EX-99.1 3 d05495exv99w1.txt EX-99.1 REQUIRED PRO-FORMA FINANCIAL INFORMATION EXHIBIT 99.1 UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION The unaudited pro forma condensed balance sheet as of March 31, 2003 presents Vari-L's financial position as if the sale to Sirenza of certain assets and liabilities (otherwise referred to as "Vari-L Sale Operations") occurred on March 31, 2003. The Vari-L balance sheet information included in the unaudited pro forma condensed balance sheet as of March 31, 2003 was derived from Vari-L's unaudited balance sheet as of March 31, 2003. The unaudited pro forma condensed statement of operations for the fiscal year ended June 30, 2002 and for the nine months ended March 31, 2003 gives pro forma effect to the sale of certain assets and liabilities of Vari-L to Sirenza as if the transactions were consummated on July 1, 2001. The information included in the unaudited pro forma condensed statement of operations for the fiscal year ended June 30, 2002 was derived from the audited statement of operations of Vari-L. The information included in the unaudited pro forma condensed statement of operations for the nine months ended March 31, 2003 was derived from the unaudited statement of operations of Vari-L. The unaudited pro forma condensed financial information has been prepared by Vari-L management for illustrative purposes only. The unaudited pro forma condensed financial statements are not intended to represent or be indicative of the financial position or results of operations in future periods or the results that actually would have been realized by Vari-L had the sale of certain assets and liabilities of Vari-L been consummated as of the dates indicated. The sale of the assets and liabilities of Vari-L to Sirenza constitutes substantially all of the operating business of Vari-L Sale Operations. The pro forma adjustments are based on information available at the date of this proxy statement/prospectus. Therefore the actual amounts recorded at the completion of the sale of certain assets and liabilities of Vari-L to Sirenza may differ materially from the amounts presented in these pro forma condensed financial statements due to expected future losses of Vari-L, additional borrowings under the loan facility with Sirenza and changes in the market price of Sirenza stock. Such changes could significantly impact the equity of Vari-L at closing. The unaudited pro forma condensed financial information, including the notes thereto, is qualified in its entirety by reference to, and should be read in conjunction with, the historical financial statements of Vari-L included in its Form 10-K filed October 8, 2002 and Forms 10-Q filed on November 14, 2002, February 13, 2003 and May 5, 2003, respectively, with the Securities and Exchange Commission. VARI-L COMPANY, INC. UNAUDITED PRO FORMA BALANCE SHEET AS OF MARCH 31, 2003 (IN THOUSANDS, EXCEPT SHARE DATA)
Vari-L Sale Pro Forma Historical Operations Adjustments Pro Forma ------------ ------------ ------------ ------------ ASSETS Current assets: Cash and cash equivalents $ 222 $ 362(2),(6) $ 2,094 Restricted cash -- -- 1,510(2) 1,510 Trade accounts receivable, less allowance for doubtful accounts 2,466 (2,461)(1) 5 Inventories 2,326 (2,326)(1) -- Prepaid expenses and other current assets 225 (12)(1) 213 Investment in Sirenza -- 4,854(2) 4,854 ------------ ------------ ------------ ------------ Total current assets 5,239 (4,799) 6,726 7,166 Property and equipment, net 5,060 (4,771)(1) 289 Intangible and other assets, net of accumulated amortization 397 (236)(1) 161 ------------ ------------ ------------ ------------ Total assets $ 10,696 $ (9,806) $ 6,726 $ 7,616 ============ ============ ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Trade accounts payable $ 2,116 $ (1,346)(1) $ 770 Accrued compensation 631 (223)(1) 408 Other accrued expenses 1,090 (20)(1) (499)(2),(3) 571 Notes payable and current installments of long-term obligations 4,709 (4,667)(2),(3) 42 ------------ ------------ ------------ ------------ Total current liabilities $ 8,546 $ (1,589) $ (5,166) $ 1,791 Long-term obligations -- -- Other liabilities 26 26 ------------ ------------ ------------ ------------ Total liabilities $ 8,572 $ (1,589) $ (5,166) $ 1,817 Settlement obligation to issue 2,000,000 shares of common stock 1,200 1,200 Stockholders' equity Common stock 73 73 Additional paid-in capital 36,991 36,991 Unamortized stock compensation cost (5) (5) Accumulated deficit (36,135) 3,675(2),(3),(6) (32,460) ------------ ------------ ------------ ------------ Total stockholders' equity $ 924 $ -- $ 3,675 $ 4,599 ------------ ------------ ------------ ------------ Total liabilities and stockholders' equity $ 10,696 $ (1,589) $ (1,491) $ 7,616 ============ ============ ============ ============
VARI-L COMPANY, INC. UNAUDITED PRO FORMA STATEMENT OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 2002 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
Vari-L Sale Pro Forma Historical Operations Adjustments Pro Forma ------------ ------------ ------------ ------------ Net sales $ 21,348 $ (21,348)(4) $ -- $ -- Cost of goods sold 13,647 (13,647)(4) -- -- ------------ ------------ ------------ ------------ Gross profit 7,701 (7,701) -- -- ------------ ------------ ------------ ------------ Operating expenses: Selling 2,925 (2,925)(4) -- -- General and administrative 6,418 (3,107)(4),(6) -- 3,311 Research and development 2,669 (2,669)(4) -- -- Expenses related to workforce reductions and the proposed transaction with Sirenza -- -- -- -- Expenses relating to accounting restatements and related legal matters, net of recoveries 1,805 -- -- 1,805 ------------ ------------ ------------ ------------ Total operating expenses 13,817 (8,701) -- 5,116 ------------ ------------ ------------ ------------ Operating loss (6,116) 1,000 -- (5,116) Other income (expense): Interest income 48 -- -- 48 Interest expense (199) -- 157(5) (42) Other, net 12 (12)(4) -- -- ------------ ------------ ------------ ------------ Total other income (expense) (139) (12) 157 6 ------------ ------------ ------------ ------------ Net loss $ (6,255) $ 988 $ 157 $ (5,110) ============ ============ ============ ============ Loss per share, basic $ (0.87) $ (0.71) ============ ============ Loss per share, diluted $ (0.87) $ (0.71) ============ ============ Weighted average shares outstanding, basic 7,152,342 7,152,342 ============ ============ Weighted average shares outstanding, diluted 7,152,342 7,152,342 ============ ============
VARI-L COMPANY, INC. UNAUDITED PRO FORMA STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED MARCH 31, 2003 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
Vari-L Sale Pro Forma Historical Operations Adjustments Pro Forma ------------ ------------ ------------ ------------ Net sales $ 12,315 $ (12,315)(4) $ -- $ -- Cost of goods sold 8,837 (8,837)(4) -- -- ------------ ------------ ------------ ------------ Gross profit 3,478 (3,478) -- -- ------------ ------------ ------------ ------------ Operating expenses: Selling 1,949 (1,949)(4) -- -- General and administrative 4,209 (3,122)(4) -- 1,087 Research and development 2,182 (2,182)(4) -- -- Expenses related to workforce reductions and the proposed transaction with Sirenza 1,198 -- -- 1,198 Expenses relating to accounting restatements and related legal matters, net of recoveries 73 -- -- 73 ------------ ------------ ------------ ------------ Total operating expenses 9,611 (7,253) -- 2,358 ------------ ------------ ------------ ------------ Operating loss (6,133) 3,775 -- (2,358) Other income (expense): Interest income 13 -- -- 13 Interest expense (716) -- 676(5) (40) Other, net (52) 52(4) -- -- ------------ ------------ ------------ ------------ Total other income (expense) (755) 52 676 (27) ------------ ------------ ------------ ------------ Net loss $ (6,888) $ 3,827 $ 676 $ (2,385) ============ ============ ============ ============ Loss per share, basic $ (0.95) $ (0.33) ============ ============ Loss per share, diluted $ (0.95) $ (0.33) ============ ============ Weighted average shares outstanding, basic 7,252,561 7,252,561 ============ ============ Weighted average shares outstanding, diluted 7,252,561 7,252,561 ============ ============
NOTES TO UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION NOTE 1: ASSET PURCHASE AGREEMENT BETWEEN VARI-L AND SIRENZA On December 2, 2002, Vari-L entered into a definitive agreement (the "Asset Purchase Agreement") with Sirenza. Under the terms of the Asset Purchase Agreement, Sirenza was to acquire substantially all of the assets of Vari-L and assume specified liabilities of Vari-L for approximately $13.6 million in cash and common stock consideration and forgiveness of $1.4 million in secured loans. The aggregate proceeds from Sirenza are subject to adjustment based on certain Vari-L working capital changes between September 30, 2002 and the closing date, and will be reduced by any additional funds drawn by Vari-L under its secured loan facility with Sirenza. The net proceeds payable to Vari-L under the Asset Purchase Agreement were to be paid in a ratio of fifty-five percent (55%) Sirenza common stock (valued at $1.44 per share) and forty-five percent (45%) cash. On May 5, 2003, the asset sale contemplated by the Asset Purchase Agreement was consummated. The Company received $3.972 million in cash and 3.371 million shares of Sirenza's common stock with a market value of $5.158 million as of May 2, 2003. In addition, debt of $1.354 million was forgiven and Sirenza assumed $4.594 million in secured loans and accrued interest payable. The final consideration to be received is subject to adjustments based upon finalization of the closing balance sheet. Under the terms of the Asset Purchase Agreement, the Company is required to set aside $1.510 million in cash and 1.281 million shares of Sirenza's common stock to satisfy any indemnification claims from Sirenza that may arise prior to March 31, 2004. NOTE 2: PRO FORMA ADJUSTMENTS - SALE TO SIRENZA Pro forma adjustments are necessary to reflect the sale of certain assets and liabilities and the impact of the transaction upon the financial position and results of operations of Vari-L. The pro forma adjustments are based on information available at the date of this filing. Therefore, the actual amounts recorded at the completion of the sale of certain asset and liabilities of Vari-L to Sirenza may differ materially from the amounts presented in these pro forma condensed financial statements due to the expected future losses of Vari-L, additional borrowings under the loan facility with Sirenza and changes in the market price of Sirenza stock. Such changes could significantly impact the equity of Vari-L at closing. The pro forma adjustments included in the unaudited pro forma condensed financial statements are as follows (in thousands of dollars): (1) To reflect the sale of certain assets and the assumption of certain liabilities of Vari-L as of March 31, 2003 (in thousands of dollars): ASSETS SOLD Accounts receivable $ 2,461 Inventories 2,326 Prepaid expenses 12 Property and equipment, net 4,771 Intangible assets 236 ------------ Gross assets sold $ 9,806 ------------ LIABILITIES ASSUMED Trade accounts payable 1,346 Accrued compensation 223 Other accrued expenses 20 ------------ Gross liabilities assumed $ 1,589 ------------ Net assets sold $ 8,217 ============
(2) To reflect cash of $3.972 million paid to Vari-L by Sirenza, stock consideration for an investment in the common stock of Sirenza of $4.856 million, forgiveness of $1.354 million and assumption of $4.594 million in secured loans and accrued interest payable to Sirenza. Under the terms of the Asset Purchase Agreement, the Company is required to set aside $1,510 million in cash and 1,281 million shares of Sirenza's common stock to satisfy any indemnification claims from Sirenza that may arise prior to March 31, 2004. (3) To reflect the gain of $5.775 million on the sale of certain assets to and the assumption of certain liabilities by Sirenza, offset by borrowings and accrued interest of $782,000 during April 2003. The estimated aggregate sales price to be received by Vari-L is $14.774 million (net of an adjustment to reflect a $230,000 decline in the agreed upon net asset balance between September 31, 2002 and March 31, 2003); net assets are $8.217 million. (4) To eliminate the operations of Vari-L Sale Operations due to the sale of substantially all of the assets of Vari-L to Sirenza as of July 1, 2001 (in thousands of dollars):
For the For the Year Nine Months Ended Ended June 30, March 31, 2002 2003 -------------- -------------- Net sales ....................................................... 21,348 12,315 Cost of goods sold .............................................. 13,647 8,837 Selling ......................................................... 2,925 1,949 General and administrative, except expenses relating to existing lease agreements retained by Vari-L of $921 and $655, respectively and expenses relating to professional services matters (legal, audit and tax) of $942 and $432, respectively .................................................... 5,007 3,122 Research and development ........................................ 2,669 2,182 Other income (expense), net ..................................... 12 (52)
(5) In conjunction with the sale of Vari-L Sale Operations, the Wells Fargo Credit Facility and the Sirenza Loan Facility will be paid in full. Accordingly, Vari-L will no longer have any long tem debt outstanding. The following reflects the elimination of interest expense related to the Wells Fargo Credit Facility and the Sirenza Loan Facility (in thousands of dollars):
For the For the Year Nine Months Ended Ended June 30, March 31, 2002 2003 ---------------- ------------------ Interest expense......................................... 157 676
(6) Upon closing of the asset sale, significant related non-recurring charges aggregating approximately $2.1 million were incurred. The amounts due will be paid out of net proceeds from the sale. The amounts due consist of post-closing bonuses payable to key officers, investment banking fees and contract and lease termination penalties. NOTE 3: CONTINUING EXPENSES AND REMAINING LIABILITIES OF VARI-L Pursuant to the Asset Purchase Agreement, Vari-L will retain certain assets and liabilities. Additionally, as the dissolution of Vari-L is not expected to be completed prior to March 31, 2004, Vari-L will continue to incur certain fees and expenses related to professional services performed, existing lease agreements and litigation issues, as well as expenses relating to the accounting restatements and related legal matters. Accordingly, the pro-forma condensed financial information has been prepared to attribute all such recurring fees and expenses.