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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

(Mark One)

[X]		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
		For the quarterly period ended June 30, 2002.

Commission File Number (0-21767)

ViaSat, Inc.

6155 El Camino Real, Carlsbad, California 92009
(760) 476-2200
(Address, including zip code, and telephone number, including area code, of principal executive offices)

     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 outstanding of the registrant’s Common Stock, $.0001 par value, as of August 9, 2002 was 26,008,006.

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VIASAT, INC.

INDEX

				Page
PART I. Financial Information
Item 1.		Financial Statements
		Condensed Consolidated Balance Sheets at March 31, 2002 and June 30, 2002.		3
		Condensed Consolidated Statements of Operations for the three months ended June 30, 2001 and 2002.		4
		Condensed Consolidated Statements of Cash Flows for the three months ended June 30, 2001 and 2002.		5
		Condensed Consolidated Statement of Stockholders’ Equity for the three months ended June 30, 2002.		6
		Notes to Condensed Consolidated Financial Statements		7
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations		14
Item 3.		Quantitative and Qualitative Disclosures About Market Risk		31
PART II. Other Information
Item 6.		Exhibits and Reports on Form 8-K		31
		Signatures		32

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VIASAT, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)

				March 31, 2002				June 30, 2002
								(Unaudited)
Assets
Current assets:
	Cash and cash equivalents			$	6,464			$	7,920
	Short-term investments				156				156
	Accounts receivable, net				80,170				80,145
	Inventory				30,116				33,884
	Deferred income taxes				2,974				2,818
	Prepaid expenses and other current assets				7,343				7,321
		Total current assets			127,223				132,244
Goodwill					19,456				19,456
Other intangible assets, net					43,922				41,811
Property and equipment, net					31,117				32,350
Other assets					16,949				18,940
		Total assets		$	238,667			$	244,801
Liabilities and Stockholders’ Equity
Current liabilities:
	Accounts payable			$	16,069			$	20,045
	Accrued liabilities				17,796				12,441
	Line of credit				9,900				18,350
		Total current liabilities			43,765				50,836
Other liabilities					2,549				2,425
		Total liabilities			46,314				53,261
Contingencies (Note 7)
Minority interest in consolidated subsidiary					414				407
Stockholders’ equity:
	Common stock				2				3
	Paid in capital				152,775				153,492
	Retained earnings				39,485				37,903
	Unearned compensation				(138	)			(103	)
	Accumulated other comprehensive income (loss)				(185	)			(162	)
		Total stockholders’ equity			191,939				191,133
		Total liabilities and stockholders’ equity		$	238,667			$	244,801

See accompanying notes to condensed consolidated financial statements

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VIASAT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(In thousands, except share data)

			Three Months Ended June 30,
			2001				2002
Revenues			$	48,834			$	42,863
Cost of revenues				33,942				29,364
	Gross profit			14,892				13,499
Operating expenses:
	Selling, general and administrative			7,995				8,738
	Independent research and development			1,280				5,698
	Amortization of intangible assets			598				2,111
	Amortization of goodwill			436				—
Income (loss) from operations				4,583				(3,048	)
Other income (expense):
	Interest income			218				14
	Interest expense			(5	)			(125	)
	Minority interest			(77	)			(4	)
	Equity in loss of joint venture			(724	)			(529	)
Income (loss) before income taxes				3,995				(3,692	)
Provision (benefit) for income taxes				1,291				(2,110	)
Net income (loss)			$	2,704			$	(1,582	)
Basic net income (loss) per share			$	0.12			$	(0.06	)
Diluted net income (loss) per share			$	0.12			$	(0.06	)
Shares used in computing basic net income (loss) per share				22,029,336				25,911,632
Shares used in computing diluted net income (loss) per share				22,982,581				25,911,632

See accompanying notes to condensed consolidated financial statements

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VIASAT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)

					Three Months Ended June 30,
					2001				2002
Cash flows from operating activities:
	Net income (loss)				$	2,704			$	(1,582	)
	Adjustments to reconcile net income to net cash provided by (used in) operating activities:
		Depreciation				1,873				2,430
		Amortization of goodwill, intangible assets and software				1,047				2,376
		Deferred income taxes				541				(408	)
		Equity in loss of joint venture				724				529
		Minority interest in consolidated subsidiary				45				(7	)
		Non-cash compensation				—				35
	Increase (decrease) in cash resulting from changes in, net of effects of acquisitions:
		Accounts receivable				2,979				71
		Inventory				(4,115	)			(3,937	)
		Other assets				634				301
		Accounts payable				(2,380	)			3,974
		Accrued liabilities				(219	)			(5,369	)
		Other liabilities				563				14
			Net cash provided by (used in) operating activities			4,396				(1,573	)
Cash flows from investing activities:
	Investment in joint venture					(724	)			(529	)
	Purchases of short-term investments, net					(152	)			—
	Investment in capitalized software					(1,628	)			(1,971	)
	Purchases of property and equipment, net					(2,588	)			(3,661	)
			Net cash used in investing activities			(5,092	)			(6,161	)
Cash flows from financing activities:
	Proceeds from line of credit					—				8,450
	Repayment of notes payable					(168	)			—
	Net proceeds from issuance of common stock, net of issuance costs					789				718
			Net cash provided by financing activities			621				9,168
Effect of exchange rate changes on cash						(48	)			22
Net (decrease) increase in cash and cash equivalents						(123	)			1,456
Cash and cash equivalents at beginning of period						17,721				6,464
Cash and cash equivalents at end of period					$	17,598			$	7,920

See accompanying notes to condensed consolidated financial statements

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VIASAT, INC.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
(UNAUDITED)
(In thousands, except share data)

See accompanying notes to condensed consolidated financial statements

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VIASAT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Note 1 — Basis of Presentation

     The accompanying condensed consolidated balance sheet as of June 30, 2002 the condensed consolidated statements of operations for the three months ended June 30, 2001 and 2002, the condensed consolidated statements of cash flows for the three months ended June 30, 2001 and 2002, and the condensed consolidated statement of stockholders’ equity for the three months ended June 30, 2002 have been prepared by the management of ViaSat, Inc., and have not been audited. These financial statements, in the opinion of management, include all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the financial position, results of operations and cash flows for all periods presented. These financial statements should be read in conjunction with the financial statements and notes thereto for the year ended March 31, 2002 included in our 2002 Annual Report on Form 10-K. Interim operating results are not necessarily indicative of operating results for the full year.

     Our consolidated financial statements include the assets, liabilities and results of operations of TrellisWare Technologies, Inc., a majority owned subsidiary of ViaSat. All significant intercompany amounts have been eliminated.

     Certain prior period adjustments have been reclassified to conform to the current period presentation

     The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Estimates have been prepared on the basis of the most current and best available information and actual results could differ from those estimates. Significant estimates made by management include revenue recognition, capitalized software, allowance for doubtful accounts, warranty reserves and valuation of goodwill and other intangible assets.

     In July 2002, the FASB issued SFAS No. 146 — Accounting for Costs Associated with Exit or Disposal Activities was issued. SFAS No. 146 provides guidance on the recognition and measurement of liabilities associated with exit and disposal activities. Under SFAS No. 146, liabilities for costs associated with exit or disposal activities should be recognized when the liabilities are incurred and measured at fair value. This statement is effective prospectively for exit or disposal activities initiated after December 31, 2002. The adoption is not expected to have a material effect on the consolidated financial statements.

     In April 2002, the FASB issued SFAS No. 145 — Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections. SFAS No. 145 provides guidance on the classification of gains and losses from the extinguishment of debt and on the accounting for certain specified lease transactions. This statement is effective for fiscal years beginning after May 15, 2002. The adoption is not expected to have a material effect on the consolidated financial statements.

     In October 2001, the FASB issued SFAS No. 144 — Accounting for the Impairment or Disposal of Long-Lived Assets, which replaces SFAS No. 121— Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. SFAS No. 144 resolves implementation issues previously experienced under SFAS No. 121 and broadens the reporting of discontinued operations. This statement becomes effective for financial statements issued for fiscal years beginning after December 15, 2001. The adoption did not have a material impact on the consolidated financial statements.

     In August 2001, the FASB issued SFAS No. 143 — Accounting for Asset Retirement Obligations. SFAS No. 143 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. This statement becomes effective for financial statements issued for fiscal years beginning after June 15, 2002. The adoption is not expected to have a material impact on the consolidated financial statements.

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VIASAT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Note 2 — Revenue Recognition

     The majority of our revenues are derived from services performed under a variety of contracts including cost-plus-fixed fee, fixed-price, and time and materials type contracts. Generally, revenues are recognized as services are performed using the percentage of completion method, measured primarily by costs incurred to date compared with total estimated costs at completion or based on the number of units delivered. We provide for anticipated losses on contracts by a charge to income during the period in which they are first identified. In June 2002 we received an award of approximately $29.6 million to continue engineering development and for the low rate initial production of terminals under an existing government contract. The most recent award required a revision of the estimate of total contract value and total estimated contract costs at completion for determining the cumulative amounts of revenue and gross profit to be recognized through June 30, 2002. This change in estimate resulted in a favorable gross profit impact of $1.9 million for the three months ended June 30, 2002.

     Contract costs on U.S. Government contracts, including indirect costs, are subject to audit and negotiations with government representatives. These audits have been completed and agreed upon through fiscal year 1998. Contract revenues and accounts receivable are stated at amounts which are expected to be realized upon final settlement.

Note 3 — Earnings Per Share

     Common stock equivalents of 953,245 and 544,769 shares for the three months ended June 30, 2001 and 2002, respectively were used to calculate diluted earnings per share. Antidilutive shares excluded from the calculation were 1,902,183 and 3,052,502 shares for the three months ended June 30, 2001 and 2002, respectively. Common stock equivalents are primarily comprised of options granted under our stock option plans.

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VIASAT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Note 4 — Composition of Certain Balance Sheet Captions (in thousands)

			March 31,				June 30,
			2002				2002
							(Unaudited)
Cash and cash equivalents:
	Cash		$	4,494			$	5,944
	Investments in debt securities			1,970				1,976
			$	6,464			$	7,920
Accounts receivable, net:
	Billed		$	39,081			$	37,701
	Unbilled			41,576				42,889
	Allowance for doubtful accounts			(487	)			(445	)
			$	80,170			$	80,145
Inventory:
	Raw materials		$	13,268			$	20,753
	Work in process			9,906				10,494
	Finished goods			6,942				2,637
			$	30,116			$	33,884
Other intangible assets:
	Technology		$	26,770			$	26,770
	Contracts and relationships			9,736				9,736
	Non-compete agreement			7,950				7,950
	Other intangibles			6,875				6,875
				51,331				51,331
	Less accumulated amortization			(7,409	)			(9,520	)
			$	43,922			$	41,811
Property and equipment:
	Machinery and equipment		$	30,131			$	30,824
	Computer equipment and software			15,783				16,298
	Furniture and fixtures			2,030				2,062
	Construction in progress			5,161				7,539
				53,105				56,723
	Less accumulated depreciation			(21,988	)			(24,373	)
			$	31,117			$	32,350
Other assets:
	Capitalized software costs, net		$	12,313			$	14,019
	Prepaid satellite services			2,500				2,500
	Deferred income taxes			1,172				1,736
	Other			964				685
			$	16,949			$	18,940
Accrued liabilities:
	Current portion of warranty reserve		$	494			$	527
	Accrued vacation			3,284				3,724
	Accrued bonus			1,952				891
	Accrued 401(k) matching contribution			2,288				—
	Collections in excess of revenues			6,090				5,262
	Other			3,688				2,037
			$	17,796			$	12,441

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VIASAT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Note 5 — Accounting for Goodwill and Intangible Assets

     The FASB issued SFAS No. 141 Business Combinations and SFAS No. 142 Goodwill and Other Intangible Assets in July 2001. SFAS No. 141 requires that all business combinations be accounted for using the purchase method. SFAS No. 141 also specifies criteria for recognizing and reporting intangible assets apart from Goodwill; however, Acquired workforce must be recognized and reported in goodwill. SFAS No. 142 requires that intangible assets with an indefinite life should not be amortized until their life is determined to be finite, and all other intangible assets must be amortized over their useful life. SFAS No. 142 also requires that goodwill not be amortized but instead tested for impairment in accordance with the provisions of SFAS No. 142 at least annually and more frequently upon the occurrence of certain events. In addition, all goodwill must be assigned to reporting units for purposed of impairment testing.

     We adopted certain of the provisions of these pronouncements effective July 1, 2002, as required for goodwill and intangible assets acquired in purchase business combination consummated after June 30, 2001. We adopted the remaining provisions of SFAS No. 141 and SFAS No. 142 effective April 1, 2002. As a result of adopting SFAS No. 142 on April 1, 2002, “Acquired workforce” with a net book value of $3.4 million was reclassified to goodwill.

     We are in the process of assessing whether goodwill within our reporting units was impaired at the date of adoption of this pronouncement using a two-step transitional impairment test. The first step, which we must complete by September 30, 2002, is our identification of any impairment of goodwill as of April 1, 2002. If any impairment is identified in step one, we will be required to complete a second step to measure the actual amount of the impairment loss, if any, prior to March 31, 2003. Any impairment loss resulting from the transitional impairment test will be reflected as the cumulative effect of a change in accounting principle as of April 1, 2002. As we have not yet completed the impairment test, we have not yet determined the impact, if any, that it will have on our financial position or results of operations.

     A reconciliation of results of operations adjusted to exclude amortization expense net of tax related to goodwill (including Acquired workforce) assuming adoption of SFAS 142 on April 1, 2001 is as follows (In thousands, except share data):

The intangible assets are amortized using the straight-line method over their estimated useful lives of two to ten years. The technology intangible asset has several components with estimated useful lives of six to nine years, contracts and relationships intangible asset has several components with estimated useful lives of three to nine years and non-compete agreements have useful lives of three to five years.

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VIASAT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

The current and expected amortization expense for each of the following periods is as follows (in thousands):

Note 6 — Notes Payable and Line of Credit

     On June 21, 2001 we entered into a Revolving/Term Loan Agreement of $25 million with certain banks. On March 29, 2002 we extended our Revolving/Term Loan Agreement of $25 million to April 30, 2003. Under the revolving/term facility, we have the option to borrow at the bank’s prime rate or at LIBOR plus, in each case, an applicable margin based on the ratio of our total debt to EBITDA (earnings before interest and taxes and depreciation and amortization). The agreement contains financial covenants that set maximum debt to EBITDA limits, minimum quarterly EBITDA limits, a minimum quick ratio limit and a minimum tangible net worth limit. As of March 31, 2002 we were in violation of the minimum quarterly EBITDA limit and the minimum tangible net worth limit. On July 10, 2002, ViaSat executed a Waiver and Amendment No. 2 to the Revolving/Term Loan Agreement which waived those covenant violations and added limitations on ViaSat’s ability to borrow additional funds from the banks based on the levels of accounts receivable and inventory held by ViaSat. The agreement is collateralized by cash, accounts receivable, and inventory of ViaSat.

     As of June 30, 2002 ViaSat was in violation of the EBITDA limit of the Revolving/Term Loan Agreement. ViaSat obtained a waiver of this covenant violation which is subject to further negotiation and may require a reduction in the line of credit.

     We cannot assure you that we will be able to comply with our financial covenants in the future, or that any further financial covenant violations will be waived. Any violation that is not waived could result in an event of default, permitting the Administrative Agent and lenders to suspend commitments to make any advance, to declare notes and interest thereon due and payable, and to require any outstanding letters of credit to be collateralized by an interest bearing cash account. At June 30, 2002 the total outstanding borrowings under the revolving/term facility were $18.4 million and amounts outstanding under standby letters of credit were $1.3 million. With the limitation of borrowing based on levels of accounts receivable and inventory, borrowing availability under the revolving/term facility was $1.0 million at June 30, 2002.

Note 7 — Contingencies

     On December 5, 2001 Astrolink International LLC terminated for convenience two of our ground segment contracts. At the time of termination, one of Astrolink’s major investors had announced that it would not invest further in the Astrolink program. These two contracts relate to the development and production of subscriber terminals and service provider gateways for the Astrolink satellite system. The terms of the contracts require Astrolink to pay us an aggregate termination claim of approximately $34.1 million. This contractual termination amount, to the extent collectible, exceeds our assets at risk, but has not been recorded in the accompanying consolidated balance sheet. Astrolink contracts, accounted for approximately 10% of our revenues in fiscal year 2002. We have not recorded any revenue related to the Astrolink contracts in fiscal year 2003.

     The assets at risk to Astrolink included in our balance sheet as of June 30, 2002 were accounts receivable due from Astrolink in the amount of approximately $6.3 million, inventory specific to Astrolink of $394,000 and $2.5 million we had prepaid for airtime on Astrolink satellites. The $6.3 million accounts receivable is included in Astrolink’s $34.1 million termination liability to us noted above. We expect that our assets at risk will exceed $9.2 million. We expect to incur additional costs associated with winding down the program and terminating the contracts of our subcontractors on the program, but the additional amounts at risk are not determinable at this time.

     In May 2002 Liberty Satellite & Technology, Inc. (“Liberty”), an investor in Astrolink, reported that it has signed non-binding letter of intent with the other investors in Astrolink (Lockheed Martin Corporation, TRW, Inc. and Telepazio S.p.A.) in connection with a proposed restructuring of Astrolink.

     We are currently a party to various government and commercial contracts which require us to meet performance covenants and project milestones. Under the terms of these contracts, failure by us to meet such performance covenants and milestones permit the other party to terminate the contract and, under certain circumstances, recover liquidated damages or other penalties. We are currently not in compliance (or in the past was not in compliance)

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VIASAT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

with the performance or milestone requirements of certain of these contracts. Historically, our customers have not elected to terminate such contracts or seek liquidated damages from us and we do not believe that our existing customers will do so; therefore, we have not accrued for any potential liquidated damages or penalties.

Note 8 — Immeon Networks, L.L.C.

     In January 2001 ViaSat and Loral Skynet formed a joint venture named Immeon Networks, L.L.C. (Immeon). We account for our investment under the equity method because we have significant influence, but not control, of the operations of Immeon. During periods of operating losses of Immeon, those losses are allocated to ViaSat and Loral Skynet according to each venture’s contribution to Immeon. If Immeon attains profitability in the future, contributions previously provided by the joint venturers will be reimbursed based on the allocation of profits. Once all contributions have been fully reimbursed to the respective venturer, each venturer is entitled to 50% of the net profits of Immeon, subject to certain adjustments. To date, we have provided services to Immeon. As such, in accordance with the terms of the joint venture agreement, the services are considered contributions to Immeon for the purposes of determining the allocation of the net loss of Immeon to the venturers. Our share of the operating losses of Immeon for the three months ended June 30, 2001 and 2002 was $724,000 and $529,000, respectively. Our share of the net losses of Immeon is limited to the extent of our investment in (including contributions in the form of services), advances to and financial guarantees that create additional basis in Immeon. Our share of losses and advances to Immeon has reduced our investment, including contributions in the form of services, to zero. We are obligated to provide services to Immeon through December 31, 2002; provided however, that we would maintain an obligation to provide some level of service to Immeon through the end of its customer contracts in 2004.

Note 9 — Income Taxes

     In calculating the tax benefit for the three months ended June 30, 2002 we applied a 40% tax rate to income before taxes and combined the result with the research and development tax credit estimated for the period. Our estimated annual effective rate for the fiscal year is influenced by the amount of research and development tax credit relative to income before taxes. Since the research and development tax credit is not variable to income, fluctuations in estimated annual income before taxes can cause disproportionate changes in the tax provision. In calculating the tax provision for the three months ended June 30, 2001 we applied the estimated annual effective rate of 32.3% to income before taxes.

Note 10 — Segment Information

     We are organized primarily on the basis of products with commercial and government (defense) communication applications. The following table summarizes revenues and operating profits by operating segment for the three months ended June 30, 2001 and 2002. Certain corporate general and administrative costs, amortization of intangible assets and charges of acquired in-process research and development are not allocated to either segment and accordingly, are shown as reconciling items from segment operating profit and consolidated operating profit. Assets are not tracked by operating segment. Consequently, it is not practical to show assets by operating segments. Depreciation expense is allocated to operating segments as an overhead charge based on direct labor dollars within the operating segments (in thousands).

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VIASAT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Revenue information by geographic area for the three month periods ended June 30, 2001 and 2002 is as follows (in thousands):

We distinguish revenues from external customers by geographic areas based on customer location.

The net book value of long-lived assets located outside North America were $39,000 and $35,000 at June 30, 2001 and 2002, respectively.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

     The following information should be read in conjunction with the condensed consolidated financial statements and the notes thereto included in Item 1 of this Quarterly Report and the audited consolidated financial statements and notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations for included in ViaSat’s Annual Report on Form 10-K for the year ended March 31, 2002, filed with the Securities and Exchange Commission.

     Except for the historical information contained herein, the following discussion contains forward-looking statements that are subject to risks and uncertainties. Actual results may differ substantially from those referred to herein due to a number of factors, including but not limited to risks described in the section entitled “Factors That May Affect Future Performance” and elsewhere in this Quarterly Report.

General

     ViaSat was incorporated in 1986 and completed its initial public offering in 1996. We are a leading provider of advanced broadband digital satellite communications and other wireless networking and signal processing equipment and services to the defense and commercial markets. Based on our extensive experience in complex defense communications systems, we have developed the capability to design and implement innovative communications solutions that enhance bandwidth utilization by applying our sophisticated networking and digital signal processing techniques. Our goal is to leverage our advanced technology and capabilities to capture a significant share of the global satellite communications services and equipment segment of the broadband communications market for both government and commercial customers.

Critical Accounting Policies and Estimates

     Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses ViaSat’s consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The policies discussed below are considered by management to be critical to an understanding of our financial statements because their application places the most significant demands on management’s judgment, with financial reporting results relying on estimation about the effect of matters that are inherently uncertain. Specific risks for these critical accounting policies are described in the following paragraphs. For all of these policies, management cautions that future events rarely develop exactly as forecast, and the best estimates routinely require adjustment.

Revenue recognition

     Our revenue recognition policy is significant because our revenue is a key component of our results of operations. Generally, revenues are recognized as services are performed using the percentage of completion method, measured primarily by costs incurred to date compared with total estimated costs at completion or based on the number of units delivered. Historically, we have been able to make reliable estimates and have therefore been able to reasonably determine our percent complete. However, many of our contracts involve the development of new technology and, as a result, the development of estimates underlying our percent complete is inherently subject to greater uncertainty. Even with our experience in estimating contract costs it is possible that our actual results could ultimately differ from our estimates, or that estimates could change as we make progress on a contract. Either of these potential outcomes would result in adjustments to the revenues and profits recorded on a contract. From time to time we have recorded such changes in estimate. We encounter multiple awards to a single contract that may occur simultaneously or over time. The separate awards are treated as part of the same contract when recognizing revenue on the percentage of completion method when the awards: 1) are negotiated as a package in the same economic environment with an overall profit margin objective, 2) constitute in essence an agreement to do a single project, 3) require closely interrelated activities with substantial common costs that cannot be separately identified with, or reasonably allocated to, the elements, phases or units of output, 4) are performed concurrently or

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in a continuous sequence under the same project management at the same location or at different location in the same general vicinity, and 5) constitute in substance an agreement with a single customer.

     It is also possible that adjusted estimates could indicate that we will incur a loss on a contract. We provide for anticipated losses on contracts by a charge to income during the period in which they are first identified.

Capitalized Software Development Costs

     Software development costs incurred from the time technological feasibility is reached until the product is available for general release to customers are capitalized and reported at the lower of unamortized cost or net realizable value. Once the product is available for general release, the software development costs are amortized based on the ratio of current to future revenue for each product with an annual minimum equal to straight-line amortization over the remaining estimated economic life of the product. The determination of net realizable value involves judgement and estimates of future revenues to be derived from a product, as well as estimates of estimated future costs of manufacturing that product. We use our experience in the marketplace in making judgements in estimating net realizable value, but our estimates may differ from the actual outcome. We periodically assess the assumptions underlying our estimates and, if necessary, we would adjust the carrying amount of capitalized software development costs downward to our new estimate of net realizable value.

     At March 31, 2002, $12.6 million of software development costs had been incurred and as of June 30, 2002 a total of $14.6 million of software development costs had been incurred. For the three months ended June 30, 2001 and 2002 amortization expense was $14,000 and $265,000, respectively. These software development costs are part of other assets on the balance sheet and the related amortization expense is recorded as a charge to cost of revenues on the income statement.

Allowance for doubtful accounts

     We make estimates of the collectibility of our accounts receivable based on historical bad debts, customer credit-worthiness and current economic trends when evaluating the adequacy of the allowance for doubtful accounts. Historically, our bad debts have been minimal; a contributing factor to this is that a significant portion of our sales have been to the U.S. Government. Our accounts receivables balance was $80.1 million, net of allowance for doubtful accounts of $445,000 as of June 30, 2002.

Allowance for warranty reserves

     We provide limited warranties on certain of our products for periods of up to five years. We record a liability for our warranty obligations when products are shipped based upon an estimate of expected warranty costs. Amounts expected to be incurred within twelve months are classified as a current liability. For mature products the warranty costs estimates are based on historical experience with the particular product. For newer products that do not have a history of warranty costs, we base our estimates on our experience with the technology involved and the types of failure that may occur. It is possible that our underlying assumptions will not reflect the actual experience and in that case, future adjustments will be made to the recorded warranty obligation.

Goodwill and other intangible assets

     The acquisition of the Satellite Networks Business in fiscal year 2001 and Comsat Laboratories and U.S. Monolithics in fiscal year 2002 were accounted for by the purchase method of accounting. An independent appraiser was used to assist management in identifying the intangible assets acquired and establishing their fair value and estimated lives of the goodwill and other intangible assets. The criteria used for these appraisals include management’s estimates of cash flows to be generated by these intangible assets in future periods. Useful lives and related amortization expense are based on our estimates of the periods that the assets will generate revenues or otherwise be used by us. Factors that would influence the likelihood of a material change in our reported results include significant changes in our estimates of future cash flow, significant changes in our strategic business objectives, or significant negative changes in industry or economic trends.

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     As required in Statement of Financial Accounting Standards (“SFAS”) No. 142 and 144, we will perform periodic reviews for impairment of goodwill and other intangible assets. There are many management assumptions and estimates underlying the determination of an impairment loss, and estimates using different, but reasonable, assumptions could produce significantly different results. Therefore, the timing and recognition of impairment losses by us in the future, if any, will continue to be dependent upon our estimates and assumptions.

Results of Operations

     The following table presents, as a percentage of total revenues, income statement data for the periods indicated.

Three Months Ended June 30, 2001 vs. Three Months Ended June 30, 2002

     Revenues. Revenues decreased 12.1% from $48.8 million for the three months ended June 30, 2001 to $42.9 million for the three months ended June 30, 2002. The decrease was largely due to lower revenues from commercial broadband activities and commercial product sales, partially offset by higher sales volume from certain government products.

Revenues from the government segment increased 35.3% from $15.0 million for the three months ended June 30, 2001 to $20.3 million for the three months ended June 30, 2002. The increase was driven by higher revenues from the MIDS and UHF modem programs.

Revenues from the commercial segment decreased 33.1% from $33.8 million for the three months ended June 30, 2001 to $22.6 million for the three months ended June 30, 2002. The decrease was largely due to lower revenues from commercial broadband activities, particularly from the Astrolink contract termination.

     Gross Profit. Gross profit decreased 9.4% from $14.9 million (30.5% of revenues) for the three months ended June 30, 2001 to $13.5 million (31.5% of revenues) for the three months ended June 30, 2002. This decrease in gross profit was primarily due to lower volumes of broadband development programs partially offset by the favorable impact of the recent MIDS award and by higher sales volumes of other higher margin government products. In June 2002 we received an award of approximately $29.6 million to continue engineering development and for low rate initial production of terminals under our existing MIDS contract. Consistent with our accounting policy for contracts with multiple awards, the most recent award was combined with the existing contract for accounting purposes, requiring us to revise our estimate of total contract value and total estimated contract costs at completion for determining the cumulative amounts of revenue and gross profit to be recognized through June 30, 2002. As a result of the award and the combination with the existing MIDS contract, we estimated an increase in gross profit on the combined contract, that will be recognized over the term of the combined contract including a favorable gross profit impact of $1.9 million for the three months ended June 30, 2002.

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     Selling, General and Administrative Expenses. Selling, general and administrative (“SG&A”) expenses increased 8.8% from $8.0 million (16.4% of revenues) for the three months ended June 30, 2001 to $8.7 million (20.4% of revenues) for the three months ended June 30, 2002. The increase in SG&A expenses was due to the addition of expenses for U.S. Monolithics that was acquired in January 2002 and an increase in business development partially offset by a reduction in our bonus accrual and certain other cost saving measures. SG&A expenses consist primarily of personnel costs and expenses for business development, marketing and sales, bid and proposal, finance, contract administration and general management. Some SG&A expenses are difficult to predict and vary based on specific government and commercial sales opportunities.

     Independent Research and Development. Independent research and development (“IR&D”) expenses increased 338.5% from $1.3 million (2.6% of revenues) for the three months ended June 30, 2001, to $5.7 million (13.3% of revenues) for the three months ended June 30, 2002. This increase was primarily due to IR&D spending for U.S. Monolithics whose current products are primarily in the development phase and for increased spending in commercial broadband development.

     Amortization of Goodwill and Intangible Assets. The acquisition of the Satellite Networks Business in fiscal year 2001 and Comsat Laboratories and U.S. Monolithics in fiscal year 2002 were accounted for by the purchase method of accounting. The dates of acquisition of Comsat Laboratories and U.S. Monolithics were both after June 30, 2001 and were accounted for under SFAS 141. Therefore, the goodwill of those two acquisitions has not been subject to amortization. As the result of adopting SFAS 142 for our fiscal year ending March 31, 2003, we no longer amortize the intangibles assets “Acquired workforce” of $5.5 million or “Goodwill” of $4.5 million acquired in the Satellite Networks Business acquisition. “Acquired workforce” did not meet the separability requirements of SFAS 141 and has been subsumed into goodwill beginning April 1, 2002. The intangible assets are being amortized over useful lives ranging from two to ten years. Below is the allocation of the amortization expense for the three month periods ending June 30, 2001 and 2002 (In thousands).

     Interest Expense. Interest expense increased from $5,000 for the three months ended June 30, 2001 to $125,000 for the three months ended June 30, 2002. Total outstanding equipment loans were $168,000 at June 30, 2001. There were no outstanding borrowings under our line of credit as of June 30, 2001. At June 30, 2002 there were no outstanding equipment loans and $18.4 million in outstanding borrowings under our line of credit.

     Interest Income. Interest income decreased from $218,000 for the three months ended June 30, 2001 to $14,000 for the three months ended June 30, 2002. This decrease resulted from lower average invested cash balances and lower yields.

     Equity in Loss of Joint Venture. Equity in loss of joint venture decreased from $724,000 for the three months ended June 30, 2001 to $529,000 for the three months ended June 30, 2002. This decrease was related to an increase in revenues and lower costs for Immeon.

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     Provision for Income Taxes. Our effective income tax rate decreased from a provision of 32.3% for the three months ended June 30, 2001 to a benefit of 57.2% for the three months ended June 30, 2002. In calculating the tax benefit for the three months ended June 30, 2002 we applied a 40% tax rate to income before taxes and combined the result with the research and development tax credit estimated for the period. Our estimated annual effective rate for the fiscal year is influenced by the amount of research and development tax credit relative to income before taxes. Since the research and development tax credit is not variable to income, fluctuations in estimated annual income before taxes can cause disproportionate changes in the tax provision. In calculating the tax provision for the three months ended June 30, 2001 we applied the estimated annual effective rate of 32.3% to income before taxes.

Backlog

     At June 30, 2002 we had firm backlog of $176.2 million of which $150.6 million was funded. The firm backlog of $176.2 million does not include contract options of $47.7 million. Of the $176.2 million in firm backlog, approximately $96.3 million is expected to be delivered in the fiscal year ending March 31, 2003, and the balance is expected to be delivered in the fiscal year ending March 31, 2004 and thereafter. At March 31, 2002 we had firm backlog of $139.4 million, of which $124.2 million was funded, not including options of $48.8 million. We include in our backlog only those orders for which we have accepted purchase orders.

     Backlog is not necessarily indicative of future sales. A majority of our U.S. government contracts can be terminated at the convenience of the customer since orders are often made substantially in advance of delivery, and our U.S. government contracts typically provide that orders may be terminated with limited or no penalties. Further, most of our commercial contracts do not contain specific termination liability amounts, and therefore, upon termination by a commercial customer we would only be entitled to damages provided by law. These damages would likely be substantially less than the full value of the contract. In addition, purchase orders may set forth product specifications that would require us to complete additional product development. A failure to develop products meeting such specifications could lead to a termination of the related purchase order.

     The backlog amounts as presented are comprised of funded and unfunded components. Funded backlog represents the sum of contract amounts for which funds have been specifically obligated by customers to contracts. Unfunded backlog represents future amounts that customers may obligate over the specified contract performance periods. Our customers allocate funds for expenditures on long-term contracts on a periodic basis. Our ability to realize revenues from contracts in backlog is dependent upon adequate funding for such contracts. Although funding of our contracts is not within our control, our experience indicates that actual contract fundings have ultimately been approximately equal to the aggregate amounts of the contracts.

Recent Accounting Pronouncements

     In July 2002, the FASB issued SFAS No. 146 — Accounting for Costs Associated with Exit or Disposal Activities was issued. SFAS No. 146 provides guidance on the recognition and measurement of liabilities associated with exit and disposal activities. Under SFAS No. 146, liabilities for costs associated with exit or disposal activities should be recognized when the liabilities are incurred and measured at fair value. This statement is effective prospectively for exit or disposal activities initiated after December 31, 2002. The adoption is not expected to have a material effect on the consolidated financial statements.

     In April 2002, the FASB issued SFAS No. 145 — Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections. SFAS No. 145 provides guidance on the classification of gains and losses from the extinguishment of debt and on the accounting for certain specified lease transactions. This statement is effective for fiscal years beginning after May 15, 2002. The adoption is not expected to have a material effect on the consolidated financial statements.

     In October 2001, the FASB issued SFAS No. 144 — Accounting for the Impairment or Disposal of Long-Lived Assets, which replaces SFAS No. 121— Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. SFAS No. 144 resolves implementation issues previously experienced under SFAS No. 121 and broadens the reporting of discontinued operations. This statement becomes effective for financial statements issued for fiscal years beginning after December 15, 2001. The adoption did not have a material impact on the consolidated financial statements.

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In August 2001, the FASB issued SFAS No. 143 — Accounting for Asset Retirement Obligations. SFAS No. 143 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. This statement becomes effective for financial statements issued for fiscal years beginning after June 15, 2002. The adoption is not expected to have a material impact on the consolidated financial statements.

Liquidity and Capital Resources

     We have financed our operations to date primarily with cash flows from operations, bank line of credit financing, equity financing and loans for the purchase of capital equipment. Cash provided by operating activities for the three months ended June 30, 2001 was $4.4 million and cash used in operating activities for the three months ended June 30, 2002 was $1.6 million. We used cash to fund a net loss of $1.6 million for the three months ended June 30, 2002. Increase in inventory and an increase in accrued liabilities caused a reduction in cash which was partially offset by a decrease in accounts payable.

     Cash used in investing activities for the three months ended June 30, 2001 was $5.1 million and cash used in investing activities for the three months ended June 30, 2002 was $6.2 million. We acquired $2.6 million in equipment and invested $1.6 million in capitalized software in the three months ended June 30, 2001 compared to $3.7 million of equipment and $2.0 million of capitalized software during the three months ended June 30, 2002.

     Cash provided by financing activities for the three months ended June 30, 2001 was $621,000 and cash provided by financing activities for the three months ended June 30, 2002 was $9.2 million. This increase was primarily the result of $8.5 million in loan proceeds from our line of credit in the three months ended June 30, 2002.

     At June 30, 2002, we had $8.1 million in cash, cash equivalents and short-term investments and $81.4 million in working capital. We had $18.4 million in outstanding borrowings under our line of credit at June 30, 2002.

     On June 21, 2001 we entered into a Revolving/Term Loan Agreement of $25 million with certain banks. On March 29, 2002 we extended our Revolving/Term Loan Agreement of $25 million to April 30, 2003. Under the revolving/term facility, we have the option to borrow at the bank’s prime rate or at LIBOR plus, in each case, an applicable margin based on the ratio of our total debt to EBITDA (earnings before interest and taxes and depreciation and amortization). The agreement contains financial covenants that set maximum debt to EBITDA limits, minimum quarterly EBITDA limits, a minimum quick ratio limit and a minimum tangible net worth limit. As of March 31, 2002 we were in violation of the minimum quarterly EBITDA limit and the minimum tangible net worth limit. On July 10, 2002, ViaSat executed a Waiver and Amendment No. 2 to the Revolving/Term Loan Agreement which waived those covenant violations and added limitations on ViaSat’s ability to borrow additional funds from the banks based on the levels of accounts receivable and inventory held by ViaSat. The agreement is collateralized by cash, accounts receivable, and inventory of ViaSat.

     We cannot assure you that we will be able to comply with our financial covenants in the future, or that any further financial covenant violations will be waived. Any violation that is not waived could result in an event of default, permitting the Administrative Agent and lenders to suspend commitments to make any advance, to declare notes and interest thereon due and payable, and to require any outstanding letters of credit to be collateralized by an interest bearing cash account. At June 30, 2002 the total outstanding borrowings under the revolving/term facility were $18.4 million and amounts outstanding under standby letters of credit were $1.3 million. With the limitation of borrowing based on levels of accounts receivable and inventory, borrowing availability under the revolving/term facility was $1.0 million at June 30, 2002.

     As of June 30, 2002, ViaSat was in violation of the EBITDA limit of the Revolving/Term Loan Agreement. ViaSat obtained a waiver of this covenant violation which is subject to further negotiation and may require a reduction in the line of credit.

     On December 5, 2001 Astrolink International LLC terminated for convenience two of our ground segment contracts. At the time of termination, one of Astrolink’s major investors had announced that it would not invest further in the Astrolink program. These two contracts relate to the development and production of subscriber terminals and service provider gateways for the Astrolink satellite system. The terms of the contract require Astrolink to pay us an aggregate termination claim of approximately $34.1 million. This contractual termination amount, to the extent collectible, exceeds our assets at risk but has not been recorded in the accompanying consolidated balance sheet. Astrolink contracts accounted for approximately 10% of our revenues in fiscal year 2002. We have not recorded any revenue related to the Astrolink contracts in fiscal year 2003.

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     The assets at risk to Astrolink included in our balance sheet as of June 30, 2002 were accounts receivable due from Astrolink in the amount of approximately $6.3 million, inventory specific to Astrolink of $394,000 and $2.5 million we had prepaid for airtime on Astrolink satellites. The $6.3 million accounts receivable is included in Astrolink’s $34.1 million termination liability to us noted above. We expect that our assets at risk will exceed $9.2 million. We expect to incur additional costs associated with winding down the program and terminating the contracts of our subcontractors on the program, but the additional amounts at risk are not determinable at this time.

     In May 2002 Liberty Satellite & Technology, Inc. (“Liberty”), an investor in Astrolink, reported that it has signed non-binding letter of intent with the other investors in Astrolink (Lockheed Martin Corporation, TRW. Inc. and Telepazio S.p.A.) in connection with a proposed restructuring of Astrolink.

     ViaSat is continuing discussions with Astrolink and other interested parties regarding potential alternatives for the Astrolink project. We cannot, however, make assurances that the assets or the contractual termination amounts will be fully recovered. If Astrolink is unable to successfully restructure its operations, or obtain additional funding, it would substantially limit our ability to recover the assets at risk and could cause ViaSat to incur losses which could harm our business; however, we have not made any adjustments to the recorded amount as it is not possible at this time to reasonably estimate or determine what loss, if any, will be incurred.

     In September 2001, we filed a universal shelf registration statement with the Securities and Exchange Commission for the future sale of up to $75 million of debt securities, common stock, preferred stock, depositary shares, and warrants. The securities may be offered from time to time, separately or together, directly by us or through underwriters at amounts, prices, interest rates and other terms to be determined at the time of the offering. We currently intend to use the net proceeds from the sale of the securities under the shelf registration statement for general corporate purposes, including acquisitions, capital expenditures, working capital and the repayment or refinancing of our debt. In January 2002, we issued 2,000,000 shares of our common stock under this registration statement for proceeds, net of offering costs, of approximately $27.1 million. We used the net proceeds from the sale of the common stock for general corporate purposes, which included funding research, increasing our working capital, reducing indebtedness and capital expenditures.

     Our future capital requirements will depend upon many factors, including the expansion of our research and development and marketing efforts and the nature and timing of orders. Additionally, we will continue to evaluate possible acquisitions of, or investments in complementary businesses, products and technologies which may require the use of cash. We believe that our current cash balances and net cash expected to be provided by operating activities will be sufficient to meet our operating requirements for at least the next 12 months. However, we may sell additional equity or debt securities or obtain credit facilities to further enhance our liquidity position. The sale of additional securities could result in additional dilution of our stockholders. We invest our cash in excess of current operating requirements in short-term, interest-bearing, investment-grade securities.

     The following table sets forth a summary of our obligations under operating leases, capital leases, notes payable and irrevocable letters of credit for the periods indicated (in thousands):