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Technology Stocks : Vari-L (VARL) -- Ignore unavailable to you. Want to Upgrade?

To: John J. Riley who wrote (2306)	6/1/2000 9:16:00 AM
From: JakeStraw	Read Replies (2) \| Respond to of 2702

John, C'mon what are they supposed to say in the press release?

To: John J. Riley who wrote (2306)	6/1/2000 10:05:00 AM
From: Labrador	Read Replies (1) \| Respond to of 2702

Just received my proxy and annual report. After reviewing the option grants etc., I think that Note 8 to the financial statements should be reviewed by each of you in detail. Further, I hope that each of you votes against Proxy Proposal #3. The footnote discloses what earnings per share would have been had the Company valued the employee option grants at fair market value. The Company has not adopted SFAS 123 and, accordingly, they do not take an expense charge to reflect the grants. The Company uses FASB 25, which is permissible, but not the preferred accounting method per the FASB. Since they did not adopt SFAS 123, they must disclose the pro forma results in their financial statement footnotes. If one values the employee option grants at fair value, earnings per share actually declined in 1999 to 29 cents from 33 cents in 1998 !! I suggest that we stop the Company from continuing to grant options, and one was to do so is to vote against Proposal #3, which permits the Company to issue another 350,000 shares. I believe that the Company has over 1 million shares that can still be granted through options; there is no reason to increase the permitted number of options that can be granted. For your information, SFAS 123 defines a fair value based method of accounting for an employee stock option or similar equity instrument and encourages all entities to adopt that method of accounting for all of their employee stock compensation plans. However, it also allows an entity to continue to measure compensation cost for those plans using the intrinsic value based method of accounting prescribed by APB 25. The fair value of a stock option equals the sum of three elements: intrinsic value, time value of money, and volatility. Vari-L only would take a charge under their current accounting method if they granted an in-the-money option. A review of this footnote is very enlightening, and demonstrates a criterion in reviewing the effect of dilution to Vari-L shareholders.