UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------
FORM 8-K/A
----------------------------
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
April 30, 2001 0-7928
- ------------------------------------------------ ------------------------
Date of Report (Date of earliest event reported) (Commission File Number)
COMTECH TELECOMMUNICATIONS CORP.
(Exact name of registrant as specified in its charter)
Delaware 11-2139466
- ------------------------------------------------ -----------------------
(State or other jurisdiction of incorporation or (I.R.S. Employer )
organization) Identification Number
105 Baylis Road, Melville, NY 11747
---------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(631)777-8900
----------------------------------------------------
(Registrant's telephone number, including area code)
1
ITEM 2. ACQUISITION OF ASSETS.
This Amendment to Form 8-K filed on May 14, 2001 is being submitted to
provide the financial statements required in connection with the acquisition by
Comtech Telecommunications Corp. (the "Company") of the commercial satellite,
medical and government RF microwave amplifier product lines of MPD Technologies,
Inc., which was acquired by Ericsson Amplifier Technologies, Inc, in November
2000.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Business Acquired
Attached is the audited balance sheet of Ericsson Amplifier
Technologies, Inc.'s Non-Wireless Division as of December 31, 2000, and
the related statements of income and cash flows for the year then
ended.
(b) Pro Forma Financial Information
Attached is the unaudited pro forma financial information and notes to
the unaudited pro forma financial information of the Company for the
nine months ended April 30, 2001 and the year ended July 31, 2000.
(c) Exhibits
The following exhibit is filed as part of this report pursuant to Item
601 of Regulation S-K:
Exhibit
Number Description
23.1 Consent of Arthur Andersen LLP filed herewith.
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
Comtech Telecommunications Corp. has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
COMTECH TELECOMMUNICATIONS CORP.
By:
-------------------------------
Name: J. Preston Windus, Jr.
Title: Senior Vice President
and Chief Financial Officer
Date: July 13, 2001
3
Index to Financial Statements
Report of Independent Public Accountants.....................................F-1
Balance Sheet................................................................F-2
Statement of Income..........................................................F-3
Statement of Cash Flows......................................................F-4
Notes to the Financial Statements......................................F-5 - F-9
4
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
Comtech Telecommunications Corp.:
We have audited the accompanying balance sheet of Ericsson Amplifier
Technologies, Inc. - Non-Wireless Division (a Delaware corporation), as of
December 31, 2000, and the related statements of income and cash flows for the
year 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 audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. 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 audit provides 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 Ericsson Amplifier
Technologies, Inc. - Non-Wireless Division as of December 31, 2000, and the
results of its operations and its cash flows for the year then ended in
conformity with accounting principles generally accepted in the United States.
/s/ ARTHUR ANDERSEN LLP
Melville, New York
June 4, 2001
F-1
ERICSSON AMPLIFIER TECHNOLOGIES, INC. -
NON-WIRELESS DIVISION
BALANCE SHEET
AS OF DECEMBER 31, 2000
(in thousands)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,735
Accounts receivable, net of allowance for doubtful accounts of $90 6,204
Inventories, net 3,089
Prepaid expenses and other current assets 166
--------
Total current assets 11,194
MACHINERY AND EQUIPMENT, net 391
--------
$ 11,585
========
LIABILITIES AND INVESTMENT BY PARENT IN EQUITY
CURRENT LIABILITIES:
Accounts payable $ 3,670
Accrued liabilities 2,566
--------
Total current liabilities 6,236
COMMITMENTS AND CONTINGENCIES (Note 5)
INVESTMENT BY PARENT IN EQUITY OF NON-WIRELESS DIVISION 5,349
--------
$ 11,585
========
The accompanying notes are an integral part of this balance sheet.
F-2
ERICSSON AMPLIFIER TECHNOLOGIES, INC. -
NON-WIRELESS DIVISION
STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 2000
(in thousands)
NET SALES $ 30,921
COST OF SALES 25,769
--------
Gross profit 5,152
OPERATING EXPENSES (Note 1):
General and administrative 1,750
Selling 1,510
Research and development 134
--------
Total operating expenses 3,394
Operating income 1,758
INTEREST EXPENSE (Note 1) 618
--------
Income before provision for income taxes 1,140
PROVISION FOR INCOME TAXES (Note 2) 456
--------
Net income $ 684
========
The accompanying notes are an integral part of this statement.
F-3
ERICSSON AMPLIFIER TECHNOLOGIES, INC. -
NON-WIRELESS DIVISION
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2000
(in thousands)
OPERATING ACTIVITIES:
Net income $ 684
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 319
Provision for doubtful accounts 75
Provision for income taxes 456
Changes in operating assets and liabilities:
Accounts receivable (483)
Inventories 6,200
Prepaid expenses and other assets 82
Accounts payable and accrued liabilities (88)
-------
Net cash provided by operating activities 7,245
-------
INVESTING ACTIVITIES:
Purchases of property, plant and equipment (289)
-------
Net cash used in investing activities (289)
-------
FINANCING ACTIVITIES:
Net repayments on revolving credit loans (3,631)
Principal payments of long-term debt (1,880)
-------
Net cash used in financing activities (5,511)
-------
INCREASE IN CASH AND CASH EQUIVALENTS 1,445
CASH AND CASH EQUIVALENTS, beginning of year 290
-------
CASH AND CASH EQUIVALENTS, end of year $ 1,735
=======
SUPPLEMENTAL DATA:
Cash paid for income taxes $ 12
=======
The accompanying notes are an integral part of this statement.
F-4
ERICSSON AMPLIFIER TECHNOLOGIES, INC. -
NON-WIRELESS DIVISION
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2000
(in thousands)
(a) DESCRIPTION AND ORGANIZATION OF BUSINESS
Basis of Presentation
The accompanying financial statements represent the historical assets,
liabilities and operating results of the non-wireless division of Ericsson
Amplifier Technologies, Inc. or "Ericsson" (formerly Microwave Power Devices,
Inc. or "MPD", which was acquired by Ericsson in November 2000). The financial
statements were prepared as if the non-wireless division had operated as an
independent stand-alone entity for all of 2000. Certain allocations of operating
expenses, interest expense (related to a line of credit financing the operations
of the non-wireless division before the related principal was repaid prior to
year-end), assets and liabilities were made based upon ratable allocation of
Ericsson's combined sales from both its wireless and non-wireless divisions.
Furthermore, certain of Ericsson's assets and liabilities presented herein were
based upon either specific identification or ratable allocation based on the
non-wireless division's historical results of operations.
Organization of Business
On March 2, 2001, Comtech Telecommunications Corp., agreed to purchase the
commercial satellite, medical and government RF Microwave Amplifier product
lines (collectively the "Non-Wireless Division") from Ericsson, which had
planned to sell the Non-Wireless Division as part of its plan of acquisition of
MPD. Prior to Ericsson's purchase, both the wireless and non-wireless divisions
were separate operating, reported segments of MPD.
Nature of Business
The Ericsson Non-Wireless Division (herein after referred to as the "Division"),
headquartered in Hauppauge, New York, is primarily engaged in the engineering
and manufacturing of radio frequency and microwave power amplifiers for
commercial and military applications. The Division currently markets its
products to the satellite communications and medical industries, within both the
U.S. and foreign military marketplaces.
(b) SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents
The Division considers all highly liquid investments with an original maturity
of three months or less to be cash equivalents.
Inventories
Inventories are stated at the lower of cost (using the first-in, first-out cost
method) or net realizable value. Work-in-process associated with fixed-price
long-term contracts is valued at the sum of the direct labor, direct material,
other direct costs and related overhead costs incurred under each contract, less
amounts charged to cost of sales.
(continued)
F-5
ERICSSON AMPLIFIER TECHNOLOGIES, INC. -
NON-WIRELESS DIVISION
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2000
(in thousands)
Progress Payments
Progress payments received from customers are offset against inventories
associated with the contracts for which the payments were received (Note 3).
Under contractual arrangements by which progress payments are received from the
U.S. Government, the U.S. Government has a lien title interest in the
inventories identified with related contracts.
Long-Term Contracts
All contract-related assets and liabilities are classified as current, even
though certain of these contract-related assets and liabilities may not be
realized within one year. This practice is reflective of the Division's
operating cycle as a contractor under long-term contracts.
Machinery and Equipment
Machinery and equipment is stated at cost less accumulated depreciation and
amortization. Depreciation and amortization are provided using the straight-line
method over an estimated useful life of 3 to 7 years.
Concentration of Credit Risk
Financial instruments, which subject the Division to concentrations of credit
risk, consist primarily of cash and cash equivalents and trade accounts
receivable. The Division performs ongoing credit evaluations, generally does not
require collateral, and establishes an allowance for doubtful accounts, if
necessary, based upon factors surrounding the credit risk of customers,
historical trends and other information.
For the year ended December 31, 2000, 3 customers accounted for 24%, 21% and 17%
of total revenue. As of December 31, 2000, 3 customers accounted for 17%, 17%
and 12% of total accounts receivable.
Long-Lived Assets
The Division follows the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of." This statement establishes
financial accounting and reporting standards for the impairment of long-lived
assets, certain identifiable intangibles, and goodwill related to those assets
to be held and used, and for long-lived assets and certain identifiable
intangibles to be disposed of. Management has performed a review of the
Division's long-lived assets and has determined that no impairment of the
respective carrying values has occurred as of December 31, 2000.
(continued)
F-6
ERICSSON AMPLIFIER TECHNOLOGIES, INC. -
NON-WIRELESS DIVISION
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2000
(in thousands)
Revenue Recognition
Revenue and profits on fixed-price long-term and commercial contracts are
recognized using the unit of delivery method. Profits expected to be realized on
contracts are based on total sales value as related to estimated costs at
completion. These estimates are reviewed and revised periodically throughout the
lives of the contracts, and adjustments to profits resulting from such revisions
are made cumulative to the date of the change. Estimated losses on long-term
contracts-in-progress are recorded in the period in which such losses become
known.
During the fourth quarter of 2000, the Division adopted the provisions of Staff
Accounting Bulletin ("SAB") No. 101 "Revenue Recognition", which did not have
any effect on how the Division recognizes its revenue.
Research and Development
Research and development costs are expensed as incurred. Such costs amounted to
approximately $134 for the year ended December 31, 2000. Certain other
development costs are incurred in connection with long-term contracts pursuant
to which these costs are financed under related contracts. These costs are
included in cost of sales and the related revenues are included in net sales in
the accompanying statement of income.
Derivative Instruments
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." The Statement
establishes accounting and reporting standards for derivative instruments
(including certain derivative instruments embedded in other contracts) and for
hedging activities. SFAS No. 133 is effective for all fiscal quarters beginning
after June 15, 2000 (as amended by SFAS No. 137) and will not require
retroactive restatement of prior-period financial statements. The Division
currently does not use derivative instruments or engage in hedging activities
and, accordingly, its provisions did not have any impact on its financial
statements when it was adopted on January 1, 2001.
Comprehensive Income
The Division observes the provisions of SFAS No. 130, "Reporting Comprehensive
Income", which requires companies to report all changes in equity during a
period, except those resulting from investment by owners and distribution to
owners, in a financial statement for the period in which they are recognized.
Comprehensive income is the total of net income and all other non-owner changes
in equity (or other comprehensive income) such as unrealized gains/losses on
securities available-for-sale, foreign currency translation adjustments and
minimum pension liability adjustments. Comprehensive and other comprehensive
income must be reported on the face of the annual financial statements. The
Division's comprehensive income is the same as its net income presented in the
statement of income.
(continued)
F-7
ERICSSON AMPLIFIER TECHNOLOGIES, INC. -
NON-WIRELESS DIVISION
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2000
(in thousands)
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States 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 revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Income Taxes
The Division does not have a separate corporate legal existence apart from
Ericsson. Accordingly, the accompanying provision for income taxes reflects the
effects of historical Federal and state statutory rates on the Division's
operating income. Furthermore, future income tax effects have not been provided
for in the accompanying balance sheet.
3. INVENTORIES, NET
Inventories, net consist of the following:
Raw materials $ 4,285
Work-in-process 1,513
Unliquidated progress payments (174)
-------
5,624
Less: reserves (2,535)
-------
$ 3,089
=======
4. ACCRUED LIABILITIES
Accrued liabilities consist of the following:
Accrued payroll, benefits and termination costs $ 1,036
Accrued losses on long-term contracts 690
Customer overpayments 329
Other 511
-------
$ 2,566
=======
5. COMMITMENTS AND CONTINGENCIES
Operating Leases
Rent expense, including amounts charged to inventory, as part of overhead
allocations and the rental of machinery and equipment (on a month-to-month
basis) was $263 for the year ended December 31, 2000.
(continued)
F-8
ERICSSON AMPLIFIER TECHNOLOGIES, INC. -
NON-WIRELESS DIVISION
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2000
(in thousands)
Litigation
In the normal course of business, the Division is a party to various claims
and/or litigation. Management believes that the settlement of all such claims
and/or litigation, considered in the aggregate, will not have a material adverse
effect on the Division's financial position and results of operations.
Letters of Credit
As of December 31, 2000, the Division had outstanding letters of credit
aggregating $1,127.
F-9
Comtech Telecommunications Corp.
Pro Forma Combined Financial Statements
On April 30, 2001, the Company acquired the commercial satellite,
medical and government RF microwave amplifier product lines of MPD
Technologies, Inc. ("MPD"), the Non-Wireless Division of Ericsson
Amplifier Technologies, Inc., for an adjusted sales price of $12.9
million. The original sales price of $11.0 million was adjusted
subsequent to the acquisition date, as per the terms of the agreement,
to reflect the change in the inventory amount actually acquired as
compared to the inventory amount included in the agreement. Also
included in the adjusted purchase price are the acquisition costs
associated with the transaction. The acquisition of MPD was accounted
for under the purchase method of accounting.
The attached unaudited pro forma combined statements of operations for
the nine months ended April 30, 2001 and the year ended July 31, 2000
give effect to the purchase by the Company of MPD. The unaudited pro
forma combined statements of operations for the nine months ended April
30, 2001 combines the Company's historical results for the nine months
ended April 30, 2001 and MPD's historical results for the nine months
ended April 30, 2001, giving effect to the acquisition as if it had
occurred as of August 1, 2000. The unaudited pro forma combined
statement of operations for the year ended July 31, 2000 combines the
Company's historical results for the year ended July 31, 2000 and MPD's
historical results for the year ended July 31, 2000, giving effect to
the acquisition as if it had occurred as of August 1, 1999.
The unaudited pro forma combined financial statements were prepared
utilizing the accounting principles of the respective entities as
outlined in each entity's historical financial statements. The pro forma
adjustments are based upon available information and certain assumptions
that the Company believes are reasonable under the circumstances. The
unaudited combined financial statements do not purport to be indicative
of the operating results or financial position that would have been
achieved had the acquisition taken place on the dates indicated or the
results that may be obtained in the future. These unaudited pro forma
statements should be read in conjunction with the notes to the unaudited
pro forma financial statements.
Contents
Unaudited Pro Forma Combined Statement of Operations for the
Nine Months Ended April 30, 2001....................................F 11
Unaudited Pro Forma Combined Statement of Operations for the
Year Ended July 31, 2000............................................F-12
Notes to Unaudited Pro Forma Combined Financial Statements.....F-13-F-14
F-10
Comtech Telecommunications Corp.
Unaudited Pro Forma Combined Statement of Operations
For the nine months ended April 30, 2001
(in thousands, except per share data)
Unaudited Unaudited
Comtech Tel. Pro Forma Pro Forma
Corp. MPD Adjustments Combined
------------ --------- ----------- ---------
Net sales $ 105,279 22,087 (4,533)(a) 122,833
Operating costs and expenses:
Cost of sales 67,172 17,943 (5,089)(b) 80,026
Selling, general and administrative 18,030 2,111 116(c) 20,257
Research and development 7,651 180 -- 7,831
Amortization of intangibles 1,759 -- 636(g) 2,395
--------- --------- --------- ---------
Total operating costs and expenses 94,612 20,234 (4,337) 110,509
--------- --------- --------- ---------
Operating income (loss) 10,667 1,853 (196) 12,324
Other expense (income):
Interest expense 2,836 452 550(d)(h) 3,838
Interest income (1,968) -- -- (1,968)
Other, net 864 -- -- 864
--------- --------- --------- ---------
Income (loss) before provision for
income taxes 8,935 1,401 (746) 9,590
Provision (benefit) for income taxes 3,529 560 (295)(e)(f) 3,794
--------- --------- --------- ---------
Net income (loss) $ 5,406 841 (451) 5,796
========= ========= ========= =========
Net income per share:
Basic $ 0.74 0.79
========= =========
Diluted $ 0.69 0.74
========= =========
Weighted average number of common
shares outstanding - basic 7,324 7,324
Potential dilutive common shares 561 561
--------- ---------
Weighted average number of common
and common equivalent shares
outstanding assuming dilution -
diluted 7,885 7,885
========= =========
The accompanying notes are an integral part of these unaudited
pro forma combined financial statements.
F-11
Comtech Telecommunications Corp.
Unaudited Pro Forma Combined Statement of Operations
For the year ended July 31, 2000
(in thousands, except per share data)
Comtech Tel. Pro Forma Pro Forma
Corp. MPD Adjustments Combined
------------ ------- ----------- ---------
Net sales $ 66,444 28,938 (6,534)(a) 88,848
Operating costs and expenses:
Cost of sales 45,942 27,221 (7,864)(b) 65,299
Selling, general and administrative 12,058 4,154 155(c) 16,367
Research and development 2,644 84 -- 2,728
In-process research and development 10,218 -- -- 10,218
Amortization of intangibles 230 -- 848(g) 1,078
-------- ------- ------ -------
Total operating costs and expenses 71,092 31,459 (6,861) 95,690
-------- ------- ------ -------
Operating income (loss) from continuing operations (4,648) (2,521) 327 (6,842)
Other expenses (income):
Interest expense 381 688 668(d)(h) 1,737
Interest income (1,511) -- (1,511)
Other, net 201 -- -- 201
-------- ------- ------ -------
Loss from continuing operations before income taxes (3,719) (3,209) (341) (7,269)
Provision (benefit) for income taxes 85 (1,284) (90)(e)(f) (1,289)
-------- ------- ------ -------
Loss from continuing operations (3,804) (1,925) (251) (5,980)
Discontinued operations :
Loss from operations of discontinued segment (137) -- -- (137)
Loss on disposal of segment -- -- -- --
-------- ------- ------ -------
Net loss $ (3,941) (1,925) (251) (6,117)
======== ======= ====== =======
Basic loss per share:
Loss from continuing operations $ (0.67) (1.08)
Loss from discontinued operations (0.02) (0.02)
-------- -------
Basic loss per share $ (0.69) (1.10)
======== =======
Diluted loss per share:
Loss from continuing operations $ (0.67) (1.08)
Loss from discontinued operations (0.02) (0.02)
-------- -------
Diluted loss per share $ (0.69) (1.10)
======== =======
Weighted average number of common shares
outstanding-basic 5,663 5,663
Potential dilutive common shares -- --
-------- -------
Weighted average number of common and
common equivalent shares outstanding assuming
dilution - diluted 5,663 5,663
======== =======
The accompanying notes are an integral part of these unaudited
pro forma combined financial statements.
F-12
Comtech Telecommunications Corp.
Notes to Unaudited Pro Forma Combined Financial Statements
For the nine months ended April 30, 2001 and the year ended July 31, 2000
(in thousands)
A. Basis of Presentation
The accompanying unaudited pro forma financial statements present the
financial position and results of operations of Comtech Telecommunications
Corp. and Subsidiaries (the "Company") giving effect to the acquisition by
the Company of the commercial satellite, medical and government RF
microwave amplifier product lines of MPD Technologies, Inc. ("MPD") on
April 30, 2001, pursuant to an Asset Purchase Agreement dated as of March
2, 2001 between MPD and the Company (the "Agreement). The acquisition of
MPD by the Company was accounted for under the purchase method of
accounting and, accordingly, the purchase price was allocated to the
assets and liabilities of MPD based on their fair values at April 30,
2001.
Throughout the period covered by the financial statements, MPD was
conducted and accounted for as the Non-Wireless Division of Ericsson
Amplifier Technologies, Inc. ("Ericsson"). Historically, separate
financial statements were not prepared for MPD. The audited MPD financial
statements were derived from the historical accounting records of
Ericsson, and do not reflect the impact of the Agreement.
Pursuant to the Agreement, the Company acquired substantially all of the
assets and liabilities of MPD. The assets and liabilities not acquired
relate to the contracts of MPD that are excluded from the agreement
("Excluded Contracts"). The preparation of the unaudited pro forma
financial statements required certain carve-out adjustments to derive the
total revenues, expenses, assets and liabilities of MPD. Such adjustments
were not reflected in the books and accounting records of MPD but are
necessary to fairly reflect the actual historical results of the MPD
business acquired. The unaudited pro forma financial statements include
all costs directly associated with the MPD business acquired such as cost
of goods sold, general and administrative, selling, research and
development and interest expense.
All of the allocations and estimates in the MPD financial statements are
based on assumptions that Ericsson and MPD management believes are
reasonable under the circumstances. The audited MPD financial statements
are not necessarily indicative of the financial position or results of
operations and cash flows of MPD in the future or indicative of the
results that would have been reported.
(continued)
F-13
Comtech Telecommunications Corp.
Notes to Unaudited Pro Forma Combined Financial Statements
For the nine months ended April 30, 2001 and the year ended July 31, 2000
(in thousands)
(B) Purchase Price Allocation
Reflects acquisition of MPD for $12.9 million, resulting in an excess of
the purchase price over the fair value of the net assets acquired
(goodwill and identifiable intangibles) of $10,063. The purchase price
allocation is summarized as follows:
Cash paid by Comtech $ 1,986
Debt issued 10,000
Estimated transaction expenses 890
--------
Adjusted purchase price $ 12,876
========
The adjusted purchase price has been allocated as follows:
Fair value of net assets acquired $ 2,813
Fair value of existing technology 1,800
Fair value of customer base 1,800
Excess of the purchase price over the fair value of the
net assets and identifiable intangibles acquired 6,463
--------------
$ 12,876
==============
(C) Unaudited Pro Forma Adjustments
A description of the unaudited pro forma adjustments included in the
unaudited pro forma combined statements of operations are as follows:
(a) Reflects actual net sales of the Excluded Contracts.
(b) Reflects actual cost of sales of the Excluded Contracts.
(c) Reflects additional depreciation expense on fixed assets acquired by the
Company.
(d) Reflects an allocation of interest expense to the Excluded Contracts.
(e) Reflects the tax effect of the Excluded Contracts using the Non-Wireless
Division's historical effective tax rate.
(f) Reflects the income tax effect of increased interest, depreciation, and
amortization expense at the effective tax rate of 39.5% for the nine
months ended April 30, 2001 and 37.5% for the Company's year ended July
31, 2000.
(g) Represents the amortization of goodwill and identifiable intangible assets
on a straight-line basis computed as follows:
o Goodwill, totaling $6,463, amortized over 20 years.
o Existing technology, totaling $1,800, amortized over 6 years.
o Customer base, totaling $1,800, amortized over 8 years
(h) Reflects interest expense resulting from the issuance of debt to finance
the acquisition. The interest rate on new debt of $10,000 is 8.50%.
F-14