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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2003
OR
[ ] 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 000-22221
KONTRON MOBILE COMPUTING, INC.
(Exact name of registrant as specified in its charter)
Minnesota 41-1731723
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7631 Anagram Drive
Eden Prairie, Minnesota 55344
(Address of principal executive offices)
(Zip Code)
(952) 974-7000
(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 [ ]
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act)
Yes [ ] No [X]
The number of shares of the registrant's Common Stock, $.001 par value,
outstanding as of May 6, 2003 was 14,952,926.
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1
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
KONTRON MOBILE COMPUTING, INC.
BALANCE SHEETS
MARCH 31, DECEMBER 31,
2003 2002
------------ ------------
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents .......................................................... $ 1,345,700 $ 2,031,285
Accounts receivable, net of allowance for doubtful accounts of $133,500
and $127,200 ................................................................... 859,002 3,015,258
Accounts receivable, related parties ............................................... 89,799 119,919
Inventories ........................................................................ 1,356,936 975,263
Prepaid expenses and other ......................................................... 104,236 54,269
------------ ------------
Total current assets .................................................... 3,755,673 6,195,994
------------ ------------
Property and Equipment:
Computers and equipment ......................................................... 1,163,624 1,163,624
Furniture and fixtures .......................................................... 800,706 800,706
Leasehold improvements .......................................................... 346,099 346,099
Less: Accumulated depreciation and amortization ................................. (2,164,666) (2,129,623)
------------ ------------
Property and equipment, net ................................................. 145,763 180,806
Deposits and Other Assets, net ..................................................... 44,027 39,398
------------ ------------
TOTAL ASSETS ....................................................................... $ 3,945,463 $ 6,416,198
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable ................................................................... $ 225,655 $ 401,845
Accounts payable, related parties .................................................. 396,276 412,425
Accrued warranty ................................................................... 283,000 332,169
Accrued compensation and benefits .................................................. 54,047 272,312
Other accrued liabilities .......................................................... 116,451 340,174
Deferred revenue, short-term ....................................................... 743,397 797,658
------------ ------------
Total current liabilities ................................................... 1,818,826 2,556,583
------------ ------------
LONG TERM LIABILITIES:
Notes payable to Kontron AG ........................................................ 6,138,330 7,462,071
Deferred revenue, long-term ........................................................ 158,400 266,634
------------ ------------
Total long term liabilities ................................................. 6,296,730 7,728,705
------------ ------------
Total Liabilities .................................................................. 8,115,556 10,285,288
------------ ------------
SHAREHOLDERS' EQUITY (DEFICIT):
Series B Convertible Preferred Stock, $.001 par value, 4,250,000 shares authorized;
4,250,000 issued and outstanding at March 31, 2003 .............................. 4,250 4,250
Series C Convertible Preferred Stock, $.001 par value, 500,000 shares authorized;
500,000 issued and outstanding at March 31, 2003 ................................ 500 500
Common stock, $.001 par value, 30,000,000 shares authorized;
14,952,926 issued and outstanding for both periods .............................. 14,953 14,953
Additional paid-in capital ......................................................... 32,551,972 32,551,972
Accumulated deficit ................................................................ (36,741,768) (36,440,765)
------------ ------------
Total shareholders' equity (deficit) .................................... (4,170,093) (3,869,090)
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) ............................... $ 3,945,463 $ 6,416,198
============ ============
The accompanying notes are an integral part of these financial statements.
2
KONTRON MOBILE COMPUTING, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31,
------------------------------------
2003 2002
---- ----
Net Sales ............................................ $ 2,126,710 $ 3,156,371
Cost of Sales ........................................ 1,202,676 1,664,846
------------ ------------
Gross profit .................................... 924,034 1,491,525
------------ ------------
Operating Expenses:
Sales and marketing ............................. 441,909 582,622
General and administrative ...................... 280,322 305,034
Research and development ........................ 290,837 220,327
------------ ------------
Total operating expenses ................... 1,013,068 1,107,983
------------ ------------
Operating income (loss) .................... (89,034) 383,542
Loss on foreign currency ............................. (54,005) (26,626)
Interest expense, net ................................ (157,964) (183,311)
------------ ------------
Net income (loss) applicable to common shareholders .. $ (301,003) $ 173,605
============ ============
Basic and Diluted Income (Loss) Per Common Share:
Net income (loss) per common share ................... $ (.02) $ .01
------------ ------------
Basic weighted average common shares outstanding ..... 14,952,926 14,952,926
============ ============
Diluted weighted average common shares outstanding ... 14,952,926 15,020,941
============ ============
The accompanying notes are an integral part of these financial statements.
3
KONTRON MOBILE COMPUTING, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31,
------------------------------------
2003 2002
---- ----
OPERATING ACTIVITIES:
Net income (loss) ................................................ $ (301,003) $ 173,605
Adjustments to reconcile net income (loss) to net cash provided by
operating activities--
Depreciation and amortization ............................... 35,043 77,758
Loss on foreign currency .................................... 54,005 26,626
Changes in operating items:
Accounts receivable .................................... 2,186,376 1,495,158
Inventories ............................................ (381,673) (89,565)
Prepaid expenses and other ............................. (54,596) 65,062
Accounts payable ....................................... (192,339) (705,544)
Accrued expenses ....................................... (506,740) (683,407)
Deferred revenue ....................................... (162,495) (25,895)
----------- -----------
Net cash provided by operating activities ................... 676,578 333,798
----------- -----------
INVESTING ACTIVITIES:
Purchase of property and equipment .......................... -- (33,818)
----------- -----------
FINANCING ACTIVITIES:
Repayments of notes to Kontron AG ........................... (1,655,349) (622,716)
Net proceeds from forward contracts ......................... 293,186 --
----------- -----------
Net cash used for financing activities ...................... (1,362,163) (622,716)
----------- -----------
CHANGE IN CASH AND CASH EQUIVALENTS .............................. (685,585) (322,736)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD ................... 2,031,285 2,073,970
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD ......................... $ 1,345,700 $ 1,751,234
=========== ===========
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Cash paid for interest ........................................... $ 344,651 $ 193,879
=========== ===========
The accompanying notes are an integral part of these financial statements.
4
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION:
The accompanying unaudited financial statements of Kontron Mobile
Computing, Inc. ("Kontron Mobile Computing" or "the Company") should be read in
conjunction with the financial statements and notes thereto filed with the
Securities and Exchange Commission in the Company's Annual Report on Form 10-K,
for the fiscal year ended December 31, 2002. In the opinion of management, the
accompanying financial statements reflect all adjustments (consisting only of
normal recurring adjustments) considered necessary to present fairly the
financial results for the interim periods presented. The results of operations
for the interim periods are not necessarily indicative of the results to be
expected for the entire fiscal year.
2. INVENTORIES:
Inventories are stated at the lower of cost, as determined by the first-in,
first-out cost method, or market value.
The components of inventories were:
MARCH 31, DECEMBER 31,
2003 2002
---- ----
Raw materials ..... $ 874,132 $ 626,560
Work in process ... 201,260 59,962
Finished goods .... 281,544 288,741
---------- ----------
Total ........ $1,356,936 $ 975,263
========== ==========
3. FINANCING:
Kontron AG ("Kontron") has provided the Company with a written agreement to
provide financial support to enable the Company to meet its cash flow needs and
obligations as and when they become due through December 31, 2003, if necessary.
The Company has a line of credit agreement with Kontron which allows for
borrowings of up to 8.5 million Euros for operations ($9.2 million based on
March 31, 2003 exchange rate.) As of March 31, 2003, borrowings under this
agreement bear interest at 8% per annum (payable monthly). Outstanding
borrowings under this line of credit were approximately $6.1 million at March
31, 2003. In the first quarter of 2003, the Company repaid $2.0 million to
Kontron, consisting of $1,655,000 in principal and $345,000 in accrued interest.
4. FOREIGN CURRENCY TRANSACTIONS:
The Company's credit agreements with Kontron allow for borrowings which are
payable in Euros. In the second quarter of 2001, the Company began utilizing
foreign currency forward contracts to protect against significant fluctuations
in net income (loss) caused by changes in Euro exchange rates. The Company's
practice is to enter into a forward contract at the beginning of each quarter
and settle the contract at the end of the quarter. The Company records gains and
losses on these derivative contracts (which are not designated as hedging
instruments for accounting purposes) in net income (loss) in accordance with the
requirements of Statement of Financial Accounting Standards (SFAS) No. 133,
"Derivatives and Hedging Activities," and also marks the related debt instrument
to market under SFAS No. 52, "Foreign Currency Translation." For the quarter
ended March 31, 2003, the Company recorded a loss of $54,005. As of March 31,
2003, the Company entered into a new forward contract whereby the Company can
hedge up to 5.7 million Euros.
The Company currently has no other balances or transactions conducted in a
foreign currency.
5
5. ACCOUNTING PRONOUNCEMENTS:
In November 2002, the FASB issued Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others" (FIN 45). FIN 45 establishes accounting
and disclosure requirements for a company's obligations under certain guarantees
that it has issued. A guarantor is required to recognize a liability for the
obligation it has undertaken in issuing a guarantee, including the ongoing
obligation to stand ready to perform over the term of the guarantee in the event
that the specified triggering events or conditions occur. The objective of the
initial measurement of that liability is the fair value of the guarantee at its
inception. The initial recognition and measurement provisions of this
Interpretation are applicable on a prospective basis to guarantees issued or
modified after December 31, 2002. FIN 45 also requires expanded disclosure of
information related to product warranty amounts recorded in the financial
statements. The disclosure provisions are effective for interim and annual
periods ending after December 15, 2002.
The Company warrants its products against defects in materials and
workmanship under normal use and service for one year from the date of purchase.
Warranty costs for existing products, including parts and labor, are estimated
based on actual historical experience. Management uses that historical data to
accrue reserves to cover estimated costs based on units in the field. Management
reviews the estimated warranty liability on a quarterly basis to determine its
adequacy.
As required under Financial Accounting Standards Board (FASB)
Interpretation No. 45 (FIN 45), the following table presents the changes in the
Company's warranty liability for the quarter ended March 31, 2003:
Actual Warranty Amounts Charged
Beginning Balance Costs Paid to Expense Ending Balance
----------------- ---------- ---------- --------------
$332,169 $(64,064) $14,895 $283,000
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure." SFAS No. 148 amends SFAS No. 123,
"Accounting for Stock-Based Compensation," to provide alternative methods of
transition to the fair value method of accounting for stock-based employee
compensation. In addition, SFAS No. 148 amends the disclosure provisions of SFAS
No. 123 to require prominent disclosures about an entity's accounting policy
with respect to stock-based employee compensation on reported net income and
earnings per share in annual and interim financial statements.
The Company has adopted the disclosure provisions of SFAS No. 148.
Accordingly, under the provisions of SFAS No. 123, the Company applies
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" ("APB 25"), and related interpretations in accounting for its stock
option plans. In accordance with APB 25, no compensation expense was recognized
as the exercise price of the Company's stock options was equal to the market
price of the underlying stock on the date of grant and the exercise price and
number of shares subject to grant were fixed. If the Company had elected to
recognize compensation expense based on the fair value of the options granted at
the date of grant and in respect to shares issuable under the Company's equity
compensation plans as prescribed by SFAS No. 123, net income and diluted
earnings per share using the Black-Scholes option-pricing model would have been
reduced to the pro forma amounts indicated in the table below:
March 31,
---------
2003 2002
---- ----
Net income (loss), as reported.................................... $ (301,003) $ 173,605
Deduct: Total stock-based employee compensation expense
determined under fair value based method for all awards..... (581) --
---------- ---------
Pro forma net income (loss)....................................... $ (301,584) $ 173,605
=========== =========
Net income (loss) per share:
Basic and diluted - as reported............................. $ (.02) $ .01
Basic and diluted - pro forma............................... (.02) .01
6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. When used in
this Form 10-Q and in future filings by the Company with the Securities and
Exchange Commission, in the Company's press releases and in oral statements made
with the approval of an authorized executive officer, the words or phrases
"believes," "anticipates," "expects," "intends," "estimates," "should," "may" or
similar expressions are intended to identify such forward-looking statements,
but are not the exclusive means of identifying such statements. These
forward-looking statements involve risks and uncertainties that may cause the
Company's actual results to differ materially from the results discussed in the
forward-looking statements. Factors that might cause such differences include,
but are not limited to, the following: risks associated with the development of
new products, market acceptance of new products and services, technological
obsolescence, dependence on third-party manufacturers and suppliers, risks
associated with the Company's dependence on proprietary technology and the long
customer sales cycle. The Company wishes to caution readers not to place undue
reliance on any such forward-looking statements, which speak only as of the date
made. The Company undertakes no obligation to revise any forward-looking
statements in order to reflect events or circumstances after the date of such
statements. Readers are urged to carefully review and consider the various
disclosures made by the Company in this report and in the Company's other
reports filed with the Securities and Exchange Commission that attempt to advise
interested parties of the risks and factors that may affect the Company's
business. The Company's forward-looking statements are qualified in their
entirety by the cautions and risk factors set forth under the "Cautionary
Statement" filed as Exhibit 99.1 to its Form 10-K for the year ended December
31, 2002.
OPERATING RESULTS
The following table sets forth certain financial data expressed as a
percentage of net sales for the periods indicated:
FOR THE THREE MONTHS ENDED MARCH 31,
-----------------------------------
2003 2002
---- ----
Net sales .............................................. 100 % 100 %
Cost of sales .......................................... 57 53
--- ---
Gross profit ...................................... 43 47
Operating expenses:
Sales and marketing ............................... 21 18
General and administrative ........................ 13 10
Research and development .......................... 14 7
--- ---
Total operating expenses ..................... 48 35
--- ---
Operating income (loss) ................................ (5) 12
Loss on foreign currency ............................... (2) (1)
Interest expense, net .................................. (7) (5)
--- ---
Net income (loss) applicable to common shareholders .... (14)% 6%
=== ===
Net Sales. The Company's net sales decreased $1.0 million, or 33%, to $2.1
million in the first quarter of 2003 from $3.2 million in the first quarter of
2002. The decrease was due to the inability to ship two large orders due to a
delay in receiving parts from a supplier.
The Company continues to target key vertical markets, including government,
military, public services, utilities and other field service organizations.
Sales to Kontron, for further resale outside North America, accounted for 13% of
net sales in the first quarter of 2003. No customers accounted for greater than
10% of net sales in the first quarter of 2002.
International sales decreased to $0.4 million for the first quarter of 2003
from $0.5 million for the first quarter in 2002. As a percentage of net sales,
international sales were 20% for the first quarter of 2003 and 15% for the first
quarter of 2002. The majority of international sales, 64% and 78%, for the first
quarter of 2003 and 2002,
7
respectively, were in Europe. The Company believes that international sales as a
percentage of net sales for the year 2003 will be in the low- to mid-teen %
range with little impact on the Company's results of operations and liquidity.
The Company records all sales in U.S. Dollars.
Gross Margin. Gross margin decreased to $0.9 million, or 43% of net sales,
for the first quarter of 2003 from $1.5 million, or 47% of net sales for the
first quarter of 2002. The decrease in gross margin percentage is due to sales
of some remaining discontinued 5000 Series products in the first quarter of 2002
at a high margin due to the inventory previously being written down to the
estimated net realizable value, with no comparable sales in the first quarter of
2003. The Company's gross margin will fluctuate as a result of a number of
factors, including mix of products sold, inventory obsolescence, the proportion
of international sales, large customer contracts (with the associated volume
discounts) and other manufacturing expenses.
Sales and Marketing. Sales and marketing expenses include salaries,
incentive compensation, commissions, travel, trade shows, technical support and
professional services personnel and general advertising and promotion. These
expenses also include the labor and material costs related to maintaining the
Company's standard one-year warranty program on all products with the exception
of ReVolution which has a three-year limited warranty on some components and a
one-year warranty on some devices and accessories. Sales and marketing expenses
decreased to $0.4 million for the first quarter of 2003 compared to $0.6 million
for the first quarter of 2002. As a percentage of net sales, sales and marketing
expenses increased to 21% for the first quarter of 2003 from 18% for the first
quarter of 2002. The decreased dollars are due to lower sales commissions paid
on lower revenue. The increased percentage is due to lower revenue over which to
allocate the costs, other than commissions.
General and Administrative. General and administrative expenses include the
Company's executive, finance, information services and human resources
departments. These expenses remained constant at $0.3 million for the first
quarters of 2003 and 2002. As a percentage of net sales, general and
administrative expenses increased to 13% for the first quarter of 2003 from 10%
for the first quarter of 2002. The increased percentage is due to lower revenue
over which to allocate the costs.
Research and Development. Research and development expenses are incurred in
the design, development and testing of new or enhanced products, services and
customized computing platforms. All research and development costs are expensed
as incurred. Research and development expenses increased to $0.3 million in the
first quarter of 2003 from $0.2 million for the first quarter of 2002. As a
percentage of net sales, research and development expenses increased to 14% for
the first quarter of 2003 from 7% for the first quarter of 2002. The difference
from 2002 to 2003 is due to an engineering adjustment that occurred in first
quarter 2002. The increased percentage is due to lower revenue over which to
allocate the costs.
Loss on Currency Conversion. The Company's credit agreements with Kontron
allow for borrowings which are payable in Euros. In the second quarter of 2001,
the Company began utilizing foreign currency forward contracts to protect
against significant fluctuations in net income (loss) caused by changes in Euro
exchange rates. The Company's practice is to enter into a forward contract at
the beginning of each quarter and settle the contract at the end of the quarter.
The Company records gains and losses on these derivative contracts (which are
not designated as hedging instruments for accounting purposes) in net income
(loss) in accordance with the requirements of Statement of Financial Accounting
Standards (SFAS) No. 133, "Derivatives and Hedging Activities," and also marks
the related debt instrument to market under SFAS No. 52, "Foreign Currency
Translation." For the quarter ended March 31, 2003, the Company recorded a loss
on currency conversion of $54,005. As of March 31, 2003, the Company entered
into a new forward contract whereby the Company can hedge up to 5.7 million
Euros.
The Company currently has no other balances or transactions conducted in a
foreign currency.
Interest Expense, Net. Net interest expense was approximately $158,000 for
the first quarter of 2003 compared to net interest expense of $183,300 for the
comparable period in 2002. The decrease in interest expense is due to the
reduction of the interest rate of the Kontron note payable from 10% to 8%,
effective March 1, 2003, in addition to a reduction of the principal balance,
due to a $1,655,000 repayment made in February 2003.
8
LIQUIDITY AND CAPITAL RESOURCES
In 2003, one of the Company's focus areas is long-term growth by
introducing new products that will further penetrate existing markets as well as
new and growing markets. In the first quarter of 2003, the Company began
shipping the ReVolution, marking the re-entry of the Company into the rugged
notebook market. The Company continues to be focused on further cost reductions
through on-going product re-design initiatives by Kontron worldwide mobile
design teams. The Company realizes that continuous management of sales, gross
margin and cash is necessary to improve liquidity. There can be no assurance
that the Company will be successful in achieving these measures. Circumstances
that are reasonably likely to affect liquidity include changes in technology,
dependence on key customers, decrease in demand for the Company's products and
reliance on Kontron for financing and research and development support.
As in 2002, the Company intends to continue funding its own cash needs in
2003 without assistance from Kontron. To be successful, the Company will focus
on increased sales and profitability, in addition to working capital management.
The Company intends to reduce interest expense in 2003 by making partial
repayments of the note payable to Kontron as funds are available, in addition to
the reduction of the interest rate of the Kontron note payable from 10% to 8%,
effective March 1, 2003. During the first quarter of 2003, the Company repaid
$2.0 million to Kontron, consisting of $1,655,000 in principal and $345,000 in
accrued interest. However, there can be no assurance that additional repayments
will be possible.
Kontron has provided the Company with a written agreement to provide
financial support to enable the Company to meet its cash flow needs and
obligations as and when they become due through December 31, 2003, if necessary.
As of March 31, 2003, Kontron controlled approximately 65% of the Company. The
Company has a line of credit agreement with Kontron which allows for borrowings
of up to 8.5 million Euros for operations ($9.2 million based on March 31, 2003
exchange rate.) As of March 31, 2003, borrowings under this agreement bear
interest at 8% per annum (payable monthly). Outstanding borrowings under this
line of credit were approximately $6.1 million at March 31, 2003.
After re-paying $2.0 million to Kontron in the first quarter, the Company
had $1.3 million in cash and cash equivalents at March 31, 2003. The Company
will continue to monitor its cash balance and cash flow needs through the year.
Based in part upon the Company's current budget projections for the balance of
2003, the Company believes it will have sufficient cash to operate through the
end of fiscal 2003; however, there can be no assurance that the Company will
achieve its budgeted projections, and additional borrowings may be necessary.
The Company has a $750,000 line of credit with a commercial bank and if
necessary, intends to use this line of credit to fund potential cash
requirements in excess of its current cash flow projection. The line of credit
expires May 15, 2003. The Company is currently finalizing an arrangement with
the bank for a new agreement through May 2004. There were no borrowings
outstanding on this line of credit at March 31, 2003.
Cash provided by operating activities was $0.7 million for the first
quarter of 2003, compared to $0.3 million provided by operating activities in
the comparable period in 2002. The primary reason for the improvement relates to
timing of receivable collections. Inventory increased to $1.4 million at March
31, 2003 compared to $1.0 million at December 31, 2002 due to increased stock of
new products, in addition to lower sales in the first quarter 2003. Accrued
liabilities decreased to $0.1 million at March 31, 2003, from $0.3 million at
December 31, 2002 due to the first quarter payment of accrued interest to
Kontron.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As of March 31, 2003 the Company had $6.1 million outstanding on its line
of credit from Kontron. This loan bears interest at 8% per annum, payable
monthly. Both the principal amount borrowed under the line of credit and
interest payable thereunder are payable in Euros. See the earlier discussion
under "Foreign Currency Transactions" for a description of the foreign currency
forward contract in effect. All remaining transactions of the Company are
conducted and accounts are denominated in U.S. dollars. Based on its overall
foreign currency rate exposure at March 31, 2003, and in light of the Company's
currently effective foreign currency forward contract, the Company does not
believe that a hypothetical 10% change in foreign currency rates would
materially adversely affect its financial position or results of operations.
9
The Company has no derivative financial instruments or derivative commodity
instruments in its cash and cash equivalents. The Company had $1.3 million in
cash and cash equivalents at March 31, 2003. Based on analysis, shifts in money
market rates would have an immaterial impact on the Company.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures. Based on their evaluation
as of a date within 90 days of the filing date of this Quarterly Report on Form
10-Q, our principal executive officer and principal financial and accounting
officer have concluded that our disclosure controls and procedures (as defined
in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934, as
amended) were effective as of the date of such evaluation to ensure that
information we are required to disclose in reports that we file or submit under
the Securities Exchange Act of 1934 is recorded, processed, summarized and
reported within the time periods specified in Securities and Exchange Commission
rules and forms.
Changes in Internal Controls. There were no significant changes in our
internal controls or in other factors that could significantly affect these
controls subsequent to the date of their evaluation, nor were there any
significant deficiencies or material weaknesses in our internal controls. As a
result, no corrective actions were required or undertaken.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is involved in legal actions in the ordinary course of its
business. Although the Company cannot predict the outcome of any such legal
actions, management believes that there is no pending legal proceeding against
or involving the Company for which the outcome is likely to have a material
adverse effect upon the Company's financial position, results of operations or
cash flows.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 3.1 Second Amended and Restated Articles of Incorporation
of the Company (incorporated by reference to Exhibit
3.2 to the Company's Registration Statement filed on
Form S-1, File No. 333-18335)
10
Exhibit 3.2 Second Amended and Restated Bylaws of the Company
(incorporated by reference to Exhibit 3.4 to the
Company's Registration Statement filed on Form S-1,
File No. 333-18335)
Exhibit 3.3 Articles of Merger amending the Company's Articles of
Incorporation effective June 4, 2001 (incorporated by
reference to the exhibit 3.1 filed with the Company's
Report on Form 8-K filed June 4, 2001)
Exhibit 99.1 Certification of Chief Executive Officer pursuant to
18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
Exhibit 99.2 Certification of President 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:
None.
11
SIGNATURE
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.
KONTRON MOBILE COMPUTING, INC.
Date: May 15, 2003
/s/ Thomas Sparrvik
------------------------------------------
Thomas Sparrvik, Chief Executive Officer
(principal executive officer)
12
CERTIFICATIONS
I, Thomas Sparrvik, Chief Executive Officer of Kontron Mobile Computing, Inc.,
certify that:
1. I have reviewed this quarterly report on Form 10-Q of Kontron Mobile
Computing, 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 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.
Date: May 15, 2003 /s/ Thomas Sparrvik
-----------------------------------
Chief Executive Officer
(principal executive officer)
13
CERTIFICATIONS
I, Dale R. Szymborski, President of Kontron Mobile Computing, Inc., certify
that:
1. I have reviewed this quarterly report on Form 10-Q of Kontron Mobile
Computing, 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 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.
Date: May 15, 2003 /s/ Dale R. Szymborski
-----------------------------------
President
(principal financial and accounting officer)
14