UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||
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| For the fiscal period ended March 31, 2003 | |||
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||
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| For the transition period from _________ to ________ | |||
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| Commission File Number 000-30612 | |||
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| ACTIVCARD S.A. | |||
| (Exact name of Registrant as specified in its charter) | |||
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| Delaware |
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450485038 | |
| (State or other jurisdiction of incorporation of organization) |
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(I.R.S. Employer Identification Number) | |
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| 6623 Dumbarton Circle, Fremont, California 94555 | |||
| (Address of principal executive offices including Zip code) | |||
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| (510) 574-0100 | |||
| (Registrant’s telephone number, including area code) | |||
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| NOT APPLICABLE | |||
| (Former name, former address and former fiscal year, if changed since last report) | |||
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
| YES x |
NO o |
Indicate by check mark whether the Registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).
| YES o |
NO x |
The number of shares of the Registrant’s Common Stock outstanding on April 30, 2003 was 42,033,301.
ACTIVCARD S.A.
TABLE OF CONTENTS
| PART I: FINANCIAL INFORMATION |
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| Item 1 |
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3 | |
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4 | |
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5 | |
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6 | |
| Item 2 |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
16 |
| Item 3 |
35 | |
| Item 4 |
36 | |
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| PART II: OTHER INFORMATION |
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| Item 1 |
37 | |
| Item 2 |
37 | |
| Item 3 |
37 | |
| Item 4 |
37 | |
| Item 5 |
37 | |
| Item 6 |
37 | |
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| 37 | ||
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| CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 |
38 | |
2
EXPLANATORY NOTE
In August 2002, ActivCard S.A. formed a new entity, ActivCard Corp., a Delaware corporation, to undertake a registered exchange offer for the purpose of moving the domicile of the publicly listed entity in the ActivCard group of companies from the Republic of France to the State of Delaware in the United States. The exchange offer closed on February 3, 2003, with ActivCard Corp. acquiring 94.8% of the outstanding ActivCard S.A. securities. ActivCard S.A. believes it is not currently able to file with the U.S. Securities and Exchange Commission (the "SEC") a Certificate of Termination of Registration on Form 15 pursuant to Rule 12g-4 of the Securities Exchange Act of 1934 (the "Exchange Act"). As a result, both ActivCard S.A. and ActivCard Corp. are currently required to file periodic and current reports with the SEC pursuant to the Exchange Act.
The unaudited condensed consolidated financial statements included in this quarterly report on Form 10-Q present the financial position and results of operations and cash flows for ActivCard S.A., an affiliate of ActivCard Corp. the publicly listed company in the ActivCard group of companies trading under the symbol "ACTI." ActivCard Corp. does not have any assets or liabilities other than its investment in and receivable from ActivCard S.A. The unaudited condensed consolidated financial statements of ActivCard S.A. for the period ended March 31, 2003 should be read in conjunction with (i) ActivCard Corp.'s Quarterly Report on Form 10-Q for the period ended March 31, 2003 and (ii) ActivCard S.A.'s audited consolidated financial statements included in ActivCard Corp.'s Annual Report on Form 10-K for the fiscal year ended December 31, 2002.
Unless otherwise expressly indicated, references to the "Company", "ActivCard", "we", "us" and "our" refer to the consolidated group of ActivCard companies, excluding ActivCard Corp.
ACTIVCARD S.A.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
(Unaudited)
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Three months ended |
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2003 |
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2002 |
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| Revenue |
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| Hardware |
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$ |
5,485 |
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$ |
2,656 |
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| Software and maintenance |
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7,582 |
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5,509 |
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13,067 |
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8,165 |
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| Cost of revenue |
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| Hardware |
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3,784 |
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1,835 |
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| Software and maintenance |
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1,378 |
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810 |
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5,162 |
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2,645 |
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| Gross margin |
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7,905 |
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5,520 |
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| Operating expenses |
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| Research and development |
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4,394 |
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4,988 |
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| Sales and marketing |
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5,147 |
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5,232 |
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| General and administrative |
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1,374 |
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927 |
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| Amortization of acquired intangible assets |
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152 |
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566 |
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| Other charges |
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2,190 |
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7,771 |
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| Total operating expenses |
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13,257 |
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19,484 |
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| Loss from operations |
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(5,352 |
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(13,964 |
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| Interest expense |
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— |
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(7 |
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| Interest income |
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1,245 |
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1,249 |
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| Foreign exchange (loss) gain |
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(216 |
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35 |
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| Loss from continuing operations before income taxes |
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(4,323 |
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(12,687 |
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| Income tax expense |
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(62 |
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(1 |
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| Loss from continuing operations |
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(4,385 |
) |
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(12,688 |
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| Loss from discontinued operations |
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(228 |
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(15,918 |
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| Net loss |
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$ |
(4,613 |
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$ |
(28,606 |
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| Basic and diluted loss per common share: |
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| From continuing operations |
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$ |
(0.10 |
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$ |
(0.31 |
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| From discontinued operations |
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(0.01 |
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$ |
(0.40 |
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$ |
(0.11 |
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$ |
(0.71 |
) |
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| Shares used in the calculation of loss per common share: |
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| Basic and diluted |
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41,954,924 |
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40,511,626 |
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| Other charges were comprised of: |
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| Acquired in process research and development |
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$ |
— |
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$ |
68 |
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| Amortization of deferred stock compensation: |
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| Cost of revenue |
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10 |
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7 |
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| Research and development |
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156 |
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190 |
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| Sales and marketing |
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106 |
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128 |
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| General and administrative |
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26 |
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26 |
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| Restructuring and business realignment expenses |
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947 |
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7,352 |
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| Re-incorporation expenses |
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945 |
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— |
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| Total other charges |
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$ |
2,190 |
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$ |
7,771 |
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See accompanying notes to unaudited condensed consolidated financial statements.
3
ACTIVCARD S.A.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
(Unaudited)
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March 31, |
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December 31, |
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| ASSETS |
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| Current assets |
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| Cash and equivalents |
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$ |
43,629 |
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$ |
158,880 |
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| Short-term investments |
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201,468 |
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89,502 |
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| Accounts receivable (net of allowance for doubtful accounts of $522 and $525 at March 31, 2003 and December 31, 2002, respectively) |
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10,888 |
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9,192 |
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| Other receivables |
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2,283 |
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1,579 |
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| Inventories |
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4,298 |
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3,488 |
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| Assets held for sale |
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— |
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262 |
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| Other current assets |
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2,278 |
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1,959 |
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| Total current assets |
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264,844 |
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264,862 |
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| Restricted investments |
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524 |
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432 |
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| Property and equipment |
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6,976 |
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7,313 |
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| Goodwill |
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10,600 |
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10,600 |
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| Other intangible assets |
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2,144 |
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2,311 |
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| Other long-term assets |
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848 |
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874 |
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$ |
285,936 |
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$ |
286,392 |
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| LIABILITIES AND SHAREHOLDERS’ EQUITY |
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| Current liabilities |
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| Accounts payable and accrued liabilities |
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$ |
12,749 |
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$ |
10,493 |
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| Current portion of restructuring and business realignment accruals |
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835 |
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867 |
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| Deferred revenue |
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3,383 |
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3,997 |
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| Related party payable |
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83 |
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— |
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| Liabilities held for sale |
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— |
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250 |
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| Current portion of long-term debt |
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— |
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15 |
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| Current portion of obligations under capital lease |
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6 |
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7 |
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| Total current liabilities |
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17,056 |
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15,629 |
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| Long-term portion of restructuring and business realignment accruals |
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4,267 |
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4,429 |
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| Other long-term liabilities |
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580 |
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525 |
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| Total long-term liabilities |
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4,847 |
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4,954 |
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| Commitments and contingencies |
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| Shareholders’ equity |
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| Common shares, €1.00 nominal value; 42,033 and 41,690 shares issued and outstanding at March 31, 2003 and December 31, 2002, respectively |
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45,481 |
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45,117 |
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| Additional paid-in capital |
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355,591 |
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354,400 |
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| Accumulated other comprehensive loss |
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(14,386 |
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(14,817 |
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| Deferred stock compensation |
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(2,271 |
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(3,122 |
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| Accumulated deficit |
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(120,382 |
) |
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(115,769 |
) |
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| Total shareholders’ equity |
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264,033 |
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265,809 |
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$ |
285,936 |
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$ |
286,392 |
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See accompanying notes to unaudited condensed consolidated financial statements.
4
ACTIVCARD S.A.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
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Three months ended |
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2003 |
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2002 |
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| Operating activities |
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| Loss from continuing operations |
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$ |
(4,385 |
) |
$ |
(12,688 |
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| Adjustments to reconcile loss from continuing operations to net cash used in continuing operations: |
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| Depreciation and amortization |
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|
827 |
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|
924 |
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| Amortization of acquired intangible assets |
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152 |
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587 |
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| In process research and development |
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— |
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68 |
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| Amortization of deferred stock compensation |
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298 |
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351 |
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| Non-ca | |||||||