UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(Amendment No. 1)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2005
Commission file number 0-21221
Microvision, Inc.
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6222 185th Avenue NE
Redmond, Washington 98052
(425) 415-6847
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.001
(Title of class)
Indicate by check mark if the registrant is a well-known seasoned issuer (as defined in Rule 405 of the Act). Yes
o No xIndicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes
o No xIndicate by check mark whether the registrant (1) has filed all reports required to be filed by Section13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes
x No oIndicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
xIndicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer o Accelerated filer x Non-accelerated filer o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
o No xThe aggregate market value of the common stock held by non-affiliates of the registrant as of June 30, 2005 was approximately $106,307 (based on the closing price for the registrant's Common Stock on the NASDAQ National Market of $5.10 per share).
The number of shares of the registrant's Common Stock outstanding as of March 1, 2006 was 21,481,000.
Documents Incorporated by Reference
Portions of the registrant's definitive Proxy Statement to be filed with the Commission pursuant to Regulation 14A in connection with the Registrant's Annual Meeting of Shareholders to be held on June 30, 2006 are incorporated herein by reference into Part III of this report.
Amendment No. 1
Explanatory Note
As required by Rule 3-09(b) of Regulation S-X, Microvision, Inc. ("the Company") is filing this Form 10-K/A to amend Item 15, Exhibits and Financial Statement Schedule, to include the audited financial statements of Lumera Corporation as of December 31, 2005 and for the years ended December 31, 2005, December 31, 2004, and December 31, 2003. The Company had a 28% equity interest in Lumera Corporation. Item 15 is also being amended to include reference to the Lumera Corporation financial statements, financial statement schedule and the related report of the entity's independent registered public accounting firm, and to file the consent of the independent registered public accounting firm related to their opinion contained in this filing and certifications under Sections 302 and 906 of the Sarbanes-Oxley Act of 2002. In accordance with Rule 12b-15 under the Securities and Exchange Act of 1934, as amended, the text of the amended item (Item 15) is set forth entirety in the attached pages hereto.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a) Documents filed as part of the report
1. Financial Statements
Microvision Financial Statements
Balance Sheets as of December 31, 2005 and 2004, as previously filed on the original Form 10-K
Statements of Operations for the years ended December 31, 2005, 2004 and 2003, as previously filed on the original Form 10-K
Statements of Shareholders' Equity for the years ended December 31, 2005, 2004 and 2003, as previously filed on the original Form 10-K
Statements of Comprehensive Loss for the years ended December 31, 2005, 2004 and 2003, as previously filed on the original Form 10-K
Statements of Cash Flows for the years ended December 31, 2005, 2004 and 2003, as previously filed on the original Form 10-K
Valuation and Qualified Accounts and Reserves for the years ended December 31, 2005, 2004 and 2003, as previously filed on the original Form 10-K
Lumera Financial Statements
Balance Sheets as of December 31, 2005 and 2004
Statements of Operations for the years ended December 31, 2005, 2004 and 2003
Statements of Shareholders' Equity for the years ended December 31, 2005, 2004 and 2003
Statements of Comprehensive Loss for the years ended December 31, 2005, 2004 and 2003
Statements of Cash Flows for the years ended December 31, 2005, 2004 and 2003
Valuation and Qualifying Accounts and Reserves for the years ended December 31, 2005, 2004 and 2003
2. None
(b) Exhibits
3.1 |
Certificate of Incorporation of Microvision, Inc. (2) |
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3.2 |
Bylaws of Microvision, Inc. (2) |
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3.3 |
Certificate of Designations, Preferences and Rights of the Series A Convertible Preferred Stock of Microvision, Inc.(14) |
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4.1 |
Form of Specimen Stock Certificate for Common Stock.(2) |
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4.2 |
Form of Indenture.(6) |
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4.3 |
Form of Warrant issued on July 22, 2002.(10) |
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4.4 |
Form of Warrant issued on March 5, 2003.(9) |
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4.5 |
Registration Rights Agreement dated as of September 9, 2004 by and between Microvision, Inc. and Satellite Strategic Finance Associates, LLC. (14) |
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4.6 |
Warrant No. 76 to Purchase Common Stock of Microvision, Inc. issued September 10, 2004 to Satellite Strategic Finance Associates, LLC. (14) |
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4.7 |
Form of Warrant issued under the Securities Purchase Agreement dated as of March 11, 2005 by and among Microvision, Inc. and the investors listed on the Schedule of Buyers thereto. (15) |
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4.8 |
Registration Rights Agreement executed in connection with the Securities Purchase Agreement dated as of March 11, 2005 by and among Microvision, Inc. and the investors listed on the Schedule of Buyers thereto. (15) |
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4.9 |
Form of Amended and Restated Note issued as of March 11, 2005 under the Master Amendment Agreement dated July 25, 2005 by and among Microvision, Inc. and the investors listed on the Schedule of Buyers thereto.(18) |
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4.10 |
Form of Warrant issued as of July 25, 2005 under the Master Amendment Agreement dated as of July 25, 2005 by and among Microvision, Inc. and the investors listed on the Schedule of Buyers thereto. (18) |
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4.11 |
Registration Rights Agreement dated as of August 8, 2005 by and between Microvision, Inc., Satellite Strategic Finance Associates, LLC and Satellite Strategic Finance Partners, Ltd.. (20) |
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4.12 |
Warrant No. 86 to Purchase Common Stock of Microvision, Inc. issued August 9, 2005 to Satellite Strategic Finance Partners, Ltd. (20) |
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4.13 |
Warrant No. 87 to Purchase Common Stock of Microvision, Inc. issued August 9, 2005 to Satellite Strategic Finance Associates, LLC. (20) |
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4.14 |
Warrant No. 88 to Purchase Common Stock of Microvision, Inc. issued August 31, 2005 to Omicron Master Trust (21) |
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4.15 |
Form of Note issued as of December 1, 2005 under the Securities and Purchase Agreement dated as of December 1, 2005 by and among Microvision, Inc. and the investors listed on the Schedule of Buyers thereto.(22) |
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4.16 |
Form of Warrant issued under the Securities Purchase Agreement dated as of December 1, 2005 by and among Microvision, Inc. and the investors listed on the Schedule of Buyers thereto. (22) |
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4.17 |
Form of Amended and Restated Pledge and Security Agreement executed in connection with the Securities Purchase Agreement dated as of December 1, 2005 by and among Microvision, Inc. and the investors listed on the Schedule of Buyers thereto. (22) |
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10.1 |
Assignment of License and Other Rights between The University of Washington and the Washington Technology Center and the H. Group, dated July 25, 1993.(1) |
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10.2 |
Project II Research Agreement between The University of Washington and the Washington Technology Center and Microvision, Inc., dated October 28, 1993.(1)+ |
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10.3 |
Exclusive License Agreement between The University of Washington and Microvision, Inc., dated October 28, 1993.(1)+ |
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10.4 |
Exclusive License Agreement between the University of Washington and Microvision, Inc. dated March 3, 1994.(9) |
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10.5 |
1993 Stock Option Plan.(1)* |
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10.6 |
1996 Stock Option Plan, as amended.(8)* |
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10.7 |
Independent Director Stock Option Plan, as amended.(8)* |
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10.8 |
Form of Executive Option Exercise Loan Plan.(3)* |
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10.9 |
Lease Agreement between S/I Northcreek II, LLC and Microvision, Inc., dated October 27, 1998.(13) |
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10.9.1 |
Lease Amendment No 1 to Lease between S/I Northcreek II, LLC and Microvision, Inc. dated July 12, 1999.(5) |
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10.9.2 |
Lease Amendment No 2 to Lease between S/I Northcreek II, LLC and Microvision, Inc. dated February 14, 2000.(5) |
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10.10 |
Form of Consulting Agreement between Microvision, Inc. and Avram Miller and Jacqueline Brandwynne dated August 10, 2000.(4) |
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10.11 |
Form of Common Stock Purchase Warrant issued to Avram Miller and Jacqueline Brandwynne dated August 10, 2000.(4) |
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10.12 |
Executive Loan Plan and Related Form of Note.(7)* |
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10.13 |
Form of Stock Purchase Agreement dated March 22, 2002.(11) |
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10.14 |
Form of Stock Purchase Agreement dated July 22, 2002.(10) |
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10.15 |
Form of Securities Purchase Agreement dated as of March 3, 2003.(9) |
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10.16 |
Form of the Option Agreement for options granted outside of the Plans.(12) |
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10.17 |
Securities Purchase Agreement dated as of September 9, 2004 by and between Microvision, Inc. and Satellite Strategic Finance Associates, LLC. (14) |
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10.18 |
License and Development Agreement dated as of December 30, 2004 by and between Microvision, Inc. and Ethicon Endo-Surgery, Inc. (16)+ |
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10.19 |
Securities Purchase Agreement dated as of March 11, 2005 by and among Microvision, Inc. and the investors listed on the Schedule of Buyers thereto. (15) |
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10.20 |
Employment Agreement between Microvision, Inc. and Alexander Y. Tokman dated July 18, 2005.(17) |
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10.21 |
Master Amendment Agreement dated July 25, 2005 by and among Microvision, Inc. and the investors listed on the Schedule of Buyers thereto. (18) |
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10.22 |
Lease Agreement between Carramerica Reality Operating Partnership, L.P. and Microvision, Inc., dated July 15, 2005.(19) |
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10.23 |
Securities Purchase Agreement dated as of August 8, 2005 by and between Microvision, Inc., Satellite Strategic Finance Associates, LLC and Satellite Strategic Finance Partners, Ltd. (20) |
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10.24 |
Conversion and Modification Agreement dated as of August 8, 2005 by and between Microvision, Inc. and Satellite Strategic Finance Associates, LLC. (20) |
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10.25 |
Securities Purchase Agreement dated as of August 31, 2005 by and between Microvision, Inc. and Omicron Master Trust. (21) |
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10.26 |
Securities Purchase Agreement dated as of December 1, 2005 by and among Microvision, Inc. and the investors listed on the Schedule of Buyers thereto. (22) |
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23 |
Consent of Independent Registered Public Accounting Firm, as previously filed on the original Form 10-K |
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23.1 |
Consent of Independent Registered Public Accounting Firm, as filed with the amended Form 10-K/A |
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31.1 |
Chief Executive Officer certification pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
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31.2 |
Principal Financial Officer certification pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
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32.1 |
Chief Executive Officer certification pursuant to Rule 13a-14(b) or Rule 15d-14(b) and Section 1350, Chapter 63 of Title 18 United States Code (18 U.S.C. 1350), as adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002. |
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32.2 |
Principal Financial Officer certification pursuant to Rule 13a-14(b) or Rule 15d-14(b) and Section 1350, Chapter 63 of Title 18 United States Code (18 U.S.C. 1350), as adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002. |
_______________
(1) Incorporated by reference to the Company's Form SB-2 Registration Statement, Registration No. 333-05276-LA.
(2) Incorporated by reference to the Company's Post-Effective Amendment to Form S-3 Registration Statement, Registration No. 333-102244.
(3) Incorporated by reference to the Company's Form 10-QSB for the quarterly period ended June 30, 1998, available at the SEC's Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549 under the Company's Commission File Number, 0-21221.
(4) Incorporated by reference to the Company's Form 10-Q for the quarterly period ended September 30, 2000, available at the SEC's Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549 under the Company's Commission File Number, 0-21221.
(5) Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 1999, available at the SEC's Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549 under the Company's Commission File Number, 0-21221.
(6) #9; Incorporated by reference to the Registration Statement on Form S-3, Registration No. 333-69652.
(7) Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 2001, available at the SEC's Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549 under the Company's Commission File Number, 0-21221.
(8) Incorporated by reference to the Company's Form 10-Q for the quarterly period ended June 30, 2002.
(9) Incorporated by reference to the Company's Current Report on Form 8-K filed on March 5, 2003.
(10) Incorporated by reference to the Company's Current Report on Form 8-K filed on July 23, 2002.
(11) Incorporated by reference to the Company's Current Report on Form 8-K filed on March 26, 2002.
(12) Incorporated by reference to the Company's Schedule TO file on November 1, 2002.
(13) Incorporated by reference to the Company's Form 10-QSB for the quarterly period ended September 30, 1998, available at the SEC's Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549 under the Company's Commission File Number, 0-21221.
(14) Incorporated by reference to the Company's Current Report on Form 8-K filed on September 10, 2004.
(15) Incorporated by reference to the Company's Current Report on Form 8-K filed on March 14, 2005.
(16) Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 2004.
(17) Incorporated by reference to the Company's Current Report on Form 8-K filed on July 7, 2005.
(18) Incorporated by reference to the Company's Current Report on Form 8-K filed on July 29, 2005.
(19) Incorporated by reference to the Company's Form 10-Q for the quarterly period ended June 30, 2005.
(20) #9; Incorporated by reference to the Company's Current Report on Form 8-K filed on August 10, 2005.
(21) #9; Incorporated by reference to the Company's Current Report on Form 8-K filed on September 2, 2005.
(22) Incorporated by reference to the Company's Current Report on Form 8-K filed on December 1, 2005.
(23) #9; Incorporated by reference to the Company's Current Report on Form 8-K/A filed on December 2, 2005.
+ Subject to confidential treatment.
* Management contracts and compensatory plans and arrangements required to be filed as exhibits pursuant to Item 15(b) of this Report.
(c) Lumera financial statements
|
December
31,
|
December
31,
|
|||||
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2005
|
2004
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|||||
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Assets
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|||||
Current
Assets
|
|
|
|||||
Cash
and cash equivalents
|
$
|
4,885,000
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$
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3,505,000
|
|||
Investment
securities, available-for-sale, current
|
16,871,000
|
15,460,000
|
|||||
Accounts
receivable
|
—
|
32,000
|
|||||
Costs
and estimated earnings in excess of billings on
|
|||||||
uncompleted
contracts
|
77,000
|
3,000
|
|||||
Other
current assets
|
551,000
|
623,000
|
|||||
Total
current assets
|
22,384,000
|
19,623,000
|
|||||
|
|||||||
Investment
securities, available-for-sale, long-term
|
—
|
11,216,000
|
|||||
Property
and equipment, net
|
1,276,000
|
2,047,000
|
|||||
Other
assets
|
46,000
|
—
|
|||||
TOTAL
ASSETS
|
$
|
23,706,000
|
$
|
32,886,000
|
|||
|
|||||||
LIABILITIES
AND SHAREHOLDERS' EQUITY (DEFICIT)
|
|||||||
|
|||||||
CURRENT
LIABILITES
|
|||||||
Accounts
payable
|
$
|
493,000
|
$
|
416,000
|
|||
Current
portion of research liability
|
—
|
101,000
|
|||||
Accrued
liabilities
|
1,059,000
|
976,000
|
|||||
Total
current liabilities
|
1,552,000
|
1,493,000
|
|||||
|
|||||||
Total
liabilities
|
1,552,000
|
1,493,000
|
|||||
|
|||||||
COMMITMENTS
AND CONTINGENCIES (Note 10)
|
—
|
—
|
|||||
|
|||||||
SHAREHOLDERS'
EQUITY (DEFICIT)
|
|||||||
Common
stock, $0.001 par value, 120,000,000 shares authorized; 16,748,116
shares issued and outstanding at December 31, 2005, and 16,546,430
shares
issued and outstanding at December 31, 2004
|
17,000
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16,000
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|||||
Additional
Paid-in Capital
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71,070,000
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70,435,000
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Deferred
stock-based compensation
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(215,000
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)
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(666,000
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)
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Accumulated
other comprehensive gain (loss)
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(18,000
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)
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(145,000
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)
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Accumulated
deficit
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(48,700,000
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)
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(38,247,000
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)
|
|||
Total
shareholders' equity (deficit)
|
22,154,000
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31,393,000
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|||||
TOTAL
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
|
$
|
23,706,000
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$
|
32,886,000
|
|||
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Year
ended December 31,
|
|||||||||
|
2005
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2004
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2003
|
|||||||
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|
|||||||
|
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|
|||||||
Revenue
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$
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1,509,000
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$
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989,000
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$
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1,725,000
|
||||
Cost
of revenue
|
922,000
|
651,000
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1,014,000
|
|||||||
GROSS
PROFIT
|
587,000
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338,000
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711,000
|
|||||||
|
||||||||||
|
||||||||||
Research
and development expense
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6,540,000
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4,561,000
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7,602,000
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|||||||
Marketing,
general and administrative expense
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5,155,000
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4,588,000
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1,270,000
|
|||||||
Total
operating expenses
|
11,695,000
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9,149,000
|
8,872,000
|
|||||||
|
||||||||||
Loss
from operations
|
(11,108,000
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)
|
(8,811,000
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)
|
(8,161,000
|
)
|
||||
|
||||||||||
Interest
income
|
655,000
|
237,000
|
39,000
|
|||||||
Interest
expense
|
(349,000
|
)
|
||||||||
Realized
gain on sale of investment securities
|
-
|
-
|
39,000
|
|||||||
Net
loss
|
(10,453,000
|
)
|
(8,923,000
|
)
|
(8,083,000
|
)
|
||||
|
||||||||||
Deemed
dividend upon issuance of mandatorily redeemable
convertible preferred stock
|
-
|
(500,000
|
)
|
-
|
||||||
|
||||||||||
NET
LOSS AVAILABLE TO COMMON SHAREHOLDERS
|
$
|
(10,453,000
|
)
|
$
|
(9,423,000
|
)
|
$
|
(8,083,000
|
)
|
|
|
||||||||||
NET
LOSS PER SHARE-BASIC AND DILUTED
|
$
|
(0.63
|
)
|
$
|
(0.89
|
)
|
$
|
(1.31
|
)
|
|
|
||||||||||
WEIGHTED-AVERAGE
SHARES OUTSTANDING - BASIC AND DILUTED
|
16,607,653
|
10,613,606
|
6,172,400
|
Mandatorily
Redeemable
Convertible
Preferred Stock
|
Common
Stock
|
Paid-in
Capital
|
Common
Stock - A
|
Common
Stock - B
|
Deferred
Stock
Compensation
|
Accumulated
Other Comprehensive Income
|
Accumulated
Deficit
|
Total
Shareholders' Equity (Deficit)
|
||||||||||||||||||||||||||||||||
Activity
|
Shares
|
$ |
Shares
|
$ |
$
|
Shares
|
$ |
Shares
|
$ |
$
|
$ |
$
|
$
|
|||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
Balance
at December 31, 2002
|
2,400,000
|
24,603,000
|
802,414
|
3,325,000
|
5,370,000
|
105,000
|
(8,000
|
)
|
59,000
|
(21,241,000
|
)
|
(17,760,000
|
)
|
|||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||
Issuance
of mandatorily redeemable convertible preferred stock
for cash, net of issuance costs of $67,000
|
1,335,000
|
2,603,000
|
—
|
—
|
—
|
|||||||||||||||||||||||||||||||||||
Issuance
of options for services
|
36,000
|
(36,000
|
)
|
—
|
||||||||||||||||||||||||||||||||||||
Amortization
of deferred compensation
|
13,000
|
13,000
|
||||||||||||||||||||||||||||||||||||||
Other
comprehensive income
|
(59,000
|
)
|
(59,000
|
)
|
||||||||||||||||||||||||||||||||||||
Net
Loss
|
(8,083,000
|
)
|
(8,083,000
|
)
|
||||||||||||||||||||||||||||||||||||
Balance
at December 31, 2003
|
3,735,000
|
27,206,000
|
802,414
|
3,361,000
|
5,370,000
|
105,000
|
(31,000
|
)
|
—
|
(29,324,000
|
)
|
(25,889,000
|
)
|
|||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||
Issuance
of mandatorily redeemable convertible preferred stock
and related beneficial conversion feature
|
250,000
|
500,000
|
500,000
|
|||||||||||||||||||||||||||||||||||||
Deemed
dividend related to beneficial conversion feature
|
500,000
|
(500,000
|
)
|
(500,000
|
)
|
|||||||||||||||||||||||||||||||||||
Issuance
of Common Stock, net of offering costs of $1,995,000
|
6,000,000
|
$
|
6,000
|
$
|
36,730,000
|
36,736,000
|
||||||||||||||||||||||||||||||||||
Conversion
of mandatorily redeemable convertible preferred stock
and Common B to Common Stock
|
(3,985,000
|
)
|
(27,706,000
|
)
|
10,484,745
|
10,000
|
31,162,000
|
(802,414
|
)
|
(3,361,000
|
)
|
(5,370,000
|
)
|
(105,000
|
)
|
27,706,000
|
||||||||||||||||||||||||
Deferred
Compensation related to options issued
|
2,032,000
|
(2,032,000
|
)
|
—
|
||||||||||||||||||||||||||||||||||||
Issuance
of options for services
|
571,000
|
571,000
|
||||||||||||||||||||||||||||||||||||||
Deemed
dividend to Microvision related to options issued to
Microvision employee
|
(272,000
|
)
|
(272,000
|
)
|
||||||||||||||||||||||||||||||||||||
Value
of warrants issued in connction with convertible notes
|
301,000
|
301,000
|
||||||||||||||||||||||||||||||||||||||
Reversal
of deferred compensation expense for cancelled options
|
(112,000
|
)
|
112,000
|
0
|
||||||||||||||||||||||||||||||||||||
Exercise
of Warrants
|
38,935
|
—
|
||||||||||||||||||||||||||||||||||||||
Exercises
of options
|
22,750
|
23,000
|
23,000
|
|||||||||||||||||||||||||||||||||||||
Amortization
of deferred compensation
|
1,285,000
|
1,285,000
|
||||||||||||||||||||||||||||||||||||||
Other
comprehensive income
|
—
|
(145,000
|
)
|
(145,000
|
)
|
|||||||||||||||||||||||||||||||||||
Net
Loss
|
(8,923,000
|
)
|
(8,923,000
|
)
|
||||||||||||||||||||||||||||||||||||
Balance
at December 31, 2004
|
0
|
0
|
16,546,430
|
16,000
|
70,435,000
|
—
|
—
|
—
|
—
|
(666,000
|
)
|
(145,000
|
)
|
(38,247,000
|
)
|
31,393,000
|
||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||
Issuance
of options for services
|
236,000
|
236,000
|
||||||||||||||||||||||||||||||||||||||
Reversal
of deferred compensation expense for cancelled options
|
(37,000
|
)
|
37,000
|
0
|
||||||||||||||||||||||||||||||||||||
Exercises
of options
|
201,686
|
1,000
|
436,000
|
437,000
|
||||||||||||||||||||||||||||||||||||
Amortization
of deferred compensation
|
414,000
|
414,000
|
||||||||||||||||||||||||||||||||||||||
Other
comprehensive income
|
—
|
127,000
|
127,000
|
|||||||||||||||||||||||||||||||||||||
Net
Loss
|
(10,453,000
|
)
|
(10,453,000
|
)
|
||||||||||||||||||||||||||||||||||||
Balance
at December 31, 2005
|
—
|
$
|
—
|
16,748,116
|
$
|
17,000
|
$
|
71,070,000
|
—
|
$
|
—
|
—
|
$
|
—
|
$
|
(215,000
|
)
|
$
|
(18,000
|
)
|
$
|
(48,700,000
|
)
|
$
|
22,154,000
|
|
Year
ended December 31,
|
|||||||||
|
2005
|
2004
|
2003
|
|||||||
|
|
|
|
|||||||
Net
loss
|
$
|
(10,453,000
|
)
|
$
|
(8,923,000
|
)
|
$
|
(8,083,000
|
)
|
|
Other
comprehensive income (loss) -
|
||||||||||
Unrealized
gain (loss) on investment
|
||||||||||
securities,
available-for-sale:
|
||||||||||
Unrealized
holding gains (losses)
|
||||||||||
arising
during period
|
127,000
|
(145,000
|
)
|
(20,000
|
)
|
|||||
Less:
Reclassification adjustment for
|
||||||||||
gains
realized in net loss
|
—
|
—
|
(39,000
|
)
|
||||||
Net
unrealized gain (loss)
|
127,000
|
(145,000
|
)
|
(59,000
|
)
|
|||||
Comprehensive
loss
|
$
|
(10,326,000
|
)
|
$
|
(9,068,000
|
)
|
$
|
(8,142,000
|
)
|
|
Year
ended December 31,
|
|||||||||
|
2005
|
2004
|
2003
|
|||||||
|
|
|
|
|||||||
Cash
flows from operating activities
|
|
|
|
|||||||
Net
loss
|
$
|
(10,453,000
|
)
|
$
|
(8,923,000
|
)
|
$
|
(8,083,000
|
)
|
|
Adjustments
to reconcile net loss to
|
||||||||||
net
cash used in operations
|
||||||||||
Depreciation
|
1,297,000
|
1,198,000
|
1,185,000
|
|||||||
Noncash
expenses related to issuance of stock,
|
||||||||||
options
and amortization of deferred compensation
|
469,000
|
1,985,000
|
1,041,000
|
|||||||
Amortization
on investments
|
254,000
|
|||||||||
Realized
gain on sale of investment securities
|
—
|
—
|
(39,000
|
)
|
||||||
Interest
on Notes Payable
|
—
|
301,000
|
(39,000
|
)
|
||||||
Change
in
|
||||||||||
Accounts
receivable
|
32,000
|
119,000
|
(68,000
|
)
|
||||||
Costs
and estimated earnings in excess of billings
|
||||||||||
on
uncompleted contracts
|
(74,000
|
)
|
163,000
|
(18,000
|
)
|
|||||
Other
current assets
|
72,000
|
(568,000
|
)
|
57,000
|
||||||
Other
assets
|
(46,000
|
)
|
100,000
|
100,000
|
||||||
Accounts
payable
|
77,000
|
29,000
|
51,000
|
|||||||
Payable
to related party
|
—
|
(42,000
|
)
|
31,000
|
||||||
Accrued
liabilities
|
264,000
|
142,000
|
136,000
|
|||||||
Research
liability
|
(101,000
|
)
|
(1,847,000
|
)
|
923,000
|
|||||
Net
cash used in operating activities
|
(8,209,000
|
)
|
(7,343,000
|
)
|
(4,684,000
|
)
|
||||
|
||||||||||
Cash
flows from investing activities
|
||||||||||
Sales
of investment securities
|
—
|
—
|
2,409,000
|
|||||||
Purchases
of investment securities
|
(16,122,000
|
)
|
(29,821,000
|
)
|
—
|
|||||
Maturities
of investment securities
|
25,800,000
|
3,000,000
|
||||||||
Purchases
of property and equipment
|
(526,000
|
)
|
(378,000
|
)
|
(455,000
|
)
|
||||
Net
cash provided by (used in) investing activities
|
9,152,000
|
(27,199,000
|
)
|
1,954,000
|
||||||
|
||||||||||
Cash
flows from financing activities:
|
||||||||||
Proceeds
from issuance of convertible notes
|
—
|
2,300,000
|
—
|
|||||||
Principal
payments on convertible notes
|
—
|
(2,300,000
|
)
|
—
|
||||||
Net
proceeds from issuance of common stock
|
—
|
36,964,000
|
—
|
|||||||
Net
proceeds from the exercise of stock options
|
437,000
|
23,000
|
||||||||
redeemable
convertible preferred stock
|
—
|
500,000
|
2,603,000
|
|||||||
Net
cash provided by financing activities
|
437,000
|
37,487,000
|
2,603,000
|
|||||||
|
||||||||||
Net
(decrease) increase in cash and cash equivalents
|
1,380,000
|
2,945,000
|
(127,000
|
)
|
||||||
Cash
and cash equivalents at beginning of period
|
3,505,000
|
560,000
|
687,000
|
|||||||
|
||||||||||
Cash
and cash equivalents at end of period
|
$
|
4,885,000
|
$
|
3,505,000
|
$
|
560,000
|
||||
|
||||||||||
Value
assigned to warrants issued in connection with convertible
note
|
$
|
—
|
$
|
301,000
|
$
|
—
|
||||
Unrealized
gain (loss) in investment securities, available-for-sale
|
$
|
127,000
|
$
|
(145,000
|
)
|
$
|
—
|
|||
Accrued
offering costs included in accounts payable
|
$
|
—
|
$
|
228,000
|
$
|
—
|
||||
Accrued
liability for non-cash stock compensation
|
$
|
84,000
|
$
|
266,000
|
$
|
—
|
||||
Interest
Paid
|
$
|
—
|
$
|
44,000
|
$
|
—
|
||||
Deemed
dividend upon issuance of options to Microvision Employee
|
$
|
—
|
$
|
272,000
|
$
|
—
|
Wideband
polymer modulator
|
Polymer-based
linear modulator
|
Electro-optic
organic polymer
|
Polymer-based
milimeter wave detection
|
Other
|
|||||||||||||||||||||||||||
Award
|
Revenue
|
Award
|
Revenue
|
Award
|
Revenue
|
Award
|
Revenue
|
Award
|
Revenue
|
||||||||||||||||||||||
2001
|
$
|
1,623,000
|
$
|
821,000
|
|||||||||||||||||||||||||||
2002
|
1,031,000
|
885,000
|
$
|
149,000
|
$
|
61,000
|
|||||||||||||||||||||||||
2003
|
950,000
|
1,118,000
|
$
|
497,000
|
$
|
95,000
|
400,000
|
488,000
|
$
|
24,000
|
$
|
24,000
|
|||||||||||||||||||
2004
|
1,114,000
|
780,000
|
192,000
|
||||||||||||||||||||||||||||
2005
|
1,000,000
|
1,161,000
|
210,000
|
$
|
411,000
|
$
|
41,000
|
21,000
|
21,000
|
||||||||||||||||||||||
$
|
5,718,000
|
$
|
4,765,000
|
$
|
497,000
|
$
|
497,000
|
$
|
549,000
|
$
|
549,000
|
$
|
411,000
|
$
|
41,000
|
$
|
45,000
|
$
|
45,000
|
|
2005
|
2004
|
|||||
Computer
equipment
|
$
|
644,000
|
$
|
491,000
|
|||
Furniture
and office equipment
|
20,000
|
20,000
|
|||||
Lab
equipment
|
3,513,000
|
3,244,000
|
|||||
Leasehold
improvements
|
2,831,000
|
2,727,000
|
|||||
|
$
|
7,008,000
|
$
|
6,482,000
|
|||
Less:
Accumulated depreciation
|
(5,732,000
|
)
|
(4,435,000
|
)
|
|||
|
$
|
1,276,000
|
$
|
2,047,000
|
For
the year ended December 31,
|
||||||||||
|
2005
|
2004
|
2003
|
|||||||
Net
loss available to common shareholders, as reported
|
$
|
(10,453,000
|
)
|
$
|
(9,423,000
|
)
|
$
|
(8,083,000
|
)
|
|
Deduct:
Stock-based employee compensation expense included in net loss
available
to common shareholders,
as reported
|
$
|
384,000
|
$
|
1,285,000
|
$
|
6,000
|
||||
Add:
Total stock-based employee compensation expense determined under
fair
value-based method for all awards
|
$
|
(2,141,541
|
)
|
$
|
(2,009,000
|
)
|
$
|
(245,000
|
)
|
|
Net
loss available to common shareholders, pro
forma
|
$
|
(12,210,541
|
)
|
$
|
(10,147,000
|
)
|
$
|
(8,322,000
|
)
|
|
Net
loss per share, as reported (basic and diluted)
|
$
|
(0.63
|
)
|
$
|
(0.89
|
)
|
$
|
(1.31
|
)
|
|
Net
loss per share, pro forma (basic and diluted)
|
$
|
(0.74
|
)
|
$
|
(0.96
|
)
|
$
|
(1.35
|
)
|
|
|
2005
|
2004
|
2003
|
||||||||
Common
Stock
|
27.60
|
%
|
32.84
|
%
|
—
|
|||||
Class
B common stock
|
—
|
—
|
87.50
|
%
|
||||||
Series
A convertible preferred stock
|
—
|
—
|
11.00
|
%
|
||||||
Series
B convertible preferred stock
|
—
|
—
|
32.50
|
%
|
|
2005
|
2004
|
2003
|
|||||||
Rent
|
$
|
323,000
|
$
|
320,000
|
$
|
317,000
|
||||
Allocated
Services
|
89,000
|
57,000
|
54,000
|
|||||||
Management
Fees
|
—
|
60,000
|
60,000
|
|||||||
Total
|
$
|
412,000
|
$
|
437,000
|
$
|
431,000
|
2005
|
2004
|
||||||
Deferred
income tax assets
|
|||||||
Net
operating loss carryforwards
|
$
|
14,997,000
|
$
|
11,673,000
|
|||
R&D
credit carryforwards
|
$
|
1,055,000
|
$
|
868,000
|
|||
Other
|
$
|
1,412,000
|
$
|
1,194,000
|
|||
Gross
deferred tax assets
|
17,464,000
|
13,735,000
|
|||||
Less:
valuation allowance
|
(17,464,000
|
)
|
(13,735,000
|
)
|
|||
Net
deferred tax asset
|
$
|
—
|
$
|
—
|
Weighted-
|
Weighted-
|
|||||||||
Average
|
Average
|
|||||||||
Exercise
|
Grant
Date
|
|||||||||
Activity
|
Shares
|
Price
|
Fair
Value
|
|||||||
Outstanding
at December 31, 2002
|
633,430
|
$
|
8.18
|
|||||||
Granted
|
||||||||||
Exercise
price greater than fair value
|
308,450
|
$
|
3.38
|
$
|
0.65
|
|||||
Forfeited
|
(36,700
|
)
|
$
|
10.00
|
||||||
Outstanding
at December 31, 2003
|
905,180
|
$
|
6.47
|
|||||||
Granted
|
||||||||||
Exercise
price greater than fair value
|
5,000
|
$
|
2.00
|
$
|
0.65
|
|||||
Exercise
price at fair value
|
257,550
|
$
|
6.12
|
$
|
4.16
|
|||||
Exercise
price less than fair value
|
709,900
|
$
|
2.19
|
$
|
3.99
|
|||||
Forfeited
|
(76,250
|
)
|
$
|
4.01
|
||||||
Exercised
|
(22,750
|
)
|
$
|
1.01
|
||||||
Outstanding
at December 31, 2004
|
1,778,630
|
$
|
4.88
|
|||||||
Granted
|
||||||||||
Exercise
price greater than fair value
|
||||||||||
Exercise
price at fair value
|
733,950
|
$
|
5.05
|
$
|
3.56
|
|||||
Exercise
price less than fair value
|
||||||||||
Forfeited
|
(35,938
|
)
|
$
|
5.95
|
||||||
Exercised
|
(201,686
|
)
|
$
|
2.16
|
||||||
Outstanding
at December 31, 2005
|
2,274,956
|
$
|
5.16
|
|||||||
Options
Exerciseable at:
|
||||||||||
December
31, 2003
|
463,161
|
$
|
7.26
|
|||||||
December
31, 2004
|
1,105,033
|
$
|
5.42
|
|||||||
December
31, 2005
|
1,345,071
|
$
|
5.56
|
Options
Outstanding
|
Options
Exercisable
|
|||||||||||||||
Weighted
|
||||||||||||||||
Average
|
Weighted
|
Weighted
|
||||||||||||||
Remaining
|
Average
|
Average
|
||||||||||||||
Exercise
|
Contractual
|
Exercise
|
Exercise
|
|||||||||||||
Price
|
Shares
|
Life
(Years)
|
Price
|
Shares
|
Price
|
|||||||||||
$0.50
- $2.50
|
680,551
|
7.50
|
$
|
1.91
|
512,973
|
$
|
1.88
|
|||||||||
$3.65
- $5.49
|
872,700
|
8.55
|
$
|
4.82
|
195,662
|
$
|
4.60
|
|||||||||
$5.50
- $10.00
|
721,705
|
6.19
|
$
|
8.62
|
636,436
|
$
|
8.82
|
|||||||||
2,274,956
|
7.49
|
$
|
5.15
|
1,345,071
|
$
|
5.56
|
|
For
the twelve months ended
|
|||||||||
|
December
31,
|
|||||||||
|
2005
|
2004
|
2003
|
|||||||
Employees
|
$
|
343,000
|
$
|
644,000
|
$
|
6,000
|
||||
Directors
|
41,000
|
641,000
|
-
|
|||||||
Third
Party
|
85,000
|
608,000
|
32,000
|
|||||||
|
$
|
469,000
|
$
|
1,893,000
|
$
|
38,000
|
||||
|
||||||||||
Component
of:
|
||||||||||
Research
and development
|
$
|
95,000
|
$
|
573,000
|
$
|
35,000
|
||||
Marketing,
general and administrative
|
374,000
|
1,320,000
|
3,000
|
|||||||
|
$
|
469,000
|
$
|
1,893,000
|
$
|
38,000
|
December
31,
|
||||||||||
2005
|
2004
|
2003
|
||||||||
Risk
Free Interest Rate
|
4.05
|
%
|
3.2
|
%
|
3.8
|
%
|
||||
Expected
Life (in years)
|
5.6
|
5.2
|
7.0
|
|||||||
Dividend
Yield
|
0.0
|
%
|
0.0
|
%
|
0.0
|
%
|
||||
Volatility
|
83.0
|
%
|
83.0
|
%
|
83.0
|
%
|
|
2005
|
2004
|
2003
|
|||||||
|
|
|
||||||||
Payments
made
|
$
|
1,018,000
|
$
|
800,000
|
$
|
1,300,000
|
||||
|
||||||||||
Sponsored
research
|
$
|
650,000
|
$
|
(1,223,000
|
)
|
$
|
1,924,000
|
|||
Optical
materials
|
166,000
|
50,000
|
300,000
|
|||||||
Minimum
royalty
|
75,000
|
75,000
|
75,000
|
|||||||
Expenses
recorded on payments
|
$
|
891,000
|
$
|
(1,098,000
|
)
|
$
|
2,299,000
|
|||
Amortization
of stock
|
159,000
|
1,003,000
|
||||||||
Total
expense recorded
|
$
|
891,000
|
$
|
(939,000
|
)
|
$
|
3,302,000
|
|
First
|
Second
|
Third
|
Fourth
|
Fiscal
|
|||||||||||
|
Quarter
|
Quarter
|
Quarter
|
Quarter
|
Year
|
|||||||||||
|
(in
thousands, except per share data)
|
|||||||||||||||
|
|
|
|
|
|
|||||||||||
Total
Revenue
|
|
|
|
|
|
|||||||||||
2005
|
$
|
240
|
$
|
348
|
$
|
681
|
$
|
240
|
$
|
1,509
|
||||||
2004
|
$
|
316
|
$
|
288
|
$
|
292
|
$
|
93
|
$
|
989
|
||||||
Gross
Profit
|
||||||||||||||||
2005
|
72
|
131
|
215
|
169
|
587
|
|||||||||||
2004
|
122
|
100
|
128
|
(12
|
)
|
338
|
||||||||||
Net
Loss Available to Common Shareholders
|
||||||||||||||||
2005
|
(2,878
|
)
|
(2,926
|
)
|
(2,034
|
)
|
(2,615
|
)
|
(10,453
|
)
|
||||||
2004
|
(2,592
|
)
|
(732
|
)
|
(3,176
|
)
|
(2,923
|
)
|
(9,423
|
)
|
||||||
|
||||||||||||||||
Basic
and diluted net loss per share attributable to common
stockholders
|
||||||||||||||||
2005
|
$
|
(0.17
|
)
|
$
|
(0.18
|
)
|
$
|
(0.12
|
)
|
$
|
(0.16
|
)
|
$
|
(0.63
|
)
|
|
2004
|
$
|
(0.50
|
)
|
$
|
(0.04
|
)
|
$
|
(0.24
|
)
|
$
|
(0.18
|
)
|
$
|
(0.89
|
)
|
Schedule
II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
|
||||||||||||||||
Balance
at
|
Charges
to
|
Charges
|
Balance
at
|
|||||||||||||
Beginning
of
|
Costs
|
to
|
End
of
|
|||||||||||||
Fiscal
|
and
|
Other
|
Fiscal
|
|||||||||||||
Year
|
Expenses
|
Accounts
|
Deductions
|
Period
|
||||||||||||
Year
ended December 31, 2003
|
||||||||||||||||
Tax
valuation allowance
|
$
|
7,426,000
|
$
|
3,170,000
|
—
|
—
|
$
|
10,596,000
|
||||||||
Year
ended December 31, 2004
|
||||||||||||||||
Tax
valuation allowance
|
$
|
10,596,000
|