U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
Amendment No. 1
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 2004
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-10799
ADDVANTAGE TECHNOLOGIES GROUP, INC.
(Exact name of registrant as specified in its charter)
Oklahoma 73-1351610
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1605 East Iola 74012
Broken Arrow, Oklahoma (Zip code)
(Address of principal executive offices)
Registrant's telephone number: (918) 251-9121
Securities registered under Section 12(b) of the Act:
Common Stock, $.01 par value
Securities registered under Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act during the past
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
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and disclosure will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. X
-
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act)
Yes No X
-----
The aggregate market value of the shares of common stock, par value $.01 per
share, held by non-affiliates of the issuer was $14,419,734 as of March 31,
2004.
The number of the registrant's common stock, $.01 par value per share,
outstanding was 10,061,789 as of December 1, 2004.
EXPLANATORY NOTE
This Amendment No. 1 (this "Form 10-K/A") to our Annual Report on Form
10-K for the fiscal year ended September 30, 2004 that was originally filed on
December 22, 2004 (the "Original Filing"), is being filed to include informat-
ion incorporated by reference into Part III of Form 10-K. No attempt has been
made in this Form 10-K/A to modify or update other disclosures presented in the
Original Filing, other than to correct typographical and other immaterial
errors. This Form 10-K/A does not reflect events occurring after the filing of
the Original Filing or modify or update disclosures, including the exhibits to
the Original Filing, affected by subsequent events.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS AND EXECUTIVE OFFICERS
The names, ages and business experience of our directors is set forth
below. The term of each director is one year and will expire at the Company's
annual shareholders' meeting in 2005. The Company's only executive officers are
David E. Chymiak and Kenneth A. Chymiak, whose positions are set forth below.
David E. Chymiak Director since 1999
David E. Chymiak, 59, has been the Chairman of our board since 1999. He
is also the President and a director of our wholly owned subsidiary, TULSAT
Corporation, which he and Kenneth A. Chymiak acquired in 1985. David E.
Chymiak is the brother of Kenneth A. Chymiak, our President and Chief Executive
Officer.
Kenneth A. Chymiak Director since 1999
Kenneth A. Chymiak, 58, has been our President and Chief Executive Officer
since 1999. He has also been the Executive Vice President and a director of
our wholly owned subsidiary, TULSAT Corporation, which he acquired with David
E. Chymiak in 1985, since 1985. Kenneth A. Chymiak is the brother of David E.
Chymiak, our Chairman of the Board since 1999.
Freddie H. Gibson Director since 1999
Freddie H. Gibson, 57, has been with the Heat Transfer Equipment Company
in Tulsa, Oklahoma since 1988. First as CEO, he has served since 1994 as the
President with responsibilities for the financial and accounting controls,
financial reporting, management of staff coordination and short and long-term
planning. Previously, Mr. Gibson had been President of Interactive Computer
Systems from 1980-1988. Also, he was the Controller and Systems Manager for
two other companies and began his career with Arthur Andersen & Co. in their
administrative services division. Mr. Gibson holds a Bachelor of Science
degree in Business Administration from Oklahoma State University, graduating
with honors.
2
Stephen J. Tyde Director since 1999
Stephen J. Tyde, 58, is the founder of The Pump & Motor Works, Inc., a re-
manufacturer of industrial pumps, motors, transformers and switchgear
(to 20,000 hp). After 20 years in the turbo machinery business, Mr. Tyde
started The Pump & Motor Works in 1989 and developed it to a multi-million
dollar operation before his divestiture in 2001. During that time, Mr. Tyde
oversaw all aspects of the company and retained personal responsibility for
financial planning, reporting and controls. He continues to serve on a part
time basis as Vice President. Mr. Tyde is currently the sole owner and COO of
P&MW Holding, Inc., an industrial real estate company. Steven J. Tyde received
an undergraduate degree in Business Administration from The Ohio State
University, a Masters Degree in Business Administration from George Washington
University, and has studied engineering at the University of Pittsburgh.
Henry F. McCabe Director since 2004
Henry F. McCabe, 82, is Chairman of the Board of McCabe Minerals Inc. in
Tulsa, Oklahoma, where he has been employed since 1976. McCabe Minerals
operates manufacturing and processing plants in the states of Nebraska, Kansas
and Oklahoma, which provide granules for asphalt shingle manufacturers. Mr.
McCabe was Co-Founder of the company in 1976 and engages in numerous other
business enterprises.
Audit Committee
The Company's Board of Directors has designated an Audit Committee,
composed during 2004 of three members: Stephen J. Tyde, Freddie H. Gibson and
Henry F. McCabe.
Audit Committee Financial Expert
--------------------------------
The Securities and Exchange Commission has adopted rules pursuant to the
provisions of the Sarbanes-Oxley Act requiring audit committees to include an
"audit committee financial expert," defined as a person who has the following
attributes:
1) an understanding of generally accepted accounting principles and
financial statements;
2) the ability to assess the general application of such principles in
connection with the accounting for estimates, accruals and reserves;
3) experience preparing, auditing, analyzing or evaluating financial
statements that present a breadth and level of complexity of accounting
issues that are generally comparable to the breadth and complexity of
issues that can reasonably be expected to be raised by the registrant's
financial statements, or experience actively supervising one or more
persons engaged in such activities;
4) an understanding of internal control over financial reporting; and
5) an understanding of audit committee functions.
An individual will have to possess all of the attributes listed above to
qualify as an audit committee financial expert. The Audit Committee member
currently serving in this capacity is Stephen J. Tyde, an independent director.
3
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires our
directors and executive officers, and persons who own more than 10% of our
common stock to report their initial ownership of our common stock and any
subsequent changes in that ownership to the SEC and to furnish us with a copy
of each of these reports. SEC regulations impose specific due dates for these
reports and we are required to disclose in this proxy statement any failure to
file by these dates during fiscal 2004.
Based solely on the review of the copies of these reports furnished to us
and written representations that no other reports were required, during and
with respect to the fiscal year ended September 30, 2004, we believe that these
persons have complied with all applicable filing requirements.
Code of Ethics
We have adopted a Code of Business Conduct and Ethics which is applicable
to all of our directors, officers and employees. A copy of our Code of
Business Conduct and Ethics is posted on our website at www.addvantagetech.com.
ITEM 11. EXECUTIVE COMPENSATION
Summary Compensation Table
Executive Officers
The following table sets forth the compensation for our two executive officers
for the periods indicated:
Annual Compensation Long-Term Compensation
------------------- ----------------------
Number
Other of Shares
Annual Under-
Compen- lying
Name and Salary Bonus sation Options
Principal Position Year ($)(1) ($) ($)(2) Granted
------------------ ---- ------ ----- ------ -------
David E. Chymiak 2004 225,000 -0- 10,837 1,000
Chairman 2003 225,000 -0- 10,240 1,000
2002 225,000 -0- 10,000 1,000
Kenneth A. Chymiak 2004 225,000 -0- 10,837 1,000
President and 2003 225,000 -0- 10,240 1,000
Chief Executive Officer 2002 225,000 -0- 10,000 1,000
________________
(1) These amounts represent the salaries paid to these officers by TULSAT
Corporation, our wholly owned subsidiary.
(2) Other annual compensation represents, in 2004, 2003, and 2002 our
contributions on behalf of each of the individuals to our 401(k) Plan.
4
Option Grants During Fiscal 2004
The following table sets forth information regarding options granted
during fiscal 2004 to named executive officers.
Potential Realizable Value at
Assumed Annual Rate of
Shares % of Total Stock Price Appreciation of
Under- Options Granted
lying options to Employees in Exercise Expiration Option Term(2)
Name Granted(1) Fiscal Year Price($/Sh) Date 5% 10%
---- ---------- ----------- ----------- ---- -- ---
Kenneth A. Chymiak 1,000 25.0% $ 4.40 3/1/14 $2,767 $7,012
David E. Chymiak 1,000 25.0% $ 4.40 3/1/14 $2,767 $7,012
(1) These options are fully vested and exercisable at date of grant.
(2) The dollar amounts under these columns represent the potential realizable
value of each grant of option assuming that the market price of the
Company's Common Stock appreciates in value from the date of grant at the
5% and 10% annualized rates prescribed by the Securities and Exchange
Commission for purposes of this table and are not intended to forecast
possible future appreciation, if any, of the price of the Company's Common
Stock.
Option Exercises and Year-End Option Value Table
There were no stock options exercised by the named executive officers
during fiscal 2004. The following table sets forth information regarding the
value of unexercised stock options held by each of the named executive officers
as of the year ended September 30, 2004.
Number of Number of Shares of Common Value of Unexercised In-
Shares Stock Underlying Unexercised the-Money Options at
Aquired on Value Options at September 30, 2004 September 30, 2004
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- -------- -------- ----------- ------------- ----------- -------------
Kenneth A. Chymiak - - 5,000 - $8,315 -
David E. Chymiak - - 5,000 - $8,315 -
Compensation of Directors
We pay our three non-employee directors $500 per quarter and $500 for each
board meeting and $250 for each committee meeting or telephonic board or
committee meeting the director attends. The chairman of the audit committee
receives an additional $250 per quarter. In addition, directors are eligible
to receive awards of options to purchase 1,000 shares of our common stock each
year after the annual shareholders meeting. We reimburse all directors for
out-of-pocket expenses incurred by them in connection with their service on our
board and any board committee. During the fiscal year ended September 30,
2004, Henry McCabe, Fred Gibson and Steve Tyde received director's fees of
$2,000, $2,750 and $3,000, respectively. All of the directors with the
exception of Henry McCabe received an award of stock options to purchase 1,000
shares of common stock at an exercise price of $4.40 per share. Directors who
were our employees received no additional cash compensation for their services
on our board of directors.
5
Compensation Committee Interlocks and Insider Participation
During 2004, the Compensation Committee was composed of Stephen J. Tyde,
Freddie H. Gibson and Henry F. McCabe, all of whom are non-employee directors
of the Company. During 2004, none of the Company's executive officers served
on the board of directors or on the compensation committee of any other entity
who had an executive officer that served either on the Company's Board of
Directors or on its Compensation Committee.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table shows the number of shares of common stock or
preferred stock beneficially owned (as of January 25, 2005) by:
* each person known by us who beneficially owns more than 5% of any class of
our voting stock;
* each director and nominee for director;
* each executive officer named in the Summary Compensation Table on page 10;
and
* our directors and executive officers as a group.
Except as otherwise indicated, the beneficial owners listed in the table have
sole voting and investment powers of their shares.
6
Beneficial Ownership
Number of
Number of Shares of
Shares of Series B
Common Preferred
Stock Percent Stock Percent
Name and Address of Beneficially of Beneficially of
Beneficial Owner Owned (1) Class(1) Owned Class
---------------- --------- -------- ----- -----
David E. Chymiak 3,684,900 (2) 36.6% 150,000 50.0%
1605 E. Iola
Broken Arrow, OK 74012
Kenneth A. Chymiak (3) 3,301,000 (2) 32.8% 150,000 50.0%
1605 E. Iola
Broken Arrow, OK 74012
Stephen J. Tyde 22,000 (2) * -0- -0-
1900 Sandwedge Place
Wilmington, NC 28405
Freddie H. Gibson 5,000 (2) * -0- -0-
8008 S. Erie Avenue
Tulsa, OK 74136
Henry F. McCabe 2,000 * -0- -0-
7225 S. 85th E. Avenue
Tulsa, OK 74133
All Executive Officers 7,014,900 (4) 69.7% 300,000 100%
and Directors as a group
(5 persons)
_____________________________
* Less than one percent.
(1) Shares which an individual has the right to acquire within 60 days pursuant
to the exercise of options are deemed to be outstanding for the purpose of
computing the percentage ownership of such individual, but are not deemed to be
outstanding for the purpose of computing the percentage ownership of any other
person shown in the table or the percentage ownership of all officers and
directors as a group.
(2) Includes 5,000 shares subject to stock options which are fully exercisable.
(3) All of the shares beneficially owned by Mr. Chymiak are held of record
45.6% by him as trustee of the Ken Chymiak Revocable Trust and 54.4% by his
wife as trustee of the Susan Chymiak Revocable Trust. Mr. Chymiak disclaims
beneficial ownership of the shares held by his wife.
(4) Includes 20,000 shares subject to stock options which are fully
exercisable.
7
Equity Compensation Plan Information
The following table summarizes information as of September 30, 2004
regarding the Company's common stock reserved for issuance under the Company's
equity compensation plan.
Number of Securities
Weighted- Remaining Available for
Number of Securities to average Future Issuance Under
be Issued Upon Exercise Price the Plans (Excluding)
Exercise of Outstanding of Outstanding Securities Reflected in
Options Options Column (a))
Plan Category (a) (b) (c)
------------- ------- ------- -----------
Equity Compensation Plans 131,125 $2.83 811,041
Approved by Security
Holders
Equity Compensation Plans - - -
Not Approved by Security
Holders
TOTAL 131,125 $2.83 811,041
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In fiscal 1999, Chymiak Investments, L.L.C., which is owned by David E.
Chymiak and Kenneth A. Chymiak, purchased from TULSAT Corporation on September
30, 1999, the real estate and improvements comprising the headquarters and a
substantial portion of the other office and warehouse space of TULSAT
Corporation for a price of $1,286,000. The price represents the appraised
value of the property less the sales commission and other sales expenses that
would have been incurred by TULSAT Corporation if it had sold the property to a
third party in an arm's-length transaction. TULSAT Corporation entered into a
five-year lease commencing October 1, 1999 with Chymiak Investments, L.L.C.
covering the property. This lease was renewed on October 1, 2004 and will
expire on September 30, 2008.
In fiscal 2001, ADDvantage Technologies Group of Texas, a subsidiary of
the Company, borrowed $150,000 on June 26, 2001 from Chymiak Investments, L.L.C
for the purchase of a building consisting of office and warehouse space at the
location in Texas. The note was payable at 7.5% over 10 years and total
interest paid in 2004 was $4,898. The note was repaid in April 2004.
In fiscal 2002, ADDvantage Technologies Group of Missouri completed
additions at its location in Missouri and financed $342,000 from Chymiak
Investments, L.L.C for a building consisting of office and warehouse space.
The note is payable at 7.5% over 10 years and total interest paid in 2004 was
$11,694. The note was repaid in April 2004.
Chymiak Investments Inc., which is owned by Kenneth A. Chymiak and his
wife, Susan C. Chymiak, owns three other properties leased to TULSAT
Corporation for five-year terms (all ending in 2008).
The Company had outstanding, unsecured shareholder loans of $800,000 at
September 30, 2003. Of this amount, $650,000 was payable to revocable trusts
for the benefit of Kenneth A. Chymiak and his wife and $150,000 was payable to
David E. Chymiak. The interest rate on the notes was 1.25% below the Chase
Manhattan Bank Prime, which was the same rate as the Company's bank line of
credit. The total interest paid on the notes was $19,134 in 2004. These notes
were repaid in August and September 2004.
The Company leases various properties primarily from two companies owned by
David E. Chymiak and Kenneth A. Chymiak as discussed above. Future minimum
lease payments under these leases are as follows:
2005 $ 480,240
2006 380,040
2007 360,000
2008 324,000
---- ----------
$1,544,280
==========
Related party rental expense for the year ended September 30, 2004 was
$466,000.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
We have appointed the accounting firm of Tullius Taylor Sartain & Sartain
LLP as our independent auditors to examine our financial statements for the
fiscal year ending September 30, 2004. Tullius Taylor Sartain & Sartain LLP
has been our independent auditor since 1994. Our Audit Committee has
considered whether the provision of the tax services and other services of
Tullius Taylor Sartain & Sartain LLP are compatible with maintaining their
independence and have determined that they are. The Audit Committee's policy
is to submit all proposed non-audit services to the Audit Committee chairman,
who considers and pre-approves all engagements for audit or non-audit services
rendered by our independent auditors. The Audit Committee approved 100% of
such services in 2004 under its pre-approval policy. Fees paid to the firm in
relation to fiscal 2004 and 2003 were as follows:
Fee Category 2004 2003
------------ ---- ----
Audit Fees $ 44,221 $ 41,750
Audit-Related Fees 4,669 7,925
Tax Fees 18,259 40,190
All Other Fees - -
--------------------
Total $ 67,149 $ 89,865
====================
Audit Fees. Consists of fees billed for professional services rendered for the
audit of the Company's consolidated financial statements and review of the
interim consolidated financial statements included in quarterly reports and
services that are normally provided by Tullius Taylor Sartain & Sartain LLP in
connection with statutory and regulatory filings or engagements.
9
Audit-Related Fees. Consists of fees billed for assurance and related services
that are reasonably related to the performance of the audit or review of the
Company's consolidated financial statements and are not reported under "Audit
Fees." These services include consultation and review of the Company's
responses to ordinary and routine inquiries by the SEC.
Tax Fees. Consists of fees billed for professional services for tax
compliance, tax advice and representation pursuant to an examination by the
Internal Revenue Service.
All Other Fees. Consists of fees for all other services other than audit
services, audit-related services and tax services.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant caused this amendment to its annual report
on Form 10-K to be signed on its behalf by the undersigned, thereunto duly
authorized.
ADDvantage Technologies Group, Inc.
Date: February 11, 2005 By: /s/ Kenneth A. Chymiak
--------------------------
Kenneth A. Chymiak, President
10
INDEX TO EXHIBITS
The following documents are included as exhibits to this Form 10-K/A. Those
exhibits below which are incorporated by reference herein are indicated as
such. If no information regarding incorporation by reference appears after an
exhibit, such exhibit is filed herewith except as otherwise indicated.
Exhibit Description
------- -----------
3.1 Certificate of Incorporation of the Company and amendments
thereto incorporated by reference to Exhibit 3.1 to the
Annual Report on Form 10-KSB filed with the Securities
Exchange Commission by the Company on January 10, 2003.
3.2 Bylaws of the Company, as amended, incorporated by reference
to Exhibit 3.2 to the Annual Report on Form 10-KSB filed
with the Securities Exchange Commission by the Company on
January 10, 2003.
4.1 Certificate of Designation, Preferences, Rights and
Limitations of ADDvantage Media Group, Inc. Series A 5%
Cumulative Convertible Preferred Stock and Series B 7%
Cumulative Preferred Stock as filed with the Oklahoma
Secretary of State on September 30, 1999 incorporated by
reference to Exhibit 4.1 to the Current Report on Form 8-K
filed with the Securities Exchange Commission by the Company
on October 14, 1999.
10.1 Lease Agreement dated September 15, 1999 by and between
Chymiak Investments, L.L.C. and TULSAT Corporation (formerly
named DRK Enterprises, Inc.) incorporated by reference to
Exhibit 10.3 to the Annual Report on Form 10-KSB filed with
the Securities Exchange Commission by the Company on
December 30, 1999.
10.2 Schedule of documents substantially similar to Exhibit 10.1
incorporated by reference to Exhibit 10.3 to the Annual
Report on Form 10-KSB filed with the Securities Exchange
Commission on December 30, 1999.
10.4 Form of promissory notes issued by TULSAT to David Chymiak
and to Ken Chymiak Revocable Trust and Susan C. Chymiak
Revocable Trust dated as of February 7, 2000 incorporated by
reference to Exhibit 10.7 to the Annual Report on Form
10-KSB filed with the Securities Exchange Commission on
January 9, 2001.
10.5 Revolving Credit and Term Loan Agreement dated September 30,
2004, by and between Bank of Oklahoma, N.A. ("Lender") and
Registrant ("Borrower") (filed with original Form 10-K).
21.1 Subsidiaries incorporated by reference to Exhibit 21.1 to
the Annual Report on Form 10-KSB filed with the Securities
Exchange Commission by the Company on January 10, 2003.
23.1 Consent of Tullius Taylor Sartain & Sartain LLP.
11
31.1 Certification of Chief Executive Officer and Chief Financial
Officer under Section 302 of the Sarbanes Oxley Act of 2002.
32.1 Certification of the Chief Executive Officer and Chief
Financial Officer Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
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