**SECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C.  20549**

 

**FORM 10-Q/A**

**AmendmentNo. 1**

 

| **(Mark One)**                                                                                                                                                                                                                                                   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                             |   |   |
| **ý****             ****QUARTERLY REPORT  PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934**                                                                         |
|                                                                                                                                                                                                                                                             |   |   |
| **For the quarterly period  ended:        DECEMBER 31, 2002**                                                                                                                                                            |
|                                                                                                                                                                                                                                                             |   |   |
| **o****             ****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:  1-8101**                                                                                                                                                                                                                         |
|                                                                                                                                                                                                                                                             |   |   |
| Exact Name of Registrant as  Specified in Its Charter:                                                                                                                                                                                                           |   | **SMTEK INTERNATIONAL, INC.** |
|                                                                                                                                                                                                                                                             |   |
|                                                                                                                                                                                                                                                             |   |   |
| **DELAWARE**                                                                                                                                                                                                                                                     |   |   | **33-0213512** |   |
| State or  Other Jurisdiction of  Incorporation or Organization:                                                                                                                                                                                                  |   |   | I.R.S. Employer  Identification No. |   |
|                                                                                                                                                                                                                                                             |   |   |
| Address of  Principal Executive Offices:                                                                                                                                                                                                                         |   | **200 Science Drive  Moorpark, CA  93021** |
|                                                                                                                                                                                                                                                             |   |   |
| Registrant’s  Telephone Number:                                                                                                                                                                                                                             |   | **(805) 532-2800** |
|                                                                                                                                                                                                                                                                  |  |  |  |  |  |  |  |  |  |

 

Indicate by check mark whether the registrant:  (1) has filed all reports required to befiled by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90days.        Yes ý  No o

 

Indicate by check mark whether the registrant is an accelerated filer(as defined in Rule 12b-2 of the Securities Exchange Act of1934).  Yes o No ý

 

The registrant had 2,284,343 shares of common stock outstanding as ofFebruary 7, 2003.

 

 

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**ExplanatoryNote**

 

The financialstatements included in this quarterly report on Form 10Q/A (Amendment No. 1)have been restated to reflect the estimated fair value of restricted equitysecurities received by the Company as part of a settlement agreement enteredinto between the Company and a prior customer on December 17, 2002 as furtherdescribed in Note 2 to the financial statements herein.

 

This Amendmentincorporates certain revisions to historical financial data and relateddescriptions but is not intended to update other information presented in thisquarterly report as originally filed, except where noted.  In this regard, note that the certificationsof the Company’s officers included as exhibits hereto and the Company’sdisclosure under Part I, Item 4, Controls and Procedures, have been updated.

 

Theinformation contained in this amendment is subject to update and supplement bythe Company’s reports filed with the Securities and Exchange Commission forperiods subsequent to the date of the original filing of our quarterly reporton Form 10-Q.

 

**PART I.  FINANCIAL INFORMATION**

 

**ITEM 1.  FINANCIAL STATEMENTS**

 

The financialstatements included in this quarterly report on Form 10Q/A (Amendment No. 1)have been restated to reflect the estimated fair value of restricted equitysecurities received by the Company as part of a settlement agreement enteredinto between the Company and a prior customer on December 17, 2002 as furtherdescribed in Note 2 to the financial statements herein.

 

2

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**SMTEKINTERNATIONAL, INC. AND SUBSIDIARIES**

**CONDENSEDCONSOLIDATED BALANCE SHEETS (UNAUDITED)**

**(Inthousands except share amounts)**

 
|                                                                                                                                  |   | **December  31,  2002** |   | **June 30,  2002** |   |
|---------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------|--------|--------------------|--------|
|                                                                                                                                  |   |                    |   |               |   |
| **ASSETS**                                                                                                                            |   |                    |   |               |   |
| Current assets:                                                                                                                       |   |                    |   |               |   |
| Cash and cash equivalents                                                                                                             |   | $                       | 628    |               | $      | 816 |   |
| Accounts receivable, less allowance for  doubtful accounts of $175 and $380, as of December 31, 2002 and June 30,  2002, respectively |   | 12,155                  |   | 12,351             |   |
| Inventories, net                                                                                                                      |   | 10,082                  |   | 11,223             |   |
| Prepaid expenses                                                                                                                      |   | 1,061                   |   | 863                |   |
| Total current assets                                                                                                                  |   | 23,926                  |   | 25,253             |   |
|                                                                                                                                  |   |                    |   |               |   |
| Property, equipment and improvements, net  of accumulated depreciation and amortization                                               |   | 8,115                   |   | 8,809              |   |
| Other assets                                                                                                                          |   | 666                     |   | 772                |   |
|                                                                                                                                  |   | $                       | 32,707 |               | $      | 34,834 |   |
| **LIABILITIES AND STOCKHOLDERS’ EQUITY**                                                                                         |   |                    |   |               |   |
| Current liabilities:                                                                                                                  |   |                    |   |               |   |
| Current portion of bank lines of credit  payable                                                                                      |   | $                       | 8,131  |               | $      | 3,223 |   |
| Current portion of long-term debt                                                                                                     |   | 3,235                   |   | 2,527              |   |
| Accounts payable                                                                                                                      |   | 8,343                   |   | 8,652              |   |
| Other accrued liabilities                                                                                                             |   | 7,099                   |   | 4,936              |   |
| Total current liabilities                                                                                                             |   | 26,808                  |   | 19,338             |   |
| Long-term liabilities:                                                                                                                |   |                    |   |               |   |
| Long-term bank lines of credit payable                                                                                                |   | —                  |   | 4,005              |   |
| Long-term debt                                                                                                                        |   | 4,618                   |   | 6,066              |   |
| Other long-term liabilities                                                                                                           |   | 710                     |   | —             |   |
| Total long-term liabilities                                                                                                           |   | 5,328                   |   | 10,071             |   |
| Commitments and contingencies                                                                                                         |   |                    |   |               |   |
|                                                                                                                                  |   |                    |   |               |   |
| Stockholders’ equity:                                                                                                            |   |                    |   |               |   |
| Preferred stock, $1 par value;  1,000,000 shares authorized; no shares  issued or outstanding                                    |   | —                  |   | —             |   |
| Common stock, $.01 par value; 3,750,000  shares authorized; 2,284,343 issued and outstanding at December 31, 2002 and  June 30, 2002  |   | 23                      |   | 23                 |   |
| Additional paid-in capital                                                                                                            |   | 37,028                  |   | 37,028             |   |
| Accumulated deficit                                                                                                                   |   | (36,361                 | )      | (31,616            | )      |
| Accumulated other comprehensive loss                                                                                                  |   | (119                    | )      | (10                | )      |
| Total stockholders’ equity                                                                                                       |   | 571                     |   | 5,425              |   |
|                                                                                                                                  |   | $                       | 32,707 |               | $      | 34,834 |   |

 

See accompanying notes to unaudited condensedconsolidated financial statements.

 

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** **

**SMTEKINTERNATIONAL, INC. AND SUBSIDIARIES**

**CONDENSEDCONSOLIDATED STATEMENTS OF OPERATIONS**

**ANDOTHER COMPREHENSIVE INCOME (LOSS) (Unaudited)**

**(Inthousands except per share amounts)**

 
|                                                       |   | **Three  Months Ended  December 31,** |   | **Six Months  Ended  December 31,** |   |
|------------------------------------------------------------|--------|---------------------------------------|--------|-------------------------------------|--------|
|                                                       |   | **2002**                              |   | **2001**                            |   | **2002** |   | **2001** |   |
| Revenues                                                   |   | $                                     | 17,299 |                                | $      | 19,594 |   | $ | 38,035 |   | $ | 39,228 |   |
| Cost of goods sold                                         |   | 16,501                                |   | 17,632                              |   | 35,540 |   | 35,262 |   |
| Gross profit                                               |   | 798                                   |   | 1,962                               |   | 2,495 |   | 3,966 |   |
| Operating expenses:                                        |   |                                  |   |                                |   |   |   |   |   |
| Administrative and selling                                 |   | 4,021                                 |   | 2,438                               |   | 6,190 |   | 4,146 |   |
| Goodwill amortization                                      |   | —                                |   | 9                                   |   | — |   | 19 |   |
| Total operating expenses                                   |   | 4,021                                 |   | 2,447                               |   | 6,190 |   | 4,165 |   |
| Operating loss                                             |   | (3,223                                | )      | (485                                | )      | (3,695 | ) | (199 | ) |
| Non-operating income (expense):                            |   |                                  |   |                                |   |   |   |   |   |
| Interest expense, net                                      |   | (330                                  | )      | (291                                | )      | (654 | ) | (563 | ) |
| Other income, net                                          |   | 12                                    |   | 26                                  |   | 30 |   | 54 |   |
| Total non-operating expense, net                           |   | (318                                  | )      | (265                                | )      | (624 | ) | (509 | ) |
| Loss from operations before income taxes                   |   | (3,541                                | )      | (750                                | )      | (4,319 | ) | (708 | ) |
| Income tax provision                                       |   | 1                                     |   | 12                                  |   | 6 |   | 27 |   |
| Loss from operations                                       |   | (3,542                                | )      | (762                                | )      | (4,325 | ) | (735 | ) |
|                                                       |   |                                  |   |                                |   |   |   |   |   |
| Change in accounting principle, net of  taxes              |   | —                                |   | —                              |   | (420 | ) | — |   |
| Net loss                                                   |   | $                                     | (3,542 | )                                   | $      | (762 | ) | $ | (4,745 | ) | $ | (735 | ) |
| Other comprehensive income (loss):                         |   |                                  |   |                                |   |   |   |   |   |
| Foreign currency translation adjustments                   |   | (2                                    | )      | 2                                   |   | (72 | ) | 44 |   |
| Change in unrealized gain/(loss) on forward  contracts     |   | (20                                   | )      | —                              |   | (37 | ) | — |   |
| Comprehensive loss                                         |   | $                                     | (3,564 | )                                   | $      | (760 | ) | $ | (4,854 | ) | $ | (691 | ) |
|                                                       |   |                                  |   |                                |   |   |   |   |   |
| Basic and diluted loss per share:                          |   |                                  |   |                                |   |   |   |   |   |
| Loss from operations                                       |   | $                                     | (1.55  | )                                   | $      | (0.33 | ) | $ | (1.90 | ) | $ | (0.32 | ) |
| Change in accounting principle                             |   | —                                |   | —                              |   | (0.18 | ) | — |   |
| Basic and diluted loss per share                           |   | $                                     | (1.55  | )                                   | $      | (0.33 | ) | $ | (2.08 | ) | $ | (0.32 | ) |
|                                                       |   |                                  |   |                                |   |   |   |   |   |
| Shares used in computing basic and diluted  loss per share |   | 2,284                                 |   | 2,284                               |   | 2,284 |   | 2,284 |   |

 

See accompanying notes to unaudited condensedconsolidated financial statements.

 

4

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** **

**SMTEKINTERNATIONAL, INC. AND SUBSIDIARIES**

**CONDENSEDCONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)**

**(Inthousands)**

 
|                                                                                     |   | **Six Months  Ended  December 31,** |   |
|------------------------------------------------------------------------------------------|--------|-------------------------------------|--------|
|                                                                                     |   | **2002**                            |   | **2001** |   |
| Cash flows from operating activities:                                                    |   |                                |   |   |   |
| Net loss                                                                                 |   | $                                   | (4,745 | ) | $ | (735 | ) |
| Adjustments to reconcile net loss to net  cash provided by operating activities:         |   |                                |   |   |   |
| Depreciation and amortization                                                            |   | 1,301                               |   | 1,215 |   |
| Loss on sale of assets                                                                   |   | 6                                   |   | — |   |
| Facility consolidation costs                                                             |   | 1,815                               |   | — |   |
| Restricted equity securities received in  settlement of claims against former customer   |   | (336                                | )      | — |   |
| (Increase) decrease in accounts receivable                                               |   | 440                                 |   | (469 | ) |
| Decrease in costs and estimated earnings in  excess of billings on uncompleted contracts |   | —                              |   | 3,692 |   |
| (Increase) decrease  in inventories                                                 |   | 1,195                               |   | (1,045 | ) |
| Increase (decrease) in accounts payable                                                  |   | (381                                | )      | 515 |   |
| Increase (decrease) in other accrued  liabilities                                        |   | 1,834                               |   | (510 | ) |
| Other, net                                                                               |   | (314                                | )      | (518 | ) |
| Net cash provided by operating activities                                                |   | 815                                 |   | 2,145 |   |
|                                                                                     |   |                                |   |   |   |
| Cash flows from investing activities:                                                    |   |                                |   |   |   |
| Capital expenditures                                                                     |   | (907                                | )      | (2,717 | ) |
| Purchase of Century Thailand, net of cash  received                                      |   | —                              |   | (129 | ) |
| Net cash used in investing activities                                                    |   | (907                                | )      | (2,846 | ) |
|                                                                                     |   |                                |   |   |   |
| Cash flows from financing activities:                                                    |   |                                |   |   |   |
| Proceeds from (payments of) bank lines of  credit                                        |   | 749                                 |   | (60 | ) |
| Proceeds from long-term debt                                                             |   | —                              |   | 2,452 |   |
| Payments of long-term debt                                                               |   | (810                                | )      | (798 | ) |
| Proceeds from the exercise of stock options                                              |   | —                              |   | 7 |   |
| Net cash provided by (used in) financing  activities                                     |   | (61                                 | )      | 1,601 |   |
|                                                                                     |   |                                |   |   |   |
| Effect of exchange rate changes on cash                                                  |   | (35                                 | )      | 5 |   |
| Increase (decrease) in cash and cash  equivalents                                        |   | (188                                | )      | 905 |   |
| Cash and cash equivalents at beginning of  period                                        |   | 816                                 |   | 224 |   |
| Cash and cash equivalents at end of period                                               |   | $                                   | 628    |   | $ | 1,129 |   |
|                                                                                     |   |                                |   |   |   |
| Supplemental cash flow information:                                                      |   |                                |   |   |   |
| Interest paid                                                                            |   | $                                   | 501    |   | $ | 426 |   |
| Income taxes paid                                                                        |   | —                              |   | 40 |   |
| Non-cash investing activities:                                                           |   |                                |   |   |   |
| Other obligations                                                                        |   | —                              |   | 2 |   |

 

See accompanying notes to unaudited condensedconsolidated financial statements.

 

5

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**SMTEKINTERNATIONAL, INC. AND SUBSIDIARIES**

**NOTESTO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**SixMonths Ended December 31, 2002 and 2001**

 

**NOTE 1 – DESCRIPTIONOF BUSINESS AND BASIS OF PRESENTATION**

 

SMTEK International, Inc. (the “Company,” “we,” “us” or “our”) is anelectronics manufacturing services (“EMS”) provider to original equipmentmanufacturers (“OEMs”) primarily in the industrial and instrumentation,medical, telecommunications, security, financial services automation andaerospace and defense industries.  Weprovide integrated solutions to OEMs across the entire product life cycle, fromdesign to manufacturing to end-of-life services, for the worldwidelow-to-medium volume, high complexity segment of the EMS industry.

 

We have seven wholly owned subsidiaries:  SMTEK, Inc. (dba SMTEK Moorpark), located in Moorpark,California; Technetics, Inc. (dba SMTEK San Diego), located in Poway,California (see discussion in the next paragraph); Jolt Technology, Inc. (akaSMTEK Fort Lauderdale), located in Fort Lauderdale, Florida; SMTEK EuropeLimited, located in Craigavon, Northern Ireland; SMTEK New England, located inMarlborough, Massachusetts; SMTEK Santa Clara, located in Santa Clara,California; and SMTEK International Thailand Limited, located in Ayutthya,Thailand.

 

On November 19, 2002, we announced that we are consolidating our Powayfacility into our other California operations in Moorpark and Santa Clara.  This transition is expected to be completedby the quarter ending March 2003.

 

We have experienced and may continue to experience an adverse effect onour operating results and in our financial condition, especially if currenteconomic conditions continue for an extended period of time, despite our costreduction measures and efficiency improvements at our operating facilities.  We arefocused on the consolidation and streamlining of operations so as to reduce ourexcess capacity to better match market conditions.  Recent actions taken and strategies being pursued are as follows:

 

•                       Transitioning the San Diego facility andevaluating further opportunities of consolidation, transition or sale of otherfacilities.

 

•                       Continuing focus on cost reductions related topertinent production levels and reductions in administrative costs.

 

•                       Focusing our marketing efforts in thesolicitation of customers in nonecomically affected industries.

 

We remaindependent on our lines of credit for operations and growth.  Our domestic line of credit agreement is setto mature in September 2003.  We canprovide no assurance that the agreement will be renewed or that any renewal wouldoccur on commercially reasonable terms. We may have to explore alternative financing if the bank does not renewour line of credit.

 

We may requireadditional financing to satisfy our debt obligations.  However, there can be no assurance that we will be able to obtainadditional debt or equity financing when needed, or on acceptable terms.  Any additional debt or equity financing mayinvolve substantial dilution to our stockholders, restrictive covenants or highinterest costs.  The failure to raise neededfunds on sufficiently favorable terms could have a material adverse effect onour business, operating results, and financial condition.

 

Althoughmanagement believes our cash resources, cash from operations and availableborrowing capacity on our working capital lines of credit are

 

6

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sufficient to fund operations,if we cannot refinance the domestic line of credit upon its maturity or findalternative financing/funding of this obligation, there is no assurance that wewill continue as a going concern.

 

All significant intercompany transactions and accounts have beeneliminated in consolidation.  In theopinion of the Company’s management, the accompanying condensed consolidatedfinancial statements reflect all adjustments (consisting of normal recurringaccruals) necessary to present fairly our financial position, results ofoperations and cash flows as of and for the periods presented.

 

We utilize a 52-53 week fiscal year ending on the Friday closest toJune 30, which for fiscal year 2002 fell on June 28, 2002.  In the accompanying  condensed consolidated financial statements,the 2002 fiscal year end is shown as June 30 and the interim period end forboth years is shown as December 31 for clarity of presentation.  The actual interim periods ended on December27, 2002 and December 28, 2001.

 

Certain notes and other information are condensed or omitted from theinterim financial statements presented in this Quarterly Report on Form10-Q.  Therefore, these condensedfinancial statements should be read in conjunction with our 2002 Annual Reporton Form 10-K as filed with the Securities and Exchange Commission on September26, 2002.

 

**NOTE 2 – RESTATEMENTOF FINANCIAL STATEMENTS**

 

The balance sheet at December 31, 2002 and the results of operationsfor the three and six months ended December 31, 2002 included in this quarterlyreport on Form 10-Q/A have been restated to reflect the transaction describedbelow.  The impact of the restatementwas as follows:

 
|                                    |   | **Three  Months Ended  December 31, 2002** |    | **Six Months  Ended  December 31, 2002** |   |
|-----------------------------------------|--------|--------------------------------------------|---------|------------------------------------------|--------|
|                                    |   | **(000’s)**                           |    | **(000’s)**                         |   |
| Administrative and selling expense:     |   |                                       |    |                                     |   |
| As previously reported                  |   | $                                          | 4,357   |                                     | $      | 6,526 |   |
| Adjustment                              |   | (336                                       | )       | (336                                     | )      |
| As restated                             |   | $                                          | 4,021   |                                     | $      | 6,190 |   |
|                                    |   |                                       |    |                                     |   |
| Net loss:                               |   |                                       |    |                                     |   |
| As previously reported                  |   | $                                          | (3,878  | )                                        | $      | (5,081 | ) |
| Adjustment                              |   | 336                                        |    | 336                                      |   |
| As restated                             |   | $                                          | (3,542  | )                                        | $      | (4,745 | ) |
|                                    |   |                                       |    |                                     |   |
| Net loss per share - basic and diluted: |   |                                       |    |                                     |   |
| As previously reported                  |   | $                                          | (1.70   | )                                        | $      | (2.23 | ) |
| Adjustment                              |   | 0.15                                       |    | 0.15                                     |   |
| As restated                             |   | $                                          | (1.55   | )                                        | $      | (2.08 | ) |
|                                    |   |                                       |    |                                     |   |
| Other assets:                           |   |                                       |    |                                     |   |
| As previously reported                  |   | $                                          | 330     |                                     |   |   |
| Adjustment                              |   | 336                                        |    |                                     |   |
| As restated                             |   | $                                          | 666     |                                     |   |   |
|                                    |   |                                       |    |                                     |   |
| Accumulated deficit:                    |   |                                       |    |                                     |   |
| As previously reported                  |   | $                                          | (36,697 | )                                        |   |   |
| Adjustment                              |   | 336                                        |    |                                     |   |
| As restated                             |   | $                                          | (36,361 | )                                        |   |   |
|                                    |   |                                       |    |                                     |   |
| Total stockholders’ equity:        |   |                                       |    |                                     |   |
| As previously reported                  |   | $                                          | 235     |                                     |   |   |
| Adjustment                              |   | 336                                        |    |                                     |   |
| As restated                             |   | $                                          | 571     |                                     |   |   |

 

7

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On December 17, 2002, the Company entered into a settlement agreementwith a former customer.  In full andfinal settlement of all claims by the Company against its former customer, theformer customer paid the Company $25,000 in cash and issued the Company 175,000shares of restricted common stock.  TheCompany’s initial estimate of fair value for such stock was zero due to therestricted nature of the shares. However, upon consultation with a third-partyappraisal firm, the Company has revised its estimate of the fair value of theshares to $336,000 as of the date of settlement.  This bad debt recovery has been reflected as a reduction ofAdministrative and Selling expense in the accompanying financialstatements.  The investment has beenincluded in other noncurrent assets. Once the restriction on the shares has been removed, or the shares havebeen registered under the Securities Exchange Act, their carrying value will be“marked to market” on a quarterly basis.

 

**NOTE 3 – CHANGE INACCOUNTING PRINCIPLE**

 

We adoptedStatement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill andOther Intangible Assets,” as of July 1, 2002. SFAS No. 142 requires that goodwill and intangible assets withindefinite useful lives no longer be amortized, but instead tested for impairment,at least annually, in accordance with the provisions of SFAS No. 142.  SFAS No. 142 also requires that intangibleassets with definite useful lives be amortized over their respective estimateduseful lives to their estimated residual values, and reviewed for impairment inaccordance with SFAS No. 144, “Accounting for the Impairment or Disposal ofLong-Lived Assets.”  In accordance withSFAS No. 142, during the December 2002 quarter we completed our initialassessment of impairment and determined that our goodwill was fully impairedand have recognized an impairment loss of $420,000, net of taxes, in thecondensed consolidated statement of operations as a change in accountingprinciple, effective July 1, 2002.  Theeffect of the change in accounting principle to the quarter ended September 30,2002 is as follows (dollars in thousands except per share amounts):

 
|                                          |   | **Three  months ended  September 30, 2002** |   |
|-----------------------------------------------|--------|---------------------------------------------|--------|
| Net loss as originally reported               |   | $                                           | (783   | ) |
| Change in accounting principle, net of  taxes |   | (420                                        | )      |
| Net loss as restated                          |   | $                                           | (1,203 | ) |
|                                          |   |                                        |   |
| Basic and diluted loss per share:             |   |                                        |   |
| Net loss as originally reported               |   | $                                           | (0.34  | ) |
| Change in accounting principle                |   | (0.18                                       | )      |
| Net loss as restated                          |   | $                                           | (0.52  | ) |

 

8

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Goodwillamortization of $9,000 and $19,000 was recognized in the three and six monthsended December 31, 2001, respectively. Unaudited pro forma results of operations for the three and six monthsended December 31, 2001, as if the change in accounting principle occurred atthe beginning of the period reported, are as follows (dollars in thousands,except for per share amounts):

 
|                             |   | **Three  Months Ended  December 31,** |   | **Six Months  Ended  December 31,** |   |
|----------------------------------|--------|---------------------------------------|--------|-------------------------------------|--------|
|                             |   | **2002**                              |   | **2001**                            |   | **2002** |   | **2001** |   |
|                             |   |                                  |   |                                |   |   |   |   |   |
| Net loss                         |   | $                                     | (3,542 | )                                   | $      | (753 | ) | $ | (4,745 | ) | $ | (716 | ) |
|                             |   |                                  |   |                                |   |   |   |   |   |
| Basic and diluted loss per share |   | $                                     | (1.55  | )                                   | $      | (0.33 | ) | $ | (2.08 | ) | $ | (0.31 | ) |

 

**NOTE 4 – ACQUISITIONOF THE ASSETS OF CENTURY ELECTRONICS MANUFACTURING, INC.**

 

On October 24, 2001, we completed a transaction to purchase certainassets, but not assume any liabilities, of Century Electronics Manufacturing,Inc. (“Century”), an EMS company that filed for bankruptcy.  As part of this transaction, we alsopurchased substantially all of the common stock of Century’s subsidiary in Thailand.  The aggregate purchase price of thistransaction was approximately $3.2 million in cash and was funded by ourexisting bank lines of credit.

 

Specifically, we purchased from Century certain equipment and machineryfor approximately $1.4 million and inventory for approximately $900,000.  We have and will continue to utilize some ofthe purchased assets at our other locations. We negotiated new facility leases in Marlborough, Massachusetts andSanta Clara, California and began operations in Marlborough and Santa Clara inconnection with the purchase of these assets.

 

As part of the Century agreement we purchased the common stock of theCentury subsidiary in Thailand (“Century Thailand”) for approximately$900,000.  The acquisition of theThailand subsidiary provides us with a low cost manufacturing facility inSoutheast Asia.  The acquisition ofCentury Thailand was accounted for using the purchase method of accounting and,accordingly, the statements of condensed consolidated operations include the resultsof the Thailand subsidiary from the date of acquisition.  The assets acquired and liabilities assumedwere recorded at fair value as determined by us based on information currentlyavailable.  A summary of the assetsacquired and the liabilities assumed in the acquisition is as follows (in thousands):

 
| Estimated fair values: |   |   |   |
|------------------------|--------|--------|--------|
| Assets acquired        |   | $      | 1,392  |   |
| Liabilities assumed    |   | 476    |   |
|                   |   |   |   |
| Purchase price         |   | $      | 916    |   |
| Less cash received     |   | 787    |   |
| Net cash paid          |   | $      | 129    |   |

 

Unaudited pro forma results of operations for the three and six monthsended December 31, 2001, as if the acquisition of the Thailand subsidiary hadoccurred at the beginning of the period reported, follow (dollars inthousands).  The unaudited pro formaresults are not necessarily indicative of

 

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the results which would haveoccurred if the business combination had occurred on the date indicated:

 
|              |   | **Three  Months Ended  December 31, 2001** |   | **Six Months  Ended  December 31, 2001** |   |
|-------------------|--------|--------------------------------------------|--------|------------------------------------------|--------|
|              |   |                                       |   |                                     |   |
| Revenue           |   | $                                          | 19,608 |                                     | $      | 40,548 |   |
|              |   |                                       |   |                                     |   |
| Net loss          |   | $                                          | (788   | )                                        | $      | (672 | ) |
|              |   |                                       |   |                                     |   |
| Loss per share:   |   |                                       |   |                                     |   |
| Basic and diluted |   | $                                          | (0.35  | )                                        | $      | (0.29 | ) |

 

**NOTE 5 – EARNINGS PERSHARE**

 

Basic earnings (loss) per share is computed by dividing net income(loss) available to common stockholders by the weighted average number ofcommon shares outstanding during the period. Diluted earnings (loss) per share reflects the potential dilution thatcould occur if securities or other contracts to issue common stock wereexercised or converted into common stock or resulted in the issuance of commonstock that then shared in our earnings (losses).

 

Common stock equivalents used in the determination of diluted earningsper share include the effect, when such effect is dilutive, of our outstandingemployee stock options and the 8-1/2% Convertible Subordinated Debentures(which are convertible into 7,435 shares of common stock at $212.50 per shareof common stock).  The following is asummary of the calculation of basic and diluted earnings per share (dollars inthousands, except per share data):

 
|                                                         |   | **Three  Months Ended  December 31,** |   | **Six Months  Ended  December 31,** |   |
|--------------------------------------------------------------|--------|---------------------------------------|--------|-------------------------------------|--------|
|                                                         |   | **2002**                              |   | **2001**                            |   | **2002** |   | **2001** |   |
|                                                         |   |                                  |   |                                |   |   |   |   |   |
| Net loss                                                     |   | $                                     | (3,542 | )                                   | $      | (762 | ) | $ | (4,745 | ) | $ | (735 | ) |
|                                                         |   |                                  |   |                                |   |   |   |   |   |
| Weighted average shares:                                     |   |                                  |   |                                |   |   |   |   |   |
| Basic weighted average number of common  shares outstanding  |   | 2,284,343                             |   | 2,284,343                           |   | 2,284,343 |   | 2,283,693 |   |
| Dilutive effect of outstanding common stock  equivalents     |   | —                                |   | —                              |   | — |   | — |   |
| Diluted weighed average number of common  shares outstanding |   | 2,284,343                             |   | 2,284,343                           |   | 2,284,343 |   | 2,283,693 |   |
|                                                         |   |                                  |   |                                |   |   |   |   |   |
| Basic and diluted loss per share                             |   | $                                     | (1.55  | )                                   | $      | (0.33 | ) | $ | (2.08 | ) | $ | (0.32 | ) |

 

Because we had a net loss for the three and six months ended December31, 2002, there were no common stock equivalents which had a dilutive effect onearnings per share.  However, if we hadreported net income rather than a loss for the three and six months endedDecember 31, 2002, the additional

 

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diluted shares outstandingwould have been 3,704 and 3,002 for the three and six months ended December 31,2002, respectively.  Further, options topurchase approximately 657,200 of common stock at prices ranging from $1.05 to$10.00 which were outstanding at December 31, 2002, would not have beenincluded in the computation of diluted earnings per share for the three and sixmonths ended December 31, 2002, because the exercise prices of these optionswere greater than the average market price of the common stock.  If we had reported net income rather than aloss for the three and six months ended December 31, 2001, the additionaldiluted shares outstanding would have been 87,213 and 132,497 for the three andsix months ended December 31, 2001, respectively.  Options to purchase approximately 157,800 shares of common stockat prices ranging from $5.80 to $10.00 were outstanding at December 31, 2001,but were not included in the computation of diluted earnings per share for thethree and six months ended December 31, 2001, because the exercise prices ofthese options were greater than the average market price of the common stock.

 

Convertible subordinated debentures aggregating $1,580,000, due in 2008and convertible at a price of $212.50 per share at any time prior to maturity,were outstanding during the three and six months ended December 31, 2002 and2001, but were not included in the computation of diluted earnings per sharebecause the effect would be antidilutive.

 

**NOTE 6 – REVENUERECOGNITION**

 

All of our subsidiaries recognize revenues and cost of sales upon shipmentof products.  We ship products FOBshipping point and accordingly, title and risk of ownership pass to thecustomer upon shipment.

 

Prior to June 30, 2002, the Moorpark facility historically generated asignificant portion of its revenue through long-term contracts with suppliersof electronic components and products. Consequently, this operating unit historically used the percentage ofcompletion method to recognize revenues and cost of sales.  Percentage of completion was determined onthe basis of costs incurred to total estimated costs.  Contract costs include direct material and direct labor costs andthose indirect costs related to the assembly process, such as indirect labor,supplies, tools, repairs and depreciation costs.  Selling and administrative costs were charged to expense asincurred.  In the period in which it wasdetermined that a loss would result from the performance of a contract, theentire amount of the estimated loss was charged to cost of goods sold.  Other changes in contract price andestimates of costs and profits at completion were recognizedprospectively.  The asset “costs andestimated earnings in excess of billings on uncompleted contracts” representedrevenues recognized in excess of amounts billed.

 

During fiscal 2002, our Moorpark facility entered into sales contractsconsistent with our other locations, and as such, recognized revenue on thesenew arrangements upon shipment of products rather than on a percentage ofcompletion method.  As a result, duringmost of fiscal 2002, the Moorpark facility was recognizing revenue uponshipment of product as well as under the percentage of completion method.  Since June 30, 2002, no sales contracts havebeen accounted for using the percentage of completion method of accounting.

 

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**NOTE 7 - INVENTORIES**

 

Inventoriesconsist of the following (in thousands):

 
|              |   | **December  31,  2002** |   | **June 30,  2002** |   |
|-------------------|--------|-------------------------|--------|--------------------|--------|
| Raw materials     |   | $                       | 6,587  |               | $      | 7,553 |   |
| Work in process   |   | 3,288                   |   | 3,174              |   |
| Finished goods    |   | 207                     |   | 496                |   |
| Total inventories |   | $                       | 10,082 |               | $      | 11,223 |   |

 

**Note 8 – PROPERTY,EQUIPMENT AND IMPROVEMENTS**

 

Property, equipment and improvements consist of the following (inthousands):

 
|                                            |   | **December  31,  2002** |   | **June 30,  2002** |   |
|-------------------------------------------------|--------|-------------------------|--------|--------------------|--------|
| Buildings and improvements                      |   | $                       | 4,076  |               | $      | 3,980 |   |
| Plant equipment                                 |   | 17,172                  |   | 16,243             |   |
| Office and other equipment                      |   | 3,091                   |   | 2,941              |   |
| Less accumulated depreciation and  amortization |   | (16,224                 | )      | (14,355            | )      |
| Total property, equipment and improvements      |   | $                       | 8,115  |               | $      | 8,809 |   |

 

**NOTE 9 – CREDITAGREEMENTS**

 

At December 31, 2002, borrowings under our working capital facility forour domestic operating units amounted to $5.2 million.  This credit facility is collateralized byaccounts receivable, inventory and equipment for our domestic operating unitsand matures September 25, 2003.  AtDecember 31, 2002, the weighted average interest rate on the line of credit was4.91%.  The line of credit agreementcontains certain financial covenants, with which we were not in compliance atDecember 31, 2002.  However, the termsof our line of credit have been amended as of February 5, 2003.  Under the new terms, our line of credit isat $8.5 million, bears interest at either the bank’s prime rate (4.25% atDecember 31, 2002) plus 1.00% or a Eurodollar-base rate (1.37% at December 31,2002) plus 3.75%, and the covenants have been amended.  We are currently and expect to be incompliance with the amended bank covenants. Our available borrowing capacity as of December 31, 2002, after givingeffect to the amendment, was approximately $1.8 million.

 

In addition, during fiscal 2002, we borrowed $1.6 million on ourequipment line of credit to finance our capital expenditures.  This advance has a maturity date of October24, 2006.  At December 31, 2002, thebalance outstanding was $945,000 and the weighted average interest rate was4.87%.  Under the amended creditfacility terms, interest is at either the bank’s prime rate plus 1.00% or at aEurodollar-base rate plus 3.75%. Additional advances under our equipment line of credit will not beavailable to us until a review by the bank at a future date.

 

We also have a credit facility agreement with Ulster Bank Markets forour Northern Ireland operating company. This agreement consists of an accounts receivable revolver, with maximumborrowings equal to the lesser of

 

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75% of eligible receivables or2,500,000 British pounds sterling (approximately $4,025,000 at December 31,2002), of which 500,000 British pounds sterling (approximately $805,000 atDecember 31, 2002) consists of an overdraft facility, and bears interest at thebank’s base rate (4.00% at December 31, 2002) plus 2.00%.  At December 31, 2002, borrowings outstandingunder this credit facility amounted to approximately $2.9 million, of which theoverdraft facility was fully utilized, and there was nominal availableborrowing capacity.  The credit facilityagreement matures on November 30, 2003.

 

We also have a mortgage note secured by real property at NorthernIreland with an outstanding balance of $732,000 at December 31, 2002.  At December 31, 2002, we were in arrears andwe are currently seeking to negotiate a payment plan.

 

**NOTE 10 – BUSINESSSEGMENT AND GEOGRAPHIC INFORMATION**

 

We operate in a single business segment - the EMS industry.  Our revenues and long-lived assets, net ofaccumulated depreciation, by geographic area are as follows (in thousands):

 
|                    |   | **Three  Months Ended  December 31,** |   | **Six Months  Ended  December 31,** |   |
|-------------------------|--------|---------------------------------------|--------|-------------------------------------|--------|
|                    |   | **2002**                              |   | **2001**                            |   | **2002** |   | **2001** |   |
| Revenues:               |   |                                  |   |                                |   |   |   |   |   |
| United States           |   | $                                     | 14,526 |                                | $      | 16,590 |   | $ | 31,358 |   | $ | 34,532 |   |
| Northern Ireland        |   | 1,842                                 |   | 2,655                               |   | 4,991 |   | 4,347 |   |
| Thailand                |   | 931                                   |   | 349                                 |   | 1,686 |   | 349 |   |
| Total revenues          |   | $                                     | 17,299 |                                | $      | 19,594 |   | $ | 38,035 |   | $ | 39,228 |   |
|                    |   |                                  |   |                                |   |   |
|                    |   | **December 31,  2002**                |   | **June 30,  2002**                  |   |   |
| Long-lived assets:      |   |                                  |   |                                |   |   |
| United States           |   | $                                     | 6,262  |                                | $      | 7,487 |   |   |
| Northern Ireland        |   | 1,672                                 |   | 1,549                               |   |   |
| Thailand                |   | 181                                   |   | 193                                 |   |   |
| Total long-lived assets |   | $                                     | 8,115  |                                | $      | 9,229 |   |   |

 

**NOTE 11 – FOREIGNCURRENCY FORWARD CONTRACTS**

 

It is our policy not to enter into derivative financial instruments forspeculative purposes.  We may, from timeto time, enter into foreign currency forward exchange contracts in an effort toprotect us from adverse currency rate fluctuations on foreign currency commitmentsentered into in the ordinary course of business.  These commitments are generally for terms of less than oneyear.  The foreign currency forwardexchange contracts are executed with banks believed to be creditworthy and aredenominated in currencies of major industrial countries.  In accordance with SFAS No. 133, “Accountingfor Derivative Instruments and Hedging Activities,” all derivative financialinstruments are measured at fair value and are recognized as either assets orliabilities in the balance sheet.  Theaccounting treatment of changes in fair value is dependent upon whether or nota derivative financial instrument is designated as a hedge and, if so, the typeof hedge.  Changes in fair value

 

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are recognized in current resultsof operations for fair value hedges and in other comprehensive income for cashflow hedges.  Derivative financialinstruments not qualifying for hedge accounting treatment under SFAS No. 133are recognized as assets or liabilities with gains or losses recognized incurrent results of operations.  AtDecember 31, 2002, we did not have any open forward foreign currency contracts.

 

**NOTE 12 - COMMITMENTSAND CONTINGENCIES – ENVIRONMENTAL MATTERS**

 

Since the early 1990s, we have been, and continue to be, involved incertain remediation and investigative studies regarding soil and groundwatercontamination at the site of a former printed circuit board manufacturing plantin Anaheim, California.  One of ourformer subsidiaries, Aeroscientific Corp., leased the Anaheim facility.  Under the terms of a cost sharing agreemententered into in July 1993, the remaining remediation costs are currently beingshared on a 50-50 basis with the landlord. There is no environmental insurance coverage for this remediation.  At December 31, 2002, we had a reserve of$416,000 for future remediation costs. Management, based in part on consultations with outside environmentalengineers and scientists, believes that this reserve is adequate to cover itsshare of future remediation costs at this site.  However, the future actual remediation costs could differsignificantly from the estimates and our portion could exceed the amount of ourreserve.  Our liability for remediationin excess of our reserve could have a material adverse impact on our business,financial condition, results of operations and cash flows.

 
| **ITEM 2.** | **MANAGEMENT’S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS** |
|-------------|-------------------------------------------------------------------------------------------------|

 

THIS QUARTERLY REPORT ON FORM 10-Q, INCLUDING THE DISCLOSURES BELOW,CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE SUBSTANTIAL RISKS ANDUNCERTAINTIES.  WHEN USED HEREIN, THETERMS “ANTICIPATES,” “EXPECTS,” “ESTIMATES,” “BELIEVES,” “WILL” AND SIMILAREXPRESSIONS, AS THEY RELATE TO US OR OUR MANAGEMENT, ARE INTENDED TO IDENTIFYSUCH FORWARD-LOOKING STATEMENTS. FORWARD-LOOKING STATEMENTS IN THIS REPORT OR HEREAFTER INCLUDED IN OTHERPUBLICLY AVAILABLE DOCUMENTS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION(“SEC”), REPORTS TO THE STOCKHOLDERS OF SMTEK INTERNATIONAL, INC., A DELAWARECORPORATION (THE “COMPANY,” “WE,” “US” OR “OUR”) AND OTHER PUBLICLY AVAILABLESTATEMENTS ISSUED OR RELEASED BY US INVOLVE KNOWN AND UNKNOWN RISKS,UNCERTAINTIES AND OTHER FACTORS WHICH COULD CAUSE OUR ACTUAL RESULTS,PERFORMANCE (FINANCIAL OR OPERATING) OR ACHIEVEMENTS TO DIFFER FROM THE FUTURERESULTS, PERFORMANCE (FINANCIAL OR OPERATING) OR ACHIEVEMENTS EXPRESSED ORIMPLIED BY FORWARD-LOOKING STATEMENTS. THESE RISKS INCLUDE, BUT ARE NOT LIMITED TO, THE RISKS SET FORTH HEREINAND IN OTHER DOCUMENTS FILED WITH THE SEC, EACH OF WHICH COULD ADVERSELY AFFECTOUR BUSINESS AND THE ACCURACY OF THE FORWARD-LOOKING STATEMENTS CONTAINEDHEREIN.  FUTURE EXPECTED RESULTS AREBASED UPON MANAGEMENT’S BEST ESTIMATES BASED UPON CURRENT CONDITIONS AND THEMOST RECENT RESULTS OF OPERATIONS.  OURACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS MAY DIFFER MATERIALLY FROM THOSEEXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS.

 

THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTIONWITH THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND RELATED NOTES INCLUDEDELSEWHERE IN THIS REPORT.

 

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**UPDATE OF RISKFACTORS**

 

The following updates the risk factors identified in our 2002 AnnualReport on Form 10-K which was filed with the SEC on September 26, 2002.

 

 

**Our Debt AgreementsContain Certain Financial Covenants That Must Be Met.**

 

As a result ofconsolidating our San Diego facility and the related costs incurred during thesecond quarter of 2003, we were in violation of certain covenants on ourdomestic line of credit agreement as of December 31, 2002.  In February 2003, the bank either removed oramended the related restricted covenants in an amendment to the credit agreementwhich enabled us to regain compliance with the terms of the creditagreement.  If we are unable to complywith the terms of our revised financial covenants, our lender may declare adefault and immediately accelerate the due date of our outstanding loans.  If we are unable to repay our outstandingloans when asked to do so by the lender, the lender may exercise any one ormore of the remedies available to it, including foreclosing on the assetspledged to support the facility, which includes virtually all of our assets.

 

Our domesticline of credit agreement is set to mature in September 2003.  Our borrowings on this line of credit atDecember 31, 2002 amounted to $5.2 million. We can provide no assurance that the agreement will be renewed or thatany renewal would occur on commercially reasonable terms.  We remain dependent on our line of creditfor operations and growth and may have to explore alternative financing if thebank does not renew our line of credit or if amounts outstanding becomeimmediately payable as a result of future covenant violations.

 

We also have a mortgage note secured by real property at NorthernIreland with an outstanding balance of $732,000 at December 31, 2002.  At December 31, 2002, we were in arrears andwe are currently seeking to negotiate a payment plan.

 

We may require additional financing to satisfy our debtobligations.  However, there can be noassurance that we will be able to obtain additional debt or equity financingwhen needed, or with acceptable terms. Any additional debt or equity financing may involve substantial dilutionto our stockholders, restrictive covenants or high interest costs.  The failure to raise needed funds onsufficiently favorable terms could have a material adverse effect on ourbusiness, operating results and financial condition.

 

Althoughmanagement believes our cash resources, cash from operations and availableborrowing capacity on our working capital lines of credit are sufficient tofund operations, if we cannot refinance the domestic line of credit upon itsmaturity or find alternative financing/funding of this obligation, there is noassurance that we will continue as a going concern.

 

**OurStock Price Has Been And Continues To Be Volatile.  Based Upon Any Number of Factors, We May Face DelistingProceedings From Nasdaq.**

 

The market price for our common stockcontinues to be volatile due to various factors.  These factors include, but are not limited to:

 

•                   our public stock float being relatively small andthinly traded;

 

•                   announcements by us or our competitors of newcontracts or technological innovations;

 

•                   fluctuations in our quarterly and annualoperating results;

 

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•                   continued losses in each quarter;

 

•                   acquisition-related announcements; and

 

•                   general market conditions.

 

In addition, in recent years, our stock pricehas experienced significant price fluctuations for a variety of reasons, bothinternal to us and due to external conditions.

 

Under Nasdaq rules, if our stock trades below$1.00 per share for 30 consecutive days, or if we are below $2.5 million inshareholders’ equity, we face delisting proceedings from Nasdaq.  Our common stock has traded below $1.00 pershare for 30 consecutive days starting in October 2002.  It has traded below $1.00 per share for muchof the time since October 2002. Further, we are now below $2.5 million in shareholders’ equity.  Therefore, we are not in compliance with twoNasdaq Small Cap Market criteria for continued listing.

 

In November 2002, we received a deficiencynotice from Nasdaq relating to our stock trading below $1.00 per share for 30consecutive days.  The notice indicatedthat we have until May 2003 in which to show 10 consecutive trading days wherethe closing minimum bid is $1.00 per share or more.  We have not yet satisfied that requirement at this time.  However, even if we met this criterion atany time before May 2003, we are still likely to be delisted if we continue tofail to meet the $2.5 million minimum level of stockholders’ equity criterionthat Nasdaq has established.  While wehave not yet received any deficiency or other similar notice from Nasdaq withreference to our failure to meet the criterion of having $2.5 million instockholders’ equity, we expect to receive a notice from Nasdaq in this regardafter the filing of this Form 10-Q.

 

If we are delisted from the Nasdaq Small CapMarket, we may be transferred to the over-the-counter market on the NASDElectronic Bulletin Board or to the “pink sheets” maintained by the NationalQuotation Bureau, Inc.  There is also arisk that we will not continue to be listed at all.  Non-prominent trading markets are generally considered to be lessefficient than markets such as Nasdaq or other national exchanges, and maycause us difficulty in obtaining future financing.  If our stock is no longer traded in a prominent trading market,or at all, it may be difficult for you to sell shares that you own, and theprice of the stock may be negatively affected.

 

For companies whose securities are traded inthe Over-The-Counter Market, it is more difficult: (i) to obtain accuratequotations and (ii) to obtain coverage for significant news events becausemajor wire services, such as the Dow Jones News Service, generally do notpublish press releases about such companies.

 

**DESCRIPTION OF THEBUSINESS**

 

SMTEK International, Inc. (the “Company,” “we,” “us” or “our”) is anelectronics manufacturing services (“EMS”) provider to original equipmentmanufacturers (“OEMs”) primarily in the industrial and instrumentation,medical, telecommunications, security, financial services automation andaerospace and defense industries.  Weprovide integrated solutions to OEMs across the entire product life cycle, fromdesign to manufacturing to end-of-life services, for the worldwidelow-to-medium volume, high complexity segment of the EMS industry.

 

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We have seven wholly owned subsidiaries:  SMTEK, Inc. (dba SMTEK Moorpark), located in Moorpark,California; Technetics, Inc. (dba SMTEK San Diego), located in Poway,California (see discussion in next paragraph); Jolt Technology, Inc. (aka SMTEKFort Lauderdale), located in Fort Lauderdale, Florida; SMTEK Europe Limited,located in Craigavon, Northern Ireland; SMTEK New England, located inMarlborough, Massachusetts; SMTEK Santa Clara, located in Santa Clara,California; and SMTEK International Thailand Limited, located in Ayutthya,Thailand.

 

On November 19, 2002, we announced that we are consolidating our Powayfacility into our other California operations in Moorpark and Santa Clara.  As a result, we will record during fiscalyear 2003 a one-time charge of approximately $2.3 million to $3.0 million forseverance and other costs related to facilities consolidation.  As of December 31, 2002, costs ofapproximately $2.2 million, related to the consolidation, have been recognizedin the condensed consolidated statement of operations.  This transition is expected to be completedby the quarter ending March 2003.

 

**CRITICAL ACCOUNTINGPOLICIES**

 

In response to SEC Release No. 33-8040, “Cautionary Advice RegardingDisclosure About Critical Accounting Policies,” we have identified our mostcritical accounting policies that require significant management judgment orinvolve complex estimates upon which our financial status depends.  The consolidated condensed financialstatements and related notes within this Quarterly Report on Form 10-Q containinformation that is pertinent to our accounting policies and to management’sdiscussion and analysis and should also be read in conjunction with our 2002Annual Report on Form 10-K as filed with the SEC on September 26, 2002.  The information that follows describesspecific disclosures about our accounting policies regarding risks, estimates,subjective decisions, or assessments under which materially different resultsof operations and financial condition could have been reported had differentassumptions been used or different conditions existed.

 

REVENUE AND COST RECOGNITION—We recognize revenues and cost of salesupon shipment of products.  Prior toJune 30, 2002, our Moorpark subsidiary historically generated a significantportion of its revenue through long-term contracts with suppliers of electroniccomponents and products.  Consequently,this operating unit historically used the percentage of completion method torecognize revenues and cost of sales. Percentage of completion was determined on the basis of costs incurredto total estimated costs.  Contractcosts include direct material and direct labor costs and those indirect costsrelated to the assembly process, such as indirect labor, supplies, tools,repairs and depreciation costs.  Sellingand administrative costs were charged to expense as incurred.  In the period in which it was determinedthat a loss would result from the performance of a contract, the entire amountof the estimated loss was charged to cost of goods sold.  Other changes in contract price andestimates of costs and profits at completion were recognized prospectively.  A change in our estimate of costs to completemay have resulted in lower earnings than currently recorded.  A portion of the asset “costs and estimatedearnings in excess of billings on uncompleted contracts” represented revenuesrecognized in excess of amounts billed.

 

During fiscal 2002, our Moorpark facility entered into sales contractsconsistent with our other locations, and as such, recognized revenue on thesenew arrangements upon shipment of products rather than on a percentage ofcompletion method.  As a result, duringmost of fiscal 2002, the Moorpark facility was recognizing revenue uponshipment of products as well as under the percentage of completion method.  Since June 30, 2002, no sales contracts havebeen accounted for using the percentage of completion method of accounting.

 

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ACCOUNTS RECEIVABLE—We perform ongoing credit evaluations of ourcustomers and adjust credit limits based upon each customer’s payment historyand current credit worthiness, as determined by credit information available atthat time.  We continuously monitorcollections and payments from our customers and we maintain allowances fordoubtful accounts for estimated losses resulting from the inability of ourcustomers to make required payments.  Ifthe condition of our customers were to deteriorate, resulting in an impairmentof their ability to make payments, additional allowances may be required.

 

INVENTORIES—Inventoriesare stated at the lower of cost or net realizable value, with cost determinedprincipally by use of the first-in, first-out method.  We write down inventory for slow-moving and obsolete inventorybased on assessments of future demands, market conditions and customers who maybe experiencing financial difficulties. If these factors are less favorable than those projected, additionalinventory write downs may be required.

 

LONG-LIVED ASSETS—Property, equipment and improvements are stated atcost.  Depreciation and amortization arecomputed on the straight-line method. The principal estimated useful lives are:  buildings - 20 years; improvements - 5 to 10 years; and plant,office and other equipment - 3 to 7 years. Property, equipment and improvements acquired by our Northern Irelandoperating unit are recorded net of capital grants received from the IndustrialDevelopment Board for Northern Ireland. Goodwill represents the excess of acquisition cost over the fair valueof net assets of a purchased business, and has been amortized over 5 to 15years through June 30, 2002. Amortization of goodwill ceased on July 1, 2002 when we adoptedStatement of Financial Accounting Standards (“SFAS”) No. 142.  As a result of implementing SFAS No. 142, wedetermined that our goodwill was fully impaired and recognized an impairmentloss of $420,000, net of taxes, in the condensed consolidated statement ofoperations, effective July 1, 2002.  Therecoverability of long-lived assets is evaluated whenever events or changes incircumstances indicate that the carrying amount of an asset may not berecoverable, and if future undiscounted cash flows expected to result from theuse of such assets are believed insufficient to recover the carrying value ofthe asset, the carrying value is written down to fair value in the period theimpairment is identified.  Factors weconsider important which could trigger an impairment review include, but arenot limited to, the following:

 

•                   the asset’sability to continue to generate income;

 

•                   loss of legalownership or title to the asset;

 

•                   significantchanges in our strategic business objectives and utilization of the asset;

 

•                   the impact ofsignificant negative industry or economic trends; or

 

•                   significantdecrease in the market value of the asset.

 

**RESULTS OF OPERATIONS**

 

We utilize a 52-53 week fiscal year ending on the Friday closest toJune 30, which for fiscal year 2002 fell on June 28, 2002.  In the accompanying condensed consolidatedfinancial statements, the 2002 fiscal year end is shown as June 30 and theinterim period end for both years is shown as December 31 for clarity ofpresentation. The actual interim periods ended on December 27, 2002 andDecember 28, 2001.

 

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Consolidated revenues for the three and six months ended December 31,2002 were $17.3 million and $38.0 million, respectively, compared to $19.6million and $39.2 million for the three and six months ended December 31, 2001,respectively.  The decrease in revenueswas mainly due to the current downward economic and EMS market trends in theUnited States, slightly offset by an increase in revenues generated at ourthree new facilities. Starting in the third quarter of fiscal 2001, existingcustomers began to defer shipments, and some cancelled orders.

 

Consolidated gross profit for the three and six months ended December31, 2002 was $798,000 (4.6% of sales) and $2.5 million (6.6% of sales),respectively, compared to $2.0 million (10.0% of sales) and $4.0 million (10.1%of sales) for the three and six months ended December 31, 2001, respectively.  Gross profit for the three and six monthsended December 31, 2001 was positively impacted by the benefit received frominventory used during the period that was purchased at a discount from CenturyElectronics Manufacturing, Inc. (“Century”). Excluding the positive impact from these reduced inventory costs, weestimate that the consolidated gross profit for the three and six months endedDecember 31, 2001 would have been approximately $1.2 million (6.0% of sales)and $3.2 million (8.1% of sales), respectively.  The decrease in gross profit and gross profit margin, excludingthe purchase benefit, was due to an increase in fixed costs, primarily due toour new facilities and lower revenues, partially offset by a decrease inheadcount and decrease in material costs.

 

Administrative and selling expenses were $4.0 million and $6.2 millionfor the three months and six months of December 31, 2002, respectively,compared to $2.4 million and $4.1 million for the three and six months ofDecember 31, 2001, respectively.  Theincrease in administrative and selling expenses included the recognition,during the second quarter of 2003, of approximately $1.6 million in expensesrelated to the closing of our San Diego facility.  These costs are detailed as follows:  $1.0 million loss related to the lease of the building, $370,000related to write-off of leasehold improvements and $200,000 related toseverance and other related costs.  Inthe second quarter of 2003, we also recognized a $600,000 loss related to thelease at our former Thousand Oaks facility. Also contributing to the increase in expenses for the six months endedDecember 31, 2002 were costs incurred by our three new facilities that werecreated upon the completion of the Century transaction in mid-October2001.  Partially offsetting these costs,we recognized a recovery of bad debt of $336,000 due to the receipt ofrestricted equity securities from a prior customer in settlement of ouroutstanding claim.

 

Total non-operating expense was $318,000 and $624,000 for the three andsix months ended December 31, 2002, respectively, compared to $265,000 and$509,000 for the three and six months ended December 31, 2001,respectively.  The primary reason forthis increase was due to the increase in interest expense as a result of higherlevels of debt outstanding during the three and six months ended December 31,2002 as compared to the three and six months ended December 31, 2001.  The increased debt level is a result of theacquisition costs of the new facilities and from supporting their workingcapital requirements.

 

We had an income tax provision of $1,000 and $6,000 for the three andsix months ended December 31, 2002, respectively, as compared to $12,000 and$27,000 for the three and six months ended December 31, 2001, respectively.  The income tax provision for the three andsix months ended December 31, 2002 was lower than that for the three and sixmonths ended December 31, 2001, due mainly to minimum state and federal taxesthat were incurred.

 

Net loss from operations was $3.5 million and $4.3 million for thethree and six months ended December 31, 2002, or $1.55 and $1.90 loss perdiluted

 

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share, respectively, comparedto net loss from operations of $762,000 and $735,000 for the three and sixmonths ended December 31, 2001, or $0.33 or $0.32 loss per diluted share, duemainly to lower gross profit and higher administrative and selling expenses andnon-operating expense.

 

**CHANGE IN ACCOUNTINGPRINCIPLE**

 

We adopted SFAS No. 142, “Goodwill and Other Intangible Assets,” as ofJuly 1, 2001.  SFAS No. 142 requiresthat goodwill and intangible assets with indefinite useful lives no longer beamortized, but instead tested for impairment, at least annually, in accordancewith the provisions of SFAS No. 142. SFAS No. 142 also requires that intangible assets with definite usefullives be amortized over their respective estimated useful lives to theirestimated residual values, and reviewed for impairment in accordance with SFASNo. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.”  In accordance with SFAS No. 142, during theDecember 2002 quarter we completed our initial assessment of impairment anddetermined that our goodwill was fully impaired and have recognized an impairmentloss of $420,000, net of taxes, in the condensed consolidated statement ofoperations as a change in accounting principle, effective July 1, 2002.

 

**RECENT ACCOUNTINGPRONOUNCEMENTS**

 

In October 2001, the FASB issued SFAS No. 144, “Accounting for theImpairment or Disposal of Long-Lived Assets.” SFAS No. 144 replaces SFAS No. 121, “Accounting for the Impairment ofLong-Lived Assets and for Long-Lived Assets to be Disposed Of.”  The primary objectives of SFAS No. 144 wereto develop one accounting model, based on the framework established in SFAS No.121, for long-lived assets to be disposed of by sale and to address othersignificant implementation issues. While SFAS No. 144 supersedes SFAS No. 121, it retains many of thefundamental provisions of SFAS No. 121. SFAS No. 144 is effective for financial statements issued for fiscalyears beginning after December 15, 2001. We have adopted SFAS No. 144 as of July 1, 2002.

 

In July 2002, the FASB issued SFAS No. 146, “Accounting for CostsAssociated with Exit or Disposal Activities.” SFAS No. 146 requires recognition of a liability for a cost associatedwith an exit or disposal activity when the liability is incurred, as opposed towhen the entity commits to an exit plan under previous guidance.  SFAS No. 146 is effective for exit ordisposal activities initiated after December 31, 2002.  We believe that the adoption of SFAS No. 146will not have a material impact on our results of operations or financialposition.

 

**LIQUIDITY AND CAPITALRESOURCES**

 

Our primary sources of liquidity are our cash and cash equivalents,which amounted to $628,000 at December 31, 2002, and amounts available underour bank lines of credit, which provided approximately $1.8 million ofavailability in excess of current borrowings at December 31, 2002, after givingeffect to the amendment to the credit agreement discussed below.   During the six months ended December 31,2002, cash and cash equivalents decreased by $188,000.  This decrease resulted from purchases ofequipment of $907,000 and financing activities of $61,000, partially offset bycash provided by operations of $815,000.

 

Net cash provided by operating activities of $815,000 for the sixmonths ended December 31, 2002 was attributable primarily to facilityconsolidation costs of $1.8 million, a decrease in inventories of $1.2 millionand an

 

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increase in accrued liabilitiesof $1.8 million offset by our net loss before depreciation and amortization of$3.8 million.

 

Net cash used in investing activities was $907,000 for the six monthsended December 31, 2002 compared to $2.8 million for the six months endedDecember 31, 2001.  The cash used wasfor the purchase of capital expenditures mainly for production purposes.

 

Net cash used in financing activities was $61,000 for the six monthsended December 31, 2002 compared to net cash provided by financing activitiesof $1.6 million for the six months ended December 31, 2001.  At December 31, 2002, we had approximately$1.8 million available to borrow under our bank lines of credit, after givingeffect to the amendment to the credit agreement discussed below.

 

At December 31, 2002, borrowings under our working capital facility forour domestic operating units amounted to $5.2 million.  This credit facility is collateralized byaccounts receivable, inventory and equipment for our domestic operating unitsand matures September 25, 2003.  AtDecember 31, 2002, the weighted average interest rate on the line of credit was4.91%.  The line of credit agreementcontains certain financial covenants, with which we were not in compliance atDecember 31, 2002.  However, the termsof our line of credit have been amended as of February 5, 2003.  Under the new terms, our line of credit isat $8.5 million, bears interest at either the bank’s prime rate (4.25% atDecember 31, 2002) plus 1.00% or a Eurodollar-base rate (1.37% at December 31,2002) plus 3.75%, and the covenants have been amended.  We are currently and expect to be incompliance with the amended bank covenants. Our available borrowing capacity as of December 31, 2002, after givingeffect to the amendment, was approximately $1.8 million.

 

In addition, during fiscal 2002 we borrowed $1.6 million on ourequipment line of credit to finance our capital expenditures.  This advance has a maturity date of October24, 2006.  At December 31, 2002, thebalance outstanding was $945,000 and the weighted average interest rate was4.87%.  Under the amended creditfacility terms, interest is at either the bank’s prime rate plus 1.00% or at aEurodollar-base rate plus 3.75%. Additional advances under our equipment line of credit will not beavailable to us until a review by the bank at a future date.

 

We also have a credit facility agreement with Ulster Bank Markets forour Northern Ireland operating company. This agreement consists of an accounts receivable revolver, with maximumborrowings equal to the lesser of 75% of eligible receivables or 2,500,000British pounds sterling (approximately $4,025,000 at December 31, 2002), ofwhich 500,000 British pounds sterling (approximately $805,000 at December 31,2002) consists of an overdraft facility, and bears interest at the bank’s baserate (4.00% at December 31, 2002) plus 2.00%. At December 31, 2002, borrowings outstanding under this credit facilityamounted to approximately $2.9 million, of which the overdraft facility wasfully utilized, and there was nominal available borrowing capacity.  The credit facility agreement matures onNovember 30, 2003.

 

We also have a mortgage note secured by real property at NorthernIreland with an outstanding balance of $732,000 at December 31, 2002.  At December 31, 2002, we were in arrears andwe are currently seeking to negotiate a payment plan.

 

We anticipate that additional expenditures of as much as $125,000 maybe made during the remainder of fiscal 2003, primarily to improve productionefficiency at our subsidiaries.  Asubstantial portion of these capital expenditures is expected to be financed byour line of credit or other notes/leases payable.

 

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At December 31, 2002, the ratio of current assets to currentliabilities was 0.9 to 1.0 compared to 1.3 to 1.0 at June 30, 2002.  At December 31, 2002, we had $2.9 million ofnegative working capital compared to $5.9 million of working capital at June30, 2002.  At December 31, 2002, we hadlong-term borrowings of $4.6 million compared to $10.1 million at June 30,2002.  The decreases in the workingcapital and long-term debt is due to the reclassification of our domestic lineof credit of $5.2 million from long-term debt to current liabilities as thismatures in less than 12 months.  Inaddition, contributing to the decrease in working capital is an increase inlease reserves recognized in the second quarter of 2003.

 

As more fully described in Note 6 to the notes to our consolidatedfinancial statements in our June 30, 2002 Form 10-K, at December 31, 2002, wehave a federal tax assessment liability of approximately $1.1 million and arelated accrued interest liability of approximately $1.3 million, which reflectthe results of a settlement with the IRS Appeals Division in December2001.  We are currently seeking aninstallment payment plan with the IRS.

 

We have experienced and may continue to experience an adverse effect onour operating results and our financial condition, especially if currenteconomic conditions continue for an extended period of time, despite our costreduction measures and efficiency improvements at our operating subsidiaries.  We arefocused on the consolidation and streamlining of operations so as to reduce ourexcess capacity to better match market conditions.  Recent actions taken and strategies being pursued are as follows:

 

•                       Transitioning the San Diego facility andevaluating further opportunities of consolidation, transition or sale of otherfacilities.

 

•                       Continuing focus on cost reductions related topertinent production levels and reductions in administrative costs.

 

•                       Focusing our marketing efforts in thesolicitation of customers in nonecomically affected industries.

 

For further discussion, see section entitled “Risk Factors That MayAffect Your Decision to Invest in Us” in our 2002 Form 10-K, which was filedwith the SEC on September 26, 2002 and to the discussion in this Form 10-Qunder the heading “Update of Risk Factors.”

 

We remaindependent on our lines of credit for operations and growth.  Our domestic line of credit agreement is setto mature in September 2003.  We canprovide no assurance that the agreement will be renewed or that any renewalwould occur on commercially reasonable terms. We may have to explore alternative financing if the bank does not renewour line of credit.

 

We may requireadditional financing to satisfy our debt obligations.  However, there can be no assurance that we will be able to obtainadditional debt or equity financing when needed, or on acceptable terms.  Any additional debt or equity financing mayinvolve substantial dilution to our stockholders, restrictive covenants or highinterest costs.  The failure to raiseneeded funds on sufficiently favorable terms could have a material adverseeffect on our business, operating results, and financial condition.

 

Althoughmanagement believes our cash resources, cash from operations and availableborrowing capacity on our working capital lines of credit are sufficient tofund operations, if we cannot refinance the domestic line of credit upon itsmaturity or find alternative financing/funding of this obligation, there is noassurance that we will continue as a going concern.

 

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**ENVIRONMENTAL MATTERS**

 

Since the early 1990s, we have been, and continue to be, involved incertain remediation and investigative studies regarding soil and groundwatercontamination at the site of a former printed circuit board manufacturing plantin Anaheim, California.  One of ourformer subsidiaries, Aeroscientific Corp., leased the Anaheim facility.  Under the terms of a cost sharing agreemententered into in July 1993, the remaining remediation costs are currently beingshared on a 50-50 basis with the landlord. There is no environmental insurance coverage for this remediation.  At December 31, 2002, we had a reserve of$416,000 for future remediation costs. Management, based in part on consultations with outside environmentalengineers and scientists, believes that this reserve is adequate to cover itsshare of future remediation costs at this site.  However, the future actual remediation costs could differsignificantly from the estimates and our portion could exceed the amount of ourreserve.  Our liability for remediationin excess of our reserve could have a material adverse impact on our business,financial condition, results of operations and cash flows.

 
| **ITEM 3.** | **QUANTITATIVE AND  QUALITATIVE DISCLOSURES ABOUT MARKET RISK** |
|-------------|-----------------------------------------------------------------|

 

Our financial instruments include cash and cash equivalents, accountsreceivable and short-term and long-term debt. At December 31, 2002, the carrying amount of long-term debt (includingthe current portion thereof but excluding bank lines of credit) was $7.9million and the fair value was $7.4 million. The carrying values of our other financial instruments approximated theirfair values.  The fair value of ourfinancial instruments is estimated based on quoted market prices for the sameor similar issues.  A change in interestrates of one percent would result in an annual impact on interest expense ofapproximately $110,000.

 

It is our policy not to enter into derivative financial instruments forspeculative purposes.  We may, from timeto time, enter into foreign currency forward exchange contracts in an effort toprotect us from adverse currency rate fluctuations on foreign currencycommitments entered into in the ordinary course of business.  These commitments are generally for terms ofless than one year.  The foreigncurrency forward exchange contracts are executed with banks believed to becreditworthy and are denominated in currencies of major industrial countries.  In accordance with SFAS No. 133, “Accountingfor Derivative Instruments and Hedging Activities,” all derivative financialinstruments are measured at fair value and are recognized as either assets orliabilities in the balance sheet.  Theaccounting treatment of changes in fair value is dependent upon whether or nota derivative financial instrument is designated as a hedge and, if so, the typeof hedge.  Changes in fair value arerecognized in current results of operations for fair value hedges and in othercomprehensive income for cash flow hedges. Derivative financial instruments not qualifying for hedge accountingtreatment under SFAS No. 133 are recognized as assets or liabilities with gainsor losses recognized in current results of operations.  At December 31, 2002, we did not have anyopen forward foreign currency contracts.

 

Our operationsconsist of investments in foreign operating units.  Our foreign subsidiaries represent approximately 18% of ourrevenues and 26% of our total assets.  As a result, our financial results have been and may continue tobe affected by changes in foreign currency exchange rates.

 

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| **ITEM 4.** | **CONTROLS AND  PROCEDURES** |
|-------------|------------------------------|

 

**Evaluation ofdisclosure controls and procedures**.

 

Based onmanagement’s evaluation (with the participation of our principal executiveofficer and principal financial officer), as of the end of the period coveredby this report, our principal executive officer and principal financial officerhave concluded that our disclosure controls and procedures (as defined in Rules13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended,(the “Exchange Act”)) are effective to ensure that information required to bedisclosed by us in reports that we file or submit under the Exchange Act isrecorded, processed, summarized and reported within the time periods specifiedin Securities and Exchange Commission rules and forms.

 

**Changes in internalcontrol over financial reporting**.

 

There was nochange in our internal control over financial reporting during our mostrecently completed fiscal quarter that has materially affected, or isreasonably likely to materially affect, our internal control over financialreporting.

 
| **PART II.** | **OTHER INFORMATION** |
|--------------|-----------------------|

 
| **ITEM 1.** | **LEGAL PROCEEDINGS** |
|-------------|-----------------------|

 

In the ordinary course of business, we experience various types ofclaims which sometimes result in litigation or other legal proceedings.  We do not anticipate that any of theseclaims or proceedings that are currently pending will have a material adverseeffect on us.

 
| **ITEM 3.** | **DEFAULTS UPON  SENIOR SECURITIES** |
|-------------|--------------------------------------|

 

This information is set forth in this report under the captions “Updateof Risk Factors - Our Debt Agreements Contain Financial Covenants That Must BeMet” and “Management’s Discussion and Analysis - Liquidity” and is incorporatedherein by reference.

 
| **ITEM 4.** | **SUBMISSION OF  MATTERS TO A VOTE OF SECURITY HOLDERS** |
|-------------|----------------------------------------------------------|

 

At the 2002Annual Meeting of Stockholders, held on November 12, 2002, James P. Burgess waselected as Class I director.  Directorswhose terms of office continued after the meeting were Kimon Amenogiannis, ClayM. Biddinger, Oscar B. Marx, III and Steven M. Waszak.  There were 2,284,343 shares of common stockoutstanding and entitled to vote at this meeting.  Following is a summary of the results of voting:

 
|                                     |   | **Votes For** |   | **Votes  Against or  Withheld** |   |
|------------------------------------------|--------|---------------|--------|---------------------------------|--------|
| Election of James P. Burgess as director |   | 2,094,964     |   | 66,588                          |   |

 

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| **ITEM 5.** | **OTHER INFORMATION** |
|-------------|-----------------------|

 

**PRE-APPROVAL OFNON-AUDIT SERVICES**

 

In accordancewith Section 10A of the Securities Exchange Act of 1934, as amended by Section202 of the Sarbanes-Oxley Act of 2002, the members of the Audit Committeeapproved non-audit, tax-related services by our auditors during this reportedfiscal quarter.

 
| **ITEM 6.** | **EXHIBITS AND  REPORTS ON FORM 8-K** |
|-------------|---------------------------------------|

 

a.                    Exhibits:

 

10.1                           AmendmentNo. 4 to Credit Agreement, dated February 5, 2003, between the Company andComerica Bank (incorporated by reference to Exhibit 10.1 of the Company’squarterly report on Form 10-Q filed on February 10, 2003).

 

 

31.1                           Section 302 Certification ofPrincipal Executive Officer.

 

31.2                           Section302 Certification of Principal Financial Officer.

 

32.1                           Section906 Certification of Principal Executive Officer.

 

32.2                           Section906 Certification of Principal Financial Officer.

 

b.                   Reportson Form 8-K:

 

On October 14, 2002, the Board of Directors and the Audit Committeedismissed KPMG LLP as our principal independent auditors and engagedPricewaterhouseCoopers LLP as our principal independent auditors.

 

 

**SIGNATURE**

 

Pursuant tothe requirements of the Securities Exchange Act of 1934, the registrant hasduly caused this report to be signed on its behalf by the undersigned thereuntoduly authorized.

 
| October 2, 2003 |   | /s/ Edward J. Smith |
|-----------------|--------|---------------------|
| Date            |   |                | Edward J.  Smith |
|            |   |                | Chief Executive Officer and  President (Principal Executive  Officer) |
|            |   |                |
|            |   |                | /s/ Kirk A.  Waldron |   |
|            |   |                | Kirk A.  Waldron |
|            |   |                | Senior Vice President and Chief  Financial Officer (Principal  Financial Officer) |

 

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