eMagin Corporation Price & Performance (EMAN)

Thank you, and good morning, everyone. Welcome to Imagine's Q2 2023 earnings conference call. Before we begin, I would like to remind you that in the following prepared remarks, We will be making statements about expected future results that may be forward looking for the purpose of federal securities law, Including Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities and Company's Exchange Act of 1934. These forward looking statements are based on the company's current and his team. Expectations, estimates and projections about the expected date of closing of the PROS transaction and the potential benefits thereof, It's business and industry, management's beliefs and certain assumptions made by the company and Samsung Display Company Limited, All of which are subject to change. These forward looking statements should be considered only in conjunction with the detailed information contained in our and his SEC filings, including the risk factors described in our 2022 Annual Report on Form 10 ks And the definitive proxy statement related to our proposed merger agreement with Samsung Display. During this call, we will also refer to adjusted EBITDA, a non GAAP financial measure, to provide additional information to investors.

A reconciliation of adjusted EBITDA to net income, which is the most directly comparable GAAP financial measure, is provided in the press release that we issued this Good morning. Non GAAP financial measures such as adjusted EBITDA are not meant to be considered in isolation and I will now turn the call over to our CEO, Andrew Sculley.

Thanks, Mark, and good morning, everyone. As I'm sure you've seen by now, Imagine has entered into a definitive Merger Agreement with Samsung Display Company, which is a subsidiary of Samsung Electronics and a leading manufacturer and Distributor of Display Products. Under the terms of the agreement, all shares of Imagine stock would be acquired by Samsung for $2.08 per share in an all cash transaction. We will hold a virtual special meeting of shareholders on August 31, at which time Imagine's shareholders will be asked to vote on the adoption of the merger agreement. This merger represents a significant moment for Imagine, and we believe it is in the best interest of our shareholders. Our decision to enter into the agreement was reached only after careful consideration by our Board of Directors, including a formal and thorough review of strategic alternatives to maximize shareholder value. That process included the solicitation of competing offers among 8 strategic counterparties, but did not yield any actionable alternatives. It is worth noting that a significant expenditure of several $100,000,000 would be required By such a strategic counterparty to build a DPD OLED micro display line capable of serving the ARVR consumer market. In addition, such a line would take a number of years to design and build.

As such, even if a strategic partner were available today And willing to make the required investment, it would likely be several years before Imagine could begin to realize meaningful and and others, including a recognition that Imagine would need to raise significant capital in the near term and that such a capital raise would be dilutive for existing shareholders. In what were extensive negotiations with Samsung, our Board sought a transaction price that would as well as to a range of historical market prices. In the unanimous opinion of the Board And on a risk adjusted and time adjusted basis, this merger is more favorable to our shareholders And any other alternative reasonably available to us. That includes the continued operation of Imagine as a standalone company and the pursuit of other potential strategic or financial transactions. In fact, we had explored the possibility of a commercial partnership with Samsung Business prospects and competitive position, projected financial performance and a number of operational factors, In our final analysis, it became clear to both the Board and the management team that our proposed merger with Samsung Display represents the best and his shareholders. I remain tremendously proud of Imagine's accomplishments to date And appreciative of the support of our loyal shareholders.

I am also grateful to everyone at the company for their hard work and meeting the challenges who have endured by operating independently for so long. I would like to thank all of you for your support. I will now turn the call over to Mark, who will review our Q2 financials.

Thank you, Andrew, and hello, everyone. Total revenues for the Q2 of 2023 decreased 31 percent to $5,000,000 compared with $7,200,000 reported in the prior year period. Total revenue consists of both product revenue and contract revenue. As of June 30, our sales backlog totaled $22,700,000 compared with $16,700,000 at the end of Q4 2022. Our Q2 product revenues of $4,900,000 compared negatively to the $7,000,000 realized in the year ago period. The $2,100,000 decrease was driven by unexpected production downtime and lower than expected production yields. Contract revenues were $100,000 flat year over year. Imagine continues to work under the U. S. Army's Program Executive Office for Simulation, Training and Instrumentation or PEO STRIDE contract as well as on a high brightness for specific milestones that are not uniformly distributed through the project's duration. Total gross margin for the 2nd quarter decreased Negative 10% resulted in a gross profit of negative $500,000 compared with a gross margin of 22%, which Primarily due to production downtime, which resulted in a lower volume of displays produced, reduced shipments, lower yields And higher average product costs as fixed costs were spread over less finished and work in process displays. Operating expenses for the Q2 of 2023, including R and D expenses, were $10,700,000 Compared with $3,400,000 in the prior year period, operating expenses as a percentage of sales were 2 Our operating expenses increased year over year primarily due to legal and investment banking costs for the Q2 of 2023 was $11,200,000 compared with an operating loss of $1,800,000 in the prior year period.

Net loss for the Q2 of 2023 was $11,200,000 or a loss of $0.13 per share Compared with a net loss of $1,400,000 or a loss of $0.02 per share in the prior year period. Adjusted EBITDA for the Q2 of 2023, which excludes expenses related to the merger agreement, Was negative $2,600,000 This compares with a negative $300,000 in the prior year period, Which did not include any merger related expenses. As of June 30, the company had cash and with cash equivalents of $3,300,000 and working capital of $10,600,000 During the second quarter, The company did not repay any borrowings under its asset based lending facility. As of June 30, there was $800,000 under a loan and security agreement entered into concurrently with the May 17 signing of the merger agreement. The merger is expected to close in the second half of twenty twenty three, subject to the approval by Imagine stockholders and other customary closing conditions and regulatory approvals. On July 3, the required waiting period under the Hart Scott Rodino Antitrust Improvements Act expired. On July 18, the Committee for Foreign Investment in the U. S, also known as CFIUS, Acknowledge receipt of the joint Samsung Display Imagine filing and notify the Imagine that the initial Review period would conclude no later than August 31.

CFIUS may, at its discretion, to commence a subsequent investigation, which would start on September 1 and end on October 16. As Andrew mentioned, a special meeting of the Imagine stockholders will be held virtually on August 31. Until the closing of the transaction, Imagine and Samsung Display will remain separate and independent companies. With that, I'll turn the call back over to Andrew for his closing remarks. Andrew?

Thank you, Mark. Given the timing of our special meeting of the shareholders, we will not take questions at this time. If you have not already done so, I encourage you to to review the definitive proxy statement related to the merger, which is available on our Investor Relations website. The proxy statement contains detailed information concerning the special meeting and the merger agreement, including the reasons for the proposed merger and the Board's recommendations. Please know that your vote is important. Whether or not you plan to attend the special meeting virtually, Please submit your proxy as soon as possible, whether over the Internet, by telephone or by returning your proxy card by mail. You may revoke your proxy or change your vote at any time before it is voted at the special meeting. Thank you again for your support of IMAGINE.

Thank you for your participation in today's conference. This does conclude the program. You may now