SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 26, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file no. 1-11056
ADVANCED PHOTONIX, INC.
Incorporated pursuant to the Laws of Delaware
IRS Employer Identification No. 33-0325826
1240 Avenida Acaso, Camarillo, CA 93012
(805) 987-0146
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
On February 7, 2000, 11,569,704 shares of Class A Common Stock,$.001 par value,
and 36,135 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) 3 - 6
Consolidated Statements of Operations for the
three and nine month periods ended
December 26, 1999 and December 27, 1998 3
Consolidated Balance Sheets
at December 26, 1999 and March 28, 1999 4 - 5
Consolidated Statements of Cash Flows for the
nine month periods ended December 26, 1999 and
December 27, 1998 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations 8 - 10
PART II OTHER INFORMATION 10
SIGNATURES 10
2
ADVANCED PHOTONIX, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended Nine Months Ended
---------------------------------------------- ---------------------------------------------
December 26,1999 December 27,1998 December 26,1999 December 27,1998
---------------------- ---------------------- ---------------------- ---------------------
NET SALES $ 1,346,000 $ 1,866,000 $ 4,474,000 $ 5,785,000
Cost of sales 828,000 1,115,000 3,010,000 3,530,000
------------- ------------- ------------- -------------
GROSS PROFIT 518,000 751,000 1,464,000 2,255,000
OPERATING COSTS & EXPENSES:
Research and development 203,000 146,000 605,000 351,000
Marketing and sales 211,000 237,000 723,000 771,000
General and administrative 222,000 253,000 904,000 824,000
------------- ------------- ------------- -------------
636,000 636,000 2,232,000 1,946,000
------------- ------------- ------------- -------------
OPERATING INCOME (LOSS) (118,000) 115,000 (768,000) 309,000
------------- ------------- ------------- -------------
OTHER INCOME
Interest income 29,000 29,000 83,000 91,000
Other, net (7,000) (1,000) (9,000) -
------------- ------------- ------------- -------------
22,000 28,000 74,000 91,000
------------- ------------- ------------- -------------
NET INCOME (LOSS) $ (96,000) $ 143,000 $ (694,000) $ 400,000
============= ============= ============= ==============
NET PROFIT (LOSS) Per Share $ (.01) $ 0.01 $ (.06) $ 0.04
============= ============= ============= ==============
Weighted Average Number 10,917,000 10,917,000 10,917,000 10,917,000
of Common Shares Outstanding ============= ============= ============= ==============
<FN>
See notes to consolidated financial statements.
</FN>
3
ADVANCED PHOTONIX, INC.
CONSOLIDATED BALANCE SHEETS
December 26, 1999 March 28, 1999
UNAUDITED AUDITED
- --------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 2,073,000 $ 664,000
Short-term investments - 1,867,000
Accounts receivable, less allowance
of $83,000 in December 1999
and March 1999 676,000 986,000
Inventories 1,731,000 1,551,000
Prepaid expenses and other current assets 60,000 88,000
------------- -------------
Total Current Assets 4,540,000 5,156,000
------------- -------------
EQUIPMENT AND LEASEHOLD IMPROVEMENTS,
at cost 3,109,000 2,985,000
Less accumulated depreciation
and amortization (2,636,000) (2,474,000)
------------- -------------
473,000 511,000
OTHER ASSETS
Goodwill, net of accumulated amortization
of $278,000 in December 1999 and
$253,000 in March 1999 558,000 583,000
Patents, net of accumulated amortization
of $32,000 in December 1999 and
$28,000 in March 1999 67,000 52,000
Other 24,000 26,000
------------- -------------
649,000 661,000
------------- -------------
$ 5,662,000 $ 6,328,000
============= =============
See notes to consolidated financial statements.
4
ADVANCED PHOTONIX, INC.
CONSOLIDATED BALANCE SHEETS
December 26, 1999 March 28, 1999
UNAUDITED AUDITED
- -------------------------------------------------------------------- ---------------- ---------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 223,000 $ 263,000
Accrued expenses:
Salaries and employee benefits 414,000 310,000
Warranty 95,000 95,000
Other 97,000 133,000
---------------- ---------------
Total Current Liabilities 829,000 801,000
---------------- ---------------
COMMITMENTS AND CONTINGENICES
STOCKHOLDERS' EQUITY
Class A Common Stock, par value $.001 per share; authorized
50,000,000 shares;
December 26, 1999 - 10,849,260 shares issued and outstanding
March 28, 1999 - 10,849,260 shares issued and outstanding 11,000 11,000
Class B Common Stock, par value $.001 per share; authorized
4,420,113 shares;
December 26, 1999 - 68,135 shares issued and outstanding
March 28, 1999 - 68,135 shares issued and outstanding - -
Convertible Preferred Stock at redemption value; authorized
10,000,000 shares
December 26, 1999 - 80,000 shares issued and outstanding
March 28, 1999 - 80,000 shares issued and outstanding 64,000 64,000
Additional paid-in capital 22,704,000 22,704,000
Accumulated Deficit (17,946,000) (17,252,000)
---------------- ---------------
4,833,000 5,527,000
---------------- ---------------
$ 5,662,000 $ 6,328,000
================ ===============
<FN>
See notes to consolidated financial statements.
</FN>
5
ADVANCED PHOTONIX, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
For the nine month period ended December 26, 1999 December 27, 1998
- ------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $ (694,000) $ 400,000
Adjustments to reconcile net income (loss) to net cash provided by (used in)
operating activities:
Depreciation 162,000 258,000
Amortization 29,000 28,000
Changes in assets and liabilities:
Short-term investments 1,867,000 (898,000)
Accounts receivable 310,000 (257,000)
Inventories (180,000) 214,000
Prepaid expenses and other assets 11,000 7,000
Accounts payable and accrued expenses 28,000 (338,000)
---------------- ----------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 1,533,000 (586,000)
---------------- ----------------
NET CASH USED IN INVESTING ACTIVITIES
Capital expenditures (124,000) (119,000)
---------------- ----------------
NET INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS 1,409,000 (705,000)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 664,000 1,386,000
---------------- ----------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,073,000 $ 681,000
================ ================
<FN>
See notes to consolidated financial statements.
</FN>
6
ADVANCED PHOTONIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 26, 1999
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
notes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring adjustments) necessary for a fair presentation have been
included. Operating results for the nine month period ended December 26, 1999,
are not necessarily indicative of the results that may be expected for the
fiscal year ending March 26, 2000. For further information, refer to the
consolidated financial statements and notes thereto included in the Advanced
Photonix, Inc. (together with its subsidiary, the "Company") Annual Report on
Form 10-K for the fiscal year ended March 28, 1999.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Net Income (Loss) Per Share: Net loss per share is based on the weighted average
number of common and common equivalent shares outstanding. Net income (loss) per
share calculations are in accordance with Statement of Financial Accounting
Standards ("SFAS") No. 128, "Earnings per Share". Accordingly, "basic" net
income (loss) per share is computed by dividing net income (loss) by the
weighted average number of shares outstanding for the year. "Diluted" net income
(loss) per share has not been presented as the impact is either not material or
anti-dilutive.
Inventories: Inventories consist of the following:
December 26, 1999 March 28, 1999
-------------------------- ---------------------
Raw materials $ 526,000 $ 453,000
Work in progress 1,020,000 926,000
Finished products 185,000 172,000
-------------------------- ---------------------
$ 1,731,000 $ 1,551,000
========================== =====================
7
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
RESULTS OF OPERATIONS
- ---------------------
NET SALES
The Company's net sales for the third quarter ("Q3 00") and nine month period
("YTD 00") ended December 26, 1999, were $1.3 million and $4.5 million,
respectively. Net sales for the Q3 00 and YTD 00 period were down 28% and 23%,
respectively, when compared to $1.9 million and $5.8 million in the comparable
periods of the prior year ("Q3 99" and "YTD 99"). The decrease in net sales was
primarily due to lower volume in military aerospace products, which decreased by
approximately 65% in Q3 00, and by 58% for YTD 00 when compared to the
comparable periods in the prior year. The Company completed deliveries on orders
related to a large military program during the second half of fiscal 1999. New
purchase orders under this military program totaling more than $400,000 have
been booked and an additional order in excess of $500,000 is anticipated during
Q4 00. Deliveries under these new orders are expected to resume during Q4 00. In
addition, orders on another military program totaling $500,000 were booked
during Q4 for deliveries during Q4 00 and Q1 of fiscal 2001. During YTD 00,
shipments of Large Area Avalanche Photodiode (LAAPD) products (included in net
sales) were 2% higher than the same period in the prior year. While YTD 00 net
sales from these products represented 7% of total net sales, the Company
anticipates increasing volume from sales of LAAPD products as markets begin to
implement this "enabling" technology.
COST OF SALES
Cost of sales decreased by $287,000 (26%) during Q3 00 and by $520,000 (15%)
during YTD 00 compared to Q3 99 and YTD 99, respectively. The decreases are
primarily attributable to lower product shipments. Cost of sales as a percent of
net sales increased by 2 percentage points in Q3 00 compared to Q3 99 and by 6
percentage points in YTD 00 compared to YTD 99 due to a number of factors,
including inefficiencies associated with lower volume, lower margins stemming
from variability in product mix, and decreased sales from engineering design.
OPERATING COSTS & EXPENSES
Research and development costs for the Q3 00 and YTD 00 period were higher by
39% and 72%, respectively, when compared to $146,000 and $351,000 in the
comparable periods of the prior year. The increase in R&D costs is primarily due
to two factors: a.) higher overhead rates due to lower overall volume and b.) an
increase in internal R&D efforts as the Company focuses on improving its current
line of LAAPD products as well as expanding into new derivatives of the patented
technology. The Company is developing an Extreme Ultra Violet LAAPD capable of
detecting low light levels well below 200 nm. In addition, the Company continues
the development of a new generation two-dimensional LAAPD Array. R&D costs have
varied significantly in the past, and may continue to do so, due to the level of
activity associated with development contracts as well as the number and
complexity of new process and product development projects, the qualification of
new process developments and customer evaluation and acceptance of new products.
8
Marketing and sales expenses decreased by $26,000 (11%) to $211,000 in Q3 00
compared to Q3 99 and by $48,000 (6%) to $723,000 in YTD 00 compared to YTD 99
primarily due to a decrease in commissions paid. The Company believes its
marketing and sales expenses will increase in the near term as the Company
pursues its plan of adding additional sales personnel, increased trade show
attendance and substantial print media advertising.
General and administrative expenses decreased by $31,000 (12%) to $222,000 in Q3
00 compared to Q3 99 and increased by $80,000 (10%) to $904,000 in YTD 00
compared to YTD 99 primarily due to severance costs associated with a management
change. General and administrative expenses before the impact of severance costs
decreased by $100,000 (12%) in YTD 00 when compared to the same period of the
prior year. These decreases were primarily due to manpower cutbacks and general
efforts to reduce costs.
LIQUIDITY AND CAPITAL RESOURCES
At December 26, 1999, the Company had cash and cash equivalents of $2.1 million,
working capital of $3.7 million and an accumulated deficit of $17.9 million. The
Company's cash, cash equivalents and short-term investments decreased by
$458,000 during the nine months ended December 26, 1999. Cash of $334,000 was
used for operating activities (before cash provided by short-term investments).
Cash of $124,000 was used for capital equipment, compared to $119,000 during the
comparable period of the prior year.
To enable the Company to meet its capital commitment needs, the Company has
historically supplemented cash provided by operations with proceeds from private
and public sales of capital stock and borrowings. These funds have been used to
grow the core business and finance the development and initial commercialization
of the Company's LAAPD technology. While the Company believes that initial
commercialization has been completed and has reduced its expenditures for
research and development, it continues development of other derivatives of the
base technology. The continued development of LAAPD derivative products as well
as revenue growth in the business may require additional funds.
The Company's revolving line of credit agreement with a bank for the lesser of
$1,000,000 or 75 percent of eligible trade accounts receivable, as defined by
the agreement, expired on July 16, 1999. The Company does not foresee a need for
borrowing based upon current projections and, therefore, has elected to forego
the costs for maintaining the line at this time. The Company believes that it
would be most efficient to establish a line when the situation warrants.
During the period from January 1, 2000 to February 7, 2000, the Company's cash
position has improved due to the exercise of stock options. During that period,
a total of $1.3 million has been received for such exercises resulting in a cash
balance of approximately $3.2 million at February 7, 2000. Total shares
outstanding at February 7, 2000 was 11,605,839
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.
9
FORWARD LOOKING STATEMENTS
The information contained herein includes forward looking statements that are
based on assumptions that management believes to be reasonable but are subject
to inherent uncertainties and risks including, but not limited to, unforeseen
technological obstacles which may prevent or slow the development and/or
manufacture of new products, limited (or slower than anticipated) customer
acceptance of new products which have been and are being developed by the
Company (particularly its LAAPD product line), the availability of other
competing technologies and a decline in the general demand for optoelectronic
products.
PART II OTHER INFORMATION
Items 1 - 5
None
Item 6 Exhibits and Reports on Form 8-k
--------------------------------
(a) Exhibits
Exhibit
No. Description
- ------- -------------
10.5 Employment Agreement dated January 1, 2000, between Advanced Photonix,
Inc. and Patrick J. Holmes
10.6 Employment Agreement dated January 1, 2000, between Advanced Photonix,
Inc. and Brock Koren
(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: February 8, 2000 /s/ P. J. Holmes
---------------- ----------------
Patrick J. Holmes
Executive Vice President, Chief Financial
Officer and Secretary/Treasurer
10