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Interim report and financial statements for the third quarter 2010
From stand-alone memory to printed systems
- Partnership with PARC enables higher density memories and entry to new markets
- The Thinfilm Memory Controller will accelerate market launch of smart toys powered by Thinfilm
- Successful placement of new shares funds development of next-generation memory products and go-to-market activities
Thinfilm's application roadmap is moving from stand-alone memories towards integrated systems.
Thin Film Electronics ASA ("Thinfilm") has concentrated its go-to-market efforts on toys and games. As a result of these activities, several of the world?s large toy manufacturers are now evaluating concepts including Thinfilm Memory.
"Toys and games will continue to be an important market for Thinfilm Memory. We will also add resources to support the development of printed ID and sensor tags powered by Thinfilm Memory," says Davor Sutija, Thinfilm CEO.
The next generation of Thinfilm Memory products will be coupled with other electronic circuit elements to make fully printed systems. Target products are expected to include ID tags, sensor tags, and disposable price labels.
"RFID will boom earlier than expected. Item level tagging is the largest single market opportunity for the application of Thinfilm Memory," Sutija believes. "Thinfilm is uniquely positioned with low-power rewritable memory that meets the standards and cost-targets of this new industry."
Strategic partnership with PARC
"To develop fully printed devices that include addressable memory, we need high-performance printed transistors. Our strategic partnership with PARC enables us to design higher density memories and enter new markets," says Sutija.
By combining Thinfilm memory technology and PARC transistor technology, the project?s first goal is the design of an addressable memory array for commercial production. "We aim to have the first design for a 128 bit memory with printed circuitry ready early next year," Sutija continues. The design will include printed circuit elements that will reduce the number of contact pads and reduce the size - the "footprint? - of Thinfilm Memory.
Thinfilm Memory Controller available
"Toy manufacturers have been working on concepts for new interactive games that include Thinfilm Memory, and have done extensive testing of our technology," says Sutija. "With the release of our new Memory Controller, this will allow them to design smaller, more cost effective reader/writer units that we believe will accelerate market launch of smart toys powered by Thinfilm," continues Christer Karlsson, Thinfilm CTO.
By storing user and game flow information, Thinfilm Memory enables evolution of characters and skill levels, and makes cards and toys "intelligent?. The information is written and read by a reader/writer built into the game or available as a separate hand-held device. The central component of the reader is the Thinfilm Memory Controller, an application-specific integrated circuit (ASIC).
Issue of new Thinfilm shares subscribed 3.5 times
The gross proceeds from the placement closed 01 October amount to NOK 18.7 million. Including the two proposed warrants issued to each share subscribed, the potential gross proceeds are NOK 62.9 million.
"The successful placement will fund the development of next-generation memory products and go-to-market activities," says Sutija.
About Thinfilm and printed electronics
Thinfilm is focused on providing low-power, non-volatile, rewritable polymer memory technology and products in the rapidly growing market of Printed Electronics. Thinfilm?s current main product offering is a 20-bit non-volatile rewriteable memory printed in a high-volume roll-to-roll process.
The Printed Electronics market is still in its early stages, and according to industry analyst group IDTechEx, is expected to grow to more than USD 50 billion in market value over the next ten years. IDTechEx predicts that logic (i.e., memory and transistors) will be the largest segment in this market.
Printed RFID tags are predicted to rapidly gain market share over the coming years. According to IDTechEx, the numbers of printed and chipless RFID tags sold globally will rise from 12 million in 2011 to 209 billion in 2021.
The demand for low cost tags is expected to be fuelled by retailers? adoption of standard EPC RFID tags in open supply chains. Governments will also drive the RFID boom. The public sector is the largest customer for RFID today, and in the future the use of RFID in transit ticketing, people identification and animal tagging is forecasted to grow.
In parallel to the embracement of item level ID tagging, NFC enabled phones will put an RFIDcompatible reader in people?s pockets, purses, and backpacks. Major communication device companies are targeting RF applications for consumer mass markets. Examples of these applications are location tags, advertising and smart packaging.
Using printing to manufacture electronic memory makes it possible to reduce the number of process steps, dramatically reduce manufacturing costs, as well as the environmental impact as compared to traditional semiconductor processes. Commercial applications of printed electronics include e-paper, electronic readers, and organic light emitting (OLED) displays. Sensors, batteries, and photovoltaic en ergy sources are also in development, and together with Thinfilm?s memory technology they will open the door to new products and applications.
Memory is an essential part of most electronics. Memory is required for identification, tracking status and history, and is used whenever information is stored. Thinfilm?s non-volatile ferroelectric polymer memory technology is well suited for application with other printed electronics devices because power consumption during read and write is negligible, and as it is permanent, no connection to external power is required for data detainment. Also, the current required to write information is so small that operation would be limited by the battery?s lifetime and not its capacity.
About Thinfilm's product roadmap
Thinfilm is developing higherdensity memories. Together with PARC Thinfilm is designing a 128 bit addressable array memory that includes printed transistors.
Thinfilm will also partner with other companies to develop system products equipped with Thinfilm Memory. Target products are expected to include:
1. Sensor tags coupled with printed sensors, measuring temperature, humidity, etc., and printed battery.
2. Proximity ID tags (that can be read without contacting the tag). This means integrating low cost transistors and antenna with Thinfilm Memory.
3. Disposable price labels in stores with printed display and memory powered by printed batteries.
4. NFC RFID. RFID tags compliant with NFC (Near Field Communication) and EPC (Electronic Product Code).
New breakthroughs in materials and ink formulation make it possible to print high quality transistors. Transistors are needed to "drive? the logic for system products. The numbers of printed transistors needed defines the timeline for Thinfilm?s system products roadmap. The figure above indicates a timeline between 24 to 36 months, with sensor tags and ID tags as the first system products.
Other events in 2010
Partnership for volume production of polymer: Solvay and Thinfilm entered a commercial Agreement on 1 June 2010.
Thinfilm Memory EU Certified: Certification that Thinfilm Memory(TM) products meet EU standards for safety of toys received on 18 June 2010.
On 1 July 2010 Davor Sutija, previously EVP Business Development, was named CEO of Thinfilm. He took over from Rolf Åberg, who served as acting CEO since June, 2009.
Mr. Åberg continues in an executive board position.
Geir Harald Aase joined Thinfilm on 7 April 2010 as Vice President of Communications and Investor Relations.
Thinfilm presented at PARC Forum in Palo Alto on 28 October 2010. The presentation is available at http://www.parc.com/event/1249/from-stand-alone-memory-to-printedsystems.html
Thinfilm exhibited and presented at the Printed Electronics ASIA 2010 conference in Hong Kong 13-14 October 2010
Thinfilm exhibited and presented at the LOPE-C conference in Frankfurt 31 May-2 June 2010
Thinfilm presented at the invitation-only Solvay-COPE conference in Leuven, 4 May, 2010
Thinfilm exhibited and presented at the Printed Electronics Summit in San José 10-11 May 2010
Thinfilm gave a master class lecture and exhibited at the Printed Electronics Europe 2010 conference in Dresden 12-14 April 2010.
Thinfilm attended the Engage & New York Toy Shows, 16-18 February 2010.
Thinfilm attended the International Toy Fair Nürnberg, 8-9 February, 2010.
An updated company presentation was released on 7 May 2010.
A new and updated web site was launched, at www.thinfilm.no, in January.
Condensed consolidated financial report as at 30 September 2010 Thinfilm did not earn revenue in the third quarter. In the first nine months of 2010, the revenue was less than NOK 0.1 million and related to administrative services. Similar revenue amounted to NOK 0.9 million and Thinfilm had NOK 3.5 million gain on sale of equipment no longer in use in the same period of 2009.
Other operating costs (i.e. all operating costs excluding depreciation and impairment charge) amounted to NOK 19.2 million year to date, including the notional cost of subscription rights (share based compensation) of NOK 3.4 million. The corresponding numbers for the same period of 2009 were NOK 15.3 million and NOK 0.4 million. Excluding share based remuneration, the underlying cash cost increase was thus only NOK 0.9 million. There were six full-time and one part-time employees in the group at the end of the first half, and in addition Thinfilm makes use of outsourced services and specialist contractors. Depreciation is negligible because all costs related to equipment and intangible assets have been expensed. Going forward, costs will vary with manning and activity level.
Net financial items, mainly exchange gains/losses related to variations in SEK, amounted to a loss of NOK 0.2 million in the first nine months, compared to a gain of NOK 0.4 million in the same period of 2009. Interest income and expense is insignificant.
The company operates at a loss and there is a tax loss carry forward position also in the Swedish subsidiary, such that the group has not incurred any tax costs in 2010 or the year before. The company has not recognized the deferred tax asset in its balance sheet, because this potential asset does not yet qualify for inclusion.
The net result year to date was a loss of NOK 19.4 million, corresponding to a loss of NOK 0.10 per basic share. In the first three quarters of 2009, the loss amounted to NOK 10.6 million.
Result per share is not comparable because the number of shares increased substantially because of the 5:1 rights issues in June 2009.
Because the warrants exercised in May raised NOK 9.9 million in new equity, the group?s cash balance decreased by only NOK 6.2 million in the first nine months, of which NOK 5.5 million reduction was in the third quarter. The cash balance on 30 September 2010 amounted to NOK 3.6 million, while net of receivables and payables amounted to NOK 3.7 million payable.
Consequently, the company?s liquidity was constrained.
The company?s balance sheet comprises essentially cash, receivables, payables and accruals, and net equity. The intangible property rights in form of patents and know how, have not been capitalized. At 30 September 2010, the equity was virtually nil. The company conducted a successful private placement on 1 October 2010, raising new equity and working capital amounting to NOK 18.7 million before expenses. The new capital has been registered and the equity is positive at the date of this report. The second and final exercise period for warrants runs from 1 September to 6 November 2010. A letter and exercise form was sent to all holders of warrants on 20 October 2010. The board takes for its basis that the outstanding warrants will be exercised and adds NOK 2.1 million equity and liquidity.
Principal risks It is the duty of the board to present the principal risks of Thinfilm and its business. Thinfilm does not have any significant assets or liabilities with risk. Thinfilm does not have financial instruments, assets or liabilities, and has limited financial risks related to currency and interest rates.
The company?s major risk is its business risk, meaning its ability to earn revenue. This risk is difficult to assess, because the operating history is limited and the target market is immature and yet to be developed. The company has to date earned insignificant revenue from its technology.
Thinfilm operates at a loss and does not have assets suitable for secured borrowing. At 30 September 2010, the equity was virtually nil. Following the successful private placement on 1 October 2010, the equity is positive at the date of this report.
Outlook Thinfilm foresees a developing shift towards ubiquitous memory where people and devices can store and retrieve information through portable devices and communicate both with external (e.g., cloud-based) data sources, and also with memory-enabled objects and sensors in their surroundings. This is our Memory Everywhere(TM) vision.
Thinfilm?s sales activities will continue focusing on the toys and games market. Business development activities will focus on this market and development of next generation printed electronics products.
Thinfilm?s technology staff will continue to provide technical pre-sales support, and aid commercialization efforts with manufacturing partners. Thinfilm will also work directly with toy and game inventors to integrate printed memory into specific designs. Development of next generation products is also on the R&D agenda.
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