Comparison of the Three Months Ended March 31, 2009 and 2008:
Certain reclassifications have been made to the 2008 financial information to conform to the 2009 presentation. Such reclassifications had no impact on net loss.
Research and development expenses:
Research and development expenses were $4,886,104 for the three months ended March 31, 2009 compared to $2,980,223 for the three months ended March 31, 2008, an increase of $1,905,881 or 64%. The increase is primarily due to the ramp up of development efforts for the company’s monolithically integrated CIGS-on-glass modules and the manufacturing processes the company will utilize for this product. Throughout the year in 2008, the company hired several key individuals required for such development efforts and are currently in the process of constructing the company’s initial manufacturing line in order to commercialize the company’s products. As such, the company experienced an increase in personnel-related costs during the first quarter of 2009 as compared with the same period in 2008, as well as an overall increase in operational expenses for materials and supplies in this area. Additionally, the company experienced an increase of $157,484 in share-based compensation provided to research and development personnel.
Selling, general and administrative expenses:
Selling, general and administrative expenses were $1,744,166 for the three months ended March 31, 2009 compared to $2,737,286 for the three months ended March 31, 2008, a decrease of $993,120 or 36%. The decrease in selling, general and administrative expenses was primarily due to a reduction in personnel costs during the first quarter of 2009 as compared with the same period in 2008, including a decrease of around $557,453 in share-based compensation provided to selling, general and administrative personnel.
Depreciation and amortization expenses:
Depreciation and amortization expenses were $896,461 for the three months ended March 31, 2009 compared to $753,947 for the three months ended March 31, 2008, an increase of $142,514 or 19%. Depreciation and amortization expense increased primarily due to an increase in equipment utilized in the development of the company’s CIGS PV products and manufacturing processes.
Other income:
Other income was $5,781 for the three months ended March 31, 2009 compared to $208,385 for the three months ended March 31, 2008, a decrease of $202,604. This decrease was primarily due to a reduction in interest income during the first quarter of 2009 as compared with the first quarter of 2008.
Interest expense:
Interest expense was $20,728 for the three months ended March 31, 2009 compared to $12,451 for the three months ended March 31, 2008, an increase of $8,277. The increase in interest expense was primarily due to the recording of interest on tenant improvements financed by the landlord in the company’s Newark, California facility, partially offset by a decrease in interest related to notes and capital leases payable.
(Loss) gain on derivative liabilities:
The loss on derivative liabilities was $114,070 for the three months ended March 31, 2009 compared to a gain on derivative liabilities of $1,791,025 for the three months ended March 31, 2008. The warrants issued in 2006 in conjunction with a convertible note are considered derivative liabilities and are therefore required to be adjusted to fair value each quarter. A decrease in the company’s stock price during the period results in a decrease in the warrant liability and a gain on derivative liabilities. Conversely, an increase in the company’s stock price during the period would result in an increase in the warrant liability and a loss on derivative liabilities. During the three months ended March 31, 2009, the company’s common stock price increased which caused an increase in the fair value of the warrant liability. This resulted in a loss on derivative liabilities of $114,070. The company’s stock price decreased during the three months ended March 31, 2008, which resulted in a gain on derivative liabilities of $1,791,025.
