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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) July 24, 2003
ALIGN TECHNOLOGY, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-32259 94-3267295
- ---------------------------- ------------------------ -------------------
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification No.)
821 Martin Avenue, Santa Clara, California 95050
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (408) 470-1000
Not applicable
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits.
Exhibit No. Description
- ----------- ---------------------------------------------------------------
99.1 Press Release of Align Technology, Inc. dated July 24, 2003.
ITEM 9. REGULATION FD DISCLOSURE (Information furnished pursuant to Item 12 -
Results of Operations and Financial Condition)
On July 24, 2003, Align Technology, Inc. ("Align") is issuing a press
release and holding a conference call regarding its financial results for the
second quarter of fiscal 2003 ended June 30, 2003. A copy of the press release
is furnished as Exhibit 99.1 to this Form 8-K. Align is making reference to
non-GAAP financial information in both the press release and the conference
call. A reconciliation of these non-GAAP financial measures to the comparable
GAAP financial measures is contained in the attached press release.
The information in this Form 8-K and the exhibit attached hereto shall not
be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of
1934 (the "Exchange Act") or otherwise subject to the liabilities of that
section, nor shall it be deemed incorporated by reference in any filing under
the Securities Act of 1933 or the Exchange Act, regardless of any general
incorporation language in such filing.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
Dated: July 24, 2003 Align Technology, INC.
By: /s/ Eldon M. Bullington
----------------------------------------
Eldon M. Bullington
Vice President of Finance and
Chief Financial Officer
INDEX TO EXHIBITS
Exhibit No. Description
- ----------- ---------------------------------------------------------------
99.1 Press Release of Align Technology, Inc. dated July 24, 2003
Exhibit 99.1
Align Technology, Inc. Reports Record Revenues of $29.2 Million for the Second
Quarter 2003
- Second Quarter Revenues Increase 86% Year Over Year; Net Loss Decreases
62% Year Over Year
- Company to Restate Approximately $9 Million in Prior Period Net
Revenue; Will Restate Results for FY 2001, FY 2002, and the First
Quarter of FY 2003
- Restatement Will Have No Effect on Business Operations, Cash Flow or
Liquidity
SANTA CLARA, Calif., July 24 /PRNewswire-FirstCall/ -- Align Technology,
Inc. (Nasdaq: ALGN), the inventor of Invisalign(R), a proprietary method of
straightening teeth without wires and brackets, today reported record revenues
of $29.2 million for the second quarter of 2003.
"We are pleased with the progress we are making," stated Thomas M.
Prescott, Align Technology's President and CEO. "The solid results delivered
this quarter are driven by adoption and utilization by orthodontists and
general practitioner dentists as they, and their patients, experience
outstanding results first-hand. Our operating profile continues to improve and
we continue to aggressively decrease our net loss. Our focus on the balance
sheet is also showing as we increased our cash resources by over $1 million
this quarter. We have much to do, yet these results should indicate we are on
the right path."
Second Quarter Results
The Company reported total revenues for the second quarter of 2003 of
$29.2 million, compared to $23.0 million in the first quarter of 2003, an
increase of 27.3 percent, and $15.7 million in the second quarter of 2002, an
increase of 86.0 percent. The net loss for the second quarter of 2003, as
reported under generally accepted accounting principles ("GAAP"), was $7.8
million, or a net loss per share of $0.13. This compares to a net loss for the
first quarter of 2003 of $10.7 million, or a net loss of $0.19 per share, and
a net loss for the second quarter of 2002 of $20.3 million, or a net loss of
$0.44 per share. Net loss for the second quarter of 2003 was impacted by a
$1.4 million charge to operating expense in connection with sales tax for
which the Company decided during the quarter not to pursue collection from its
customers. In addition, the net loss was impacted by a $400 thousand charge to
cost of revenues related to certain use tax matters. Second quarter of 2002
and first quarter of 2003 GAAP financial data is presented on an as restated
basis.
Non-GAAP net loss for the second quarter of 2003, which excludes
$4.4 million of stock-based compensation, was $3.4 million, or a non-GAAP net
loss of $0.06 per share, compared to a non-GAAP net loss of $14.5 million, in
the second quarter of 2002, which excludes $5.9 million of stock-based
compensation, or a non-GAAP net loss of $0.31 per share. Non-GAAP net loss for
the second quarter of 2003 included the same charge for sales and use tax of
$1.8 million included in the GAAP net loss above. Non-GAAP second quarter of
2002 and first quarter of 2003 financial data is presented on an as adjusted
basis. The reconciliation of the GAAP to non-GAAP measurements for net loss
for the second quarter of 2003 is set forth below within Align Technology's
financial data.
As of June 30, 2003, cash, cash equivalents and marketable securities
increased by $1.1 million to $38.4 million, compared to $37.3 million as of
March 31, 2003, without incurring new debt or drawing down on a line of
credit.
$9.0 Million Net Revenue Restatement
In conjunction with the Company's adoption during the quarter of Emerging
Issues Task Force Issue No. 00-21, Accounting for Revenue Arrangements with
Multiple Deliverables (EITF 00-21), which addresses the issue of accounting
for arrangements that involve the delivery of multiple products or services,
the Company also reviewed its revenue recognition policies governing case
refinement (a case refinement occurs when Aligners are prescribed by the
clinician for patients needing tooth movements beyond the original
prescription). Based on this review, the Company will reverse previous loss
accruals of approximately $900 thousand and defer net revenues of
approximately $9.0 million recorded in prior periods. These revenues will be
recognized primarily in the second half of fiscal year 2003 and throughout
fiscal year 2004. The Company will restate its financial results for fiscal
years 2001 and 2002, including the related interim periods, and the first
quarter of 2003. Revenues will be reduced and deferred by approximately
$1.6 million, $5.7 million and $1.8 million in fiscal year 2001, fiscal year
2002 and the first quarter of fiscal year 2003, respectively.
The Company stated that these prior period adjustments will have no effect
on business operations, cash flow or liquidity.
When the Company began offering case refinement as a finishing tool in
June 2001, the Company charged $50 for this product if it was purchased at the
beginning of a treatment period, and $250 if it was purchased during the
course of treatment. The Company deferred $50 of revenue and accrued any
anticipated losses related to the cost of producing and delivering each case
refinement sold at the beginning of the treatment period until either the case
refinement was utilized or upon case expiration. Over the past two years, the
demand for case refinements has been higher than was originally anticipated
when the product was first introduced.
In light of the aforementioned changes in product demand and the adoption
of EITF 00-21, the Company reevaluated the accounting treatment for case
refinement revenues under the principals contained in Staff Accounting
Bulletin No. 101, Revenue Recognition in Financial Statements (SAB 101), and
related guidance. The Company has determined that the revenue amount deferred
for each case refinement in prior periods should have been $250 rather than
$50, as previously deferred. The Company's restated financial statements will
reflect this appropriate deferral amount.
On May 1, 2003, the Company updated its pricing policy to include the
future delivery of one case refinement in the price of each case and to offer
additional case refinements at a price of $125 each, which the Company
believes represents the fair value based on competitive product offerings.
Revenue deferrals associated with future case refinements will be $125, which
was determined in a manner consistent with the newly adopted rules contained
in EITF 00-21. These revenue deferrals will be recognized when the case
refinement has been utilized or upon case expiration.
The Company expects to file its amended 2002 Annual Report on Form 10-K,
which will include the restated consolidated financial statements for the
years 2002 and 2001 and the corresponding interim periods, and its amended
10-Q for the first quarter of 2003 as soon as possible. The Company does not
propose to file amendments to its Quarterly Report on Form 10-Q for the
quarters ending June 30, 2001 through September 30, 2002, nor their Annual
Report on Form 10-K for the year ending December 31, 2001, and accordingly,
these filings should be disregarded.
Align Technology will host a webcast and conference call today,
July 24, 2003 at 5:00 p.m. EDT, 2:00 p.m. PDT, to review second quarter of
2003 results, discuss the reallocation and restatement of revenues, and
discuss future operating trends and guidance on the outlook for the future. To
access the webcast, click on "Conference Calls" on Align Technology's Investor
Relations website at
http://www.invisalign.com/US/html/corporate/investor_frameset.html . To
access the conference call, please dial 415-537-1928 approximately ten minutes
prior to the start of the call. If you are unable to listen to the call, an
archived webcast will be available beginning approximately one hour after the
call's conclusion and will remain available through 5:30 p.m. EDT on July 23,
2004. Additionally, a telephonic replay of the call can be accessed by dialing
800-633-8284 with reservation number 21154321. The replay may be accessed
from international locations by dialing 402-977-9140 using the same
reservation number. The telephonic replay will be available through 5:30 p.m.
EDT on August 6, 2003.
About Align Technology, Inc.
Align Technology designs, manufactures and markets Invisalign, a
proprietary method for treating malocclusion, or the misalignment of teeth.
Invisalign corrects malocclusion using a series of clear, nearly invisible,
removable appliances that gently move teeth to a desired final position.
Because it does not rely on the use of metal or ceramic brackets and wires,
Invisalign significantly reduces the aesthetic and other limitations
associated with braces. Invisalign is appropriate for treating adults and
older teens. Align Technology was founded in March 1997 and received FDA
clearance to market Invisalign in 1998.
To learn more about Invisalign or to find a certified Invisalign doctor,
please visit www.invisalign.com or call 1-800-INVISIBLE.
Forward-Looking Statement
This news release contains forward-looking statements, including
statements regarding Align's planned restatement of its financial results for
fiscal 2001, fiscal 2002 and the first quarter of fiscal 2003 (including the
reallocation of revenue recorded in prior periods), the impact of the
restatements upon Align's prior and future period revenues and upon Align's
operations, cash flow and liquidity, the inclusion in the restated financial
statements of deferred revenues for case refinements in accordance with SAB
101, the amount of deferred revenues associated with future case refinements,
and the filing of Align's amended Form 10-K for fiscal 2002 and its amended
Form 10-Q for the first quarter of fiscal 2003. Forward-looking statements
contained in this news release relating to expectations about future events or
results are based upon information available to Align as of the date hereof.
Readers are cautioned that these forward-looking statements are only
predictions and are subject to risks, uncertainties and assumptions that are
difficult to predict. As a result, actual results may differ materially and
adversely from those expressed in any forward-looking statement. Factors that
might cause such a difference include, but are not limited to, risks relating
to the possible discovery of additional events or circumstances requiring
additional adjustments for Align's financial results for fiscal 2001, fiscal
2002 or the first quarter of fiscal 2003. These and other risks are detailed
from time to time in Align's periodic reports filed with the Securities and
Exchange Commission, including, but not limited to, its Annual Report on Form
10-K for the fiscal year ended December 31, 2002, which was filed with the
Securities and Exchange Commission on March 27, 2003, and its Quarterly
Reports on Form 10-Q. Align undertakes no obligation to revise or update
publicly any forward-looking statements for any reason.
Investor Relations and Press Contact:
Barbara Domingo
Align Technology, Inc.
408-470-1204
bdomingo@aligntech.com
ALIGN TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (A)
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
(in thousands, except 2003 2002 2003 2002
per share data) (as restated) (as restated)
Revenues $29,225 $15,714(B) $52,185(B) $31,572(B)
Cost of revenues 13,269 10,730(C) 25,193(C) 22,754(C)
Gross profit 15,956 4,984 26,992 8,818
Operating expenses:
Sales and marketing 11,416 11,994 22,046 22,321
General and
administrative 9,014 9,957 16,908 19,828
Research and
development 3,712 3,275 6,697 6,621
Total operating
expenses 24,142 25,226 45,651 48,770
Loss from operations (8,186) (20,242)(D) (18,659)(D) (39,952)(D)
Interest and other
income (expense), net 427 (71) 229 335
Net loss $(7,759) $(20,313)(D) $(18,430)(D) $(39,617)(D)
Basic and diluted
net loss per share $(0.13) $(0.44)(E) $(0.32)(E) $(0.86)(E)
Weighted-average shares
used in computing basic
and diluted net loss
per share 57,489 46,576 57,339 46,322
(A) Certain reclassifications of prior period amounts have been made to
conform with current year presentation.
(B) Revenues for the six months ended June 30, 2003 include a reduction
of $1,775,000 due to the restatement of the three months ended
March 31, 2003. Revenues for the three and six months ended
June 30, 2002 have been reduced by $1,541,000 and $2,824,000,
respectively, due to the restatement of the three months ended
March 31, 2002 and June 30, 2002.
(C) Cost of revenues for the six months ended June 30, 2003 includes an
increase of $114,000 due to the restatement of the three months ended
March 31, 2003. Cost of revenues for the three and six months ended
June 30, 2002 have been reduced by $44,000 and $525,000,
respectively, due to the restatement of the three months ended
March 31, 2002 and June 30, 2002.
(D) Net loss for the six months ended June 30, 2003 includes an increase
of $1,889,000 due to the restatement of the three months ended
March 31, 2003. Net loss for the three and six months ended
June 30, 2002 have been increased by $1,497,000 and $2,299,000,
respectively, due to the restatement of the three months ended
March 31, 2002 and June 30, 2002.
(E) Basic and diluted net loss per share for the six months ended
June 30, 2003 includes an increase of $0.04 due to the restatement of
the three months ended March 31, 2003. Basic and diluted net loss per
share for the three and six months ended June 30, 2002 have been
increased by $0.04 and $0.05, respectively, due to the restatement of
the three months ended March 31, 2002 and June 30, 2002.
ALIGN TECHNOLOGY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
June 30, December 31, December 31,
2003 2002 2001
(in thousands) (as restated) (as restated)
ASSETS
Current assets:
Cash and cash equivalents $31,715 $35,552 $50,550
Restricted cash 3,274 3,261 723
Marketable securities, short-term 3,392 2,693 12,494
Accounts receivable, net 18,573 16,766 11,556
Inventories, net 1,661 1,533 1,549
Deferred costs 1,043 1,139 714
Other current assets 6,106 4,888 3,997
Total current assets 65,764 65,832 81,583
Property and equipment, net 23,732 25,078 32,021
Marketable securities, long-term -- -- 2,627
Other long-term assets 2,299 1,946 1,987
Total assets $91,795 $92,856 $118,218
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $1,872 $1,974 $4,376
Accrued liabilities 16,058 11,112(A) 11,425(A)
Deferred revenue 13,166 9,403(B) 3,127(B)
Debt obligations, current portion 2,089 2,183 483
Total current liabilities 33,185 24,672 19,411
Financing debt, long-term portion 2,500 3,333 --
Capital lease obligations, net of
current portion 346 504 980
Total liabilities 36,031 28,509 20,391
Total stockholders' equity 55,764 64,347(C) 97,827(C)
Total liabilities and
stockholders' equity $91,795 $92,856 $118,218
(A) Accrued liabilities include a reduction of $1,000,000 and $1,000 at
December 31, 2002 and 2001, respectively, due to a decrease in
accrued loss as a result of the restatement.
(B) Deferred revenue includes an increase of $7,273,000 and $1,576,000 at
December 31, 2002 and 2001, respectively, as a result of the
restatement.
(C) Stockholders' equity includes a net increase in the accumulated
deficit of $6,273,000 and $1,575,000 at December 31, 2002 and 2001,
respectively, due to the increase in deferred revenue and decrease in
accrued loss as a result of the restatement.
ALIGN TECHNOLOGY, INC.
NON-GAAP CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (A) (B)
(in thousands, except per share data)
(unaudited)
Use of Non-GAAP Financial Information
To supplement our condensed consolidated financial statements presented on
a GAAP basis, Align uses a non-GAAP measure of net loss, which is adjusted to
exclude certain costs and expenses. We believe that our non-GAAP net loss
gives an indication of our baseline performance before other charges that are
considered by management to be outside of our core operating results. In
addition, our non-GAAP net loss is among the primary indicators management
uses as a basis for our planning and forecasting of future periods. The
presentation of this additional information should not be considered in
isolation or as a substitute for net loss prepared in accordance with
generally accepted accounting principles in the United States of America.
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
2003 2002 2003 2002
(as (as
adjusted) adjusted)
Revenues $29,225 $15,714 $52,185 $31,572
Cost of revenues 12,586 9,866 23,789 20,902
Gross profit 16,639 5,848 28,396 10,670
Operating expenses:
Sales and marketing 10,812 11,321 20,814 20,837
General and administrative 7,120 6,433 12,322 13,421
Research and development 2,542 2,486 4,794 4,916
Total operating expenses 20,474 20,240 37,930 39,174
Loss from operations (3,835) (14,392) (9,534) (28,504)
Interest and other income (expense),
net 427 (71) 229 335
Net loss $(3,408) $(14,463) $(9,305) $(28,169)
Basic and diluted net loss per share $(0.06) $(0.31) $(0.16) $(0.61)
Weighted-average shares used in
computing basic and diluted net
loss per share 57,489 46,576 57,339 46,322
(A) Certain reclassifications of prior period amounts have been made to
conform with current year presentation.
(B) The as adjusted non-GAAP financials reflect the adjustments as noted
in this press release.
See Reconciliation of GAAP Net Loss to non-GAAP Net Loss Below.
ALIGN TECHNOLOGY, INC.
RECONCILIATION OF RESTATED GAAP NET LOSS TO ADJUSTED NON-GAAP NET LOSS
(in thousands)
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
2003 2002 2003 2002
(as adjusted) (as adjusted)
Calculation of non-GAAP net loss excluding special items:
Net loss $(7,759) $(20,313)(A) $(18,430)(A) $(39,617)(A)
Items:
Stock-based
compensation
expense included
in: (B)
- cost of revenues 683 864 1,404 1,852
- sales and
marketing 604 673 1,232 1,484
- general and
administrative 1,894 3,524 4,079 6,407
- research and
development 1,170 789 1,903 1,705
Restructuring
costs included in
general and
administrative
operating
expenses (C) -- -- 507 --
Non-GAAP net loss
excluding special
items $(3,408) $(14,463) $(9,305) $(28,169)
(A) Includes the restatements previously noted on the Condensed
Consolidated Statements of Operations.
(B) Stock-based compensation expense represents the amortization of
deferred stock-based compensation recorded in connection with the
granting of stock options to employees and non-employees.
Stock-based compensation expense also includes the accelerated
vesting of options to several employees in connection with severance
packages.
(C) Restructuring costs represent the remainder of our indirect
operational activities related to the transition of operations from
the United Arab Emirates and Pakistan to Costa Rica.
ALIGN TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS, AS RESTATED (A)
(unaudited)
(in thousands, Year Ended December 31,
except per 2002 2002 2001 2001
share data) (as (as (as (as
reported) restated) reported) restated)
Revenues $75,395 $69,698(B) $46,384 $44,808(B)
Cost of revenues 45,990 44,991(C) 46,831 46,830(C)
Gross profit
(loss) 29,405 24,707 (447) (2,022)
Operating expenses:
Sales and marketing 45,313 45,313 51,929 51,929
General and
administrative 39,265 39,265 30,774 30,774
Research and
development 13,064 13,064 15,644 15,644
Litigation
settlement -- -- 400 400
Total operating
expenses 97,642 97,642 98,747 98,747
Loss from
operations (68,237) (72,935)(D) (99,194) (100,769)(D)
Interest and other
income (expense),
net 116 116 1,730 1,730
Net loss before
provision for
income taxes (68,121) (72,819)(D) (97,464) (99,039)(D)
Provision for
income taxes -- -- 10 10
Net loss available
to common
stockholders (68,121) (72,819)(D) (97,474) (99,049)(D)
Dividend related
to beneficial
conversion feature
of preferred stock -- -- (11,191) (11,191)
Net loss per share
available to
common stockholders,
basic and diluted $(68,121) $(72,819)(D) $(108,665) $(110,240)(D)
Basic and diluted
net loss per share $(1.42) $(1.52)(E) $(2.57) $(2.61)(E)
Weighted-average
shares used in
computing basic
and diluted net
loss per share 47,878 47,878 42,247 42,247
(A) Certain reclassifications of prior period amounts have been made to
conform with current year presentation.
(B) Revenues include a reduction of $5,697,000 and $1,576,000 for the
years ended December 31, 2002 and 2001, respectively, due to an
increase in deferred revenue as a result of the restatement.
(C) Cost of revenues include a reduction of $999,000 and $1,000 for the
years ended December 31, 2002 and 2001, respectively, due to a
decrease in accrued loss as a result of the restatement.
(D) The years ended December 31, 2002 and 2001 include an increase in net
loss of $4,698,000 and $1,575,000, respectively.
(E) The years ended December 31, 2002 and 2001 include an increase in net
loss per share of $0.10 and $0.04, respectively.
ALIGN TECHNOLOGY, INC.
NON-GAAP CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (A) (B)
(in thousands, except per share data)
(unaudited)
Use of Non-GAAP Financial Information
To supplement our condensed consolidated financial statements presented on
a GAAP basis, Align uses a non-GAAP measure of net loss, which is adjusted to
exclude certain costs and expenses. We believe that our non-GAAP net loss
gives an indication of our baseline performance before other charges that are
considered by management to be outside of our core operating results. In
addition, our non-GAAP net loss is among the primary indicators management
uses as a basis for our planning and forecasting of future periods. The
presentation of this additional information should not be considered in
isolation or as a substitute for net loss prepared in accordance with
generally accepted accounting principles in the United States of America.
Year Ended December 31,
2002 2002 2001 2001
(as (as
adjusted) adjusted)
Revenues $75,395 $69,698 $46,384 $44,808
Cost of revenues 42,032 41,033 42,229 42,228
Gross profit 33,363 28,665 4,155 2,580
Operating expenses:
Sales and marketing 41,161 41,161 48,009 48,009
General and administrative 25,198 25,198 21,011 21,011
Research and development 9,762 9,762 11,496 11,496
Litigation settlement -- -- -- --
Total operating expenses 76,121 76,121 80,516 80,516
Loss from operations (42,758) (47,456) (76,361) (77,936)
Interest and other income (expense),
net 116 116 3,533 3,533
Net loss before provision for
income taxes (42,642) (47,340) (72,828) (74,403)
Provision for income taxes -- -- 10 10
Net loss $(42,642) $(47,340) $(72,838) $(74,413)
Basic and diluted net loss per
share $(0.89) $(0.99) $(1.72) $(1.76)
Weighted-average shares used in
computing basic and diluted net
loss per share 47,878 47,878 42,247 42,247
(A) Certain reclassifications of prior period amounts have been made to
conform with current year presentation.
(B) The as adjusted non-GAAP financials reflect the adjustments as noted
in this press release.
See Reconciliation of GAAP Net Loss to non-GAAP Net Loss Below.
ALIGN TECHNOLOGY, INC.
RECONCILIATION OF RESTATED GAAP NET LOSS TO ADJUSTED NON-GAAP NET LOSS
(in thousands)
(unaudited)
Year Ended December 31,
2002 2002 2001 2001
(as (as (as (as
reported) restated) reported) restated)
Calculation of non-GAAP net loss excluding special items:
Net loss available
to common
stockholders $(68,121) $(72,819) $(108,665) $(110,240)
Items:
Stock-based compensation
expense (A) 20,285 20,285 22,433 22,433
Restructuring costs
included in general
and administrative
operating expenses (B) 5,194 5,194 -- --
Litigation settlement
expense -- -- 400 400
Dividend related to
beneficial conversion
feature of preferred
stock -- -- 11,191 11,191
Non cash interest
expense on convertible
subordinated notes on
preferred stock -- -- 1,803 1,803
Non-GAAP net loss
excluding special
items $(42,642) $(47,340) $(72,838) $(74,413)
(A) Stock-based compensation expense represents the amortization of
deferred stock-based compensation recorded in connection with the
granting of stock options to employees and non-employees.
Stock-based compensation expense also includes the accelerated
vesting of options to several employees in connection with severance
packages.
(B) Restructuring costs represent the remainder of our indirect
operational activities related to the transition of operations from
the United Arab Emirates and Pakistan to Costa Rica.