Edgar Filing: ADVANCED PHOTONIX INC

SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934

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Advanced Photonix, Inc.
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Notice of Annual Meeting of Shareholders
To Be Held
August 27, 2004

To the Shareholders of Advanced Photonix, Inc.:

You are invited to attend the Annual Meeting of Shareholders (the "Annual
Meeting") of Advanced Photonix, Inc. (the "Company"), which will be held at the
Company's corporate office, 1240 Avenida Acaso, Camarillo, California, at 10:00
a.m., Pacific time, on August 27, 2004, to consider the following matters:

(1) The election of five Directors to hold office until the next Annual
Meeting of Shareholders and until their respective successors are duly
elected and qualified. The persons nominated by the Board of Directors
are Richard D. Kurtz, M. Scott Farese, Ward Harper, Paul D. Ludwig and
Stephen P. Soltwedel, all of whom are described in the accompanying
Proxy Statement.

(2) Amendment to the Advanced Photonix, Inc. 2000 Stock Option Plan,
increasing the number of shares of Class A Common Stock reserved for
issuance by 1,000,000 (from 1,500,000 to 2,500,000). This amendment
has been approved by the Board of Directors and is hereby being
submitted for shareholder approval.

The Board of Directors has fixed the close of business on June 25, 2004 as the
record date for the Annual Meeting. Only shareholders who owned the Company's
Common Stock at the close of business on June 25, 2004 will be entitled to
notice of, and to vote at, the Annual Meeting or any adjournments or
postponements thereof. Shares can be voted at the Annual Meeting only if the
holder is present or represented by proxy.

The accompanying form of proxy is solicited by the Board of Directors of the
Company. Reference is made to the attached Proxy Statement for further
information with respect to the business to be transacted at the Annual Meeting.

A complete list of Shareholders entitled to vote at the Annual Meeting shall be
open to the examination of any stockholder, for any purpose relevant to the
Annual Meeting, during ordinary business hours, for a period of at least 10 days
prior to the Annual Meeting, at the Company's principal office, 1240 Avenida
Acaso, Camarillo, CA 93012.

Shareholders are cordially invited to attend the Annual Meeting. Whether or not
you expect to attend the Annual Meeting in person, please complete, date and
sign the accompanying proxy card and return it without delay in the enclosed
postage prepaid envelope. Your proxy will not be used if you are present and
prefer to vote in person or if you revoke the proxy.

By Order of the Board of Directors

/s/ Susan A. Schmidt
--------------------
Susan A. Schmidt
July 30, 2004 Secretary

Proxy Statement
Annual Meeting of Shareholders
August 27, 2004

This Proxy Statement is furnished in connection with the solicitation of proxies
by the Board of Directors of Advanced Photonix, Inc., a Delaware corporation
(the "Company"), for use at the 2004 Annual Meeting of Shareholders of the
Company and for any adjournments or postponements thereof (the "Annual Meeting")
to be held at the Company's corporate office, 1240 Avenida Acaso, Camarillo,
California, at 10:00 a.m., Pacific time, on August 27, 2004, for the purposes
set forth in the accompanying Notice of Annual Meeting of Shareholders. A Board
of Directors' proxy (the "Proxy") for the Annual Meeting is enclosed, by means
of which you may vote as to the proposals described in this Proxy Statement.

The Board of Directors recommends a vote FOR the election of directors and the
approval of the adoption of amendment to the 2000 Stock Option plan as described
in this Proxy Statement. All Proxies that are properly completed, signed and
returned to the Company prior to the Annual Meeting, and which have not been
revoked, will be voted in accordance with the stockholder's instructions
contained in such Proxy. In the absence of instructions, shares represented by
such Proxy will be voted FOR the election of the five nominees to the Board of
Directors and FOR the adoption of the amendment to the 2000 Stock Option Plan as
described herein. The Board of Directors is not aware of any business to be
presented at the Annual Meeting except the matters set forth in the Notice and
described in the Proxy Statement. If any other matters come before the Annual
Meeting, the persons named in the accompanying Proxy will vote on those matters
in accordance with their best judgment. A stockholder may revoke his or her
Proxy at any time before it is exercised by filing with the Secretary of the
Company at its offices at 1240 Avenida Acaso, Camarillo, CA 93012, either a
written notice of revocation or a duly executed Proxy bearing a later date, or
by appearing in person at the Annual Meeting and expressing a desire to vote his
or her shares in person.

This Proxy Statement and the accompanying Notice of Annual Meeting of
Shareholders, Proxy and 2004 Annual Report to Shareholders are being sent to
Shareholders on or about July 30, 2004.

VOTING SECURITIES

June 25, 2004 has been fixed as the record date for the determination of
Shareholders entitled to notice of and to vote at the Annual Meeting or any
adjournment or postponement thereof. As of that date, the Company had
outstanding 13,430,750 shares of Class A and Class B Common Stock, $.001 par
value. A quorum, representing a majority of the total outstanding shares, must
be established for the meeting to be held and any action to be taken. The
presence, in person or by proxy, of shareholders entitled to cast a majority of
votes will constitute a quorum for the Annual Meeting. Holders of Class A and
Class B Common Stock are entitled to one vote for each share owned. As a
plurality of votes cast is required for the election of directors, abstentions
and broker non-votes will have no effect on the outcome of the election. As the
affirmative vote of a majority of votes represented at the meeting by the Class
A and Class B Common Stock (voting together as a class) in person or represented
by proxy is necessary for Proposal 2 (adoption of amendment to the 2000 Stock
Option Plan), an abstention will have the same effect as a negative vote but
"broker non-votes" will have no effect on the outcome of the vote.

Brokers holding shares for beneficial owners must vote those shares according to
the specific instructions they receive from beneficial owners. If specific
instructions are not received, brokers may vote those shares in their
discretion, depending on the type of proposal involved. The Corporation believes
that, in accordance with American Stock Exchange rules applicable to such voting
by brokers, brokers will have discretionary authority to vote on matters
relating to the election of directors, but will have no such authority with
respect to Proposal 2. Shares as to which brokers have not exercised such
discretionary authority or received instructions from beneficial owners are
considered "broker non-votes."

PROPOSAL 1 - ELECTION OF DIRECTORS

A Board of five Directors of the Company is to be elected at the Annual Meeting,
each to serve, subject to the provisions of the Company's by-laws, until the
next Annual Meeting of Shareholders and until his successor is duly elected and
qualified. It is management's recommendation that the accompanying form of Proxy
be voted FOR the election as Directors of the five persons named below, four of
whom are currently Directors of the Company and one who is currently President
of the Company. The Board of Directors believes that the nominees named below
are willing to serve as Directors. However, in the event that any of the
nominees should become unable or unwilling to serve as a Director, the Proxy
will be voted for the election of such person or persons as shall be designated
by the Board of Directors pursuant to the recommendation of the Company's
Nominating Committee.

The following persons are nominees for election as Directors:

Name Age Position
------------------------ --- ---------------------------
Richard D. Kurtz 52 Chairman of the Board
and Chief Executive Officer

M. Scott Farese 47 Director

Ward Harper 51 Director

Stephen P. Soltwedel 57 Director

Paul D. Ludwig 41 President

Set forth below is certain information relating to the other officers of the
Company:

Name Age Position
------------------------- --- ---------------------------
Susan A. Schmidt 39 Chief Financial Officer
and Secretary

Richard D. Kurtz - Chairman of the Board and Chief Executive Officer
--------------------------------------------------------------------
Mr. Kurtz became a Director of the Company in February 2000, was elected
Chairman of the Board in July 2000, and was appointed Chief Executive Officer in
February 2003. Prior to joining Advanced Photonix, he was Director of Client
Services and Strategic Planning for Quantum Compliance Systems Inc. a privately
owned software company specializing in the development and installation of
Environmental Health and Safety Management systems. Mr. Kurtz continues as an
equity owner in Quantum and was employed there from July 2001 through February
2003. Prior to joining Quantum, Mr. Kurtz had been Vice President of Sales and
Marketing for Filtertek Inc. an ESCO Technology company for more than 13 years.

M. Scott Farese - Director
--------------------------
Mr. Farese became a director of the Company in August 1998. He is currently a
Business Unit Director for Filtertek Inc. Mr. Farese joined Filtertek in 1991.
Filtertek, a subsidiary of ESCO Technologies, is the largest worldwide producer
of custom filtration products and fluid control devices and the world's largest
manufacturer of custom molded filter elements.

Ward Harper - Director
----------------------
Mr. Harper became a director of the Company in May 2003. He is currently an
attorney in private solo practice in Utah. Mr. Harper has been a practicing
attorney for the past 14 years before the U.S. Court and U.S. Court of Appeals,
Tenth Circuit. Prior to going into private practice, Mr. Harper was an
Attorney/Advisor for U.S. Administrative Law Judges and was also the Attorney in
charge of public benefits litigation for the Salt Lake City Office of Legal
Services Corporation.

Stephen P. Soltwedel - Director
-------------------------------
Mr. Soltwedel became a director of the Company in February 2000. Since 1972, he
has been employed by Filtertek, Inc. and is currently acting as interim
President. Prior to joining Filtertek, Mr. Soltwedel was employed by the public
accounting firm of Baillies Denson Erickson & Smith in Lake Geneva, WI.

Paul D. Ludwig - President
--------------------------
Mr. Ludwig joined the Company in August 2002 through the acquisition of Silicon
Sensors, LLC, where he was President and co-owner since 1996. Mr. Ludwig became
the Chief Operating Officer of Advanced Photonix, Inc. at the time of
acquisition and was promoted to President in February 2003. Prior to joining
Silicon Sensors, Mr. Ludwig spent 11 years at Honeywell, Inc. holding sales,
marketing and management responsibilities in their Sensing and Control group.

Susan A. Schmidt - Chief Financial Officer and Secretary
--------------------------------------------------------
Ms. Schmidt joined the Company in March 2000. From 1997 to 2000, she was
Director of Finance - Amphitheaters for SFX Entertainment, Inc. in Encino, CA.
SFX was a New York-based promoter and producer of live entertainment events.
From 1992 to 1997 she was Controller for Revchem Plastics, Inc., a privately
held distribution company serving the reinforced plastics industry, and Durall
Plastics, Inc., Revchem Plastics Inc.'s sister manufacturing company in Rialto,
CA.

Directors serve annual terms until the next annual meeting of stockholders and
until their successors are elected and qualified. Officers serve at the pleasure
of the Board of Directors.

The Board has determined that M. Scott Farese, Ward Harper and Stephen P.
Soltwedel are "independent" within the meaning of Securities Exchange Act Rule
10A-3 and within the applicable American Stock Exchange (AMEX) definition.

Compliance with Section 16(a) of the Securities Exchange Act of 1934
--------------------------------------------------------------------
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and Directors and persons who own more than ten percent of a registered
class of the Company's equity securities (collectively the "Reporting Persons")
to file reports of beneficial ownership and changes in beneficial ownership of
the Company's equity securities with the Securities and Exchange Commission and
to furnish the Company with copies of these reports. Based solely on its review
of the copies of the forms received by it, the Company believes that all of its
officers and directors complied with all filing requirements applicable to them,
except with respect to the late filing of Form 5 in June 2004 by Richard Kurtz,
Ward Harper and Paul Ludwig to report a stock option grant occurring during the
fiscal year, which was not previously reported on Form 4.

Nomination Procedures
---------------------
The Company has not made any changes to the procedures by which security holders
may recommend nominees to the Company's Board of Directors since the Company
last provided disclosure to security holders in response to the requirements of
Item 7(d)(2)(ii)(G) of Schedule 14A of the Exchange Act.

PROPOSAL 2 - APPROVAL OF AMENDMENT TO THE 2000 STOCK OPTION PLAN

In July 2000, the Company adopted the 2000 Stock Option Plan (the "2000 Plan")
under which the Company may, from time to time, issue options exercisable for
shares of Class A Common Stock. The 2000 Plan authorizes the grant of options to
purchase 1,500,000 shares. The Board of Directors has adopted an amendment to
the 2000 Plan to increase the number of shares of Class A Common Stock reserved
for issuance by 1,000,000 shares, to 2,500,000 shares. Adoption of such
amendment requires stockholder approval.

The following description of the 2000 Plan is qualified in its entirety by
reference to such 2000 Plan, a copy of which is attached to this Proxy Statement
as Annex A and is incorporated by reference herein. Attention is particularly
directed to the description therein of the prices, expiration dates and other
material conditions upon which the options may be granted and exercised.

All employees and directors of, and consultants and advisors to, the Company and
its subsidiaries are eligible to participate in the 2000 Plan. The Company
estimates that currently, approximately 96 employees, 3 directors, and 3
consultants are eligible to participate in the 2000 Plan. The 2000 Plan
provides, among other things, that options may be granted to purchase shares of
Class A Common Stock at a price per share fixed by the Board of Directors;
provided, however, that in the case of an incentive stock option ("ISO"), as
defined by Section 422 of the Internal Revenue Code, as amended, the exercise
price shall not be less than 100% of the fair market value of the Class A Common
Stock on the date of the option grant (110% of such fair market value in the
case of optionees holding 10% or more of the total combined voting rights of all
classes of stock of the Company or its subsidiaries). The Board of Directors may
determine the employees, directors, consultants and advisors to whom options are
to be granted and the number of shares subject to each option. Options may be
exercised by the payment in full in cash or by the tendering of shares of Class
A Common Stock having a fair market value, as determined by the Board of
Directors, equal to the option exercise grant. The Board of Directors shall
determine whether an option granted under the Plan is intended to be an ISO, or
whether such option is intended not to be an ISO.

Since all grants under the 2000 Plan are within the discretion of the Board, the
benefits of such grants are, therefore, not determinable. However, please refer
to the "Option Grants in Fiscal 2004" table on page 9 of this Proxy Statement,
which provides information on the grants made to the named Executive Officers
under "Executive Compensation" in the last fiscal year 2004.

The principal federal income tax consequences of the issuance and granting of
options will be as follows:

Although an individual can receive an unlimited number of ISOs during any
calendar year, the aggregate fair market value (determined at the time of the
option grant) of the stock with respect to which ISOs first become exercisable
during any calendar year (under all of the Company's Plans) cannot exceed
$100,000. An optionee will not realize taxable income for federal income tax
purposes upon the exercise of an ISO provided he does not dispose of shares
acquired upon the exercise within two years from the date of grant or within one
year from the date of exercise. If these conditions are met, the Company will
not be entitled to a deduction in connection with the grant or the exercise of
the option. The net capital gain realized on the sale or disposition of the
shares is subject to tax at the same rate as ordinary income. If the optionee
disposes of the shares within the two year or one year periods mentioned above,
he will realize taxable ordinary income in an amount equal to any excess of the
fair market value of the shares on the date of exercise (or the amount realized
on disposition, if less) over the option price, and the Company will be allowed
a corresponding deduction as the case of a non-ISO.

The foregoing is only a summary of the effect of federal income taxation upon
the Optionee and the Company with respect to the grant and exercise of options
under the 2000 Plan, does not purport to be complete, and does not discuss the
income tax laws of any state or foreign country in which an optionee may reside.

The Board of Directors is of the opinion that proposed amendment to the 2000
Plan is in the best interests of the Company in that it will aid the Company in
securing and retaining competent management personnel and other employees by
making it possible to offer them an opportunity to acquire stock of the Company
and thereby increase their proprietary interest in the Company's success.

Code of Ethics
--------------
The Company has adopted a Code of Ethics for Senior Financial Officers, pursuant
to the Sarbanes-Oxley Act of 2002. The Code of Ethics is published on the
Company's web site, www.advancedphotonix.com on the Investor Relations page.

Meetings and Committees of the Board of Directors
-------------------------------------------------
The Board of Directors held four meetings during the fiscal year ended March 28,
2004. The Board of Directors has the following standing committees: Compensation
Committee, Audit Committee, Special Committee and Nominating and Governance
Committee. The Compensation Committee was established to evaluate directors and
management compensation plans as well as the Company's stock option and
incentive plans. The Special Committee was established during fiscal year 2002
to focus on future development and any other duties assigned by the Board of
Directors. The Nominating and Governance Committee was established in fiscal
2004 to identify individuals qualified to become members of the Board of
Directors and its Committees as well as the Corporation's demands for
governance. The Compensation Committee met once during fiscal 2004. The members
of the Compensation Committee are Mr. Farese, Mr. Harper, and Mr. Soltwedel, all
of whom are independent under the applicable SEC and AMEX definitions. The
Special Committee did not meet independently during fiscal 2003; all discussions
and decisions were made as part of the regular board meetings. The members of
the Special Committee are Mr. Farese, Mr. Kurtz and Mr. Soltwedel. The
Nominating and Governance Committee was formed late in fiscal 2004 and therefore
no meetings were held during fiscal 2004. The members of the Nominating and
Governance Committee are Mr. Harper, Mr. Farese, and Mr. Soltwedel, all of whom
are independent under the applicable SEC and AMEX definitions. The Board of
Directors is in the process of finalizing the charters for the Compensation
Committee and the Nominating Committee. Once approved by the Board of Directors
the charters will be posted on the Company's website at www.advancedphotonix.com
under "Investor Relations."

Stockholder Communications and Policy regarding Annual Meeting Attendance
-------------------------------------------------------------------------
The Board of Directors has approved a policy for stockholder communications
whereby stockholders may contact the Board of Directors or any Committee or
individual director through an outside vendor to be hired by the Company to
process the correspondence. The outside vendor will forward appropriate
stockholder communications to the Company's Audit Committee who will then
distribute the correspondence to the appropriate directors. The Company is
working to have this mechanism in place in fiscal 2005. Stockholders are also
welcome to communicate directly with the Board of Directors at its Annual
Meeting of Stockholders. As a matter of policy, members of the Board of
Directors are required to make every reasonable effort to attend the Annual
Meeting of Stockholders. All members of the Board of Directors attended the
Company's 2003 Annual Meeting of Stockholders held on August 22, 2003.

Audit Committee
---------------
For the fiscal year ended March 28, 2004, the Audit Committee consisted of
Mssrs. Farese, Harper and Soltwedel, all of whom are independent within the
meaning of Securities Exchange Act Rule 10A-3 and within the applicable American
Stock Exchange ("AMEX") definition of independence. The Board has determined
that Stephen P. Soltwedel qualifies as an "audit committee financial expert" as
defined by Item 401(e)(2) of Regulation S-B promulgated by the Securities and
Exchange Commission.

None of the independent directors receives compensation from the Company other
than directors' fees and discretionary option grants under the Company's Stock
Option Plans for service on the Board or its Committees.

The Audit Committee's primary responsibilities are to: (1) oversee the Company's
financial reporting principles and policies including review of the financial
reports and other financial and related information released by the Company to
the public, or in certain circumstances governmental bodies; (2) review of the
Company's system of internal controls regarding finance, accounting, business
conduct and ethics and legal compliance that management and the Board have
established; (3) review of the Company's accounting and financial reporting
processes; (4) review and appraisal with management of the performance of the
Company's independent auditors; and (5) the provision of an open avenue of
communication between the independent auditors and the Board of Directors. The
Audit Committee held six meetings during fiscal 2004.

Audit Committee Report
----------------------
The Audit Committee assists the Board, through review and recommendation, in its
oversight responsibility related to the financial reporting process. The Audit
Committee of the Company's Board of Directors is composed of three independent
Directors and operates under a written charter adopted by the Board of Directors
and the Audit Committee.

The Company's Management has the primary responsibility for the financial
statements and the reporting process including the system of internal controls.
The Company's independent public accountants, Farber & Hass LLP, are responsible
for performing an audit and expressing an opinion as to whether the Company's
financial statements are fairly presented, in all material respects, in
conformity with generally accepted accounting principles. In fulfilling its
oversight responsibilities, the Audit Committee reviewed the audited financial
statements in the Annual Report on Form 10-KSB with management including a
discussion of the quality, not just the acceptability, of the accounting
principles, the reasonableness of significant judgments, and the clarity of
disclosures in the financial statements.

The Audit Committee reviewed with the independent auditors, their judgments as
to the quality, not just the acceptability, of the Company's accounting
principles and such other matters are required to be discussed with the Audit
Committee under generally accepted auditing standards. In addition, the Audit
Committee has discussed with the independent auditors the auditors' independence
from management and the company including the matters in the written disclosures
required by the Independence Standards Board and considered the compatibility of
nonaudit services with the auditors' independence.

The Audit Committee discussed with the Company's independent auditors the
overall scope and plans for their audit, and approves all payments to the
independent auditors for services performed. The Audit Committee meets with the
independent auditors, with and without management present, to discuss the
results of their examinations, their evaluations of the Company's internal
controls, and the overall quality of the financial reporting.

In reliance on the reviews and discussions referred to above, the Audit
Committee recommended to the Board of Directors (and the Board of Directors has
approved) that the audited financial statements be included in the Annual Report
on Form 10-KSB for the year ended March 28, 2004 for filing with the Securities
and Exchange Commission.

SUBMITTED BY THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS

Stephen Soltwedel
M. Scott Farese
Ward Harper

EXECUTIVE COMPENSATION

The following table sets forth the compensation paid or accrued by the Company
for services rendered to the Company's Chief Executive Officer and to each of
the other executive officers of the Company whose cash compensation exceeded
$100,000 for services rendered during the last three fiscal years.

SUMMARY COMPENSATION TABLE
Long Term Compensation
--------------------------------------------------
Annual Compensation Awards Payouts
------------------- ------ -------
Other Securities
Annual Restricted Underlying LTIP All Other
Fiscal Salary Bonus Compensation Stock Awards Options Payouts Compensation
Name and Principal Position Year ($) ($) ($) ($) (#) ($) ($)(1)
------------------------------- ------ --------- -------- ------------ ------------- ----------- --------- ---------------

Richard D. Kurtz 2004 160,000 32,000 - - 150,000 - 5,800
Chairman of the Board and 2003 22,000 - 11,500 - - - 100
Chief Executive Officer(2) 2002 n/a n/a 10,000 - 245,000 - n/a
------------------------------- ------ --------- -------- ------------ ------------- ----------- --------- ---------------
Paul D. Ludwig 2004 160,000 32,000 - - 50,000 - 16,300
President 2003 97,000 - 4,000 - 100,000 - 7,000
2002 n/a n/a n/a n/a n/a n/a n/a
------------------------------- ------ --------- -------- ------------ ------------- ----------- --------- ---------------
Susan A. Schmidt 2004 99,000 16,000 - - - - 14,100
Chief Financial Officer and 2003 n/a n/a n/a n/a n/a n/a n/a
Secretary (3) 2002 n/a n/a n/a n/a n/a n/a n/a
------------------------------- ------ --------- -------- ------------ ------------- ----------- --------- ---------------
Brock Koren 2004 125,000 - - - - - -
President and Chief Executive 2003 155,000 - - - - - 86,000
Officer(4) 2002 175,000 - - - 100,000 - 16,300
------------------------------- ------ --------- -------- ------------ ------------- ----------- --------- ---------------
(1) Represents amounts paid by the Company on behalf of the named person in
connection with the Company's benefits plans, 401(k) Retirement Plan,
vacation pay and car allowance.
(2) Mr. Kurtz was appointed to the office of Chief Executive Officer in February
2003, following the resignation of Mr. Koren. Other annual compensation and
securities underlying options reflect Director's fees and options granted as
part of plans provided to outside directors.
(3) Ms. Schmidt joined the Company in March 2000; however, total compensation
is not reported for fiscal years 2002 and 2003, as annual salary and bonus
did not exceed $100,000.
(4) Mr. Koren resigned from his position as President in February 2003.
Compensation continued through December 2003 under a severance agreement.

Employment Agreements
---------------------
Pursuant to the terms of a three-year Employment Agreement entered into on
August 21, 2002, Paul D. Ludwig, our President, is employed at an annual salary
of $168,000, with an annual bonus of at least 40% of his salary if certain goals
agreed upon with the Compensation Committee are met. Similarly, our Chief
Executive Officer, Richard D. Kurtz, entered into a two-year Employment
Agreement with the Company on February 10, 2003, whereby he is employed at an
annual salary of $168,000, with an annual bonus of at least 40% of his salary if
certain goals agreed upon with the Compensation Committee are met. Both officers
may receive additional bonuses and stock options as the Board of Directors may
from time to time determine. Further, both officers may resign and receive
severance payments following a change of control of the Company and are
prohibited from competing with the Company for a period of one year following
certain terminations of their employment. The Company has no other employment or
termination agreements with any employees.

Stock Options
-------------
The following tables set forth certain information concerning stock options
granted to the persons named in the Summary Compensation Table during the last
fiscal year and unexercised stock options held by such persons at the end of
such fiscal year.

Option Grants in Fiscal 2004
Individual Grants
--------------------------------- ------------------- ------------------- --------------------- ----------------------

Number of Securities % of Total
Underlying Options Granted Exercise or
Options to Employees in Base Price Expiration
Name(1) Granted (#) Fiscal Year ($/Sh) Date
--------------------------------- ------------------- ------------------- --------------------- ----------------------

Richard D. Kurtz 150,000 50% $.93 5/19/13

Paul D. Ludwig 50,000 17% $.93 5/19/13

Susan A. Schmidt - - - -

--------------------------------- ------------------- ------------------- --------------------- ----------------------
(1) See "Summary Compensation Table" for principal position.

Aggregated Option Exercises in Last Fiscal Year and FY-End Option Values

Number of Securities Underlying Value of Unexercised
Unexercised Options In-the-Money Options
Shares Acquired at Fiscal Year End (#) at Fiscal Year End ($)
Name (1) on Exercise (#) Value Realized Exercisable/Unexercisable Exercisable/Unexercisable
------------------ --------------- -------------- ------------------------- -------------------------

Richard D. Kurtz - - 450,000 / 120,000 $357,900 / $134,400

Paul D. Ludwig - - 50,000 / 100,000 $68,800 / $131,200

Susan A. Schmidt - - 88,000 / 22,000 $70,800 / $18,550

(1) See "Summary Compensation Table" for principal position.

Compensation of Directors
-------------------------
During 2004 each independent member of the Board of Directors received an annual
retainer in the amount of $4,000, plus directors' fees in the amount of $1,000
for each board meeting attended, plus $500 for each committee meeting attended.
In addition, all directors, including employee directors, are reimbursed for
reasonable travel expenses incurred in connection with their attending meetings
of the Board of Directors and committees. Each of the directors who is not an
employee of the Company is also eligible for grants of stock options upon their
appointment to the Board of Directors and all directors are eligible for stock
option grants on a discretionary basis so long as they remain on the Board under
the Advanced Photonix 2000 Stock Option Plan. Directors who are also officers of
the Company do not receive cash compensation in consideration for their services
as directors.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth, as of June 25, 2004, certain information
concerning the holdings of each person who was known by the Company to be the
beneficial owner of more than five percent (5%) of the outstanding shares of
Class A common stock of the Company, by each director and executive officer and
by all directors and officers as a group.

Class A Common Stock
---------------------------------------
Shares Under
Shares Exercisable Percent
Owned Options/Warrants(1) Voting(2)
------- ---------------- -------

Burke, Mayborn Co., Ltd.(3) 831,245 -- 6.2

Richard D. Kurtz(4) 75,000 480,000 4.0

M. Scott Farese(4) 25,100 289,000 2.3

Stephen P. Soltwedel(4) 14,000 300,000 2.3

Ward Harper(4) 10,000 25,000 .3

Paul D. Ludwig(4) 86,100 80,000 1.2

Susan A. Schmidt(4) 500 102,000 .8

Directors & Officers as a 210,700 1,276,000 10.1
Group

------------------------------
(1) Includes shares under options exercisable on June 25, 2004 and options
which become exercisable within 60 days thereafter.

(2) Represents voting power assuming beneficial owner exercises all exercisable
options and warrants.

(3) Includes shares beneficially owned by Burke, Mayborn Co., Ltd. and Frank M.
Burke, Jr. The address of this shareholder is 5500 Preston Road, Suite 315,
Dallas, TX 75205.

(4) The address of this shareholder is c/o Advanced Photonix, Inc. 1240 Avenida
Acaso, Camarillo, CA 93012.

The following table sets forth, as of June 25, 2004, the aggregated information
pertaining to all securities authorized for issuance under the Company's equity
compensation plans:

Number of
Securities to be
issued upon Weighted-average
exercise of exercise price Number of
outstanding of outstanding securities
options, options, remaining
warrants and warrants and available for
Plan Category rights rights future issuance
---------------------------------------------------------------------------------------

Equity compensation plans 1,662,200 $1.49 358,222
approved by shareholders

Equity compensation plans
not approved by shareholders - - -

---------------------------------------------------------------------------------------
Total 1,662,200 $1.49 358,222
---------------------------------------------------------------------------------------

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

See "Executive Compensation".

RELATIONSHIP WITH INDEPENDENT AUDITORS

Farber & Hass LLP, independent auditors, audited the Company's financial
statements for fiscal years 2000-2004, and have been selected to audit the
Company's financial statements for fiscal year 2005. Representatives of Farber &
Hass are expected to be present at the Annual Meeting to respond to appropriate
questions from Shareholders and to make a statement if they desire to do so.

Independent Auditor Fees
------------------------
The following table presents fees for professional audit services rendered by
F&H for the audit of the Company's annual financial statements and review of
financial statements included in the registrant's quarterly reports on Form
10-QSB (Audit Fees) for fiscal 2004 and 2003, and fees billed for other services
rendered by Farber & Hass LLP.

2004 2003
---- ----
Audit Fees 58,840 60,087
Audited Related Fees(1)(2) 9,275 39,700
Tax Fees(2)(3) 7,650 7,450
All Other Fees -- --
--------------------------------
Total 75,765 107,237

(1) Audit related fees consisted principally of the audit of the Company's
benefit plan and consultations regarding acquisitions.

(2) The Audit Committee has determined that the provision of all non-audit
services performed for the Company by F&H is compatible with
maintaining that firm's independence.

(3) Tax fees consisted primarily of tax return preparation, state tax
matters and tax advisory services.

The Audit Committee's policy is to pre-approve all audit services and all
non-audit services that the Company's independent auditor is permitted to
perform for the Company under applicable federal securities regulations. While
it is the general policy of the Audit Committee to make such determinations at
full Audit Committee Meetings, the Audit Committee may delegate its pre-approval
authority to one or more members of the Audit Committee, provided that all such
decisions are presented to the full Audit Committee at its next regularly
scheduled meeting.

EXPENSES

The entire cost of preparing, assembling, printing and mailing the Proxy
Statement, the enclosed Proxy, Annual Report and other materials, and the cost
of soliciting Proxies with respect to the Annual Meeting, will be borne by the
Company. The Company will request banks and brokers to solicit their customers
who beneficially own shares listed of record in names of nominees, and will
reimburse those banks and brokers for the reasonable out-of-pocket expenses of
such solicitations. The solicitation of Proxies by mail may be supplemented by
telephone and telegram by officers and other regular employees of the Company,
but no additional compensation will be paid to such individuals.

SHAREHOLDER PROPOSALS

Proposals of Shareholders intended to be presented at the Annual Meeting of
Shareholders in 2005 must be received at the Company's principal executive
office no later than March 21, 2005.

By Order of the Board of Directors

/s/ Susan A. Schmidt
--------------------------------
Camarillo, California Susan A. Schmidt
July 30, 2004 Secretary

THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON SOLICITED BY THIS PROXY
STATEMENT, ON THE WRITTEN REQUEST OF ANY SUCH PERSON, A COPY OF THE COMPANY'S
ANNUAL REPORT ON FORM 10-KSB FOR THE YEAR ENDED MARCH 28, 2004 AS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION (INCLUDING THE FINANCIAL STATEMENTS AND THE
SCHEDULES THERETO, BUT EXCLUDING EXHIBITS). SUCH REQUESTS SHOULD BE DIRECTED TO
CORPORATE SECRETARY, 1240 AVENIDA ACASO, CAMARILLO, CALIFORNIA 93012.

ANNEX A

2000 STOCK OPTION PLAN
OF ADVANCED PHOTONIX, INC.
As amended by the Board of Directors on June 10, 2004

(Original plan authorized by the Board of Directors on July 24, 2000
and adopted by the Shareholders of the Registrant as of August 25, 2000)

1. The Plan. This 2000 Stock Option Plan (the "Plan") is intended to encourage
ownership of stock of Advanced Photonix, Inc. (which together with its
subsidiaries is hereinafter referred to as the "Corporation") by employees
and directors of, and consultants and advisors to, the Corporation and its
subsidiaries and to provide additional incentive for them to promote the
success of the business of the Corporation.

2. Stock Subject to the Plan. Except as otherwise provided herein, the total
number of shares of Class A Common Stock, par value $.001 per share, of the
Corporation (the "Stock") which may be issued pursuant to the exercise of
options granted hereunder ("Options") shall be Two Million, Five Hundred
Thousand (2,500,000). Such shares of Stock may be, in whole or in part,
either authorized and unissued shares or treasury shares as the Board of
Directors of the Corporation (the "Board") shall from time to time
determine. If an Option shall expire or terminate for any reason without
having been exercised in full, the unpurchased shares covered thereby shall
(unless the Plan shall have been terminated) again be available for Options
under the Plan.

3. Administration of the Plan. The Plan shall be administered by the Board
which shall have plenary authority, in its discretion, to determine the
employees and directors of, and consultants and advisors to, the
Corporation and its subsidiaries to whom Options shall be granted
("Optionees"), the number of shares to be subject to each Option (subject
to the provisions of Paragraph 2), the option exercise price (the "Exercise
Price") (subject to the provisions of Paragraph 7), the vesting schedule of
each option, whether an Option is intended to be an incentive stock option
(an "ISO") within the meaning of Section 422 of the Internal Revenue Code
(the "Code") or whether it is intended not to be an ISO (a "Non ISO") and
the other terms of each Option. Acts approved at a meeting by a majority of
the members of the Board or acts approved in writing by the unanimous
consent of the members of the Board shall be the valid acts of the Board.
The Board shall have plenary authority, subject to the express provisions
of the Plan, to interpret the Plan, to prescribe, amend and rescind any
rules and regulations relating to the Plan and to take such other action in
connection with the Plan as it deems necessary or advisable. The
interpretation and construction by the Board of any provisions of the Plan
or of any Option granted thereunder shall be final and no member of the
Board shall be liable for any action or determination made in good faith
with respect to the Plan or any Option granted thereunder by the Board.

4. Employees Eligible for Options. All employees and directors of, and
consultants and advisors to, the Corporation shall be eligible for Options,
except that only employees of the Company shall be eligible for ISO's. In
making the determination as to persons to whom Options shall be granted,
the number of shares to be covered by such Options, and the other terms and
conditions of the Options, the Board shall take into account such persons'
duties, their present and potential contributions to the success of the
Corporation, and such other factors as it shall deem relevant in connection
with accomplishing the purpose of the Plan.

5. Term of Plan. The Plan shall terminate on, and no Options shall be granted
after, July 24, 2010 provided that the Board may at any time terminate the
Plan prior thereto.

6. Maximum Option Grant. Subject to the provisions of Section 2 above, the
number of shares of Stock for which any individual may be granted Options
shall be unlimited.

7. Exercise Price. Each Option shall state the exercise price, which shall be
such price as the Board in its discretion may determine; provided, however,
that in the case of ISOs, the exercise price shall be not less than 100% of
the fair market value of the Stock on the date of the granting of the
Option, nor less than 110% of such fair market value in the case of an ISO
granted to an individual who, at the time the Option is granted, is a 10%
Holder (as hereinafter defined). The fair market value of shares of Stock
shall be determined by the Board and shall be (i) the closing price of the
Stock on the American Stock Exchange on the date of the granting of the
Option, or (ii) if the Stock did not trade on such date, the mean between
the high bid and low asked prices.

8. Term of Options. The term of each Option granted under this Plan shall be
for a maximum of ten years from the date of granting thereof, and a maximum
of five years in the case of an ISO granted to a 10% Holder, but may be for
a lesser period or be subject to earlier termination as hereinafter
provided.

9. Exercise of Options. Except as otherwise provided by the Board, an Option
may be exercised from time to time as to any part or all of the Stock
covered thereby, provided, however, that an Option may not be exercised (a)
as to less than 100 shares at any time (or as to less than the remaining
shares then purchasable under the Option, if less than 100 shares), and (b)
prior to the expiration of at least six months from the date of grant. The
Exercise Price shall be paid in full at the time of the exercise of an
Option (i) in cash or (ii) by the transfer to the Corporation of shares of
its Stock with a fair market value (as determined by the Board) equal to
the purchase price of the Stock issuable upon exercise of such Option. The
holder of an Option shall not have any rights as a stockholder with respect
to the Stock issuable upon exercise of an Option until certificates for
such Stock shall have been delivered to him after the exercise of the
Option.

10. Non-Transferability of Options. Except as provided in the following
sentence, an Option shall not be transferable otherwise than by will or the
laws of descent and distribution and is exercisable during the lifetime of
the of an Option only by him or his guardian or legal representative. Non
ISO's will be transferable to members of an Optionee's immediate family,
including trusts for the benefit of such family members and partnerships in
which such family members are the only partners ("Permitted Transferees").
A transferred Option would be subject to all of the same terms and
conditions as if such Option had not been transferred.

11. Form of Option. Each Option granted pursuant to the Plan shall be evidenced
by an agreement (the "Option Agreement") which shall clearly identify the
status of the Options granted thereunder (i.e., whether an ISO or Non ISO)
and which shall be in such form as the Board shall from time to time
approve. The Option Agreement shall comply in all respects with the terms
and conditions of the Plan and may contain such additional provisions,
including, without limitation, restrictions upon the exercise of the
Option, as the Board shall deem advisable.

12. Termination of Options. No Option shall be exercisable after the first to
occur of the following:

a. Expiration of the Option term specified in the Option, which in no
event shall exceed (A) ten years from the date of grant, or (B) in the
case of an ISO granted to an Optionee who is a 10% Holder, five years
from the date of the grant;

b. (i) In the case of a non ISO, six (6) months from the date of
termination or cessation of employment of the Optionee for any reason;
or (ii) in the case of an ISO, six (6) months after the date the
Optionee ceases to be an employee of the Company due to the Optionee's
disability (within the meaning of Section 22(e)(3) of the Code) or
death, or three (3) months following the date the Optionee ceases to
be an employee of the Company for any reason other than disability or
death.

c. The date, if any, set by the Board to be an accelerated expiration
date pursuant to the provisions of Paragraph 17 below.

13. Termination or Cessation of Employment. For purposes of the Plan, the
termination of membership on the Board in the case of a director who is not
otherwise an employee of the Company, or the termination of the contractual
relationship between the Corporation and a consultant or advisor shall be
deemed a termination or cessation of employment.

14. Limit on Exercise of Incentive Stock Options. The aggregate Fair Market
Value (determined as of the time Options are granted) of the Shares of
Stock with respect to which ISO's may first become exercisable by an
Optionee in any one calendar year under the Plan and under any other plan
of the Corporation or any subsidiary of the Corporation shall not exceed
$100,000. The limits imposed by this Paragraph 14 shall apply only to ISO's
granted under the Plan, and not to any other Options. In the event an
individual receives an Option intended to be an ISO which is subsequently
determined to have exceeded the limit set forth above, or if any individual
is granted an Option intended to be an ISO that first become exercisable in
a calendar year for Option Shares that have an aggregate fair market value
(determined as of the time the Options are granted) that exceeds the limit
set forth above, the Options for Option Shares in excess of the limit shall
be treated as Non ISO's.

15. Stock Dividends or Recapitalization. In the event of a stock dividend paid
in shares of the class of stock subject to any Option outstanding
hereunder, or recapitalization, reclassification, split-up or combination
of shares with respect to said class of stock, the Board shall have the
power to make appropriate adjustments of the exercise price under such
option and of the number and kind of shares as to which such Option is then
exercisable, to the end that the Optionee's proportionate interest shall be
maintained as before the occurrence of such event, and in any case an
appropriate adjustment shall also be made in the total number and kind of
shares of stock reserved for the future granting of Options under this
Plan. Any such adjustment made by the Board pursuant to this Plan shall be
binding upon the holders of all unexpired Options outstanding hereunder.
Anything in the foregoing to the contrary notwithstanding, no such
adjustment shall be made with respect to any Option which is an ISO without
the consent of the Optionee, if such adjustment would be a modification of
such Option within the meaning of Section 424(h) of the Code.

16. Mergers, Consolidation, Reorganization, Etc. If the Corporation shall
become a party to any corporate merger, agreement for the sale of
substantially all of its assets and property, separation or reorganization,
the Board shall have the power to make appropriate arrangements, which
shall be binding upon the holders of unexpired Options, for the
substitution of new Options for any unexpired Options then outstanding
under this Plan, or for the assumption of any such unexpired Options, which
in the opinion of the Board maintain, to the maximum extent practicable,
the Optionee's proportionate interest as before the occurrence of such
event; provided, however, that such arrangements with respect to ISO's
shall meet the requirements of Sections 422 and 424(h) of the Code.

17. Liquidation or Dissolution of the Corporation.

a. In the event of the dissolution or liquidation of the Corporation, whether
voluntary or otherwise, and unless in connection therewith the obligations
of the Corporation under all outstanding Options granted under this Plan
have been assumed or replaced in accordance with Section 16 hereof, all
options outstanding under this Plan shall be exercised, if at all, within
the ninety day period commencing on the date specified in subparagraph (b)
below and shall be exercisable to the extent only of, and with respect to,
any or all shares for which they could have been exercised immediately
prior to such date. All Options not exercisable prior to the date specified
in subparagraph (b) shall terminate upon such date, and all Options
exercisable immediately prior to such date shall, to the extent not
exercised within the ninety-day period commencing on such date, terminate
at the end of such ninety-day period.

b. The date specified in this subparagraph (b) is the date of the earliest to
occur of the following events:

i. The entry, in a court having jurisdiction, of an order that the
Corporation be liquidated or dissolved;

ii. Adoption by the shareholders of the Corporation of a resolution
resolving that the corporation be liquidated or dissolved voluntarily;
or

iii. Adoption by the shareholders of the Corporation of a resolution to the
effect that the Corporation cannot, by reason of its liabilities,
continue its business and that it is advisable to liquidate or
dissolve the Corporation.

18. Shareholder and Stock Exchange Approval. This Plan is subject to and no
Options shall be exercisable hereunder until after the approval by the
holders of a majority of the Stock of the Corporation voting at a duly held
meeting of the stockholders of the Corporation within twelve months after
the date of the adoption of the Plan by the Board.

19. Amendment of the Plan. The Board shall have complete power and authority to
modify or amend the Plan (including the form of Option Agreement) from time
to time in such respects as it shall deem advisable; provided, however,
that the Board shall not, without the approval of the votes represented by
a majority of the outstanding Stock of the Corporation present or
represented at a meeting duly held in accordance with the applicable laws
of the Corporation's jurisdiction of incorporation and entitled to vote at
a meeting of stockholders or by the written consent of stockholders owning
stock representing a majority of the votes of the Corporation's outstanding
stock, (i) increase the maximum number of shares which in the aggregate are
subject to Options under the Plan (except as provided by Paragraph 15),
(ii) extend the term of the Plan or the period during which Options may be
granted or exercised, (iii) reduce the Exercise Price, in the case of ISOs
below 100% (110% in the case of an ISO granted to a 10% Holder) of the fair
market value of the Stock issuable upon exercise of Options at the time of
the granting thereof, other than to change the manner of determining the

fair market value thereof, (iv) increase the maximum number of shares of
Stock for which any employee may be granted Options under the Plan pursuant
to Paragraph 6, (v) modify the requirements as to eligibility for
participation in the Plan, or (vi) with respect to options which are ISOs,
amend the plan in any respect which would cause such options to no longer
qualify for ISO treatment pursuant to the Code. No termination or amendment
of the Plan shall, without the consent of the individual Optionee,
adversely affect the rights of such Optionee under an Option theretofore
granted to him or under such Optionee's Option Agreement.

20. Taxes. The Corporation may make such provisions as it may deem appropriate
for the withholding of any taxes which it determines is required in
connection with any Options granted under the Plan. The Corporation may
further require notification from the Optionees upon any disposition of
Stock acquired pursuant to the exercise of Options granted hereunder.

21. Code References and Definitions. Whenever reference is made in this Plan to
a section of the Code, the reference shall be to said section as it is now
in force or as it may hereafter be amended by any amendment which is
applicable to this Plan. The term "subsidiary" shall have the meaning given
to the term "subsidiary corporation" by Section 424(f) of the Code. The
term "10% Holder" shall mean any person who, for purposes of Section 422 of
the Code owns more than 10% of the total combined voting power of all
classes of stock of the employer corporation or of any subsidiary
corporation.

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ADVANCED PHOTONIX, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
AUGUST 27, 2004

The undersigned hereby constitutes and appoints Richard D. Kurtz and Paul D.
Ludwig or any one of them, as proxies, with full power of substitution, to vote
all shares of stock of Advanced Photonix, Inc. (the "Company") which the
undersigned would be entitled to vote if personally present at the Annual
Meeting of Stockholders of the Company to be held at the Company's Corporate
office, 1240 Avenida Acaso, Camarillo, California, at 10:00 o'clock A.M.,
Pacific Time, on August 27, 2004, or at any adjournments or postponements
thereof:

(1) Election of Directors

FOR all nominees listed below (except as marked to the contrary below) [ ]

WITHHOLD AUTHORITY to vote for all nominees listed below [ ]

Richard D. Kurtz Ward Harper,
M. Scott Farese Stephen P. Soltwedel
Paul D. Ludwig

(Instructions: To withhold authority to vote for any individual nominee, strike
a line through the nominee's name in the above list.)

(2) To approve the amendment to the 2000 Stock Option Plan, increasing the
number of shares reserved for issuance from 1,500,000 to 2,500,000.

Vote FOR [ ] Vote against [ ] Vote abstained [ ]

(3) To transact such other business as may properly come before the meeting or
any adjournment or postponement thereof.

(PLEASE SIGN ON REVERSE SIDE)
--------------------------------------------------------------------------------
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS SPECIFIED, OR IF NO
SPECIFICATIONS ARE MADE, WILL BE VOTED BY THE PROXIES FOR THE ELECTION OF THE
ABOVE NOMINEES FOR DIRECTOR, AND TO USE THEIR DISCRETION TO VOTE ON ANY OTHER
MATTER AS MAY PROPERLY COME BEFORE THE MEETING.

THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF MEETING AND ANNUAL
REPORT FURNISHED HEREWITH.

Dated:_____________________, 2004

_________________________________
Signature of Stockholder

Note: When signing as attorney-in-fact, executor, administrator, trustee or
guardian, please add your title as such, and if signer is a corporation, please
sign with full corporate name by duly authorized officer or officers and affix
the corporate seal. Where stock is issued in the name of two or more persons,
all such persons should sign. Please date, sign and return in the enclosed
envelope promptly.