================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
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
----------
I.R.S. 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 August 5, 1996, 10,678,064 shares of Class A Common Stock, $.001 par value,
and 145,002 shares of Class B Common Stock, $.001 par value, were outstanding.
================================================================================
<PAGE>
ADVANCED PHOTONIX, INC.
INDEX
PAGE
PART I FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited) 3 - 6
Consolidated Statements of Operations
for the three month periods ended
June 30, 1996 and July 2, 1995 3
Consolidated Balance Sheets
at June 30, 1996 and March 31, 1996 4 - 5
Consolidated Statements of Cash Flows
for the three month periods ended
June 30, 1996 and July 2, 1995 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations 8 - 10
PART II OTHER INFORMATION 10
SIGNATURES 10
2
<PAGE>
ADVANCED PHOTONIX, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended
--------------------------------------------
June 30, 1996 July 2, 1995
------------------- ----------------------
REVENUES
Net product sales $ 1,633,000 $ 1,845,000
Development contracts 133,000 57,000
------------ ------------
1,766,000 1,902,000
------------ ------------
COSTS AND EXPENSES
Cost of product sales 1,016,000 1,263,000
Research and development 576,000 453,000
Marketing and sales 210,000 148,000
General and administrative 325,000 338,000
----------- ------------
2,127,000 2,202,000
----------- ------------
LOSS FROM OPERATIONS (361,000) (300,000)
------------ -------------
OTHER INCOME
Interest income 45,000 9,000
Other, net 6,000 4,000
------------ ------------
51,000 13,000
------------ ------------
NET LOSS $ (310,000) $ (287,000)
============= =============
NET LOSS PER SHARE $ (.03) $ (.03)
============= =============
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 10,812,000 8,389,000
============= =============
See notes to consolidated financial statements
3
<PAGE>
ADVANCED PHOTONIX, INC.
CONSOLIDATED BALANCE SHEETS
June 30, March 31,
1996 1996
(Unaudited) (Audited)
-----------------------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 3,380,000 $4,042,000
Accounts receivable, less allowance of
$105,000 at June 30, 1996 and at March 31, 1996 1,154,000 792,000
Inventories 916,000 813,000
Prepaid expenses and other current assets 80,000 86,000
------------ ------------
Total Current Assets 5,530,000 5,733,000
------------ ------------
EQUIPMENT AND LEASEHOLD IMPROVEMENTS, at cost 3,306,000 3,198,000
Less accumulated depreciation and amortization (2,175,000) (2,038,000)
------------ -----------
1,131,000 1,160,000
------------ -----------
OTHER ASSETS
Goodwill, net of accumulated amortization
of $161,000 at June 30, 1996 and
$152,000 at March 31, 1996 675,000 684,000
Patents, net of accumulated amortization of
$9,000 at June 30, 1996 and March 31, 1996 53,000 53,000
Other 71,000 76,000
------------ ------------
799,000 813,000
------------ ------------
$ 7,460,000 $ 7,706,000
============ ============
See notes to consolidated financial statements
4
<PAGE>
ADVANCED PHOTONIX, INC.
CONSOLIDATED BALANCE SHEETS
June 30, March 31,
1996 1996
(Unaudited) (Audited)
-----------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 226,000 $ 167,000
Accrued expenses:
Salaries and employee benefits 248,000 293,000
Warranty 95,000 95,000
Other 252,000 247,000
------------ -----------
Total Current Liabilities 821,000 802,000
------------ -----------
REDEEMABLE CONVERTIBLE PREFERRED
STOCK AT REDEMPTION VALUE 98,000 98,000
------------ -----------
STOCKHOLDERS' EQUITY
Class A Common Stock, par value $.001 11,000 10,000
per share; authorized 50,000,000 shares;
June 30, 1996--10,675,841 shares issued
and outstanding; March 31, 1996--10,631,186
shares issued and outstanding
Class B Common Stock, par value $.001 - -
per share; authorized 4,420,113 shares;
June 30, 1996--169,448 shares issued
and 147,225 outstanding; March 31, 1996--
193,003 shares issued and 170,780 outstanding
Additional paid-in capital 22,676,000 22,632,000
Less cost of 22,223 shares of Class B Common
Stock in Treasury at June 30, 1996
and March 31, 1996 (50,000) (50,000)
Accumulated deficit (16,096,000) (15,786,000)
------------ ------------
6,541,000 6,806,000
------------ ------------
$ 7,460,000 $ 7,706,000
============ ============
See notes to consolidated financial statements
5
<PAGE>
ADVANCED PHOTONIX, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
------------------------------------
June 30, 1996 July 2, 1995
---------------- ---------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $ (310,000) $ (287,000)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation 137,000 134,000
Amortization 14,000 13,000
Changes in assets and liabilities:
Accounts receivable (362,000) (237,000)
Inventories (103,000) 164,000
Prepaid expenses and other assets 6,000 7,000
Accounts payable and accrued expenses 19,000 (140,000)
Other current liabilities - (84,000)
--------- ---------
NET CASH USED IN OPERATING ACTIVITIES (599,000) (430,000)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment (108,000) (15,000)
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES (108,000) (15,000)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Sales of common and preferred stock,
net of issuance costs 45,000 -
NET CASH PROVIDED BY FINANCING ACTIVITIES 45,000 -
--------- ---------
NET DECREASE IN CASH AND CASH EQUIVALENTS (662,000) (445,000)
CASH AND CASH EQUIVALENTS AT BEG. OF PERIOD 4,042,000 903,000
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $3,380,000 $ 458,000
========== =========
See notes to consolidated financial statements
6
<PAGE>
ADVANCED PHOTONIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1996
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. 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 three month period ended June 30, 1996, are
not necessarily indicative of the results that may be expected for the fiscal
year ending March 30, 1997. For further information, refer to the consolidated
financial statements and notes thereto included in the Advanced Photonix, Inc.
(together with its subsidiary, the "Company") Annual Report on Form 10-K for the
fiscal year ended March 31, 1996.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Net Loss Per Share: Net loss per share is based on the weighted average number
of common and common equivalent shares outstanding, computed in accordance with
Accounting Principles Board (APB) Opinion No. 15. Common stock equivalents were
not considered in the calculation as their effect would be antidilutive.
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
RESULTS OF OPERATIONS
REVENUES
The Company's revenues for the first quarter of fiscal year 1997 ("Q1 97") were
$1.8 million, a decrease of $136,000 or 7% from revenues of $1.9 million for the
first quarter of fiscal year 1996 ("Q1 96"). Net product sales of $1.6 million
decreased $212,000 (11%) in Q1 97 primarily due to the Company's Core Business
product lines which represent 99% of net product sales. Development contract
revenues increased by $76,000 (133%) to $133,000.
Net product sales of Core Business products declined in Q1 97 primarily as a
result of a lower level of shipments to the Company's largest customer. The
Company anticipates that total sales to that customer for fiscal 1997 will
approximate those of the prior year.
Q1 1997 net product sales from Large Area Avalanche Photodiode (LAAPD) products
were relatively low and flat to the prior year. During fiscal year 1995, the
Company suspended most shipments of its proprietary LAAPD products and curtailed
LAAPD production because of low reliability and yields it was obtaining in the
manufacturing process. Thereafter, the Company focused its research and
development resources on the baseline LAAPD manufacturing process. As a result
of these efforts, the Company developed a new manufacturing process which it
anticipates will significantly improve both reliability and process yields. In
July 1996, the Company filed for a patent seeking protection of the new
manufacturing process. The Company believes this new LAAPD process positions it
to begin aggressive marketing of LAAPD products for OEM applications. Shipment
of products manufactured with the new process began at the end of Q1 97 and
should increase during the remainder of fiscal 1997.
Development contract revenues increased 133% during Q1 97, from $57,000 in Q1
96, to $133,000 in Q1 97. This is primarily due to two development contracts for
which work did not build up until the second and third quarters of fiscal 1996.
The Company was awarded a Phase II Department of Energy grant of approximately
$750,000 in June 1995 based upon the success of a Phase I effort, and in
September 1995, was awarded a $1.1 million contract from the Advanced Research
Projects Agency of the Pentagon and the Aircraft Division of the Naval Air
Warfare Center. These types of government development contracts are typically
multi-year awards and are subject to periodic review and cancellation by the
government due to a variety of reasons including a lack of funding. If not
rescheduled or canceled, revenues from existing contracts should continue
through the third quarter of fiscal 1998.
COSTS AND EXPENSES
Cost of product sales decreased by $247,000 in Q1 97 compared to Q1 96. This
decrease was primarily due to lower product shipments as well as cost
containment programs, productivity improvements and product mix improvements.
Cost of product sales as a percent of product sales decreased by 6% due to
factors noted above.
Research and development ("R&D") costs increased by $123,000 (27%) to $576,000
in Q1 97 compared to Q1 96. The increase in R&D costs is primarily due to the
higher level of R&D effort on government
8
<PAGE>
contracts and efforts expended on LAAPD process improvements for which the above
mentioned manufacturing process patent was applied for during the period. During
the past fiscal year, the Company has better controlled internal R&D activities
and has been successful in obtaining government funded development contracts
complementary to its internal R&D efforts. These costs might otherwise be
partially incurred as internal R&D without any additional funding. R&D costs
have varied significantly in the past, and may continue to do so, due to the
level of activity associated with development contracts as well as the number
and complexity of new process and product development projects, the
qualification of new process developments and customer evaluation and acceptance
of new products.
Marketing and sales expenses increased by $62,000 (42%) to $210,000 in Q1 97
compared to Q1 96. The increase was entirely due to expenses incurred in the
Core Business where the Company has increased manpower compared to Q1 96 and
incurred higher marketing costs. This increase was expected, as the Company
pursues its plan to grow the Core Business. Marketing and sales expenses should
begin to increase in the LAAPD Business as the Company begins to commercialize
the LAAPD family of products.
General and administrative expenses decreased by $13,000 (4%) to $325,000 in Q1
97 compared to Q1 96. This decrease is primarily due to a reduction in fees paid
to outside members of the Company's Board of Directors partially offset by
higher incentive compensation costs. In October 1995, the Company's Board of
Directors unanimously agreed to eliminate all fees for its outside directors
except for reasonable travel expenses in conjunction with regular or committee
meetings.
Interest income increased by $36,000 (400%) in Q1 97 compared to Q1 96 primarily
as a result of higher average cash balances since the third quarter of fiscal
1996. In August 1995, the Company completed a private placement which increased
its average cash balances from that point forward. (See Liquidity and Capital
Resources.)
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1996, the Company had cash and cash equivalents of $3.4 million,
working capital of $4.7 million and an accumulated deficit of $16.1 million. The
Company's cash and cash equivalents decreased by $662,000 during the three
months ended June 30, 1996. Cash of $599,000 was used for operating activities
primarily for accounts receivable ($362,000). A significant portion of the
growth in accounts receivable was related to start-up billing issues with a new
government customer and not collection problems. In addition, past due accounts
were unusually low at March 31, 1996. Cash of $108,000 was used for purchasing
of capital equipment, compared to $15,000 during the comparable period of the
prior year. Capital spending had decreased during fiscal 1996 as the Company
conserved its resources pending receipt of additional equity financing.
To enable the Company to meet its capital commitment needs, the Company
historically has supplemented cash provided by operations with proceeds from
private placement equity financing, bank lines of credit and loans from
stockholders. At June 30, 1996, no amounts were outstanding under any bank
line-of-credit and there were no stockholder loans to the Company. On August 15,
1995, the Company completed a $3,000,000 private placement offering in which it
issued 2,400,000 shares of Class A Common Stock.
9
<PAGE>
The Company believes that the proceeds of its private placement offering will
permit it to implement its strategic business plan, which focuses on achieving
profitable operating results while maintaining its commitment to develop the
LAAPD based products. The Company's plan focuses on growing the Core Business,
bringing initial LAAPD products to market and developing proof-of-concept
demonstration LAAPD Arrays which are expected to prove helpful in securing
future financing and strategic partners.
The Company will utilize its available funds to continue development of the
LAAPD business and for other working capital purposes including, but not limited
to, capital equipment and working capital to expand the Core Business and bring
the initial LAAPD products to market; and capital equipment, salaries, wages and
other development costs to further develop the LAAPD manufacturing process and
develop proof-of-concept demonstration LAAPD Arrays. The continued development
of LAAPD Arrays beyond the proof-of-concept phase may require additional funds.
The Company believes that the moderate rate of inflation over the past few years
has not had a significant impact on the Company's sales or operating results.
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, unforseen
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 (particularly its LAAPD product line), and a decline in the general
demand for optoelectronic products.
PART II. OTHER INFORMATION
Items 1.- 6. None
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)
By /s/ Patrick J. Holmes
---------------
Patrick J. Holmes
Vice President and Chief Financial Officer
Dated: August 13, 1996
10
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-30-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 3,380
<SECURITIES> 0
<RECEIVABLES> 1,154
<ALLOWANCES> 105
<INVENTORY> 916
<CURRENT-ASSETS> 5,530
<PP&E> 3,306
<DEPRECIATION> 2,175
<TOTAL-ASSETS> 7,460
<CURRENT-LIABILITIES> 821
<BONDS> 0
0
98
<COMMON> 11
<OTHER-SE> 6,530
<TOTAL-LIABILITY-AND-EQUITY> 7,460
<SALES> 1,633
<TOTAL-REVENUES> 1,766
<CGS> 1,016
<TOTAL-COSTS> 2,127
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (310)
<INCOME-TAX> 0
<INCOME-CONTINUING> (310)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (310)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
