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U.S. SECURITIES AND EXCHANGE COMMISSION

FORM 10-K

For the fiscal year ended June 30, 2003

Commission File No. 0-23866

VL Dissolution Corporation

1625 Broadway
Suite 990
Denver, Colorado 80202
(303) 592-5700
(Address and Telephone Number of Principal Executive Offices)

Securities registered under Section 12(b) of the Exchange Act: None

Securities registered under Section 12(g) of the Exchange Act:

Title of Class

          Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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. [X] Yes  [   ] No

          Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-K contained in this form, and no disclosure will be contained, to the best of issuer’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [   ]

          At September 15, 2003, 7,348,572 shares of Common Stock were outstanding. The aggregate market value of the Common Stock held by non-affiliates on September 15, 2003 was $8,156,915 based on the OTCBB closing price of $1.11 per share on that date.

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PART I

Item 1. Business

Introduction

VL Dissolution Corporation, formerly Vari-L Company, Inc., a Colorado corporation (the “Company”), is engaged in the process of orderly liquidation of its remaining assets, the winding up of its business and operations, and the dissolution of the Company.

On May 5, 2003, we completed the sale of substantially all of our assets to a wholly owned subsidiary of Sirenza Microdevices, Inc. (“Sirenza”). In exchange for the assets sold, we received cash and shares of Sirenza’s common stock. At the time of the closing, the cash and stock were valued at approximately $14.469 million, which consisted of $3.835 million in cash, $5.143 million in Sirenza stock (3.255 million shares valued at $1.53 per share), and assumption and forgiveness of $5.948 million in debt and accrued interest by Sirenza. We also adopted a plan of dissolution, which included the change of our corporate name to VL Dissolution Corporation. All of our officers and employees resigned or were terminated following the closing of the asset sale. To manage the Company’s wind down and liquidation, we retained Cloyses Partners, LLC (“Cloyses”), an independent consulting firm.

The asset sale resulted from a process that began in 2002, when we determined that an asset sale was in the best interest of our shareholders. That process involved consideration of various alternatives to finance the Company or sell our business. On December 2, 2002, we entered into an agreement to sell substantially all of our assets to Sirenza.

On December 19, 2002, the Board of Directors voted to approve a plan of dissolution subject to the completion of the asset sale to Sirenza. We held a special meeting of our shareholders on April 28, 2003, to approve the proposed asset sale and plan of dissolution. A quorum of shareholders was not present when the meeting was first convened on April 28, 2003, so we adjourned the meeting to May 5, 2003.

We reconvened the meeting on May 5, 2003 and at that time a quorum of the shares of common stock was present. At that meeting, our shareholders approved the proposals included in the proxy statement, including the asset sale and plan of dissolution. On that same day, we closed the asset purchase agreement and our name was changed to VL Dissolution Corporation.

Since that date, we have begun the process of the orderly liquidation of our remaining assets, the winding up of the business, and the dissolution of the Company. This process is being managed by Cloyses under the direction of our Board of Directors. This process involves the sale and disposition of assets that were not acquired by Sirenza, the payment of or provision for liabilities and other claims that were not assumed by Sirenza, and the distribution of any remaining assets to our shareholders.

Today, our primary assets are common stock of Sirenza and cash. We have sold 550,000 shares of Sirenza common stock to satisfy liabilities and wind-up expenses and to provide a cash reserve for potential future liabilities and expenses.

Our corporate headquarters are currently located at 1625 Broadway, Suite 990, Denver, Colorado 80202, and the telephone number is (303) 592-5700. Our website address is www.vl-dissolution-corp.com. We lease one building in Denver, Colorado with a total of 13,500 square feet of manufacturing and office space. We are in the process of attempting to sublease this facility since we no longer need office or manufacturing space.

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Accounting Restatement and Related Issues

In late 1999, the Securities and Exchange Commission (the “SEC”) commenced an investigation into our accounting and reporting practices for the periods prior to and including 1999. The investigation ultimately led to the withdrawal of audit reports issued by our previous auditors for the 1997, 1998 and 1999 financial statements. In September 2001 we agreed to a settlement with the SEC under which a federal district court issued an injunction against future violations of reporting, proxy and anti-fraud provisions by us, but did not require us to pay any civil penalties or money damages. See “Legal Proceedings.”

As a result of the withdrawal of audit reports for the 1997, 1998 and 1999 financial statements, we no longer met the requirements for listing on NASDAQ. Beginning September 11, 2000, our securities were quoted on the other OTC market. In May 2002, an application for listing was filed with the Over the Counter Bulletin Board system (the “OTCBB”). On June 26, 2002, the application was accepted and our common stock began trading on the OTCBB under the stock symbol “VARL.”

Business Operations Prior to the Asset Sale

Prior to closing the asset sale to Sirenza, we designed, manufactured, and marketed a wide variety of radio frequency and microwave components and devices for use in wireless communications. Our products were used in many different commercial and military/aerospace applications, including wireless telecommunications networks, wireless base stations, wireless point-to-point radio systems, wireless point-to-multi-point radio systems, wireless local area networks, satellite payload, test equipment (instrumentation) and ground communications, radar systems, weapons guidance systems and advanced telemetry systems. We operated as a single business unit and will continue to report as such during liquidation. While we no longer have active business operations, the following description of our business operations prior to the asset sale is provided to aid our reader’s understanding of our historical financial statements.

Our products were primarily used as parts or components of other manufacturers’ wireless communications products or equipment. Wireless communication is the transmission of voice or data signals through the air, without a physical connection, such as a metal wire or fiber-optic cable. Information transmitted through wireless communications equipment is transmitted by electromagnetic waves, also known as signals. Electromagnetic waves vary in length, frequency, and intensity. The range of electromagnetic waves is called the spectrum, which encompasses audio near the low end and light toward the higher end. In between is the radio spectrum used in most wireless communications. RF refers to the lower frequencies in the spectrum while “microwave” refers to higher frequencies.

For more than 50 years, we supplied wireless communications products to the military/aerospace industry. In 1993, we expanded our engineering, manufacturing and sales efforts to address the growing demand for commercial wireless communications products. In 2002, we expanded our current product line by introducing wideband voltage-controlled oscillators, and stripline couplers.

Through May 5, 2003, our principal commercial customers were original equipment manufacturers (“OEMs”) and contract manufacturers that design and build electronic products and equipment such as cellular base stations, point to point radios, pagers and radar systems. These contract manufacturers included Solectron, Flextronics and Sanmina-SCI. Our commercial product lines were marketed to OEM customers including Motorola, Ericsson, Lucent, Nokia, Microwave Data Systems, Hughes Network Systems, GE Medical and Siemens. We sold our

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military/aerospace product lines to companies such as Raytheon, Lockheed Martin, Northrup Grumman and Textron.

Our product lines fell into two major categories: products which produce electromagnetic signals, which we refer to as signal source components, and products which receive or process electromagnetic signals, or passive components. Sales of our products were generated through a combination of manufacturers’ representatives and our own direct sales force team, and were supplemented by advertising in trade magazines, participating in trade shows and on our website. Most of our products were customized according to our customers’ specifications, but we also produced some standard products. We also designed and manufactured custom products in response to specific customer requirements. The majority of our sales were in parts that are customized to meet the performance requirements of specific customers.

Products

Prior to the closing of the asset sale to Sirenza, we had three primary product lines:

	•		Commercial Signal Sources
	•		High-Reliability Signal Sources
	•		Military Signal Processing Components

Most of our revenue came from sales of signal source components namely, voltage-controlled oscillators (“VCOs”) and phase locked loop synthesizers (“PLLs”). These signal source components were designed to produce a high quality signal that can be used over a range of radio frequencies. We held six patents related to signal source design and technology. These patents were included in the assets sold to Sirenza.

Commercial Signal Source Components

Over the last seven years, most of our revenues came from sales of our commercial narrowband VCOs. However we were beginning to see a shift in the wireless industry from VCOs to PLLs resulting in increasing sales of our PLLs. The PLL assemblies consist of our VCOs integrated with other components and have a higher average selling price than our VCOs. Our VCOs and PLLs are used in high-performance cellular base stations and other demanding applications where signal quality is especially important.

High-Reliability Signal Source Components

Our high reliability, or hi-rel, signal source components performed the same function as the commercial signal source components. Our hi-rel signal source components, however, were constructed using different assembly techniques because they are designed to operate in different operating environments. These components were designed for wideband applications (i.e., applications involving a wider range of signal frequencies) and were constructed in hermetically sealed packages for use over extended temperature ranges and in adverse environments. Hi-rel products are typically specified for both military/aerospace and high-end industrial applications.

Military Signal Processing Components

Our military signal processing components were primarily used in military and aerospace applications. These products included power dividers and combiners used for directing RF and microwave signals, solid state switches used to change the routing of RF and microwave signals, and transformers used to convert signals between different impedances. We also produced mixers, which are used to convert the frequency of RF and microwave signals to baseband signals.

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Other Products

In March 2002, we introduced a line of 3-dB hybrid couplers. 3-dB hybrid couplers are critical components used to build high-power amplifiers, vector modulators and antenna systems.

We also offered other passive components (couplers, transformers and power dividers) that are used in a variety of niche fiber-optic applications, including cable television and point-to-point data transmission networks. However, these products did not account for a significant percentage of total revenue for the period from July 1, 2002 to May 5, 2003.

Manufacturing

Through the date of the asset sale to Sirenza, we manufactured most of our products in our own facilities in Denver, Colorado. All of our products were completed and tested at our manufacturing facilities in Denver, Colorado. Our 3dB hybrid couplers were manufactured by a contract manufacturer who specializes in the unique production process required by this product. Final testing and marking was performed at our facilities in Denver, Colorado.

Sales and Marketing

Our original business focus was on the military/aerospace market. In 1993, we expanded our market focus to include commercial applications, to lessen our susceptibility to cyclical trends in defense spending and to seek a share of the growing market for commercial wireless communications products. As a result of this shift, our business became less dependent on U.S. military spending and more dependent on the commercial telecommunications market. During the fiscal year ended June 30, 2002 and the period from July 1, 2002 to May 5, 2003, demand for our core products sold to the telecommunications equipment providers fell dramatically due to an overall slowdown within the telecommunications industry, including rapid declines in expenditures for capital infrastructure equipment by service providers.

Our commercial signal source product line accounted for 76%, 73% and 84% of revenue for the period from July 1, 2002 to May 5, 2003 and for the years ended June 30, 2002 and 2001, respectively.

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The following table summarizes our net sales by product line (in thousands of dollars):

We sold our products primarily through manufacturers’ representatives who promote and solicit orders for our products on a commission basis in exclusive marketing territories. We typically engaged 14 to 16 manufacturers’ representative firms in the U.S. We also had 20 manufacturers’ representatives covering 18 foreign countries. In addition, we had a direct-sales force.

Customers

Our principal customers were OEMs and contract manufacturers of communications equipment in either the commercial or military/aerospace marketplace. Many of our customers are large international and domestic companies with worldwide operations or prime contractors for military/aerospace work.

Through May 5, 2003, our key customers included ACAL Electronics, Hughes Network Systems, Ericsson, Motorola, Nokia, Microwave Data Systems, Siemens and Solectron in the commercial market, and Boeing (formerly Hughes), Lockheed Martin, Textron, Northrop Grumman, Raytheon and in the military/aerospace market.

The following represents the sales revenues from our largest customers as a percentage of our total sales:

Our customers historically purchased products from us as needed, rather than through long-term supply contracts. We did, however, enter into long-term purchase agreements with some of our larger customers that established preferred vendor status for us and, in most cases, indicated estimated purchase quantities over the term of the agreement.

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Competition

We considered Mini-Circuits, M/A-COM, Matsushita, ALPs, Temex and Z-Com to be our largest competitors in the commercial signal source components market. Additionally, we believed Merrimac Industries was our largest competitor in the military signal processing components market. Remec/Magnum was our primary competitor in the Hi-Rel signal source components market and Anaren Microwave was our primary competitor in the coupler market.

Research and Development

Prior to the asset sale to Sirenza, we focused our research and development efforts in the following areas:

	•		Application engineering,
	•		Improvement of the Commercial Signal Source product line, and
	•		Development of new product lines.

Our research and development team focused on developing both new base technologies and design methodologies for existing base technologies. The application and design engineering team used these efforts and modified and/or extended them to meet specific customer needs. We also had an ongoing product improvement program.

Our research and development expenses for the period from July 1, 2002 to May 5, 2003 were $2.4 million compared to $2.7 million for the year ended June 30, 2002 and $4.0 million for the year ended June 30, 2001.

Patents

We do not have any patents at this time. On May 5, 2003 we assigned nine active U.S. Patents to Sirenza, six of which related to signal source products.

Employees

We had no employees as of June 30, 2003.

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Financial Information about Geographic Regions

We attributed sales to customers based on the country to which the products are shipped. Net sales by country are as follows (in thousands of dollars):

Item 2. Description of Property

We currently lease one building, a 13,500 square foot building in Denver, Colorado that was our main commercial products manufacturing facility. We lease this facility from a partnership that includes our former Chief Scientific Officer as the general partner. This lease expires on October 31, 2005 and the current lease rate is $10,801 per month. We believe that the lease rate for this facility is in excess of the current fair market value lease rates for comparable facilities within the area. We are in the process of attempting to sublease this facility since we no longer need office or manufacturing space. We have listed this property for sublease with a broker; however there can be no assurance that we will be successful in subleasing this property prior to the expiration of the existing lease agreement. Even if we are successful in subleasing this property, there can be no assurance that the sublease agreement will be at prevailing market rates.

Item 3. Legal Proceedings

Securities and Exchange Commission Investigation

In December 1999, the Company learned that the SEC was conducting an investigation to determine whether there were violations of the federal securities laws by the Company or any of its officers, directors or employees. The SEC’s investigation was focused primarily on the Company’s financial reporting and accounting practices and procedures during the fiscal years 1996 through 1999.

In September 2001, the Company agreed to a settlement with the SEC under which the Company, without admitting or denying that it violated any laws, consented to the entry of an injunction prohibiting future violations by the Company of certain periodic reporting, record keeping, internal controls, proxy solicitation and antifraud provisions of the Exchange Act. On November 9, 2001, the Company’s settlement with the SEC was approved by the United States District Court for the District of Colorado pursuant to its judgment order Final Judgment as to Vari-L, Civil Action No. 01-WM-1903, Securities and Exchange Commission v. Vari-L, David

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G.Sherman, Jon L. Clark and Sarah E. Hume, United States District Court, District of Colorado.

Private Securities Class Action

A number of private shareholder class actions alleging violations of federal securities laws were filed against the Company and certain of its former officers in the United States District Court for the District of Colorado beginning in June 2000.

On January 22, 2003, the Company, the class action representatives and the individual defendants executed and filed a stipulation of settlement (“the Stipulation”) with the United States District Court for the District of Colorado (the “Court”). The terms under the Stipulation provided that the Company pay $250,000 in cash and issue 2.0 million shares of its common stock to settle that action. On March 28, 2003, the Court approved the settlement of the private securities class action as fair and reasonable to the members of the class. Following the hearing, the Court entered its final judgment and order of dismissal of the actions with prejudice. On May 7, 2003, the Company paid $250,000 in cash to the class. On September 12, 2003, the Company received from the class action representatives’ claims administrator the names of the shareholders in the plaintiff class and the amount of shares to be issued to each shareholder pursuant to the settlement. On September 15, 2003, the Company’s Board of Directors approved the issuance of the 2.0 million settlement shares to the class members, which issuance is anticipated to be completed by Computershare, the transfer agent for the Company’s capital stock, within 10 to 14 days from the approval of the issuance.

Shareholder Derivative Suit

On August 21, 2002, the District Court, City and County of Denver dismissed the shareholder derivative action filed, purportedly on behalf of the Company against Joseph Kiser, David Sherman, Jon Clark, Derek Bailey, Sarah Booher, David Lisowski, Anthony Petrelli, Jae Shim and the Company. The derivative plaintiff appealed the Court’s ruling to the Colorado Court of Appeals. On November 12, 2002, the parties filed a stipulated voluntary dismissal of the appeal. On November 14, 2002, the Colorado Court of Appeals granted the stipulated dismissal and issued its mandate ordering that the appeal be dismissed.

Declaratory Judgment Action by Excess Insurer

On June 5, 2001, Agricultural Excess and Surplus Insurance Company (“AESIC”), which had issued to the Company a $2.5 million excess directors and officers liability insurance policy for the period of time covered by the shareholder and class action litigation referenced above, filed suit in United States District Court for the District of Colorado asking the court to find that it is not obligated to provide coverage, or in the alternative, seeking permission to rescind its policy. In connection with the execution of the Stipulation, the Company executed a settlement agreement with AESIC in which the Company and AESIC executed mutual releases. On April 21, 2003, AESIC filed a Motion to Dismiss its action with prejudice. On August 24, 2003, the Court dismissed the action with prejudice.

Company Action against Former Officers

On March 19, 2002, the Company filed a lawsuit in the District Court, City and County of Denver, against Mr. David Sherman, Mr. Joseph Kiser, individuals, and J.C. Enterprises, a Colorado general partnership. Mr. Sherman is the former President of the Company and Mr. Kiser is the former Chairman of the Company’s Board of Directors and Chief Scientific Officer. Additionally, Mr. Kiser is the General Partner of J.C. Enterprises. The Company subsequently amended the complaint to add Ms. Joan Sherman and the Kaythern Sherman Trust as defendants.

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In its lawsuit, the Company sought to rescind certain employment and consulting agreements between the Company and Messrs. Kiser and Sherman, and to rescind certain stock and stock option grants made to them, on the basis that such agreements were entered into, and such stock option grants were made, based upon mistaken or misrepresented information regarding the Company’s true financial performance. The Company also sought to recover the compensation and bonuses paid to them as a result of such mistaken or misrepresented information. In addition, the Company sought to recover excessive rent it paid pursuant to a lease agreement between the Company and J.C. Enterprises in reliance on misrepresented information provided by Messrs. Kiser and Sherman. The Company added Ms. Sherman and the Kaythern Sherman Trust to this action because they may have received assets from Mr. Sherman that the Company may have been entitled to recover.

On May 30, 2002, David Sherman filed a counter-claim against the Company alleging that the Company breached its obligation to him by suspending payment of consulting fees under the termination and consulting agreement between him and the Company.

On July 8, 2002, Joseph Kiser filed counter-claims against the Company, Charles R. Bland, Richard P. Dutkiewicz, Gil J. Van Lunsen and David M. Risley alleging a variety of claims. Mr. Bland was the Company’s President and Chief Executive Officer. Mr. Dutkiewicz was the Company’s Vice President of Finance and Chief Financial Officer. Messrs. Risley and Van Lunsen are on the Company’s Board of Directors and were members of the Special Litigation Committee of the Board of Directors.

During the latter half of calendar 2002, the Company executed settlement agreements and/or mutual releases with all parties to the Company action against the former officers. Under the terms of the settlement agreement with Mr. Kiser and J.C. Enterprises, the Company paid $245,000 in total consideration; $230,000 to Mr. Kiser as well as $15,000 to his former attorneys to cover certain legal expenses. In return, Mr. Kiser agreed to a mutual general release including, but not limited to, releasing the Company, Messrs. Bland, Dutkiewicz, Risley and Van Lunsen from all claims related to his employment agreement and the advancement or indemnification of attorneys’ fees and other costs of defense, subject to the settlement of the private securities class action. Under the terms of this settlement agreement, the Company agreed to pay the current required rental amount under the existing lease with J.C. Enterprises, but the Company has the option to terminate the lease, after sufficient notice, in the event J.C. Enterprises contracts to sell the property during the remaining lease term.

Additionally, the Company signed a mutual general release with Mr. Sherman, which, among other things, released the Company from all claims related to his employment and separation agreements and any rights he may have had regarding advancement or indemnification of attorneys’ fees and other costs of defense. In consideration of the mutual release with Mr. Sherman, Mr. Sherman transferred 100,813 shares of the Company’s common stock to the Company and the Company repaid Mr. Sherman’s promissory note to Carolyn Kiser in the principal amount of $55,030. The Company also executed mutual releases relating to litigation with Joan Sherman and the Kaythern Sherman Trust on December 17, 2002.

The Company also signed mutual general releases with Messrs. Bailey and Clark, which, among other things, release the Company from all claims related to their employment and separation agreements and any rights they may have had regarding advancement or indemnification of attorneys’ fees and other costs of defense.

The parties to the Company action against former officers executed a stipulation of dismissal. On May 5, 2003, the Court dismissed the action and all counterclaims with prejudice.

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Patent Litigation

On August 8, 2002, Anaren Microwave, Inc. (“Anaren”) filed suit against the Company for infringement of U.S. Patent No. 4,821,007. On November 19, 2002, the Company was served with the complaint. Anaren has requested damages in an unspecified amount and attorneys’ fees, costs and expenses. The Company and its counsel are investigating Anaren’s allegations. The complaint does not specify which of the Company’s products is alleged to infringe the intellectual property of Anaren, nor the exact nature of the alleged infringement. However, the Company believes that Anaren’s claim is directed at its coupler product line. The coupler line is a recently introduced product line which accounted for less than $10,000 of gross sales from its inception through May 5, 2003. The Company has sold substantially all of its assets to Sirenza, including the products to which the company believes that Anaren’s claim is directed. Under the Company’s agreement with Sirenza, Sirenza has assumed responsibility for this claim.

Item 4. Submission of Matters to a Vote of Security Holders

A special meeting of the shareholders was held on April 28, 2003. Because a quorum was not present when the meeting was originally convened, the special meeting was adjourned until May 5, 2003. When the special meeting reconvened on May 5, 2003, a quorum was present and the shareholders voted on and approved the following:

Proposal I - To approve the sale by the Company of substantially all of its tangible and intangible assets to Sirenza pursuant to the terms of the Purchase Agreement.

          The results were as follows:

Proposal II - To approve the dissolution of the Company and adopt the Plan of Dissolution of the Company, including the change of the Company’s name to VL Dissolution Corp.

          The results were as follows:

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Item 4A. Executive Officers of the Registrant

Concurrent with the closing of the asset sale with Sirenza on May 5, 2003, all employees of the Company resigned or were terminated. Effective May 6, 2003, the process of liquidating our remaining assets, winding up the business, and dissolving the Company is being managed by Cloyses under the direction of our Board of Directors. Following is a list of our executive officers that served through May 5, 2003, their respective ages as of May 5, 2003 and their former positions within the Company:

Charles R. Bland – President, Chief Executive Officer and Director. Mr. Bland, age 55, joined us in May 2001 as our President and Chief Executive Officer. On December 26, 2001, he was appointed to the Board of Directors. From June 1, 2000 until he joined us, he served as the President of Growzone, Inc., a software company focused on the horticultural industry, and from June 1999 until June 2000, he was the President of AmericasDoctors.com, an Internet health care content site. From 1998 to 1999, Mr. Bland was the Chief Operating Officer at Quark Incorporated, provider of shrink wrap and client server software for the publishing industry. For the previous 24 years, Mr. Bland worked in positions of increasing responsibility with Owens Corning Fiberglas, a world leader in high performance glass composites and building materials, with his final assignment being President, Africa/Latin American Operations. Mr. Bland received his B.S., Accounting and Finance, from Ohio State University and his MBA from the Sloan School, Massachusetts Institute of Technology.

Richard P. Dutkiewicz – Vice President of Finance, Chief Financial Officer and Secretary. Mr. Dutkiewicz, age 48, joined us in January 2001 as our Vice President of Finance, Chief Financial Officer and Assistant Secretary. On December 31, 2001, he was appointed Secretary of the Corporation. From 1995 to 2001, Mr. Dutkiewicz was Vice President – Finance, Chief Financial Officer, Secretary and Treasurer of Coleman Natural Products, Inc., located in Denver, Colorado, a leading supplier of branded natural beef in the United States. Mr. Dutkiewicz’ previous experience includes senior financial management positions at Tetrad Corporation, MicroLithics Corporation and various divisions of United Technologies Corporation. Mr. Dutkiewicz was an Audit Manager at KPMG LLP. Mr. Dutkiewicz also serves on the Board of Directors of CareerLab.com. He received his BBA degree from Loyola University of Chicago in 1977. He is a member of the American Institute of Certified Public Accountants, Financial Executives International and the Association for Corporate Growth.

Timothy G. Schamberger – Vice President, Sales and Marketing. Mr. Schamberger, age 42, became our Vice President of Sales and Marketing in May 2002. Prior to joining us, he served in various capacities including Strategic Account Manager with M/A-COM Inc., a leading wireless RF components manufacturer since 1993. Mr. Schamberger’s previous experience also includes sales management and engineering positions with Allied Signal Aerospace Corp., a manufacturer of non-nuclear systems for nuclear weapons, and Wilcox Electric, a manufacturer of ground-based navigation aid equipment. Mr. Schamberger received his BSEE from Kansas State University in 1983.

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Daniel J. Wilmot – Vice President of Research and Development. Mr. Wilmot, age 37, joined us in August 1992. He served as Product Development PLL Design Engineer and Director of Advanced Product/Development Engineer in 1993 before he was appointed Vice President of Research and Development in November 1993. Prior to joining us, Mr. Wilmot was an RF Lead Engineer with Rockwell International where he worked in management, design, development, cost management and containment for PLLs and VCOs among other hybrid RF devices. Before Rockwell International, he worked at Interstate Electronics Corp. in Anaheim, California as a Radio subsystem designer for GPS applications. Mr. Wilmot received his BSEE from University of California at Santa Barbara in June 1986 and an MSEE from the California State University at Fullerton in December 1991. Mr. Wilmot also completed the AEA/Stanford Executive Institute for Management of High-Technology Companies at Stanford University, California in August 1999.

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PART II

Item 5. Market for Common Equity and Related Stockholder Matters.

Market

In May 2002, an application for listing was filed with the Over the Counter Bulletin Board system (the “OTCBB”). The application was accepted and we began trading on the OTCBB under the stock symbol “VARL.” Formerly, our common stock was traded on the Nasdaq National Market until July 7, 2000 when it was suspended by Nasdaq. During the period from July 7, 2000 through September 9, 2000 when the stock was delisted by Nasdaq, there was no active public trading market for our stock. Beginning September 11, 2000, our stock was quoted on the other OTC market until our subsequent listing with the OTCBB on June 26, 2002.

The following table sets forth the high and low prices for the common stock for the periods indicated:

Holders

As of September 15, 2003, there were approximately 400 holders of record of our common stock.

Dividends/Distributions

We have never declared or paid a cash dividend on our common stock. Our Board of Directors presently intends to use our assets and any future earnings first to satisfy or provide for the satisfaction of our liabilities, with the balance to be distributed to our shareholders in one or more distributions. Any distributions may be in the form of cash or shares of Sirenza common stock, or a combination of the two. The declaration of any such distributions in the future would be subject to the discretion of the Board of Directors, which may consider such factors as our financial condition, contingent liabilities and expenses, and any contractual or other legal restrictions.

Equity Compensation Plan Information

See “Equity Compensation Plan Information” in Item 12.

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Sales of Unregistered Securities

Stock Grant Plan. During the period from July 1, 2002 to May 5, 2003, we issued 3,600 shares of our common stock with an approximate fair market value of $1,000 to non-management members of our Board of Directors under our Stock Grant Plan. Although we have filed a registration statement on Form S-8 covering the shares issuable under the Stock Grant Plan, due to the fact that certain of our financial statements for the periods prior to June 30, 2000 are unaudited, we have issued such shares in reliance on Section 4(2) under the Securities Act of 1933, as amended.

Employee Stock Purchase Plan. During the period from July 1, 2002 to May 5, 2003, we sold 96,079 shares of our common stock for a weighted average price of $0.24 per share to employees pursuant to our Employee Stock Purchase Plan. Although we have filed a registration statement on Form S-8 covering the shares issuable under the Employee Stock Purchase Plan, due to the fact that certain of our financial statements for the periods prior to June 30, 2000 are unaudited, we have issued such shares in reliance on Section 4(2) under the Securities Act of 1933, as amended.

Issuance of Class Action Settlement Shares. Pursuant to the settlement of the private securities class action, we authorized the issuance of 2.0 million shares of our common stock to the members of the plaintiff class on or about September 15, 2003. Based on the closing price of our common stock on September 15, 2003, the aggregate fair market value of the common stock was approximately $2,220,000. Since the terms and conditions of the issuance of the shares was approved by the United States District Court for the District of Colorado as fair and reasonable to the members of the class, the shares are to be issued in reliance upon Section 3(a)(10) of the Securities Act of 1933, as amended.

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Item 6. Selected Financial Data

The selected historical financial information presented below (in thousands of dollars, except share and per share data) should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and related notes thereto. Certain fiscal year 2002 amounts have been reclassified to conform to the fiscal year 2003 presentation. Information prior to January 1, 1999 cannot be prepared without unreasonable effort and expense. The financial statements for periods prior to June 30, 2000 have not been audited.

Upon the sale of substantially all of our operating assets to Sirenza on May 5, 2003, we terminated our employees and ceased operations. Accordingly, a comparison of the selected financial data for the period from July 1, 2002 to May 5, 2003 with that of the prior fiscal years should take into account the fact that the Company ceased its operations just over ten months after the beginning of the fiscal year ended June 30, 2003.

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On May 5, 2003, we completed the sale of all of our operating assets to Sirenza and ceased preparing our financial statements on a going concern basis in accordance with accounting principles generally accepted in the United States of America. Changes in our net assets in liquidation since May 5, 2003 are as follows:

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward Looking Statements

The Management’s Discussion and Analysis of Financial Condition and Results of Operations contains “forward looking statements” as that term is defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on a number of assumptions by us about the future, usually based on current conditions. These assumptions may or may not prove to be correct and, as a result, our own forward-looking statements may also be inaccurate. On the other hand, based on what we know today and what we expect in the future, we believe that the forward-looking statements we make in this report are reasonable. In most cases, when we use words like “believe,” “expect,” “estimate,” “anticipate,” “project,” “plan,” or “predict” to describe something which has not yet occurred, we are making a forward-looking statement.

We cannot list here all of the risks and uncertainties that could cause our actual future financial and operating results to differ materially from our historical experience and our present expectations or projections but we can identify many of them. For example, our future results could be affected by the cost of satisfying currently known liabilities, the need to satisfy unanticipated liabilities that might arise in the future, the expenses of dissolving and winding up the Company, and the price at which Sirenza stock may be held or sold. It is important to remember that forward-looking statements speak only as of the date when they are made and we do not promise that we will publicly update or revise those statements whenever conditions

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change or future events occur. Accordingly, we do not recommend that any person seeking to evaluate our Company should place undue reliance on any forward-looking statement in this report.

The following discussion and analysis should be read in conjunction with the selected financial data in Item 6 and our financial statements and the notes thereto beginning on page F-1. The financial statements for periods prior to June 30, 2000 have not been audited. Our fiscal year end was changed to June 30 effective in 2000. Previously, our fiscal year ended on December 31. Prior to May 5, 2003, our operations consisted of a single business segment — the design, manufacture and sale of a wide variety of radio frequency and microwave components and devices mainly used in the wireless communications industry.

Critical Accounting Policies and Estimates

Our discussion and analysis of our historical and liquidation based financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. On an on-going basis, we evaluated our estimates, including those related to revenue recognition, allowances for doubtful accounts, inventory valuation and commitments and contingencies. We based our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We believe the following critical accounting policies impacted our more significant judgments and estimates used in the preparation of our historical and liquidation based financial statements.

Revenue Recognition and Allowances for Doubtful Accounts

Revenues were recognized at the time of shipment to, or acceptance by, the customer, provided title and risk of loss transferred to the customer.

We maintained allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. The allowance for doubtful accounts was determined based on review of the overall condition of accounts receivable balances and review of significant past due accounts. Additionally, we maintained credit insurance on certain of our foreign accounts receivable. If the financial condition of our customers deteriorated, resulting in an impairment of their ability to make payments, additional allowances were provided.

Inventory Valuation

We valued our inventories at lower of cost or market on a part-by-part basis. Additionally, we made estimates regarding the market value of our inventory, including an assessment of excess or obsolete inventory. We determined excess and obsolete inventory based on an estimate of the future demand within a specified time horizon, generally twelve months. The estimates we used for demand were also used for near-term capacity planning and inventory purchasing and were consistent with our revenue forecasts. If our actual forecast was less than our demand forecast, we provided additional excess inventory charges, which decreased future gross margin and net operating results.

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Commitments and Contingencies

We were party to various legal proceedings and claims, as well as various other commitments and contingencies. We recorded a liability if it was (1) probable that an obligation was incurred because of a transaction or event happening on or before the date of the financial statements and (2) the amount of the obligation could be reasonably estimated.

Accrued Costs of Liquidation and Effects of Change to Liquidation Basis

Pursuant to the amended plan of dissolution, which was approved by the shareholders at the special meeting on May 5, 2003, we filed articles of dissolution with the Secretary of State of the State of Colorado. Upon filing of the articles of dissolution, our operations were limited to winding-up our business and affairs, selling our remaining assets, discharging our known liabilities, establishing a contingency reserve for payment of expenses and contingent liabilities, and distributing any remaining assets to our shareholders, all in accordance with the amended plan of dissolution. As a result, we changed our basis of accounting to the liquidation basis as of May 5, 2003. The accompanying statements of operations, stockholders’ equity and cash flows for the period from July 1, 2002 to May 5, 2003 and for each of the years in the two year period ended June 30, 2002 have been presented on a going concern basis comparable to prior periods, which assumes the realization of assets and the liquidation of liabilities in the normal course of business. Upon changing to the liquidation basis of accounting, which assumes that assets and liabilities are reflected at the estimated amounts to be paid or received, we recorded $1.317 million of accrued costs of liquidation representing an estimate of the costs to be incurred during dissolution; however, actual costs could differ from those estimates. Distributions ultimately made to stockholders upon liquidation will differ from the “net assets in liquidation” recorded in the accompanying Statement of Net Assets in Liquidation as a result of future operations, the sale proceeds ultimately received by us and adjustments, if any, to estimated costs of liquidation.

At June 30, 2003, the following represents the estimated costs of liquidation (in thousands of dollars):

Upon closing of the asset sale on May 5, 2003, we received shares in the common stock of Sirenza. Those shares increased in value by $1.9 million during the period from May 6, 2003 to June 30, 2003, which increase has been recorded as a mark-to-market adjustment in the accompanying Statement of Changes in Net Assets in Liquidation for the period from May 6, 2003 to June 30, 2003.

Results of Operations for the period from July 1, 2002 to May 5, 2003 compared with the Fiscal Year Ended June 30, 2002

On May 5, 2003, we completed the sale of all of our operating assets to Sirenza and ceased preparing our financial statements on a going concern basis under generally accepted accounting principles. Accordingly,

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results of operations are not comparable to the year ended June 30, 2002. Results of operations do not reflect adjustments recorded upon the change to the liquidation basis of accounting.

Net Sales

Net sales for the period from July 1, 2002 to May 5, 2003 decreased 34.8% to $13.9 million compared with $21.3 million for the year ended June 30, 2002. While our unit volume for its commercial signal source products increased slightly, we maintained our pattern of the last few quarters of lowering prices of our commercial signal source products to several key customers to maintain market share. The sale of all of our operating assets on May 5, 2003 also contributed to the decline in revenue. Overall, the wireless telecommunications industry has been negatively impacted by the severe market downturn and more specifically by a rapid decline in expenditures for capital infrastructure equipment by service providers.

Gross Profit

Gross profit for the period from July 1, 2002 to May 5, 2003 decreased 51.5% to $3.8 million, or 27.1% of net sales, compared with $7.8 million, or 36.4% of net sales, for the year ended June 30, 2002. The gross profit percent in any period can be affected significantly by volume and price concessions. Fixed manufacturing overhead adversely affects gross profit at lower sales levels. Accordingly, reduced sales levels combined with fixed manufacturing overhead levels comparable to prior periods has the effect of lowering gross profit as a percentage of sales. Additionally, changes in market demand for our products, combined with changes in product design resulted in excess inventory parts. On a quarterly basis, we reviewed our inventory on hand and firm purchase commitments versus our sales forecast to determine the adequacy of the existing reserve for excess and obsolete inventory.

Included in cost of goods sold for the period from July 1, 2002 to May 5, 2003 and for the year ended June 30, 2002 is a charge of $475,000 and $564,000 for excess and obsolete inventory, respectively. Additionally, for the year ended June 30, 2002, we recognized a benefit of $268,000 of recoveries for previously written-off inventory.

Selling Expenses

Selling expenses for the period from July 1, 2002 to May 5, 2003 decreased 21.4% to $2.3 million, or 16.5% of net sales, compared with $2.9 million, or 13.7% of net sales, for the year ended June 30, 2002. The dollar decrease in selling expenses was primarily attributable to a decrease of $267,000 in commissions paid to manufacturer’s representatives as a result of reduced sales volume. The sale of all of our operating assets on May 5, 2003 also contributed to the decline in selling expenses.

General and Administrative Expenses

General and administrative expenses for the period from July 1, 2002 to May 5, 2003 decreased 21.2% to $5.0 million, or 36.2% of net sales, compared with $6.4 million, or 30.0% of net sales, for the year ended June 30, 2002. The dollar decrease was primarily attributable to a decrease of $1.4 million in salaries paid and independent contractors utilized for accounting and information technology services. The sale of all of our operating assets on May 5, 2003 also contributed to the decline in general and administrative expenses.

Research and Development Expenses

Research and development expenses for the period from July 1, 2002 to May 5, 2003 decreased 7.9% to $2.4 million, or 17.6% of net sales, compared with $2.7 million or 12.4% of net sales, for the year ended June 30, 2002.

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Expenses Related to Workforce Reductions and the Asset Sale to Sirenza

As a result of the continuing weakness in the wireless industry and the impact it had upon our revenues, we reduced our workforce and incurred severance expenses. Additionally, we incurred costs in connection with the asset sale to Sirenza. Expenses related to workforce reductions and the asset sale to Sirenza were as follows (in thousands of dollars):

Expenses Relating to Accounting Restatements and Related Legal Matters, Net of Recoveries

In early 2000, management of the Company commenced efforts to restate its previously issued financial statements after being notified by the Securities and Exchange Commission (the “Commission”) that the Commission was investigating its accounting and reporting practices. Certain costs incurred in conjunction with these efforts have been separately classified in the Company’s Statements of Operations as “Expenses relating to accounting restatements and related legal matters, net of recoveries.” Expenses included in this classification include the cost of external counsel for services provided in connection with shareholder lawsuits, the Commission’s investigation of the Company, legal fees and expenses of the Special Litigation Committee of the Board of Directors, the costs incurred to settle the private securities action and the Company action against former officers (net of recoveries), the cost of certain consultants and temporary labor hired to assist in the accounting restatements, and reimbursements to current and former employees of the Company for their legal fees and expenses.

The accounting restatements were completed in February 2001. Additionally, during October 2002 and December 2002, the Company, the individual defendants in the private securities class action, the Agricultural Excess and Surplus Insurance Company, and the individual defendants in the action against former officers attended global settlement conferences. All parties involved reached an agreement in principle for the global settlement of all litigation as further described in Part II, Item I, “Legal Proceedings.” On January 22, 2003, the Company, the class action representatives and the individual defendants in the private securities class action executed and filed a Stipulation of Settlement (the “Stipulation”) with the United States District Court for the District of Colorado (the “Court”). On January 29, 2003, the Court issued its order preliminarily approving the settlement of the private securities class action, certification of the class, and the provision of notice to members of the class (the “Preliminary Approval”). On March 28, 2003, the Court held a fairness hearing regarding the settlement of the private securities class action. At the hearing, the court approved the settlement of the private securities class action as fair and reasonable to the members of the class. Following the hearing, the Court entered its final judgment and order of dismissal of the actions with prejudice. See Part I, Item 3 “Legal Proceedings” for additional information.

Expenses relating to accounting restatements and related legal matters, net of recoveries, were as follows (in thousands of dollars):

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Other Income (Expense)

Interest expense increased 335.2% to $848,000 for the period from July 1, 2002 to May 5, 2003, compared with expense of $199,000 for the year ended June 30, 2002. The increase was primarily attributable to an increase in interest expense of $649,000 due to a larger balance of debt outstanding during the period from July 1, 2002 to May 5, 2003 as compared to the year ended June 30, 2002 at significantly higher interest rates as a result of our Loan Facility with Sirenza.

The sale of all of our operating assets on May 5, 2003 contributed to the net gain of $6.3 million. Other income, net, primarily represents a gain of $375,000 on the sale of various term and whole life insurance policies.

Net Loss and Loss per Share

Due to the factors described above, our net loss decreased $2.6 million to $3.9 million, or $0.54 per share, for the period from July 1, 2002 to May 5, 2003, compared with a net loss of $6.3 million, or $0.87 per share, for the year ended June 30, 2002.

Results of Operations for the Year Ended June 30, 2002 compared with the Year Ended June 30, 2001

Net Sales

Net sales for the year ended June 30, 2002 decreased 48.4% to $21.3 million compared with $41.4 million for the year ended June 30, 2001. This decline is primarily due to a decrease in demand for the quantity of commercial signal source products consistent with an overall slowdown in the wireless communications industry.

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Revenue from commercial signal source products was $15.6 million for the year ended June 30, 2002, a 55.3% decrease from the $34.9 million for the year ended June 30, 2001. Revenue from commercial signal source products for the year ended June 30, 2001 included fees earned from a contract modification of $295,000. Revenue from all other products was $5.7 million for the year ended June 30, 2002, a 12.3% decrease from the $6.5 million for the year ended June 30, 2001. Revenue from all other products for the year ended June 30, 2001 included a significant end-of-life production run generating net sales of $809,000.

Gross Profit

Gross profit for the year ended June 30, 2002 decreased 60.6% to $7.7 million, or 36.1% of net sales, compared with $19.6 million, or 47.4% of net sales, for the year ended June 30, 2001. The gross profit percent in any period is affected significantly by volume and unusual items.

Fixed manufacturing overhead adversely affects gross profit at lower sales volumes. Accordingly, the reduced sales level for the year ended June 30, 2002 had the effect of lowering gross profit as a percentage of sales. Additionally, changes in market demand for our products, combined with changes in product design can result in excess inventory parts, such as printed circuit boards. On a quarterly basis, we review our inventory on hand and firm purchase commitments versus our sales forecast to determine the adequacy of the existing reserve for excess and obsolete inventory.

Included in cost of goods sold for the years ended June 30, 2002 and 2001 are charges of $564,000 and $1.4 million, respectively, for excess and obsolete inventory. Additionally, for the year ended June 30, 2002, we charged $65,000 to cost of goods sold for severance costs related to a reduction in our work force. These charges were offset by $268,000 of recoveries for previously written-off inventory.

During the quarter ended June 30, 2002, we sold inventories with a net book value of approximately $250,000 for $75,000. As a result, we recorded a charge to cost of goods sold for $175,000. Additionally, due to the continuing decline in the industry and weak demand of our commercial signal source products, we offered certain of our preferred customers’ price decreases which resulted in a $152,000 decrement in gross margin for the quarter ended June 30, 2002.

Operating Expenses

Included in operating expenses are charges for non-cash stock compensation of $44,000 and $487,000 for the years ended June 30, 2002 and 2001, respectively. The charges for stock compensation principally relate to amortization of deferred stock compensation attributable to stock options granted at less than the market price of the common stock on the date of the grant. Of the $487,000 total amount of stock compensation expense recorded for the year ended June 30, 2001, $409,000 relates to options granted in December 1999. In December 2000, these options were re-priced at $34.50 per share, the market price of the common stock at the date of the original grant. As a result, the remaining unamortized stock compensation associated with these option grants was reversed in December 2000.

In April 2002, we filed a Tender Offer (the “Offer”) with the SEC which offered employees the right to exchange all outstanding options to purchase shares of the Company’s common stock with an exercise price equal to $34.50 per share for replacement options to be granted no earlier than six months and one day from the expiration of the Offer at an exercise price equal to no less than the fair market value of the common stock on the grant date. Under the terms and subject to the conditions set forth in the Offer, 180,579 options were surrendered by eligible employees and cancelled on May 23, 2002. We issued replacement options to purchase an aggregate of up to 180,579 shares of common stock in exchange for the options surrendered pursuant to the Offer on November 25, 2002.

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Selling Expenses

Selling expenses for the year ended June 30, 2002 decreased 31.5% to $2.9 million, or 13.7% of net sales, compared with $4.3 million, or 10.3% of net sales, for the year ended June 30, 2001. The dollar decrease in selling expenses was primarily attributable to lower commissions paid to manufacturer’s representatives as a result of reduced sales volume and a decrease in charges for non-cash stock compensation.

General and Administrative Expenses

General and administrative expenses for the year ended June 30, 2002 decreased 33.6% to $6.4 million, or 30.1% of net sales, compared with $9.7 million, or 23.4% of net sales, for the year ended June 30, 2001. The dollar decrease was primarily attributable to reduced spending on independent contractors for interim management and accounting services, the timing of audit fees paid in connection with the audit of our financial statements for the years ended June 30, 2001 and 2000 and a decrease in charges for non-cash stock compensation, partially offset by an increase in salaries and wages for the permanent transfer of personnel to assist in business development efforts, as well as new employees hired in 2002. Additionally, we recognized a $125,000 benefit from the recovery of a disputed amount that was written off in a previous period and a $145,000 benefit from an insurance recovery for undocumented travel advances to a former officer, offset by $20,000 for severance costs related to a reduction in our work force.

Research and Development Expenses

Research and development expenses for the year ended June 30, 2002 decreased 33.6% to $2.7 million, or 12.5% of net sales, compared with $4.0 million or 9.7% of net sales, for the year ended June 30, 2001. The dollar decrease was primarily attributable to lower salaries and benefits from the permanent transfer of personnel to assist in business development efforts, fewer employees engaged in research and development efforts, a reduction in stay bonuses and production bonuses paid to employees and a decrease in charges for non-cash stock compensation offset by $16,000 for severance costs related to a reduction in our work force.

Expenses Relating to Accounting Restatements and Related Legal Matters, Net of Recoveries

Expenses relating to the accounting restatements and related legal matters, net of recoveries for the year ended June 30, 2002 and 2001 were $1.8 million and $2.4 million, respectively.

Included in these expenses for the year ended June 30, 2002, is $1.45 million representing the approximate cost to settle the Private Securities Class Action as described in Item 3, “Legal Proceedings” offset by a benefit of $117,000 resulting from an adjustment of an estimated liability recorded in a previous period. These expenses included the cost of external counsel for services provided in connection with shareholder lawsuits and the SEC investigation, the cost of certain consultants and temporary labor hired to assist in the accounting restatements, and reimbursements to current and former employees for their legal fees and expenses. The accounting restatements were completed in February 2001, however we continued to incur costs related to implementing the settlement of the shareholder litigation.

In December 1999, we learned that the SEC was conducting an investigation to determine whether there were any violations of the federal securities laws. In September 2001, we agreed to a settlement with the SEC. In December 2001, we formed the SLC. The SLC retained independent counsel to advise the Committee in its investigation of allegations of wrong doing during prior periods by former employees, as well as current and former members of our Board of Directors. For the year ended June 30, 2002, approximately $226,000 of these expenses related to fees charged by the independent counsel to the SLC.

Other Income (Expense)

Interest income decreased 88.5% to $48,000 for the year ended June 30, 2002 compared with $416,000 for the year ended June 30, 2001. The decrease was attributable to lower average cash balances available during

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the year for investing, along with lower interest rates on invested balances. Interest expense and other, net, decreased 83.1% to $187,000 for the year ended June 30, 2002 compared with $1.1 million for the year ended June 30, 2001. The decrease was primarily attributable to less interest expense as a result of a reduction in the outstanding debt and a decrease in the lender’s prime rate.

Net Loss and Loss per Share

Due to the factors described above, our net loss increased $4.9 million to $6.3 million, or $0.87 per share, for the year ended June 30, 2002, compared with a net loss of $1.4 million, or $0.20 per share, for the year ended June 30, 2001.

Liquidity and Capital Resources

At of June 30, 2003, we had $60,000 of unrestricted cash. During the period from July 1, 2002 to May 5, 2003, operations consumed $4.4 million of cash primarily due to losses incurred.

During the period from July 1, 2002 to May 5, 2003, investing activities provided $4.0 million of cash due primarily to the sale of substantially all of our operating assets to Sirenza. We received $3.8 million in cash and 3.3 million shares of Sirenza’s common stock with a market value of $5.1 million at May 5, 2003.

During the period from July 1, 2002 to May 5, 2003, financing activities provided $3.8 million in cash primarily due to forgiveness and assumption of $5.3 million in secured loans in connection with the closing of the asset sale.

Outstanding Liabilities and Investment in Common Stock of Sirenza

At June 30, 2003, we had $2.5 million in liabilities and an investment in the common stock of Sirenza valued at $6.6 million. During August and September 2003, we sold 550,000 shares of the common stock of Sirenza at an average price of $3.76. Proceeds from the sale are being used to pay our outstanding liabilities and obligations, and to establish a reserve for future liabilities and expenses. Any cash not used to satisfy liabilities and expenses will be distributed to shareholders. It is our intention to settle our outstanding obligations and sell our remaining assets as expeditiously as possible. Final dissolution of the Company and related distributions to our shareholders will occur upon obtaining final resolution of all liquidation issues and expiration of the period during which Sirenza may make an indemnity claim. As of the date of this filing, no distributions have been made to shareholders. We intend to make an initial distribution of the Sirenza stock to our shareholders during October 2003.

Factors Affecting Our Future Results

In addition to the factors discussed elsewhere in this Form 10-K, the following are important factors which could cause actual results or events to differ materially from those contained in any forward looking statements made by or on behalf of us. If we are adversely affected by such risks, then the trading price of our common stock could decline, and you could lose all or part of your investment.

The proceeds from the sale of the Sirenza common stock received in the asset sale are uncertain.

Sirenza issued 3,255,000 shares to us upon the closing of the asset purchase agreement. Subsequent to that date, we have sold 550,000 shares of Sirenza stock in the open market to provide liquidity to pay our obligations as they become due. We and our shareholders bear the risk that we may not be able to promptly resell the shares as a result of market conditions, securities law restrictions, restrictions contained in the asset purchase agreement, or other factors. Additionally, approximately 1.3 million shares of Sirenza stock bear a restrictive stop legend subject to stop transfer restrictions imposed by Sirenza and will remain restricted until the later of March 31, 2004 or the date at which all indemnified

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parties are paid or otherwise resolved. Accordingly, we and our shareholders will bear market risk with respect to a decline in the trading price of Sirenza’s stock until such shares are resold.

We may not be able to pay, or provide for the payment of, all our liabilities and obligations. Even though the asset sale to Sirenza has been completed, the proceeds we received may not be sufficient to pay or provide for the payment of all our known and unknown liabilities and obligations. While we believe that we have sufficient assets available to provide for all these obligations, the market price of the Sirenza stock could decline to a point where it is worthless.

Management is unable to develop reliable estimates of future operating results or the ultimate realizable value of remaining assets due to the current uncertainties surrounding the final dissolution of the Company. Accordingly, management cannot determine the precise amount of distributions that will be available after resolution of any unknown or contingent liabilities.

Pursuant to the amended plan of dissolution, which was approved by the shareholders at the special meeting on May 5, 2003, we filed articles of dissolution with the Secretary of State of the State of Colorado. Upon filing of the articles of dissolution, our operations were limited to winding-up its business and affairs, selling certain of our remaining assets, discharging our known liabilities, establishing a contingency reserve for payment of expenses and contingent liabilities, and distributing any remaining assets to our shareholders, all in accordance with the amended plan of dissolution. As a result, we changed our basis of accounting to the liquidation basis as of May 5, 2003. Upon changing to the liquidation basis of accounting, we recorded $1.317 million of accrued costs of liquidation representing an estimate of the costs to be incurred during dissolution. However, actual costs could differ from those estimates. Distributions ultimately made to stockholders upon liquidation will differ from the “net assets in liquidation” recorded in the accompanying Statement of Net Assets in Liquidation as a result of future operations, the sale proceeds ultimately received by the Company and adjustments, if any, to estimated costs of liquidation.

It is our intention to settle our outstanding obligations and sell our remaining assets as expeditiously as possible. Final dissolution of the Company and related distributions to our shareholders will occur upon obtaining final resolution of all liquidation issues and expiration of the period during which Sirenza may make an indemnity claim. As of the date of this filing, no distributions have been made to shareholders. We intend to make an initial distribution of the Sirenza shares to our shareholders during October 2003.

Effect of Recently Issued Accounting Standards

In November 2002, the FASB issued Financial Interpretation No. 45 (“FIN 45”), “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others.” FIN 45 requires that a liability be recorded in the guarantor’s balance sheet upon issuance of a guarantee. In addition, FIN 45 requires disclosures about the guarantees that an entity has issued, including a roll-forward of the entity’s product warranty liabilities. The disclosure provisions of FIN 45 are effective for financial statements for fiscal year 2003. Adoption of this standard did not have a material impact on its results of operations, financial condition or cash flows.

In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation, Transition and Disclosure.” SFAS No. 148 provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. SFAS No. 148 also requires that disclosures of the pro forma effect of using the fair value method of accounting for stock-based employee compensation be displayed more prominently and in a tabular format. The transition and annual disclosure requirements of SFAS No. 148 are included in these Notes to the Financial Statements. The financial statements comply with the disclosure requirements of this new standard. All options were terminated concurrent with the asset sale to Sirenza. Accordingly, SFAS No. 148 will not impact the Company.

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In April 2003, the FASB issued SFAS No. 149, Amendment of Statement No. 133 on Derivative Instruments and Hedging Activities (SFAS No. 149). The statement is effective for contracts entered into or modified after June 30, 2003 and for hedging relationships designated after June 30, 2003. This statement amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities. This statement amends Statement 133 for decisions made as part of the Derivatives Implementation Group process that effectively required amendments to Statement 133, in connection with other Board projects dealing with financial instruments and in connection with implementation issues raised in relation to the application of the definition of a derivative. Management does not expect the adoption of SFAS No. 149 to have a material impact on its financial condition, results of operations or cash flows.

In May 2003 the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity (SFAS No. 150). This statement establishes standards for how an entity classifies and measures certain financial instruments with characteristics of both liabilities and equity. This statement applies specifically to a number of financial instruments that companies have historically presented within their financial statements either as equity or between the liabilities section and the equity section, rather than as liabilities. This statement is effective for financial instruments entered into or modified after May 31, 2003, and is otherwise effective at the beginning of the first interim period beginning after June 15, 2003. Management does not expect the adoption of SFAS No. 150 to have a material impact on its financial condition, results of operations or cash flows.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

We are exposed to certain market risks, including the effects of adverse changes in interest rates. Our exposure to such changes results from cash deposits managed by Colorado Business Bank. At the present time, we have no financial instruments in place to manage the impact of changes in interest rates. We estimate that a 1% increase or decrease in interest rates would have impacted our results of operations by less than $1,000 for the year ended June 30, 2003. Additionally we are exposed to the effects of adverse changes in the fair value of marketable securities. We currently have an investment in the common stock of Sirenza acquired in connection with the asset sale with no financial instrument in place to manage the impact of a change in the fair value. We estimate that a 10% increase or decrease in the fair value would have impacted the change in net assets in liquidation by approximately $661,000 at June 30, 2003.

As of June 30, 2002, we were exposed to certain market risks resulting from borrowings with floating interest rates for which we had no financial instruments in place to manage the impact of changes in interest rates. At June 30, 2002, we had notes payable outstanding of $1.5 million under our term loan with Wells Fargo at an interest rate of 10.25%. Additionally, in connection with the acquisition of certain assets of Asvan Technology, LLC, we had $139,000 outstanding on a two-year promissory note at an interest rate of 10.00%. We estimated that a 10% upward movement in interest rates would have impacted our results of operations by less than $200,000 for the year ended June 30, 2002. Due to the repayment of our obligations under these notes, we are no longer exposed to such market risks with respect to the notes.

Item 8. Financial Statements

The financial statements and related financial information required to be filed hereunder begins on page F-1.

Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure

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None

Item 9A. Controls and Procedures

As of May 5, 2003, VL Dissolution Corp. (the “Company”) sold substantially all of its assets and began the orderly dissolution and liquidation of its assets. As the Company currently has no ongoing operations, chief executive officer, principal financial officers, principal accounting officer or employees, it is unable to perform the evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(e).

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PART III

Item 10. Directors of the Registrant

Board of Directors

David A. Lisowski – Director. Mr. Lisowski, age 50, was elected a Director on June 26, 1996. Mr. Lisowski is the President and a Director of the Denver Wholesale Florist Company, a national wholesale florist, for which he has been the President and Chief Executive Officer since 1993. He was employed by Central Bank of Denver, N.A., a commercial bank in Colorado, and various affiliated banks from 1972 to 1992. His employment with Central Bank included serving as Senior Vice President of Commercial Lending in Southern Colorado as well as various other positions. Mr. Lisowski attended Metropolitan State College where he received a BS degree in Finance in 1988.

Anthony B. Petrelli – Acting Chairman of the Board and Director. Mr. Petrelli, age 50, was elected a Director on October 17, 1997 and became Acting Chairman of the Board of Directors on July 3, 2001. Mr. Petrelli has served as Senior Vice President of Investment Banking Services at Neidiger, Tucker, Bruner, Inc., an investment banking firm and registered broker-dealer in Denver, Colorado, since May of 1987. He formerly served as a Director of Guardian Acceptance Corp., a consumer finance company in Denver, Colorado, for which he served as President from September 1996 until December 1997. Mr. Petrelli received a BS degree in Business in 1974 and an MBA in 1979 from the University of Colorado.

David M. Risley – Director. Mr. Risley, age 59, was elected a Director on November 27, 2001. He currently serves as Senior Vice President and Chief Financial Officer of La-Z-Boy Inc., a $2.2 billion furniture manufacturer. Prior to joining La-Z-Boy, he was Vice President of Finance and Chief Financial Officer with Aeroquip Vickers, Inc., a manufacturing firm serving the industrial, aerospace and automotive markets with power and motion control devices, fluid connectors and composite components. He also had served as Vice President and Controller of Heizer Corporation, a venture capital and business development firm and in various positions with TransUnion Corporation, a diversified conglomerate. He began his career as a Certified Public Accountant with Arthur Young & Company (now Ernest & Young LLP). He holds a BBA in Accounting from the University of Iowa and an MBA in Finance from Loyola University of Chicago.

Gil J. Van Lunsen – Director. Mr. Van Lunsen, age 61, was elected a Director on June 1, 2001. He retired from KPMG in June 2000 following 32 years of service. Nine years after joining KPMG in 1968 as an assistant accountant, he became partner and subsequently was promoted to partner in charge of national accounting and audit training. In 1994, he was appointed managing partner of the Tulsa, Oklahoma office, a position he held until his retirement in 2000. Mr. Van Lunsen is the Chairman of the Audit Committee of Hillcrest Healthcare Systems, a Tulsa, Oklahoma based hospital system and Array BioPharma, a Boulder, Colorado based drug discovery company. He was a member of the Ethics Compliance Committee of Tyson Foods from March 1998 to December 2002. He received his BSBA in Accounting and Finance from the University of Denver in 1968 and is a Certified Public Accountant.

Concurrent with the closing of the asset sale on May 5, 2003, Mr. Charles R. Bland, Ms. Sarah Booher and Mr. Robert C. Dixon resigned from their positions on the Board of Directors.

The Company currently does not have any employees or executive officers. All persons providing services to the Company, including Cloyses, are doing so in their capacity as independent contractors.

Section 16(a) Beneficial Ownership Reporting Compliance

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Section 16(a) of the 1934 Act requires our directors and executive officers, and persons who own more than ten percent of a registered class of our equity securities, to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock and other equity securities. Officers, directors and greater than ten percent stockholders are required by SEC regulation to furnish us with copies of all Section 16(a) forms they file.

To our knowledge, based solely on a review of the copies of such reports furnished to us and written representations that no other reports were required, during the fiscal year ended June 30, 2003, all Section 16(a) filing requirements applicable to our officers, directors and greater than ten percent beneficial owners were complied with. It has come to our attention, however, that with respect to the fiscal year ended June 30, 2002, Daniel Wilmot, our former Vice President of Advanced Technology, failed to timely file a Section 16(a) form in connection with an option exchange. On May 23, 2002, Mr. Wilmot tendered to the Company an option granted to him on December 27, 1999 in connection with an option exchange. No Section 16(a) filing was made in connection with this disposition due to a misunderstanding as to the applicability of Section 16(a) reporting requirements with respect to the option exchange. The replacement option was subsequently issued on November 24, 2002, in connection with which a Section 16(a) form was timely filed which reported both the disposition of the original option and the issuance of the replacement option.

Item 11. Executive Compensation

The following table summarizes the compensation for the period from July 1, 2002 to May 5, 2003 and for the years ended June 30, 2002 and 2001 of our Chief Executive Officer and our two most highly compensated Executive Officers whose salary and bonus exceeded $100,000:

(1)		Includes an automobile benefit of $8,438.
(2)		Includes a post-closing termination payment of $153,750
(3)		Includes automobile benefit of $10,000.
(4)		Includes automobile benefit of $1,538.
(5)		Includes an automobile benefit of $8,438.
(6)		Includes a post-closing termination payment of $60,469
(7)		Includes automobile benefit of $10,000.
(8)		Includes sign-on bonus of $10,000.
(9)		Includes automobile benefit of $2,692.
(10)		Includes an automobile benefit of $8,438 and sign-on/moving bonus of $83,500.

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(11)		Includes a post-closing termination payment of $62,188
(12)		Includes automobile benefit of $1,154.

None of the named Executive Officers received additional perquisites or other personal benefits the aggregate amount of which was the lesser of either $50,000 or 10% of the total of annual salary and bonus reported for such persons.

Option/SAR Grants in Last Fiscal Year

There were no grants of stock options and appreciation rights during the last fiscal year to any of the named Executive Officers.

Aggregated Option/SAR Exercises in Last Fiscal Year and
Fiscal Year End Option/SAR Values

The following table sets forth information concerning each exercise of stock options during the last fiscal year by each of our Executive Officers and the fiscal year end value of unexercised options:

(1)  Upon termination or resignation of the named executive officers, all outstanding options were canceled.

Directors’ Compensation

We currently have an arrangement whereby each outside Director receives $3,000 per financial quarter. Additionally, the Chairman of the Audit Committee receives an additional $1,000 per financial quarter. We reimburse outside Directors for their expenses in attending meetings of the Board of Directors and its committees.

Employment Agreements with Officers

Concurrent with the signing of the asset purchase agreement, each of Messrs. Bland, Dutkiewicz, Schamberger, Wilmot and Mr. Larry Romero amended their then existing employment agreements with the Company by signing termination letters that were effective upon the closing of the asset sale.

Under the terms of their termination letters, each of Messrs. Dutkiewicz, Schamberger, Wilmot and Romero are entitled to receive (i) a payment equal to approximately four months’ worth of such officer’s salary (determined at the time such officer executed the termination letter) to be paid following the closing of the asset sale, (ii) a payment equal to approximately four months’ worth of such officer’s salary (determined at the time such officer executed the termination letter) to be paid

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one year after the closing of the asset sale provided such officer remains employed by Sirenza and (iii) if the officer is terminated by Sirenza other than for cause prior to the one year anniversary of the closing of the asset sale, a payment equal to the difference between what such officer would have received under such original employment agreement and the payment described in (i) above. The Company anticipates that the cost of the payments to Messrs. Dutkiewicz, Schamberger, Wilmot and Romero in connection with their termination letters could be as large as $120,938, $124,375, $116,000 and $96,375, respectively.

Under the terms of Mr. Bland’s termination letter, he is entitled to receive (i) a payment equal to approximately seven and one-half months’ worth of his salary (determined at the time Mr. Bland executed the termination letter) to be paid following the closing of the asset sale, (ii) a payment equal to approximately seven and one-half months’ worth of his salary (determined at the time Mr. Bland executed the termination letter) to be paid one year after the closing of the asset sale provided Mr. Bland remains employed by Sirenza and (iii) in the event Mr. Bland is terminated by Sirenza other than for cause prior to the one year anniversary of the closing of the asset sale, a payment equal to the difference between what Mr. Bland would have received under his original employment agreement and the payment described in (i) above. The Company anticipates that the cost of the payments to Mr. Bland in connection with his termination letter could be as large as $307,500.

Concurrently with the signing of the asset purchase agreement, each of Messrs. Bland, Dutkiewicz, Schamberger and Wilmot entered into offer letters with Sirenza that were effective with the closing of the asset sale. Such offer letters provide for “at-will” employment of each officer.

In addition to the compensation contemplated by Mr. Dutkiewicz’s termination letter, upon closing of the asset sale, Mr. Dutkiewicz received a bonus payment of $60,000.

Compensation Committee Interlocks

We had a Compensation Committee which, in fiscal 2003, was comprised of David A. Lisowski (Chairman), Sarah L. Booher and Anthony B. Petrelli. Upon closing of the asset sale, the Compensation Committee was disbanded.

None of the directors is or was in the past one of our officers or employees. No interlocking relationship exists between the Board of Directors or the Compensation Committee and the board of directors or compensation committee of any other company, nor has such an interlocking relationship existed in the past.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Equity Compensation Plan Information

As of June 30, 2003, the Company had no securities to be issued upon exercise of outstanding options, warrants or rights. All equity compensation plans have been terminated in connection with the asset sale and dissolution of the Company.

Security Ownership of Certain Beneficial Owners and Management

The following table sets forth the number and percentage of shares of our Common Stock owned beneficially, as of August 30, 2003, by any person who is known to us to be the beneficial owner of five percent or more of such Common Stock, and, in addition, by each of our Directors and Executive Officers, and by all of our Directors and Executive Officers as a group. Information as to beneficial

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ownership is based upon statements furnished to us by such persons. For purposes of this disclosure, the amount of our Common Stock beneficially owned is the aggregate number of shares of the Common Stock outstanding on such date plus an amount equal to the aggregate amount of Common Stock which could be issued upon the exercise of stock options within 60 days of such date by each individual, irrespective of exercise price. In connection with the asset sale and dissolution of the Company, all outstanding options were canceled effective May 5, 2003.

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Item 13. Certain Relationships and Related Transactions

In the past, the Company has entered into various transactions with its officers and major shareholders. Transactions with such individuals which subject the Company to continuing obligations are described below.

Lease

We currently lease one building, a 13,500 square foot building in Denver, Colorado that was our main commercial products manufacturing facility. We lease this facility from a partnership that includes our Mr. Joseph H. Kiser as the general partner. The lease expires in 2005 and contains provisions which would permit us to extend the terms of the lease. Total rent expense associated with this lease for the period from July 1, 2002 to May 5, 2003 was $110,000. There was no rent expense incurred for the period May 6, 2003 to June 30, 2003 due to a sublease agreement in place between us and Sirenza at substantially identical terms to the lease agreement. The sublease agreement expired on June 30, 2003. We believe that the lease rate for this facility is in excess of the current fair market value lease rates for comparable facilities within the area. We are in the process of attempting to sublease this facility since we no longer need office or manufacturing space. We have listed this property for sublease with a broker; however there can be no assurance that we will be successful in subleasing this property prior to the expiration of the existing lease agreement. Even if we are successful in subleasing this property, there can be no assurance that the sublease agreement will be at prevailing market rates.

Settlement Agreement with Shareholder

During the latter half of 2002, the Company executed a settlement and release agreement with Mr. Kiser related to an employment agreement between the Company and Mr. Kiser. Under the terms of the settlement agreement with Mr. Kiser and J.C. Enterprises, a Colorado general partnership of which Mr. Kiser is a general partner, the Company paid $245,000 in total consideration consisting of $230,000 to Mr. Kiser as well as $15,000 to his former attorneys to cover certain legal expenses. In return, Mr. Kiser agreed to a mutual general release with the Company. Under the terms of this settlement agreement, the Company agreed to pay the current required rental amount under the existing lease with J.C. Enterprises, but the Company has the option to terminate the lease, after sufficient notice, in the event J.C. Enterprises contracts to sell the property during the remaining lease term.

Indemnification and Expense Advancement

Under our Articles of Incorporation, Bylaws and applicable Colorado corporate law, we have certain obligations to indemnify our officers and directors for expenses they incur in connection with the defense of litigation brought against them on account of actions taken by them in those capacities if such officers or directors are wholly successful, on the merits or otherwise, in their defense in such proceedings.

The Company has entered into an Amended and Restated Indemnity Agreement with each of Gil J. Van Lunsen, Sarah I. Booher, David A. Lisowski, Anthony B. Petrelli, David M. Risley, Robert C. Dixon, Charles R. Bland and Richard P. Dutkiewicz, each dated as of March 11, 2003 (the “Indemnity Agreements”). The Indemnity Agreements provide that the Company shall indemnify each indemnitee to the fullest extent permitted by law, including against any and all reasonable expenses, witness fees, damages, judgments, fines and amounts paid because of any claim made against or by the indemnitee in connection with any threatened, pending or completed action, suit or other proceeding of any sort to which the indemnitee is, was or at any time becomes a party, or is threatened to be made a party, by reason of the fact that the indemnitee is, was or at any time becomes a director, officer, employee or other agent of the Company. The Company’s obligation to indemnify does not apply

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where a determination has been made that the indemnitee is not entitled to indemnification under applicable law, in which case the indemnitee agrees to reimburse the Company for any amounts previously paid or advanced to the indemnitee. Additionally, the Company shall not be required to indemnify an indemnity for any claims for which indemnification is not lawful, on account of the indemnitee’s conduct that is established by a final judgment as knowingly fraudulent or deliberately dishonest or that constituted willful misconduct, for claims initiated by the indemnitee and not by way of defense (except in certain limited circumstances), to the extent which payment is actually made to the indemnity under a valid and collectible insurance policy or under a valid and enforceable indemnity clause, by law or agreement, or for claims under Section 16 of the Securities Exchange Act of 1934.

The indemnification obligation of the Company under the Indemnity Agreements extends throughout an indemnitee’s term of service to the Company and for so long thereafter as an indemnitee shall be subject to any possible claim or action of any sort by reason of the fact that the indemnitee was serving the Company. The Company is also obligated to advance reasonable expenses incurred by an indemnitee in connection with a covered claim or action if it receives any affirmation by the indemnitee required by the Company’s Bylaws or the Colorado Business Corporation Act and an undertaking by the indemnitee to repay any amounts advanced if it shall be determined ultimately that the indemnitee is not entitled to be indemnified under the Indemnity Agreements.

The assets and equity of the Company will be subject to risk if any of the indemnitees incur liability for which they are entitled to indemnification under the agreements.

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K

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Financial Statement Schedule

Schedule II, Valuation and Qualifying Accounts, for the period from July 1, 2002 to May 5, 2003 and for the years ended June 30, 2002 and 2001 (Unaudited)

Reports on Form 8-K

A report on Form 8-K dated May 5, 2003 under Items 2 and 7 was filed with the Commission on May 6, 2003.

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SIGNATURES

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

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CERTIFICATIONS

As of May 5, 2003, VL Dissolution Corp. (the “Company”) sold substantially all of its assets and began the orderly dissolution and liquidation of its remaining assets. As the Company currently has no ongoing operations, chief executive officer, principal financial officers, principal accounting officer or employees, it is unable to make the certifications required under Sections 302 and 906 of the Sarbanes-Oxley Act.

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VL DISSOLUTION CORPORATION

Financial Statements

June 30, 2003

(With Independent Auditors’ Report Thereon)

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VL DISSOLUTION CORPORATION

Financial Statements

June 30, 2003

Index