(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

4390 US Route One

Princeton, NJ

ITEM 1.

Financial Statements

Consolidated Balance Sheets as of March 31, 2004 and December 31, 2003 (unaudited)

Notes to Consolidated Financial Statements (unaudited)

ITEM 2.

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

ITEM 3.

Quantitative and Qualitative Disclosures about Market Risk

ITEM 4.

Controls and Procedures

ITEM 1.

Legal Proceedings

ITEM 2.

Changes in Securities, Use of Proceeds and Issuers Purchases of Equity Securities

ITEM 3.

Defaults Upon Senior Securities

ITEM 4.

Submission to Matters of Vote to Security Holders

ITEM 5.

Other Information

ITEM 6.

Exhibits and Reports on Form 8-K

Assets

Current assets:

Cash and cash equivalents

Restricted cash

Accounts receivable, net

Inventory

Prepaids and other current assets

Assets of a business component held for sale

Total current assets

Fixed assets, net

Goodwill, net

Other intangibles, net

Restricted cash

Other assets

Total assets

Liabilities and Stockholders’ Equity

Current liabilities:

Accounts payable

Accrued expenses

Current portion of long-term debt

Deferred revenue

Liabilities of a business component held for sale

Total current liabilities

Long-term debt, less current portion

Accrued restructuring, less current portion

Other liabilities

Total liabilities

Redeemable Convertible Series A preferred stock;

Designated 1,680 shares: $.001 per share par value; 0 and 1,675 shares issued as of March 31, 2004 and December 31, 2003, respectively; 0 and 503 shares outstanding as of March 31, 2004 and December 31, 2003, respectively; stated, minimum redemption and liquidation value of $5,025

Commitments and contingencies

Stockholders’ equity:

Preferred stock, $.001 par value. Authorized 5,000,000 shares designated 1,680 shares of redeemable convertible Series A preferred stock, and 1,675 shares issued as of March 31, 2004 and December 31, 2003, respectively and 503 shares outstanding as of December 31, 2003

Series A junior participating preferred stock, $.001 par value. Designated 1,000,000 shares; no shares issued or outstanding

Common stock, $0.001 par value. Authorized 150,000,000 shares; issued and outstanding 22,202,806 and 16,717,498 at March 31, 2004 and December 31, 2003, respectively

Common stock, $0.001 par value. 20,115 shares to be issued

Additional paid-in capital

Deferred compensation

Accumulated other comprehensive income

Accumulated deficit

Total stockholders’ equity

Total liabilities and stockholders’ equity

Revenues:

Service revenues

Other revenues

Total revenues

Operating expenses:

Cost of service revenues

Research and development

Marketing and sales

General and administrative

Restructuring

Amortization of intangible assets

Total operating expenses

Operating loss

Other income (expense):

Interest income

Interest expense

Other income/(expense)

Total other income/(expense), net

Loss from continuing operations before income taxes

Income tax expense

Loss from continuing operations

Discontinued operations:

Loss from operations of a business held for sale

Net loss

Dividends to Series A preferred shareholders

Accretion of Series A preferred stock discount

Beneficial conversion feature of redeemable Series A preferred stock

Net loss allocable to common stockholders

Basic and diluted loss from continuing operations per share allocable to common stockholders

Basic and diluted loss from discontinued operations per share

Basic and diluted net loss per share allocable to common stockholders

Shares used in computing basic and diluted net loss per share allocable to common stockholders

Cash flows from operating activities:

Loss from continuing operations

Loss from discontinued operations

Adjustments to reconcile net loss to net cash provided by/(used in) operating activities:

Cash provided by discontinued operations

Noncash compensation expense

Depreciation and amortization

Non cash expense for warrants issued as a financing fee and modification of stock options

Bad debt expense

Loss of sale of investment

Changes in assets and liabilities:

Accounts receivable

Inventory

Prepaids and other current assets

Other assets

Accounts payable

Accrued expenses, including restructuring

Deferred revenue

Other liabilities

Net cash provided by (used in) operating activities

Cash flows from investing activities:

Capital expenditures

Proceeds from the sale of investments

Net cash used in investing activities

Cash flows from financing activities:

Net proceeds from issuance of common stock

Net proceeds from issuance of redeemable convertible preferred stock

Repayment of debt from line of credit

Payments of patent obligations

Net cash provided by financing activities

Effect of foreign currency translation on cash and cash equivalents

Net increase in cash and cash equivalents

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

Supplemental disclosure of noncash financing and investing activities:

Changes in deferred compensation for grant, forfeiture and remeasurement of common stock options

Issuance of common stock warrants to investors of the redeemable preferred stock

Issuance of units of redeemable preferred stock to placement agent as a financing fee

Issuance of common stock warrants to placement agent of the redeemable preferred stock

Beneficial settlements of purchase accounting obligations