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 29,1997
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 August 4, 1997, 10,717,493 shares of Class A Common Stock, $.001 par value,
and 137,002 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 29, 1997 and June 30, 1996 3
Consolidated Balance Sheets
at June 29, 1997 and March 30, 1997 4 - 5
Consolidated Statements of Cash Flows
for the three month periods ended
June 29, 1997 and June 30, 1996 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations 8 - 11
PART II OTHER INFORMATION 11
SIGNATURES 11
<PAGE>
ADVANCED PHOTONIX, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the three month period ended June 29, 1997 June 30, 1996
----------------------------------------------------------------------------
REVENUES
Net product sales $ 1,383,000 $ 1,633,000
Development contracts 100,000 133,000
--------- ----------
1,483,000 1,766,000
--------- ----------
COSTS AND EXPENSES
Cost of product sales 949,000 1,016,000
Research and development 229,000 576,000
Marketing and sales 248,000 210,000
General and administrative 294,000 325,000
--------- ----------
1,720,000 2,127,000
--------- ----------
LOSS FROM OPERATIONS (237,000) (361,000)
--------- ----------
OTHER INCOME
Interest income 33,000 45,000
Other, net 1,000 6,000
--------- ----------
34,000 51,000
--------- ----------
NET LOSS - $(.02), $(.03) per share $ (203,000) $ (310,000)
=========== ===========
See notes to consolidated financial
statements.
<PAGE>
ADVANCED PHOTONIX, INC.
CONSOLIDATED BALANCE SHEETS
June 29, 1997 March 30, 1997
Unaudited Audited
- --------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 761,000 $ 1,217,000
Short-term investments 1,480,000 1,459,000
Accounts receivable,less allowance of
$83,000 at June 29, 1997 and at March 30, 1997 791,000 642,000
Inventories 1,203,000 1,074,000
Prepaid expenses and other current assets 85,000 61,000
----------- -----------
Total Current Assets 4,320,000 4,453,000
----------- -----------
EQUIPMENT AND LEASEHOLD IMPROVEMENTS, at cost 3,361,000 3,331,000
Less accumulated depreciation
and amortization (2,470,000) (2,364,000)
----------- -----------
891,000 967,000
----------- -----------
OTHER ASSETS
Goodwill, net of accumulated amortization of
$194,000 at June 29, 1997 and
$186,000 at March 30, 1997 642,000 650,000
Patents, net of accumulated amortization of
$22,000 at June 29, 1997 and
$21,000 at March 30, 1997 39,000 40,000
Other 55,000 55,000
----------- -----------
736,000 745,000
----------- -----------
$ 5,947,000 $ 6,165,000
=========== ===========
See notes to consolidated financial statements.
<PAGE>
ADVANCED PHOTONIX, INC.
CONSOLIDATED BALANCE SHEETS
June 29, 1997 March 30, 1997
Unaudited Audited
- --------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 252,000 $ 295,000
Accrued expenses:
Salaries and employee benefits 440,000 451,000
Warranty 95,000 95,000
Other 317,000 278,000
----------- -----------
Total Current Liabilities 1,104,000 1,119,000
----------- -----------
REDEEMABLE CONVERTIBLE PREFERRED STOCK AT
REDEMPTION VALUE 98,000 98,000
----------- ------------
COMMITMENTS AND CONTINGENCIES (Note 8)
STOCKHOLDERS' EQUITY
Class A Common Stock,
par value $.001 per share;
authorized 50,000,000 shares;
June 29, 1997--10,717,493 shares
issued and outstanding
March 30, 1997--10,717,493 shares
issued and outstanding 11,000 11,000
Class B Common Stock,
par value $.001 per share;
authorized 4,420,113 shares;
June 29, 1997--159,225 shares
issued and 137,002 outstanding
March 30, 1997--159,225
shares issued and 137,002 outstanding - -
Additional paid-in capital 22,659,000 22,659,000
Less cost of 22,223 shares of Class B
Common Stock in Treasury at June 29,
1997 and March 30, 1997 (50,000) (50,000)
Accumulated deficit (17,875,000) (17,672,000)
------------ ------------
4,745,000 4,948,000
------------ ------------
$ 5,947,000 $ 6,165,000
============ ============
See notes to consolidated financial statements.
<PAGE>
<TABLE>
ADVANCED PHOTONIX, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
<CAPTION>
For the three month period ended June 29, 1997 June 30, 1996
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $ (203,000) $ (310,000)
Adjustments to reconcile net loss to net cash provided by (used in) operating
activities:
Depreciation 106,000 137,000
Amortization 9,000 14,000
Changes in assets and liabilities:
Short-term investments (21,000) -
Accounts receivable (149,000) (362,000)
Inventories (129,000) (103,000)
Prepaid expenses and other current assets (24,000) 6,000
Accounts payable and accrued expenses (15,000) 19,000
---------- ----------
NET CASH USED IN OPERATING ACTIVITIES (426,000) (599,000)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (30,000) (108,000)
---------- ----------
NET CASH USED IN INVESTING ACTIVITIES (30,000) (108,000)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from exercise of stock options and warrants - 45,000
---------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES - 45,000
---------- ----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (456,000) (662,000)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,217,000 4,042,000
---------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 761,000 $ 3,380,000
========== ==========
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
ADVANCED PHOTONIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 29, 1997
(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 29, 1997, are
not necessarily indicative of the results that may be expected for the fiscal
year ending March 29, 1998. 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 30, 1997.
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. Common stock equivalents
were not considered in the calculation, as their effect would be antidilutive.
Such weighted average shares were approximately 10,854,000 at June 29, 1997 and
10,812,000 at June 30, 1996.
<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 1998 ("Q1 98") were
$1.5 million, a decrease of $283,000 or (16%) from revenues of $1.8 million for
the first quarter of fiscal year 1997 ("Q1 97") and an increase of $35,000 (2%)
from revenues of $1.4 million in the fourth quarter of fiscal year 1997 ("the
previous quarter").
Net product sales of $1.4 million decreased $250,000 (15%) and development
contract revenues decreased by $33,000 (25%) to $100,000 in Q1 98 compared to Q1
97. The Company believes that cutbacks in its sales and marketing efforts during
fiscal 1996 impacted its ability to book new orders and resulted in lower sales
during the second half of fiscal 1997 and Q1 98. These cutbacks were a result of
cash conservation measures put in place prior to the Company completing a
private placement in August 1995. After receiving the additional equity
financing, the Company hired and replaced employees in the sales department and
otherwise increased marketing efforts including additional trade-show attendance
and advertising.
The decrease in net product sales was primarily due to lower shipments of
industrial sensing products which decreased by approximately 30% in Q1 98
compared to Q1 97 but were relatively flat to the previous quarter. Volume in
military aerospace products increased slightly in Q1 98 compared to the prior
quarter and is expected to continue to increase in fiscal 1998 as the Company
begins deliveries under a new, longer term military program. The Company was
awarded a contract for $1.3 million under this program which, along with
follow-on orders, should provide a solid base to grow revenues over the next few
years.
During Q1 98, net product sales of Large Area Avalanche Photodiode (LAAPD)
products were insignificant. During 1996, the Company curtailed LAAPD production
because of low reliability and yields it was obtaining in the manufacturing
process. After additional research 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, and has begun to market
LAAPD products to original equipment manufacturers. While the Company
anticipates increasing volume from sales of LAAPD products made with its newly
developed manufacturing process, further refinements in the manufacturing
process will be required before full production can be achieved. Meanwhile, the
Company continues to ship quality product, albeit at low production levels and
less than desired manufacturing yields. The Company recently consolidated its
core business and LAAPD manufacturing operations and continues its efforts to
further refine and optimize certain process steps in LAAPD products.
<PAGE>
The decrease in development contract revenues was primarily due to the
completion of a Department of Energy ("DOE") contract during the third quarter
of fiscal 1997. The Company was awarded a Phase II DOE grant of approximately
$750,000 in June 1995 based upon the success of a Phase I effort. In addition,
in December 1995, the Company 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 ("ARPA/NAWC"). 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. During the third quarter of 1997, revenues from the
DOE contract began to wind down and the contract was completed. During the
second half of 1997, revenues from the ARPA/NAWC contract were impacted by a
delay in funding from the customer. Incremental funding has now been awardd to
complete the current phase of the contract. The work on this phase should be
completed during Q2 98.
COSTS AND EXPENSES
Cost of product sales decreased by $67,000 in Q1 98 compared to Q1 97. The
decrease is attributable to lower product shipments and a related decrease in
manufacturing volume efficiencies. In line with the reduction in product
shipments which has spanned the second half of fiscal 1997 through Q1 98, the
Company has reduced its workforce (permanent and temporary employees from 86 to
69 during fiscal 1997 -- and to 67 at the end of Q1 98) through attrition and a
reduction in force in February 1997.
Research and development costs decreased by $347,000 (60%) to $229,000 in Q1 98
as compared to Q1 97. The decrease in R&D costs is primarily due to the lower
level of R&D effort on government contracts (see "Revenues" above) as well as a
general reduction in internal R&D efforts as the Company focuses more on the
commercialization/manufacture of the LAAPD. In conjunction with its
commercialization efforts, the Company has consolidated its core business and
LAAPD manufacturing operations. In addition, the Company has better controlled
internal R&D activities. 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. The Company is currently developing
LAAPD imaging arrays which the Company believes will have the greatest future
market potential within the line of LAAPD products. An acceleration in
development efforts to bring this technology into production could substantially
impact R&D costs.
Marketing and sales expenses increased by $38,000 (18%) to $248,000 in Q1 98
compared to Q1 97. The increases were primarily due to increased personnel,
advertising and marketing costs. This increase was expected, as the Company
pursues its plan for growth. Marketing and sales expenses should continue to
increase as the Company continues to pursue its plan for growth including
commercialization of the LAAPD family of products.
General and administrative expenses decreased by $31,000 (10%) to $294,000 in Q1
98 compared to Q1 97 primarily due to general cutbacks and efforts to reduce
costs.
Interest income in Q1 98 of $33,000 was $12,000 lower than Q1 97 as a result of
lower average cash balances.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
At June 29, 1997, the Company had cash, cash equivalents and short-term
investments of $2.2 million, working capital of $3.2 million and an accumulated
deficit of $17.9 million. The Company's cash and cash equivalents decreased by
$456,000 during the three months ended June 29, 1997. Cash of $426,000 was used
for operating activities primarily for accounts receivable ($149,000) which was
primarily related to a large billing on a government contract made at the end of
the period. Cash of $30,000 was used for capital equipment, compared to $108,000
during the comparable period of the prior year.
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. On August 15, 1995, the Company completed a $3,000,000 private
placement in which it issued 2,400,000 shares of Class A Common Stock.
The Company has a revolving line of credit agreement with a bank for the lesser
of $1,000,000 or 75 percent of eligible trade accounts receivable, as defined by
the agreement. The agreement was renewed on July 15, 1997, expires in one year
and provides for interest to be paid monthly at prime plus 1.25 percent. The
Company must adhere to certain requirements and provisions to be in compliance
with the terms of the agreement. Borrowings under the line of credit are secured
by accounts receivable, inventory, equipment and general intangibles. At June
29, 1997, no amounts were outstanding under any bank line of credit and there
were no stockholder loans to the Company.
The Company has used the proceeds of its 1995 private placement to implement its
strategic business plan, which 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 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, 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 (particularly its LAAPD product line), the availability of other
competing technologies and a decline in the general demand for optoelectronic
products.
<PAGE>
PART II. OTHER INFORMATION
Items 1. - 5. None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.14 Amendment to Loan Agreement and Schedule to Loan and Security
Agreement dated July 15, 1997 between Silicon Valley Bank and Registrant.
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: August 13, 1997 /s/ Patrick J. Holmes
--------------- ---------------------
Patrick J. Holmes
Executive Vice President, Chief Financial
Officer and Secretary/Treasurer
[GRAPHIC OMITTED] Silicon Valley Bank
Amendment to Loan Agreement
Borrower: Advanced Photonix, Inc.
Address: 1240 Avenida Acaso
Camarillo, California 93012
Dated as of: July 15, 1997
THIS AMENDMENT TO LOAN AGREEMENT is entered into between SILICON VALLEY
BANK ("Silicon") and the borrower named above (the "Borrower").
The Parties agree to amend the Loan and Security Agreement between them dated
September 6, 1995, as amended by that Amendment to Loan Agreement dated
September 6, 1996 (as so amended and as otherwise amended from time to time, the
"Loan Agreement") as follows, effective as of the date hereof. (Capitalized
terms used but not defined in this Agreement, shall have the meanings set forth
in the Loan Agreement.)
1. Amended Schedule. The Schedule to Loan and Security Agreement is
hereby amended in its entirety and replaced with the Amended Schedule
to Loan and Security Agreement attached hereto.
2. Amended Section 4.5. Section 4.5 of the Loan Agreement is hereby
amended in its entirety to read as follows:
"4.5 Access to Collateral, Books and Records. At all reasonable times,
and upon one business day notice, Silicon, or its agents, shall have
the right to inspect the Collateral, and the right to audit and copy
the Borrower's accounting books and records and Borrower's books and
records relating to the Collateral. Silicon shall take reasonable steps
to keep confidential all information obtained in any such inspection or
audit, but Silicon shall have the right to disclose any such
information to its auditors, regulatory agencies, and attorneys, and
pursuant to any subpoena or other legal process. The foregoing audits
shall be at Silicon's expense, except that the Borrower shall reimburse
Silicon for its reasonable out of pocket costs for semi-annual accounts
receivable audits by Silicon, its agents, or third parties retained by
Silicon (the "Borrower's Reimbursement Obligation"), and Silicon may
debit Borrower's deposit accounts with Silicon for the cost of such
semi-annual accounts receivable audits (in which event Silicon shall
send notification thereof to the
<PAGE>
Borrower) *. Notwithstanding the foregoing, after the occurrence
of an Event of Default all audits shall be at the Borrower's expense.
* , provided, however, that after the performance of the first audit
after September 6, 1996 which will be subject to Borrower's
Reimbursement Obligation, if the Loans outstanding do not exceed
$200,000 the Borrower's Reimbursement Obligation shall not apply as
long as the amount of such Loans does not exceed $200,000. Borrower
agrees to provide Silicon with 30 days prior written notice of its
intent to borrow more than $200,000 so that an audit may be conducted
(a "Borrowing Audit") and such audit shall be subject to the
Reimbursement Obligation"
3. Fee. Borrower shall concurrently herewith pay a fee to Silicon in the
amount of $5,250, which shall be in addition to all interest and all
other amounts payable hereunder, and which shall not be refundable.
4. Representations True. Borrower represents and warrants to Silicon that
all representations and warranties set forth in the Loan Agreement, as
amended hereby, are true and correct.
5r. General Provisions. This Extension Agreement, the Loan Agreement, any
prior written amendments to the Loan Agreement signed by Silicon and
the Borrower, and the other written documents and agreements between
Silicon and the Borrower set forth in full all of the representations
and agreements of the parties with respect to the subject matter
hereof and supersede all prior discussions, representations,
agreements and understandings between the parties with respect to the
subject hereof. Except as herein expressly amended, all of the terms
and provisions of the Loan Agreement, as so amended, and all other
documents and agreements between Silicon and the Borrower shall
continue in full force and effect and the same are hereby ratified and
confirmed.
Borrower: Silicon:
ADVANCED PHOTONIX, INC. SILICON VALLEY BANK
By /s/Harry Melkonian By Karl R. Brier
------------------ -------------
President or Vice President
Title Vice President
--------------
By /s/P. J. Holmes
-------------------
Secretary or Ass't Secretary
<PAGE>
[GRAPHIC OMITTED] SILICON VALLEY BANK
Schedule to
Loan and Security Agreement
Borrower: Advanced Photonix, Inc.
Address: 1240 Avenida Acaso
Camarillo, California 93012
Dated: July 15, 1997
THIS SCHEDULE is an integral part of the Loan and Security Agreement
between Silicon Valley Bank ("Silicon") and the above-named borrower
("Borrower") of even date.
Credit Limit
(Section 1.1): An amount not to exceed the lesser of: (i) $1,000,000 at any
one time outstanding; or (ii) 75% * of the Net Amount of Borrower's
accounts, which Silicon in its discretion deems eligible for
borrowing. "Net Amount" of an account means the gross amount of the
account, minus all applicable sales, use, excise and other similar
taxes and minus all discounts, credits and allowances of any nature
granted or claimed.
* (provided that on and after a Borrowing Audit (as defined in Section
4.5 of the Loan Agreement), this percentage may be modified in the
reasonable discretion of Silicon based on the results of any such
audit)
Without limiting the fact that the determination of which accounts are
eligible for borrowing is a matter of Silicon's discretion, the
following will not be deemed eligible for borrowing: accounts
outstanding for more than 90 days from the invoice date, accounts
subject to any contingencies, accounts owing from the United States or
any department, agency or instrumentality of the United States or any
state, city or municipality, accounts owing from an account debtor
outside the United States (unless pre- approved by Silicon in its
discretion, or backed by a letter of credit satisfactory to Silicon,
or FCIA insured satisfactory to Silicon), accounts owing from one
account debtor to the extent they exceed 25% of the total eligible
accounts outstanding, accounts owing from an affiliate of Borrower,
and accounts owing from an account debtor to whom Borrower is or may
be liable for goods purchased from such account debtor or otherwise.
In addition, if more than 50% of the accounts owing from an account
debtor are outstanding more than 90 days from the invoice date or are
otherwise not eligible accounts, then all accounts owing from that
account debtor will be deemed ineligible for borrowing.
Letter of Credit Sublimit
Silicon, in its reasonable discretion, will from time to time during
the term of this Agreement issue letters of credit for the account of
the Borrower ("Letters of Credit"), in an aggregate amount at any one
time outstanding not to exceed $100,000, upon the request of the
Borrower, provided that, on the date the Letters of Credit are to be
<PAGE>
issued, Borrower has available to it Loans in an amount equal to or
greater than the face amount of the Letters of Credit to be issued.
Prior to the issuance of any Letters of Credit, Borrower shall execute
and deliver to Silicon Applications for Letters of Credit and such
other documentation as Silicon shall specify (the "Letter of Credit
Documentation"). Fees for the Letters of Credit shall be as provided
in the Letter of Credit Documentation. Letters of Credit may have a
maturity date up to twelve months beyond the Maturity Date in effect
from time to time, provided that if on the Maturity Date, or on any
earlier effective date of termination, there are any outstanding
letters of credit issued by Silicon or issued by another institution
based upon an application, guarantee, indemnity or similar agreement
on the part of Silicon, then on such date Borrower shall provide to
Silicon cash collateral in an amount equal to the face amount of all
such letters of credit plus all interest, fees and costs due or to
become due in connection therewith, to secure all of the Obligations
relating to said letters of credit, pursuant to Silicon's then
standard form cash pledge agreement.
The Credit Limit set forth above and the Loans available under this
Agreement at any time shall be reduced by the face amount of Letters
of Credit from time to time outstanding.
Interest Rate (Section 1.2):
A rate equal to the "Prime Rate" in effect from time to time, plus
1.25% per annum. Interest shall be calculated on the basis of a
360-day year for the actual number of days elapsed. "Prime Rate" means
the rate announced from time to time by Silicon as its "prime rate;"
it is a base rate upon which other rates charged by Silicon are based,
and it is not necessarily the best rate available at Silicon. The
interest rate applicable to the Obligations shall change on each date
there is a change in the Prime Rate.
Loan Origination Fee
(Section 1.3): See Amendment to Loan Agreement.
Maturity Date
(Section 5.1): July 15, 1998
Prior Names of Borrower
(Section 3.2): Xsirius Photonix, Inc.
Trade Names of Borrower
(Section 3.2): None
Other Locations and Addresses
(Section 3.3): None
Material Adverse Litigation
(Section 3.10): None
Negative Covenants-Exceptions
(Section 4.6):
Without Silicon's prior written consent, Borrower may do the
following, provided that, after giving effect thereto, no Event of
Default has occurred and no event has occurred which, with notice or
passage of time or both, would constitute an Event of Default, and
provided that the following are done in compliance with all applicable
laws, rules and regulations: (i) repurchase shares of Borrower's stock
pursuant to any employee stock purchase or benefit plan, provided that
the total amount paid by Borrower for such stock does not exceed
$100,000 in any fiscal year.
<PAGE>
Financial Covenants
(Section 4.1):
Borrower shall comply with all of the following covenants beginning
with the period ending March 30, 1997 (and shall be deemed amended as
of such date). Compliance shall be determined as of the end of each
fiscal month, except as otherwise specifically provided below:
Quick Asset Ratio:
Borrower shall maintain a ratio of "Quick Assets" to current
liabilities of not less than 1.50 to 1.
Tangible Net Worth:
Borrower shall maintain a tangible net worth of not less than
$3,250,000 plus 50% of Borrower's net profits (after taxes) for each
quarter (without deduction for losses) after the date hereof plus 80%
of the net proceeds that the Borrower receives from equity financing
transactions that are consummated after the date hereof.
Debt to Tangible
Net Worth Ratio:
Borrower shall maintain a ratio of total liabilities to tangible net
worth of not more than 0.75 to 1.
Profitability
For fiscal year starting April 1996, Borrower shall not incur a loss
(after taxes), on a cumulative basis, in excess of $2,000,000; and for
the fiscal year starting April 1997, Borrower shall not incur a loss
(after taxes), on a cumulative basis, in excess of $1,000,000
Definitions:
"Current assets," and "current liabilities" shall have the meanings
ascribed to them in accordance with generally accepted accounting
principles.
"Tangible net worth" means the excess of total assets over total
liabilities, determined in accordance with generally accepted
accounting principles, excluding however all assets which would be
classified as intangible assets under generally accepted accounting
principles, including without limitation goodwill, licenses, patents,
trademarks, trade names, copyrights, capitalized software and
organizational costs, licences and franchises.
"Quick Assets" means cash on hand or on deposit in banks, readily
marketable securities issued by the United States, readily marketable
commercial paper rated "A-1" by Standard & Poor's Corporation (or a
similar rating by a similar rating organization), certificates of
deposit and banker's acceptances, and accounts receivable (net of
allowance for doubtful accounts).
Subordinated Debt:
"Liabilities" for purposes of the foregoing covenants do not include
indebtedness which is subordinated to the indebtedness to Silicon
under a subordination agreement in form specified by Silicon or by
language in the instrument evidencing the indebtedness which is
acceptable to Silicon.
Other Covenants
(Section 4.1):
Borrower shall at all times comply with all of the following
additional covenants:
1. Banking Relationship. Borrower shall at all times maintain its
primary banking relationship with Silicon.
2. Monthly Borrowing Base Certificate and Listing. When any Loans or
Obligations relating thereto are outstanding, within 20 days after the
end of each month, Borrower shall provide Silicon with a Borrowing
Base Certificate in such form as Silicon shall specify, and
<PAGE>
an aged listing of Borrower's accounts receivable and accounts
payable. At all other times, within 20 days after the end of each
quarter, Borrower shall provide Silicon with a Borrowing Base
Certificate in such form as Silicon shall specify, and an aged listing
of Borrower's accounts receivable and accounts payable 3.
Indebtedness. Without limiting any of the foregoing terms or
provisions of this Agreement, Borrower shall not in the future incur
indebtedness for borrowed money, except for (i) indebtedness to
Silicon, and (ii) indebtedness incurred in the future for the purchase
price of or lease of equipment in an aggregate amount not exceeding
$750,000 at any time outstanding.
3. Update. At such time that the Borrower requests Loans such that the
Obligations outstanding hereunder shall exceed $200,000, Borrower
shall supply an update to Silicon of the intellectual property portion
of the representations and warranties form Borrower has previously
supplied to Silicon in order to allow Silicon to prepare such
supplemental security agreements and take such additional actions as
Silicon deems necessary or advisable in order to perfect its security
interest in such items of Borrower's intellectual property not already
subject to Silicon's perfected security interest.
Borrower:
ADVANCED PHOTONIX, INC.
By /s/Harry Melkonian
President or Vice President
By /s/P. J. Holmes
Secretary or Ass't Secretary
Silicon:
SILICON VALLEY BANK
By /s/Karl R. Brier
Title Vice President
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-29-1998
<PERIOD-START> MAR-31-1997
<PERIOD-END> JUN-29-1997
<EXCHANGE-RATE> 1
<CASH> 761
<SECURITIES> 1,480
<RECEIVABLES> 791
<ALLOWANCES> 83
<INVENTORY> 1,203
<CURRENT-ASSETS> 4,320
<PP&E> 3,361
<DEPRECIATION> 2,470
<TOTAL-ASSETS> 5,947
<CURRENT-LIABILITIES> 1,104
<BONDS> 0
0
98
<COMMON> 11
<OTHER-SE> 4,734
<TOTAL-LIABILITY-AND-EQUITY> 5,947
<SALES> 1,383
<TOTAL-REVENUES> 1,483
<CGS> 949
<TOTAL-COSTS> 1,720
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (203)
<INCOME-TAX> 0
<INCOME-CONTINUING> (203)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (203)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
