Fiscal 2001 Compared to Fiscal 2000

  Revenues increased by $61.9 million, or 32%, to $258.8 million in fiscal 2001 compared to $196.8 million in fiscal 2000. The overall increase was primarily a result of increased unit volume due to strong market demand. Revenues from all of the Company's product lines increased. The largest percentage increase was experienced in the sale of test and maintenance products. Base site infrastructure, subscriber accessory and test and maintenance products and services accounted for approximately 49%, 32% and 19%, respectively, of fiscal 2001 revenue, as compared to 49%, 36% and 15%, respectively, of fiscal 2000 revenues. Revenue increases in the systems operators, resellers and consumer categories were partially offset by a decrease in the international category. The largest increase was experienced in the reseller category. Systems operators, resellers, consumers and international users accounted for approximately 57%, 31%, 8% and 4%, respectively, of fiscal 2001 revenues, as compared to 56%, 30%, 8% and 6%, respectively, of fiscal 2000 revenues.

  Gross profit increased by $16.2 million, or 30%, to $70.5 million in fiscal 2001 compared to $54.3 million in fiscal 2000. The gross profit margin decreased to 27.2% in fiscal 2001 from 27.6% in fiscal 2000. The decrease in gross profit margin was attributable to changes in product mix and increases in inventory reserve levels.

  Total operating expenses increased by $15.9 million, or 36%, to $60.0 million in fiscal 2001 compared to $44.0 million in fiscal 2000. Total operating expenses increased as a percentage of revenues to 23.2% in fiscal 2001, from 22.4% in fiscal 2000. The increase in operating expenses is primarily attributable to an increased investment in personnel and order fulfillment expenses to support revenue, gross profit and order volume growth, as well as increases in depreciation and amortization related to information systems enhancements and increased bad debt expense due to several customer liquidity issues.

  Income from operations increased by $265,700, or 3%, to $10.5 million in fiscal 2001 compared to $10.3 million in fiscal 2000. The operating income margin decreased to 4.1% in fiscal 2001 from 5.2% in fiscal 2000.

  Net interest and other expense increased by $698,800, or 52%, to $2.0 million in fiscal 2001 compared to $1.3 million in fiscal 2000. This increase is due to increased levels of borrowing under the Company's revolving credit facility to finance capital expenditures, higher interest rates and higher credit card fees resulting from an increased number of credit card payments received from customers.

  Income before the provision for income taxes decreased $433,100 or 5% to $8.5 million in fiscal 2001 compared to $8.9 million in fiscal 2000. The effective tax rate in fiscal 2001 and 2000 was 38.0%. Net income and diluted earnings per share for fiscal 2001 decreased 5% and 6%, respectively, compared to fiscal 2000.

  At the end of the third quarter of fiscal 2001, year-to-date revenues and earnings per share were up 41% and 20%, respectively, over the comparable periods of fiscal 2000. Then, after seven consecutive quarters of record revenues and gross profits, the Company's fourth quarter fiscal 2001 performance was hindered by general economic conditions and a tightening of the capital markets. These factors have combined to inhibit the ability of some of the Company's customers and potential customers to finance their growth plans. As a consequence, for the 2001 fiscal year, revenues increased 32% as compared to fiscal 2000, and net income and diluted earnings per share decreased from $5.5 million and $1.20 to $5.2 million and $1.13, respectively. A number of the Company's customers, particularly those involved in building out new or improving existing cellular or broadband systems, require access to capital to finance their growth and, correspondingly, to finance purchases of the Company's products. Many are struggling now under the weight of excess inventories and supply chain costs. Nevertheless, the Company believes that its business model -- particularly its ability to provide customers with real-time product availability -- will assist its customers by helping them to better deploy capital to revenue generation projects as opposed to inventory ownership.

Fiscal 2000 Compared to Fiscal 1999

  Revenues increased by $36.2 million, or 23%, to $196.8 million in fiscal 2000 compared to $160.6 million in fiscal 1999. The overall increase was primarily a result of increased unit volume due to strong market demand. Revenues from all of the Company's product lines increased. The largest percentage increase was experienced in the sale of test and maintenance products. Base site infrastructure, subscriber accessory and test and maintenance products and services accounted for approximately 49%, 36% and 15%, respectively, of fiscal 2000 revenue, as compared to 52%, 36% and 12%, respectively, of fiscal 1999 revenues. Revenue increases in the systems operators, resellers and consumer categories were partially offset by a decrease in the international category. The largest increase was experienced in the systems operator category. Systems operators, resellers, consumers and international users accounted for approximately 56%, 30%, 8% and 6%, respectively, of fiscal 2000 revenues, as compared to 53%, 29%, 9% and 9%, respectively, of fiscal 1999 revenues.

  Gross profit increased by $12.3 million, or 29%, to $54.3 million in fiscal 2000 compared to $42.0 million in fiscal 1999. The gross profit margin increased to 27.6% in fiscal 2000 from 26.2% in fiscal 1999. The increase in gross profit margin was attributable to continued margin improvement in all market categories as well as changes in product mix.

  Total operating expenses increased by $6.4 million, or 17%, to $44.0 million in fiscal 2000 compared to $37.6 million in fiscal 1999. Fiscal 1999 operating expenses included a non-recurring asset impairment and restructuring charge of $831,000 taken as a result of the Company's decision to reorganize its sales and marketing activities, including the closure of two sales offices. Total operating expenses decreased as a percentage of revenues to 22.4% in fiscal 2000, from 23.4%, or 22.9% excluding the above-mentioned non-recurring charge, in fiscal 1999. The increase in operating expenses is primarily attributable to an increased investment in personnel and marketing expenses to support revenue and gross profit growth, as well as increases in depreciation and amortization related to information systems enhancements. The decrease in operating expenses as a percentage of revenue is attributable to a disproportionately greater increase in revenues.

  Income from operations increased by $5.9 million, or 132%, to $10.3 million in fiscal 2000 compared to $4.4 million in fiscal 1999. Excluding the non-recurring charge in fiscal 1999, income from operations increased 96%. The operating income margin increased to 5.2% in fiscal 2000 from 2.8%, or 3.3% excluding the non-recurring charge, in fiscal 1999.

  Net interest and other expense increased by $99,500, or 8%, to $1.3 million in fiscal 2000 compared to $1.2 million in fiscal 1999. This increase is due to increased levels of borrowing under the Company's revolving credit facility to finance capital expenditures, as well as higher interest rates.

  Income before the provision for income taxes increased $5.8 million or 181% to $8.9 million in fiscal 2000 compared to $3.2 million in fiscal 1999. The effective tax rate in fiscal 2000 and 1999 was 38.0%. Net income and diluted earnings per share for fiscal 2000 increased 181% and 179%, respectively, compared to fiscal 1999.

Liquidity and Capital Resources

  Working capital increased to $30.8 million as of April 1, 2001, from $28.2 million as of March 26, 2000. Shareholders' equity increased to $46.7 million as of April 1, 2001, from $41.1 million as of March 26, 2000.

  The Company generated $2.9 million of net cash from operating activities in fiscal 2001 compared to $3.4 million in fiscal 2000. The decrease in operating cash flow was primarily the result of a large decrease in trade accounts payable, partially offset by a significantly smaller increase in inventory and a decrease in accounts receivable.

  Capital expenditures totaled $7.8 million in fiscal 2001, primarily related to investments in information technology, compared to $3.9 million in fiscal 2000.

  The Company generated $4.1 million of net cash from financing activities in fiscal 2001 compared to $1.2 million in fiscal 2000. In fiscal 2001 and 2000, the Company increased borrowings under its revolving credit facility to support increased capital expenditures.

  The Company has a revolving credit facility with a bank that provides for a maximum borrowing capacity of $30.0 million through September 2003. This agreement contains certain conditions, covenants and representations with which the Company was in compliance as of April 1, 2001. As of April 1, 2001, the Company had $10.0 million in outstanding borrowings under this facility.

Forward-Looking Statements

This Report contains a number of forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, all of which are based on current expectations. These forward looking statements may generally be identified by the use of the words "may," "will," "expects," "anticipates," "estimates," and similar expressions. The Company's future results of operations and other forward-looking statements contained in this report involve a number of risks and uncertainties. For a variety of reasons, actual results may differ materially from those described in any such forward- looking statement. Such factors include, but are not limited to, the following: the Company's dependence on a relatively small number of suppliers and vendors, which could hamper the Company's ability to maintain appropriate inventory levels and meet customer demand; the effect that the loss of certain customers or vendors could have on the Company's net profits; the possibility that unforeseen events could impair the Company's ability to service its customers promptly and efficiently, if at all; the possibility that, for unforeseen reasons, the Company may be delayed in entering into or performing, or may fail to enter into or perform, anticipated contracts or may otherwise be delayed in realizing or fail to realize anticipated revenues or anticipated savings; existing competition from national and regional distributors and the absence of significant barriers to entry which could result in pricing and other pressures on profitability and market share; and continuing changes in the wireless communications industry, including risks associated with conflicting technologies, changes in technologies, inventory obsolescence and evolving Internet business models and the resulting competition. Consequently, the reader is cautioned to consider all forward-looking statements in light of the risks to which they are subject.

ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company does not use derivative financial instruments. Management of the Company believes its exposure to market risks, including exchange rate risk, interest rate risk and commodity price risk, is not material at the present time.