♬Key Summary
-Received two U.S. Department of Defense (DoD) awards (grants) totaling $39.1 million in 2020
-July 28, 2020 Signed a $33.6 million subsidy contract from the U.S. Department of Defense over the next 33 months to maintain and strengthen U.S. domestic capabilities for OLED microdisplays
-In addition to the $5.5 million announced under the OLED Supply Chain Assurance Program on June 11, 2020 ($39.1 million total)
-As of the end of the first quarter of 2022, the company has validated 4 equipment and added it to the production line, and has received 3 additional equipment currently in the verification phase.
- We have spent $18.2 million in grants to pay our equipment suppliers on-going, and for the benefit of our five major equipment, including a producible advanced dPd organic deposition tool that is expected to improve the yield and throughput of this innovative technology. additionally ordered.
- Additional equipment to be purchased and added during fiscal years 2022 and 2023 under government-funded programs is expected to reduce the risk of single point of failure and continue to improve manufacturing yield and throughput.
- Display gross margin improved to 32% in the first quarter of 2022
-We believe that US-based design and manufacturing, in-house advanced backplane design, and dPd technology combine to provide a competitive advantage.
-Our direct patterning equipment is in operation.
- We built full color displays using our newly upgraded and installed dPd tools for 2021, including 4kX4k and WUXGA displays.
- In July 2021, a full-color WUXGA display with a brightness of over 10,000 cd/m2 was created using dPd technology and presented to industry analysts.
- We are continuing our development work for our Tier 1 consumer customers and are targeting similar levels of brightness in proof-of-concept displays using a full-color dPd process.
- Achieved full color brightness level of over 10,000 cd/m2 in July 2021, and expect to achieve brightness level of over 28,000 cd/m2 for mass production of full color displays by 2023.
-Display brightness is very important for AR/VR devices because of the optical inefficiencies 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 in eliminating the "screen door" effect that occurs when scaling low resolution displays across a wide field of view.
SEC filing is the same concept as a Korean business report.
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※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.
※Equipment Purchase Commitments
The Company has committed to equipment purchases of approximately $18.2 million at March 31, 2022.
In addition, through March 31, 2022, the Company has committed to equipment to be purchased under government awards of $1.4 million.
※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.
※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 first quarter of 2022 our revenue was $7.4 million marked by diversified sales and contract revenue and reflected the contributions of new engineering talent that joined eMagin in late 2021.
-In addition to higher yields, we saw a 27% increase in display production from the first quarter of last year.
-Our first quarter 2022 display revenues of $7.0 million was up 15% year over year while our quarterly display revenue gross margin improved to 32%.
-Our first-quarter results included continued display revenue growth in our ENVG-B program and growth in shipments to customers in North American Treaty Organization, or NATO countries and international distributors.
-As of the end of the first quarter, our sales backlog remained strong at $13.6 million, reflecting demand for our displays for use in thermal weapon sights, military night vision goggles, and medical applications.
-Operating expenses for the first quarter of 2022, including R&D expenses were $3.7 million, compared with $3.7 million in the prior-year period.
-Operating expenses as a percentage of sales were 50% in the first quarter of 2022, with 54% in the prior-year period.
-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 first 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 $18.2 million of grant money towards progress payments to equipment vendors and has 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.
-As of March 31, 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 four pieces of production equipment and received $18.1 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 March 31, 2022, was $13.6 million compared to backlog of $10.7 million at March 31, 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 are increasingly turning to us because of our technological leadership in display brightness and resolution.
-This leadership in brightness is further demonstrated by our proprietary dPd capability.
-Unlike traditional OLEDs that produce colors by using a white source with filters that eliminate about 80% of the emitted light, with dPd we make full color displays by directly depositing each of the primary color materials on respective sub-pixels, without the use of filters.
-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.
This was also mentioned in the last article about the Pancake lens structure.
"The pancake technology itself is not new. The military and scientific community used Pancake optics years before virtual reality adopted it. We first saw a Pancake VR headset prototype at eMagin in 2015."
“The disadvantage of pancake optics compared to Fresnel is that pancakes reflect light within the lens itself, resulting in lower light efficiency. In short, it blurs the wearer's perceived image and it causes John C.C. That's why I pointed out that pancake lenses are a good match for 'high-brightness micro-displays.' And ghosting is also a problem with pancake lenses."
-Total revenue for the three months ended March 31, 2022 were $7.4 million, as compared to revenues of $6.8 million, for the three months ended March 31, 2021.
-Product revenue is comprised primarily of sales of displays as well as sales of other hardware.
-For the three months ended March 31, 2022 product revenue increased by $0.9 million primarily due to increased shipments to customers in NATO countries, 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 months ended March 31, 2022 contract revenue decreased by $0.3 million, 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.
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