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 June 24, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file no. 1-11056
ADVANCED PHOTONIX, INC.
Incorporated pursuant to the Laws of Delaware
IRS Employer Identification No. 33-0325826
1240 Avenida Acaso, Camarillo, CA 93012
(805) 987-0146
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
On August 6, 2001, 12,207,648 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)
Balance Sheet at June 24, 2001 3 - 4
Statements of Operations for the three
month periods ended June 24, 2001 and June 25, 2000 5
Statements of Cash Flows for the three
month periods ended June 24, 2001 and June 25, 2000 6
Notes to Financial Statements 7 - 8
Item 2. Management's Discussion and Analysis 9 - 11
PART II OTHER INFORMATION 12
SIGNATURES 12
-2-
ADVANCED PHOTONIX, INC.
BALANCE SHEET
AT JUNE 24, 2001
(UNAUDITED)
-----------------------------------------------------------------------------------------------------------------
CURRENT ASSETS
Cash and cash equivalents $ 4,922,000
Accounts receivable, less allowance of $6,000 1,043,000
Inventories 2,219,000
Prepaid acquisition costs 448,000
Prepaid expenses and other current assets 94,000
-------------------------
Total Current Assets 8,726,000
-------------------------
EQUIPMENT AND LEASEHOLD IMPROVEMENTS, at cost 3,391,000
Less accumulated depreciation and amortization (2,873,000)
-------------------------
Equipment and Leasehold Improvements, net 518,000
-------------------------
OTHER ASSETS
Goodwill, net of accumulated amortization of $328,000 508,000
Patents, net of accumulated amortization of $38,000 22,000
Other 24,000
-------------------------
Total Other Assets 554,000
-------------------------
TOTAL ASSETS $ 9,798,000
=========================
-3-
ADVANCED PHOTONIX, INC.
BALANCE SHEET - Continued
AT JUNE 24, 2001
(UNAUDITED)
-----------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 258,000
Accrued expenses:
Salaries and employee benefits 216,000
Other 45,000
-------------------------
Total Current Liabilities 519,000
-------------------------
COMMITMENTS AND CONTINGENCIES
Class A redeemable convertible preferred stock, $.001 par value; 32,000
780,000 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
Class A common stock, $.001 par value; 50,000,000 shares authorized; 12,000
12,207,648 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 26,573,000
Accumulated Deficit (17,338,000)
-------------------------
Total Shareholders' Equity 9,279,000
-------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 9,798,000
=========================
See notes to financial statements.
-4-
ADVANCED PHOTONIX, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
For the three month periods ended June 24, 2001 June 25, 2000
-------------------------------------------------- ------------------- -------------------
SALES $ 1,831,000 $ 1,662,000
Cost of Goods Sold 918,000 961,000
------------------- -------------------
GROSS PROFIT 913,000 701,000
Research and development expenses 130,000 109,000
Sales and marketing expenses 256,000 226,000
General and administrative expenses 261,000 246,000
------------------- -------------------
INCOME FROM OPERATIONS 266,000 120,000
------------------- -------------------
OTHER INCOME
Interest income 89,000 74,000
------------------- -------------------
NET INCOME $ 355,000 $ 194,000
=================== ===================
Basic and Diluted Earnings Per Share $ 0.03 $ 0.02
Weighted Average Shares Outstanding 12,239,000 12,167,000
See notes to financial statements.
-5-
ADVANCED PHOTONIX, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the three month periods ended June 24, 2001 June 25, 2000
----------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 355,000 $ 194,000
Adjustments to reconcile net income to net cash provided by
(used by) operating activities:
Depreciation 54,000 56,000
Amortization 10,000 11,000
Changes in assets and liabilities:
Short-term investments 1,082,000 (634,000)
Accounts receivable 124,000 128,000
Inventories (492,000) (150,000)
Prepaid expenses and other current assets
40,000 39,000
Other assets (1,000) --
Accounts payable and accrued expenses (4,000) (212,000)
--------------- ---------------
Net cash provided by (used by) operating activities 1,168,000 (568,000)
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (135,000) (7,000)
Prepaid acquisition costs (18,000) (235,000)
--------------- ---------------
Net cash used by investing activities (153,000) (242,000)
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from exercise of stock options -- 95,000
--------------- ---------------
Net cash provided by financing activities -- 95,000
--------------- ---------------
NET INCREASE (DECREASE) IN CASH 1,015,000 (715,000)
AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 3,907,000 3,309,000
--------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 4,922,000 $ 2,594,000
=============== ===============
See notes to financial statements.
-6-
ADVANCED PHOTONIX, INC.
NOTES TO FINANCIAL STATEMENTS
June 24, 2001
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-QSB and Article 10 of Regulation S-X and
Regulation S-B. Accordingly, they do not include all of the information and
notes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring adjustments) necessary for a fair presentation have been
included. Operating results for the three month period ended June 24, 2001, are
not necessarily indicative of the results that may be expected for the fiscal
year ending March 24, 2002. 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 25, 2001.
NOTE 2 - 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 12,239,000 at June 24, 2001 and 12,167,000 at June 25,
2000. 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. "Diluted" net income (loss) per share has not been presented in the
financial statements as the impact is either not material or anti-dilutive. The
impact of Statement 128 on the calculation of earnings per share is as follows:
Three Months Ended
BASIC June 24, 2001
----- ------------------
Average Shares Outstanding 12,239,000
Net Income 355,000
Basic Earnings Per Share $ 0.03
DILUTED
-------
Average Shares Outstanding 12,239,000
Net Effect of Dilutive Stock Options
based on the treasury stock method 66,500
using average market price
Total Shares 12,305,500
Net Income 355,000
Diluted Earnings Per Share $ 0.03
Average Market Price of Common Stock $ 0.986
Ending Market Price of Common Stock $ 0.920
-7-
NOTE 2 - Continued
The following 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 either anti-dilutive or immaterial for the periods
reported:
No. of Shares Exercise Price
Underlying Options Per Share
-------------------------- -----------------------
8,000 .5000
92,000 .5630
500 .6250
3,000 .6875
92,000 .7500
50,000 1.0000
13,300 1.1875
65,200 1.2500
4,000 1.5000
2,000 1.6250
44,000 1.8750
43,100 2.5000
4,000 3.0000
500 3.0940
400,000 3.1875
25,000 5.3440
-------------------------- -----------------------
846,600
========================== =======================
Inventories: Inventories consist of the following:
June 24, 2001
---------------------
Raw materials $ 739,000
Work in progress 1,160,000
Finished products 320,000
---------------------
$ 2,219,000
=====================
-8-
Item 2. Management's Discussion and Analysis
RESULTS OF OPERATIONS
NET PRODUCT SALES
Net product sales for the first quarter of fiscal year 2002 ("Q1 02") were
$1,831,000, an increase of $169,000 or 10% from revenues of $1,662,000 for the
first quarter of fiscal year 2001 ("Q1 01").
Compared to Q1 01, the increase in net revenues for the period was primarily due
to increased sales to companies in the medical equipment and medical imaging
markets, which were partially offset by a reduction in sales to the automotive
electronic market. In recent years, sales to the medical markets have steadily
increased, due to continuous improvements made by medical equipment
manufacturers in technology and design, resulting in increased demand for the
Company's products in those markets. Sales to the medical markets in Q1 02
represented 21% of total net sales, as compared to 6% in Q1 01. In addition,
sales to the military and aerospace markets remained strong for Q1 02,
comprising 31% of total net sales for the period, as compared to 33% for the
same period of the prior year. While the Company continues to anticipate
increasing volume from sales of its proprietary LAAPD products as markets begin
to implement more sophisticated technology, it expects more rapid growth to be
seen in the sales of its commercial and core product lines during the remainder
of fiscal year 2002 and expects that the overall current growth rate is
indicative of what can be expected for the remainder of the year.
COSTS AND EXPENSES
Cost of product sales decreased by $43,000 in Q1 02 compared to Q1 01. As a
result of increased revenues, cost of product sales as a percentage of net sales
decreased by 8% and gross profit margin on net product sales increased 8
percentage points to 50% as compared to 42% in Q1 01. The increase in gross
margin for the quarter is primarily attributable to higher margins associated
with the current product mix and to improved efficiencies associated with higher
sales volume. In addition, the Company has implemented several cost cutting
measures in its continuing efforts to streamline the manufacturing process and
to reduce production overhead, accounting for approximately 39% of the cost
savings. Due to the variability in product mix, it is expected that cost of
product sales as a percentage of net sales will increase slightly during the
remainder of the year, thus causing a slight reduction in overall gross margin
as a percentage of net sales.
Research and development costs increased by $21,000 (19%) to $130,000 in Q1 02
as compared to Q1 01. The increase in R&D costs is primarily due to variable
expenditures associated with current development projects, including the
continual improvement of the Company's current line of LAAPD and core business
products. As they have in the past, R&D costs may continue to vary
significantly, 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.
-9-
Marketing and sales expenses increased by $30,000 (13%) to $256,000 in Q1 02 as
compared to Q1 01. The Company expects continued increases in its marketing and
sales expenses for the remainder of the year, as a new Director of Sales was
hired in April 2001 and higher commission expenses are anticipated as a result
of increased sales.
General and administrative expenses increased slightly (6%) to $261,000 in Q1 02
as compared to $246,000 in Q1 01. The Company anticipates general and
administrative expenses will continue to increase during the remainder of the
year, due to projected increases in employee benefit and utility costs.
Interest income in Q1 02 was $89,000, or $15,000 higher than the $74,000
reported in Q1 01. The increase in interest income was due primarily to the sale
of corporate bonds which were held at year end, resulting in the recognition of
$29,000 in interest income previously recorded as unrealized gain on
investments. This amount was partially offset by lower income resulting from
lower interest rates available during the current quarter, as compared to the
prior year.
Net income for Q1 02 was $355,000, an increase of $161,000 or 83%, over $194,000
reported in Q1 01.
FINANCIAL CONDITION
At June 24, 2001, the Company had cash and cash equivalents of $4.9 million, no
short-term investments, and working capital of $8.2 million. Due to declining
interest rates available on securities available to the Company pursuant to its
investment policy, the Company held no short-term investments at June 24, 2001.
Rather, the Company was able to achieve higher yields on more liquid money
market accounts and thus transferred excess available cash to such instruments.
The Company's cash, cash equivalents and short-term investments decreased by
$67,000, including $29,000 in recognized interest income previously reported as
unrealized gain on short term investment, during the three months ended June 24,
2001. Cash of $57,000 was obtained through operating activities (before cash
provided by short-term investments). Operating expenditures were impacted by
increases in raw materials and work in process inventories totaling $492,000,
due to several contracts requiring advance expenditures for materials,
engineering and production charges which were not scheduled to ship during Q1
02; such orders are scheduled to ship throughout the remainder of the year.
Cash of $135,000 was used for capital equipment, compared to $7,000 during the
same period of the prior year. Computer hardware and software purchases
accounted for $98,000 of the increase in capital spending; the remainder was due
to expenditures required for manufacturing equipment upgrades and replacements.
The Company expects that cash outlays for capital items will continue to
increase during 2002, as plans to purchase additional machinery and the
completion of the computer system upgrades are scheduled throughout the
remainder of the year.
Cash of $18,000 was paid as prepaid acquisition costs, representing additional
costs incurred by the Company in connection with the examination of a possible
business combination with Jenner Biotherapies, Inc.. The investigation is
continuing and the costs incurred in connection with the potential transaction
will be expensed if a business combination is not consummated. To date, such
prepaid acquisition costs total $448,000.
-10-
In the past, the Company has maintained a revolving line of credit agreement
when needed. Based on current projections and available cash reserves, the
Company does not foresee an immediate need for borrowing and has therefore
elected to forego the costs for maintaining a line of credit 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.
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.
-11-
PART II OTHER INFORMATION
Items 1 - 5
None
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
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: August 7, 2000 /s/ Susan A. Schmidt
-------------- -------------------------------
Susan A. Schmidt
Chief Financial Officer and Secretary
-12-