x

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

For the fiscal period ended March 31, 2003

OR

o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number 000-50223

ACTIVCARD CORP.

(Exact name of Registrant as specified in its charter)

Delaware

450485038

(State or other jurisdiction of incorporation of organization)

(I.R.S. Employer Identification Number)

6623 Dumbarton Circle, Fremont, California 94555

(Address of principal executive offices including Zip code)

(510) 574-0100

(Registrant’s telephone number, including area code)

NOT APPLICABLE

(Former name, former address and former fiscal year, if changed since last report)

YES   x

NO   o

YES   x

NO   o

PART I: FINANCIAL INFORMATION

Item 1

Financial Statements

Condensed Consolidated Statements of Operations

3

Condensed Consolidated Balance Sheets

4

Condensed Consolidated Statements of Cash Flows

5

Notes to Condensed Consolidated Financial Statements

6

Item 2

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

16

Item 3

Quantitative and Qualitative Disclosures about Market Risk

36

Item 4

Controls and Procedures

36

PART II: OTHER INFORMATION

Item 1

Legal Proceedings

37

Item 2

Changes in Securities and Use of Proceeds

37

Item 3

Defaults Upon Senior Securities

37

Item 4

Submission of Matters to a Vote of Security Holders

37

Item 5

Other Information

37

Item 6

Exhibits and Reports on Form 8-K

37

SIGNATURES

37

CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

38

Three months ended
March 31,

2003

2002

Revenue

Hardware

$

5,485

$

2,656

Software and maintenance

7,582

5,509

13,067

8,165

Cost of revenue

Hardware

3,784

1,835

Software and maintenance

1,378

810

5,162

2,645

Gross margin

7,905

5,520

Operating expenses

Research and development

4,394

4,988

Sales and marketing

5,147

5,232

General and administrative

1,374

927

Amortization of acquired intangible assets

152

566

Other charges

2,190

7,771

Total operating expenses

13,257

19,484

Loss from operations

(5,352

)

(13,964

)

Interest expense

—  

(7

)

Interest income

1,245

1,249

Foreign exchange (loss) gain

(216

)

35

Loss from continuing operations before income taxes and minority interest

(4,323

)

(12,687

)

Income tax expense

(62

)

(1

)

Minority interest

49

—  

Loss from continuing operations

(4,336

)

(12,688

)

Loss from discontinued operations

(228

)

(15,918

)

Net loss

$

(4,564

)

$

(28,606

)

Basic and diluted loss per common share:

From continuing operations

$

(0.10

)

$

(0.31

)

From discontinued operations

(0.01

)

$

(0.40

)

$

(0.11)

$

(0.71

)

Shares used in the calculation of loss per common share:

Basic and diluted

40,614,240

40,511,626

Other charges were comprised of:

Acquired in process research and development

$

—  

$

68

Amortization of deferred stock compensation:

Cost of revenue

10

7

Research and development

156

190

Sales and marketing

106

128

General and administrative

26

26

Restructuring and business realignment expenses

947

7,352

Re-incorporation expenses

945

—  

Total other charges

$

2,190

$

7,771

March 31, 2003

December 31, 2002

ASSETS

Current assets

Cash and equivalents

$

43,629

$

158,880

Short-term investments

201,468

89,502

Accounts receivable (net of allowance for doubtful accounts of $522 and $525 at March 31, 2003 and December 31, 2002, respectively)

10,888

9,192

Other receivables

2,283

1,579

Inventories

4,298

3,488

Assets held for sale

—  

262

Other current assets

2,278

1,959

Total current assets

264,844

264,862

Restricted investments

524

432

Property and equipment

6,976

7,313

Goodwill

10,600

10,600

Other intangible assets

2,144

2,311

Other long-term assets

848

874

$

285,936

$

286,392

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities

Accounts payable and accrued liabilities

$

12,749

$

10,493

Current portion of restructuring and business realignment accruals

835

867

Deferred revenue

3,383

3,997

Liabilities held for sale

—  

250

Current portion of long-term debt

—  

15

Current portion of obligations under capital lease

6

7

Total current liabilities

16,973

15,629

Long-term portion of restructuring and business realignment accruals

4,267

4,429

Other long-term liabilities

580

525

Total long-term liabilities

4,847

4,954

Minority interest

13,603

—  

Commitments and contingencies

Shareholders’ equity

Preferred shares, $0.001 par value, none issued

—  

—  

Common shares, $0.001 par value, 39,887 shares issued and outstanding at March 31, 2003; €1.00 nominal value, 41,690 shares issued and outstanding at December 31, 2002

40

45,117

Additional paid-in capital

380,452

354,400

Accumulated other comprehensive loss

(13,642

)

(14,817

)

Deferred stock compensation

(2,154

)

(3,122

)

Accumulated deficit

(114,183

)

(115,769

)

Total shareholders’ equity

250,513

265,809

$

285,936

$

286,392

Three months ended
March 31,

2003

2002

Operating activities

Loss from continuing operations

$

(4,336

)

$

(12,688

)

Adjustments to reconcile loss from continuing operations to net cash used in continuing operations:

Depreciation and amortization

827

924

Amortization of acquired intangible assets

152

587

In process research and development

—  

68

Amortization of deferred stock compensation

298

351

Non-cash restructuring and business realignment expenses

520