Annual Report for Fiscal Year Ending 12-31, 2025 (Form 10-K)

Management's Discussion and Analysis of Financial Condition and Results of Operations

Our Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is provided in addition to the accompanying consolidated financial statements and notes to assist readers in understanding our results of operations, financial condition, and cash flows. The following discussion and analysis of our financial condition and results of operations should be read together with our consolidated financial statements and the related notes and other financial information included in this Report. Some of the information contained in this discussion and analysis or set forth elsewhere in this Report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties as described under the heading "Cautionary Note on Forward-Looking Statements" above. You should review the disclosure under the heading "Item1A. Risk Factors" in this Report for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statement.

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Overview

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We develop and manufacture custom electronic materials designed to enable the next generation of electronics. Our advanced TRUFLEX® materials integrate into existing manufacturing processes, supporting efficient, scalable production and high-performance outcomes across a broad range of electronic applications. We combine materials science expertise with practical engineering to deliver tailored solutions for partners seeking to innovate in electronics.

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We design and develop our materials at our research and development facility in Manchester, UK and operate a field application office in Hsinchu, Taiwan. We operate with an international footprint, providing materials development, prototyping and technical support to customers and collaborators globally.

Key Factors Affecting Our Performance

There are a number of industry factors that affect our business which include, among others: 

Overall Demand for Products and Applications using Organic thin film transistors 

Our potential for growth depends significantly on the adoption of OTFT materials in the display and sensor markets and our ability to capture a significant share of any market that does develop. We expect that demand for our technology will also fluctuate based on various market cycles, continuously evolving industry supply chains, trade and tariff terms, as well as evolving competitive dynamics in each of the respective markets. These uncertainties make demand difficult to forecast for us and our customers. 

Intense and Constantly Evolving Competitive Environment 

Competition in the industries we serve is intense. Many companies have made significant investments in product development and production equipment. To remain competitive, market participants must continuously increase product performance, reduce costs, and develop improved ways to serve their customers. To address these competitive pressures, we have invested in research and development activities to support new product development, improve ease of use, lower product costs and deliver higher levels of performance to differentiate our products in the market. 

Governmental Trade and Regulatory Conditions 

Our potential for growth depends on a balanced and stable trade, political, economic and regulatory environment among the countries where we do business. Changes in trade policy such as the imposition of tariffs or export bans to specific customers or countries could reduce or limit demand for our products in certain markets. 

Technological Innovation and Advancement 

Innovations and advancements in organic materials continue to expand the potential commercial application for our products. However, new technologies or standards could emerge, or improvements could be made in existing technologies that could reduce or limit the demand for our products in certain markets. 

Intellectual Property Issues 

We rely on patented and non-patented proprietary information relating to product development, manufacturing capabilities and other core competencies of our business. Protection of intellectual property is critical. Therefore, steps such as additional patent applications, confidentiality, and non-disclosure agreements, as well as other security measures are important. While we believe we have a strong patent portfolio and there is no actual or, to our knowledge, threatened litigation against us for patent-related matters, litigation or threatened litigation is a common method to effectively enforce or protect intellectual property rights. Such action may be initiated by or against us and would require significant management time and expenses.

Components of Results of Operations

Revenue

Revenue. Our revenue consists of revenue from the sale of TRUFLEX® inks and demonstration products and revenue earned from various joint development agreements.

Cost of Revenues. Cost of revenues consists of (1) direct product costs incurred for the raw materials and manufacturing services for our products, (2) fixed product costs primarily relating to production, manufacturing and personnel and (3) depreciation consisting primarily of expenses related to our fixed assets. We expect our cost of goods sold attributable to direct product costs to increase proportionately with increases in revenue, and our cost of goods sold attributable to fixed product costs to remain substantially flat or moderately increase in connection with increases in revenue.

Other Operating Income. Our Other Operating Income includes government grants received for qualifying research and development projects, and research and development tax credits related to the United Kingdom's Research and Development tax relief for small and medium-sized enterprises, which is a government tax incentive designed to reward innovative companies for investing in research and development. The income associated with these items is recognized in the period which the research and development expenses occurred.

Operating Expenses

Research and Development. Research and development expenses consist primarily of compensation and related costs for personnel, including share-based compensation and employee benefits as well as costs associated with design, fabrication and testing of OTFT devices. In addition, research and development expenses include depreciation expenses related to our fixed assets. We expense research and development expenses as incurred. As we continue to invest in developing our technology for new products, we expect research and development expenses to remain flat or moderately increase in absolute dollars but to decline as a percentage of revenue. We do not believe that it is possible at this time to accurately project total program-specific expenses through commercialization. There are numerous factors associated with the successful commercialization of our technology, many of which cannot be determined with accuracy at this time based on our stage of development. Additionally, future commercial and other factors beyond our control will impact our development programs and plans.

General and Administrative. General and administrative expenses consist primarily of allocated compensation and related costs for personnel, including share-based compensation, employee benefits and travel. In addition, general and administrative expenses include third-party consulting, legal, audit, accounting services, allocations of overhead costs, such as rent, facilities and information technology. We expect general and administrative expenses to increase in absolute dollars in future periods due to additional legal, accounting, insurance, investor relations and other costs associated with being a public company, as well as other costs associated with growing our business.

Non-Operating Income (Expense)

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Non-operating income/expense aggregates the following amounts:

Foreign Currency Translation. Foreign currency translation reflects adjustments made due to currency fluctuations.

Fair Value of Warrant Liability. The fair value of equity contracts that are classified as a liability.

Interest Income. Interest income is interest on our cash deposits.

Interest Expense. Interest Expense is related to our short term note payables.

Income Tax Expense/Refund

Income tax expense/refund consists primarily of income taxes in jurisdictions in which we conduct business.

Results of Operations

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Twelve months ended December 31, 2025 compared with the twelve months ended December 31, 2024

Revenue and Cost of Revenue

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Our revenue and cost of revenue reflects sales of TRUFLEX® inks and demonstration products, and the direct costs associated with those sales.

Revenues were $697 thousand for the year ended December 31, 2025, compared to $82 thousand for the same period of 2024. The increase in revenues resulted primarily from an increase of $107 thousand in the sale of demonstrator products to potential partners, as we sought to expand our marketing efforts and $508 thousand related to several joint development agreements that were completed in 2025. Cost of revenue was $272 thousand for the twelve months ended December 31, 2025, compared to $32 thousand for the same period of 2024, primarily as a result of a unit increase in the number of products sold during 2025 and costs associated with the completed joint development agreements during 2025.

Other Operating Income

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Other operating income was $1.0 million for both years ended December 31, 2025 and 2024 and is comprised primarily of research grants and research and development tax credits.

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Operating Expenses

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Operating expenses increased by $2.7 million to $14.2 million for the year ended December 31, 2025, compared to $11.5 million for the comparable period of 2024.

Research and development expenses, which represented 49.4% and 44.3% of our total operating expenses for the twelve months ended December 31, 2025 and 2024, respectively, increased by $1.9 million to $7.0 million for the year ended December 31, 2025, compared to $5.1 million for the same period of 2024. The increase in research and development expenses was mainly due to the increase in the cost of our prototyping activities.

General and administrative expense, which represented 51.9% and 55.0% of our total operating expenses for the twelve months ended December 31, 2025 and 2024, respectively, increased by $1.1 million to $7.4 million for year ended December 31, 2025 as compared to $6.3 million for the same period in 2024. This increase was mainly due to increased professional service fees.

Non-Operating Income/(Expenses)

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Total non-operating income was $2.3 million for the year ended December 31, 2025, compared to $0.1 thousand for the year ended December 31, 2024. The increase in non-operating income resulted primarily from a gain on foreign currency transactions of $2.4 million in 2025, compared to a loss of $0.1 thousand for the comparable period of 2024. The increase in loss on foreign currency transactions resulted from fluctuations in U.S. dollar/British pound value affecting transactions denominated in foreign currencies and the translation of foreign currency denominated balances on intra-group loans. There was a decrease of $0.7 million in non-operating income resulting from the change in the valuation of the warrant liability.

Net Loss

Net loss was $10.5 million for the year ended December 31, 2025, an increase of $0.2 million, compared to a net loss of $10.3 million for the year ended December 31, 2024. The increase in net loss in the 2025 period was attributable to the factors described in the preceding paragraphs.

Liquidity and Capital Resources

As of December 31, 2025, our cash and cash equivalents were $0.4 million compared with $7.1 million as of December 31, 2024. We anticipate operating losses to continue for the foreseeable future due to, among other things, costs related to research and development of our technology and products and expenses related to the marketing and commercialization of our products.

We expect that our cash and cash equivalents of $0.4 million as of December 31, 2025 will not be sufficient to fund our operating expenses and capital expenditure requirements for the next 12 months and that we will require additional capital funding to continue our operations and research development activity thereafter.

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Our expected cash payments over the next twelve months include (a) $2.6 million to satisfy accounts payable and accrued expenses, (b) $271 thousand to satisfy the lease liabilities and (c) $1.1 million to satisfy the note payable. Additional expected cash payments beyond the next twelve months include $312 thousand of lease liabilities.

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Our future viability is dependent on our ability to raise additional capital to fund our operations. We will need to obtain additional funds to satisfy our operational needs and to fund our sales and marketing efforts, research and development expenditures, and business development activities. Until such time, if ever, as we can generate sufficient cash through revenue, management's plans are to finance our working capital requirements through a combination of equity offerings, debt financings, collaborations, strategic alliances and marketing, distribution or licensing arrangements. If we raise additional funds by issuing equity securities, our existing security holders will likely experience dilution. If we borrow money, the incurrence of indebtedness would result in increased debt service obligations and could require us to agree to operating and financial covenants that could restrict its operations. If we enter into a collaboration, strategic alliance or other similar arrangement, it may be forced to give up valuable rights. There can be no assurance however that such financing will be available in sufficient amounts, when and if needed, on acceptable terms or at all. The precise amount and timing of the funding needs cannot be determined accurately at this time, and will depend on a number of factors, including the market demand for the Company's products and services, the quality of product development efforts, management of working capital, and continuation of normal payment terms and conditions for purchase of services. If the Company is unable to substantially increase revenues, reduce expenditures, or otherwise generate cash flows for operations, then the Company will need to raise additional funding.

There is substantial doubt that we will be able to pay our obligations as they fall due, and this substantial doubt is not alleviated by management plans.

Cash Flow from Operating Activities

Net cash used in operating activities was $7.7 million for the year ended December 31, 2025 and $8.1 million for the year ended December 31, 2024. Our net loss increased by $0.2 million for the year ended December 31, 2025, the non-cash expenses decreased by $1.4 million and the change in operating asset and liabilities increased by $1.9 million.

Cash Flow from Investing Activities

Net cash used in investing activities was $123 thousand for the year ended December 31, 2025, compared to $75 thousand for the year ended December 31, 2024, an increase of $48 thousand. The increase resulted from additional purchases of laboratory and capital equipment in 2025.

Cash Flow from Financing Activities

Net cash flows provided by financing activities was $1.0 million for the year ended December 31, 2025, compared to $6.5 million for the year ended December 31, 2024, a decrease of $5.5 million. The decrease in net cash provided by financing activities resulted primarily from lower proceeds from offering activities in 2025 compared to 2024.

Contractual Payment Obligations

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Our principal commitments primarily consist of obligations under leases for office space and purchase commitments in the normal course of business for research & development facilities and services, communications infrastructure, and administrative services. We expect to fund these commitments from our cash balances and working capital.

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Recently Issued Accounting Pronouncements

For recently issued accounting announcements, see "Recently Issued Accounting Pronouncements" in Note 2, "Significant Accounting Policies and Recent Accounting Pronouncements" in the Notes to our Consolidated Financial Statements included in this Annual Report on Form 10-K.

Critical Accounting Estimates

We prepare our consolidated financial statements in accordance with U.S. generally accepted accounting principles, which require our management to make estimates that affect the reported amounts of assets, liabilities and disclosures of contingent assets and liabilities at the balance sheet dates, as well as the reported amounts of revenues and expenses during the reporting periods. To the extent that there are material differences between these estimates and actual results, our financial condition or results of operations would be affected. We base our estimates on our own historical experience and other assumptions that we believe are reasonable after taking account of our circumstances and expectations for the future based on available information. We evaluate these estimates on an ongoing basis.

We consider an accounting estimate to be critical if: (i) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (ii) changes in the estimate that are reasonably likely to occur from period to period or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations.

Although there are items within our financial statements that require management to make accounting estimates, we do not believe them to be critical, as defined above.

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