ADDVANTAGE TECHNOLOGIES GROUP INC - Quarter Report: 2013 March (Form 10-Q)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE    SECURITIES EXCHANGE ACT OF 1934

OR

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM________________ TO ______________

OKLAHOMA	73-1351610
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1221 E. Houston

Broken Arrow, Oklahoma 74012

(Address of principal executive office)

(918) 251-9121

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.	Yes x    No  o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).	Yes x    No  o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule12b-2 of the Exchange Act. Large accelerated filer                                                                                           o                                   Accelerated filero Non-accelerated filer                                                                                           o (do not check if a smaller reporting company) Smaller reporting company x
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).	Yes o    No  x
Shares outstanding of the issuer's $.01 par value common stock as of April 30, 2013 were 9,998,480.

	PART I.    FINANCIAL INFORMATION
		Page
Item 1.	Financial Statements.
	Consolidated Balance Sheets	2
	March 31, 2013 (unaudited) and September 30, 2012 (audited)
	Consolidated Statements of Operations and Comprehensive Income (unaudited)	4
	Three and Six Months Ended March 31, 2013 and 2012
	Consolidated Statements of Cash Flows (unaudited)	5
	Six Months Ended March 31, 2013 and 2012
	Notes to Unaudited Consolidated Financial Statements	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations.	10
Item 4.	Controls and Procedures.	13
	PART II - OTHER INFORMATION
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	14
Item 6.	Exhibits.	14
	SIGNATURES

 
 

 
 

 
 

		March 31, 2013 (unaudited)				September 30, 2012 (audited)
Assets
Current assets:
Cash and cash equivalents		$	7,538,630			$	5,191,514
Accounts receivable, net of allowance of $300,000			3,391,557				3,050,796
Income tax refund receivable			24,179				409,386
Inventories, net of allowance for excess and obsolete inventory of $1,320,000 and $1,000,000, respectively			21,538,953				22,666,385
Prepaid expenses			220,233				129,357
Deferred income taxes			919,000				920,000
Total current assets			33,632,552				32,367,438
Property and equipment, at cost:
Land and buildings			8,794,272				8,794,272
Machinery and equipment			2,977,279				2,953,949
Leasehold improvements			9,633				9,633
Total property and equipment, at cost			11,781,184				11,757,854
Less accumulated depreciation and amortization			(3,817,842	)			(3,666,327	)
Net property and equipment			7,963,342				8,091,527
Other assets:
Goodwill			1,560,183				1,560,183
Other assets			11,428				13,778
Total other assets			1,571,611				1,573,961
Total assets		$	43,167,505			$	42,032,926

		March 31, 2013 (unaudited)				September 30, 2012 (audited)
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable		$	2,030,822			$	1,437,492
Accrued expenses			881,533				1,030,174
Notes payable – current portion			184,008				184,008
Total current liabilities			3,096,363				2,651,674
Notes payable, less current portion			1,410,608				1,502,612
Deferred income taxes			109,000				62,000
Shareholders’ equity:
Common stock, $.01 par value; 30,000,000 shares authorized; 10,499,138 and 10,465,323 shares issued, respectively; and 9,998,480 and 10,189,120 shares outstanding, respectively			104,991				104,653
Paid in capital			(5,627,759	)			(5,748,503	)
Retained earnings			45,074,316				43,980,590
Total shareholders’ equity before treasury stock			39,551,548				38,336,740
Less: Treasury stock, 500,658 and 276,203 shares, respectively, at cost			(1,000,014	)			(520,100	)
Total shareholders’ equity			38,551,534				37,816,640
Total liabilities and shareholders’ equity		$	43,167,505			$	42,032,926

 
 

		Three Months Ended March 31,								Six Months Ended March 31,
		2013				2012				2013				2012
Sales:
Net new sales income		$	4,905,471			$	5,854,479			$	10,504,369			$	11,161,940
Net refurbished sales income			2,375,450				2,366,833				5,388,667				4,955,550
Net service income			944,118				1,009,644				1,948,201				2,117,861
Total net sales			8,225,039				9,230,956				17,841,237				18,235,351
Cost of sales			6,079,242				6,703,637				12,549,612				12,969,011
Gross profit			2,145,797				2,527,319				5,291,625				5,266,340
Operating, selling, general and administrative expenses			1,659,979				1,712,862				3,513,509				3,559,477
Income from operations			485,818				814,457				1,778,116				1,706,863
Interest expense			6,509				940,736				13,390				1,099,362
Income (loss) before provision for income taxes			479,309				(126,279	)			1,764,726				607,501
Provision (benefit) for income taxes			183,000				(50,000	)			671,000				237,000
Net income (loss)			296,309				(76,279	)			1,093,726				370,501
Other comprehensive income:
Unrealized gain on interest rate swap, net of taxes			–				532,889				–				587,258
Comprehensive income		$	296,309			$	456,610			$	1,093,726			$	957,759
Earnings (loss) per share:
Basic		$	0.03			$	(0.01	)		$	0.11			$	0.04
Diluted		$	0.03			$	(0.01	)		$	0.11			$	0.04
Weighted average shares used in per share calculation:
Basic			10,029,377				10,199,564				10,106,612				10,203,477
Diluted			10,029,501				10,199,564				10,106,906				10,204,780

 
 

 

 

		Six Months Ended March 31,
		2013				2012
Operating Activities
Net income		$	1,093,726			$	370,501
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization			159,015				176,846
Provision for excess and obsolete inventories			320,000				202,000
Deferred income tax provision			48,000				25,000
Share based compensation expense			82,784				71,781
Changes in assets and liabilities:
Accounts receivable			(340,761	)			896,048
Income tax refund receivable			385,207				128,394
Inventories			807,432				856,397
Prepaid expenses			(55,878	)			(18,603	)
Other assets			2,350				5,467
Accounts payable			593,330				(625,464	)
Accrued expenses			(148,641	)			(350,272	)
Net cash provided by operating activities			2,946,564				1,738,095
Investing Activities
Additions to machinery and equipment			(30,830	)			(63,149	)
Additions of land and buildings			–				(113,723	)
Net cash used in investing activities			(30,830	)			(176,872	)
Financing Activities
Payments on notes payable			(92,004	)			(10,279,504	)
Purchase of treasury stock			(479,914	)			(113,821	)
Proceeds from stock options exercised			3,300				1,620
Net cash used in financing activities			(568,618	)			(10,391,705	)
Net increase (decrease) in cash and cash equivalents			2,347,116				(8,830,482	)
Cash and cash equivalents at beginning of period			5,191,514				10,943,654
Cash and cash equivalents at end of period		$	7,538,630			$	2,113,172
Supplemental cash flow information:
Cash paid for interest		$	13,398			$	1,151,183
Cash paid for income taxes		$	296,000			$	93,000
Supplemental schedule of noncash operating activities:
Unrealized gain on interest rate swap		$	–			$	957,258
Deferred tax provision			–				(370,000	)
Unrealized gain on interest rate swap, net of tax		$	–			$	587,258

		Three Months Ended March 31,								Six Months Ended March 31,
		2013				2012				2013				2012
Net income (loss) attributable to common shareholders		$	296,309			$	(76,279	)		$	1,093,726			$	370,501
Basic weighted average shares			10,029,377				10,199,564				10,106,612				10,203,477
Effect of dilutive securities:
Stock options			124				–				294				1,303
Diluted weighted average shares			10,029,501				10,199,564				10,106,906				10,204,780
Earnings (loss) per common share:
Basic		$	0.03			$	(0.01	)		$	0.11			$	0.04
Diluted		$	0.03			$	(0.01	)		$	0.11			$	0.04

 
 

		Shares				Wtd. Avg. Ex. Price
Outstanding at September 30, 2012			370,000			$	2.83
Granted			–				–
Exercised			(2,000	)		$	1.65
Expired			–				–
Forfeited			(5,000	)		$	3.00
Outstanding at March 31, 2013			363,000			$	2.83
Exercisable at March 31, 2013			113,000			$	3.68

 
 

	Six Months Ended
	March 31, 2013
Fiscal year 2012 grant	$47,782

 

 

 

 

Management judgments and estimates are made in connection with establishing the allowance for returns and doubtful accounts. Specifically, we analyze historical return volumes, 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

Period		Total Number of Shares Purchased				Average Price Paid per Share				Total Number of Shares Purchased as Part of Publicly Announced Plan (1)				Maximum Dollar Value of Shares That May Yet Be Purchased Under the Plan (1)
January 1 – 31, 2013			106,832			$	2.12				106,832			$	184,284
February 1 – 29,  2013			83,429			$	2.21				83,429			$	0
March 1 – 31,  2013			–				–				–			$	0

1.

We have one program, which was announced in 2000 after approval by our Board of Directors, to repurchase up to $1.0 million of outstanding shares of our common stock from time to time in the open market at prevailing market prices or in privately negotiated transactions.  All of the shares we purchased during these periods were purchased on the open market pursuant to this program.  As of the end of February 2013, the Company has purchased the maximum dollar amount under the previously announced program.  The Board of Directors has elected to not extend this program at this time.  The repurchased shares of common stock will be held in treasury and used for general corporate purposes including possible use in our employee stock plans or for acquisitions.

Item 6.  Exhibits.
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.
101.INS	XBRL Instance Document.
101.SCH	XBRL Taxonomy Extension Schema.
101.CAL	XBRL Taxonomy Extension Calculation Linkbase.
101.DEF	XBRL Taxonomy Extension Definition Linkbase.
101.LAB	XBRL Taxonomy Extension Label Linkbase.
101.PRE	XBRL Taxonomy Extension Presentation Linkbase.

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.
101.INS	XBRL Instance Document.
101.SCH	XBRL Taxonomy Extension Schema.
101.CAL	XBRL Taxonomy Extension Calculation Linkbase.
101.DEF	XBRL Taxonomy Extension Definition Linkbase.
101.LAB	XBRL Taxonomy Extension Label Linkbase.
101.PRE	XBRL Taxonomy Extension Presentation Linkbase.