EXHIBIT 99.2
U.S. MONOLITHICS, L.L.C.
FINANCIAL STATEMENTS
TOGETHER WITH
INDEPENDENT AUDITORS' REPORT
December 31, 2000 and 1999
U.S. MONOLITHICS, L.L.C.
TABLE OF CONTENTS
Page
----
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS
Balance sheets 2
Statements of operations 3
Statements of changes in members' equity 4
Statements of cash flows 5
Notes to financial statements 6 - 10
INDEPENDENT AUDITORS' REPORT
To the Members of
U.S. Monolithics, L.L.C.
We have audited the accompanying balance sheets of U.S. Monolithics, L.L.C. (an
Arizona limited liability company) as of December 31, 2000 and 1999, and the
related statements of operations, changes in members' equity and cash flows for
the years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of U.S. Monolithics, L.L.C. as of
December 31, 2000 and 1999, and the results of its operations and its cash flows
for the years then ended in conformity with accounting principles generally
accepted in the United States of America.
NELSON LAMBSON & CO., PLC
Mesa, Arizona
February 12, 2001
U.S. MONOLITHICS, L.L.C.
BALANCE SHEETS
December 31, 2000 and 1999
2000 1999
---------- ----------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $3,511,332 $ 42,848
Accounts receivable 47,790 100,160
Due from members 20,353 --
Prepaid expenses 28,818 4,658
Other assets -- 1,978
---------- ----------
Total current assets 3,608,293 149,644
PROPERTY, net 1,630,500 116,037
---------- ----------
$5,238,793 $ 265,681
========== ==========
LIABILITIES AND MEMBERS' EQUITY
CURRENT LIABILITIES
Current portion of obligations under capital leases $ 379,536 $ 27,619
Accounts payable 110,830 28,189
Accrued liabilities 157,031 48,317
Deferred revenue -- 7,500
---------- ----------
Total current liabilities 647,397 111,625
OBLIGATIONS UNDER CAPITAL LEASES,
less current portion 638,936 33,112
---------- ----------
Total liabilities 1,286,333 144,737
---------- ----------
MEMBERS' EQUITY 3,952,460 120,944
---------- ----------
$5,238,793 $ 265,681
========== ==========
The accompanying notes are an integral part of these financial statements.
2
U.S. MONOLITHICS, L.L.C.
STATEMENTS OF OPERATIONS
For the years ended December 31, 2000 and 1999
2000 1999
----------- -----------
REVENUE $ 350,847 $ 517,396
GENERAL AND ADMINISTRATIVE EXPENSES 3,130,894 345,291
----------- -----------
Operating income (loss) (2,780,047) 172,105
OTHER INCOME (EXPENSE)
Interest income 182,261 --
Interest expense (52,638) (5,112)
----------- -----------
Other income (expense), net 129,623 (5,112)
----------- -----------
NET INCOME (LOSS) $(2,650,424) $ 166,993
=========== ===========
The accompanying notes are an integral part of these financial statements.
3
U.S. MONOLITHICS, L.L.C.
STATEMENTS OF CHANGES IN MEMBERS' EQUITY
For the years ended December 31, 2000 and 1999
Class "A" Class "B" Offering
Units Units Costs Total
----------- ----------- ----------- -----------
Balance at December 31, 1998 $ 11,458 $ -- $ -- $ 11,458
Capital contributions 14,718 -- -- 14,718
Distributions to members (72,225) -- -- (72,225)
Net income 166,993 -- -- 166,993
----------- ----------- ----------- -----------
Balance at December 31, 1999 120,944 -- -- 120,944
Capital contributions 17,160 6,500,000 (35,220) 6,481,940
Net loss (1,956,379) (694,045) -- (2,650,424)
----------- ----------- ----------- -----------
Balance at December 31, 2000 $(1,818,275) $ 5,805,955 $ (35,220) $ 3,952,460
=========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements.
4
U.S. MONOLITHICS, L.L.C.
STATEMENTS OF CASH FLOWS
For the years ended December 31, 2000 and 1999
2000 1999
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $(2,650,424) $ 166,993
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation 242,385 34,886
(Increase) decrease in:
Accounts receivable 52,370 (100,160)
Due from members (20,353) --
Prepaid expenses (24,160) (4,658)
Other assets 1,978 (1,553)
Increase (decrease) in:
Accounts payable 82,641 28,189
Accrued liabilities 108,714 48,317
Deferred revenue (7,500) 7,500
----------- -----------
Net cash provided by (used in) operating activities (2,214,349) 179,514
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property (621,149) (68,044)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on obligations under capital leases (177,958) (14,161)
Capital contributions 6,481,940 14,718
Distributions to members -- (72,225)
----------- -----------
Net cash provided by (used in) financing activities 6,303,982 (71,668)
----------- -----------
Net increase in cash and cash equivalents 3,468,484 39,802
CASH AND CASH EQUIVALENTS - Beginning of year 42,848 3,046
----------- -----------
CASH AND CASH EQUIVALENTS - End of year $ 3,511,332 $ 42,848
=========== ===========
The accompanying notes are an integral part of these financial statements.
5
U.S. MONOLITHICS, L.L.C.
NOTES TO FINANCIAL STATEMENTS
December 31, 2000 and 1999
(1) OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Operations
U.S. Monolithics, L.L.C. (the Company) was organized under the laws of
the state of Arizona in November 1998. The Company engages in engineering design
and consulting in wireless communications and microwave and millimeter-wave
technology.
Cash and Cash Equivalents
For purposes of reporting the statements of cash flows, the Company
considers all highly liquid debt instruments with original maturities of three
months or less to be cash equivalents.
Accounts Receivable
Management considers all accounts receivable to be fully collectible.
Accordingly, no allowance for doubtful accounts is provided in the accompanying
financial statements.
The Company does not require collateral on accounts receivable balances.
Income Taxes
The Company is not a tax-paying entity for federal or state income tax
purposes, and thus no income tax provision or liability for income taxes has
been recorded in the accompanying financial statements. Instead, the members are
taxed on their proportionate shares of the Company's taxable income.
Advertising
Advertising costs are expensed as they are incurred. There were no
advertising expenses for the years ended December 31, 2000 and 1999.
(2) ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results may differ from those
estimates.
6
U.S. MONOLITHICS, L.L.C.
NOTES TO FINANCIAL STATEMENTS
December 31, 2000 and 1999
(3) PROPERTY
Property is stated at cost and is depreciated using the straight-line
method over the estimated useful lives of the assets, ranging from 2-15 years.
Depreciation expense was approximately $242,000 and $35,000 for the years ended
December 31, 2000 and 1999, respectively.
Property consisted of the following at December 31:
2000 1999
----------- -----------
Office equipment and furniture $ 32,510 $ 764
Test equipment 1,030,292 --
Computer equipment 252,538 27,119
Computer software 591,289 125,037
Construction-in-progress 3,139 --
----------- -----------
Total property 1,909,768 152,920
Less - Accumulated depreciation (279,268) (36,883)
----------- -----------
Property, net $ 1,630,500 $ 116,037
=========== ===========
(4) OBLIGATIONS UNDER CAPITAL LEASES
The Company has entered into computer equipment and software lease
agreements which expire through October 2003. Amortization expense on these
capital leases is included in depreciation expense. The gross amount of assets
recorded under these capital leases was approximately $1,218,000 and $82,000 and
the related accumulated amortization was approximately $151,000 and $19,000 as
of December 31, 2000 and 1999, respectively. Future minimum lease payments on
obligations under capital leases are scheduled as follows:
Year Ending
December 31
2001 $ 476,466
2002 451,634
2003 249,464
----------
Total future minimum lease payments 1,177,564
Less - Amount representing interest (159,092)
----------
Present value of future minimum lease payments 1,018,472
Less - Current portion (379,536)
----------
Obligations under capital leases, less current portion $ 638,936
==========
7
U.S. MONOLITHICS, L.L.C.
NOTES TO FINANCIAL STATEMENTS
December 31, 2000 and 1999
(5) MEMBERS' EQUITY
Member Allocations and Distributions
Profits and losses are allocated to the members based on the number of
units they own, as defined in the Operating Agreement. Allocations are made to
Class A units first and then to Class B units. Losses can only be allocated to
the extent that there is capital. At December 31, 2000, there were Class A and
Class B units.
Class A Units Issued
In March 2000, the Company amended its operating agreement and increased
its authorized units from 15,000 to 30,000,000. The Company then issued Class A
units to certain employees. A total of 6,600,000 Class A units were issued at a
purchase price of $17,160. These units represent approximately 22% of total
Class A units.
Sale of Units
In March, July and October 2000, the Company sold 11,307,690, 3,230,770
and 1,615,385 Class B units, respectively, to a third party investor. A total of
16,153,845 Class B units was sold at a total sales price of $6,500,000. These
units represent approximately 35% of the voting and economic interests in the
Company.
Unit Split
In October 2000, the Company authorized a five for one unit split.
Accordingly, all references in the financial statements to number of units have
been restated to reflect this unit split.
(6) UNIT OPTION PLAN
In October 2000, the Company adopted the 2000 unit incentive plan, under
which options may be granted to employees, advisors and consultants of the
Company. The units available for grant of options under the plan are the
Company's reserved but unissued Class A units. The aggregate number of units
that may be issued pursuant to exercise of options granted under the plan is
5,000,000 units. The exercise price for a unit may be any amount as determined
by the managers and shall not be less than fair market value as determined by
the managers on the date the option is granted. However, the managers may at
their discretion, grant options with an exercise price less than fair market
value on the date of the grant. An option's maximum term is ten years. The
vesting period on options will be determined by the managers.
8
U.S. MONOLITHICS, L.L.C.
NOTES TO FINANCIAL STATEMENTS
December 31, 2000 and 1999
(6) UNIT OPTION PLAN (continued)
The status of the plan was as follows at December 31, 2000 and for the
year then ended:
Number of Option
Units Price
--------- ------
Outstanding at December 31, 1999 -- $ --
Granted 704,000 0.363
Exercised -- --
-------- ------
Outstanding at December 31, 2000 704,000 0.363
======== ======
Options exercisable at December 31, 2000 -- --
======== ======
Weighted average fair value per unit of options
granted during 2000 $ 0.363
========
The Company applies Accounting Principles Board Opinion No. 25 in
accounting for its unit option plan. Accordingly, no compensation cost has been
recognized in 2000. Had compensation cost been determined on the basis of fair
value pursuant to Statement of Financial Accounting Standards No. 123, the
Company's net loss would not have been materially effected.
The fair value of each option granted is estimated on the grant date
using the Black-Scholes option pricing model. The following assumptions were
made in estimating fair value:
Risk-free interest rate 6.0%
Expected life 10 years
Dividend yield 0.0%
Volatility 0.0%
(7) OPERATING LEASES
The Company is obligated under non-cancelable operating leases for
office space. The escalating monthly payments, including fees and taxes,
required on this lease are currently approximately $9,100 and the leases expire
in February 2003. Total rent expense was approximately $110,000 and $13,000
during the years ended December 31, 2000 and 1999, respectively. Future minimum
lease payments under these leases are as follows:
Year Ending
December 31
- -----------
2002 $146,828
2003 150,929
2004 92,422
--------
Total future minimum lease payments $390,179
========
9
U.S. MONOLITHICS, L.L.C.
NOTES TO FINANCIAL STATEMENTS
December 31, 2000 and 1999
(8) SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest for the years ended December 31, 2000 and 1999,
was approximately $52,000 and $5,000, respectively.
The Company acquired approximately $1,136,000 and $82,000 in property
through capital lease obligations during the years ended December 31, 2000 and
1999, respectively.
(10) CONCENTRATIONS
Cash Deposits
The Company maintains its cash in bank deposit accounts which, at times,
may exceed federally insured limits. The Company has not experienced any losses
in such accounts. The Company believes it is not exposed to any significant
credit risk on cash balances. At December 31, 2000, the Company had no uninsured
bank balances.
Major customers
During the year ended December 31, 2000, two customers each comprised
10% or more of the Company's total sales. Sales to these customers represented
approximately 99% of total sales for the year. Accounts receivable due from
these major customers at December 31, 2000 totaled approximately $48,000.
Major Suppliers
During the year ended December 31, 2000, two suppliers each comprised
more than 10% of the Company's total purchases. Purchases from those suppliers
represented approximately 19% and 11% of total purchases for the year ended
December 31, 2000.
10