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 September 26, 1999
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 October 29, 1999, 10,849,260 shares of Class A Common Stock,$.001 par value,
and 68,135 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 and six month periods ended
September 26, 1999 and September 27, 1998 3
Consolidated Balance Sheets
at September 26, 1999 and March 28, 1999 4 - 5
Consolidated Statements of Cash Flows for the
six month periods ended September 26, 1999 and
September 27, 1998 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 - 11
SIGNATURES 11
2
<PAGE>
<TABLE>
ADVANCED PHOTONIX, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<CAPTION>
Three Months Ended Six Months Ended
---------------------------------------------- ---------------------------------------------
September 26,1999 September 27,1998 September 26,1999 September 27,1998
---------------------- ---------------------- ---------------------- ---------------------
<S> <C> <C> <C> <C>
NET SALES $ 1,608,000 $ 1,961,000 $ 3,128,000 $ 3,919,000
Cost of sales 1,148,000 1,160,000 2,182,000 2,415,000
------------- ------------- ------------- -------------
GROSS PROFIT 460,000 801,000 946,000 1,504,000
OPERATING COSTS & EXPENSES:
Research and development 239,000 115,000 402,000 205,000
Marketing and sales 259,000 284,000 512,000 534,000
General and administrative 433,000 301,000 682,000 571,000
------------- ------------- ------------- -------------
931,000 700,000 1,596,000 1,310,000
------------- ------------- ------------- -------------
OPERATING INCOME (LOSS) (471,000) 101,000 (650,000) 194,000
------------- ------------- ------------- -------------
OTHER INCOME
Interest income 27,000 33,000 53,000 62,000
Other, net 1,000 1,000 (1,000) 1,000
------------- ------------- ------------- -------------
28,000 34,000 52,000 63,000
------------- ------------- ------------- -------------
NET INCOME (LOSS) $ (443,000) $ 135,000 $ (598,000) $ 257,000
============= ============= ============= ==============
NET PROFIT (LOSS) Per Share $ (.04) $ 0.01 $ (.05) $ 0.02
============= ============= ============= ==============
Weighted Average Number 10,917,000 10,914,000 10,917,000 10,914,000
of Common Shares Outstanding ============= ============= ============= ==============
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
3
<PAGE>
ADVANCED PHOTONIX, INC.
CONSOLIDATED BALANCE SHEETS
September 26, 1999 March 28, 1999
UNAUDITED AUDITED
- --------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,591,000 $ 664,000
Short-term investments 734,000 1,867,000
Accounts receivable, less allowance
of $83,000 in September 1999
and March 1999 812,000 986,000
Inventories 1,573,000 1,551,000
Prepaid expenses and other current assets 69,000 88,000
------------- -------------
Total Current Assets 4,779,000 5,156,000
------------- -------------
EQUIPMENT AND LEASEHOLD IMPROVEMENTS,
at cost 3,088,000 2,985,000
Less accumulated depreciation
and amortization (2,598,000) (2,474,000)
------------- -------------
490,000 511,000
OTHER ASSETS
Goodwill, net of accumulated amortization
of $269,000 in September 1999 and
$253,000 in March 1999 567,000 583,000
Patents, net of accumulated amortization
of $31,000 in September 1999 and
$28,000 in March 1999 49,000 52,000
Other 25,000 26,000
------------- -------------
641,000 661,000
------------- -------------
$ 5,910,000 $ 6,328,000
============= =============
See notes to consolidated financial statements.
4
<PAGE>
<TABLE>
ADVANCED PHOTONIX, INC.
CONSOLIDATED BALANCE SHEETS
<CAPTION>
September 26, 1999 March 28, 1999
UNAUDITED AUDITED
- -------------------------------------------------------------------- ---------------- ---------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 284,000 $ 263,000
Accrued expenses:
Salaries and employee benefits 501,000 310,000
Warranty 95,000 95,000
Other 101,000 133,000
---------------- ---------------
Total Current Liabilities 981,000 801,000
---------------- ---------------
COMMITMENTS AND CONTINGENICES
STOCKHOLDERS' EQUITY
Class A Common Stock, par value $.001 per share; authorized
50,000,000 shares;
September 26, 1999 - 10,849,260 shares issued and outstanding
March 28, 1999 - 10,849,260 shares issued and outstanding 11,000 11,000
Class B Common Stock, par value $.001 per share; authorized
4,420,113 shares;
September 26, 1999 - 68,135 shares issued and outstanding
March 28, 1999 - 68,135 shares issued and outstanding - -
Convertible Preferred Stock at redemption value; authorized
10,000,000 shares
September 26, 1999 - 80,000 shares issued and outstanding
March 28, 1999 - 80,000 shares issued and outstanding 64,000 64,000
Additional paid-in capital 22,704,000 22,704,000
Accumulated Deficit (17,850,000) (17,252,000)
---------------- ---------------
4,929,000 5,527,000
---------------- ---------------
$ 5,910,000 $ 6,328,000
================ ===============
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
5
<PAGE>
<TABLE>
ADVANCED PHOTONIX, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
<CAPTION>
For the six month period ended September 26, 1999 September 27, 1998
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $ (598,000) $ 257,000
Adjustments to reconcile net income (loss) to net cash used in operating
activities:
Depreciation 124,000 184,000
Amortization 19,000 15,000
Changes in assets and liabilities:
Short-term investments 1,133,000 (1,098,000)
Accounts receivable 174,000 (54,000)
Inventories (22,000) 166,000
Prepaid expenses and other assets 20,000 3,000
Accounts payable and accrued expenses 180,000 (371,000)
---------------- ----------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 1,030,000 (898,000)
---------------- ----------------
NET CASH USED IN INVESTING ACTIVITIES
Capital expenditures (103,000) (54,000)
---------------- ----------------
NET INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS 927,000 (952,000)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 664,000 1,386,000
---------------- ----------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,591,000 $ 434,000
================ ================
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
6
<PAGE>
ADVANCED PHOTONIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 26, 1999
(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 six month period ended September 26, 1999,
are not necessarily indicative of the results that may be expected for the
fiscal year ending March 26, 2000. 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 28, 1999.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Net Income (Loss) Per Share: Net loss per share is based on the weighted average
number of common and common equivalent shares outstanding. Net income (loss) per
share calculations are in accordance with Statement of Financial Accounting
Standards ("SFAS") No. 128, "Earnings per Share". 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. "Diluted" net income
(loss) per share has not been presented as the impact is either not material or
anti-dilutive. Inventories: Inventories consist of the following:
September 26, 1999 March 28, 1999
-------------------------- ---------------------
Raw materials $ 432,000 $ 453,000
Work in progress 1,020,000 926,000
Finished products 121,000 172,000
-------------------------- ---------------------
$ 1,573,000 $ 1,551,000
========================== =====================
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
RESULTS OF OPERATIONS
- ---------------------
NET SALES
The Company's net sales for the second quarter ("Q2 00") and six month period
("YTD 00") ended September 26, 1999, were $1.6 million and $3.1 million,
respectively. Net Sales for the Q2 00 and YTD 00 period were down 18% and 20%,
respectively, when compared to $2.0 million and $3.9 million in the comparable
periods of the prior year ("Q2 99" and "YTD 99"). The decrease in net sales was
primarily due to lower volume in military aerospace products which decreased by
approximately 56% for both Q2 00 and YTD 00 when compared to the comparable
periods in the prior year. The Company completed deliveries on orders related to
a large military program during the second half of fiscal 1999. New purchase
orders under this military program totaling more than $400,000 have been booked
and an additional order in excess of $500,000 is anticipated during Q4 00.
Deliveries under these new orders will resume during Q4 00. During Q2 00 and YTD
00, shipments of Large Area Avalanche Photodiode (LAAPD) products (included in
net sales) were 138% and 56% higher than the same periods in the prior year.
While YTD 00 net sales from these products represented 8% of total net sales,
the Company anticipates increasing volume from sales of LAAPD products as
markets begin to implement this "enabling" technology.
COST OF SALES
Cost of sales decreased by $12,000 (1%) during Q2 00 and by $233,000 (10%)
during YTD 00 compared to Q2 99 and YTD 99, respectively. The decreases are
primarily attributable to lower product shipments. Cost of sales as a percent of
net sales increased by 12 percentage points in Q2 00 compared to Q2 99 and by 8
percentage points in YTD 00 compared to YTD 99 due to a number of factors,
including inefficiencies associated with lower volume, lower margins stemming
from variability in product mix, and decreased sales from engineering design.
OPERATING COSTS & EXPENSES
Research and development costs for the Q2 00 and YTD 00 period were higher by
108% and 96%, respectively, when compared to $115,000 and $205,000 in the
comparable periods of the prior year ("Q2 99" & "YTD 99"). The increase in R&D
costs is primarily due to two factors: a.) higher overhead rates due to lower
overall volume and b.) an increase in internal R&D efforts as the Company
focuses on improving its current line of LAAPD products as well as expanding
into new derivatives of the patented technology. The Company is developing an
Extreme Ultra Violet LAAPD capable of detecting low light levels well below 200
nm. In addition, the Company continues the development of a new generation
two-dimensional LAAPD Array. 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.
8
<PAGE>
Marketing and sales expenses were relatively flat when compared to the prior
year. The Company believes its marketing and sales expenses will increase during
the remainder of the year as the Company pursues its plan of adding additional
sales personnel, increased trade show attendance and substantial print media
advertising.
General and administrative expenses increased by $132,000 (44%) to $433,000 in
Q2 00 compared to Q2 99 and by $111,000 (19%) to $682,000 in YTD 00 compared to
YTD 99 primarily due to severance costs associated with a management change.
General and administrative expenses before the impact of severance costs
decreased by $48,000 (16%) and by $69,000 (12%) in Q2 00 and YTD 00,
respectively, when compared to the same periods of the prior year. These
decreases were primarily due to manpower cutbacks and general efforts to reduce
costs.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
At September 26, 1999, the Company had cash, cash equivalents and short-term
investments of $2.3 million, working capital of $3.8 million and an accumulated
deficit of $17.9 million. The Company's cash, cash equivalents and short-term
investments decreased by $206,000 during the six months ended September 26,
1999. Cash of $103,000 was used for operating activities (before cash provided
by short-term investments). Cash of $103,000 was used for capital equipment,
compared to $54,000 during the comparable period of the prior year.
To enable the Company to meet its capital commitment needs, the Company has
historically supplemented cash provided by operations with proceeds from private
and public sales of capital stock and borrowings. These funds have been used to
grow the core business and finance the development and initial commercialization
of the Company's LAAPD technology. While the Company believes that initial
commercialization has been completed and has reduced its expenditures for
research and development, it continues development of other derivatives of the
base technology. The continued development of LAAPD derivative products as well
as revenue growth in the business may require additional funds.
The Company's 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, expired on July 16, 1999. The Company does not foresee a need for
borrowing based upon current projections and, therefore, has elected to forego
the costs for maintaining the line at this time. The Company believes that it
would be most efficient to establish a line when the situation warrants.
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.
YEAR 2000 ISSUES
- ----------------
The Company is aware of the potential for Year 2000 software failures and the
associated impact on business operations. Software utilizing a two digit date
field may recognize a date using "00" as the year 1900 rather than the year 2000
(the "Year 2000 Issue"). The Year 2000 Issue could potentially result in a
system failure or in miscalculations causing disruptions of operations,
including among other things, a temporary inability to process transactions,
send invoices or
9
<PAGE>
engage in other similar normal business activities. The Company developed a plan
and identified Year 2000 Issues in certain software applications and upgraded
such applications with software that recognizes dates beyond December 31, 1999,
thus addressing a substantial portion of the Year 2000 Issue that may impact the
Company (the Company is currently operating in its fiscal 2000 and, therefore,
has proven its reliability). The cost of this project, as it relates to the Year
2000 Issue, did not have a material effect on the operations of the Company. In
addition, the Company made inquiries and took inventory of its "mission
critical" suppliers and manufacturing equipment. There are alternative vendors
and equipment available to meet the "mission critical" needs of the Company in
the event of unforeseen circumstances.
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.
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 20, 1999. 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
--------- --------
Robert G. Allison 9,281,237 100,310
Harold A. Blomquist 9,281,237 100,310
M. Scott Farese 9,281,237 100,310
Hayden Leason 9,281,237 100,310
Harry Melkonian 9,281,237 100,310
10
<PAGE>
Item 5 Other Information
(a) During October 1999, Mr. Harold A. Blomquist and Mr. Robert G. Allison
resigned from the Board of Directors due primarily to time constraints. In
addition, Mr. Harry Melkonian resigned as Director, President and Chief
Executive Officer. He was replaced by Mr. Brock Koren, formerly Vice
President of Sales & Marketing, who was also elected to the Board of
Directors.
(b) In accordance with the requirements of Rule 14a-4(c) promulgated under the
Securities Exchange Act of 1934 (the "Exchange Act"), in order for
shareholder proposals submitted outside Rule 14a-8 (which includes
proposals that the regulations under the Exchange Act generally do not
require to be included in the Company's definitive proxy statement for its
annual meeting of shareholders) to be timely for purposes of the Company's
2000 Annual Meeting of Shareholders within the meaning of Rule 14a-4(c)
under the Exchange Act, such proposals must be received by the Company no
later than the close of business on April 20, 2000.
Item 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)
Date: November 3, 1999 /s/ P. J. Holmes
---------------- ----------------
Patrick J. Holmes
Executive Vice President, Chief Financial
Officer and Secretary/Treasurer
11
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