SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly 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: 0-22427
HESKA CORPORATION
(Exact name of registrant as specified in its charter)
| Delaware (State or other jurisdiction of incorporation or organization) |
77-0192527 (I.R.S. Employer Identification Number) |
1613 Prospect Parkway
Fort Collins, Colorado 80525
(Address of principal executive offices)
(970) 493-7272
Registrant’s telephone number, including area code:
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
The number of shares of the Registrant’s Common Stock, $.001 par value, outstanding at
May 14, 2003 was 47,861,713
HESKA CORPORATION
FORM 10-Q
QUARTERLY REPORT
TABLE OF CONTENTS
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PART I. FINANCIAL INFORMATION |
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| Item 1. |
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Financial Statements: |
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Consolidated Balance Sheets (Unaudited) as of December 31, 2002 and March 31, 2003 |
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Consolidated Statements of Operations (Unaudited) for the three months ended March 31, 2002 and 2003 |
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Consolidated Statements of Cash Flows (Unaudited) for the three months ended March 31, 2002 and 2003 |
4 |
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5 | |
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| Item 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
13 |
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| Item 3. |
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32 | |
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| Item 4. |
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33 | |
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PART II. OTHER INFORMATION |
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| Item 1. |
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Legal Proceedings |
Not Applicable |
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| Item 2. |
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Changes in Securities and Use of Proceeds |
Not Applicable |
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| Item 3. |
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Defaults Upon Senior Securities |
Not Applicable |
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| Item 4. |
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Submission of Matters to a Vote of Security Holders |
Not Applicable |
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| Item 5. |
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Other Information |
Not Applicable |
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| Item 6. |
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34 |
ALLERCEPT, AVERT, E.R.D.-HEALTHSCREEN, E.R.D.-SCREEN, E-SCREEN, FELINE ULTRANASAL, G2 DIGITAL, HESKA, IMMUCHECK, PERIOCEUTIC, SOLO STEP, TRI-HEART, VET/IV and VET/OX are trademarks of Heska Corporation. i-STAT is a trademark of i-STAT Corporation. SPOTCHEM is a trademark of Arkray, Inc. This 10-Q also refers to trademarks and trade names of other organizations.
HESKA CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands except per share
amounts)
(unaudited)
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December 31, |
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March 31, |
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| ASSETS |
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| Current assets: |
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| Cash and cash equivalents |
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$ |
6,026 |
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$ |
5,116 |
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| Accounts receivable, net of allowance for doubtful accounts of $229 and $196, respectively |
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9,722 |
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8,396 |
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| Inventories |
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8,191 |
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8,095 |
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| Other current assets |
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761 |
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539 |
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| Total current assets |
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24,700 |
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22,146 |
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| Property and equipment, net |
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8,968 |
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7,972 |
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| Goodwill and intangible assets, net |
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1,718 |
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1,759 |
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| Other assets |
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199 |
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212 |
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| Total assets |
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$ |
35,585 |
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$ |
32,089 |
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| LIABILITIES AND STOCKHOLDERS’ EQUITY |
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| Current liabilities: |
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| Accounts payable |
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$ |
4,362 |
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$ |
4,589 |
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| Accrued liabilities |
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4,515 |
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3,661 |
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| Deferred revenue |
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463 |
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697 |
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| Line of credit |
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7,596 |
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6,947 |
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| Current portion of capital lease obligations |
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43 |
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21 |
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| Current portion of long-term debt |
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2,295 |
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714 |
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| Total current liabilities |
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19,274 |
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16,629 |
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| Capital lease obligations, net of current portion |
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9 |
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3 |
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| Long-term debt, net of current portion |
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761 |
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2,230 |
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| Deferred revenue and other non-current liabilities |
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6,331 |
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6,468 |
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| Total liabilities |
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26,375 |
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25,330 |
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| Commitments and contingencies |
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| Stockholders’ equity: |
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| Preferred stock, $.001 par value, 25,000,000 shares authorized; none issued or outstanding |
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— |
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— |
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| Common stock, $.001 par value, 75,000,000 shares authorized; 47,808,105 and 47,813,740 shares issued and outstanding, respectively |
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48 |
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48 |
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| Additional paid-in capital |
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211,726 |
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211,516 |
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| Deferred compensation |
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(471 |
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(236 |
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| Accumulated other comprehensive loss |
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(261 |
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(261 |
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| Accumulated deficit |
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(201,832 |
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(204,308 |
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| Total stockholders’ equity |
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9,210 |
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6,759 |
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| Total liabilities and stockholders’ equity |
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$ |
35,585 |
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$ |
32,089 |
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See accompanying notes to consolidated financial statements
2
HESKA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per
share amounts)
(unaudited)
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Three Months Ended |
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2002 |
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2003 |
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| Revenue: |
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| Products, net of sales returns and allowances |
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$ |
9,921 |
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$ |
12,974 |
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| Research, development and other |
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244 |
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300 |
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| Total revenue |
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10,165 |
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13,274 |
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| Cost of products sold |
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5,899 |
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7,873 |
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4,266 |
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5,401 |
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| Operating expenses: |
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| Selling and marketing |
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3,177 |
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3,776 |
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| Research and development |
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2,916 |
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1,759 |
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| General and administrative |
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1,735 |
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1,850 |
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| Restructuring and other operating expenses |
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236 |
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515 |
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| Total operating expenses |
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8,064 |
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7,900 |
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| Loss from operations |
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(3,798 |
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(2,499 |
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| Other income (expense), net |
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(93 |
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23 |
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| Net loss |
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$ |
(3,891 |
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$ |
(2,476 |
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| Basic and diluted net loss per share |
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$ |
(0.08 |
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$ |
(0.05 |
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| Shares used to compute basic and diluted net loss per share |
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47,835 |
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47,812 |
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See accompanying notes to consolidated financial statements
3
HESKA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
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Three Months Ended |
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2002 |
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2003 |
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| CASH FLOWS USED IN OPERATING ACTIVITIES: |
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| Net loss |
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$ |
(3,891 |
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$ |
(2,476 |
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| Adjustments to reconcile net loss to cash used in operating activities: |
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| Depreciation and amortization |
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627 |
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507 |
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| Amortization of intangible assets |
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27 |
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37 |
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| Stock based compensation |
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41 |
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23 |
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| (Gain) loss on sale of assets |
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— |
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(30 |
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| Provision for bad debts |
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67 |
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33 |
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| Provision for excess and obsolete inventory |
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(58 |
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(68 |
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| Changes in operating assets and liabilities: |
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| Accounts receivable |
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2,207 |
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1,300 |
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| Inventories |
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(564 |
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163 |
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| Other current assets |
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343 |
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216 |
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| Other long-term assets |
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129 |
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12 |
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| Accounts payable |
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1,198 |
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227 |
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| Accrued liabilities |
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(1,493 |
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(385 |
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| Deferred revenue and other long-term liabilities |
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(7 |
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93 |
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| Other |
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(25 |
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(25 |
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| Net cash used in operating activities |
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(1,399) |
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(373 |
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| CASH FLOWS FROM INVESTING ACTIVITIES: |
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| Proceeds from licensing of technology and product rights |
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— |
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200 |
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| Proceeds from disposition of property and equipment |
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52 |
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65 |
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| Purchases of property and equipment |
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(97 |
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(13 |
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| Net cash (used in) provided by investing activities |
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(45 |
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252 |
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| CASH FLOWS FROM FINANCING ACTIVITIES: |
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| Proceeds from issuance of common stock |
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2 |
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2 |
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| Proceeds from (repayments on) line of credit borrowings, net |
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288 |
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(648 |
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| Repayments of debt and capital lease obligations |
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(386 |
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(143 |
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