and the calculation that results in the most dilutive earnings per share amount for the common stock is reported. The Preferred Stock – Series B is not required to absorb any net loss. Although the Company paid a one-time special dividend in 2012, the Company does not expect to pay dividends on its common or preferred stock in the near future.

For the three months ended March 31, 2023 and 2022, the Company reported a net loss and as a result, basic and diluted loss per common share are the same.

In calculating net loss per share amounts, all shares underlying the potentially dilutive common stock equivalents were excluded from the calculation of diluted net income (loss) per common share in both periods, because their effect was anti-dilutive.

The following table sets forth the potentially dilutive common stock equivalents for the three months ended March 31, 2023 and 2022 that were not included in diluted earnings per share as their effect would be anti-dilutive:

	Three Months Ended
	March 31,
	2023		2022
Restricted Stock Units		790,980		454,956
Options		2,487,269		3,360,426
Warrants		—		3,100,000
Convertible preferred stock		17,723,362		18,726,009
Total potentially dilutive common stock equivalents		21,001,611		25,641,391

Government Funding

The Company accounts for awards received from the U.S. Government for procurement of capital equipment after analysis of the terms of the underlying award contract, and in accordance with contract and equipment purchase milestones and accounting principles for grant accounting. For awards in which the Company will hold title to the underlying equipment, the Company initially records amounts invoiced to the U.S. Government for equipment progress payments on the accompanying Condensed Consolidated Balance Sheets as Deferred Income – Government Awards – long term and Accounts Receivable – due from Government Awards. The Company records such progress payments made to capital equipment vendors in Property, plant and equipment. Amounts recorded in Deferred Income – Government Awards – long term are recognized as Other Income on the accompanying Condensed Consolidated Statement of Operations on a systematic basis as depreciation and other expenses are incurred over the useful life of the capital equipment.

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Restricted Cash

The Company accounts for cash received pursuant to U.S. Government funding, that is legally restricted for procurement of capital equipment, as Restricted Cash on the accompanying Condensed Consolidated Balance Sheets. Restricted Cash amounts are received from the U.S. Government in advance of progress payments required for various program related capital equipment purchases and are disbursed by the Company to related equipment vendors.

Fair Value of Financial Instruments

Cash, cash equivalents, accounts receivable, short-term investments and accounts payable are stated at cost, which approximates fair value, due to the short-term nature of these instruments. The asset based lending facility, or the ABL Facility, is also stated at cost, which approximates fair value because the interest rate is based on a market based rate plus a margin.

The Company has categorized its assets and liabilities that are valued at fair value on a recurring basis into a three-level fair value hierarchy in accordance with GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets and liabilities (Level 1) and lowest priority to unobservable inputs (Level 3).

Assets and liabilities recorded in the Condensed Consolidated Balance Sheets at fair value are categorized based on a hierarchy of inputs as follows:

Level 1 – Unadjusted quoted prices in active markets of identical assets or liabilities.

Level 2 – Quoted prices for similar assets or liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument.

Level 3 – Unobservable inputs for the asset or liability.

The common stock warrant liability was the only financial asset or liability recorded at fair value on a recurring basis and was considered a Level 3 liability. The respective 2018 Warrants expired on January 29, 2023.

Concentrations

The Company purchases principally all of its silicon wafers, which are a key ingredient in its OLED production process, from two suppliers located in Taiwan and Korea.

For the three months ended March 31, 2023, one customer of 15.1% accounted for over 10% of net revenues. As of March 31, 2023, the Company had accounts receivable from that one customer that accounted for 18.5% of total accounts receivable. For the three months ended March 31, 2022, one customer of 23.7% accounted for over 10% of the Company’s net revenues.

Liquidity and Going Concern

The accompanying Condensed Consolidated Financial Statements have been prepared on a going concern basis, which assumes that the Company will continue to operate as a going concern and which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. For the three months ended March 31, 2023, the Company incurred a net loss of $2.6 million and used cash in operating activities of $0.2 million. As of March 31, 2023, the Company had $3.8 million of cash, no outstanding indebtedness and borrowing availability of $2.4 million under its ABL Facility.

The Company’s ABL Facility expires on December 31, 2023, and renews automatically for another year unless terminated pursuant to its terms. The ABL Facility agreement contains certain lenders remedies that give the bank the ability to impose discretionary reserves against our borrowing availability or terminate the facility upon events of default. Although our relationship with the lender is positive, there is no assurance the lender will renew or extend this facility or continue to make funds available during 2023 and beyond at present availability levels, or at all.

Due to continuing losses, the Company’s financial position, and uncertainty regarding the Company’s ability to borrow under its ABL Facility, or continue to raise funds under its ATM facility, the Company may not be able to meet its financial obligations as they become due without additional financing or sources of capital. Although demand for the Company’s products has remained steady, due to lingering supply chain issues caused in part by the COVID-19 Pandemic, and also inflationary pressures the Company’s ability to obtain components and other materials or services on a timely basis has resulted in manufacturing delays, and increased costs. If these trends worsen or result in lost orders it could materially and adversely affect its business, financial condition, and results of

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operations. Management is prepared to reduce expenses and raise additional capital, but there can be no assurance that the Company will be successful in sufficiently reducing expenses or raising capital to meet its operating needs.

The Company has taken actions to increase revenues and to reduce expenses and is considering financing alternatives. The Company’s plans with regard to these matters include the following actions: 1) focus production and engineering resources on improving manufacturing yields and increasing production volumes, 2) continue the Work Status Reduction program that began in October 2019 for certain members of senior management pursuant to which their work status is reduced by approximately 20%, 3) continue to utilize government grants for purchase of capital equipment and funding manufacturing personnel, 4) reduce discretionary and other expenses, 5) seek to enter new markets, 6) sell shares under its At the Market or ATM equity facility entered into in November 2021, and 7) consider additional financing and/or strategic alternatives.

The Company is reassessing its business plans and forecasts over the next two years. Based on its known cash needs as of May 2023, and the anticipated availability of its ABL facility, the Company has developed plans to extend its liquidity to support its working capital requirements through the second quarter of 2024.

However, there can be no assurance the Company’s plans will be achieved and the Company will be able to meet its financial obligations as they become due without obtaining additional financing or sources of capital. Therefore, in accordance with applicable accounting guidance, and based on the Company’s current financial condition and availability of funds, there is substantial doubt about the Company’s ability to continue as a going concern through twelve months from the date these financial statements were issued.

Recently adopted accounting pronouncements

The Company's accounting policies are the same as those described in Note 1 to the Company's Consolidated Financial Statements in the Company’s 2022 Form 10-K.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326) and subsequently issued amendments. The guidance affects the Company's accounts receivable, and it requires the measurement of expected credit losses to be based on relevant information from past events, including historical experiences, current conditions and reasonable and supportable forecasts that affect collectability. This new guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022. The Company adopted the guidance on January 1, 2023, on a prospective basis and such adoption did not have a material impact on the Company’s financial statements but did change how the allowance for credit losses is determined.

Recently issued accounting pronouncements

In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40) Accounting for Convertible Instruments and Contracts in an Entity's Own Equity. This guidance changes how entities account for convertible instruments and contracts in an entity's own equity and simplifies the accounting for convertible instruments by removing certain separation models for convertible instruments. This guidance also modifies the guidance on diluted earnings per share calculations. This new guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2023. The Company is currently evaluating the impact of this ASU on the Condensed Consolidated Financial Statements.

Note 2 – Revenue Recognition

All of the Company’s revenues are earned from contracts with customers and are classified as either Product or Contract revenues. Contract revenues include R&D activities performed pursuant to written agreements and purchase orders, as well as arrangements that are implied by customary practices or law.

Product revenue is generated primarily from contracts to produce, ship and deliver OLED microdisplays. The Company’s performance obligations are satisfied, control of our products is transferred, and revenue is recognized at a single point in time when control transfers to our customer for product shipped. The Company’s customary terms are FOB our factory and control is deemed to transfer upon shipment. The Company has elected to treat shipping and other transportation costs charged to customers as fulfillment activities and are recorded in both revenue and cost of sales at the time control is transferred to the customer. As customers are invoiced at the time control transfers and the right to consideration is unconditional at that time, the Company does not maintain contract asset balances for product revenue. Additionally, the Company does not maintain contract liability balances for product revenues, as performance obligations are satisfied prior to customer payment for product. The Company generally offers a one year product warranty, for replacement of product only, and does not allow returns. The Company offers industry standard payment terms that typically require payment from our customers from 30 to 60 days after title transfers.

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The Company also recognizes revenues under the over time method from certain research and development, or R&D, activities (contract revenues) under both firm fixed-price contracts and cost-type contracts. Progress and revenues from research and development activities relating to firm fixed-price contracts and cost-type contracts are generally recognized on an input method of accounting as costs are incurred. Under the input method, revenue is recognized based on efforts expended to date (e.g., the costs of resources consumed or labor hours worked, or machine hours used) relative to total efforts intended to be expended. Contract costs include all direct material, labor and subcontractor costs and an allocation of allowable indirect costs as defined by each contract, as periodically adjusted to reflect revised agreed upon rates. These rates are subject to audit by the other party. Any changes in estimate related to contract accounting are accounted for prospectively over the remaining life of the contract. Under the over time method, billings may not correlate directly to the revenue recognized. Based upon the terms of the specific contract, billings may be in excess of the revenue recognized, in which case the amounts are included in deferred revenues as a liability on the Condensed Consolidated Balance Sheets. Likewise, revenue recognized may exceed customer billings in which case the amounts are reported as unbilled receivables. Unbilled revenues are expected to be billed and collected within one year.

Costs to Obtain and Fulfill a Contract

The incidental costs related to obtaining product sales contracts are non-recoverable from customer and, accordingly, are expensed as incurred. The Company capitalizes costs incurred to fulfill its R&D contracts that i) relate directly to a contract or anticipated contract, ii) are expected to satisfy the Company’s performance obligation under the contract, and iii) are expected to be recovered through revenue generated under the contract. Contact fulfillment costs are expensed to cost of revenue as the related performance obligations are satisfied.

Disaggregation of Revenue

The Company sells products directly to military contractors and OEM’s who use the Company’s displays in a diverse range of applications encompassing the military and commercial, including medical and industrial, market sectors. Revenues are classified as either military, commercial, consumer or multiple based on management’s knowledge of the customer’s products and markets served by displays or the R&D contract work. Revenues classified as multiple are for sales to customers that incorporate the Company’s displays in products that could be used for either military or commercial applications. R&D activities are performed for both military customers and U.S. Government defense related agencies and consumer companies. Product and contract revenues are disclosed on the Condensed Consolidated Statements of Operations.

Additional disaggregated revenue information for the three months ended March 31, 2023 and 2022 were as follows (in thousands):

	Three Months Ended
	March 31,
	2023		2022
North and South America	$	3,170	$	4,326
Europe, Middle East, and Africa		3,021		2,920
Asia Pacific		404		112
Total	$	6,595	$	7,358

	Three Months Ended
	March 31,
		2023		2022
Military	$	4,906	$	5,360
Commercial, including industrial and medical		854		977
Consumer		5		289
Multiple		830		732
Total	$	6,595	$	7,358

Accounts Receivable from Customers

Accounts receivable, net of allowances, were $5.5 million and $7.0 million as of March 31, 2023 and December 31, 2022.

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Contract Assets and Liabilities

Unbilled Accounts Receivables (Contract Assets) - Pursuant to the over time revenue recognition model, revenue may be recognized prior to the customer being invoiced. Unbilled accounts receivable is recorded to reflect revenue that is recognized when the cost based input method is applied and such revenue exceeds the amount invoiced to the customer. Unbilled receivables are disclosed on the Condensed Consolidated Balance Sheets. With the adoption of ASU 2016-13, the Company considered the risk of credit loss related to its contract assets. Our analysis was performed by type of accounts receivable (commercial vs. government) and geographic location. We did not record an adjustment to retained earnings as this ASU did not have a material impact on the Company’s consolidated allowance for credit losses.

Customer Advances and Deposits (Contract Liabilities) - The Company recognizes a contract liability when it has billed and received consideration from the customer pursuant to the terms of a contract but has not yet recognized the related revenue. These billings in excess of revenue are classified as deferred revenue on the Condensed Consolidated Statements of Operations.

Total contract assets and liabilities consisted of the following amounts (in thousands):

	March 31,		December 31,
	2023		2022
Unbilled Receivables (contract assets)	$	2,665	$	2,438
Deferred Revenue (contract liabilities)	$	12	$	12

For the three months ended March 31, 2023, the Company recognized no revenue related to its contract liabilities that existed at December 31, 2022. For the three months ended March 31, 2022, the Company recognized $42 thousand of revenue related to its contract liabilities that existed at December 31, 2021.

Remaining Performance Obligations

The Company has elected the practical expedient, which allows disclosure of remaining performance obligations only for contracts with an original duration of greater than one year. Such remaining performance obligations primarily relate to engineering and design services. As of March 31, 2023, the aggregate amount of the transaction price allocated to remaining performance obligations was $1.3 million. The Company expects to recognize revenue on all of its remaining performance obligations over the next 12 months.

Note 3 – Accounts Receivable

The majority of the Company’s commercial accounts receivable are due from OEM’s. Credit is extended based on an evaluation of a customer’s financial condition and, generally, collateral is not required.

Accounts receivable consisted of the following (in thousands):

	March 31,		December 31,
	2023		2022
Accounts receivable	$	5,671	$	7,193
Less allowance for credit losses		(158)		(158)
Accounts receivable, net	$	5,513	$	7,035

Allowance for Credit Losses

Our provision for credit losses represents the periodic expense of maintaining an allowance sufficient to absorb lifetime expected credit losses in trade receivables. The evaluation of the allowance for credit losses is inherently subjective, as it requires estimates that may be susceptible to significant changes. We believe the allowance for credit losses is appropriate to cover lifetime losses expected to be incurred in our trade receivables. Prior to the adoption of ASU 2016-13, the allowance for doubtful accounts was determined based on a variety of factors, including the length of time receivables were past due, historical experience, the customer's current ability to pay its obligation, and the condition of the general economy and the industry as a whole. With the adoption of ASU 2016-13, we amended our loss model to include analysis of domestic and international political and economic conditions and future trends. Our analysis was performed by accounts receivable aging, type of accounts receivable and geographic location. We did not record an adjustment to retained earnings as this ASU did not have a material impact on the Company’s consolidated allowance for credit losses.

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Activity related to the allowance for credit losses is as follows (in thousands):

Balance as of January 1, 2023	$	158
Current period provision		—
Write-offs charged against the allowance		—
Recoveries collected		—
Balance as of March 31, 2023	$	158

Note 4 – Inventories, net

The components of inventories are as follows (in thousands):

	March 31,		December 31,
	2023		2022
Raw materials	$	3,821	$	3,497
Work in process		2,694		3,496
Finished goods		2,835		2,103
Total inventories		9,350		9,096
Less inventory reserve		(546)		(387)
Total inventories, net	$	8,804	$	8,709

Note 5 – Line of Credit / Loan Payable

Revolving Credit Facility

	March 31,		December 31,
(in thousands)	2023		2022
Revolving credit facility	$	—	$	1,037

On December 21, 2016, the Company entered into the ABL Facility with a lender that provides for up to a maximum amount of $5 million based on a borrowing base equivalent to 85% of eligible accounts receivable plus the lesser of $2 million or 50% of eligible inventory. The interest on the ABL Facility is equal to the Prime Rate plus 3% but may not be less than 6.5% with a minimum monthly interest payment of $2 thousand. The Company is also obligated to pay the lender a monthly administrative fee of $1 thousand and an annual facility fee equal to 1% of the maximum amount borrowable under the facility.

The ABL Facility renewed on December 31, 2022 and will automatically renew on December 31, 2023 for a one year term unless written notice to terminate the agreement is provided by either party. The ABL Facility agreement contains certain lenders remedies that upon events of default, give the bank the ability to terminate the facility before the scheduled maturity date. Accordingly, the Company classifies borrowing under the ABL Facility as current liabilities on the accompanying Consolidated Balance Sheet.

The ABL Facility is secured by a lien on all receivables, property and the proceeds thereof, credit insurance policies and other insurance relating to the collateral, books, records and other general intangibles, inventory and equipment, proceeds of the collateral and accounts, instruments, chattel paper, and documents. Collections received on accounts receivable are directly used to pay down the outstanding borrowings on the credit facility.

The ABL Facility contains customary representations and warranties, affirmative and negative covenants and events of default. The Company is required to maintain a minimum tangible net worth of $13 million and a minimum working capital balance of $4 million at all times. As of March 31, 2023 the Company had no borrowings outstanding under the ABL Facility, had unused borrowing availability of $2.4 million under the ABL Facility and was in compliance with all financial debt covenants under the ABL Facility.

Note 6 – Stock Compensation 

The Company uses the fair value method of accounting for share-based compensation arrangements. The fair value of stock options is estimated at the date of grant using the Black-Scholes option valuation model. Stock-based compensation expense is reduced for estimated forfeitures and is amortized over the vesting period using the straight-line method.

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The fair value of Restricted Stock Units, or RSU’s is established by the market price of the Company’s common stock at the date of grant and for time based grants, is amortized over the vesting period using the straight line method. Performance-based RSUs are typically granted such that they vest upon the achievement of EBITDA targets, during a specified performance period, subject to the satisfaction of certain time-based service criteria. Certain Performance-based RSUs vest upon the achievement of operational milestones. Compensation expense from these awards is equal to the fair market value of the Company’s ordinary shares on the date of grant and is recognized over the remaining service period based on the probable outcome of achievement of the financial metrics used in the specific grant’s performance criteria. Management’s estimate of the number of shares expected to vest is based on the anticipated achievement of the specified non-market performance criteria, which are assessed at each reporting period.

The following table summarizes the allocation of non-cash stock-based compensation to our expense categories for the three months ended March 31, 2023 and 2022 (in thousands): 

	Three Months Ended
	March 31,
	2023		2022
Cost of revenues	$	3	$	28
Research and development		171		36
Selling, general and administrative		82		101
Total stock compensation expense	$	256	$	165

The following table summarizes the Company’s stock-based compensation expense by each award type:

	Three Months Ended
	March 31,
	2023		2022
Stock options	$	17	$	70
Restricted Share Units		239		95
Total stock compensation expense	$	256	$	165

At March 31, 2023, total unrecognized compensation costs related to stock options and RSUs was approximately $13 thousand and $1.4 million, respectively, net of estimated forfeitures. Total unrecognized compensation cost for stock options and RSUs will be adjusted for future changes in estimated forfeitures and is expected to be recognized over a weighted average period of approximately 0.2 years and approximately 2.0 years, respectively.

Stock Option Summary

The following key assumptions were used in the Black-Scholes option pricing model to determine the fair value of stock options granted:

	Three Months Ended
	March 31,
	2023				2022
Dividend yield			0	%			0	%
Risk free interest rates	3.24	-	3.25	%	0.89	-	0.95	%
Expected volatility	79.3	to	83.0	%	75.9	to	79.0	%
Expected term (in years)	5.0	to	5.5		5.0	to	5.5

The Company does not expect to pay dividends in the near future. Therefore, the Company used an expected dividend yield of 0%. The risk-free interest rate used in the Black-Scholes option pricing model is based on applicable yield available at the date of the option grant on U.S. Treasury securities with an equivalent term. Expected volatility is based on the weighted average historical volatility of the Company’s common stock for the equivalent term. The expected term of the options represents the period that the Company’s stock-based awards are expected to be outstanding and was determined based on historical experience and vesting schedules of similar awards.

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A summary of the Company’s stock option activity for the three months ended March 31, 2023 presented in the following table (unaudited):

	Number of ‎Shares		Weighted ‎Average ‎Exercise ‎Price		Weighted Average Remaining Contractual Life (In Years)	Aggregate ‎Intrinsic ‎Value
Outstanding at December 31, 2022		3,459,882	$	1.50
Options granted		—		—
Options exercised		—		—
Options forfeited		—		—
Options cancelled or expired		(209,930)		1.78
Outstanding at March 31, 2023		3,249,952	$	1.48	3.27	$	2,591,607
Vested or expected to vest at March 31, 2023 (1)		3,249,415	$	1.48	3.27	$	2,590,823
Exercisable at March 31, 2023		3,114,952	$	1.52	3.02	$	2,394,507

(1)The expected to vest options are the result of applying the pre-vesting forfeiture rate assumptions to total unvested options.

The aggregate intrinsic value in the table above represents the difference between the exercise price of the underlying options and the quoted price of the Company’s common stock. The Company issues new shares of common stock upon exercise of stock options. There were no options exercised in the three months ended March 31, 2023.

Restricted Stock Units (“RSU”) Summary

The following table summarized the activity in respect of RSUs issued under the Company’s plans for the three months ended March 31, 2023:

					Weighted Average Grant Date
	Number of Awards				Fair Value Per Share
	Service		Performance		Service		Performance
	based		based		based		based
RSU's outstanding at December 31, 2022		1,422,679		436,874	$	1.26	$	1.23
Granted		20,000		—		1.66		—
Vested and settled		—		—		—		—
Forfeited		(18,021)		(11,679)		2.57		3.60
RSU's outstanding at March 31, 2023		1,424,658		425,195	$	1.25	$	1.16

Note 7 – Income Taxes

The Company’s effective tax rate is calculated quarterly based upon current assumptions relating to the full year’s estimated operating results and various tax-related items. The Company’s effective tax rate was 0% for the three months ended March 31, 2023 and 2022. The difference between the effective tax rate of 0% and the U.S. federal statutory rate of 21% for three months ended March 31, 2023 and 2022 was primarily due to recognizing a full valuation allowance on deferred tax assets.

The Company determined that, based on all available evidence, both positive and negative, including the Company’s latest forecasts and cumulative losses in recent years, it was more likely than not that none of its deferred tax assets would be realized and therefore it continued to record a full valuation allowance as of March 31, 2023.

The Company’s 2017 and prior net operating loss carry-forward amounts expire through 2037 and are subject to certain limitations that may occur due to a change in the ownership provisions under Section 382 of the Internal Revenue Code and similar state provisions. Pursuant to provisions of the Tax Cuts and Jobs Act, the net operating losses originating in years subsequent to 2017 can be carried forward indefinitely.

Due to the Company’s operating loss carry-forwards, all tax years remain open to examination to the extent of the operating loss carry-forward by the major taxing jurisdictions to which the Company is subject. In the event that the Company is assessed interest or penalties at some point in the future, it will be classified in the financial statements as tax expense.

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On March 27, 2020, the President of the United States signed the CARES Act. The CARES Act provides several provisions that effect businesses from an income tax perspective. Due to the history of the tax losses, most of the CARES Act provisions have no current benefit to the Company. The Company can, however, benefit from one provision, which allows for the immediate refund of the Alternative Minimum Tax Credit, or AMT Credit, previously recognized as deferred tax asset. The Company has filed an amendment to claim the AMT Credit and is anticipating a refund of $212 thousand. This tax receivable is reflected in Prepaid Expenses and Other Current Assets on the Condensed Consolidated Balance Sheets.

Note 8 – Commitments and Contingencies 

Equipment Purchase Commitments 

The Company has committed to equipment purchases of approximately $7.5 million at March 31, 2023, of which $6.9 million relates to equipment to be purchased under government awards.

Litigation

From time to time, the Company may become subject to various legal proceedings that are incidental to the ordinary conduct of our business. In the ordinary course of business, the Company may be subject from time to time to various proceedings, lawsuits, disputes, or claims. The Company investigates these claims as they arise. Although claims are inherently unpredictable, the Company is currently not aware of any matters that, if determined adversely to the Company, would individually or taken together, have a material adverse effect on its business, financial position, results of operations, or cash flows.

Note 9 – Warrants

The Company accounts for common stock warrants pursuant to applicable accounting guidance contained in ASC 815, "Derivatives and Hedging - Contracts in Entity's Own Equity" and makes a determination as to their treatment as either equity instruments or a warrant liability based on an analysis of the underlying warrant agreements.

The following table sets forth the Company’s outstanding common stock warrants as of March 31, 2023:

	Issued		Outstanding		Exercise Price		Expiration
2019 Warrant Issuance (1)		6,000,000		2,919,402		0.78		Oct 2024

(1)Private Placement unregistered warrants exercisable six months following issuance.

Equity classified warrants

The 2019 warrants were issued in a private placement concurrent with an offering of shares of Company Common Stock, and the exercise price of the Warrant Shares are subject to adjustment in the event of any stock dividends and splits, reverse stock splits, stock dividends, recapitalizations, reorganizations or similar transactions. The Warrants will be exercisable on a “cashless” basis in certain circumstances, including in the event a registration statement is not in effect at time of exercise. The warrant agreements contain a clause specifying that in the event there is no effective registration in effect for the underlying warrant shares to be issued at time of exercise, in no circumstance will the Company be required to net cash settle the warrants.

Based on the Company’s analysis of the terms and conditions of the warrants, the Company has concluded that they meet the conditions outlined in applicable accounting guidance to be classified as equity instruments.

During the three months ended March 31, 2023, 80,598 warrants were exercised on a cashless basis in exchange for 50,000 shares of the Company’s common stock.

During the three months ended March 31, 2022, there were no warrant exercises.

Liability classified warrants

Certain warrants issued in 2017 and in 2018 warrants had alternative settlement provisions that, at the option of the holder, provide for physical settlement or if, at the time of settlement there is no effective registration statement, a cashless exercise as defined in the warrant agreement.

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Based on analysis of the underlying warrant agreement and applicable accounting guidance, the Company concluded that these registered warrants require the issuance of registered securities upon exercise and do not sufficiently preclude an implied right to net cash settlement. Accordingly, these warrants were classified in the Company’s Condensed Consolidated Balance Sheets as a current liability upon issuance and were revalued at each subsequent balance sheet date.

The warrants issued in 2017, expired May 2022, and the warrants issued in 2018 expired January 2023.

The fair value of the liability for common stock purchase warrants was estimated using the Black Scholes option pricing model based on the market value of the underlying common stock at the measurement date, the contractual term of the warrant, risk-free interest rates, expected dividends and expected volatility of the price of the underlying common stock.

Based on the Black Scholes method the fair value of the Company’s warrants are as follows (in thousands):

	March 31,		December 31,
	2023		2022
2018 January and February Issuance (1)
Fair Value	$	—	$	—
	$	—	$	—

(1)Warrants from the 2018 January and February Issuance expired on January 29, 2023.

	Three Months Ended
	March 31,
	2023		2022
Change in Fair Value of common stock warrant liability (1)	$	—	$	1,146

(1)The combined changes in fair value are reflected as income (loss) from change in the fair market value of common stock warrant liability.

Note 10 – Leases

The Company leases office and manufacturing facilities in Hopewell Junction, New York under a non-cancelable lease agreement, which, as amended, expire in 2031, and includes two, five year options to extend. The lease agreement did not contain any residual value guarantees, or material restrictive covenants. Upon signing a 12^th amendment in November 2020, the Company reassessed the lease from operating to a finance lease.

The Company also leases an office facility for its design group in Santa Clara, California. In October 2021, the Company signed an additional two year extension of the lease for the Santa Clara design group facility, and has classified this as an operating lease. The lease agreement did not contain any residual value guarantees, material restrictive covenants or a renewal option and was classified as an operating lease. On May 2, 2019, the Company entered into a three year finance lease commitment for phone equipment.

The Company's leases generally do not provide an implicit rate, and therefore the Company uses its incremental borrowing rate as the discount rate when measuring lease liabilities. The Company estimates its incremental borrowing rate based on a yield curve analysis, utilizing the interest rate derived from the fair value analysis of the Company’s credit facility and adjusting it for factors that appropriately reflect the profile of secured borrowing over the expected term of the lease.

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The components of lease expense were as follows (in thousands):

	Three Months Ended
	March 31,
	2023		2022
Finance Lease Cost:
Amortization of right-of-use assets	$	174	$	163
Interest on lease liabilities		244		198
Operating lease cost		16		—
Total Lease Cost	$	434	$	361
Cash paid for amounts included in the measurement of lease liabilities:
Principal payments on operating lease liabilities	$	16	$	15
Principal payments on finance lease liabilities	$	307	$	267
Right-of-use assets obtained in exchange for new finance lease liabilities	$	—	$	69
Right-of-use assets obtained in exchange for new operating lease liabilities	$	—	$	—

	March 31, 2023		December 31, 2022
Finance lease right-of-use assets	$	13,734	$	13,908
Operating lease right-of-use assets	$	37	$	53
Finance lease liability, current	$	1,229	$	1,229
Finance lease liability, non-current	$	13,545	$	13,608
Operating lease liabilities, current	$	38	$	54
Operating lease liabilities, non-current	$	-	$	-
Weighted average remaining lease terms - finance leases		19.75 years		20.00 years
Weighted average remaining lease terms - operating leases		0.58 years		0.83 years
Weighted average discount rate - finance leases		6.94%		6.94%
Weighted average discount rate - operating leases		6.48%		6.48%

Future annual minimum lease payments and finance lease commitments as of March 31, 2023 were as follows (in thousands):

	Operating Leases		Finance Leases
2023	$	39	$	922
2024		—		1,229
2025		—		1,229
2026		—		1,229
2027		—		1,269
Thereafter		—		21,345
Total undiscounted future minimum lease payments		39		27,223
Less imputed interest		(1)		(12,449)
Lease liability	$	38	$	14,774

Note 11 – Shareholders’ Equity

Equity Raises

On November 18, 2021, the Company entered into an ATM offering agreement with H.C. Wainwright & Co., LLC, or Wainwright, relating to sales of shares of its common stock under an ATM facility. On November 18, 2021, the Company also filed a prospectus supplement to allow the sale of shares of its common stock having an aggregate offering price of up to $10.0 million under the ATM facility.

During the three months ended March 31, 2023, the Company raised $1.2 million, net of offering expenses, through the sale of shares under the ATM facility. The Company used and intends to use the net proceeds from sales made under the ATM facility for working capital and other general corporate purposes.

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Note 12 – Government Funding

On July 28, 2020, the Company announced that it had been awarded a $33.6 million contract over the next 33 months from the U.S. Department of Defense, or the DoD, to sustain and enhance U.S. domestic capability for high resolution, high brightness OLED microdisplays that will be based on the Company’s proprietary direct patterning technology dPd. This investment is in addition to the $5.5 million award announced on June 11, 2020, under the U.S. Department of Defense Industrial Base Analysis, or IBAS, Program for OLED Supply Chain Assurance and will be used to increase capacity and sustain operations at the Company’s Hopewell Junction, New York, headquarters. These funds will be used to procure key equipment and tooling, and reimburse the Company for certain labor and material costs, which the Company believes will improve all aspects of its OLED microdisplay production, including increased throughput and capacity.

Pursuant to the preliminary Technology Investment Agreement the U.S. government provided when the award was announced, the Company expects that the U.S. government will own the related equipment purchases until the end of the 33 month contract period, at which point the Company can apply to take title. The Company began making payments to related equipment vendors during the fourth quarter of 2020. For accounting purposes, the Company considers that it is probable that title will pass to the Company and accordingly will treat this award in a similar fashion as the IBAS award.

The Company recognizes the government awards as deferred income – government awards as program milestones are invoiced, and will recognize other income as depreciation and other expenditures are incurred over the useful life of the capital equipment. As of March 31, 2023, the Company has received $32.2 million in total, for initial deposits required by capital equipment vendors. Amounts received, pending payment of deposits to vendors as of March 31, 2023, of $0.3 million are reflected in restricted cash on the accompanying Condensed Consolidated Balance Sheets. Amounts due from the U.S. DoD pursuant to invoices for capital equipment are presented on the Condensed Consolidated Balance Sheets as accounts receivable – due from government awards. The total amount invoiced on these programs of $32.2 million is reflected less depreciation in deferred revenue government awards – long term, and other current liabilities. Additional amounts remaining under the awards will be recorded in a similar fashion and will coincide with the progress payments required under the various capital equipment purchase terms. For the three months ended March 31, 2023, the Company recognized deferred income related to certain overhead expenses, not capitalized, of $40 thousand.

The terms of various government agreements provide among other items that the Company must achieve certain yield targets, give priority to military orders and continue to maintain the productive capacity of equipment purchased for up to five years past the completion of the programs.

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ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 

The following discussion should be read in conjunction with our financial statements and notes thereto. Our fiscal year ends December 31. This Report contains certain forward-looking statements including, among others, anticipated trends in our financial condition and results of operations and our business strategy. These forward-looking statements are based largely on our current expectations and are subject to a number of risks and uncertainties. Actual results could differ materially from these forward-looking statements. Important factors to consider in evaluating such forward-looking statements include changes in external factors or in our internal budgeting process which might impact trends in our results of operations, unanticipated working capital or other cash requirements, changes in our business strategy or an inability to execute our strategy due to unanticipated changes in the industries in which we operate, and various competitive market factors that may prevent us from competing successfully in the marketplace. Forward-looking statements do not represent our views as of any date other than the date of this Report. Please see "Statement Regarding Forward-Looking Information" and the sections titled “Risk Factors” included in this Report, in our Annual Report on Form 10-K for year ended December 31, 2022 filed with the SEC on March 10, 2023, or 2022 Form 10-K, and in our other filings with the SEC.

Business

We design, develop, manufacture and market organic light emitting diode, or OLED, miniature displays, which we refer to as OLED-on-silicon microdisplays, virtual imaging products that utilize OLED microdisplays, and related products. We also perform research in the OLED field. Our virtual imaging products integrate OLED technology with silicon chips to produce high-resolution microdisplays which, when viewed through a magnifying headset, create virtual images that appear comparable in size to that of a computer monitor or a large‑screen television. Our products enable our original equipment manufacturer, or OEM, customers in the military and commercial markets to develop and market improved or new electronic products which enable the visualization of digital information and imagery.

We believe that our OLED microdisplays offer a number of significant advantages over comparable liquid crystal microdisplays, including higher contrast, greater power efficiency, less weight, more compact size, and negligible image smearing. Using our active matrix OLED technology, many computer and electronic system functions can be built directly into the OLED microdisplays silicon backplane, resulting in compact, high resolution and power efficient systems. Already proven in military and commercial systems, our product portfolio of OLED microdisplays deliver high‑resolution, virtual images that perform effectively even in extreme temperatures and high‑vibration conditions.

During the first quarter of 2023 our total revenue was $6.6 million, as compared to $7.4 million in the first quarter of 2022. The decrease was primarily due to first quarter 2023 display revenues of $6.4 million which were down 9% year over year. Our quarterly display revenue gross margin decreased to 21% from the prior year’s first quarter of 32%. The gross margin decline was primarily due to production downtime, which resulted in a lower volume of displays produced and higher average product costs. As of the end of the first quarter, our sales backlog of orders shippable in one year remained strong at $11.9 million, reflecting demand for our displays for use in thermal weapon sights, military night vision goggles, and medical applications.

Operating expenses for the first quarter of 2023, including R&D expenses, were $4.0 million, compared with $3.7 million in the prior-year period. Operating expenses as a percentage of sales were 61% in the first quarter of 2023, with 50% in the prior-year period.

We have been deemed to be an essential business in the State of New York and have continued to produce and ship products during the COVID-19 pandemic. We have implemented employee health and safety measures per Centers for Disease Control and Prevention, or CDC, guidelines, and monitor, federal, state and local governmental regulations to respond to the latest health and safety guidelines. We have experienced disruptions in supply, had several employees test positive for the COVID-19 virus and had to close our facilities for cleaning purposes. There is no assurance that our operations will not be disrupted in the future by additional impacts of the COVID-19 pandemic, its variants, or other resurgences of the virus, on either our internal operations or those of our suppliers or customers, including the possible impact of disruptions in the supply of silicon wafers or other raw materials that could harm our ability to meet demand for our products in a timely manner, or within budget.

We received a validation of our products and technology during fiscal 2020 from the U.S. government. In 2020, we received two U.S. Department of Defense, or DoD, awards totaling $39.1 million. We believe we are the only commercial U.S. manufacturer of OLED microdisplays and our displays are used in many U.S. Military programs.

We have committed the funds and ordered all equipment to be purchased under these programs, including an advanced, production capable dPd organic deposition tool that is expected to improve yield and throughput of this innovative technology for the benefit of our AR/VR customers. As of March 31, 2023, we had taken delivery of seven pieces of production equipment and received $32.2 million of the total $39.1 million in government granted awards for initial deposits required by capital equipment vendors.We believe we remain on track and within requirements of the U.S. Defense Production Act Title III and IBAS funding grants. The new equipment will help

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us increase capacity and yield for all display types, address critical productions points, and replace certain older equipment, which we expect will aid us in meeting expected demand for our microdisplays. In April 2023, the period of performance under the IBAS program was extended through September 30, 2023 in recognition of global supply chain challenges.

We are continually making improvements in production processes; however, until we are able to fully operationalize the equipment we acquired as a result of the $39.1 million in government grants we were awarded in 2020, much of our equipment remains older, and malfunctions in single point of failure equipment have the potential to delay our production until repairs can be made. We experienced some equipment issues in 2021 that impacted revenues. Equipment purchased and placed in service, under our government awards programs is expected to reduce our single point of failure risk and improve manufacturing yields and throughput. As part of our ongoing efforts to improve our throughput, yield, and quality practices, we are working with an industrial engineering firm to develop an operations excellence strategy. In September 2022, we obtained the AS9100 quality certification. AS9100 is an internationally recognized quality management system standard specific to the aerospace, aviation, and defense industries. The standard is widely supported and adhered to by major aerospace OEMs and is increasingly required by vendors within the supply chain.

Our backlog on March 31, 2023, was $11.9 million compared to backlog of $13.6 million at March 31, 2022. Backlog is comprised of orders believed to be firm with scheduled delivery dates over the next twelve months and does not include contract revenues.

We believe that our U.S.-based design and manufacturing, combined with in-house advanced backplane design, and our dPd technology give us a competitive advantage. Our direct patterning equipment is operational. We have fabricated full color displays using the newly upgraded and installed dPd tool during 2021 including our 4kX4k and WUXGA displays. In July 2021, using our dPd technology we created full color WUXGA displays with a brightness of over 10,000 cd/m2 and exhibited these displays to industry analysts in October 2021. During 2023 as a result of enhancements made to our R&D chamber, we have produced several dPd displays approaching the 15,000 cd/m2 luminance levels. We continue our development work for a tier one consumer customer and are targeting similar levels of brightness on proof-of-concept displays using our full color dPd process.

Consumer, commercial (in which we include the medical and industrial sectors), and military customers are increasingly turning to us because of our technological leadership in display brightness and resolution. This leadership in brightness is further demonstrated by our proprietary dPd capability. Unlike traditional OLEDs that produce colors by using a white source with filters that eliminate about 80% of the emitted light, with dPd, we make full color displays by directly depositing each of the primary color materials on respective sub-pixels, without the use of filters. In July 2021, we achieved full color brightness levels of over 10,000 cd/m2, and in April 2023 have produced prototype displays with our enhanced R&D tool approaching 15,000 cd/m2 and expect to achieve a brightness level of over 22,000 cd/m2 ready for mass production of full color displays by 2024. We achieved the highest monochrome brightness levels in the market years ago and are continuing our leadership with color displays. Display brightness is critical for AR/VR devices because of optics inefficiency and the need to eliminate motion artifacts. This is especially important for heads up displays used in bright, daylight environments. Our high resolution and low pixel pitch are also important to eliminate the “screen door” effect that comes with expanding lower resolution displays over wide fields of view.

Critical Accounting Policies

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. which require that management make numerous estimates and assumptions.

Please refer to the information provided under the heading "Critical Accounting Policies and Estimates" included in our 2022 Form 10-K for a discussion of our critical accounting policies. There were no material changes to such policies in the three months ended March 31, 2023.

Results of Operations 

Comparative results of operations for the three months ended March 31, 2023 and 2022 (in thousands):

Revenues 

	Three Months Ended
	March 31,
	2023		2022		Change
Product	$	6,368	$	7,027	$	(659)
Contract		227		331		(104)
Total revenue, net	$	6,595	$	7,358	$	(763)

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Total revenue for the three months ended March 31, 2023 was $6.6 million, as compared to revenues of $7.4 million, for the three months ended March 31, 2022.

Product revenue is comprised primarily of sales of displays as well as sales of other hardware. For the three months ended March 31, 2023 product revenue decreased by $0.7 million, primarily due to late deliveries resulting from unexpected production downtime and the timing of military orders.

Contract revenue primarily reflected development associated with a high brightness display design for the Department of Defense and a proof of concept display for a tier one consumer company. For the three months ended March 31, 2023 contract revenue decreased by $0.1 million, as compared to the prior period, reflecting the timing of phases and milestones of these contracts. We are continuing to work on the high brightness display design and our proof of concept for this consumer customer and expect ongoing contract revenue under these programs. Contract revenues are based on accomplishing specific milestones and are not uniformly distributed throughout the project duration.

Cost of Revenues 

	Three Months Ended
	March 31,
	2023		2022		Change
Product	$	5,004	$	4,787	$	217
Contract		117		82		35
Total cost of revenues	$	5,121	$	4,869	$	252

Total cost of revenues is comprised of costs of product and contract revenues. Cost of product revenue includes materials, labor and manufacturing overhead, warranty costs and depreciation related to our products. Cost of contract revenue includes direct and allocated indirect costs associated with performance on the contracts, primarily engineering resources and materials. Total cost of revenues for the three months ended March 31, 2023 increased by $0.3 million from the comparable prior year period.

Product cost of revenues for the three months ended March 31, 2023, increased from the prior year period, primarily due to lower production volumes due to unplanned equipment downtime, and a resultant increase in average display cost.

Contract cost of revenues for the three months ended March 31, 2023 was comparable to the prior year period.

The following table outlines product and contract gross profit and related gross margins for the three months ended March 31, 2023 and 2022 (dollars in thousands):  

	Three Months Ended
	March 31,
	2023			2022
Product revenues gross profit	$	1,364		$	2,240
Product revenues gross margin		21	%		32	%
Contract revenues gross profit	$	110		$	249
Contract revenues gross margin		48	%		75	%
Total gross profit	$	1,474		$	2,489
Total gross margin		22	%		34	%

Total gross profit is a function of revenues less cost of revenues. Gross profit for the three months ended March 31, 2023 of $1.5 million decreased $1.0 million, from the comparable prior year period reflecting decreased product and contract revenues. Total gross margin was 22% for the three months ended March 31, 2023, compared to 34% for the comparable 2022 period.

The product gross profit of $1.4 million for the three months ended March 31, 2023, decreased from $2.2 million in the comparable prior year period. The decrease was primarily due to production downtime, which resulted in a lower volume of displays produced, and higher average product costs resulting from factory overhead costs being allocated across a reduced quantity of finished and work in process displays.

Contract gross margin is dependent upon the mix of internal labor costs versus external third-party costs and materials, with the external third-party costs and materials causing a lower gross margin and reducing the contract gross profit. For the three months ended March 31, 2023, contract revenue gross profit was $0.1 million compared to $0.2 million, for the prior year period. The decrease in contract gross margin for the three months ended March 31, 2023 versus the prior year period is primarily due to decreased contract revenues.

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Operating Expenses

	Three Months Ended
	March 31,
	2023			2022			Change
Research and development expense	$	1,203		$	1,484		$	(281)
Percentage of net revenue		18	%		20	%
Selling, general and administrative expense	$	2,805		$	2,170		$	635
Percentage of net revenue		43	%		29	%
Total operating expenses	$	4,008		$	3,654		$	354
Percentage of net revenue		61	%		50	%

Research and Development Expense

R&D expenses are Company funded and are primarily compromised of salaries and related benefits, development materials and other costs specifically allocated to the development of new technologies, microdisplay products, OLED technologies and production processes. R&D related costs associated with fulfilling contracts are categorized as contract cost of revenues. R&D expense was $1.2 million for the three months ended March 31, 2023, compared to $1.5 million, in the prior year period. Prior year R&D expenses reflected higher benefit accruals.

Selling, General and Administrative Expense

SG&A expenses consist primarily of personnel expenses, professional services fees, as well as other marketing, general corporate and administrative expenses. The increase in SG&A expenses for the three months ended March 31, 2023 of $0.6 million reflects an increase in legal and professional fees and changes in non-cash stock compensation.

Other Income (Expense)

Other income (expense), net consists of changes in the fair value of warrant liability as well as interest income earned on cash balances. There was no other income related to the change in fair value of warrant liability for the three months ended March 31, 2023, compared to other income of $1.1 million for the three months ended March 31, 2022. This non-cash income recorded in the first quarter of 2022 was associated with changes in the liability related to registered warrants issued in January 2018. In periods before the expiration of these warrants in January 2023, we were required to revalue warrants classified on our Condensed Consolidated Balance Sheets as a liability at the end of each reporting period and reflect a gain or loss from the change in fair value in the period in which the change occurred. 

Other income for the three months ended March 31, 2023, includes $120 thousand in deferred income related to assets provided under government grant programs and the related reimbursement of labor overhead charges incurred under these grant programs. Pursuant to our accounting policy, we reduce the deferred income – government awards liability to recognize income associated with these grants over depreciable lives of the assets purchased with the awards.

Liquidity and Capital Resources

As of March 31, 2023, we had $3.8 million in cash and cash equivalents, working capital of $16.1 million, no borrowings outstanding and borrowing availability under the ABL Facility of $2.4 million. We had $4.3 million in cash, working capital of $17.0 million and borrowings outstanding and borrowing availability under the ABL Facility of $1.0 million and $1.8 million, respectively, at December 31, 2022.

On July 28, 2020, we announced that we had been awarded a $33.6 million contract over the following 33 months from the DoD to sustain and enhance U.S. domestic capability for high resolution, high brightness OLED microdisplays that will be based on our proprietary direct dPd technology. This investment is in addition to the $5.5 million award announced on June 11, 2020, under the IBAS Program for OLED Supply Chain Assurance. We have used and expect to continue to use the investment to increase capacity and sustain operations at our Hopewell Junction, New York headquarters. In August 2020, these funds began to be released to us and will continue to be released over the life of the programs in accordance with the down payment and progress payment schedules of the various capital equipment vendors.

We have committed the funds and ordered all equipment to be purchased under these programs, including a production capable dPd organic deposition tool that is expected to improve yield and throughput of this innovative technology for the benefit of our AR/VR customers. As of March 31, 2023, we had taken delivery of seven pieces of production equipment and received $32.2 million of the

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total $39.1 million in government granted awards for initial deposits required by capital equipment vendors. Overall, we believe we remain on track and within requirements of the U.S. Defense Production Act Title III and IBAS funding grants.

For the three months ended March 31, 2023 cash used in operating activities were $0.2 million which was attributable to a net loss of $2.6 million offset by cash used by operating assets and liabilities of $1.4 million and non-cash income and expenses of $1.0 million. Cash used in operating activities for the three months ended March 31, 2022 was $0.1 million.

For the three months ended March 31, 2023 cash used in investing activities was $2.8 million related to equipment purchases primarily to improve manufacturing yields and production capacity and to advance our dPd technology including grant proceeds for capital expenditures of $2.4 million.

As of March 31, 2023, we had outstanding commitments to purchase approximately $0.6 million in capital expenditures, and expect to make additional capital expenditures during 2023 to improve our manufacturing and R&D capabilities. These commitments exclude $6.9 million expected to be purchased and funded by the DoD, as described above. Cash used in investing activities during the three months ended March 31, 2022 was $7.1 million for equipment purchases.

For the three months ended March 31, 2023, cash provided by financing activities of $2.5 million, includes proceeds from government grants of $2.4 million, and public offering (ATM) proceeds of $1.2 million offset by net borrowings of $1.0 million under our ABL Facility and change in finance lease liabilities of $0.1 million. Net cash provided by financing activities during the three months ended March 31, 2022 was $5.4 million.

Going concern

The accompanying Condensed Consolidated Financial Statements have been prepared on a going concern basis, which assumes that we will continue to operate as a going concern and which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. For the three months ended March 31, 2023, a net loss of $2.6 million was incurred and cash used in operating activities of $0.2 million. As of March 31, 2023, we had $3.8 million of cash, no borrowings outstanding and borrowing availability of $2.4 million under our ABL Facility.

Our ABL Facility expires on December 31, 2023, and renews automatically for another year unless terminated pursuant to its terms. The ABL Facility agreement contains certain lenders remedies that give the bank the ability to impose discretionary reserves against our borrowing availability or terminate the facility upon events of default. Although our relationship with the lender is positive, there is no assurance the lender will renew or extend this facility or continue to make funds available during 2023 and beyond at present availability levels, or at all.

Due to continuing losses, our financial position, and uncertainty regarding our ability to borrow under our ABL Facility, or continue to raise funds under our ATM facility, we may not be able to meet our financial obligations as they become due without additional financing or sources of capital. Although demand for our products has remained steady, due to lingering supply chain issues caused in part by the COVID-19 Pandemic, and also inflationary pressures our ability to obtain components and other materials or services on a timely basis has resulted in manufacturing delays, and increased costs in certain of our raw materials. If these trends worsen or result in lost orders it could materially and adversely affect our business, financial condition, and results of operations. Management is prepared to reduce expenses and raise additional capital, but there can be no assurance that we will be successful in sufficiently reducing expenses or raising capital to meet our operating needs.

We have taken actions to increase revenues and to reduce expenses and are considering financing alternatives. Our plans with regard to these matters include the following actions: 1) focus production and engineering resources on improving manufacturing yields and increasing production volumes, 2) continue the Work Status Reduction program that began in October 2019 for certain members of senior management pursuant to which their work status is reduced by approximately 20%, 3) continue to utilize government grants for purchase of capital equipment and funding manufacturing personnel, 4) reduce discretionary and other expenses, 5) seek to enter new markets, 6) sale of common shares under our At the Market, or ATM, equity facility entered into in November 2021, and 7) consider additional financing and/or strategic alternatives.

We are reassessing our business plans and forecasts over the next two years. Based on our known cash needs as of March 2023, our latest forecast of revenues and expenses, and the anticipated availability of our ABL facility, we have developed plans to extend our liquidity to support working capital requirements through the second quarter of 2024 and beyond.

However, there can be no assurance our plans will be achieved and we will be able to meet our financial obligations as they become due without obtaining additional financing or sources of capital. Therefore, in accordance with applicable accounting guidance, and based

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on our current financial condition and availability of funds, there is substantial doubt about our ability to continue as a going concern through twelve months from the date these financial statements were issued.

In addition, even if we successfully generate additional funds through the sale of additional equity securities, borrowings or alternative financing, there can be no assurances that the revenue or capital infusion will be sufficient to enable us to develop our business to a level where it will be profitable or generate positive cash flow. If we raise additional funds through the issuance of equity or convertible debt securities, the percentage ownership of our stockholders could be significantly diluted, and these newly issued securities may have rights, preferences or privileges senior to those of existing stockholders. If we incur additional debt, a substantial portion of its operating cash flow may be dedicated to the payment of principal and interest on such indebtedness, thus limiting funds available for our operational business activities. The terms of any debt securities issued could also impose significant restrictions on our operations. In addition, broad market and industry factors may seriously harm the market price of our common stock, regardless of its operating performance, and may adversely impact its ability to raise additional funds.

Equity Raises

On November 18, 2021, we entered into an ATM offering agreement with H.C. Wainwright & Co., LLC, or Wainwright, relating to sales of shares of our common stock under an ATM facility. On November 18, 2021, we also filed a prospectus supplement to allow the sale of shares of our common stock having an aggregate offering price of up to $10.0 million under the ATM facility.

For the three months ended March 31, 2023, we raised $1.2 million through the sale of shares under the ATM facility. We used and intend to use the net proceeds from sales made under the ATM facility for working capital and other general corporate purposes. We had approximately $2.4 million of potential sales remaining under the ATM facility, gross of offering expenses as of March 31, 2023.

ABL Facility

On December 21, 2016, we entered into an asset based revolving credit facility with a lender that provides for up to a maximum amount of $5 million based on a borrowing base equivalent of 85% of eligible accounts receivable plus the lesser of $2 million or 50% of eligible inventory. The interest on the ABL Facility is equal to the Prime Rate plus 3% but may not be less than 6.5% with a minimum monthly interest payment of $2,000. We are obligated to pay the lender a monthly administrative fee of $1,000 and an annual facility fee equal to 1% of the maximum amount borrowable under the facility. The ABL Facility automatically renewed on December 31, 2022 for a one-year term.

Our ABL Facility expires on December 31, 2023 and renews automatically for another year unless terminated pursuant to its terms. Our ABL Facility agreement contains certain lenders remedies that give the bank the ability to impose discretionary reserves against our borrowing availability or terminate the facility upon events of default.

The ABL Facility is secured by a lien on all receivables, property and the proceeds thereof, credit insurance policies and other insurance relating to the collateral, books, records and other general intangibles, inventory and equipment, proceeds of the collateral and accounts, instruments, chattel paper, and documents. The ABL Facility contains customary representations and warranties, affirmative and negative covenants and events of default, including a provision that we maintain a minimum tangible net worth of $13 million and a minimum working capital balance of $4 million. As of March 31, 2023, we had no borrowings, had unused borrowing availability of $2.4 million and were in compliance with all financial debt covenants.

ITEM 3.   Quantitative and Qualitative Disclosures About Market Risk 

Not applicable.

ITEM 4.   Controls and Procedures 

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of the principal executive and principal financial officers, evaluated the effectiveness of our disclosure controls and procedures, as defined in Rules 13a – 15(e) and 15d – 15(e) under the Securities Exchange Act of 1934, as amended, or Exchange Act, as of the end of the period covered by this Report.

Our disclosure controls and procedures are designed to provide reasonable, not absolute, assurance that the objectives of our disclosure control system are met. Because of inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within a company have been detected. Based on our evaluation, our Chief Executive Officer and Chief Financial Officer has concluded that, as of the end of the period covered by this Report, our disclosure controls and procedures were not effective because of a material weakness in internal control over financial reporting related to the calculation of

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diluted earnings per share for the year-ended December 31, 2022, that was disclosed in the our Annual Report on Form 10-K for the year-ended December 31, 2022. Accordingly, management has concluded that this control deficiency constitutes a material weakness. Management did not identify a material misstatement within its financial statements in this or any previously filed Quarterly Report on Form 10-Q or Annual Report on Form 10-K as a result of the material weakness.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.

Remediation Steps to Address the Material Weakness

As previously disclosed in Part II, Item 9A of our Annual Report on Form 10-K for the year-ended December 31,2022, we commenced a remediation plan with the goal of remediating this material weakness as soon as possible. The material weakness will not be considered remediated until the conclusion by management that the enhanced internal control over financial reporting is operating effectively following appropriate testing, although the Company cannot estimate when the remediation will be completed. While we have processes to identify and appropriately apply applicable accounting requirements, we plan to enhance our system of evaluating and implementing the accounting standards that apply to our financial statements, including through enhanced analyses by our personnel and third-party professionals with whom we consult regarding complex accounting applications. Management plans to document key controls over earnings per share calculations and modify existing controls as necessary to ensure they operate at a sufficient level of precision.

During the remediation of the above material weakness, the Company may decide to modify other internal controls to further strengthen its overall internal control environment.

Changes in Internal Control Over Financial Reporting

Except with respect to the remediation efforts described above, during the quarter ended March 31, 2023, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
‎

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PART II – OTHER INFORMATION

ITEM 1.   Legal Proceedings

From time to time, we may become subject to various legal proceedings that are incidental to the ordinary conduct of our business. In the ordinary course of business, we may be subject from time to time to various proceedings, lawsuits, disputes, or claims. We investigate these claims as they arise. Although claims are inherently unpredictable, we are currently not aware of any matters that, if determined adversely to us, would individually or taken together, reasonably be expected to have a material adverse effect on our business, financial position, results of operations, or cash flows.

ITEM 1A.   Risk Factors

We operate in a rapidly changing environment that involves a number of risks that could materially affect our business, financial condition or future results, some of which are beyond our control. In addition to the other information set forth in this Report, you should carefully consider the factors discussed in the sections titled “Risk Factors” included in this Report, in our 2022 Form 10-K and in our other filings with the SEC. In addition, refer to our discussion in the Management’s Discussion and Analysis of Financial Condition and Results of Operations, and other sections of this report, which address the effects of the COVID-19 pandemic and the war in Ukraine, inflationary factors and our ability to continue as a going concern. The COVID-19 pandemic can also exacerbate other risks discussed in the “Risk Factors” sections of this Report, our 2022 Form 10-K and our other filings with the SEC, which could in turn have a material adverse effect on us. The “Risk Factors” section in our 2022 Form 10-K otherwise remains current in all material respects. The risks discussed in the “Risk Factors” section in our 2022 Form 10-K do not identify all risks that we face. Our operations could also be affected by factors that are not presently known to us or that we currently consider to be immaterial to our operations. Due to risks and uncertainties, known and unknown, our past financial results may not be a reliable indicator of future performance and historical trends should not be used to anticipate results or trends in future periods.

ITEM 2.   Unregistered Sales of Equity Securities and Use of Proceeds

None.

ITEM 3.   Defaults Upon Senior Securities 

None. 

ITEM 4.   Mine Safety Disclosures 

Not applicable. 

ITEM 5.   Other Information

None.

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ITEM 6. Exhibits 

Exhibit ‎Number	Description
2.1	Agreement and Plan of Merger between Fashion Dynamics Corp., FED Capital Acquisition Corporation and FED Corporation dated March 13, 2000 (incorporated by reference to exhibit 2.1 to the Registrant's Current Report on Form 8-K/A filed on March 17, 2000).
3.1	Amended and Restated Certificate of Incorporation (incorporated by reference to an appendix to the Registrant's Definitive Proxy Statement filed on September 21, 2006).
3.2	Certificate of Amendment of Amended and Restated Certificate of Incorporation (incorporated by reference to an appendix to the Registrant’s Definitive Proxy Statement filed on October 26, 2010).
3.3	Bylaws of the Registrant (incorporated by reference to exhibit 99.3 to the Registrant's Definitive Proxy Statement filed on June 14, 2001).
3.4	Certificate of Designations of Series B Convertible Preferred Stock (incorporated by reference to Exhibit 4.2 of the Registrant’s current report on Form 8-K filed on December 23, 2008).
3.5	Amended and Restated By-Laws of the Company (incorporated by reference to Exhibit 3.4 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2021 filed on May 13, 2021).
4.1	Form of Common Stock Purchase Warrant (incorporated by reference to exhibit 4.1 of the Registrant’s Current Report on Form 8-K filed on April 8, 2019).
4.2	Form of Common Stock Purchase Warrant (incorporated by reference to exhibit 4.2 of the Registrant’s Current Report on Form 8-K filed on April 12, 2019).
4.3	Description of Registrant's Securities (incorporated by reference to Exhibit 4.8 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2022 filed on March 10, 2023).
10.1	Lease between International Business Machines Corporation (“IBM”) and FED Corporation dated May 28, 1999 (incorporated by reference to exhibit 10.9 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2000 filed on March 30, 2001).
10.2	Securities Purchase Agreement, dated December 18, 2008 (incorporated by reference to exhibit 99.1 of the Registrant’s Current Report on Form 8-K filed on December 23, 2008).
10.3	2011 Incentive Stock Plan (incorporated by reference to exhibit 99.1 of the Registrant’s Current Report on Form 8-K filed on November 8, 2011).*
10.4	2013 Incentive Stock Plan (incorporated by reference to an appendix to the Registrant's Definitive Proxy Statement filed on April 2, 2013).*
10.5	8th Lease Amendment between International Global Foundries U.S. 2 LLC and eMagin Corporation, effective as of March 21, 2016 (incorporated by reference to exhibit 99.1 of the Registrant’s Current Report on Form 8-K filed on May 9, 2016).
10.6	Financing Agreement, dated as of December 29, 2016, by and between the Company and Rosenthal & Rosenthal, Inc. (incorporated by reference to exhibit 10.31 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2016 filed on March 29, 2017).

10.7	Form of Amended and Restated Change in Control Agreement (incorporated by reference to exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 18, 2019).
10.8	2019 Employee and Consultant Stock Option and Incentive Plan (incorporated by reference to an appendix to the Registrant's Definitive Proxy Statement filed on October 23, 2019).*

30

10.9	2019 Non-Employee Director Stock Option and Incentive Plan (incorporated by reference to an appendix to the Registrant's Definitive Proxy Statement filed on October 23, 2019).*
10.10	12th Lease Amendment between IPark East Fishkill and eMagin Corporation, effective as of November 20, 2020 (incorporated by reference to exhibit 10.10 to the Company's Current Report on Form 10-K filed on March 19, 2021).
10.11	At Market Offering Agreement, dated November 18, 2021, between eMagin Corporation and H.C. Wainwright & Co., LLC (incorporated by reference to exhibit 10.1 to the Company’s Current Report on Form 8-K filed on November 19, 2021).
10.12	Form of Securities Purchase Agreement (incorporated by reference to exhibit 10.1 to the Company’s Current Report on Form 8-K filed on April 8, 2019).
10.11	Prototype Project Agreement for Organic Light Emitting Diode (OLED) Micro-Displays, dated as of June 8, 2020, between the Company and the United States of America (incorporated by reference to exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q filed on August 13, 2020).
31.1	Certification by Chief Executive Officer pursuant to Sarbanes Oxley Section 302 (filed herewith).
31.2	Certification by Chief Financial Officer pursuant to Sarbanes Oxley Section 302 (filed herewith).
32.1	Certification by Chief Executive Officer pursuant to 18 U.S.C. Section 1350 (furnished herewith).
32.2	Certification by Chief Financial Officer pursuant to 18 U.S.C. Section 1350 (furnished herewith).
101.INS	Inline XBRL Instance Document (filed herewith).
101.SCH	Inline XBRL Taxonomy Extension Schema Document (filed herewith).
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document (filed herewith).
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document (filed herewith).
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document (filed herewith).
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document (filed herewith).
104.	Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) (filed herewith).
* Each of the Exhibits noted by an asterisk is a management compensatory plan or arrangement.

31

SIGNATURES 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. 

Date: May 11, 2023

eMAGIN CORPORATION
By:	/s/ Andrew G. Sculley
	Andrew G. Sculley
	Chief Executive Officer
	Principal Executive Officer

32

EX-31.1

EXHIBIT 31.1 

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER 

PURSUANT TO SECTION 302 OF THE 

SARBANES-OXLEY ACT OF 2002 

I, Andrew G. Sculley, certify that: 

1.    I have reviewed this quarterly report on Form 10-Q of eMagin Corporation. 

2.    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 

3.    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 

4.     The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: 

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.    The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function): 

a) All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.     

By:	/s/  Andrew G. Sculley
	Andrew G. Sculley
	Chief Executive Officer
	(Principal Executive Officer)

Dated:  May 11, 2023

EX-31.2

EXHIBIT 31.2 

CERTIFICATION OF PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER 

PURSUANT TO SECTION 302 OF THE 

SARBANES-OXLEY ACT OF 2002 

I, Mark A. Koch, certify that: 

1.    I have reviewed this quarterly report on Form 10-Q of eMagin Corporation. 

2.    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 

3.    Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 

4.    The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: 

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.    The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function): 

a) All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

By:	/s/ Mark A. Koch
	Mark A. Koch
	Chief Financial Officer
	(Principal Accounting and Financial Officer)

Dated: May 11, 2023

EX-32.1

EXHIBIT 32.1 

CERTIFICATION PURSUANT TO 

18 U.S.C. SECTION 1350, 

AS ADOPTED PURSUANT TO 

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 

In connection with the Quarterly Report of eMagin Corporation (the “Company”) on Form 10-Q for the quarter ended March 31, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Andrew G. Sculley, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: 

(1)	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. section 1350 and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing. 

By:	/s/ Andrew G. Sculley
	Andrew G. Sculley
	Chief Executive Officer
	(Principal Executive Officer)

Dated: May 11, 2023

EX-32.2

EXHIBIT 32.2 

CERTIFICATION PURSUANT TO 

18 U.S.C. SECTION 1350, 

AS ADOPTED PURSUANT TO 

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 

In connection with the Quarterly Report of eMagin Corporation (the “Company”) on Form 10-Q for the quarter ended March 31, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Mark A. Koch,  Acting Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: 

(1)	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. section 1350 and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing. 

By:	/s/ Mark A. Koch
	Mark A. Koch
	Chief Financial Officer
	(Principal Accounting and Financial Officer)

May 11, 2023

XML

Document And Entity Information - shares	3 Months Ended
	Mar. 31, 2023	Apr. 30, 2023
Document and Entity Information [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Current Fiscal Year End Date	--12-31
Document Period End Date	Mar. 31, 2023
Document Fiscal Year Focus	2023
Document Transition Report	false
Entity File Number	001-15751
Entity Registrant Name	eMAGIN CORPORATION
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	56-1764501
Entity Address, Address Line One	700 South Drive
Entity Address, Address Line Two	Suite 201
Entity Address, City or Town	Hopewell Junction
Entity Address, State or Province	NY
Entity Address, Postal Zip Code	12533
City Area Code	845
Local Phone Number	838-7900
Title of 12(b) Security	Common Stock, $.001 Par Value Per Share
Trading Symbol	EMAN
Security Exchange Name	NYSE
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		83,041,694
Document Fiscal Period Focus	Q1
Amendment Flag	false
Entity Central Index Key	0001046995

XML

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Current assets:
Cash and cash equivalents	$ 3,849	$ 4,346
Restricted cash	303	303
Accounts receivable, net	5,513	7,035
Account receivable-due from government awards		501
Unbilled accounts receivable	2,665	2,438
Inventories	8,804	8,709
Prepaid expenses and other current assets	688	594
Total current assets	21,822	23,926
Property, plant and equipment, net	51,171	49,099
Operating lease right-of-use assets	37	53
Intangibles and other assets	27	29
Total assets	73,057	73,107
Current liabilities:
Accounts payable	1,199	2,077
Accrued compensation	1,856	1,662
Revolving credit facility, net		1,037
Other accrued expenses	961	659
Deferred revenue	12	12
Operating lease liability - current	38	54
Finance lease liability - current	1,229	1,229
Other current liabilities	471	231
Total current liabilities	5,766	6,961
Other liability - long term	14	14
Deferred income - government awards - long term	31,136	28,729
Finance lease liability - long term	13,545	13,608
Total liabilities	50,461	49,312
Commitments and contingencies (Note 8)
Shareholders' equity:
Preferred stock, $.001 par value: authorized 10,000,000 shares: Series B Convertible Preferred stock, (liquidation preference of $5,356) stated value $1,000 per share, $0.001 par value: 10,000 shares designated and 5,356 issued and outstanding as of March 31, 2023 and 5,356 issued and outstanding as of December 31, 2022.
Common stock, $0.001 par value: authorized 200,000,000 shares, issued 82,530,660 shares, outstanding 82,368,594 shares as of March 31, 2023 and issued 81,241,516 shares, outstanding 81,079,450 shares as of December 31, 2022.	82	80
Additional paid-in capital	284,002	282,582
Accumulated deficit	(260,988)	(258,367)
Treasury stock, 162,066 shares as of March 31, 2023 and December 31, 2022.	(500)	(500)
Total shareholders' equity	22,596	23,795
Total liabilities and shareholders' equity	$ 73,057	$ 73,107

XML

Condensed Consolidated Balance Sheets (Parenthetical) - USD ($)	Mar. 31, 2023	Dec. 31, 2022
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	10,000,000	10,000,000
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	200,000,000	200,000,000
Common stock, shares issued	82,530,660	81,241,516
Common stock, shares outstanding	82,368,594	81,079,450
Treasury stock, shares	162,066	162,066
Preferred Stock- Series B [Member]
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, liquidation preference	$ 5,356	$ 5,356
Preferred stock, stated value	$ 1,000	$ 1,000
Preferred stock, shares designated	10,000	10,000
Preferred stock, shares issued	5,356	5,356
Preferred stock, shares outstanding	5,356	5,356

XML

Condensed Consolidated Statements of Operations - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Revenues:
Total revenues, net	$ 6,595	$ 7,358
Cost of revenues:
Total cost of revenues	5,121	4,869
Gross profit	1,474	2,489
Operating expenses:
Research and development	1,203	1,484
Selling, general and administrative	2,805	2,170
Total operating expenses	4,008	3,654
Loss from operations	(2,534)	(1,165)
Other (expense) income:
Change in fair value of common stock warrant liability		1,146
Interest expense, net	(207)	(214)
Other income, net	120	96
Total other (expense) income	(87)	1,028
Loss before provision for income taxes	(2,621)	(137)
Income taxes
Net Loss	$ (2,621)	$ (137)
Loss per share, basic	$ (0.03)
Loss per share, diluted	$ (0.03)
Weighted average number of shares outstanding:
Basic	81,993,294	72,835,629
Diluted	81,993,294	72,835,629
Product [Member]
Revenues:
Total revenues, net	$ 6,368	$ 7,027
Cost of revenues:
Cost of revenues	5,004	4,787
Contract [Member]
Revenues:
Total revenues, net	227	331
Cost of revenues:
Cost of revenues	$ 117	$ 82

XML

Condensed Consolidated Statements of Shareholder's Equity - USD ($) $ in Thousands	Preferred Stock [Member]	Common Stock [Member]	Additional Paid-in Capital [Member]	Accumulated Deficit [Member]	Treasury Stock [Member]	Total
Balance at Dec. 31, 2021		$ 72	$ 275,936	$ (257,264)	$ (500)	$ 18,244
Balance, shares at Dec. 31, 2021	5,659	72,931,490
Public offering of common shares, net of offering costs			460			460
Public offering of common shares, net of offering costs, shares		405,086
Stock based compensation			165			165
Net Loss				(137)		(137)
Balance at Mar. 31, 2022		$ 72	276,561	(257,401)	(500)	18,732
Balance, shares at Mar. 31, 2022	5,659	73,336,576
Balance at Dec. 31, 2022		$ 80	282,582	(258,367)	(500)	$ 23,795
Balance, shares at Dec. 31, 2022	5,356	81,241,516
Exercise of common stock warrants, shares		50,000
Exercising of options, shares
Vesting of RSUs, shares		30,148
Public offering of common shares, net of offering costs		$ 2	1,164			$ 1,166
Public offering of common shares, net of offering costs, shares		1,208,996
Stock based compensation			256			256
Net Loss				(2,621)		(2,621)
Balance at Mar. 31, 2023		$ 82	$ 284,002	$ (260,988)	$ (500)	$ 22,596
Balance, shares at Mar. 31, 2023	5,356	82,530,660

XML

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Cash flows from operating activities:
Net loss	$ (2,621)	$ (137)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	734	722
Change in fair value of common stock warrant liability		(1,146)
Stock-based compensation	256	165
Amortization of operating lease right-of-use assets	16	14
Changes in operating assets and liabilities:
Accounts receivable	2,023	(1,220)
Unbilled accounts receivable	(227)	(289)
Inventories	(95)	(535)
Prepaid expenses and other current assets	(94)	(252)
Deferred revenues		(42)
Operating lease liabilities	(16)	(15)
Accounts payable, accrued expenses, and other current liabilities	(143)	2,607
Net cash used in operating activities	(167)	(128)
Cash flows from investing activities:
Purchase of equipment	(411)	(474)
Purchase of equipment, government grant	(2,392)	(6,599)
Net cash used in investing activities	(2,803)	(7,073)
Cash flows from financing activities:
Repayments under revolving line of credit, net	(1,037)	(468)
Proceeds from public offering, net	1,166	460
Change in finance lease liabilities	(63)	(74)
Proceeds from government grant	2,407	5,485
Net cash provided by financing activities	2,473	5,403
Net decrease in cash, cash equivalents, and restricted cash	(497)	(1,798)
Cash, cash equivalents, and restricted cash, beginning of period	4,649	6,530
Cash, cash equivalents, and restricted cash, end of period	4,152	4,732
Cash, cash equivalents, end of period	3,849	3,857
Restricted cash, end of period	303	875
Supplementary Cash Flow Information
Cash paid for interest	207	214
Cash paid for income taxes
Non-cash activities:
Right-of-use assets obtained in exchange for finance lease liabilities		$ 69

XML

Description of the Business and Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2023

Description of the Business and Summary of Significant Accounting Policies [Abstract]

Description of the Business and Summary of Significant Accounting Policies

Note 1 – Description of the Business and Summary of Significant Accounting Policies 

The Business 

eMagin Corporation, or the Company, designs, develops, manufactures and markets Active Matrix organic light emitting diode, or OLED, -on-silicon microdisplays used in military and commercial AR/VR devices and other near-eye imaging products which utilize OLED microdisplays. The Company’s products are sold mainly in North America, Asia, and Europe.

Basis of Presentation 

In the opinion of management, the accompanying unaudited interim Condensed Consolidated Financial Statements of eMagin Corporation and its subsidiary reflect all adjustments, including normal recurring accruals, necessary for a fair presentation. All significant intercompany balances and transactions have been eliminated in consolidation. The Company manages its operations on a consolidated, integrated basis in order to optimize its equipment and facilities and to effectively service its global customer base and concludes that it operates in a single business segment. Certain information and footnote disclosure normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States, or GAAP, have been condensed or omitted pursuant to instructions, rules and regulations prescribed by the SEC. These unaudited Condensed Consolidated Financial Statements, and related disclosures, should be read in conjunction with the audited Consolidated Financial Statements contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 Form 10-K”). The results of operations for the periods ended March 31, 2023 are not necessarily indicative of the results to be expected for the full year. The Consolidated Financial Statements as of December 31, 2022 are derived from audited financial statements included in the Company’s 2022 Form 10-K.

Use of estimates

In accordance with GAAP, management utilizes certain estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments related to, among others, allowance for doubtful accounts, warranty reserves, inventory reserves, stock-based compensation expense, percentage of completion of contracts, deferred tax asset valuation allowances, litigation and other loss contingencies. Management bases its estimates and judgments on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates. 

Intangible Assets – Patents

Acquired patents are recorded at purchase price as of the date acquired and amortized over the expected useful life which is generally the remaining life of the patent.

The total intangible amortization expense was approximately $2 thousand for the three months ended March 31, 2023 and 2022, respectively.

Product warranty

The Company generally offers a one year product replacement warranty. The standard policy is to repair or replace the defective products. The Company accrues for estimated returns of defective products at the time revenue is recognized based on historical activity as well as for specific known product issues. The determination of these accruals requires the Company to make estimates of the frequency and extent of warranty activity and estimate future costs to replace the products under warranty. If the actual warranty activity and/or repair and replacement costs differ significantly from these estimates, adjustments to cost of revenue may be required in future periods.

‎

The following table provides a summary of the activity related to the Company's warranty liability included in other current liabilities, during the three months ended March 31, 2023 and 2022 (in thousands):

	Three Months Ended
	March 31,
	2023		2022
Beginning balance	$	214	$	519
Warranty accruals and adjustments		245		(100)
Warranty claims		(2)		(3)
Ending balance	$	457	$	416

Earnings per Common Share

Basic earnings per share is computed using the weighted average number of common shares outstanding during the period, and excludes any dilutive effects of common stock equivalent shares such as stock options, warrants, restricted stock units and convertible preferred stock. Diluted earnings per share is computed using the weighted average number of common shares outstanding and potentially dilutive common stock equivalent shares outstanding during the period. Common stock equivalent shares are excluded from the computation if their effect is anti-dilutive. 

The Company’s Series B Convertible Preferred stock, or Preferred Stock – Series B, is considered a participating security as the preferred stock participates in dividends with the common stock, which requires the use of the two-class method when computing basic earnings per share. Diluted earnings per share must be calculated under both the treasury stock and two-class method, and the calculation that results in the most dilutive earnings per share amount for the common stock is reported. The Preferred Stock – Series B is not required to absorb any net loss. Although the Company paid a one-time special dividend in 2012, the Company does not expect to pay dividends on its common or preferred stock in the near future.

For the three months ended March 31, 2023 and 2022, the Company reported a net loss and as a result, basic and diluted loss per common share are the same.

In calculating net loss per share amounts, all shares underlying the potentially dilutive common stock equivalents were excluded from the calculation of diluted net income (loss) per common share in both periods, because their effect was anti-dilutive.

The following table sets forth the potentially dilutive common stock equivalents for the three months ended March 31, 2023 and 2022 that were not included in diluted earnings per share as their effect would be anti-dilutive:

	Three Months Ended
	March 31,
	2023		2022
Restricted Stock Units		790,980		454,956
Options		2,487,269		3,360,426
Warrants		—		3,100,000
Convertible preferred stock		17,723,362		18,726,009
Total potentially dilutive common stock equivalents		21,001,611		25,641,391

Government Funding

The Company accounts for awards received from the U.S. Government for procurement of capital equipment after analysis of the terms of the underlying award contract, and in accordance with contract and equipment purchase milestones and accounting principles for grant accounting. For awards in which the Company will hold title to the underlying equipment, the Company initially records amounts invoiced to the U.S. Government for equipment progress payments on the accompanying Condensed Consolidated Balance Sheets as Deferred Income – Government Awards – long term and Accounts Receivable – due from Government Awards. The Company records such progress payments made to capital equipment vendors in Property, plant and equipment. Amounts recorded in Deferred Income – Government Awards – long term are recognized as Other Income on the accompanying Condensed Consolidated Statement of Operations on a systematic basis as depreciation and other expenses are incurred over the useful life of the capital equipment.

Restricted Cash

The Company accounts for cash received pursuant to U.S. Government funding, that is legally restricted for procurement of capital equipment, as Restricted Cash on the accompanying Condensed Consolidated Balance Sheets. Restricted Cash amounts are received from the U.S. Government in advance of progress payments required for various program related capital equipment purchases and are disbursed by the Company to related equipment vendors.

Fair Value of Financial Instruments

Cash, cash equivalents, accounts receivable, short-term investments and accounts payable are stated at cost, which approximates fair value, due to the short-term nature of these instruments. The asset based lending facility, or the ABL Facility, is also stated at cost, which approximates fair value because the interest rate is based on a market based rate plus a margin.

The Company has categorized its assets and liabilities that are valued at fair value on a recurring basis into a three-level fair value hierarchy in accordance with GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets and liabilities (Level 1) and lowest priority to unobservable inputs (Level 3).

Assets and liabilities recorded in the Condensed Consolidated Balance Sheets at fair value are categorized based on a hierarchy of inputs as follows:

Level 1 – Unadjusted quoted prices in active markets of identical assets or liabilities.

Level 2 – Quoted prices for similar assets or liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument.

Level 3 – Unobservable inputs for the asset or liability.

The common stock warrant liability was the only financial asset or liability recorded at fair value on a recurring basis and was considered a Level 3 liability. The respective 2018 Warrants expired on January 29, 2023.

Concentrations

The Company purchases principally all of its silicon wafers, which are a key ingredient in its OLED production process, from two suppliers located in Taiwan and Korea.

For the three months ended March 31, 2023, one customer of 15.1% accounted for over 10% of net revenues. As of March 31, 2023, the Company had accounts receivable from that one customer that accounted for 18.5% of total accounts receivable. For the three months ended March 31, 2022, one customer of 23.7% accounted for over 10% of the Company’s net revenues.

Liquidity and Going Concern

The accompanying Condensed Consolidated Financial Statements have been prepared on a going concern basis, which assumes that the Company will continue to operate as a going concern and which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. For the three months ended March 31, 2023, the Company incurred a net loss of $2.6 million and used cash in operating activities of $0.2 million. As of March 31, 2023, the Company had $3.8 million of cash, no outstanding indebtedness and borrowing availability of $2.4 million under its ABL Facility.

The Company’s ABL Facility expires on December 31, 2023, and renews automatically for another year unless terminated pursuant to its terms. The ABL Facility agreement contains certain lenders remedies that give the bank the ability to impose discretionary reserves against our borrowing availability or terminate the facility upon events of default. Although our relationship with the lender is positive, there is no assurance the lender will renew or extend this facility or continue to make funds available during 2023 and beyond at present availability levels, or at all.

Due to continuing losses, the Company’s financial position, and uncertainty regarding the Company’s ability to borrow under its ABL Facility, or continue to raise funds under its ATM facility, the Company may not be able to meet its financial obligations as they become due without additional financing or sources of capital. Although demand for the Company’s products has remained steady, due to lingering supply chain issues caused in part by the COVID-19 Pandemic, and also inflationary pressures the Company’s ability to obtain components and other materials or services on a timely basis has resulted in manufacturing delays, and increased costs. If these trends worsen or result in lost orders it could materially and adversely affect its business, financial condition, and results of

operations. Management is prepared to reduce expenses and raise additional capital, but there can be no assurance that the Company will be successful in sufficiently reducing expenses or raising capital to meet its operating needs.

The Company has taken actions to increase revenues and to reduce expenses and is considering financing alternatives. The Company’s plans with regard to these matters include the following actions: 1) focus production and engineering resources on improving manufacturing yields and increasing production volumes, 2) continue the Work Status Reduction program that began in October 2019 for certain members of senior management pursuant to which their work status is reduced by approximately 20%, 3) continue to utilize government grants for purchase of capital equipment and funding manufacturing personnel, 4) reduce discretionary and other expenses, 5) seek to enter new markets, 6) sell shares under its At the Market or ATM equity facility entered into in November 2021, and 7) consider additional financing and/or strategic alternatives.

The Company is reassessing its business plans and forecasts over the next two years. Based on its known cash needs as of May 2023, and the anticipated availability of its ABL facility, the Company has developed plans to extend its liquidity to support its working capital requirements through the second quarter of 2024.

However, there can be no assurance the Company’s plans will be achieved and the Company will be able to meet its financial obligations as they become due without obtaining additional financing or sources of capital. Therefore, in accordance with applicable accounting guidance, and based on the Company’s current financial condition and availability of funds, there is substantial doubt about the Company’s ability to continue as a going concern through twelve months from the date these financial statements were issued.

Recently adopted accounting pronouncements

The Company's accounting policies are the same as those described in Note 1 to the Company's Consolidated Financial Statements in the Company’s 2022 Form 10-K.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326) and subsequently issued amendments. The guidance affects the Company's accounts receivable, and it requires the measurement of expected credit losses to be based on relevant information from past events, including historical experiences, current conditions and reasonable and supportable forecasts that affect collectability. This new guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022. The Company adopted the guidance on January 1, 2023, on a prospective basis and such adoption did not have a material impact on the Company’s financial statements but did change how the allowance for credit losses is determined.

Recently issued accounting pronouncements

In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40) Accounting for Convertible Instruments and Contracts in an Entity's Own Equity. This guidance changes how entities account for convertible instruments and contracts in an entity's own equity and simplifies the accounting for convertible instruments by removing certain separation models for convertible instruments. This guidance also modifies the guidance on diluted earnings per share calculations. This new guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2023. The Company is currently evaluating the impact of this ASU on the Condensed Consolidated Financial Statements.

 

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Revenue Recognition

3 Months Ended

Mar. 31, 2023

Revenue Recognition [Abstract]

Revenue Recognition

Note 2 – Revenue Recognition

All of the Company’s revenues are earned from contracts with customers and are classified as either Product or Contract revenues. Contract revenues include R&D activities performed pursuant to written agreements and purchase orders, as well as arrangements that are implied by customary practices or law.

Product revenue is generated primarily from contracts to produce, ship and deliver OLED microdisplays. The Company’s performance obligations are satisfied, control of our products is transferred, and revenue is recognized at a single point in time when control transfers to our customer for product shipped. The Company’s customary terms are FOB our factory and control is deemed to transfer upon shipment. The Company has elected to treat shipping and other transportation costs charged to customers as fulfillment activities and are recorded in both revenue and cost of sales at the time control is transferred to the customer. As customers are invoiced at the time control transfers and the right to consideration is unconditional at that time, the Company does not maintain contract asset balances for product revenue. Additionally, the Company does not maintain contract liability balances for product revenues, as performance obligations are satisfied prior to customer payment for product. The Company generally offers a one year product warranty, for replacement of product only, and does not allow returns. The Company offers industry standard payment terms that typically require payment from our customers from 30 to 60 days after title transfers.

The Company also recognizes revenues under the over time method from certain research and development, or R&D, activities (contract revenues) under both firm fixed-price contracts and cost-type contracts. Progress and revenues from research and development activities relating to firm fixed-price contracts and cost-type contracts are generally recognized on an input method of accounting as costs are incurred. Under the input method, revenue is recognized based on efforts expended to date (e.g., the costs of resources consumed or labor hours worked, or machine hours used) relative to total efforts intended to be expended. Contract costs include all direct material, labor and subcontractor costs and an allocation of allowable indirect costs as defined by each contract, as periodically adjusted to reflect revised agreed upon rates. These rates are subject to audit by the other party. Any changes in estimate related to contract accounting are accounted for prospectively over the remaining life of the contract. Under the over time method, billings may not correlate directly to the revenue recognized. Based upon the terms of the specific contract, billings may be in excess of the revenue recognized, in which case the amounts are included in deferred revenues as a liability on the Condensed Consolidated Balance Sheets. Likewise, revenue recognized may exceed customer billings in which case the amounts are reported as unbilled receivables. Unbilled revenues are expected to be billed and collected within one year.

Costs to Obtain and Fulfill a Contract

The incidental costs related to obtaining product sales contracts are non-recoverable from customer and, accordingly, are expensed as incurred. The Company capitalizes costs incurred to fulfill its R&D contracts that i) relate directly to a contract or anticipated contract, ii) are expected to satisfy the Company’s performance obligation under the contract, and iii) are expected to be recovered through revenue generated under the contract. Contact fulfillment costs are expensed to cost of revenue as the related performance obligations are satisfied.

Disaggregation of Revenue

The Company sells products directly to military contractors and OEM’s who use the Company’s displays in a diverse range of applications encompassing the military and commercial, including medical and industrial, market sectors. Revenues are classified as either military, commercial, consumer or multiple based on management’s knowledge of the customer’s products and markets served by displays or the R&D contract work. Revenues classified as multiple are for sales to customers that incorporate the Company’s displays in products that could be used for either military or commercial applications. R&D activities are performed for both military customers and U.S. Government defense related agencies and consumer companies. Product and contract revenues are disclosed on the Condensed Consolidated Statements of Operations.

Additional disaggregated revenue information for the three months ended March 31, 2023 and 2022 were as follows (in thousands):

	Three Months Ended
	March 31,
	2023		2022
North and South America	$	3,170	$	4,326
Europe, Middle East, and Africa		3,021		2,920
Asia Pacific		404		112
Total	$	6,595	$	7,358

	Three Months Ended
	March 31,
		2023		2022
Military	$	4,906	$	5,360
Commercial, including industrial and medical		854		977
Consumer		5		289
Multiple		830		732
Total	$	6,595	$	7,358

Accounts Receivable from Customers

Accounts receivable, net of allowances, were $5.5 million and $7.0 million as of March 31, 2023 and December 31, 2022.

Contract Assets and Liabilities

Unbilled Accounts Receivables (Contract Assets) - Pursuant to the over time revenue recognition model, revenue may be recognized prior to the customer being invoiced. Unbilled accounts receivable is recorded to reflect revenue that is recognized when the cost based input method is applied and such revenue exceeds the amount invoiced to the customer. Unbilled receivables are disclosed on the Condensed Consolidated Balance Sheets. With the adoption of ASU 2016-13, the Company considered the risk of credit loss related to its contract assets. Our analysis was performed by type of accounts receivable (commercial vs. government) and geographic location. We did not record an adjustment to retained earnings as this ASU did not have a material impact on the Company’s consolidated allowance for credit losses.

Customer Advances and Deposits (Contract Liabilities) - The Company recognizes a contract liability when it has billed and received consideration from the customer pursuant to the terms of a contract but has not yet recognized the related revenue. These billings in excess of revenue are classified as deferred revenue on the Condensed Consolidated Statements of Operations.

Total contract assets and liabilities consisted of the following amounts (in thousands):

	March 31,		December 31,
	2023		2022
Unbilled Receivables (contract assets)	$	2,665	$	2,438
Deferred Revenue (contract liabilities)	$	12	$	12

For the three months ended March 31, 2023, the Company recognized no revenue related to its contract liabilities that existed at December 31, 2022. For the three months ended March 31, 2022, the Company recognized $42 thousand of revenue related to its contract liabilities that existed at December 31, 2021.

Remaining Performance Obligations

The Company has elected the practical expedient, which allows disclosure of remaining performance obligations only for contracts with an original duration of greater than one year. Such remaining performance obligations primarily relate to engineering and design services. As of March 31, 2023, the aggregate amount of the transaction price allocated to remaining performance obligations was $1.3 million. The Company expects to recognize revenue on all of its remaining performance obligations over the next 12 months.

 

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Accounts Receivable

3 Months Ended

Mar. 31, 2023

Accounts Receivable [Abstract]

Accounts Receivable

Note 3 – Accounts Receivable

The majority of the Company’s commercial accounts receivable are due from OEM’s. Credit is extended based on an evaluation of a customer’s financial condition and, generally, collateral is not required.

Accounts receivable consisted of the following (in thousands):

	March 31,		December 31,
	2023		2022
Accounts receivable	$	5,671	$	7,193
Less allowance for credit losses		(158)		(158)
Accounts receivable, net	$	5,513	$	7,035

Allowance for Credit Losses

Our provision for credit losses represents the periodic expense of maintaining an allowance sufficient to absorb lifetime expected credit losses in trade receivables. The evaluation of the allowance for credit losses is inherently subjective, as it requires estimates that may be susceptible to significant changes. We believe the allowance for credit losses is appropriate to cover lifetime losses expected to be incurred in our trade receivables. Prior to the adoption of ASU 2016-13, the allowance for doubtful accounts was determined based on a variety of factors, including the length of time receivables were past due, historical experience, the customer's current ability to pay its obligation, and the condition of the general economy and the industry as a whole. With the adoption of ASU 2016-13, we amended our loss model to include analysis of domestic and international political and economic conditions and future trends. Our analysis was performed by accounts receivable aging, type of accounts receivable and geographic location. We did not record an adjustment to retained earnings as this ASU did not have a material impact on the Company’s consolidated allowance for credit losses.

Activity related to the allowance for credit losses is as follows (in thousands):

Balance as of January 1, 2023	$	158
Current period provision		—
Write-offs charged against the allowance		—
Recoveries collected		—
Balance as of March 31, 2023	$	158

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Inventories, Net

3 Months Ended

Mar. 31, 2023

Inventories, Net [Abstract]

Inventories, Net

Note 4 – Inventories, net

The components of inventories are as follows (in thousands):

	March 31,		December 31,
	2023		2022
Raw materials	$	3,821	$	3,497
Work in process		2,694		3,496
Finished goods		2,835		2,103
Total inventories		9,350		9,096
Less inventory reserve		(546)		(387)
Total inventories, net	$	8,804	$	8,709

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Line of Credit / Loan Payable

3 Months Ended

Mar. 31, 2023

Line of Credit / Loan Payable [Abstract]

Line of Credit / Loan Payable

Note 5 – Line of Credit / Loan Payable

Revolving Credit Facility

	March 31,		December 31,
(in thousands)	2023		2022
Revolving credit facility	$	—	$	1,037

On December 21, 2016, the Company entered into the ABL Facility with a lender that provides for up to a maximum amount of $5 million based on a borrowing base equivalent to 85% of eligible accounts receivable plus the lesser of $2 million or 50% of eligible inventory. The interest on the ABL Facility is equal to the Prime Rate plus 3% but may not be less than 6.5% with a minimum monthly interest payment of $2 thousand. The Company is also obligated to pay the lender a monthly administrative fee of $1 thousand and an annual facility fee equal to 1% of the maximum amount borrowable under the facility.

The ABL Facility renewed on December 31, 2022 and will automatically renew on December 31, 2023 for a one year term unless written notice to terminate the agreement is provided by either party. The ABL Facility agreement contains certain lenders remedies that upon events of default, give the bank the ability to terminate the facility before the scheduled maturity date. Accordingly, the Company classifies borrowing under the ABL Facility as current liabilities on the accompanying Consolidated Balance Sheet.

The ABL Facility is secured by a lien on all receivables, property and the proceeds thereof, credit insurance policies and other insurance relating to the collateral, books, records and other general intangibles, inventory and equipment, proceeds of the collateral and accounts, instruments, chattel paper, and documents. Collections received on accounts receivable are directly used to pay down the outstanding borrowings on the credit facility.

The ABL Facility contains customary representations and warranties, affirmative and negative covenants and events of default. The Company is required to maintain a minimum tangible net worth of $13 million and a minimum working capital balance of $4 million at all times. As of March 31, 2023 the Company had no borrowings outstanding under the ABL Facility, had unused borrowing availability of $2.4 million under the ABL Facility and was in compliance with all financial debt covenants under the ABL Facility.

 

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Stock Compensation

3 Months Ended

Mar. 31, 2023

Stock Compensation [Abstract]

Stock Compensation

Note 6 – Stock Compensation 

The Company uses the fair value method of accounting for share-based compensation arrangements. The fair value of stock options is estimated at the date of grant using the Black-Scholes option valuation model. Stock-based compensation expense is reduced for estimated forfeitures and is amortized over the vesting period using the straight-line method.

The fair value of Restricted Stock Units, or RSU’s is established by the market price of the Company’s common stock at the date of grant and for time based grants, is amortized over the vesting period using the straight line method. Performance-based RSUs are typically granted such that they vest upon the achievement of EBITDA targets, during a specified performance period, subject to the satisfaction of certain time-based service criteria. Certain Performance-based RSUs vest upon the achievement of operational milestones. Compensation expense from these awards is equal to the fair market value of the Company’s ordinary shares on the date of grant and is recognized over the remaining service period based on the probable outcome of achievement of the financial metrics used in the specific grant’s performance criteria. Management’s estimate of the number of shares expected to vest is based on the anticipated achievement of the specified non-market performance criteria, which are assessed at each reporting period.

The following table summarizes the allocation of non-cash stock-based compensation to our expense categories for the three months ended March 31, 2023 and 2022 (in thousands): 

	Three Months Ended
	March 31,
	2023		2022
Cost of revenues	$	3	$	28
Research and development		171		36
Selling, general and administrative		82		101
Total stock compensation expense	$	256	$	165

The following table summarizes the Company’s stock-based compensation expense by each award type:

	Three Months Ended
	March 31,
	2023		2022
Stock options	$	17	$	70
Restricted Share Units		239		95
Total stock compensation expense	$	256	$	165

At March 31, 2023, total unrecognized compensation costs related to stock options and RSUs was approximately $13 thousand and $1.4 million, respectively, net of estimated forfeitures. Total unrecognized compensation cost for stock options and RSUs will be adjusted for future changes in estimated forfeitures and is expected to be recognized over a weighted average period of approximately 0.2 years and approximately 2.0 years, respectively.

Stock Option Summary

The following key assumptions were used in the Black-Scholes option pricing model to determine the fair value of stock options granted:

	Three Months Ended
	March 31,
	2023				2022
Dividend yield			0	%			0	%
Risk free interest rates	3.24	-	3.25	%	0.89	-	0.95	%
Expected volatility	79.3	to	83.0	%	75.9	to	79.0	%
Expected term (in years)	5.0	to	5.5		5.0	to	5.5

The Company does not expect to pay dividends in the near future. Therefore, the Company used an expected dividend yield of 0%. The risk-free interest rate used in the Black-Scholes option pricing model is based on applicable yield available at the date of the option grant on U.S. Treasury securities with an equivalent term. Expected volatility is based on the weighted average historical volatility of the Company’s common stock for the equivalent term. The expected term of the options represents the period that the Company’s stock-based awards are expected to be outstanding and was determined based on historical experience and vesting schedules of similar awards.

A summary of the Company’s stock option activity for the three months ended March 31, 2023 presented in the following table (unaudited):

	Number of ‎Shares		Weighted ‎Average ‎Exercise ‎Price		Weighted Average Remaining Contractual Life (In Years)	Aggregate ‎Intrinsic ‎Value
Outstanding at December 31, 2022		3,459,882	$	1.50
Options granted		—		—
Options exercised		—		—
Options forfeited		—		—
Options cancelled or expired		(209,930)		1.78
Outstanding at March 31, 2023		3,249,952	$	1.48	3.27	$	2,591,607
Vested or expected to vest at March 31, 2023 (1)		3,249,415	$	1.48	3.27	$	2,590,823
Exercisable at March 31, 2023		3,114,952	$	1.52	3.02	$	2,394,507

(1)The expected to vest options are the result of applying the pre-vesting forfeiture rate assumptions to total unvested options.

The aggregate intrinsic value in the table above represents the difference between the exercise price of the underlying options and the quoted price of the Company’s common stock. The Company issues new shares of common stock upon exercise of stock options. There were no options exercised in the three months ended March 31, 2023.

Restricted Stock Units (“RSU”) Summary

The following table summarized the activity in respect of RSUs issued under the Company’s plans for the three months ended March 31, 2023:

					Weighted Average Grant Date
	Number of Awards				Fair Value Per Share
	Service		Performance		Service		Performance
	based		based		based		based
RSU's outstanding at December 31, 2022		1,422,679		436,874	$	1.26	$	1.23
Granted		20,000		—		1.66		—
Vested and settled		—		—		—		—
Forfeited		(18,021)		(11,679)		2.57		3.60
RSU's outstanding at March 31, 2023		1,424,658		425,195	$	1.25	$	1.16

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Income Taxes

3 Months Ended

Mar. 31, 2023

Income Taxes [Abstract]

Income Taxes

Note 7 – Income Taxes

The Company’s effective tax rate is calculated quarterly based upon current assumptions relating to the full year’s estimated operating results and various tax-related items. The Company’s effective tax rate was 0% for the three months ended March 31, 2023 and 2022. The difference between the effective tax rate of 0% and the U.S. federal statutory rate of 21% for three months ended March 31, 2023 and 2022 was primarily due to recognizing a full valuation allowance on deferred tax assets.

The Company determined that, based on all available evidence, both positive and negative, including the Company’s latest forecasts and cumulative losses in recent years, it was more likely than not that none of its deferred tax assets would be realized and therefore it continued to record a full valuation allowance as of March 31, 2023.

The Company’s 2017 and prior net operating loss carry-forward amounts expire through 2037 and are subject to certain limitations that may occur due to a change in the ownership provisions under Section 382 of the Internal Revenue Code and similar state provisions. Pursuant to provisions of the Tax Cuts and Jobs Act, the net operating losses originating in years subsequent to 2017 can be carried forward indefinitely.

Due to the Company’s operating loss carry-forwards, all tax years remain open to examination to the extent of the operating loss carry-forward by the major taxing jurisdictions to which the Company is subject. In the event that the Company is assessed interest or penalties at some point in the future, it will be classified in the financial statements as tax expense.

On March 27, 2020, the President of the United States signed the CARES Act. The CARES Act provides several provisions that effect businesses from an income tax perspective. Due to the history of the tax losses, most of the CARES Act provisions have no current benefit to the Company. The Company can, however, benefit from one provision, which allows for the immediate refund of the Alternative Minimum Tax Credit, or AMT Credit, previously recognized as deferred tax asset. The Company has filed an amendment to claim the AMT Credit and is anticipating a refund of $212 thousand. This tax receivable is reflected in Prepaid Expenses and Other Current Assets on the Condensed Consolidated Balance Sheets.

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Commitments and Contingencies

3 Months Ended

Mar. 31, 2023

Commitments and Contingencies [Abstract]

Commitments and Contingencies

Note 8 – Commitments and Contingencies 

Equipment Purchase Commitments 

The Company has committed to equipment purchases of approximately $7.5 million at March 31, 2023, of which $6.9 million relates to equipment to be purchased under government awards.

Litigation

From time to time, the Company may become subject to various legal proceedings that are incidental to the ordinary conduct of our business. In the ordinary course of business, the Company may be subject from time to time to various proceedings, lawsuits, disputes, or claims. The Company investigates these claims as they arise. Although claims are inherently unpredictable, the Company is currently not aware of any matters that, if determined adversely to the Company, would individually or taken together, have a material adverse effect on its business, financial position, results of operations, or cash flows.

 

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Warrants

3 Months Ended

Mar. 31, 2023

Warrants [Abstract]

Warrants

Note 9 – Warrants

The Company accounts for common stock warrants pursuant to applicable accounting guidance contained in ASC 815, "Derivatives and Hedging - Contracts in Entity's Own Equity" and makes a determination as to their treatment as either equity instruments or a warrant liability based on an analysis of the underlying warrant agreements.

The following table sets forth the Company’s outstanding common stock warrants as of March 31, 2023:

	Issued		Outstanding		Exercise Price		Expiration
2019 Warrant Issuance (1)		6,000,000		2,919,402		0.78		Oct 2024

(1)Private Placement unregistered warrants exercisable six months following issuance.

Equity classified warrants

The 2019 warrants were issued in a private placement concurrent with an offering of shares of Company Common Stock, and the exercise price of the Warrant Shares are subject to adjustment in the event of any stock dividends and splits, reverse stock splits, stock dividends, recapitalizations, reorganizations or similar transactions. The Warrants will be exercisable on a “cashless” basis in certain circumstances, including in the event a registration statement is not in effect at time of exercise. The warrant agreements contain a clause specifying that in the event there is no effective registration in effect for the underlying warrant shares to be issued at time of exercise, in no circumstance will the Company be required to net cash settle the warrants.

Based on the Company’s analysis of the terms and conditions of the warrants, the Company has concluded that they meet the conditions outlined in applicable accounting guidance to be classified as equity instruments.

During the three months ended March 31, 2023, 80,598 warrants were exercised on a cashless basis in exchange for 50,000 shares of the Company’s common stock.

During the three months ended March 31, 2022, there were no warrant exercises.

Liability classified warrants

Certain warrants issued in 2017 and in 2018 warrants had alternative settlement provisions that, at the option of the holder, provide for physical settlement or if, at the time of settlement there is no effective registration statement, a cashless exercise as defined in the warrant agreement.

Based on analysis of the underlying warrant agreement and applicable accounting guidance, the Company concluded that these registered warrants require the issuance of registered securities upon exercise and do not sufficiently preclude an implied right to net cash settlement. Accordingly, these warrants were classified in the Company’s Condensed Consolidated Balance Sheets as a current liability upon issuance and were revalued at each subsequent balance sheet date.

The warrants issued in 2017, expired May 2022, and the warrants issued in 2018 expired January 2023.

The fair value of the liability for common stock purchase warrants was estimated using the Black Scholes option pricing model based on the market value of the underlying common stock at the measurement date, the contractual term of the warrant, risk-free interest rates, expected dividends and expected volatility of the price of the underlying common stock.

Based on the Black Scholes method the fair value of the Company’s warrants are as follows (in thousands):

	March 31,		December 31,
	2023		2022
2018 January and February Issuance (1)
Fair Value	$	—	$	—
	$	—	$	—

(1)Warrants from the 2018 January and February Issuance expired on January 29, 2023.

	Three Months Ended
	March 31,
	2023		2022
Change in Fair Value of common stock warrant liability (1)	$	—	$	1,146

(1)The combined changes in fair value are reflected as income (loss) from change in the fair market value of common stock warrant liability.

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Leases

3 Months Ended

Mar. 31, 2023

Leases [Abstract]

Leases

Note 10 – Leases

The Company leases office and manufacturing facilities in Hopewell Junction, New York under a non-cancelable lease agreement, which, as amended, expire in 2031, and includes two, five year options to extend. The lease agreement did not contain any residual value guarantees, or material restrictive covenants. Upon signing a 12^th amendment in November 2020, the Company reassessed the lease from operating to a finance lease.

The Company also leases an office facility for its design group in Santa Clara, California. In October 2021, the Company signed an additional two year extension of the lease for the Santa Clara design group facility, and has classified this as an operating lease. The lease agreement did not contain any residual value guarantees, material restrictive covenants or a renewal option and was classified as an operating lease. On May 2, 2019, the Company entered into a three year finance lease commitment for phone equipment.

The Company's leases generally do not provide an implicit rate, and therefore the Company uses its incremental borrowing rate as the discount rate when measuring lease liabilities. The Company estimates its incremental borrowing rate based on a yield curve analysis, utilizing the interest rate derived from the fair value analysis of the Company’s credit facility and adjusting it for factors that appropriately reflect the profile of secured borrowing over the expected term of the lease.

The components of lease expense were as follows (in thousands):

	Three Months Ended
	March 31,
	2023		2022
Finance Lease Cost:
Amortization of right-of-use assets	$	174	$	163
Interest on lease liabilities		244		198
Operating lease cost		16		—
Total Lease Cost	$	434	$	361
Cash paid for amounts included in the measurement of lease liabilities:
Principal payments on operating lease liabilities	$	16	$	15
Principal payments on finance lease liabilities	$	307	$	267
Right-of-use assets obtained in exchange for new finance lease liabilities	$	—	$	69
Right-of-use assets obtained in exchange for new operating lease liabilities	$	—	$	—

	March 31, 2023		December 31, 2022
Finance lease right-of-use assets	$	13,734	$	13,908
Operating lease right-of-use assets	$	37	$	53
Finance lease liability, current	$	1,229	$	1,229
Finance lease liability, non-current	$	13,545	$	13,608
Operating lease liabilities, current	$	38	$	54
Operating lease liabilities, non-current	$	-	$	-
Weighted average remaining lease terms - finance leases		19.75 years		20.00 years
Weighted average remaining lease terms - operating leases		0.58 years		0.83 years
Weighted average discount rate - finance leases		6.94%		6.94%
Weighted average discount rate - operating leases		6.48%		6.48%

Future annual minimum lease payments and finance lease commitments as of March 31, 2023 were as follows (in thousands):

	Operating Leases		Finance Leases
2023	$	39	$	922
2024		—		1,229
2025		—		1,229
2026		—		1,229
2027		—		1,269
Thereafter		—		21,345
Total undiscounted future minimum lease payments		39		27,223
Less imputed interest		(1)		(12,449)
Lease liability	$	38	$	14,774

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Shareholders' Equity

3 Months Ended

Mar. 31, 2023

Shareholders' Equity [Abstract]

Shareholders' Equity

Note 11 – Shareholders’ Equity

Equity Raises

On November 18, 2021, the Company entered into an ATM offering agreement with H.C. Wainwright & Co., LLC, or Wainwright, relating to sales of shares of its common stock under an ATM facility. On November 18, 2021, the Company also filed a prospectus supplement to allow the sale of shares of its common stock having an aggregate offering price of up to $10.0 million under the ATM facility.

During the three months ended March 31, 2023, the Company raised $1.2 million, net of offering expenses, through the sale of shares under the ATM facility. The Company used and intends to use the net proceeds from sales made under the ATM facility for working capital and other general corporate purposes.

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Government Funding

3 Months Ended

Mar. 31, 2023

Government Funding [Abstract]

Government Funding

Note 12 – Government Funding

On July 28, 2020, the Company announced that it had been awarded a $33.6 million contract over the next 33 months from the U.S. Department of Defense, or the DoD, to sustain and enhance U.S. domestic capability for high resolution, high brightness OLED microdisplays that will be based on the Company’s proprietary direct patterning technology dPd. This investment is in addition to the $5.5 million award announced on June 11, 2020, under the U.S. Department of Defense Industrial Base Analysis, or IBAS, Program for OLED Supply Chain Assurance and will be used to increase capacity and sustain operations at the Company’s Hopewell Junction, New York, headquarters. These funds will be used to procure key equipment and tooling, and reimburse the Company for certain labor and material costs, which the Company believes will improve all aspects of its OLED microdisplay production, including increased throughput and capacity.

Pursuant to the preliminary Technology Investment Agreement the U.S. government provided when the award was announced, the Company expects that the U.S. government will own the related equipment purchases until the end of the 33 month contract period, at which point the Company can apply to take title. The Company began making payments to related equipment vendors during the fourth quarter of 2020. For accounting purposes, the Company considers that it is probable that title will pass to the Company and accordingly will treat this award in a similar fashion as the IBAS award.

The Company recognizes the government awards as deferred income – government awards as program milestones are invoiced, and will recognize other income as depreciation and other expenditures are incurred over the useful life of the capital equipment. As of March 31, 2023, the Company has received $32.2 million in total, for initial deposits required by capital equipment vendors. Amounts received, pending payment of deposits to vendors as of March 31, 2023, of $0.3 million are reflected in restricted cash on the accompanying Condensed Consolidated Balance Sheets. Amounts due from the U.S. DoD pursuant to invoices for capital equipment are presented on the Condensed Consolidated Balance Sheets as accounts receivable – due from government awards. The total amount invoiced on these programs of $32.2 million is reflected less depreciation in deferred revenue government awards – long term, and other current liabilities. Additional amounts remaining under the awards will be recorded in a similar fashion and will coincide with the progress payments required under the various capital equipment purchase terms. For the three months ended March 31, 2023, the Company recognized deferred income related to certain overhead expenses, not capitalized, of $40 thousand.

The terms of various government agreements provide among other items that the Company must achieve certain yield targets, give priority to military orders and continue to maintain the productive capacity of equipment purchased for up to five years past the completion of the programs.

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Description of the Business and Summary of Significant Accounting Policies (Policy)

3 Months Ended

Mar. 31, 2023

Description of the Business and Summary of Significant Accounting Policies [Abstract]

The Business

The Business 

eMagin Corporation, or the Company, designs, develops, manufactures and markets Active Matrix organic light emitting diode, or OLED, -on-silicon microdisplays used in military and commercial AR/VR devices and other near-eye imaging products which utilize OLED microdisplays. The Company’s products are sold mainly in North America, Asia, and Europe.

Basis of Presentation

Basis of Presentation 

In the opinion of management, the accompanying unaudited interim Condensed Consolidated Financial Statements of eMagin Corporation and its subsidiary reflect all adjustments, including normal recurring accruals, necessary for a fair presentation. All significant intercompany balances and transactions have been eliminated in consolidation. The Company manages its operations on a consolidated, integrated basis in order to optimize its equipment and facilities and to effectively service its global customer base and concludes that it operates in a single business segment. Certain information and footnote disclosure normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States, or GAAP, have been condensed or omitted pursuant to instructions, rules and regulations prescribed by the SEC. These unaudited Condensed Consolidated Financial Statements, and related disclosures, should be read in conjunction with the audited Consolidated Financial Statements contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 Form 10-K”). The results of operations for the periods ended March 31, 2023 are not necessarily indicative of the results to be expected for the full year. The Consolidated Financial Statements as of December 31, 2022 are derived from audited financial statements included in the Company’s 2022 Form 10-K.

Use of Estimates

Use of estimates

In accordance with GAAP, management utilizes certain estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments related to, among others, allowance for doubtful accounts, warranty reserves, inventory reserves, stock-based compensation expense, percentage of completion of contracts, deferred tax asset valuation allowances, litigation and other loss contingencies. Management bases its estimates and judgments on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates. 

Intangible Assets - Patents

Intangible Assets – Patents

Acquired patents are recorded at purchase price as of the date acquired and amortized over the expected useful life which is generally the remaining life of the patent.

The total intangible amortization expense was approximately $2 thousand for the three months ended March 31, 2023 and 2022, respectively.

Product Warranty

Product warranty

The Company generally offers a one year product replacement warranty. The standard policy is to repair or replace the defective products. The Company accrues for estimated returns of defective products at the time revenue is recognized based on historical activity as well as for specific known product issues. The determination of these accruals requires the Company to make estimates of the frequency and extent of warranty activity and estimate future costs to replace the products under warranty. If the actual warranty activity and/or repair and replacement costs differ significantly from these estimates, adjustments to cost of revenue may be required in future periods.

‎

The following table provides a summary of the activity related to the Company's warranty liability included in other current liabilities, during the three months ended March 31, 2023 and 2022 (in thousands):

	Three Months Ended
	March 31,
	2023		2022
Beginning balance	$	214	$	519
Warranty accruals and adjustments		245		(100)
Warranty claims		(2)		(3)
Ending balance	$	457	$	416

Earnings per Common Share

Earnings per Common Share

Basic earnings per share is computed using the weighted average number of common shares outstanding during the period, and excludes any dilutive effects of common stock equivalent shares such as stock options, warrants, restricted stock units and convertible preferred stock. Diluted earnings per share is computed using the weighted average number of common shares outstanding and potentially dilutive common stock equivalent shares outstanding during the period. Common stock equivalent shares are excluded from the computation if their effect is anti-dilutive. 

The Company’s Series B Convertible Preferred stock, or Preferred Stock – Series B, is considered a participating security as the preferred stock participates in dividends with the common stock, which requires the use of the two-class method when computing basic earnings per share. Diluted earnings per share must be calculated under both the treasury stock and two-class method, and the calculation that results in the most dilutive earnings per share amount for the common stock is reported. The Preferred Stock – Series B is not required to absorb any net loss. Although the Company paid a one-time special dividend in 2012, the Company does not expect to pay dividends on its common or preferred stock in the near future.

For the three months ended March 31, 2023 and 2022, the Company reported a net loss and as a result, basic and diluted loss per common share are the same.

In calculating net loss per share amounts, all shares underlying the potentially dilutive common stock equivalents were excluded from the calculation of diluted net income (loss) per common share in both periods, because their effect was anti-dilutive.

The following table sets forth the potentially dilutive common stock equivalents for the three months ended March 31, 2023 and 2022 that were not included in diluted earnings per share as their effect would be anti-dilutive:

	Three Months Ended
	March 31,
	2023		2022
Restricted Stock Units		790,980		454,956
Options		2,487,269		3,360,426
Warrants		—		3,100,000
Convertible preferred stock		17,723,362		18,726,009
Total potentially dilutive common stock equivalents		21,001,611		25,641,391

Government Funding

Government Funding

The Company accounts for awards received from the U.S. Government for procurement of capital equipment after analysis of the terms of the underlying award contract, and in accordance with contract and equipment purchase milestones and accounting principles for grant accounting. For awards in which the Company will hold title to the underlying equipment, the Company initially records amounts invoiced to the U.S. Government for equipment progress payments on the accompanying Condensed Consolidated Balance Sheets as Deferred Income – Government Awards – long term and Accounts Receivable – due from Government Awards. The Company records such progress payments made to capital equipment vendors in Property, plant and equipment. Amounts recorded in Deferred Income – Government Awards – long term are recognized as Other Income on the accompanying Condensed Consolidated Statement of Operations on a systematic basis as depreciation and other expenses are incurred over the useful life of the capital equipment.

Restricted Cash

Restricted Cash

The Company accounts for cash received pursuant to U.S. Government funding, that is legally restricted for procurement of capital equipment, as Restricted Cash on the accompanying Condensed Consolidated Balance Sheets. Restricted Cash amounts are received from the U.S. Government in advance of progress payments required for various program related capital equipment purchases and are disbursed by the Company to related equipment vendors.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

Cash, cash equivalents, accounts receivable, short-term investments and accounts payable are stated at cost, which approximates fair value, due to the short-term nature of these instruments. The asset based lending facility, or the ABL Facility, is also stated at cost, which approximates fair value because the interest rate is based on a market based rate plus a margin.

The Company has categorized its assets and liabilities that are valued at fair value on a recurring basis into a three-level fair value hierarchy in accordance with GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets and liabilities (Level 1) and lowest priority to unobservable inputs (Level 3).

Assets and liabilities recorded in the Condensed Consolidated Balance Sheets at fair value are categorized based on a hierarchy of inputs as follows:

Level 1 – Unadjusted quoted prices in active markets of identical assets or liabilities.

Level 2 – Quoted prices for similar assets or liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument.

Level 3 – Unobservable inputs for the asset or liability.

The common stock warrant liability was the only financial asset or liability recorded at fair value on a recurring basis and was considered a Level 3 liability. The respective 2018 Warrants expired on January 29, 2023.

Concentrations

Concentrations

The Company purchases principally all of its silicon wafers, which are a key ingredient in its OLED production process, from two suppliers located in Taiwan and Korea.

For the three months ended March 31, 2023, one customer of 15.1% accounted for over 10% of net revenues. As of March 31, 2023, the Company had accounts receivable from that one customer that accounted for 18.5% of total accounts receivable. For the three months ended March 31, 2022, one customer of 23.7% accounted for over 10% of the Company’s net revenues.

Liquidity and Going Concern

Liquidity and Going Concern

The accompanying Condensed Consolidated Financial Statements have been prepared on a going concern basis, which assumes that the Company will continue to operate as a going concern and which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. For the three months ended March 31, 2023, the Company incurred a net loss of $2.6 million and used cash in operating activities of $0.2 million. As of March 31, 2023, the Company had $3.8 million of cash, no outstanding indebtedness and borrowing availability of $2.4 million under its ABL Facility.

The Company’s ABL Facility expires on December 31, 2023, and renews automatically for another year unless terminated pursuant to its terms. The ABL Facility agreement contains certain lenders remedies that give the bank the ability to impose discretionary reserves against our borrowing availability or terminate the facility upon events of default. Although our relationship with the lender is positive, there is no assurance the lender will renew or extend this facility or continue to make funds available during 2023 and beyond at present availability levels, or at all.

Due to continuing losses, the Company’s financial position, and uncertainty regarding the Company’s ability to borrow under its ABL Facility, or continue to raise funds under its ATM facility, the Company may not be able to meet its financial obligations as they become due without additional financing or sources of capital. Although demand for the Company’s products has remained steady, due to lingering supply chain issues caused in part by the COVID-19 Pandemic, and also inflationary pressures the Company’s ability to obtain components and other materials or services on a timely basis has resulted in manufacturing delays, and increased costs. If these trends worsen or result in lost orders it could materially and adversely affect its business, financial condition, and results of

operations. Management is prepared to reduce expenses and raise additional capital, but there can be no assurance that the Company will be successful in sufficiently reducing expenses or raising capital to meet its operating needs.

The Company has taken actions to increase revenues and to reduce expenses and is considering financing alternatives. The Company’s plans with regard to these matters include the following actions: 1) focus production and engineering resources on improving manufacturing yields and increasing production volumes, 2) continue the Work Status Reduction program that began in October 2019 for certain members of senior management pursuant to which their work status is reduced by approximately 20%, 3) continue to utilize government grants for purchase of capital equipment and funding manufacturing personnel, 4) reduce discretionary and other expenses, 5) seek to enter new markets, 6) sell shares under its At the Market or ATM equity facility entered into in November 2021, and 7) consider additional financing and/or strategic alternatives.

The Company is reassessing its business plans and forecasts over the next two years. Based on its known cash needs as of May 2023, and the anticipated availability of its ABL facility, the Company has developed plans to extend its liquidity to support its working capital requirements through the second quarter of 2024.

However, there can be no assurance the Company’s plans will be achieved and the Company will be able to meet its financial obligations as they become due without obtaining additional financing or sources of capital. Therefore, in accordance with applicable accounting guidance, and based on the Company’s current financial condition and availability of funds, there is substantial doubt about the Company’s ability to continue as a going concern through twelve months from the date these financial statements were issued.

Recently Adopted Accounting Pronouncements and Recently Issued Accounting Pronouncements

Recently adopted accounting pronouncements

The Company's accounting policies are the same as those described in Note 1 to the Company's Consolidated Financial Statements in the Company’s 2022 Form 10-K.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326) and subsequently issued amendments. The guidance affects the Company's accounts receivable, and it requires the measurement of expected credit losses to be based on relevant information from past events, including historical experiences, current conditions and reasonable and supportable forecasts that affect collectability. This new guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022. The Company adopted the guidance on January 1, 2023, on a prospective basis and such adoption did not have a material impact on the Company’s financial statements but did change how the allowance for credit losses is determined.

Recently issued accounting pronouncements

In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40) Accounting for Convertible Instruments and Contracts in an Entity's Own Equity. This guidance changes how entities account for convertible instruments and contracts in an entity's own equity and simplifies the accounting for convertible instruments by removing certain separation models for convertible instruments. This guidance also modifies the guidance on diluted earnings per share calculations. This new guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2023. The Company is currently evaluating the impact of this ASU on the Condensed Consolidated Financial Statements.

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Description of the Business and Summary of Significant Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2023

Description of the Business and Summary of Significant Accounting Policies [Abstract]

Summary of Activity Related to Warranty Liability Included in Other Current Liabilities

	Three Months Ended
	March 31,
	2023		2022
Beginning balance	$	214	$	519
Warranty accruals and adjustments		245		(100)
Warranty claims		(2)		(3)
Ending balance	$	457	$	416

Schedule of Potentially Dilutive Common Stock Equivalents

	Three Months Ended
	March 31,
	2023		2022
Restricted Stock Units		790,980		454,956
Options		2,487,269		3,360,426
Warrants		—		3,100,000
Convertible preferred stock		17,723,362		18,726,009
Total potentially dilutive common stock equivalents		21,001,611		25,641,391

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Revenue Recognition (Tables)

3 Months Ended

Mar. 31, 2023

Revenue Recognition [Abstract]

Schedule of Disaggregated Revenue

 

	Three Months Ended
	March 31,
	2023		2022
North and South America	$	3,170	$	4,326
Europe, Middle East, and Africa		3,021		2,920
Asia Pacific		404		112
Total	$	6,595	$	7,358

	Three Months Ended
	March 31,
		2023		2022
Military	$	4,906	$	5,360
Commercial, including industrial and medical		854		977
Consumer		5		289
Multiple		830		732
Total	$	6,595	$	7,358

Schedule of Contract Assets and Liabilities

	March 31,		December 31,
	2023		2022
Unbilled Receivables (contract assets)	$	2,665	$	2,438
Deferred Revenue (contract liabilities)	$	12	$	12

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Accounts Receivable (Tables)

3 Months Ended

Mar. 31, 2023

Accounts Receivable [Abstract]

Schedule of Accounts Receivable

	March 31,		December 31,
	2023		2022
Accounts receivable	$	5,671	$	7,193
Less allowance for credit losses		(158)		(158)
Accounts receivable, net	$	5,513	$	7,035

Activity Related to Allowance for Credit Losses

Balance as of January 1, 2023	$	158
Current period provision		—
Write-offs charged against the allowance		—
Recoveries collected		—
Balance as of March 31, 2023	$	158

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Inventories, Net (Tables)

3 Months Ended

Mar. 31, 2023

Inventories, Net [Abstract]

Schedule of Components of Inventories

	March 31,		December 31,
	2023		2022
Raw materials	$	3,821	$	3,497
Work in process		2,694		3,496
Finished goods		2,835		2,103
Total inventories		9,350		9,096
Less inventory reserve		(546)		(387)
Total inventories, net	$	8,804	$	8,709

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Debt / Line of Credit (Tables)

3 Months Ended

Mar. 31, 2023

Line of Credit / Loan Payable [Abstract]

Schedule of Line of Credit

	March 31,		December 31,
(in thousands)	2023		2022
Revolving credit facility	$	—	$	1,037

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Stock Compensation (Tables)

3 Months Ended

Mar. 31, 2023

Stock Compensation [Abstract]

Schedule of Allocation of Non-Cash Stock-Based Compensation

	Three Months Ended
	March 31,
	2023		2022
Cost of revenues	$	3	$	28
Research and development		171		36
Selling, general and administrative		82		101
Total stock compensation expense	$	256	$	165

Schedule of Stock-Based Compensation Cost by Award Type

	Three Months Ended
	March 31,
	2023		2022
Stock options	$	17	$	70
Restricted Share Units		239		95
Total stock compensation expense	$	256	$	165

Schedule of Key Assumptions of Fair Value of Stock Options Granted

	Three Months Ended
	March 31,
	2023				2022
Dividend yield			0	%			0	%
Risk free interest rates	3.24	-	3.25	%	0.89	-	0.95	%
Expected volatility	79.3	to	83.0	%	75.9	to	79.0	%
Expected term (in years)	5.0	to	5.5		5.0	to	5.5

Schedule of Option Activity

	Number of ‎Shares		Weighted ‎Average ‎Exercise ‎Price		Weighted Average Remaining Contractual Life (In Years)	Aggregate ‎Intrinsic ‎Value
Outstanding at December 31, 2022		3,459,882	$	1.50
Options granted		—		—
Options exercised		—		—
Options forfeited		—		—
Options cancelled or expired		(209,930)		1.78
Outstanding at March 31, 2023		3,249,952	$	1.48	3.27	$	2,591,607
Vested or expected to vest at March 31, 2023 (1)		3,249,415	$	1.48	3.27	$	2,590,823
Exercisable at March 31, 2023		3,114,952	$	1.52	3.02	$	2,394,507

(1)The expected to vest options are the result of applying the pre-vesting forfeiture rate assumptions to total unvested options.

Schedule of Restricted Stock Unit Activity

					Weighted Average Grant Date
	Number of Awards				Fair Value Per Share
	Service		Performance		Service		Performance
	based		based		based		based
RSU's outstanding at December 31, 2022		1,422,679		436,874	$	1.26	$	1.23
Granted		20,000		—		1.66		—
Vested and settled		—		—		—		—
Forfeited		(18,021)		(11,679)		2.57		3.60
RSU's outstanding at March 31, 2023		1,424,658		425,195	$	1.25	$	1.16

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Warrants (Tables)

3 Months Ended

Mar. 31, 2023

Warrants [Abstract]

Summary of Warrants Issued and Warrants Outstanding

	Issued		Outstanding		Exercise Price		Expiration
2019 Warrant Issuance (1)		6,000,000		2,919,402		0.78		Oct 2024

(1)Private Placement unregistered warrants exercisable six months following issuance.

Fair Value of Warrants

	March 31,		December 31,
	2023		2022
2018 January and February Issuance (1)
Fair Value	$	—	$	—
	$	—	$	—

(1)Warrants from the 2018 January and February Issuance expired on January 29, 2023.

	Three Months Ended
	March 31,
	2023		2022
Change in Fair Value of common stock warrant liability (1)	$	—	$	1,146

(1)The combined changes in fair value are reflected as income (loss) from change in the fair market value of common stock warrant liability.

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Leases (Tables)

3 Months Ended

Mar. 31, 2023

Leases [Abstract]

Components of Lease Expense

	Three Months Ended
	March 31,
	2023		2022
Finance Lease Cost:
Amortization of right-of-use assets	$	174	$	163
Interest on lease liabilities		244		198
Operating lease cost		16		—
Total Lease Cost	$	434	$	361
Cash paid for amounts included in the measurement of lease liabilities:
Principal payments on operating lease liabilities	$	16	$	15
Principal payments on finance lease liabilities	$	307	$	267
Right-of-use assets obtained in exchange for new finance lease liabilities	$	—	$	69
Right-of-use assets obtained in exchange for new operating lease liabilities	$	—	$	—

Schedule of Other Information

	March 31, 2023		December 31, 2022
Finance lease right-of-use assets	$	13,734	$	13,908
Operating lease right-of-use assets	$	37	$	53
Finance lease liability, current	$	1,229	$	1,229
Finance lease liability, non-current	$	13,545	$	13,608
Operating lease liabilities, current	$	38	$	54
Operating lease liabilities, non-current	$	-	$	-
Weighted average remaining lease terms - finance leases		19.75 years		20.00 years
Weighted average remaining lease terms - operating leases		0.58 years		0.83 years
Weighted average discount rate - finance leases		6.94%		6.94%
Weighted average discount rate - operating leases		6.48%		6.48%

Future Annual Minimum Lease Payments and Finance Lease Commitments

	Operating Leases		Finance Leases
2023	$	39	$	922
2024		—		1,229
2025		—		1,229
2026		—		1,229
2027		—		1,269
Thereafter		—		21,345
Total undiscounted future minimum lease payments		39		27,223
Less imputed interest		(1)		(12,449)
Lease liability	$	38	$	14,774

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Description of the Business and Summary of Significant Accounting Policies (Narrative) (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2023 USD ($) customer item	Mar. 31, 2022 USD ($) customer	Dec. 31, 2022 USD ($)
Accounting Policies [Line Items]
Total intangible amortization expense	$ 2	$ 2
Standard product warranty period	1 year
Unbilled revenue, billed and collected, term	1 year
Net Loss	$ (2,621)	(137)
Net cash used in operating activities	167	128
Cash and cash equivalents	$ 3,849	$ 3,857	$ 4,346
Work status reduction program, percentage decrease in senior management compensation	0.20%
Minimum [Member]
Accounting Policies [Line Items]
Payment term	30 days
Maximum [Member]
Accounting Policies [Line Items]
Payment term	60 days
Revolving Credit Facility [Member]
Accounting Policies [Line Items]
Remaining borrowing capacity	$ 2,400
Outstanding amount on credit facility			$ 1,037
Revenues [Member] | Customer Concentration Risk [Member] | One Customer [Member]
Accounting Policies [Line Items]
Number of customers | customer	1
Concentration risk percentage	15.10%
Cost of Goods, Product Line [Member] | Supplier Concentration Risk [Member]
Accounting Policies [Line Items]
Number of suppliers | item	2
Accounts Receivable [Member] | Customer Concentration Risk [Member] | One Customer [Member]
Accounting Policies [Line Items]
Number of customers | customer		1
Accounts Receivable [Member] | Customer Concentration Risk [Member] | Customer One [Member]
Accounting Policies [Line Items]
Concentration risk percentage	18.50%	23.70%

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Description of the Business and Summary of Significant Accounting Policies (Summary of Activity Related to Warranty Liability Included in Other Current Liabilities) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Description of the Business and Summary of Significant Accounting Policies [Abstract]
Beginning balance	$ 214	$ 519
Warranty accruals and adjustments	245	(100)
Warranty claims	(2)	(3)
Ending balance	$ 457	$ 416

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Description of the Business and Summary of Significant Accounting Policies (Schedule of Potentially Dilutive Common Stock Equivalents) (Details) - shares	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total potentially dilutive common stock equivalents	21,001,611	25,641,391
Restricted Stock Units [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total potentially dilutive common stock equivalents	790,980	454,956
Stock Options [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total potentially dilutive common stock equivalents	2,487,269	3,360,426
Warrants [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total potentially dilutive common stock equivalents		3,100,000
Preferred Stock- Series B [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total potentially dilutive common stock equivalents	17,723,362	18,726,009

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Revenue Recognition (Narrative) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022	Dec. 31, 2022
Revenue from Contract with Customer [Line Items]
Product warranty term	1 year
Unbilled revenue, billed and collected, term	1 year
Accounts Receivable, after Allowance for Credit Loss, Current	$ 5,513		$ 7,035
Revenue recognized related to contract liabilities		$ 42
Minimum [Member]
Revenue from Contract with Customer [Line Items]
Payment term	30 days
Maximum [Member]
Revenue from Contract with Customer [Line Items]
Payment term	60 days

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Revenue Recognition (Remaining Performance Obligations Narrative) (Details) - Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-07-01 $ in Millions	Mar. 31, 2023 USD ($)
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Remaining performance obligation	$ 1.3
Remaining performance obligation, expected timing of satisfaction, period	12 months

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Revenue Recognition (Schedule of Disaggregated Revenue) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Disaggregation of Revenue [Line Items]
Revenues from contract with customer	$ 6,595	$ 7,358
Military [Member]
Disaggregation of Revenue [Line Items]
Revenues from contract with customer	4,906	5,360
Commercial, including Industrial and Medical [Member]
Disaggregation of Revenue [Line Items]
Revenues from contract with customer	854	977
Consumer [Member]
Disaggregation of Revenue [Line Items]
Revenues from contract with customer	5	289
Multiple [Member]
Disaggregation of Revenue [Line Items]
Revenues from contract with customer	830	732
North and South America [Member]
Disaggregation of Revenue [Line Items]
Revenues from contract with customer	3,170	4,326
Europe, Middle East, and Africa [Member]
Disaggregation of Revenue [Line Items]
Revenues from contract with customer	3,021	2,920
Asia Pacific [Member]
Disaggregation of Revenue [Line Items]
Revenues from contract with customer	$ 404	$ 112

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Revenue Recognition (Schedule of Contract Assets and Liabilities) (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Revenue Recognition [Abstract]
Unbilled Receivables (contract assets)	$ 2,665	$ 2,438
Deferred Revenue (contract liabilities)	$ 12	$ 12

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Accounts Receivable (Schedule of Accounts Receivable) (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Accounts Receivable [Abstract]
Accounts receivable	$ 5,671	$ 7,193
Less allowance for credit losses	(158)	(158)
Accounts receivable, net	$ 5,513	$ 7,035

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Accounts Receivable (Activity Related to Allowance for Credit Losses) (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2023 USD ($)
Accounts Receivable [Abstract]
Beginning Balance	$ 158
Current period provision
Write-offs charged against the allowance
Recoveries collected
Ending Balance	$ 158

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Inventories, Net (Schedule of Components of Inventories) (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Inventories, Net [Abstract]
Raw materials	$ 3,821	$ 3,497
Work in process	2,694	3,496
Finished goods	2,835	2,103
Total inventories	9,350	9,096
Less inventory reserve	(546)	(387)
Total inventories, net	$ 8,804	$ 8,709

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Line of Credit / Loan Payable (Narrative) (Details) - Revolving Credit Facility [Member] - USD ($)		3 Months Ended
	Dec. 21, 2016	Mar. 31, 2023
Line of Credit Facility [Line Items]
Borrowing capacity description		provides for up to a maximum amount of $5 million based on a borrowing base equivalent to 85% of eligible accounts receivable plus the lesser of $2 million or 50% of eligible inventory.
Maximum borrowing capacity	$ 5,000,000
Borrowing base equivalent of eligible accounts receivable, percentage	85.00%
Borrowing base equivalent of eligible inventory	$ 2,000,000
Borrowing base equivalent of eligible inventory, percentage	50.00%
Stated interest rate	6.50%
Monthly interest payment	$ 2,000
Monthly administrative fee	$ 1,000
Annual facility fee on maximum amount borrowable	1.00%
Automatic renewal term		1 year
Minimum net worth required		$ 13,000,000
Minimum working capital required		4,000,000
Remaining borrowing capacity		$ 2,400,000
Prime Rate [Member]
Line of Credit Facility [Line Items]
Basis spread on variable rate	3.00%

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Line of Credit / Loan Payable (Schedule of Line of Credit) (Details) $ in Thousands	Dec. 31, 2022 USD ($)
Revolving Credit Facility [Member]
Line of Credit Facility [Line Items]
Revolving credit facility	$ 1,037

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Stock Compensation (Narrative) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Dividend yield	0.00%	0.00%
Shares issued due to Options exercised
Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized stock option compensation, net of forfeitures	$ 13
Unrecognized compensation cost, weighted average period of recognition	2 months 12 days
Restricted Stock Units [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized stock option compensation, net of forfeitures	$ 1,400
Unrecognized compensation cost, weighted average period of recognition	2 years

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Stock Compensation (Schedule of Allocation of Non-Cash Stock-Based Compensation) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock compensation expense	$ 256	$ 165
Cost of Revenues [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock compensation expense	3	28
Research and Development [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock compensation expense	171	36
Selling, General and Administrative [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock compensation expense	$ 82	$ 101

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Stock Compensation (Schedule of Stock-Based Compensation Cost by Award Type) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock compensation expense	$ 256	$ 165
Stock Options [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock compensation expense	17	70
Restricted Stock Units [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock compensation expense	$ 239	$ 95

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Stock Compensation (Schedule of Key Assumptions of Fair Value of Stock Options Granted) (Details)	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Dividend yield	0.00%	0.00%
Risk free interest rates, minimum	3.24%	0.89%
Risk free interest rates, maximum	3.25%	0.95%
Expected volatility, minimum	79.30%	75.90%
Expected volatility, maximum	83.00%	79.00%
Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected term (in years)	5 years	5 years
Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected term (in years)	5 years 6 months	5 years 6 months

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Stock Compensation (Schedule of Option Activity) (Details) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2023 USD ($) $ / shares shares
Stock Compensation [Abstract]
Number of Shares, Outstanding at December 31, 2022 | shares	3,459,882
Number of Shares, Options granted | shares
Number of Shares, Options exercised | shares
Number of Shares, Options forfeited | shares
Number of Shares, Options cancelled or expired | shares	(209,930)
Number of Shares, Outstanding at March 31, 2023 | shares	3,249,952
Number of Shares, Vested or expected to vest at March 31, 2023 | shares	3,249,415
Number of Shares, Exercisable at March 31, 2023 | shares	3,114,952
Weighted Average Exercise Price, Outstanding at December 31, 2022 | $ / shares	$ 1.50
Weighted Average Exercise Price, Options granted | $ / shares
Weighted Average Exercise Price, Options exercised | $ / shares
Weighted Average Exercise Price, Options forfeited | $ / shares
Weighted Average Exercise Price, Options cancelled or expired | $ / shares	1.78
Weighted Average Exercise Price, Outstanding at March 31, 2023 | $ / shares	1.48
Weighted Average Exercise Price, Vested or expected to vest at March 31, 2023 | $ / shares	1.48
Weighted Average Exercise Price, Exercisable at March 31, 2023 | $ / shares	$ 1.52
Weighted Average Remaining Contractual Life (In Years), Outstanding at March 31, 2023	3 years 3 months 7 days
Weighted Average Remaining Contractual Life (In Years), Vested or expected to vest at March 31, 2023	3 years 3 months 7 days
Weighted Average Remaining Contractual Life (In Years), Exercisable at March 31, 2023	3 years 7 days
Aggregate Intrinsic Value, Outstanding at March 31, 2023 | $	$ 2,591,607
Aggregate Intrinsic Value, Vested or expected to vest at March 31, 2023 | $	2,590,823
Aggregate Intrinsic Value, Exercisable at March 31, 2023 | $	$ 2,394,507

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Stock Compensation (Schedule of Restricted Stock Unit Activity) (Details) - $ / shares	3 Months Ended
	Mar. 31, 2023	Dec. 31, 2022
Service Based Shares [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of Awards, RSUs outstanding at December 31, 2022	1,422,679
Number of Awards, Granted	20,000
Number of Awards, Forfeited	(18,021)
Number of Awards, RSUs outstanding at March 31, 2023	1,424,658
Weighted Average Grant Date Fair Value per Share, RSUs outstanding at December 31, 2022	$ 1.25	$ 1.26
Weighted Average Grant Date Fair Value per Share, Granted	1.66
Weighted Average Grant Date Fair Value per Share, Forfeited	2.57
Weighted Average Grant Date Fair Value per Share, RSUs outstanding at March 31, 2023	$ 1.25
Performance Based Shares [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of Awards, RSUs outstanding at December 31, 2022	436,874
Number of Awards, Granted
Number of Awards, Vested and settled
Number of Awards, Forfeited	(11,679)
Number of Awards, RSUs outstanding at March 31, 2023	425,195
Weighted Average Grant Date Fair Value per Share, RSUs outstanding at December 31, 2022	$ 1.16	$ 1.23
Weighted Average Grant Date Fair Value per Share, Granted
Weighted Average Grant Date Fair Value per Share, Vested and settled
Weighted Average Grant Date Fair Value per Share, Forfeited	3.60
Weighted Average Grant Date Fair Value per Share, RSUs outstanding at March 31, 2023	$ 1.16

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Income Taxes (Narrative) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Income Taxes [Abstract]
Effective tax rate	0.00%	0.00%
Federal statutory rate	21.00%	21.00%
Operating loss carryforward, expiration	Dec. 31, 2037
Expected refund for AMT credit carryforward	$ 212

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Commitments and Contingencies (Narrative) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Loss Contingencies [Line Items]
Equipment purchases commitments	$ 7,500
Other income (expense)	120	$ 96
Government Award [Member]
Loss Contingencies [Line Items]
Equipment purchases commitments	$ 6,900

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Warrants (Narrative) (Details) - shares	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Warrants [Abstract]
Warrants exercised	80,598	0
Number of common stock exchanged	50,000

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Warrants (Summary of Warrants Issued and Warrants Outstanding) (Details) - 2019 Warrant Issuance [Member]	3 Months Ended
	Mar. 31, 2023 $ / shares shares
Class of Warrant or Right [Line Items]
Issued	6,000,000
Outstanding	2,919,402
Exercise Price | $ / shares	$ 0.78
Expiration	2024-10

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Warrants (Fair Value of Warrants) (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2022 USD ($)
Warrants [Abstract]
Change in Fair Value of common stock warrant liability	$ 1,146

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Leases (Narrative) (Details) - item	1 Months Ended	3 Months Ended
	Oct. 31, 2021	Mar. 31, 2023	May 02, 2019
Hopewell Junction, NY [Member] | 12th Amendment [Member]
Lessee, Lease, Description [Line Items]
Number of options to renew lease agreement		2
Options to renew lease agreement, period of renewal		5 years
Santa Clara, California [Member]
Lessee, Lease, Description [Line Items]
Lease extension term	2 years
Phone Equipment [Member]
Lessee, Lease, Description [Line Items]
Finance lease, term of contract			3 years

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Leases (Components of Lease Expense) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Finance Lease Cost:
Amortization of right-of-use assets	$ 174	$ 163
Interest on lease liabilities	244	198
Operating lease cost	16
Total Lease Cost	434	361
Principal payments on operating lease liabilities	16	15
Principal payments on finance leases liabilities	$ 307	267
Right-of-use assets obtained in exchange for finance lease liabilities		$ 69

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Leases (Schedule of Other Information) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022	Dec. 31, 2022
Leases [Abstract]
Operating cash flows from operating leases	$ 16	$ 15
Principal payments on finance leases liabilities	307	267
Right-of-use assets obtained in exchange for new finance lease liabilities		$ 69
Finance lease right-of-use assets	13,734		$ 13,908
Operating lease right-of-use assets	37		53
Finance lease liability, current	1,229		1,229
Finance lease liability, non-current	13,545		13,608
Operating lease liabilities, current	38		54
Operating lease liabilities, non-current
Weighted average remaining lease terms - finance leases	19 years 9 months		20 years
Weighted average remaining lease terms - operating leases	6 months 29 days	9 months 29 days
Weighted average discount rate - finance leases	6.94%		6.94%
Weighted average discount rate - operating leases	6.48%		6.48%

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Leases (Future Annual Minimum Lease Payments and Finance Lease Commitments) (Details) $ in Thousands	Mar. 31, 2023 USD ($)
Operating Leases
2023	$ 39
Total undiscounted future minimum lease payments	39
Less imputed interest	(1)
Lease liability	38
Finance Leases
2023	922
2024	1,229
2025	1,229
2026	1,229
2027	1,269
Thereafter	21,345
Total undiscounted future minimum lease payments	27,223
Less imputed interest	(12,449)
Lease liability	$ 14,774

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Shareholders' Equity (Narrative) (Details) - USD ($) $ in Thousands		3 Months Ended
	Nov. 18, 2021	Mar. 31, 2023	Mar. 31, 2022	Dec. 31, 2022
Class of Stock [Line Items]
Proceeds from offering		$ 1,166	$ 460
ATM Offering [Member]
Class of Stock [Line Items]
Sale of stock agreement, authorized amount	$ 10,000
Proceeds from offering		$ 1,200
Preferred Stock- Series B [Member]
Class of Stock [Line Items]
Preferred stock, shares issued		5,356		5,356
Preferred stock, shares outstanding		5,356		5,356

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Government Funding (Narrative) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Dec. 31, 2022	Jul. 28, 2020	Jun. 11, 2020
Government Funding [Abstract]
Amount awarded			$ 33,600	$ 5,500
Government funding, term of contract	33 months
Deposits received, required by capital equipment vendors	$ 32,200
Restricted cash	303	$ 303
Amount invoiced	32,200
Deferred income related to certain overhead expenses, not capitalized	$ 40
Maintain productive capacity of equipment purchased past completion of program, period	5 years