UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark
(Mark One)
[x]
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 ORor 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED DECEMBERMARCH 31, 2005, OR
2006,
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROMFROM________________ TO ------------ -----------
______________
Commission File number 1-10799
ADDvantage Technologies Group, Inc.
(Exact
(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 E. Iola
Broken Arrow, Oklahoma 74012
(Address of principal executive office) (Zip Code)
OKLAHOMA | 73-1351610 |
| (State or other jurisdiction of | (I.R.S. Employer |
| incorporation or organization) | Identification No.) |
1221 E. Houston | |
Broken Arrow, Oklahoma | 74012 |
| (Address of principal executive office) | (Zip Code) |
(918) 251-9121
(Registrant's
(Registrant's telephone number, including area code)
Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for suchmuch 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__X_ No ------ ------
_____
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. (See definition of
"accelerated filer and large accelerated filer"(as defined in Rule 12b-2 of the Exchange Act).
Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [X]
| Large accelerated filer ______ | Accelerated filer ______ | Non-accelerated filer __X__ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-212-2 of the Exchange Act). Yes _____ No X
------- ------
__X__
Shares outstanding of the issuer's $.01 par value common stock as of January 31,May 5, 2006 were 10,115,647.
Part I 10,142,247.
- Financial Information Page
Financial Information:
Item 1. Financial Statements
Consolidated Balance Sheets
December 31, 2005 (Unaudited) and September 30, 2005 3
Consolidated Statements of Income and Comprehensive
Income (Unaudited)
Three Months Ended December 31, 2005 and 2004 5
Consolidated Statements of Cash Flows (Unaudited)
Three Months Ended December 31, 2005 and 2004 6
Notes to Unaudited Consolidated Financial Statements 7
Item 2.
Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Item 3.
Quantitative and Qualitative Disclosures About Market Risk 13
Item 4.
Controls and Procedures 13
Part II1 - Other Information
Item 6. Exhibits 13
Signatures 14
-2-
ADDVANTAGE TECHNOLOGIES GROUP, INC.
Form 10-Q
For the Period Ended March 31, 2006
PART I. Financial Information | |
ITEM 1 - Financial Statements (Unaudited) | |
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| PART II - Other Information | |
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ADDVANTAGE TECHNOLOGIES GROUP, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
December 31, September 30,
2005 2005
(Unaudited) (Audited)
Assets
Current assets:
Cash $ 733,607 $ 449,219
Accounts receivable, net of allowance of
$222,000 and $92,000 at December 31, and
September 30, 2005 respectively 6,460,061 7,671,549
Inventories, net of allowance for excess and
obsolete inventory of $1,575,395 at
December 31, and September 30, 2005
repectively 27,763,873 25,321,149
Deferred income taxes 1,024,000 968,000
Total current assets 35,981,541 34,409,917
Property and equipment, at cost:
Machinery and equipment 2,414,874 2,357,182
Land and buildings 1,598,808 1,591,413
Leasehold improvements 525,006 565,945
------------ -----------
4,538,688 4,514,540
Less accumulated depreciation and amortization (1,858,406) (1,811,784)
------------ -----------
Net property and equipment 2,680,282 2,702,756
Other assets:
Deferred income taxes 784,000 786,000
Goodwill,net 1,150,060 1,150,060
Other assets 237,925 220,275
------------ -----------
Total other assets 2,171,985 2,156,335
------------ -----------
Total assets $40,833,808 $39,269,008
| | | March 31, | | September 30, | |
| | | 2006 | | 2005 | |
| | | (Unaudited) | | (Audited) | |
Assets | | | | | |
| Current assets: | | | | | |
| Cash | | $ | 204,868 | | $ | 449,219 | |
Accounts receivable, net allowance of $383,000 and $92,000 | | | 6,427,086 | | | 7,671,549 | |
Inventories, net of allowance for excess and obsolete inventory of $1,575,395 and $1,575,395 | | | 26,592,677 | | | 25,321,149 | |
| Deferred income taxes | | | 1,182,750 | | | 968,000 | |
| Total current assets | | | 34,407,381 | | | 34,409,917 | |
Property and equipment, at cost: | | | | | | | |
| Machinery and equipment | | | 2,429,540 | | | 2,357,182 | |
| Land and buildings | | | 1,606,730 | | | 1,591,413 | |
| Leasehold improvements | | | 525,006 | | | 565,945 | |
| | | | 4,561,276 | | | 4,514,540 | |
| Less accumulated depreciation and amortization | | | (1,919,043 | ) | | (1,811,784 | ) |
| Net property and equipment | | | 2,642,233 | | | 2,702,756 | |
| | | | | | | | |
| Other assets: | | | | | | | |
| Deferred income taxes | | | 702,250 | | | 786,000 | |
| Goodwill | | | 1,150,060 | | | 1,150,060 | |
| Other assets | | | 295,946 | | | 220,275 | |
| Total other assets | | | 2,148,256 | | | 2,156,335 | |
| | | | | | | | |
Total assets | | $ | 39,197,870 | | $ | 39,269,008 | |
See notes to unaudited consolidated condensed financial statements.
-3-
ADDVANTAGE TECHNOLOGIES GROUP, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
December 31, September 30,
2005 2005
(Unaudited) (Audited)
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 4,260,223 $ 4,958,834
Accrued expenses 1,140,976 1,876,523
Accrued income taxes 791,979 110,691
Bank revolving line of credit 3,312,632 2,234,680
Notes payable - current portion 1,239,589 1,239,071
Dividends payable 210,000 210,000
------------ ------------
Total current liabilities 10,955,399 10,629,799
Notes payable 5,598,074 5,908,199
Stockholders' equity:
Preferred stock, 5,000,000 shares authorized,
$1.00 par value, at stated value:
Series B, 7% cumulative; 300,000 shares issued and
outstanding with a stated value of
$40 per share 12,000,000 12,000,000
Common stock, $.01 par value; 30,000,000 shares
authorized; 10,095,897 and 10,093,147 shares
issued and outstanding, respectively 100,959 100,931
Paid-in capital (7,261,833) (7,265,930)
Retained earnings 19,392,561 17,860,967
Accumulated other comprehensive income:
Unrealized gain on interest rate swap
(net of $65,000 and $55,000 in taxes) 102,812 89,206
------------ ------------
24,334,499 22,785,174
Less: Treasury stock, 21,100 shares at cost (54,164) (54,164)
Total stockholders' equity 24,280,335 22,731,010
Total liabilities and stockholders' equity $40,833,808 $39,269,008
| | | March 31, | | September 30, | |
| | | 2006, | | 2005 | |
| | | (Unaudited) | | (Audited) | |
Liabilities and Stockholders’ Equity | | | | | |
| Current liabilities: | | | | | |
| Accounts payable | | $ | 1,934,846 | | $ | 4,958,834 | |
| Accrued expenses | | | 1,238,350 | | | 1,876,523 | |
| Accrued income taxes | | | 78,245 | | | 110,691 | |
| Bank revolving line of credit | | | 3,711,913 | | | 2,234,680 | |
| Notes payable - current portion | | | 1,246,656 | | | 1,239,071 | |
| Dividends payable | | | 210,000 | | | 210,000 | |
| Total current liabilities | | | 8,420,190 | | | 10,629,799 | |
| | | | | | | | |
| Notes payable | | | 5,281,219 | | | 5,908,199 | |
Stockholders’ equity: | | | | | | | |
| Preferred stock, 5,000,000 shares authorized, $1.00 par value, at stated value: Series B, 7% cumulative; 300,000 shares issued and outstanding with a stated value of $40 per share | | | 12,000,000 | | | 12,000,000 | |
| Common stock, $.01 par value; 30,000,000 shares authorized; 10,163,247 and 10,093,147 shares issued and outstanding, respectively | | | 101,632 | | | 100,931 | |
| Paid-in capital | | | (6,937,922 | ) | | (7,265,930 | ) |
| Retained earnings | | | 20,259,359 | | | 17,860,967 | |
| Accumulated other comprehensive income: | | | | | | | |
| Unrealized gain on interest rate swap, net of tax | | | 127,556 | | | 89,206 | |
| | | | 25,550,625 | | | 22,785,174 | |
| | | | | | | | |
| Less: Treasury stock, 21,100 shares at cost | | | (54,164 | ) | | (54,164 | ) |
Total stockholders’ equity | | | 25,496,461 | | | 22,731,010 | |
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Total liabilities and stockholders’ equity | | $ | 39,197,870 | | $ | 39,269,008 | |
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See notes to unaudited consolidated condensed financial statements.
-4-
ADDVANTAGE TECHNOLOGIES GROUP, INC.
(UNAUDITED)
Three Months Ended December 31,
2005 2004
Net sales $ 13,540,949 $ 11,117,284
Net service income 1,212,662 1,143,841
------------ ------------
Total income 14,753,611 12,261,125
Costs of sales 8,833,114 7,373,377
Cost of service 849,945 831,334
------------ ------------
Gross profit 5,070,552 4,056,414
Operating, selling, general and
administrative expenses 2,130,412 1,510,542
Depreciation and amortization 46,622 57,031
------------ ------------
Income from operations 2,893,518 2,488,841
Interest expense 146,924 146,154
------------ ------------
Income before income taxes 2,746,594 2,342,687
Provision for income taxes 1,005,000 828,000
------------ ------------
Net income 1,741,594 1,514,687
Other comprehensive income: ------------ ------------
Unrealized gain on interest rate swap
(net of $10,000 and $6,275 in taxes) 13,606 10,239
------------ ------------
Comprehensive income $ 1,755,200 $ 1,524,926
------------ ------------
Net income $ 1,741,594 $ 1,514,687
Preferred dividends 210,000 210,000
------------ ------------
Net income attributable to common stockholders$ 1,531,594 $ 1,304,687
============ ============
Earnings per share:
Basic $ 0.15 $ 0.13
Diluted $ 0.15 $ 0.13
Shares used in per share calculation:
Basic 10,073,297 10,061,756
Diluted 10,116,782 10,117,873
| | | Three Months Ended March 31, | | Six Months Ended March 31, | |
| | | 2006 | | 2005 | | 2006 | | 2005 | |
| Net sales income | | $ | 11,198,570 | | $ | 8,681,531 | | $ | 24,739,519 | | $ | 19,798,815 | |
| Net service income | | | 1,220,587 | | | 1,213,355 | | | 2,433,249 | | | 2,357,196 | |
Total income | | | 12,419,157 | | | 9,894,886 | | | 27,172,768 | | | 22,156,011 | |
| | | | | | | | | | | | | | |
| Costs of sales | | | 7,474,629 | | | 5,540,336 | | | 16,307,743 | | | 12,913,713 | |
| Cost of service | | | 848,717 | | | 834,834 | | | 1,698,662 | | | 1,666,168 | |
| Gross profit | | | 4,095,811 | | | 3,519,716 | | | 9,166,363 | | | 7,576,130 | |
| Operating, selling, general and | | | | | | | | | | | | | |
| administrative expenses | | | 2,262,251 | | | 1,587,332 | | | 4,392,663 | | | 3,097,874 | |
| Depreciation and amortization | | | 60,637 | | | 58,109 | | | 107,259 | | | 115,140 | |
| Income from operations | | | 1,772,923 | | | 1,874,275 | | | 4,666,441 | | | 4,363,116 | |
Interest expense | | | 165,125 | | | 147,037 | | | 312,049 | | | 293,191 | |
| Income before income taxes | | | 1,607,798 | | | 1,727,238 | | | 4,354,392 | | | 4,069,925 | |
| Provision for income taxes | | | 531,000 | | | 639,000 | | | 1,536,000 | | | 1,467,000 | |
| | | | | | | | | | | | | | |
Net income | | | 1,076,798 | | | 1,088,238 | | | 2,818,392 | | | 2,602,925 | |
| | | | | | | | | | | | | | |
| Other comprehensive income: | | | | | | | | | | | | | |
Unrealized gain on interest rate swap (net of $13,000, $46,584, $23,000 and $52,859 in taxes) | | | 24,744 | | | 76,004 | | | 38,350 | | | 86,243 | |
| Comprehensive income | | $ | 1,101,542 | | $ | 1,164,242 | | $ | 2,856,742 | | $ | 2,689,168 | |
| | | | | | | | | | | | | | |
| Net income | | $ | 1,076,798 | | $ | 1,088,238 | | $ | 2,818,392 | | $ | 2,602,925 | |
| Preferred dividends | | | 210,000 | | | 210,000 | | | 420,000 | | | 420,000 | |
Net income attributable | | | | | | | | | | | | | |
to common stockholders | | $ | 866,798 | | $ | 878,238 | | $ | 2,398,392 | | $ | 2,182,925 | |
| | | | | | | | | | | | | | |
Earnings per share: | | | | | | | | | | | | | |
| Basic | | $ | 0.09 | | $ | 0.09 | | $ | 0.24 | | $ | 0.22 | |
| Diluted | | $ | 0.09 | | $ | 0.09 | | $ | 0.24 | | $ | 0.22 | |
| | | | | | | | | | | | | | |
| Shares used in per share calculation | | | | | | | | | | | | | |
| Basic | | | 10,133,147 | | | 10,065,128 | | | 10,122,685 | | | 10,063,441 | |
| Diluted | | | 10,172,143 | | | 10,117,578 | | | 10,182,106 | | | 10,117,972 | |
See notes to unaudited consolidated condensed financial statements.
-5-
ADDVANTAGE TECHNOLOGIES GROUP, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
December 31,
2005 2004
---- ----
Cash Flows from Operating Activities
Net income $ 1,741,594 $ 1,514,687
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 46,622 57,031
Deferred income tax benefit (64,000) -
Change in:
Receivables 1,211,488 (286,618)
Inventories (2,442,724) (826,411)
Other assets 5,956 (28,732)
Accounts payable (698,611) 1,181,148
Accrued expenses (54,259) (172,961)
------------ ------------
Net cash (used in) provided by operating
activities (253,934) 1,438,144
------------ ------------
Cash Flows from Investing Activities
Additions to property and equipment (24,148) (9,180)
------------ ------------
Net cash used in investing activities (24,148) (9,180)
------------ ------------
Cash Flows from Financing Activities
Net change under line of credit 1,077,952 (815,969)
Payments on notes payable (309,607) (309,111)
Proceeds from stock options exercised 4,125 3,275
Payments of preferred dividends (210,000) (210,000)
------------ ------------
Net cash provided by (used in) financing activities 562,470 (1,331,805)
------------ ------------
Net increase in cash 284,388 97,159
Cash, beginning of period 449,219 1,316,239
------------ ------------
Cash, end of period $ 733,607 $ 1,413,398
============ ============
Supplemental Cash Flow Information
Cash paid for interest $ 146,924 $ 146,154
Cash paid for income taxes $ 386,500 $ 529,947
(UNAUDITED)
| | | Six Months Ended March 31, | |
| | | 2006 | | 2005 | |
Cash Flows from Operating Activities | | | | | |
| Net income | | $ | 2,818,392 | | $ | 2,602,925 | |
| Adjustments to reconcile net income to net cash | | | | | | | |
| provided by operating activities: | | | | | | | |
| Depreciation and amortization | | | 107,259 | | | 115,140 | |
| Deferred income tax benefit | | | (131,000 | ) | | (48,859 | ) |
| Change in: | | | | | | | |
| Receivables | | | 1,244,463 | | | 638,813 | |
| Inventories | | | (1,271,528 | ) | | (2,303,246 | ) |
| Other assets | | | (37,321 | ) | | (56,779 | ) |
| Accounts payable | | | (3,023,988 | ) | | 1,218,651 | |
| Accrued liabilities | | | (670,439 | ) | | (436,766 | ) |
| Net cash provided by operating activities | | | (964,162 | ) | | 1,729,879 | |
| | | | | | | | |
Cash Flows from Investing Activities | | | | | | | |
| Additions to property and equipment | | | (46,736 | ) | | (57,677 | ) |
| Net cash used in investing activities | | | (46,736 | ) | | (57,677 | ) |
| | | | | | | | |
Cash Flows from Financing Activities | | | | | | | |
| Net change under line of credit | | | 1,477,233 | | | (1,389,433 | ) |
| Payments on notes payable | | | (619,395 | ) | | (618,392 | ) |
| Proceeds from stock options exercised | | | 328,709 | | | 16,935 | |
| Payments of preferred dividends | | | (420,000 | ) | | (420,000 | ) |
| Net cash (used in) or provided by financing activities | | | 766,547 | | | (2,410,890 | ) |
| | | | | | | | |
| Net decrease in cash | | | (244,351 | ) | | (738,688 | ) |
| | | | | | | | |
| Cash, beginning of period | | | 449,219 | | | 1,316,239 | |
| | | | | | | | |
| Cash, end of period | | $ | 204,868 | | $ | 577,551 | |
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Supplemental Cash Flow Information | | | | | | | |
| Cash paid for interest | | $ | 305,041 | | $ | 293,191 | |
| Cash paid for income taxes | | $ | 1,717,500 | | $ | 1,930,972 | |
See notes to unaudited consolidated condensed financial statements.
-6-
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Basis of Presentation
The accompanying unaudited consolidated condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United
Statesaccounting principles for interim financial statements and do not include all information and footnotes required by generally accepted accounting principles for complete financial statements. However, the information furnished reflects all adjustments, consisting only of normal recurring items which are, in the opinion of management, necessary in order to make the financial statements not misleading. The consolidated financial statements as of September 30, 2005 have been audited by an independent certifiedregistered public accountants.accounting firm. It is suggested that these consolidated financial statements be read in conjunction with the financial statements and the notes thereto included in the Company'sCompany’s Annual Report on Form 10-K for the fiscal year ended September 30, 2005.
Note 2 - Description of Business
ADDvantage Technologies Group, Inc., through its subsidiaries Tulsat Tulsat-Nebraska, Inc.,Corporation, ADDvantage Technologies Group of Nebraska, NCS Industries, Inc., ADDvantage Technologies Group of Missouri, Inc., ADDvantage Technologies Group of Texas, Tulsat-Atlanta, LLC,Tulsat - Atlanta, LLC., and Jones Broadband International, Inc,Inc., (collectively, the "Company"), sells new, surplus, and refurbished cable television equipment throughout North America and Latin America in addition to being a repair center for various cable companies. The Company operates in one business segment.
Note 3 - Earnings perPer Share
Basic and diluted net earnings per share were computed in accordance with Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share." Basic net earnings per share is computed by dividing net earnings available to common shareholders (numerator) by the weighted average number of common shares outstanding (denominator) during the period and excludes the dilutive effect of stock options. Diluted net earnings per share gives effect to all dilutive potential common shares outstanding during a period. In computing diluted net earnings per share, the average stock price for the period is used in determining the number of shares assumed to be reacquired under the treasury stock method from the exercise of stock options.
-7-
Three months ended
December 31,
2005 2004
---- ----
Basic EPS Computation:
Net income attributable to
common stockholders $ 1,531,594 $ 1,304,687
Weighted average outstanding
common shares 10,073,297 10,061,756
Earnings per Share
- Basic $ 0.15 $ 0.13
============= ============
Diluted EPS Computation:
Net income attributable to
common stockholders $ 1,531,594 $ 1,304,687
Weighted average outstanding
common shares 10,073,297 10,061,756
Potentially dilutive securities7 - -------------------------------
Effect of dilutive stock options 43,485 56,117
Weighted average shares outstanding - ------------- ------------
assuming dilution 10,116,782 10,117,873
Earnings per Share - Diluted $ 0.15 $ 0.13
============== ============
| | | Three Months Ended March 31, | | Six Months Ended March 31, | |
| | | 2006 | | 2005 | | 2006 | | 2005 | |
Basic EPS Computation: | | | | | | | | | |
| | | | | | | | | | |
| Net income attributable to | | | | | | | | | |
| common stockholders | | $ | 866,798 | | $ | 878,238 | | $ | 2,398,392 | | $ | 2,182,925 | |
| | | | | | | | | | | | | | |
| Weighted average outstanding | | | | | | | | | | | | | |
| common shares | | | 10,133,147 | | | 10,065,128 | | | 10,122,685 | | | 10,063,441 | |
| | | | | | | | | | | | | | |
| Earnings per Share - Basic | | $ | 0.09 | | $ | 0.09 | | $ | 0.24 | | $ | 0.22 | |
| | | | | | | | | | | | | | |
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Diluted EPS Computation: | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| Net income attributable to | | | | | | | | | | | | | |
| common stockholders | | $ | 866,798 | | $ | 878,238 | | $ | 2,398,392 | | $ | 2,182,925 | |
| | | | | | | | | | | | | | |
| Weighted average outstanding | | | | | | | | | | | | | |
| common shares | | | 10,133,147 | | | 10,065,128 | | | 10,122,685 | | | 10,063,441 | |
| | | | | | | | | | | | | | |
| Potentially dilutive securities | | | | | | | | | | | | | |
| Effect of dilutive stock options | | | 38,996 | | | 52,450 | | | 59,421 | | | 54,531 | |
Weighted average shares outstanding | | | | | | | | | | | | | |
| assuming dilution | | | 10,172,143 | | | 10,117,578 | | | 10,182,106 | | | 10,117,972 | |
| | | | | | | | | | | | | | |
| Earnings per Share - Diluted | | $ | 0.09 | | $ | 0.09 | | $ | 0.24 | | $ | 0.22 | |
| | | | | | | | | | | | | | |
Note 4 - Line of Credit, Stockholder Loans, and Notes Payable
At DecemberMarch 31, 2005,2006, a $3,312,632$3,711,913 balance is outstanding under a $7.0 million line of credit due September 30, 2006, with interest payable monthly based on the prevailing 30-day LIBOR rate plus 2.0% (6.4%(6.83% at DecemberMarch 31, 2005)2006). At
December 31, 2005, $3,687,368$3.3 million of the $7.0 million line of credit was available for borrowingat March 31, 2006. Borrowings under the line of credit.
credit are limited to the lesser of $7 million or the sum of 80% of qualified accounts receivable and 50% of qualified inventory for working capital purposes. Among other financial covenants, the line of credit agreement provides that the Company’s net worth must be greater than $15 million plus 50% of annual net income (with no deduction for net losses), determined quarterly. The line of credit is collateralized by inventory, accounts receivable, equipment and fixtures, and general intangibles.
Cash receipts are applied from the Company'sCompany’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, was $43,783$347,680 at DecemberMarch 31, 2005,2006, and is included in the bank revolving line of credit.
An $8$8.0 million amortizing term note with Bank of Oklahoma was obtained to finance the redemption of the outstanding shares of the Series A Convertible Preferred Stock at September 30, 2004. The outstanding balance on this note was $6.5$6.2 million at DecemberMarch 31, 2005.2006. The note is due on September 30, 2009, with monthly principal payments of $100,000 plus accrued interest, and the note bears interest at the prevailing 30-day LIBOR rate plus 2.50% (6.9% at
December 31, 2005). An interest rate swap was entered into simultaneously with the note on September 30, 2004, which fixed the interest rate at 6.13%. Upon entering into this interest rate swap, the Company designated this derivative as a cash flow hedge by documenting ourthe Company’s risk management objective and strategy
-8- for undertaking the hedge along with methods for assessing the swap's effectiveness. At DecemberMarch 31, 2005,2006, the fair market value of the interest rate swap approximated its carrying value of $167,812. $205,556.
Notes payable secured by real estate of $337,663$327,875 are due in monthly payments through 2013 with interest at 5.5% through 2008, converting thereafter to prime minus .25%.
Note 5 - Stock Option Plans
Effective October 1, 2005,
Prior to fiscal year 2006, the Company accounted for stock awards under the recognition and measurement principles of Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees”(“APB 25”) and related interpretations. Accordingly, the company historically recognized no compensation expense for grants of stock options to employees because all stock options had an exercise price equal to the market price of the underlying common stock on the date of the grant.
In the first quarter of fiscal year 2006, the Company adopted Statement of Financial Accounting Standards 123R, “Share Based Payment” (“SFAS 123R”). SFAS 123R which requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their grant date fair market values.value. The Company has elected the modified-prospective transition method of adopting SFAS 123R which requires the fair value of unvested options be calculated and amortized as compensation expense over the remaining vesting period. SFAS 123R does not require the Company to restate prior periods for the value of vested options. Compensation expense for stock based awards is included in the operating, selling, general and administrative expense section of the consolidated statements of income and comprehensive income. On October 1, 2005, all outstanding options, representing 144,767 shares, were fully vested. Therefore, the adoption of SFAS 123R had no impact on the Company's resultsCompany’s statement of operations. Employees exercised 2,750 sharesincome on the date of adoption.
On March 6, 2006, the Company issued nonqualified stock options totaling 35,000 to directors and executives. A portion of these options vested at the grant date and the remaining vest over 4 years. The company used the Black Scholes pricing model to calculate the value of the options. The value of the options granted on March 6 totaled $120,510. The Company recorded compensation expense of $88,537 during the quarter ended DecemberMarch 31, 2005,2006. The remaining $37,973 represents the value of the unvested portion of the options issued and nowill be amortized as compensation expense over the 4 year vesting term.
Employees exercised 67,350 options during the quarter ended March 31, 2006.
Note 6 - Subsequent Events and Commitments and Contingencies
On March 30, 2006, the Company issued a press release announcing the move of its corporate headquarters and the headquarters of its subsidiary Tulsat in Broken Arrow, Oklahoma. This move was not completed as of the date of this report. During the quarter ended March 31, 2006, the Company was not charged rent for the new options were granted.
facility but continued to incur rent on the facilities being vacated. The Company has the option to buy or lease the new facility and anticipates making this decision during the quarter ending June 30, 2006. In addition, the Company expects to terminate the leases on its vacated facilities without significant penalties. The change in cost from the rents on the existing leases to the rent, or depreciation and interest, on the new facility is not expected to be significant.
The facilities being vacated and the new facility are all owned by entities that are owned by David E. Chymiak and Kenneth A. Chymiak. Management believes that the terms of the occupancy agreements with the entities owned by Messrs Chymiak are consistent with the terms available under similar agreements with third parties.
Overview
We are a Value Added Reseller ("VAR") for selected Scientific-Atlanta and Motorola broadband new products. We also specialize in the sale of new surplus and refurbished previously-owned cable television ("CATV") equipment to CATV operators and other broadband communication companies. Within the last three years, we have become distributors for several different manufacturers of CATV equipment and other related products. It is through our development of these relationships that that we have focused our initiative to market our products and services to the larger cable multiple system operators ("MSOs"). As a
result, our overall sales increased for the first three months of fiscal 2006.
We continue to believe that as cable companies look at expandingto expand their services in key markets and to remain competitive, during this period of economic
recovery, there will be an emphasis on minimizing their costs, thus creating a higher demand for our repair services and surplus-new equipment.
Results of Operations
Comparison of Results of Operations for the Three Months Ended - --------------------------------------------------------------
DecemberMarch 31, 20052006 and DecemberMarch 31, 2004
- ---------------------------------------
2005
Net Sales. Net sales increased $2.5 million, or 20.3%25.5%, to $14.8$12.4 million in the firstsecond quarter of fiscal 2006 from $12.3$9.9 million for the same period in fiscal 2005, primarily due to the positive results of our marketing initiatives and
distributor relationships discussed in the previous paragraph.2005. New equipment sales were up 19.5%increased $2.9 million, or 45%, to $10.6$9.4 million forin the current period, compared with
$8.9second quarter of fiscal 2006 from $6.5 million for the same period in fiscal 2005. Our continued growth in new equipment sales results from midsize and large MSO customers adding new equipment to expand their bandwiths in an effort to offer bundled services that include video, data and telephony. The acquisition of Jones Broadband International in the fourth quarter of fiscal 2005. Sales2005 was responsible for 20% of remanufacturedthe growth in new equipment increased 27.0%sales. Refurbished sales dropped 18% to $2.8 million for the current period, compared
with $2.2 million in the same period last year. Repair service revenues were
up 6.1% to $1.21$1.7 million for the current quarter, compared with $1.14$2.1 million for the same period last year. The acquisition of Jones Broadband accountedRepair sales were up 6.5% to $1.19 million for 26.3% of the total net sales increase and all ofcurrent quarter, compared with $1.12 million for the repair income
increase.
Costsame period last year.
Costs of Sales. CostCosts of sales includes (i) the costcosts of new and refurbished equipment, on a weighted average cost basis, sold during the period, (ii) the equipment costcosts used in repairs, (iii) the related transportation cost,costs, and (iv) the labor and overhead directly related to these sales. CostCosts of sales -9-
increased $1.9 million, or 30.6%, to $9.7$8.3 million forin the firstsecond quarter of fiscal 2006 from $8.2$6.4 million for the same period of fiscal 2005. TheThis increase was primarily due to the increase in new equipment sales for the period and the Jones Broadband International acquisition, which was responsible for 20.5%33% of the total increased cost of sales. Cost of sales for new and
refurbished equipment decreased slightly to 65.2% of net sales income for 2006
from 66.3% of net sales income for 2005. Cost of sales for repair services
decreased to 70.1% of net service income for 2006 from 72.7% of net service
income for 2005.
Gross Profit.Profit. Gross profit climbed $1.0 million,increased $576,000, or 25.0%16.4%, to $5.1$4.1 million for the firstsecond quarter of fiscal 2006 from $4.1$3.5 million for the same period in fiscal 2005. The gross margin percentage dropped to 33.0% of revenue for the current quarter, compared to 35.6% of revenue for the same quarter last year. The margin percentage decrease was primarily due to increases in new product sales, as a percentage of total sales, at lower gross margins than refurbished and repairs sales which remained consistent between the two periods.
Operating, Selling, General and Administrative Expenses. Operating, selling, general and administrative expenses include personnel costs (including fringe benefits, insurance and taxes), occupancy, transportation (other than freight-in), communication and professional services, among other less significant cost categories. Operating, selling, general and administrative expenses increased $677,446, or 41.2%, to $2.3 million in the second quarter of fiscal 2006 from $1.7 million for the same period in 2005. Incremental operating, selling general and administrative expenses from the acquisition of Jones Broadband International was responsible for $328,685, or 48.5% of the increased expenses. Other increased expenses in the second quarter of 2006 include an increase in the reserve for bad debt of $150,000 and $88,537 of compensation costs for stock options issued, resulting from the implementation of FAS 123R. Prior to fiscal 2006, the Company accounted for stock options under the guidelines of APB 25, which did not result in expense recognition when stock options were granted.
Income from Operations. Income from operations decreased $101,351, or 5.4%, to $1.6 million for the second quarter of fiscal 2006 from $1.7 million for the same period last year. This decrease was primarily due to the decrease in gross margin percentage and the increase in operating, selling, general and administrative expenses, discussed herein.
Interest Expense. Interest expense for the second quarter of fiscal year 2006 was $165,125 compared to $147,036 for the same period last year. The increase was primarily attributable to an increase in borrowings on the line of credit. As of March 31, 2006 the line of credit balance was $3.7 million, compared to $1.8 million as of March 31, 2005.
Income Taxes. The provision for income taxes for the second quarter of fiscal 2006 was $531,000 or 33% of profit before tax, compared to $639,000 or 37% of profit before tax for the same period last year. The decrease was primarily due to lower pre-tax earnings in the second quarter of fiscal 2006 and a decrease in the estimated effective 2006 tax rate due to stock options exercised in the quarter ending March 31, 2006 and an increase in the estimated stock options that will be exercised in fiscal year 2006.
Comparison of Results of Operations for the Six Months Ended March 31, 2006 and March 31, 2005
Net Sales. Net sales increased $4.9 million, or 22.3%, to $27.2 million for the six months ended March 31, 2006 from $22.2 million for the same period in fiscal 2005. New equipment sales increased $4.6 million, or 30.0%, to $20.1 million for the six months ended March 31, 2006 from $15.4 million for the same period in fiscal 2005. Our continued growth in new equipment sales results from midsize and large MSO customers adding new equipment to expand their bandwiths in an effort to offer bundled services that include video, data and telephony. In addition, the acquisition of Jones Broadband International accounted for 16% of the new equipment sales increase. Refurbish sales grew 5.1% to $4.5 million for the six months ended March 31, 2006, from $4.3 million for the same period in 2005. Repair service revenues grew 4.8% to $2.36 million for the six months ended March 31, 2006, compared with $2.25 million for the same period last year.
Costs of Sales. Costs of sales includes (i) the costs of new and refurbished equipment, on a weighted average cost basis, sold during the period, (ii) the equipment costs used in repairs, (iii) the related transportation costs, and (iv) the labor and overhead directly related to these sales. Costs of sales increased $3.4 million, or 23.3%, to $18.0 million for the six months ended March 31, 2006 from $14.6 million for the same period of fiscal 2005. This increase was primarily due to increased new product sales for the period and the acquisition of Jones Broadband International which accounted for 28% of the total cost of sales increase.
Gross Profit. Gross profit increased $1.6 million, or 21%, to $9.2 million for the six months ended March 31, 2006 from $7.6 million for the same period in fiscal 2005. The gross margin percentage was 34.4%33.7% for the current quarter,period, compared to 33.1%34.2% for the same quarterperiod last year. The margin percentage increasedecrease was primarily due to increases in new product sales, as a percentage of total sales, at lower gross margins than refurbished and repairs sales which held less of a percentage of total sales from the increase in sales described above.
previous period.
Operating, Selling, General and Administrative Expenses. Operating, selling, general and administrative expenses include all personnel costs including(including fringe benefits, insurance and taxes,taxes), occupancy, transportation (other than freight-in), communication and professional services, among other less significant accounts.cost categories. Operating, selling, general and administrative expenses increased by $620,000 in$1.3 million, or 41.1%, to $4.5 million for the first quarter of fiscalsix months ended March 31, 2006 to $2.13 million
from $1.51$3.2 million for the same period in 2005,2005. Incremental operating, selling, general and administrative expenses from the acquisition of Jones Broadband International was responsible for $671,423, or 52% of the increased expenses. Other increased expenses in the first six months of fiscal 2006 include an increase in the reserve for bad debt of 41.0%. Over
half$290,000 and $88,537 of compensation costs for stock options issued, resulting from the increase was dueimplementation of FAS 123R. Prior to increased operating costs associated withfiscal 2006, the Jones Broadband acquisitionCompany accounted for stock options under the guidelines of APB 25, which did not result in August of 2005. The additional increase was due
to increased expenses related to the growth of the Company's sales and related
activities.
expense recognition when stock options were granted.
Income from Operations. Income from operations rose $405,000,increased $303,325, or 16.3%7.0%, to $2.9$4.7 million for the first quarter of fiscalsix months ended March 31, 2006 from $2.5$4.4 million for the same period last year. ThisThe increase was primarily due to increasesthe increase in sales of new and refurbished equipment partially offset by the increase in operating, costs.
selling, general and administrative expenses, discussed herein.
Interest Expense. Interest expense for the six months ended March 31, 2006 totaled $312,049 compared to $293,191 for the same period last year. The increase was primarily attributable to an increase in borrowings on the line of credit. As of March 31, 2006 the line of credit balance was $3.7 million, compared to $1.8 million as of March 31, 2005.
Income Taxes. The provision for income taxes for fiscalthe six months ended March 31, 2006 increasedtotaled $1.5 million or 33% of profit before taxes, compared to $1,005,000$1.5 million, or 36% of profit before taxes for the same period last year. The reduced effective tax rate resulted from $828,000stock options exercised in the quarter ending March 31, 2006 and an increase in the estimated stock options that will be exercised in fiscal 2005. This increase was due to higher
pre-tax earnings in fiscalyear 2006.
.
Critical Accounting Policies
Note 1 to the Consolidated Financial Statements in Form 10-K for fiscal
year 2005 includes a summary of the significant accounting policies or methods used in the preparation of our Consolidated Financial Statements. Some of those significant accounting policies or methods require us to make estimates and assumptions that affect the amounts reported by us. We believe the following items require the most significant judgments and often involve complex estimates.
General
-------
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. We base our estimates and judgments on historical experience, current market conditions, and various other factors we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The most significant estimates and assumptions relate to the carrying value of our inventory and, to a lesser extent, the adequacy of our allowance for doubtful accounts.
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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. Market is defined principally as net realizable value. Cost is determined using the weighted average method.
We market our products primarily to MSOs and other users of cable television equipment who are seeking products of which manufacturers have discontinued production, or are seeking shipment on a same-day basis. Our position in the industry requires us to carry large inventory quantities relative to quarterly sales, but also allows us to realize high overall gross profit margins on our sales. Carrying these largesignificant inventories represents our largestgreatest risk. For individual inventory items, we may carry inventory quantities that are excessive relative to market potential, or we may not be able to recover our acquisition costs for sales we are able to make in a reasonable period. Over the past two years, our investment in inventory has shifted to become predominantly new products purchased from manufacturers and "surplus-new"surplus-new products, which are unused products purchased from other distributors or MSOs.
In order to address the risks associated with our investment in inventory, we regularly review inventory quantities on hand and reduce the carrying value by recording a provision for excess and obsolete inventory based primarily on inventory aging and forecasts of product demand and pricing. The broadband industry is characterized by changing customer demands and changes in technology that could result in significant increases or decreases of inventory pricing or increases in excess or obsolete quantities on hand. Our estimates of future product demand may prove to be inaccurate; in which case the provision required for excess and obsolete inventory may have been understated or overstated. Although every effort is made to ensure the accuracy of internal forecasting, any significant changes in demand or prices could have a significant impact on the carrying value of our inventory and reported operating results. Demand for some of the items in our inventory has been impacted by recent economic conditions present in the cable industry. No
change to theAs of September 30, 2005 we have reduced inventories by maintaining an allowance for excess orand obsolete inventoryinventories totaling $1,575,000. No addition to this allowance was recorded during the quartersix months ended DecemberMarch 31, 2005.
2006.
Accounts Receivable Valuation
-----------------------------
Management judgments and estimates are made in connection with establishing the allowance for doubtful accounts. Specifically, we analyze the aging of accounts receivable balances, historical bad debts, customer concentrations, customer creditworthiness, current economic trends and changes in our customer payment terms. Significant changes in customer concentration or payment terms, deterioration of customer creditworthiness, or weakening in economic trends could have a significant impact on the collectibility of receivables and our operating results. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. At DecemberMarch 31, 2005,2006, accounts receivable, net of allowance for doubtful accounts of $222,000,$383,000, amounted to $6.5$6.4 million. The $130,000 increase in the doubtful accounts,
during the first fiscal quarter ended December 31, 2005, is based on the
analysis of a few of the Company's customers' change in paying habits.
Stock-based Compensation
------------------------
In December 2004, the FASB issued SFAS 123R, which replaced SFAS 123 and
superseded APB 25. SFAS 123R requires all share-based payments to employees,
including grants of employee stock options, to be recognized in the financial
statements based on their grant date fair market values and requires that such
recognition begin in the first interim or annual period after June 15, 2005,
-11-
with early adoption encouraged. In April 2005, the Securities and Exchange
Commission (the SEC) postponed the effective date of SFAS 123R until the
issuer's first fiscal year beginning after June 15, 2005. Under SFAS 123R,
the pro forma disclosures previously permitted no longer will be an alternative
to financial statement recognition. We adopted SFAS 123R effective
October 1, 2005, and will apply the Black-Scholes valuation model in
determining the fair value of share-based payments to employees, which will
then be amortized on a straight line basis over the requisite service period.
We will apply the modified prospective method, which requires that compensation
expense be recorded for all unvested stock options and restricted stock upon
adoption of SFAS 123R. On October 1, 2005, all outstanding options
representing 144,767 shares were fully vested. Employees exercised 2,750 shares
during the quarter ended December 31, 2005 and no new options were granted.
Liquidity and Capital Resources
We have a line of credit with the Bank of Oklahoma under which we are authorized to borrow up to $7.0$7 million at a borrowing rate based on the prevailing 30-day LIBOR rate plus 2.0% (6.4%(6.83% at DecemberMarch 31, 2005.2006.) This line of credit will provide the lesser of $7.0$7 million or the sum of 80% of qualified accounts receivable and 50% of qualified inventory in a revolving line of credit for working capital purposes. At December 31, 2005,
$3,687,368 was available for borrowing under the line of credit. The line of credit is collateralized by inventory, accounts receivable, equipment and fixtures, and general intangibles and had an outstanding balance at DecemberMarch 31, 2005,2006, of $3.3$3.7 million, due September 30, 2006. $3.3 million of the $7.0 million line of credit was available at March 31, 2006. We intend to renew the agreement at the maturity date under similar terms.
An $8 million amortizing term note with Bank of Oklahoma was obtained to finance the redemption of the outstanding shares of our Series A Convertible Preferred Stock at September 30, 2004. The outstanding balance on this note was $6.5$6.2 million at DecemberMarch 31, 2005.2006. The note is due on September 30, 2009, with monthly principal payments of $100,000 plus accrued interest, and the note bears interest at the prevailing 30-day LIBOR rate plus 2.50% (6.9% at
December 31, 2005). An interest rate swap was entered into simultaneously with the note on September 30, 2004, which fixed the interest rate at 6.13%.
Notes payable secured by real estate of $337,663$327,875 are due in monthly payments through 2013 with interest at 5.5% through 2008, converting thereafter to prime minus ..25%.25%.
We finance our operations primarily through internally generated funds and the bank line of credit. Monthly minimum payments of principal for notes payable and loans used to purchase buildings will be slightly overtotal $1.2 million in the next 12 months. We expect to fund these payments through cash flows from operations.
Forward Looking
Forward-Looking Statements
Certain statements included in this report which are not historical facts are forward-looking statements. These forward-looking statements are based on current expectations, estimates, assumptions and beliefs of management; and words such as "expects," "anticipates," "intends," "plans," "believes," "projects," "estimates" and similar expressions are intended to identify such forward-looking statements. These forward-looking statements involve risks and uncertainties, including, but not limited to, the future prospects for our business, our ability to generate or to raise sufficient capital to allow it to make additional business acquisitions, changes or developments in the cable television business that could adversely affect our business or operations, the continued availability to us of our key management personnel, general economic conditions, the availability of new and used equipment and other inventory and our ability to fund the costs thereof, and other factors which may affect our -12-
ability to comply with future obligations. Accordingly, actual results may differ materially from those expressed in the forward-looking statements.
Item
The Company'sCompany’s exposure to market rate risk for changes in interest rates relates primarily to its revolving line of credit. The interest rates under the line of credit fluctuate with the LIBOR rate. At DecemberMarch 31, 2005,2006, the outstanding balances subject to variable interest rate fluctuations totaled $3.3$3.7 million. Future changes in interest rates could cause our borrowing costs to increase or decrease.
The Company maintains no cash equivalents. However, the Company entered into an interest rate swap on September 30, 2004, in an amount equivalent to the $8 million notenotes payable in order to minimize interest rate risk. Although the note bears interest at the prevailing 30-day LIBOR rate plus 2.50%, the swap effectively fixed the interest rate at 6.13%. The fair value of this derivative, $167,812$205,556 at DecemberMarch 31, 2005,2006, will increase or decrease opposite any future changes in interest rates.
The Company does business in North America and Latin America. All sales and purchases are denominated in U.S. dollars. ItemThe majority of all sales into Latin America are made on a prepayment basis.
We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) designed to ensure that we are able to collect the information we are required to disclose in the reports we file or submit under the Exchange Act, and to record, process, summarize and report this information within the time periods specified in the rules of the Securities and Exchange Commission. Our Chief Executive Officer and Chief Financial Officer evaluated our disclosure controls and procedures as of the end of the period covered by this reportreport. Based on Form 10-Qtheir evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that these controls and procedures are effective to ensure that information required to be disclosed by us in
reports that we file or submit under the Exchange Act are recorded, processed,
summarized and reported within the time periods specified in Securities and
Exchange Commission rules and forms. We plan to implement increased education
of relevant personnel of the timing requirements for the reports required under
the Exchange Act and to adopt procedures which should result in better
coordination between our personnel responsible for reporting and our securities
counsel.
effective.
During the period covered by this report on Form 10-Q, there have been no changes in our internal controlcontrols over financial reporting that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.
PART II - OTHER INFORMATION
OTHER INFORMATION
Item 6. Exhibits
Exhibit No. Description
31.1 CertificationII—Other Information
The annual meeting of shareholders of the Sarbanes Oxley ActCompany was held in Broken Arrow, Oklahoma at the Corporate Offices of 2002.
32.1 CertificationADDvantage Technologies Group, Inc. on March 7, 2006. At the meeting, the following directors were elected for one year terms (with the votes as indicated):
| | FOR | WITHHELD |
| Kenneth A. Chymiak | 10,077,640 | 51,507 |
| David E. Chymiak | 10,087,540 | 41,607 |
| Stephen J. Tyde | 10,079,715 | 49,432 |
| Freddie H. Gibson | 10,089,615 | 39,532 |
| Henry F. McCabe | 10,087,615 | 41,532 |
The shareholders also approved the appointment of Chief Executive OfficerHogan and Chief
Financial Officer Pursuant to 18 U.S.C. Section 1350,Slovacek as Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
-13-
Company’s auditors for fiscal 2006 with 10,128,897 votes FOR, 0 votes AGAINST, and 250 votes ABSTAINING.
| Exhibit No. | Description |
| |
| 31.1 | Certification of Chief Executive Officer under Section 302 of the Sarbanes Oxley Act of 2002. |
| |
| 31.2 | Certification of Chief Financial Officer under Section 302 of the Sarbanes Oxley Act of 2002. |
| |
| 32.1 | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
| |
| 32.2 | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
ADDVANTAGE TECHNOLOGIES GROUP, INC.
(Registrant)
/s/ Kenneth A. Chymiak
-------------------------------------
Date: February 13, 2006 Kenneth A. Chymiak,
President and Chief Executive Officer
(Principal Executive Officer and
Principal Financial Officer)
/s/ James W. Brown
-------------------------------------
Date: February 13, 2006 James W. Brown,
Vice President and Secretary
(Chief Accounting Officer)
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(Registrant)
| | |
| |
| | |
| Date: May 15, 2006 | By: | /s/ KENNETH A. CHYMIAK |
| Kenneth A. Chymiak |
| (President and Chief Executive Officer) |
| | |
| |
| | |
| Date: May 15, 2006 | By: | /s/ DANIEL E. O'KEEFE |
| Daniel E. O'Keefe |
| (Chief Financial Officer) |
Exhibit Index
The following documents are included as exhibits to this Form 10-Q:
Exhibit No. Description
31.1 Certification of Chief Executive Officer and Chief Financial
Officer pursuant to Section 302 of the Sarbanes Oxley Act of
2002.
32.1 Certification of 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.
-15-
Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL
OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Kenneth A. Chymiak, certify that:
1. I have reviewed this quarterly report on Form 10-Q of ADDvantage
Technologies Group, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. I am responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15-(e))
for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under my supervision,
to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to me by others
within those entities, particularly during the period in which this
report is being prepared;
b. Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report my conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
c. Disclosed in this report any change in the registrant's internal control
over financial reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal quarter in the
case of an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant's internal control over
financial reporting; and
5. I have disclosed, based on my most recent evaluation of internal control
over financial reporting, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons performing the
equivalent functions):
a. All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
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Date: February 13, 2006
/s/ Kenneth A. Chymiak
-------------------------------------------
Kenneth A. Chymiak
Chief Executive Officer and Chief Financial
Officer
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Exhibit 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER PURSUANT
TO 18 U.S.C. SECTION 1350, AS ADOPTED PURUSANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of ADDvantage
Technologies Group, Inc. (the "Company") for the fiscal quarter ended
December 31, 2005, as filed with the Securities and Exchange Commission on the
date hereof (the "Report") I, Kenneth A. Chymiak, the Chief Executive Officer
and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934, as amended; and
(2) The information contained on the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Company.
/s/Kenneth A. Chymiak
----------------------------------------
Name: Kenneth A. Chymiak
Title: Chief Executive Officer and
Chief Financial Officer
Date: February 13, 2006
| Exhibit No. | Description |
| |
| 31.1 | Certification of Chief Executive Officer under Section 302 of the Sarbanes Oxley Act of 2002. |
| |
| 31.2 | Certification of Chief Financial Officer under Section 302 of the Sarbanes Oxley Act of 2002. |
| |
| 32.1 | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
| |
| 32.2 | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |