x  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2002

California

95-4522566

(State or other jurisdiction of
Incorporation or organization)

(I.R.S. Employer Identification No.)

300 Atrium Drive, 2^nd Floor, Somerset, New Jersey       08873

(Address of principal executive offices)                                             (Zip Code)

Registrant’s telephone number, including area code:(732) 537-3700

PAGE

PART I.

FINANCIAL INFORMATION

Item 1.

Financial Statements (unaudited):

Condensed Consolidated Balance Sheets as of June 30, 2002 and December 31, 2001

1

Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2002 and 2001

2

Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2002 and 2001

3

Notes to Unaudited Condensed Consolidated Financial Statements

4

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

10

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

33

PART II.

OTHER INFORMATION

Item 1.

Legal Proceedings

36

Item 2.

Changes in Securities and Use of Proceeds

36

Item 3.

Defaults Upon Senior Securities

36

Item 4.

Submission of Matters to a Vote of Security Holders

36

Item 5.

Other Information

37

Item 6.

Exhibits and Reports on Form 8-K

37

June 30,
2002

December 31,
2001

ASSETS

Current assets

Cash and cash equivalents

$

45,832

$

49,779

Short term investments

33,882

42,903

Accounts receivable, net

1,524

19,849

Inventories

2,866

8,735

Prepaid expenses and other current assets

3,939

10,485

Total current assets

88,043

131,751

Property and equipment, net

35,245

28,160

Deferred income taxes

—

22,790

Other assets

4,271

4,352

Total assets

$

127,559

$

187,053

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:

Accounts payable

$

5,715

$

8,366

Accrued expenses

13,199

20,506

Accrued warranty costs

793

1,293

Software and equipment financing-current portion

4,944

1,995

Lease obligations-current portion

1,506

1,060

Income taxes payable

926

—

Total current liabilities

27,083

33,220

Lease obligations-net of current portion

—

221

Software and equipment financing-net of current portion

7,230

1,452

Commitments and contingencies

Shareholders’ equity:

Common stock, $.0001 par value:

Class A

5

4

Class B

3

3

Additional paid-in-capital

184,529

192,212

Deferred stock compensation

(11,856

)

(15,207

)

Accumulated deficit

(79,362

)

(24,851

)

Accumulated other comprehensive income

528

117

Shareholder loan

(483

)

—

Treasury stock, at cost

(118

)

(118

)

Total shareholders’ equity

93,246

152,160

Total liabilities and shareholders’ equity

$

127,559

$

187,053

Three Months Ended
June 30,

Six Months Ended
June 30,

2002

2001

2002

2001

Total revenues.

$

4,959

$

35,103

$

15,050

$

66,171

Cost of revenues

Product.

2,092

12,721

7,537

24,070

Inventory write down and related charges.

5,307

—

5,307

4,895

Fixed asset impairment.

1,051

—

1,051

—

Deferred stock compensation.

324

445

888

921

Total cost of revenues.

8,774

13,166

14,783

29,886

Gross (loss) profit.

(3,815

)

21,937

267

36,285

Operating expenses:

Research and development, excluding deferred stock compensation

11,949

13,259

24,738

25,795

Sales and marketing, excluding deferred stock compensation.

3,720

4,507

7,652

8,034

General and administrative, excluding deferred stock compensation

2,068

3,310

4,466

6,256

Deferred stock compensation.

2,501

2,303

4,714

4,884

Total operating expenses.

20,238

23,379

41,570

44,969

Operating loss.

(24,053

)

(1,442

)

(41,303

)

(8,684

)

Other income and expenses

Interest expense.

(194

)

(88

)

(282

)

(185

)

Other income (including $256 and $314 of equity losses in affiliate during the three and six months in 2002, respectively and $77 and $207 in 2001, respectively).

289

132

768

344

Loss before provision (benefit) for income taxes..

(23,958

)

(1,398

)

(40,817

)

(8,525

)

Provision (benefit) for income taxes.

20,062

(545

)

13,694

(3,221

)

Net loss.

(44,020

)

(853

)

(54,511

)

(5,304

)

Accretion of redeemable convertible preferred stock to redemption value

—

—

—

24

Net loss attributable to common shareholders.

$

(44,020

)

$

(853

)

$

(54,511

)

$

(5,328

)

Net loss per share, basic and diluted.

$

(0.60

)

$

(0.03

)

$

(0.76

)

$

(0.17

)

Weighted average shares of common stock, basic and diluted.

72,911

33,688

71,807

31,874

The composition of the amortization of deferred stock compensation is as follows:

Research and development.

$

1,522

$

1,146

$

2,885

$

2,527

Sales and marketing.

392

429

663

852

General and administrative.

587

728

1,166

1,505

Total.

$

2,501

$

2,303

$

4,714

$

4,884

Six Months Ended
June 30,

2002

2001

Cash flows from operating activities:

Net loss.

$

(54,511

)

$

(5,304

)

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization.

6,449

4,024

Fixed asset impairment charge

1,051

—

Inventory write down & related charges

5,307

4,895

Deferred stock compensation.