Over the past several decades, the markets for computing, communications and entertainment electronic products have grown dramatically. A key component in many of these products is the display, which provides visual information to the user. Displays are incorporated into a wide variety of products, including televisions, instrument panels, desktop and notebook computers, handheld communications and entertainment devices, amusement and gaming applications, cellular phones and digital cameras.

Market research firm Display Search estimates that the display industry comprised of conventional cathode ray tubes, or CRTs, and flat panel displays will grow from $55.5 billion in 2001 to $103.2 billion in 2005, a compounded annual growth rate of 13.2%. Display Search estimates that sales of conventional CRTs, which represent the dominant display technology today, will grow from $26.1 billion in 2001 to $36.2 billion in 2005, a compounded annual growth rate of 6.8%. Display Search further estimates that sales of flat panel displays will grow from $29.4 billion in 2001 to $67.0 billion in 2005, a compounded annual growth rate of 17.9%.

Conventional CRTs has dominated the display industry for more than 75 years and are used primarily in non-mobile products such as televisions and desktop computers. Many factors are driving demand for flat panel displays. For example, consumer demand for mobility is projected to increase growth in the markets for portable products such as handheld personal computers, personal digital assistants and cellular phones. Display Search estimates that total display sales for these products will increase from 65.0 million units in 2001 to 805.1 million units in 2005, a compounded annual growth rate of 65.4%.

Therefore, these applications require a display with wide viewing angles, high brightness, color saturation and contrast, and fast video response time. Many of these applications, particularly portable devices, will benefit from a power-efficient display. In addition, some targeted applications, such as automotive applications or portable applications designed for outdoor use, also require a display that can operate in extreme temperatures.

The Company’s ThinCRT incorporates much of the technology used in a conventional CRT into a thin package suitable for flat panel display applications. A conventional color CRT consists of a funnel-shaped glass vacuum tube, a source of electrons, and a means for modulating and directing a stream of electrons from that single source toward a screen coated with an array of red, green and blue phosphor dots, or sub pixels.

To eliminate the need for the thick glass found in a conventional CRT, the Company has developed a patented ceramic material to provide structural support between the faceplate and the back plate. This material is fabricated into thin strips that fit in the narrow space between rows of individual sub pixels while remaining invisible to the user of the display.

The Company currently operates a flat panel display manufacturing development line at its research and development facility in San Jose, California that uses glass sheets, or substrates, that are 320 mm × 340 mm in size. The Company is using this facility to develop its display architecture and process technology. The Company intends to use its 320 mm × 340 mm development line to continue development of technology for small displays, such as its 5.3-inch and planned 7.0-inch displays and, in the future, to develop the technology for large displays, such as its planned 24.0-inch display.

General and administrative expenses were $7.2 million for the nine months ended September 30, 1999, compared to $8.3 million for the corresponding period in 2000.

Amortization of deferred stock compensation was $565.0 thousand for the nine months ended September 30, 1999 and $1.4 million for the nine months ended September 30, 2000.

Net interest income and other was $2.2 million for the nine months ended September 30, 1999, compared to $2.6 million for the corresponding period in 2000.