SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 27, 2002
Commission file number 1-8048
TII NETWORK TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
State of incorporation: DELAWARE IRS Employer Identification No: 66-0328885
1385 AKRON STREET, COPIAGUE, NEW YORK 11726
(Address and zip code of principal executive office)
(631) 789-5000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES X NO __
The number of shares of the registrant's Common Stock, $.01 par value,
outstanding as of October 28, 2002 was 11,682,284.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TII NETWORK TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
September 27, June 28,
2002 2002
---------------- ---------------
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 759 $ 868
Accounts receivable, net 3,113 3,518
Inventories 6,967 7,362
Other current assets 229 212
---------------- ---------------
Total current assets 11,068 11,960
---------------- ---------------
Property, plant and equipment, net 5,730 5,846
Other assets 713 722
---------------- ---------------
TOTAL ASSETS $ 17,511 $ 18,528
================ ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 293 $ 476
Accounts payable and accrued liabilities 2,369 3,260
---------------- ---------------
Total current liabilities 2,662 3,736
---------------- ---------------
Long-term debt 9 13
---------------- ---------------
Commitments and contingencies
Stockholders' Equity:
Preferred stock, par value $1.00 per share; 1,000,000 shares authorized;
Series D Junior Participating, 30,000 shares authorized, no shares
outstanding - -
Common stock, par value $.01 per share; 30,000,000 shares authorized;
11,699,921 shares issued and 11,682,284 shares outstanding 117 117
Additional paid-in capital 37,867 37,867
Accumulated deficit (22,863) (22,924)
---------------- ---------------
15,121 15,060
Less: Treasury stock, at cost; 17,637 common shares (281) (281)
---------------- ---------------
Total stockholders' equity 14,840 14,779
---------------- ---------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 17,511 $ 18,528
================ ===============
See Notes to Consolidated Financial Statements
2
TII NETWORK TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Three months ended
September 27, September 28,
2002 2001
------------------ ------------------
(Unaudited)
Net sales $ 7,074 $ 9,098
Cost of sales 5,230 6,828
------------------ ------------------
Gross profit 1,844 2,270
------------------ ------------------
Operating expenses:
Selling, general and administrative 1,438 1,919
Research and development 354 561
------------------ ------------------
Total operating expenses 1,792 2,480
------------------ ------------------
Operating income (loss) 52 (210)
Interest expense (10) (28)
Interest income 4 1
Other income 15 -
------------------ ------------------
Net earnings (loss) $ 61 $ (237)
================== ==================
Net earnings (loss) per common share:
Basic $ .01 $ (0.02)
================== ==================
Diluted $ .01 $ (0.02)
================== ==================
Weighted average common shares outstanding:
Basic 11,682 11,682
Diluted 11,702 11,682
See Notes to Consolidated Financial Statements
3
TII NETWORK TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
(UNAUDITED)
Common Additional Total
Common Stock Stock Paid-In Accumulated Treasury Stockholders'
Shares Amount Capital Deficit Stock Equity
-------------- ------------ ------------- ---------------- ------------ ---------------
Balance, June 28, 2002 11,682,284 $ 117 $ 37,867 $ (22,924) $ (281) $ 14,779
Net earnings for the three
months ended September 27,
2002 - - - 61 - 61
-------------- ------------ ------------- ---------------- ------------ ---------------
Balance, September 27, 2002 11,682,284 $ 117 $ 37,867 $ (22,863) $ (281) $ 14,840
============== ============ ============= ================ ============ ===============
See Notes to Consolidated Financial Statements
4
TII NETWORK TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
For the three months ended
September 27, September 28,
2002 2001
-------------------- --------------------
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) $ 61 $ (237)
Adjustments to reconcile net earnings (loss) to net cash provided by
operating activities:
Depreciation and amortization 282 340
Changes in operating assets and liabilities:
Accounts receivable 405 2,339
Inventories 395 457
Other assets (16) (99)
Accounts payable and accrued liabilities (891) (2,564)
-------------------- --------------------
Net cash provided by operating activities 236 236
-------------------- --------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures, net of proceeds from dispositions (158) (107)
-------------------- --------------------
Net cash used in investing activities (158) (107)
-------------------- --------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of debt and obligations under capital leases (187) (63)
Net repayments of borrowings under revolving credit facility - (95)
-------------------- --------------------
Net cash used in financing activities (187) (158)
-------------------- --------------------
Net decrease in cash and cash equivalents (109) (29)
Cash and cash equivalents, at beginning of period 868 233
-------------------- --------------------
Cash and cash equivalents, at end of period $ 759 $ 204
==================== ====================
SUPPLEMENTAL DISCLOSURE OF CASH TRANSACTIONS:
Cash paid during the period for interest $ 10 $ 29
==================== ====================
See Notes to Consolidated Financial Statements
5
TII NETWORK TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - INTERIM FINANCIAL STATEMENTS: The unaudited interim consolidated
financial statements presented herein have been prepared in accordance with
accounting principles generally accepted in the United States for interim
financial statements and in accordance with the instructions to Form 10-Q and
Regulation S-X pertaining to interim financial statements. Accordingly, they do
not include all information and notes required by accounting principles
generally accepted in the United States for complete financial statements. The
consolidated financial statements reflect all adjustments, consisting of normal
recurring adjustments and accruals which, in the opinion of management, are
considered necessary for a fair presentation of the Company's financial position
and results of operations and cash flows for the interim periods presented. The
consolidated financial statements should be read in conjunction with the summary
of significant accounting policies and notes to consolidated financial
statements included in the Company's Annual Report on Form 10-K for the fiscal
year ended June 28, 2002. Results of operations for interim periods are not
necessarily indicative of the results that may be expected for the full fiscal
year.
NOTE 2 - COMPREHENSIVE INCOME (LOSS): For the three months ended September 27,
2002 and September 28, 2001, comprehensive income equaled net income and
comprehensive loss equaled net loss, respectively.
NOTE 3 - FISCAL YEAR: The Company reports on a 52-53 week fiscal year ending on
the last Friday in June, with fiscal quarters ending on the last Friday of each
calendar quarter. The Company's fiscal year ending June 27, 2003 will contain 52
weeks. Fiscal 2002 also had 52 weeks.
NOTE 4 - NET EARNINGS (LOSS) PER COMMON SHARE: Basic earnings (loss) per share
is computed based on the weighted average number of common shares outstanding.
Diluted earnings per share is computed based on the weighted average number of
common shares outstanding increased by dilutive common stock warrants and
options. As of September 27, 2002, there were 6,980,000 options and warrants
outstanding that were exercisable for the Company's common stock.
The following table sets forth the computation of basic and diluted earnings per
share:
For the three months ended
September 27, September 28,
2002 2001
------------------ ------------------
(in thousands)
Numerator for diluted calculation:
Net earnings (loss) $ 61 $ (237)
================== ==================
Denominator:
Weighted average common shares outstanding 11,682 11,682
Dilutive effect of stock warrants and options 20 -
------------------ ------------------
Denominator for diluted calculation 11,702 11,682
================== ==================
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NOTE 5 - INVENTORIES: Inventories consisted of the following major
classifications:
September 27, June 28,
2002 2002
----------------- ----------------
(in thousands)
Raw materials and subassemblies $ 3,028 $ 3,851
Work in process 534 144
Finished goods 3,405 3,367
----------------- ----------------
$ 6,967 $ 7,362
================= ================
NOTE 6 - REVOLVING CREDIT FACILITY: The Company has a credit facility ("Credit
Facility") that consists of a revolving line of credit and a term loan. The
revolving credit facility enables the Company to have up to $6.0 million of
revolving credit loans outstanding at any one time, limited by a borrowing base
equal to 85% of eligible accounts receivable and 50% of eligible inventory,
subject to certain reserves. As a result of the limitation, the maximum
borrowings available to the Company under the revolving line of credit was
approximately $4.6 million as of September 27, 2002. There were no borrowings
outstanding under the revolving line of credit at September 27, 2002 or June 28,
2002. Subject to extension in certain instances, the scheduled maturity date of
revolving credit loans is September 30, 2003. There was $271,000 and $455,000
outstanding under the term loan as of September 27, 2002 and June 28, 2002,
respectively. The term loan is to be repaid in equal installments through March
31, 2003 with a final payment of $175,000.
NOTE 7 - RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS: SFAS No. 146, "Accounting
for Costs Associated with Exit or Disposal Activities," was issued in July 2002.
SFAS No. 146, which is effective prospectively for exit or disposal activities
initiated after December 31, 2002, applies to costs associated with an exit
activity, including restructurings, or with a disposal of long-lived assets.
Those activities can include eliminating or reducing product lines, terminating
employees and contracts and relocating plant facilities or personnel. SFAS No.
146 requires that exit or disposal costs be recorded as an operating expense
when the liability is incurred and can be measured at fair value. Commitment to
an exit plan or a plan of disposal by itself will not meet the requirement for
recognizing a liability and the related expense under SFAS No. 146. SFAS No.146
grandfathers the accounting for liabilities that were previously recorded under
EITF Issue 94-3. Therefore, the accounting for the charges associated with the
Company's exit and disposal activities will be unaffected upon adoption of SFAS
No. 146 and the charges recognized with respect thereto will not be restated
into future periods.
NOTE 8 - SIGNIFICANT CUSTOMERS: For the period ended September 27, 2002, one
customer accounted for approximately 59% of the Company's consolidated net sales
and for the period ended September 28, 2001, two customers accounted for
approximately 72% of the Company's consolidated net sales.
7
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
foregoing consolidated financial statements and notes thereto.
BUSINESS
TII Network Technologies, Inc., formerly named TII Industries, Inc., and
subsidiary ("Company" or "TII"), design, produce and market lightning and surge
protection products, network interface devices ("NIDs") and station electronic
and other products. The Company has been a leading supplier of overvoltage surge
protectors to U.S. telephone operating companies ("Telcos") for over 30 years.
CRITICAL ACCOUNTING POLICIES, ESTIMATES AND JUDGMENTS
TII's consolidated financial statements have been prepared in accordance with
accounting principles that are generally accepted in the United States of
America. The preparation of these financial statements requires management to
make estimates and judgments. The Company believes that the issues associated
with determining the carrying value of the Company's inventories and long-lived
assets are the most critical areas where management's judgments and estimates
affect the Company's reported results. While the Company believes its estimates
are reasonable, misinterpretation of these conditions could result in actual
results varying from reported results that are based on the Company's estimates,
assumptions and judgments as of the balance sheet date.
Inventories are required to be stated at the lower of cost or market. In
establishing the appropriate inventory reserves, management assesses the
ultimate recoverability of the inventory considering such issues as
technological advancements in products required by the Company's customers,
changes within the marketplace and general economic conditions.
The Company reviews long-lived assets, such as fixed assets to be held and used
or disposed of, for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. If the sum
of the expected cash flows undiscounted and without interest is less than the
carrying amount of the asset, an impairment loss is recognized as the amount by
which the carrying amount of the asset exceeds its fair value.
GENERAL
Over the last several years, the Company restructured and downsized its
operations to reduce its cost structure, for which the Company recognized
significant charges at the time (including in the fourth quarter of fiscal
2002). These actions included outsourcing the majority of the Company's
manufacturing to Pacific Rim contract manufacturers, a significant reduction of
manufacturing and other personnel, the consolidation of certain functional
departments from Puerto Rico to the Company's New York headquarters and writing
down certain assets and the discontinuance of the Digital Closet product line.
These actions enabled the Company to operate profitably for the first quarter of
fiscal 2003. Net earnings for the first quarter of fiscal 2003 was $61,000
compared to a
8
net loss of $237,000 for the comparable prior year period. There is no assurance
that the Company will remain profitable, even at the lower cost levels.
RESULTS OF OPERATIONS
Net sales for the first quarter of fiscal 2003 were $7.1 million compared to
$9.1 million for the first quarter of fiscal 2002, a decrease of approximately
$2.0 million or 22.2%. The decrease is primarily due to the continuing
telecommunications industry-wide slowdown, including cutbacks by
telecommunications service providers in their construction and maintenance
budgets, actions taken by the service providers to reduce inventory levels and a
reduction in the number of telephone access lines per subscriber being deployed.
The Company expects this industry-wide slowdown to continue through fiscal 2003.
Gross profit for the first quarter of fiscal 2003 was $1.8 million compared to
$2.3 million for the comparable prior year period, a decrease of approximately
$426,000 or 18.8%. However, gross profit margin improved to 26.1% from 25.0% for
the comparable prior year period. The lower dollar amount of gross profit for
the fiscal 2003 first quarter was primarily due to the lower comparable sales
level. The improved gross profit margin, despite the lower sales, is primarily
due to the actions taken by the Company to reduce its cost structure and a more
favorable mix of sales of higher margin products.
Selling, general and administrative expenses for the first quarter of fiscal
2003 were $1.4 million compared to $1.9 million for the comparable prior year
period, a decrease of approximately $481,000 or 25.1%. The decrease reflects the
actions taken by the Company to reduce its cost structure in response to the
changes that have been occurring in the telecommunications industry. The cost
reductions were primarily related to lower marketing costs, primarily due to the
discontinuance of the Digital Closet product line in the fourth quarter of
fiscal 2002 and lower personnel levels.
Research and development expenses for the first quarter of fiscal 2003 were
$354,000 compared to $561,000 for the comparable prior year period, a decrease
of approximately $207,000 or 36.9%. The lower expense was due to the utilization
of collaborative engineering efforts with the Company's contract manufacturers
and a reduction in the Company's research and development staff.
Interest expense for the first quarter of fiscal 2003 decreased by $18,000 due
to decreased borrowings under the Company's credit facilities and lower
prevailing interest rates.
Interest income for the first quarter of fiscal 2003 increased by $3,000 to
$4,000 due to higher comparable average cash and cash equivalent balances held
by the Company.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents balance decreased to $759,000 at the end
of the first quarter of fiscal 2003 from $868,000 at the end of fiscal 2002. The
decrease resulted from net cash flows from operations of $236,000 offset by cash
outflows from investing activities of $158,000 and financing activities of
$187,000. Working capital increased to $8.4 million at the end of the first
quarter of fiscal 2003 from $8.2 million at the end of fiscal 2002.
9
During the first quarter of fiscal 2003, the Company generated $236,000 of net
cash from operating activities. The cash generated from operating activities
resulted from net earnings of $61,000 supplemented by non-cash depreciation and
amortization expense of $282,000. This was partially offset by cash used by
changes in operating assets and liabilities of $107,000, caused by a decrease of
$405,000 in accounts receivable from the prior year balance to $3.1 million due
to improved collections and lower sales, and an inventory decrease of $395,000
primarily due to the fulfillment of sales orders with existing inventory. These
increases to cash were offset by reductions in accounts payable and accrued
expenses of $891,000 due to the lower sales volume and cost reduction efforts
implemented during the period.
Net cash of $158,000 was used in investing activities to purchase capital
equipment.
Net cash of $187,000 was used in financing activities to repay debt and
obligations under capital leases.
Although the Company has no current material commitments for capital
expenditures, it expects to purchase new equipment and incur leasehold
improvements in the normal course of business, subject to the maximum amount
permitted under its revolving credit facility discussed below.
The Company has a credit facility ("Credit Facility") that consists of a
revolving line of credit and a term loan. The revolving credit facility enables
the Company to have up to $6.0 million of revolving credit loans outstanding at
any one time, limited by a borrowing base equal to 85% of eligible accounts
receivable and 50% of eligible inventory, subject to certain reserves. As a
result of the limitation, the maximum borrowings available to the Company under
the revolving line of credit was approximately $4.6 million as of September 27,
2002. There were no borrowings outstanding under the revolving line of credit at
September 27, 2002 or June 28, 2002. Subject to extension in certain instances,
the scheduled maturity date of revolving credit loans is September 30, 2003.
There was $271,000 and $455,000 outstanding under the term loan as of September
27, 2002 and June 28, 2002, respectively. The term loan is to be repaid in equal
installments through March 31, 2003 with a final payment of $175,000.
Funds anticipated to be generated from operations, together with available cash
and borrowings under the Credit Facility, are considered to be adequate to
finance the Company's current operational and capital needs. If the slowdown in
the telecommunications industry continues or worsens for an extended period of
time, or if the Company cannot extend or secure a new Credit Facility under
similar terms, the Company may need to seek additional capital to support its
operations.
FORWARD-LOOKING STATEMENTS
In order to keep the Company's stockholders and investors informed of the
Company's future plans, this Report contains and, from time to time, other
reports and oral or written statements issued by the Company or on its behalf by
its officers contain, forward-looking statements concerning, among other things,
the Company's future plans and objectives that are or may be deemed to be
"forward-looking statements." The Company's ability to do this has been fostered
by the Private Securities Litigation Reform Act of 1995 which provides a "safe
harbor" for forward-looking
10
statements to encourage companies to provide prospective information so long as
those statements are accompanied by meaningful cautionary statements identifying
important factors that could cause actual results to differ materially from
those discussed in the statement. The Company believes that it is in the best
interests of its stockholders and potential investors to take advantage of the
"safe harbor" provisions of that Act. Such forward-looking statements are
subject to a number of known and unknown risks and uncertainties that could
cause the Company's actual results, performance or achievements to differ
materially from those described or implied in the forward-looking statements.
These factors include, but are not limited to, general economic and business
conditions, including the regulatory environment applicable to the
communications industry; weather and similar conditions; competition; potential
technological changes, including the Company's ability to timely develop new
products and adapt its existing products to technological changes; potential
changes in customer spending and purchasing policies and practices; the level of
inventories maintained by the Company's customers; loss or disruption of sales
to major customers as a result of, among other things, labor disputes at these
customers, third party labor disputes, political unrest in or shipping
disruptions from countries in which the Company's contract manufacturers produce
the Company's products; labor disputes at the ports through which the Company
imports its products; the Company's ability to market existing and new products;
its ability to retain and win contracts; risks inherent in new product
introductions, such as start-up delays and uncertainty of customer acceptance;
dependence on third parties for products and product components; the Company's
ability to maintain its relationship with or reduce its dependence upon one of
its principal contract manufacturers which is an affiliate of a customer; the
Company's ability to attract and retain technologically qualified personnel; the
Company's ability to fulfill its growth strategies; the Company's ability to
maintain the listing of its Common Stock on the Nasdaq SmallCap market; the
availability of financing on satisfactory terms; and other factors discussed
elsewhere in this Report and in other Company reports hereafter filed with the
Securities and Exchange Commission.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risks, including changes in interest rates. The
interest payable under the Company's credit facility is principally between 250
and 275 basis points above the London Interbank Offered Rate ("LIBOR") and,
therefore, is affected by changes in market interest rates. Historically, the
effects of movements in the market interest rates have been immaterial to the
consolidated operating results of the Company.
The Company requires foreign sales to be paid in U.S. currency and all payments
to foreign suppliers are also made in U.S. currency. The Company does not
purchase future contracts, options or other instruments to hedge against changes
in relative values of currencies, nor does the Company use derivatives.
ITEM 4. CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedures
Within 90 days prior to the date of this report, an evaluation was carried out
of the effectiveness of the design and operation of the Company's "disclosure
controls and procedures," as defined in, and
11
pursuant to, Rule 13a-14 of the Securities Exchange Act of 1934 (the "Exchange
Act") under the supervision and with the participation of the Company's
management, including, the Company's President and principal executive officer
and Vice President-Finance and principal financial officer. Based on that
evaluation the Company's President and principal executive officer and Vice
President-Finance and principal financial officer concluded that, as of the date
of their evaluation, the Company's disclosure controls and procedures were
effective to ensure that material information relating to the Company and the
Company's subsidiary is made known to them.
(b) Changes in internal controls
There were no significant changes in the Company's internal controls or in other
factors that could significantly affect these internal controls subsequent to
the evaluation discussed above.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
99.01 Certification of Principal Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
99.02 Certification of Principal Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed by the Company during the quarter
for which this report is filed.
12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TII NETWORK TECHNOLOGIES, INC.
Date: November 6, 2002 By: /s/ Kenneth A. Paladino
-----------------------
Kenneth A. Paladino
Vice President-Finance, Treasurer and
Chief Financial Officer
13
I, Timothy J. Roach, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of TII Network
Technologies, Inc.;
2. Based on my knowledge, this Quarterly Report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this Quarterly
Report;
3. Based on my knowledge, the financial statements, and other financial
information included in this Quarterly Report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this Quarterly Report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this Quarterly
Report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this Quarterly Report (the "Evaluation Date"); and
c) presented in this Quarterly Report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
Quarterly Report whether or not there were significant changes in internal
controls or in other factors that could
14
significantly affect internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.
/s/ Timothy J. Roach
Date: November 6, 2002 ----------------------------
Timothy J. Roach,
President and Principal
Executive Officer
15
I, Kenneth A. Paladino, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of TII Network
Technologies, Inc.;
2. Based on my knowledge, this Quarterly Report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this Quarterly
Report;
3. Based on my knowledge, the financial statements, and other financial
information included in this Quarterly Report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this Quarterly Report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this Quarterly
Report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this Quarterly Report (the "Evaluation Date"); and
c) presented in this Quarterly Report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
Quarterly Report whether or not there were significant changes in internal
controls or in other factors that could
16
significantly affect internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.
/s/ Kenneth A. Paladino
Date: November 6, 2002 ---------------------------------
Kenneth A. Paladino,
Vice President-Finance
and Principal Financial Officer
17
Exhibit Index
99.01 Certification of Principal Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
99.02 Certification of Principal Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
18