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 June 30, 2022

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 July 27, 2022 there were 76,680,029 common shares at $0.001 par value per share of the registrant outstanding.

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Table of Contents

		Page
PART I - FINANCIAL INFORMATION
Item 1	Condensed Consolidated Financial Statements
	Condensed Consolidated Balance Sheets as of June 30, 2022 (unaudited) and December 31, 2021	5
	Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2022 and 2021 (unaudited)	6
	Condensed Consolidated Statements of Changes in Shareholders’ Equity for the three and six months ended June 30, 2022 and 2021 (unaudited)	7
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2022 and 2021 (unaudited)	8
	Notes to Condensed Consolidated Financial Statements (unaudited)	9
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3	Quantitative and Qualitative Disclosures About Market Risk	28
Item 4	Controls and Procedures	28
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		31

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 and in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021. 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 needs for additional financing, as well as our ability to obtain such additional financing on reasonable terms and the interest rate and expense we incur on any debt financing;

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;

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;

3

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; 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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4

ITEM 1.  Financial Statements 

eMAGIN CORPORATION 

CONDENSED CONSOLIDATED BALANCE SHEETS 

(In thousands, except share data)

(unaudited) 

	June 30,		December 31,
	2022		2021
ASSETS
Current assets:
Cash and cash equivalents	$	4,290	$	5,724
Restricted cash		511		806
Accounts receivable, net		5,020		4,488
Account receivable-due from government awards		367		292
Unbilled accounts receivable		1,318		1,102
Inventories		7,661		7,632
Prepaid expenses and other current assets		672		691
Total current assets		19,839		20,735
Property, plant and equipment, net		37,499		30,483
Operating lease right - of - use assets		84		113
Intangibles and other assets		33		37
Total assets	$	57,455	$	51,368
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1,160	$	1,348
Accrued compensation		2,181		1,664
Revolving credit facility, net		2,087		1,974
Common stock warrant liability		2		1,374
Other accrued expenses		391		722
Deferred revenue		114		54
Operating lease liability - current		63		60
Finance lease liability - current		1,127		1,133
Other current liabilities		366		608
Total current liabilities		7,491		8,937
Other liability - long term		28		28
Deferred income - government awards - long term		19,161		12,458
Operating lease liability - long term		22		54
Finance lease liability - long term		11,647		11,647
Total liabilities		38,349		33,124
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 $5,659) stated value $1,000 per share, $0.001 par value: 10,000 shares designated and 5,659 issued and outstanding as of June 30, 2022 and December 31, 2021.		—		—
Common stock, $0.001 par value: authorized 200,000,000 shares, issued 75,621,126 shares, outstanding 75,459,060 shares as of June 30, 2022 and issued 72,931,490 shares, outstanding 72,769,424 shares as of December 31, 2021.		75		72
Additional paid-in capital		278,372		275,936
Accumulated deficit		(258,841)		(257,264)
Treasury stock, 162,066 shares as of June 30, 2022 and December 31, 2021.		(500)		(500)
Total shareholders’ equity		19,106		18,244
Total liabilities and shareholders’ equity	$	57,455	$	51,368

See notes to Condensed Consolidated Financial Statements. 

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5

eMAGIN CORPORATION 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS 

(In thousands, except share and per share data) 

(unaudited) 

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Revenues:
Product	$	7,026	$	5,742	$	14,053	$	11,847
Contract		133		537		464		1,205
Total revenues, net		7,159		6,279		14,517		13,052
Cost of revenues:
Product		5,522		5,466		10,309		10,173
Contract		68		242		150		600
Total cost of revenues		5,590		5,708		10,459		10,773
Gross profit		1,569		571		4,058		2,279
Operating expenses:
Research and development		1,457		1,788		2,941		3,630
Selling, general and administrative		1,904		1,690		4,074		3,514
Total operating expenses		3,361		3,478		7,015		7,144
Loss from operations		(1,792)		(2,907)		(2,957)		(4,865)
Other (expense) income:
Change in fair value of common stock warrant liability		226		2,642		1,372		(4,566)
Interest expense, net		(225)		(205)		(439)		(415)
Gain on forgiveness of debt		—		—		—		1,963
Other income, net		351		192		447		227
Total other income (expense)		352		2,629		1,380		(2,791)
Loss before provision for income taxes		(1,440)		(278)		(1,577)		(7,656)
Income taxes		—		—		—		—
Net loss	$	(1,440)	$	(278)	$	(1,577)	$	(7,656)
Loss per share, basic and diluted	$	(0.02)	$	0.00	$	(0.02)	$	(0.11)
Weighted average number of shares outstanding:
Basic and Diluted		73,895,212		72,193,205		73,368,347		71,238,060

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, 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
Vesting of RSUs						110,608		—		—		—		—		—
Stock based compensation		—		—		—		—		214		—		—		214
Public offering of common shares, net of offering costs		—		—		2,173,942		3		1,597		—		—		1,600
Net loss		—		—		—		—		—		(1,440)		—		(1,440)
Balance, June 30, 2022		5,659	$	—		75,621,126	$	75	$	278,372	$	(258,841)	$	(500)	$	19,106

	Preferred Shares		Preferred Stock		Common Shares		Common Stock		Additional Paid-in Capital		Accumulated Deficit		Treasury Stock		Total Shareholders’ Equity
Balance, December 31, 2020		5,659	$	—		68,890,819	$	69	$	268,729	$	(252,058)	$	(500)	$	16,240
Exercising of options		—		—		227,792		—		364		—		—		364
Stock based compensation		—		—		—		—		13						13
Exercise of common stock warrants		—		—		3,019,247		3		5,059		—		—		5,062
Net loss		—		—		—		—		—		(7,378)		—		(7,378)
Balance, March 31, 2021		5,659	$	—		72,137,858	$	72	$	274,165	$	(259,436)	$	(500)	$	14,301
Exercising of options		—		—		203,459		—		381		—		—		381
Stock based compensation		—		—		—		—		37		—		—		37
Exercise of common stock warrants		—		—		324,413		—		590		—		—		590
Net loss		—		—		—		—		—		(278)		—		(278)
Balance, June 30, 2021		5,659	$	—		72,665,730	$	72	$	275,173	$	(259,714)	$	(500)	$	15,031

See notes to Condensed Consolidated Financial Statements.

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7

eMAGIN CORPORATION 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 

(In thousands) 

(unaudited)

	Six Months Ended
	June 30,
	2022		2021
Cash flows from operating activities:
Net loss	$	(1,577)	$	(7,656)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		1,671		1,427
Change in fair value of common stock warrant liability		(1,372)		4,566
Gain on forgiveness of debt		—		(1,963)
Stock-based compensation		379		50
Amortization of operating lease right-of-use assets		29		30
Changes in operating assets and liabilities:
Accounts receivable		(607)		3,133
Unbilled accounts receivable		(216)		(530)
Inventories		(29)		246
Prepaid expenses and other current assets		19		148
Deferred revenues		60		(339)
Operating lease liabilities		(29)		(30)
Accounts payable, accrued expenses, and other current liabilities		(173)		(1,134)
Net cash used in operating activities		(1,845)		(2,052)
Cash flows from investing activities:
Purchase of equipment		(1,128)		(501)
Purchase of equipment, government grant		(7,418)		(5,198)
Net cash used in investing activities		(8,546)		(5,699)
Cash flows from financing activities:
Borrowings (repayments) under revolving line of credit, net		113		(1,470)
Proceeds from public offering, net		2,060		—
Change in finance lease liabilities		(144)		(158)
Proceeds from government grant		6,633		4,615
Proceeds from warrant exercise		—		5,652
Proceeds from exercise of stock options		—		745
Net cash provided by financing activities		8,662		9,384
Net (decrease) increase in cash, cash equivalents, and restricted cash		(1,729)		1,633
Cash, cash equivalents, and restricted cash, beginning of period		6,530		10,426
Cash, cash equivalents, and restricted cash, end of period	$	4,801	$	12,059
Cash, cash equivalents, end of period		4,290		10,568
Restricted cash, end of period		511		1,491
Supplementary Cash Flow Information
Cash paid for interest	$	439	$	210
Cash paid for income taxes	$	—	$	—
Non-cash activities:
Right-of-use assets obtained in exchange for finance lease liabilities	$	137	$	108

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, 2021. The results of operations for the periods ended June 30, 2022 are not necessarily indicative of the results to be expected for the full year. The Consolidated Financial Statements as of December 31, 2021 are derived from audited financial statements included in the Company’s 2021 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, liability classified warrants, 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 and $4 thousand for the three and six months ended June 30, 2022 and 2021, 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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9

The following table provides a summary of the activity related to the Company's warranty liability included in other current liabilities, during the three and six months ended June 30, 2022 and 2021 (in thousands):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Beginning balance	$	416	$	465	$	519	$	615
Warranty accruals and adjustments		(127)		242		(227)		100
Warranty claims		(7)		(2)		(10)		(10)
Ending balance	$	282	$	705	$	282	$	705

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. In accordance with the Preferred Stock – Series B agreements, the conversion price was adjusted to $0.3033 per share in December 2019, and the resultant, if converted common shares are reflected in the table of anti-dilutive common stock equivalents below.

The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share and share data) for the three and six months ended June 30, 2022 and 2021:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Net Loss	$	(1,440)	$	(278)	$	(1,577)	$	(7,656)
Income allocated to participating securities		—		—		—		—
Loss allocated to common shares	$	(1,440)	$	(278)	$	(1,577)	$	(7,656)
Change in fair value of warrant liability(1)	$	—	$	—	$	—	$	—
Loss allocated to common shares   - Diluted	$	(1,440)	$	(278)	$	(1,577)	$	(7,656)
Weighted average common shares outstanding ‎  - Basic		73,895,212		72,193,205		73,368,347		71,238,060
Dilutive effect of liability classified warrants		—		—		—		—
Weighted average common shares outstanding ‎  - Diluted(1)		73,895,212		72,193,205		73,368,347		71,238,060
Net loss per share:
Basic	$	(0.02)	$	-	$	(0.02)	$	(0.11)
Diluted	$	(0.02)	$	-	$	(0.02)	$	(0.11)

(1)For the three months ended June 30, 2022 and 2021, income (loss) allocated to common shares, and the weighted average shares used for calculating basic and diluted earnings per share exclude the assumed impact of exercise liability classified warrants, because it would be anti-dilutive to the earnings per share calculation.

In calculating net income (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.

10

The following table sets forth the potentially dilutive common stock equivalents for the three and six months ended June 30, 2022 and 2021 that were not included in diluted earnings per share, or EPS, as their effect would be anti-dilutive:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Restricted Stock Units		408,226		435,501		408,226		435,501
Options		3,625,426		3,841,671		3,625,426		3,841,671
Warrants		6,009,374		9,339,816		6,009,374		9,339,816
Convertible preferred stock		18,726,009		18,726,009		18,726,009		18,726,009
Total potentially dilutive common stock equivalents		28,769,035		32,342,997		28,769,035		32,342,997

Government Funding

The Company accounts for awards received from the U.S. Government for procurement of capital equipment after reviewing 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 is currently the only financial asset or liability recorded at fair value on a recurring basis and is considered a Level 3 liability. The fair value of the common stock warrant liability is included in current liabilities on the Condensed Consolidated Balance Sheets, as the warrants are currently exercisable.

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The following table shows the reconciliation of the Level 3 warrant liability measured and recorded at fair value on a recurring basis, using significant unobservable inputs (in thousands):

	Estimated Fair Value
Balance as of January 1, 2022	$	1,374
Change in fair value of warrant liability, net		(1,372)
Balance as of June 30, 2022	$	2

The fair value of the liability for common stock purchase warrants at issuance and at June 30, 2022 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. Inputs to the model at June 30, 2022 included remaining contractual terms of the warrants of 0.58 years, at risk-free interest rates of 2.51% with no expected dividends, and expected volatility of the price of the underlying common stock of 45.02%.

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 June 30, 2022, one customer of 11.0% accounted for over 10% of net revenues. For the six months ended June 30, 2022, a different customer of 12.5% accounted for over 10% of net revenues. As of June 30, 2022, the Company had accounts receivable from those two customers that accounted for 8.4% and 1.1% of total accounts receivable, respectively. For the three and six months ended June 30, 2021, one customer of 19.4% and 15.6%, respectively 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 six months ended June 30, 2022, the Company incurred a net loss of $1.6 million and used cash in operating activities of $1.8 million. As of June 30, 2022, the Company had $4.3 million of cash, $2.1 million of outstanding indebtedness and borrowing availability of $0.7 million under its ABL Facility.

The Company’s ABL Facility expires on December 31, 2022, 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 2022 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. In addition, the COVID-19 pandemic, and disruptions caused by the war in the Ukraine have significantly increased economic and demand uncertainty across the globe and contributed to supply chain shortages and disruptions. Although demand for the Company’s products has remained steady, 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 as a result of COVID-19, the Ukraine war, or other semiconductor supply chain issues 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 a Work Status Reduction program that began in October 2019 wherein senior management work status was 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 it’s At the Market or ATM equity facility entered into in November 2021, and 7) consider additional financing and/or strategic alternatives.

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The Company is reassessing its business plans and forecasts over the next two years. Based on its known cash needs as of July 2022, 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 third quarter of 2023.

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 its Annual Report on Form 10-K for the year ended December 31, 2021.

Recently issued accounting pronouncements

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. Based on the composition of the Company's receivables, current market conditions and historical credit loss activity, the Company is currently evaluating the impact of this ASU on the Condensed Consolidated Financial Statements.

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.

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

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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 fulfil 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 and six months ended June 30, 2022 and 2021 were as follows (in thousands):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
North and South America	$	3,790	$	3,647	$	8,116	$	6,950
Europe, Middle East, and Africa		3,099		2,090		6,019		4,621
Asia Pacific		270		542		382		1,481
Total	$	7,159	$	6,279	$	14,517	$	13,052

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021			2022		2021
Military	$	4,799	$	3,884	$	10,159	$	7,759
Commercial, including industrial and medical		1,184		820		2,161		1,800
Consumer		23		500		312		1,150
Multiple		1,153		1,075		1,885		2,343
Total	$	7,159	$	6,279	$	14,517	$	13,052

Accounts Receivable from Customers

Accounts receivable, net of allowances, were $5.0 million and $4.5 million as of June 30, 2022 and December 31, 2021.

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. An 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.

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.

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

	June 30,		December 31,
	2022		2021
Unbilled Receivables (contract assets)	$	1,318	$	1,102
Deferred Revenue (contract liabilities)	$	114	$	54

For the three and six months ended June 30, 2022 the Company recognized no revenue and $42 thousand of revenue related to its contract liabilities that existed at December 31, 2021, respectively. For the three and six months ended June 30, 2021 the Company recognized $37 thousand and $339 thousand respectively, of revenue related to its contract liabilities that existed at December 31, 2020.

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 June 30, 2022, the aggregate amount of the transaction price allocated to remaining performance obligations was $2.7 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):

	June 30,		December 31,
	2022		2021
Accounts receivable	$	5,159	$	4,627
Less allowance for doubtful accounts		(139)		(139)
Accounts receivable, net	$	5,020	$	4,488

Note 4 – Inventories, net

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

	June 30,		December 31,
	2022		2021
Raw materials	$	2,749	$	3,517
Work in process		3,077		2,149
Finished goods		2,225		2,363
Total inventories		8,051		8,029
Less inventory reserve		(390)		(397)
Total inventories, net	$	7,661	$	7,632

Note 5 – Line of Credit / Loan Payable

Revolving Credit Facility

	June 30,		December 31,
(in thousands)	2022		2021
Revolving credit facility	$	2,087	$	1,974

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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, 2021 and will automatically renew on December 31, 2022 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 June 30, 2022 the Company had $2.1 million in borrowings outstanding under the ABL Facility, had unused borrowing availability of $0.7 million under the ABL Facility and was in compliance with all financial debt covenants under the ABL Facility.

Promissory Note under the Paycheck Protection Program

On June 8, 2020, the Company received a loan under the U.S. Small Business Administration’s, or SBA, Paycheck Protection Program, or PPP, from KeyBank National Association related to the COVID-19 pandemic in the amount of $1.9 million at an interest rate of 1% per annum. The Company used the proceeds to pay qualified payroll costs, in accordance with loan requirements and applied for forgiveness of the entire loan in the fourth quarter of 2020. During the first quarter of 2021 the entire loan amount was forgiven and recorded in the Condensed Consolidated Statements of Operations as gain on forgiveness of debt.

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. 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 and six months ended June 30, 2022 and 2021 (in thousands): 

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Cost of revenues	$	30	$	3	$	58	$	3
Research and development		56		9		92		12
Selling, general and administrative		128		25		229		35
Total stock compensation expense	$	214	$	37	$	379	$	50

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

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Stock options	$	119	$	13	$	189	$	25
Restricted Share Units		95		24		190		25
Total stock compensation expense	$	214	$	37	$	379	$	50

At June 30, 2022, total unrecognized compensation costs related to stock options and RSUs was approximately $62 thousand and $0.9 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 0.9 years and approximately 2.1 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:

	Six Months Ended
	June 30,
	2022				2021
Dividend yield			0	%			0	%
Risk free interest rates	3.24	-	3.25	%	1.77	-	2.48	%
Expected volatility	79.3	to	83.0	%	41.7	to	49.2	%
Expected term (in years)	5.0	to	5.5		3.5	to	4.0

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 six months ended June 30, 2022 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, 2021		3,712,867	$	1.81
Options granted		270,000		0.73
Options exercised		—		—
Options forfeited		(5,000)		0.40
Options cancelled or expired		(352,441)		3.59
Outstanding at June 30, 2022		3,625,426	$	1.56	3.66	$	144,835
Vested or expected to vest at June 30, 2022 (1)		3,622,861	$	1.56	3.65	$	144,835
Exercisable at June 30, 2022		3,489,426	$	1.59	3.42	$	144,835

(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 were exercised in the three and six months ended June 30, 2022.

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Restricted Stock Units (“RSU”) Summary

The following table summarized the activity in respect of RSUs issued under the Company for the six months ended June 30, 2022:

					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, 2021		405,453		103,047	$	3.52	$	3.60
Granted		165,885		46,729		1.01		1.07
Vested and settled		(110,608)		—		3.60		—
Forfeited		(52,504)		(34,349)		3.60		3.60
RSU's outstanding at June 30, 2022		408,226		115,427	$	3.13	$	2.58

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 and six months ended June 30, 2022 and 2021. The difference between the effective tax rate of 0% and the U.S. federal statutory rate of 21% for three and six months ended June 30, 2022 and 2021 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 June 30, 2022.

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 was recorded during 2017, and 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 $17.3 million at June 30, 2022, of which $16.4 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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As disclosed in the financial statements in Company’s Annual Report on Form 10-K for the year ended December 31, 2018, the Company made a decision to exit the consumer night vision business and accrued approximately $1.0 million related to invoices received for inventory purchased by Suga Electronics Limited, or Suga, a contract manufacturer in anticipation of future production. As a result of settlement of the arbitration with Suga related to those costs in the second quarter of 2021, the Company removed the $1.0 million accrual from its balance sheet, wrote off $0.3 million in prepayments and recorded a gain of $0.1 million in Other Income/Expense during the second quarter of 2021.

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 June 30, 2022:

	Issued		Outstanding		Exercise Price		Expiration
2017 Warrant Issuance (1)		100,000		100,000		2.25		Sep 2022
2018 Warrant Issuance (2)		4,004,329		2,909,374		1.55		Jan 2023
2019 Warrant Issuance (3)		6,000,000		3,000,000		0.78		Oct 2024
				6,009,374

(1)Issued in conjunction with an unsecured line of credit.

(2)Warrant is subject to liability accounting.

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

Equity classified warrants

The 2019 warrants share similar terms, 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. As a result, the Company has accounted for the exercise price paid by investors for purchase of the pre-funded warrants as additional paid in capital on the accompanying Condensed Consolidated Balance Sheets.

Liability classified warrants

The 2018 warrants have 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 accompanying Condensed Consolidated Balance Sheets as a current liability upon issuance and will be revalued at each subsequent balance sheet date.

The fair value of the liability for common stock purchase warrants is 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.

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

	June 30,		December 31,
	2022		2021
2018 January and February Issuance
Fair Value	$	2	$	1,355
2017 May Issuance (1)
Fair Value		—		19
	$	2	$	1,374

(1)Warrants from the 2017 May Issuance expired on May 24, 2022.

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Change in Fair Value of common stock warrant liability (1)	$	226	$	2,642	$	1,372		(4,566)

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

During the three and six months ended June 30, 2022, there were no warrant exercises. During the three months ended June 30, 2021, the Company received $0.6 million in payment of the exercise price for warrants to purchase 324,413 shares of common stock. During the six months ended June 30, 2021, the Company received $5.7 million in payment of the exercise price for warrants to purchase 3,343,660 shares of common stock.

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. During the fourth quarter of 2019, the Company signed a two year extension of this lease that expired in October 2021. The lease agreement did not contain any residual value guarantees, material restrictive covenants or a renewal option and was classified as an operating lease. 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. 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				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Finance Lease Cost:
Amortization of right-of-use assets	$	149	$	155	$	302	$	312
Interest on lease liabilities		198		197		396		396
Operating lease cost		16		15		33		30
Total Lease Cost	$	363	$	367	$	731	$	738

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Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	14	$	15	$	29	$	31
Financing cash flows from finance leases	$	270	$	294	$	542	$	549
Right-of-use assets obtained in exchange for new finance lease liabilities	$	69	$	94	$	137	$	108
Right-of-use assets obtained in exchange for new operating lease liabilities	$	-	$	-	$	-	$	-

	June 30, 2022		December 31, 2021
Finance lease right-of-use assets	$	13,106	$	12,318
Operating lease right-of-use assets	$	84	$	113
Finance lease liability, current	$	1,127	$	1,133
Finance lease liability, non-current	$	11,647	$	11,647
Operating lease liabilities, current	$	63	$	60
Operating lease liabilities, non-current	$	22	$	54
Weighted average remaining lease terms - finance leases		20.58 years		20.58 years
Weighted average remaining lease terms - operating leases		1.33 years		1.83 years
Weighted average discount rate - finance leases		6.42%		6.42%
Weighted average discount rate - operating leases		6.48%		7.75%

Future annual minimum lease payments and finance lease commitments as of June 30, 2022 were as follows (in thousands):

	Operating Leases		Finance Leases
2022	$	33	$	527
2023		55		1,214
2024		-		1,229
2025		-		1,229
2026		-		1,229
Thereafter		-		22,717
Total undiscounted future minimum lease payments		88		28,145
Less imputed interest		(3)		(15,371)
Lease liability	$	85	$	12,774

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 six months ended June 30, 2022, the Company raised $2.1 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.

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.

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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 June 30, 2022, the Company has received $19.8 million in total, for initial deposits required by capital equipment vendors. Amounts received, pending payment of deposits to vendors as of June 30, 2022, of $0.5 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 $19.8 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 six months ended June 30, 2022, the Company recognized deferred income related to certain overhead expenses, not capitalized, of $159 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. Please see "Statement Regarding Forward-Looking Information" and Part II, Item 1A, "Risk Factors" of this Report. 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.

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.

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 second quarter of 2022 our total revenue was $7.2 million marked by continuing strength in military demand and increased revenue contributions from medical customers. In addition to higher yields, we saw a 40% increase in display production from the second quarter of last year. Our second quarter 2022 display revenues of $7.0 million was up 22% year over year while our quarterly display revenue gross margin improved to 21% from the prior year’s second quarter of 5%. As of the end of the second quarter, our sales backlog remained strong at $12.8 million, reflecting demand for our displays for use in thermal weapon sights, military night vision goggles, and medical applications.

Operating expenses for the second quarter of 2022, including R&D expenses were $3.4 million, compared with $3.5 million in the prior-year period. Operating expenses as a percentage of sales were 47% in the second quarter of 2022, with 55% in the prior-year period.

We have implemented employee health and safety measures as required by the 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. As a result of the COVID-19 pandemic, we 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. The Company has committed the funds and ordered all equipment to be purchased under these programs. As of the end of the second quarter of 2022, the Company has qualified and added four pieces of equipment to its production line and received three additional pieces of equipment that are currently in qualification stages. We expended $19.3 million of grant money towards progress payments to equipment vendors and have five more major pieces of equipment on order, 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 AR/VR customers. Overall, the Company remains on track and on budget with the requirements of these important government grants and is beginning to realize the anticipated yield, reliability, and throughput improvements.

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As of June 30, 2022, all equipment awarded by these grants had been ordered, including a production-capable dPd organic deposition tool that is expected to improve yield and throughput of this innovative technology. We have taken delivery of seven pieces of production equipment and received $19.8 million of the total $39.1 million in government granted awards for initial deposits required by capital equipment vendors.

We are continually making improvements in production processes and beginning to add the government funded equipment to our production line however, most of our equipment is older. Malfunctions in single point of failure equipment have the potential to delay our production until repairs can be made. We experienced equipment issues leading to late order shipments during 2020 and 2021, and had delays in getting vendor support personnel due to COVID-19 travel restrictions, resulting in occasional production disruptions. Additional equipment to be purchased and added to our line during fiscal 2022 and 2023 under our government awards programs are expected to reduce our single point of failure risk and continue to 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 and to obtain the AS9100 quality certification by the fourth quarter of 2022. Our backlog on June 30, 2022, was $12.8 million compared to backlog of $9.5 million at June 30, 2021. 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 displayed these to industry analysts. 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 continue to look 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. This advanced technology gives us an increase in brightness of over 10X versus the competition. In July 2021, we achieved full color brightness levels of over 10,000 cd/m2 and expect to achieve a brightness level of over 28,000 cd/m2 ready for mass production of full color displays by 2023. 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 Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on March 10, 2022, or 2021 Form 10-K for a discussion of our critical accounting policies. There were no material changes to such policies in the six months ended June 30, 2022.

Results of Operations 

Comparative results of operations for the three and six months ended June 30, 2022 and 2021 (in thousands):

Revenues 

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2022		2021		Change		2022		2021		Change
Product	$	7,026	$	5,742	$	1,284	$	14,053	$	11,847	$	2,206
Contract		133	$	537		(404)		464		1,205		(741)
Total revenue, net	$	7,159	$	6,279	$	880	$	14,517	$	13,052	$	1,465

Total revenue for the three and six months ended June 30, 2022 were $7.2 million and $14.5 million, respectively, as compared to revenues of $6.3 million and $13.1 million, for the three and six months ended June 30, 2021.

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Product revenue is comprised primarily of sales of displays as well as sales of other hardware. For the three and six months ended June 30, 2022 product revenue increased by $1.3 million and $2.2 million, respectively, primarily due to increased shipments to customers in NATO countries, increased medical revenues and shipments of displays used for the ENVG-B program.

Contract revenue primarily reflected development associated with a proof of concept display for a tier one consumer company. For the three and six months ended June 30, 2022 contract revenue decreased by $0.4 million and $0.7 million, respectively, as compared to the prior period, reflecting the timing of phases and milestones of this contract. We are continuing to work on our proof of concept for this customer and expect ongoing contract revenue under this program.

Cost of Revenues 

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2022		2021		Change		2022		2021		Change
Product	$	5,522	$	5,466	$	56	$	10,309	$	10,173	$	136
Contract		68		242		(174)		150		600		(450)
Total cost of revenues	$	5,590	$	5,708	$	(118)	$	10,459	$	10,773	$	(314)

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 and six months ended June 30, 2022 decreased by $0.1 million and $0.3 million, respectively from the comparable prior year period due to improvements in yield.

Product cost of revenues for the three and six months ended June 30, 2022, increased from the prior year period, primarily due to the increases in revenue.

Contract cost of revenues for the three and six months ended June 30, 2022 decreased $0.2 million and $0.5 million, respectively, compared to the prior year period, reflecting decreased contract revenue.

The following table outlines product and contract gross profit and related gross margins for the three and six months ended June 30, 2022 and 2021 (dollars in thousands):  

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2022			2021			2022			2021
Product revenues gross profit	$	1,504		$	276		$	3,744		$	1,674
Product revenues gross margin		21	%		5	%		27	%		14	%
Contract revenues gross profit	$	65		$	295		$	314		$	605
Contract revenues gross margin		49	%		55	%		68	%		50	%
Total gross profit	$	1,569		$	571		$	4,058		$	2,279
Total gross margin		22	%		9	%		28	%		17	%

Total gross profit is a function of revenues less cost of revenues. Gross profit for the three months ended June 30, 2022 of $1.6 million increased $1.0 million, from the comparable prior year period reflecting increased product revenues and the impact of higher average selling prices in the current year’s periods due to price increases and a favorable sales mix. Total gross margin was 22% and 28% for the three and six months ended June 30, 2022, respectively, compared to 9% and 17% for the comparable 2021 periods.

The product gross profit of $1.5 million and $3.7 million for the three and six months ended June 30, 2022, increased from $0.3 million and $1.7 million in the comparable prior year periods due to increased shipments of displays in the three and six months ended June 30, 2022 combined with the favorable impact of price increases, improvements in yields and increases in period costs capitalized into inventory due to increased production volumes.

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 and six months ended June 30, 2022, contract revenue gross profit was $0.1 million and $0.3 million compared to $0.3 million and $0.6 million, respectively, for the prior year period. The decrease in contract gross margin for the three months ended June 30, 2022 versus the prior year period is primarily due to the mix of higher margin consumer contracts versus military revenues.

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Operating Expenses

	Three Months Ended								Six Months Ended
	June 30,								June 30,
	2022			2021			Change		2022			2021			Change
Research and development expense	$	1,457		$	1,788		$	(331)	$	2,941		$	3,630		$	(689)
Percentage of net revenue		20	%		28	%				20	%		28	%
Selling, general and administrative expense	$	1,904		$	1,690		$	214	$	4,074		$	3,514		$	560
Percentage of net revenue		27	%		27	%				28	%		27	%
Total operating expenses	$	3,361		$	3,478		$	(117)	$	7,015		$	7,144		$	(129)
Percentage of net revenue		47	%		55	%				48	%		55	%

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 $1.5 million and $2.9 million for the three and six months ended June 30, 2022, compared to $ 1.8 million and $3.6 million, respectively, in the prior year period. The decrease in R&D costs in the second quarter and first six months of 2022 primarily reflect lower allocations of production costs to R&D due to the completion of development work on the XLE process in the last quarter of 2021.

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 and six months ended June 30, 2022 of $0.2 million and $0.6 million, respectively, primarily reflects changes in non-cash stock compensation, and increase in legal fees.

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. Other income related to the change in fair value of warrant liability was $0.2 million for the three months ended June 30, 2022, compared to other expense of $2.6 million for the three months ended June 30, 2021. This non-cash income or expense is associated with changes in the liability related to registered warrants issued in May 2017 and January 2018. We are 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. We calculate the fair value of the warrants outstanding using the Black-Scholes model. Other income for the three and six months ended June 30, 2022, also includes a $0.1 million in reimbursement of labor overhead charges under government grant programs. During the three and six months ended June 30, 2022 we started to depreciate assets purchased with government awards and pursuant to our accounting policy, we began to record systematic reductions in the deferred income – government awards liability to recognize income associated with these grants over their useful, or depreciable lives. For each quarterly period going forward we will reduce the government awards liability and record a credit to other income equal to the related quarterly depreciation on any assets purchased with government funds. During the three and six months ended June 30, 2022 we recognized other income of $0.2 million related to these assets.

Gain on forgiveness of debt

Gain on forgiveness of debt of $1.9 million reflects indebtedness payable to the Small Business Administration that was forgiven on March 31, 2021, pursuant to the terms of the Paycheck Protection Program and the CARES Act.

Liquidity and Capital Resources

As of June 30, 2022, we had $4.3 million in cash and cash equivalents, working capital of $12.3 million and borrowings outstanding and borrowing availability under the ABL Facility of $2.1 million and $0.7 million, respectively. We had $5.7 million in cash, working capital of $11.8 million and borrowings outstanding and borrowing availability under the ABL Facility of $2.0 million and $2.3 million, respectively, at December 31, 2021.

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

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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.

As of June 30, 2022, we have ordered all equipment awarded by these grants, including a production-capable dPd organic deposition tool that is expected to improve yield and throughput of this innovative technology. We have taken delivery of seven pieces of production equipment and expended $19.3 million of the total $39.1 million in government granted awards for progress payments required by capital equipment vendors.

For the six months ended June 30, 2022 cash used in operating activities were $1.8 million which was attributable to a net loss of $1.6 million and cash used by operating assets and liabilities of $1.0 million and non-cash income and expenses of $0.7 million. Cash used in operating activities for the six months ended June 30, 2021 was $2.1 million.

For the six months ended June 30, 2022 cash used in investing activities was $8.5 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 $7.4 million.

As of June 30, 2022, we had outstanding commitments to purchase approximately $0.9 million in capital expenditures, and expect to make additional capital expenditures during 2022 to improve our manufacturing and R&D capabilities. These commitments exclude $16.4 million expected to be purchased and funded by the DoD, as described above. Cash used in investing activities during the six months ended June 30, 2021 was $5.7 million for equipment purchases.

For the six months ended June 30, 2022, cash provided by financing activities of $8.7 million, includes proceeds from government grants of $6.6 million, and public offering (ATM) proceeds of $2.1 million offset by net borrowings of $0.1 million under our ABL Facility. Net cash provided by financing activities during the six months ended June 30, 2021 was $9.4 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 six months ended June 30, 2022, a net loss of $1.6 million was incurred and cash used in operating activities of $1.8 million. As of June 30, 2022, we had $4.3 million of cash, $2.1 million of outstanding indebtedness and borrowing availability of $0.7 million under our ABL Facility.

Our ABL Facility expires on December 31, 2022, 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 2022 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. In addition, the COVID-19 pandemic and disruptions caused by the war in Ukraine have significantly increased economic and demand uncertainty across the globe and contributed to supply chain shortages and disruptions. Although demand for our products has remained steady, inflationary factors and our 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 as a result of COVID-19, the Ukraine war, or other semiconductor supply chain issues 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 its 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 a Work Status Reduction program that began in October 2019 wherein senior management work status was 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 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 July 2022, our latest forecast of revenues and expenses, and the anticipated availability of our ABL facility, we have developed plans to extend our

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liquidity to support working capital requirements through the third quarter of 2023 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 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.

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 six months ended June 30, 2022, we raised $2.1 million through the sale of shares under the ATM facility. During 2021, we raised $0.2 million, net of offering expenses. 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 $7.5 million of potential sales remaining under the ATM facility, gross of offering expenses as of June 30, 2022.

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, 2021 for a one-year term.

Our ABL Facility expires on December 31, 2022 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 June 30, 2022, we had $2.1 million in borrowings, had unused borrowing availability of $0.7 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 our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15 under the Securities Exchange Act of 1934, as amended, or the 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 have concluded that, as of the end of the period covered by this Report, our disclosure controls and procedures were effective.

Changes in Internal Control Over Financial Reporting

During the quarter ended June 30, 2022, 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.
‎

28

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 Part I, “Item 1A. Risk Factors” in our 2021 Form 10-K. 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 our 2021 Form 10-K and this Report, which could in turn have a material adverse effect on us. The “Risk Factors” section in our 2021 Form 10-K otherwise remains current in all material respects. The risks discussed in the “Risk Factors” section in our 2021 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.

Significant Congressional delays or reductions in appropriations for programs our military customers participate in, and U.S. government funding more broadly, can negatively impact our sales of microdisplays and could have a material adverse effect on our financial position, results of operations and/or cash flows.

U.S. government programs are subject to annual Congressional budget authorization and appropriation processes. For many military programs, including those our customers participate in, Congress appropriates funds on an annual fiscal year basis even though the program performance period may extend over several years. Programs are often partially funded initially, and additional funds are committed only as Congress makes further appropriations. We cannot predict the extent to which funding for individual programs will be included, increased, or reduced as part of the annual appropriations ultimately approved or in separate supplemental appropriations or continuing resolutions and what the impact will be on our customers buying decisions regarding purchases of our microdisplays.

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.

29

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	Common Stock Purchase Warrant issued on March 24, 2017, set forth as Exhibit 4.5 to the Company’s quarterly report on form 10-Q filed on November 9, 2017 (incorporated by reference to exhibit 4.5 to the Company’s Quarterly Report on Form 10-Q filed on November 9, 2017).
4.2	Form of Common Stock Purchase Warrant set forth as Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on May 24, 2017 (incorporated by reference to exhibit 4.1 to the Company’s Current Report on Form 8-K filed on May 24, 2017).
4.3	Form of Common Stock Warrant Agreement and Common Stock Purchase Warrant Certificate (incorporated by reference to exhibit 4.2 to the Company’s registration statement on Form S-1/A filed on January 23, 2018).
4.4	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 August 24, 2016).
4.5	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).
4.7	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).
4.8	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, 2021 filed on March 10, 2022).
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).*

30

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).*
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: August 11, 2022

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:  August 11, 2022

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: August 11, 2022

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 June 30, 2022, 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: August 11, 2022

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 June 30, 2022, 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)

August 11, 2022

XML

Document And Entity Information - shares	6 Months Ended
	Jun. 30, 2022	Jul. 27, 2022
Document and Entity Information [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Current Fiscal Year End Date	--12-31
Document Period End Date	Jun. 30, 2022
Document Fiscal Year Focus	2022
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		76,680,029
Document Fiscal Period Focus	Q2
Amendment Flag	false
Entity Central Index Key	0001046995

XML

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Current assets:
Cash and cash equivalents	$ 4,290	$ 5,724
Restricted cash	511	806
Accounts receivable, net	5,020	4,488
Account receivable-due from government awards	367	292
Unbilled accounts receivable	1,318	1,102
Inventories	7,661	7,632
Prepaid expenses and other current assets	672	691
Total current assets	19,839	20,735
Property, plant and equipment, net	37,499	30,483
Operating lease right-of-use assets	84	113
Intangibles and other assets	33	37
Total assets	57,455	51,368
Current liabilities:
Accounts payable	1,160	1,348
Accrued compensation	2,181	1,664
Revolving credit facility, net	2,087	1,974
Common stock warrant liability	2	1,374
Other accrued expenses	391	722
Deferred revenue	114	54
Operating lease liability - current	63	60
Finance lease liability - current	1,127	1,133
Other current liabilities	366	608
Total current liabilities	7,491	8,937
Other liability - long term	28	28
Deferred income - government awards - long term	19,161	12,458
Operating lease liability - long term	22	54
Finance lease liability - long term	11,647	11,647
Total liabilities	38,349	33,124
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 $5,659) stated value $1,000 per share, $0.001 par value: 10,000 shares designated and 5,659 issued and outstanding as of June 30, 2022 and December 31, 2021.
Common stock, $0.001 par value: authorized 200,000,000 shares, issued 75,621,126 shares, outstanding 75,459,060 shares as of June 30, 2022 and issued 72,931,490 shares, outstanding 72,769,424 shares as of December 31, 2021.	75	72
Additional paid-in capital	278,372	275,936
Accumulated deficit	(258,841)	(257,264)
Treasury stock, 162,066 shares as of June 30, 2022 and December 31, 2021.	(500)	(500)
Total shareholders' equity	19,106	18,244
Total liabilities and shareholders' equity	$ 57,455	$ 51,368

XML

Condensed Consolidated Balance Sheets (Parenthetical) - USD ($)	Jun. 30, 2022	Dec. 31, 2021
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	75,621,126	72,931,490
Common stock, shares outstanding	75,459,060	72,769,424
Treasury stock, shares	162,066	162,066
Preferred Stock- Series B [Member]
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, liquidation preference	$ 5,659	$ 5,659
Preferred stock, stated value	$ 1,000	$ 1,000
Preferred stock, shares designated	10,000	10,000
Preferred stock, shares issued	5,659	5,659
Preferred stock, shares outstanding	5,659	5,659

XML

Condensed Consolidated Statements of Operations - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Revenues:
Total revenues, net	$ 7,159	$ 6,279	$ 14,517	$ 13,052
Cost of revenues:
Total cost of revenues	5,590	5,708	10,459	10,773
Gross profit	1,569	571	4,058	2,279
Operating expenses:
Research and development	1,457	1,788	2,941	3,630
Selling, general and administrative	1,904	1,690	4,074	3,514
Total operating expenses	3,361	3,478	7,015	7,144
Loss from operations	(1,792)	(2,907)	(2,957)	(4,865)
Other (expense) income:
Change in fair value of common stock warrant liability	226	2,642	1,372	(4,566)
Interest expense, net	(225)	(205)	(439)	(415)
Gain on forgiveness of debt				1,963
Other income, net	351	192	447	227
Total other income (expense)	352	2,629	1,380	(2,791)
Loss before provision for income taxes	(1,440)	(278)	(1,577)	(7,656)
Income taxes
Net loss	$ (1,440)	$ (278)	$ (1,577)	$ (7,656)
Loss per share, basic	$ (0.02)	$ 0.00	$ (0.02)	$ (0.11)
Loss per share, diluted	$ (0.02)	$ 0.00	$ (0.02)	$ (0.11)
Weighted average number of shares outstanding:
Basic	73,895,212	72,193,205	73,368,347	71,238,060
Diluted	73,895,212	72,193,205	73,368,347	71,238,060
Product [Member]
Revenues:
Total revenues, net	$ 7,026	$ 5,742	$ 14,053	$ 11,847
Cost of revenues:
Cost of revenues	5,522	5,466	10,309	10,173
Contract [Member]
Revenues:
Total revenues, net	133	537	464	1,205
Cost of revenues:
Cost of revenues	$ 68	$ 242	$ 150	$ 600

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, 2020		$ 69	$ 268,729	$ (252,058)	$ (500)	$ 16,240
Balance, shares at Dec. 31, 2020	5,659	68,890,819
Exercising of options			364			364
Exercising of options, shares		227,792
Stock based compensation			13			13
Exercise of common stock warrants		$ 3	5,059			5,062
Exercise of common stock warrants, shares		3,019,247
Net loss				(7,378)		(7,378)
Balance at Mar. 31, 2021		$ 72	274,165	(259,436)	(500)	14,301
Balance, shares at Mar. 31, 2021	5,659	72,137,858
Balance at Dec. 31, 2020		$ 69	268,729	(252,058)	(500)	$ 16,240
Balance, shares at Dec. 31, 2020	5,659	68,890,819
Exercise of common stock warrants, shares						3,343,660
Net loss						$ (7,656)
Balance at Jun. 30, 2021		$ 72	275,173	(259,714)	(500)	15,031
Balance, shares at Jun. 30, 2021	5,659	72,665,730
Balance at Mar. 31, 2021		$ 72	274,165	(259,436)	(500)	14,301
Balance, shares at Mar. 31, 2021	5,659	72,137,858
Exercising of options			381			381
Exercising of options, shares		203,459
Stock based compensation			37			37
Exercise of common stock warrants			590			$ 590
Exercise of common stock warrants, shares		324,413				324,413
Net loss				(278)		$ (278)
Balance at Jun. 30, 2021		$ 72	275,173	(259,714)	(500)	15,031
Balance, shares at Jun. 30, 2021	5,659	72,665,730
Balance at Dec. 31, 2021		$ 72	275,936	(257,264)	(500)	18,244
Balance, shares at Dec. 31, 2021	5,659	72,931,490
Stock based compensation			165			165
Public offering of common shares, net of offering costs			460			460
Public offering of common shares, net of offering costs, shares		405,086
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, 2021		$ 72	275,936	(257,264)	(500)	$ 18,244
Balance, shares at Dec. 31, 2021	5,659	72,931,490
Exercising of options, shares
Net loss						$ (1,577)
Balance at Jun. 30, 2022		$ 75	278,372	(258,841)	(500)	19,106
Balance, shares at Jun. 30, 2022	5,659	75,621,126
Balance at Mar. 31, 2022		$ 72	276,561	(257,401)	(500)	18,732
Balance, shares at Mar. 31, 2022	5,659	73,336,576
Vesting of RSUs, shares		110,608
Stock based compensation			214			214
Public offering of common shares, net of offering costs		$ 3	1,597			1,600
Public offering of common shares, net of offering costs, shares		2,173,942
Net loss				(1,440)		(1,440)
Balance at Jun. 30, 2022		$ 75	$ 278,372	$ (258,841)	$ (500)	$ 19,106
Balance, shares at Jun. 30, 2022	5,659	75,621,126

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Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021
Cash flows from operating activities:
Net loss	$ (1,577)	$ (7,656)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	1,671	1,427
Change in fair value of common stock warrant liability	(1,372)	4,566
Gain on forgiveness of debt		(1,963)
Stock-based compensation	379	50
Amortization of operating lease right-of-use assets	29	30
Changes in operating assets and liabilities:
Accounts receivable	(607)	3,133
Unbilled accounts receivable	(216)	(530)
Inventories	(29)	246
Prepaid expenses and other current assets	19	148
Deferred revenues	60	(339)
Operating lease liabilities	(29)	(30)
Accounts payable, accrued expenses, and other current liabilities	(173)	(1,134)
Net cash used in operating activities	(1,845)	(2,052)
Cash flows from investing activities:
Purchase of equipment	(1,128)	(501)
Purchase of equipment, government grant	(7,418)	(5,198)
Net cash used in investing activities	(8,546)	(5,699)
Cash flows from financing activities:
Borrowings (repayments) under revolving line of credit, net	113	(1,470)
Proceeds from public offering, net	2,060
Change in finance lease liabilities	(144)	(158)
Proceeds from government grant	6,633	4,615
Proceeds from warrant exercise		5,652
Proceeds from exercise of stock options		745
Net cash provided by financing activities	8,662	9,384
Net (decrease) increase in cash, cash equivalents, and restricted cash	(1,729)	1,633
Cash, cash equivalents, and restricted cash, beginning of period	6,530	10,426
Cash, cash equivalents, and restricted cash, end of period	4,801	12,059
Cash, cash equivalents, end of period	4,290	10,568
Restricted cash, end of period	511	1,491
Supplementary Cash Flow Information
Cash paid for interest	439	210
Cash paid for income taxes
Non-cash activities:
Right-of-use assets obtained in exchange for finance lease liabilities	$ 137	$ 108

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Description of the Business and Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2022

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, 2021. The results of operations for the periods ended June 30, 2022 are not necessarily indicative of the results to be expected for the full year. The Consolidated Financial Statements as of December 31, 2021 are derived from audited financial statements included in the Company’s 2021 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, liability classified warrants, 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 and $4 thousand for the three and six months ended June 30, 2022 and 2021, 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 and six months ended June 30, 2022 and 2021 (in thousands):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Beginning balance	$	416	$	465	$	519	$	615
Warranty accruals and adjustments		(127)		242		(227)		100
Warranty claims		(7)		(2)		(10)		(10)
Ending balance	$	282	$	705	$	282	$	705

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. In accordance with the Preferred Stock – Series B agreements, the conversion price was adjusted to $0.3033 per share in December 2019, and the resultant, if converted common shares are reflected in the table of anti-dilutive common stock equivalents below.

The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share and share data) for the three and six months ended June 30, 2022 and 2021:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Net Loss	$	(1,440)	$	(278)	$	(1,577)	$	(7,656)
Income allocated to participating securities		—		—		—		—
Loss allocated to common shares	$	(1,440)	$	(278)	$	(1,577)	$	(7,656)
Change in fair value of warrant liability(1)	$	—	$	—	$	—	$	—
Loss allocated to common shares   - Diluted	$	(1,440)	$	(278)	$	(1,577)	$	(7,656)
Weighted average common shares outstanding ‎  - Basic		73,895,212		72,193,205		73,368,347		71,238,060
Dilutive effect of liability classified warrants		—		—		—		—
Weighted average common shares outstanding ‎  - Diluted(1)		73,895,212		72,193,205		73,368,347		71,238,060
Net loss per share:
Basic	$	(0.02)	$	-	$	(0.02)	$	(0.11)
Diluted	$	(0.02)	$	-	$	(0.02)	$	(0.11)

(1)For the three months ended June 30, 2022 and 2021, income (loss) allocated to common shares, and the weighted average shares used for calculating basic and diluted earnings per share exclude the assumed impact of exercise liability classified warrants, because it would be anti-dilutive to the earnings per share calculation.

In calculating net income (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 and six months ended June 30, 2022 and 2021 that were not included in diluted earnings per share, or EPS, as their effect would be anti-dilutive:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Restricted Stock Units		408,226		435,501		408,226		435,501
Options		3,625,426		3,841,671		3,625,426		3,841,671
Warrants		6,009,374		9,339,816		6,009,374		9,339,816
Convertible preferred stock		18,726,009		18,726,009		18,726,009		18,726,009
Total potentially dilutive common stock equivalents		28,769,035		32,342,997		28,769,035		32,342,997

Government Funding

The Company accounts for awards received from the U.S. Government for procurement of capital equipment after reviewing 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 is currently the only financial asset or liability recorded at fair value on a recurring basis and is considered a Level 3 liability. The fair value of the common stock warrant liability is included in current liabilities on the Condensed Consolidated Balance Sheets, as the warrants are currently exercisable.

The following table shows the reconciliation of the Level 3 warrant liability measured and recorded at fair value on a recurring basis, using significant unobservable inputs (in thousands):

	Estimated Fair Value
Balance as of January 1, 2022	$	1,374
Change in fair value of warrant liability, net		(1,372)
Balance as of June 30, 2022	$	2

The fair value of the liability for common stock purchase warrants at issuance and at June 30, 2022 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. Inputs to the model at June 30, 2022 included remaining contractual terms of the warrants of 0.58 years, at risk-free interest rates of 2.51% with no expected dividends, and expected volatility of the price of the underlying common stock of 45.02%.

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 June 30, 2022, one customer of 11.0% accounted for over 10% of net revenues. For the six months ended June 30, 2022, a different customer of 12.5% accounted for over 10% of net revenues. As of June 30, 2022, the Company had accounts receivable from those two customers that accounted for 8.4% and 1.1% of total accounts receivable, respectively. For the three and six months ended June 30, 2021, one customer of 19.4% and 15.6%, respectively 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 six months ended June 30, 2022, the Company incurred a net loss of $1.6 million and used cash in operating activities of $1.8 million. As of June 30, 2022, the Company had $4.3 million of cash, $2.1 million of outstanding indebtedness and borrowing availability of $0.7 million under its ABL Facility.

The Company’s ABL Facility expires on December 31, 2022, 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 2022 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. In addition, the COVID-19 pandemic, and disruptions caused by the war in the Ukraine have significantly increased economic and demand uncertainty across the globe and contributed to supply chain shortages and disruptions. Although demand for the Company’s products has remained steady, 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 as a result of COVID-19, the Ukraine war, or other semiconductor supply chain issues 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 a Work Status Reduction program that began in October 2019 wherein senior management work status was 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 it’s 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 July 2022, 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 third quarter of 2023.

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 its Annual Report on Form 10-K for the year ended December 31, 2021.

Recently issued accounting pronouncements

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. Based on the composition of the Company's receivables, current market conditions and historical credit loss activity, the Company is currently evaluating the impact of this ASU on the Condensed Consolidated Financial Statements.

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

6 Months Ended

Jun. 30, 2022

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 fulfil 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 and six months ended June 30, 2022 and 2021 were as follows (in thousands):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
North and South America	$	3,790	$	3,647	$	8,116	$	6,950
Europe, Middle East, and Africa		3,099		2,090		6,019		4,621
Asia Pacific		270		542		382		1,481
Total	$	7,159	$	6,279	$	14,517	$	13,052

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021			2022		2021
Military	$	4,799	$	3,884	$	10,159	$	7,759
Commercial, including industrial and medical		1,184		820		2,161		1,800
Consumer		23		500		312		1,150
Multiple		1,153		1,075		1,885		2,343
Total	$	7,159	$	6,279	$	14,517	$	13,052

Accounts Receivable from Customers

Accounts receivable, net of allowances, were $5.0 million and $4.5 million as of June 30, 2022 and December 31, 2021.

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. An 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.

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):

	June 30,		December 31,
	2022		2021
Unbilled Receivables (contract assets)	$	1,318	$	1,102
Deferred Revenue (contract liabilities)	$	114	$	54

For the three and six months ended June 30, 2022 the Company recognized no revenue and $42 thousand of revenue related to its contract liabilities that existed at December 31, 2021, respectively. For the three and six months ended June 30, 2021 the Company recognized $37 thousand and $339 thousand respectively, of revenue related to its contract liabilities that existed at December 31, 2020.

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 June 30, 2022, the aggregate amount of the transaction price allocated to remaining performance obligations was $2.7 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

6 Months Ended

Jun. 30, 2022

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):

	June 30,		December 31,
	2022		2021
Accounts receivable	$	5,159	$	4,627
Less allowance for doubtful accounts		(139)		(139)
Accounts receivable, net	$	5,020	$	4,488

 

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Inventories, Net

6 Months Ended

Jun. 30, 2022

Inventories, Net [Abstract]

Inventories, Net

Note 4 – Inventories, net

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

	June 30,		December 31,
	2022		2021
Raw materials	$	2,749	$	3,517
Work in process		3,077		2,149
Finished goods		2,225		2,363
Total inventories		8,051		8,029
Less inventory reserve		(390)		(397)
Total inventories, net	$	7,661	$	7,632

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Line of Credit / Loan Payable

6 Months Ended

Jun. 30, 2022

Line of Credit / Loan Payable [Abstract]

Line of Credit / Loan Payable

Note 5 – Line of Credit / Loan Payable

Revolving Credit Facility

	June 30,		December 31,
(in thousands)	2022		2021
Revolving credit facility	$	2,087	$	1,974

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, 2021 and will automatically renew on December 31, 2022 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 June 30, 2022 the Company had $2.1 million in borrowings outstanding under the ABL Facility, had unused borrowing availability of $0.7 million under the ABL Facility and was in compliance with all financial debt covenants under the ABL Facility.

Promissory Note under the Paycheck Protection Program

On June 8, 2020, the Company received a loan under the U.S. Small Business Administration’s, or SBA, Paycheck Protection Program, or PPP, from KeyBank National Association related to the COVID-19 pandemic in the amount of $1.9 million at an interest rate of 1% per annum. The Company used the proceeds to pay qualified payroll costs, in accordance with loan requirements and applied for forgiveness of the entire loan in the fourth quarter of 2020. During the first quarter of 2021 the entire loan amount was forgiven and recorded in the Condensed Consolidated Statements of Operations as gain on forgiveness of debt.

 

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Stock Compensation

6 Months Ended

Jun. 30, 2022

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. 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 and six months ended June 30, 2022 and 2021 (in thousands): 

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Cost of revenues	$	30	$	3	$	58	$	3
Research and development		56		9		92		12
Selling, general and administrative		128		25		229		35
Total stock compensation expense	$	214	$	37	$	379	$	50

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

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Stock options	$	119	$	13	$	189	$	25
Restricted Share Units		95		24		190		25
Total stock compensation expense	$	214	$	37	$	379	$	50

At June 30, 2022, total unrecognized compensation costs related to stock options and RSUs was approximately $62 thousand and $0.9 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 0.9 years and approximately 2.1 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:

	Six Months Ended
	June 30,
	2022				2021
Dividend yield			0	%			0	%
Risk free interest rates	3.24	-	3.25	%	1.77	-	2.48	%
Expected volatility	79.3	to	83.0	%	41.7	to	49.2	%
Expected term (in years)	5.0	to	5.5		3.5	to	4.0

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 six months ended June 30, 2022 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, 2021		3,712,867	$	1.81
Options granted		270,000		0.73
Options exercised		—		—
Options forfeited		(5,000)		0.40
Options cancelled or expired		(352,441)		3.59
Outstanding at June 30, 2022		3,625,426	$	1.56	3.66	$	144,835
Vested or expected to vest at June 30, 2022 (1)		3,622,861	$	1.56	3.65	$	144,835
Exercisable at June 30, 2022		3,489,426	$	1.59	3.42	$	144,835

(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 were exercised in the three and six months ended June 30, 2022.

Restricted Stock Units (“RSU”) Summary

The following table summarized the activity in respect of RSUs issued under the Company for the six months ended June 30, 2022:

					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, 2021		405,453		103,047	$	3.52	$	3.60
Granted		165,885		46,729		1.01		1.07
Vested and settled		(110,608)		—		3.60		—
Forfeited		(52,504)		(34,349)		3.60		3.60
RSU's outstanding at June 30, 2022		408,226		115,427	$	3.13	$	2.58

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Income Taxes

6 Months Ended

Jun. 30, 2022

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 and six months ended June 30, 2022 and 2021. The difference between the effective tax rate of 0% and the U.S. federal statutory rate of 21% for three and six months ended June 30, 2022 and 2021 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 June 30, 2022.

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 was recorded during 2017, and is reflected in Prepaid Expenses and Other Current Assets on the Condensed Consolidated Balance Sheets.

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2022

Commitments and Contingencies [Abstract]

Commitments and Contingencies

Note 8 – Commitments and Contingencies 

Equipment Purchase Commitments 

The Company has committed to equipment purchases of approximately $17.3 million at June 30, 2022, of which $16.4 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.

As disclosed in the financial statements in Company’s Annual Report on Form 10-K for the year ended December 31, 2018, the Company made a decision to exit the consumer night vision business and accrued approximately $1.0 million related to invoices received for inventory purchased by Suga Electronics Limited, or Suga, a contract manufacturer in anticipation of future production. As a result of settlement of the arbitration with Suga related to those costs in the second quarter of 2021, the Company removed the $1.0 million accrual from its balance sheet, wrote off $0.3 million in prepayments and recorded a gain of $0.1 million in Other Income/Expense during the second quarter of 2021.

 

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Warrants

6 Months Ended

Jun. 30, 2022

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 June 30, 2022:

	Issued		Outstanding		Exercise Price		Expiration
2017 Warrant Issuance (1)		100,000		100,000		2.25		Sep 2022
2018 Warrant Issuance (2)		4,004,329		2,909,374		1.55		Jan 2023
2019 Warrant Issuance (3)		6,000,000		3,000,000		0.78		Oct 2024
				6,009,374

(1)Issued in conjunction with an unsecured line of credit.

(2)Warrant is subject to liability accounting.

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

Equity classified warrants

The 2019 warrants share similar terms, 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. As a result, the Company has accounted for the exercise price paid by investors for purchase of the pre-funded warrants as additional paid in capital on the accompanying Condensed Consolidated Balance Sheets.

Liability classified warrants

The 2018 warrants have 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 accompanying Condensed Consolidated Balance Sheets as a current liability upon issuance and will be revalued at each subsequent balance sheet date.

The fair value of the liability for common stock purchase warrants is 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):

	June 30,		December 31,
	2022		2021
2018 January and February Issuance
Fair Value	$	2	$	1,355
2017 May Issuance (1)
Fair Value		—		19
	$	2	$	1,374

(1)Warrants from the 2017 May Issuance expired on May 24, 2022.

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Change in Fair Value of common stock warrant liability (1)	$	226	$	2,642	$	1,372		(4,566)

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

During the three and six months ended June 30, 2022, there were no warrant exercises. During the three months ended June 30, 2021, the Company received $0.6 million in payment of the exercise price for warrants to purchase 324,413 shares of common stock. During the six months ended June 30, 2021, the Company received $5.7 million in payment of the exercise price for warrants to purchase 3,343,660 shares of common stock.

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Leases

6 Months Ended

Jun. 30, 2022

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. During the fourth quarter of 2019, the Company signed a two year extension of this lease that expired in October 2021. The lease agreement did not contain any residual value guarantees, material restrictive covenants or a renewal option and was classified as an operating lease. 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. 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				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Finance Lease Cost:
Amortization of right-of-use assets	$	149	$	155	$	302	$	312
Interest on lease liabilities		198		197		396		396
Operating lease cost		16		15		33		30
Total Lease Cost	$	363	$	367	$	731	$	738

Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	14	$	15	$	29	$	31
Financing cash flows from finance leases	$	270	$	294	$	542	$	549
Right-of-use assets obtained in exchange for new finance lease liabilities	$	69	$	94	$	137	$	108
Right-of-use assets obtained in exchange for new operating lease liabilities	$	-	$	-	$	-	$	-

	June 30, 2022		December 31, 2021
Finance lease right-of-use assets	$	13,106	$	12,318
Operating lease right-of-use assets	$	84	$	113
Finance lease liability, current	$	1,127	$	1,133
Finance lease liability, non-current	$	11,647	$	11,647
Operating lease liabilities, current	$	63	$	60
Operating lease liabilities, non-current	$	22	$	54
Weighted average remaining lease terms - finance leases		20.58 years		20.58 years
Weighted average remaining lease terms - operating leases		1.33 years		1.83 years
Weighted average discount rate - finance leases		6.42%		6.42%
Weighted average discount rate - operating leases		6.48%		7.75%

Future annual minimum lease payments and finance lease commitments as of June 30, 2022 were as follows (in thousands):

	Operating Leases		Finance Leases
2022	$	33	$	527
2023		55		1,214
2024		-		1,229
2025		-		1,229
2026		-		1,229
Thereafter		-		22,717
Total undiscounted future minimum lease payments		88		28,145
Less imputed interest		(3)		(15,371)
Lease liability	$	85	$	12,774

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Shareholders' Equity

6 Months Ended

Jun. 30, 2022

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 six months ended June 30, 2022, the Company raised $2.1 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

6 Months Ended

Jun. 30, 2022

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 June 30, 2022, the Company has received $19.8 million in total, for initial deposits required by capital equipment vendors. Amounts received, pending payment of deposits to vendors as of June 30, 2022, of $0.5 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 $19.8 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 six months ended June 30, 2022, the Company recognized deferred income related to certain overhead expenses, not capitalized, of $159 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)

6 Months Ended

Jun. 30, 2022

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, 2021. The results of operations for the periods ended June 30, 2022 are not necessarily indicative of the results to be expected for the full year. The Consolidated Financial Statements as of December 31, 2021 are derived from audited financial statements included in the Company’s 2021 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, liability classified warrants, 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 and $4 thousand for the three and six months ended June 30, 2022 and 2021, 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 and six months ended June 30, 2022 and 2021 (in thousands):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Beginning balance	$	416	$	465	$	519	$	615
Warranty accruals and adjustments		(127)		242		(227)		100
Warranty claims		(7)		(2)		(10)		(10)
Ending balance	$	282	$	705	$	282	$	705

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. In accordance with the Preferred Stock – Series B agreements, the conversion price was adjusted to $0.3033 per share in December 2019, and the resultant, if converted common shares are reflected in the table of anti-dilutive common stock equivalents below.

The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share and share data) for the three and six months ended June 30, 2022 and 2021:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Net Loss	$	(1,440)	$	(278)	$	(1,577)	$	(7,656)
Income allocated to participating securities		—		—		—		—
Loss allocated to common shares	$	(1,440)	$	(278)	$	(1,577)	$	(7,656)
Change in fair value of warrant liability(1)	$	—	$	—	$	—	$	—
Loss allocated to common shares   - Diluted	$	(1,440)	$	(278)	$	(1,577)	$	(7,656)
Weighted average common shares outstanding ‎  - Basic		73,895,212		72,193,205		73,368,347		71,238,060
Dilutive effect of liability classified warrants		—		—		—		—
Weighted average common shares outstanding ‎  - Diluted(1)		73,895,212		72,193,205		73,368,347		71,238,060
Net loss per share:
Basic	$	(0.02)	$	-	$	(0.02)	$	(0.11)
Diluted	$	(0.02)	$	-	$	(0.02)	$	(0.11)

(1)For the three months ended June 30, 2022 and 2021, income (loss) allocated to common shares, and the weighted average shares used for calculating basic and diluted earnings per share exclude the assumed impact of exercise liability classified warrants, because it would be anti-dilutive to the earnings per share calculation.

In calculating net income (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 and six months ended June 30, 2022 and 2021 that were not included in diluted earnings per share, or EPS, as their effect would be anti-dilutive:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Restricted Stock Units		408,226		435,501		408,226		435,501
Options		3,625,426		3,841,671		3,625,426		3,841,671
Warrants		6,009,374		9,339,816		6,009,374		9,339,816
Convertible preferred stock		18,726,009		18,726,009		18,726,009		18,726,009
Total potentially dilutive common stock equivalents		28,769,035		32,342,997		28,769,035		32,342,997

Government Funding

Government FundingThe Company accounts for awards received from the U.S. Government for procurement of capital equipment after reviewing 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 is currently the only financial asset or liability recorded at fair value on a recurring basis and is considered a Level 3 liability. The fair value of the common stock warrant liability is included in current liabilities on the Condensed Consolidated Balance Sheets, as the warrants are currently exercisable.

The following table shows the reconciliation of the Level 3 warrant liability measured and recorded at fair value on a recurring basis, using significant unobservable inputs (in thousands):

	Estimated Fair Value
Balance as of January 1, 2022	$	1,374
Change in fair value of warrant liability, net		(1,372)
Balance as of June 30, 2022	$	2

The fair value of the liability for common stock purchase warrants at issuance and at June 30, 2022 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. Inputs to the model at June 30, 2022 included remaining contractual terms of the warrants of 0.58 years, at risk-free interest rates of 2.51% with no expected dividends, and expected volatility of the price of the underlying common stock of 45.02%

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 June 30, 2022, one customer of 11.0% accounted for over 10% of net revenues. For the six months ended June 30, 2022, a different customer of 12.5% accounted for over 10% of net revenues. As of June 30, 2022, the Company had accounts receivable from those two customers that accounted for 8.4% and 1.1% of total accounts receivable, respectively. For the three and six months ended June 30, 2021, one customer of 19.4% and 15.6%, respectively 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 six months ended June 30, 2022, the Company incurred a net loss of $1.6 million and used cash in operating activities of $1.8 million. As of June 30, 2022, the Company had $4.3 million of cash, $2.1 million of outstanding indebtedness and borrowing availability of $0.7 million under its ABL Facility.

The Company’s ABL Facility expires on December 31, 2022, 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 2022 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. In addition, the COVID-19 pandemic, and disruptions caused by the war in the Ukraine have significantly increased economic and demand uncertainty across the globe and contributed to supply chain shortages and disruptions. Although demand for the Company’s products has remained steady, 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 as a result of COVID-19, the Ukraine war, or other semiconductor supply chain issues 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 a Work Status Reduction program that began in October 2019 wherein senior management work status was 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 it’s 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 July 2022, 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 third quarter of 2023.

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 its Annual Report on Form 10-K for the year ended December 31, 2021.

Recently issued accounting pronouncements

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. Based on the composition of the Company's receivables, current market conditions and historical credit loss activity, the Company is currently evaluating the impact of this ASU on the Condensed Consolidated Financial Statements.

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)

6 Months Ended

Jun. 30, 2022

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				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Beginning balance	$	416	$	465	$	519	$	615
Warranty accruals and adjustments		(127)		242		(227)		100
Warranty claims		(7)		(2)		(10)		(10)
Ending balance	$	282	$	705	$	282	$	705

Schedule of Earnings Per Share, Basic and Diluted

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Net Loss	$	(1,440)	$	(278)	$	(1,577)	$	(7,656)
Income allocated to participating securities		—		—		—		—
Loss allocated to common shares	$	(1,440)	$	(278)	$	(1,577)	$	(7,656)
Change in fair value of warrant liability(1)	$	—	$	—	$	—	$	—
Loss allocated to common shares   - Diluted	$	(1,440)	$	(278)	$	(1,577)	$	(7,656)
Weighted average common shares outstanding ‎  - Basic		73,895,212		72,193,205		73,368,347		71,238,060
Dilutive effect of liability classified warrants		—		—		—		—
Weighted average common shares outstanding ‎  - Diluted(1)		73,895,212		72,193,205		73,368,347		71,238,060
Net loss per share:
Basic	$	(0.02)	$	-	$	(0.02)	$	(0.11)
Diluted	$	(0.02)	$	-	$	(0.02)	$	(0.11)

(1)For the three months ended June 30, 2022 and 2021, income (loss) allocated to common shares, and the weighted average shares used for calculating basic and diluted earnings per share exclude the assumed impact of exercise liability classified warrants, because it would be anti-dilutive to the earnings per share calculation.

Schedule of Potentially Dilutive Common Stock Equivalents

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Restricted Stock Units		408,226		435,501		408,226		435,501
Options		3,625,426		3,841,671		3,625,426		3,841,671
Warrants		6,009,374		9,339,816		6,009,374		9,339,816
Convertible preferred stock		18,726,009		18,726,009		18,726,009		18,726,009
Total potentially dilutive common stock equivalents		28,769,035		32,342,997		28,769,035		32,342,997

Reconciliation of the Level 3 Warrant Liability Measured and Recorded at Fair Value on a Recurring Basis

	Estimated Fair Value
Balance as of January 1, 2022	$	1,374
Change in fair value of warrant liability, net		(1,372)
Balance as of June 30, 2022	$	2

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Revenue Recognition (Tables)

6 Months Ended

Jun. 30, 2022

Revenue Recognition [Abstract]

Schedule of Disaggregated Revenue

 

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
North and South America	$	3,790	$	3,647	$	8,116	$	6,950
Europe, Middle East, and Africa		3,099		2,090		6,019		4,621
Asia Pacific		270		542		382		1,481
Total	$	7,159	$	6,279	$	14,517	$	13,052

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021			2022		2021
Military	$	4,799	$	3,884	$	10,159	$	7,759
Commercial, including industrial and medical		1,184		820		2,161		1,800
Consumer		23		500		312		1,150
Multiple		1,153		1,075		1,885		2,343
Total	$	7,159	$	6,279	$	14,517	$	13,052

Schedule of Contract Assets and Liabilities

	June 30,		December 31,
	2022		2021
Unbilled Receivables (contract assets)	$	1,318	$	1,102
Deferred Revenue (contract liabilities)	$	114	$	54

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Accounts Receivable (Tables)

6 Months Ended

Jun. 30, 2022

Accounts Receivable [Abstract]

Schedule of Accounts Receivable

	June 30,		December 31,
	2022		2021
Accounts receivable	$	5,159	$	4,627
Less allowance for doubtful accounts		(139)		(139)
Accounts receivable, net	$	5,020	$	4,488

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Inventories, Net (Tables)

6 Months Ended

Jun. 30, 2022

Inventories, Net [Abstract]

Schedule of Components of Inventories

	June 30,		December 31,
	2022		2021
Raw materials	$	2,749	$	3,517
Work in process		3,077		2,149
Finished goods		2,225		2,363
Total inventories		8,051		8,029
Less inventory reserve		(390)		(397)
Total inventories, net	$	7,661	$	7,632

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Line of Credit / Loan Payable (Tables)

6 Months Ended

Jun. 30, 2022

Line of Credit / Loan Payable [Abstract]

Schedule of Line of Credit

	June 30,		December 31,
(in thousands)	2022		2021
Revolving credit facility	$	2,087	$	1,974

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Stock Compensation (Tables)

6 Months Ended

Jun. 30, 2022

Stock Compensation [Abstract]

Schedule of Allocation of Non-Cash Stock-Based Compensation

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Cost of revenues	$	30	$	3	$	58	$	3
Research and development		56		9		92		12
Selling, general and administrative		128		25		229		35
Total stock compensation expense	$	214	$	37	$	379	$	50

Schedule of Stock-Based Compensation Cost by Award Type

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Stock options	$	119	$	13	$	189	$	25
Restricted Share Units		95		24		190		25
Total stock compensation expense	$	214	$	37	$	379	$	50

Schedule of Key Assumptions of Fair Value of Stock Options Granted

	Six Months Ended
	June 30,
	2022				2021
Dividend yield			0	%			0	%
Risk free interest rates	3.24	-	3.25	%	1.77	-	2.48	%
Expected volatility	79.3	to	83.0	%	41.7	to	49.2	%
Expected term (in years)	5.0	to	5.5		3.5	to	4.0

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, 2021		3,712,867	$	1.81
Options granted		270,000		0.73
Options exercised		—		—
Options forfeited		(5,000)		0.40
Options cancelled or expired		(352,441)		3.59
Outstanding at June 30, 2022		3,625,426	$	1.56	3.66	$	144,835
Vested or expected to vest at June 30, 2022 (1)		3,622,861	$	1.56	3.65	$	144,835
Exercisable at June 30, 2022		3,489,426	$	1.59	3.42	$	144,835

(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, 2021		405,453		103,047	$	3.52	$	3.60
Granted		165,885		46,729		1.01		1.07
Vested and settled		(110,608)		—		3.60		—
Forfeited		(52,504)		(34,349)		3.60		3.60
RSU's outstanding at June 30, 2022		408,226		115,427	$	3.13	$	2.58

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Warrants (Tables)

6 Months Ended

Jun. 30, 2022

Warrants [Abstract]

Summary of Warrants Issued and Warrants Outstanding

	Issued		Outstanding		Exercise Price		Expiration
2017 Warrant Issuance (1)		100,000		100,000		2.25		Sep 2022
2018 Warrant Issuance (2)		4,004,329		2,909,374		1.55		Jan 2023
2019 Warrant Issuance (3)		6,000,000		3,000,000		0.78		Oct 2024
				6,009,374

(1)Issued in conjunction with an unsecured line of credit.

(2)Warrant is subject to liability accounting.

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

Fair Value of Warrants

	June 30,		December 31,
	2022		2021
2018 January and February Issuance
Fair Value	$	2	$	1,355
2017 May Issuance (1)
Fair Value		—		19
	$	2	$	1,374

(1)Warrants from the 2017 May Issuance expired on May 24, 2022.

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Change in Fair Value of common stock warrant liability (1)	$	226	$	2,642	$	1,372		(4,566)

(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)

6 Months Ended

Jun. 30, 2022

Leases [Abstract]

Components of Lease Expense

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Finance Lease Cost:
Amortization of right-of-use assets	$	149	$	155	$	302	$	312
Interest on lease liabilities		198		197		396		396
Operating lease cost		16		15		33		30
Total Lease Cost	$	363	$	367	$	731	$	738

Schedule of Other Information

Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	14	$	15	$	29	$	31
Financing cash flows from finance leases	$	270	$	294	$	542	$	549
Right-of-use assets obtained in exchange for new finance lease liabilities	$	69	$	94	$	137	$	108
Right-of-use assets obtained in exchange for new operating lease liabilities	$	-	$	-	$	-	$	-

	June 30, 2022		December 31, 2021
Finance lease right-of-use assets	$	13,106	$	12,318
Operating lease right-of-use assets	$	84	$	113
Finance lease liability, current	$	1,127	$	1,133
Finance lease liability, non-current	$	11,647	$	11,647
Operating lease liabilities, current	$	63	$	60
Operating lease liabilities, non-current	$	22	$	54
Weighted average remaining lease terms - finance leases		20.58 years		20.58 years
Weighted average remaining lease terms - operating leases		1.33 years		1.83 years
Weighted average discount rate - finance leases		6.42%		6.42%
Weighted average discount rate - operating leases		6.48%		7.75%

Future Annual Minimum Lease Payments and Finance Lease Commitments

	Operating Leases		Finance Leases
2022	$	33	$	527
2023		55		1,214
2024		-		1,229
2025		-		1,229
2026		-		1,229
Thereafter		-		22,717
Total undiscounted future minimum lease payments		88		28,145
Less imputed interest		(3)		(15,371)
Lease liability	$	85	$	12,774

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Description of the Business and Summary of Significant Accounting Policies (Narrative) (Details) $ / shares in Units, $ in Thousands	3 Months Ended				6 Months Ended
	Jun. 30, 2022 USD ($) item customer $ / shares	Mar. 31, 2022 USD ($)	Jun. 30, 2021 USD ($) customer $ / shares	Mar. 31, 2021 USD ($)	Jun. 30, 2022 USD ($) item customer $ / shares	Jun. 30, 2021 USD ($) customer $ / shares	Dec. 31, 2021 USD ($)	Dec. 31, 2020 $ / shares
Accounting Policies [Line Items]
Total intangible amortization expense	$ 2		$ 2		$ 4	$ 4
Standard product warranty period					1 year
Unbilled revenue, billed and collected, term					1 year
Net loss	$ (1,440)	$ (137)	$ (278)	$ (7,378)	$ (1,577)	$ (7,656)
Net income (loss) per share: Basic | $ / shares	$ (0.02)		$ 0.00		$ (0.02)	$ (0.11)
Net cash used in operating activities					$ 1,845	$ 2,052
Cash and cash equivalents	$ 4,290		$ 10,568		$ 4,290	$ 10,568	$ 5,724
Preferred Stock- Series B [Member]
Accounting Policies [Line Items]
Conversion price per share | $ / shares								$ 0.3033
Warrants [Member] | Measurement Input, Expected Term [Member]
Accounting Policies [Line Items]
Expected term	6 months 29 days				6 months 29 days
Warrants [Member] | Measurement Input, Risk Free Interest Rate [Member]
Accounting Policies [Line Items]
Measurement input | item	0.0251				0.0251
Warrants [Member] | Measurement Input, Price Volatility [Member]
Accounting Policies [Line Items]
Measurement input | item	0.4502				0.4502
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]
Outstanding amount on credit facility	$ 2,087				$ 2,087		$ 1,974
Remaining borrowing capacity	$ 700				$ 700
Revenues [Member] | Customer Concentration Risk [Member] | One Customer [Member]
Accounting Policies [Line Items]
Number of customers | customer	1
Concentration risk percentage	11.00%
Revenues [Member] | Customer Concentration Risk [Member] | Different Customer [Member]
Accounting Policies [Line Items]
Concentration risk percentage					12.50%
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			1
Concentration risk percentage						15.60%
Accounts Receivable [Member] | Customer Concentration Risk [Member] | Two Customers [Member]
Accounting Policies [Line Items]
Number of customers | customer					2
Accounts Receivable [Member] | Customer Concentration Risk [Member] | Customer One [Member]
Accounting Policies [Line Items]
Concentration risk percentage			19.40%		8.40%
Accounts Receivable [Member] | Customer Concentration Risk [Member] | Customer Two [Member]
Accounting Policies [Line Items]
Concentration risk percentage					1.10%

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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		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Description of the Business and Summary of Significant Accounting Policies [Abstract]
Beginning balance	$ 416	$ 465	$ 519	$ 615
Warranty accruals and adjustments	(127)	242	(227)	100
Warranty claims	(7)	(2)	(10)	(10)
Ending balance	$ 282	$ 705	$ 282	$ 705

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Description of the Business and Summary of Significant Accounting Policies (Schedule of Earnings Per Share, Basic and Diluted) (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended				6 Months Ended
	Jun. 30, 2022	Mar. 31, 2022	Jun. 30, 2021	Mar. 31, 2021	Jun. 30, 2022	Jun. 30, 2021
Description of the Business and Summary of Significant Accounting Policies [Abstract]
Net loss	$ (1,440)	$ (137)	$ (278)	$ (7,378)	$ (1,577)	$ (7,656)
Income (loss) allocated to common shares	(1,440)		(278)		(1,577)	(7,656)
Income (loss) allocated to common shares - Diluted	$ (1,440)		$ (278)		$ (1,577)	$ (7,656)
Weighted average common shares outstanding - Basic	73,895,212		72,193,205		73,368,347	71,238,060
Weighted average common shares outstanding - Diluted	73,895,212		72,193,205		73,368,347	71,238,060
Net income (loss) per share: Basic	$ (0.02)		$ 0.00		$ (0.02)	$ (0.11)
Net income (loss) per share: Diluted	$ (0.02)		$ 0.00		$ (0.02)	$ (0.11)

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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		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total potentially dilutive common stock equivalents	28,769,035	32,342,997	28,769,035	32,342,997
Restricted Share Units [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total potentially dilutive common stock equivalents	408,226	435,501	408,226	435,501
Stock Options [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total potentially dilutive common stock equivalents	3,625,426	3,841,671	3,625,426	3,841,671
Warrants [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total potentially dilutive common stock equivalents	6,009,374	9,339,816	6,009,374	9,339,816
Preferred Stock- Series B [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total potentially dilutive common stock equivalents	18,726,009	18,726,009	18,726,009	18,726,009

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Description of the Business and Summary of Significant Accounting Policies (Reconciliation of the Level 3 Warrant Liability Measured and Recorded at Fair Value on a Recurring Basis) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Description of the Business and Summary of Significant Accounting Policies [Abstract]
Balance as of January 1, 2022			$ 1,374
Change in fair value of warrant liability, net	$ (226)	$ (2,642)	(1,372)	$ 4,566
Balance as of June 30, 2022	$ 2		$ 2

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Revenue Recognition (Narrative) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021	Dec. 31, 2021
Revenue Recognition [Abstract]
Product warranty term			1 year
Unbilled revenue, billed and collected, term			1 year
Accounts Receivable, after Allowance for Credit Loss, Current	$ 5,020		$ 5,020		$ 4,488
Revenue recognized related to contract liabilities	$ 42	$ 37	$ 42	$ 339

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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	Jun. 30, 2022 USD ($)
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Remaining performance obligation	$ 2.7
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		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Disaggregation of Revenue [Line Items]
Revenues from contract with customer	$ 7,159	$ 6,279	$ 14,517	$ 13,052
Military [Member]
Disaggregation of Revenue [Line Items]
Revenues from contract with customer	4,799	3,884	10,159	7,759
Commercial, including Industrial and Medical [Member]
Disaggregation of Revenue [Line Items]
Revenues from contract with customer	1,184	820	2,161	1,800
Consumer [Member]
Disaggregation of Revenue [Line Items]
Revenues from contract with customer	23	500	312	1,150
Multiple [Member]
Disaggregation of Revenue [Line Items]
Revenues from contract with customer	1,153	1,075	1,885	2,343
North and South America [Member]
Disaggregation of Revenue [Line Items]
Revenues from contract with customer	3,790	3,647	8,116	6,950
Europe, Middle East, and Africa [Member]
Disaggregation of Revenue [Line Items]
Revenues from contract with customer	3,099	2,090	6,019	4,621
Asia Pacific [Member]
Disaggregation of Revenue [Line Items]
Revenues from contract with customer	$ 270	$ 542	$ 382	$ 1,481

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Revenue Recognition (Schedule of Contract Assets and Liabilities) (Details) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Revenue Recognition [Abstract]
Unbilled Receivables (contract assets)	$ 1,318	$ 1,102
Deferred Revenue (contract liabilities)	$ 114	$ 54

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Accounts Receivable (Schedule of Accounts Receivable) (Details) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Accounts Receivable [Abstract]
Accounts receivable	$ 5,159	$ 4,627
Less allowance for doubtful accounts	(139)	(139)
Accounts receivable, net	$ 5,020	$ 4,488

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Inventories, Net (Schedule of Components of Inventories) (Details) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Inventories, Net [Abstract]
Raw materials	$ 2,749	$ 3,517
Work in process	3,077	2,149
Finished goods	2,225	2,363
Total inventories	8,051	8,029
Less inventory reserve	(390)	(397)
Total inventories, net	$ 7,661	$ 7,632

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Line of Credit / Loan Payable (Narrative) (Details) - USD ($)		6 Months Ended
	Dec. 21, 2016	Jun. 30, 2022	Dec. 31, 2021	Jun. 08, 2020
Revolving Credit Facility [Member]
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
Outstanding amount on credit facility		2,087,000	$ 1,974,000
Remaining borrowing capacity		$ 700,000
Revolving Credit Facility [Member] | Prime Rate [Member]
Line of Credit Facility [Line Items]
Basis spread on variable rate	3.00%
Paycheck Protection Program [Member]
Line of Credit Facility [Line Items]
Stated interest rate				1.00%
Loans payable				$ 1,900,000

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Line of Credit / Loan Payable (Schedule of Line of Credit) (Details) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Revolving Credit Facility [Member]
Line of Credit Facility [Line Items]
Revolving credit facility	$ 2,087	$ 1,974

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Stock Compensation (Narrative) (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation cost, weighted average period of recognition	10 months 24 days
Dividend yield	0.00%	0.00%
Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized stock option compensation, net of forfeitures	$ 62
Restricted Share Units [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized stock option compensation, net of forfeitures	$ 900
Unrecognized compensation cost, weighted average period of recognition	2 years 1 month 6 days

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Stock Compensation (Schedule of Allocation of Non-Cash Stock-Based Compensation) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock compensation expense	$ 214	$ 37	$ 379	$ 50
Cost of Revenues [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock compensation expense	30	3	58	3
Research and Development [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock compensation expense	56	9	92	12
Selling, General and Administrative [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock compensation expense	$ 128	$ 25	$ 229	$ 35

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Stock Compensation (Schedule of Stock-Based Compensation Cost by Award Type) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock compensation expense	$ 214	$ 37	$ 379	$ 50
Stock Options [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock compensation expense	119	13	189	25
Restricted Share Units [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock compensation expense	$ 95	$ 24	$ 190	$ 25

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Stock Compensation (Schedule of Key Assumptions of Fair Value of Stock Options Granted) (Details)	6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Dividend yield	0.00%	0.00%
Risk free interest rates, minimum	3.24%	1.77%
Risk free interest rates, maximum	3.25%	2.48%
Expected volatility, minimum	79.30%	41.70%
Expected volatility, maximum	83.00%	49.20%
Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected term (in years)	5 years	3 years 6 months
Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected term (in years)	5 years 6 months	4 years

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Stock Compensation (Schedule of Option Activity) (Details) $ / shares in Units, $ in Thousands	6 Months Ended
	Jun. 30, 2022 USD ($) $ / shares shares
Stock Compensation [Abstract]
Number of Shares, Outstanding at December 31, 2021 | shares	3,712,867
Number of Shares, Options granted | shares	270,000
Number of Shares, Options exercised | shares
Number of Shares, Options forfeited | shares	(5,000)
Number of Shares, Options cancelled or expired | shares	(352,441)
Number of Shares, Outstanding at June 30, 2022 | shares	3,625,426
Number of Shares, Vested or expected to vest at June 30, 2022 | shares	3,622,861
Number of Shares, Exercisable at June 30, 2022 | shares	3,489,426
Weighted Average Exercise Price, Outstanding at December 31, 2021 | $ / shares	$ 1.81
Weighted Average Exercise Price, Options granted | $ / shares	0.73
Weighted Average Exercise Price, Options exercised | $ / shares
Weighted Average Exercise Price, Options forfeited | $ / shares	0.40
Weighted Average Exercise Price, Options cancelled or expired | $ / shares	3.59
Weighted Average Exercise Price, Outstanding at June 30, 2022 | $ / shares	1.56
Weighted Average Exercise Price, Vested or expected to vest at June 30, 2022 | $ / shares	1.56
Weighted Average Exercise Price, Exercisable at June 30, 2022 | $ / shares	$ 1.59
Weighted Average Remaining Contractual Life (In Years), Outstanding at June 30, 2022	3 years 7 months 28 days
Weighted Average Remaining Contractual Life (In Years), Vested or expected to vest at June 30, 2022	3 years 7 months 24 days
Weighted Average Remaining Contractual Life (In Years), Exercisable at March 31, 2022	3 years 5 months 1 day
Aggregate Intrinsic Value, Outstanding at March 31, 2022 | $	$ 144,835
Aggregate Intrinsic Value, Vested or expected to vest at March 31, 2022 | $	144,835
Aggregate Intrinsic Value, Exercisable at March 31, 2022 | $	$ 144,835

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Stock Compensation (Schedule of Restricted Stock Unit Activity) (Details) - $ / shares	6 Months Ended
	Jun. 30, 2022	Dec. 31, 2021
Service Based Shares [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of Awards, RSUs outstanding at December 31, 2021	405,453
Number of Awards, Granted	165,885
Number of Awards, Vested and settled	(110,608)
Number of Awards, Forfeited	(52,504)
Number of Awards, RSUs outstanding at June 30, 2022	408,226
Weighted Average Grant Date Fair Value per Share, RSUs outstanding at December 31, 2021	$ 3.13	$ 3.52
Weighted Average Grant Date Fair Value per Share, Granted	1.01
Weighted Average Grant Date Fair Value per Share, Vested and settled	3.60
Weighted Average Grant Date Fair Value per Share, Forfeited	3.60
Weighted Average Grant Date Fair Value per Share, RSUs outstanding at June 30, 2022	$ 3.13
Performance Based Shares [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of Awards, RSUs outstanding at December 31, 2021	103,047
Number of Awards, Granted	46,729
Number of Awards, Vested and settled
Number of Awards, Forfeited	(34,349)
Number of Awards, RSUs outstanding at June 30, 2022	115,427
Weighted Average Grant Date Fair Value per Share, RSUs outstanding at December 31, 2021	$ 2.58	$ 3.60
Weighted Average Grant Date Fair Value per Share, Granted	1.07
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 June 30, 2022	$ 2.58

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Income Taxes (Narrative) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Income Taxes [Abstract]
Effective tax rate	0.00%	0.00%	0.00%	0.00%
Federal statutory rate	21.00%	21.00%	21.00%	21.00%
Operating loss carryforward, expiration			Dec. 31, 2037
Expected refund for AMT credit carryforward	$ 212		$ 212

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Commitments and Contingencies (Narrative) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021	Dec. 31, 2018
Loss Contingencies [Line Items]
Equipment purchases commitments			$ 17,300
Consumer Night Vision, accrued invoices					$ 1,000
Other income (expense)	$ 351	$ 192	447	$ 227
Reclassification, Other [Member]
Loss Contingencies [Line Items]
Consumer Night Vision, accrued invoices		(1,000)		$ (1,000)
Prepayment, writeoff		300
Other income (expense)		$ 100
Government Award [Member]
Loss Contingencies [Line Items]
Equipment purchases commitments			$ 16,400

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Warrants (Narrative) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Warrants [Abstract]
Warrants exercised	0		0
Proceeds from exercise of warrants		$ 600		$ 5,652
Exercise of common stock warrants, shares		324,413		3,343,660

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Warrants (Summary of Warrants Issued and Warrants Outstanding) (Details)	6 Months Ended
	Jun. 30, 2022 $ / shares shares
Class of Warrant or Right [Line Items]
Outstanding	6,009,374
2017 Warrant Issuance 1 [Member]
Class of Warrant or Right [Line Items]
Issued	100,000
Outstanding	100,000
Exercise Price | $ / shares	$ 2.25
Expiration	2022-09
2018 Warrant Issuance [Member]
Class of Warrant or Right [Line Items]
Issued	4,004,329
Outstanding	2,909,374
Exercise Price | $ / shares	$ 1.55
Expiration	2023-01
2019 Warrant Issuance [Member]
Class of Warrant or Right [Line Items]
Issued	6,000,000
Outstanding	3,000,000
Exercise Price | $ / shares	$ 0.78
Expiration	2024-10

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Warrants (Fair Value of Warrants) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021	Dec. 31, 2021
Class of Warrant or Right [Line Items]
Fair Value	$ 2		$ 2		$ 1,374
Change in Fair Value of common stock warrant liability	226	$ 2,642	1,372	$ (4,566)
2018 January and February Issuance [Member]
Class of Warrant or Right [Line Items]
Fair Value	$ 2		$ 2		1,355
2017 May issuance [Member]
Class of Warrant or Right [Line Items]
Fair Value					$ 19

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Leases (Narrative) (Details)	1 Months Ended	3 Months Ended
	Oct. 31, 2021	Dec. 31, 2019	May 02, 2019
Santa Clara, California [Member]
Lessee, Lease, Description [Line Items]
Lease expiration date		2021-10
Lease extension term	2 years	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		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Finance Lease Cost:
Amortization of right-of-use assets	$ 149	$ 155	$ 302	$ 312
Interest on lease liabilities	198	197	396	396
Operating lease cost	16	15	33	30
Total Lease Cost	$ 363	$ 367	$ 731	$ 738

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Leases (Schedule of Other Information) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021	Dec. 31, 2021
Leases [Abstract]
Operating cash flows from operating leases	$ 14	$ 15	$ 29	$ 31
Financing cash flows from finance leases	270	294	542	549
Right-of-use assets obtained in exchange for new finance lease liabilities	69	94	137	108
Right-of-use assets obtained in exchange for new operating lease liabilities
Finance lease right-of-use assets	13,106		13,106		$ 12,318
Operating lease right-of-use assets	84		84		113
Finance lease liability, current	1,127		1,127		1,133
Finance lease liability, non-current	11,647		11,647		11,647
Operating lease liabilities, current	63		63		60
Operating lease liabilities, non-current	$ 22		$ 22		$ 54
Weighted average remaining lease terms - finance leases	20 years 6 months 29 days		20 years 6 months 29 days		20 years 6 months 29 days
Weighted average remaining lease terms - operating leases	1 year 3 months 29 days		1 year 3 months 29 days		1 year 9 months 29 days
Weighted average discount rate - finance leases	6.42%		6.42%		6.42%
Weighted average discount rate - operating leases	6.48%		6.48%		7.75%

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Leases (Future Annual Minimum Lease Payments and Finance Lease Commitments) (Details) $ in Thousands	Jun. 30, 2022 USD ($)
Operating Leases
2022	$ 33
2023	55
Total undiscounted future minimum lease payments	88
Less imputed interest	(3)
Lease liability	85
Finance Leases
2022	527
2023	1,214
2024	1,229
2025	1,229
2026	1,229
Thereafter	22,717
Total undiscounted future minimum lease payments	28,145
Less imputed interest	(15,371)
Lease liability	$ 12,774

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Shareholders' Equity (Narrative) (Details) - USD ($) $ in Thousands		6 Months Ended
	Nov. 18, 2021	Jun. 30, 2022
Class of Stock [Line Items]
Proceeds from offering		$ 2,060
ATM Offering [Member]
Class of Stock [Line Items]
Sale of stock agreement, authorized amount	$ 10,000
Proceeds from offering		$ 2,100

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Government Funding (Narrative) (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2022	Dec. 31, 2021	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	$ 19,800
Restricted cash	511	$ 806
Amount invoiced	19,800
Deferred income related to certain overhead expenses, not capitalized	$ 159
Maintain productive capacity of equipment purchased past completion of program, period	5 years