NVTL » Topics » Nine Months Ended September 30, 2005 Compared to Nine Months Ended September 30, 2004

This excerpt taken from the NVTL 10-K filed Mar 16, 2007.

Year Ended December 31, 2005 Compared to Year Ended December 31, 2004

Revenue.    Revenue for the year ended December 31, 2005 increased $58.0 million, or 55.9%, to $161.7 million compared to $103.7 million in 2004. The overall increase in revenue is primarily attributable to an increase in product sales of approximately $61.5 million primarily due to strong demand for our UMTS U630 and EV-DO PC cards, which were both introduced during the fourth quarter of 2004. The overall increase in CDMA / EV-DO product sales in 2005 was approximately $45.5 million. Our UMTS / HSDPA product sales, which include the Fixed Mobile Convergence products that were introduced during the first quarter of 2005, increased by approximately $16.0 million in 2005 compared to 2004. The increase in revenue was also attributable to the overall increase in demand for our wireless products and wireless access services, which is the direct result of the continued deployment of 3G networks throughout Europe, North America, Asia and Africa. Revenue recognized for development services decreased by $3.5 million, or 87.5%, to $500,000 during 2005 as compared to $4.0 million in 2004. We do not expect development services revenue to represent a significant percentage of total revenue in the foreseeable future.

Cost of revenue.    Cost of revenue for the year ended December 31, 2005 increased by $45.8 million, or 65.6%, to $115.6 million compared to $69.8 million in 2004. The increase in cost of revenues was primarily related to an increase in product cost of $39.2 million due to the increase in revenues as discussed above. In addition, freight and distribution costs increased by approximately $3.7 million due to additional costs associated

 

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with our European product sales. The remaining increases in costs of sales consisted of an increase of approximately $2.8 million related to the write-off of certain legacy products in inventory and an increase in royalty costs of approximately $2.7 million. The cost of revenues was favorably impacted by a decrease in development service costs from $2.9 million in 2004 to $200,000 in 2005.

Gross margin.    Gross margin for the year ended December 31, 2005 increased by $12.2 million, or 36%, to $46.2 million compared to $33.9 million in 2004. The increase was primarily attributable to the increase in sales volume of our products. Gross margin as a percentage of revenue decreased to 28.5% for the year ended December 31, 2005 compared to 32.7% for 2004. The decrease in gross margin as a percentage of revenue was primarily attributable to the negative impact of competitive pricing pressures on our sales prices in Europe, write-offs of inventory as discussed above, and the additional freight and distribution costs associated with our move towards a direct distribution model in Europe in 2005.

Research and development expenses.    Our research and development expenses for the year ended December 31, 2005 increased $9.9 million, or 93.1%, to $20.5 million compared to $10.6 million for the same period in 2004. Research and development expenses increased as a result of additional staff and products developed in 2005 compared to 2004. This increase was primarily attributable to an increase of approximately $2.8 million in salary and related expenses due to additional headcount, an increase in outside consulting services and travel costs of approximately $1.7 million, an increase of $1.6 million in research supplies and expendable equipment due to increased product development activities in 2005 as compared to 2004, an increase in facility and depreciation expenses of approximately $1.0 million due to facility expansions and capital equipment purchases. In addition, costs recovered from customer funded development contracts decreased by $2.7 million, to $200,000, compared to $2.9 million for 2004.

Sales and marketing expenses.    Sales and marketing expenses for the year ended December 31, 2005 increased $2.9 million, or 60.6%, to $7.6 million compared to $4.7 million for the same period in 2004. The increase was primarily a result of an increase in sales and marketing efforts, which included hiring new personnel during 2005 to expand our European sales team, which increased salary and related expenses by approximately $1.6 million, an increase in marketing expenses of approximately $500,000, an increase in rent and utilities expense of $400,000 due primarily to facility expansions and an increase in travel costs of approximately $300,000 compared to 2004.

General and administrative expenses.    General and administrative expenses for the year ended December 31, 2005 increased approximately $2.4 million, or 46.5%, to $7.5 million compared to $5.1 million for the same period in 2004. The increase was primarily attributable to an increase in professional fees of approximately $1.4 million due largely to costs associated with complying with the requirements of Sarbanes-Oxley as well as tax accounting fees associated with consulting services related to evaluating our ability to utilize our net operating losses, and an increase in salary and related expenses of approximately $1.0 million due to additional headcount during 2005 as compared to 2004.

Interest income and expense.    Interest income and expense increased by approximately $1.3 million for the year ended December 31, 2005 compared to the same period in 2004 primarily due to the increase in our average cash and marketable securities balances in 2005, as well as an increase in the average yields realized on our marketable securities and cash balances, which resulted in higher income yielded as compared to 2004.

Provision for income taxes.    Income tax expense was approximately $1.4 million for 2005, which consists of federal and state taxes at our estimated effective tax rate of 31% offset by a revision of our valuation allowance on specific U.S. deferred tax assets of approximately $2.4 million. During 2005, management evaluated the deferred tax valuation allowance and determined that the valuation allowance on a portion of the U.S. deferred tax assets should be revised and as a result, the Company recorded a non-cash deferred income tax benefit to the Statements of Operations of $2.4 million for the year ended December 31, 2005. This determination was based on 2004 and 2005 operating results and in anticipation of using net operating losses due

 

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to current projections of future taxable income. In addition, we recorded a credit of $8.2 million to Stockholders’ Equity relating to the reduction of the valuation allowance on net operating loss carryforwards from stock option deductions.

The difference between the federal and state statutory rate of approximately 40% and our effective tax rate is due primarily to research and development credits generated in 2005 and a low effective state tax rate.

Net income.    For the year ended December 31, 2005, the Company reported net income available to common stockholders of $11.1 million as compared to $13.7 million for the same period in 2004.

This excerpt taken from the NVTL 10-K filed Mar 16, 2006.

Year Ended December 31, 2005 Compared to Year Ended December 31, 2004

Revenue.    Revenue for the year ended December 31, 2005 increased $58.0 million, or 55.9%, to $161.7 million compared to $103.7 million in 2004. The overall increase in revenue is primarily attributable to an increase in product sales of approximately $61.5 million primarily due to strong demand for our UMTS U630 and EV-DO PC Cards, which were both introduced during the fourth quarter of 2004. The overall increase in CDMA / EV-DO product sales in 2005 was approximately $45.5 million. Our UMTS / HSDPA product sales, which include the Fixed Mobile Convergence products that were introduced during the first quarter of 2005, increased by approximately $16.0 million in 2005 compared to 2004. The increase in revenue was also attributable to the overall increase in demand for our wireless products and wireless access services, which is the direct result of the continued deployment of 3G networks throughout Europe, North America, Asia and Africa. Revenue recognized for development services decreased by $3.5 million, or 87.5%, to $500,000 during 2005 as compared to $4.0 million in 2004. We do not expect development services revenue to represent a significant percentage of total revenue in the foreseeable future.

Cost of revenue.    Cost of revenue for the year ended December 31, 2005 increased by $45.8 million, or 65.6%, to $115.6 million compared to $69.8 million in 2004. The increase in cost of revenues was primarily related to an increase in product cost of $39.2 million due to the increase in revenues as discussed above. In addition, freight and distribution costs increased by approximately $3.7 million due to additional costs associated with our European product sales. The remaining increases in costs of sales consisted of an increase of approximately $2.8 million related to the write-off of certain legacy products in inventory and an increase in royalty costs of approximately $2.7 million. The cost of revenues was favorably impacted by a decrease in development service costs from $2.9 million in 2004 to $200,000 in 2005.

Gross margin.    Gross margin for the year ended December 31, 2005 increased by $12.2 million or 36% to $46.1 million compared to $33.9 million in 2004. The increase was primarily attributable to the increase in sales

 

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volume of our products. Gross margin as a percent of revenue decreased to 28.5% for the year ended December 31, 2005 compared to 32.7% for 2004. The decrease in gross margin as a percentage of revenue was primarily attributable to the negative impact of competitive pricing pressures on our sales prices in Europe, write-offs of inventory as discussed above, and the additional freight and distribution costs associated with our move towards a direct distribution model in Europe in 2005.

Research and development expenses.    Our research and development expenses for the year ended December 31, 2005 increased $9.9 million, or 93.1%, to $20.5 million compared to $10.6 million for the same period in 2004. Research and development expenses increased as a result of additional staff and products developed in 2005 compared to 2004. This increase was primarily attributable to an increase of approximately $2.8 million in salary and related expenses due to additional headcount, an increase in outside consulting services and travel costs of approximately $1.7 million, an increase of $1.6 million in research supplies and expendable equipment due to increased product development activities in 2005 as compared to 2004, an increase in facility and depreciation expenses of approximately $1.0 million due to facility expansions and capital equipment purchases. In addition, costs recovered from customer funded development contracts decreased by $2.7 million, to $200,000, compared to $2.9 million for 2004.

Sales and marketing expenses.    Sales and marketing expenses for the year ended December 31, 2005 increased $2.9 million, or 60.6%, to $7.6 million compared to $4.7 million for the same period in 2004. The increase was primarily a result of an increase in sales and marketing efforts, which included hiring new personnel during 2005 to expand our European sales team, which increased salary and related expenses by approximately $1.6 million, an increase in marketing expenses of approximately $500,000, an increase in rent and utilities expense of $400,000 due primarily to facility expansions and an increase in travel costs of approximately $300,000 compared to 2004.

General and administrative expenses.    General and administrative expenses for the year ended December 31, 2005 increased approximately $2.4 million, or 46.5%, to $7.5 million compared to $5.1 million for the same period in 2004. The increase was primarily attributable to an increase in professional fees of approximately $1.4 million due largely to costs associated with complying with the requirements of Sarbanes-Oxley as well as tax accounting fees associated with consulting services related to evaluating our ability to utilize our net operating losses, and an increase in salary and related expenses of approximately $1.0 million due to additional headcount during 2005 as compared to 2004.

Interest income and expense.    Interest income and expense increased by approximately $1.3 million for the year ended December 31, 2005 compared to the same period in 2004 primarily due to the increase in our average cash and marketable securities balances in 2005, as well as an increase in the average yields realized on our marketable securities and cash balances, which resulted in higher income yielded as compared to 2004.

Provision for income taxes.    Income tax expense was approximately $1.4 million for 2005, which consists of federal and state taxes at our estimated effective tax rate of 31% offset by a revision of our valuation allowance on specific U.S. deferred tax assets of approximately $2.4 million. During 2005, management evaluated the deferred tax valuation allowance and determined that the valuation allowance on a portion of the U.S. deferred tax assets should be revised and as a result, the Company recorded a non-cash deferred income tax benefit to the Statements of Operations of $2.4 million for the year ended December 31, 2005. This determination was based on 2004 and 2005 operating results and in anticipation of using net operating losses due to current projections of future taxable income. In addition, we recorded a credit of $8.2 million to Stockholders’ Equity relating to the reduction of the valuation allowance on net operating loss carryforwards from stock option deductions.

The difference between the federal and state statutory rate of approximately 40% and our effective tax rate is due primarily to research and development credits generated in 2005 and a low effective state tax rate.

Net income.    For the year ended December 31, 2005, the Company reported net income applicable to common stockholders of $11.1 million as compared to $13.7 million for the same period in 2004.

 

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This excerpt taken from the NVTL 10-Q filed Nov 9, 2005.

Nine Months Ended September 30, 2005 Compared to Nine Months Ended September 30, 2004

 

Revenue. Revenue for the nine months ended September 30, 2005 increased $42.8 million, or 60.9%, to $113.1 million compared to $70.3 million for the same period in 2004. The overall increase in revenue is primarily attributable to an increase in product sales of approximately $45.3 million primarily due to strong demand for our UMTS U630 and EVDO PC Cards, which we introduced during the fourth quarter of 2004 and the first nine months of 2005, respectively. In addition, the increase in revenue was attributable to the introduction of our Ovation Multimedia Application Console during the first half of 2005. The increase in revenue was also attributable to the overall increase in demand for wireless products and wireless access services during the nine months ended September 30, 2005 as compared to the same period in 2004, which is the direct result of the continued deployment of 3G networks throughout Europe, North America, Asia and Africa. This increase in revenue was offset by a $2.6 million decrease in revenue recognized for development services during the nine months ended September 30, 2005 as compared to the same period in 2004. Revenue recognized for development services was approximately $500,000 for the nine months ended September 30, 2005, as compared to approximately $3.1 million for the same period in

 

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2004. We do not expect development services revenue to represent a significant percentage of total revenue in the foreseeable future.

 

Cost of revenue. Cost of revenue for the nine months ended September 30, 2005 increased $29.5 million, or 61.6%, to $77.4 million compared to $47.9 million for the same period in 2004. The increase in cost of revenue related to products of $31.9 million was primarily attributable to a $27.0 million increase in costs related to product shipments, an increase in manufacturing overhead costs of approximately $2.6 million, an increase in royalty costs of approximately $1.8 million, and an increase of $500,000 related to excess inventory for products that are no longer being manufactured, offset by a reduction in amortization of software licenses of approximately $200,000. Total cost of revenue for development services during the nine months ended September 30, 2005 amounted to $200,000 as compared to $2.4 million during the same period in 2004.

 

Gross profit. Gross profit for the nine months ended September 30, 2005 increased by $13.2 million, or 59.3% to $35.6 million compared to $22.4 million for the same period in 2004. The increase was primarily attributable to the increase in sales volume of our products. Gross margin as a percent of revenue were 31.5% for the nine months ended September 30, 2005 compared to 31.8% for same period in 2004. During the nine months ended September 30, 2005, our gross margins on our sales in Europe were negatively impacted by additional freight and distribution costs associated with our move towards a direct distribution model in Europe in 2005 and by the charge for excess inventory as described above, as compared to the same period in 2004.

 

Research and development. Research and development expenses for the nine months ended September 30, 2005 increased $5.9 million, or 80.5%, to $13.2 million compared to $7.3 million for the same period in 2004. The increase was primarily attributable to increases in salary and related expenses of approximately $1.8 million, an increase of approximately $1.1 million attributable to an increase in the use of research supplies and expendable equipment due to increased product development activities, and an increase in research and development overhead costs of approximately $900,000 during the nine months ended September 30, 2005 as compared to the same period in 2004. In addition, research and development expenses increased by approximately $2.1 million as a result of the reassignment of research and development personnel from customer funded development contracts to internally funded research and development projects during the nine months ended September 30, 2005 as compared to the same period in 2004.

 

Sales and marketing. Sales and marketing expenses for the nine months ended September 30, 2005 increased approximately $2.0 million, or 64.3%, to $5.2 million compared to approximately $3.2 million for the same period in 2004. The increase was primarily a result of an increase in sales and marketing efforts which included hiring new personnel during the second half of 2004 and during 2005, primarily to expand our European sales team, which increased salary and related expenses by approximately $1.3 million. In addition to the increases in personnel, sales and marketing overhead, travel and promotion expenses increased by approximately $700,000, as a result of the expansion of our sales force in Europe and marketing activities.

 

General and administrative. General and administrative expenses for the nine months ended September 30, 2005 increased approximately $2.0 million, or 55.0%, to $5.6 million compared to $3.6 million for the same period in 2004. The increase was primarily attributable to an increase in professional fees of approximately $1.0 million due primarily to costs associated with complying with the requirements of the Sarbanes-Oxley Act of 2002, as well as fees associated with our ongoing evaluation of our ability to utilize our net operating losses. Additionally, our salary and related expenses increased by approximately $1.0 million due to headcount increases during the nine months ended September 30, 2005 compared to the same period in 2004.

 

Interest income and expense, net. Interest income and expense, net increased by approximately $1.2 million for the nine months ended September 30, 2005 compared to the same period in 2004 primarily due to the increase in our average cash and marketable securities balances for the nine months ended September 30, 2005, as compared to the same period in 2004, as well as an increase in the average yields realized on our marketable securities and cash balances.

 

Provision for income taxes. Provision for income taxes of approximately $2.1 million for the nine months ended September 30, 2005 consists of federal and state taxes at our estimated effective tax rate of 35% offset by a revision of our valuation allowance on specific U.S. deferred tax assets of approximately $2.4 million. In addition, we recorded a credit of $4.0 million to Stockholders’ Equity relating to the revision of the valuation allowance on stock option deductions. For the remainder of 2005, we will continue to record income taxes at a rate equal to our combined federal and state effective rates. As a result of the utilization of our net operating loss carry-forwards, we

 

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do not anticipate paying any cash income taxes for 2005, other than possibly alternative minimum taxes and certain state taxes.

 

The difference between the federal and state statutory rate of 40% and our effective tax rate is due primarily to research and development credits generated in 2005 and a low effective state tax rate. Our future effective income tax rate depends on various factors, such as our profits before taxes, additional releases of valuation allowance reserves, the geographic composition of pre-tax income and the use of our net operating loss carryforwards. Future effective tax rates may therefore vary based on these factors.

 

Net income. For the nine months ended September 30, 2005, we reported net income available to common stockholders of $11.0 million as compared to net income available to common stockholders of $8.5 million for the same period in 2004. The increase in net income available to common stockholders was attributable to the results of operations described above and the income tax benefit recorded during the third quarter of 2005. No income taxes were provided for during the same period in 2004.

 

This excerpt taken from the NVTL 10-Q filed Aug 9, 2005.

Six Months Ended June 30, 2005 Compared to Six Months Ended June 30, 2004

 

Revenue. Revenue for the six months ended June 30, 2005 increased $31.6 million, or 80.7%, to $70.9 million compared to $39.3 million for the same period in 2004. The overall increase in revenue is primarily attributable to an increase in product sales of approximately $33.3 million primarily due to strong demand for our UMTS U630 and EVDO V620 PC Cards, which we introduced during the fourth quarter of 2004 and the first half of 2005, respectively. In addition, the increase in revenue was attributable to the introduction of our Ovation Multimedia Application Console during the first half of 2005. The increase in revenue was also attributable to the overall increase in demand for wireless products and wireless access services during the six months ended June 30, 2005 as compared to the same period in 2004, which is the direct result of the continued deployment of 3G networks throughout Europe, North America, Asia and Africa. This increase in revenue was offset by a $1.7 million decrease in revenue recognized for development services during the six months ended June 30, 2005 as compared to the same period in 2004. Revenue recognized for development services was approximately $500,000 for the first six months of 2005, as compared to approximately $2.2 million for the same period in 2004. We do not expect development services revenue to represent a significant percentage of total revenue in the foreseeable future.

 

Cost of revenue. Cost of revenue for the six months ended June 30, 2005 increased $21.2 million, or 78.0%, to $48.4 million compared to $27.2 million for the same period in 2004. The increase in cost of revenue was primarily attributable to an $18.6 million increase in costs related to product shipments, an increase in royalty costs of approximately $2.7 million and an increase in manufacturing overhead costs of approximately $1.3 million. Cost of revenue related to products was higher due to the increase in product sales as described above. Total cost of revenue for development services during the first half of 2005 amounted to $200,000 as compared to $1.6 million during the same period in 2004.

 

Gross profit. Gross profit for the six months ended June 30, 2005 increased by $10.4 million, or 86.7% to $22.5 million compared to $12.1 million for the same period in 2004. The increase was primarily attributable to the increase in sales volume of our products. Gross margin as a percent of revenue increased to 31.7% for the six months ended June 30, 2005 compared to 30.7% for same period in 2004. The increase in gross margin as a percentage of revenue was primarily attributable to sales of products with higher margin in 2005 as compared to 2004. During the second quarter, our margins on our sales in Europe were negatively impacted due to the weakening Euro as well as additional manufacturing overhead and freight costs associated with our move towards a direct distribution model in Europe in the fist six months of 2005 as compared to the same period in 2004.

 

Research and development. Research and development expenses for the six months ended June 30, 2005 increased $3.6 million, or 82.1%, to $8.0 million compared to $4.4 million for the same period in 2004. The increase was primarily attributable to increases in salary and related expenses of approximately $1.0 million, an increase of approximately $700,000 attributable to an increase in the use of research supplies and expendable equipment due to increased product development activities and an increase in research and development overhead costs of approximately $400,000 during the first half of 2005 as compared to the same period in 2004. In addition, research and development expenses increased by approximately $1.5 million as a result of the reassignment of research and development personnel from customer funded development contracts to internally funded research and development projects in the first half of 2005 as compared to the same period in 2004.

 

Sales and marketing. Sales and marketing expenses for the six months ended June 30, 2005 increased approximately $1.5 million, or 78.6%, to $3.3 million compared to approximately $1.8 million for the same period in 2004. The increase was primarily a result of an increase in sales and marketing efforts which included hiring new personnel during the second half of 2004 and the first half of 2005, primarily to expand our European sales team, which increased salary and related expenses by approximately $900,000. In addition to the increases in personnel,

 

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sales and marketing overhead, travel and promotion expenses increased by approximately $400,000, as a result of the expansion of our sales force in Europe and marketing activities.

 

General and administrative. General and administrative expenses for the six months ended June 30, 2005 increased approximately $1.4 million, or 63.5%, to $3.6 million compared to $2.2 million for the same period in 2004. The increase was primarily attributable to an increase in professional fees of approximately $700,000 due primarily to costs associated with complying with the requirements of The Sarbanes-Oxley Act of 2002 as well as fees associated with our ongoing evaluation of our ability to utilize our net operating losses. Additionally, our salary and related expenses increased by approximately $700,000 due to headcount increases during the second half of 2004 and the second half of 2005.

 

Interest income. Interest income increased by approximately $900,000 for the six months ended June 30, 2005 compared to the same period in 2004 due to the increase in our average cash and marketable securities balances for the first half of 2005, as compared to the same period in 2004, as well as an increase in the average yields realized on our marketable securities and cash balances.

 

Provision for income taxes. Provision for income taxes of approximately $3.0 million for the six months ended June 30, 2005 consists of federal and state taxes at our estimated effective tax rate of 35%. The difference between the federal and state statutory rate of 40% and our effective tax rate is due primarily to research and development credits generated in 2005 and a low effective state tax rate. Our future effective income tax rate depends on various factors, such as the company’s profits before taxes, release of valuation allowance reserves, the geographic composition of pre-tax income and the use of our net operating loss carryforwards. Future effective tax rates may therefore vary based on these factors.

 

Net income. For the six months ended June 30, 2005, we reported net income available to common stockholders of $5.5 million as compared net income available to common stockholders of $3.6 million for the same period in 2004.

 

This excerpt taken from the NVTL 10-Q filed May 10, 2005.

Three Months Ended March 31, 2005 Compared to Three Months Ended March 31, 2004

 

Revenue. Revenue for the three months ended March 31, 2005 increased $17.2 million, or 113.5%, to $32.3 million compared to $15.1 million for the same period in 2004. The overall increase in revenue is attributable to an increase in product sales of approximately $17.7 million primarily due to higher sales volumes resulting from our introduction of our new UMTS and EVDO products during the fourth quarter of 2004 and the first quarter of 2005. The increase in revenue was also attributable to the overall increase in demand for wireless products and wireless access services during the first quarter of 2005 as compared to the first quarter of 2004. Revenue recognized for development services was approximately $500,000 during the first quarter of 2005 as compared to approximately $1.0 million for the same period in 2004. We do not expect development services revenue to represent a significant percentage of total revenue in the foreseeable future.

 

Cost of revenue. Cost of revenue for the three months ended March 31, 2005 increased $10.9 million, or 100.6%, to $21.7 million compared to $10.8 million for the same period in 2004. The increase in cost of revenue was attributable to a $9.6 million increase in costs related to product shipments, an increase in royalty costs of approximately $1.5 million and an increase in manufacturing overhead costs of approximately $400,000. Cost of revenue related to products was higher due to the increase in product sales as described above. Total cost of revenue for development services during the first quarter of 2005 and 2004 amounted to $200,000 and $800,000, respectively.

 

Gross profit. Gross profit for the three months ended March 31, 2005 increased by $6.4 million, or 145.6% to $10.7 million compared to $4.3 million for the same period in 2004. The increase was primarily attributable to the

 

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increase in sales volume of our products with consistent or higher margins as discussed above. Gross margin as a percent of revenue increased to 33.0% for the three months ended March 31, 2005 compared to 28.7% for same period in 2004. The increase in gross margin as a percentage of revenue was primarily attributable to sales of products with higher margin and higher margins on development services revenue in 2005 as compared to 2004.

 

Research and development expenses. Research and development expenses for the three months ended March 31, 2005 increased $1.5 million, or 78.0%, to $3.5 million compared to $2.0 million for the same period in 2004. The increase was primarily attributable to increases in salary and related expenses of approximately $500,000, an increase of approximately $200,000 attributable to an increase in the use of research supplies and expendable equipment due to increased product development activities and an increase in research and development overhead and travel costs of approximately $200,000 in 2005 as compared to 2004. In addition, research and development expenses increased by approximately $600,000 as a result of the reassignment of research and development personnel from customer funded development contracts to internally funded research and development projects in 2005 as compared to the first quarter of 2004.

 

Sales and marketing expenses. Sales and marketing expenses for the three months ended March 31, 2005 increased approximately $850,000, or 100%, to $1.7 million compared to approximately $850,000 for the same period in 2004. The increase was primarily a result of an increase in sales and marketing efforts which included hiring new personnel during the second half of 2004 and the first quarter of 2005, primarily to expand our European sales team, which increased salary and related expenses by approximately $500,000. In addition to the increases in personnel, marketing and related trade show and travel expenses increased by approximately $200,000.

 

General and administrative expenses. General and administrative expenses for the three months ended March 31, 2005 increased approximately $1.0 million, or 105.7%, to $1.9 million compared to $900,000 for the same period in 2004. The increase was primarily attributable to an increase in professional fees of approximately $500,000 due primarily to costs associated with complying with the requirements of The Sarbanes-Oxley Act of 2002 as well as fees associated with the ongoing professional fees associated with evaluating the ability to utilize our net operating losses and an increase in salary and related expenses of approximately $400,000 due to additional headcount increases during the second half of 2004 and the first quarter of 2005.

 

Interest income. Interest income increased by approximately $500,000 for the three months ended March 31, 2005 compared to the same period in 2004 due to the increase in our average cash and marketable securities balances in 2005 as compared to the three months ended March 31, 2004.

 

Provision for income taxes. Provision for income taxes of approximately $1.4 million for the three months ended March 31, 2005 consists of Federal and state taxes at our estimated effective tax rate of 35%. The difference between the Federal and state statutory rate of 40% and our effective tax rate is due primarily to research and development credits generated in 2005 and a low effective state tax rate.

 

Net income. For the three months ended March 31, 2005, we reported net income available to common stockholders of $2.7 million as compared net income available to common stockholders of $413,000 for the same period in 2004.

 

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