Symmetricom (SYMM) 10-Q 2013 Q1 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2012

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission file number 0-02287

SYMMETRICOM, INC.

(Exact name of registrant as specified in our charter)

Delaware	No. 95-1906306
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

2300 Orchard Parkway, San Jose, California 95131-1017

(Address of principal executive offices)

Registrant’s telephone number: (408) 433-0910

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  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	¨	Accelerated filer	x
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

Indicate number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practical date:

Class	Outstanding as of October 28, 2012
Common Stock	40,883,825

SYMMETRICOM, INC.

FORM 10-Q

INDEX

		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements:
	Condensed Consolidated Balance Sheets—September 30, 2012 and July 1, 2012		3
	Condensed Consolidated Statements of Operations—Three months ended September  30, 2012 and October 2, 2011		4
	Condensed Consolidated Statements of Comprehensive Income (Loss)—Three months ended September  30, 2012 and October 2, 2011		5
	Condensed Consolidated Statements of Cash Flows—Three months ended September  30, 2012 and October 2, 2011		6
	Notes to Condensed Consolidated Financial Statements		7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		24
Item 4.	Controls and Procedures		24
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings		25
Item 1A.	Risk Factors		25
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		25
Item 3.	Defaults Upon Senior Securities		25
Item 4.	Mine Safety Disclosures		25
Item 5.	Other Information		25
Item 6.	Exhibits		25
SIGNATURES			26

2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

SYMMETRICOM, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value)

(Unaudited)

	September 30, 2012			July 1, 2012
ASSETS
Current assets:
Cash and cash equivalents	$	27,814		$	27,659
Short-term investments		43,811			39,280
Accounts receivable, net of allowance for doubtful accounts of $119 and $108		41,392			45,952
Inventories		45,899			47,618
Prepaids and other current assets		17,919			16,943
Total current assets		176,835			177,452
Property, plant and equipment, net		22,284			22,702
Intangible assets, net		3,196			3,458
Deferred taxes and other assets		27,773			27,413
Total assets	$	230,088		$	231,025
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	13,941		$	9,300
Accrued compensation		10,692			14,574
Accrued warranty		1,779			1,722
Other accrued liabilities		10,671			11,841
Total current liabilities		37,083			37,437
Long-term obligations		5,241			5,472
Deferred income taxes		334			334
Total liabilities		42,658			43,243
Commitments and contingencies (Note 10)
Stockholders’ equity:
Preferred stock, $0.0001 par value; 500 shares authorized, none issued		—			—
Common stock, $0.0001 par value; 70,000 shares authorized, 51,954 shares issued and 40,797 outstanding at September 30, 2012; 51,500 shares issued and 40,952 outstanding at July 1, 2012		193,210			193,478
Accumulated other comprehensive loss		(113	)		(232	)
Accumulated deficit		(5,667	)		(5,464	)
Total stockholders’ equity		187,430			187,782
Total liabilities and stockholders’ equity	$	230,088		$	231,025

See notes to the condensed consolidated financial statements.

3

SYMMETRICOM, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)

	Three Months Ended
	September 30, 2012			October 2, 2011
Net revenue	$	56,391		$	56,378
Cost of sales:
Cost of products and services		31,900			29,830
Acquisition-related costs		234			186
Restructuring charges		(45	)		417
Total cost of sales		32,089			30,433
Gross profit		24,302			25,945
Operating expenses:
Research and development		8,313			6,898
Selling, general and administrative		16,227			14,810
Amortization of intangible assets		86			52
Restructuring charges		55			96
Total operating expenses		24,681			21,856
Operating income (loss)		(379	)		4,089
Interest income (loss), net of amortization (accretion) of premium (discount) on investments		(36	)		66
Income (loss) before taxes		(415	)		4,155
Income tax provision (benefit)		(212	)		1,406
Net income (loss)	$	(203	)	$	2,749
Earnings (loss) per share:
Basic	$	(0.01	)	$	0.06
Diluted	$	(0.01	)	$	0.06
Shares used in computing earnings (loss) per share:
Weighted average shares outstanding—basic		40,510			42,687
Weighted average shares outstanding—diluted		40,510			43,294

See notes to the condensed consolidated financial statements.

4

SYMMETRICOM, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

(Unaudited)

	Three Months Ended
	September 30, 2012			October 2, 2011
	(in thousands )
Net income (loss)	$	(203	)	$	2,749
Other comprehensive income (loss), net of taxes:
Foreign currency translation adjustments		99			(247	)
Unrealized gain (loss) on investments		20			(35	)
Other comprehensive income (loss)		119			(282	)
Total comprehensive income (loss)	$	(84	)	$	2,467

See notes to the condensed consolidated financial statements.

5

SYMMETRICOM, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Three Months Ended
	September 30, 2012			October 2, 2011
Cash flows from operating activities:
Net income (loss)	$	(203	)	$	2,749
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization		1,557			1,455
Deferred income taxes		(382	)		1,231
Loss on disposal of fixed assets		—			73
Stock-based compensation		1,772			1,163
Allowance for doubtful accounts		9			6
Provision for excess and obsolete inventory		534			1,238
Changes in assets and liabilities:
Accounts receivable		4,551			5,427
Inventories		1,185			(3,228	)
Prepaids and other assets		(746	)		(1,817	)
Accounts payable		4,748			(7,444	)
Accrued compensation		(3,882	)		(1,899	)
Other accrued liabilities		(1,344	)		(3,073	)
Net cash provided by (used in) operating activities		7,799			(4,119	)
Cash flows from investing activities:
Purchases of short-term investments		(13,219	)		(998	)
Maturities/sale of short-term investments		8,500			14,646
Purchases of property, plant and equipment		(984	)		(968	)
Remaining cash proceeds from sale of discontinued operations		—			210
Net cash (used in) provided by investing activities		(5,703	)		12,890
Cash flows from financing activities:
Proceeds from issuance of common stock		1,759			774
Repurchase of common stock		(3,799	)		(2,023	)
Net cash used in financing activities		(2,040	)		(1,249	)
Effect of exchange rate changes on cash		99			(247	)
Net increase in cash and cash equivalents		155			7,275
Cash and cash equivalents at beginning of period		27,659			20,318
Cash and cash equivalents at end of period	$	27,814		$	27,593
Non-cash investing and financing activities:
Unrealized gain (loss) on investments, net	$	20		$	(35	)
Property, plant and equipment purchases included in accounts payable		78			80
Cash payments for:
Income taxes		1,217			175

See notes to the condensed consolidated financial statements.

6

SYMMETRICOM, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1. Basis of Presentation and Recently Issued Accounting Pronouncements

The condensed consolidated financial statements of Symmetricom, Inc. (“Symmetricom,” “we,” “us,” the “Company,” or “our”) included herein are unaudited and reflect all adjustments (consisting only of normal recurring adjustments) which are, in the opinion of the management, necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods presented. In presenting the financial statements in accordance with accounting principles generally accepted in the United States (US GAAP), management makes certain estimates and assumptions that impact the amounts reported and related disclosures. Estimates, by their nature, are judgments based upon available information. Accordingly, actual results could differ from those estimates.

These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in Symmetricom’s Annual Report on Form 10-K for the fiscal year ended July 1, 2012. The results of operations for the three months ended September 30, 2012 are not necessarily indicative of the results to be anticipated for the entire fiscal year ending June 30, 2013.

The condensed consolidated balance sheet as of July 1, 2012 has been derived from the audited consolidated financial statements as of that date but does not include all of the information and footnotes required by US GAAP for complete financial statements.

Fiscal Quarter

Our fiscal quarter is 13 weeks ending on the Sunday closest to the end of the calendar quarter.

Note 2. Financial Instruments

We account for certain assets and liabilities at fair value. The hierarchy below lists three levels of fair value based on the extent to which inputs used in measuring fair value are observable in the market. We categorize each of our fair value measurements in one of these three levels based on the lowest level input that is significant to the fair value measurement in its entirety. These levels are:

• Level 1—inputs are based upon unadjusted quoted prices for identical instruments traded in active markets;

• Level 2—inputs are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and

• Level 3—inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models, and similar techniques.

7

Financial assets and liabilities measured at fair value on a recurring basis consisted of the following types of instruments as of September 30, 2012 and July 1, 2012:

	Fair Value as  of September 30, 2012		Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)
	(In thousands)
Assets:
Money market funds	$	11,006	$	11,006	$	—	$	—
Short-term investments:
Corporate debt securities		31,931		—		31,931		—
Government sponsored enterprise debt securities		9,016		—		9,016		—
Mutual funds		2,864		2,864		—		—
Total short-term investments		43,811		2,864		40,947		—
Total financial assets	$	54,817	$	13,870	$	40,947	$	—
Liabilities:
Contingent consideration	$	598	$	—	$	—	$	598
Total financial liabilities	$	598	$	—	$	—	$	598

	Fair Value as  of       July 1, 2012		Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)
	(In thousands)
Assets:
Money market funds	$	8,650	$	8,650	$	—	$	—
Short-term investments:
Corporate debt securities		23,703		—		23,703		—
Government sponsored enterprise debt securities		12,515		—		12,515		—
Mutual funds		3,062		3,062		—		—
Total short-term investments		39,280		3,062		36,218		—
Total financial assets	$	47,930	$	11,712	$	36,218	$	—
Liabilities:
Contingent consideration	$	540	$	—	$	—	$	540
Total financial liabilities	$	540	$	—	$	—	$	540

Level 1 and 2 financial assets:

The fair values of our money market funds and mutual funds were derived from quoted market prices as active markets for these instruments exist. The fair values of corporate debt securities and government sponsored enterprise debt securities were derived from non-binding market consensus prices that are corroborated by observable market data.

8

The investments in mutual funds are held in a Rabbi trust to support the terms of our deferred compensation plan. The following table summarizes available-for-sale and trading securities recorded as cash and cash equivalents or short-term investments:

	Amortized Cost		Gross Unrealized Gains (Losses)		Fair Value
September 30, 2012	(In thousands)
Money market funds	$	11,006	$	—	$	11,006
Corporate debt securities		31,903		28		31,931
Government sponsored enterprise debt securities		9,012		4		9,016
Mutual funds		2,864		—		2,864
Total financial assets	$	54,785	$	32	$	54,817

	Amortized Cost		Gross Unrealized Gains (Losses)			Fair Value
July 1, 2012	(In thousands)
Money market funds	$	8,650	$	—		$	8,650
Corporate debt securities		23,705		(2	)		23,703
Government sponsored enterprise debt securities		12,513		2			12,515
Mutual funds		3,062		—			3,062
Total financial assets	$	47,930	$	—		$	47,930

The following table summarizes the contractual maturities of fixed income securities (Corporate debt securities and Government sponsored enterprise debt securities) recorded as short-term investments as of September 30, 2012:

	Amortized Cost		Fair Value
	(In thousands)
Less than 1 year	$	24,627	$	24,652
Due in 1 to 3 years		16,288		16,295
Total	$	40,915	$	40,947

Actual maturities may differ from the contractual maturities because borrowers may have the right to call or prepay certain obligations.

Level 3 financial liability:

The following table reconciles the beginning and ending balances for Level 3 liabilities for the first quarter of 2013 (in thousands):

	Contingent consideration
Balance as of July 1, 2012	$	540
Add: Adjustment to present value of contingent consideration		58
Balance as of September 30, 2012	$	598

9

Contingent consideration on acquired business was measured at fair value on a recurring basis using Level 3 inputs as defined in the fair value hierarchy. The following table presents certain information about the significant unobservable inputs used in the fair value measurement for the contingent consideration measured at fair value on a recurring basis using significant unobservable inputs:

Description	Valuation Techniques	Significant Unobservable Inputs
Liabilities: Contingent consideration	Present value of a Probability Weighted Earnout model using an appropriate discount rate.	Estimate of future revenue associated with acquired technology. Revenue of $4.9 million over a range of 2.5 years to 3 years.

An increase in the revenue growth percentage could result in a significantly higher estimated fair value of the contingent consideration liability. Alternatively, a decrease in the revenue growth percentage could result in a significantly lower estimated fair value of contingent consideration liability.

The fair value of contingent consideration was derived from a probability weighted earn-out model of future contingent payments. The cash payments, if any, are expected to be made quarterly, based upon revenue generated from the acquired product line, starting in fiscal 2013. No payments were made in first quarter of fiscal 2013. The valuation of this liability is estimated based upon a collaborative effort of the Company’s marketing and finance departments. These future contingent payments are calculated based on estimates of future revenue attributable to the acquired technology (Note 12). To obtain a current valuation of these projected cash flows, an expected present value technique is applied using an appropriate discount rate. The cash flow projections and discount rates will be reviewed quarterly and updated as and when necessary. Potential valuation adjustments will be made as future revenue projections are updated which affect the calculation of the related contingent consideration payments. These adjustments will be recorded in the income statement.

Note 3. Inventories

Components of inventories were as follows:

	September 30, 2012		July 1, 2012
	(In thousands )
Raw materials	$	20,419	$	21,003
Work-in-process		10,617		10,440
Finished goods		14,863		16,175
Inventories	$	45,899	$	47,618

Certain inventories, not expected to be consumed within the next 12 months, are included in the condensed consolidated balance sheet as non-current other assets (within “Deferred Tax and Other Assets”). These inventories consist of raw materials and finished goods and totaled $2.6 million, as of both September 30, 2012 and July 1, 2012, respectively.

10

Note 4. Intangible Assets

Intangible assets consist of:

	Gross Carrying Amount		Accumulated Amortization			Net Intangible Assets
	(in thousands)
Purchased technology	$	25,970	$	(24,058	)	$	1,912
Customer lists and trademarks		7,303		(6,019	)		1,284
Total as of September 30, 2012	$	33,273	$	(30,077	)	$	3,196
Purchased technology	$	25,970	$	(23,845	)	$	2,125
Customer lists and trademarks		7,303		(5,970	)		1,333
Total as of July 1, 2012	$	33,273	$	(29,815	)	$	3,458

The estimated future amortization expense by fiscal year is as follows:

Fiscal year:	(in thousands)
2013 (Remaining 9 months)	$	782
2014		1,010
2015		635
2016		461
2017		154
Thereafter		154
Total amortization	$	3,196

Intangible asset amortization expense for the first quarter of fiscal 2013 and 2012 was $0.3 million and $0.2 million, respectively.

Note 5. Warranty

Changes in our accrued warranty liability were as follows:

	Three Months Ended
	September 30, 2012			October 2, 2011
	(In thousands)
Beginning balance	$	1,722		$	1,601
Provision for warranty		731			505
Accruals related to change in estimate		117			92
Less: Actual warranty costs		(791	)		(721	)
Ending balance	$	1,779		$	1,477

11

Note 6. Long-term Obligations

Long-term obligations consist of:

	September 30, 2012		July 1, 2012
	(In thousands)
Long-term obligations:
Deferred revenue	$	2,103	$	2,254
Lease loss accrual, net		1,100		1,240
Rent accrual		1,074		1,102
Post-retirement benefits		203		173
Income tax		216		216
Contingent consideration for acquired business		545		487
Total	$	5,241	$	5,472

Note 7. Stockholders’ Equity

Stock Options and Awards Activity

Stock award activity for the three months ended September 30, 2012 is as follows:

				Non Performance-based Options Outstanding					Restricted Stock Outstanding
	Shares Available For Grant			Number of Shares			Weighted Average Exercise Price		Number of Shares		Weighted Average Grant-Date Fair Value
	(In thousands, except per share amounts)
Balances at July 1, 2012		2,889			7,316		$	5.54		261	$	5.68
Granted—options		(104	)		104			6.11		—		—
Granted—restricted shares		(200	)		—			—		100		6.15
Exercised		—			(196	)		4.97		—		—
Cancelled and Expired		66			(66	)		6.09		—		—
Balances at September 30, 2012		2,652			7,158		$	5.55		361	$	5.81

On October 26, 2012, the stockholders approved an amendment to the 2006 Incentive Award Plan to increase the number of shares of common stock authorized for issuance under the plan by 2,000,000 shares.

12

Stock options outstanding, vested and expected to vest, and exercisable as of September 30, 2012 were as follows:

Options	Number of Shares		Weighted Average Remaining Contractual Life		Weighted Average Exercise Price		Aggregate Intrinsic Value
	(In thousands)		(In years )				(In thousands)
Outstanding		7,158		4.41	$	5.55	$	10,948
Vested and expected to vest		6,902		4.37	$	5.56	$	10,560
Exercisable		3,724		3.42	$	5.67	$	5,658

The aggregate intrinsic value in the preceding table represents the total pre-tax value of stock options outstanding as of September 30, 2012, based on our common stock closing price of $6.97 on September 28, 2012, which would have been received by the option holders had all option holders exercised their options as of that date.

The total intrinsic value of options exercised during the first quarter of fiscal 2013 and 2012 was approximately $0.3 million and $0.1 million, respectively.

For the first quarter of fiscal 2013 and 2012, the weighted-average estimated fair value of options granted was $2.89 and $2.43 per share, respectively. Our calculations were made using the Black-Scholes option-pricing model. The fair value of Symmetricom stock-based awards to employees was estimated assuming no expected dividends and the weighted-average assumptions for the three months ended September 30, 2012 and October 2, 2011 as follows:

	Three months ended
	September 30, 2012			October 2, 2011
Expected life (in years)		4.9			5.1
Risk-free interest rate		0.7	%		0.7	%
Volatility		56.6	%		55.7	%

We calculated the stock-based compensation expense in the first quarter of fiscal 2013 and 2012, using an estimated annual forfeiture rate of 5.6% and 7.5%, respectively. At September 30, 2012, the total cumulative compensation cost related to unvested stock-based awards granted to employees, directors and consultants under the Company’s stock option plans, but not yet recognized, was approximately $4.5 million, net of estimated forfeitures of $0.8 million. This cost will be amortized on an accelerated method basis over a period of approximately 1.1 years and will be adjusted for subsequent changes in estimated forfeitures.

13

The following table shows total stock-based compensation costs included in the condensed consolidated statements of operations:

	Three Months Ended
	September 30, 2012		October 2, 2011
	(In thousands )
Cost of sales	$	291	$	119
Research and development		361		289
Selling, general and administrative		1,120		755
Pre-tax stock-based compensation expense		1,772		1,163
Less: Income Tax effect		656		430
Net stock-based compensation expense	$	1,116	$	733

The above table includes expense of $0.1 million and $0.1 million, relating to the employee stock purchase plan (ESPP) for the first quarter of fiscal 2013 and 2012, respectively.

Performance Awards

In the second quarter of fiscal 2012, the Company communicated its intention to grant 110,000 shares of performance based restricted stock to its executive management employees subject to the achievement of certain financial performance targets. The number of stock awards that would ultimately be granted depended on actual business performance measured for fiscal 2012 against certain targets for revenue and profitability for the Company’s business as well as continued employment with the Company. During the first quarter of fiscal 2013, 92,620 restricted shares were granted upon achievement of financial performance targets.

Stock Repurchases

During the first quarter of fiscal 2013, the Company repurchased 609,633 shares of common stock pursuant to our repurchase program for an aggregate price of approximately $3.8 million. As of September 30, 2012, the total number of shares available for repurchase under the repurchase program authorized by the Board of Directors was approximately 2.2 million.

Note 8. Restructuring Charges

The following table shows the details of the restructuring cost accruals, which consist of facilities and severance costs, at September 30, 2012:

	July 1, 2012		Expense Additions			Payments			September 30, 2012
	(in thousands)
Lease loss accrual (fiscal 2004)	$	137	$	1		$	(10	)	$	128
All other restructuring changes (fiscal 2004)		68		—			(22	)		46
Lease loss accrual (fiscal 2009)		902		33			(104	)		831
All other restructuring changes (fiscal 2010)		75		(185	)		185			75
Lease loss accrual (fiscal 2011)		170		1			(13	)		158
Lease loss accrual (fiscal 2012)		698		5			(77	)		626
All other restructuring changes (fiscal 2012)		159		155			(215	)		99
Total	$	2,209	$	10		$	(256	)	$	1,963

The lease loss accruals are subject to periodic revisions based on current market estimates. The lease loss accruals as of September 30, 2012 will be paid over the next five years.

Note 9. Net Income (Loss) Per Share

Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding and common equivalent shares from dilutive stock options, employee stock purchase plan and restricted stock using the treasury stock method, except when antidilutive.

14

The following table reconciles the number of shares utilized in the net income (loss) per share calculations:

	Three Months Ended
	September 30, 2012			October 2, 2011
	(In thousands, except per share amounts)
Numerator:
Net income (loss)	$	(203	)	$	2,749
Shares (denominator):
Weighted average common shares outstanding		40,826			42,897
Weighted average common shares outstanding subject to repurchase		(316	)		(210	)
Weighted average shares outstanding—basic		40,510			42,687
Weighted average dilutive share equivalents from stock options		—			506
Weighted average dilutive common shares subject to repurchase		—			101
Weighted average shares outstanding— diluted		40,510			43,294
Earnings (loss) per share:
Basic	$	(0.01	)	$	0.06
Diluted	$	(0.01	)	$	0.06

Unvested restricted stock is subject to repurchase by the Company and therefore is not included in the calculation of the weighted-average shares outstanding for basic earnings per share.

The following common stock equivalents were excluded from the earnings (loss) per share calculation as their effect would have been anti-dilutive:

	Three Months Ended
	September 30, 2012		October 2, 2011
	(In thousands)
Stock options		7,281		3,391
Common shares subject to repurchase		316		—
Total shares of common stock excluded from diluted net income (loss) per share calculation		7,597		3,391

Note 10. Litigation and Contingencies

Litigation—The Company is or was a party to the following material litigations:

Former Texas Facility Environmental Cleanup

We formerly leased a tract of land in Texas for our operations. Those operations involved the use of solvents and, at the end of the lease, we remediated an area where the solvents had been deposited on the ground and obtained regulatory approval for that remedial activity. In 1996, an environmental investigation of the property detected those same contaminants in groundwater in excess of then current regulatory standards. The groundwater contamination has migrated to some adjacent properties. We have entered into the Texas Natural Resource Conservation Commission’s Voluntary Cleanup Program (the “Voluntary Cleanup Program”) to obtain regulatory approval for closure of this site and a release from liability to the State of Texas for subsequent landowners and lenders. We have notified adjacent property owners affected by the contamination of participation in the Voluntary Cleanup Program. On May 20,

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2004, we received a demand from the owner of several adjacent lots for damages in the amount of $1.3 million, as well as seeking an indemnity for the contamination and a promise to remediate the contamination. On March 14, 2006, the adjacent property owner filed suit in Probate Court No. 1, Travis County, Texas (Anna B. Miller, Individually and as Executrix of the Estate of Robert L. Miller, et al. vs. Austron, Inc., et al.), seeking damages. Symmetricom has not yet been served in this matter, but we intend to defend this lawsuit vigorously. We are continuing to work on the remediation of the formerly leased site as well as the adjacent properties, and have also taken steps to begin work on the Miller property. As of September 30, 2012, we had an accrual of $46,000 for remediation costs and other ongoing monitoring costs which has been included within “other accrued liabilities” on our condensed consolidated balance sheet.

Michael E. McNeil, et al. vs. Jason Book, et al.

On or around May 25, 2010, Symmetricom was served with the first amended complaint in the case of Michael E. McNeil, et al. vs. Jason Book, et al. (Case No. CV165643) filed in Santa Cruz County Superior Court, California. The first amended complaint added Symmetricom and several other parties to the lawsuit, which had been originally filed in 2009 by plaintiffs against their former attorney for legal malpractice in connection with certain settlement agreements in 1999 between plaintiffs and Datum (a company acquired by Symmetricom) in which they assigned to Datum certain intellectual property rights. The complaint has since been amended for the second time and Symmetricom was served with the second amended complaint on or around January 7, 2011. The second amended complaint alleges several causes of action, including claims against Symmetricom for contract rescission, breach of contract, conversion and unjust enrichment, and seeks unspecified monetary damages along with equitable relief. Management believes that this lawsuit has no merit or basis and intends to defend this lawsuit vigorously and as a result, no accrual has been made in relation to this litigation. Management believes the final outcome of this matter will not have a material adverse effect on our financial position and results of operations.

General

Under the indemnification provisions of our standard sales contracts, we agree to defend the customer against third party claims asserting infringement of certain intellectual property rights, which may include patents, copyrights, trademarks or trade secrets, and to pay any judgments entered on such claims against the reseller/customer. The exposure to us under these indemnification provisions is generally limited to the total amount paid by the customer under the agreement. However, certain agreements include indemnification provisions that could potentially expose us to losses in excess of the amount received under the agreement. To date, there have been no claims under such indemnification provisions. We believe the estimated fair value of these indemnification agreements is not material.

We are also a party to certain other claims in the normal course of our operations. While the results of these claims cannot be predicted with any certainty, we believe that the final outcome of these matters will not have a material adverse effect on our consolidated financial position and results of operations.

Note 11. Business Segment Information

Symmetricom is organized into two operating segments:Communications andGovernment and Enterprise. These two operating segments are our reporting segments. The Chief Operating Decision Maker (CODM), as defined by authoritative accounting guidance on Segment Reporting, is our President and Chief Executive Officer (CEO). Our CEO allocates resources to and assesses the performance of each operating segment using information about its revenue and operating income (loss) before interest and taxes.

With the exception of intangible assets, we do not identify or allocate assets by operating segment, nor does our CEO evaluate operating segments using discrete asset information. We do not allocate restructuring charges, interest and other income, interest expense, or income taxes to operating segments.

The following describes our two reporting segments:

Communications

Our Communications business supplies timing technologies and services for worldwide communications infrastructure. Products include primary reference sources, synchronization distribution systems, embedded components and software, and test and measurement equipment, all of which support the timing and synchronization requirements of telecommunications and cable networks and equipment.

Government and Enterprise

Our Government and Enterprise business provides time technology products for aerospace/defense, IT infrastructure and science and metrology applications. Precision time and frequency systems enable a range of critical operations, including the international time scale, global navigation, the management of power grids, synchronization of complex control systems, and signals intelligence for securing communications in remote and hostile environments.

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Segment revenue, gross profit and operating income (loss) were as follows during the periods presented (in thousands):

Three months ended September 30, 2012

	Communications		Government and Enterprise		Corporate			Total
Net revenue	$	31,439	$	24,952	$	—		$	56,391
Cost of sales		15,210		16,924		(45	)		32,089
Gross profit		16,229		8,028		45			24,302
Operating expenses		9,691		7,188		7,802			24,681
Operating income (loss)	$	6,538	$	840	$	(7,757	)	$	(379	)

Three months ended October 2, 2011

	Communications		Government and Enterprise		Corporate			Total
Net revenue	$	33,570	$	22,808	$	—		$	56,378
Cost of sales		16,279		13,737		417			30,433
Gross profit		17,291		9,071		(417	)		25,945
Operating expenses		9,730		6,269		5,857			21,856
Operating income (loss)	$	7,561	$	2,802	$	(6,274	)	$	4,089

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The information in the Corporate category above represents corporate-related costs that are not allocated to either of our two segments for the purpose of evaluating their performance. The following table outlines our major corporate-related costs (in thousands):

	Three Months Ended
	September 30, 2012		October 2, 2011
Selling, general and administrative costs	$	7,747	$	5,761
Restructuring charges		10		513
Corporate-related total	$	7,757	$	6,274

12. Business Combination

During third quarter of fiscal 2012, the Company acquired a product line (existing technology, customer relationships, fixed assets and employees) to enhance the Company’s product offerings in embedded timing and synchronization solutions for residential small cell solutions. This transaction was recorded as an acquisition of a business. The transaction price was approximately $2.4 million of which $1.4 million was paid in cash and approximately $1.0 million is contingent consideration payable as a royalty upon future sales of such products.

The fair value of the contingent consideration arrangement at the acquisition date was $0.5 million. We estimated the fair value of the contingent consideration using a probability-weighted discounted cash flow model (See Note 2). The purchase price was determined as follows (amounts in thousands):

Initial cash payment	$	1,400
Fair value of contingent consideration		540
Total	$	1,940

This purchase price was allocated to fixed assets and intangible assets based on their estimated fair values as follows (amounts in thousands):

Fixed assets	$	50
Intangible assets		1,890
Total	$	1,940

The estimated fair value of intangible assets acquired under the transaction consists of the following (in thousands):

Existing technology (estimated useful life 4 years)	$	1,612
Customer relationships (estimated useful life 2 years)		278
Total	$	1,890

The fair value of the acquired non-monetary assets, summarized above, were derived from significant unobservable inputs (“Level 3 inputs”) determined by the Company based on market analysis, income analysis (discounted cash flow model), or cost approach. The fair value of fixed assets acquired was determined using market data for similar assets. The fair value of existing technology was determined using a discounted cash flow model from cash flow projections prepared by management, including estimated undiscounted cash flows of approximately $3 million during the five to six year period after the acquisition, and a weighted average cost of capital. The fair value of customer relationships was determined using a cost approach which includes an estimate of time and expenses required to recreate the intangible asset.

Pro forma results of operations have not been presented because the effect of the business combination described in this Note was not material to our condensed consolidated results of operations. Revenue and earnings per share for the acquired business, since the date of acquisition through September 30, 2012, were not material.

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13. Subsequent Event

On October 22, 2012, the Company committed to closing its research and development operation in Beijing, China. After evaluating the Beijing R&D operation against current and future needs, the Company decided to consolidate its engineering resources into its existing U.S. facilities, placing test engineering and development engineering positions in closer geographic proximity. The Company is therefore closing its Beijing R&D operation, eliminating approximately 35 positions in China, primarily system test engineering positions. The closure and transition is expected to be completed in the second half of fiscal 2013. After relocating a certain number of these positions to the U.S., the Company expects to incur restructuring and other transition related costs of approximately $3.0 million over the next few quarters, and once completed, anticipates the transition to be cost neutral. Total restructuring and other transition charges are expected to include severance and employee termination benefits of approximately $0.6 million, facility lease termination costs of approximately $0.4 million, legal fees and other intellectual property related costs of approximately $1.2 million, equipment write-off and re-location costs of approximately $0.3 million and travel and other position re-location costs of approximately $0.5 million. Total cash expenditures associated with the closure are expected to be approximately $2.8 million.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read together with the condensed consolidated financial statements and related notes included elsewhere in this report.

When used in this discussion, the words “expect,” “anticipate,” “estimate,” “believe,” “plan,” “will,” “may,” “intend,” “can,” “project” and similar expressions are intended to identify forward-looking statements. These statements in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere are subject to risks and uncertainties that could cause actual results to differ materially from those projected.

These risks and uncertainties include, but are not limited to, the extent and magnitude of customer orders received and shipped within the same quarter, risks relating to general economic conditions in the markets we address and the telecommunications and government markets in general, risks related to the development of our new products and services, reliance on our contract manufacturer, the effects of increasing competition and competitive pricing pressure, uncertainties associated with changing intellectual property laws or misappropriation of intellectual property, developments in and expenses related to litigation, the inability to obtain sufficient amounts of key components, the rescheduling or cancellation of key customer orders, the loss of a key customer, the effects of new and emerging technologies, the risk that excess inventory may result in write-offs, price erosion and decreased demand, fluctuations in the rate of exchange of foreign currency, changes in our effective tax rate, market acceptance of our new products and services, technological advancements, undetected errors, design flaws, defects in our products or start-up manufacturing difficulties, the risks associated with our international sales, potential short-term investment losses and other risks due to credit market dislocation, geopolitical risks and risk of terrorist activities, the risks associated with attempting to integrate other companies and businesses we acquire, and the risks set forth below in Item 1A, “Risk Factors.”

These forward-looking statements speak only as of the date hereof. We expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

All references to “Symmetricom,” “we,” “us,” and “our” mean Symmetricom, Inc. and its subsidiaries, except where it is made clear that the term means only the parent company. Dollar amounts in the tables in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” are in thousands.

Overview

Symmetricom, a world leader in precise time solutions, sets the world’s standard for time. We generate, distribute and apply precise time for the communications, aerospace/defense, IT infrastructure and metrology industries. Our customers, from communications service providers and network equipment manufacturers to governments and their suppliers worldwide, are able to build more reliable networks and systems by using our advanced timing technologies, atomic clocks, services and solutions. Our products support today’s precise timing standards, including GPS-based timing, IEEE 1588 (PTP), Network Time Protocol (NTP), Synchronous Ethernet and DOCSIS^® timing.

Critical Accounting Estimates

Our condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States, which require us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosures at the date of our financial statements. On an ongoing basis, management evaluates its estimates and judgments. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

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An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, if different estimates reasonably could have been used, or if changes in the estimate that are reasonably likely to occur could materially impact the financial statements. We believe that there have been no significant changes during the three months ended September 30, 2012 to the items that we disclosed as our critical accounting policies and estimates in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended July 1, 2012.

Known Trends and Uncertainties Impacting Future Results of Operations: Global Market and Economic Conditions

Current macro-economic factors are dynamic and uncertain. Further, the recent hurricane, which impacted the north-eastern United States, could exacerbate these uncertainties and impact our customers and our manufacturing supply-chain partners. There is the potential for these conditions to remain uncertain for the remainder of fiscal year 2013. If difficult economic conditions continue or markedly worsen or if the impacts of the hurricane are prolonged or if there are reductions in government/defense spending or if there are further reductions in telecommunications market spending, our customers may delay or reduce capital expenditures. Among other things, these factors could result in reductions in sales of our products, longer sales cycles, difficulties in collecting accounts receivable, additional excess and obsolete inventory, gross margin deterioration, slower adoption of new technologies, increased price competition and supplier difficulties.

Results of Operations

The following table presents selected items in our condensed consolidated statements of operations as a percentage of total net revenue for the three months ended September 30, 2012 and October 2, 2011:

	Three Months Ended
	September 30,			October 2,
	2012			2011
Net revenue
Communications		55.8	%		59.5	%
Government and Enterprise		44.2	%		40.5	%
Total net revenue		100.0	%		100.0	%
Cost of products and services		56.6	%		52.9	%
Acquisition-related costs		0.4	%		0.3	%
Restructuring charges		(0.1	)%		0.7	%
Gross profit		43.1	%		46.0	%
Operating expenses:
Research and development		14.7	%		12.2	%
Selling, general and administrative		28.8	%		26.3	%
Amortization of intangible assets		0.2	%		0.1	%
Restructuring charges		0.1	%		0.2	%
Operating income (loss)		(0.7	)%		7.3	%
Interest income (loss), net of amortization (accretion) of premium (discount) on investments		(0.1	)%		0.1	%
Income (loss) before taxes		(0.7	)%		7.3	%
Income tax provision (benefit)		(0.4	)%		2.4	%
Net income (loss)		(0.4	)%		4.9	%

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Net Revenue:

	Three Months Ended						$ Change			% Change
	September 30, 2012			October 2, 2011
Net Revenue :
Communications	$	31,439		$	33,570		$	(2,131	)		(6.3	)%
Government and Enterprise		24,952			22,808			2,144			9.4
Total Net Revenue	$	56,391		$	56,378		$	13			0.0
Percentage of Revenue		100	%		100	%

Net revenue consists of sales of products, software licenses and services. In the first quarter of fiscal 2013, net revenue remained at a level comparable to the corresponding quarter of fiscal 2012. The decrease in Communications business is due to lower sales of traditional sync and DOCSIS© Timing Interface (DTI) products, partially offset by higher sales of PackeTime™ and embedded products. The increase in Government and Enterprise segment revenue is due to an increase in sales of Quantum™ Chip Scale Atomic Clocks (CSAC) and government programs business, partially offset by a decrease in sales of instrument, enterprise and clock products.

Gross Profit:

	Three Months Ended						$ Change			% Change
	September 30, 2012			October 2, 2011
Gross Profit :
Communications	$	16,229		$	17,291		$	(1,062	)		(6.1	)%
Government and Enterprise		8,028			9,071			(1,043	)		(11.5	)
Corporate related		45			(417	)		462			(110.8	)
Total Gross Profit	$	24,302		$	25,945		$	(1,643	)		(6.3	)
Percentage of Revenue		43.1	%		46.0	%

Gross profit in the first quarter of fiscal 2013 decreased by $1.6 million, or 6.3%, compared to the corresponding quarter of fiscal 2012. Gross profit as a percentage of revenue in the first quarter of fiscal 2013 decreased to 43.1% compared to 46.0% in the corresponding quarter of fiscal 2012 due to a product mix shift to lower margin products. Gross profit for our Communications segment decreased by 6.1% in the first quarter of fiscal 2013 compared to the corresponding quarter of fiscal 2012 due to a corresponding decrease in the revenue in this segment of 6.3%. Gross profit for our Government and Enterprise segment decreased by 11.5% in the first quarter of fiscal 2013 compared to the corresponding quarter of fiscal 2012 whereas the revenue in this segment increased by 9.4% due to a higher mix of government programs business and CSAC sales, which carry lower gross margins.

Corporate related charges decreased by $0.5 million, or 110.8%, in the first quarter of fiscal 2013 due to higher restructuring charges in the first quarter of fiscal 2012 related to activities associated with the closure of our Santa Rosa manufacturing facility.

Operating Expenses:

Research and Development Expense:

	Three Months Ended						$ Change		% Change
	September 30, 2012			October 2, 2011
Research and development expense	$	8,313		$	6,898		$	1,415		20.5	%
Percentage of Revenue		14.7	%		12.2	%

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Research and development expense consists primarily of salaries and benefits, prototype expenses and fees paid to outside consultants. Research and development expenses in the first quarter of fiscal 2013 increased compared to the same quarter of fiscal 2012 due primarily to an increase in new product introduction costs and consulting services costs. We expect research and development expenses in the second quarter of fiscal 2013 to be consistent with the first quarter of fiscal 2013.

Selling, General and Administrative:

	Three Months Ended						$ Change		% Change
	September 30, 2012			October 2, 2011
Selling, general and administrative	$	16,227		$	14,810		$	1,417		9.6	%
Percentage of Revenue		28.8	%		26.3	%

Selling, general and administrative expenses consist primarily of salaries, benefits, sales commissions and travel-related expenses for our sales and services, marketing, finance, human resources, information technology and facilities departments. These expenses increased in the first quarter of fiscal 2013 compared to the same quarter of fiscal 2012, due primarily to an increase in employee compensation costs and higher legal, audit fees and costs incurred related to the planned closure of our China R&D operation. We expect selling, general and administrative expenses in the second quarter of fiscal 2013 to be consistent with the first quarter of fiscal 2013.

Amortization of intangible assets:

	Three Months Ended						$ Change		% Change
	September 30, 2012			October 2, 2011
Amortization of intangible assets	$	86		$	52		$	34		65.4	%
Percentage of Revenue		0.2	%		0.1	%

Amortization of intangible assets increased in the first quarter of fiscal 2013 compared to the same period of fiscal 2012 due to higher amortization of intangible assets arising from the assets acquired after the first quarter of fiscal 2012, partially offset by certain assets becoming fully amortized during first quarter of fiscal 2013.

Restructuring charges:

	Three Months Ended						$ Change			% Change
	September 30, 2012			October 2, 2011
Restructuring charges	$	55		$	96		$	(41	)		(42.7	)%
Percentage of Revenue		0.1	%		0.2	%

Restructuring charges in the first quarter of fiscal 2013 and in the corresponding quarter of fiscal 2012 consisted of severance, consulting and outside services.

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Interest income (loss), net of amortization (accretion) of premium (discount) on investments:

	Three Months Ended						$ Change			% Change
	September 30, 2012			October 2, 2011
Interest income (loss), net of amortization (accretion) of premium (discount) on investments	$	(36	)	$	66		$	(102	)		(154.5	)%
Percentage of Revenue		(0.1	)%		0.1	%

Interest income (loss), net of amortization (accretion) of premium (discount) on investments decreased $0.1 million in the first quarter of fiscal 2013 compared to the same period of prior year due to the decline in value of the assets of the Company’s deferred compensation plan in the first quarter of fiscal 2013.

Income tax provision (benefit):

	Three Months Ended						$ Change			% Change
	September 30, 2012			October 2, 2011
Income tax provision (benefit)	$	(212	)	$	1,406		$	(1,618	)		(115.1	)%
Percentage of Revenue		(0.4	)%		2.4	%

In the first quarter of fiscal 2013, we recorded an income tax benefit of $0.2 million due to a pretax loss, compared to a provision of $1.4 million in the corresponding quarter of fiscal 2012. Our effective tax rate in the first quarter of fiscal 2013 was 51.1%, compared to an effective tax rate of 33.8% in the corresponding quarter of fiscal 2012. The effective tax rate for the first quarter of fiscal 2013 benefitted from employees’ disqualifying dispositions of shares purchased through our employee stock purchase plan.

Key Operating Metrics

Key operating metrics for measuring our performance includes sales backlog. A comparison of this metric at the end of the first quarter of fiscal 2013 with the end of fiscal 2012 is below:

Sales Backlog:

Our backlog consists of firm orders that have yet to be shipped to the customer, or may not be shippable to a customer until a future period. Most orders included in backlog can be rescheduled or cancelled by customers without significant penalty. Historically, a substantial portion of net revenue in any fiscal period has been derived from orders received during that fiscal period.

Our backlog totaled $48.9 million as of September 30, 2012, compared to $45.4 million as of July 1, 2012. As of September 30, 2012, $39.4 million of our backlog was shippable within the next six months, compared to $34.9 million as of July 1, 2012.

Liquidity and Capital Resources

Balance Sheet and Cash Flows

The following table summarizes our cash, cash equivalents and short-term investments:

	September 30, 2012		July 1, 2012		Change
Cash and cash equivalents	$	27,814	$	27,659	$	155
Short-term investments		43,811		39,280		4,531
Total	$	71,625	$	66,939	$	4,686

As of September 30, 2012, our principal sources of liquidity consisted of cash, cash equivalents and short-term investments of $71.6 million and accounts receivable of $41.4 million.

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As of September 30, 2012, working capital was $139.8 million compared to $140.0 million as of July 1, 2012. Cash, cash equivalents and short-term investments as of September 30, 2012 increased to $71.6 million from $66.9 million as of July 1, 2012.

Our days sales outstanding in accounts receivable was 67 days as of September 30, 2012, compared to 67 days as of July 1, 2012.

Our principal uses of cash historically have consisted of the purchase of inventories, payroll and other operating expenses related to the manufacturing of products, development of new products and purchase of property and equipment.

Cash flows from operating activities

Net cash provided by operating activities in the first three months of fiscal 2013 was $7.8 million. Net cash provided by operating activities consisted of non-cash charges of $3.5 million and net changes in assets and liabilities of $4.5 million, partially offset by a loss of $0.2 million. The non-cash charges consisted of $1.6 million in depreciation and amortization, $1.8 million in stock-based compensation, $0.5 million in provision for excess and obsolete inventory, partially offset by $0.4 million in deferred income taxes. Changes in assets and liabilities consisted of a $4.7 million increase in accounts payable, $4.6 million decrease in accounts receivable, and a $1.2 million decrease in inventories, partially offset by $3.9 million decrease in accrued compensation, $1.3 million decrease in other accrued liabilities and $0.7 million increase in prepaid and other assets.

Cash flows from investing activities

Net cash used in investing activities was $5.7 million in the first three months of fiscal 2013, which represented purchase of short-term investments of $13.2 million and purchase of $1.0 million for property, plant and equipment, partially offset by sales/maturities of short-term investments of $8.5 million.

Cash flows from financing activities

Net cash used for financing activities was $2.0 million in the first three months of fiscal 2013, which was comprised of the repurchase of common stock for $3.8 million, partially offset by cash generated from the issuance of common stock for $1.8 million.

Contingencies

See Item 1 of Part I, Financial Statements—Note 10—Litigation and Contingencies.

Recently Issued Accounting Pronouncements

See Item 1 of Part I, Financial Statements—Note 1—Basis of Presentation.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

For quantitative and qualitative disclosures about market risk affecting Symmetricom see “Quantitative and Qualitative Disclosures About Market Risk” in Item 7A of Part II of our Annual Report on Form 10-K for the fiscal year ended July 1, 2012. Our exposure to market risk has not changed materially since July 1, 2012.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is (i) recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and (ii) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effective as of the end of the fiscal quarter covered by this report.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2012 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

See Item 1 of Part I, Financial Statements—Note 10—Litigation and Contingencies.

Item 1A. Risk Factors

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for our fiscal year ended July 1, 2012. The risks discussed in our Annual Report on Form 10-K could materially affect our business, financial condition and future results. The risks described in our Annual Report on Form 10-K are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition or operating results.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

a) Not applicable.

b) Not applicable.

c) The following table provides monthly detail regarding our share repurchases during the three months ended September 30, 2012:

Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Approximate Number of Shares That May Yet Be Purchased Under the Plans or Programs
July 2, 2012 through July 29, 2012		182,233	$	6.01		182,233		2,580,261
July 30, 2012 through August 26, 2012		217,400		6.16		217,400		2,362,861
August 27, 2012 through September 30, 2012		210,000		6.50		210,000		2,152,861
Total		609,633	$	6.23		609,633

During the first quarter of fiscal 2013, we repurchased 609,633 shares of common stock pursuant to our repurchase program for an aggregate price of approximately $3.8 million. As of September 30, 2012, the total number of shares available for repurchase under the repurchase program authorized by the Board of Directors was approximately 2.2 million.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not applicable.

Item 6. Exhibits

Exhibit Number	Description of Exhibits
31	Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32	Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101	Interactive Data File.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on our behalf by the undersigned thereunto duly authorized.

	SYMMETRICOM, INC.
	(Registrant)
Date: November 8, 2012	By:	/S/    DAVID G. CÔTÉ
		David G. Côté
		Chief Executive Officer (Principal Executive Officer) and Director
Date: November 8, 2012	By:	/S/    JUSTIN R. SPENCER
		Justin R. Spencer
		Executive Vice President, Chief Financial Officer and Secretary (Principal Financial and Accounting Officer)

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