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)
<Table>
<Caption>
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
============ ============ ============ ============
</Table>
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)
<Table>
<Caption>
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
============ ============
</Table>
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)
<Table>
<Caption>
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
============ ============
</Table>
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):
<Table>
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
============
</Table>
(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):
<Table>
<Caption>
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)
</Table>
(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):
<Table>
<Caption>
For the For the
Year Nine Months
Ended Ended
June 30, March 31,
2002 2003
---------------- ------------------
Interest expense......................................... 157 676
</Table>
(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.