UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): May 2, 2005
Advanced Photonix, Inc
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 1-11056 33-0325836
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(STATE OR OTHER JURISDICTION (COMMISSION (IRS EMPLOYER
OF INCORPORATION) FILE NUMBER) IDENTIFICATION NO.)
1240 Avenida Acaso, Camarillo, California 93012
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code: (805) 987-0146
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
ITEM 2.01. COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS.
As reported in Advanced Photonix, Inc.'s ("API") Current Report on Form 8-K
dated May 2, 2005, API completed its previously disclosed acquisition of
Picotronix, Inc, through the merger of Picotronix, Inc. (doing business as and
referred to herein as "Picometrix"), a Michigan corporation, with and into
Michigan Acquisition Sub, LLC ("Newco"), a Delaware limited liability company
and a wholly-owned subsidiary of API, pursuant to an Agreement and Plan of
Merger dated March 8, 2005 by and among API, Newco, Picometrix and Robin Risser
and Steven Williamson, the stockholders of Picometrix. Immediately following the
effective time of the merger, the name of Newco was changed to Picometrix, LLC.
This Amendment No. 1 to Current Report on Form 8-K dated May 2, 2005 is being
filed to include the financial statements and pro forma financial information
under Item 9.01 below relating to the acquisition of the Picometrix as described
in such Current Report.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Business Acquired. The following financial
statements relating to Picometrix are included at the end of this Amendment No.
1 to Current Report on Form 8-K dated May 2, 2005 and are filed herewith and
incorporated herein by reference.
AUDITED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
Audited Balance Sheet as at December 31, 2004
Statements of Operations and Accumulated Deficit for the Years Ended
December 31, 2004 and December 31, 2003
Statements of Cash Flows for the Years Ended December 31, 2004 and
December 31, 2003
Consolidated Statements of Shareholders' Equity for the three years in the
period ended December 31, 2004
Notes to Financial Statements
UNAUDITED INTERIM FINANCIAL STATEMENTS
Balance Sheet as at March 31, 2005
Statements of Cash Flows for the Three Months Ended March 31, 2005
Statements of Operations an Accumulated Deficit for the Three Months Ended
March 31, 2005
2
(b) Pro Forma Financial Information. The following unaudited pro forma financial
statements of Advanced Photonix, Inc. relating to the acquisition of Picometrix
are included at the end of this Amendment No. 1 to Current Report on Form 8-K
dated May 2, 2005 and are filed herewith and incorporated herein by reference.
Summary of Combined Company Unaudited Pro Forma Condensed Consolidated
Statements of Operations
Unaudited Pro Forma Condensed Consolidated Balance Sheet as at March 27,
2005
Unaudited Pro Forma Condensed Consolidated Statements of Operations for
the Year Ended March 27, 2005
(c) Exhibits: None
3
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Picotronix, Inc.:
We have audited the accompanying balance sheets of Picotronix, Inc. (the
"Company") as of December 31, 2004 and the related consolidated statements of
operations, shareholders' equity and cash flows for each of the years ended
December 31, 2004 and 2003. 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 audits.
We conducted our audits in accordance with the Standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated 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 consolidated
financial statements. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the accompanying financial statements present fairly, in all
material respects, the financial position of the Picotronix, Inc. at December
31, 2004 and the results of its operations and its cash flows for the years
ended December 31, 2004 and 2003 in conformity with accounting principles
generally accepted in the United States.
Farber & Hass LLP
May 26, 2005
Camarillo, California
4
PICOTRONIX, INC.
AUDITED BALANCE SHEETS
DECEMBER 31, 2004
-----------------
ASSETS
Current Assets:
Cash and cash equivalents $ 1,008,605
Restricted Cash 276,333
Accounts receivable, net of allowance for doubtful accounts of $2,184 1,245,795
Inventories, net of reserve for obsolescence of $216,006 652,509
Prepaid expenses and other current assets 185,907
Deferred tax asset, current portion, net of valuation allowance of ($688,721) 349.979
Total current assets 3,719,128
Property and equipment:
Leasehold improvements 130,712
Machinery and equipment 3,844,665
Furniture and fixtures 582,880
-----------------
4,558,257
Accumulated depreciation (2,556,172)
-----------------
2,002,085
Other assets:
Deposits and other assets 94,452
Patents, net of accumulated amortization of $7,091 467,142
-----------------
Total assets $ 6,282,807
=================
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
Total current liabilities
Accounts payable:
Trade 293,758
Income taxes payable 5,889
Accrued liabilities:
Compensation and related withholdings 206,246
Interest payable 81,111
Consulting 60,000
Deferred Revenue 275,000
Other 151,403
Current portion of long-term debt 146,861
-----------------
Total liabilities 1,220,268
Long-term debt, less current portion 6,904,490
-----------------
Total liabilities 8,124,758
Shareholders' deficit:
Class A common stock, non-voting, no par value,
2,520,000 shares authorized and reserved for future issuance, zero shares
issued and outstanding
Class B common stock, voting, no par value; 15,480,000
shares authorized, 15,480,000 issued and outstanding 22,440
Accumulated deficit (1,864,391)
-----------------
Total shareholders' deficit (1,841,951)
-----------------
Total liabilities and shareholders' deficit $ 6,282,807
=================
5
PICOTRONIX, INC. STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
DECEMBER 31, DECEMBER 31,
2004 2003
------------- ------------
Net sales $ 7,473,404 $ 3,488,230
Cost of products sold 2,311,104 987,360
------------- ------------
Gross profit 5,162,300 2,500,870
Selling, general and administrative expenses 1,703,389 1,508,024
Research and development expenses 2,574,997 2,737,611
------------- ------------
4,278,386 4,245,635
------------- ------------
Income (loss) from operations 883,914 (1,744,765)
Other income (expense):
Interest expense (297,795) (256,500)
Loss on impairment of property and equipment - (104,689)
Other (42,039) 22,732
------------- ------------
Income (loss) before income taxes 544,080 (2,083,222)
Federal income taxes (benefit):
Current 5,889 -
Deferred (349,979) -
------------- ------------
Total provision (benefit) for income taxes (344,090) -
------------- ------------
Net income (loss) 888,170 (2,083,222)
(Accumulated deficit) retained earnings at
beginning of year (2,752,561) (669,339)
------------- ------------
Accumulated deficit at end of year $ (1,864,391) $ (2,752,561)
============= ============
See accompanying notes.
6
PICOTRONIX, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED
DECEMBER 31
2004 2003
----------- -----------
OPERATING ACTIVITIES
Net income (loss) $ 888,170 $(2,083,222)
Adjustments to reconcile net income (loss) to net
cash used in operating activities:
Depreciation 568,441 779,756
Loss on impairment of property and equipment - 104,689
Deferred income tax benefit (349,979) -
Changes in operating assets and liabilities:
Income taxes 5,889 209,567
Prepaid expenses 67,181 (90,581)
Accounts payable, accrued expenses, and
other 41,760 (58,870)
Deposits and other assets 11,785 (7,003)
Inventories (277,933) 42,519
Accounts receivable (857,394) 32,109
----------- -----------
Net cash provide by (used by) operating
activities 97.920 (1,071,036)
INVESTING ACTIVITIES
Purchases of property and equipment (110,678) (106,689)
Patents (264,918) (202,224)
----------- -----------
Net cash used in investing activities (375,596) (308,913)
FINANCING ACTIVITIES
Payments on capital lease obligation (52,232) (62,328)
Net borrowings from finance companies and state agencies 750,000
Net repayments to finance companies 229,840 41,271
Proceeds from issuance of common stock - 19,440
----------- -----------
Net cash (used in) provided by financing activities 927,608 (1,617)
----------- -----------
Net (decrease) increase in cash 649,932 (1,381,566)
Cash at beginning of year 635,006 2,016,572
----------- -----------
Cash at end of year $ 1,284,938 $ 635,006
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash refunded for income taxes $ - $ 209,567
=========== ===========
Cash paid for interest $ 173,365 $ 233,206
=========== ===========
SUPPLEMENTAL DISCLOSURE OF NON CASH OPERATING, INVESTING AND FINANCING
ACTIVITIES
See accompanying notes.
7
PICOTRONIX, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
CLASS B
COMMON STOCK
For each of the three years in the period ------------------------ ACCUMULATED
ended December 31, 2004 SHARES AMOUNT DEFICIT TOTAL
----------------------------------------- ---------- ------ ----------- -----------
BALANCE AT DECEMBER 31, 2002 13,536,000 3,000 (669,339) (666,339)
Shares issued for cash 1,944,000 19,440 19,440
Net Loss (2,083,222) (2,083,222)
---------- ------ ----------- -----------
BALANCE AT DECEMBER 31, 2003 15,480,000 22,440 (2,752,561) (2,730,121)
Shares issued -
Net profit 888,170 888,170
---------- ------ ----------- -----------
BALANCE AT DECEMBER 31, 2004 15,480,000 22,440 (1,864,391) (1,841,951)
8
PICOTRONIX, INC.
NOTES TO FINANCIAL STATEMENTS
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Picotronix, Inc., d.b.a. Picometrix, Inc. (the "Company") was
incorporated on January 9, 1992 under the laws of the State of
Michigan.
DESCRIPTION OF BUSINESS
The Company designs and manufactures ultra high-speed optical
electronic (optoelectronic) components used for the detection and
measurement of optical and electrical signals for the
telecommunication, defense, and measurement markets and terahertz
systems used for defense/homeland security, and industrial quality
control markets.100% of sales in 2004 and 2003 were to customers
located in the United States. Sales to government agencies account
for 15% and 47% in 2004 and 2003 respectively.
FISCAL YEAR-END
The Company's fiscal year ends on December 31st. Fiscal years in the
two-year period ended December 31st contains fifty-two weeks each.
OPERATING SEGMENT INFORMATION
The Company predominantly operates in one industry segment, hi-speed
optoelectronic components and terahertz systems. Substantially all
of the Company's assets and employees are located at the Company's
facility in Ann Arbor, Michigan.
USE 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 disclosures of contingent assets and liabilities at
the date of the financial statements and reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of all financial instruments potentially subject
to valuation risk (principally consisting of cash equivalents,
accounts receivable, accounts payable, notes receivable and notes
payable) approximates fair value based upon prevailing interest
rates available to the Company.
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.
RECEIVABLES AND REVENUE RECOGNITION
Revenue is recognized at the time of shipment. Shipping and delivery
costs are included in cost of sales.
9
Accounts receivable are stated at amounts estimated by management to
be the net realizable value. Credit terms are granted and
periodically revised based upon evaluations of the customer's
financial condition, with collateral generally not required. The
Company reserves for doubtful accounts based upon past history or
known billing disputes. The Company reviews all accounts receivable
balances in determining its reserve estimate. The Company charges
off accounts receivable when it becomes apparent that amounts will
not be collected.
SHORT-TERM AND LONG-TERM INVESTMENTS
Statement of Financial Accounting Standards (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
diverse portfolio to take advantage of investment opportunities. The
Company has classified all investments as current assets, which
includes available-for-sale and held-to-maturity. Available-for-sale
investments are redeemable within one year. Held-to-maturity
securities are callable government issues; however, market rates
make the call remote and the Company has the intent and ability to
not redeem the issue.
Available-for-sale securities are recorded at market value.
Unrealized holding gains and losses, net of the related income tax
effect, are excluded from earnings and area reported as a separate
component of shareholders' 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.
Held-to-maturity securities are carried at amortized cost. The
Company held no short-term or long-term investments as of December
31, 2004 The Company did have $51,614 invested in a money market
account at December 31, 2004 which is included as a part of Cash and
Cash Equivalents on the Balance Sheet.
CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of cash
equivalents and accounts receivable. The Company maintains cash
balances at two financial institutions that are insured by the
Federal Deposit Insurance Corporation (FDIC) up to $100,000. As of
December 31, 2004, the Company had cash at two financial
institutions in excess of Federally insured amounts. As excess cash
is available, the Company invests in short-term and long-term
investments, primarily consisting of Government Securities and Money
Market instruments. 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
December 31, 2004, two customers comprised 18% and 15%,
respectively, of accounts receivable. As of December 31, 2003, two
customers comprised 25 % and 19%, respectively, of accounts
receivable. For fiscal years 2004 and 2003, cash deposits held at
financial institutions in excess of FDIC insured amounts were as
follows:
2004 2003
---------- ---------
$1,029,411 $ 334,018
SIGNIFICANT CUSTOMERS
During the fiscal year ended December 31, 2004, two customers
represented 40% and 16%, respectively, of the Company's net sales.
During the fiscal year ended December 31, 2003, two customers
represented 29% and 20%, respectively, of the Company's net sales.
10
INVENTORIES
Inventories, which include material, labor and manufacturing
overhead, are stated at standard cost (which approximates the first
in, first out method) or market.
Inventories consist of the following at December 31, 2004.
2004
-----------
Raw material $ 844,467
Finished goods 24,047
-----------
Total inventories 868,514
Less reserve (216,005)
-----------
Inventories, net $ 652,509
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 three to twenty years.
Equipment and leasehold improvements consist of the following at
December 31, 2004.
2004
-----------
Machinery and equipment $ 3,446,458
Furniture and fixtures 582,880
Leasehold improvements 130,712
Data processing equipment 398,207
-----------
Total $ 4,558,257
Future depreciation on equipment and leasehold improvements is
approximately as follows:
2005 $ 520,000
2006 496,000
2007 491,000
2008 284,000
2009 139,000
thereafter 72,085
----------
total 2,002,085
LONG-LIVED ASSETS
The Company recognizes impairment losses on long-lived assets used
in operations when indicators of impairment are present and the
undiscounted cash flows estimated to be generated by those assets
are less than the assets' carrying amount. In such circumstances,
those assets are written down to estimated fair value. Long-lived
assets consist primarily of fixed assets. In 2003 the Company took
an impairment charge of $104,689 for clean room equipment which
represented the purchase price of the equipment. Picometrix impaired
the cleanroom in prior years due to the fact that the company
located a third party cleanroom facility which was more economical
to operate.
REVENUE RECOGNITION
Revenues from research and development cost plus 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. Estimations of costs
are reviewed periodically and any anticipated losses are recognized
in the period in which they first become determinable. The Company
recognizes revenues upon shipment. Provision for estimated losses,
if any, is made in the period in which such losses are determined.
11
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 $3,200 and $1,700 in 2004 and
2003, respectively. The current patents held by the Company have
remaining useful lives of approximately 15 years. Future
amortizations of patent expenses are as follows:
2005 $ 3,511
2006 3,511
2007 3,511
2008 3,511
2009 3,511
thereafter 22,943
--------
TOTAL $ 40,499
The balance of $426,643 of patents is not currently being amortized
as these patents applications have not yet been granted. These costs
will be amortized over the useful patent life when the patents are
granted. If these patent applications are denied the Company will
expense those patent application costs at that time.
SHIPPING AND HANDLING COSTS
The Company's policy is to classify shipping and handling costs as a
component of Cost of Goods sold in the Statement of Operations.
ADVERTISING EXPENSE
Advertising costs are expensed as incurred. Advertising expense was
approximately $ 47,000 and $ 19,000 in 2004 and 2003, respectively.
WARRANTIES
The Company typically warrants its products against defects in
material and workmanship for a period of one (1) year from the date
of shipment. Warranty costs are expensed in the period incurred and
were not material in 2004 and 2003
PERVASIVENESS OF ESTIMATES
The preparation of consolidated financial statements in conformity
with accounting principles generally accepted in the United States
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.
12
ACCOUNTING FOR STOCK OPTION BASED COMPENSATION
SFAS No. 123, "Accounting for Stock Based Compensation", 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 ("APB 25"), "Accounting for Stock Issued to Employees" and
complies with the pro forma disclosure requirements of the standard.
NEW ACCOUNTING PRONOUNCEMENTS
In November 2004, the FASB issued FASB Statement No. 151, "Inventory
Costs - An amendment of ARB No. 43, Chapter 4". Statement 151
clarifies that abnormal amounts of idle facility expense, freight,
handling costs and spoilage should be expensed as incurred and not
included in overhead. Further, Statement 151 requires that
allocation of fixed production overheads to conversion costs should
be based on normal capacity of the production facilities. The
provisions in Statement 151 are effective for inventory costs
incurred during fiscal years beginning after June 15, 2005.
Companies must apply the standard prospectively. The Company will
adopt this standard on April 1, 2006.
In December 2004, the FASB issued FASB Statement No. 153, "Exchanges
of Non-monetary Assets" which is an amendment of APB Opinion No. 29.
The amendments made by the Statement are based on the principle that
exchanges of non-monetary assets should be measured based on the
fair value of the assets exchanged. Further, the amendment
eliminates the narrow exception for non-monetary exchanges of
similar productive assets and replaces it with a broader exception
for exchanges of non-monetary assets that do not have "commercial
substance." Previously, Opinion 29 required that the accounting for
an exchange of a productive asset for a similar productive asset or
an equivalent interest in the same or similar productive asset
should be based on the recorded amount of the asset relinquished.
The provisions in Statement 153 are effective for non-monetary asset
exchanges occurring in fiscal periods beginning after June 15, 2005.
Early application is permitted and companies must apply the standard
prospectively. The Company will adopt this statement on July 1,
2005.
In December 2004 the FASB issued SFAS 123(R), "Share-Based Payment"
-- Statement 123, as originally issued, is effective until the
provisions of Statement 123(R) are fully adopted. This statement
will provide investors and other users of financial statements with
more complete and neutral financial information by requiring the
compensation cost relating to share-based payment transactions be
recognized in financial statements. That cost will be measured based
on the fair market value of the equity or liability instruments
issued. The Company will adopt this Statement in July 2005.
The FASB issued SFAS 132(R), "Employers' Disclosures about Pensions
and Other Postretirement Benefits -- Statement 132", as originally
issued, is effective until the provisions of Statement 132(R) are
fully adopted. The provisions of FAS 132 did not change. FAS 132(r)
identified new disclosures that are required. All new disclosure
requirements for the domestic plans of publicly traded entities are
effective for years ending after December 15, 2003. Estimated future
benefit payments, and all other new disclosure requirements for
foreign plans and nonpublic entities are effective for years ending
after June 15, 2004.
In May 2005, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards 154 "Accounting Changes
and Error Corrections"("SFAS 154"). This Statement replaces APB
Opinion No. 20, "Accounting Changes", and FASB Statement No. 3,
"Reporting Accounting Changes in Interim Financial Statements", and
changes the requirements for the accounting for and reporting of a
change in accounting principle. The accompanying audited
consolidated financial statements do not have any accounting changes
or error corrections.
The Company does not believe that any of these recent accounting
pronouncements will have a material impact on its financial position
or results of operations.
13
RESEARCH AND DEVELOPMENT EXPENSES
Expenditures for research, development and engineering of products
and manufacturing processes are expensed as incurred. .
DEFERRED REVENUE
The company recorded deferred revenue in 2004 of $275,000 for
prepaid extended warranty contracts for I year from one customer.
The deferred warranty revenue will be recognized over the period
covered by the extended warranty.
NOTES PAYABLE AND LONG-TERM DEBT
On August 28, 2002, the Company entered into a $6 million loan
agreement (note payable) with Coherent, Inc. ("Coherent" and used
the proceeds for the payment of certain indebtedness of the Company
and for working capital purposes. Interest was paid monthly at prime
minus 0.50% (5.25% and 4% at December 31, 2004 and 2003,
respectively).. Coherent assigned the $6 million note payable to DP1
LLC (Assignee and the "Lender") on September 30, 2004 for $ 4
million and Picometrix entered into an amended and restated
promissory note with DP1 LLC with a maturity date of March 1, 2006.
Payment of either principle or interest is not required until
maturity or until the closing, if sooner, of an investment by the
Lender and/or its affiliate in Picometrix or a financing by a party
other than the Lender and/or its affiliates. Interest accrues at 10%
until April 1, 2005 and 18% from April 1, 2005 to December 1, 2005
on $ 4 million and 12% thereafter on $ 6 million. The note can be
retired for $ 4 million plus accrued interest if paid off by
December 1, 2005, thereafter the payoff amount is $ 6 million plus
accrued thereafter. Upon the maturity of the note payable and in
addition to the outstanding principal and accrued interest, the
Company will pay Assignee $50,000. The note is secured by
substantially all assets of the Company. The assignor has agreed to
subordinate the note payable and any security interest securing
repayment for any secured loan from an institutional lender,
provided 100% of the proceeds of such loan are used to repay the
note. On March 8, 2005, Picometrix entered into an Agreement and
Plan of Merger (the "Agreement") with Advanced Photonix, Inc. and
its newly formed subsidiary, Michigan Acquisition Sub, LLC
("Newco"), a Delaware limited liability company, whereby Picometrix
merged with and into Newco, with Newco (renamed Picometrix LLC)
being the surviving entity. Advanced Photonix, Inc. provided a loan
to Picometrix for $4,228,000, which was used to prepay a $6,000,000
Note Payable, plus accrued interest at the time of the Agreement.
This resulted in a $1,950,000 gain on the note payable. Immediately
following the closing of the transaction in May 2005, the API Loan
was contributed to the capital of Picometrix, LLC. See subsequent
events footnote.
In September of 2004 Picometrix entered into a long-term financing
obligation with the Michigan Economic Development Corporation for up
to $1,024,526 in unsecured financing with interest accruing monthly
for the first four years and then added to the principle and
amortized over the next four years at 7%.
In 2003 and 2004 Picometrix entered into long term financing
arrangements with certain equipment vendors for approximately
$334,000 amortized over 12 to 48 months at varying interest rates as
described below.
A long term, unsecured financing arrangement with Advanced Air
in an original amount of $95,000 entered into on May 1, 2003
at zero percent interest rate, with payments of $3,200 per
month, a maturity of October 1, 2005 and a balance at December
31, 2004 of $31,000.
A short term, secured financing arrangement with Agilent in an
original amount of $77,440 entered into in December 2004 at
8.16% interest rate, with payments of $6,742 per month, a
maturity of November, 2005 and a balance at December 31, 2004
of $71,224.
14
A long term, unsecured financing arrangement with Angstrom in
an original amount of $19,130 entered into in June, 2003 at
zero percent interest rate, with payments of $638 per month, a
maturity in November, 2005 and a balance at December 31, 2004
of $7,014.
A long term, unsecured financing arrangement with Bede
Scientific in an original amount of $20,300 entered into on
June, 2003 at 4.25% interest rate, with payments of $461 per
month, a maturity of October, 2006 and a balance at December
31, 2004 of $9,732.
A long term, unsecured financing arrangement with Siemens in
an original amount of $122,500 entered into in October, 2003
at zero percent interest rate, with payments of $3,403 per
month, a maturity of September, 2006 and a balance at December
31, 2004 of $71,458.
Long-term financing obligations at December 31, 2004 consist of the
following:
Note payable - DP1 LLC, see above $ 6,000,000
Note payable - MEDC 750,000
Obligations under capital leases (see note below) 103,908
Bede 9,733
Siemens Building 71,458
-----------
Agilent 71,224
-----------
Advanced Air 31,000
-----------
ANGSTROM 7,014
Total 7,051,351
Less: current portion (146,861)
-----------
LONG-TERM FINANCING LESS CURRENT PORTION 6,904,490
Future payments on long-term financing obligations through 2009 are
approximately as follows:
2005 $ 146,861
2006 6,154,490
2007 0
2008 52,000
2009 219,000
thereafter 479,000
Total 7,051,351
CAPITALIZED LEASES
The Company has two (2) capitalized lease obligations which provide
for monthly payments of $5,284 with capitalized imputed interest
rates of 8.7% each with a weighted average imputed interest rate of
8.7% at December 31, 2004. The leases mature at the end of 2006..
Future payments on the lease obligations are approximately as
follows:
2005 $ 63,400
2006 51,000
-----------
Total minimum lease payments $ 114,400
Interest (10,492)
-----------
Present value of net minimum lease payments $ 103,908
15
CAPITALIZATION
The Company's Certificate of Incorporation provides for two classes
of common stock, a Class A, non-voting, no par stock for future
issuance to employees, directors and consultants of the company
(none issued or outstanding at December 31, 2004), for which
2,520,000 shares are authorized for issuance and reserved under the
2000 stock option plan and a Class B voting, no par common stock for
which 15,480,000 shares are authorized and issued.
INCOME TAXES
Deferred taxes reflect the net effect of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.
Significant components of the Company's deferred tax assets and
liabilities at December 31, 2004 and 2003 are as follows:
2004 2003
----------- -----------
Deferred tax assets:
Net operating loss carry forwards $ 480,551 $ 20,066
Asset impairment 470,731 470,731
Research and development tax credit 187,358 187,358
Inventory 81,942 61,874
Accruals & Other 25,972 22,072
AMT credits 5,889 -
----------- -----------
Total deferred tax assets 1,252,443 1,462,101
Deferred tax liabilities:
Depreciation (145,873) (133,456)
Tax accounting method change (67,870) (101,805)
Total deferred tax liabilities (213,743) (235,261)
----------- -----------
Net deferred tax asset 1,030,700 1,226,840
Less valuation allowance (688,721) -
----------- -----------
Net deferred tax asset $ 349,979 $ 1,226,840
Realization of future tax benefits related to deferred tax assets is
dependent on many factors, including the Company's ability to
generate sufficient taxable income and the change in control
provisions of Internal Revenue Code section 382.. Management has
considered these factors in reaching its conclusion to provide a
valuation allowance for financial reporting purposes.
At December 31, 2004 and 2003, the Company has net operating loss
carry forwards of approximately $1,413,000 and $2,117,000,
respectively that begin to expire in 2022.
The Company has $187,000 of R&D tax credit carry forwards available
at December 31, 2004 and 2003.
RETIREMENT PLAN
The Company maintains a 401(k) Plan which is qualified under the
Internal Revenue Code. The plan permits eligible employees to make
voluntary contributions up to the IRS allowable limit. The Company
has the option to make a discretionary contribution of a percentage
of the employee's compensation limited to the amount deductible for
federal tax purposes. The Company contributions and administrative
costs recognized as expense were approximately $55,000 and $1,000 in
2004 and 2003, respectively.
16
COMMITMENTS
The Company leases a building and office equipment under various operating
leases. The building lease expires in 2011, and the Company has an option
to extend for two additional five year periods with annual base rent
increase of 80% of the increase in the CPI index. In accordance with the
lease agreement, the Company is required to have a letter of credit (LOC)
of $275,000 throughout the lease term. At December 31, 2004, future
minimum annual rental commitments under non-cancelable operating leases
are approximately as follows:
2005 $ 704,300
2006 704,300
2007 704,300
2008 704,300
2009 704,300
2010 704,300
2011 352,100
-----------
Total $ 4,577,900
Rent expense was approximately $704,000 and $704,000 for the years ended
December 31, 2004 and 2003, respectively.
In connection with the issuance of the LOC, the issuing bank has required
that the Company provide applicable funds to cover amounts drawn under the
LOC. The funds are invested in bank certificates of deposit. These funds
are shown as restricted cash on the balance sheet.
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.
STOCK OPTIONS
During 2000, the Company adopted the 2000 Stock Option Plan, under which
stock options may be granted to employees, directors and consultants of
the Company. The Plan is administered by the Board of Directors (BOD), and
the Company's shareholders have authorized the BOD to reserve 2,520,000
shares of Class A, non-voting, no par stock for future issuance under the
Plan. The options are not transferable and are subject to various
restrictions outlined in the Plan.
The Company accounts for employee stock options in accordance with
Accounting Principles Board Opinion No. 25 (APB 25), Accounting for Stock
Issued to Employees. Accordingly, no compensation expense has been
recognized in the financial statements for employee stock options.
Statement of Financial Accounting Standards (SFAS) No. 123 encourages
companies to adopt a fair value method of accounting for stock
compensation plans. Companies that do not adopt a fair value method are
required to make pro-forma disclosures of net income and earnings per
share, if material, as if they had adopted the fair value accounting
method. The fair value of options granted has been estimated at the date
of the grant using the minimum value method. No compensation cost has been
recognized as all options were granted at the fair market value at the
date of grant. Had compensation expense for these plans been determined
consistent with SFAS No. 123, the Company's net income (loss) and net
income (loss) per share would be as follows:
2004 2003
Net income (loss), as reported $ 888,170 $ (2,083,222)
Net incomes (loss), Pro forma 871,377 (2,106,252)
Because the SFAS No. 123 method of accounting has not been applied to
options granted prior to
17
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 2004 and 2003, respectively: risk-free
interest rates of, 3%, 3.07% expected volatility of .73, and .8 and
expected lives of 10 years in all periods. No dividends were assumed in
the calculations.
Options vest over 3 to 5 years and are subject to forfeiture. Stock option
transactions for fiscal years 2003 and 2004 are summarized as follows:
Shares Weighted Average
(000) Exercise Price
------ ----------------
Outstanding, December 31, 2002 1,508 $ 0.36
Granted 362 $ 0.03
Exercised 0 0
Canceled/Expired (472) $ 0.33
-----
Outstanding, December 31, 2003 1,398 $ 0.28
===== ========
Exercisable, December 31, 2003 826 $ .32
===== ========
Outstanding, December 31, 2003 1,398 $ 0.28
Granted 0 0
Exercised 0 0
Canceled/Expired (160) $ 0.05
-----
Outstanding, December 31, 2004 1,238 $ .31
===== ========
Exercisable, December 31, 2004 991 $ .33
===== ========
Information regarding stock options outstanding as of December 31, 2004 is as
follows:
Options Outstanding
-----------------------------------------------
(in 000s) Weighted Average Weighted Average
Price Range Shares Exercise Price Remaining Life
------------- -------- ---------------- ----------------
$0.03 - $.23 788 $ 0.18 6.3
$0.40 - $1.25 450 $ 0.55 7.0
Options Outstanding
-----------------------------------------------
(in 000s) Weighted Average Weighted Average
Price Range Shares Shares Exercise Price Remaining Life
------------------ -------- ---------------- ----------------
$0.03 - $.23 1,212 $ 0.21 5.7
$0.40 - $1.25 467 $ 0.57 6.9
All outstanding stock options of Picometrix representing 1,238,000 of
Class A non-voting common stock if exercised were repurchased in April
2005 for a cash consideration $ 509,545 at an average price $.41 per
share.
SUBSEQUENT EVENTS (UNAUDITED)
On March 8, 2005, Picometrix entered into an Agreement and Plan of Merger
(the "Agreement") with Advanced Photonix, Inc. and its newly formed
subsidiary, Michigan Acquisition Sub, LLC ("Newco"), a
18
Delaware limited liability company, whereby Picometrix merged with and
into Newco, with Newco (renamed Picometrix LLC) being the surviving
entity. Advanced Photonix, Inc. provided a loan to Picometrix for
$4,228,000, which was used to prepay a $6,000,000 Note Payable, plus
accrued interest at the time of the Agreement. This resulted in a
$1,950,000 gain on the note payable. The merger transaction was completed
in May 2005. The merger consideration paid to the stockholders of
Picometrix at the closing of the transaction consisted of $3,500,000 in
cash, four-year API promissory notes in the aggregate principal amount of
$2,900,500 (the "API Notes") and 2,575,000 shares of API Class A Common
Stock.
The API notes are payable in four annual installments of $500,000,
$550,000, $900,000 and $950,500 respectively. The API Notes bear an
interest rate of prime plus 1.0% and are secured by all of the
intellectual property of Picometrix. API has the option of prepaying the
API Notes without penalty. API engaged a third party valuation firm to
perform a valuation of tangible and intangible assets. This valuation was
then used to allocate the merger consideration (including all cash, the
API LOAN TO Picometrix, the API Notes and the API Class A Common Stock) to
Picometrix LLC tangible and intangible assets. The excess of the assets
over liabilities represented the capitalization of Picometrix LLC.
Immediately following the effective time of the transaction, the API Loan
was contributed to the capital of Picometrix, LLC.
19
UNAUDITED INTERIM FINANCIAL STATEMENTS
PICOTRONIX, INC.
BALANCE SHEETS
UNAUDITED
UNAUDITED
MARCH 31, 2005
--------------
ASSETS
Current Assets:
Cash and cash equivalents $ 1,498,077
Accounts receivable 988,506
Inventories 723,233
Prepaid expenses and other current assets 122,204
-----------
Total current assets 3,332,020
Property and equipment:
Leasehold improvements 130,712
Machinery and equipment 3,849,413
Furniture and fixtures 582,880
-----------
4,563,005
Accumulated depreciation (2,690,206)
-----------
1,872,799
Other assets:
Deposits and other assets 94,452
Patents, net 467,142
-----------
Total assets $ 5,766,413
===========
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
Current liabilities
Accounts payable:
Trade 227,106
Income taxes payable 16,725
Accrued liabilities:
Compensation and related withholdings 303,896
Interest Accrual -
Consulting -
Other 172,582
Current portion of long-term debt 4,349,681
-----------
Total liabilities 5,069,990
Long-term debt, less current portion 1,153,291
-----------
Total liabilities 6,223,281
Shareholders' deficit:
Class B common stock, voting, no par value; 15,480,000 shares authorized,
15,480,000 issued and outstanding (13,536,000 issued and outstanding in
2002) 22,440
Accumulated deficit (479,308)
-----------
Total shareholders' deficit (456,868)
-----------
Total liabilities and shareholders' deficit $ 5,766,413
===========
See accompanying notes
20
PICOTRONIX, INC.
STATEMENTS OF CASH FLOWS
UNAUDITED
3 MONTHS ENDED
MARCH 31, 2005
--------------
OPERATING ACTIVITIES
Net income $ 1,385,083
Adjustments to reconcile net income to net
cash used in operating activities:
Depreciation 134,034
Deferred income tax benefit 349,979
Changes in operating assets and liabilities:
Income taxes 10,836
Prepaid expenses 63,703
Accounts payable, accrued expenses, and other (88,934)
Inventories (70,724)
Accounts receivable 257,289
-----------
Net cash used in operating activities 2,041,266
INVESTING ACTIVITIES
Purchases of property and equipment (4,748)
Decrease in restricted investments -
-----------
Net cash used in operating activities (4,748)
FINANCING ACTIVITIES
Payments on capital lease obligation (15,852)
Net borrowings from vendors (1,807,527)
-----------
Net cash (used in) provided by financing activities (1,823,379)
-----------
Net increase in cash 213,139
Cash at beginning of year 1,284,938
-----------
Cash at end of year $ 1,498,077
===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash refunded for income taxes -
===========
Cash paid for interest $ 178,099
===========
SUPPLEMENTAL DISCLOSURE OF NON CASH OPERATING, INVESTING
AND FINANCING ACTIVITIES
21
PICOMETRIX, INC.
STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
UNAUDITED
3 MONTHS ENDED
MARCH 31, 2005
--------------
Net sales $ 1,464,398
Cost of products sold 338,179
-----------
Gross profit 1,126,219
Selling, general and administrative expenses 530,288
Research and development expenses 708,070
-----------
1,238,358
-----------
Income (loss) from operations (112,139)
Other income (expense):
Interest expense (85,963)
Forgiveness of debt 1,950,000
-----------
Income (loss) before income taxes 1,751,898
Federal income taxes (benefit):
Total provision (benefit) for income taxes 366,815
-----------
Net income (loss) 1,385,083
(Accumulated deficit) retained earnings at
beginning of year (1,864,391)
-----------
Accumulated deficit at end of year $ (479,308)
===========
22
SUMMARY COMBINED COMPANY UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
Effective May 2, 2005, Advanced Photonix, Inc ("API") completed its acquisition
of Picotronix, Inc, through the merger of Picotronix, Inc. (doing business as
and referred to herein as "Picometrix"), into Picometrix LLC, a wholly-owned
subsidiary of API. Pursuant to the merger between Picometrix and API, API paid
approximately $16 million in the form of $3.5 million in cash, four-year API
promissory notes in the aggregate principal amount of approximately $2.9 million
(the "API Notes") and $5.4 million in API Class A Common Stock (2,575,000 shares
valued at $2.11) and provided a loan in the amount of approximately $4.2 million
to Picometrix (the "API Loan"), the proceeds of which were used to prepay
existing long-term indebtedness of Picometrix to a third party. Immediately
following the effective time of the transaction, the API Loan was contributed to
the capital of Picometrix, LLC.
The combined company unaudited pro forma consolidated statements of operations
give effect to the purchase of Picometrix as if the transaction had occurred on
March 28, 2004. The combined company unaudited pro forma condensed consolidated
statements of operations do not purport to represent what the results of
operations actually would have been if the purchase had occurred as of such
date, or what such results will be for any future periods.
The combined company unaudited pro forma consolidated statements of operations
are derived from the historical financial statements of API and Picometrix and
the assumptions and adjustments described in the accompanying notes. The pro
forma adjustments are based on preliminary estimates and assumptions that API
and Picometrix believe are reasonable under the circumstances. The combined
company unaudited pro forma financial information should be read in conjunction
with the historical financial statements and the accompanying notes thereto of
API and Picometrix. The combined company unaudited pro forma consolidated
statements of operations do not reflect any cost savings or other economic
efficiencies which will result from the purchase.
23
ADVANCED PHOTONIX, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 27, 2005
3/27/2005 3/31/2005
API PICOMETRIX ADJUSTMENTS NOTE PROFORMA
------------ ------------ ------------ --------- ------------
CURRENT ASSETS
Cash and cash equivalents $ 1,503,000 $ 1,222,303 $ (4,291,471) 3
2,700,000 6
1,254,000 8
Restricted cash 1,254,000 (1,254,000) 8 -
Repurchase of Class A Stock Options (509,545) 9
------------ ------------ ------------ ------------
TOTAL CASH AND CASH EQUIVALENTS 2,757,000 1,222,303 (2,101,016) 1,878,287
Accounts receivable, net 2,610,000 988,506 3,598,506
Note receivable from Picometrix, Inc. 4,228,000 (4,228,000) 7 -
Inventory 3,644,000 723,233 4,367,233
Deferred tax asset, current portion 644,000 644,000
Prepaid expenses and other current
assets 563,000 122,204 685,204
------------ ------------ ------------ ------------
TOTAL CURRENT ASSETS 14,446,000 3,056,246 (6,329,016) 11,173,230
------------ ------------ ------------ ------------
Fixed assets, net of depreciation 1,399,000 1,872,799 595,163 2 3,866,962
------------ ------------ ------------ ------------
OTHER ASSETS
Deferred tax assets, net 4,105,000 4,105,000
Goodwill, net 2,421,000 2,421,000
Intangible assets 494,000 467,142 12,486,926 2 13,448,068
Prepaid capital finance expenses, net 315,000 315,000
Security deposits and other assets 175,000 370,226 545,226
------------ ------------ ------------ ------------
TOTAL OTHER ASSETS 7,510,000 837,368 12,486,926 20,834,294
------------ ------------ ------------ ------------
TOTAL ASSETS $ 23,355,000 $ 5,766,413 $ 6,753,073 $ 35,874,486
============ ============ ============ ============
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 2,185,000 $ 703,584 $ 2,888,584
Income taxes payable $ 16,725
Deferred revenue -
Current portion of long-term debt 1,000,000 4,349,681 (5,128,000) 6,7 221,681
------------ ------------ ------------ ------------
TOTAL CURRENT LIABILITIES 3,185,000 5,069,990 (5,128,000) 3,126,990
------------ ------------ ------------ ------------
LONG-TERM LIABILITIES
Long-term debt 4,859,000 1,153,291 6,012,291
2,900,500 4 2,900,500
1,800,000 6 1,800,000
Capital lease payable 2,000 2,000
------------ ------------ ------------ ------------
TOTAL LONG-TERM LIABILITIES 4,861,000 1,153,291 4,700,500 10,714,791
------------ ------------ ------------ ------------
COMMITMENTS AND CONTINGENCIES
Class A redeemable convertible
preferred stock 32,000 - 32,000
------------ ------------ ------------ ------------
TOTAL COMMITMENTS AND
CONTINGENCIES 32,000 - - 32,000
TOTAL LIABILITIES $ 8,078,000 $ 6,223,281 $ (427,500) 13,873,781
------------ ------------ ------------ ------------
SHAREHOLDERS' EQUITY
Common stock 13,000 22,440 (22,440) 1 13,000
2,575 5 2,575
Additional paid-in capital 27,995,000 5,430,675 5 33,425,675
Accumulated deficit (12,731,000) (479,308) 479,308 1 (12,731,000)
------------
Option Repurchase 509,545 9
------------ ------------ ------------ ------------
TOTAL SHAREHOLDERS' EQUITY 15,277,000 (456,868) 6,399,663 21,219,795
------------ ------------ ------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 23,355,000 $ 5,766,413 $ 5,972,163 $ 35,093,576
============ ============ ============ ============
SEE NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
24
NOTES:
1 Eliminates the items on Picometrix historical financial statements.
2 Reflects preliminary allocation of purchase price to tangible and
intangible assets.
3 Represents the cash portion of the purchase price.
4 Reflects the impact of issuance of $2,900,500 aggregate principal amount
of promissory notes issued to finance the acquisition of Picometrix, (the
"API notes"), payable to the Picometrix stockholders.
5 Reflects API stock issued as part of the purchase price.
6 Reflects incurrence of a term loan by API for $2,700,000 to finance
purchase of Picometrix.
7 Reflects loan from API to Picometrix that was forgiven as part of the
agreement and plan of merger and current portion of SBBT loan.
8 Reclassification of restricted cash on API balance sheet.
9 Repurchase of Class A common Stock Options.
25
ADVANCED PHOTONIX, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MARCH 27, 2005
API PICOMETRIX
HISTORICAL HISTORICAL ADJUSTMENTS NOTE PRO FORMA
----------- ---------- ----------- ---- -----------
REVENUES
Revenues $14,803,000 $7,473,404 $ - $22,276,404
COST OF SALES 10,071,000 2,311,104 62,619 8 12,444,723
----------- ---------- ----------- -----------
GROSS PROFIT (LOSS) 4,732,000 5,162,300 (62,619) 9,831,681
OPERATING EXPENSES
Research and development expense 146,000 2,574,997 399,376 8 3,120,373
Selling, General and administrative expense 3,920,000 1,703,389 47,550 8 5,670,939
Depreciation 119,033 1 119,033
Amortization - - 1,186,017 2 1,186,017
----------- ---------- ----------- -----------
TOTAL OPERATING EXPENSES 4,066,000 4,278,386 1,751,976 10,096,362
INCOME (LOSS) FROM OPERATIONS 666,000 883,914 (1,814,595) (264,681)
OTHER (INCOME) EXPENSE
Interest income (43,000) (6,990) (49,990)
Interest expense 154,000 304,784 167,752 3 626,536
(392,771) 4 (392,771)
62,045 5 62,045
Other, net 35,000 42,040 (1,950,000) 7 (1,872,960)
----------- ---------- ----------- -----------
TOTAL OTHER (INCOME) EXPENSE 146,000 339,834 (2,112,974) (1,627,140)
NET INCOME (LOSS) BEFORE PROVISION
FOR INCOME TAXES 520,000 544,080 298,379 1,362,459
PROVISION FOR INCOME TAXES
Provision for income taxes - current 18,000 5,889 6 23,889
Provision for income taxes - deferred (4,752,000) (349,979) (5,101,979)
----------- ---------- ----------- -----------
TOTAL PROVISION FOR INCOME TAXES (4,734,000) (344,090) - (5,078,090)
NET INCOME (LOSS) $ 5,254,000 $ 888,170 $ 298,379 $ 6,440,549
=========== ========== =========== ===========
1 Reflects the projected impact of depreciation on writeup of
assets.
2 Reflects the projected impact of amortization of acquired
intangible assets of $3,588,616 over 15 years useful life and
$9,467,764 over 10 years useful life.
3 Reflects the impact of interest expense from $2,900,500
aggregate principal amount of the API notes. The interest rate
used was the average prime rate plus 1% per quarter (4/1/04 -
3/27/05) multiplied by the number of days in each quarter.
4 Reflects the reversal of Interest paid to Coherent and DPC1 with
respect to the repayment of the loan.
5 Reflects the impact of interest expense from $2,700,000
aggregate principal amount of the API notes. The interest rate
used was the average prime rate plus 1% per quarter (4/1/04 -
9/30/04) multiplied by 5 the number of days in each quarter.
6 No income tax benefit is assumed due to uncertainties
surrounding the ultimate realizability of net operating losses.
7 Reflects gain on forgiveness of debt on DPC1.
8 Repurchase of class A stock options.
26
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ADVANCED PHOTONIX, INC.
By: /s/ Richard Kurtz
-------------------------------------------
Richard Kurtz, Chief Executive Officer
Dated: July 18, 2005
27