UNITED STATES
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 June 30, 2003
OR
|_| TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File number # 000-24547
Scientific Learning Corporation
(Exact name of Registrant as specified in its charter)
| Delaware (State or other jurisdiction of incorporation or organization) |
94-3234458 (I.R.S. Employer Identification No.) |
300 Frank H. Ogawa Plaza, Suite 500
Oakland, California 94612
(510) 444-3500
(Address of Registrant’s principal executive offices, including zip code, and
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 |_|
Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes |_| No |X|
The number of shares of the Registrant’s Common Stock, $.001 par value per share, outstanding at July 31, 2003 was 16,043,154
SCIENTIFIC LEARNING CORPORATION
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2003
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PART 1. FINANCIAL INFORMATION |
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| Item 1. |
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Financial Statements |
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Condensed Balance Sheets as of June 30, 2003 and December 31, 2002 |
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Condensed Statement of Operations for the Three and Six Months Ended June 30, 2003 and 2002 |
4 |
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Condensed Statements of Cash Flows for the Six Months Ended June 30, 2003 and 2002 |
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6 | |
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| Item 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
10 |
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| Item 3. |
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16 | |
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| Item 4. |
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16 | |
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PART II. OTHER INFORMATION |
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| Item 1. |
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17 | |
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| Item 4. |
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17 | |
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| Item 6. |
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18 | |
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21 | |
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Certifications |
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2
PART I. FINANCIAL INFORMATION
SCIENTIFIC LEARNING CORPORATION
CONDENSED BALANCE SHEET
(In thousands)
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June 30, |
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December 31, |
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(Unaudited) |
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| Assets |
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| Current assets: |
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| Cash and cash equivalents |
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$ |
4,406 |
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$ |
4,613 |
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| Accounts receivable, net |
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6,520 |
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4,867 |
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| Prepaid expenses and other current assets |
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788 |
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1,340 |
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| Total current assets |
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11,714 |
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10,820 |
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| Property and equipment, net |
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897 |
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1,198 |
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| Loans to officers and former officers |
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3,114 |
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3,114 |
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| Other assets |
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2,610 |
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3,511 |
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| Total assets |
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$ |
18,335 |
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$ |
18,643 |
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| Liabilities and stockholders’ deficit |
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| Current liabilities: |
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| Accounts payable |
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$ |
419 |
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$ |
287 |
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| Accrued liabilities |
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4,432 |
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5,411 |
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| Borrowings under bank line of credit |
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5,000 |
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— |
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| Deferred revenue |
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14,574 |
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13,433 |
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| Total current liabilities |
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24,425 |
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19,131 |
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| Borrowings under bank line of credit |
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— |
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5,000 |
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| Deferred revenue, long-term |
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1,771 |
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2,151 |
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| Other liabilities |
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589 |
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484 |
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| Total liabilities |
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26,785 |
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26,766 |
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| Commitments and contingencies | |||||||
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| Stockholders’ deficit: |
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| Common stock |
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74,109 |
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73,771 |
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| Accumulated deficit |
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(82,559 |
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(81,894 |
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| Total stockholders’ deficit |
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(8,450 |
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(8,123 |
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| Total liabilities and stockholders’ deficit |
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$ |
18,335 |
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$ |
18,643 |
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Certain 2002 items have been reclassified to conform to the presentation adopted in 2003.
See accompanying notes to condensed financial statements.
3
SCIENTIFIC LEARNING CORPORATION
CONDENSED STATEMENT OF OPERATIONS
(In thousands, except share and per share amounts)
Unaudited
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Three months ended June 30, |
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Six months ended June 30, |
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2003 |
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2002 |
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2003 |
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2002 |
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| Revenues: |
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| Products |
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$ |
6,217 |
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$ |
3,766 |
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$ |
11,548 |
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$ |
6,220 |
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| Service and support |
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1,140 |
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683 |
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2,186 |
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1,414 |
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| Total revenues |
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7,357 |
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4,449 |
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13,734 |
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7,634 |
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| Cost of revenues: |
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| Cost of products |
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674 |
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529 |
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1,128 |
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810 |
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| Cost of service and support |
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837 |
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337 |
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1,766 |
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730 |
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| Total cost of revenues |
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1,511 |
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866 |
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2,894 |
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1,540 |
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| Gross profit |
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5,846 |
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3,583 |
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10,840 |
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6,094 |
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| Operating expenses: |
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| Sales and marketing |
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3,367 |
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3,634 |
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6,640 |
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7,361 |
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| Research and development |
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935 |
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604 |
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1,844 |
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1,419 |
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| General and administrative |
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1,284 |
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1,367 |
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2,396 |
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2,633 |
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| Restructuring charges |
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— |
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647 |
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— |
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880 |
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| Total operating expenses |
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5,586 |
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6,252 |
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10,880 |
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12,293 |
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| Operating income (loss) |
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260 |
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(2,669 |
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(40 |
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(6,199 |
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| Interest expense, net |
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(316 |
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(257 |
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(625 |
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(589 |
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| Net loss |
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$ |
(56 |
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$ |
(2,926 |
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$ |
(665 |
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$ |
(6,788 |
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| Basic and diluted net loss per share |
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$ |
(0.00 |
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$ |
(0.19 |
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$ |
(0.04 |
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$ |
(0.44 |
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| Shares used in computing basic and diluted net loss per share |
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16,004,911 |
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15,563,850 |
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15,942,365 |
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15,535,181 |
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Certain 2002 items have been reclassified to conform to the presentation adopted in 2003.
See accompanying notes to condensed financial statements.
4
SCIENTIFIC LEARNING CORPORATION
CONDENSED STATEMENT OF CASH FLOWS
(In thousands)
Unaudited
|
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Six months ended June 30, |
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2003 |
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2002 |
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| Operating Activities: |
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| Net loss |
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$ |
(665 |
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$ |
(6,788 |
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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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772 |
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859 |
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| Amortization of deferred financing costs |
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608 |
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608 |
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| Stock based compensation |
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144 |
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132 |
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| Changes in operating assets and liabilities: |
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| Accounts receivable |
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(1,653 |
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(1,660 |
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| Prepaid expenses and other current assets |
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552 |
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254 |
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| Accounts payable |
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132 |
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|
278 |
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| Accrued liabilities |
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(979 |
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(71 |
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| Deferred revenue |
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761 |
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4,858 |
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| Other liabilities |
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105 |
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121 |
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| Net cash used in operating activities |
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(223 |
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(1,409 |
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| Investing Activities: |
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| Sale of government securities |
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— |
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1,168 |
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| Purchases of property and equipment, net |
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(102 |
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(43 |
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| Other non-current assets |
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(76 |
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(217 |
) |
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| Net cash (used in) provided by investing activities |
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(178 |
) |
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908 |
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| Financing Activities: |
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| Proceeds from issuance of common stock |
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194 |
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80 |
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