SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(Mark One)
[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended: August 31, 2002
-----------------
[ ] 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: 012182
Exact Name of Registrant as
Specified in Its Charter: CALIFORNIA AMPLIFIER, INC.
--------------------------
DELAWARE 95-3647070
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State or Other Jurisdiction of I.R.S. Employer
Incorporation or Organization: Identification No.
Address of Principal Executive Offices: 460 Calle San Pablo
Camarillo, CA 93012
Registrant's Telephone Number: (805) 987-9000
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 [ ]
The registrant had 14,720,312 shares of Common Stock outstanding as of
September 30, 2002.
EXPLANATORY NOTE RE: AMENDED FORM 10-Q FILING
The Form 10-Q of California Amplifier, Inc. for the quarter ended August
31, 2002, originally filed with the Securities and Exchange Commission on
October 1, 2002, is being amended herewith to add as Exhibit 99-1 the
officers' certification required by Section 906 of the Sarbanes-Oxley Act of
2002, which was omitted from the original filing. No other changes have been
made to the information contained in the Form 10-Q.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CALIFORNIA AMPLIFIER, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands except par value amounts)
August 31, February 28,
2002 2002
-------- --------
Assets
Current assets:
Cash and cash equivalents $ 23,507 $ 23,156
Accounts receivable, less allowance for doubtful
accounts of $480 and $417, respectively 11,236 8,219
Inventories, net 7,877 9,472
Deferred income tax asset, net 4,870 3,580
Prepaid expenses and other current assets 1,076 1,312
-------- --------
Total current assets 48,566 45,739
Property and equipment, at cost, net of
accumulated depreciation and amortization 10,153 7,375
Goodwill 20,992 3,287
Other assets 894 287
-------- --------
$ 80,605 $ 56,688
======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term debt $ 1,962 $ 917
Accounts payable 5,981 5,713
Accrued payroll and employee benefits 2,183 1,870
Other accrued liabilities 2,565 6,980
-------- --------
Total current liabilities 12,691 15,480
-------- --------
Long-term debt, less current portion 14,100 3,628
-------- --------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value; 3,000 shares
authorized; no shares issued or outstanding - -
Common stock, $.01 par value; 30,000 shares
authorized; 14,720 and 13,630 shares issued
and outstanding, respectively 147 136
Additional paid-in capital 40,717 27,569
Retained earnings 13,960 10,676
Accumulated other comprehensive loss (1,010) (801)
-------- --------
Total stockholders' equity 53,814 37,580
-------- --------
$ 80,605 $ 56,688
======== ========
See notes to unaudited consolidated financial statements.
CALIFORNIA AMPLIFIER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(In thousands except per share amounts)
Three Months Ended Six Months Ended
August 31, August 31,
------------------- -------------------
2002 2001 2002 2001
------- ------- ------- -------
Sales $27,526 $24,654 $50,008 $45,456
Cost of goods sold 21,171 18,502 37,809 34,525
------- ------- ------- -------
Gross profit 6,355 6,152 12,199 10,931
------- ------- ------- -------
Operating expenses:
Research and development 1,723 2,059 3,424 3,720
Selling 744 592 1,474 1,226
General and administrative 1,052 2,775 2,102 5,118
------- ------- ------- -------
Total operating expenses 3,519 5,426 7,000 10,064
------- ------- ------- -------
Operating income 2,836 726 5,199 867
Other income (expense), net (79) 11 (80) 1
------- ------- ------- -------
Income from continuing operations
before income taxes 2,757 737 5,119 868
Income tax provision (939) (272) (1,835) (312)
------- ------- ------- -------
Income from continuing operations 1,818 465 3,284 556
Loss from discontinued
operations, net of tax - (5) - (25)
Gain on sale of discontinued
operations, net of tax - 1,615 - 1,615
------- ------- ------- -------
Net income $ 1,818 $ 2,075 $ 3,284 $ 2,146
======= ======= ======= =======
Basic earnings per share:
Continuing operations $ 0.12 $ 0.03 $ 0.23 $ 0.04
Discontinued operation - 0.12 - 0.12
------- ------- ------- -------
$ 0.12 $ 0.15 $ 0.23 $ 0.16
======= ======= ======= =======
Diluted earnings per share:
Continuing operations $ 0.12 $ 0.03 $ 0.22 $ 0.04
Discontinued operation - 0.12 - 0.11
------- ------- ------- -------
$ 0.12 $ 0.15 $ 0.22 $ 0.15
======= ======= ======= =======
Shares used in per share
calculations:
Basic 14,720 13,723 14,547 13,723
Diluted 14,914 14,000 14,835 13,979
See notes to unaudited consolidated financial statements.
CALIFORNIA AMPLIFIER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Six Months Ended
August 31,
---------------------
2002 2001
------- -------
Cash flows from operating activities:
Net income $ 3,284 $ 2,146
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,824 1,873
Gain on sale of equipment (148) -
Increase in equity associated with tax
benefit from exercise of stock options 2,972 1,072
Deferred tax assets, net (1,290) (821)
Gain on sale of discontinued operations - (1,615)
Changes in operating assets and liabilities:
Accounts receivable (3,017) (330)
Inventories 2,625 269
Prepaid expenses and other assets (230) (246)
Accounts payable 268 4,119
Accrued payroll and other accrued liabilities (566) (377)
------- -------
Net cash provided by operating activities 5,722 6,090
------- -------
Cash flows from investing activities:
Capital expenditures (702) (880)
Proceeds from sale of property and equipment 299 14
Acquisition of Kaul-Tronics (16,558) -
Net proceeds from sale of discontinued operation - 3,231
------- -------
Net cash provided by (used in) investing activities (16,991) 2,365
------- -------
Cash flows from financing activities:
Proceeds from long-term debt 12,000 -
Repayments of long-term debt (483) (86)
Proceeds from exercise of stock options 103 3
------- -------
Net cash provided by (used in) financing activities 11,620 (83)
------- -------
Effect of foreign exchange rate changes - (129)
------- -------
Net change in cash and cash equivalents 351 8,243
Cash and cash equivalents at beginning of period 23,156 9,778
------- -------
Cash and cash equivalents at end of period $23,507 $18,021
======= =======
Supplemental cash flow information:
Interest paid $ 257 $ 179
Income taxes paid $ 170 $ 142
Non-cash activities:
Issuance of common stock as partial consideration
for acquisition of Kaul-Tronics $ 6,054 -
Increase in valuation allowance for
available-for-sale investment $ 209 -
Issuance of common stock to reduce
accrued liability $ 4,030 -
See notes to unaudited consolidated financial statements.
CALIFORNIA AMPLIFIER, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended August 31, 2002
Note 1 - DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
California Amplifier, Inc. (the "Company") designs, manufactures and
markets microwave equipment used in the reception of video and data
transmitted from satellites and wireless terrestrial transmission sites, and
two-way wireless transceivers used for fixed point wireless broadband data
(Internet) applications. The Company's Satellite business unit designs and
markets reception components for the worldwide direct broadcast satellite
(DBS) television market as well as a full line of consumer and commercial
products for video and data reception. The Wireless Access business unit
designs and markets integrated reception and two-way transmission fixed
wireless equipment for video, voice, data and networking applications.
All significant intercompany transactions and accounts have been
eliminated in consolidation. In the opinion of the Company's management,
the accompanying consolidated financial statements reflect all adjustments
necessary to present fairly the Company's financial position at August 31,
2002 and its results of operations and cash flows for the three and six
months ended August 31, 2002 and 2001. The results of operations and cash
flows for such periods are not necessarily indicative of results to be
expected for the full fiscal year.
The Company uses a 52-53 week fiscal year ending on the Saturday
closest to February 28, which for fiscal year 2002 fell on March 2, 2002.
The actual interim periods ended on August 31, 2002 and September 1, 2001.
In the accompanying consolidated financial statements, the 2002 fiscal year
end is shown as February 28 and the interim period end for both years is
shown as August 31 for clarity of presentation.
Certain notes and other information are condensed or omitted from the
interim financial statements presented in this Quarterly Report on Form
10-Q. Therefore, these financial statements should be read in conjunction
with the Company's 2002 Annual Report on Form 10-K as filed with the
Securities and Exchange Commission on May 31, 2002.
Note 2 - ACQUISITION
On April 5, 2002, the Company acquired substantially all of the assets,
properties and business of Kaul-Tronics, Inc., a Wisconsin corporation, and
two affiliated companies (collectively, "Kaul-Tronics"). The results of
Kaul-Tronics' operations have been included in the Company's consolidated
financial statements since that date. The operations acquired by the
Company involve primarily the design and manufacture of satellite antenna
dishes used in the DBS industry. The satellite antenna dishes of the type
produced by Kaul-Tronics, and the downconverter/amplifier devices ("LNBFs")
of the type produced by the Company, together comprise the outdoor portion
of customer premise equipment for DBS television reception. In calendar
year 2001, Kaul-Tronics had revenues of approximately $36 million and pretax
income of $4.8 million. Kaul-Tronics' 2001 revenues included approximately
$12 million of LNBFs of the type produced by the Company.
The total acquisition cost was $22,642,000, consisting of a cash payment
to the sellers of $16,063,000, issuance to the sellers of 929,086 shares of
the Company's common stock valued at $6,054,000, and $525,000 for direct costs
of the acquisition including legal, accounting and financial advisory fees.
The acquisition gave rise to goodwill of $17,705,000, which was assigned to
the Company's Satellite business segment. The value of the common shares
issued was determined based on the average closing price of the Company's
common stock during the six trading day period beginning two trading days
before the acquisition was agreed to and ending two trading days after the
terms of the acquisition were announced.
The source of funds for the cash payment was the Company's cash on hand
and the proceeds of a $12 million drawdown on the Company's existing bank
revolving line of credit which had been increased from $8 million to $13
million effective April 3, 2002. On May 2, 2002, the $12 million
outstanding principal balance on the revolver was repaid in full from the
proceeds of a new $12 million term loan. The new term loan bears interest
at LIBOR plus 2.0% or the bank's prime rate. The $12 million term loan
provides for interest only payments until April 1, 2003, and thereafter
provides for monthly principal reductions of $200,000 plus accrued interest.
Following is a computation of the goodwill arising from this
acquisition (in thousands):
Total acquisition costs $22,642
Fair value of net assets acquired:
Inventory $1,030
Prepaid expenses 4
Property and equipment 3,998
Non-compete agreements 400
Accrued liabilities assumed (495)
-------
Total fair value of net assets acquired 4,937
-------
Goodwill $17,705
=======
Pursuant to the provisions of Statement of Financial Accounting
Standards No. 142, "Accounting for Goodwill and Intangible Assets", which
the Company adopted effective at the beginning of fiscal 2003, goodwill
which arose from this transaction will not be amortized. Instead, goodwill
will be evaluated on an annual basis for impairment. None of the goodwill
arising from this acquisition is expected to be deductible for income taxes.
The following pro forma information is presented as if the acquisition
had occurred at the beginning of each of the respective periods (in
thousands):
Six Months Ended Six Months Ended
August 31, 2002 August 31, 2001
-------------------- --------------------
As Pro As Pro
reported forma reported forma
-------- -------- -------- --------
Sales $50,009 $52,635 $45,456 $64,276
Income from continuing
operations $ 3,284 $ 3,431 $ 556 $ 2,123
Income from continuing
operations per share:
Basic $ .23 $ .23 $ .04 $ .14
Diluted $ .22 $ .23 $ .04 $ .14
The "as reported" amounts for the six months ended August 31, 2002 include
the operating results of Kaul-Tronics for the five months since the April 5,
2002 acquisition date. Pro forma adjustments for the six month period ended
August 31, 2002 consist mainly of adding Kaul-Tronics' results for the month
of March 2002. Because Kaul-Tronics had a different fiscal year-end than
the Company, pro forma adjustments for the six months ended August 31, 2001
include Kaul-Tronics' results for the six months ended September 30, 2001.
Note 3 - DISCONTINUED OPERATIONS
On July 31, 2001, the Company sold its 51% ownership interest in Micro
Pulse. The sale generated net cash proceeds of $3,231,000 and an after-tax
gain of $1,615,000.
Micro Pulse was the sole operating unit comprising the Company's Antenna
segment. Accordingly, operating results for Micro Pulse have been presented
in the accompanying consolidated statements of income as a discontinued
operation, and are summarized as follows (in thousands):
Period ended
August 31, 2001
-----------------
Three Six
months months
------ ------
Sales $1,226 $2,556
====== ======
Operating loss $ (51) $ (105)
====== ======
Loss from discontinued
operations, net of tax $ (5) $ (25)
====== ======
Note 4 - INVENTORIES
Inventories include the cost of material, labor and manufacturing
overhead, are stated at the lower of cost (determined on the first-in,
first-out method) or market, and consist of the following (in thousands):
August 31, February 28,
2002 2002
------ ------
Raw materials and subassemblies $ 5,585 $6,163
Finished goods 2,292 3,309
------ ------
$ 7,877 $9,472
====== =====
Note 5 - GOODWILL AND OTHER INTANGIBLE ASSETS
The changes in the carrying amount of goodwill for the six months ended
August 31, 2002 are as follows:
Balance as of February 28, 2002 $ 3,287
Goodwill acquired in April 2002 17,705
-------
Balance as of August 31, 2002 $ 20,992
=======
All goodwill is associated with the Company's Satellite business segment.
For the three and six months ended August 31, 2001, income from
continuing operations and income from continuing operations per share
adjusted to exclude goodwill amortization expense is as follows:
Three months ended Six months ended
August 31, 2001 August 31, 2001
-------- --------
Income from continuing
operations as reported $465,000 $556,000
Add back goodwill amortization 73,000 146,000
------- -------
Income from continuing
operations as adjusted $538,000 $702,000
======= =======
Income from continuing
operations per share:
Basic -
As reported $.03 $.04
As adjusted $.04 $.05
Diluted -
As reported $.03 $.04
As adjusted $.04 $.05
At August 31, 2002, the gross carrying amount and accumulated
amortization of covenants not to compete acquired in conjunction with the
Kaul-Tronics purchase (Note 2) was $400,000 and $44,000, respectively. The
covenants not to compete, which are included in other assets in the
accompanying consolidated balance sheet at August 31, 2002, are being
amortized on a straight-line basis over a weighted average life of
approximately 4.1 years.
Note 6 - INCOME TAXES
The effective income tax rate was 34.1% and 36.9% in the three months
ended August 31, 2002 and 2001, respectively. For the six month period, the
effective income tax rate was 35.8% and 35.9% in 2002 and 2001,
respectively.
The deferred income tax asset reflects the net tax effects of temporary
differences between the carrying amount of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes.
A deferred income tax asset is recognized if realization of such asset is
more likely than not, based upon the weight of available evidence which
includes historical operating performance and the Company's forecast of
future operating performance. The Company evaluates the realizability of
its deferred income tax asset on a quarterly basis, and a valuation
allowance is provided, as necessary. During this evaluation, the Company
reviews its forecasts of income in conjunction with the positive and
negative evidence surrounding the realizability of its deferred income tax
asset to determine if a valuation allowance is needed.
At February 28, 2002, the deferred tax asset valuation allowance was
$8,724,000. Of this amount, approximately $5.6 million represented reserved
tax benefits associated with the exercise of non-qualified stock options in
years prior to fiscal 2002 and, in general, these are the tax benefits which
are being recognized first.
Based on profitable operations in fiscal 2002 and in the first six
months of fiscal 2003, and on management's internal forecast of expected
operating results over the next several quarters, management believes it is
more likely than not that the Company will generate sufficient taxable
income in the future to utilize deferred tax benefits of $4,870,000, and
accordingly the deferred tax asset valuation allowance was reduced by
$2,972,000 during the latest six month period with a corresponding increase
in additional paid-in capital.
Note 7 - EARNINGS PER SHARE
Basic earnings per share is computed by dividing net income available
to common stockholders by the weighted average number of common shares
outstanding during the period. Diluted earnings per share reflects the
potential dilution, using the treasury stock method, that could occur if
securities or other contracts to issue Common Stock were exercised or
converted into Common Stock or resulted in the issuance of Common Stock that
then shared in the earnings of the Company.
Common stock equivalents used in the determination of diluted earnings
per share include the effect, when such effect is not antidilutive, of the
Company's outstanding employee stock options. The following is a summary of
the calculation of weighted average shares used in the computation of basic
and diluted earnings per share (in thousands):
Three months ended Six months ended
August 31, August 31,
---------------- ----------------
2002 2001 2002 2001
------ ------ ------ ------
Weighted average number of
common shares outstanding 14,651 13,601 14,451 13,601
Shares issuable for legal
settlement 70 122 96 122
------ ------ ------ ------
Basic weighted average number
of common shares outstanding 14,720 13,723 14,547 13,723
Effect of dilutive securities:
Stock options 194 277 288 256
------ ------ ------ ------
Diluted weighted average number
of common shares outstanding 14,914 14,000 14,835 13,979
====== ====== ====== ======
Options to purchase approximately 1,236,000 shares of Common Stock at
prices ranging from $4.72 to $50.56 were outstanding at August 31, 2002 but
were not included in the computation of diluted earnings per share for the
three and six months then ended because the exercise price of these options
was greater than the average market price of the Common Stock and
accordingly the effect of inclusion would be antidilutive. For the same
reason, options outstanding at August 31, 2001 to purchase approximately
934,000 shares of Common Stock at prices ranging from $5.69 to $50.56 were
excluded from the computation of diluted earnings per share for the three
and six months then ended.
Note 8 - COMPREHENSIVE INCOME
Comprehensive income is defined as the total of net income and all non-
owner changes in equity. The following table details the components of
comprehensive income for the three and six months ended August 31, 2002 and
2001 (in thousands):
Three months ended Six months ended
August 31, August 31,
---------------- ----------------
2002 2001 2002 2001
------ ------ ------ ------
Net income $1,818 $2,075 $3,284 $2,146
Change in valuation allowance for
available-for-sale investments (35) - (209) -
Foreign currency translation
adjustments - (45) - (129)
------ ------ ------ ------
Comprehensive income $1,783 $2,030 $3,075 $2,017
====== ====== ====== ======
Note 9 - CONCENTRATION OF RISK
A significant percentage of sales and accounts receivable relate to a
small number of customers, as summarized below. Customers A, B, D, E and F
are Satellite customers, while C is a Wireless Access customer.
Sales to significant customers as a percent of consolidated sales are
as follows:
Three months ended Six months ended
August 31, August 31,
---------------- ----------------
Customer 2002 2001 2002 2001
-------- ------ ------ ------ ------
A 47.2% 10.6% 48.7% 15.2%
B 8.5% 18.4% 7.1% 34.5%
C - 7.3% - 17.2%
D - 7.7% .1% 15.5%
E 8.4% - 7.3% -
F 7.4% - 4.9% -
Accounts receivable from significant customers as a percent of
consolidated net accounts receivable are as follows:
Aug. 31, 2002 Feb. 28, 2002
-------- -------
A 49.8% 39.6%
B 9.8% 30.0%
C - -
D - 8.5%
E 16.1% -
F 10.6% -
Note 10 - SEGMENT INFORMATION
The Company currently manages its business under two identifiable
business segments: Satellite products and Wireless Access products. Segment
information for the three and six months ended August 31, 2002 and 2001 is
as follows (in thousands):
Three months ended August 31, 2002:
Wireless General
Satellite Access Corporate Total
------- ------ ------- -----
Sales $24,640 $ 2,886 $27,526
Gross profit $ 5,463 $ 892 $ 6,355
Gross margin 22.2% 30.9% 23.1%
Income (loss) from continuing
operations before income taxes $ 4,300 $ (412) $(1,131) $ 2,757
Three months ended August 31, 2001:
Wireless General
Satellite Access Corporate Total
------- ------ ------- -----
Sales $18,730 $ 5,924 $24,654
Gross profit $ 3,902 $ 2,250 $ 6,152
Gross margin 20.8% 38.0% 25.0%
Income (loss) from continuing
operations before income taxes $ 2,962 $ (624) $(1,601) $ 737
Six months ended August 31, 2002:
Wireless General
Satellite Access Corporate Total
------- ------ ------- -----
Sales $44,114 $ 5,894 $50,008
Gross profit $10,291 $ 1,908 $12,199
Gross margin 23.3% 32.4% 24.4%
Income (loss) from continuing
operations before income taxes $ 8,030 $ (729) $(2,182) $ 5,119
Six months ended August 31, 2001:
Wireless General
Satellite Access Corporate Total
------- ------ ------- -----
Sales $33,015 $12,441 $45,456
Gross profit $ 6,242 $ 4,689 $10,931
Gross margin 18.9% 37.7% 24.0%
Income (loss) from continuing
operations before income taxes $ 4,436 $ 387 $(3,955) $ 868
Note 11 - LEGAL MATTERS
Yourish class action and RLI Insurance Company litigation:
On March 29, 2000 the Company and the individual defendants (certain
present and former officers and directors of the Company) reached a
settlement in the matter entitled Yourish v. California Amplifier, Inc., et
al., Case No. CIV 173569 shortly after trial commenced in the Superior Court
for the State of California, County of Ventura. The terms of the settlement
called for the issuance by the Company of 187,500 shares of stock along with
a cash payment of $3.5 million, funded in part by insurance proceeds, for a
total settlement valued at approximately $11.0 million. Of the total
settlement, $9.5 million was accrued in the consolidated financial
statements for the year ended February 28, 2000, and the remaining $1.5
million was expected to be funded by the Company's director and officer
liability insurance carriers. The common stock portion of the settlement
was originally accrued at $7.5 million, or $40 per share, which share price
was based on the trading range of the Company's common stock at the time the
settlement agreement was reached. By Order dated September 14, 2000, the
Court approved the terms of the settlement and dismissed the action with
prejudice.
Upon approval of the settlement agreement by the Court, in September
2000 the Company issued 65,625 of the 187,500 shares of common stock and
paid $2.5 million of the $3.5 million cash portion of the settlement.
T.I.G. Insurance Company ("T.I.G."), one of the Company's liability
insurance carriers, paid the remaining $1 million.
The fair value of the Company's common stock on September 14, 2000, the
date the settlement agreement was approved by the court, was $33.063 per
share. Accordingly, at that time the Company reduced its litigation accrual
by $1.3 million to revalue the common stock portion of the settlement at
$33.063 per share instead of $40 per share. Also in September 2000, the
Company accrued $500,000 for additional legal expenses associated with this
litigation which had not been previously accrued, and accrued $800,000 for a
refund contingently payable to T.I.G., which had contributed $1 million to
the settlement under a reservation of rights.
In March 2002, T.I.G. notified the Company that it intends to seek a
refund of its $1 million settlement contribution made under a reservation of
rights. As discussed above, the Company had previously accrued a reserve of
$800,000 for the refund contingently payable to T.I.G. Consequently, at
February 28, 2002 the Company accrued an additional $200,000 for the
contingent refund payable to T.I.G.
The remaining 121,875 shares of common stock, previously accrued as
part of the Yourish legal settlement at $33.063 per share, were issued on
July 24, 2002, upon receipt of instructions from plaintiffs' counsel.
The Company's consolidated balance sheet at August 31, 2002 includes an
accrued liability of $1 million for the contingent refund payable to T.I.G.
2001 securities litigation and shareholder derivative lawsuit:
Following the announcement by the Company on March 29, 2001 of the
resignation of its controller and the possible overstatement of net income
for the fiscal year ended February 28, 2000 and the subsequent restatement
of the Company's financial statements for fiscal year 2000 and the interim
periods of fiscal years 2000 and 2001, the Company and certain officers were
named as defendants in twenty putative actions in Federal Court. Caption
information for each of the lawsuits is set forth in Item 3 of the Company's
Form 10-K for the fiscal year ended February 28, 2001. On June 18, 2001,
the twenty actions were consolidated into a single action pursuant to
stipulation of the parties, and lead plaintiffs' counsel was appointed.
In July 2001, all of the current directors of the Company were named as
defendants in the above-entitled shareholder derivative lawsuit filed in Los
Angeles Superior Court. The Company was named as a nominal defendant. The
complaint alleged claims against the directors for breach of fiduciary duty,
abuse of control and gross mismanagement, arising out of the Company's
restatement of earnings for fiscal year 2000 and portions of fiscal year
2001.
In October 2001, the insurance company that provides the Company's
primary director and officer liability coverage applicable to the above
matters filed a lawsuit seeking to rescind the policy on the grounds that
there was a misstatement in the policy application that incorporated by
reference the Company's financial statements prior to their restatement.
In December 2001, the parties reached an agreement to settle both the
class action litigation and the shareholder derivative lawsuit for the
aggregate sum of $1.5 million, subject to final Court approval. Of this
amount, the Company's primary directors and officers liability insurance
carrier agreed to contribute $575,000 toward the settlement, which amount
was paid in December 2001, and agreed to withdraw its policy rescission
lawsuit. The Company accrued its $925,000 share of the settlement in the
fiscal year ended February 28, 2002. Of this amount, $425,000 was paid by
the Company in December 2001, and the remaining $500,000 is to be paid once
the Court approves the settlement. At the Company's option, this final
settlement installment of $500,000 may be paid in the form of cash or Common
Stock. The Stipulation of Settlement seeking preliminary Court approval of
the settlement was filed with the Court in May 2002. The Court granted its
preliminary approval on June 6, 2002, ordered that notice be given to the
class and scheduled a hearing date on October 7, 2002 for final approval of
the settlement agreement.
Investigation by the Securities and Exchange Commission:
In May 2001, the Company announced that it had received notice from the
Securities and Exchange Commission (SEC) that the SEC was conducting an
informal inquiry into the circumstances that caused the Company to announce
that it would be restating earnings for fiscal year 2000 and certain interim
quarters of fiscal year 2001. Subsequently, the Company learned that the
SEC adopted an order directing a private investigation and designating
certain officers to take testimony. The Company has provided the SEC with
documents and testimony and expects to continue cooperating with the SEC in
connection with its investigation.
Note 12 - NEW AUTHORITATIVE PRONOUNCEMENTS
In July 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 141, "Accounting for
Business Combinations" ("SFAS 141"). SFAS 141 establishes accounting and
reporting standards for business combinations initiated after June 30, 2001.
It requires that all business combinations use the purchase method of
accounting. Goodwill will continue to be initially recognized as an asset
in the financial statements and goodwill will be measured as the excess of
the cost of an acquired entity over the fair value amounts assigned to
assets acquired and liabilities assumed. An intangible asset acquired in a
business combination is recognized as an asset apart from goodwill if that
asset arises from contractual or other legal rights. The provisions of SFAS
141 are required to be applied starting with fiscal years beginning after
December 15, 2001. The Company adopted SFAS 141 on March 3, 2002 (i.e., the
first day of fiscal 2003). The adoption of SFAS 141 did not have a material
effect on the Company's results of operations, financial position or
liquidity.
In July 2001, the FASB also issued Statement of Financial Accounting
Standards No. 142, "Accounting for Goodwill and Intangible Assets" ("SFAS
142"). Under SFAS 142, goodwill is no longer amortized but rather is tested
for impairment at least annually at the reporting unit level. A recognized
intangible asset is amortized over its useful life and reviewed for
impairment in accordance with SFAS 144 (see below). A recognized intangible
asset with an indefinite useful life is not amortized until its life is
determined to be finite. The provisions of SFAS 142 are required to be
applied starting with fiscal years beginning after December 15, 2001. The
Company adopted SFAS 142 on March 3, 2002. As a result of adopting SFAS
142, beginning in fiscal 2003 the Company no longer records amortization on
goodwill of approximately $270,000 per year.
In August 2001, the FASB issued Statement of Financial Accounting
Standards No. 143, "Accounting for Asset Retirement Obligations" ("SFAS
143"). SFAS 143 addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and
the associated asset retirement costs and applies to all entities. It
applies to legal obligations associated with the retirement of long-lived
assets that result from the acquisition, construction, development and/or
the normal operation of a long-lived asset, except for certain obligations
of lessees. SFAS 143 requires that the fair value of a liability for an
asset retirement obligation be recognized in the period in which it is
incurred if a reasonable estimate of fair value can be made. The associated
asset retirement costs are capitalized as part of the carrying amount of the
long-lived asset. SFAS 143 is effective for financial statements issued for
fiscal years beginning after June 15, 2002. The Company plans on adopting
SFAS 143 in March 2003. The Company believes that the adoption of SFAS 143
will not have a material effect on the Company's results of operations,
financial position or liquidity.
In August 2001, the FASB also issued Statement of Financial Accounting
Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets" ("SFAS 144"). SFAS 144 addresses financial accounting and reporting
for the impairment or disposal of long-lived assets. SFAS 144 establishes a
single accounting model, based on the framework established in Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of" ("SFAS 121"),
for long-lived assets to be disposed of by sale. SFAS 121 did not address
the accounting for a segment of a business accounted for as a discontinued
operation under APB Opinion No. 30, "Reporting the Results of Operations-
Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions"
("APB 30") so two accounting models existed for the disposal of long-lived
assets. SFAS 144 replaces both SFAS 121 and APB 30, so that only one
accounting model exists for the disposal of long-lived assets. SFAS 144
also resolves implementation issues related to SFAS 121. The provisions of
SFAS 144 are effective for financial statements issued for fiscal years
beginning after December 15, 2001. The provisions of SFAS 144 are to be
applied prospectively. The Company adopted SFAS 144 on March 3, 2002. The
adoption of SFAS 144 did not have a material effect on the Company's results
of operations, financial position or liquidity.
In April 2002, the FASB issued Statement of Financial Accounting
Standards No. 145, "Rescission of FASB Statements No. 4, 44 and 64,
Amendment of FASB Statement No. 13, and Technical Corrections". This
statement provides guidance on the classification of gains and losses from
the extinguishment of debt and on the accounting for certain specified lease
transactions. The adoption of this statement is not expected to have a
material impact on the Company's current financial position and results of
operations.
In July 2002, the FASB issued Statement of Financial Accounting
Standards No. 146, "Accounting for Costs Associated with Exit or Disposal
Activities" (SFAS No. 146). SFAS 146 nullifies FASB Emerging Issues Task
Force (EITF) Issue No. 94-3, "Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a Restructuring)". It requires that a liability be
recognized for those costs only when the liability is incurred, that is,
when it meets the definition of a liability in the FASB's conceptual
framework. SFAS No. 146 also establishes fair value as the objective for
initial measurement of liabilities related to exit or disposal activities.
SFAS 146 is effective for exit or disposal activities that are initiated
after December 31, 2002, with earlier adoption encouraged. The Company does
not expect that the adoption of SFAS 146 will have a material impact on its
financial position or results from operations.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
CRITICAL ACCOUNTING POLICIES
The Company's discussion and analysis of its financial condition and
results of operations are based upon the Company's consolidated financial
statements, which have been prepared in accordance with accounting
principles generally accepted in the United States of America. The
preparation of these financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of sales and expenses
during the reporting periods. Areas where significant judgments are made
include, but are not limited to: allowance for doubtful accounts, inventory
valuation, product warranties and the deferred tax asset valuation
allowance. Actual results could differ materially from these estimates.
Allowance for Doubtful Accounts
The Company establishes an allowance for estimated bad debts based upon
a review and evaluation of specific customer accounts identified as known
and expected collection problems, based on historical experience, due to
insolvency, disputes or other collection issues. As further described in
Note 9 to the accompanying consolidated financial statements, the Company's
customer base is quite concentrated, with three customers accounting for
approximately 63% of the Company's sales in the six months ending August 31,
2002. Changes in either a key customer's financial position, or the economy
as a whole, could cause actual write-offs to be materially different from
the recorded allowance amount.
Inventories
The Company evaluates the carrying value of inventory on a quarterly
basis to determine if the carrying value is recoverable at estimated selling
prices. To the extent that estimated selling prices do not exceed the
associated carrying values, inventory carrying amounts are written down. In
addition, the Company generally considers that inventory on hand or
committed with suppliers, which is not expected to be sold within the next
12 months, as excess and thus appropriate write-downs of the inventory
carrying amounts are established through a charge to cost of sales.
Estimated usage in the next 12 months is based on firm demand represented by
orders in backlog at the end of the quarter and management's estimate of
sales beyond existing backlog, giving consideration to customers' forecasted
demand, ordering patterns and product life cycles. Significant reductions
in product pricing, or changes in technology and/or demand may necessitate
additional write-downs of inventory carrying value in the future.
Product Warranties
The Company provides for the estimated cost of product warranties at
the time revenue is recognized. While it engages in extensive product
quality programs and processes, including actively monitoring and evaluating
the quality of its component suppliers, the Company's warranty obligation is
affected by product failure rates and material usage and service delivery
costs incurred in correcting a product failure. Should actual product
failure rates, material usage or service delivery costs differ from
management's estimates, revisions to the estimated warranty liability would
be required.
Deferred Income Tax Asset Valuation Allowance
The deferred income tax asset reflects the net tax effects of temporary
differences between the carrying amount of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes.
A deferred income tax asset is recognized if realization of such asset is
more likely than not, based upon the weight of available evidence which
includes historical operating performance and the Company's forecast of
future operating performance. The Company evaluates the realizability of
its deferred income tax asset on a quarterly basis, and a valuation
allowance is provided, as necessary. During this evaluation, the Company
reviews its forecasts of income in conjunction with the positive and
negative evidence surrounding the realizability of its deferred income tax
asset to determine if a valuation allowance is needed. If in the future a
portion or all of the valuation allowance is no longer deemed to be
necessary, reductions of the valuation allowance will either increase
additional paid-in capital or decrease the income tax provision, depending
on the nature of the underlying deferred tax asset. Alternatively, if in
the future the Company were unable to support the recovery of its net
deferred income tax asset, it would be required to provide an additional
valuation allowance for all or a portion of the net deferred income tax
asset, which would increase the income tax provision. At August 31, 2002,
the Company's net deferred income tax asset was $4,870,000, which amount is
net of a valuation allowance of $5,752,000. Approximately $2.6 million of
the valuation allowance at August 31, 2002 is related to a tax asset
generated upon the exercise of non-qualified stock options and, in general,
these are the tax benefits which are being recognized first. Any future
reduction of this portion of the valuation allowance will result in the tax
benefit being recorded as an increase in additional paid-in capital. If and
when this portion of the valuation allowance is completely eliminated, any
further reductions of the valuation allowance will be recognized as an
income tax benefit.
RESULTS OF OPERATIONS
Sales
Total sales for the three months ended August 31, 2002 were
$27,526,000, compared to $24,654,000 for the same period in the previous
fiscal year. Sales of Satellite products increased $5,910,000, or 32%, from
$18,730,000 to $24,640,000. Sales of Wireless Access products decreased
$3,038,000, or 51%, from $5,924,000 to $2,886,000.
Total sales for the six months ended August 31, 2002 increased by
$4,552,000 from $45,456,000 to $50,008,000. Sales of Satellite products
increased $11,099,000, or 34%, from $33,015,000 to $44,114,000. Sales of
Wireless Access products decreased $6,547,000, or 53%, from $12,441,000 to
$5,894,000.
Sales of the Satellite segment increased primarily as a result of the
acquisition of the Kaul-Tronics satellite antenna business on April 5, 2002,
as further described in Note 2 to the accompanying financial statements.
The acquired Kaul-Tronics business accounted for approximately $4.5 million
and $7.5 million of Satellite segment revenues during the three and six
months ended August 31, 2002, respectively. The remainder of the increased
Satellite revenue in these periods is attributable to higher unit sales of
low-noise block feed (LNBF) downconverter/amplifier products.
The decline in sales of Wireless Access products compared to the prior
year is attributable to a combination of the general slowdown in capital
spending in the telecommunications industry and the anticipation of second
generation non-line of sight products. On a sequential quarter basis,
Wireless Access sales in the latest quarter were relatively unchanged from
the preceding two quarters. The Company does not anticipate that its
Wireless Access sales will increase appreciably until the development of
second generation non-line of sight two-way transceiver products is
completed, and until wireless access service providers resume the expansion
of their subscriber bases.
Gross Profit and Gross Margins
Gross profit for the three months ended August 31, 2002 was $6,355,000,
up about 3% from the $6,152,000 gross profit in the comparable period of the
prior year. Gross margin decreased from 25.0% to 23.1%. The decrease in
gross margin is attributable primarily to lower sales of Wireless Access
products.
Gross profit for the six months ended August 31, 2002 increased by
$1,268,000, or 12%, to $12,199,000 from $10,931,000 in the first six months
of last year. Gross margin improved from 24.0% last year to 24.4% in the
first six months of this year. The small increase in overall gross margin
is the net result of higher gross margins for Satellite products and lower
Wireless Access gross margins due to lower sales.
Gross margins for Satellite products improved to 22.2% and 23.3%,
respectively, in the three and six months ended August 31, 2002, from 20.8%
and 18.9%, respectively, in the second quarter and first six months of last
fiscal year. Satellite gross margin improved primarily because of increased
volume, a more favorable mix of Satellite products compared to last year,
and cost reductions.
Gross margins for Wireless Access products declined to 30.9% and 32.4%,
respectively, in the three and six months ended August 31, 2002, from 38.0%
and 37.7%, respectively, in the second quarter and first six months of last
fiscal year. Wireless Access gross margins have declined principally due to
the decline in sales and a change in product mix.
See also Note 10 to the accompanying unaudited consolidated financial
statements for additional operating data by business segment.
Operating Expenses
Research and development expense decreased by $336,000, or 16%, from
$2,059,000 in the second quarter of last year to $1,723,000 in the latest
quarter. For the six month year-to-date periods, research and development
expense decreased $296,000 from $3,720,000 last year to $3,424,000 this
year. These declines are primarily due to a reduced level of subcontracted
product development costs of the Wireless Access business segment in the
current three- and six-month periods compared to the prior year. During the
quarter ended August 31, 2002, the Company cancelled a product development
contract for broadband wireless application specific integrated circuits
(ASICs) because the market timing of large scale deployment for this
technology is uncertain in the near-term future.
Selling expense increased by 26% from $592,000 in the three months
ended August 31, 2001 to $744,000 in the three months ended August 31, 2002.
For the six month periods, selling expense increased 20% from $1,226,000
last year to $1,474,000 this year. These increases are attributable
primarily to the acquisition of the Kaul-Tronics business in early April
2002.
General and administrative expense in the latest quarter decreased 62%
to $1,052,000 from $2,775,000 in the second quarter of last year. This
decrease was due primarily to a provision of $1,162,000 for a doubtful
accounts receivable balance from a Wireless Access customer recorded in last
year's second quarter. For the six month periods, general and
administrative expenses decreased by $3,016,000, or 59%, to $2,102,000 in
2002 from $5,118,000 in 2001. This decrease was primarily due to the
aforementioned $1,162,000 provision for doubtful accounts receivable and to
expenses of $950,000 incurred in the first quarter of last fiscal year in
connection with the restatement of the Company's fiscal year 2000 and fiscal
year 2001 interim financial statements.
Non-operating Income (Expense), Net
Non-operating income (expense) declined from $11,000 in the second
quarter of last year to ($79,000) in the latest quarter due principally to
higher interest expense associated with a new $12 million term loan which
partially financed the acquisition of Kaul-Tronics in April 2002. Primarily
for the same reason, non-operating income (expense) for the six month
periods declined from $1,000 in 2001 to ($80,000) in 2002.
Income from Continuing Operations before Income Taxes
Income from continuing operations before income taxes in the latest
quarter was $2,757,000 compared to $737,000 in the second quarter of last
year. For the six month periods, income from continuing operations before
income taxes was $5,119,000 in 2002 compared to $868,000 in 2001. This
increase is primarily attributable to the $1,268,000 increase in gross
profit and the $3,016,000 decrease in general and administrative expenses,
as discussed above.
Income Taxes
The effective income tax rate was 34.1% and 36.9% in the three months
ended August 31, 2002 and 2001, respectively. For the six month period, the
effective income tax rate was 35.8% and 35.9% in 2002 and 2001,
respectively.
During the three and six months ended August 31, 2002, the Company
recognized income tax benefits of $1,381,000 and $2,972,000, respectively,
associated with tax deductions on non-qualified employee stock options which
were exercised in prior years. These tax benefits were recognized by
reducing the deferred tax asset valuation allowance in the aggregate amount
of $2,972,000, with a corresponding increase in additional paid-in capital.
The deferred tax asset valuation allowance was established in fiscal years
2000 and 2001, years during which a significant number of non-qualified
stock options were exercised, because management believed at the time that
it did not have the basis to conclude that it was more likely than not that
the deferred tax benefits arising from the stock option tax deductions would
be realized in the future. Based on profitable operations in fiscal 2002
and in the first six months of fiscal 2003, and on management's internal
forecast of expected operating results over the next several quarters,
management believes it is more likely than not that the Company will
generate sufficient taxable income in the future to utilize deferred tax
benefits of $4,870,000, and accordingly the deferred tax asset valuation
allowance was reduced by $2,972,000 during the latest six month period as
described above.
Income from Continuing Operations
Income from continuing operations, for the reasons discussed above,
increased from $465,000 in the second quarter of last year to $1,1818,000 in
the latest quarter. For the six month periods, income from continuing
operations increased from $556,000 last year to $3,284,000 this year.
Discontinued Operations
As described further in Note 3 to the accompanying unaudited
consolidated financial statements, the Company sold its 51% ownership
interest in Micro Pulse during the second quarter of last year. A gain of
$1,615,000 net of tax was recognized on this transaction.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity are its cash and cash
equivalents, which amounted to $23,507,000 at August 31, 2002, and its
working capital line of credit with a bank. During the six months ended
August 31, 2002, cash and cash equivalents increased by $351,000. This
increase consisted of the $12 million proceeds from a new bank term loan and
cash provided by operating activities of $5,722,000, offset by cash used for
the acquisition of Kaul-Tronics of $16,668,000, capital expenditures of
$702,000, and all other activity during the quarter which had a net cash
outflow effect of $1,000.
Components of operating working capital increased by $920,000 during
the six months ended August 31, 2002 comprised of a $3,017,000 increase in
accounts receivable, a decrease of $2,625,000 in inventory, and a net
increase of $528,000 in all other components of operating working capital.
The accounts receivable increase is primarily the result of the acquisition
in April 2002 of the Kaul-Tronics business, which accounted for
approximately $4.5 million of Satellite segment revenues during the three
months ended August 31, 2002.
The Company believes that inflation and foreign currency exchange rates
have not had a material effect on its operations. The Company believes that
fiscal year 2003 will not be impacted significantly by foreign exchange
since a significant portion of the Company's sales are to U.S. markets, or
to international markets where its sales are denominated in U.S. dollars.
In April 2002, the Company's working capital line of credit with its
bank was increased from $8 million to $13 million. In that same month, the
Company borrowed $12 million on the working capital line to partially fund
the acquisition of Kaul-Tronics. In addition, the Company used
approximately $4.7 million of its existing cash and issued 929,086 shares of
its common stock to pay for the Kaul-Tronics acquisition. In May 2002, the
$12 million outstanding balance on the working capital line of credit was
repaid in full from the proceeds of a new $12 million bank term loan. Also,
the maturity date of the working capital line was extended from August 2,
2002 to August 2, 2005. At August 31, 2002 and at the present time, there
are no outstanding borrowings under the $13 million working capital line of
credit. Of this amount, $12 million is available for borrowing and the
remaining $1 million of the working capital line is reserved for an
outstanding standby letter of credit.
The $12 million bank term loan bears interest at LIBOR plus 2.0% or the
bank's prime rate. Future maturities of this new term loan are $200,000 per
month, or $2.4 million annually, beginning in April 2003 and continuing
through March 2008.
At August 31, 2002, the Company had contractual cash obligations,
consisting of future maturities of debt (including the $12 million term loan
referred to above) and operating lease commitments, of approximately
$840,000 during the remainder of fiscal 2003, amounts in fiscal years 2004
through fiscal 2008 ranging from $2.4 million to $3.9 million annually, and
$200,000 in fiscal 2009, for a grand total of $17.3 million.
The Company believes that cash flow from operations, together with
amounts available under its working capital line of credit, are sufficient
to support operations, fund capital equipment requirements and discharge
contractual cash obligations over the next twelve months.
NEW AUTHORITATIVE PRONOUNCEMENTS
Reference is made to Note 12 of the accompanying unaudited consolidated
financial statements for a description of new authoritative accounting
pronouncements.
SAFE HARBOR STATEMENT
Forward looking statements in this 10-Q which include, without
limitation, statements relating to the Company's plans, strategies,
objectives, expectations, intentions, projections and other information
regarding future performance, are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. The
words "believes," "anticipates," "expects," and similar expressions are
intended to identify forward-looking statements. These forward-looking
statements reflect the Company's current views with respect to future events
and financial performance and are subject to certain risks and
uncertainties, including, without limitation, lack of product
diversification, dependence upon a small number of customers, highly
competitive markets, rapid technology changes affecting the Company's
wireless access business, and other risks and uncertainties that are
described under the heading "Risk Factors" in the Company's Registration
Statement on Form S-3 as filed with the Securities and Exchange Commission
("SEC") on August 30, 2002, copies of which may be obtained from the Company
upon request, or directly from the SEC's website at http://www.sec.gov/.
Such risks and uncertainties could cause future results to differ materially
from historical results or from results presently anticipated. Although the
Company believes the expectations reflected in such forward-looking
statements are based upon reasonable assumptions, it can give no assurance
that its expectations will be attained. The Company undertakes no
obligation to update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's financial instruments include cash equivalents, accounts
receivable, accounts payable and bank term loans payable. At August 31,
2002, the carrying values of cash equivalents, accounts receivable and
accounts payable approximate fair values given the short maturity of these
instruments.
The carrying value of bank term loans payable approximates fair value
since the interest rates on these loans approximate the interest rates which
are currently available to the Company for the issuance of debt with similar
provisions and maturities. Based on the amount of bank debt outstanding at
August 31, 2002, a change in interest rates of one percent would result in
an annual impact of approximately $100,000, net of tax, on the Company's
consolidated statement of income.
A portion of the Company's operations consists of investments in
foreign subsidiaries. As a result, the consolidated financial results have
been and could continue to be affected by changes in foreign currency
exchange rates. However, the Company believes that it does not have
material foreign currency exchange rate risk since a significant portion of
the Company's sales are to U.S. markets, or to international markets where
its sales are denominated in U.S. dollars, and material purchases from
foreign suppliers are typically also denominated in U.S. dollars.
Additionally, the functional currency of the Company's foreign subsidiaries
is the U.S. dollar.
It is the Company's policy not to enter into derivative financial
instruments for speculative purposes. Furthermore, the Company generally
does not enter into foreign currency forward exchange contracts. There are
no foreign currency forward exchange contracts outstanding at May 31, 2002.
ITEM 4. CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedures.
Within the 90 days prior to the date of this report, the Company carried
out an evaluation, under the supervision and with the participation of the
Company's management, including the Company's Chief Executive Officer and
Chief Financial Officer, of the effectiveness of the design and operation of
the Company's disclosure controls and procedures pursuant to Exchange Act
Rule 13a-14. Based upon that evaluation, the Chief Executive Officer and
Chief Financial Officer concluded that the Company's disclosure controls and
procedures are effective in timely alerting them to material information
relating to the Company (including its consolidated subsidiaries) required
to be included in the Company's periodic SEC filings.
(b) Changes in internal controls.
Not applicable.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See Note 11 to the accompanying consolidated financial statements for a
description of pending legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the 2002 Annual Meeting of Stockholders held on July 18, 2002, the
six incumbent directors stood for reelection to a one year term expiring at
the fiscal 2003 Annual Meeting. All six of the director nominees were
reelected. Following is a summary of the results of the director voting:
Votes
Against or
Votes For Withheld Unvoted
-------- ------- -------
Ira Coron 13,305,562 684,654 608,221
Richard Gold 13,595,815 394,401 608,221
Arthur Hausman 13,663,782 326,434 608,221
Frank Perna 11,933,359 2,056,857 608,221
Thomas Ringer 13,643,782 346,434 608,221
Fred Sturm 13,548,742 441,474 608,221
In addition to the election of directors, the stockholders voted on two
proposed amendments to the Company's 1999 Stock Option Plan, as described
below. Following is a summary of the voting results on these two proposals,
neither of which were approved by the stockholders:
Votes
Against or Votes
Votes For Withheld Abstained Unvoted
-------- ------- ------- -------
Amendment to the 1999 Stock Option
Plan to increase the maximum
number of stock options which
can be granted each year 2,690,036 3,547,625 88,560 8,272,216
Amendment to the 1999 Stock Option
Plan to increase the number of
options granted to non-employee
directors 2,713,800 3,538,454 73,967 8,272,216
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
Exhibit 99-1 - Certification Pursuant to 18 U.S.C. Section 1350,
as Adopted Pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002
b. Reports on Form 8-K:
On April 22, 2002, a Form 8-K was filed which disclosed the
acquisition of substantially all of the assets, properties and
business of Kaul-Tronics, Inc. and two affiliated companies. This
Form 8-K was amended by the filing of a Form 8-K/A on June 19, 2002
to provide the required audited financial statements of the
acquired business and the unaudited pro forma financial information
for this acquisition.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
March 7, 2003 /s/ Richard K. Vitelle
--------------------------------- -----------------------------------
Date Richard K. Vitelle
Vice President Finance & CFO
(Principal Financial Officer
and Chief Accounting Officer)
CERTIFICATIONS
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, Fred M. Sturm, Chief Executive Officer of California Amplifier, Inc.,
certify that:
1. I have reviewed this quarterly report on Form 10-Q/A of California
Amplifier, Inc. (the "registrant");
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within these entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of the registrant's board of directors:
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
March 7, 2003 /s/ Fred M. Sturm
------------------------ -----------------------------
Date Fred M. Sturm
Chief Executive Officer
CERTIFICATION OF CHIEF FINANCIAL OFFICER
I, Richard K. Vitelle, Chief Financial Officer of California Amplifier,
Inc., certify that:
1. I have reviewed this quarterly report on Form 10-Q/A of California
Amplifier, Inc. (the "registrant");
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within these entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of the registrant's board of directors:
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
March 7, 2003 /s/ Richard K. Vitelle
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Date Richard K. Vitelle
Chief Financial Officer
29