Form 10-Q
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þ
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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 Quarterly period ended September 30, 2003 | ||
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o
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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 | ||
Commission File Number 000-26521
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Delaware
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94-3334199 | |
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(State or other jurisdiction of Incorporation or organization) |
(IRS Employer Identification No.) |
5858 Horton St., Suite 350, Emeryville, CA 94608
(510) 985-7400
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 þ No o
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes þ No o
The number of shares outstanding of the registrants Common Stock as of October 31, 2003 was 46,516,716.
The Exhibit Index begins on page 41.
ASK JEEVES, INC.
TABLE OF CONTENTS
| Page | ||||||
| PART I. FINANCIAL INFORMATION | ||||||
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Item 1.
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Unaudited Condensed Consolidated Financial Statements: | |||||
| Condensed Consolidated Balance Sheets as of September 30, 2003 and December 31, 2002 | 3 | |||||
| Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2003 and 2002 | 4 | |||||
| Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2003 and 2002 | 5 | |||||
| Notes to the Unaudited Condensed Consolidated Financial Statements | 6 | |||||
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Item 2.
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Managements Discussion and Analysis of Financial Condition and Results of Operations | 13 | ||||
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Item 3.
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Quantitative and Qualitative Disclosure About Market Risk | 38 | ||||
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Item 4.
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Controls and Procedures | 38 | ||||
| PART II. OTHER INFORMATION | ||||||
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Item 1.
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Legal Proceedings | 39 | ||||
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Item 2.
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Change in Securities | 39 | ||||
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Item 3.
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Defaults Upon Senior Securities | 39 | ||||
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Item 4.
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Submission of Matters to a Vote of Securities Holders | 39 | ||||
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Item 5.
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Other Information | 39 | ||||
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Item 6.
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Exhibits and Reports on Form 8-K | 39 | ||||
| Signatures | 40 | |||||
Cautionary Note regarding Forward-Looking Statements
In addition to historical information, this Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Forward-looking statements are those that predict or describe future events or trends and that do not relate solely to historical matters. You can generally identify forward-looking statements as statements containing the words believe, expect, will, anticipate, intend, estimate, project, assume or other similar expressions, although not all forward-looking statements contain these identifying words. All statements in this report regarding our future strategy, future operations, projected financial position, estimated future revenues, projected costs, future prospects, and results that might be obtained by pursuing managements current plans and objectives are forward-looking statements. You should not place undue reliance on our forward-looking statements because the matters they describe are subject to known and unknown risks, uncertainties and other unpredictable factors, many of which are beyond our control. Our forward-looking statements are based on the information currently available to us and speak only as of the date on which this report was filed with the SEC. We expressly disclaim any obligation to issue any updates or revisions to our forward-looking statements, even if subsequent events cause our expectations to change regarding the matters discussed in those statements. Over time, our actual results, performance or achievements will likely differ from the anticipated results, performance or achievements that are expressed or implied by our forward-looking statements, and such difference might be significant and materially adverse to our stockholders. Many important factors that could cause such a difference are described in this Quarterly Report under the caption Risk Factors as well as in our most recent Annual Report on Form 10-K under the captions Competition, Proprietary Rights and Risk Factors, all of which you should review carefully. Please consider our forward-looking statements in light of those risks as you read this report.
2
PART I. FINANCIAL INFORMATION
| Item 1. | Unaudited Condensed Consolidated Financial Statements |
ASK JEEVES, INC.
| September 30, | December 31, | |||||||||
| 2003 | 2002 | |||||||||
| (Unaudited) | (Note 1) | |||||||||
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ASSETS
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Current assets:
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Cash and cash equivalents
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$ | 82,766 | $ | 27,613 | ||||||
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Marketable securities
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89,408 | 5,827 | ||||||||
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Restricted cash and marketable securities
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| 11,000 | ||||||||
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Total cash, cash equivalents and marketable
securities
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172,174 | 44,440 | ||||||||
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Accounts receivable, net
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11,894 | 7,600 | ||||||||
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Prepaid expenses and other current assets
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3,692 | 2,272 | ||||||||
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Assets of discontinued operations
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| 2,699 | ||||||||
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Total current assets
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187,760 | 57,011 | ||||||||
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Property and equipment, net
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10,546 | 10,922 | ||||||||
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Intangible assets, net
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1,361 | 2,948 | ||||||||
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Other assets
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4,434 | 1,295 | ||||||||
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Total assets
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$ | 204,101 | $ | 72,176 | ||||||
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LIABILITIES AND STOCKHOLDERS EQUITY
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Current liabilities:
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Accounts payable and other accrued liabilities
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$ | 14,434 | $ | 8,209 | ||||||
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Accrued compensation and related expenses
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4,658 | 3,598 | ||||||||
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Accrued restructuring costs
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1,355 | 1,892 | ||||||||
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Deferred revenue
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6,220 | 8,633 | ||||||||
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Deferred gain on joint venture
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| 6,226 | ||||||||
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Borrowings under line of credit
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| 11,000 | ||||||||
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Liabilities of discontinued operations
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| 3,015 | ||||||||
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Total current liabilities
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26,667 | 42,573 | ||||||||
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Convertible subordinated notes
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115,000 | | ||||||||
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Other liabilities
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326 | 326 | ||||||||
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Total liabilities
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141,993 | 42,899 | ||||||||
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Commitments and contingencies Stockholders
equity:
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Convertible preferred stock, $.001 par value;
5,000,000 shares authorized; no shares issued or outstanding
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Common stock, $.001 par value; 150,000,000 shares
authorized; 45,911,170 and 41,418,334 shares issued and
outstanding at September 30, 2003 and December 31,
2002, respectively
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738,757 | 725,366 | ||||||||
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Deferred stock compensation
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| (7 | ) | |||||||
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Accumulated deficit
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(678,324 | ) | (696,735 | ) | ||||||
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Accumulated other comprehensive income
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1,675 | 653 | ||||||||
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Total stockholders equity
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62,108 | 29,277 | ||||||||
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Total liabilities and stockholders equity
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$ | 204,101 | $ | 72,176 | ||||||
See accompanying notes to condensed consolidated financial statements.
3
ASK JEEVES, INC.
| Three Months Ended | Nine Months Ended | ||||||||||||||||
| September 30, | September 30, | September 30, | September 30, | ||||||||||||||
| 2003 | 2002 | 2003 | 2002 | ||||||||||||||
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Revenue
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$ | 27,176 | $ | 15,886 | $ | 75,458 | $ | 44,880 | |||||||||
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Cost of revenue
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5,256 | 5,108 | 16,259 | 14,238 | |||||||||||||
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Gross profit
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21,920 | 10,778 | 59,199 | 30,642 | |||||||||||||
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Operating expenses:
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Product development
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4,207 | 3,370 | 11,006 | 10,583 | |||||||||||||
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Sales and marketing
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8,235 | 6,390 | 22,263 | 20,688 | |||||||||||||
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General and administrative
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4,845 | 3,429 | 14,036 | 11,766 | |||||||||||||
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Impairment and write-off of long-lived assets
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702 | | 702 | 2,592 | |||||||||||||
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Restructuring and other
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| 73 | | 513 | |||||||||||||
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Total operating expenses
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17,989 | 13,262 | 48,007 | 46,142 | |||||||||||||
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Operating income (loss)
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3,931 | (2,484 | ) | 11,192 | (15,500 | ) | |||||||||||
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Gains on acquisition and dissolution of joint
ventures
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| | 6,356 | 974 | |||||||||||||
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Interest and other income, net
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646 | 249 | 1,007 | 809 | |||||||||||||
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Income (loss) before income tax provision
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4,577 | (2,235 | ) | 18,555 | (13,717 | ) | |||||||||||
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Income tax provision
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738 | | 1,408 | | |||||||||||||
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Income (loss) from continuing operations
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3,839 | (2,235 | ) | 17,147 | (13,717 | ) | |||||||||||
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Discontinued operations:
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Loss from discontinued operations
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| (2,135 | ) | (1,218 | ) | (9,591 | ) | ||||||||||
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Gain on sale of discontinued operations, net of
taxes
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2,482 | | 2,482 | | |||||||||||||
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Income (loss) from discontinued operations
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2,482 | (2,135 | ) | 1,264 | (9,591 | ) | |||||||||||
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Net income (loss)
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$ | 6,321 | $ | (4,370 | ) | $ | 18,411 | $ | (23,308 | ) | |||||||
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Earnings per share Basic
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Income (loss) from continuing operations
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$ | 0.09 | $ | (0.06 | ) | $ | 0.39 | $ | (0.34 | ) | |||||||
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Income (loss) from discontinued operations
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$ | 0.05 | $ | (0.05 | ) | $ | 0.03 | $ | (0.24 | ) | |||||||
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Net income (loss) per share
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$ | 0.14 | $ | (0.11 | ) | $ | 0.42 | $ | (0.58 | ) | |||||||
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Weighted average shares outstanding used in
computing basic net income (loss) per share
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44,692,016 | 41,087,722 | 44,422,327 | 40,522,128 | |||||||||||||
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Earnings per share Diluted
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Income (loss) from continuing operations
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$ | 0.07 | $ | (0.06 | ) | $ | 0.32 | $ | (0.34 | ) | |||||||
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Income (loss) from discontinued operations
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$ | 0.04 | $ | (0.05 | ) | $ | 0.02 | $ | (0.24 | ) | |||||||
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Net income (loss) per share
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$ | 0.11 | $ | (0.11 | ) | $ | 0.34 | $ | (0.58 | ) | |||||||
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Weighted average shares outstanding used in
computing diluted net income (loss) per share
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57,921,361 | 41,087,722 | 53,424,494 | 40,522,128 | |||||||||||||
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Revenues from related parties
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$ | 1,131 | $ | 1,131 | $ | 3,394 | $ | 5,035 | |||||||||
See accompanying notes to condensed consolidated financial statements.
4
ASK JEEVES, INC.
| Nine Months Ended | ||||||||||
| September 30, | September 30, | |||||||||
| 2003 | 2002 | |||||||||
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Operating activities
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Income (loss) from continuing operations
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$ | 17,147 | $ | (13,717 | ) | |||||
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Adjustment to reconcile income (loss) from
continuing operations to net cash provided by (used in)
operating activities:
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Loss from discontinued operations
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(1,218 | ) | (9,591 | ) | ||||||
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Gain on sale of discontinued operations
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2,482 | | ||||||||
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Depreciation and amortization
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5,856 | 6,608 | ||||||||
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Stock-based compensation
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39 | 335 | ||||||||
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Amortization of intangible assets
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1,641 | 1,654 | ||||||||
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Impairment and write-off of long-lived assets
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702 | 2,592 | ||||||||
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Non-cash charge for adjustment to
shareholders notes receivable
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| (64 | ) | |||||||
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Gain on acquisition of joint venture
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(6,124 | ) | (974 | ) | ||||||
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Changes in operating assets and liabilities:
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Accounts receivable
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(2,341 | ) | 478 | |||||||
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Prepaid expenses and other assets
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(751 | ) | (804 | ) | ||||||
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Accounts payable and other accrued liabilities
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6,520 | (6,632 | ) | |||||||
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Accrued compensation and related expenses
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1,337 | (947 | ) | |||||||
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Accrued restructuring costs
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(553 | ) | (17,401 | ) | ||||||
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Deferred revenue
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(4,570 | ) | (4,037 | ) | ||||||
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Net cash provided by (used in) operating
activities
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20,167 | (42,500 | ) | |||||||
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Investing activities
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Purchases of property and equipment
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(5,901 | ) | (4,744 | ) | ||||||
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Purchases of marketable securities
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(83,565 | ) | | |||||||
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Proceeds from redemption of restricted marketable
securities
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11,000 | 13,741 | ||||||||
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Proceeds from redemption of marketable securities
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| 15,610 | ||||||||
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Net cash from acquisition and dissolution of
joint ventures
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| 9,563 | ||||||||
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Net cash provided by (used in) investing
activities
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(78,466 | ) | 34,170 | |||||||
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Financing activities
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Issuance of common stock
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12,378 | 1,231 | ||||||||
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Issuance of convertible subordinated notes, net
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111,744 | | ||||||||
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Repayment of notes receivable to stockholders
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| 52 | ||||||||
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Repayment of borrowings under line of credit
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(11,000 | ) | | |||||||
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Repayment of capital lease obligations
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(572 | ) | (664 | ) | ||||||
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Net cash provided by financing activities
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112,550 | 619 | ||||||||
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Effect of exchange rate changes on cash and cash
equivalents
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902 | 827 | ||||||||
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Increase (decrease) in cash and cash equivalents
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55,153 | (6,884 | ) | |||||||
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Cash and cash equivalents at beginning of period
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27,613 | 33,125 | ||||||||