U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 2001
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-10799
ADDVANTAGE TECHNOLOGIES GROUP, INC.
(Name of small business issuer in its charter)
Oklahoma 73-1351610
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1605 East Iola
Broken Arrow, Oklahoma 74012
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(Address of principal executive offices) (Zip code)
Issuer's telephone number: (918) 251-9121
Securities registered under Section 12(b) of the Act: None
Securities registered under Section 12(g) of the Act:
Common Stock, $.01 par value
Check whether the issuer (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
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will 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-KSB or any amendment to this Form 10-KSB.
The issuer's revenues for its most recent fiscal year are $22,884,566.
The aggregate market value of the shares of common stock, par value $.01 per
share, held by non-affiliates of the issuer was $1,690,844 as of December 26,
2001.
As of the latest practicable date, the number of the registrant's common
stock, $.01 par value per share, outstanding was 9,991,716 as of December 26,
2001.
The definitive Proxy Statement to be filed pursuant to Regulation 14A in
connection with the Regisrant's 2002 annual meeting of shareholders is
incorporated by reference in Part III, Items 9, 10, 11 and 12 of this Form 10-
KSB. The Proxy Statement will be filed with the Securities and Exchange
Commission within 120 days after the close of the registrant's most recent
fiscal year.
TRANSITIONAL SMALL BUSINESS DISCLOSURE
FORMAT (CHECK ONE): Yes [ ] No X
Forward Looking-Statements
Certain matters discussed in this report constitute forward-looking
statements, within the meaning of the Private Securities Litigation Reform
Act of 1995, including statements which relate to, among other things,
expectations of the business environment in which the Company operates,
projections of future performance, perceived opportunities in the market and
statements regarding the Company's goals and objectives and other similar
matters. The words "estimates, "projects," "intends," "expects,"
"anticipates," "believes," "plans" and similar expressions are intended to
identify forward-looking statements. These forward-looking statements are
found at various places throughout this report and the documents incorporated
into it by reference. These and other statements which are not historical
facts are hereby identified as "forward-looking statements" for purposes of
the safe harbor provided by Section 21E of the Securities Exchange Act of
1934, as amended, and Section 27A of the Securities Act of 1933, as amended.
These statements are subject to a number of risks, uncertainties and
developments beyond the control or foresight of the Company, including
changes in the trends of the cable television industry, technological
developments, changes in the economic environment generally, the growth or
formation of competitors, changes in governmental regulation or taxation,
changes in the Company's personnel and other such factors. The Company's
actual results, performance, or achievements may differ significantly from
the results, performance, or achievements expressed or implied in the forward-
looking statements. The Company does not undertake any obligation to
publicly release any revisions to these forward-looking statements to reflect
events or circumstances after the date of this report or to reflect the
occurrence of unanticipated events.
PART I
ITEM 1. DESCRIPTION OF BUSINESS
Developments in the Business
On September 30, 1999, the former shareholders of TULSAT Corporation
(formerly named DRK Enterprises, Inc.) assumed control of ADDvantage
Technologies Group, Inc. ("ADDvantage Technologies," formerly named
ADDvantage Media Group, Inc.) pursuant to the Securities Exchange Agreement
("Agreement") entered into on September 16, 1999. Pursuant to the Agreement,
the TULSAT shareholders transferred all the issued and outstanding common
stock of TULSAT, along with $10,000,000 of TULSAT promissory notes, to
ADDvantage Technologies in exchange for 8,000,000 shares of ADDvantage
Technologies $.01 par value common stock, 200,000 shares of newly issued
Series A 5% Cumulative Convertible Preferred Stock, par value $1.00 per
share, with a stated value of $40.00 per share (convertible into ADDvantage
Technologies common stock at a price of $4.00 per share), and 300,000 shares
of newly issued Series B 7% Cumulative Preferred Stock, par value $1.00 per
share, with a stated value of $40.00 per share.
As a result of this transaction, TULSAT became a wholly owned subsidiary
of ADDvantage Technologies and the former TULSAT owners acquired
approximately 82% of the issued and outstanding common stock, and 100% of the
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issued and outstanding preferred stock of ADDvantage Technologies. TULSAT's
management assumed management and control of ADDvantage Technologies.
As a result of the transaction, all of the executive officers and
directors of the Company other than Gary W. Young, Executive Vice President
and a director, resigned. David E. Chymiak became Chairman of the Board and
Kenneth A. Chymiak became President and Chief Executive Officer of the
Company. The new board of directors included Stephen J. Tyde and Freddie H.
Gibson, in addition to Messrs. David Chymiak, Kenneth Chymiak and Gary Young.
Randy L. Weideman was elected to the board of directors in 2000.
On November 22, 1999, the Company's wholly owned subsidiary, Lee CATV
Corporation, a Nebraska corporation ("Lee"), merged with Diamond W
Investments, Inc., a Nebraska corporation ("Diamond"). Lee was the surviving
corporation and is carrying on the business and operations previously
conducted by Diamond. Diamond was established in 1986 as a full service
repair and sales center, selling new and re-manufactured cable equipment,
designing, pre-wiring, installing and repairing along with FCC Proof of
Performance on all types of headend equipment. Diamond built its reputation
on high-quality with prompt turn around in repairs and technical training for
their customers. As a result of the merger, the shareholders of Diamond
received 27,211 shares of the Company's Series C Convertible Preferred Stock
(which have since been converted into 272,110 shares of the Company's common
stock) and a promissory note in the original principal amount of $271,000,
which is payable over two years and bears interest at the rate of 8.0% per
annum.
On December 30, 1999, the name of the Company changed to ADDvantage
Technologies Group, Inc.
In March 2001, the Company purchased all of the issued and outstanding
common stock of NCS Industries, Inc., a Pennsylvania corporation ("NCS").
The consideration for the acquisition of $1,988,000 included: (i) $800,000 in
cash, (ii) a promissory note payable to the seller, Richard S. Grasso in the
amount of $200,000, (iii) the assumption of the seller's obligation of
$639,000 under a promissory note issued to the former shareholders, and (iv)
$49,000 remaining in a payable to the seller. As contemplated by the
Purchase and Sale Agreement, the seller entered into a three-year consulting
agreement with NCS for $300,000 and the seller also entered into a non-
competition agreement with the Company and NCS. The Company financed the
purchase price through borrowings under its line of credit agreement with
Bank of Oklahoma. As a result of this transaction, NCS became a wholly owned
subsidiary of the Company.
NCS was established in 1973 as a full service repair and sales center,
selling new and re-manufactured cable equipment and has been a leading
distributor of telecommunication equipment and a solutions provider to cable
operators and other related businesses since the market's infancy. The
principal place of business of NCS is located in Willow Grove, Pennsylvania.
In May 2001, the Company purchased from Nick Ferolito and Russell Brown
all of the issued and outstanding stock of Fero-Midwest dba Comtech Services,
a Missouri corporation ("Comtech). The consideration for the acquisition was
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$250,000 in cash and assumption of certain liabilities as stated in the
agreement. As a result of this transaction, Comtech became a wholly owned
subsidiary of the Company.
Current Business
The principal business of the Company is the sale and repair of cable
television ("CATV") equipment. This includes new, surplus and re-manufactured
equipment. Customers of the Company include: cable operators, apartment
complexes, universities and other entities that distribute broadband signals.
The Company purchases the equipment from cable operators who have surplus due
to either an upgrade in their systems or an overstock in their warehouse.
This equipment is sold both re-manufactured and "as is" to CATV operators
throughout North America, South America, Mexico and Pacific Rim. The Company
supplies virtually any type of electronic equipment a cable operator would use,
from the headend (receiving and transmitting site) to the converter box at the
customer's home. The Company also is a large stocking distributor for new
equipment.
Overview of the Industry
CATV is a service that delivers multiple channels of television to
subscribers who pay a monthly fee for the services they receive. A CATV
system consists of four principal components. The first is the "up-link"
where the programmer's signal is first scrambled and addressed, and is then
transmitted to a C-band satellite. The second, known as a cable system
"headend" facility, receives television signals from satellites and other
sources. The headend facility organizes and retransmits those signals
through the third component, the distribution network, to the subscriber.
The third principal component is the distribution network, which consists of
fiber optic and coaxial cables and associated electronic equipment, which
originate at the headend and extend throughout the CATV system. The fourth
component of the CATV system, the subscriber equipment, is comprised of a
"drop wire" which extends from the distribution network to the subscriber's
home and connects either directly to the subscriber's television set or to a
converter box. An addressable converter box is a home terminal device, which
permits the efficient delivery of premium CATV services, including pay-per-
view programming, by enabling the CATV operator to control CATV subscriber
services from a central headend computer.
CATV operators generally offer to subscribers a basic service package
and, for additional charges, additional tiers of services, including premium
services. Basic service programming typically includes broadcast network
local affiliates, independent television stations and other locally
originated programs. Additional tiers of service may consist of different
satellite-delivered services and premium services, such as HBO and ShowTime
that typically are offered to subscribers as a package for a separate monthly
fee. Successive tiers of programming include additional services for
additional monthly fees. In addition, movies and special entertainment
events, such as boxing matches and Olympic Games can be offered to
subscribers with addressable converters on a selective, pay-per-view basis.
CATV operators are also introducing digital cable audio services, which
consist of multiple channels of commercial-free, compact disc quality music
and programming.
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Business of the Company
The basic strategy of the Company is to: (a) maintain and expand its
current customer base in North America for the sale of new and re-manufactured
CATV equipment while focusing on expanding the repair side of the business
and (b) acquire existing companies in the industry within specific geographic
areas utilizing their service and sales staffs to increase sales.
The Company believes that the CATV industry is expanding from a home
entertainment service to providing telecommunications services to both homes
and businesses. Management believes that the Company is well positioned to
thrive and prosper in the industry.
Construction, maintenance, expansion and upgrade of CATV systems require
significant capital expenditures by CATV operators for system components,
including coaxial and fiber optic cable, traditional radio frequency ("RF")
amplifiers and fiber optic electronics, and addressable system controllers
and converters. A major trend in the cable and satellite television industry
has been the continuing expansion of channel capacity in response to CATV
operators' desire to provide subscribers with more programming selections,
including pay-per-view and additional premium programming services.
The Company expects that CATV operators will continue to upgrade the
technological capabilities of their systems and increase channel capacity in
order to meet subscriber demand for more programming services, such as
expanded pay-per-view, premium services and digital cable audio, which, in
turn, provides opportunities for increased revenues for the CATV operators.
In addition, new technologies can improve a CATV operator's margins and
customer services by increasing the CATV system's reliability, picture
quality and the "user friendliness" of the converter. The Company also
expects CATV operators to increase spending to meet governmental requirements
for renewing franchises and to position themselves to enter new and potential
markets such as telephone and personal communications networks.
In addition, the consolidation of CATV operators and their ongoing
transformation into multi-service companies is prompting a re-evaluation of
the re-manufactured equipment values, as new services roll out using new
technologies and state-of-the-art components. With the cost and
sophistication of new equipment and technologies on the rise, and their shelf
lives shrinking, the savvy use of re-manufactured equipment by cable
operators and manufacturers is becoming a vital component in their overall
operational strategies. The Company believes that it is in a position to
serve this expanding market.
With respect to technology, CATV operators and suppliers, including the
Company, are demonstrating that system upgrades with currently available
equipment and system architectures can be used as a basis to provide advanced
subscriber services. Moreover, the growing use of United States broadband
system designs and equipment in international markets, where CATV penetration
is low, presents another opportunity for sales of the Company's systems and
equipment.
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Products and Services
The majority of the Company's business is the sale of re-manufactured
CATV equipment. The following is a list of the products sold by the Company
with a brief description of the application of each product line:
Linegear covers all products, which are actually placed on the cable
line. This includes active electronics, trunk stations and line extenders,
which amplify and distribute the cable signal, and passive equipment such as
taps, splitters and directional couplers, which simply pass the signal
through for delivery to additional lines and the customer's home. The Company
focuses on sales and repair of Scientific Atlanta, Magnavox, Jerrold, General
Instruments, Texcan and Thetacom lines of taps, traps, splitters, DCs, power
inserters and pin connectors. Linegear presently account for approximately
43% of revenues.
Headend equipment is used to provide signal acquisition, processing
and manipulation for further transmission. Among the products offered by the
Company in this category are Scientific Atlanta, Blonder Tongue, Magnavox,
General Instruments and Drake lines of satellite receivers, integrated
receiver/decoders, videociphers, demodulators, modulators, amplifiers,
equalizers, processors, antennas, and antenna mounts. The Company
specializes in the refurbishing and repairing of various manufacturers' lines
of headend products as well as modifying these for use in different video
formats. Headend equipment presently account for approximately 46% of
revenues.
Repair Services are offered for all product lines, with an emphasis
in headend equipment. The Company expects this area to grow significantly
with the Company's focus on this side of the business and as additional
mergers or acquisitions develop.
Sales and Marketing
The majority of the Company's sales activity is generated through
personal relationships developed by its sales personnel and executives,
advertising in trade journals and other periodicals, telemarketing and direct
mail to cable operators in the United States. The Company has developed
contacts with the major CATV operators in the United States and is constantly
in touch with these operators regarding plans for upgrading or expansion and
their needs to either purchase or sell equipment. The Company purchases a
large amount of its inventory from cable operators who have upgraded, or are
in the process of upgrading their system. The sales and purchasing functions
operate under the same umbrella using a computerized buy/sell board to
coordinate the activity between the two. In addition, the Company has very
close relationships with major manufacturers of CATV equipment and purchases
a large amount of such equipment from these original equipment manufacturers.
The Company's purchasing department buys previously used CATV equipment
throughout North America. As a result of competition in the communications
industry, cable operators are aggressively upgrading their system with newer,
technologically advanced equipment. This provides the Company's purchasing
department opportunities to buy equipment, which were not normally available
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in the past. This competitive CATV market enables the Company to acquire
additional inventory for sale to cable operators who are expanding with new
subscribers or who are upgrading their system with the newer, more expensive
technology.
The Company is not dependent on one or a few customers to support its
business. There are approximately 6,000 cable television systems within the
United States, each of which is a potential customer.
Competition
There are a number of businesses similar to the Company throughout the
United States engaged in buying and selling re-manufactured CATV equipment.
Most competitors are not able to maintain the large inventory the Company
maintains due to capital requirements. In terms of sales and inventory, the
Company is the largest in this industry providing both sales and service of
re-manufactured CATV equipment.
The CATV industry is highly competitive and is characterized by numerous
companies competing in various segments of the market. In addition to
companies which operate in a manner similar to the Company, it also faces
competition from vendors supplying new products and various manufacturers in
this industry. The Company has the ability to ship and supply products to
their customers from its large inventory without having to wait for the
manufacturers to supply the items.
Personnel
At September 30, 2001, the Company had 132 employees. Management
considers its relationships with its employees to be excellent. The
employees of the Company are not unionized and the Company is not subject to
any collective bargaining agreements.
ITEM 2. DESCRIPTION OF PROPERTY
TULSAT leases a total of approximately 133,050 square feet of office
space and warehouse facilities in seven buildings from entities, which are
controlled by David E.Chymiak and Kenneth A. Chymiak. Each lease has a five-
year term. At September 30, 2001, total monthly payments of $36,500 were
required. The Company believes that its current facilities are adequate to
meet its needs.
ITEM 3. LEGAL PROCEEDINGS
The company is not involved in any material legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of the shareholders of the
Company during the fiscal quarter ended September 30, 2001.
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock traded on the Nasdaq Small Cap Market from
April 11, 1997 to September 21, 1999 under the symbol ADDM. On September 22,
1999, the Company's common stock was delisted from the Nasdaq Small Cap
Market because the closing price of the stock was less than $1.00 per share
for a period of greater than 30 consecutive trading days. The Company's
common stock is currently traded on the OTC Bulletin Board under the symbol
ADDM.
The following table sets forth, for the periods indicated, the high and
low closing bid quotations per share for the Company's common stock as quoted
on the Nasdaq Small Cap Market and the OTC Bulletin Board, as the case may
be. Quotations represent inter-dealer prices without an adjustment for
retail mark-ups, mark-downs or commissions and may not represent actual
transactions:
Year Ended September 30, 2000 High Low
----------------------------- ----- -----
First Quarter $4.13 $2.38
Second Quarter $3.63 $2.00
Third Quarter $3.75 $2.50
Fourth Quarter $2.63 $1.25
Year Ended September 30, 2001 High Low
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First Quarter $2.00 $0.81
Second Quarter $2.22 $1.03
Third Quarter $1.63 $0.86
Fourth Quarter $1.90 $0.81
Substantially all of the holders of common stock maintain ownership of
their shares in "street name" accounts and are not, individually,
shareholders of record. As of December 26, 2001, there were approximately 77
holders of record of common stock. However, the Company believes there are
in excess of 825 beneficial owners of common stock.
Dividend Policy
The Company has never declared or paid a cash dividend on its common
stock. It has been the policy of the Company's Board of Directors to use all
available funds to finance the development and growth of the Company's
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business. The payment of cash dividends in the future will be dependent upon
the earnings and financial requirements of the Company and other factors
deemed relevant by the Board of Directors.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
Year Ended September 30, 2001 Compared to Year Ended September 30, 2000 (ALL
REFERENCES TO YEARS ARE TO FISCAL YEARS)
Net Sales. Net sales increased $882,000 or 4.0%, to $22.9 million for the
year ended September 30, 2001 from $22.0 million for the year 2000. Despite
the slowdown in capital spending by cable operators due to the economic
environment in the United States and an over building of capacity, new sales
increased 160.0% from $2.1 million last year to $5.4 million this year as a
result of our new distributorship with Scientific-Atlanta and the acquisition
of NCS. Our focus on increasing repair revenue is evidenced by the 38.1%
increase from $2.4 million last year to $3.3 million this year primarily due
to the acquisitions of Comtech and NCS. Although we are pleased with the
results of repair services, they were severely impacted by the tightening of
credit for the small cable operators. Our revenue generated by sales of re-
manufactured equipment has also been impacted by the economic slowdown, and
as a result, revenue from re-manufactured equipment sales dropped 21.3% from
$17.5 million last year to $13.8 million this year.
Cost of Goods Sold. Cost of goods sold this year was 51.9% of net sales
compared to 50.2% last year. While the overall gross margins percentages
were relatively constant over the two years, the revenue mix has
significantly changed. In the year 2001, revenue generated from re-
manufactured sales was 60.3% of sales, compared to 79.7% last year, while
23.6% of our revenue this year was new equipment sales compared to 9.4% last
year. Margins for the current year were affected by the lower margins of
newly-acquired NCS and Comtech and the slow down in capital expenditures in
the cable industry that caused reduction in some of the selling prices of re-
manufactured equipment. Due to the nature of the secondary market for CATV
equipment, low inventory turnover tends to be a characteristic of companies
carrying this type of inventory. However, this condition greatly contributes
to the attainment of high profit margins and profitability of the Company.
Operating Expenses. Operating expenses increased $1.3 million, or 27.2% in
2001 over the previous year. Of this increase, $1.1 million was directly
attributable to operating expenses (primarily salaries and wages) associated
with NCS and Comtech and the $142,000 associated with increases in property
tax assessments.
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Income from Operations. Income from operations decreased 20.0 %, to $4.9
million for fiscal 2001 from $6.1 million for fiscal 2000. This decrease was
primarily due to the increase in operating costs associated with the recent
acquisitions.
Liquidity and Capital Resources
On November 4, 2000, the Bank of Oklahoma increased the Company's line
of credit up to $12.0 million and reduced the borrowing rate to 1 1/4% below
prime (4.75% at September 30, 2001). This line of credit will provide the
lesser of $6.0 million or the sum of 80% of qualified accounts receivable and
40% of qualified inventory in a revolving line of credit for working capital
purposes, $4.0 million for future acquisitions meeting Bank of Oklahoma
credit guidelines and $2.0 million to be used at the Company's discretion
based on assets purchased. The line of credit is collateralized by
inventory, accounts receivable, equipment and fixtures, and general
intangibles.
The Company finances its operations primarily through internally
generated funds and the 6.0 million bank line of credit reserved for working
capital. At September 30, 2001, the revolving line of credit consisted of a
$4.3 million balance outstanding due June 30, 2002, with interest payable
monthly at Chase Manhattan Prime less 1.25% (4.75% at September 30, 2001).
At September 30, 2001, the company also owes a $34,000 balance remaining on a
note resulting from the Diamond W Investments, Inc. purchase, payable
quarterly at 8% to the former owners and $179,000 on a note resulting from
the NCS purchase, payable quarterly at 7% to the former owner.
Stockholder loans include a $1.3 million note bearing interest the same
rate as the Company's bank line of credit, and which note is subordinate to
the bank note payable.
On February 1, 2000, the Board of Directors of the Company authorized
the repurchase of up to $l.0 million of its outstanding common stock from
time to time in the open market at prevailing market prices or in privately
negotiated transactions. The repurchased shares will be held in treasury and
used for general corporate purposes including possible use in the Company's
Incentive Stock Plan or for future acquisitions. As of September 30, 2001,
a total of 20,000 shares had been repurchased on the open market pursuant to
this authorization.
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ITEM 7. FINANCIAL STATEMENTS
Index to Financial Statements Page
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Independent Auditors' Report 12
Consolidated Balance Sheet, September 30, 2001 13
Consolidated Statements of Income for Years Ended September 30, 2001 and
2000 15
Consolidated Statement of Changes in Stockholders' Equity 16
Consolidated Statements of Cash Flows, Years Ended September 30, 2001 and
2000 17
Notes to Consolidated Financial Statements 19
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INDEPENDENT AUDITORS' REPORT
The Stockholders of
ADDvantage Technologies Group, Inc.
We have audited the accompanying consolidated balance sheet of ADDvantage
Technologies Group, Inc. (the "Company") as of September 30, 2001, and the
related statements of income, changes in stockholders' equity and cash flows
for the years ended September 30, 2001 and 2000. 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 auditing standards generally
accepted in the United States of America. 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
audits provide 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 the Company as of
September 30, 2001, and the results of its operations and its cash flows for
the years ended September 30, 2001 and 2000, in conformity with accounting
principles generally accepted in the United States of America.
/S/ TULLIUS TAYLOR SARTAIN & SARTAIN LLP
TULLIUS TAYLOR SARTAIN & SARTAIN LLP
December 20, 2001
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ADDVANTAGE TECHNOLOGIES GROUP, INC.
CONSOLIDATED BALANCE SHEET
September 30, 2001
Assets
Current assets:
Cash $ 230,558
Accounts receivable 2,995,486
Inventories 17,729,121
Deferred income taxes 36,000
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Total current assets 20,991,165
Property and equipment, at cost
Machinery and equipment 1,959,943
Land and buildings 478,871
Leasehold improvements 177,500
-------------
2,616,314
Less accumulated depreciation and amortization (857,105)
-------------
Net property and equipment 1,759,209
Other assets:
Deferred income taxes 990,000
Goodwill, net of accumulated amortization of $260,056 1,488,024
Other assets 106,493
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Total other assets 2,584,517
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Total assets $ 25,334,891
=============
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ADDVANTAGE TECHNOLOGIES GROUP, INC.
CONSOLIDATED BALANCE SHEET
September 30, 2001
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 852,424
Accrued expenses 491,839
Accrued income taxes 492,145
Bank revolving line of credit 4,251,133
Note payable - current portion 221,975
Dividends payable 310,000
Stockholder loans 1,250,000
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Total current liabilities 7,869,516
Notes payable 529,865
Stockholders' equity:
Preferred stock, 5,000,000 shares authorized,
$1.00 par value, at stated value:
Series A, 5% cumulative convertible; 200,000 shares issued and
outstanding with a stated value of $40 per share 8,000,000
Series B, 7% cumulative; 300,000 shares issued and outstanding with
a stated value of $40 per share 12,000,000
Common stock, $.01 par value; 30,000,000
shares authorized; 10,011,716 shares issued 100,117
Common stockholders' deficit (3,110,443)
-------------
16,989,674
Less: Treasury stock, 20,000 shares at cost (54,164)
-------------
Total stockholders' equity 16,935,510
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Total liabilities and stockholders' equity $ 25,334,891
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ADDVANTAGE TECHNOLOGIES GROUP, INC.
STATEMENTS OF INCOME
Year ended
September 30,
2001 2000
------------------------------------------
Net sales and service income $ 22,884,566 $ 22,002,543
Cost of sales 11,885,210 11,055,052
------------------------------------------
Gross profit 10,999,356 10,947,491
Operating expenses 6,144,174 4,813,011
------------------------------------------
Income from operations 4,855,182 6,134,480
Other Income - 127,235
Interest expense 336,752 385,069
------------------------------------------
Income before income taxes 4,518,430 5,876,646
Provision for income taxes 1,667,000 2,169,000
------------------------------------------
Net income 2,851,430 3,707,646
Preferred Dividends 1,240,000 1,240,000
Net income attributable to common ------------------------------------------
stockholders $ 1,611,430 $ 2,467,646
==========================================
Earnings per share:
Basic $ 0.16 $ 0.25
Diluted $ 0.16 $ 0.24
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ADDVANTAGE TECHNOLOGIES GROUP, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Years ended September 30, 2001 and 2000
Series A Series B Common
Common Stock Preferred Preferred Stockholders' Treasury
Shares Amount Stock Stock Deficit Stock Total
------------------------------------------------------------------------------------
Balance, September 30, 1999 9,712,346 $ 97,124 $8,000,000 $12,000,000 $(8,212,241) $ - $11,884,883
Net income - - - - 3,707,646 - 3,707,646
Preferred stock dividends (1,240,000) (1,240,000)
Purchase Treasury Stock (54,164) (54,164)
Options Exercised 8,500 85 12,052 12,137
Issue common shares for business purchase 272,110 2,721 997,341 1,000,062
------------------------------------------------------------------------------------
Balance, September 30, 2000 9,992,956 $ 99,930 $8,000,000 $12,000,000 $(4,735,202) $(54,164) $15,310,564
Net income 2,851,430 2,851,430
Preferred stock dividends (1,240,000) (1,240,000)
Issue common shares 18,760 187 13,329 13,516
-------------------------------------------------------------------------------------
Balance, September 30, 2001 10,011,716 $ 100,117 $8,000,000 $12,000,000 $(3,110,443) $(54,164) $16,935,510
=====================================================================================
-16-
ADDVANTAGE TECHNOLOGIES GROUP, INC.
STATEMENTS OF CASH FLOWS
Year ended
September 30,
2001 2000
-------------------------------------
Cash Flows from Operating Activities
Net income $ 2,851,430 $ 3,707,646
Adjustments to reconcile net income to net cash provided
by operating activities
Depreciation and amortization 312,441 202,886
Provision for deferred income taxes 117,000 155,000
Change in:
Receivables 1,118,782 (381,953)
Prepaid and other expense (26,431) 157,736
Inventories (2,327,183) (2,239,810)
Accounts payable and accrued liabilities (177,325) (341,280)
-------------------------------------
Net cash provided by operating activities 1,868,714 1,260,225
-------------------------------------
Cash Flows from Investing Activities
Additions to property and equipment (583,536) (275,000)
Proceeds from sale of investment in Ventures 657,569 90,047
Purchase business combinations, net of cash acquired of
$575,958 in 2001, and $90,047 in 2000 (1,090,269) -
-------------------------------------
Net cash used in investing activities (1,016,236) (184,953)
-------------------------------------
Cash Flows from Financing Activities
Net borrowings (repayments) under line of credit 895,585 (167,886)
Advances (payment) on stockholder loans (300,000) 74,993
Purchases of treasury stock - (54,164)
Payments of preferred dividends (1,240,000) (930,000)
Proceeds from exercise of common stock options - 7,437
-------------------------------------
Net cash used in financing activities (644,415) (1,069,620)
-------------------------------------
Net increase in cash 208,063 5,652
Cash, beginning of period 22,495 16,843
-------------------------------------
Cash, end of period $ 230,558 $ 22,495
=====================================
-17-
ADDVANTAGE TECHNOLOGIES GROUP, INC.
STATEMENTS OF CASH FLOWS
Year ended
September 30,
2001 2000
-------------------------------------
Supplemental Cash Flow Information
Cash paid for interest $ 343,460 $ 385,069
Cash paid for income taxes 1,462,000 2,149,000
Supplemental Disclosure of Non-cash
Investing and Financing Activities
Acquisition of Lee CATV Corporation:
Issuance of preferred stock - 1,000,000
Working capital other than cash - 241,017
Land and equipment - 116,694
Intangibles and other assets - 1,276,229
Assumption of note payable - 723,987
Issuance of note payable - 271,094
-18-
ADDVANTAGE TECHNOLOGIES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended September 30, 2001 and 2000
Note 1 - Summary of Significant Accounting Policies
Description of business
ADDvantage Technologies Group, Inc. and its subsidiaries (the "Company") sell
new, surplus, and re-manufactured cable television equipment throughout
North America in addition to being a repair center for various cable
companies. The Company operates in one business segment.
Principles of consolidation
The consolidated financial statements include the accounts of ADDvantage
Technologies Group, Inc. and its subsidiaries. All significant intercompany
balances and transactions have been eliminated in consolidation.
Inventory valuation
Inventory consists of new and used electronic components for the cable
television industry. Inventory is stated at the lower of cost or market.
Cost is determined using the weighted average method.
Property and equipment
Depreciation is provided using straight line and accelerated methods over the
estimated useful lives of the related assets. Repairs and maintenance are
expensed as incurred, whereas major improvements are capitalized.
Depreciation expense was $165,493 and $87,762 for the years ended
September 30, 2001 and 2000, respectively.
Income taxes
The Company provides for income taxes in accordance with the liability method
of accounting pursuant to SFAS No. 109, "Accounting for Income Taxes." Under
this method, deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases, and tax carryforward amounts. Management provides
valuation allowance against deferred tax assets for amounts which are not
considered "more likely than not" to be realized.
-19-
Revenue recognition
Revenue is recognized when inventory or service components are shipped to the
customers.
Advertising costs
Advertising costs are expensed as incurred. Advertising expense was $229,947
and $182,581 for the years ended September 30, 2001 and 2000, respectively.
Management 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 revenue and expenses during the reporting period.
Actual results could differ from those estimates.
Concentrations of credit risk
Financial instruments that potentially subject the Company to concentration
of credit risk consist principally of trade receivables. Concentrations of
credit risk with respect to trade receivables are limited because a large
number of geographically diverse customers make up the Company's customer
base, thus spreading the trade credit risk. The Company controls credit risk
through credit approvals, credit limits, and monitoring procedures. The
Company performs in-depth credit evaluations for all new customers but does
not require collateral to support customer receivables.
Goodwill
Goodwill is amortized on a straight-line basis over periods ranging from 10
to 20 years. Amortization of goodwill for the years ended September 30, 2001
and 2000, was $144,838 and $115,218, respectively.
Employee stock-based awards
Employee stock-based awards are accounted for using the intrinsic value
method prescribed in Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees" and related interpretations. Under APB
No. 25, compensation expense is based on the difference, if any, on the date
of grant between the fair value of the Company's stock and the exercise
price. The Company accounts for stock issued to non-employees in accordance
with the provisions of SFAS No. 123, "Accounting for Stock-Based
Compensation."
-20-
Earnings per share
Basic earnings per share are based on the sum of the average number of common
shares outstanding and issuable restricted and deferred shares. Diluted
earnings per share include any dilutive effect of stock options, restricted
stock and convertible preferred stock.
Fair value of financial instruments
The carrying amounts of accounts receivable and payable approximate fair
value due to their short maturities. The carrying value of the Company's
line of credit approximates fair value since the interest rate fluctuates
periodically based on the prime rate. Terms of the stockholder loans are
similar to the bank loan. Management believes that the carrying value of the
Company's borrowings approximate fair value based on credit terms currently
available for similar debt.
Impact of recently issued accounting standards
In July 2001, the FASB issued Statements of Financial Accounting Standards
No. 141, "Business Combinations" (SAFS 141), Statement of Financial
Accounting Standards No. 142, "Goodwill and Other Intangible Assets" (SFAS
142), and Statement No. 143, "Accounting for Asset Retirement Obligations"
(SFAS 143). SFAS 141 requires all business combinations to be accounted for
using the purchase method of accounting and is effective for all business
combinations initiated after June 30, 2001. The Company is currently not
affected by SFAS 141 as there are no transactions covered by these
pronouncements.
SFAS 142 requires goodwill to be tested for impairment under certain
circumstances, and written off when impaired, rather than being amortized as
previous standards required. SFAS 142 is effective for fiscal years
beginning after December 15, 2001. The Company has goodwill from recent
acquisitions and does not have any impairment at this time.
SFAS 143 requires entities to record the fair value of a liability for an
asset retirement obligation in the period in which it is incurred and a
corresponding increase in the carrying amount of the related long-lived
asset. Statement No. 143 is effective for fiscal years beginning after June
15, 2002. The Company does not expect SFAS 143 to have a material impact on
its financial condition and results of operations.
In August 2001, the FASB issued Statement No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets" (SFAS 144). SFAS 144 supersedes
Statement 121, "Accounting for the Impairment of Long-Lived assets and Long-
Lived Assets to Be Disposed Of" and the accounting and reporting provisions
of Accounting Principals Board Opinion No. 30, "Reporting the Results of
Operations-Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions"
for the disposal of a segment of a business. Goodwill is excluded from the
scope of Statement No. 144. Additionally, Statement No. 144 utilizes a
probability-weighted cash flow estimation approach and establishes a "primary-
asset" approach to determine the cash flow estimation period for a group of
assets. Statement No. 144 is effective for fiscal years beginning after
December 15, 2001. The Company does not expect SFAS 144 to have a material
impact on its financial condition and results of operations.
-21-
Note 2 - Cash Management
Cash receipts are applied from the Company's lockbox account directly against
the bank line of credit, and checks clearing the bank are funded from the
line of credit. The resulting overdraft balance, consisting of outstanding
checks, is $206,649 and $86,676 at September 30, 2001 and 2000 and is
included in accounts payable.
Note 3 - Line of Credit, Stockholder Loans, and Notes Payable
At September 30, 2001, a $4,251,132 balance is outstanding under a $6.0
million line of credit due June 30, 2002, with interest payable monthly at
Chase Manhattan Prime less 1.5% (4.75% at September 30, 2001). Borrowings
under the line of credit are limited to the lesser of $6.0 million or the sum
of 80% of qualified accounts receivable and 25% of qualified inventory. The
line of credit is collateralized by inventory, accounts receivable, equipment
and fixtures, and general intangibles, and is guaranteed by certain
stockholders up to an aggregate $1.0 million. The line of credit is subject
to customary covenants, including a minimum net income and net worth
requirement.
Stockholder loans of $1,250,000 million bear interest at rates that
correspond with the line of credit (4.75% at September 30, 2001) and are
subordinate to the bank notes payable.
Notes payable consist of the following items - a $250,000 obligation due
$25,000 per quarter over 10 quarters, a $159,959 note bearing interest at
7.0% due quarterly with a 3 year term, notes payable to Chymiak Investments
in the amounts of $160,455 and $147,458, bearing interest at 7.5% due monthly
with a 10 year term, and a $33,968 note bearing interest at 8% with the final
payment due October 22, 2001.
The aggregate maturities of notes payable for the five years ending September
30, 2006 are as follows: 2002 - $221,975; 2003 - $189,660; 2004 - $108,113;
2005 - $26,704; 2006 - $28,776; thereafter - $176,612.
-22-
Note 4 - Income Taxes
The provisions for income taxes consist of:
2001 2000
----------------------------
Current $1,550,000 $2,057,000
Deferred 117,000 112,000
----------------------------
$1,667,000 $2,169,000
============================
The following table summarizes the differences between the U.S. federal
statutory rate and the Company's effective tax rate for financial statement
purposes for the year ended September 30, :
2001 2000
-------------------------
Statutory tax rate 34.0% 34.0%
State income taxes, net
of U.S.federal tax benefit 3.4 3.4
Non-deductible goodwill
amortization and other
non-deductible expenses .9 .8
Adjustment of deferred
tax asset valuation allowance (1.2) (2.4)
allowance
Other (0.2) .8
-------------------------
36.9% 36.6%
=========================
Deferred tax assets consist of the following at September 30,
2001 2000
-------------------------
Net operating losses carryforwards $1,449,000 $1,539,000
Tax basis in excess of financial
basis of certain assets 108,000 245,000
Financial liability accruals 36,000 43,000
--------------------------
Total deferred tax assets 1,593,000 1,827,000
Valuation allowance (567,000) (684,000)
--------------------------
Net deferred tax asset $1,026,000 $1,143,000
==========================
-23-
Deferred Tax Assets are
classified as:
Current $ 36,000 $ 43,000
Noncurrent 990,000 1,100,000
---------------------------
$1,026,000 $ 1,143,000
===========================
Utilization of ADDvantage's net operating loss carryforward of approximately
$4,261,000 to reduce future taxable income is limited to an annual amount of
$265,000. The NOL carryforward expires in varying amounts from 2014 to 2019.
Note 5 - Stockholders' Equity
The 1998 Incentive Stock Plan provides for the award to officers, directors,
key employees and consultants of stock options and restricted stock. The
Plan provides that upon any issuance of additional shares of common stock by
the Company, other than pursuant to the Plan, the number of shares covered by
the Plan will increase to an amount equal to 10% of the then outstanding
shares of common stock. Under the Plan, option prices will be set by the
Board of Directors and may be greater than, equal to, or less than fair
market value on the grant date.
At September 30, 2001, 1,004,874 shares of common stock were reserved for the
exercise of stock awards under the 1998 Incentive Stock Plan. Of the shares
reserved for exercise of stock awards, 886,476 shares were available for
future grants at September 30, 2001.
A summary of the status of the Company's stock options at September 30, 2001
and 2000, and changes during the years then ended is presented below.
2001 2000
-------------------- ----------------------
Wtd. Avg. Wtd. Avg.
Shares Ex. Price Shares Ex. Price
-------------------- ----------------------
Outstanding, beginning of year 38,500 $2.23 14,750 $0.86
Granted 74,500 1.50 38,500 3.13
Exercised - - 14,750 0.84
Canceled - - - -
-------------------- ----------------------
Outstanding, end of year 113,000 $1.75 38,500 $2.23
==================== ======================
Exercisable, end of year 19,700 $2.23 6,000 $3.13
==================== ======================
Weighted average fair value of
Options granted $1.82 $2.56
========= ==========
-24-
The following table summarizes information about fixed stock options
outstanding at September 30, 2001:
Options Outstanding Options Exercisable
--------------------------------------- -------------------------
Weighted
Average
Number Remaining Number
Range of Outstanding Contract Wtd. Avg. Exercisable Wtd. Avg.
Exercise Prices At 9/30/01 Life Ex. Price at 9/30/01 Ex. Price
------------------------------------------------------------- --------------------------
$1.500 6,000 9.5 years $1.50 6,000 $1.50
$1.500 68,500 9.5 years $1.50 - $1.50
$3.125 6,000 8.5 years $3.13 6,000 $3.13
$3.125 32,500 8.5 years $3.13 6,500 $3.13
----------- ------------
113,000 18,500
=========== ============
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 2001: risk-free interest rates of 5.5%;
expected dividend yield of 0.0; expected lives of 10 years; and estimated
volatility of 122%.
SFAS No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123") provides
an alternative method of determining compensation cost for employee stock
options, which alternative method may be adopted at the option of the
Company. Had compensation cost been determined consistent with SFAS 123, the
Company's net income would not have changed significantly.
The Series A and Series B Preferred Stock are prior to the Company's common
stock with respect to the payment of dividends and the distribution of
assets. Cash dividends shall be payable quarterly when and as declared by
the Board of Directors. Interest accrues on unpaid dividends at the rate of
5% per annum with respect to the Series A Preferred Stock and 7% per annum
with respect to the Series B Preferred Stock. No dividends may be paid on
any class of stock ranking junior to the Preferred Stock unless Preferred
Stock dividends have been paid. Liquidation preference is equal to the stated
value per share. The Series A and B Preferred Stock is redeemable at any
time at the option of the Board of Directors at a redemption price equal to
the stated value per share. Holders of the Preferred Stock do not have any
voting rights unless the Company fails to pay dividends for four consecutive
dividend payment dates. Shares of Series A Preferred Stock are convertible
into common stock at any time at the option of the holder. Each share of
Series A Preferred Stock is convertible into 10 shares of common stock.
Note 6 - Operating Leases
The Company leases various properties primarily from a company owned by the
-25-
Company's principal shareholders. Future minimum lease payments under these
leases are as follows:
2002 438,000
2003 414,500
2004 357,000
2005 58,500
--------------
$ 1,268,000
==============
Total rental expense for all operating leases was $482,800 for the year ended
September 30, 2001 and $405,300 for the year ended September 30, 2000.
Note 7 - Retirement Plan
The Company sponsors a 401(k) plan that covers all employees who are at least
21 years of age and have completed one year of service as of the plan
effective date. The Company's contributions to the plan consist of a
matching contribution as determined by the plan document. Pension expense
under the 401(k) plan was $84,134 during the year ended September 30, 2001
and $56,586 during the year ended September 30, 2000.
Note 8 - Business Combinations
On March 2, 2001, the Company entered into a Purchase and Sale Agreement with
Richard S. Grasso (the "Shareholder") and NCS, a Pennsylvania corporation, to
purchase from the Shareholder all of the issued and outstanding common stock
of NCS. The consideration for the acquisition of $1,988,000 included: (i)
$800,000 in cash, (ii) a promissory note payable to the Shareholder in the
amount of $200,000, (iii) the assumption of Shareholder's obligation of
$639,000 under a promissory note issued to a prior owner of NCS (iv) $49,000
remaining in a payable to the shareholder; and a three-year consulting
agreement with NCS for $300,000. The Shareholder also entered into a non-
competition agreement with the Company and NCS. The Company financed the
purchase price through borrowings under its line of credit agreement with
Bank of Oklahoma. Immediately after closing, $639,000 was paid for the
assumption of the Shareholder's obligation. As a result of this transaction,
NCS became a wholly owned subsidiary of the Company.
NCS was established in 1973 as a full service repair and sales center,
selling new and re-manufactured cable equipment and has been a leading
distributor of telecommunication equipment and a solutions provider to cable
operators and other related businesses since the market's infancy. The
principal place of business of NCS is located in Willow Grove, Pennsylvania.
On May 31, 2001, the Company entered into a Purchase and Sale Agreement with
Nick Ferolito and Russell Brown (the "Shareholders") and Fero-Midwest dba
-26-
Comtech Services, a Missouri corporation ("Comtech"), to purchase from the
Shareholders all of the issued and outstanding common stock of Comtech. The
consideration for the acquisition was $250,000 in cash and assumption of
certain liabilities as stated in the agreement. As a result of this
transaction, Comtech became a wholly owned subsidiary of the Company.
Following are the unaudited pro-forma results of operations for the years
ending 2001 and 2000, assuming the NCS and Comtech acquisitions occurred at
the beginning of each year presented.
2001 2000
----------------------------
(Unaudited)
Net sales and service income $ 25,291,350 $ 30,177,640
Income before income tax 4,355,760 5,894,794
Income tax 1,494,026 2,169,000
Net income attributable to common stock 2,861,734 3,725,794
These unaudited pro-forma results have been prepared for comparison purposes
only and do not purport to be indicative of the results of operations which
would have actually resulted had the combination been in effect on the dates
indicated, or of future results of operations.
Note 9 - Investment in Ventures Education System Corporation
On November 1, 2000, Ventures Education System Corporation exercised its
option to repurchase the Company's 27% interest in Ventures. The exercise
price consisted of $660,000 and common stock warrants to purchase 50,000
shares at $.90 per share. The warrants expire on January 31, 2004 or one
year after a public offering, whichever first occurs. The warrants were
valued at $12,000. The transaction resulted in no gain or loss.
-27-
Note 10 - Earnings per Share
Year ended Year ended
September 30 September 30
2001 2000
----------------------------
Net income $ 2,981,702 $ 3,707,646
Dividends on preferred stock 1,240,000 1,240,000
stock
----------------------------
Net income attributable to
common shareholders - basic 1,741,702 2,467,646
Dividends on Series A
convertible preferred stock 400,000 400,000
----------------------------
Net income attributable to
common shareholders - diluted $ 2,141,702 $ 2,867,646
============================
Weighted average shares outstanding 9,991,716 9,862,054
Weighted average shares outstanding -
assuming dilution 11,991,716 11,862,054
============================
Earnings per common share:
Basic $ 0.16 $ 0.25
Diluted 0.16 0.24
============================
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
-28-
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
The information required by this item concerning the Company's officers,
directors and compliance with Section 16(a) of the Securities Exchange Act of
1934, as amended, is incorporated by reference to the information in the
sections entitled "Identity of Officers," "Election of Directors" and
"Compliance with Section 16(a) of the Exchange Act," respectively, of the
Company's Proxy Statement for the 2002 Annual Meeting of Shareholders (the
"Proxy Statement") to be filed with the Securities and Exchange Commission
within 120 days after the end of the Company's fiscal year ended September
30, 2001.
ITEM 10. EXECUTIVE COMPENSATION
The information required by this item concerning executive compensation
is incorporated by reference to the information set forth in the section
entitled "Compensation of Directors and Executive Officers" of the Company's
Proxy Statement.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item regarding certain relationships
and related transactions is incorporated by reference to the information set
forth in the section entitled "Security Ownership of Certain Beneficial
Owners and Management" of the Company's Proxy Statement.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item regarding certain relationships
and related transactions is incorporated by reference to the information set
forth in the section entitled "Certain Relationships and Related
Transactions" of the Company's Proxy Statement.
-29-
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following documents are included as exhibits to this Form 10-
KSB. Those exhibits below incorporated by reference herein are indicated as
such by the information supplied in the parenthetical thereafter. If no
parenthetical appears after an exhibit, such exhibit is filed herewith.
Exhibit
2.1 The Securities Exchange Agreement, dated as of September
16, 1999, by and among ADDvantage Media Group, Inc. and David
E. Chymiak, Kenneth A. Chymiak, as Trustee of the Ken Chymiak
Revocable Trust Dated March 4, 1992, and Susan C. Chymiak, as
Trustee of the Susan Chymiak Revocable Trust Dated March 4,
1992 is incorporated by reference to Exhibit 2 to the Current
Report on Form 8-K filed with the Securities Exchange
Commission by the Company on September 24, 1999.
2.2 The Amendment and Clarification of the Securities
Exchange Agreement, dated as of September 16, 1999
incorporated by reference to Exhibit 2.2 to the Current Report
on Form 8-K filed with the Securities Exchange Commission by
the Company on October 14, 1999.
2.3 The Agreement and Plan of Merger, dated as of November
22, 1999, by and among ADDvantage Media Group, Inc., TULSAT
Corporation, Lee CATV Corporation, Diamond W Investments,
Inc., Randy L. Weideman and Deborah R. Weideman incorporated
by reference to Exhibit 2.1 to the Current Report on Form 8-K
filed with the Securities Exchange Commission by the Company
on December 7, 1999.
2.4 The Sale and Purchase Agreement, dated as of March 2,
2001 by and among ADDvantage Technologies Group, Inc., NCS
Industries, Inc. and Richard S. Grasso incorporated by
reference to the Current Report on Form 8-K filed with the
Securities Exchange Commission by the Company on March 16,
2001.
2.5 The Purchase and Sale Agreement with Nick Ferolito,
Russell Brown and Fero-Midwest d/b/a Comtech Services, dated
May 31, 2001, less the exhibits and schedules listed in the
table of contents of that agreement. The Registrant
undertakes to furnish supplementally to the Commission upon
request a copy of any such omitted schedule or exhibit listed
in the Exhibit Index set forth elsewhere herein.
3.1 Certificate of Incorporation of the Company and
amendments thereto incorporated by reference to Exhibit 3.1 to
the Company's Registration Statement on Form S-18, File No. 33-
399902-FW (the "S-18 Registration Statement").
-30-
3.2 Fourth Amendment to the Certificate of Incorporation of
the Company incorporated by reference to Exhibit 3.2 to the
Company's Registration Statement on Form S-1, File No. 33-
49892 (the "S-1 Registration Statement").
3.3 Bylaws of the Company incorporated by reference to
Exhibit 3.2 to the S-18 Registration Statement.
4.1 Certificate of Designation, Preferences, Rights and
Limitations of ADDvantage Media Group, Inc. Series 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
field with the Securities Exchange Commission by the Company
on October 14, 1999.
4.2 Certificate of Designation, Preferences, Rights and
Limitations of ADDvantage Media Group, Inc. Series C
Convertible Preferred Stock as filed with the Oklahoma
Secretary of State on November 22, 1999 incorporated by
reference to Exhibit 2.1 to the Current Report on Form 8-K
filed with the Securities Exchange Commission by the Company
on December 7, 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 Current 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 Current
Report on Form 10-KSB filed with the Securities Exchange
Commission by the Company on December 30, 1999.
10.3 Promissory Note for $271,093.54 from the Company to Randy
L. Weideman and Deborah R. Weideman dated November 22, 1999
incorporated by reference to Exhibit 10.3 to the Current
Report on Form 10-KSB filed with the Securities Exchange
Commission by the Company on December 30, 1999.
-31-
10.4 Lease Agreement, dated November 22, 1999, by and between
Randy L. Weideman and Deborah R. Weideman and Lee CATV
Corporation incorporated by reference to Exhibit 10.1 to the
Current Report on Form 8-K filed with the Securities Exchange
Commission by the Company on December 7, 1999.
10.5 Employment Agreement, dated as of November 22, 1999, by
and between Lee CATV Corporation, Randy L. Weideman and TULSAT
Corporation incorporated by reference to Exhibit 10.2 to the
Current Report on Form 8-K filed with the Securities Exchange
Commission by the Company on December 7, 1999.
10.6 Noncompete Agreement, dated as of November 22, 1999, by
and between Lee CATV Corporation and Deborah R. Weideman
incorporated by reference to Exhibit 10.3 to the Current Report
on Form 8-K filed with the Securities Exchange Commission by
the Company on December 7, 1999.
10.7 Form of promissory notess issued by TULSAT to David Chymiak
and to Ken Chymiak Revocable Trust and Susan C. Chymiak
Revocable Trust dated as of February 7, 2000.
10.8 Amended and restated loan agreement dated June 30, 1997,
by and between Bank of Oklahoma, N.A. ("Lender") and
Registrant's wholly owned subsidiary, Tulsat Corporation,
formerly DRK Enterprises, Inc., an Oklahoma corporation doing
business as Tulsat ("Borrower"), as amended through the eighth
amendment dated as of November 3, 2000.
21.1 Subsidiaries.
23.1 Consent of Tullius Taylor Sartain & Sartain LLP.
(b) Reports on Form 8-K
None.
-32-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
ADDvantage Technologies Group, Inc.
Date: December 28 , 2001 By: /S/ Kenneth A. Chymiak
----------------------------------------
Kenneth A. Chymiak, President
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the capacities
and on the dates indicated.
Date: December 24, 2001 /S/ David E. Chymiak
-------------------------------------------
David E. Chymiak, Chairman of the Board of
Directors
Date: December 28, 2001 /S/ Kenneth A. Chymiak
-------------------------------------------
Kenneth A. Chymiak, President, Chief
Executive Officer and Director (Principal
Executive Officer and Principal Financial
Officer)
Date: December 28, 2001 /S/ Adam R. Havig
-------------------------------------------
Adam R. Havig, Controller (Principal
Accounting Officer)
Date: December 28, 2001 /S/ Gary W. Young
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Gary W. Young, Director
Date: December 28, 2001 /S/ Stephen J. Tyde
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Stephen J. Tyde, Director
Date: December 28, 2001 /S/ Freddie H. Gibson
-------------------------------------------
Freddie H. Gibson, Director
Date: December 28, 2001 /S/ Randy L. Weideman
-------------------------------------------
Randy L. Weideman, Director
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INDEX TO EXHIBITS
The following documents are included as exhibits to this Form 10-K. Those
exhibits below incorporated by reference herein are indicated as such by the
information supplied in the parenthetical thereafter. If no parenthetical
appears after an exhibit, such exhibit is filed herewith.
Exhibit Description
2.1 The Securities Exchange Agreement, dated as of September
16, 1999, by and among ADDvantage Media Group, Inc. and David
E. Chymiak, Kenneth A. Chymiak, as Trustee of the Ken Chymiak
Revocable Trust Dated March 4, 1992, and Susan C. Chymiak, as
Trustee of the Susan Chymiak Revocable Trust Dated March 4,
1992 is incorporated by reference to Exhibit 2 to the Current
Report on Form 8-K filed with the Securities Exchange
Commission by the Company on September 24, 1999.
2.2 The Amendment and Clarification of the Securities
Exchange Agreement, dated as of September 16, 1999
incorporated by reference to Exhibit 2.2 to the Current Report
on Form 8-K filed with the Securities Exchange Commission by
the Company on October 14, 1999.
2.3 The Agreement and Plan of Merger, dated as of November
22, 1999, by and among ADDvantage Media Group, Inc., TULSAT
Corporation, Lee CATV Corporation, Diamond W Investments,
Inc., Randy L. Weideman and Deborah R. Weideman incorporated
by reference to Exhibit 2.1 to the Current Report on Form 8-K
filed with the Securities Exchange Commission by the Company
on December 7, 1999.
2.4 The Sale and Purchase Agreement, dated as of March 2,
2001 by and among ADDvantage Technologies Group, Inc., NCS
Industries, Inc. and Richard S. Grasso incorporated by
reference to the Current Report on Form 8-K filed with the
Securities Exchange Commission by the Company on March 16,
2001.
2.5 The Purchase and Sale Agreement with Nick Ferolito,
Russell Brown and Fero-Midwest d/b/a Comtech Services, dated
May 31, 2001, less the exhibits and schedules listed in the
table of contents of that agreement. The Registrant
undertakes to furnish supplementally to the Commission upon
request a copy of any such omitted schedule or exhibit listed
in the Exhibit Index set forth elsewhere herein.
3.1 Certificate of Incorporation of the Company and
amendments thereto incorporated by reference to Exhibit 3.1 to
the Company's Registration Statement on Form S-18, File No. 33-
399902-FW (the "S-18 Registration Statement").
3.2 Fourth Amendment to the Certificate of Incorporation of
the Company incorporated by reference to Exhibit 3.2 to the
Company's Registration Statement on Form S-1, File No. 33-
49892 (the "S-1 Registration Statement").
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3.3 Bylaws of the Company incorporated by reference to
Exhibit 3.2 to the S-18 Registration Statement.
4.1 Certificate of Designation, Preferences, Rights and
Limitations of ADDvantage Media Group, Inc. Series 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
field with the Securities Exchange Commission by the Company
on October 14, 1999.
4.2 Certificate of Designation, Preferences, Rights and
Limitations of ADDvantage Media Group, Inc. Series C
Convertible Preferred Stock as filed with the Oklahoma
Secretary of State on November 22, 1999 incorporated by
reference to Exhibit 2.1 to the Current Report on Form 8-K
filed with the Securities Exchange Commission by the Company
on December 7, 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.).
10.2 Schedule of documents substantially similar to Exhibit
10.1.
10.3 Promissory Note for $271,093.54 from the Company to Randy
L. Weideman and Deborah R. Weideman dated November 22, 1999.
10.4 Lease Agreement, dated November 22, 1999, by and between
Randy L. Weideman and Deborah R. Weideman and Lee CATV
Corporation incorporated by reference to Exhibit 10.1 to the
Current Report on Form 8-K filed with the Securities Exchange
Commission by the Company on December 7, 1999.
10.5 Employment Agreement, dated as of November 22, 1999, by and
between Lee CATV Corporation, Randy L. Weideman and TULSAT
Corporation incorporated by reference to Exhibit 10.2 to the
Current Report on Form 8-K filed with the Securities Exchange
Commission by the Company on December 7, 1999.
10.6 Noncompete Agreement, dated as of November 22, 1999, by and
between Lee CATV Corporation and Deborah R. Weideman
incorporated by reference to Exhibit 10.3 to the Current Report
on Form 8-K filed with the Securities Exchange Commission by
the Company on December 7, 1999.
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10.7 Form of promissory notess issued by TULSAT to David Chymiak and
to Ken Chymiak Revocable Trust and Susan C. Chymiak Revocable
Trust dated as of February 7, 2000.
10.8 Amended and restated loan agreement dated June 30, 1997, by and
between Bank of Oklahoma, N.A. ("Lender") and Registrant's
wholly owned subsidiary, Tulsat Corporation, formerly DRK
Enterprises, Inc., an Oklahoma corporation doing business as
Tulsat ("Borrower"), as amended through the eighth amendment
dated as of November 3, 2000.
21.2 Subsidiaries.
23.1 Consent of Tullius Taylor Sartain & Sartain LLP.
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