##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-K
 
 (Mark One)
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended March 31, 2005
 OR
 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: 0-23576
 CTK Windup Corp.
 (Exact name of registrant as specified in its charter)
 California
    
    77-0057484(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)
 c/o
Mimix Broadband ,Inc.  3236 Scott Boulevard, Santa Clara, California 95054
(Address of principal executive offices, including zip code)
 Registrants telephone number including area code:(206) 706-0464
 Securities registered pursuant to Section 12(b) of the Act:
 NONE
 Securities registered pursuant to Section 12(g) of the Act:
 Common Stock, no par value
 þ o
 o
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE




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TABLE OF CONTENTS  PART IItem 1. BusinessItem 2. PropertiesItem 3. Legal ProceedingsItem 4. Submission of Matters to a Vote of Security HoldersPART IIItem 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity SecuritiesItem 6. Selected Financial DataItem 7. Managements Discussion and Analysis of Financial Condition and Results of OperationItem 7A. Quantitative and Qualitative Disclosures About Market RiskItem 8. Financial Statements and Supplementary DataItem 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureItem 9A. Controls and ProceduresPART IIIItem 10. Directors and Executive Officers of the RegistrantItem 11. Executive CompensationItem 12.  Security Ownership of Certain Beneficial Owners and ManagementItem 13. Certain Relationships and Related TransactionsItem 14. Principal Accounting Fees and ServicesPART IVItem 15. Exhibits, Financial Statement Schedules and Reports on Form 8-KSIGNATURESEXHIBIT 10.15EXHIBIT 21EXHIBIT 23.1EXHIBIT 23.2EXHIBIT 31EXHIBIT 32    Table of Contents  
  This Annual Report on Form 10-K contains forward-looking statements within the meaning of the
Private-Securities Litigation Reform Act of 1995. These forward-looking statements include, without
limitation, statements regarding our expectations about: the timing and amounts of the liquidation
of remaining assets; expectations concerning the costs of liquidation. These, and other
forward-looking statements, are subject to business and economic risks and uncertainties that could
cause our actual results of operations to differ materially from those contained in the
forward-looking statements. Please see the section of this Annual Report entitled Risk Factors
for a description of the risks and uncertainties that could cause our actual results to differ
materially from those contained in the forward-looking statements. Unless required by law, we
undertake no obligation to update publicly any forward-looking statements, whether as a result of
new information, future events, or otherwise.
 
 Item 1. Business
 Recent Events  Sale of Operating Assets and Plan of Liquidation:
       2




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Company Information
   Customers
    Sales and Marketing
  Backlog
   Research and Development
  3




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##### Table of Contents



Competition
  Proprietary Rights
  Employees
  Where You Can Find More Information
  
 Item 2. Properties
  
 Item 3. Legal Proceedings
  
 Item 4. Submission of Matters to a Vote of Security Holders
  4




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PART II
 
 Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
 Market Information
  Quarter Ended
    
    High
    
    
    LowFiscal 2004First Quarter
    
    $
    8.21
    
    
    $
    7.30Second Quarter
    
    
    8.60
    
    
    
    6.67Third Quarter
    
    
    8.34
    
    
    
    6.95Fourth Quarter
    
    
    8.75
    
    
    
    3.17Fiscal 2005First Quarter
    
    $
    3.92
    
    
    $
    3.20Second Quarter
    
    
    4.26
    
    
    
    3.28Third Quarter
    
    
    3.70
    
    
    
    0.79Fourth Quarter
    
    
    1.32
    
    
    
    0.71
   Dividends
    
 Item 6. Selected Financial Data
  Fiscal Years Ended March 31,2001
    
    2002
    
    2003
    
    2004
    
    2005(In thousands, except per share data)Net sales
    
    $
    85,062
    
    
    $
    57,050
    
    
    $
    49,423
    
    
    $
    29,928
    
    
    $
    20,939Gross profit
    
    
    7,580
    
    
    
    5,211
    
    
    
    10,322
    
    
    
    7,753
    
    
    
    5,923Loss from operations
    
    
    (15,695
    )
    
    
    (24,592
    )
    
    
    (17,975
    )
    
    
    (17,691
    )
    
    
    (7,711
    )Net income (loss)
    
    $
    (10,602
    )
    
    $
    (22,618
    )
    
    $
    (17,027
    )
    
    $
    (15,980
    )
    
    $
    19,141Basic net income (loss) per share
    
    $
    (0.94
    )
    
    $
    (1.87
    )
    
    $
    (1.39
    )
    
    $
    (1.28
    )
    
    $
    1.48Diluted net income (loss) per share
    
    $
    (0.94
    )
    
    $
    (1.87
    )
    
    $
    (1.39
    )
    
    $
    (1.28
    )
    
    $
    1.47Cash dividends per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    4.50
    
    
    $
    3.00Shares used in net income (loss)
per share calculation (1):Basic
    
    
    11,272
    
    
    
    12,076
    
    
    
    12,285
    
    
    
    12,460
    
    
    
    12,929Diluted
    
    
    11,272
    
    
    
    12,076
    
    
    
    12,285
    
    
    
    12,460
    
    
    
    13,054
 
 (1)
    
    See Note 1 of notes to consolidated financial statements for a description of the computation
of the number of shares and net income (loss) per share. 5




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Fiscal 2005 results of operations include a charge of $1.5 million for the write down of
equipment being sold to Mimix. Net income includes a gain of $26.4 million on the sale of our
defense subsystem business and $0.4 million in other income from transition services provided to
Teledyne.Fiscal 2004 results of operations include a $4.5 million special charge for equipment
impairments, a building lease impairment and severance costs that resulted from our decision to
exit the wireless handset power amplifier market, partially offset by $0.2 million in proceeds
received in fiscal 2004 from the sale of equipment impaired in fiscal 2002.Fiscal 2003 results of operations include a charge of approximately $4.4 million for In-process
research and development and $2.8 million of special charges. Net loss includes a $0.4 million
strategic investment write-down.Fiscal 2002 results of operations include a fixed asset impairment charge of approximately $11.0
million. Net loss includes a $1.7 million strategic investment write-down.Fiscal 2001 results of operations include a fixed asset impairment charge of approximately $1.3
million. Net loss includes a write-down of short-term investments of $0.5 million. At March 31,2001
    
    
    2002
    
    
    2003
    
    
    2004
    
    
    2005(In thousands)Consolidated Balance Sheet DataTotal assets
    
    $
    170,525
    
    
    $
    139,688
    
    
    $
    122,460
    
    
    $
    46,766
    
    
    $
    18,981Long-term obligations
    
    
    5,578
    
    
    
    6,015
    
    
    
    2,919
    
    
    
    
    
    
    
    
 
 Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operation
 You should read this discussion together with the financial statements and other financial
information included in this Form 10-K . This discussion and analysis contains forward-looking
statements that involve risks, uncertainties and assumptions. Our actual results may differ
materially from those anticipated in these forward-looking statements as a result of a number of
factors, including those described under Risk Factors and elsewhere in this Form 10-K .
 Overview
   6




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Critical Accounting Policies
   Basis of Presentation.
 7




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Revenue Recognition.
 Allowance for Doubtful Accounts.
 Inventory Write-downs.
 Long-lived Assets and Strategic Investments.
    Recent Accounting Pronouncements
   8




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Fiscal year ended March 31, 2005 compared to fiscal year ended March 31, 2004
 Net sales.
 Gross margin.
 Research and development.
 Selling, general and administrative. .
 Costs related to shareholder actions.
 Special charges
  9




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LeaseEmployee
    
    
    
    
    
    
    
    TerminationTermination
    
    Excess
    
    Impairment
    
    and RelocationCosts
    
    Equipment
    
    of Assets
    
    Costs
    
    TotalAccrual balances, March 31, 2003
    
    
    123
    
    
    
    
    
    
    
    
    
    
    $
    1,050
    
    
    $
    1,173Fiscal 2004 special charges
    
    
    734
    
    
    
    2,618
    
    
    
    183
    
    
    
    1,005
    
    
    
    4,540Cash paid
    
    
    (680
    )
    
    
    
    
    
    
    
    
    
    
    (932
    )
    
    
    (1,612
    )Non-cash activity
    
    
    (100
    )
    
    
    (2,618
    )
    
    
    (183
    )
    
    
    
    
    
    
    (2,901
    )Accrual balances, March 31, 2004
    
    $
    77
    
    
    $
    
    
    
    $
    
    
    
    $
    1,123
    
    
    $
    1,200Fiscal 2005 special charges
    
    
    
    
    
    
    
    
    
    
    1,500
    
    
    
    
    
    
    
    1,500Cash paid
    
    
    (77
    )
    
    
    
    
    
    
    
    
    
    
    (974
    )
    
    
    (1,051
    )Non-cash activity
    
    
    
    
    
    
    
    
    
    
    (1,500
    )
    
    
    
    
    
    
    (1,500
    )Accrual balances, March 31, 2005
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    149
    
    
    $
    149
 Amortization of intangibles.
 Impairment of short-term and strategic investments.
 Gain on sale of defense business
 Interest income and other, net.
 Provision (benefit) for income taxes.
 Forward-Looking Information on Costs To Be Incurred In Connection With Sale of Assets and
Dissolution of Business.
 Fiscal year ended March 31, 2004 compared to fiscal year ended March 31, 2003
 Net sales.
  10




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Gross margin.
 Research and development.
 Selling, general and administrative. .
 Costs related to shareholder actions.
 In-process Research and Development.
 Special charges
  11




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LeaseEmployee
    
    
    
    
    
    Impairment
    
    TerminationTermination
    
    Excess
    
    of Assets Held
    
    and RelocationCosts
    
    Equipment
    
    For Sale
    
    Costs
    
    TotalFiscal 2003 special charges
    
    $
    350
    
    
    $
    1,160
    
    
    $
    
    
    
    $
    1,326
    
    
    $
    2,836Cash Paid
    
    
    (227
    )
    
    
    
    
    
    
    
    
    
    
    (276
    )
    
    
    (503
    )Non-cash activity
    
    
    
    
    
    
    (1,160
    )
    
    
    
    
    
    
    
    
    
    
    (1,160
    )Accrual balances, March 31, 2003
    
    
    123
    
    
    
    
    
    
    
    
    
    
    $
    1,050
    
    
    $
    1,173Fiscal 2004 special charges
    
    
    734
    
    
    
    2,618
    
    
    
    183
    
    
    
    1,005
    
    
    
    4,540Cash paid
    
    
    (680
    )
    
    
    
    
    
    
    
    
    
    
    (932
    )
    
    
    (1,612
    )Non-cash activity
    
    
    (100
    )
    
    
    (2,618
    )
    
    
    (183
    )
    
    
    
    
    
    
    (2,901
    )Accrual balances, March 31, 2004
    
    $
    77
    
    
    $
    
    
    
    $
    
    
    
    $
    1,123
    
    
    $
    1,200
 Amortization of intangibles.
 Impairment of short-term and strategic investments.
 Interest income and other, net.
 Provision (benefit) for income taxes.
 Liquidity and Capital Resources
   12




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13




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Commitments
   Fiscal YearContractual Obligations
    
    Total
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    ThereafterCapital lease obligations
    
    $
    216
    
    
    $
    216
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Operating lease obligations
    
    
    4,889
    
    
    
    1,019
    
    
    
    900
    
    
    
    855
    
    
    
    831
    
    
    
    1,284Open purchase order
commitments
    
    
    747
    
    
    
    747
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    5,852
    
    
    $
    1,982
    
    
    $
    900
    
    
    $
    855
    
    
    $
    831
    
    
    $
    1,284
    Related Party Transactions
   14




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RISK FACTORS
 You should carefully consider the risks described below. The risks and uncertainties described
below are not the only ones facing us. Additional risks and uncertainties not presently known to us
or that we currently deem immaterial may also impair our liquidation and dissolution plans and the
timing and amount of liquidating distributions If any of the following risks actually occur, our
business, results of operations or cash flows could be adversely affected. In those cases, the
trading price of our common stock could decline, and you may lose all or part of your investment.
 We cannot assure you of the exact amount or timing of any future distribution to our shareholders
under the plan of dissolution.
  Our
common stock may continue to trade even though we are in the process of liquidation and
liquidating distributions, if any, may be below any trading price.
  We will continue to incur claims, liabilities and expenses that will reduce the amount available
for distribution out of the liquidation to shareholders.
  15




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Distribution of cash, if any, to our shareholders could be delayed.
  If we fail to create an adequate contingency reserve for payment of our expenses and liabilities,
our shareholders could be held liable for payment to our creditors of each such shareholders pro
rata share of amounts owed to the creditors in excess of the contingency reserve, up to the amount
actually distributed to such shareholder.
   Our
stock transfer books closed at the close of business on July 22,
2005, after which we are not recording transfers of our common stock.
  16




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Threatened litigation could harm our financial position.
  
 Item 7A. Quantitative and Qualitative Disclosures About Market Risk
 Interest Rate Risk
  Foreign Currency Exchange Risk
  
 Item 8. Financial Statements and Supplementary Data
  
 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
 Selection of BDO Seidman, LLP
    17




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Item 9A. Controls and Procedures
    
 PART III
 
 Item 10. Directors and Executive Officers of the Registrant
  Name
    
    Age
    
    Position
    
    Director or Officer SinceJ. Michael Gullard
    
    
    60
    
    
    Director, President and Treasurer
    
    
    2003Bryant R. Riley
    
    
    37
    
    
    Director
    
    
    2003
  J. Michael Gullard
 Bryant R. Riley
 Board of Directors and Committees
  Code of Ethics
  18




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Section 16(a) Beneficial Ownership Reporting Compliance
   
 Item 11. Executive Compensation
 Summary Compensation Table
  Long-TermCompensation AwardsFiscal
    
    
    
    
    
    
    Securities Underlying
    
    
    All OtherName and Principal Position
    
    Year
    
    
    Salary ($)
    
    
    Options (#)
    
    
    CompensationTamer Husseini
    
    
    2005
    
    
    
    321,235
    
    
    
    
    
    
    
    9,112
    (1)Chairman of the Board,
President and Chief
    
    
    2004
    
    
    
    321,238
    
    
    
    
    
    
    
    7,966Executive Officer
    
    
    2003
    
    
    
    319,382
    
    
    
    
    
    
    
    8,700Margaret E. Smith
    
    
    2005
    
    
    
    225,000
    
    
    
    
    
    
    
    7,153
    (1)Vice President, Finance
    
    
    2004
    
    
    
    224,994
    
    
    
    
    
    
    
    8,093and Chief Financial
Officer
    
    
    2003
    
    
    
    220,657
    
    
    
    
    
    
    
    9,230Damian M. McCann
    
    
    2005
    
    
    
    165,000
    
    
    
    20,000
    
    
    
    3,899
    (1)Vice President, Advanced
    
    
    2004
    
    
    
    165,006
    
    
    
    
    
    
    
    2,816Marketing and Technology
    
    
    2003
    
    
    
    170,889
    
    
    
    
    
    
    
    3,038
 
 (1)
    
    Represents premiums paid on supplemental long term disability insurance, medical
reimbursement insurance and 401(k) Plan contributions. Option Grants in the Last Fiscal Year
  Individual GrantsNumber of
    
    
    Percent of
    
    
    
    
    
    
    
    
    
    
    Potential Realizable Value atSecurities
    
    
    Total Options
    
    
    
    
    
    
    
    
    
    
    Assumed Annual Rates of StockUnderlying
    
    
    Granted to
    
    
    
    
    
    
    
    
    
    
    Price Appreciation forOptions
    
    
    Employees in
    
    
    Exercise Price
    
    
    Expiration
    
    
    Option Term (4)Name
    
    Granted (1)
    
    
    Fiscal Year (2)
    
    
    ($/Sh) (3)
    
    
    Date
    
    
    5% ($)
    
    
    10% ($)Tamer Husseini
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Damian McCann
    
    
    20,000
    (1)
    
    
    6.7
    %
    
    
    0.80
    
    
    
    12/14/2014
    
    
    
    10,062
    
    
    
    25,400Margaret E. Smith.
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 
 (1)
    
    This option was granted on December 24, 2004 at a vesting rate of one-fourth of the shares on June 14, 2005 and
one-twenty-fourth of the shares on each one month anniversary thereafter.(2)
    
    In the fiscal year ended March 31, 2005, we granted options to purchase up to an aggregate of 300,500 shares to employees.(3)
    
    The exercise price per share is equal to the closing price of our common stock on the date of grant.(4)
    
    Potential gains are net of the exercise price but before taxes associated with the exercise. The 5% and 10% assumed
annual rates of compounded stock appreciation based upon the deemed fair market value are mandated by the rules of the
SEC and do not represent our estimate or projection of the future price of our common stock. Actual gains, if any, on
stock option exercises are dependent on our future financial performance, overall market conditions and the option
holders continued employment through the vesting period. There can be no assurance that the amounts reflected in this
table will be achieved. 19




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Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values
  Number of Securities Underlying
    
    
    Value of UnexercisedUnexercised Options at
    
    
    In-the-Money Options atFiscal Year End(#)
    
    
    Fiscal Year End($)Name
    
    Exercisable
    
    
    Unexercisable
    
    
    Exercisable
    
    
    UnexercisableTamer Husseini
    
    
    206,228
    
    
    
    19,272
    
    
    
    
    
    
    
    Damian M. McCann
    
    
    88,832
    
    
    
    26,668
    
    
    
    
    
    
    
    Margaret E. Smith
    
    
    50,082
    
    
    
    10,418
    
    
    
    
    
    
    
    
 Compensation of Directors
  Employment Contracts and Termination of Employment and Change-in-Control Arrangements
   Indemnification Agreements
  20




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Recent Developments
  
 Item 12. Security Ownership of Certain Beneficial Owners and Management
  
    
    each shareholder who we know beneficially owns more than 5% of our common stock;
    
    each of our directors;
    
    each of our named executive officers; and
    
    all of our current directors and executive officers as a group.
  Shares
    
    
    PercentageBeneficially
    
    
    BeneficiallyOwned
    
    
    Owned5% Shareholders:Dimensional Fund Advisors Inc. (1)
    
    
    986,103
    
    
    
    7.4
    %Ingalls & Snyder LLC (2)
    
    
    858,370
    
    
    
    6.5
    %John S. Moran (3)
    
    
    677,270
    
    
    
    5.1
    %Directors and Executive Officers:Bryant R. Riley (4)
    
    
    853,037
    
    
    
    6.4
    %Tamer Husseini (5)
    
    
    215,562
    
    
    
    1.6
    %Damian M. McCann (6)
    
    
    114,539
    
    
    
    *Margaret E. Smith (7)
    
    
    94,750
    
    
    
    *J. Michael Gullard
    
    
    1,500
    
    
    
    *All directors and executive officers as a group (5 persons) (8)
    
    
    1,855,576
    
    
    
    14.0
    %
 
 *
    
    Less than 1%.(1)
    
    Principal address is 1299 Ocean Avenue, 11th Floor, Santa Monica, CA 90401. The
number of shares held is as set forth in an amended Schedule 13G filed by Dimensional Fund
Advisors Inc. on February 9, 2005.(2)
    
    Principal address is 61 Broadway, New York, NY 10006. The number of shares held is as set
forth in a Schedule 13G filed by Ingalls & Snyder LLC on February 10, 2005. Ingalls & Snyder
LLC has shared dispositive power over 858,370 shares and has no voting power with respect to
such shares.(3)
    
    Principal address is Ingalls & Snyder LLC, 61 Broadway, New York, NY 10006. The number of
shares held is as set forth in a Schedule 13G filed by John S. Moran on January 25, 2005.
John S. Moran has sole voting and dispositive power over 20,000 shares and has shared
dispositive power over 657,270 shares(4)
    
    Includes 121,934 shares held by B. Riley & Co. Inc., of which Bryant R. Riley serves as chief
executive officer and is the sole equity holder, 10,000 shares held by B. Riley & Co.
Holdings, LLC, of which Bryant R. Riley serves as president, 654,200 shares held by SACC Partners LP, of which Riley Investment Management LLC
(RIM) is general partner, and 3,500 shares held by B. Riley & Co. Retirement Trust, of which
Bryant R. Riley serves as Trustee. Bryant R. Riley owns all of the outstanding membership
interests of RIM. 21




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(5)
    
    Includes options to purchase 214,562 shares of common stock exercisable within 60 calendar
days of June 30, 2005. Mr. Husseinis employment with our company as President and Chief
Executive Officer terminated on June 3, 2005.(6)
    
    Includes options to purchase 99,249 shares of common stock exercisable within 60 calendar
days of June 30, 2005. Mr. McCanns employment with our company as Vice President, Advanced
Marketing and Technology, terminated on June 3, 2005.(7)
    
    Includes options to purchase 54,666 shares of common stock exercisable within 60 calendar
days of June 30, 2005. Ms. Smiths employment with our company as Vice President, Finance and
Chief Financial Officer terminated on June 3, 2005.(8)
    
    Includes options to purchase an aggregate of 368,477 shares of common stock exercisable
within 60 calendar days of June 30, 2005. Equity Compensation Plan Information
   (c)Number of SecuritiesRemaining Available for(a)
    
    
    (b)

    
    
    Future Issuance UnderNumber of Securities to be
    
    
    Weighted Average
    
    
    Equity CompensationIssued Upon Exercise of
    
    
    Exercise Price of
    
    
    Plans (ExcludingOutstanding Options,
    
    
    Outstanding Options,
    
    
    Securities Reflected inPlan Category
    
    Warrants and Rights
    
    
    Warrants and Rights
    
    
    Column (a))Equity compensation
plans approved
by security
holders
(1)
    
    
    1,279,945
    (3)
    
    
    
    
    
    $
    5.94
    
    
    
    971,674
    (4)Equity compensation
plans not approved
by security holders
(2)
    
    
    222,490
    
    
    
    
    
    
    $
    14.46
    
    
    
    0Total
    
    
    1,502,435
    
    
    
    
    
    
    $
    7.20
    
    
    
    971,674
 
 (1)
    
    Consists of the 1994 Stock Option Plan, the Outside Directors Plan and the Employee
Qualified Stock Purchase Plan (the Purchase Plan).(2)
    
    Consists of only the 2000 Nonstatutory Stock Option Plan, which does not require the
approval of and has not been approved by our shareholders. See description of the 2000
Nonstatutory Stock Option Plan below.(3)
    
    Includes options to purchase 851,260 shares of common stock issued under the 1994 Stock
Option Plan, and options to purchase 428,685 shares of common stock issued under the Outside
Directors Stock Option Plan. Excludes purchase rights accruing under the Purchase Plan,
which has a reserve of 191,421 shares as of March 31, 2005.(4)
    
    Consists of shares available for future issuance under the equity compensation plans
approved by security holders, including: 780,253 shares of common stock available for future
issuance under the 1994 Stock Option Plan and 191,421 shares of common stock available for
future issuance under the Purchase Plan. 2000 Nonstatutory Stock Option Plan
  22




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##### Table of Contents



Item 13. Certain Relationships and Related Transactions
  
 Item 14. Principal Accounting Fees and Services
    Principal Auditor Fees and Services
  2005
    
    
    2004Audit fees (1)
    
    $
    172,922
    
    
    $
    123,282Audit-related fees (2)
    
    $
    0
    
    
    $
    0Tax fees (3)
    
    $
    44,780
    
    
    $
    0All Other Fees
    
    $
    0
    
    
    $
    0$
    217,702
    
    
    $
    123,282
 
 (1)
    
    Represents fees for professional services provided in
connection with the audit of our annual financial
statements and review of our quarterly financial
statements and audit services provided in connection
with other statutory or regulatory filings.(2)
    
    No audit related services were provided.(3)
    
    Represents fees for tax compliance services.  23




---



##### Table of Contents



2004Audit fees (1)
    
    $
    77,930Audit-related fees (2)
    
    $
    32,400Tax fees (3)
    
    $
    0All Other Fees
    
    $
    0$
    83,330
 
 (1)
    
    Represents fees for professional services provided in connection with the audit of our
annual financial statements and review of our quarterly financial statements and audit
services provided in connection with other statutory or regulatory filings.(2)
    
    Represents fees for accounting consultations, statutory audits and SEC registrations.(3)
    
    No tax compliance services were provided.  
 PART IV
 
 Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K
 The following documents are filed as part of this report:
  PageReport
of Independent Registered Public Accounting Firm  BDO Seidman,
LLP
    
    
    26Report of Independent Registered Public Accounting Firm  Ernst & Young LLP
    
    
    27Consolidated Balance Sheets as of March 31, 2005 and 2004
    
    
    28Consolidated Statements of Operations for the years ended March 31, 2005, 2004, and 2003
    
    
    29Consolidated Statements of Shareholders Equity for the years ended March 31, 2005, 2004, and 2003
    
    
    30Consolidated Statements of Cash Flow for the years ended March 31, 2005, 2004, and 2003
    
    
    31Notes to Consolidated Financial Statements
    
    
    32
  Schedule II  Valuation and Qualifying Accounts
    
    
    49
  24




---



##### Table of Contents



Exhibits
  Financial Statement Schedules
  25




---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
       
 26




---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
     
 27




---



##### Table of Contents



Consolidated Balance Sheets
 March 31,2005
    
    2004AssetsCurrent assets:Cash and cash equivalents
    
    $
    8,276
    
    
    $
    3,121Short-term investments
    
    
    2,506
    
    
    
    24,110Accounts receivable, net of allowance for doubtful
accounts of $428 and $547 at March 31, 2005 and 2004, respectively
    
    
    2,561
    
    
    
    6,048Inventories
    
    
    1,051
    
    
    
    2,739Prepaid expenses and other current assets
    
    
    311
    
    
    
    1,275Loans to employees-short term portion
    
    
    40
    
    
    
    40Total current assets
    
    
    14,745
    
    
    
    37,333Net property and equipment
    
    
    1,150
    
    
    
    5,430Strategic investments
    
    
    2,504
    
    
    
    2,741Other assets
    
    
    91
    
    
    
    731Loans to employees-long term portion
    
    
    491
    
    
    
    531Total assets
    
    $
    18,981
    
    
    $
    46,766Liabilities and shareholders equityCurrent liabilities:Accounts payable
    
    $
    1,301
    
    
    $
    3,171Accrued payroll
    
    
    523
    
    
    
    1,459Accrued liabilities
    
    
    1,306
    
    
    
    4,826Current portion of long-term debt
    
    
    
    
    
    
    1,866Current obligations under capital leases
    
    
    216
    
    
    
    328Total current liabilities
    
    
    3,346
    
    
    
    11,650Commitments and contingencies (Notes 4, 7, 9, 10 and 12)Shareholders equity:Preferred stock, no par value:Authorized shares  2,000,000Issued and outstanding  none
    
    
    
    
    
    
    Common stock, no par value:Authorized shares  50,000,000Issued and outstanding shares  13,034,756 and
12,855,962 at March 31, 2005 and 2004, respectively
    
    
    64,286
    
    
    
    102,891Accumulated other comprehensive income
    
    
    (2
    )
    
    
    15Accumulated deficit
    
    
    (48,649
    )
    
    
    (67,790
    )Total shareholders equity
    
    
    15,635
    
    
    
    35,116Total liabilities and shareholders equity
    
    $
    18,981
    
    
    $
    46,766
 See accompanying notes.
 28




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##### Table of Contents



Consolidated Statements of Operations
 Years Ended March 31,2005
    
    2004
    
    2003Net sales
    
    $
    20,939
    
    
    $
    29,928
    
    
    $
    49,423Cost of goods sold
    
    
    15,016
    
    
    
    22,175
    
    
    
    39,101Gross profit
    
    
    5,923
    
    
    
    7,753
    
    
    
    10,322Operating expenses:Research and development
    
    
    6,031
    
    
    
    9,288
    
    
    
    10,797Selling, general, and administrative
    
    
    6,103
    
    
    
    8,182
    
    
    
    8,729Costs related to shareholder and strategic actions
    
    
    
    
    
    
    3,412
    
    
    
    1,306Special charges
    
    
    1,500
    
    
    
    4,305
    
    
    
    2,836In-process research and development
    
    
    
    
    
    
    
    
    
    
    4,414Amortization of intangible assets
    
    
    
    
    
    
    257
    
    
    
    215Total operating expenses
    
    
    13,634
    
    
    
    25,444
    
    
    
    28,297Loss from operations
    
    
    (7,711
    )
    
    
    (17,691
    )
    
    
    (17,975
    )Impairment of strategic investments
    
    
    (237
    )
    
    
    
    
    
    
    (422
    )Gain on sale of defense business
    
    
    26,402
    
    
    
    
    
    
    
    Interest income and other
    
    
    1,005
    
    
    
    2,125
    
    
    
    2,217Interest expense
    
    
    (100
    )
    
    
    (414
    )
    
    
    (711
    )Gain (loss) before income taxes
    
    
    19,359
    
    
    
    (15,980
    )
    
    
    (16,891
    )Provision for income taxes
    
    
    218
    
    
    
    
    
    
    
    136Net income (loss)
    
    $
    19,141
    
    
    $
    (15,980
    )
    
    $
    (17,027
    )Basic net income (loss) per share
    
    $
    1.48
    
    
    $
    (1.28
    )
    
    $
    (1.39
    )Diluted net income (loss) per share
    
    $
    1.47
    
    
    $
    (1.28
    )
    
    $
    (1.39
    )Basic shares used in net income (loss) per share
calculation
    
    
    12,929
    
    
    
    12,460
    
    
    
    12,285Dilutive shares used in net income (loss) per
share calculation
    
    
    13,054
    
    
    
    12,460
    
    
    
    12,285
 See accompanying notes.
 29




---



##### Table of Contents



Consolidated Statements of Shareholders Equity
 AccumulatedOther
    
    
    
    
    
    TotalCommon Stock
    
    Comprehensive
    
    Accumulated
    
    ShareholdersShares
    
    Amount
    
    Income
    
    Deficit
    
    EquityBalance at March 31, 2002
    
    
    12,228
    
    
    $
    156,340
    
    
    $
    (51
    )
    
    $
    (34,783
    )
    
    $
    121,506Issuance of common stock on exercise of
options
under stock option plans
    
    
    33
    
    
    
    187
    
    
    
    
    
    
    
    
    
    
    
    187Issuance of common stock under employee
stock
purchase plan
    
    
    81
    
    
    
    522
    
    
    
    
    
    
    
    
    
    
    
    522Stock option consideration for Tavanza
asset purchase
    
    
    
    
    
    
    1,000
    
    
    
    
    
    
    
    
    
    
    
    1,000Comprehensive loss:Net loss for the year ended March 31, 2003
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17,027
    )
    
    
    (17,027
    )Unrealized gain on available-for-sale
securities
    
    
    
    
    
    
    
    
    
    
    63
    
    
    
    
    
    
    
    63Reclassification adjustments for gain on
sale of available-for-sale
investments
    
    
    
    
    
    
    
    
    
    
    (7
    )
    
    
    
    
    
    
    (7
    )Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16,971
    )Balance at March 31, 2003
    
    
    12,342
    
    
    
    158,049
    
    
    
    5
    
    
    
    (51,810
    )
    
    
    106,244Issuance of common stock on exercise of
options
under stock option plans
    
    
    436
    
    
    
    2,245
    
    
    
    
    
    
    
    
    
    
    
    2,245Issuance of common stock under employee
stock
purchase plan
    
    
    78
    
    
    
    441
    
    
    
    
    
    
    
    
    
    
    
    441Extraordinary dividend
    
    
    
    
    
    
    (57,844
    )
    
    
    
    
    
    
    
    
    
    
    (57,844
    )Comprehensive loss:Net loss for the year ended March 31, 2004
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15,980
    )
    
    
    (15,980
    )Unrealized gain on available-for-sale
securities
    
    
    
    
    
    
    
    
    
    
    24
    
    
    
    
    
    
    
    24Reclassification adjustments for gain on
sale of available-for-sale
investments
    
    
    
    
    
    
    
    
    
    
    (14
    )
    
    
    
    
    
    
    (14
    )Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15,970
    )Balance at March 31, 2004
    
    
    12,856
    
    
    
    102,891
    
    
    
    15
    
    
    
    (67,790
    )
    
    
    35,116Issuance of common stock on exercise of
options
under stock option plans
    
    
    67
    
    
    
    136
    
    
    
    
    
    
    
    
    
    
    
    136Issuance of common stock under employee
stock
purchase plan
    
    
    112
    
    
    
    207
    
    
    
    
    
    
    
    
    
    
    
    207Extraordinary dividend
    
    
    
    
    
    
    (38,948
    )
    
    
    
    
    
    
    
    
    
    
    (38,948
    )Comprehensive income:Net income for the year ended March 31,
2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,141
    
    
    
    19,141Unrealized gain on available-for-sale
securities
    
    
    
    
    
    
    
    
    
    
    34
    
    
    
    
    
    
    
    34Reclassification adjustments for gain on
sale of available-for-sale
investments
    
    
    
    
    
    
    
    
    
    
    (51
    )
    
    
    
    
    
    
    (51
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,124Balance at March 31, 2005
    
    
    13,035
    
    
    $
    64,286
    
    
    $
    (2
    )
    
    $
    (48,649
    )
    
    $
    15,635
 See accompanying notes.
 30




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##### Table of Contents



Consolidated Statements of Cash Flows
 Years Ended March 31,2005
    
    2004
    
    2003Operating activitiesNet income (loss)
    
    $
    19,141
    
    
    $
    (15,980
    )
    
    $
    (17,027
    )Adjustments to reconcile net income (loss) to net cash provided (used)
in operating activities:Depreciation
    
    
    2,704
    
    
    
    3,602
    
    
    
    5,000Gain on sale of defense subsystem business
    
    
    (26,402
    )
    
    
    
    
    
    
    Amortization of intangible assets
    
    
    
    
    
    
    257
    
    
    
    215Impairment of strategic and short-term investments
    
    
    243
    
    
    
    
    
    
    
    422Loss on impairment and disposal of property and equipment
    
    
    1,785
    
    
    
    2,755
    
    
    
    1,292(Gain) on sale of short-term investments
    
    
    (10
    )
    
    
    (14
    )
    
    
    (7
    )Income tax receivable and other
    
    
    
    
    
    
    101
    
    
    
    244Purchase of in-process research and development
    
    
    
    
    
    
    
    
    
    
    793Changes in operating assets and liabilities:Non-cash write off of operating assets and liabilities related to
sale of defense subsystem business
    
    
    (3,583
    )
    
    
    
    
    
    
    Accounts receivable
    
    
    3,487
    
    
    
    (1,565
    )
    
    
    5,518Inventories
    
    
    1,688
    
    
    
    860
    
    
    
    5,773Prepaid expenses and other current assets
    
    
    989
    
    
    
    538
    
    
    
    1,425Other assets
    
    
    674
    
    
    
    29
    
    
    
    (29
    )Related party receivables
    
    
    40
    
    
    
    897
    
    
    
    145Intangible assets
    
    
    
    
    
    
    674
    
    
    
    (939
    )Accounts payable
    
    
    (1,871
    )
    
    
    (1,167
    )
    
    
    (221
    )Accrued payroll
    
    
    (936
    )
    
    
    (137
    )
    
    
    99Accrued liabilities
    
    
    (3,517
    )
    
    
    537
    
    
    
    1,103Net cash (used in) provided by operating activities
    
    
    (5,568
    )
    
    
    (8,613
    )
    
    
    3,806Investing activitiesPurchases of property and equipment
    
    
    (870
    )
    
    
    (875
    )
    
    
    (2,593
    )Purchase of strategic investments
    
    
    
    
    
    
    
    
    
    
    (1,992
    )Purchases of short-term investments
    
    
    (16,814
    )
    
    
    (124,525
    )
    
    
    (132,145
    )Proceeds from sale of property and equipment
    
    
    
    
    
    
    775
    
    
    
    168Proceeds from sales of short-term investments
    
    
    8,500
    
    
    
    82,676
    
    
    
    34,258Proceeds from maturities of short-term investments
    
    
    29,892
    
    
    
    84,490
    
    
    
    121,820Proceeds on sale of defense subsystem business, net of cash expenses
    
    
    30,871
    
    
    
    
    
    
    
    Net cash provided by investing activities
    
    
    51,579
    
    
    
    42,541
    
    
    
    19,516Financing activitiesPrincipal payments on long-term debt
    
    
    (1,866
    )
    
    
    (2,803
    )
    
    
    (2,318
    )Borrowings on long-term debt
    
    
    
    
    
    
    
    
    
    
    Principal payments on obligations under capital leases
    
    
    (395
    )
    
    
    (1,535
    )
    
    
    (693
    )Extraordinary dividend payment
    
    
    (38,948
    )
    
    
    (57,844
    )
    
    
    Proceeds from the exercise of stock options and employee stock
purchase plan
    
    
    343
    
    
    
    2,686
    
    
    
    709Net cash (used in) financing activities
    
    
    (40,866
    )
    
    
    (59,496
    )
    
    
    (2,302
    )Effect of exchange rate changes on cash
    
    
    10
    
    
    
    (220
    )
    
    
    (207
    )Increase (decrease) in cash and cash equivalents
    
    
    5,155
    
    
    
    (25,788
    )
    
    
    20,813Cash and cash equivalents at beginning of year
    
    
    3,121
    
    
    
    28,909
    
    
    
    8,096Cash and cash equivalents at end of year
    
    $
    8,276
    
    
    $
    3,121
    
    
    $
    28,909
 See accompanying notes.
 31




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##### Table of Contents



Notes to Consolidated Financial Statements
 Note 1. Organization and Summary of Significant Accounting Policies
 (a) Business Activities
 (b) Basis of Presentation
  (c) Recent Events  Sale of Operating Assets and Plan of Liquidation.
    32




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##### Table of Contents



(d) Use of Estimates
 (e) Cash and Cash Equivalents and Short-Term Investments
   Gross
    
    GrossAmortized
    
    Unrealized
    
    Unrealized
    
    FairCost
    
    Gains
    
    Losses
    
    Value(In thousands)As of March 31, 2005Money market funds
    
    $
    7,859
    
    
    $
    
    
    
    $
    
    
    
    $
    7,859Certificate of deposits
    
    
    508
    
    
    
    
    
    
    
    
    
    
    
    508U.S. Government and federal
agency bonds
    
    
    1,000
    
    
    
    
    
    
    
    
    
    
    
    1,000Corporate debt securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Municipal bonds
    
    
    1,000
    
    
    
    
    
    
    
    (2
    )
    
    
    998Total
    
    $
    10,367
    
    
    $
    
    
    
    $
    (2
    )
    
    $
    10,365As of March 31, 2004Money market funds
    
    $
    2,028
    
    
    $
    
    
    
    $
    
    
    
    $
    2,028Certificate of deposits
    
    
    504
    
    
    
    
    
    
    
    
    
    
    
    504U.S. Government and federal
agency bonds
    
    
    4,500
    
    
    
    
    
    
    
    
    
    
    
    4,500Corporate debt securities
    
    
    18,091
    
    
    
    15
    
    
    
    
    
    
    
    18,106Municipal bonds
    
    
    1,000
    
    
    
    
    
    
    
    
    
    
    
    1,000Total
    
    $
    26,123
    
    
    $
    15
    
    
    $
    
    
    
    $
    26,138
 33




---



##### Table of Contents



Estimated Fair ValueMarch 31,2005
    
    2004(In thousands)Due in one year
    
    $
    10,365
    
    
    $
    25,138Due after 1 years through 2 years
    
    
    
    
    
    
    1,000Total
    
    $
    10,365
    
    
    $
    26,138
  March 31,2005
    
    2004(In thousands)Cash and cash equivalents
    
    $
    7,859
    
    
    $
    2,028Short-term investments
    
    
    2,506
    
    
    
    24,110Total
    
    $
    10,365
    
    
    $
    26,138
  March 31,2005
    
    2004(In thousands)Available-for-sale securities
    
    $
    7,859
    
    
    $
    2,028Cash and bank accounts
    
    
    417
    
    
    
    1,093Total
    
    $
    8,276
    
    
    $
    3,121
   (f) Fair Values of Financial Instruments.
 (g) Concentration of Credit Risk
 (h)
    
    Inventories. Inventories are stated at the lower of standard cost (which approximates
actual cost on a first-in, first-out method) or market.
 34




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##### Table of Contents



March 31,2005
    
    2004(In thousands)Raw materials
    
    $
    90
    
    
    $
    763Work-in-process
    
    
    961
    
    
    
    1,976$
    1,051
    
    
    $
    2,739
  (i) Property and Equipment
  March 31,2005
    
    2004(In thousands)Equipment
    
    $
    14,852
    
    
    $
    24,102Furniture and fixtures
    
    
    129
    
    
    
    232Leasehold improvements
    
    
    874
    
    
    
    1,31415,855
    
    
    
    25,648Accumulated depreciation and amortization
    
    
    (14,705
    )
    
    
    (20,218
    )Net property and equipment
    
    $
    1,150
    
    
    $
    5,430
 (j) Long-lived Assets and Strategic Investments
   (k) Stock-Based Compensation
  35




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##### Table of Contents



Years Ended March 31,2005
    
    2004
    
    2003(in thousands, except per share amounts)Net income (loss), as reported
    
    $
    19,141
    
    
    $
    (15,980
    )
    
    $
    (17,027
    )Add: Total stock-based employee
compensation expense determined
under fair value method for all
awards, net of related tax effects
    
    
    (3,048
    )
    
    
    (4,484
    )
    
    
    (5,012
    )Pro forma net income (loss)
    
    
    16,093
    
    
    
    (20,464
    )
    
    
    (22,039
    )Basic net income (loss) per share:As reported
    
    $
    1.48
    
    
    $
    (1.28
    )
    
    $
    (1.39
    )Pro forma
    
    $
    1.23
    
    
    $
    (1.64
    )
    
    $
    (1.79
    )Diluted net income (loss) per share:As reported
    
    $
    1.47
    
    
    $
    (1.28
    )
    
    $
    (1.39
    )Pro forma
    
    $
    1.23
    
    
    $
    (1.64
    )
    
    $
    (1.79
    )
 (l) Revenue Recognition
 (m) Product Warranty
 (n) Research and Development
 (o) Advertising
 (p) Net Loss Per Share
  Years Ended March 31,2004
    
    
    2003Options to purchase common stock
    
    
    1,186,796
    
    
    
    1,983,911Average exercise price
    
    $
    19.78
    
    
    $
    14.98
 36




---



##### Table of Contents



(q) Comprehensive Gain (loss)
  Years Ended March 31,2005
    
    2004
    
    2003(in thousands)Net income (loss)
    
    $
    19,141
    
    
    $
    (15,980
    )
    
    $
    (17,027
    )Unrealized gain on available for sale securities
    
    
    34
    
    
    
    24
    
    
    
    63Reclassification adjustments for (gain) on sale of available for
sale securities
    
    
    (51
    )
    
    
    (14
    )
    
    
    (7
    )Comprehensive income (loss)
    
    $
    19,124
    
    
    $
    (15,970
    )
    
    $
    (16,971
    )
  Years Ended March 31,2005
    
    2004
    
    2003(in thousands)Accumulated deficit
    
    $
    (48,649
    )
    
    $
    (67,790
    )
    
    $
    (51,810
    )Unrealized gain (loss) on available for sale securities
    
    
    (2
    )
    
    
    15
    
    
    
    5Accumulated comprehensive loss
    
    $
    (48,651
    )
    
    $
    (67,775
    )
    
    $
    (51,805
    )
 (r) Foreign Currency Translation
 (s) Principles of Consolidation
 (t) Reclassification
 (u) 
Sale of Defense Subsystem Business.
 (v) Recent Accounting Pronouncements
   37




---



##### Table of Contents



Note 2. Special Charges
  LeaseEmployee
    
    
    
    
    
    Impairment
    
    TerminationTermination
    
    Excess
    
    of Assets held
    
    and RelocationCosts
    
    Equipment
    
    for sale
    
    costs
    
    TotalFiscal 2003 special charges
    
    $
    350
    
    
    $
    1,160
    
    
    $
    
    
    
    $
    1,326
    
    
    $
    2,836Cash Paid
    
    
    (227
    )
    
    
    
    
    
    
    
    
    
    
    (276
    )
    
    
    (503
    )Non-cash activity
    
    
    
    
    
    
    (1,160
    )
    
    
    
    
    
    
    
    
    
    
    (1,160
    )Accrual balances, March 31, 2003
    
    
    123
    
    
    
    
    
    
    
    
    
    
    $
    1,050
    
    
    $
    1,173Fiscal 2004 special charges
    
    
    734
    
    
    
    2,618
    
    
    
    183
    
    
    
    1,005
    
    
    
    4,540Cash paid
    
    
    (680
    )
    
    
    
    
    
    
    
    
    
    
    (932
    )
    
    
    (1,612
    )Non-cash activity
    
    
    (100
    )
    
    
    (2,618
    )
    
    
    (183
    )
    
    
    
    
    
    
    (2,901
    )Accrual balances, March 31, 2004
    
    $
    77
    
    
    $
    
    
    
    $
    
    
    
    $
    1,123
    
    
    $
    1,200Fiscal 2005 special charges
    
    
    
    
    
    
    
    
    
    
    1,500
    
    
    
    
    
    
    
    1,500Cash paid
    
    
    (77
    )
    
    
    
    
    
    
    
    
    
    
    (974
    )
    
    
    (1,051
    )Non-cash activity
    
    
    
    
    
    
    
    
    
    
    (1,500
    )
    
    
    
    
    
    
    (1,500
    )Accrual balances, March 31, 2005
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    149
    
    
    $
    149
      38




---



##### Table of Contents



Note 3. Asset Acquisition
  Cash
    
    $
    3,568Liabilities assumed
    
    
    1,493Fair value of assumed options
    
    
    1,000Acquisition legal and accounting costs
    
    
    79Total purchase price
    
    $
    6,140
   Tangible assets less liabilities assumed
    
    $
    580Patent applications
    
    
    233Assembled workforce
    
    
    913In-process research and development
    
    
    4,414Total purchase price
    
    $
    6,140
  39




---



##### Table of Contents



Note 4. Costs Related to Shareholder and Strategic Actions
  Note 5. Product Warranty
   Three months ended
    
    
    Twelve months endedMarch 31,
    
    
    March 31,2005
    
    
    2004
    
    
    2005
    
    
    2004Beginning accrual balance
    
    $
    100
    
    
    $
    400
    
    
    $
    301
    
    
    $
    400Warranties issued
    
    
    12
    
    
    
    35
    
    
    
    78
    
    
    
    188Transferred with sale of defense business
    
    
    (200
    )
    
    
    
    
    
    
    (200
    )
    
    
    Adjustment related to change in estimates
    
    
    
    
    
    
    (100
    )
    
    
    
    
    
    
    (100
    )Charges incurred
    
    
    (12
    )
    
    
    (34
    )
    
    
    (79
    )
    
    
    (187
    )Ending accrual balance
    
    $
    100
    
    
    $
    301
    
    
    $
    100
    
    
    $
    301
  Note 6. Strategic Investments
 Handset Design Company
  40




---



##### Table of Contents



GaAs Foundry
   Note 7. Related Party Transactions
  Note 8. Accrued Liabilities
  March 31,2005
    
    2004(In thousands)Accrued expenses
    
    $
    209
    
    
    $
    2,613Accrued commissions
    
    
    107
    
    
    
    589Warranty accrual
    
    
    100
    
    
    
    301Other
    
    
    890
    
    
    
    1,323$
    1,306
    
    
    $
    4,826
 Note 9. Leases
   March 31,2005
    
    2004(In thousands)Equipment
    
    $
    5,486
    
    
    $
    5,202Less accumulated amortization
    
    
    (5,270
    )
    
    
    (3,488
    )$
    216
    
    
    $
    1,741
  41




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##### Table of Contents



Capital
    
    OperatingLeases
    
    Leases(In thousands)2006
    
    $
    225
    
    
    $
    1,0192007
    
    
    
    
    
    
    9002008
    
    
    
    
    
    
    8552009
    
    
    
    
    
    
    831Thereafter
    
    
    
    
    
    
    1,284Total minimum lease payments
    
    
    225
    
    
    $
    4,889Less amounts representing interest
    
    
    (9
    )Present value of net minimum lease payments
    
    
    216Less current portion
    
    
    (216
    )$
    
   Note 10. Income Taxes
  Years Ended March 31,2005
    
    2004
    
    2003(In thousands)Current:Federal
    
    $
    360
    
    
    $
    
    
    
    $
    State
    
    
    110
    
    
    
    
    
    
    
    Foreign
    
    
    (252
    )
    
    
    
    
    
    
    136Total current
    
    
    218
    
    
    
    
    
    
    
    136Deferred:Federal
    
    
    
    
    
    
    
    
    
    
    State
    
    
    
    
    
    
    
    
    
    
    Total deferred
    
    
    
    
    
    
    
    
    
    
    Provision (benefit) for income taxes
    
    $
    218
    
    
    $
    
    
    
    $
    136
  Years Ended March 31,2005
    
    2004
    
    2003(In thousands)Domestic
    
    $
    19,373
    
    
    $
    (15,644
    )
    
    $
    (17,338
    )Foreign
    
    
    (14
    )
    
    
    (336
    )
    
    
    447Income (loss) before
provision for income
taxes
    
    $
    19,359
    
    
    $
    (15,980
    )
    
    $
    (16,891
    )
  42




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##### Table of Contents



Years Ended March 31,2005
    

2004
    

2003Amount
    
    Percent
    
    Amount
    
    Percent
    
    Amount
    
    Percent(In thousands, except percentages)At U.S. statutory rate
    
    $
    6,604
    
    
    
    34.0
    %
    
    $
    (5,434
    )
    
    
    (34.0
    )%
    
    $
    (5,743
    )
    
    
    (34.0
    )%Change in valuation allowance
    
    
    (3,033
    )
    
    
    (15.6
    )
    
    
    5,763
    
    
    
    36.1
    
    
    
    4,219
    
    
    
    25.0In-process research and development
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,501
    
    
    
    8.9Foreign taxes
    
    
    (253
    )
    
    
    (1.3
    )
    
    
    
    
    
    
    
    
    
    
    136
    
    
    
    0.8Benefit due to change in tax law
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Federal alternative minimum tax
    
    
    360
    
    
    
    1.9
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Federal net operating loss carryforwards
    
    
    (4,146
    )
    
    
    (21.4
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    686
    
    
    
    3.5
    
    
    
    (329
    )
    
    
    (2.1
    )
    
    
    23
    
    
    
    0.1Provision (benefit) for income taxes
    
    $
    218
    
    
    
    1.1
    %
    
    $
    
    
    
    
    0
    %
    
    $
    136
    
    
    
    0.8
    %
  March 31,2005
    
    2004(In thousands)Deferred tax assets:Inventory valuation
    
    $
    2,154
    
    
    $
    3,378Accruals and reserves not deductible for tax purposes
    
    
    1,108
    
    
    
    1,378Net operating loss carryforwards
    
    
    19,716
    
    
    
    21,131Tax credit carryforwards
    
    
    3,120
    
    
    
    2,515Other
    
    
    537
    
    
    
    1,266Deferred tax assets
    
    
    26,635
    
    
    
    29,668Valuation allowance
    
    
    (26,635
    )
    
    
    (29,668
    )$
    
    
    
    $
    Deferred tax liabilities:Acquisition-related item
    
    $
    
    
    
    $
    Net deferred tax assets
    
    $
    
    
    
    $
    
      43




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##### Table of Contents



Note 11. Salary Deferral Plan
  Note 12. Shareholders Equity
 Employee Stock Purchase Plan
  Stock Option Plans
  1994 Stock Option Plan
  2000 Nonstatutory Stock Option Plan
  Tavanza, Inc. Statutory Stock Option Plan
  44




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##### Table of Contents



WeightedShares
    
    Options Outstanding
    
    AverageAvailable
    
    Number of
    
    Price Per
    
    Exercisefor Grant
    
    Shares
    
    Share
    
    PriceBalance at March 31, 2002
    
    
    284,977
    
    
    
    1,824,294
    
    
    $
    3.00 $53.75
    
    
    $
    16.39Assumed Tavanza, Inc. Statutory stock option plan
    
    
    200,000Options granted
    
    
    (375,000
    )
    
    
    375,000
    
    
    
    6.74  9.44
    
    
    
    7.65Options exercised
    
    
    
    
    
    
    (33,324
    )
    
    
    4.00  6.94
    
    
    
    5.61Options canceled and expired
    
    
    171,059
    
    
    
    (182,059
    )
    
    
    3.00  53.75
    
    
    
    15.09Balance at March 31, 2003
    
    
    281,036
    
    
    
    1,983,911
    
    
    $
    3.00 $53.75
    
    
    $
    14.98Additional shares authorized for 1994 Plan
    
    
    250,000Options granted
    
    
    (7,500
    )
    
    
    7,500
    
    
    
    7.33  7.33
    
    
    
    7.33Options exercised
    
    
    
    
    
    
    (435,885
    )
    
    
    3.00  7.05
    
    
    
    5.12Options canceled and expired
    
    
    183,730
    
    
    
    (368,730
    )
    
    
    6.63  53.75
    
    
    
    11.03Balance at March 31, 2004
    
    
    707,266
    
    
    
    1,186,796
    
    
    $
    3.00 $53.75
    
    
    $
    19.78Options granted
    
    
    (2,202,643
    )
    
    
    2,202,643
    
    
    
    0.42  49.25
    
    
    
    12.50Options exercised
    
    
    
    
    
    
    (66,922
    )

    
    
    0.94  3.42
    
    
    
    2.03Options canceled and expired
    
    
    2,245,329
    
    
    
    (2,248,767
    )
    
    
    2.54  53.75
    
    
    
    17.96Balance at March 31, 2005
    
    
    749,952
    
    
    
    1,073,750
    
    
    $
    0.42 $46.25
    
    
    $
    9.79
  Options Outstanding
    
    Options ExercisableWeightedAverage
    
    Weighted
    
    
    
    
    
    WeightedRemaining
    
    Average
    
    
    
    
    
    AverageRange of
    
    Number
    
    Contractual
    
    Exercise
    
    Number
    
    ExerciseExercise Prices
    
    Outstanding
    
    Life
    
    Price
    
    Exercisable
    
    Price$0.35  $0.80
    
    
    318,750
    
    
    8.24 years
    
    $
    0.78
    
    
    
    3,744
    
    
    $
    0.51$1.27  $18.38
    
    
    518,000
    
    
    6.54 years
    
    $
    4.69
    
    
    
    445,244
    
    
    $
    5.06$23.94  $46.25
    
    
    237,000
    
    
    5.21 years
    
    $
    33.07
    
    
    
    237,000
    
    
    $
    33.071,073,750
    
    
    7.15 years
    
    $
    9.79
    
    
    
    685,988
    
    
    $
    14.71
   Years Ended March 31,2005
    
    
    2004
    
    
    2003Risk-free interest rate
    
    
    3.6
    %
    
    
    3.5
    %
    
    
    4.1
    %Dividend yield
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %Volatility
    
    
    87.9
    %
    
    
    87.2
    %
    
    
    88.7
    %Expected life of options
    
    5 years
    
    5 years
    
    5 years
 45




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##### Table of Contents



Years Ended March 31,2005
    
    
    2004
    
    
    2003Risk-free interest rate
    
    
    1.3
    %
    
    
    1.1
    %
    
    
    1.7
    %Dividend yield
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %Volatility
    
    
    87.9
    %
    
    
    87.2
    %
    
    
    88.7
    %Expected life of options
    
    0.5 years
    
    0.5 years
    
    0.5 years
   Outside Directors Stock Option Plan
  Note 13. Business Segment Data and Related Information
   Significant customers representing 10% or more of total revenues
  46




---



##### Table of Contents



Years Ended March 31,2005
    
    2004
    
    2003(In thousands)Net sales to customers:United States
    
    $
    12,472
    
    
    $
    19,397
    
    
    $
    16,366Europe
    
    
    3,885
    
    
    
    4,905
    
    
    
    3,630China
    
    
    2,910
    
    
    
    2,034
    
    
    
    9,771Japan
    
    
    1,124
    
    
    
    1,781
    
    
    
    4,149Canada
    
    
    (19
    )
    
    
    750
    
    
    
    710Korea
    
    
    61
    
    
    
    610
    
    
    
    3,277India
    
    
    7
    
    
    
    245
    
    
    
    216Brazil
    
    
    68
    
    
    
    88
    
    
    
    2,357Mexico
    
    
    
    
    
    
    
    
    
    
    8,912Other
    
    
    431
    
    
    
    118
    
    
    
    35$
    20,939
    
    
    $
    29,928
    
    
    $
    49,423Net property and equipment:United States
    
    
    890
    
    
    
    5,238
    
    
    
    9,997United Kingdom
    
    
    260
    
    
    
    165
    
    
    
    848Philippines
    
    
    
    
    
    
    27
    
    
    
    139South Korea
    
    
    
    
    
    
    
    
    
    
    45$
    1,150
    
    
    $
    5,430
    
    
    $
    11,029
  Note 14. Commitments
   Note 15. Supplemental Cash Flow Information
 Years Ended March 31,2005
    
    
    2004
    
    
    2003(In thousands)Cash paid for interest
    
    $
    100
    
    
    $
    414
    
    
    $
    711Cash paid for income taxes
    
    
    470
    
    
    
    
    
    
    
    74Capital lease obligations incurred to acquire equipment
    
    
    284
    
    
    
    480
    
    
    
    100Assumption of options as consideration for acquisition
of Tavanza, Inc. assets
    
    
    
    
    
    
    
    
    
    
    1,000
 47




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##### Table of Contents



Note 16. Quarterly Results of Operations (Unaudited)
  Three Months EndedJune 30,
    
    Sept. 30,
    
    Dec. 31,
    
    Mar. 31,
    
    June 30,
    
    Sept. 30,
    
    Dec. 31,
    
    Mar. 31,2003
    
    2003(1)
    
    2003(2)
    
    2004
    
    2004
    
    2004
    
    2004 (3)
    
    2005(4)(In thousands, except per share data)Consolidated
Statement of
Operations Data:Net sales
    
    $
    6,572
    
    
    $
    7,083
    
    
    $
    7,714
    
    
    $
    8,559
    
    
    $
    8,001
    
    
    $
    6,807
    
    
    $
    2,790
    
    
    $
    3,341Gross profit (loss)
    
    
    555
    
    
    
    1,379
    
    
    
    2,630
    
    
    
    3,189
    
    
    
    3,010
    
    
    
    2,000
    
    
    
    (407
    )
    
    
    1,320Loss from operations
    
    
    (7,139
    )
    
    
    (6,721
    )
    
    
    (3,406
    )
    
    
    (425
    )
    
    
    (808
    )
    
    
    (1,587
    )
    
    
    (2,805
    )
    
    
    (2,511
    )Net profit
(loss)
    
    $
    (6,898
    )
    
    $
    (5,730
    )
    
    $
    (3,148
    )
    
    $
    (204
    )
    
    $
    (965
    )
    
    $
    (1,350
    )
    
    $
    22,931
    
    
    $
    (1,475
    )Basic net profit
(loss) per share
    
    $
    (0.56
    )
    
    $
    (0.46
    )
    
    $
    (0.25
    )
    
    $
    (0.02
    )
    
    $
    (0.08
    )
    
    $
    (0.10
    )
    
    $
    1.77
    
    
    $
    (0.11
    )Diluted net profit
(loss) per share
    
    $
    (0.56
    )
    
    $
    (0.46
    )
    
    $
    (0.25
    )
    
    $
    (0.02
    )
    
    $
    (0.08
    )
    
    $
    (0.10
    )
    
    $
    1.75
    
    
    $
    (0.11
    )Shares used in net
profit (loss) per
share calculation:Basic
    
    
    12,343
    
    
    
    12,374
    
    
    
    12,408
    
    
    
    12,715
    
    
    
    12,856
    
    
    
    12,894
    
    
    
    12,951
    
    
    
    13,016Diluted
    
    
    12,343
    
    
    
    12,374
    
    
    
    12,408
    
    
    
    12,715
    
    
    
    12,856
    
    
    
    12,894
    
    
    
    13,080
    
    
    
    13,016
 
 (1)
    
    The quarter ended September 30, 2003 included a $2.6 million special charge due to the
Companys restructuring activities at its Belfast facility in July 2003, and the Companys
decision to exit the wireless handset power amplifier market in late September 2003.(2)
    
    The quarter ended December 31, 2003 included a $1.9 million special charge due to the
Companys decision to exit the wireless handset power amplifier market in late September
2003.(3)
    
    The quarter ended December 31, 2004 included a gain of $26.4 million due to the sale of
the Companys defense subsystems business to Teledyne.(4)
    
    The quarter ended March 31, 2005 included a special charge of $1.5 million due to the
sale of the Companys assets to Mimix for less than book value. 48




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##### Table of Contents



Schedule II  Valuation and Qualifying Accounts
 Allowance for Doubtful Accounts (in thousands)
 AdditionsBalance at
    
    
    Charged to
    
    
    
    
    
    
    BalanceBeginning
    
    
    Costs and
    
    
    
    
    
    
    at EndPeriod
    
    of Period
    
    
    Expenses
    
    
    Deductions(1)
    
    
    of PeriodYear Ended 3/31/05
    
    $
    547
    
    
    $
    133
    
    
    $
    252
    
    
    $
    428Year Ended 3/31/04
    
    $
    626
    
    
    $
    
    
    
    $
    79
    
    
    $
    547Year Ended 3/31/03
    
    $
    1,183
    
    
    $
    277
    
    
    $
    834
    
    
    $
    626
 
 (1)
    
    Deductions represent write-offs of uncollectible accounts receivable. 49




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##### Table of Contents



SIGNATURES
  CTK WINDUP CORPORATIONBy:
    /s/  J. Michael GullardJ. Michael GullardPresident and Treasurer  Signature
    
    Title
    
    Date/s/ J. Michael Gullard
J. Michael Gullard
    
    President, Treasurer and Director
    
    July 29, 2005/s/ Bryant R. Riley
Bryant R. Riley
    
    Director
    
    July 29, 2005
 50




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##### Table of Contents



LIST OF EXHIBITS
 ExhibitNumber
    
    Description2.1 (1)
    
    Asset Purchase Agreement dated July 8, 2004 between the Registrant and Teledyne Wireless, Inc.2.1 (2)
    
    Asset Purchase Agreement dated March 14, 2005 between the Registrant and Mimix Broadband, Inc.2.2 (3)
    
    Plan of Dissolution and Complete Liquidation of the Registrant.3.1 (4)
    
    Amended and Restated Articles of Incorporation of Registrant.3.2 (5)
    
    Bylaws of Registrant, as amended through May 28, 2003.4.1 (6)
    
    Form of Registrants Stock Certificate.10.2 (7)
    
    1994 Stock Option Plan, as amended, and form of Stock Option Agreement.10.3 (8)
    
    Employee Qualified Stock Purchase Plan, as amended, and form of Subscription Agreement.10.4 (6)
    
    Outside Directors Stock Option Plan and form of Stock Option Agreement.10.5 (6)
    
    Form of Directors and Officers Indemnification Agreement.10.6 (6)
    
    Lease Agreement dated April 1, 1993 between the Registrant and Berg & Berg Developers.10.7 (9)
    
    Lease agreement dated April 11, 1997 between the Registrant and Spieker Properties, L.P.10.8 (10)
    
    First Amendment to Lease dated June 17, 1999 by and between Registrant and Mission West
Properties, L.P. II (formerly known as Berg & Berg Developers).10.9 (11)
    
    2000 Nonstatutory Stock Option Plan.10.12 (12)
    
    Stock Purchase agreement, dated as of March 18, 2002, by and among the Registrant and NewGen
Telecom Co., Ltd.10.13 (13)
    
    Change of Control Severance Agreement by and between the Registrant and Tamer Husseini, dated
November 22, 2002.10.14 (13)
    
    Change of Control Severance Agreement by and between the Registrant and Margaret E. Smith,
dated November 22, 2002.10.15
    
    Code of Business Conduct and Ethics
of the Registrant.21
    
    Subsidiaries of Celeritek.23.1
    
    Consent of BDO Seidman LLP, Independent Registered Public Accounting Firm.23.2
    
    Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm.31
    
    Certification pursuant to Securities and Exchange Act Rules 13a-15(e) and 15d-1(e), as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32
    
    Certifications of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 200299.1 (14)
    
    Settlement Agreement, dated May 28, 2003, between Celeritek, Inc., the Celeritek Shareholder
Protective Committee and the members and certain affiliates of the Celeritek Shareholder
Protective Committee.
 
 (1)
    
    Incorporated by reference to Exhibit 2.1 to our Form 8-K filed on July 9, 2004.(2)
    
    Incorporated by reference to Exhibit 2.1 our Form 8-K filed on March 15, 2005.(3)
    
    Incorporated by reference to Annex D to our definitive proxy statement filed on May 5, 2005.(4)
    
    Incorporated by reference to our Form 8-K filed on July 29, 2002.(5)
    
    Incorporated by reference to our Form 10-K filed for the fiscal year ended March 31, 2003.(6)
    
    Incorporated by reference to the identically numbered exhibits to our Registration Statement
of Form S-1 (Commission File No. 33-98854), which became effective on December 19, 1995.(7)
    
    Incorporated by reference to our Statement on Form S-8 (Commission File No. 333-52037), filed
May 7, 1998.(8)
    
    Incorporated by reference to our Form S-8 (Commission File No. 333-67624) filed on August 15,
2001.(9)
    
    Incorporated by reference to our Form 10-K filed for the fiscal year ended March 31, 1997.(10)
    
    Incorporated by reference to our Form 10-K/A filed for the fiscal year ended March 31, 2000.(11)
    
    Incorporated by reference to our Form 10-K filed for the fiscal year ended March 31, 2001.(12)
    
    Incorporated by reference to our Form 10-K filed for the fiscal year ended March 31, 2002.(13)
    
    Incorporated by reference to our Form 8-K filed on April 16, 2003.(14)
    
    Incorporated by reference to our Form 8-K filed on May 28, 2003. 
 51