EMAN 2021 Q1

10-Q 1 eman-20210331x10q.htm 10-Q EMAN 2021 Q1

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

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

For the quarterly period ended March 31, 2021

☐ 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 ☑ 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 ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 ☑
Accelerated filer ☐		Emerging growth company ☐
Non-accelerated filer ☑

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 ☑

As of April 30, 2021, there were 72,270,927 common shares at $0.001 par value per share of the registrant outstanding.

Table of Contents


		Page
PART I - FINANCIAL INFORMATION
Item 1	Condensed Consolidated Financial Statements
	Condensed Consolidated Balance Sheets as of March 31, 2021 (unaudited) and December 31, 2020	5
	Condensed Consolidated Statements of Operations for the three months ended March 31, 2021 and 2020 (unaudited)	6
	Condensed Consolidated Statements of Changes in Shareholders’ Equity for the three months ended March 31, 2021 and 2020 (unaudited)	7
	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020 (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	29
Item 4	Controls and Procedures	29

PART II - OTHER INFORMATION
Item 1	Legal Proceedings	31
Item 1A	Risk Factors	31
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	31
Item 3	Defaults Upon Senior Securities	31
Item 4	Mine Safety Disclosures	31
Item 5	Other Information	31
Item 6	Exhibits	31
SIGNATURES		33

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 our Annual Report on Form 10-K for the fiscal year ended December 31, 2020. 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.

In particular, forward-looking statements in this Report include statements about:

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;

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 impact of the COVID-19 pandemic on our business;

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;

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;

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 potential exposure to product liability claims;

our ability to meet customers’ delivery schedules;

market pricing for our products and for competing products;

the concentration of a significant ownership percentage in a relatively small number of stockholders and the ability of one or more of such stockholders to exert substantial control over our affairs;

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;

increasing competition;

our ability to comply with the terms of government awards;

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;

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; and

successful resolution and documentation of our agreement in principle to settle purchase commitments remaining from our consumer night vision business for a total of $0.6 million.

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. References to “Consumer Night Vision Business” refers to our consumer night vision products business.

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

ITEM 1. Financial Statements

eMAGIN CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(unaudited)


	March 31,		December 31,
	2021		2020
ASSETS
Current assets:
Cash and cash equivalents	$	10,705	$	8,315
Restricted cash		1,671		2,111
Accounts receivable, net		4,423		5,314
Account receivable-due from government awards		97		1,013
Unbilled accounts receivable		374		253
Inventories		8,413		8,379
Prepaid expenses and other current assets		1,095		943
Total current assets		26,778		26,328
Property, plant and equipment, net		22,118		21,132
Operating lease right - of - use assets		35		50
Intangibles and other assets		124		126
Total assets	$	49,055	$	47,636

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1,266	$	1,206
Accrued compensation		1,929		1,628
Paycheck Protection Program loan - current		—		982
Revolving credit facility, net		198		1,875
Common stock warrant liability		11,830		4,622
Other accrued expenses		1,474		1,693
Deferred revenue		124		425
Operating lease liability - current		36		51
Finance lease liability - current		1,028		1,027
Other current liabilities		621		757
Total current liabilities		18,506		14,266
Other liability - long term		42		56
Paycheck Protection Program loan - long term		—		982
Deferred Income - government awards - long term		4,473		4,309
Finance lease liability - long term		11,733		11,783
Total liabilities		34,754		31,396

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, $.001 par value: 10,000 shares designated and 5,659 issued and outstanding as of March 31, 2021 and December 31, 2020.		—		—
Common stock, $.001 par value: authorized 200,000,000 shares, issued 72,137,858 shares, outstanding 71,975,792 shares as of March 31, 2021 and issued 68,890,819 shares, outstanding 68,728,753 shares as of December 31, 2020.		72		69
Additional paid-in capital		274,165		268,729
Accumulated deficit		(259,436)		(252,058)
Treasury stock, 162,066 shares as of March 31, 2021 and December 31, 2020.		(500)		(500)
Total shareholders’ equity		14,301		16,240
Total liabilities and shareholders’ equity	$	49,055	$	47,636

See notes to Condensed Consolidated Financial Statements.

eMAGIN CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share data)

(unaudited)


	Three Months Ended
	March 31,
	2021		2020
Revenues:

Product	$	6,105	$	5,634
Contract		668		1,097
Total revenues, net		6,773		6,731

Cost of revenues:

Product		4,707		4,790
Contract		358		507
Total cost of revenues		5,065		5,297

Gross profit		1,708		1,434

Operating expenses:

Research and development		1,842		980
Selling, general and administrative		1,824		1,798
Total operating expenses		3,666		2,778

Loss from operations		(1,958)		(1,344)

Other (expense) income:
Change in fair value of common stock warrant liability		(7,208)		(20)
Interest expense, net		(210)		(17)
Gain on forgiveness of debt		1,963		—
Other income, net		35		12
Total other (expense)		(5,420)		(25)
Loss before provision for income taxes		(7,378)		(1,369)
Income taxes		—		—
Net loss	$	(7,378)	$	(1,369)

Loss per share, basic and diluted	$	(0.10)	$	(0.03)

Weighted average number of shares outstanding:

Basic and Diluted		70,272,302		51,638,598

See notes to Condensed Consolidated Financial Statements.

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, 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