-----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, KGEhEXk0iirHhENnwvKg6D8tt21hHce/5HdA3snwPBbC7StcLm1S8KJyZrcmMljo ftxT5QehFOrTt2JimhGEmw== 0000950134-01-001297.txt : 20010223 0000950134-01-001297.hdr.sgml : 20010223 ACCESSION NUMBER: 0000950134-01-001297 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20010214 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: 0630 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: SEC FILE NUMBER: 000-23866 FILM NUMBER: 1541042 BUSINESS ADDRESS: STREET 1: 4895 PEORIA STREET CITY: DENVER STATE: CO ZIP: 80239 BUSINESS PHONE: 3033711560 MAIL ADDRESS: STREET 1: 11101 EAST 51ST AVENUE CITY: DENVER STATE: CO ZIP: 80239 10-Q/A 1 d84154ae10-qa.txt AMENDMENT NO. 1 TO FORM 10-Q-QUARTER END 3/31/00 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q/A 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, 2000 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 No X ------- ------- The number of shares outstanding of each of the issuer's classes of common stock, as of March 31, 2000: Class of Securities Outstanding Securities ------------------- ---------------------- $0.01 par value 7,069,188 shares Common shares 2 VARI-L COMPANY, INC. March 31, 2000 Index Part I. Financial Information Item 1. Financial Statements: Balance Sheets, March 31, 2000 and December 31, 1999 (unaudited) 2 Statements of Operations, Three months ended March 31, 2000 and 1999 (unaudited) 3 Statements of Stockholders' Equity, Three months ended March 31, 2000 and year ended December 31, 1999 (unaudited) 4 Statements of Cash Flows, Three months ended March 31, 2000 and 1999 (unaudited) 5 Notes to Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 15 Item 3. Qualitative and Quantitative Disclosures about Market Risk 19 The unaudited interim financial statements included herein have not been reviewed by the Company's independent accountants as required by Rule 210.10-01 of Regulation S-X, which became effective for interim procedures ending after March 15, 2000. The Company has been informed by its independent accountants that they are not able to complete the review procedures required under Statement of Auditing Standards No. 71 for periods prior to June 30, 2000 based on their determination that the internal controls over inventory accounting and management systems prior to June 30, 2000 was not sufficiently reliable to enable them to perform review procedures on the Company's inventory. Part II. Other Information Item 1 Legal Proceedings 20 Item 2 Changes in Securities 21 Item 3 Defaults Upon Senior Securities 21 Item 4 Submission of Matters to a Vote of Security Holders 21 Item 5 Other Information 21 Item 6 Exhibits and Reports on Form 8-K 22
1 3 PART I FINANCIAL INFORMATION VARI-L COMPANY, INC. Balance Sheets March 31, 2000 and December 31, 1999 (unaudited) (restated - note 2)
MARCH 31, DECEMBER 31, ASSETS 2000 1999 ------------ ------------ Current assets: Cash and cash equivalents $ 11,766,295 14,721,048 Trade accounts receivable, less allowance for doubtful 4,923,972 4,075,990 accounts of $215,472 and $208,156, respectively Inventories (note 3) 5,757,503 4,465,102 Prepaid expenses and other current assets 72,546 22,474 ------------ ------------ Total current assets 22,520,316 23,284,614 ------------ ------------ Property and equipment: Machinery and equipment 8,474,787 8,223,217 Furniture and fixtures 680,667 668,368 Leasehold improvements 1,494,739 1,486,045 ------------ ------------ 10,650,193 10,377,630 Less accumulated depreciation and amortization 4,396,944 4,048,163 ------------ ------------ Net property and equipment 6,253,249 6,329,467 Intangible and other assets 715,819 625,729 ------------ ------------ Total assets $ 29,489,384 30,239,810 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Trade accounts payable $ 2,951,078 2,385,130 Accrued compensation 1,344,706 2,164,644 Other accrued expenses 61,054 56,106 Notes payable and current installments of long-term obligations (note 4) 9,557,653 11,159,081 ------------ ------------ Total current liabilities 13,914,491 15,764,961 Long-term obligations (note 4) 93,608 101,791 ------------ ------------ Total liabilities 14,008,099 15,866,752 ------------ ------------ Stockholders' equity: Common stock, $.01 par value, 50,000,000 shares authorized; 7,069,188 and 6,945,483 shares issued and outstanding, respectively 70,692 69,455 Additional paid-in capital 41,440,074 40,449,692 Unamortized stock compensation cost (5,425,212) (5,732,611) Accumulated deficit (20,604,269) (20,413,478) ------------ ------------ Total stockholders' equity 15,481,285 14,373,058 ------------ ------------ Commitments and contingencies (note 7) Total liabilities and stockholders' equity $ 29,489,384 30,239,810 ============ ============
See accompanying notes to financial statements. 2 4 VARI-L COMPANY, INC. Statements of Operations Three months ended March 31, 2000 and 1999 (unaudited) (restated - note 2)
THREE MONTHS THREE MONTHS ENDED ENDED MARCH 31, MARCH 31, 2000 1999 -------------- -------------- Net sales $ 7,746,763 5,313,770 Cost of goods sold 4,399,225 2,711,835 -------------- -------------- Gross profit 3,347,538 2,601,935 -------------- -------------- Operating expenses: Selling 888,719 658,677 General and administrative 1,075,797 794,259 Research and development 1,462,607 961,319 Expenses relating to accounting restatements and the related shareholder litigation (note 6) 16,483 -- -------------- -------------- Total operating expenses 3,443,606 2,414,255 -------------- -------------- Operating (loss) income (96,068) 187,680 Other income (expense): Interest income 151,697 68,548 Interest expense (252,790) (240,224) Other, net 6,370 (16,166) -------------- -------------- Total other income (expense) (94,723) (187,842) -------------- -------------- Net loss $ (190,791) (162) ============== ============== Loss per share $ (0.03) * ============== ============== Weighted average shares outstanding 7,014,347 5,488,449 ============== ==============
* Loss per share is less than $ .01 See accompanying notes to financial statements. 3 5 VARI-L COMPANY, INC. Statements of Stockholders' Equity Year ended December 31, 1999 and three months ended March 31, 2000 (unaudited) (restated - note 2)
UNAMORTIZED COMMON STOCK ADDITIONAL STOCK ---------------------------- PAID-IN COMPENSATION SHARES AMOUNT CAPITAL COST ----------- ----------- ----------- -------------- Balance, January 1, 1999, as previously reported 5,464,134 $ 54,641 22,083,833 -- Restatement adjustments -- -- 1,045,637 (340,540) ----------- ----------- ----------- -------------- Balance, January 1, 1999, as restated 5,464,134 54,641 23,129,470 (340,540) Warrants exercised 665,000 6,650 6,310,871 -- Stock options exercised 788,193 7,882 5,319,142 -- Common stock issued under employee stock purchase plan 12,773 128 82,003 -- Common stock issued to profit sharing plan 12,851 128 101,073 -- Common stock issued under stock award plan 14,300 143 91,905 -- Common stock repurchased and retired (11,768) (117) (88,999) -- Stock options granted as compensation -- -- 5,535,938 (5,535,938) Stock options forfeited -- -- (31,711) 31,711 Amortization of stock compensation cost -- -- -- 112,156 Net loss -- -- -- -- ----------- ----------- ----------- -------------- Balance, December 31, 1999 6,945,483 69,455 40,449,692 (5,732,611) Stock options exercised 115,784 1,158 923,799 -- Common stock issued under employee stock purchase plan 7,471 75 50,130 -- Common stock issued under stock award plan 450 4 16,453 -- Amortization of stock compensation cost -- -- -- 307,399 Net loss -- -- -- -- ----------- ----------- ----------- -------------- Balance, March 31, 2000 7,069,188 $ 70,692 41,440,074 (5,425,212) =========== =========== =========== ============== RETAINED EARNINGS TOTAL ACCUMULATED STOCKHOLDERS' (DEFICIT) EQUITY -------------- -------------- Balance, January 1, 1999, as previously reported 10,286,987 32,425,461 Restatement adjustments (29,783,330) (29,078,233) -------------- -------------- Balance, January 1, 1999, as restated (19,496,343) 3,347,228 Warrants exercised -- 6,317,521 Stock options exercised -- 5,327,024 Common stock issued under employee stock purchase plan -- 82,131 Common stock issued to profit sharing plan -- 101,201 Common stock issued under stock award plan -- 92,048 Common stock repurchased and retired -- (89,116) Stock options granted as compensation -- -- Stock options forfeited -- -- Amortization of stock compensation cost -- 112,156 Net loss (917,135) (917,135) -------------- -------------- Balance, December 31, 1999 (20,413,478) 14,373,058 Stock options exercised -- 924,957 Common stock issued under employee stock purchase plan -- 50,205 Common stock issued under stock award plan -- 16,457 Amortization of stock compensation cost -- 307,399 Net loss (190,791) (190,791) -------------- -------------- Balance, March 31, 2000 (20,604,269) 15,481,285 ============== ==============
See accompanying notes to financial statements. 4 6 VARI-L COMPANY, INC. Statements of Cash Flows Three months ended March 31, 2000 and 1999 (unaudited) (restated - note 2)
THREE MONTHS THREE MONTHS ENDED ENDED MARCH 31, MARCH 31, 2000 1999 ------------ ------------ Net loss $ (190,791) (162) Adjustments to reconcile net loss to cash used in operating activities: Depreciation of property and equipment 348,781 286,780 Amortization of intangible assets 6,650 4,253 Common stock issued under profit sharing and stock award plans 16,457 179,346 Amortization of stock compensation 307,399 27,102 Changes in operating assets and liabilities: Trade accounts receivable, net (847,982) 625,795 Inventories, net (1,292,401) (156,717) Prepaid expenses and other current assets (50,072) (11,909) Trade accounts payable 565,948 (1,368,242) Accrued compensation (819,938) (518,983) Other accrued expenses 4,948 (209,617) ------------ ------------ Total adjustments (1,760,210) (1,142,192) ------------ ------------ Cash used in operating activities (1,951,001) (1,142,354) Cash flows from investing activities: Purchases of property and equipment (268,647) (494,717) Increase in other assets (96,740) (54,161) ------------ ------------ Cash used in investing activities (365,387) (548,878) ------------ ------------ Cash flows from financing activities: Increase in bank overdraft -- 637,534 Proceeds from notes payable 9,500,000 1,632,625 Payments of notes payable (11,103,408) (1,499,937) Payments of long-term obligations (10,119) (9,998) Proceeds from stock options exercised 924,957 -- Proceeds from common stock issued under stock purchase plan 50,205 82,131 Common stock repurchased -- (22,490) ------------ ------------ Cash provided by (used in) financing activities (638,365) 819,865 ------------ ------------ Decrease in cash and cash equivalents (2,954,753) (871,367) Cash and cash equivalents at beginning of period 14,721,048 6,515,062 ------------ ------------ Cash and cash equivalents at end of period $ 11,766,295 5,643,695 ============ ============ Supplemental disclosures of cash flow information: Cash paid for interest $ 261,654 272,096 ============ ============ Cash paid for income taxes $ -- -- ============ ============
See accompanying notes to financial statements. 5 7 VARI-L COMPANY, INC. Notes to Financial Statements Three months ended March 31, 2000 and 1999 (unaudited) (1) BASIS OF PRESENTATION The accompanying financial statements of the Company have been prepared without audit and have not been reviewed by an independent accounting firm. Certain information and note disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted. These financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's Transition Report on Form 10-K/T for the six months ended June 30, 2000. In the opinion of management, the accompanying unaudited financial statements include all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the financial position and results of operations for the periods presented. Interim results of operations for the three month period ended March 31, 2000 are not necessarily indicative of operating results that can be expected for the full year. The Company's Board of Directors approved a change in the Company's year end to June 30 effective in 2000. (2) RESTATEMENT OF FINANCIAL STATEMENTS In late 1999, the Securities and Exchange Commission commenced an investigation into the Company's accounting and reporting practices in recent years. Subsequently, the Company announced that its previously issued financial statements should not be relied upon and that it would be amending its 1997 and subsequent financial statements. It also announced that the Audit Committee of the Board of Directors was conducting an investigation into the Company's accounting policies and practices which may result in further adjustments to the Company's financial statements. The preliminary results of the Company's investigation were reported to the Audit Committee in September 2000, and on September 12, 2000, the Company announced that it would restate its previously issued financial statements, reducing stockholders' equity by $30 to $35 million. That estimate included write-downs of assets and changes in liabilities identified in a preliminary report from an independent accounting firm engaged by the Audit Committee. Thereafter, the Company began a process of restating its previously issued financial statements. The adjustments to restate the Company's previously issued financial statements are numerous, however, the principal reasons and significant effects of the restatement adjustments on the accompanying financial statements from amounts previously reported are summarized as follows: 6 8 VARI-L COMPANY, INC. Notes to Financial Statements Three months ended March 31, 2000 and 1999 (unaudited)
INCREASE INCREASE INCREASE INCREASE INCREASE (DECREASE) IN (DECREASE) IN (DECREASE) IN (DECREASE) IN (DECREASE) IN NET INCOME NET INCOME STOCKHOLDERS' STOCKHOLDERS' STOCKHOLDERS' FOR THE THREE FOR THE THREE EQUITY AS OF EQUITY AS OF EQUITY AS OF MONTHS ENDED MONTHS ENDED JANUARY 1, DECEMBER 31, MARCH 31, MARCH 31, MARCH 31, 1999 1999 2000 2000 1999 -------------- -------------- -------------- -------------- -------------- Accounts receivable (a) $ (932,527) (686,010) (712,028) (26,018) (7,857) Inventories (b) (4,953,828) (6,264,898) (6,663,497) (398,599) (278,282) Prepaid expenses (c) (1,214,751) (1,137,526) (1,983,454) (845,928) (899,091) Property and equipment (d) (21,568,983) (25,827,533) (26,487,751) (936,218) (1,050,063) Intangible and other assets (e) (2,389,403) (3,055,271) (3,129,181) (73,910) 561,909 Accrued expenses (f) (1,923,127) (2,207,704) (911,804) 610,281 1,029,475 Deferred income taxes (g) 3,904,386 3,730,000 3,614,000 682,000 (83,151) Stock compensation expense (h) -- -- -- (307,399) (27,102) -------------- -------------- -------------- -------------- -------------- Total restatement adjustments $ (29,078,233) (35,448,942) (36,273,715) (1,295,791) (754,162) ============== ============== ============== ============== ==============
(a) ACCOUNTS RECEIVABLE An adjustment was recorded to increase the allowance for doubtful accounts and to write-off uncollectible accounts receivable. (b) INVENTORIES Inventories were adjusted to record work-in-process and finished goods inventory based on the actual cost of raw materials used in the manufacturing process and the labor and associated overhead required to complete the manufacturing processes. Inventories were also adjusted to increase the allowance for excess and obsolete raw materials and finished goods inventories. Inventories were further adjusted to eliminate amounts recorded for products that had failed to meet the customer specifications which had been returned to the Company. (c) PREPAID EXPENSES Prepaid expenses were adjusted to record certain amounts as period expenses. 7 (continued) 9 VARI-L COMPANY, INC. Notes to Financial Statements Three months ended March 31, 2000 and 1999 (unaudited) (d) PROPERTY AND EQUIPMENT Property and equipment balances were adjusted to charge to expense amounts capitalized relating to finished unit prototypes, and to reverse the related depreciation expense. Property and equipment was also adjusted to eliminate amounts identified as labor and related overhead incurred to install machinery. The amounts capitalized were not supported by time records of the individuals involved in the installations and the overhead burden rate applied to payroll costs was not supported by any analysis of the underlying costs. Depreciation expense was adjusted for the revised carrying values. Adjustments were also made to eliminate certain amounts that should be recorded as period costs. Depreciation expense was adjusted for the revised carrying values. Finally, adjustments were made to increase depreciation to reflect a decrease in the estimated useful lives and salvage values of property and equipment. (e) INTANGIBLE AND OTHER ASSETS Adjustments were recorded to charge to expense labor and overhead costs incurred to develop new products and apply for patents which had previously been capitalized. Other assets were also reduced for labor and overhead and third party costs incurred in connection with the Company's ISO registration which should have been expensed as incurred. Additionally, adjustments were recorded to eliminate certain costs recorded as other assets which should have been expensed as period costs. (f) ACCRUED EXPENSES Accrued expenses were adjusted to record salaries, wages, bonuses and related payroll expenses in the proper period. Certain expenses were previously not accrued in the period to which they relate. (g) DEFERRED INCOME TAXES The tax effect of the above adjustments was recorded, which reduced the net deferred tax liability to zero. A net deferred tax asset was not recorded, as management believes that it is not more likely than not that the deferred tax assets will be realized. See note 5. 8 (continued) 10 VARI-L COMPANY, INC. Notes to Financial Statements Three months ended March 31, 2000 and 1999 (unaudited) (h) STOCK COMPENSATION EXPENSE Stock compensation expense was recorded for options granted to employees during 1999, with exercise prices below the market price on the respective grant dates, for which compensation expense was not previously recognized. The condensed balance sheets as previously reported and as restated are summarized as follows:
MARCH 31, DECEMBER 31, 2000 1999 DECEMBER 31, (AS PREVIOUSLY MARCH 31, 2000 (AS PREVIOUSLY 1999 ASSETS REPORTED) (AS RESTATED) REPORTED) (AS RESTATED) -------------- -------------- -------------- -------------- Cash and cash equivalents $ 11,800,000 11,766,295 14,883,000 14,721,048 Trade accounts receivable, net 5,636,000 4,923,972 4,762,000 4,075,990 Inventories 12,421,000 5,757,503 10,730,000 4,465,102 Prepaid expenses and other current assets 2,056,000 72,546 1,160,000 22,474 Net property and equipment 32,741,000 6,253,249 32,157,000 6,329,467 Intangible and other assets 3,845,000 715,819 3,681,000 625,729 -------------- -------------- -------------- -------------- Total assets $ 68,499,000 29,489,384 67,373,000 30,239,810 ============== ============== ============== ============== LIABILITIES AND STOCKHOLDERS' EQUITY Trade accounts payable $ 2,464,000 2,951,078 1,996,000 2,385,130 Accrued compensation 1,344,706 576,000 2,164,644 Income taxes payable 682,000 -- -- -- Other accrued expenses 250,000 61,054 26,000 56,106 Notes payable and current installments of long-term obligations 179,000 9,557,653 1,108,000 11,159,081 Long-term obligations 9,555,000 93,608 10,115,000 101,791 Deferred income taxes 3,614,000 -- 3,730,000 -- Stockholders' equity 51,755,000 15,481,285 49,822,000 14,373,058 -------------- -------------- -------------- -------------- Total liabilities and stockholders' equity $ 68,499,000 29,489,384 67,373,000 30,239,810 ============== ============== ============== ==============
9 (continued) 11 VARI-L COMPANY, INC. Notes to Financial Statements Three months ended March 31, 2000 and 1999 (unaudited) The income statements for the three months ended March 31, 2000 and 1999 as previously reported and as restated are as follows:
THREE MONTHS THREE MONTHS ENDED THREE MONTHS ENDED THREE MONTHS MARCH 31, ENDED MARCH 31, ENDED 2000 MARCH 31, 1999 MARCH 31, (AS PREVIOUSLY 2000 (AS PREVIOUSLY 1999 REPORTED) (AS RESTATED) REPORTED) (AS RESTATED) -------------- -------------- -------------- -------------- Net sales $ 7,866,000 7,746,763 5,313,000 5,313,770 Cost of goods sold 3,589,000 4,399,225 2,366,000 2,711,835 -------------- -------------- -------------- -------------- Gross profit 4,277,000 3,347,538 2,947,000 2,601,935 -------------- -------------- -------------- -------------- Operating expenses: Selling 869,000 888,719 618,000 658,677 General and administrative 966,000 1,075,797 477,000 794,259 Research and development 564,000 1,462,607 334,000 961,319 Expenses relating to accounting restatements and the related shareholder litigation -- 16,483 -- -- -------------- -------------- -------------- -------------- Total operating expenses 2,399,000 3,443,606 1,429,000 2,414,255 -------------- -------------- -------------- -------------- Operating income (loss) 1,878,000 (96,068) 1,518,000 187,680 Total other income (expense), net (91,000) (94,723) (299,000) (187,842) -------------- -------------- -------------- -------------- Income (loss) before income taxes 1,787,000 (190,791) 1,219,000 (162) Income tax expense (682,000) -- (465,000) -- -------------- -------------- -------------- -------------- Net income (loss) $ 1,105,000 (190,791) 754,000 (162) ============== ============== ============== ============== Income (loss) per share - basic $ 0.16 (0.03) 0.14 * ============== ============== ============== ============== Income (loss) per share - diluted $ 0.15 (0.03) 0.14 * ============== ============== ============== ==============
* Loss per share is less than $0.01 10 (continued) 12 VARI-L COMPANY, INC. Notes to Financial Statements Three months ended March 31, 2000 and 1999 (unaudited) (3) INVENTORIES Inventories, net of allowances for excess and obsolete items, consist of the following:
MARCH 31, DECEMBER 31, 2000 1999 ---------- ------------ Finished goods $ 397,302 429,768 Work-in-process 1,100,372 866,494 Raw materials 4,259,829 3,168,840 ---------- ------------ $5,757,503 4,465,102 ========== ============
(4) NOTES PAYABLE AND LONG-TERM OBLIGATIONS Notes payable and long-term obligations consist of the following:
MARCH 31, DECEMBER 31, 2000 1999 ----------- ------------- Notes payable under Revolving Credit Facility $ 9,500,000 -- Notes payable under former credit facility -- 11,103,408 Promissory notes 76,053 78,827 Capital leases 75,208 78,637 ----------- ------------- 9,651,261 11,260,872 Less current installments 9,557,653 11,159,081 ----------- ------------- Long-term obligations $ 93,608 101,791 =========== =============
On March 24, 2000, the Company entered into a $20,000,000 Revolving Credit Facility (the "Loan Agreement"). The Loan Agreement provided for interest based on the prime rate or LIBOR plus a margin, and was originally due September 30, 2002. Interest payable on the line of credit was 8.5% to 8.6% based on the term of each advance on the line of credit at March 31, 2000. The Company pays an annual commitment fee of .15% of the average unused portion of the line, payable quarterly. The loan is secured by substantially all of the Company's accounts receivable, inventories and equipment. Proceeds from the Loan Agreement were used to repay the amount outstanding under the prior credit facilities, which included a line of credit, a term loan, and a revolving equipment term loan. Interest on the loans ranged from 6.10% to 7.75% at December 31, 1999. The loans were secured by receivables, inventory, and property and equipment. The loans are now classified as current at December 31, 1999 because the Company has determined that it was in default of certain provisions of the various related loan agreements at that date. 11 (continued) 13 VARI-L COMPANY, INC. Notes to Financial Statements Three months ended March 31, 2000 and 1999 (unaudited) As of March 31, 2000, the Company was in default of certain covenants under the Loan Agreement. Upon default by the Company, the lender may call the loan at any time. On September 28, 2000, the Company entered into a forbearance agreement with the bank which, among other matters delayed the bank's right to accelerate payment of the facility to December 15, 2000. On December 15, the Company entered into a second forbearance agreement which delayed the bank's right to accelerate payment of the facility to March 31, 2001. Accordingly, the amounts outstanding as of March 31, 2000 have been classified as current. The second forbearance agreement requires the Company to maintain a borrowing base of at least $8,800,000, calculated based on a formula relating to inventories, accounts receivable aged less than 90 days, and equipment. The Company was also required to reduce the amount outstanding under the facility to $8,800,000 on December 15, 2000. The second forbearance agreement also increased the interest rate to the prime rate plus 2% through March 31, 2001. The Company is seeking a new lender to provide a long-term credit facility with more favorable terms and more capacity than is available under the forbearance agreement with its current lender. There can be no assurance, however, that the Company will be successful in obtaining a new lender or, if it is not successful, in negotiating additional forbearance agreements with its current lender. (5) INCOME TAXES For the three months ended March 31, 2000, and for the year ended December 31, 1999, the Company recorded no provision for federal or state income taxes since a valuation allowance was provided for the income tax benefit of the net operating losses incurred during those periods. (6) EXPENSES OF ACCOUNTING RESTATEMENTS AND RELATED MATTERS As discussed in note 2, in early 2000, management of the Company commenced efforts to restate its previously issued financial statements after being notified by the Securities and Exchange Commission (the "Commission") that the Commission was investigating its accounting and reporting practices. Certain costs incurred in conjunction with these efforts have been separately classified on the Company's statements of operations as "expenses relating to accounting restatements and the related shareholder litigation." These expenses included the cost of external counsel for services provided in connection with the Commission's investigation of the Company. (7) LITIGATION, COMMITMENTS AND CONTINGENCIES LITIGATION The Commission is currently investigating the Company to determine whether there were violations of the federal securities laws by the Company or any of its officers, directors or employees. The Company believes that the Commission's investigation is focused on the Company's prior financial reporting and its accounting practices and procedures. The Company has been providing documents and other information requested by the Commission staff in the course of its investigation. The Commission has not brought an action against the Company, but it may do so in the future. In such an event, the Commission may seek injunctive or other relief from the Company. 12 (continued) 14 VARI-L COMPANY, INC. Notes to Financial Statements Three months ended March 31, 2000 and 1999 (unaudited) A number of private shareholder class actions alleging violations of federal securities laws were filed against the Company in the U.S. District Court for the District of Colorado beginning in June 2000. On August 3, 2000, all of these class actions were consolidated into a single action. Lead counsel for the representatives of the putative plaintiff class have been appointed but, pursuant to the court's order the Company's obligation to respond to the complaints has been deferred until such time as the lead plaintiff files an amended complaint. As of the date hereof, an amended complaint has not yet been filed and a class has not been certified. The consolidated class action complaints were filed on behalf of persons who purchased shares of the Company's stock between 1997 and sometime in 2000 (the "Class Period"). All of the complaints name the Company; David G. Sherman, the Company's former President and Chief Executive Officer; Joseph H. Kiser, the Company's Chief Scientific Officer and Jon L. Clark, the Company's former Chief Financial Officer, as defendants. Some of the complaints also name Derek L. Bailey, the Company's Executive Vice President of Sales and Marketing, as an additional defendant. The various complaints allege that the Company's financial statements for the years 1997, 1998 and 1999 did not conform to generally accepted accounting principles and were materially false and misleading. The complaints allege violations of Section 10(b) of the Securities Exchange Act of 1934 and seek to impose "control person" liability on the individual defendants pursuant to Section 20(a) of the Exchange Act. The complaints generally seek compensatory damages in an unspecified amount, attorneys' fees and costs of suit, equitable and injunctive relief as permitted by law, including the imposition of a constructive trust on the assets of the individual defendants, and any other relief the court deems just and proper. Some of the complaints allege that the individual defendants sold stock throughout the Class Period as part of an alleged scheme to defraud the public. Some complaints specifically allege that the Company instituted a policy of "bill and hold," in which the Company would book and report revenue for the sale of its products even though the Company retained physical possession of the product. Some complaints also cite a May 18, 2000 Denver newspaper article in which Mr. Sherman stated that he believed that the restatements would have little effect on the Company's 1998 and 1999 earnings. The parties have had preliminary discussions regarding the possibility of settlement. There can be no assurance, however, that a settlement acceptable to the Company can be reached or that any settlement reached will not have a material adverse effect on the Company. In addition, the individual defendants in the class action may have claims against the Company for indemnification of their cost of defense, which claims may be material. 13 (continued) 15 VARI-L COMPANY, INC. Notes to Financial Statements Three months ended March 31, 2000 and 1999 (unaudited) On August 4, 2000, a shareholder derivative action was filed purportedly on behalf of the Company in Colorado state court in Denver. The Company is named in that action as a nominal defendant. A shareholder derivative action is a state law action in which shareholders assert claims against third parties on behalf of the corporation. The derivative complaint alleges some of the same facts as were asserted in the class actions in federal court and claims that those facts demonstrate that the officers named in the class actions, as well as the Company's directors, breached their fiduciary duties to the Company and the shareholders in connection with the Company's erroneous reporting of its financial results. The Company and the other defendants have moved to dismiss the derivative action. In its motion, the Company argues that the plaintiffs have not substantiated the allegations for a court to allow the derivative plaintiffs to bypass the Board of Directors in pursuing claims for the benefit of the Company. The Company believes that the derivative plaintiffs should not be permitted to usurp the function of the Board of Directors under the present circumstances. These circumstances include the internal investigation of the prior accounting irregularities by the Audit Committee of the Board of Directors, the retention of an independent accounting firm to assist the Committee with that investigation, the termination of the employment of the Company's former President, Chief Financial Officer and Controller, the installation of a new management team, the retention of new independent accountants, and the reformation of the Company's Board of Directors to exclude all officers and employees from the Board. The court has not yet ruled on the motion to dismiss. The Company is unable to reasonably estimate the possible loss associated with these matters. OTHER The Company is a party to other legal proceedings and claims in the ordinary course of its business. The Company believes that the outcome of these other matters will not have a material adverse effect on its financial condition, results of operations or liquidity. 14 (continued) 16 VARI-L COMPANY, INC. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations for the Three Months Ended March 31, 2000 Compared To the Three Months Ended March 31, 1999 Net Sales Net sales for the three months ended March 31, 2000 increased 45.8% to $7,746,763 compared with $5,313,770 for the three months ended March 31, 1999. This improvement primarily reflects increased demand for commercial signal source products. Revenue from commercial signal source products was $6,336,396 for the three months ended March 31, 2000, a 50.0% increase from $4,224,891 for the three months ended March 31, 1999. Revenue from all other products was $1,410,367 in the three months ended March 31, 2000, a 29.5% increase from $1,088,919 for the three months ended March 31, 1999. Gross Profit Gross profit for the three months ended March 31, 2000 increased 28.7% to $3,347,538, or 43.2% of net sales, compared with $2,601,935, or 49.0% of net sales, for the three months ended March 31, 1999. Included in cost of goods sold for the three months ended March 31, 2000 is a charge of $143,465 for obsolete and excess inventory, which was not required for the three months ended March 31, 1999. The lower gross profit margin in the 2000 period reflected a decrease in average net selling prices of the Company's products, a higher ratio of material costs to sales, due in part to the Company's decision to pay higher costs in return for expedited delivery of raw materials, as well as the above noted provision. Operating Expenses Included in operating expenses are charges for non-cash stock compensation. The charges for stock compensation principally relate to amortization of deferred stock compensation attributable to stock options granted at less than the market price of the common stock on the date of the grant. Of the $307,399 total amount of stock compensation recorded in the three months ended March 31, 2000, $285,542 relates to options granted in December, 1999. In December, 2000, these options were re-priced at $34.50 per share, the market price of the common stock at the date of the original grant. As a result, the remaining unamortized stock compensation associated with these option grants was reversed in December 2000. The following table summarizes stock compensation expense included in each category of operating expenses: 15 17
THREE MONTHS ENDED --------------------------------- MARCH 31, 2000 MARCH 31, 1999 -------------- -------------- Selling: Non-cash stock compensation $ 49,186 4,336 Other selling expenses 839,533 654,341 -------------- -------------- Total selling expenses $ 888,719 658,677 ============== ============== General and administrative: Non-cash stock compensation $ 114,471 10,093 Other general and administrative expenses 961,326 784,166 -------------- -------------- Total general and administrative expenses $ 1,075,797 794,259 ============== ============== Research and development: Non-cash stock compensation $ 143,742 12,673 Other research and development expenses 1,318,865 948,646 -------------- -------------- Total research and development expenses $ 1,462,607 961,319 ============== ==============
Selling Expenses Selling expenses for the three months ended March 31, 2000 increased 34.9% to $888,719, or 11.5% of net sales, compared with $658,677, or 12.4% of net sales, for the three months ended March 31, 1999. Excluding non-cash stock compensation, selling expenses for the three months ended March 31, 2000 increased 28.3% to $839,533, or 10.8% of net sales, compared with $654,341, or 12.3% of net sales, for the three months ended March 31, 1999. The increase in selling expenses was primarily attributable to higher commissions paid to manufacturer's representatives, increased travel in support of increased sales, as well as an increase in stock compensation expense. General and Administrative Expenses General and administrative expenses for the three months ended March 31, 2000 increased 35.4% to $1,075,797, or 13.9% of net sales, compared with $794,259, or 14.9% of net sales, for the three months ended March 31, 1999. Excluding non-cash stock compensation, general and administrative expenses for the three months ended March 31, 2000 increased 22.6% to $961,326, or 12.4% of net sales, compared with $784,166, or 14.8% of net sales, for the three months ended March 31, 1999. The increase was primarily attributable to higher salaries, bonuses and employee benefits paid to employees, increased depreciation expense for additional equipment placed in service, higher expenses for investor relations as well as an increase in stock compensation expense, partially offset by lower other miscellaneous expenses. Research and Development Expenses Research and development expenses for the three months ended March 31, 2000 increased 52.1% to $1,462,607, or 18.9% of net sales, compared with $961,319, or 18.1% of net sales, for the three months ended March 31, 1999. Excluding non-cash compensation, research and development expenses for the three months ended March 31, 2000 increased 39.0% to $1,318,865, or 17.0% of net sales, compared with $948,646, or 17.9% of net sales, for the three months ended March 31, 1999. The increase was primarily attributable to higher salaries and benefits for both current and new employees, bonuses and employee benefits paid to employees, higher expenses for repair, maintenance and calibration of engineering 16 18 equipment, and an increase in materials utilized on research and development projects, as well as an increase in stock compensation expense. Expenses Relating to Accounting Restatements and the Related Shareholder Litigation Expenses relating to the accounting restatements and the related shareholder litigation for the three months ended March 31, 2000, were $16,483. These expenses include the cost of external counsel for services provided in connection with the Securities and Exchange Commission investigation of the Company. Other Income (Expense) Interest income increased 121.3% to $151,697 for the three month period ended March 31, 2000 compared with $68,548 for the three months ended March 31, 1999. The increase was attributable to higher interest earnings on substantially larger cash balances available for investing. Interest expense and other, net, decreased slightly to $246,420 for the three months ended March 31, 2000 compared with $256,390 for the three months ended March 31, 1999. Net Loss and Loss Per Share The net loss for the three months ended March 31, 2000 was $190,791, or $0.03 per share, compared with a loss of $162, or less than $0.01 per share, for the three months ended March 31, 1999. Excluding the impact of stock compensation, which is a non-cash charge, and expenses relating to accounting restatements (which management believes is nonrecurring), net income in the three months ended March 31, 2000 would have been $133,092, or $0.02 per share, compared with net income of $26,940, or less than $0.01 per share, for the three months ended March 31, 1999. Liquidity and Capital Resources The Company's working capital at March 31, 2000, was $18,105,825, excluding notes payable under the Company's credit facility with its current bank of $9,500,000. Including the notes payable, working capital at March 31, 2000 was $8,605,825. Working capital at March 31, 2000 includes cash and cash equivalents of $11,766,295. Working capital at December 31, 1999, excluding notes payable under the Company's credit facility with its previous bank of $11,103,408, was $18,623,061. Including the notes payable, working capital at December 31, 1999 was $7,519,653. The working capital at December 31, 1999, includes cash and cash equivalents of $14,721,048. Cash used in operating activities was $1,951,001 for the three months ended March 31, 2000. Cash provided by net loss, adjusted for non-cash charges, was $488,496. This cash provided was offset by cash used for increased inventory levels and accounts receivable in support of higher net sales volume, a reduction in accrued expenses primarily related to bonus payments, partially offset by increased accounts payable to vendors. Cash used in operating activities was $1,142,354 for the three months ended March 31, 1999. Cash provided by net loss, adjusted by non-cash charges, was $497,319. This cash provided was offset by cash used for decreased accounts payable and accrued expenses, increased inventories in support of higher production volumes, increased prepaid expenses and other current assets, partially offset by a decrease in accounts receivable. Cash used in investing activities was $365,387 for the three months ended March 31, 2000 and was principally for capital expenditures. The capital expenditures for the three months ended March 31, 2000 related to additional production and test equipment to increase manufacturing capacity. Cash used in investing activities for the three months ended March 31, 1999 was $548,878 and was principally for capital expenditures. The capital expenditures for the three months ended March 31, 1999 primarily related to additional production and test equipment to increase manufacturing capacity and leasehold improvements to expand the Company's manufacturing and engineering space. 17 19 Cash flows used in financing activities were $638,365 for the three months ended March 31, 2000. Net repayments of $1,613,527 on total borrowings were partially offset by proceeds from stock options exercised and proceeds from common stock issued under the stock purchase plan of $975,162. Cash flows provided by financing activities for the three months ended March 31, 1999 were $819,865. Proceeds from net borrowings and the bank overdraft were $760,224. Proceeds from the issuance of common stock issued under the stock purchase plan were $82,131 were offset by common stock repurchases of $22,490. Revolving Credit Facility On March 24, 2000, the Company entered into a $20,000,000 Revolving Credit Facility (the "Loan Agreement"). The Loan Agreement provided for interest based on the prime rate or LIBOR plus a margin, and was originally due September 30, 2002. Interest payable on the line of credit was 8.5% to 8.6% based on the term of each advance on the line of credit at March 31, 2000. The Company pays an annual commitment fee of .15% of the average unused portion of the line, payable quarterly. The loan is secured by substantially all of the Company's accounts receivable, inventories and equipment. Proceeds from the Loan Agreement were used to repay the amount outstanding under the prior credit facilities, which included a line of credit, a term loan, and a revolving equipment term loan. Interest on the loans ranged from 6.10% to 7.75% at December 31, 1999. The loans were secured by receivables, inventory, and property and equipment. The loans are now classified as current at December 31, 1999 because the Company has determined that it was in default of certain provisions of the various related loan agreements on that date. As of March 31, 2000, the Company was in default of certain covenants under the Loan Agreement. Upon default by the Company, the lender may call the loan at any time. On September 28, 2000, the Company entered into a forbearance agreement with the bank which, among other matters delayed the bank's right to accelerate payment of the facility to December 15, 2000. On December 15, the Company entered into a second forbearance agreement which delayed the bank's right to accelerate payment of the facility to March 31, 2001. Accordingly, the amounts outstanding as of March 31, 2000 have been classified as current. The second forbearance agreement requires the Company to maintain a borrowing base of at least $8,800,000, calculated based on a formula relating to inventories, accounts receivable aged less than 90 days, and equipment. The Company was also required to reduce the amount outstanding under the facility to $8,800,000 on December 15, 2000. The second forbearance agreement also increased the interest rate to the prime rate plus 2% through March 31, 2001. The Company is seeking a new lender to provide a long-term credit facility with more favorable terms and additional capacity than is available under the forbearance agreement. There can be no assurance, however, that the Company will be successful in obtaining a new lender or, if it is not successful, in negotiating additional forbearance agreements with its current lender. Even if the Company is successful in obtaining a new lender or negotiating an additional forbearance agreement with its current lender, there can be no assurance that the terms of such an agreement would provide adequate financing for additional equipment and working capital required to support the Company's current growth plans. Forward-Looking Statements Some of the statements contained in this report 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 overall market for wireless communications products, the success of the specific products into which the Company's products are integrated, governmental action relating to wireless communications, licensing and regulation, the accuracy of the Company's 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, the outcome of pending and threatened litigation and regulatory actions, the Company's ability to refinance its loan 18 20 agreement or obtain additional forbearance agreements, the success and timeliness of the Company's efforts to restate its prior financial statements and report future financial results on a timely basis, as well as other factors. ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK The Company is exposed to market risk, including the effects of adverse changes in interest rates. The Company's exposure to changes in interest rates results from borrowings with floating interest rates. At the present time, the Company has no financial instruments in place to manage the impact of changes in interest rates. As of March 31, 2000, the Company had notes payable outstanding under a bank credit facility of $9,500,000 at interest rates ranging from 8.5% to 8.6%. The Company's second forbearance agreement with its lender increased the interest rate to the prime rate plus 2% through March 31, 2001. The notes are due March 31, 2001, under the current forbearance agreement with the bank. 19 21 VARI-L COMPANY, INC. PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The U.S. Securities and Exchange Commission (the "Commission") is currently investigating the Company to determine whether there were violations of the federal securities laws by the Company or any of its officers, directors or employees (the "SEC Investigation"). The Company believes that the SEC Investigation is focused on the Company's prior financial reporting and its accounting practices and procedures. The Company has been providing documents and other information requested by the Commission staff in the course of its investigation. The Commission has not brought an action against the Company, but it may do so in the future. In such an event, the Commission may seek injunctive or other relief from the Company. A number of private shareholder class actions alleging violations of federal securities laws were filed against the Company in the U.S. District Court for the District of Colorado beginning in June 2000. On August 3, 2000, all of these class actions were consolidated into a single action, Rasner v. Vari-L Company, Inc., et al., Civ. No. 00-S-1181, U.S.D.C., D. Colo. Lead counsel for the representatives of the putative plaintiff class have been appointed but, pursuant to the court's order, the Company's obligation to respond to the complaints has been deferred until such time as the lead plaintiff files an amended complaint. As of the date hereof, an amended complaint has not yet been filed and a class has not been certified. The consolidated class action complaints were filed on behalf of persons who purchased shares of the Company's stock between 1997 and sometime in 2000 (the "Class Period"). All of the complaints name the Company; David G. Sherman, the Company's former President and Chief Executive Officer; Joseph H. Kiser, the Company's Chief Scientific Officer and Jon L. Clark, the Company's former Chief Financial Officer, as defendants. Some of the complaints also name Derek L. Bailey, the Company's Executive Vice President of Sales and Marketing, as an additional defendant. The various complaints allege that the Company's financial statements for the years 1997, 1998 and 1999 did not conform to generally accepted accounting principles and were materially false and misleading. The complaints allege violations of Section 10(b) of the Securities Exchange Act of 1934 and seek to impose "control person" liability on the individual defendants pursuant to Section 20(a) of the Exchange Act. The complaints generally seek compensatory damages in an unspecified amount, attorneys' fees and costs of suit, equitable and injunctive relief as permitted by law, including the imposition of a constructive trust on the assets of the individual defendants, and any other relief the court deems just and proper. Some of the complaints allege that the individual defendants sold stock throughout the Class Period as part of an alleged scheme to defraud the public. Some complaints specifically allege that the Company instituted a policy of "bill and hold," in which the Company would book and report revenue for the sale of its products even though the Company retained physical possession of the product. Some complaints also cite a May 18, 2000 Denver newspaper article in which Mr. Sherman stated that he believed that the restatements would have little effect on the Company's 1998 and 1999 earnings. The parties have had preliminary discussions regarding the possibility of settlement. There can be no assurance, however, that a settlement acceptable to the Company can be reached or that any settlement reached will not have a material adverse effect on the Company. In addition, the individual defendants in the class action may have claims against the Company for indemnification of their cost of defense, which claims may be material. 20 22 On August 4, 2000, a shareholder derivative action was filed purportedly on behalf of the Company in Colorado state court in Denver, captioned Ritter v. Kiser, et al., No. 00-CV-6001, Colo. Dist. Ct., Denver. The Company is named in that action as a nominal defendant. A shareholder derivative action is a state law action in which shareholders assert claims against third parties on behalf of the corporation. The derivative complaint alleges some of the same facts as were asserted in the class actions in federal court and claims that those facts demonstrate that the officers named in the class actions, as well as the Company's directors, breached their fiduciary duties to the Company and the shareholders in connection with the Company's erroneous reporting of its financial results. The Company and the other defendants have moved to dismiss the derivative action. In its motion, the Company argues that the plaintiffs have not substantiated the allegations for a court to allow the derivative plaintiffs to bypass the Board of Directors in pursuing claims for the benefit of the Company. The Company believes that the derivative plaintiffs should not be permitted to usurp the function of the Board of Directors under the present circumstances. These circumstances include the internal investigation of the prior accounting irregularities by the Audit Committee of the Board of Directors, the retention of KPMG LLP to assist the Committee with that investigation, the termination of the employment of the Company's former President, Chief Financial Officer and Controller, the installation of a new management team, the retention of KPMG LLP as the Company's new independent accountants, and the reformation of the Company's Board of Directors to exclude all officers and employees from the Board. The court has not yet ruled on the motion to dismiss. ITEM 2. CHANGES IN SECURITIES None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES On March 24, 2000, the Company entered into a $20,000,000 Revolving Credit Facility (the "Loan Agreement"). As of March 31, 2000, the Company was in default of certain covenants under the Loan Agreement. Upon default by the Company, the lender may call the loan at any time. On September 28, 2000, the Company entered into a forbearance agreement with the lender that, among other matters, delayed the lender's right to accelerate payment of the loan to December 15, 2000. On December 15, 2000, the Company entered into a second forbearance agreement that delayed the lender's right to accelerate payment of the loan to March 31, 2001. Accordingly, the amounts outstanding as of March 31, 2000 have been classified as current. The second forbearance agreement requires the Company to maintain a borrowing base of at least $8,800,000, calculated using a formula based on inventories, accounts receivable aged less than 90 days, and equipment. The Company was required to reduce the amount outstanding under the loan to $8,800,000 on December 15, 2000. The second forbearance agreement also increased the interest rate to the prime rate plus 2% through March 31, 2001. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. ITEM 5. OTHER INFORMATION None. 21 23 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 10 Revolving Loan Agreement, Revolving Note and General Security Agreement between the Company and Bank One, Colorado, N.A. dated March 24, 2000 filed as Exhibit 10 to the Form 10-Q for the period ended March 31, 2000 and incorporated herein by reference. 27 Financial Data Schedule 99 Letter from Haugen, Springer & Co. filed as Exhibit 99 to the Form 10-Q for the period ended March 31, 2000 and incorporated herein by reference. (b) Reports on Form 8-K None. 22 24 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: February 14, 2001 By: /s/ Richard P. Dutkiewicz ---------------------- -------------------------------- Richard P. Dutkiewicz, Vice President of Finance and Chief Financial Officer 25 EXHIBIT INDEX EXHIBIT NUMBER DESCRIPTION - ------- ----------- 10 Revolving Loan Agreement, Revolving Note and General Security Agreement between the Company and Bank One, Colorado, N.A. dated March 24, 2000 filed as Exhibit 10 to the Form 10-Q for the period ended March 31, 2000 and incorporated herein by reference. 27 Financial Data Schedule 99 Letter from Haugen, Springer & Co. filed as Exhibit 99 to the Form 10-Q for the period ended March 31, 2000 and incorporated herein by reference. EX-27 2 d84154aex27.txt FINANCIAL DATA SCHEDULE
CT 3-MOS JUN-30-2000 JAN-01-2000 MAR-31-2000 29,489,384 0 0 70,692 15,410,593 29,489,384 7,746,763 0 (190,791) 0 0 0 (190,791) (0.03) (0.03)
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