UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

For the Quarter Ended September 30, 2004

Commission file number 0-50289

Brillian Corporation

(602) 389-8888

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 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  [  ]

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
YES [  ]  NO [ X ]

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practical date.

BRILLIAN CORPORATION
QUARTERLY REPORT ON FORM 10-Q
FOR QUARTER ENDED SEPTEMBER 30, 2004
TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

BRILLIAN CORPORATION

The accompanying notes are an integral part of these condensed financial statements.

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BRILLIAN CORPORATION

The accompanying notes are an integral part of these condensed financial statements.

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BRILLIAN CORPORATION

The accompanying notes are an integral part of these condensed financial statements.

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BRILLIAN CORPORATION

Note A  Organization and Basis of Presentation

We design and develop large-screen, rear-projection, high-definition televisions, or HDTVs, utilizing our proprietary liquid crystal on silicon, or LCoS^®, microdisplay technology. We market our HDTVs for sale under the brand names of retailers, including consumer electronics retailers, consumer retail stores, personal computer manufacturers, and high-end audio/video manufacturers. We have established a virtual manufacturing model utilizing third-party contract manufacturers to produce our HDTVs, which incorporate the LCoS microdisplays that we manufacture. We also offer a broad line of LCoS microdisplay products and subsystems that original equipment manufacturers, or OEMs, can integrate into proprietary HDTV products, home theater projectors, and near-to-eye applications, such as head-mounted monocular or binocular headsets and viewers, for industrial, medical, military, commercial, and consumer applications.

Historically, we operated as a division of Three-Five Systems, Inc., or TFS. On March 17, 2003, TFS announced that its board of directors had approved a decision to incorporate us as a wholly owned subsidiary of TFS, to transfer our business and assets into this subsidiary, and to distribute the common stock of this subsidiary to its stockholders in a spin-off. We were formed on May 7, 2003 in anticipation of this spin-off. The spin-off was completed on September 15, 2003 as a special dividend to the stockholders of TFS.

On September 1, 2003, we and TFS entered into a Master Separation and Distribution Agreement under which TFS transferred to us substantially all of the assets of, and we assumed substantially all of the corresponding liabilities of, TFS’ microdisplay business. On September 15, 2003, TFS distributed all outstanding shares of Brillian common stock owned by TFS to TFS stockholders as a dividend (the “spin-off”). Each TFS stockholder of record as of September 4, 2003 received one share of our stock for every four shares of TFS common stock owned. In addition, we entered into ancillary agreements that govern various ongoing relationships between us and TFS. In connection with the spin-off, TFS received a ruling from the Internal Revenue Service, or the IRS, that the spin-off would be tax free. In connection with the spin-off, TFS provided initial cash funding in the amount of $20.9 million, net of $1.1 million of spin-off related costs incurred prior to the spin-off.

On May 14, 2004, we completed an underwritten public offering of 1.5 million shares of our common stock at a public offering price of $9.00 per share. We received net proceeds from the offering of approximately $12.0 million.

The accompanying unaudited Condensed Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and the instructions to Form 10-Q. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In our opinion, all adjustments, which include only normal recurring adjustments, necessary to present fairly the financial position, results of operations, and cash flows for all periods presented have been made. The results of operations for the three-month and nine-month periods ended September 30, 2004 are not necessarily indicative of the operating results that may be expected for the entire year ending December 31, 2004. These financial statements should be read in conjunction with our December 31, 2003 financial statements included in our Annual Report on Form 10-K and the accompanying notes thereto.

The financial statements for periods prior to the spin-off have been prepared using TFS’ historical basis in the assets and liabilities and the historical results of operations of Brillian.

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Note B Inventories consisted of the following (in thousands):

Note C Property, plant, and equipment consisted of the following (in thousands):

Note D Intangibles:

Intangibles consist of mask works, patents, licenses, and other intangible assets acquired from third parties. Intangibles are recorded at cost and amortized using the straight-line method over the estimated useful lives of the respective assets, which range from two to five years.

Intangible assets consisted of the following at September 30, 2004 (in thousands):

Intangible assets consisted of the following at December 31, 2003 (in thousands):

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Intangible asset amortization expense for the nine months ended September 30, 2004 was $898,000 compared with $1.0 million for the nine months ended September 30, 2003. Estimated future annual amortization expense through 2008 and thereafter related to intangible assets reported as of September 30, 2004 is as follows (in thousands):

Note E   Loss per Share

Basic and diluted loss per common share was computed by dividing net loss by the weighted average number of shares of common stock outstanding during the three- and nine-month periods ended September 30, 2004. For the three- and nine-month periods ended September 30, 2004, the effect of approximately 1.6 million stock options was excluded from the calculation of diluted loss per share as their effect would have been antidilutive and would have decreased the loss per share.

Per share information presented for the three- and nine-month periods ended September 30, 2003 was calculated based on the number of shares issued in the spin-off. The calculation of loss per share for this period assumed that the common             shares were outstanding for the entire period.

Note F   Segment Reporting, Sales to Major Customers, and Geographic Information

SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information” establishes standards for the reporting by public business enterprises of information about operating segments, products and services, geographic areas, and major customers.

Because the products we sell for use in near-to-eye and projection devices share the same underlying technology and have similar economic characteristics, production processes, and customer types, we operate and report internally as one segment in accordance with SFAS No. 131. All of our assets are located in the United States.

Projection device sales for the three-month period ended September 30, 2004 were $526,000, or 72% of sales, while near-to-eye sales were $207,000, or 28% of sales. During the three-month period ended September 30, 2003, projection device sales were $385,000, or 55% of sales, and near-to-eye sales were $318,000, or 45% of sales.

Projection device sales for the nine-month period ended September 30, 2004 were $1.2 million, or 54% of sales, while near-to-eye sales were $1.1 million, or 46% of sales. During the nine-month period ended September 30, 2003, projection device sales were $1.1 million, or 60% of sales, and near-to-eye sales were $738,000, or 40% of sales.

For the three months ended September 30, 2004, sales to Sears, I-O Display Systems, and Zhejiang Jincheng accounted for approximately 32%, 17%, and 16%, respectively, of our net sales. For the three months ended September 30, 2003, sales to Kodak, Kaiser, and Brashear accounted for approximately 23%, 19%, and 7%, respectively, of our net sales.

For the nine months ended September 30, 2004, sales to I-O Display Systems, TQ Systems, Zhejiang Jincheng, Kodak, and Sears accounted for approximately 21%, 19%, 13%, 12%, and 10%, respectively, of our

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net sales. For the nine months ended September 30, 2003, sales to TQ Systems, Kaiser Electronics, and Brashear LP accounted for approximately 14%, 12%, and 10%, respectively, of our net sales.

We also track net sales by geographic location. Net sales by geographic area are determined based upon the location of the end customer. The following sets forth net sales (in thousands) for our geographic areas:

Note G  Transactions with TFS

Prior to the spin-off, our costs and expenses included allocations from TFS for centralized legal, accounting, treasury, quality assurance, real estate, information technology, engineering, and other TFS corporate services and infrastructure costs. These allocations were determined on the basis that we and TFS considered to be reasonable reflections of the utilization of services provided to, or the benefits received by, us. Allocated costs included in our cost of sales totaled $301,000 and $1.1 million for the three- and nine-month periods ended September 30, 2003. Allocated costs included in selling, general, and administrative expenses totaled $45,000 and $1.5 million for the three- and nine-month periods ended September 30, 2003. Allocated costs included in our research and development expenses totaled $207,000 and $795,000 for the three- and nine-month periods ended September 30, 2003. The basis for the amounts allocated to us included the following: legal, accounting, treasury, quality assurance, and other TFS corporate functions, including officers’ salaries, were allocated based on management’s estimation of time devoted to the microdisplay business for these functions; facility costs and information technology services were allocated on the basis of headcount of the microdisplay business, which is most representative of utilization of these resources; and engineering services were allocated to us based on the actual hours of services used. The allocation methodologies utilized represent management’s best estimate of the actual hours utilized by the microdisplay business of TFS.

On the spin-off date, we and TFS entered into a series of agreements to facilitate our separation from TFS. These agreements included certain transitional services, leases, intellectual property transfers, and tax sharing agreements. These agreements require us to pay a negotiated fee. We paid TFS $225,000 and $659,000 for rent and IT management services in the three- and nine-month periods ended September 30, 2004, and $41,000 and $149,000 for engineering services in the same periods. In addition, we paid $497,000 and $1.1 million for engineering and design services related to the development of printed circuit board assemblies and for purchases of these assemblies for our HDTV product during the three- and nine-month periods ended September 30, 2004.

Tax Sharing Agreement

Under the Tax Sharing Agreement, we have agreed to indemnify TFS against any taxes (other than Separation Taxes) that are attributable to us since our formation, even while we were a member of TFS’ federal

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consolidated tax group. TFS has indemnified us against any taxes (other than Separation Taxes) that are attributable to the businesses retained by TFS. The Tax Sharing Agreement sets forth rules for determining taxes attributable to us and taxes attributable to the businesses retained by TFS.

We have agreed not to take any action that would cause the spin-off not to qualify under Section 355 of the Internal Revenue Code of 1986, as amended (the “Code”). We have agreed not to take certain actions for two years following the spin-off unless we obtain an IRS ruling or an opinion of counsel to the effect that these actions will not affect the tax-free nature of the spin-off. These actions include certain issuances of our stock, a liquidation or merger of our company, and dispositions of assets outside the ordinary course of our business. If any of these transactions were to occur, the spin-off could be deemed to be a taxable distribution to TFS. This would subject TFS to a substantial tax liability. We have agreed to indemnify TFS and its affiliates to the extent that any action we take or fail to take gives rise to a tax incurred by TFS or any of its affiliates with respect to the spin-off. In addition, we have agreed to indemnify TFS for any tax resulting from an acquisition by one or more persons of a 50% or greater interest in our company.

Transition Services Agreement

We and TFS have entered into a Transition Services Agreement under which TFS provides to us certain administrative services that may be necessary to our business. The most significant service that TFS provides to us relates to document control. TFS charges us mutually agreed upon hourly rates for these services. This agreement expired on August 31, 2004.

Intellectual Property Agreement

We and TFS have entered into an Intellectual Property Agreement under which we granted to TFS a nonexclusive, royalty-free, worldwide, perpetual, fully paid up license in and to all intellectual property that was assigned to us and that is used in all fields other than in the field of microdisplays. This intellectual property includes all patents, copyrights, trademarks, trade names, trade dress, trade secrets, know how, and show how whether or not legal protection has been sought or obtained. In addition, the license granted to TFS is non-assignable and non-licensable to third parties except that TFS may sublicense its rights to the intellectual property to any party or entity in which TFS owns at least a 50% equity interest.

Real Property Sublease Agreement

We and TFS have entered into a Real Property Sublease Agreement under which we lease office and manufacturing space in the TFS headquarters building. The initial term of the sublease expires August 31, 2005, with automatic one-year renewal terms thereafter unless either party elects to terminate the sublease upon notice delivered at least six months prior to the expiration of the then applicable sublease term. The agreement also sets forth certain circumstances under which all or a portion of the sublease may be terminated without penalty. We lease approximately 34,000 square feet of the building from TFS and share certain common areas in the building with TFS. Our fixed monthly rent payable to TFS is approximately $40,000. This amount includes all normal and customary services in connection with the operation and maintenance of the building. This amount, however, does not include water or electrical utilities, which we pay separately based on our use of those items. The sublease also requires that TFS provide us with facilities-related information technology management services, for which we pay a minimum monthly fee of approximately $38,000. The sublease is not assignable by us without the prior written consent of TFS, which consent may be withheld by TFS in its sole discretion.

Note H  Commitments and Contingencies:

In February 2002, we guaranteed up to $500,000 of the debt of VoiceViewer Technology, Inc., a private start-up company developing microdisplay products. This loan guarantee has a five-year term and matures in January 2007. VoiceViewer is unable to meet its current obligations under the loan agreement. We and the other guarantors are making payments as they become due. As of September 30, 2004, our maximum liability under this guarantee was $345,000. We have determined that it is probable that VoiceViewer will be unable to meet its future obligations under the loan agreement. Accordingly, we have accrued $345,000

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for our estimated obligation under this guarantee. We have a security interest in, and second rights to, the intellectual property of VoiceViewer, while the lending institution has the first rights. We would obtain the VoiceViewer intellectual property if in the future we are required to pay amounts under the guarantee. However, we do not believe that it would be possible to realize any significant value from the intellectual property.

Note I   Stock Compensation:

Our 2003 Incentive Compensation Plan was adopted by our board of directors and approved by our stockholder on August 26, 2003. Under the 2003 Incentive Compensation Plan, an aggregate of 1,650,000 shares of common stock were originally available for issuance pursuant to options granted to acquire common stock, the direct granting of restricted common stock and deferred stock, the granting of stock appreciation rights, and the granting of dividend equivalents. On the first day of each fiscal year, an additional number of shares equal to 4% of the total number of shares then outstanding is added to the number of shares that may be subject to the granting of awards.

Prior to the spin-off, certain of our employees were granted options to purchase TFS stock under TFS’ stock-based compensation plans. In connection with the spin-off, each outstanding TFS option granted prior to the spin-off was converted into both an adjusted TFS option and a substitute Brillian option. The treatment of such TFS options and the substitute Brillian options is identical for those employees who remained employees of TFS immediately after the spin-off and for those employees who became employees of Brillian in connection with the spin-off. These TFS options were converted in a manner that preserved the aggregate exercise price of each option, which was allocated between the adjusted TFS option and the substitute Brillian option, and each preserved the ratio of the exercise price to the fair market value of the stock subject to the option. For employees who remained employees of TFS after the spin-off, employment with TFS will be taken into account in determining when each substitute Brillian option becomes exercisable and when it terminates, and in all other respects the terms of the substitute option is substantially the same as the original TFS option. Under this arrangement, on September 15, 2003, we issued options to purchase 750,275 shares of Brillian common stock. Of these options, 600,410 were issued to employees who remained employees of TFS after the spin-off. Options granted under TFS’ plans generally vest over a four-year period and are exercisable for a term of 10 years.

In addition to the Brillian substitute options granted under the terms of the Master Separation and Distribution Agreement, on September 4, 2003, we granted options to our employees to purchase approximately 526,000 shares of our common stock. Options with respect to approximately 300,000 shares have a vesting period of 32 months, and the remaining options have a vesting period of 50 months. Additionally, on September 4, 2003, we granted approximately 56,000 shares of restricted common stock to employees with a vesting period of one year. At September 30, 2004, all of this restricted common stock had vested and been issued. On September 4, 2003, the spin-off had not been completed and, therefore, no market had developed for our common stock. For purposes of setting the exercise price of the options granted on that date, fair market value was estimated by our board of directors. Based on the initial trading prices of our common stock, we recorded deferred compensation of approximately $1.5 million related to the stock option and restricted stock grants of September 4, 2003. The total amount of deferred compensation will be expensed over the vesting terms of the options and shares of restricted stock. During the three- and nine-month periods ended September 30, 2004, we recorded non-cash compensation expense of $168,000, and $569,000, respectively, related to these restricted stock and option grants.

Pursuant to the provisions of SFAS No. 123, Accounting for Stock-Based Compensation, we account for options granted to our employees pursuant to Accounting Principles Board Opinion (APB) No. 25, Accounting for Stock Issued to Employees. In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation -Transition and Disclosure”. This Statement amends SFAS No. 123 to provide alternative methods of transition for a voluntary change to the fair value method of accounting for stock-based employee compensation. In addition, this Statement amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. We have adopted the disclosure requirements of SFAS No. 148.

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We have computed compensation cost, for pro forma disclosure purposes, based on the fair value of all options awarded on the date of grant, utilizing the Black-Scholes option pricing method with the following weighted assumptions: risk-free interest rates of 2.99% for all scenarios; expected dividend yields of zero for all scenarios; expected lives of 5.0 years for all scenarios; and expected volatility (a measure of the amount by which a price has fluctuated or is expected to fluctuate during a period) of 74% for all scenarios. Had compensation cost for these plans been determined consistent with SFAS No. 123, our net loss and loss per share for the three- and nine-month periods ended September 30 would have been as follows (in thousands, except per share data):

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS AND FACTORS THAT MAY AFFECT RESULTS

     The statements contained in this report on Form 10-Q that are not purely historical are forward-looking statements within the meaning of applicable securities laws. Forward-looking statements include statements regarding our “expectations,” “anticipation,” “intentions,” “beliefs,” or “strategies” regarding the future. Forward-looking statements also include statements regarding revenue, margins, expenses, and earnings analysis for fiscal 2004 and thereafter; the amounts, prices, timing, or terms under which we sell HDTVs; technological innovations; future products or product development; our product development strategies; potential acquisitions or strategic alliances; the success of particular product or marketing programs; the amounts of revenue generated as a result of sales to significant customers; and liquidity and anticipated cash needs and availability. All forward-looking statements included in this report are based on information available to us as of the filing date of this report, and we assume no obligation to update any such forward-looking statements. Our actual results could differ materially from the forward-looking statements.

Overview

     We design and develop large-screen, rear-projection, high-definition televisions, or HDTVs, utilizing our proprietary liquid crystal on silicon, or LCoS^®, microdisplay technology. We market our HDTVs for sale under the brand names of retailers, including consumer electronics retailers, consumer retail stores, personal computer manufacturers, and high-end audio/video manufacturers. In April 2004, we announced our first customer and orders for our HDTV product, and, in August 2004, we commenced shipments of HDTVs to that customer. During the three months ended September 30, 2004, we recorded revenue from the sale of HDTVs totaling approximately $235,000.

     We have established a virtual manufacturing model utilizing third-party contract manufacturers to produce our HDTVs, which incorporate the LCoS microdisplays that we manufacture. In late August and early September

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2004, we were unable to obtain a sufficient quantity of light engines from our supplier, JDS Uniphase, to allow us to meet the required shipments to our customer. As a result, on September 9, 2004, we announced a disruption in HDTV shipments and that JDS Uniphase was working on a plan to re-commence production of light engines in early October. On September 20, 2004, we announced that, as a result of this delay, our customer, Sears, Roebuck, and Company, had terminated its agreement to purchase HDTVs from us. In late October, we were informed by JDS Uniphase that the problems were more significant than had been anticipated and, therefore, they will be unable to start volume production until the second quarter of 2005.

     We also offer a broad line of LCoS microdisplay products and subsystems that original equipment manufacturers, or OEMs, can integrate into proprietary HDTV products, home theater projectors, and near-to-eye applications, such as head-mounted monocular or binocular headsets and viewers, for industrial, medical, military, commercial, and consumer applications.

     We derive revenue from the sale of our microdisplay products and from providing design and engineering services. For the year ended December 31, 2003, we recorded revenue from product sales of $1.6 million, or 74% of net sales, and revenue from design and engineering services of $565,000, or 26% of net sales. We have never been profitable. In 2003, 2002, and 2001, we had net losses of $18.7 million, $23.2 million, and $22.3 million, respectively.

     We started the development of LCoS microdisplays in 1997 as a division of Three-Five Systems, Inc., or TFS, under which we operated until our spin-off in September 2003. In anticipation of our spin-off to the stockholders of TFS, TFS organized us as a wholly owned subsidiary. In connection with the spin-off, TFS transferred to us its LCoS microdisplay business, including the related manufacturing and business assets, personnel, and intellectual property. TFS also provided initial cash funding to us in the amount of $20.9 million. The spin-off was completed on September 15, 2003 as a special dividend to the stockholders of TFS.

     We share occupancy with TFS in a building owned by TFS in Tempe, Arizona. We manufacture all of our LCoS microdisplays on our high-volume liquid crystal on silicon manufacturing line in that Tempe facility, where we also maintain our corporate headquarters. In addition, we conduct all testing and assembly of LCoS modules and conduct research and development activities in Tempe. We also operate a facility in Boulder, Colorado. In Boulder, we conduct sales and marketing activities and research and development activities.

     Net Sales. Our sales result from both design and engineering services and product sales. Until early 2002, substantially all of our sales were for use in projection-based applications. After the purchase of certain assets in early 2002, however, we became equally focused on the near-to-eye market. In the fourth quarter of 2003, we announced our intention to develop, manufacture, and sell a complete HDTV product based on our Gen II LCoS microdisplay. Since this announcement, most of our efforts have been focused on the design of this product, the establishment of a supply chain to source the components that we do not manufacture, and the establishment of a selling channel for the marketing and sale of our HDTV product.

     In addition to designing and developing our own HDTVs, we will continue to seek selective OEM customers for our projection displays. We typically sell three displays and associated electronics for products in the projection market. In the near-to-eye market, we sell either one or two displays and associated electronics. The displays and electronics are sold together as a kit. We also sell optical modules in the near-to-eye market. The selling prices of these products range between $90 and $1,000 per unit.

     Cost of Sales. Our gross margins are influenced by various factors, including manufacturing efficiencies, yields, and absorption issues, product mix, product differentiation, product uniqueness, inventory management, and volume pricing. The manufacturing-related issues have the most significant impact on our gross margins. To date, our manufacturing capacity has exceeded our manufacturing volume, resulting in the inability to absorb fully the cost of our manufacturing infrastructure. As a result, we expect it will be difficult to attain significant improvements in gross margin until we can operate at higher production volumes.

     Selling, General, and Administrative Expense. Selling, general, and administrative expense consists principally of administrative and selling costs; salaries, commissions, and benefits to personnel; and related facilities costs. We make substantially all of our sales directly to OEMs through a very small sales force that consists

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primarily of direct technical sales persons. Therefore, there is no material cost of distribution in our selling, general, and administrative expense.

     Research and Development Expense. Research and development expense consists principally of salaries and benefits to scientists, engineers, and other technical personnel; related facilities costs; process development costs; and various expenses for projects, including new product development. Research and development expense continues to be very high as we continue to develop our LCoS technology and manufacturing processes, and refine our HDTV products.

Critical Accounting Policies and Estimates

     Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. During preparation of these financial statements, we are required to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates and judgments, including those related to bad debts, inventories, investments, fixed assets, intangible assets, income taxes, and contingencies. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. The results form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

     We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our financial statements.

     We recognize revenue from product sales when persuasive evidence of a sale exists; that is, a product is shipped under an agreement with a customer; risk of loss and title have passed to the customer; the fee is fixed and determinable; and collection of the resulting receivable is reasonably assured. Sales allowances are estimated based upon historical experience of sales returns.

     We recognize revenue related to design and engineering services depending on the relevant contractual terms. Under fixed-price contracts that contain project milestones, revenue is recognized as milestones are met. For contracts under which revenue is recognized based on milestones, the fair value of milestones completed equals the fair value of work performed. Under a prior fixed price contract under which we were paid based on performance of tasks, we recognized revenue based on the estimated percentage of completion of the entire project as measured by the costs for man hours and materials. Any anticipated losses on fixed price contracts are recorded in the period they are determinable. Revenue related to design and engineering services is recognized based on these methods and is non-refundable.

     We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. We determine the adequacy of this allowance by regularly evaluating individual customer receivables and considering a customer’s financial condition, credit history, and current economic conditions. If the financial condition of our customers were to deteriorate, additional allowances could be required.

     We write down our inventory for obsolete inventory. We write down our inventory to estimated market value based upon assumptions about future demand and market conditions. If actual market conditions are less favorable than those projected by us, additional inventory write-downs may be required.

     Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards (“SFAS”) No. 109, “Accounting for Income Taxes”, requires that a valuation allowance be established when it is more likely than not that all or a portion of a deferred tax asset will not be realized. Changes in valuation allowances from period to period are included in our tax provision in the period of change. In determining whether a valuation allowance is required, we take into account all evidence with regard to the utilization of a deferred tax asset, including our past earnings history, expected future earnings, the character and jurisdiction of such earnings, unsettled circumstances that, if unfavorably resolved, would adversely affect utilization of a deferred tax asset,

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carryback and carryforward periods, and tax strategies that could potentially enhance the likelihood of realization of a deferred tax asset. Deferred tax assets resulting from net operating losses and tax credits generated by our pre-spin-off operations were retained by TFS in accordance with applicable tax law. In the near term, we do not expect to record a tax benefit on any losses that we incur.

     Long-term assets, such as property, plant, and equipment, and intangibles, are originally recorded at cost. On an on-going basis, we assess these assets to determine if their current recorded value is impaired. When assessing these assets, we consider projected future cash flows to determine if impairment is applicable. These cash flows are evaluated for objectivity by using weighted probability techniques and also comparisons of past performance against projections. We may also identify and consider independent market values of assets that we believe are comparable. If we were to believe that an asset’s value was impaired, we would write down the carrying value of the identified asset and charge the impairment as an expense in the period in which the determination was made.

     Non-marketable equity securities are accounted for at the lower of estimated fair value or historical cost. All of our investments are subject to a periodic impairment review; the impairment analysis requires significant judgment to identify events or circumstances that would likely have a significant adverse effect on the fair value of the investment. The indicators we use to identify those events and circumstances include the investee’s revenue and earnings trends relative to predefined milestones and overall business prospects; the technological feasibility of the investee’s products and technologies; the general market conditions in the investee’s industry; the investee’s liquidity, debt ratios, and rate at which the investee is using cash; and the valuation of the investee’s most recent financing round. Investments identified as having an indicator of impairment are subject to further analysis to determine if the investment is other than temporarily impaired, in which case the investment is written down to its impaired value. When an investee is not considered viable from a financial or technological point of view, the entire investment would be written down. If an investee obtains additional funding at a valuation lower than our carrying amount or requires a new round of equity funding to stay in operation, and the new funding does not appear imminent, it would be presumed that the investment is other than temporarily impaired, unless specific facts and circumstances indicate otherwise. During the second quarter of 2004, we recorded a write-down of $131,000 due to the impairment in the value of non-marketable equity securities. This impairment occurred when one of our investee companies obtained equity funding at a valuation lower than our carrying amount.

     Our historical financial statements for periods prior to our spin-off from TFS include those assets, liabilities, revenues, and expenses directly attributable to our operations and allocations of certain TFS corporate expenses to us. These amounts have been allocated to us on the basis that we and TFS considered to reflect most fairly or reasonably the utilization of the services provided to, or the benefits received by, us. We believe the methods used to allocate these amounts are reasonable.

     The financial information included herein for periods prior to the spin-off is not necessarily indicative of our future financial position, results of operations, or cash flows, nor is it necessarily indicative of what the financial position, results of operations, and cash flows would have been had we operated as a stand-alone public entity during the periods covered.

     Prior to the spin-off, our costs and expenses included allocations from TFS for centralized legal, accounting, treasury, quality assurance, real estate, information technology, engineering, and other TFS corporate services and infrastructure costs. These allocations were determined on the basis that we and TFS considered to be reasonable reflections of the utilization of services provided to, or the benefits received by, us. Allocated costs included in our cost of sales totaled $301,000 and $1.1 million for the three- and nine-month periods ended September 30, 2003. Allocated costs included in selling, general, and administrative expenses totaled $45,000 and $1.5 million for the three- and nine-month periods ended September 30, 2003. Allocated costs included in our research and development expenses totaled $207,000 and $795,000 for the three- and nine-month periods ended September 30, 2003. The basis for the amounts allocated to us included the following: legal, accounting, treasury, quality assurance, and other TFS corporate functions, including officers’ salaries, were allocated based on management’s estimation of time devoted to the microdisplay business for these functions; facility costs and information technology services were allocated on the basis of headcount of the microdisplay business, which is most representative of utilization of these resources; and engineering services were allocated to us based on the actual hours of services used. The allocation methodologies utilized represent management’s best estimate of the actual hours utilized by the microdisplay business of TFS.

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     On the spin-off date, we and TFS entered into a series of agreements to facilitate our separation from TFS. These agreements included certain transitional services, leases, intellectual property transfers, and tax sharing agreements. These agreements require us to pay a negotiated fee. We paid TFS $225,000 and $659,000 for rent and IT management services in the three- and nine-month periods ended September 30, 2004, and $41,000 and $149,000 for engineering services in the same periods. In addition, we paid $497,000 and $1.1 million for engineering and design services related to the development of printed circuit board assemblies and for purchases of these assemblies for our HDTV product during the three- and nine-month periods ended September 30, 2004.

     Our financial results subsequent to the spin-off may differ materially from those recorded historically. These potential differences are the result of several factors, including the following:

1. actual costs for services needed by our business may differ from amounts historically allocated to us from TFS;

2. certain items, including facilities charges, that were recorded by the TFS combined entity as depreciation are now be recorded as rent expense by us, for which we need to pay cash; and

3. changes in the way we manage our business as a stand-alone entity as opposed to a division may result in different business decisions.

     Since the spin-off, the actual costs for services needed by our business have not differed materially from amounts historically allocated to us from TFS. However, we are no longer part of a larger organization; therefore, certain expense items may increase more rapidly. If this occurs and we are unable to decrease other expense items or increase revenue to offset this increased expense, our results of operations will be adversely affected.

     We and TFS entered into a series of agreements to facilitate our separation from TFS. These agreements include certain transitional services, leases, intellectual property transfers, and tax sharing agreements. Certain of these agreements require us to pay a negotiated fee. If we are unable to build an infrastructure to provide these services internally, our operating results could be adversely affected.

     Because our business serves new and developing markets, is based on a relatively new technology, and is expected to be significantly influenced by the introduction of new HDTV products, accurately forecasting revenue for a particular future period is difficult. To date, the majority of our product sales to customers have been for their use in designing their end products or for improving their production processes as opposed to volume production lots. Therefore, the amount of revenue recorded in any given period may fluctuate significantly, and predictable revenue trends have not yet developed. While we anticipate that our revenue will increase, there can be no assurances that this will occur or when it will occur. Because a significant amount of our expenses are fixed in nature and we still experience low manufacturing yields, the amount of revenue recognized during the first nine months of 2004 did not result in a material impact to our cash consumption rate. We do anticipate, however, that as we move into volume production, we will improve our manufacturing yields and more fully absorb our fixed costs, which will result in improved gross margins and results of operations. However, as we increase our revenue and shift our product mix predominantly to the HDTVs, we will use cash to finance increases in inventory and accounts receivable.

Results of Operations

  Three months ended September 30, 2004 compared to three months ended September 30, 2003

     Net Sales. Net sales increased 4% to $733,000 in the third quarter of 2004 from $703,000 in the third quarter of 2003. Product sales increased to $673,000 in the third quarter of 2004 from $602,000 in the third quarter of 2003. Design and engineering services revenue decreased to $60,000 in the third quarter of 2004 from $101,000 in the third quarter of 2003.

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     Net sales in the projection market totaled $526,000, or 72% of total net sales, in the third quarter of 2004, compared with $385,000, or 55% of total net sales, in the third quarter of 2003. The remaining net sales were in the near-to-eye market.

     Net sales in North America totaled $499,000, or 68% of total net sales, in the third quarter of 2004 compared with $229,000, or 33% of total net sales, in the third quarter of 2003. Net sales in Asia totaled $142,000, or 19% of total net sales, in the third quarter of 2004 compared with $155,000, or 22% of total net sales, in the third quarter of 2003. Net sales in Europe totaled $92,000, or 13% of total net sales, in the third quarter of 2004 compared with $319,000, or 45% of total net sales, in the third quarter of 2003.

     Cost of Sales. Cost of sales was $4.4 million, or 596% of net sales, in the third quarter of 2004 compared with $2.4 million, or 338% of net sales, in the third quarter of 2003. During the third quarter of 2004, we incurred substantial incremental costs in our efforts to commence production of our HDTVs. These incremental costs included costs for contract assembly, scrap, freight, and increased depreciation. The large negative gross margin in each period resulted primarily from the low volume of shipments and low manufacturing yields in the shipped products. To date, our manufacturing capacity has exceeded our manufacturing volume, resulting in the inability to absorb fully the cost of our manufacturing infrastructure. Cost of sales for design and engineering services decreased to $31,000 in the third quarter of 2004 from $97,000 in the third quarter of 2003.

     As is typical in most segments of the high-technology industry, we anticipate downward pressure on the prices of our products. A significant portion of our manufacturing costs are fixed in nature and consist of items such as utilities, depreciation, and amortization. The amounts of these costs do not vary period to period based on the number of units produced nor can the amounts of these costs be adjusted in the short term. Therefore, in periods of lower production volume, these fixed costs are absorbed by a lower number of units, thus increasing the cost per unit. As a result, we expect it will be difficult to attain significant improvements in gross margins until we can operate at higher production volumes.

     Selling, General, and Administrative Expense. Selling, general, and administrative expense totaled $508,000 in the third quarter of 2004 compared with $1.2 million in the third quarter of 2003. Selling, general, and administrative expenses for the third quarter of 2004 were reduced by approximately $300,000 due to the reversal of a bonus accrual. Selling, general, and administrative expense for the third quarter of 2003 included expenses of $699,000 associated with our spin-off from TFS. No such expenses were incurred in the third quarter of 2004.

     Research and Development Expense. Research and development expense increased 23% to $2.2 million in the third quarter of 2004 from $1.8 million in the third quarter of 2003. This increase is the result of increased engineering personnel costs related to the development of our HDTV product.

     Benefit from Income Taxes. During the third quarter of 2003, we recorded a benefit from income taxes of $160,000. When the assets and liabilities were transferred to us from TFS, we recorded a net deferred tax liability of $1.1 million related to differences between the book and tax basis of the assets transferred to us. As we incurred tax losses subsequent to the spin-off, we recorded a benefit from income taxes until we had offset this entire net deferred tax liability. No such benefit was recorded in the third quarter of 2004.

     Net Loss. Net loss was $6.3 million in the third quarter of 2004 compared with a net loss of $4.5 million in the third quarter of 2003.

Nine months ended September 30, 2004 compared to nine months ended September 30, 2003

     Net Sales. Net sales increased 28% to $2.3 million in the first nine months of 2004 from $1.8 million in the first nine months of 2003. Product sales increased to $2.0 million in the first nine months of 2004 from $1.4 million in the first nine months of 2003. Design and engineering services revenue decreased to $297,000 in the first nine months of 2004 from $423,000 in the first nine months of 2003.

     Net sales in the projection market totaled $1.2 million, or 54% of total net sales, in the first nine months of 2004 compared with $1.1 million, or 60% of total net sales, in the first nine months of 2003. The remaining net sales were in the near-to-eye market.

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     Net sales in North America totaled $1.2 million, or 53% of total net sales, in the first nine months of 2004 compared with $925,000, or 51% of total net sales, in the first nine months of 2003. Net sales in Asia totaled $491,000, or 21% of total net sales, in the first nine months of 2004 compared with $372,000, or 20% of total net sales, in the first nine months of 2003. Net sales in Europe totaled $608,000, or 26% of total net sales, in the first nine months of 2004 compared with $537,000, or 29% of total net sales, in the first nine months of 2003.

     Cost of Sales. Cost of sales was $9.4 million, or 400% of net sales, in the first nine months of 2004 compared with $7.2 million, or 392% of net sales, in the first nine months of 2003. The large negative gross margin in each period resulted primarily from the low volume of shipments and low manufacturing yields in the shipped products. To date, our manufacturing capacity has exceeded our manufacturing volume, resulting in the inability to absorb fully the cost of our manufacturing infrastructure. Cost of sales for design and engineering services decreased to $220,000 in the first nine months of 2004 from $380,000 in the first nine months of 2003.

     As is typical in most segments of the high-technology industry, we anticipate downward pressure on the prices of our products. A significant portion of our manufacturing costs are fixed in nature and consist of items such as utilities, depreciation, and amortization. The amounts of these costs do not vary period to period based on the number of units produced nor can the amounts of these costs be adjusted in the short term. Therefore, in periods of lower production volume, these fixed costs are absorbed by a lower number of units, thus increasing the cost per unit. As a result, we expect it will be difficult to attain significant improvements in gross margins until we can operate at higher production volumes.

     Selling, General, and Administrative Expense. Selling, general, and administrative expense decreased 21% to $2.7 million in the first nine months of 2004 from $3.4 million in the first nine months of 2003. Selling, general, and administrative expense for the first nine months of 2003 included expenses of $1.5 million associated with our spin-off from TFS. No such expenses were incurred in the first nine months of 2004.

     Research and Development Expense. Research and development expense increased 30% to $6.8 million in the first nine months of 2004 from $5.2 million in the first nine months of 2003. Research and development expense in the first nine months of 2004 includes costs totaling approximately $1.2 million associated with the development of our HDTV products.

     Loss on Investment in Start-up Company. During the first nine months of 2004, we recorded a write-down of $131,000 due to the impairment in the value of non-marketable equity securities. This impairment occurred when one of our investee companies obtained equity funding at a valuation lower than our carrying amount. No such loss was recorded in the first nine months of 2003.

     Benefit from Income Taxes. During the first nine months of 2003, we recorded a benefit from income taxes of $160,000. When the assets and liabilities were transferred to us from TFS, we recorded a net deferred tax liability of $1.1 million related to differences between the book and tax basis of the assets transferred to us. As we incurred tax losses subsequent to the spin-off, we recorded a benefit from income taxes until we had offset this entire net deferred tax liability. No such benefit was recorded in the first nine months of 2004.

     Net Loss. Net loss was $16.6 million in the first nine months of 2004 compared with a net loss of $13.8 million in the first nine months of 2003.

Liquidity and Capital Resources

     At September 30, 2004, we had cash, cash equivalents, and short-term investments of $10.0 million compared with $14.4 million at December 31, 2003.

     In the first nine months of 2004, we used $12.8 million of cash for operating activities compared with $12.1 million in the first nine months of 2003. Most of the cash outflow in each period related to our losses, since we had little change in our other working capital balances in each period. Our depreciation and amortization expense was $2.7 million in the first nine months of 2004 and $2.7 million in the first nine months of 2003. Prior to the spin-off, our entire cash outflow was funded by TFS on an as-needed basis.

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     In the first nine months of 2004, net cash provided by investing activities totaled $8.1 million. During this period, we received proceeds from the sale of short-term investments of $12.1 million. Purchases of property and equipment totaled $3.0 million and purchases of intangibles totaled $888,000 in the first nine months of 2004.

     During the first nine months of 2003, net cash used in investing activities totaled $557,000. During the first nine months of 2003, we used $334,000 for the purchase of property and equipment, received proceeds from the sale of property and equipment of $114,000, and used $337,000 for the purchase of intangibles.

     We have incurred recurring operating losses and negative cash flows since our inception as a division of TFS. Our net loss was $18.7 million, $23.2 million, and $22.3 million in 2003, 2002, and 2001, respectively. At September 30, 2004, we had $12.5 million of working capital, including $10.0 million of cash, cash equivalents, and short-term investments.

     A key element of our business involves the ongoing commercialization of our LCoS microdisplay technology. LCoS microdisplays are an emerging technology with target markets that could be slow to develop or could utilize competing technologies. Therefore, accurately forecasting revenue for any given future period is difficult. We are currently focusing a majority of our resources on penetrating the premium segment of the HDTV market. HDTV has only recently become available to consumers, and widespread market acceptance is uncertain.

     Because our business serves new and developing markets, is based on a relatively new technology, and is expected to be significantly influenced by the introduction of new HDTV products, accurately forecasting revenue for a particular future period is difficult. To date, the majority of our product sales to customers have been for their use in designing their end products or for improving their production processes as opposed to volume production lots. Therefore, the amount of revenue recorded in any given period may fluctuate significantly, and predictable revenue trends have not yet developed. While we anticipate that our revenue will increase, there can be no assurances that this will occur or when it will occur. Because a significant amount of our expenses are fixed in nature and we still experience low manufacturing yields, the amount of revenue recognized during the first nine months of 2004 did not result in a material impact to our cash consumption rate. We do anticipate, however, that as we move into volume production, we will improve our manufacturing yields and more fully absorb our fixed costs, which will result in improved gross margins and results of operations. However, as we increase our revenue and shift our product mix predominantly to the HDTVs, we will use cash to finance increases in inventory and accounts receivable.

     The successful introduction of an HDTV product to market and securing volume orders from consumer electronics retailers for HDTVs represent a key ingredient to our success. In April 2004, we announced our first customer and orders for our HDTV product, and, in August 2004, we commenced shipments of HDTVs to that customer. During the three months ended September 31, 2004, we recorded revenue from the sale of HDTVs totaling approximately $235,000. In late August and early September 2004, we were unable to obtain a sufficient quantity of light engines from our supplier, JDS Uniphase, to allow us to meet the required shipments to our customer. As a result, on September 9, 2004, we announced a disruption in HDTV shipments and that JDS Uniphase was working on a plan to re-commence production of light engines in early October. On September 20, 2004, we announced that, as a result of this delay, our customer, Sears, Roebuck, and Company, had terminated its agreement to purchase HDTVs from us. In late October, we were informed by JDS Uniphase that the problems were more significant than had been anticipated and, therefore, they will be unable to start volume production until the second quarter of 2005.

     In order for us to continue operating beyond March 31, 2005, it will be necessary for us to reduce substantially our operating losses (through increased sales, reduced expenses, or both) or raise additional funds. We are currently exploring our opportunities to raise additional funds through asset sales, or debt or equity financing. We have no commitments for or understandings regarding any additional funding with any person or firm. We can provide no assurance that we will be able to obtain any necessary financing on satisfactory terms.

     If we are unable to increase our sales or obtain additional financing, the primary cost component that can be reduced in a timely manner is personnel related costs, the majority of which relate to our research and development efforts. If we were to significantly reduce our research and development efforts, our ability to bring our HDTV

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product to market and to develop new products would be diminished, which would further hamper our ability to achieve profitability.

Aggregate Contractual Obligations

     The following table lists our commercial commitments (in thousands):

     We have contractual commitments for property leases for our Tempe headquarters and for our development center in Boulder, Colorado. In addition, we have contractual commitments for development, software maintenance, and minimum royalties related to the development and production of our HDTV products. We have issued purchase orders to vendors for the purchase of materials totaling approximately $5.8 million. If we are not able to resume production of our HDTVs, much of this material will be in excess of our requirements. In such case, if we are unable to cancel or otherwise restructure these purchase commitments, any materials purchased in excess of our requirements will be written off as excess inventory.

     The guarantee relates to our guarantee in connection with a Small Business Administration loan to VoiceViewer Technology, Inc., a private company developing microdisplay products. VoiceViewer is unable to meet its current obligations under the loan agreement. We and the other guarantors are making payments as they become due. We have determined that it is probable that VoiceViewer will be unable to meet its future obligations under the loan agreement. Therefore, we have accrued $345,000, which represents our maximum obligation under the guarantee amount. We have a security interest in, and second rights to, the intellectual property of VoiceViewer, while the lending institution has the first rights. We would obtain the VoiceViewer intellectual property if in the future we are required to pay amounts under the guarantee. However, we do not believe we can realize any significant value from VoiceViewer’s intellectual property.

     Under the Tax Sharing Agreement, we have agreed to indemnify TFS against any taxes, other than Separation Taxes, that are attributable to us since our formation, even while we were a member of TFS’ federal consolidated tax group. TFS has agreed to indemnify us against any taxes, other than Separation Taxes, that are attributable to the businesses retained by TFS. The Tax Sharing Agreement sets forth rules for determining taxes attributable to us and taxes attributable to the businesses retained by TFS.

     Pursuant to the Tax Sharing Agreement, we have agreed not to take any action that would cause the spin-off not to qualify under Section 355 of the Internal Revenue Code. We have agreed not to take certain actions for two years following the spin-off, unless we obtain an IRS ruling or an opinion of counsel to the effect that these actions will not affect the tax-free nature of the spin-off. These actions include certain issuances of our stock, a liquidation or merger of our company, and dispositions of assets outside the ordinary course of our business. If any of these transactions were to occur, the spin-off could be deemed to be a taxable distribution to TFS. This would subject TFS to a substantial tax liability. We have agreed to indemnify TFS and its affiliates to the extent that any action we take or fail to take gives rise to a tax incurred by TFS or any of its affiliates with respect to the spin-off. In addition, we have agreed to indemnify TFS for any tax resulting from an acquisition by one or more persons of a 50% or greater interest in our company.

     We have no debt. In addition, we have no capital lease obligations, other long-term obligations, or any other commercial commitments except as noted above.

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Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Derivative Financial Instruments, Other Financial Instruments, and Derivative Commodity Instruments

     At September 30, 2004, we did not participate in any derivative financial instruments, or other financial or commodity instruments for which fair value disclosure would be required under Statement of Financial Accounting Standards No. 107. We hold no investment securities that would require disclosure of market risk.

     Primary Market Risk Exposures

     Our primary market risk exposures are in the areas of foreign currency exchange rate risk. Foreign currency devaluations, especially in Asian currencies, such as the Japanese yen, the Korean won, and the Taiwanese dollar, may cause a foreign competitor’s products to be priced significantly lower than our products.

     Fluctuations in foreign currency exchange rates could affect our cost of goods and operating margins. In addition, currency devaluation can result in a loss to us if we hold deposits of that currency. Hedging foreign currencies can be difficult, especially if the currency is not freely traded.

     We have not attempted to hedge or otherwise mitigate this risk because our exposure to any given currency is nominal. A change in the currency exchange rate of 10% in any given currency would not have a material impact on our results of operations. If, in the future, our exposure to a given currency increases, we would contemplate hedging at that time. Based on the foregoing, we cannot provide assurance that fluctuations and currency exchange rates in the future will not have an adverse effect on our operations.

ITEM 4.  CONTROLS AND PROCEDURES

     As of the end of the period covered by this report, our Chief Executive Officer and Chief Financial Officer have reviewed and evaluated the effectiveness of our disclosure controls and procedures, which included inquiries made to certain other of our employees. Based on their evaluation, our Chief Executive Officer and Chief Financial Officer have each concluded that our disclosure controls and procedures are effective and sufficient to ensure that we record, process, summarize, and report information required to be disclosed by us in our periodic reports filed under the Securities Exchange Act within the time periods specified by the Securities and Exchange Commission’s rules and forms. During the quarterly period covered by this report, there have not been any changes in our internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

ITEM 5. OTHER INFORMATION

     Our Insider Trading Policy permits our directors, officers, and other key personnel to establish purchase and sale programs in accordance with Rule 10b5-1 adopted by the Securities and Exchange Commission. The rule permits employees to adopt written plans at a time before becoming aware of material nonpublic information and to sell shares according to a plan on a regular basis (for example, weekly or monthly), regardless of any subsequent nonpublic information they receive. In our view, Rule 10b5-1 plans are beneficial because systematic, pre-planned sales that take place over an extended period should have a less disruptive influence on the price of our stock. We also believe plans of this type are beneficial because they inform the marketplace about the nature of the trading activities of our directors and officers. In the absence of such information, the market could mistakenly attribute transactions as reflecting a lack of confidence in our company or an indication of an impending event involving our company. We recognize that our directors and officers may have reasons totally apart from the company in determining to effect transactions in our common stock. These reasons could include the purchase of a home, tax and estate planning, the payment of college tuition, the establishment of a trust, the balancing of assets, or other personal reasons. The establishment of any trading plan involving our company requires the pre-clearance by our Chief Executive Officer or Chief Financial Officer. An individual adopting a trading plan must comply with all requirements of Rule 10b5-1, including the requirement that the individual not possess any material nonpublic information regarding our company at the time of the establishment of the plan. In addition, sales under a trading plan may be made no earlier than 30 days after the plan establishment date. No officers currently maintain trading plans.

ITEM 6. EXHIBITS

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SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

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