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Interim report for the fourth quarter and preliminary financial report for 2009
Printed Electronics 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, representing more than 30 per cent of the total. Using printing to manufacture electronic memory makes it possible to reduce the number of process steps, dramatically slash manufacturing costs, as well as the environmental impact compared to traditional semiconductor processes. Commercial applications include epaper electronic readers and organic light emitting (OLED) displays. Sensors, batteries, and photovoltaic energy sources are also in development, and together with Thinfilm's memory technology 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 nonvolatile ferroelectric polymer memory technology is well suited for application with other printed electronics devices because power consumption during read and write is negligible, and during standby, no connection to external power is required. Data is retained without power consumption and the current required to write information is so small that operation using a standard battery would last years and likely be limited by the battery's own lifetime.
Thinfilm is exploiting nearterm commercial opportunities in toys and games as an initial market for Thinfilm's polymer memory. These applications are expected to provide innovations and operating capital for the development of additional products.
Business development activities during the year broadened existing relationships, and established new relationships with potential customers in both North America and Japan. This led to encouraging customer interest, and during the fourth quarter Thinfilm further intensified its business development activities, with participation as an exhibitor at a number of conferences:
- In October, Thinfilm attended the 'Fall Toy Preview 2009' exhibition in Dallas, USA. This exhibition is by invitation only and is limited to companies active in the toys & games industry.
- Thinfilm exhibited at the 'Toys and Games Inventor Expo (TAGIE)' in November, jointly with Cartamundi. TAGIE is a dedicated toys and games inventor conference and exhibition in Chicago, USA.
- At the end of September, Thinfilm participated as an exhibitor and also held a presentation at the 'Printed Electronics Asia 09' conference in Tokyo, Japan.
- Thinfilm participated as an exhibitor at the 'Printed Electronics USA 09' conference in December in San Jose, USA.
Thinfilm is also designing a new lowcost handheld memory read/write unit, which can be integrated into game designs or be used as a standalone toy. The Thinfilm read/write units will be manufactured by qualified volume manufacturing partners.
During the fourth quarter, Thinfilm's joint development activities with its manufacturing partners focused on further improving the yield of the memory production process and adapting the memories to various applications.
At the end of the quarter, a new and updated web site was released, at www.thinfilm.se and www.thinfilm.no.
Key events during 2009
- In February, Cartamundi and Thinfilm announced an extension to Cartamundi's production and commercialization rights regarding Thinfilm's memory technology, originally agreed to under a 2007 License Agreement
- InkTec Co., Ltd. ("InkTec") in Kyungkido, Korea, and Thinfilm announced in March the successful production of fully functional printed memory products in a highvolume rolltoroll("R2R") printing process
- On April 14, InkTec and Thin Film received the prestigious IDTechEx Technical Development Manufacturing Award for rolltoroll, high volume manufacturing of printed memories
- A large part of the technical laboratory equipment formerly used in the development of hybrid memory and no longer in use, was sold in March 2009. The transaction was completed in the second quarter of 2009. The cash proceeds amounted to SEK 4.8 million
- A rights issue raising net NOK 10.9 million in new equity was successfully completed in June, and a private placement raising net NOK 5.6 million was completed in July
- In June, board member Rolf Åberg, also took over the role of CEO
- In July Dr. John M. Lervik acquired approximately 14 per cent of the outstanding shares in Thinfilm, by purchases on the open the market and through participation in the July private placement. Dr. Lervik is actively engaged in helping Thinfilm in the areas of technology and business development
- In September, PolyIC and Thinfilm announced highvolume production of rolltoroll printed polymer memories
- On 7 January 2010 Thinfilm further strengthened its management team when Davor Sutija joined Thinfilm as Executive Vice President, Business Development and Marketing
Condensed consolidated financial report as at 31 December 2009
Attached to this interim report is the condensed consolidated financial report as of 31 December 2009.
Thinfilm's revenue in 2009 was NOK 4.5 million of which NOK 3.5 million was related to the sale of equipment no longer in use. The revenue in the fourth quarter was negligible. In 2008, the revenue was NOK 2.0 million, of which NOK 1.5 million was related to the printed memory technology.
Other operating costs (i.e. all operating costs excluding depreciation and impairment charge) in the quarter were NOK 5.4 million, including the notional cost of subscription rights (share based compensation) of NOK 1.1 million. The corresponding numbers for the year were NOK 20.7 million and NOK 1.4 million. The cost savings implemented in the first half of 2009 had full effect from the third quarter. The fourth quarter has seasonally higher costs. In comparison, for 2008 the other operating costs amounted to NOK 26.2 million for the year and NOK 6.6 million for the quarter. There were five fulltime employees in the group at the end of the quarter, and in addition Thinfilm made use of outsourced services and specialist contractors. 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 gain of NOK 0.5 million in the year of which NOK 0.1 million occurred in the fourth quarter. In 2008, the interest income earned in the first nine months were partly offset by currency losses on SEK in the fourth quarter, leaving a net gain for the year of NOK 0.3 million. Interest income in 2009 was 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 for 2009. The company has not recognised the deferred tax asset in its balance sheet, because this potential asset does not yet qualify for inclusion.
The net result in the fourth quarter was a loss of NOK 5.2 million, and for the year as a whole, the loss was NOK 15.9 million, corresponding to a loss of NOK 0.18 per basic share. The result in 2008 was a loss of NOK 24.3 million corresponding to NOK 1.12 per basic share.
Thinfilm incurred NOK 1.3 million in expenses in connection with the rights issue in June and the private placement in July. These expenses were charged against the share premium.
The group's cash balance decreased by NOK 3.7 million in the quarter, but for the year, it increased by NOK 0.6 million. NOK 19.5 million was consumed on operations, while NOK 16.5 million was obtained in new equity and NOK 4.0 million collected from the sale of assets. The cash balance on 31 December 2009 amounted to NOK 9.8 million. The available liquidity is deemed to be adequate.
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., cloudbased) data sources, and also with memoryenabled objects and sensors in their surroundings.
In order to exchange information with their environment, electronic displays, sensors, and memories must be available and allow the user to update and extract information. This can be made possible by Thinfilm's patented nonvolatile readandwrite memories (NVRAM) to store and retrieve information. This scenario illustrates our Memory Everywhere(TM) vision, where Thinfilm technology provides the distributed local storage necessary for users to seamlessly communicate and interact with physical objects and sensors in their vicinity. Early applications include entertainment (toys & games), medical devices (smart tags, sensors, and displays), as well as consumer product uses (tracking freshness, consumption, and authenticity).
Thinfilm aims at transforming the markets it participates in. First, the toys and games market, by providing cheap ubiquitous memory tags for cards and toys to unlock the potential of interactive games: allowing players to easily update game status, make strategy decisions, and store personalized information on their game characters directly on cards and individual toy components. In addition, Thinfilm plans on adding memory and stored logic functionality to printed electronic devices to drive adoption of unique products coprinted with displays, sensors, and logic elements, including permanently stored code and data. Over the longer term, Thinfilm expects to further increase adoption of exceptionally inexpensive rewritable permanent memory, as the foundation for our Memory Everywhere(TM) vision.
Thinfilm will continue its business development activities during the first quarter of 2010, with particular focus on Japan and the USA, and will attend the toy fairs and games conferences in Nuremberg, Germany, and New York City, USA.
Our technology staff will continue to provide technical presales support, and aid commercialization efforts with manufacturing partners. We will also work directly with toy and game inventors to integrate printed memory into specific designs. Development of nextgeneration printed electronics products, combining printed memory with other technologies such as transistors, sensors, and displays, will also gain attention.
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