UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 28, 2003
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file no. 1-11056
ADVANCED PHOTONIX, INC.
Incorporated pursuant to the Laws of Delaware
IRS Employer Identification No. 33-0325826
1240 Avenida Acaso, Camarillo, CA 93012
(805) 987-0146
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
On November 7, 2003, 13,430,759 shares of Class A Common Stock, $.001 par value,
and 31,691 shares of Class B Common Stock, $.001 par value, were outstanding.
ADVANCED PHOTONIX, INC.
INDEX
PAGE
PART I FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheet at September 28, 2003 3 - 4
Consolidated Statements of Operations for the three and six month periods 5
ended September 28, 2003 and September 29, 2002
Consolidated Statements of Cash Flows for the six month periods 6
ended September 28, 2003 and September 29, 2002
Notes to Consolidated Financial Statements 7 - 10
Item 2. Management's Discussion and Analysis 11 - 14
Item 3. Controls and Procedures 14
PART II OTHER INFORMATION 15
SIGNATURES 16
2
ADVANCED PHOTONIX, INC.
CONSOLIDATED BALANCE SHEET
AT SEPTEMBER 28, 2003
(UNAUDITED)
--------------------------------------------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 757,000
Short-term investments 1,700,000
Accounts receivable, less allowance of $81,000 2,459,000
Inventories 2,403,000
Prepaid expenses and other current assets 272,000
-----------------------------
Total Current Assets 7,591,000
-----------------------------
EQUIPMENT AND LEASEHOLD IMPROVEMENTS, at cost 4,885,000
Less accumulated depreciation and amortization (3,368,000)
-----------------------------
Total Equipment and Leasehold Improvements 1,517,000
-----------------------------
OTHER ASSETS
Goodwill, net of accumulated amortization of $353,000 2,439,000
Patents, net of accumulated amortization of $46,000 18,000
Non-Compete Agreement, net of accumulated amortization of $81,000 69,000
Other 24,000
-----------------------------
Total Other Assets 2,550,000
-----------------------------
TOTAL ASSETS $ 11,658,000
=============================
See notes to consolidated financial statements.
3
ADVANCED PHOTONIX, INC.
CONSOLIDATED BALANCE SHEET - Continued
AT SEPTEMBER 28, 2003
(UNAUDITED)
--------------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Line of credit $ 1,200,000
Accounts payable 565,000
Accrued salaries, wages and benefits 304,000
Current portion of capital lease payable 43,000
Note payable 8,000
Other accrued expenses 260,000
----------------------------
Total Current Liabilities 2,380,000
----------------------------
Capital lease payable, net of current portion 4,000
----------------------------
COMMITMENTS AND CONTINGENCIES
Class A redeemable convertible preferred stock, $.001 par value; 32,000
780,000 shares authorized; 40,000 shares issued and outstanding
----------------------------
SHAREHOLDERS' EQUITY
Preferred stock, $.001 par value; 10,000,000 shares authorized; --
780,000 shares designated Class A redeemable convertible;
no shares issued and outstanding, other than Class A redeemable convertible
Class A common stock, $.001 par value; 50,000,000 shares authorized; 13,000
13,430,759 shares issued and outstanding
Class B common stock, $.001 par value; 4,420,113 shares authorized; --
31,691 shares issued and outstanding
Additional paid-in capital 27,671,000
Accumulated Deficit (18,442,000)
----------------------------
Total Shareholders' Equity 9,242,000
----------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 11,658,000
============================
See notes to consolidated financial statements.
4
ADVANCED PHOTONIX, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended Six Months Ended
September 28, 2003 September 29, 2002 September 28, 2003 September 29, 2002
SALES $3,256,000 $1,838,000 $5,903,000 $3,386,000
Cost of goods sold 2,131,000 1,307,000 3,906,000 2,224,000
-------------------- -------------------- -------------------- --------------------
GROSS PROFIT 1,125,000 531,000 1,997,000 1,162,000
Research and development expenses 80,000 144,000 157,000 286,000
Sales and marketing expenses 285,000 224,000 527,000 457,000
General and administrative expenses 534,000 413,000 977,000 720,000
-------------------- -------------------- -------------------- --------------------
INCOME (LOSS) FROM OPERATIONS 226,000 (250,000) 336,000 (301,000)
-------------------- -------------------- -------------------- --------------------
OTHER INCOME (EXPENSE)
Interest income 5,000 20,000 10,000 48,000
Interest expense (8,000) -- (17,000) --
Other, net 3,000 (2,000) 9,000 (2,000)
-------------------- -------------------- -------------------- --------------------
TOTAL OTHER INCOME -- 18,000 2,000 46,000
-------------------- -------------------- -------------------- --------------------
NET INCOME (LOSS) $ 226,000 ($232,000) $ 338,000 ($255,000)
==================== ==================== ==================== ====================
Basic Income (Loss) Per Share $ .02 ($ .02) $ .03 ($ .02)
Diluted Income (Loss) Per Share $ .02 ($ .02) $ .02 ($ .02)
Weighted Average Shares Outstanding 13,449,000 12,251,000 13,428,000 12,249,000
See notes to consolidated financial statements.
5
ADVANCED PHOTONIX, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the six month periods ended September 28, 2003 September 29, 2002
-----------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $ 338,000 ($ 255,000)
Adjustments to reconcile net income (loss) to net cash
provided by(used by) operating activities:
Depreciation 156,000 107,000
Amortization 38,000 2,000
Provision for doubtful accounts 8,000 --
Provision for obsolete inventory 53,000 --
Changes in operating assets and liabilities:
Short-term investments (300,000) --
Accounts receivable (263,000) 252,000
Inventories 172,000 14,000
Prepaid expenses and other current assets 44,000 9,000
Other assets (29,000) (192,000)
Accounts payable and accrued expenses (277,000) (54,000)
------------------------ ------------------------
Net cash used by operating activities (60,000) (117,000)
------------------------ ------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (131,000) (57,000)
Purchase of selected net assets of Silicon Sensors, LLC -- (1,799,000)
------------------------ ------------------------
Net cash used by investing activities (131,000) (1,856,000)
------------------------ ------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of stock options -- 5,000
Proceeds from exercise of stock options 46,000 5,000
------------------------ ------------------------
Net cash provided by financing activities 46,000 10,000
------------------------ ------------------------
NET DECREASE IN CASH & CASH EQUIVALENTS (145,000) (1,963,000)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 902,000 3,083,000
------------------------ ------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 757,000 $ 1,120,000
======================== ========================
See notes to consolidated financial statements.
6
ADVANCED PHOTONIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 28, 2003
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements include the
accounts of Advanced Photonix, Inc. ("the Company") and the Company's wholly
owned subsidiaries, Silicon Sensors, Inc. ("SSI") and Texas Optoelectronics,
Inc. ("TOI") (See Note 2). These consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States for interim financial information and with the instructions to
Form 10-QSB and Article 10 of Regulation S-X and Regulation S-B. All significant
intercompany accounts and transactions have been eliminated in consolidation.
Accordingly, they do not include all of the information and notes required by
generally accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting of normal recurring
adjustments) necessary for a fair presentation have been included. Operating
results for the six month period ended September 28, 2003 are not necessarily
indicative of the results that may be expected for the fiscal year ending March
28, 2004. For further information, refer to the financial statements and notes
thereto included in the Advanced Photonix, Inc. Annual Report on Form 10-KSB for
the fiscal year ended March 30, 2003.
NOTE 2 - ACQUISITION
On August 21, 2002, SSI, a newly formed wholly owned subsidiary of API purchased
substantially all of the assets and selected liabilities of Silicon Sensors LLC,
a closely held manufacturer of opto-electronic semiconductor based components
located in Dodgeville, Wisconsin. The purchase price was $1,718,675 in cash plus
the assumption of the Seller's trade accounts payable and accrued liabilities,
amounting to approx. $282,000. The Company incurred $79,000 of expenses in
connection with this acquisition. In addition, the Company entered into a 3 year
$225,000 non-compete agreement with the majority member of Silicon Sensors, LLC
and is recording monthly amortization expense of $6,250.
On January 17, 2003, the Company purchased all of the issued and outstanding
shares of common stock of TOI, a privately owned custom manufacturer of
opto-electric components and assemblies. The purchase price was 1,059,110 shares
of API Class A Common Stock (issued at $0.92 per share) and repayment of a debt
of TOI in the amount of $1,200,000 representing principal and interest.
7
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Net Income (Loss) Per Share: Net income (loss) per share is based on the
weighted average number of common shares outstanding. Such weighted average
shares were approximately 13,428,000 at September 28, 2003 and 12,249,000 at
September 29, 2002. Net income (loss) per share calculations are in accordance
with Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per
Share" (SFAS 128). Accordingly, "basic" net income (loss) per share is computed
by dividing net income (loss) by the weighted average number of shares
outstanding for the year. The impact of Statement 128 on the calculation of
earnings per share is as follows:
Six Months Ended Six Months Ended
September 28, 2003 September 29, 2002
------------------ ------------------
Average Shares Outstanding 13,428,000 12,249,000
Net Income (Loss) 338,000 (255,000)
Basic Income (Loss) Per Share $ 0.03 ($ 0.02)
DILUTED
Average Shares Outstanding 13,428,000 12,249,000
Net Effect of Dilutive Stock Options
based on the treasury stock method
using average market price 286,000 292,000
Total Shares 13,714,000 12,541,000
Net Income (Loss) 338,000 (255,000)
Diluted Earnings Per Share $ 0.02 anti-dilutive
Average Market Price of Common Stock $ 1.14 $ 0.98
Ending Market Price of Common Stock $ 1.41 $ 0.85
Stock options granted to Company employees, directors, and former owners were
excluded from the calculation of earnings per share in the financial statements
because they were either anti-dilutive or immaterial for the periods reported:
8
NOTE 3 - Continued
Six Months Ended September 28, 2003 Six Months Ended September 29, 2002
----------------------------------- -----------------------------------
No. of Shares Exercise Price No. of Shares Exercise Price
Underlying Options Per Share Underlying Options Per Share
----------------------------------- -----------------------------------
16,000 0.5000 12,000 0.5000
56,000 0.5630 126,000 0.5630
65,000 0.6100 25,000 0.6100
500 0.6250 500 0.6250
36,000 0.6500 - 0.6500
226,668 0.6700 416,668 0.6700
5,000 0.6875 4,000 0.6875
56,000 0.7500 126,000 0.7500
238,000 0.8000 266,006 0.8000
77,500 0.8600 76,250 0.8600
- 1.0000 75,000 1.0000
14,900 1.1875 14,500 1.1875
58,300 1.2500 74,800 1.2500
4,000 1.6250 4,000 1.6250
88,000 1.8750 66,000 1.8750
30,500 2.5000 35,500 2.5000
- 3.0000 8,000 3.0000
1,000 3.0940 1,000 3.0940
350,000 3.1875 400,000 3.1875
50,000 5.3440 50,000 5.3440
----------------------------------- -----------------------------------
1,373,368 1,781,224
=================================== ===================================
Inventories: Inventories consist of the following:
September 28, 2003
------------------
Raw materials $ 2,572,000
Work in progress 1,003,000
Finished products 188,000
------------------
Total inventories 3,763,000
Less reserve (852,000)
Progress bill and customer prepaid inventory (508,000)
------------------
Inventories, net $ 2,403,000
==================
9
NOTE 4 - NEW ACCOUNTING PRONOUNCEMENTS
In June 2002, the Financial Accounting Standards Board ("FASB") issued Statement
on Financial Accounting Standard ("SFAS") 146, "Accounting for Costs Associated
with Exit or Disposal Activities", which nullifies EITF Issue 94-3. SFAS 146 is
effective for exit and disposal activities that are initiated after December 31,
2002 and requires that a liability for a cost associated with an exit or
disposal activity be recognized when the liability is incurred, in contrast to
the date of an entity's commitment to an exit plan, as required by EITF Issue
94-3. The Company adopted the provisions of SFAS 146 on January 1, 2003.
In December 2002, the FASB issued SFAS 148 "Accounting for Stock-Based
Compensation--Transition and Disclosure", an amendment of FASB Statement No. 123
"Accounting for Stock-Based Compensation" This Statement provides alternative
methods of transition for a voluntary change to the fair value based method of
accounting for stock-based employee compensation. In addition, this Statement
amends the disclosure requirements of Statement 123 to require disclosures in
both annual and interim financial statements about the method of accounting for
stock-based employee compensation and the effect of the method used on reported
results. The Company adopted SFAS 148 on January 1, 2003.
In May 2003 the FASB issued SFAS 150 Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity. This Statement
establishes standards for how an issuer of debt or equity classifies and
measures certain financial instruments with characteristics of both liabilities
and equity. It requires that an issuer classify a financial instrument that is
within its scope as a liability (or an asset in some circumstances). Many of
those instruments were previously classified as equity. This Statement is
effective for financial instruments entered into or modified after May 31, 2003,
and otherwise is effective at the beginning of the first interim period
beginning after June 15, 2003.
In January 2003 the FASB issued Interpretation 46 "Consolidation of Variable
Interest Entities, an interpretation of ARB No. 51". This Interpretation
requires a Company to consolidate the financial statements of a "Variable
Interest Entity" ("VIE"), sometimes also known as a "special purpose entity",
even if the entity does not hold a majority equity interest in the VIE. The
Interpretation requires that if a business enterprise has a "controlling
financial interest" in a VIE, the assets, liabilities, and results of the
activities of the VIE should be included in consolidated financial statements
with those of the business enterprise, even if it holds a minority equity
position. This Interpretation was effective immediately for all VIE's created
after January 31, 2003; for the first fiscal year or interim period beginning
after June 15, 2003 for VIE's in which a Company holds a variable interest that
it acquired before February 1, 2003.
The adoption of these pronouncements will not have a material effect on the
Company's financial position, results from operations or cash flows.
10
Item 2. Management's Discussion and Analysis
Application of Critical Accounting Policies
-------------------------------------------
Application of our accounting policies requires management to make judgments and
estimates about the amounts reflected in the financial statements. Management
uses historical experience and all available information to make these estimates
and judgments, although differing amounts could be reported if there are changes
in the assumptions and estimates. Estimates are used for, but not limited to,
the accounting for the allowance for doubtful accounts, inventory allowances,
restructuring costs, impairment costs, depreciation and amortization, sales
discounts and returns, warranty costs, taxes and contingencies. Management has
identified the following accounting policies as critical to an understanding of
our financial statements and/or as areas most dependent on management's judgment
and estimates.
Revenue Recognition
-------------------
We generally recognize revenue when persuasive evidence of an arrangement
exists, delivery has occurred, the price is fixed or readily determinable, and
collectibility is probable; which is generally the date of shipment. Sales are
recorded net of sales returns and discounts. We recognize revenue in accordance
with Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial
Statements."
Impairment of Long-Lived Assets
-------------------------------
We continually review the recoverability of the carrying value of long-lived
assets using the methodology prescribed in Statement of Financial Accounting
Standards (SFAS) 144, "Accounting for the Impairment and Disposal of Long-Lived
Assets." We also review long-lived assets and the related intangible assets for
impairment whenever events or changes in circumstances indicate that the
carrying value of such assets may not be recoverable. Upon such an occurrence,
recoverability of these assets is determined by comparing the forecasted
undiscounted net cash flows to which the assets relate, to the carrying amount.
If the asset is determined to be unable to recover its carrying value, then
intangible assets, if any, are written down first, followed by the other
long-lived assets to fair value. Fair value is determined based on discounted
cash flows, appraised values or management's estimates, depending on the nature
of the assets.
Deferred Tax Asset Valuation Allowance
--------------------------------------
We record a deferred tax asset in jurisdictions where we generate a loss for
income tax purposes. Due to our history of operating losses, we have recorded a
full valuation allowance against these deferred tax assets in accordance with
SFAS 109, "Accounting for Income Taxes," because, in management's judgment, the
deferred tax assets may not be realized in the foreseeable future.
Inventories
-----------
Our inventories are stated at standard cost (which approximates the first-in,
first-out method) or market. Slow moving and obsolete inventories are analyzed
quarterly. To calculate a reserve for obsolescence, we compare the current
on-hand quantities with both the projected usages for a two-year period and the
actual usage over the past 12 months. On-hand quantities greater than projected
usage are calculated at the standard unit cost. The production, engineering and
purchasing departments review the initial list of slow-moving and obsolete items
to identify items that have alternative uses in new or existing products. These
items are then excluded from the analysis. The remaining amount of slow-moving
and obsolete inventory is then reserved for. Additionally, non-cancelable open
purchase orders for parts we are obligated to purchase where demand has been
reduced may be reserved. Reserves for open purchase orders where the market
price is lower than the purchase order price are also established.
11
Accounts Receivable and Allowance for Doubtful Accounts
-------------------------------------------------------
The Allowance for Doubtful Accounts is established by analyzing each account
that has a balance over 90 days past due. Each account is individually assigned
a probability of collection. The total amount determined to be uncollectible in
the 90-days-past-due category is then reserved fully. The percentage of this
reserve to the 90-days-past-due total is then established as a guideline and
applied to the rest of the non-current accounts receivable balance where
appropriate. When other circumstances suggest that a receivable may not be
collectible, it is immediately reserved for, even if the receivable is not yet
in the 90-days-past-due category.
RESULTS OF OPERATIONS
---------------------
NET PRODUCT SALES
The Company's consolidated net product sales for the second quarter ("Q2 04")
and six month period ("YTD 04") ended September 28, 2003, were $3.256 million
and $5.903 million, respectively. Net sales increased by $1.418 million, or 77%,
as compared to the second quarter of the prior year ("Q2 03") and by $2.517
million, or 74% as compared to the same six month period of the prior year ("YTD
03").
The increase in revenues for both the quarter and year to date periods was due
in part to the Company's acquisitions during the past year and was reflected in
four of our principal market segments: military/aerospace, industrial sensing,
medical and automotive. Sales to the military/ aerospace markets increased by
134% over Q2 03 and by 88% over YTD 03. Similarly, sales to the medical markets
increased by 110% and 88% over the same quarter and year to date periods in the
prior year. Sales to industrial sensing customers increased 44% for both the
quarter and year to date periods and sales to the automotive markets, which were
minimal prior to acquisitions, increased 603% and 649% over the Q2 03 and YTD 03
periods, respectively. As a percentage of total year to date revenues,
industrial sensing accounts for 39%, military/aerospace for 38%, medical for
15%, and automotive for 7% (compared to 47%, 36%, 14%, and 1% respectively, for
the same six month period of the prior year). We continue to expect total sales
to increase by approximately 40% in fiscal 2004 as compared to fiscal 2003.
However, as the acquisitions of both Silicon Sensors, Inc. and Texas
Optoelectronics, Inc. were consummated during the latter half of fiscal 2003
(see Note 2), we expect that the quarter over quarter percentage increases in
revenues will decline, as future quarters will be compared to post-acquisition
sales, rather than pre-acquisition revenues reported during the first six months
of fiscal 2003. In addition, sales may vary significantly on a quarter to
quarter basis due to changes in customer delivery and production schedules.
COSTS AND EXPENSES
Cost of product sales increased by $824,000 (63%) during Q2 04 and by $1.682
million (76%) during YTD 04 as compared to Q2 03 and YTD 03, respectively. As a
result of increased revenues, cost of goods sold stated as a percentage of net
sales decreased to 65% during Q2 04, as compared to 71% in Q2 03. For the year
over year comparison, cost of sales remained flat at 66%, resulting in year to
date gross margin of 34%. The Company finalized the closing of the Texas
Optoelectronics location during the first quarter of fiscal 2004 and has fully
completed the integration of that business into its California and Wisconsin
facilities. As a result, the current cost of sales includes all of the fixed and
variable expenses associated with operating two facilities and the Company
expects that the year to date gross margin stated as a percentage of sales is
indicative of what can be expected for the remainder of the fiscal year and may
improve slightly as revenues increase, allowing for the absorption of more fixed
expenses.
12
Research and development costs decreased by $64,000 (44%) to $80,000 in Q2 04 as
compared to Q2 03, and by $129,000 (45%) year to date. The decrease in R&D costs
continues to be due to the Company's execution of its plan to restructure the
R&D department, with the focus being placed on those projects which offer higher
commercial potential. During the remainder of the fiscal year, the Company
expects to see continued decreases in R&D expenditures, similar to what has been
experienced year to date, and expects that quarterly R&D expenses will
approximate the amounts recognized in the first and second quarters of fiscal
2004. However, R&D costs may fluctuate, should the level of activity associated
with new product development projects or customer-requested development
contracts change significantly.
Marketing and sales expenses increased by $61,000 (27%) to $285,000 in Q2 04
compared to Q2 03 and by $70,000 (15%) to $527,000 in YTD 04 compared to YTD 03.
As a percentage of sales, marketing and sales expenses represent 9% of total
revenue for both the quarterly and year to date periods, as compared to 12% for
Q2 03 and 14% for YTD 03. As expected, the increases realized for both the
quarter and year to date periods are primarily due to increased salary,
commission and travel expenses over fiscal 2003. Subsequent to its acquisitions,
the Company implemented plans to consolidate the marketing and sales departments
and coordinate its efforts between facilities. Thus, as certain expenses were
expected to increase, they have been more than offset by savings realized
through consolidation. As with R&D expenses, the Company expects that marketing
and sales expenses for the remainder of fiscal 2004 will approximate the amounts
recognized during the first half of the year and will continue to represent
approximately 9% of total revenues.
General and administrative expenses increased by $121,000 (29%) to $534,000 in
Q2 04 as compared to Q2 03. Year to date, general and administrative expenses
increased by $257,000 (36%) to $977,000 as compared to the same six month period
of fiscal 2003. As with marketing and sales expenses, the Company has achieved
general and administrative savings through consolidation and coordination of its
subsidiaries and, expressed as a percentage of net sales, general and
administrative expenses decreased to 16% for both the quarterly and year to date
periods, as compared to 23% and 21% in Q2 03 and YTD 03, respectively. The net
increases in general and administrative expenses for both the quarterly and year
to date periods are primarily due to increased salary, depreciation, insurance
and outside service/consultant expenses over the same periods in the prior year,
and represent additional costs absorbed through acquisition which have been
offset with savings through consolidation. The Company expects that general and
administrative expenses will increase only slightly throughout the remainder of
the fiscal year and will continue to approximate 16% of net revenues.
The Company reported net income of $226,000 and $338,000 for Q2 04 and YTD 04,
respectively, as compared to net losses of ($232,000) and ($255,000) for Q2 03
and YTD 03, respectively.
13
LIQUIDITY AND CAPITAL RESOURCES
At September 28, 2003, the Company had cash, cash equivalents and short term
investments of $2.5 million, working capital of $5.2 million, and an accumulated
deficit of $18.4 million. The Company's cash and cash equivalents decreased by
$145,000 during the six months ended September 28, 2003. Cash obtained through
operating activities totaled $240,000 before transferring $300,000 to short term
investments. Operating cash flow was significantly impacted by increases in
accounts receivable and reductions in accounts payable which were offset by
reductions in cash outlays for inventory and prepaid expenses and other non cash
items. $46,000 was obtained through the exercise of stock options and $131,000
was used for capital expenditures, due primarily to computer and manufacturing
equipment upgrades.
The Company is exposed to interest rate risk for marketable securities. Due to
continually declining interest rates available to the Company pursuant to its
investment policy, the Company was able to achieve the best yields on liquid
money market and equity fund accounts and thus transferred the majority of its
available cash reserves from longer term investment instruments to such accounts
during the past year. At September 28, 2003, the Company held $1.7 million in a
highly liquid equity fund account which carries an average interest rate of
1.2%. During 2004, the Company will continue to monitor available interest rates
and will attempt to utilize the best possible avenues of investment for its
excess liquid assets.
Item 3. Controls and Procedures
Our Chief Executive Officer, President, and Chief Financial Officer (the
"Certifying Officers") are responsible for establishing and maintaining
disclosure controls and procedures for the Company. The Certifying Officers have
designed such disclosure controls and procedures to ensure that material
information is made known to them, particularly during the period in which this
report was prepared. The Certifying Officers have evaluated the effectiveness of
the Company's disclosure controls and procedures within 90 days of the date of
this report and believe that the Company's disclosure controls and procedures
are effective based on the required evaluation. There have been no significant
changes in internal controls or in other factors that could significantly affect
internal controls subsequent to the date of their evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
FORWARD LOOKING STATEMENTS
The information contained herein includes forward looking statements that are
based on assumptions that management believes to be reasonable but are subject
to inherent uncertainties and risks including, but not limited to, risks
associated with the integration of newly acquired businesses, unforeseen
technological obstacles which may prevent or slow the development and/or
manufacture of new products, limited (or slower than anticipated) customer
acceptance of new products which have been and are being developed by the
Company, the availability of other competing technologies and a decline in the
general demand for optoelectronic products.
14
PART II OTHER INFORMATION
Items 1 - 3
None.
Item 4 Submission of Matters to a Vote of Security Holders
---------------------------------------------------
The Company's Annual Stockholders Meeting was held on August 22, 2003. The
following persons were re-elected to the Company's Board of Directors to
serve until the next Annual Meeting of Stockholders and until their
respective successors have been duly elected and qualified.
FOR WITHHELD
------------- -------------
Richard D. Kurtz 11,673,801 213,220
M. Scott Farese 11,700,737 186,284
Ward Harper 11,649,587 237,434
Stephen P. Soltwedel 11,695,387 191,634
Item 5 Other Information
-----------------
None.
Item 6 Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
31.1 Certification of the Registrant's Chairman, Chief Executive
Officer, and Director pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
31.2 Certification of the Registrant's Chief Financial Officer
and Secretary pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
31.3 Certification of the Registrant's President pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
32.1 Certification pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
(b) Reports on Form 8-K
The Company filed form 8-K on August 13, 2003 to report that it had issued a
press release dated August 12, 2003 announcing financial results for the quarter
ended June 29, 2003.
15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Advanced Photonix, Inc.
(Registrant)
Date: November 11, 2003 /s/ Richard D. Kurtz
----------------- ---------------------------------
Richard D. Kurtz
Chairman, Chief Executive Officer
and Director
/s/ Susan A. Schmidt
---------------------------------
Susan A. Schmidt
Chief Financial Officer and Secretary
/s/ Paul D. Ludwig
---------------------------------
Paul D. Ludwig
President
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