-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Luhb9s/mk7XGKnS1DwDN1dav/Eq2x3cQh6ZUI0NiOIjhe9qV/5zswo6cESNSQcZ5 EuQLxSOT7JoHLld4Q8Fmuw== 0000895755-98-000064.txt : 19980507 0000895755-98-000064.hdr.sgml : 19980507 ACCESSION NUMBER: 0000895755-98-000064 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980506 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: VARI L CO INC CENTRAL INDEX KEY: 0000917173 STANDARD INDUSTRIAL CLASSIFICATION: COMMUNICATIONS EQUIPMENT, NEC [3669] IRS NUMBER: 060678347 STATE OF INCORPORATION: CO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-23866 FILM NUMBER: 98611497 BUSINESS ADDRESS: STREET 1: 4895 PEORIA STREET CITY: DENVER STATE: CO ZIP: 80239 BUSINESS PHONE: 303/371-1560 MAIL ADDRESS: STREET 1: 11101 EAST 51ST AVENUE CITY: DENVER STATE: CO ZIP: 80239 10QSB 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended Commission File No. 0-23866 March 31, 1998 VARI-L COMPANY, INC. (Exact name of Registrant as specified in its charter.) Colorado 06-0679347 - ----------------------- ----------------------------------- (State of Incorporation) (I.R.S. Employer identification No.) 4895 Peoria Street Denver, Colorado 80239 ----------------------- (Address of principal executive offices) (303) 371-1560 (Registrant's telephone number, including area code) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- The number of shares outstanding of each of the issuer's classes of common stock, as of March 31, 1998: Class of Securities Outstanding Securities - ------------------- ---------------------- $0.01 par value 5,310,118 shares Common shares PART 1-FINANCIAL INFORMATION Item 1. Financial Statements - ----------------------------- VARI-L COMPANY, INC. BALANCE SHEETS MARCH 31, 1998 AND DECEMBER 31, 1997
3/31/1998 12/31/1997 ASSETS (UNAUDITED) (AUDITED) ----------- ----------- Current Assets: Cash and cash equivalents $ 5,805,573 $ 5,970,582 Trade receivables, less $18,000 allowance for doubtful accounts 5,057,853 5,172,874 Inventories 7,397,425 6,936,890 Prepaid expenses and other 1,257,719 887,272 ----------- ----------- Total Current Assets 19,518,570 18,967,618 ----------- ----------- Property and Equipment: Machinery and equipment 16,901,851 15,730,870 Furniture and fixtures 1,323,540 1,200,453 Leasehold improvements 5,656,461 4,707,324 ----------- ----------- 23,881,852 21,638,647 Less accumulated depreciation and amortization (3,553,850) (3,313,483) ----------- ----------- Net Property and Equipment 20,328,002 18,325,164 ----------- ----------- Other Assets: Long-term inventories 375,000 375,000 Covenant not to compete 58,091 66,389 Patents, net of accumulated amortization of $101,410 and $88,210 539,668 504,895 Other 1,322,325 1,317,238 ----------- ----------- Total Other Assets 2,295,084 2,263,522 ----------- ----------- TOTAL ASSETS $42,141,656 $39,556,304 =========== ===========
(CONTINUED) SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS VARI-L COMPANY, INC. BALANCE SHEETS, CONTINUED MARCH 31, 1998 AND DECEMBER 31, 1997
3/31/1998 12/31/1997 LIABILITIES AND STOCKHOLDERS' EQUITY (UNAUDITED) (AUDITED) - ------------------------------------ ----------- ---------- Current Liabilities: Current installments of long-term debt $ 660,902 $ 596,645 Financed insurance premiums 15,620 23,730 Trade accounts payable 1,937,523 1,851,057 Accrued expenses and other 492,106 628,718 Income taxes payable 386,180 0 ----------- ----------- Total Current Liabilities 3,492,331 3,100,150 Bank line of credit 2,698,409 1,813,409 Long-term debt 4,783,184 4,464,021 Deferred income taxes 2,343,654 2,343,654 ----------- ----------- Total Liabilities 13,317,578 11,721,234 ----------- ----------- Stockholders' Equity: Common stock, $.01 par value, 50,000,000 shares authorized; 5,310,118 and 5,251,288 shares outstanding, respectively 53,101 52,513 Paid-in capital 20,620,740 20,211,589 Retained earnings 8,168,937 7,589,668 Less Loans for purchase of stock (18,700) (18,700) ----------- ----------- Total Stockholders' Equity 28,824,078 27,835,070 ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY - ---------------------- $42,141,656 $39,556,304 =========== ===========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS VARI-L COMPANY, INC. STATEMENTS OF INCOME FOR THE THREE MONTH PERIODS ENDED MARCH 31, 1998 AND MARCH 31, 1997
THREE MONTHS THREE MONTHS ENDED ENDED 3/31/1998 3/31/1997 (UNAUDITED) (UNAUDITED) ------------ ------------ Net sales $ 4,044,848 $ 3,299,733 Cost of products sold 1,843,213 1,667,785 ----------- ----------- Gross profit 2,201,635 1,631,948 ----------- ----------- Other costs and expenses: General and administrative 471,052 372,601 Engineering 264,739 209,184 Selling 476,249 450,222 Interest expense 74,145 174,610 Interest income (76,126) (24,123) Other 26,127 29,102 ----------- ----------- 1,236,186 1,211,596 ----------- ----------- Income before taxes 965,449 420,352 Income taxes 386,180 176,548 ----------- ----------- NET INCOME $ 579,269 $ 243,804 - ---------- =========== =========== Basic earnings per share $0.11 $0.06 =========== =========== Basic weighted average shares outstanding 5,289,603 3,822,303 =========== =========== Diluted earnings per share $ 0.11 $ 0.06 =========== =========== Diluted weighted average shares outstanding 5,370,494 3,934,127 =========== ===========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS VARI-L COMPANY, INC. STATEMENTS OF CASH FLOWS FOR THE THREE MONTH PERIODS ENDED MARCH 31, 1998 AND MARCH 31, 1997
THREE MONTHS THREE MONTHS ENDED ENDED 3/31/1998 3/31/1997 (UNAUDITED) (UNAUDITED) ----------- ----------- Net cash provided by (used in) operating activities (Note 7) $ 408,147 $(1,373,960) ----------- ------------ Cash flows from investing activities: Purchases of property and equipment (2,243,205) (623,806) ----------- ------------ Net cash used in investing activities (2,243,205) (623,806) ----------- ------------ Cash flows from financing activities: Net increase (decrease) in long-term debt 383,420 (142,127) Repayments of capital lease obligations 0 (967) Net borrowings (repayments) under bank line of credit 885,000 (247,000) Net (repayments) borrowings for insurance financing (8,110) 53,930 Net proceeds from debenture offering 0 4,562,500 Net proceeds from stock issuances 409,739 93,710 ----------- ----------- Net cash provided by financing activities 1,670,049 4,320,046 ----------- ----------- Net (decrease) increase in cash (165,009) 2,322,280 Beginning cash 5,970,582 1,224,727 ----------- ----------- ENDING CASH $ 5,805,573 $ 3,547,007 =========== =========== Supplemental disclosure of cash flows information: Cash paid for interest $180,636 $151,610 =========== =========== Cash paid for income taxes $0 $0 =========== ===========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS VARI-L COMPANY, INC. NOTES TO FINANCIAL STATEMENTS Vari-L Company, Inc. (the Company) was founded in 1953 and is a manufacturer of electronic components. The Company's products are used in commercial and military communications systems where electrical processing of radio frequency signals is required. NOTE 1 - FINANCIAL PRESENTATION These financial statements should be read in conjunction with the audited financial statements for the year ended December 31, 1997 and notes thereto. In the opinion of management, the accompanying interim, unaudited financial statements contain all the adjustments necessary to present fairly the financial position of the Company as of March 31, 1998, and the results of its operations, and its cash flows for the three months ended March 31, 1998 and March 31, 1997. All adjustments made are of a normal recurring nature. NOTE 2 - INVENTORIES Inventories consist of the following:
3/31/1998 12/31/1997 (UNAUDITED) (AUDITED) ----------- ---------- Finished goods $1,163,736 $1,173,847 Work in process 2,415,996 2,405,396 Raw materials 3,659,755 3,202,454 Gold bullion 157,938 155,193 ---------- ---------- $7,397,425 $6,936,890 ========== ========== Long-term inventories $ 375,000 $ 375,000 ========== ==========
NOTE 3 - INCOME TAXES Income tax expense reflects effective tax rates of 40% for 1998 and 42% for 1997. NOTE 4 - CREDIT FACILITY The Company has two credit facilities. The first consists of a line of credit. The second consists of a term loan and a revolving equipment term loan. The line of credit provides for borrowings of up to $3.5 million. Interest is payable monthly, calculated at prime. The line of credit matures April 30, 1999. At March 31, 1998, the outstanding balance due under the line of credit was $2,698,409. Interest accrues on the outstanding principal balance of the term loan at 8.01% and monthly principal and interest payments of $73,279 are required. The term loan matures February 13, 2001. At March 31, 1998 the balance due under the term loan was $4,403,589. The revolving equipment term loan provides for borrowings up to $2.5 million. Interest accrues on the outstanding principal balance of the revolving equipment term loan at prime plus .25% when advances are made under the revolver. These borrowings can be converted to term notes at rates which adjust to the 3-year treasury note rate plus 1.95%. When converted, the term debt requires monthly principal and interest payments calculated on a seven-year amortization basis with a 42 month maturity. The revolving loan matures on August 13, 1998. As of March 31, 1998, the balance of the three advances under the revolving loan that had been converted to term notes totaled $983,215. Interest accrues on the outstanding principal balances of these term notes at rates ranging from 7.3% to 7.72% and monthly principal and interest payments totalling $15,400 are required. Continued VARI-L COMPANY, INC. NOTES TO FINANCIAL STATEMENTS, CONTINUED NOTE 5 - SECURITIES PURCHASE AGREEMENT On March 4, 1997, the Company entered into an agreement to sell up to 75 units of debentures and warrants. The units consisted of an aggregate of $7,500,000 in 4-year, 7%, subordinated, convertible debentures and 750,000 non-redeemable warrants to purchase common stock at a price of $9.50 per share, exercisable for a period of three years. As provided for in the agreement, all of the debentures plus accrued interest were converted into common stock during 1997. As of March 31, 1998, the 750,000 warrants were still outstanding. In connection with the March 4, 1997 agreement, 45,000 agent's warrants to purchase shares of the Company's common stock were issued to Neidiger, Tucker, Bruner, Inc. ("NTB")and its assigns. All 45,000 of these agent's warrants were exercised during the three months ended March 31, 1998 at prices of $6.93 and $6.98 per share. Anthony Petrelli, who was appointed to the Company's Board of Directors in October 1997, is Senior Vice President of Investment Banking Services at NTB. Of the 45,000 agent's warrants paid to NTB in March 1997, 8,418 warrants were issued to Mr. Petrelli, all of which he converted to common stock in January 1998. NOTE 6 - STOCK COMPENSATION PLANS The Company has three stock-based compensations plans: a stock option plan, an employee stock purchase plan and a stock grant plan. Stock Option Plan - ----------------- The Company has reserved 3,000,000 shares of its common stock for issuance upon exercise of rights and options under the stock option plan. Typically, rights and options have been granted subject to a vesting schedule, vesting at the rate of 20 percent per year, becoming fully vested upon the change of control of the Company, and expiring 10 years from the date of issuance. Certain options granted to senior management are fully vested upon issuance. In the quarter ended March 31, 1998, the Company granted 533,324 options pursuant to the plan. No options were exercised in the quarter. Employee Stock Purchase Plan - ---------------------------- Under the Company's employee stock purchase plan, eligible employees may contribute up to 10 percent of their earnings, through payroll deductions, to purchase shares of the Company's common stock. The purchase price is equal to 85 percent of the fair value of the stock on specified dates. A total of 800,000 shares were reserved under the plan and the maximum number of shares to be issued is 200,000 per year. For the plan year 1997, a total of 13,530 shares were issued in January 1998 at $6.91 per share. Stock Grant Plan - ---------------- During 1996, the Company adopted a stock grant plan under which stock grants can be made to the Company's officers, directors, employees, consultants, and advisors. The Company reserved 100,000 shares of its common stock for issuance under the stock grant plan. The plan provides for automatic grants of 50 shares per month to nonmanagement members of the Compensation Committee of the Company's Board of Directors. During the first quarter of 1998, those members received grants for 300 shares. Compensation cost charged to operations was measured by the fair market value of the stock on the date of the grants. Continued VARI-L COMPANY, INC. NOTES TO FINANCIAL STATEMENTS, CONTINUED NOTE 7 - RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES The reconciliation of net income to net cash provided by (used in) operating activities for the three months ended March 31, 1998 and March 31, 1997 is as follows:
Three Months Three Months Ended Ended 3/31/1998 3/31/1997 (Unaudited) (Unaudited) ------------ ----------- Net Income $ 579,269 $ 243,804 ----------- ----------- Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 240,367 158,366 Amortization of covenant not to compete 8,298 8,298 Changes in assets and liabilities: Decrease (increase) in accounts receivable 115,021 (340,551) (Increase) in inventories (460,535) (686,879) (Increase) in prepaid expenses and other (370,447) (330,792) (Increase) in patents and other assets (39,860) (119,335) Increase (decrease) in accounts payable 86,466 (61,457) (Decrease) in accrued expenses (136,612) (396,415) (Decrease) in amount due to related party 0 (25,547) Increase in income taxes payable 386,180 176,548 ----------- ----------- Total adjustments (171,122) (1,617,764) ----------- ----------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES $ 408,147 $(1,373,960) =========== ===========
Continued VARI-L COMPANY, INC. NOTES TO FINANCIAL STATEMENTS, CONTINUED NOTE 8 - EARNINGS PER SHARE The following is a reconciliation of the net income (numerator) and number of shares (denominator) for the computations of basic and diluted earnings per shares:
For the quarter ended Income Shares Per Share March 31, 1997: (Numerator) (Denominator) Amount --------------------- ----------- ------------- ----------- Basic earnings per share $243,804 3,822,303 $0.06 ========== Effect of dilutive stock options 0 111,824 -------- --------- Diluted earnings per share $243,804 3,934,127 $0.06 ======== ========= ========== For the quarter ended Income Shares Per Share March 31, 1998: (Numerator) (Denominator) Amount --------------------- ----------- ------------- ----------- Basic earnings per share 579,269 5,289,603 $0.11 =========== Effect of dilutive stock options 0 80,891 -------- --------- Diluted earnings per share $579,269 5,370,494 $0.11 ======== ========= ===========
At March 31, 1998, the Company had 5,310,118 common shares outstanding. During the three months ended March 31, 1998, the Company issued 58,830 shares. For purposes of computing earnings per share, the shares issued during the period were weighted for the period of time they were outstanding. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. - ------------------------------------------------------------------------ OVERVIEW The Company achieved record financial results in the three-month period ended March 31, 1998. Net sales were up 23%, to $4 million, over the same quarter last year. Net income was up 138%, to $579,000, over the same quarter last year. Basic and diluted earnings per share were 11 cents per share versus 6 cents per share for the same quarter last year notwithstanding an increase in weighted average shares outstanding of more than 35% from the prior year. The Company received $3.9 million in firm customer orders during the third quarter, up 24% from the same quarter a year ago. Commercial orders continued to drive growth during the period, advancing 33% to $3.2 million, while military/aerospace orders totaled $714,000. Domestic orders surged 76% to $3.1 million and international orders accounted for $797,000 in the three-month period. The Company was awarded ISO9001 certification for its commercial products during the first quarter of 1998. ISO9001 is recognized worldwide as the leading indication of product quality and reliability, providing the Company with enhanced credibility as it competes in the various existing and emerging commercial wireless markets across the globe. The primary scope of the ISO9001 standard is to ensure that a company's quality assurance systems are organized to produce consistent levels of durability and excellence in its products. The standard covers every phase of a product's life cycle, from design to manufacturing to servicing, and requires an appropriate combination of statistical, engineering, management and motivational effort. The International Standards Organization awarded the Company ISO9001 certification after an approximately three-month audit of the Company's quality assurance systems. The Company expects the designation to be especially significant to its ongoing efforts to increase international revenues. In the quarter, the Company also began the process of preparing a production facility for its newest line of products being developed for the subscriber (pagers and handsets) marketplace. These subscriber products will have a lower profit margin in order to be priced competitively but are still expected to outperform competitors on quality even while producing volume in the millions. In anticipation of several such customer orders currently in the quotation and product design process, the Company is installing high-speed automated assembly equipment on the second floor of its new corporate headquarters facility. The finishing of the second floor, including the installation of the new equipment, is scheduled for May completion. The Company plans to commence production in June with full utilization of the new line by year end. Building 1, the Company's former corporate headquarters, was remodeled during the first quarter of 1998. This facility now houses all of the manufacturing and engineering functions related to the Company's Discrete Signal Source Components, Wide-band VCOs and Optoelectronics products. RESULTS OF OPERATIONS Three Months Ended - ------------------ March 31, 1998 and March 31, 1997 - --------------------------------- TOTAL REVENUES Sales revenues increased approximately $745,000 (23%) in the three months ended March 31, 1998 as compared with the three months ended March 31, 1997, from $3,299,733 to $4,044,848. These increases reflect a growing demand for the Company's products. The Company currently has six major product lines, including the subscriber line which is expected to begin production in June 1998: 1. Discrete signal processing components for industrial, military and aerospace. 2. Hybrid signal source components, primarily wide-band VCOs, for industrial, military and aerospace. 3. Assemblies that combine Discrete signal processing and Hybrid signal source components. 4. Commercial signal source components including PLLs and narrow-band VCOs. 5. Optoelectronic components and subassemblies used in magnetic and electro-optic products for CATV applications. 6. Subscriber products components used in hand-held sets, pagers and other consumer-oriented products. This line is expected to commence production in June 1998. In the first three months of 1998, the composition of sales revenues was 10% Discrete, 31% wide-band VCOs, 1% "Combination" sales of wide-band VCO and Discrete products, 49% narrow-band VCOs, 5% PLLs and 4% Optoelectronic products. In the first three months of 1997, the composition of sales revenues was 10% Discrete, 40% wide-band VCOs, less than 1% "Combination" sales of wide-band VCO and Discrete products, 44% narrow-band VCOs, 6% PLLs and 0% Optoelectronic products. COST OF GOODS SOLD Cost of goods sold, as a percent of sales revenues, was 46% in the three months ended March 31, 1998 and 51% in the three months ended March 31, 1997. The decrease in the 3-month period ended March 31, 1998 reflects ongoing improvements in production processing that have increased personnel efficiencies and reduced labor and material costs. SELLING AND ENGINEERING EXPENSE Selling expenses increased approximately $26,000, or 6%, for the three months ended March 31, 1998 as compared to the three months ended March 31, 1997. Engineering expenses increased approximately $56,000, or 27%, for the three months ended March 31, 1998 as compared to the three months ended March 31, 1997. These increases reflect the higher costs to obtain and retain engineering staff, in addition to expenses and equipment costs to expand and support development of the Company's product lines, including high-volume commercial products, military products, space products, optoelectronic products and the newest line of subscriber products. GENERAL AND ADMINISTRATIVE AND OTHER EXPENSES General and administrative expenses increased approximately $98,000 (26%) in the three months ended March 31, 1998 as compared with the three months ended March 31, 1997. Increases to G & A primarily reflect the higher cost to retain staff in the administrative, finance and personnel departments, as well as increasing shareholder relation expenses. Other expenses decreased approximately $3,000 (10%) in the three months ended March 31, 1998 as compared with the three months ended March 31, 1997. INTEREST INCOME AND EXPENSE The Company manages its credit facility and mutual fund in tandem. Interest income is earned on the Company's short-term investments in a U.S. government securities mutual fund purchased with proceeds from the March 1997 convertible debenture and warrant offering. Interest income increased approximately $52,000, to approximately $76,000, in the three months ended March 31, 1998 compared to the three months ended March 31, 1997. This increase reflects varying levels of these mutual funds investments during the periods reported. Interest expense decreased approximately $100,000 (58%) for the three months ended March 31, 1998 as compared with the three months ended March 31, 1997. Approximately $30,000 of the decrease is attributable to the elimination of interest expense on $5,000,000 in subordinated debentures that were converted to common stock during 1997 and the balance is attributable to a one-time adjustment of 1997 interest expense. DEPRECIATION AND AMORTIZATION Depreciation and amortization increased approximately $82,000 (52%) for the three months ended March 31, 1998 as compared with the three months ended March 31, 1997. The increase reflects depreciation on increased investments in property, equipment and leasehold improvements. Depreciation and amortization expense is expected to continue to increase as a result of these and future capital investments. FINANCIAL CONDITION LIQUIDITY At March 31, 1998, the Company's working capital was $16.0 million compared to $15.9 million at December 31, 1997. The Company's current ratio was 5.6 to 1 as of March 31, 1998 and 6.1 to 1 at December 31, 1997. The reduction in the Company's current ratio from December 31, 1997 to March 31, 1998 is attributable to the current provision in the quarter for corporate income taxes. CAPITAL RESOURCES On August 13, 1997, the Company restructured its credit facilities, renewing its line of credit agreement, which is secured by accounts receivable, inventory and general intangibles, with its present banking institution and taking its existing term loan, plus increasing its credit facility, which is secured by all of the Company's fixed assets, to a second banking institution. The line of credit provides for borrowings of up to $3.5 million and matures April 30, 1999. Interest is payable monthly, calculated at prime. At March 31, 1998, the outstanding balance of the line of credit was $2,698,409. The Company has two separate loans under its term loan agreement. The first loan is a conventional term loan. Interest accrues on the outstanding principal balance of the term loan at 8.01 percent and monthly principal and interest payments of $73,279 are required. Unpaid principal and accrued interest are due February 13, 2001. The balance on the term loan at March 31, 1998 was $4,403,589. The second loan is a revolving equipment loan which provides for borrowings up to $2,500,000. Interest accrues on the outstanding principal balance of the revolving line at prime plus .25%. Borrowings can be converted to term notes which bear interest at a rate which adjusts to the 3-year treasury note rate plus 1.95%. When converted, the term debt requires monthly principal and interest payments calculated on a seven-year amortization basis with a 42 month maturity. The revolving loan matures on August 13, 1998. As of March 31, 1998, the balance of the three advances under the revolving loan that had been converted to term notes totaled $983,215. Interest accrues on the outstanding principal balances of these term notes at rates ranging from 7.3% to 7.72% and monthly principal and interest payments totaling $15,400 are required. The Company finances certain of its annual insurance premiums through a financing company. The amounts due under these loans totaled $15,620 as of March 31, 1998 and are paid in monthly installments of $8,051 with an interest rate of 7.24%. On March 4, 1997, the Company entered into an agreement to sell up to 75 units of debentures and warrants. The units consisted of an aggregate of $7.5 million in four year, 7% convertible debentures and 750,000 non- redeemable common stock purchase warrants exercisable at $9.50 per share for a period of three years. As provided for in the agreement, all of the debentures plus accrued interest were converted into common stock during 1997. All 750,000 warrants remained outstanding as of March 31, 1998. The Company believes that it has sufficient financial resources available to meet its short-term working capital needs through cash flows generated by operating activities and through the management of its sources of financing. The Company also believes that, as the result of the sales of the convertible debentures, it has adequate capital resources to continue its growth plans. BACKLOG Total backlog of unfilled firm customer orders ("backlog") at March 31, 1998 was $16.5 million compared with $14.2 million at March 31, 1997. Backlog at December 31, 1997 was $16.6 million. FORWARD LOOKING STATEMENTS Some of the statements contained in this document are forward-looking statements. The accuracy of these statements cannot be guaranteed as they are subject to a variety of risks including, but not limited to the success of the products into which the Company's products are integrated, governmental action relating to wireless communications licensing and regulation, internal projections as to the demand for certain types of technological innovation, competitive products and pricing, the success of new product development efforts, the timely release for production and the delivery of products under existing contracts, future economic conditions generally, as well as other factors. VARI-L COMPANY, INC. PART II--OTHER INFORMATION ITEM 1 LEGAL PROCEEDINGS None ITEM 2 CHANGES IN SECURITIES None ITEM 3 DEFAULTS UPON SENIOR SECURITIES None ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None ITEM 5 OTHER INFORMATION None ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Exhibit 27 Financial Data Schedule (b) Reports on Form 8-K None SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. VARI-L COMPANY, INC. Date: May 6, 1998 By: /s/ Jon L. Clark ------------- ---------------------- Jon L. Clark, V.P. Finance and Principal Financial Officer EXHIBIT INDEX No. Description Method of Filing - --- ----------- ---------------- 27 Financial Data Schedule Filed herewith electronically EX-27 2
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM VARI-L'S UNAUDITED FINANCIAL STATEMENTS PREPARED AS OF MARCH 31, 1998 AND FOR THE THREE-MONTH PERIOD THEN ENDED, INCLUDED WITH ITS 1ST QUARTER 1998 10QSB FILING WITH THE SECURITIES AND EXCHANGE COMMISSION, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-31-1998 MAR-31-1998 5,806 0 5,076 18 7,397 19,519 23,882 3,554 42,142 3,492 0 0 0 53 28,770 42,142 4,045 4,120 1,843 1,843 1,238 0 74 965 386 579 0 0 0 579 0.11 0.11
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