A Message From Our Founder

This first year of the new millennium was an important time for Actuality Systems. It was a year that saw accomplishment of key goals, acceptance in key markets, and encouragement from key customers. It was a year of small successes that marked major milestones in the growth and development of our company.

FIRST INDUSTRY DEMONSTRATIONS

In late spring, after more than a year of development work, we unveiled our first working model of the new Actuality 3D volumetric display, codenamed Helios. The reception was outstanding. Industry leaders who gathered in San Jose for the 32nd Annual Symposium of the Society for Information Display ("SID") signed up for more information, and the press reports following the show were enthusiastic. One article in Microdisplay Report said, "We had a chance to see the prototype at SID and were indeed impressed. It is clearly the best looking volumetric display produced to date."

Development work continued on the prototype unit leading up to a full-scale demonstration at one of the industry's preeminent trade shows. SIGGRAPH 2001, the 28th International Conference on Computer Graphics and Interactive Technologies, was held at the Los Angeles Convention Center in August, and the new 3-D volumetric display from Actuality Systems proved to be one of the most widely-covered stories to come out of the conference, with follow-up articles appearing in the U.S., Europe, and Asia. The most recent example of our publicity successes this year was an article and photo in the "Must Read" section of the January 2002 Wired.

BETA-TESTING PROGRAM BEGINS

In the fall, we announced the progress of a limited beta testing phase when Structural GenomiX (SGX) of San Diego was selected as the first beta customer. SGX is a leader in experimental and computational structural biology, transforming genetic information into structural templates for drug discovery. The company will use the 360-degree display to help define the unique molecular structure of proteins for drug discovery and design.

According to SGX, the greatest value of the new 3-D display is its potential impact on work flow and collaboration. Many scientists working on molecular modeling for drug design currently spend a good part of their day working on a flat screen with goggles that can only simulate 3D. Using the Actuality Systems display will provide them with a far more natural work space, making team collaboration much easier. In addition, when used as a presentation tool, the walk-around display will make it easier for managers and clients to better visualize and understand the data. SGX is anticipated to begin working with the display this month.

Biotechnology and drug design continues to be one of our primary initial target markets for the new display, and a second beta customer - a leading publicly traded pharmaceutical company - has already been selected.

TAKING ORDERS FOR PRE-PRODUCTION DISPLAYS

In addition to the customers selected to participate actively in our beta program, we also announced in December that we would begin taking orders for a limited number of pre-production models of the display. The fully-functional units start at US$65,000, with a variety of software options, and will be released for shipment later in 2002. We discovered after talking with a number of potential customers that many companies with high-end visualization requirements would appreciate the opportunity to purchase a pre-production display that they could experiment with. It offers them an edge in applying cutting-edge technology to fit their competitive needs as quickly as possible.

BRIDGE ROUND OF FUNDING COMPLETED

Financially, we continued according to plan in 2001. In July, we completed a bridge round of nearly $1 million in private funding.

OPPORTUNITIES FOR THE FUTURE

As the year came to a close, there were a number of significant efforts underway that promise continued success for Actuality Systems in the coming year. In the marketing area, we have now built four 3-D displays that are full working models. These units are being used for presentation to potential customers, investors, and the media. This is a major improvement in our ability to explain the value and benefits of the product. In support of these efforts, we have launched an attractive new web site that uses high-quality photographs to provide more details and descriptions of the product and the company.

In the area of applied research, we are working in several new markets, including medical imaging. Actuality Systems engineers are working with data from major medical imaging organizations to explore the value that Actuality's volumetric 3-D technology can add to healthcare. We are encouraged by our initial successes in projecting mammogram data in true 3D. This application may be valuable to non-radiologist physicians and surgeons, for example, in showing the location of tumors.

Looking back on 2001, it was a year of successes for Actuality Systems, a year in which our company started strong - and finished even stronger. We have an extraordinary team of talented and dedicated professionals. Together, we are encouraged by our accomplishments and are enthusiastic about our challenges. The future of 3D technology is filled with opportunities, and we intend to capture our share.

Gregg Favalora
Founder and Chief Technology Officer