-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MkkSD7OqzUeiJ4iUmold7LSTiVDY4BJDAlXcgiDYKTzL6wVXSPjcqB3iAOB5MSsA o18DBxP6OeBBKrKL2+EGGg== /in/edgar/work/20000626/0000950150-00-000522/0000950150-00-000522.txt : 20000920 0000950150-00-000522.hdr.sgml : 20000920 ACCESSION NUMBER: 0000950150-00-000522 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20000326 FILED AS OF DATE: 20000626 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ADVANCED PHOTONIX INC CENTRAL INDEX KEY: 0000869986 STANDARD INDUSTRIAL CLASSIFICATION: [3674 ] IRS NUMBER: 330325826 STATE OF INCORPORATION: DE FISCAL YEAR END: 0328 FILING VALUES: FORM TYPE: 10KSB SEC ACT: SEC FILE NUMBER: 001-11056 FILM NUMBER: 660576 BUSINESS ADDRESS: STREET 1: 1240 AVENIDA ACASCO CITY: CAMARILLO STATE: CA ZIP: 93012 BUSINESS PHONE: 8059870146 MAIL ADDRESS: STREET 1: 1240 AVENIDA ACASO CITY: CAMARILLO STATE: CA ZIP: 93012 10KSB 1 e10ksb.txt FORM 10KSB 1 U.S. SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-KSB (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended March 26, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission file number 1-11056 ADVANCED PHOTONIX, INC.(R) (Exact name of registrant as specified in its charter) Delaware 33-0325826 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1240 Avenida Acaso, Camarillo, CA 93012 (Address of principal executive offices) (Zip Code) (805) 987-0146 (Registrant's telephone number, including area code) SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: None SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: Common Stock, $.001 Par Value Class A Common Stock ________________ 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 [ ] Total revenues for registrant's fiscal year ended March 26, 2000 were $6,090,096. As of June 19, 2000, the aggregate market value of the voting stock held by non-affiliates of the Registrant was approximately $39,000,000. As of June 19, 2000, there were 12,044,348 shares of Class A Common Stock and 36,135 shares of Class B Common Stock outstanding. Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in any definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. __ DOCUMENTS INCORPORATED BY REFERENCE None 2 PART I ITEM 1. BUSINESS GENERAL Advanced Photonix, Inc.(R) (hereafter referred to as the "Company"), is engaged in the development and manufacture of optoelectronic semiconductor based components, hybrid assemblies and other proprietary solid state light and radiation detection devices, including proprietary advanced solid state silicon photodetection devices which utilize avalanche photodiode ("APD") technology. The Company was incorporated under the laws of the State of Delaware on June 22, 1988. The Company believes that its proprietary APD technology represents a leading-edge advancement in photodetection and imaging that will become an increasingly important part of its business. The Company's proprietary technology extends the capability of the traditional APD by introducing a large surface area silicon device or large area avalanche photodiode ("LAAPD"). The Company developed the LAAPD as an alternative to the photomultiplier vacuum tube ("PMT"), which has been used for many years as the primary technology for certain measurement, control and monitoring applications in industrial, medical, military, scientific and commercial settings. The LAAPD is an advanced photodetection device developed for the photonics industry specifically as a replacement to the outdated PMT. Photodetection devices sense light of varying intensity and convert the light detected to electronic signals that cause the systems of which they are a part to respond in pre-determined ways. The photonics industry includes other devices less complex than the LAAPD such as PIN (positive-intrinsic-negative) photodiodes. Currently the bulk of the Company's revenues are derived from the sale of products based on PIN and other non-proprietary technologies, referred to as the "core business". PRODUCTS The Company designs and manufactures optoelectronic semiconductor based components and hybrid assemblies. The Company's most notable products include: - - Customer specific assemblies for fiber-optic data and telecommunications, medical/biological diagnosis, particle measuring and counting - - PIN photodetectors, spectrally enhanced, single and multi-element - - Photodetector hybrids - - Military and commercial aerospace products - - Custom optoelectronic assemblies incorporating light-emitting diodes ("LEDs") and LED displays - - FILTRODE(R) - patented technology integrating optical filters directly on photodiode chips - - Avalanche photodiodes - - Large area avalanche photodiodes (LAAPDs - discrete, with and without amplification, and with and without thermoelectric coolers) The Company supplies detectors for military and commercial aerospace and other high reliability ("Hi-Rel") applications. Hi-Rel devices are designed, manufactured, and tested to function in severe environmental conditions. The Company has many years of experience in supplying Hi-Rel devices that demand modern wafer fabrication techniques, a dedicated assembly area, and a sophisticated test lab. Hi-Rel products manufactured by the Company include: 2 3 - - Multi-element hybrid assembly used on the U.S. Navy's Rolling Airframe Missile (RAM) developed by Raytheon - - Narrow and wide field of view detectors used in various TOW missile tracking systems - - LED arrays for use in thermal image displays in various night sights, commercial and military - - Quadrant photodetectors used in the autocollimator for airborne navigation/FLIR POD's and "Smart Bombs" - - Multi-element detector arrays used in the Space Shuttle Arm control system and satellite systems - - Opto assemblies for biological and blood analysis - - Automotive distance control The Company's patented FILTRODE(R) technology integrates optical coatings directly on photodiode chips, replacing conventional technology that requires a separate filter glass. While the technology offers a simpler design and lower cost, reliability and performance are improved due to the integrated design. Special packaging of this technology allows for unique applications whereby both sides of the detector can be used to detect light. The Company's small area avalanche photodiodes ("SAAPDs" -- see description of avalanche photodiode technology below) utilize a silicon epi-planar structure. SAAPDs have been used for a variety of low-light level applications and are responsive from 400 nm to 1000 nm. Typical applications include fiber optics and free space communications, bar code readers and laser range finders. LARGE AREA AVALANCHE PHOTODIODE TECHNOLOGY The avalanche photodiode is a specialized silicon photodiode capable of detecting very low light levels due to an internal gain phenomenon known as avalanching. This performance characteristic is not present in the common PIN photodiode. The APD, developed in the late 1960's, gave promise of a solid state replacement for the photomultiplier tube, an old and outdated vacuum tube technology, for sensing low levels of energy. Historically, APDs have been 3mm diameter or smaller with an internal gain of 50:1 or less. Until now, design and manufacturing limitations have restricted the size and performance of APDs, severely limiting their practical use. The Company has developed and patented various attributes of the LAAPD, most notably producing diameters up to 25 mm with internal gains of 300:1. The LAAPD is a high speed detector capable of detecting low light levels from the DEEP UV (ultraviolet), through the visible spectrum and into the near IR (infrared). When coupled with a scintillator, the LAAPD can efficiently detect X-ray and gamma-rays. It is also sensitive to accelerated electrons with potentials greater than a few thousand electron-volts. The LAAPD offers capabilities well beyond those of the existing photo-detection devices, such as the PIN photodiode, the small area APD and the PMT. Advantages over PIN photodiodes include higher sensitivity at wider bandwidths. Advantages over small area APDs include larger active areas with much greater sensitivity and gain. The LAAPD's advantages over PMTs include superior spectral bandwidth, greater sensitivity to pulses above 500 photons especially in the visible and near IR, greater dynamic range, and a rugged, solid-state structure suitable for operation in harsh environments. LAAPDs feature superior quantum efficiency in visible, near IR and UV regions to that of the PMT. Other features that differentiate the LAAPD from the PMT include its small package size, immunity to magnetic fields and ease of temperature control, providing stable operation over temperature gradients. In addition to a rugged and compact design, their operation requires far less power, making the LAAPD more advantageous in portable applications. The Company expects, but there is no assurance, that its proprietary APD technology, employed in the development of the LAAPD, will form the basis for continuing the investigation and potential commercial development of other 3 4 lines of advanced silicon avalanche photonics products that will have a broader range of commercial and military applications than the PMT and PIN arrays. For example: - - LAAPD arrays - the Company's patented technology in which the rear surface of an LAAPD is segmented to create isolated pixels, each with a separate electronic lead to be accessed in parallel fashion for imaging applications. - - Vacuum avalanche photodiode (VAPD) - another patented technology, which combines a photocathode and an LAAPD in a vacuum tube, functioning as a detector for high resolution, single photon-counting and low light level detection. The Company has identified target markets for its LAAPD products based on customer evaluations and in-house tests. Evaluation detectors are sold to original equipment manufacturers ("OEMs"), engineers and scientists who report information to the Company concerning potential applications and markets, as well as suggesting improvements and pricing objectives. It is expected, but there is no assurance, that OEMs who can take advantage of the performance capabilities of LAAPDs will be the source of repeat business for production quantities. Targeted markets include: - - Ranging, tracking & imaging - smart image surveillance/security cameras, 3D collision avoidance cameras, missile guidance, threat warning, underwater mine detection, and mapping & salvaging. - - Medical imaging - detectors which image human physiology in slices and look for pathology. Included in this category are PET scanners, CT scanners, bone densitometers and gamma cameras. - - Industrial scanning/process control - industrial CT inspection, aerospace ice inspection, drum/flat bed scanning, semiconductor wafer defect scanning and film to video conversion. - - Analytical chemistry - analyzing the chemical "recipe" of samples, from glucose levels in the blood to pesticides in ground water. - - Medical diagnostics - human fluids are analyzed to diagnose a medical pathology or condition. A partial list of conditions which are diagnosed every day using photonics technology includes diabetes, lipid metabolism disorders, myocardial infarction, gout, liver diseases, renal diseases, pancreatitis, anemia, and electrolyte disturbances. It is expected that this list will grow dramatically in the coming years with the explosion of methods now available to perform immunodiagnostics. Examples of forthcoming diagnostics include those targeting thyroid and sexually transmitted disease conditions and wide field retinal visualization. - - Environmental monitoring - atmospheric meteorology LIDAR (light detection and ranging), radiation dose monitors, airborne and liquid particle measurement, optical air data systems, airport wind shear, atmospheric pollution monitoring. - - Scientific research - high energy physics fiber tracking, space particle experiments and neutrino experiments. The Company's products are primarily sold as components or assemblies to OEMs or other component manufacturers. The Company does not manufacture any end user products within the above or any other markets. 4 5 RAW MATERIALS The principal raw materials used by the Company in the manufacture of its semiconductor chip components and assemblies are silicon wafers, chemicals and gases used in processing wafers, gold wire, lead frames, metal and plastic packages that house the chip and the various custom assemblies. All of these raw materials can be obtained from several suppliers. From time to time, particularly during periods of increased industry-wide demand, silicon wafers and other materials have been in short supply. However, the Company has not been materially affected by such shortages. As is typical in the industry, the Company allows for a significant lead-time between order and delivery of raw materials. RESEARCH AND DEVELOPMENT The Company undertakes both internally funded and customer funded research and development programs when they are in support of the Company's development objectives. Since its inception in June 1988, the Company has incurred material amounts of research and development expenses. During the fiscal years ended in 2000 and 1999, research and development expenses amounted to $.7 million and $.6 million, respectively. Additional research and development funding will be required for LAAPD arrays and VAPDs if the Company decides to commercialize these products. ENVIRONMENTAL REGULATIONS The photonics industry, similar to the semiconductor industry, is subject to governmental regulations for the protection of the environment, including those that relate to air and water quality, solid and hazardous waste handling and the promotion of occupational safety. Various federal, state and local laws and regulations require the Company to maintain certain environmental permits. The Company believes that it has obtained all necessary environmental permits to conduct its manufacturing. Changes in the aforementioned federal and state environmental laws and regulations or enactment or promulgation of new laws and regulations could require increases in operating costs and delays or interruptions of operations and may require additional capital expenditures. BACKLOG AND CUSTOMERS The Company's sales are made primarily pursuant to standard purchase orders for delivery of products. However, by industry practice, orders may be canceled or modified at any time, with the customer being responsible for all finished goods, all costs, direct and indirect, incurred by the Company and a reasonable allowance for anticipated profits. No assurance can be given that such amounts will be received by the Company after cancellation. The Company had approximately $5 million of backlog at the end of fiscal 2000 compared with a backlog of approximately $4.5 million at the end of fiscal 1999. The Company expects that approximately $3.1 million of the backlog orders will be filled in fiscal year 2001. The Company currently supplies core business products in support of satellites, aircraft and ground vehicle missile guidance and tracking systems. Decreases in military spending have continued to reduce the Company's revenues in these markets. The Company also supplies core business products for use in various analytical and diagnostic medical equipment. The Company's agreement to provide LED/detector modules to be used in microbiological testing systems resulted 5 6 in an increase in revenues in the medical segment. Product sales to bioMerieux, Inc. represent approximately 14% and 8% of the Company's revenues for the fiscal years ending 2000 and 1999, respectively. Customers normally purchase the Company's products and incorporate them into products that they in turn sell in their own markets on an ongoing basis. As a result, the Company's sales are dependent upon the success of its customers' products, and its future performance is dependent upon its success in finding new customers and receiving new orders from existing customers. MARKETING The Company markets its products in the United States and Canada through its own technical sales staff and through independent sales representatives. International sales, principally Western Europe, are conducted through foreign distributors (see Note 1 to Consolidated Financial Statements). In marketing LAAPD products, the Company has recognized that it must compete with producers of PMTs, which have dominated low light level detection markets for many years. Even if the Company can establish that its LAAPDs are a potential alternative to PMTs for certain commercial applications, and assuming that testing of the LAAPD currently being conducted by OEMs and other third parties proves successful, the ability to successfully market its LAAPD devices on a volume basis will be substantially dependent upon the willingness of potential customers who currently use PMTs to incur the substantial expense and expend the time and effort necessary for the redesign of their products to accommodate the LAAPD devices. COMPETITION The Company competes with a range of companies for the custom optoelectronic and silicon photodetector requirements of vendors of medical instruments, computer peripherals, a variety of industrial products and specialized military and commercial aerospace applications. The Company believes its principal competitors for sales of custom devices are small to medium size companies. Because the Company specializes in custom devices requiring a high degree of engineering expertise to meet the requirements of specific applications, it generally does not compete to any significant degree with other large United States, European or Far Eastern manufacturers of standard "off-the-shelf" optoelectronic components or silicon photodetectors. The Company believes that the principal competition for its silicon LAAPD photodetection devices lies with producers of PMTs, the only product currently available for many of the applications for which the Company's LAAPD products are designed. The Company believes that there are a number of manufacturers of PMTs, most of which have significantly greater financial, technological, marketing and personnel resources than the Company. In addition, several companies produce solid state detectors based on small area APD technology. Although a few additional photodetector companies are engaged in developing APDs, the Company believes that most of these are limited by their technology to small area APD devices. The Company believes these small area APDs are considerably less useful than the Company's LAAPD devices in broadening the applicability of APD technology to imaging and the sensing of extremely low light levels. The Company's LAAPD products have electronic signal gain of up to 300 (one photoelectron converted to 300 photoelectrons) while typical small area APD devices have a gain of about 50 and, therefore, are not competitive with the Company's LAAPD devices in certain applications. PMTs were first invented in the 1940's. It is possible that existing PMT manufacturers or other photodetector manufacturers will begin APD development and eventually manufacture competitive APD devices. 6 7 PROPRIETARY TECHNOLOGY The Company has been issued patents as follows:
US PATENT NO. DESCRIPTION DATE ISSUED - --------------------- --------------------------------------------- ------------------------ 5,801,430 Solid State Photodetector with September 1998 Light-Responsive Rear Face 5,757,057 Large Area Avalanche Array May 1998 5,477,075 Solid State Photodetector with December 1995 Light-Responsive Rear Face 5,311,044 Avalanche Photomultiplier Tube May 1994 5,146,296 Devices for Detecting and/or Imaging Single September 1992 Photoelectron 5,057,892 Light Responsive Avalanche Diode October 1991 5,021,854 Silicon Avalanche Photodiode Array June 1991 4,717,946 Thin Line Junction Photodiode By predecessor company 4,782,382 High Quantum Efficiency Photodiode Devices By predecessor company
Other patent submissions are currently under review by the U.S. Patent and Trademark Office. There can be no assurance that the pending patent applications will issue as patents, that any issued patents will provide the Company with significant competitive advantages, or that challenges will not be instituted against the validity or enforceability of any patent owned by the Company or, if instituted, that such challenges will not be successful. The cost of litigation to uphold the validity and prevent infringement of a patent could be substantial. If the Company is unable to obtain patents for its proposed applications, other entities may exploit the Company's developments in APD technology. Furthermore, there can be no assurance the Company's APD technology will not infringe patents or other rights owned by others, licenses to which may not be available to the Company. Based on limited patent searches, contacts with others knowledgeable in the field of APD technology and a review of pertinent published materials, to the Company's knowledge, its competitors hold no patents, licenses or other rights to the APD technology which would preclude the Company from pursuing its intended operations or from obtaining patent protection for its proposed applications. In some cases, the Company may rely on trade secrets to protect its innovations. There can be no assurance that trade secrets will be established, that secrecy obligations will be honored or that others will not independently develop similar or superior technology. To the extent that consultants, key employees or other third parties apply technological information independently developed by them or by others to Company projects, disputes may arise as to the proprietary rights to such information which may not be resolved in favor of the Company. EMPLOYEES At June 19, 2000, the Company employed 57 full-time employees (including 3 officers), 9 engineering and development personnel, 35 operations personnel (including 1 officer), 6 sales and marketing personnel, and 7 general administrative personnel (including 2 officers). The Company may, from time to time, engage personnel to perform consulting services and to perform research and development under third party funding. In certain cases, the cost of such personnel may be included in the direct cost of the contract rather than as payroll expense. ITEM 2. PROPERTIES The Company leases its executive offices, research, marketing and manufacturing facility which consists of approximately 39,000 square feet in a building complex located at 1240 Avenida Acaso, Camarillo, California. The 7 8 lease expires in February 2004. The Company believes that its existing facility is adequate to meet its needs for the foreseeable future. ITEM 3. LEGAL PROCEEDINGS None ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None PART II ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company's Class A Common Stock is traded on the American Stock Exchange ("AMEX") under the symbol "API". The Company's Class B Common Stock is not publicly traded. At June 19, 2000, the Company had 57 holders of record for the Class A Common Stock, representing approximately 1,200 holders owning shares of Class A Common Stock in street name. On the same date, there were 6 holders of the Class B Common Stock. The following table sets forth high and low closing prices by quarter for fiscal years 2000 and 1999.
Quarterly Stock Market Data - ----------------------------------------------------------------------------------------------------------------------- 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter - ----------------------------------------------------------------------------------------------------------------------- 2000 1999 2000 1999 2000 1999 2000 1999 - ----------------------------------------------------------------------------------------------------------------------- Common Stock(1) High 3/4 1 7/16 3/4 1 3/8 7/8 15/16 16 5/8 7/8 Low 1/2 5/8 1/2 11/16 3/8 1/2 7/8 9/16 - -----------------------------------------------------------------------------------------------------------------------
(1) Price ranges on the American Stock Exchange The Company has not paid any cash dividends on its capital stock. The Company intends to retain earnings, if any, for use in its business and does not anticipate that any funds will be available for the payment of cash dividends on its outstanding shares in the foreseeable future. The holders of Common Stock will not be entitled to receive dividends in any year until the holders of the Class A Redeemable Convertible Preferred Stock receive an annual non-cumulative dividend preference of $.072 per share. As of June 19, 2000, 740,000 shares of Class A Redeemable Convertible Preferred Stock had been converted into 222,000 shares of Class B Common Stock, leaving outstanding 40,000 shares of Class A Redeemable Convertible Preferred Stock. The aggregate non-cumulative annual dividend preference of such Class A Redeemable Convertible Preferred Stock is $2,880. There is no public market for the Company's Class A Redeemable Convertible Preferred Stock or Class B Common Stock; however, such stock is convertible into Class A Common Stock at the option of the holder and upon transfer by the holder of the Class A Redeemable Convertible Preferred Stock or Class B Common Stock. 8 9 ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION RESULTS OF OPERATIONS FISCAL YEAR 2000 COMPARED TO FISCAL YEAR 1999 REVENUES The Company's revenues for the fiscal year ended March 26, 2000 ("2000") were $6.1 million, a decrease of $1.2 million, or 17%, from revenues of $7.3 million for the fiscal year ended March 28, 1999 ("1999"). Net product sales made up 100% of the total revenue for 2000. The decrease in net product sales reflects lower shipments of military aerospace products, partially offset by higher shipments of commercial products. Volume in military aerospace products decreased by $1.7 million, or approximately 49% in 2000 compared to 1999. The decrease in military aerospace products was partially offset by higher shipments of commercial products in the industrial sensing and medical markets, which increased 28% each in 2000 compared to 1999. During 2000, shipments of LAAPD products (included in net product sales) rose by 17% over 1999, to $470,000. This level is the highest on record in Company history for the product line. Sales from LAAPDs represented 8% of total product sales during 2000, as compared to 6% in 1999. The Company anticipates increasing volume from sales of its proprietary LAAPD products as markets begin to implement newer and more sophisticated technology. The Company expects continued increased revenues from the sales of commercial products in fiscal year 2001. The Company anticipates that net sales in 2001 will exceed what was realized in 2000 and are expected to approximate the sales levels reached in fiscal 1999. COSTS AND EXPENSES Cost of product sales decreased by $180,000 (4%) in 2000 compared to 1999. Cost of product sales as a percent of net product sales increased by 9% and gross profit margin on net product sales decreased 9 percentage points to 30% compared to 1999. Material and labor costs, as a percentage of net sales, remained constant at 15% and 5%, respectively, for 2000 compared to 1999. Fixed overhead costs as a percentage of net sales increased to 16% in 2000, from 7% in 1999. Overall increases in cost of product sales were due to increased overhead rates resulting from lower overall sales volume. The Company expects gross profit margin, as a percentage of net sales, to return to approximately the same rate as was realized in 1999, as sales volume is expected to increase and the Company does not foresee any notable increases in material or labor costs. Research and development ("R&D") costs increased by $119,000 (22%) to $671,000 during 2000 compared to 1999. The increase in R&D costs is attributable to increases in internal R&D efforts as the Company focused on improving its current line of LAAPD products as well as expanding into new derivatives of the patented technology. The Company continues development of its next generation line of LAAPD array products. 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. Marketing and sales expense increased by $46,000 (5%) to $1,004,000 in 2000. The increase in marketing and sales expense was due to the recruitment of additional sales staff, and the resulting increase in sales department salaries, during 2000, which was partially offset by lower commission expenses resulting from lower sales levels. Marketing and sales expenses are expected to decrease slightly in 2001 as executive compensation previously reported as marketing and sales expense is now being reported as administrative expense, due to the promotion of Brock Koren from Vice President of Sales and Marketing to President and Chief Executive Officer. The Company has no plans 9 10 to recruit additional sales staff at the executive level during 2001. However, the Company intends to pursue its plans for growth and commercialization of the LAAPD family of products and, as such, expects to incur higher commission expenses as a result of increased sales in 2001. General and administrative expenses decreased by $123,000 (12%) to $931,000 in 2000 compared to 1999. The reduction in general and administrative expenses was the result of a decrease in property tax reserve and general cost cutting efforts. The company expects a slight increase in general and administrative expenses in fiscal year 2001, to accommodate anticipated increases in sales and operating activity. Interest income in 2000 of $136,000 was $21,000 higher than in 1999. The increase in interest income is due primarily to increased cash reserves and higher available interest rates. During Q4 2000, cash reserves increased by $3 million, due to the high volume of stock options exercised. LIQUIDITY AND CAPITAL RESOURCES At March 26, 2000, the Company had cash, cash equivalents and short-term investments of $5.3 million, working capital of $7.4 million and an accumulated deficit of $17.9 million. The Company's cash, cash equivalents and short-term investments increased $2.7 million during the twelve months ended March 26, 2000. Cash expenditures were impacted by a reduction of $115,000 in accounts payable and other accrued expenses. The decrease in accrued expenses was primarily due to reductions in accrued warranty and other miscellaneous expenses. Accounts receivable increased by $190,000 in 2000, due to increased sales in Q4 2000, over the same period in 1999. Capital spending during 2000 was $134,000 compared to $147,000 during 1999. 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, it continues development of proof-of-concept, LAAPD pixelized arrays as well as other derivatives of the base technology. The continued development of LAAPD arrays beyond the proof-of-concept phase may require additional funds. The Company's revolving line of credit agreement with a bank for the lesser of $1,000,000 or 75 percent of eligible trade accounts receivable, as defined by the agreement, expired on July 16, 1999. The Company does not foresee a need for borrowing based upon current projections and, therefore, has elected to forego the costs for maintaining the line at this time. The Company believes that it would be most efficient to establish a line when the situation warrants. The Company is exposed to interest rate risk for marketable securities. At March 26, 2000, the Company had $1,723,000 of short-term investments with a weighted average interest rate of 6.30%, primarily commercial paper, all of which mature in fiscal year 2001. The Company also has $246,000 in long-term investments, with a weighted average interest rate of 6.25%. The long term-investments are made up of two corporate bond holdings, both of which mature in fiscal year 2002. The Company believes that the moderate rate of inflation over the past few years has not had a significant impact on the Company's sales or operating results. YEAR 2000 ISSUES None 10 11 FORWARD LOOKING STATEMENTS THIS ANNUAL REPORT 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), AND A DECLINE IN THE GENERAL DEMAND FOR OPTOELECTRONIC PRODUCTS. 11 12 ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The following financial statements of Advanced Photonix, Inc. are included in Item 7:
Page ---- INDEPENDENT AUDITORS' REPORTS 13-14 FINANCIAL STATEMENTS: Balance Sheet, March 26, 2000 15-16 Statements of Operations for the Years Ended March 26, 2000 and March 28, 1999 17 Statements of Stockholders' Equity for the Years Ended March 26, 2000 and March 28, 1999 18 Statements of Cash Flows for the Years Ended March 26, 2000 and March 28, 1999 19-20 Notes to Financial Statements 21-28
12 13 INDEPENDENT AUDITORS' REPORT June 16, 2000 To the Board of Directors and Shareholders of Advanced Photonix, Inc.: We have audited the accompanying balance sheet of Advanced Photonix, Inc. (the "Company") as of March 26, 2000 and the related statements of operations, stockholders' equity and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company at March 26, 2000 and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. /s/ Farber & Hass LLP Oxnard, California 13 14 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Advanced Photonix, Inc.: We have audited the accompanying balance sheet of Advanced Photonix, Inc. (a Delaware Corporation) as of March 28, 1999 (not presented herein), and the related statements of operations, stockholders' equity and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Advanced Photonix, Inc. as of March 28, 1999, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States. ARTHUR ANDERSEN LLP Los Angeles, California May 5, 1999 15 ADVANCED PHOTONIX, INC. BALANCE SHEET AS OF MARCH 26, 2000 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 3,309,000 Short-term investments 1,969,000 Accounts receivable, less allowance of $7,000 1,176,000 Inventories 1,517,000 Prepaid expenses and other current assets 108,000 ------------ Total current assets 8,079,000 ------------ EQUIPMENT AND LEASEHOLD IMPROVEMENTS, at cost 3,120,000 Less accumulated depreciation and amortization (2,596,000) ------------ Equipment and leasehold improvements, net 524,000 ------------ OTHER ASSETS: Goodwill, net of accumulated amortization of $286,000 550,000 Patents, net of accumulated amortization of $33,000 68,000 Other 24,000 ------------ Total other assets 642,000 ------------ TOTAL ASSETS $ 9,245,000 ============
(Continued) 15 16 ADVANCED PHOTONIX, INC. BALANCE SHEET - CONTINUED AS OF MARCH 26, 2000 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 225,000 Accrued salaries, wages and benefits 334,000 Accrued commissions 35,000 Accrued professional fees 48,000 Other accrued expenses 44,000 ------------ Total current liabilities 686,000 ------------ COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Convertible preferred stock at redemption value; 10,000,000 shares authorized; 40,000 shares issued and outstanding 32,000 Class A common stock, $.001 par value; 50,000,000 shares authorized; 12,039,904 shares issued and outstanding 12,000 Class B common stock, $.001 par value; 4,420,113 shares authorized; 36,135 issued and outstanding Additional paid-in capital 26,420,000 Accumulated deficit (17,905,000) ------------ Total stockholders' equity 8,559,000 ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 9,245,000 ============
See notes to financial statements. 16 17 ADVANCED PHOTONIX, INC. STATEMENTS OF OPERATIONS FOR THE YEARS ENDED MARCH 26, 2000 AND MARCH 28, 1999 - --------------------------------------------------------------------------------
2000 1999 ----------- ----------- SALES $ 6,090,000 $ 7,310,000 COST OF GOODS SOLD 4,262,000 4,442,000 ----------- ----------- GROSS PROFIT 1,828,000 2,868,000 RESEARCH AND DEVELOPMENT EXPENSES 671,000 552,000 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 1,935,000 2,012,000 ----------- ----------- INCOME (LOSS) FROM OPERATIONS (778,000) 304,000 ----------- ----------- OTHER INCOME (EXPENSE): Interest income 136,000 115,000 Other, net (1,000) ----------- ----------- Other income, net 135,000 115,000 ----------- ----------- INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES (643,000) 419,000 PROVISION FOR INCOME TAXES 10,000 8,000 ----------- ----------- NET INCOME (LOSS) $ (653,000) $ 411,000 =========== =========== BASIC EARNINGS (LOSS) PER SHARE $ (0.06) $ 0.04 =========== ===========
See notes to financial statements. 17 18 ADVANCED PHOTONIX, INC. STATEMENTS OF STOCKHOLDERS' EQUITY
Class A Class B Convertible Common Stock Common Stock Preferred Stock For years ended March 26, 2000 --------------------------- ---------------------------- ---------------------------- and March 28, 1999 Shares Amount Shares Amount Shares Amounts - ------------------------------------------------------------------------------------------------------------------------------------ BALANCE AT MARCH 29, 1998 10,838,260 $ 11,000 76,135 -- 90,000 $ 72,000 Conversion of Redeemable Preferred Stock -- -- 3,000 -- (10,000) (8,000) Conversion of Class B Common Stock 11,000 -- (11,000) -- -- -- Other -- -- -- -- -- -- Net Income -- -- -- -- -- -- - ------------------------------------------------------------------------------------------------------------------------------------ BALANCE AT MARCH 28, 1999 10,849,260 11,000 68,135 -- 80,000 64,000 Conversion of Redeemable Preferred Stock 12,000 (40,000) (32,000) Conversion of Class B Common Stock 44,000 -- (44,000) -- -- -- Exercise of Options 1,146,644 1,000 -- -- -- -- Return of "Short-Swing" Profit realized by Insider, pursuant to Section 16(b) -- -- -- -- -- -- Net loss -- -- -- -- -- -- - ------------------------------------------------------------------------------------------------------------------------------------ BALANCE AT MARCH 26, 2000 12,039,904 $ 12,000 36,135 -- 40,000 $ 32,000
Additional For each of the two years in the Paid-in Accumulated period ended March 26, 2000 Capital Deficit Total - ------------------------------------------------------------------------------------- BALANCE AT MARCH 29, 1998 $ 22,696,000 $(17,662,000) $ 5,117,000 Conversion of Redeemable Preferred Stock 8,000 -- -- Conversion of Class B Common Stock -- -- -- Other -- (1,000) (1,000) Net Income -- 411,000 411,000 - ------------------------------------------------------------------------------------- BALANCE AT MARCH 28, 1999 22,704,000 (17,252,000) 5,527,000 Conversion of Redeemable Preferred Stock 32,000 -- -- Conversion of Class B Common Stock -- -- -- Exercise of Options 2,974,000 -- 2,975,000 Return of "Short-Swing" Profit realized by Insider, pursuant to Section 16(b) 710,000 710,000 Net loss -- (653,000) (653,000) - ------------------------------------------------------------------------------------- BALANCE AT MARCH 26, 2000 $ 26,420,000 $(17,905,000) $ 8,559,000
See notes to financial statements. 18 19 ADVANCED PHOTONIX, INC. STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED MARCH 26, 2000 AND MARCH 28, 1999 - --------------------------------------------------------------------------------
2000 1999 ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ (653,000) $ 411,000 Adjustments to reconcile net income (loss) to net cash used by operating activities: Depreciation 121,000 334,000 Amortization 37,000 37,000 Changes in operating assets and liabilities: Short-term investments (102,000) (890,000) Accounts receivable (190,000) (20,000) Inventories 34,000 22,000 Prepaid expenses and other current assets (20,000) (4,000) Other assets (18,000) (17,000) Accounts payable and accrued expenses (115,000) (448,000) ----------- ----------- Net cash used by operating activities (906,000) (575,000) ----------- ----------- CASH FLOWS USED IN INVESTING ACTIVITIES - Capital expenditures (134,000) (147,000) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES - Proceeds from exercise of stock options 2,975,000 -- Refund of "short swing" profits from related party 710,000 -- ----------- ----------- Net cash provided by financing activities 3,685,000 -- ----------- ----------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,645,000 (722,000) CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 664,000 1,386,000 ----------- ----------- CASH AND EQUIVALENTS, END OF YEAR $ 3,309,000 $ 664,000 =========== ===========
(Continued) 19 20 ADVANCED PHOTONIX, INC. STATEMENTS OF CASH FLOWS - CONTINUED FOR THE YEARS ENDED MARCH 26, 2000 AND MARCH 28, 1999 - --------------------------------------------------------------------------------
2000 1999 ------- ------ SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid for interest $ -0- $ -0- Cash paid for taxes $10,000 $8,000 NON-CASH TRANSACTION: Issuance of shares of common stock upon the conversion of preferred stock $32,000 $8,000
See notes to financial statements. 20 21 ADVANCED PHOTONIX, INC. NOTES TO FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BUSINESS DESCRIPTION - Advanced Photonix, Inc. (the "Company"), is engaged in the development and manufacture of optoelectronic semiconductor based components, hybrid assemblies and other proprietary solid state light and radiation detection devices, including proprietary advanced solid state silicon photodetection devices which utilize avalanche photodiode ("APD") technology. The Company's large area avalanche photodiode ("LAAPD") technology is still considered to be a new technology and is subject to risks inherent in the development of products based on new technologies. These risks include getting the invention out of the laboratory and into actual use in the field and stepping up production from the prototype (early) stages of manufacturing. In order to fund these development efforts, the Company historically has relied upon proceeds from equity financings, bank lines-of-credit and loans from stockholders. At March 26, 2000, no amounts were outstanding under any bank line-of-credit and there were no stockholder loans to the Company. RECLASSIFICATIONS - Certain 1999 amounts have been reclassified in order to conform with 2000 classifications. FISCAL YEAR-END - The Company's fiscal year ends on the last Sunday in March. Fiscal years in the two-year period ended March 26, 2000, each contain fifty-two weeks. OPERATING SEGMENT INFORMATION - The Company predominantly operates in one industry segment, light and radiation detection devices. Substantially all of the Company's assets and employees are located at the Company's headquarters in Camarillo, California. In fiscal 2000, the Company had export sales of approximately $992,000 to customers in North America, Asia, Australia and Europe. FAIR VALUE OF FINANCIAL INSTRUMENTS - Based on borrowing rates currently available to the Company for bank loans with similar terms and maturities, the fair value of the Company's long-term debt approximates the carrying value. Furthermore, the carrying value of all other financial instruments potentially subject to valuation risk (principally consisting of cash equivalents, accounts receivable and accounts payable) also approximates fair value. CASH AND CASH EQUIVALENTS - The Company considers all highly liquid investments, with an original maturity of three months or less when purchased, to be cash equivalents. SHORT-TERM INVESTMENTS - SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities", requires that all debt and marketable equity securities be classified in one of three categories: trading, available-for-sale, or held-to-maturity. It is the Company's intent to maintain a liquid portfolio to take advantage of investment opportunities; therefore, all of the Company's short-term investments are considered to be available-for-sale. The Company has 21 22 classified all investments as current assets since it has the intent and ability to redeem them within the year. Available-for-sale securities are recorded at market value. Unrealized holding gains and losses, net of the related income tax effect, on available-for-sale securities are excluded from earnings and are reported as a separate component of stockholders' equity until realized. The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization and accretion are included in interest income. At the time of sale, any realized gains or losses, calculated by the specific identification method, are recognized as a component of operating results. Short-term investments consist of the following as of March 26, 2000:
Unrealized Fair Holding Cost Value Gain/(Losses) ---------- ---------- ------------- Corporate bonds and notes $ 665,000 $ 661,000 $ (4,000) Corporate commercial paper 1,304,000 1,308,000 4,000 ---------- ---------- ---------- TOTALS $1,969,000 $1,969,000 $ -0- ========== ========== ==========
Maturities of short-term investments as of March 26, 2000 were as follows:
Fair Cost Value ---------- ---------- Due within one year $1,721,000 $1,723,000 Due thereafter 248,000 246,000 ---------- ---------- TOTALS $1,969,000 $1,969,000 ========== ==========
CONCENTRATION OF CREDIT RISK - Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash equivalents, short-term investments and accounts receivable. The Company maintains cash balances at a financial institution that is insured by the Federal Deposit Insurance Corporation up to $100,000. As of March 26, 2000, the Company had cash equivalents at a financial institution in excess of Federally insured amounts. The Company invests in short-term investments, primarily consisting of corporate commercial paper with high-quality companies. Approximately 40% of the Company's short-term investments are invested with one company. Accounts receivable are unsecured and the Company is at risk to the extent such amount becomes uncollectible. The Company performs periodic credit evaluations of its customers' financial condition and generally does not require collateral. As of March 26, 2000, one customer comprised 37% of accounts receivable. SIGNIFICANT CUSTOMER - During the fiscal years ended March 26, 2000 and March 28, 1999 one customer accounted for 14% and 12%, respectively of the Company's net sales. 22 23 INVENTORIES - Inventories, which include material, labor and manufacturing overhead are stated at the lower of cost (first in, first out) or market. Inventories consist of the following at March 26, 2000: Raw material $ 511,000 Work-in-process 684,000 Finished products 322,000 ---------- Total $1,517,000 ==========
EQUIPMENT AND LEASEHOLD IMPROVEMENTS - Equipment and leasehold improvements are stated at cost. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the assets or lease term ranging from five to eleven years. Equipment and leasehold improvements consist of the following at March 26, 2000: Machinery and equipment $2,604,000 Furniture and fixtures 93,000 Leasehold improvements 249,000 Data processing equipment 174,000 ---------- Total $3,120,000 ==========
PATENTS - Patents represent costs incurred in connection with patent applications. Such costs are amortized using the straight-line method over the useful life of the patent once issued, or expensed immediately if any specific application is unsuccessful. Amortization expense was approximately $4,000 and $3,000 in fiscal 2000 and 1999, respectively. GOODWILL - The excess of cost over the purchase price of acquired net assets is amortized on a straight-line basis over a 25 year period. Amortization expense was $33,000 in fiscal 2000 and 1999. The Company continually evaluates the recoverability of goodwill by assessing whether the recorded value of the goodwill will be recovered through future expected operating results. REVENUE RECOGNITION - Revenues from research and development cost reimbursement-type contracts are recorded as costs are incurred based upon the relationship between actual costs incurred, total estimated costs, and the amount of the contract or grant award. Estimation of costs are reviewed periodically and any anticipated losses are recognized in the period in which they first become determinable. The Company uses the unit of delivery method for recognizing sales and cost of sales under production contracts. Provision for estimated losses, if any, is made in the period in which such losses are determined. WARRANTIES - The Company typically warrants its products against defects in material and workmanship for a period of 90 days from the date of shipment. A provision for estimated future warranty costs is recorded when products are shipped. To date, warranty costs have not 23 24 been material. NET INCOME (LOSS) PER SHARE - 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 each year (11,025,000 and 10,916,000 at March 26, 2000 and March 28, 1999, respectively). "Diluted" net income (loss) per share has not been presented as the impact is anti-dilutive in 2000 and was not material in 1999. RESEARCH AND DEVELOPMENT COSTS - The company charges all research and development costs, including costs associated with development contract revenues, to expense when incurred. Manufacturing costs associated with the development of a new fabrication process or a new product are expensed until such times as these processes or products are proven through final testing and initial acceptance by the customer. Costs related to revenues on non-recurring engineering services billed to customers are generally classified as cost of product sales. PERVASIVENESS OF ESTIMATES - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. ACCOUNTING FOR STOCK OPTION BASED COMPENSATION - SFAS No. 123, "Accounting for Stock Based Compensation" ("SFAS 123"), sets forth accounting and reporting standards for stock based employee compensation plans. As allowed by SFAS 123, the Company continues to measure compensation cost under Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25) and complies with the pro forma disclosure requirements of the new standard (see Note 4). NEW ACCOUNTING PRONOUNCEMENTS - SFAS No. 130, "Reporting Comprehensive Income", establishes standards for reporting and displaying comprehensive income and its components in financial statements. The Company adopted the provisions of SFAS No. 130 in 1998, but had no elements of comprehensive income in 2000 or 1999. SFAS No., 131, "Disclosures About Segments of an Enterprise and Related Information", establishes a new model for segment reporting, called the "management approach" and requires certain disclosures for each segment. The Company adopted the provisions of SFAS No. 131 in 1998, but currently operates in one industry segment. 2. CAPITALIZATION The Company's Certificate of Incorporation provides for two classes of common stock, a Class A for which 50,000,000 shares are authorized for issuance and a Class B for which 4,420,113 shares are authorized for issuance. The par value of each class is $.001. Subject to certain limited exceptions, shares of Class B Common Stock are automatically converted into an 24 25 equivalent number of Class A shares upon the sale or transfer of the Class B Common Stock by the original holder. The holder of each share of Class A and Class B Common Stock is entitled to one vote per share. The Company has authorized 10,000,000 shares of Preferred Stock, of which 780,000 shares have been designated Class A Redeemable Convertible Preferred Stock with a par value of $.001 per share. The number of shares of Class A Preferred Stock issued and outstanding was 40,000 at March 26, 2000. The Class A Preferred Stock has a liquidation preference equal to its issue price ($.80 per share). The Class A Preferred Stock is convertible at any time, at the option of the holder, into .3 shares of Class B Common Stock for each share of Preferred Stock converted. The Class A Preferred Stock is subject to redemption at the Company's option for $.80 per share at any time. The Company would be required to pay approximately $32,000 to redeem these shares. The holders of the Class A Preferred Stock are entitled to an annual non-cumulative dividend preference of $.072 per share when the Company's net earnings per share of Class A Preferred Stock equals or exceeds $.072. The Class A Preferred stockholders do not have voting rights except as required by applicable law. 3. INCOME TAXES At March 26, 2000, the Company had net operating loss carryforwards of approximately $14.6 million for Federal tax purposes that expire at various dates through fiscal year 2012. The tax laws related to the utilization of loss carryforwards are complex and the amount of the Company's loss carryforward that will ultimately be available to offset future taxable income may be subject to annual limitations resulting from changes in the ownership of the Company's common stock. The tax effects of temporary differences that give rise to significant portions of the deferred tax assets at March 26, 2000 are substantially composed of the Company's net operating loss carryforwards, for which the Company has made a full valuation allowance. The valuation allowance decreased approximately $284,000 in the year ended March 26, 2000, representing primarily net taxable income for tax return purposes. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. The tax provision for the years ended March 26, 2000 and March 28, 1999 are composed of Federal alternative minimum tax and California franchise tax. 4. STOCK OPTIONS The Company has three stock option plans: the 1990 Incentive Stock Option and Non-Qualified Stock Option Plan, the 1991 Directors' Stock Option Plan ("The Directors' Plan") and the 1997 Employee Stock Option Plan. The Company measures compensation for these plans under APB Opinion No. 25, under which no compensation cost has been recognized. Had 25 26 compensation expense for these plans been determined consistent with SFAS No. 123, the Company's net loss and net loss per share would have increased to the following pro forma amounts:
2000 1999 --------- --------- Net income (loss), as reported $(653,000) $ 411,000 Net (loss) - pro forma $(956,000) $ (42,000) Basic income (loss) per share, as reported $ (0.06) $ 0.04 Basic (loss) per share - pro forma $ (0.09) $ (0.00)
Because the SFAS No. 123 method of accounting has not been applied to options granted prior to April 3, 1995, the resulting pro forma compensation cost may not be representative of that to be expected in future years. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions used for grants in 2000 and 1999, respectively: risk-free interest rates of 9.0% and 5.68%, expected volatility of 75% and 69% and expected lives of 10 years in both periods. No dividends were assumed in the calculations. The Company's various stock option plans provide for the granting of non-qualified and incentive stock options to purchase up to 2,200,000 shares of common stock for periods not to exceed 10 years. As of March 26, 2000, no shares were available for future grant under such plans. Options typically vest at the rate of 25% per year over four years, except for options granted under The Directors' Plan, which typically vest at the rate of 50% per year over two years. Under these plans, the option exercise price equals the stock's market price on the date of grant. Options may be granted to employees, officers, directors and consultants. The Company has also granted options, under similar terms as above, under no specific shareholder approved plan. Stock option transactions for the years ended March 26, 2000 and March 28, 1999 are summarized as follows:
2000 1999 -------------------- -------------------- Weighted Weighted Average Average Shares Exercise Shares Exercise (000) Price (000) Price ------- -------- ------- -------- Outstanding, beginning of year 2,466 $ 3.13 2,052 $ 3.67 Granted 620 .66 676 1.18 Exercised (1,147) 2.60 -- -- Cancelled (144) 2.81 (262) 2.12 ------ ------ ------ ------ Outstanding, end of year 1,795 $ 2.62 2,466 $ 3.13 ====== ====== ====== ====== Exercisable, end of year 653 $ 5.52 1,755 $ 3.81 ====== ====== ====== ====== Weighted average fair value of options granted $ 0.47 $ 0.94 ====== ======
26 27 Information regarding stock options outstanding as of March 26, 2000 is as follows
Options Outstanding ---------------------------------------------------- Weighted Weighted Average Average Remaining Price Range Shares Exercise Price Contractual Life - ----------------------------------------------------------------------------------------- $ .50 - $6.00 1,795,000 $2.62 6.3 years
Options Exercisable -------------------------------------------------- Weighted Weighted Average Average Price Range Shares Exercise Price Remaining Life - --------------------------------------------------------------------------------------- $ .69 - $6.00 653,000 $5.52 1.6 years
5. COMMITMENTS The Company leases its manufacturing and office facility under a non-cancelable operating lease. Approximate minimum future lease payments under all non-cancelable operating leases expiring at various dates through fiscal 2004, are as follows: 2001 $ 382,000 2002 390,000 2003 398,000 2004 405,000 ---------- Total $1,575,000 ==========
Rent expense was approximately $361,000 and $279,000 in fiscal 2000 and 1999, respectively. 6. LEGAL The Company is, from time to time, subject to legal and other matters in the normal course of its business. While the results of such matters cannot be predicted with certainty, management does not believe that the final outcome of any pending matters will have a material effect on the financial position and results of operations of the Company. 7. EMPLOYEES' RETIREMENT PLAN The Company maintains a 401(k) Plan which is qualified under the Internal Revenue Code. All full-time employees are eligible to participate in the Plan. Employees may make voluntary 27 28 contributions to the Plan which are matched by the Company at the rate of $.50 for every $1.00 of employee contribution, subject to certain limitations. The Company contributions recognized as expense were approximately $81,000 and $62,000 in fiscal 2000 and 1999, respectively. 8. FOURTH QUARTER ADJUSTMENT The Company recorded an adjustment in the fourth quarter of fiscal 2000 to reduce inventories approximately $412,000, to properly reflect the cost of raw materials and valuation of inventories. The effect on previously reported quarterly earnings is as follows:
Quarter Ended June 27, 1999 ------------- NET LOSS: As previously reported $ (155,000) As restated $ (343,000) BASIC LOSS PER SHARE: As previously reported $ (0.01) As restated $ (0.03)
28 29 ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE On March 24, 2000, the Board of Directors decided to change independent accountants and voted to replace Arthur Andersen LLP with Farber & Hass LLP as the Company's independent auditor. In connection with its audits for the two most recent fiscal years, there have been no disagreements between the Company and Arthur Andersen LLP on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure. In addition, the reports of Arthur Andersen LLP on the Company's financial statements contained no adverse opinions or disclaimers and were not qualified or modified as to uncertainty, audit scope or accounting principle. PART III ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS Set forth below is certain information relating to the directors and officers of the Company.
Name Age Position ---- --- -------- Hayden Leason 69 Chairman of the Board Brock Koren 36 President and Chief Executive Officer M. Scott Farese 43 Director Richard D. Kurtz 48 Director Stephen P. Soltwedel 53 Director Susan A. Schmidt 34 Director of Finance and Chief Financial Officer Paul Sharman 42 Vice President, Operations
Hayden Leason, Chairman of the Board Mr. Leason became a director of the Company in July 1995. He served as Chairman of the Board from October 1996 until October 1997 and as Chief Executive Officer from November 1996 until October 1997. In October 1999, Mr. Leason was again appointed Chairman of the Board and is presently serving in that capacity. In 1965, Mr. Leason founded Filtertek Inc., a designer and manufacturer of specialty filtration elements, which subsequently became a New York Stock Exchange listed company. He served as Chairman and Chief Executive Officer until 1992 when he sold his interest to Schawk Inc. Since 1992, Mr. Leason has managed various private investments. Mr. Leason is a 1954 graduate of Northwestern University where he received his Bachelor of Science degree in Business Administration. Brock Koren, President and Chief Executive Officer Mr. Koren joined the Company in July 1998 and was promoted from Vice President, Sales and Marketing to President and Chief Executive Officer in October 1999. From 1992 until 1998, he was a regional sales engineer responsible for technical sales in Southern California of all Hamamatsu photonic products including Photomultiplier Tubes. Hamamatsu is a leading manufacturer of devices for generation and measurement of infrared, visible, and ultraviolet light, and is the largest manufacturer of PMTs in the world. From 1989 until 1992, he was a sales engineer/account manager for Tektronix, Inc., a $2.1 billion global high-technology company based on a portfolio of measurement, color printing and video and networking businesses. Mr Koren received his Bachelor of Science Degree in Electrical Engineering from California State University, Long Beach, California. 29 30 M. Scott Farese, Director Mr. Farese became a director of the Company in August 1998. He is currently a Regional Sales Manager for Filtertek Inc. Mr. Farese joined Filtertek in 1991. Filtertek is the largest worldwide producer of custom filtration products and fluid control devices and the world's largest manufacturer of custom molded filter elements. Filtertek is a subsidiary of ESCO Electronics Corporation. Mr. Hayden Leason, Chairman of the Board, founded Filtertek which he sold in 1992 to Schawk Inc. Mr. Farese is the son-in-law of Mr. Leason. Richard D. Kurtz, Director Mr.Kurtz became a director of the Company in February 2000. He is currently Vice President Sales and Marketing for Filtertek Inc. in Hebron, IL. Mr. Kurtz joined Filtertek in 1988 as a Sales Engineer and was subsequently promoted to Automotive Sales Manager before assuming his present responsibilities. Prior to joining Filtertek, Mr. Kurtz held the position of New Products Marketing Specialist for Amstar Technical Products Group in Jackson, MI. Mr. Kurtz received his Bachelor of Arts degree in Economics from Michigan State University and his Master of Business Administration degree from Eastern Michigan University. Stephen P. Soltwedel, Director Mr. Soltwedel became a director of the Company in February 2000. He is currently Vice President and Chief Financial Officer of Filtertek Inc. Mr. Soltwedel joined Filtertek in 1972 and was elected Vice President, Secretary and Treasurer of Filtertek Inc. and its sister corporation, Filtertek de Puerto Rico, Inc. in 1979. Mr Soltwedel held those positions during the time Filtertek Inc. was a public company, until 1992, when controlling interest in Filtertek was sold to Schawk Inc., and he was elected Vice President and Chief Financial Officer of Filtertek Inc., a wholly owned subsidiary of ESCO Electronics. Prior to joining Filtertek, Mr. Soltwedel was employed by the public accounting firm of Baillies Denson Erickson & Smith in Lake Geneva, WI. Mr. Soltwedel holds a bachelor's degree in accounting from Madison Business College. Susan A. Schmidt, Director of Finance and Chief Financial Officer 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 is a New York-based promoter and producer of live entertainment events. Ms. Schmidt held financial responsibilities for two southern California amphitheaters operated by SFX. From 1992 to 1997 she was Controller for Revchem Plastics, Inc., a full-line distribution company serving the reinforced plastics industry, and Durall Plastics,Inc., Revchem Plastics Inc.'s sister manufacturing company in Rialto, CA. Previously, Ms. Schmidt held financial management positions with Qwik Blinds, Inc. and Marriott Corporation. Ms. Schmidt received her Bachelor of Science degree in Business Administration-Accounting from California State University, San Bernardino. Paul Sharman, Vice President Operations Mr. Sharman joined API in June 1990. Mr. Sharman started in the Quality department and has held the positions of Director of Quality and Reliability, Director of Operations, and in March 2000, he was promoted to Vice President of Operations. Prior to joining API, Mr. Sharman was Senior Quality Engineer for Britax UK. He has also served two years lecturing on statistical analysis at South Downs College UK. During that period, Mr. Sharman wrote and administered courses in applied statistical analysis. Mr. Sharman holds an HND in Mechanical engineering from the Rotherham College of Technology and an IQAD in Quality Assurance from South Downs College. 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. 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 30 31 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 3 by Paul Sharman to report initial ownership of securities upon being appointed to an executive office in March 2000, which was reported on Form 5 in May 2000; the late filing of a Form 4 by Hayden Leason to report a March 2000 exercise of stock options and sale of stock, which Form 4 was filed in May 2000; and the late filing of a Form 5 by M. Scott Farese to report a January 2000 option grant and a February 2000 exercise of stock options and sale of stock, which Form 5 was filed in May 2000. ITEM 10. EXECUTIVE COMPENSATION The following table sets forth 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 $100,000 for services rendered during the last two fiscal years. SUMMARY COMPENSATION TABLE
Long Term Compensation ----------------------------------- Annual Compensation Awards Payouts ------------------------------------ ----------------------- -------- Other Restricted Securities Annual Stock Underlying LTIP All Other Fiscal Salary Bonus Compensation Awards Options Payouts Compensation Name and Principal Position Year ($) ($) ($) ($) (#) ($) ($)(1) - --------------------------- -------- -------- -------- ------------ ---------- ---------- -------- ------------ Hayden Leason 2000 -- -- -- -- -- -- -- Chairman of the Board and 1999 -- -- -- -- -- -- -- Chief Executive Officer(2) 1998 -- -- -- -- -- -- -- - ---------------------------------------------------------------------------------------------------------------------------------- Brock Koren 2000 175,000 12,500 -- -- 200,000 -- 8,600 President and Chief 1999 135,000 -- -- -- 100,000 -- 5,300 Executive Officer 1998 -- -- -- -- -- -- -- - ---------------------------------------------------------------------------------------------------------------------------------- Harry Melkonian, 2000 150,000 -- -- -- -- -- 4,500 Chairman of the Board, 1999 150,000 20,600 -- -- 200,000 -- 4,500 President and Chief 1998 150,000 40,000 -- -- -- -- 4,700 Executive Officer(3) - ---------------------------------------------------------------------------------------------------------------------------------- Patrick J. Holmes 2000 125,000 -- -- -- 100,000 -- 8,600 Executive Vice 1999 125,000 9,400 -- -- 50,000 -- 8,600 President, CFO, 1998 125,000 15,000 -- -- -- -- 3,900 Secretary and Treasurer(4) - ----------------------------------------------------------------------------------------------------------------------------------
1 Represents amounts paid by the Company on behalf of the named person in connection with the Company's 401(k) Retirement Plan, vacation pay and car allowance. 2 Mr. Leason resigned as Chairman of the Board and Chief Executive Officer in October 1997, and was re-elected as Chairman of the Board in October 1999. Options granted as part of plans provided to outside directors of the Company have been excluded from the table (0 in 2000 and 1,000 in 1999). 3 Mr. Melkonian was elected Chief Executive Officer in October, 1997, and Chairman of the Board in April 1998, and resigned from the Company in October 1999. Compensation continued under employment agreement. 4 Mr. Holmes was employed by the Company through March 2000. Compensation continued under employment agreement. Employment Agreements The Company has employment and termination agreements with certain employees, under which the employees may receive severance pay through the end of the term of the contract or up to twelve months. Total compensation under these agreements in the event of employment through the full term would be approximately $175,000 and $135,000 for fiscal years ending 2001 and 2002, respectively. Stock Options The following table sets forth certain information concerning stock options granted to the persons named in the Summary Compensation Table during the last fiscal year and unexercised stock options held by such persons at the end of such fiscal year. 31 32 OPTION GRANTS IN FISCAL 2000 Individual Grants
Number of % of Total Securities Options Underlying Granted to Options Employees Exercise or Granted in Fiscal Base Price Expiration Name(1) (#) Year ($/Sh) Date - --------------------------- ---------- ---------- ------------ ---------- Hayden Leason -- -- -- -- Brock Koren 200,000 32% $.563 / $.75(2) 11/11/09 Harry Melkonian -- -- -- -- Patrick J. Holmes 100,000 16% $.563 / $.75(3) 11/11/09
1 See "Summary Compensation Table" and Item 9 "Directors and Executive Officers" for principal position. 2 Options granted in two lots of 100,000 each, having exercise prices of $.563 per share and $.75 per share, respectively. 3 Options granted in two lots of 50,000 each, having exercise prices of $.563 per share and $.75 per share, respectively. The following tables set forth certain information concerning stock options granted to and exercised by the persons named in the Summary Compensation Table during the last fiscal year and unexercised stock options held by such persons at the end of such fiscal year. AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
Shares Acquired Number of Securities Value of Unexercised In- on Underlying Unexercised Options the-Money Options at Exercise Value at Fiscal Year End (#) Fiscal Year End ($) Name(1) (#) Realized Exercisable/Unexercisable Exercisable/Unexercisable - ----------------- ---------- ---------- ------------------------------ ------------------------- Hayden Leason 35,500 $ 490,000 -/500 -/$3,100 Brock Koren 25,000 $ 193,000 -/275,000 -/- Harry Melkonian -- -- -/- -/- Patrick J. Holmes 156,000 1,372,000 144,000/- $834,000/-
1 See "Summary Compensation Table" and Item 9 "Directors and Executive Officers" for principal position. Compensation of Directors In October 1995, the Board of Directors eliminated the accrual or payment of all fees including all annual fees, meeting fees and any payment for services as the Chairman or Member of any Committee of the Board of Directors except for reasonable travel expenses. In March 2000, the Board of Directors voted to re-establish a directors' fee in the amount of $2,500, payable to each director, for each meeting attended. The fee is paid to each non-employee director, with the exception of Hayden Leason, Chairman of the Board, who has voluntarily waived his fee. 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 eligible for grants of stock options upon their appointment to the Board of Directors under the 1991 Special Directors Stock Option Plan and on an annual basis so long as they remain on the Board. In January 1998, the Board reinstated participation in the 1991 Special Directors Stock Option Plan, which had also been suspended in October 1995, other than initial grants for new directors. Directors who are also officers of the Company or its affiliates do not receive cash compensation in consideration for their services as directors. ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth, as of March 26, 2000, 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 32 33 shares of Class A or Class B Common Stock of the Company, by each director and executive officers and by all directors and officers as a group. The outstanding Class B Common Stock represents only 0.3% of the total outstanding shares.
Class A Common Stock ---------------------------------------- Shares Under Shares Exercisable Percent Owned Options/Warrants(1) Voting(2) -------- ------------------- -------- James A. Delaney III(3) 632,800 -- 5.0 Patrick J. Holmes -- 144,000 1.2 Brock Koren(4) -- 40,000 .3 Paul Sharman(4) -- 20,400 .2 Hayden Leason(5) 10,500 -- -- M. Scott Farese(6) 10,500 -- -- Susan A. Schmidt(4) 500 -- -- Richard A. Kurtz(4) -- -- -- Harry Melkonian -- -- -- Stephen P. Soltwedel(4) -- -- -- Directors & Officers as a Group 11,000 204,400 1.8
1 Includes shares under options exercisable on March 26, 2000 and options which become exercisable within 60 days thereafter. 2 Represents combined voting power of both Class A and Class B Common Stock, assuming beneficial owner exercises all exercisable options and warrants. None of the named beneficial owners owned Class B Common Stock and there are no Class B derivatives outstanding 3 The address of this shareholder is 633 Ardsley Road, Winnetka, IL 60093 4 The address of this shareholder is c/o Advanced Photonix, Inc. 1240 Avenida Acaso, Camarillo, CA 93012. 5 The address of this shareholder is c/o Advanced Photonix, Inc. 1240 Avenida Acaso, Camarillo, CA 93012. Includes 10,000 shares owned by Mr. Farese (see footnote 6). Mr. Farese is the son-in-law of Mr. Leason. 6 The address of this shareholder is c/o Advanced Photonix, Inc. 1240 Avenida Acaso, Camarillo, CA 93012. Includes 500 shares owned by Mr. Leason (see footnote 5). Mr. Farese is the son-in-law of Mr. Leason. ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS See Item 10. Executive Compensation. PART IV ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) The following is a list of the financial statement schedules and exhibits filed herewith. (1) Financial Statements: No financial statements have been filed with this Form 10-KSB other than those listed in Item 7. (2) Financial Statement Schedules: Schedules for which provisions are made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions, or are disclosed in the accompanying consolidated financial statements, or are inapplicable and, therefore, have been omitted. 33 34 (3) Reports on Form 8-K: The Company filed form 8-K, dated March 24, 2000, indicating a change in independent accountants from Arthur Andersen LLP to Farber & Hass LLP. (4) Exhibits:
Exhibit No. Description - ------- ----------- 3.1 Certificate of Incorporation of the Registrant, as amended. - incorporated by reference to Exhibit 3.1 to the Registrant's Registration Statement on Form S-1, filed with the Securities and Exchange Commission on November 23, 1990 3.1.1 Amendment to Certificate of Incorporation of the Registrant, dated October 29, 1992-incorporated by reference to the Registrant's March 31, 1996 Annual Report on Form 10-K 3.1.2 Amendment to Certificate of Incorporation of the Registrant, dated September 9, 1992-incorporated by reference to the Registrant's March 31, 1996 Annual Report on Form 10-K 3.2 By-laws of the Registrant, as amended - incorporated by reference to the Registrant's March 31, 1996 Annual Report on Form 10-K 10.1* Advanced Photonix, Inc. 1991 Special Directors Stock Option Plan - incorporated by reference to Exhibit 10.9 to the Registrant's March 31, 1991 Annual Report on Form 10-K 10.2* Advanced Photonix, Inc. 1990 Incentive Stock Option and Non-Qualified Stock Option Plan - incorporated by reference to Exhibit No. 10.11 to the Registrant's Registration Statement on Form S-1, filed with the Securities and Exchange Commission on November 23, 1990 10.3* Advanced Photonix, Inc. 1997 Employee Stock Option Plan - incorporated by reference to Exhibit 10.13 to the Registrant's March 30, 1997 Annual report on Form 10-K 10.4* Amendment No. 1 to 1997 Employee Stock Option Plan of Advanced Photonix, Inc. - incorporated by reference to Exhibit 10.14 to the Registrant's December 28, 1997 Quarterly report on Form 10-Q 10.5 Employment Agreement dated June 1, 1998, between Advanced Photonix, Inc. and Patrick J. Holmes - incorporated by reference to Exhibit 10.5 to the Registrant's March 29, 1998 Annual Report on Form 10-K 10.5.1 Employment Agreement dated January 1, 2000, between Advanced Photonix, Inc. and Patrick J. Holmes 10.6 Employment Agreement dated June 1, 1998, between Advanced Photonix, Inc. and Harry Melkonian - incorporated by reference to Exhibit 10.6 to the Registrant's March 29, 1998 Annual Report on Form 10-K 10.7 Form of Non-Qualified Stock Option granted to Advanced Detectors, Inc., formerly Xsirius, Inc. - incorporated by reference to Exhibit 10.13 to Amendment No. 3 to the Registrant's Registration Statement on Form S-1, filed with the Securities and Exchange Commission on February 11, 1991 10.8 Employment Agreement dated January 1, 2000, between Advanced Photonix, Inc. and Brock Koren 10.9 Lease Agreement dated February 23, 1998 between Advanced Photonix, Inc. and High Tech No. 1, Ltd. - incorporated by reference to Exhibit 10.9 to the Registrant's March 29, 1998 Annual Report on Form 10-K
34 35 10.10.1 Form of Indemnification Agreement provided to Directors and Principal Officers of Advanced Photonix, Inc. - incorporated by reference to Exhibit 10.15 to the Registrant's December 28, 1997 Quarterly report on Form 10-Q 16 Notice of Change in Certifying Accountants - incorporated by reference to the Registrant's March 24, 2000 8-K filing 21 List of Subsidiaries of Registrant - incorporated by reference to Exhibit 22 to the Registrant's March 31, 1993 Annual Report on Form 10-K 23.1 Consent of Arthur Andersen LLP, independent public accountants 23.2 Consent of Farber & Hass LLP, independent public accountants
* Constitutes a compensation plan or arrangement required to be filed as part of this report. 35 36 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. By: /s/ BROCK KOREN ------------------------------------- Brock Koren, President & Date: June 22, 2000 Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated.
Signature Title Date - --------- ----- ---- /s/ HAYDEN LEASON Chairman of the Board June 22, 2000 - ---------------------------- Hayden Leason /s/ BROCK KOREN President and Chief Executive Officer June 22, 2000 - ---------------------------- Brock Koren /s/ M. SCOTT FARESE Director June 22, 2000 - ---------------------------- M. Scott Farese /s/ RICHARD D. KURTZ Director June 22, 2000 - ---------------------------- Richard D. Kurtz /s/ STEPHEN P. SOLTWEDEL Director June 22, 2000 - ---------------------------- Stephen P. Soltwedel /s/ SUSAN A. SCHMIDT Director of Finance and Chief Financial June 22, 2000 - ---------------------------- Officer Susan A. Schmidt (Principal Financial and Accounting Officer)
36 37 EXHIBIT INDEX
Exhibit No. Description - ------- ----------- 3.1 Certificate of Incorporation of the Registrant, as amended. - incorporated by reference to Exhibit 3.1 to the Registrant's Registration Statement on Form S-1, filed with the Securities and Exchange Commission on November 23, 1990 3.1.1 Amendment to Certificate of Incorporation of the Registrant, dated October 29, 1992-incorporated by reference to the Registrant's March 31, 1996 Annual Report on Form 10-K 3.1.2 Amendment to Certificate of Incorporation of the Registrant, dated September 9, 1992-incorporated by reference to the Registrant's March 31, 1996 Annual Report on Form 10-K 3.2 By-laws of the Registrant, as amended - incorporated by reference to the Registrant's March 31, 1996 Annual Report on Form 10-K 10.1* Advanced Photonix, Inc. 1991 Special Directors Stock Option Plan - incorporated by reference to Exhibit 10.9 to the Registrant's March 31, 1991 Annual Report on Form 10-K 10.2* Advanced Photonix, Inc. 1990 Incentive Stock Option and Non-Qualified Stock Option Plan - incorporated by reference to Exhibit No. 10.11 to the Registrant's Registration Statement on Form S-1, filed with the Securities and Exchange Commission on November 23, 1990 10.3* Advanced Photonix, Inc. 1997 Employee Stock Option Plan - incorporated by reference to Exhibit 10.13 to the Registrant's March 30, 1997 Annual report on Form 10-K 10.4* Amendment No. 1 to 1997 Employee Stock Option Plan of Advanced Photonix, Inc. - incorporated by reference to Exhibit 10.14 to the Registrant's December 28, 1997 Quarterly report on Form 10-Q 10.5 Employment Agreement dated June 1, 1998, between Advanced Photonix, Inc. and Patrick J. Holmes - incorporated by reference to Exhibit 10.5 to the Registrant's March 29, 1998 Annual Report on Form 10-K 10.5.1 Employment Agreement dated January 1, 2000, between Advanced Photonix, Inc. and Patrick J. Holmes 10.6 Employment Agreement dated June 1, 1998, between Advanced Photonix, Inc. and Harry Melkonian - incorporated by reference to Exhibit 10.6 to the Registrant's March 29, 1998 Annual Report on Form 10-K 10.7 Form of Non-Qualified Stock Option granted to Advanced Detectors, Inc., formerly Xsirius, Inc. - incorporated by reference to Exhibit 10.13 to Amendment No. 3 to the Registrant's Registration Statement on Form S-1, filed with the Securities and Exchange Commission on February 11, 1991 10.8 Employment Agreement dated January 1, 2000, between Advanced Photonix, Inc. and Brock Koren 10.9 Lease Agreement dated February 23, 1998 between Advanced Photonix, Inc. and High Tech No. 1, Ltd. - incorporated by reference to Exhibit 10.9 to the Registrant's March 29, 1998 Annual Report on Form 10-K 10.10.1 Form of Indemnification Agreement provided to Directors and Principal Officers of Advanced Photonix, Inc. - incorporated by reference to Exhibit 10.15 to the Registrant's December 28, 1997 Quarterly report on Form 10-Q 16 Notice of Change in Certifying Accountants - incorporated by reference to the Registrant's March 24, 2000 8-K filing 21 List of Subsidiaries of Registrant - incorporated by reference to Exhibit 22 to the Registrant's March 31, 1993 Annual Report on Form 10-K 23.1 Consent of Arthur Andersen LLP, independent public accountants 23.2 Consent of Farber & Hass LLP, independent public accountants
EX-10.5.1 2 ex10-5_1.txt EXHIBIT 10.5.1 1 EXHIBIT 10.5.1 EMPLOYMENT AGREEMENT This Agreement, made this 1st day of January, 2000 by and between Advanced Photonix, Inc., a Delaware corporation (hereinafter called "Company"), and Patrick J. Holmes, an individual (hereinafter called "Employee"). W I T N E S S E T H : Company wishes to employ Employee and Employee wishes to enter into the employ of the Company on the terms and conditions contained in this Agreement. NOW, THEREFORE, in consideration of the facts, mutual promises and covenants contained herein and intending to be legally bound hereby, Company and Employee agree as follows: 1. Employment Company hereby employs Employee and Employee hereby accepts employment by the Company for the period and upon the terms and conditions contained in this Agreement. Both the Company and individual acknowledge and agree that this Agreement supercedes all previous Employment Agreements between the parties. 2. Office and Duties a) Employee shall serve Company generally as Executive Vice President, Secretary & Chief Financial Officer. In his capacity, Employee shall have such authority and such responsibilities as the Board of Directors reasonably may determine from time to time. b) Throughout the term of this Agreement, Employee shall devote his entire working time, energy, skill and best efforts to the performance of his duties hereunder in a manner which will faithfully and diligently further the business and interests of the Company. Notwithstanding the foregoing, Employee shall be permitted to maintain memberships on the Boards of Directors and in organizations identified to the Company in writing, provided that such activities shall not, at any time, preclude Company or any Subsidiary (as herein defined) of the Company, from obtaining contracts from any such company or organization. Employee shall also be permitted to serve as a director or consultant of additional organizations and participate in other activities for the federal government and other groups upon the prior written approval by the Company, which approval shall not unreasonably be withheld; provided, however, that no such activities shall, at any time, exclude Company or any subsidiary of the Company from obtaining contracts from the government or any other organizations. For purposes of this Agreement, any corporation with respect to which Company has the ability to control more than fifty percent of the voting power shall be a "subsidiary" and all such corporations shall be "Subsidiaries". 3. Term This Agreement shall be for a term of two years, commencing on January 1, 2000, and ending on December 31, 2001, unless sooner terminated as hereinafter provided. Unless either party elects to terminate this Agreement at the end of the original or any renewal term by giving the other party notice of such election at least ninety (90) days before the expiration of the then current term, this Agreement shall be deemed to have been extended for an additional term of one (1) year commencing on the day after the expiration of the then current term. 4. Compensation and Benefits 2 a) For all the services rendered by the Employee to the Company, Employee shall receive a base salary at the rate of $125,000 per year, ("Base Salary"), payable in reasonable installments in accordance with Company's regular payroll practices in effect from time to time. b) Employee shall be eligible for additional salary increases as well as cash and stock bonuses during the term of this Agreement at the discretion of the Board of Directors. Incentive cash bonus will be $15,000 or greater on an annual basis. c) Benefits to the Employee shall be the same as those customarily provided by the Company to other employees except employee shall accrue vacation at a rate of three weeks per year since original date of employment and follow the normal progression from that date as outlined in the Company's employee manual. 5. Expenses Company will reimburse Employee for all reasonable expenses incurred by Employee in connection with the performance of the Employee's duties hereunder, upon receipt of appropriate documentation and in accordance with Company's regular reimbursement procedures and practices in effect from time to time. 6. Disability a) If Employee becomes unable to perform his duties hereunder due to partial or total disability or incapacity resulting from a mental or physical illness, injury or other cause, Company will continue the payment of Employee's Base Salary at its current rate for a period of twenty-six (26) weeks following the date Employee is first unable to perform his duties due to such disability or incapacity. Thereafter, Company shall have no obligation for Base Salary or other compensation payments to Employee during the continuance of such disability of incapacity. b) If Employee is unable to perform his duties hereunder due to partial or total disability or incapacity resulting from a mental or physical illness, injury or any other cause for a period of twenty-six (26) consecutive weeks or for a cumulative period of twenty-six (26) weeks during any twelve month period, Company shall have the right to terminate this Agreement thereafter, in which event company shall have no further obligations or liabilities hereunder after the date of such termination. 7. Death If Employee dies, all payments hereunder shall cease at the end of the month in which Employee's death shall occur and Company shall have no further obligations or liabilities hereunder to Employee's estate or legal representative or otherwise. 8. Discharge for Cause Company may discharge Employee at any time for criminal conduct (whether or not related to Employee's employment), intoxication or drug addiction (if either of these conditions impairs the Employee's ability to perform his duties), insubordination, gross negligence, any violation of any express direction or any reasonable rule or regulation established by the Company from time to time regarding the conduct of its business, any misrepresentation made in this Agreement, or any violation by Employee of the terms and conditions of this Agreement, in which event Company shall have no further obligations or liabilities hereunder after the date of such discharge. 9. Termination of Employment (a) In the event Company shall terminate Employee's employment during the term of this agreement (the "termination date"), other than as a result of disability as set forth in Paragraph 6 or for cause as set 3 forth in Paragraph 8, at any time prior to the expiration date of this Agreement as set forth in Paragraph 3, Company shall be obligated to continue Employee's compensation and benefits set forth in Paragraph 4 and 5 hereof until the later of the expiration date of this Agreement or twelve months from the termination date. In either such event, (i) Company's liability to Employee as a result of any such termination shall be limited as set forth above and (ii) Employee shall have the obligation to mitigate his damages by using his best efforts to seek employment for which he is suitably trained and experienced elsewhere. In the event Employee's compensation from any such employment during the applicable period in which he is entitled to receive compensation and benefits as set forth in this paragraph shall be less than that available to him under this Agreement, Company shall pay Employee any such difference. Employment from consulting activities defined in Paragraph 2.b) and identified to the Company in writing will not be considered for purposes of this section. (b) In the event Company terminates Employee's employment after termination of this agreement, other than as a result of disability or for cause, Company shall continue compensation and medical benefits for a period of twelve months after such termination. Employee shall have the obligation to mitigate his damages by using his best efforts to seek employment for which he is suitably trained and experienced elsewhere. In the event Employee's compensation from any such employment during the applicable period in which he is entitled to receive compensation and benefits as set forth in this paragraph shall be less than that available to him under this Agreement, Company shall pay Employee any such difference. Employment from consulting activities identified to the Company in writing will not be considered for purposes of this section. 10. Company Property All research, technology developed or being developed, advertising, sales, manufacturers' and other materials or article or information, including without limitation data processing reports, customer sales analyses, invoices, price lists or information, samples or any other materials or data of any kind furnished to Employee by Company, learned by Employee from Company's direction or for Company's use or otherwise in connection with Employee's employment hereunder, are and shall remain the sole and confidential property of Company; provided, however, the foregoing shall not apply to any such material in the public domain other than by reason of a breach of this Paragraph 10. If the Company requests the return of such materials at any time during or at or after the termination of Employee's employment, Employee shall immediately deliver the same to Company. 11. Noncompetition, Trade Secrets, Etc. a) During the term of this Agreement and for a period of one year after the termination of his employment with the Company for any reason whatsoever, Employee shall not, directly or indirectly, solicit, induce, encourage or attempt to influence any client, customer, salesman or supplier of Company to cease to do business with or to terminate his employment with Company and shall not utilize for any such purpose any names and addresses of customers or clients of Company or any data on or relating to past, present or prospective (at the time of termination of Employee's employment) customers or clients of Company. b) During the term of this Agreement, Employee shall not engage in (as a principal, partner, director, officer, agent, employee, consultant or otherwise) or be financially interested in any business operating within the United States, which is involved in business activities which are the same as the business activities carried on by Company, or being definitely planned by Company, including exploitation of the technology developed by Company or being developed by Company at the time of the termination of Employee's employment. However, nothing contained in this paragraph 11 shall prevent Employee 4 from holding for investment no more than five percent (5%) of any class of equity securities of a company whose securities are traded on a national securities exchange. c) During the term of this Agreement and at all times thereafter, Employee shall not use for his personal benefit, or disclosure, communicate or divulge to, or use for the direct or indirect benefit of any person, firm, association or company other than Company, any material referred to in this paragraph 11 or any confidential information regarding the business methods, business policies, procedures, techniques, research or development projects or results, trade secrets, or other knowledge or processes of or developed by Company or any names and addresses of customers or clients or any data on or relating to past, present or prospective customers or clients or any other confidential information relating to or dealing with the business operations or activities of Company, made known to Employee or learned or acquired by Employee while in the employ of Company. d) Any and all writings, inventions, improvements, processes, procedures and/or techniques which Employee may make, conceive, discover or develop, either solely or jointly with any other person or persons, at any time during the term of this Agreement, whether during working hours or at any other time and whether at the request or upon the suggestion of the Company or otherwise, which relate to or are useful in connection with any business now or hereafter carried on or contemplated by the Company, including developments or expansions of its present fields of operations, shall be the sole and exclusive property of Company. Employee shall make full disclosure to Company of all such writings, inventions, improvements, processes, procedures and techniques, and shall do everything necessary or desirable to vest the absolute title thereto in Company. Employee shall write and prepare all specifications and procedures regarding such inventions, improvements, processes, procedures and techniques and otherwise aid and assist Company so the Company can prepare and present applications for copyright or Letters of Patent wherever possible, as well as reissues, renewals, and extensions thereof in all countries in which it may desire to have copyright or patent protection. Employee shall not be entitled to any additional or special compensation or reimbursement regarding any and all such writings, inventions, improvements, processes, procedures and techniques. e) Employee acknowledges that the restrictions contained in the foregoing subparagraphs a), b), and c), in view of the nature of the business in which Company is engaged are reasonable and necessary in order to protect the legitimate interests of Company, and that any violation thereof would result in irreparable injuries to Company, and Employee therefore acknowledges that, in the event of his violation of any of these restrictions, Company shall be entitled to obtain from any court of competent jurisdiction preliminary and permanent injunctive relief as well as damages and an equitable accounting of all earnings, profits and other benefits arising from such violation, which rights shall be cumulative and in addition to any other rights or remedies to which Company may be entitled. f) If the period of time or the area specified in subparagraphs a) or b) above should be adjudged unreasonable in any proceeding, then the period of time shall be reduced by such number of months or the area shall be reduced by the elimination of such portion thereof or both so that such restrictions may be enforced in such area and for such time as is adjusted to be reasonable. If Employee violates any of the restrictions extended for that period beginning at the time of the commencement of any such violation and running until such time as such violation shall be cured by Employee to the satisfaction of Company, on a day to day basis. 12. Prior Agreements Employee represents to Company a) that there are no restrictions, agreements or understandings whatsoever to which Employee is a party which would prevent or make unlawful his execution of this Agreement and his employment hereunder shall not constitute a breach of any contract, agreement or 5 understanding, oral or written, to which he is a party or by which he is bound and b) that he is free and able to execute this Agreement and to enter into employment by Company. 13. Personal Rights and Obligations This Agreement and all rights and obligations hereunder are personal and shall not be assignable by either party except as provided in this subparagraph, and any purported assignment in violation thereof shall be null and void. Any person, firm or corporation succeeding to the business of Company (or that portion of the business with which Employee is involved) by merger, consolidation, purchase of assets or otherwise, must assume by contract or operation of law the obligations of Company hereunder and in such a case Employee shall continue to honor this Agreement with such person, firm or corporation substituted for Company as the employer; provided, however, that Company shall, if it still exists as a separate entity, notwithstanding such assumption and/or assignment, remain liable and responsible for the fulfillment of the terms and conditions of this Agreement on the part of the Company. 14. Miscellaneous a) Indulgences, Etc. Neither the failure nor any delay on the part of either party to exercise any right, remedy, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same or any other right, remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power or privilege with respect to any other occurrence. No waiver shall be effective unless it is in writing and is signed by the party asserted to have granted such waiver. b) Notices All notices, requests, demands and other communications required or permitted under this Agreement shall be in writing and shall be deemed to have been duly given, made and received only when delivered (personally, by courier service such as Federal Express, or by other messenger) or when deposited in the United States mails, registered or certified mail, postage prepaid, return receipt requested, addressed as set forth below: (i) if to Employee: (ii) if to Company: Patrick J. Holmes Advanced Photonix, Inc. 259 High Meadow St. 1240 Avenida Acaso Simi Valley, CA 93065 Camarillo, CA 93012 In addition, notice by mail shall be by air mail if posted outside of the continental United States. Any party may alter the address to which communications or copies are to be sent by giving notice of such change of address in conformity with the provisions of this paragraph for the giving of notice. c) Binding Nature of Agreement This Agreement shall be binding upon and inure to the benefit of Company and its successors and assigns and shall be binding upon Employee, his heirs and legal representatives. d) Execution in Counterparts This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original as against any party whose signature appears thereon, and all of which shall together constitute one and the same instrument. This Agreement shall become binding when one or more 6 counterparts hereof, individually or taken together, shall bear the signatures of all of the parties reflected hereon as the signatories. e) Provisions Separable The provisions of this Agreement are independent of and separable from each other, and no provision shall be affected or rendered invalid or unenforceable by virtue of the fact that for any reason any other or others of them may be invalid or unenforceable in whole or in part. f) Entire Agreement This Agreement contains the entire understanding among the parties hereto with respect to the subject matter hereof, and supersedes all prior and contemporaneous agreements and understandings, inducements or conditions, express or implied, oral or written, except as herein contained. The express terms hereof control and supersede any course of performance and/or usage of the trade inconsistent with any of the terms hereof. This Agreement may not be modified or amended other than by agreement in writing. g) Paragraph Headings The paragraph headings in this Agreement are for convenience only; they form no part of this Agreement and shall not affect its interpretation. h) Gender, Etc. Words used herein, regardless of the number and gender specifically used, shall be deemed and construed to include any other number, singular or plural, and any other gender, masculine, feminine or neuter, as the context indicates is appropriate. i) Number of Days In computing the number of days for purposes of this Agreement, all days shall be counted, including Saturdays, Sundays and holidays; provided, however, that if the final day of any time period falls on a Saturday, Sunday or holiday on which federal banks are or may elect to be closed, then the final day shall be deemed to be the next day which is not a Saturday, Sunday or holiday. IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the date first above written. ADVANCED PHOTONIX, Inc. EMPLOYEE By: By: /s/ Hayden Leason /s/ Patrick J. Holmes - ----------------------------------- ----------------------------------- Hayden Leason Patrick J. Holmes Chairman Attest: /s/ Brock Koren - ----------------------------------- Brock Koren President & Chief Executive Officer EX-10.8 3 ex10-8.txt EXHIBIT 10.8 1 EXHIBIT 10.8 EMPLOYMENT AGREEMENT This Agreement, made this 1st day of January, 2000 by and between Advanced Photonix, Inc., a Delaware corporation (hereinafter called "Company"), and Brock Koren, an individual (hereinafter called "Employee"). W I T N E S S E T H : Company wishes to employ Employee and Employee wishes to enter into the employ of the Company on the terms and conditions contained in this Agreement. NOW, THEREFORE, in consideration of the facts, mutual promises and covenants contained herein and intending to be legally bound hereby, Company and Employee agree as follows: 1. Employment Company hereby employs Employee and Employee hereby accepts employment by the Company for the period and upon the terms and conditions contained in this Agreement. Both the Company and individual acknowledge and agree that this Agreement supercedes all previous Employment Agreements between the parties. 2. Office and Duties a) Employee shall serve Company generally as President and Chief Executive Officer. In his capacity, Employee shall have such authority and such responsibilities as the Board of Directors reasonably may determine from time to time. b) Throughout the term of this Agreement, Employee shall devote his entire working time, energy, skill and best efforts to the performance of his duties hereunder in a manner which will faithfully and diligently further the business and interests of the Company. Notwithstanding the foregoing, Employee shall be permitted to maintain memberships on the Boards of Directors and in organizations identified to the Company in writing, provided that such activities shall not, at any time, preclude Company or any Subsidiary (as herein defined) of the Company, from obtaining contracts from any such company or organization. Employee shall also be permitted to serve as a director or consultant of additional organizations and participate in other activities for the federal government and other groups upon the prior written approval by the Company, which approval shall not unreasonably be withheld; provided, however, that no such activities shall, at any time, exclude Company or any subsidiary of the Company from obtaining contracts from the government or any other organizations. For purposes of this Agreement, any corporation with respect to which Company has the ability to control more than fifty percent of the voting power shall be a "subsidiary" and all such corporations shall be "Subsidiaries". 3. Term This Agreement shall be for a term of two years, commencing on January 1, 2000, and ending on December 31, 2001, unless sooner terminated as hereinafter provided. Unless either party elects to terminate this Agreement at the end of the original or any renewal term by giving the other party notice of such election at least ninety (90) days before the expiration of the then current term, this Agreement shall be deemed to have been extended for an additional term of one (1) year commencing on the day after the expiration of the then current term. 4. Compensation and Benefits 2 a) For all the services rendered by the Employee to the Company, Employee shall receive a base salary at the rate of $175,000 per year, ("Base Salary"), payable in reasonable installments in accordance with Company's regular payroll practices in effect from time to time. b) Employee shall be eligible for additional salary increases as well as cash and stock bonuses during the term of this Agreement at the discretion of the Board of Directors. Incentive cash bonus will be $25,000 or greater on an annual basis. c) Benefits to the Employee shall be the same as those customarily provided by the Company to other employees except employee shall accrue vacation at three weeks per year from October 19, 1999 and follow the normal progression from that date as outlined in the Company's employee manual. 5. Expenses Company will reimburse Employee for all reasonable expenses incurred by Employee in connection with the performance of the Employee's duties hereunder, upon receipt of appropriate documentation and in accordance with Company's regular reimbursement procedures and practices in effect from time to time. 6. Disability a) If Employee becomes unable to perform his duties hereunder due to partial or total disability or incapacity resulting from a mental or physical illness, injury or other cause, Company will continue the payment of Employee's Base Salary at its current rate for a period of twenty-six (26) weeks following the date Employee is first unable to perform his duties due to such disability or incapacity. Thereafter, Company shall have no obligation for Base Salary or other compensation payments to Employee during the continuance of such disability of incapacity. b) If Employee is unable to perform his duties hereunder due to partial or total disability or incapacity resulting from a mental or physical illness, injury or any other cause for a period of twenty-six (26) consecutive weeks or for a cumulative period of twenty-six (26) weeks during any twelve month period, Company shall have the right to terminate this Agreement thereafter, in which event company shall have no further obligations or liabilities hereunder after the date of such termination. 7. Death If Employee dies, all payments hereunder shall cease at the end of the month in which Employee's death shall occur and Company shall have no further obligations or liabilities hereunder to Employee's estate or legal representative or otherwise. 8. Discharge for Cause Company may discharge Employee at any time for criminal conduct (whether or not related to Employee's employment), intoxication or drug addiction (if either of these conditions impairs the Employee's ability to perform his duties), insubordination, gross negligence, any violation of any express direction or any reasonable rule or regulation established by the Company from time to time regarding the conduct of its business, any misrepresentation made in this Agreement, or any violation by Employee of the terms and conditions of this Agreement, in which event Company shall have no further obligations or liabilities hereunder after the date of such discharge. 9. Termination of Employment (a) In the event Company shall terminate Employee's employment during the term of this agreement (the "termination date"), other than as a result of disability as set forth in Paragraph 6 or for cause as set forth in Paragraph 8, at any time prior to the expiration date of this Agreement as set forth in Paragraph 3 3, Company shall be obligated to continue Employee's compensation and benefits set forth in Paragraph 4 and 5 hereof until the later of the expiration date of this Agreement or twelve months from the termination date. In either such event, (i) Company's liability to Employee as a result of any such termination shall be limited as set forth above and (ii) Employee shall have the obligation to mitigate his damages by using his best efforts to seek employment for which he is suitably trained and experienced elsewhere. In the event Employee's compensation from any such employment during the applicable period in which he is entitled to receive compensation and benefits as set forth in this paragraph shall be less than that available to him under this Agreement, Company shall pay Employee any such difference. Employment from consulting activities defined in Paragraph 2.b) and identified to the Company in writing will not be considered for purposes of this section. (b) In the event Company terminates Employee's employment after termination of this agreement, other than as a result of disability or for cause, Company shall continue compensation and medical benefits for a period of twelve months after such termination. Employee shall have the obligation to mitigate his damages by using his best efforts to seek employment for which he is suitably trained and experienced elsewhere. In the event Employee's compensation from any such employment during the applicable period in which he is entitled to receive compensation and benefits as set forth in this paragraph shall be less than that available to him under this Agreement, Company shall pay Employee any such difference. Employment from consulting activities identified to the Company in writing will not be considered for purposes of this section. 10. Company Property All research, technology developed or being developed, advertising, sales, manufacturers' and other materials or article or information, including without limitation data processing reports, customer sales analyses, invoices, price lists or information, samples or any other materials or data of any kind furnished to Employee by Company, learned by Employee from Company's direction or for Company's use or otherwise in connection with Employee's employment hereunder, are and shall remain the sole and confidential property of Company; provided, however, the foregoing shall not apply to any such material in the public domain other than by reason of a breach of this Paragraph 10. If the Company requests the return of such materials at any time during or at or after the termination of Employee's employment, Employee shall immediately deliver the same to Company. 11. Noncompetition, Trade Secrets, Etc. a) During the term of this Agreement and for a period of one year after the termination of his employment with the Company for any reason whatsoever, Employee shall not, directly or indirectly, solicit, induce, encourage or attempt to influence any client, customer, salesman or supplier of Company to cease to do business with or to terminate his employment with Company and shall not utilize for any such purpose any names and addresses of customers or clients of Company or any data on or relating to past, present or prospective (at the time of termination of Employee's employment) customers or clients of Company. b) During the term of this Agreement, Employee shall not engage in (as a principal, partner, director, officer, agent, employee, consultant or otherwise) or be financially interested in any business operating within the United States, which is involved in business activities which are the same as the business activities carried on by Company, or being definitely planned by Company, including exploitation of the technology developed by Company or being developed by Company at the time of the termination of Employee's employment. However, nothing contained in this paragraph 11 shall prevent Employee from holding for investment no more than five percent (5%) of any class of equity securities of a company whose securities are traded on a national securities exchange. 4 c) During the term of this Agreement and at all times thereafter, Employee shall not use for his personal benefit, or disclosure, communicate or divulge to, or use for the direct or indirect benefit of any person, firm, association or company other than Company, any material referred to in this paragraph 11 or any confidential information regarding the business methods, business policies, procedures, techniques, research or development projects or results, trade secrets, or other knowledge or processes of or developed by Company or any names and addresses of customers or clients or any data on or relating to past, present or prospective customers or clients or any other confidential information relating to or dealing with the business operations or activities of Company, made known to Employee or learned or acquired by Employee while in the employ of Company. d) Any and all writings, inventions, improvements, processes, procedures and/or techniques which Employee may make, conceive, discover or develop, either solely or jointly with any other person or persons, at any time during the term of this Agreement, whether during working hours or at any other time and whether at the request or upon the suggestion of the Company or otherwise, which relate to or are useful in connection with any business now or hereafter carried on or contemplated by the Company, including developments or expansions of its present fields of operations, shall be the sole and exclusive property of Company. Employee shall make full disclosure to Company of all such writings, inventions, improvements, processes, procedures and techniques, and shall do everything necessary or desirable to vest the absolute title thereto in Company. Employee shall write and prepare all specifications and procedures regarding such inventions, improvements, processes, procedures and techniques and otherwise aid and assist Company so the Company can prepare and present applications for copyright or Letters of Patent wherever possible, as well as reissues, renewals, and extensions thereof in all countries in which it may desire to have copyright or patent protection. Employee shall not be entitled to any additional or special compensation or reimbursement regarding any and all such writings, inventions, improvements, processes, procedures and techniques. e) Employee acknowledges that the restrictions contained in the foregoing subparagraphs a), b), and c), in view of the nature of the business in which Company is engaged are reasonable and necessary in order to protect the legitimate interests of Company, and that any violation thereof would result in irreparable injuries to Company, and Employee therefore acknowledges that, in the event of his violation of any of these restrictions, Company shall be entitled to obtain from any court of competent jurisdiction preliminary and permanent injunctive relief as well as damages and an equitable accounting of all earnings, profits and other benefits arising from such violation, which rights shall be cumulative and in addition to any other rights or remedies to which Company may be entitled. f) If the period of time or the area specified in subparagraphs a) or b) above should be adjudged unreasonable in any proceeding, then the period of time shall be reduced by such number of months or the area shall be reduced by the elimination of such portion thereof or both so that such restrictions may be enforced in such area and for such time as is adjusted to be reasonable. If Employee violates any of the restrictions extended for that period beginning at the time of the commencement of any such violation and running until such time as such violation shall be cured by Employee to the satisfaction of Company, on a day to day basis. 12. Prior Agreements Employee represents to Company a) that there are no restrictions, agreements or understandings whatsoever to which Employee is a party which would prevent or make unlawful his execution of this Agreement and his employment hereunder shall not constitute a breach of any contract, agreement or understanding, oral or written, to which he is a party or by which he is bound and b) that he is free and able to execute this Agreement and to enter into employment by Company. 5 13. Personal Rights and Obligations This Agreement and all rights and obligations hereunder are personal and shall not be assignable by either party except as provided in this subparagraph, and any purported assignment in violation thereof shall be null and void. Any person, firm or corporation succeeding to the business of Company (or that portion of the business with which Employee is involved) by merger, consolidation, purchase of assets or otherwise, must assume by contract or operation of law the obligations of Company hereunder and in such a case Employee shall continue to honor this Agreement with such person, firm or corporation substituted for Company as the employer; provided, however, that Company shall, if it still exists as a separate entity, notwithstanding such assumption and/or assignment, remain liable and responsible for the fulfillment of the terms and conditions of this Agreement on the part of the Company. 14. Miscellaneous a) Indulgences, Etc. Neither the failure nor any delay on the part of either party to exercise any right, remedy, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same or any other right, remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power or privilege with respect to any other occurrence. No waiver shall be effective unless it is in writing and is signed by the party asserted to have granted such waiver. b) Notices All notices, requests, demands and other communications required or permitted under this Agreement shall be in writing and shall be deemed to have been duly given, made and received only when delivered (personally, by courier service such as Federal Express, or by other messenger) or when deposited in the United States mails, registered or certified mail, postage prepaid, return receipt requested, addressed as set forth below: (i) if to Employee: (ii) if to Company: Brock Koren Advanced Photonix, Inc. 3043 Vista Grande 1240 Avenida Acaso Camarillo, CA 93012 Camarillo, CA 93012 In addition, notice by mail shall be by air mail if posted outside of the continental United States. Any party may alter the address to which communications or copies are to be sent by giving notice of such change of address in conformity with the provisions of this paragraph for the giving of notice. c) Binding Nature of Agreement This Agreement shall be binding upon and inure to the benefit of Company and its successors and assigns and shall be binding upon Employee, his heirs and legal representatives. d) Execution in Counterparts This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original as against any party whose signature appears thereon, and all of which shall together constitute one and the same instrument. This Agreement shall become binding when one or more counterparts hereof, individually or taken together, shall bear the signatures of all of the parties reflected hereon as the signatories. 6 e) Provisions Separable The provisions of this Agreement are independent of and separable from each other, and no provision shall be affected or rendered invalid or unenforceable by virtue of the fact that for any reason any other or others of them may be invalid or unenforceable in whole or in part. f) Entire Agreement This Agreement contains the entire understanding among the parties hereto with respect to the subject matter hereof, and supersedes all prior and contemporaneous agreements and understandings, inducements or conditions, express or implied, oral or written, except as herein contained. The express terms hereof control and supersede any course of performance and/or usage of the trade inconsistent with any of the terms hereof. This Agreement may not be modified or amended other than by agreement in writing. g) Paragraph Headings The paragraph headings in this Agreement are for convenience only; they form no part of this Agreement and shall not affect its interpretation. h) Gender, Etc. Words used herein, regardless of the number and gender specifically used, shall be deemed and construed to include any other number, singular or plural, and any other gender, masculine, feminine or neuter, as the context indicates is appropriate. i) Number of Days In computing the number of days for purposes of this Agreement, all days shall be counted, including Saturdays, Sundays and holidays; provided, however, that if the final day of any time period falls on a Saturday, Sunday or holiday on which federal banks are or may elect to be closed, then the final day shall be deemed to be the next day which is not a Saturday, Sunday or holiday. IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the date first above written. ADVANCED PHOTONIX, Inc. EMPLOYEE By: By: /s/ Hayden Leason /s/ Brock Koren - ----------------------------------- ----------------------------------- Hayden Leason Brock Koren Chairman Attest: /s/ Patrick J. Holmes - ----------------------------------- Patrick J. Holmes Executive Vice President EX-23.1 4 ex23-1.txt EXHIBIT 23.1 1 EXHIBIT 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our report included in this Form 10-KSB into the Company's previously filed Registration Statement File No. 33-45462, No. 33-45463 and No. 33-85274. ARTHUR ANDERSEN LLP Los Angeles, California June 22, 2000 EX-23.2 5 ex23-2.txt EXHIBIT 23.2 1 Independent Auditors Consent EXHIBIT 23.2 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our report dated June 16, 2000 included in this Form 10-KSB into the Company's previously filed Registration Statement File No. 33-45462, No. 33-45463 and No. 33-85274. /s/ Farber & Hass LLP Oxnard, California June 23, 2000 EX-27 6 ex27.txt FINANCIAL DATA SCHEDULE
5 1,000 YEAR MAR-26-2000 MAR-29-1999 MAR-26-2000 3,309 1,969 1,183 (7) 1,517 8,079 3,120 (2,596) 9,245 686 0 0 32 12 8,515 9,245 6,090 6,090 4,262 6,868 1 0 0 (643) 10 (653) 0 0 0 (653) (.06) (.06)
-----END PRIVACY-ENHANCED MESSAGE-----