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 December 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 February 9, 2004, 13,447,059 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 December 28, 2003 3 - 4
Consolidated Statements of Operations for the three and nine
month periods ended December 28, 2003 and December 29, 2002 5
Consolidated Statements of Cash Flows for the nine month
periods ended December 28, 2003 and December 29, 2002 6
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 14
SIGNATURES 15
2
ADVANCED PHOTONIX, INC.
CONSOLIDATED BALANCE SHEET
AT DECEMBER 28, 2003
(UNAUDITED)
---------------------------------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 629,000
Short-term investments 1,700,000
Accounts receivable, less allowance of $14,000 2,135,000
Inventories 2,492,000
Prepaid expenses and other current assets 350,000
-----------------------------
Total Current Assets 7,306,000
-----------------------------
EQUIPMENT AND LEASEHOLD IMPROVEMENTS, at cost 4,981,000
Less accumulated depreciation and amortization (3,430,000)
-----------------------------
Total Equipment and Leasehold Improvements 1,551,000
-----------------------------
OTHER ASSETS
Goodwill, net of accumulated amortization of $353,000 2,439,000
Patents, net of accumulated amortization of $46,000 17,000
Other 74,000
-----------------------------
Total Other Assets 2,530,000
-----------------------------
TOTAL ASSETS $ 11,387,000
=============================
See notes to consolidated financial statements.
3
ADVANCED PHOTONIX, INC.
CONSOLIDATED BALANCE SHEET - Continued
AT DECEMBER 28, 2003
(UNAUDITED)
-------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Line of credit $ 900,000
Accounts payable 509,000
Accrued salaries, wages and benefits 330,000
Current portion of capital lease payable 21,000
Other 69,000
---------------------------
Total Current Liabilities 1,829,000
---------------------------
Capital lease payable, net of current portion 12,000
---------------------------
COMMITMENTS AND CONTINGENCIES
Class A redeemable convertible preferred stock, $.001 par value; 780,000 32,000
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
13,447,059 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 27,688,000
Accumulated Deficit (18,187,000)
---------------------------
Total Shareholders' Equity 9,514,000
---------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 11,387,000
===========================
See notes to consolidated financial statements.
4
ADVANCED PHOTONIX, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended Nine Months Ended
---------------------------------------------- ----------------------------------------------
December 28, 2003 December 29, 2002 December 28, 2003 December 29, 2002
---------------------- ---------------------- ---------------------- ----------------------
SALES $2,933,000 $2,603,000 $8,836,000 $5,989,000
Cost of goods sold 1,895,000 1,737,000 5,801,000 3,961,000
---------------------- ---------------------- ---------------------- ----------------------
GROSS PROFIT 1,038,000 866,000 3,035,000 2,028,000
Research and development expenses 32,000 107,000 189,000 392,000
Marketing and sales expenses 188,000 271,000 715,000 728,000
General and administrative expenses 568,000 454,000 1,544,000 1,175,000
---------------------- ---------------------- ---------------------- ----------------------
INCOME (LOSS) FROM OPERATIONS 250,000 34,000 587,000 (267,000)
---------------------- ---------------------- ---------------------- ----------------------
OTHER INCOME
Interest income 5,000 20,000 15,000 68,000
Interest expense (7,000) -- (25,000) --
Other, net 8,000 7,000 16,000 5,000
---------------------- ---------------------- ---------------------- ----------------------
TOTAL OTHER INCOME 6,000 27,000 6,000 73,000
---------------------- ---------------------- ---------------------- ----------------------
NET INCOME (LOSS) $ 256,000 $ 61,000 $ 593,000 $ (194,000)
====================== ====================== ====================== ======================
Basic and Diluted Earnings (Loss) $ .02 $ .00 $ .04 $ (.02)
Per Share
Weighted Average Number 13,458,000 12,251,000 13,441,000 12,250,000
of Common Shares Outstanding
See notes to consolidated financial statements.
5
ADVANCED PHOTONIX, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the nine month period ended December 28, 2003 December 29, 2002
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $ 593,000 ($ 194,000)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation 170,000 173,000
Amortization 58,000 28,000
Provision for Doubtful Accounts (29,000) 35,000
Provision for Obsolete Inventory 47,000 68,000
Changes in operating assets and liabilities:
Short-term investments (300,000) --
Accounts receivable 147,000 (109,000)
Inventories 89,000 278,000
Prepaid expenses and other current assets (33,000) (114,000)
Other assets (29,000) (233,000)
Accounts payable and accrued expenses (522,000) 39,000
------------------------ -----------------------
Net cash provided by (used by) operating activities 191,000 (29,000)
------------------------ -----------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (227,000) (41,000)
Purchase of selected net assets of Silicon Sensors, LLC -- (1,799,000)
------------------------ -----------------------
Net cash used by investing activities (227,000) (1,840,000)
------------------------ -----------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of stock options -- 5,000
Proceeds from exercise of stock options 63,000 5,000
Repayment of Line of Credit (300,000) --
------------------------ -----------------------
Net cash provided by (used by) financing activities (237,000) 10,000
------------------------ -----------------------
NET DECREASE IN CASH & CASH EQUIVALENTS (273,000) (1,859,000)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 902,000 3,083,000
------------------------ -----------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 629,000 $ 1,224,000
======================== =======================
See notes to consolidated financial statements.
6
ADVANCED PHOTONIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 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
nine month period ended December 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 13,441,000 at December 28, 2003 and 12,250,000 at
December 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:
Nine Months Ended Nine Months Ended
BASIC December 28, 2003 December 29, 2002
----- ----------------- -----------------
Average Shares Outstanding 13,441,000 12,250,000
Net Income (Loss) 593,000 (194,000)
Basic Income (Loss) Per Share $ 0.04 ($ 0.02)
DILUTED
-------
Average Shares Outstanding 13,441,000 12,250,000
Net Effect of Dilutive Stock Options
based on the treasury stock method
using average market price 497,000 240,000
Total Shares 13,938,000 12,490,000
Net Income (Loss) 593,000 (194,000)
Diluted Earnings Per Share anti-dilutive anti-dilutive
Average Market Price of Common Stock $ 1.43 $ 0.92
Ending Market Price of Common Stock $ 2.13 $ 0.83
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 anti-dilutive for the periods reported:
8
NOTE 3 - Continued
Nine Months Ended December 28, 2003 Nine Months Ended December 29, 2002
-------------------------------------------------- --------------------------------------------------
No. of Shares Exercise Price No. of Shares Exercise Price
Underlying Options Per Share Underlying Options Per Share
-------------------------------------------------- --------------------------------------------------
80,000 1.8750 16,000 0.5000
28,400 2.5000 126,000 0.5630
1,000 3.0940 25,000 0.6100
350,000 3.1875 500 0.6250
50,000 5.3440 416,668 0.6700
--------------------------------------------------
509,400 5,000 0.6875
==================================================
126,000 0.7500
266,006 0.8000
76,250 0.8600
75,000 1.0000
14,500 1.1875
74,800 1.2500
4,000 1.6250
66,000 1.8750
35,500 2.5000
8,000 3.0000
1,000 3.0940
400,000 3.1875
50,000 5.3440
--------------------------------------------------
1,786,224
==================================================
Inventories: Inventories consist of the following:
December 28, 2003
-----------------
Raw materials $ 2,700,000
Work in progress 991,000
Finished products 119,000
-----------------
Total inventories $ 3,810,000
=================
Less reserve (900,000)
Progress bill and customer prepaid inventory (418,000)
-----------------
Inventories, net $ 2,492,000
=================
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.
9
NOTE 4 - Continued
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.
In December 2003, the FASB issued SFAS 132R. This Statement revises employers'
disclosures about pension plans and other postretirement benefit plans. It does
not change the measurement or recognition of those plans required by FASB
Statements No. 87, Employers'Accounting for Pensions, No. 88, Employers'
Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and
for Termination Benefits, and No. 106, Employers' Accounting for Postretirement
Benefits Other Than Pensions. This Statement retains the disclosure requirements
contained in FASB Statement No. 132, Employers' Disclosures about Pensions and
Other Postretirement Benefits, which it replaces. It requires additional
disclosures to those in the original Statement 132 about the assets,
obligations, cash flows, and net periodic benefit cost of defined benefit
pension plans and other defined benefit postretirement plans. The Company will
adopt the provisions of SFAS 132R on January 1, 2004.
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 reserved 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
The Company's net sales for the third quarter ("Q3 04") and nine month period
("YTD 04") ended December 28, 2003, were $2.933 million and $8.836 million,
respectively. As compared to the third quarter of the prior year ("Q3 03"), net
sales increased by 13%, while year to date net sales increased by 48% over the
same nine month period of the prior year ("YTD 02").
The increase in net sales for both the quarter and year to date periods is
attributable to the Company's acquisitions during the past year and is reflected
primarily in the military/aerospace and automotive markets, which represent 38%
and 7%, respectively, of total year to date revenues. Sales to the
military/aerospace markets increased 31% over the same quarter of the prior year
and 65% year to date. Sales to the automotive markets, which represented only 1%
of prior year to date sales, increased by $148,000 for the quarter and by
$526,000 year to date. Sales to the medical and industrial sensing markets
remained strong, comprising $4.9 million and representing 15% and 40% of total
year to date revenues, respectively. The Company continues to expect that total
revenues for fiscal 2004 will show an increase of approximately 40% over fiscal
2003.
COSTS AND EXPENSES
Cost of goods sold increased by $158,000 (9%) during Q3 04 and by $1.84 million
(46%) during YTD 04 as compared to the same periods of the prior year. Cost of
goods sold, stated as a percentage of net sales, decreased 2 percentage points
to 65% for Q3 04, as compared to 67% in Q3 03. Year over year, cost of sales
remained flat at 66%, resulting in a year to date gross margin of 34%. As the
Company has completed the integration of its last two acquisitions into our
California and Wisconsin facilities, we have achieved a gross margin level
indicative of what can be expected at current sales levels and throughout the
remainder of the fiscal year. As revenues increase, it is expected that margins
may improve slightly, as there are a number of fixed manufacturing expenses
which are not anticipated to increase proportionately.
Research and development costs decreased by $75,000 (70%) to $32,000 in Q3 04 as
compared to Q3 03, and by $203,000 (52%) year to date. The decrease in R & D
costs is the expected result of the Company's plan to restructure and refocus
the R & D department on those projects which offer higher commercial potential
per dollar spent. During the remainder of the fiscal year, we expect to see
continued decreases in R & D expenditures, based on current revenue and project
trends. However, R & D costs can vary, depending on the level of activity
associated with new product development projects or customer-requested
development contracts.
12
Marketing and sales expenses decreased by $83,000 (31%) to $188,000 in the third
quarter of 2004 compared to Q3 03 and by $13,000 (2%) to $715,000 year to date,
as compared to YTD 03. The quarterly decrease is primarily due to a recovery of
amounts previously recorded as bad debt expense combined with reduced commission
expenses as compared to Q3 03. The year to date decrease is the result of the
same bad debt recovery which has been offset by increases in salary and travel
expenses over fiscal 2003. As a percentage of net revenues, marketing and sales
expenses represent 6% for the quarter and 8% year to date. The Company expects
that marketing and sales expenses will represent approximately 9% of total
fiscal 2004 revenues.
General and administrative expenses increased by $114,000 (25%) to $568,000 in
Q3 04 as compared to $454,000 in Q3 03. Year to date, general and administrative
expenses increased by $369,000 (31%) to $1.544 million as compared to $1.175
million for YTD 03. The net increases in both quarterly and year to date periods
continue to be due to increased salary, depreciation, insurance and outside
service/consultant expenses over the same periods in the prior year. In
addition, the quarterly increase was impacted by a non-recurring personal
property tax expense of $37,000 for the TOI facility in Texas. As the closing of
that facility has been completed, no additional property taxes will be assessed
in the future. Thus, general and administrative expenses stated as a percentage
of net sales were 19% for the quarter and 17% year to date. Excluding one-time
charges of $37,000, the Company feels that the current level of general and
administrative expenses is indicative of what can be expected for the remainder
of the year and anticipates that such expenses will approximate 16% of total
revenues at year end.
The Company reported net income of $256,000, or $0.02 per share, and $593,000,
or $0.04 per share, for Q3 04 and YTD 04 respectively, as compared to net income
of $61,000 ($ 0.00 per share) and net loss of ($194,000) (($.02) per share) for
the same periods of the prior year.
LIQUIDITY AND CAPITAL RESOURCES
At December 28, 2003 , the Company had cash, cash equivalents and short term
investments of $2.329 million and working capital of $5.477 million. The
Company's cash and cash equivalents decreased by $273,000 during nine months
ended December 28, 2003, which included a $300,000 transfer of cash to
short-term investments, resulting in a net increase to total cash and short term
investments of $27,000. $63,000 was obtained through the exercise of stock
options and $191,000 was obtained through operating activities (excluding
short-term investments). Cash generated from the reduction of accounts
receivable was offset by increases in prepaid expenses and decreases in accounts
payable and accrued liabilities, including a $300,000 reduction in the Company's
outstanding line of credit. In addition, $227,000 was used for capital
expenditures required primarily for necessary 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 December 28, 2003, the Company held $1.7 million in a
highly liquid equity fund account which carries an average interest rate of
1.3%. During the remainder of 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.
13
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.
PART II OTHER INFORMATION
Items 1-5
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
None.
14
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: February 10, 2004 /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
15