U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 2002
[ ] 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 (I.R.S. Employer
of Identification No.)
incorporation or organization)
1605 East Iola
Broken Arrow, Oklahoma 74012
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(Address of principal (Zip code)
executive offices)
Issuer's telephone number: (918) 251-9121
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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.
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 $25,408,931.
The aggregate market value of the shares of common stock, par value $.01 per share, held by non-affiliates of the issuer was $1,196,204 as of December 26, 2002.
As of the latest practicable date, the number of the registrant's common stock, $.01 par value per share, outstanding was 10,010,414 as of December 26, 2002.
The definitive Proxy Statement to be filed pursuant to Regulation 14A in connection with the Registrant's 2003 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. Readers should carefully review the risk factors described in other documents the Company files from time to time with the Securities and Exchange Commission.
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 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 was paid over two years with 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, Inc. dba
Comtech Services, a Missouri corporation ("Comtech"). The consideration for the acquisition was $250,000 in cash and assumption of certain liabilities totaling approximately $449,000. 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 has recently shifted its focus in order to keep up with the market demands of high-speed, two way interactive network equipment. TULSAT, a subsidiary of ADDvantage, became Scientific-Atlanta's first authorized outlet for factory re-manufactured and surplus products in the United States. TULSAT offers customers recently factory remanufactured broadband products that will enable them to bring fiber deeper to the home without hassle and delay. With TULSAT as an authorized distributor for Scientific-Atlanta, customers seeking these recently discontinued model products and close-out inventory specials now have a cost-efficient, reliable, recognized source. While future profit margins could drop slightly from historical averages, management expects this strategy to propel revenue and profit growth. By continuing to purchase surplus equipment from cable operators that result from an upgrade in their systems or an overstock in their warehouse, and by expanding the repair side of the business, the Company expects to be able to continue to enjoy a healthy profit margin. The Company supplies or services 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.
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.
The broadband signal distribution industry (involving the high-speed transmission of television, telephony and internet signals) is currently dominated by CATV. The markets for wireless, direct-broadcast satellite ("DBS") and digital subscriber line ("DSL") used for this purpose are growing rapidly, creating increased competition to the cable operator. To fight competition, the operators offer more services and more TV channels as well as discounted prices. Lie the systems described in the preceding paragraph, the lineup of services typically includes an analog block of channels from 54 to 550 MHz, high speed data service using high-speed cable modems, cable telephony either interfacing with switched networks or internet protocol networks, and digital television in the 550 to 750 MHz range. These upgraded services are possible in every system that has been rebuilt to 750 MHz of bandwidth. The standard architecture for these enhanced systems contemplates a hybrid distribution network with a combination of fiber optic cable to nodes of 100 to 500 subscribers, with coaxial cable from the node to the customer and full reverse-path capability for the pay-per-view, data and phone services, typically called a hybrid fiber coaxial ("HFC") network.
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.
The CATV and Broadband industry has experienced a significant reduction in capital spending beginning with fiscal 2001 that continued through most of fiscal 2002. In addition, the market capitalization value of several multiple system operators (MSOs) has recently declined and their debt level as a percent of total market capitalization value has increased. The debt ratings of several MSOs have also been downgraded. These conditions have impacted and may continue to impact the MSOs ability in the near term to raise additional capital to fund equipment purchases. Although the conditions described above have slightly impacted net sales, there is unpredictability of the impact of the economic conditions in the industry will have in future periods.
Over the last few years, the CATV industry has seen a number of mergers and acquisitions take place. This consolidation has left over 90% of the US cable market controlled by seven of the largest MSOs. Of the over 105 million homes passed by the top twenty-five MSOs in the United States, only about 18% subscribed to more than "basic cable." Therefore, substantial opportunity exists for demand-driven growth in the sales of our products and services, provided the trend of subscriber demand for higher speed internet, alternative telephony, and other services requiring more sophisticated equipment continues in the future.
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, surplus and re- manufactured CATV equipment while continuing to expand the repair side of the business and (b) continue to evaluate and consider the acquisition of 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. With ADDvantage Technologies subsidiaries serving as distributors for equipment manufacturers (TULSAT - Scientific Atlanta, Blonder Tongue, Drake and Comscope; Comtech - Standard; NCS - Motorola and ProMax), the Company can continue to grow its new equipment and surplus sales to the largest MSOs of the industry by offering a diverse product line.
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, as described earlier in the HFC network. 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.
Products and Services
The majority of the Company's business is the sale of new and surplus- new (i.e. excess equipment available from the manufacturer) CATV equipment. New and surplus sales represent 46% of company revenues and re-manufactured sales represent 38% of the revenues. 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.
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 re-manufacturing and repairing of various manufacturers' lines of headend products as well as modifying these for use in different video formats.
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, referrals from being distributor for several large manufacturers of CATV equipment, 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 systems. The sales and purchasing functions operate under the same umbrella using a computerized buy/sell board to coordinate the activity between the two.
The Company is not dependent on one or a few customers to support its business. The customer base consists of over 1,200 active accounts. However, approximately 33% of the Company's revenues for both fiscal years 2002 and 2001 were derived from sales of products and services to the Company's five largest customers. There are approximately 6,000 cable television systems within the United States, each of which is a potential customer.
Competition
The CATV industry is highly competitive and is characterized by numerous companies competing in various segments of the market. 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 new and re-manufactured CATV equipment.
The Company also faces competition from vendors supplying new products and various manufacturers in this industry. Due to its large inventory, the Company generally 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, 2002, the Company had 134 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
Each subsidiary owns or leases property for office space and warehouse facilities. TULSAT leases a total of approximately 133,050 square feet of facilities in seven buildings from entities, which are controlled by David E.Chymiak and Kenneth A. Chymiak. Each lease has a renewable five-year term, expiring at different times in years 2003 through 2005. At September 30, 2002, total monthly rental payments of $36,500 were required. Lee owns property of approximately 8,000 square feet, with an investment of $246,000. NCS rents property of approximately 6,000 square feet. The term is month-to-month, with monthly rental payments of approximately $3,100 required. Comtech owns property of approximately 11,000 square feet, with an investment of $342,000, financed by loans of $323,000 from Messrs. David Chymiak and Kenneth Chymiak, which bear interest at 7.5% and are due in monthly payments through 2011. TULSAT-Texas owns property of approximately 13,000 square feet, with an investment of $150,000, financed by loans of $137,000 from Messrs. David Chymiak and Kenneth Chymiak, which bear interest at 7.5% and are due in monthly payments through 2011. TULSAT- Atlanta rents property of approximately 2,600 square feet. The term is month-to-month, with monthly rental payments of approximately $1,400. 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, 2002.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock is 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 OTC Bulletin Board. 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, 2001 High Low ------------------------------ ---- --- First Quarter $2.00 $0.81 Second Quarter $2.22 $1.03 Third Quarter $1.63 $0.86 Fourth Quarter $1.90 $0.81 |
Year Ended September 30, 2002 High Low
---- ---
First Quarter $1.05 $0.95
Second Quarter $1.15 $0.65
Third Quarter $1.35 $0.65
Fourth Quarter $1.30 $0.66
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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, 2002, there were approximately 80 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 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. Under the terms of the Company's outstanding preferred stock, no dividends may be paid on the Company's common stock unless all cumulative cash dividends due on the preferred stock have been paid or provided for.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of financial condition and results of operations should be read in conjunction with our consolidated historical financial statements and the notes to those statements that appear elsewhere in this report. Certain statements in the discussion contain forward-looking statements based upon current expectations that involve risks and uncertainties, such as plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under "Risk Factors" and "Business" and elsewhere in this report.
ADDvantage Technologies Group, Inc and its subsidiaries, TULSAT, Lee CATV Corporation, NCS Industries, Comtech Services, TULSAT - Texas and TULSAT - Atlanta comprise an organization involved in the re-manufacture, repair and sale of previously owned cable television ("CATV") equipment and the distribution of new and surplus equipment to CATV operators. New sales are defined as products that are purchased from the manufacturer, and includes new surplus, which is defined as inventory items purchased from other distributors or MSO's with excess equipment that have never been used. Re-manufactured sales are defined as used inventory that is updated to meet customer needs and requirements.
It is difficult to time the placing of orders in our business due to cyclical conditions that exist in the broadband and cable industry and present economic conditions that affect it. Last year continued to be a challenging business environment in the industry due to a significant reduction in capital spending that began in the first quarter of fiscal 2001. We believe we are in a unique position to service those MSO's, which are looking to minimize costs. We have an abundance of inventory and we offer repair services, which are available to our customers, who include some of the largest cable operators of the industry. The industry conditions have affected all equipment suppliers, and we have worked to minimize the negative impact of these conditions on our financial results and operations. We have aggressively sought to stimulate sales by marketing our products and services to the larger MSO's and we have managed our receivables to minimize any bad debt write-offs. Our efforts have resulted in increasing sales in a down economy (11.0% over last year), minimizing the impact of the Adelphia bankruptcy (a $96,000 bad debt write- off, representing approximately 5% of sales to Adelphia, where the impact
for other companies had been more severe) and minimizing the overall impact of bad debts written off in total compared to net income ($136,000, representing less than 7% of net income). However, our largest risk is our investment in inventory. After consideration of continued analysis, review, and evaluation of our inventory, we recorded an inventory write- down of $1.4 million due to a reduction of market prices on certain items of used and new inventory. We expect fiscal 2003 to be significantly improved based on preliminary results from increased sales in the first quarter of 2003 compared to first quarter 2002. However, there is no assurance that revenues in fiscal 2003 will continue to exceed those for comparable periods in fiscal 2002 due to the factors discussed elsewhere in this report.
Set forth below is a description of how the business has performed over the last two years. The acquisitions of NCS (March 2001), Comtech and the formation of TULSAT-Texas (May 2001) and TULSAT-Atlanta (June 2002), have changed business operations significantly and we have seen a positive impact from these additions as they implement our management philosophies and strategies.
Results of Operations
Year Ended September 30, 2002 Compared to Year Ended September 30, 2001 (all references to years are to fiscal years)
Net Sales. Net sales climbed $2.5 million or 11.0%, to $25.4 million for the year from $22.9 million for 2001. Despite the decrease in overall capital spending in the industry and the bankruptcies of several cable operators, new sales increased 31.7% from $9.0 million last year to $11.8 million this year as a result of our new distributorship with Scientific- Atlanta and the acquisition of NCS. Our focus on increasing repair revenue has resulted in an 18.5% increase in those revenues, from $3.3 million last year to $3.9 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 and bankruptcy filings of several of our customers. Our revenue generated by sales of re-manufactured equipment has also been impacted by the economic slowdown. Revenue from re-manufactured equipment sales dropped 4.4% from $10.2 million last year to $9.8 million this year. The collective impact NCS, Comtech, and Tulsat-Texas had on sales in those 2002 months which correspond to the same months in 2001 prior to the acquisitions of those companies was $1.4 million.
Cost of Sales. Cost of sales this year was 56.6% of net sales compared to 51.9% last year. Margins for the current year were affected by the inventory write-down of $1.4 million, discussed above.
Operating Expenses. Operating expenses increased $1.4 million, or 22.0% in 2002 over the previous year. Most of this increase was directly attributable to operating expenses (primarily salaries and wages) associated with NCS, Comtech, Tulsat - Texas and the addition of the new facility, Tulsat - Atlanta, in 2002.
Income from Operations. Income from operations decreased 27.1 %, to $3.5 million for 2002 from $4.9 million for 2001. This decrease was primarily due to the inventory write-down and operating costs associated with the recent acquisitions offset by higher net sales.
Interest Expense. Interest expense for fiscal 2002 was $245,000 compared to $337,000 in fiscal 2001. The decrease was primarily attributable to a lower average interest rate on the Company's line of credit.
Income Taxes. The provision for income taxes for fiscal 2002 decreased to $1.1 million from $1.7 million in fiscal 2001. The decrease was primarily due to lower pre-tax earnings coupled with a favorable impact from changes in the deferred tax valuation allowance.
Critical Accounting Policies
Note 1 to the Consolidated Financial Statements in Form 10-KSB for
fiscal year 2002 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.
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.
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 MSO's and other users of cable television equipment who are seeking products for 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 annual sales, but also allows us to realize high overall gross profit margins on our sales. Carrying these large inventories represents the Company's largest 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.
In order to address the risks associated with our investment in inventory, we regularly review inventory quantities on hand and reduce the carrying value when the loss of usefulness of an item or other factors, such as obsolete and excess inventories, indicate that cost will not be recovered when an item is sold. Demand for some of the items in our inventory has been impacted by recent economic conditions present in the cable industry. We wrote certain items in inventory down to their estimated market values at September 30, 2002, increasing the cost of sales by $1,442,938. Any significant, unanticipated changes in product demand, technological developments or continued economic trends affecting the cable industry could have a significant impact on the value of our inventory and operating results.
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 credit-worthiness, current economic trends and changes in our customer payment terms. Significant changes in customer concentration or payment terms, deterioration of customer credit- worthiness, as in the case of the bankruptcy of Adelphia and its affiliates, 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 September 30, 2002, accounts receivable, net of allowance for doubtful accounts of $85,000, amounted to $3.3 million.
Liquidity and Capital Resources
The Company finances its operations primarily through internally generated funds and a bank line of credit.
During 2002, the Company generated in excess of $2.4 million cash flow from operations, which it used to meet its preferred dividend obligations of $1.24 million, repay debt, and increase cash by $545,000.
The Company has a line of credit with the Bank of Oklahoma under which it is authorized to borrow up to $9.0 million at a borrowing rate of 1.25% below Chase Manhattan Prime (3.5% at September 30, 2002.) This line of credit will provide the lesser of $7.0 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 and $2.0 million for future acquisitions meeting Bank of Oklahoma credit guidelines. The line of credit is collateralized by inventory, accounts receivable, equipment and fixtures, and general intangibles and had an outstanding balance at September 30, 2002 of $4.5 million, due June 30, 2003.
The Company has 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 employees' stock plans or for acquisitions. The Company did not repurchase any shares during the fiscal year.
The Company believes that cash flow from operations, existing cash balances and its existing line of credit provide sufficient liquidity and capital resources to meet its needs.
Impact of Recently Issued Accounting Standards
In June 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 this pronouncement.
Under SFAS 142, goodwill and indefinite lived intangible assets are no longer amortized but are reviewed annually or more frequently if impairment indicators arise, for impairment. Separable intangible assets that have finite lives will continue to be amortized over their useful lives. SFAS 142 is effective for fiscal years beginning after December 15, 2001. The Company will discontinue the amortization of its goodwill balances and intangible assets with indefinite useful lives effective October 1, 2002. The Company has goodwill from recent acquisitions and has not recorded any impairment at this time. The Company is currently evaluating the impact of SFAS 142 on its consolidated financial statements.
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.
In April 2002, the FASB issued Statement of Financial Accounting Standards No. 145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections" (SFAS 145).
This Statement rescinds FASB Statement No. 4, Reporting Gains and Losses from Extinguishment of Debt, and an amendment of that Statement, FASB Statement No. 64, Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements. This Statement also rescinds FASB Statement No. 44, Accounting for Intangible Assets of Motor Carriers. This Statement amends FASB Statement No. 13, Accounting for Leases, to eliminate an inconsistency between the required accounting for sale-leaseback transactions and the required accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. This Statement also amends other existing authoritative pronouncements to make various technical corrections, clarify meanings, or describe their applicability under changed conditions. The Company does not expect SFAS 145 to have a material impact on its financial condition and results of operations.
In June 2002, the FASB issued Statement of Financial Accounting Standards No. 146, "Accounting for Costs Associated with Exit or Disposal Activities" (SFAS 146). This Statement addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." The Company is currently not affected by SFAS 146 as there are no transactions covered by these pronouncements.
In October 2002, the Financial Accounting Standards Board issued FASB Statement No. 147, Accounting for Acquisitions of Certain Financial Institutions - an amendment of FASB Statements No. 72 and 144 and FASB Interpretation No. 9 (SFAS 147). SFAS 147 amends SFAS 72 and no longer requires financial institutions to recognize, and subsequently amortize, any excess of the fair value of liabilities assumed over the fair value of tangible and identifiable intangible assets acquired as an unidentifiable intangible asset. In addition, SFAS 147 amends SFAS 144 to include in its scope long-term customer-relationship intangible assets of financial institutions such as depositor and borrower relationship intangible assets and credit cardholder intangible assets. Management does not anticipate that the adoption of SFAS 147 will have any material impact on the financial statements.
ITEM 7. FINANCIAL STATEMENTS
Index to Financial Statements Page
----------------------------- ----
Independent Auditors' Report 17
Consolidated Balance Sheet, September 30, 2002 18
Consolidated Statements of Income for Years Ended
September 30, 2002 and 2001 20
Consolidated Statement of Changes in Stockholders' Equity 21
Consolidated Statements of Cash Flows, Years Ended September 30,
2002 and 2001 22
Notes to Consolidated Financial Statements 24
|
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, 2002, and the related consolidated statements of income, changes in stockholders' equity and cash flows for the years ended September 30, 2002 and 2001. 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 consolidated financial position of the Company as of September 30, 2002, and the consolidated results of its operations and its cash flows for the years ended September 30, 2002 and 2001, in conformity with accounting principles generally accepted in the United States of America.
TULLIUS TAYLOR SARTAIN & SARTAIN LLP
December 12, 2002
ADDVANTAGE TECHNOLOGIES GROUP, INC.
CONSOLIDATED BALANCE SHEET
September 30, 2002
Assets
Current assets:
Cash $ 775,740
Accounts receivable, net of allowance of $85,212 3,349,108
Refundable income taxes 156,190
Inventories 17,584,237
Deferred income taxes 102,000
------------------
Total current assets 21,967,275
Property and equipment, at cost
Machinery and equipment 1,994,045
Land and buildings 763,007
Leasehold improvements 496,509
------------------
3,253,560
Less accumulated depreciation and amortization (1,040,989)
------------------
Net property and equipment 2,212,571
Other assets:
Deferred income taxes 1,005,000
Goodwill, net of accumulated amortization of $428,455 1,319,626
Other assets 26,858
------------------
Total other assets 2,351,484
------------------
Total assets $ 26,531,330
==================
|
See notes to consolidated financial statements.
ADDVANTAGE TECHNOLOGIES GROUP, INC.
CONSOLIDATED BALANCE SHEET
September 30, 2002
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 1,471,672
Accrued expenses 586,598
Bank revolving line of credit 4,473,681
Notes payable - current portion 166,667
Dividends payable 310,000
Stockholder notes 1,135,702
------------------
Total current liabilities 8,144,320
Notes payable 76,620
Stockholder notes 423,647
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 (2,159,210)
------------------
17,940,907
Less: Treasury stock, 20,000 shares at cost (54,164)
Total stockholders' equity 17,886,743
------------------
Total liabilities and stockholders' equity $ 26,531,330
==================
|
See notes to consolidated financial statements.
ADDVANTAGE TECHNOLOGIES GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
Year ended
September 30,
2002 2001
------------------------------------
Net sales and service income $ 25,408,931 $ 22,884,566
Cost of sales 14,370,776 11,885,210
------------------------------------
Gross profit 11,038,155 10,999,356
Operating expenses 7,498,175 6,144,174
------------------------------------
Income from operations 3,539,980 4,855,182
Interest expense 244,746 336,752
------------------------------------
Income before income taxes 3,295,234 4,518,430
Provision for income taxes 1,104,000 1,667,000
------------------------------------
Net income 2,191,234 2,851,430
Preferred dividends 1,240,000 1,240,000
------------------------------------
Net income attributable to common
stockholders $ 951,234 $ 1,611,430
====================================
Earnings per share:
Basic $ 0.10 $ 0.16
Diluted $ 0.10 $ 0.16
|
See notes to consolidated financial statements.
ADDVANTAGE TECHNOLOGIES GROUP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Years ended September 30, 2002 and 2001
Series A Series B Common
Common Stock Preferred Preferred Stockholders' Treasury
Shares Amount Stock Stock Deficit Stock Total
--------------------------------------------------------------------------------------------
Balance, September 30, 2000 9,992,956 $ 99,930 $8,000,000 $12,000,000 $(4,735,204) $(54,164) $15,310,562
Net income 2,851,430 2,851,430
Preferred stock dividends (1,240,000) (1,240,000)
Issue common shares 18,760 187 13,330 13,517
--------------------------------------------------------------------------------------------
Balance, September 30, 2001 10,011,716 100,117 8,000,000 12,000,000 (3,110,444) (54,164) 16,935,509
Net income 2,191,234 2,191,234
Preferred stock dividends (1,240,000) (1,240,000)
--------------------------------------------------------------------------------------------
Balance, September 30, 2002 10,011,716 $100,117 $8,000,000 $12,000,000 $(2,159,210) $(54,164) $17,886,743
============================================================================================
-21-
See notes to consolidated financial statements.
|
ADDVANTAGE TECHNOLOGIES GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended
September 30,
2002 2001
--------------------------------
Cash Flows from Operating Activities
Net income $ 2,191,234 $ 2,851,430
Adjustments to reconcile net income to net cash provided
by operating activities
Depreciation and amortization 325,665 312,441
Provision for deferred income taxes (81,000) 117,000
Change in:
Receivables (509,811) 1,118,782
Inventories 144,883 (2,327,183)
Other assets 79,634 (26,431)
Accounts payable and accrued liabilities 221,863 (177,325)
--------------------------------
Net cash provided by operating activities 2,372,468 1,868,714
--------------------------------
Cash Flows from Investing Activities
Additions to property and equipment (610,630) (583,536)
Proceeds from sale of investment in Ventures - 657,569
Purchase business combinations, net of cash acquired of
$575,958 in 2001 - (1,090,269)
--------------------------------
Net cash used in investing activities (610,630) (1,016,236)
--------------------------------
Cash Flows from Financing Activities
Net borrowings under line of credit 222,548 895,585
Payments on stockholder loans (150,000) (300,000)
Payments on notes payable (49,204) -
Payments of preferred dividends (1,240,000) (1,240,000)
--------------------------------
Net cash used in financing activities (1,216,656) (644,415)
--------------------------------
Net increase in cash 545,182 208,063
Cash, beginning of year 230,558 22,495
--------------------------------
Cash, end of year $ 775,740 $ 230,558
================================
|
See notes to consolidated financial statements.
ADDVANTAGE TECHNOLOGIES GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
September 30,
2002 2001
--------------------------------
Supplemental Cash Flow Information
Cash paid for interest $ 244,253 $ 343,460
Cash paid for income taxes $ 1,832,342 $ 1,462,000
|
See notes to consolidated financial statements.
ADDVANTAGE TECHNOLOGIES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended September 30, 2002 and 2001
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. Market is defined principally as net realizable value. 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 $157,267 and $165,493 for the years ended September 30, 2002 and 2001, 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.
Revenue recognition
Our principal sources of revenues are from sales of new, remanufactured or used equipment, and repair services. Revenue is recognized when inventory or service components are shipped to the customers. The Company's revenue recognition policies are in compliance with Staff Accounting Bulletin No. 101 "Revenue Recognition in Financial Statements" issued by the Securities and Exchange Commission.
Advertising costs
Advertising costs are expensed as incurred. Advertising expense was $224,468 and $229,947 for the years ended September 30, 2002 and 2001, 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.
Any significant, unanticipated changes in product demand, technological developments or continued economic trends affecting the cable industry could have a significant impact on the value of our inventory and operating results.
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, 2002 and 2001, was $168,398 and $144,838, 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."
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 June 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 this pronouncement.
Under SFAS 142, goodwill and indefinite lived intangible assets are no longer amortized but are reviewed annually or more frequently if impairment indicators arise, for impairment. Separable intangible assets that have finite lives will continue to be amortized over their useful lives. SFAS 142 is effective for fiscal years beginning after December 15, 2001. The Company will discontinue the amortization of its goodwill balances and intangible assets with indefinite useful lives effective October 1, 2002, and will evaluate the carrying value of goodwill during the first quarter of fiscal 2003. The Company is currently evaluating the impact of SFAS 142 on its consolidated financial statements.
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.
In April 2002, the FASB issued Statement of Financial Accounting Standards No. 145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections" (SFAS 145). This Statement rescinds FASB Statement No. 4, Reporting Gains and Losses from Extinguishment of Debt, and an amendment of that Statement, FASB Statement No. 64, Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements. This Statement also rescinds FASB Statement No. 44, Accounting for Intangible Assets of Motor Carriers. This Statement amends FASB Statement No. 13, Accounting for Leases, to eliminate an inconsistency between the required accounting for sale-leaseback transactions and the required accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. This Statement also amends other existing authoritative pronouncements to make various technical corrections, clarify meanings, or describe their applicability under changed conditions. The Company does not expect SFAS 145 to have a material impact on its financial condition and results of operations.
In June 2002, the FASB issued Statement of Financial Accounting Standards No. 146, "Accounting for Costs Associated with Exit or Disposal Activities" (SFAS 146). This Statement addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." The Company is currently not affected by SFAS 146 as there are no transactions covered by these pronouncements.
In October 2002, the Financial Accounting Standards Board issued FASB Statement No. 147, Accounting for Acquisitions of Certain Financial Institutions - an amendment of FASB Statements No. 72 and 144 and FASB Interpretation No. 9 (SFAS 147). SFAS 147 amends SFAS 72 and no longer requires financial institutions to recognize, and subsequently amortize, any excess of the fair value of liabilities assumed over the fair value of tangible and identifiable intangible assets acquired as an unidentifiable intangible asset. In addition, SFAS 147 amends SFAS 144 to include in its scope long-term customer-relationship intangible assets of financial institutions such as depositor and borrower relationship intangible assets and credit cardholder intangible assets. Management does not anticipate that the adoption of SFAS 147 will have any material impact on the financial statements.
Note 2 - Inventories
Inventories are summarized as follows:
2002 2001
---------------------------
New $ 11,731,604 $10,642,719
Used 5,852,633 7,086,402
---------------------------
$ 17,584,237 $17,729,121
===========================
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New inventory includes products purchased from the manufacturers plus "surplus-new" which is unused products purchased from other distributors or multiple system operators. Used inventory includes factory remanufactured, Company remanufactured and used products.
We regularly review inventory quantities on hand and a departure from cost is required when the loss of usefulness of an item or other factors, such as obsolete and excess inventories, indicate that cost will not be recovered when an item is sold. Demand for some of the items in our inventory has been impacted by recent economic conditions present in the cable industry. We wrote certain items in inventory down to their estimated market values at September 30, 2002, increasing the cost of sales by $1,442,938.
Note 3 - Line of Credit, Stockholder Notes, and Notes Payable
At September 30, 2002, a $4,473,681 balance is outstanding under a $9.0 million line of credit due June 30, 2003, with interest payable monthly at Chase Manhattan Prime less 1 1/4% (3.5% at September 30, 2002). Borrowings under the line of credit are limited to the lesser of $7.0 million or the sum of 80% of qualified accounts receivable and 40% of qualified inventory for working capital purposes and $2.0 million for future acquisitions meeting Bank of Oklahoma credit guidelines. In The line of credit agreement provides that the Company's net worth must be greater than $14.0 million and net income greater than $2.0 million. The line of credit is collateralized by inventory, accounts receivable, equipment and fixtures, and general intangibles.
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 $151,349 at September 30, 2002 and is included in the bank revolving line of credit.
Stockholder notes of $1,100,000 are subordinate to and bear interest at rates equal to the line of credit (3.5% at September 30, 2002). The notes are due on demand and are classified as current. Stockholder notes of $459,349, which were issued for purchases of real estate, bear interest at 7.5% and are due in monthly payments through 2011. Notes payable to unrelated parties of $243,291 are due in quarterly payments through 2004 with interest at 7%.
The aggregate maturities of stockholder and other notes payable for the
five years ending September 30, 2007 are as follows: 2003 - $1,302,369;
2004 - $115,097; 2005 - $41,460; 2006 - $44,679; 2007 - $48,147; thereafter
- $250,884.
Note 4 - Income Taxes
The provisions for income taxes consist of:
2002 2001
--------------------------
Current $ 1,185,000 $ 1,550,000
Deferred (81,000) 117,000
--------------------------
$ 1,104,000 $ 1,667,000
==========================
|
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, :
2002 2001
---------------------
Statutory tax rate 34.0% 34.0%
State income taxes, net
of U.S. federal tax
benefit 2.4 3.4
Non-deductible goodwill
amortization and other
non-deductible expenses 1.5 .9
Adjustment of deferred
tax asset valuation allowance (3.8) (1.2)
Other (0.6) (0.2)
----------------------
33.5% 36.9%
======================
|
Deferred tax assets consist of the following at September 30,
2002 2001
-----------------------------
Net operating losses carryforwards $1,358,000 $1,449,000
Tax basis in excess of financial
basis of certain assets 90,000 108,000
Financial liability accruals 102,000 36,000
-----------------------------
Total deferred tax assets 1,550,000 1,593,000
Valuation allowance (443,000) (567,000)
-----------------------------
Net deferred tax asset $1,107,000 $1,026,000
=============================
Deferred tax assets are
classified as:
Current $ 102,000 $ 36,000
Noncurrent 1,005,000 990,000
-----------------------------
$1,107,000 $1,026,000
=============================
|
Utilization of ADDvantage's net operating loss carryforward of approximately $3,996,000 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. The valuation allowance was provided due to uncertainty surrounding the probability of utilizing all of the net operating loss carryovers. The allowance is adjusted annually based on management's current evaluation.
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, 2002, 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, 2002.
A summary of the status of the Company's stock options at September 30, 2002 and 2001, and changes during the years then ended is presented below.
2002 2001
------------------- --------------------
Wtd. Avg. Wtd. Avg.
Shares Ex. Price Shares Ex. Price
------------------- --------------------
Outstanding, beginning of year 114,500 $2.07 40,000 $3.13
Granted - - 74,500 1.50
Exercised - - - -
Canceled - - - -
------- -------
Outstanding, end of year 114,500 $2.07 114,500 $2.07
======= =======
Exercisable, end of year 46,125 $2.31 20,500 $2.65
======= =======
Weighted average fair value of
Options granted N/A $1.82
======= =======
|
The following table summarizes information about fixed stock options outstanding at September 30, 2002:
Options Outstanding Options Exercisable
----------------------------------------------------- ------------------------
Weighted
Average
Number Remaining Number
Range of Outstanding Contract Wtd. Avg. Exercisable Wtd. Avg.
Exercise Prices At 9/30/02 Life Ex. Price at 9/30/02 Ex. Price
----------------------------------------------------- ------------------------
$1.500 74,500 8.5 years $1.50 23,125 $1.50
$3.125 40,000 7.5 years $3.13 23,000 $3.13
------- -------
114,500 46,125
|
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 Company's principal shareholders. Future minimum lease payments under these leases are as follows:
2003 $ 437,700
2004 384,840
2005 105,840
2006 17,640
-------------
$ 946,020
=============
|
Total rental expense for all operating leases was $520,282 for the year ended September 30, 2002 and $482,800 for the year ended September 30, 2001. $438,000 of the total rental expense was paid to the Company's principal shareholders for 2002 and 2001.
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 $111,144 during the year ended September 30, 2002 and $84,134 during the year ended September 30, 2001.
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 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 result of operations for the year ending 2001, assuming the NCS and Comtech acquisitions occurred at the beginning of 2001.
2001
(Unaudited)
----------------
Net sales and service income $ 25,291,350
Income before income tax 4,355,760
Income tax 1,494,026
|
The unaudited pro-forma result 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.
Note 10 - Earnings per Share
Year ended Year ended
September 30 September 30
2002 2001
--------------------------------
Net income $ 2,191,234 $ 2,851,430
Dividends on preferred stock 1,240,000 1,240,000
Net income attributable to
common shareholders -basic 951,234 1,611,430
Dividends on Series A convertible
preferred stock 400,000 400,000
--------------------------------
Net income attributable to common
shareholders - diluted $ 1,351,234 $ 2,011,430
================================
Weighted average shares outstanding 9,991,716 9,991,716
Weighted average shares outstanding
assuming dilution 11,991,716 11,991,716
================================
Earnings per common share:
Basic $ 0.10 $ 0.16
Diluted 0.10 0.16
================================
|
Earnings per common share-diluted are the same as basic earnings per share as conversion of potentially dilutive securities are anti-dilutive.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
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 2003 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, 2002.
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.
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.
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. The Registrant undertakes to furnish supplementally to the Commission upon request a copy of any omitted schedule or exhibit listed in the Exhibit Index set forth elsewhere herein.
3.1 Certificate of Incorporation of the Company and amendments.
3.2 Bylaws of the Company, as amended.
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.
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 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.
10.4 Form of promissory notes issued by TULSAT to David Chymiak and to Ken Chymiak Revocable Trust and Susan C. Chymiak Revocable Trust dated as of February 7, 2000.
10.5 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.
99.1 Certification of Chief Executive Officer and Chief Financial
Officer pursuant to U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K
None.
ITEM 14. CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedures.
With the participation of management, the Company's chief executive officer and chief financial officer evaluated the Company's disclosure controls and procedures on September 30, 2002. Based on this evaluation, the chief executive officer and chief financial officer concluded that the disclosure controls and procedures are effective in connection with ADDvantage Technologies, Inc.'s filing of its annual report on Form 10-KSB for the year ended September 30, 2002.
(b) Changes in internal controls.
Subsequent to September 30, 2002 through the date of this filing of Form 10-KSB for the year ended September 30, 2002, there have been no significant changes in the Company's internal controls or in other factors that could significantly affect those controls, including any significant deficiencies or material weaknesses of internal controls that would require corrective action.
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: January 9, 2002 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 30, 2002
/S/ David E. Chymiak
---------------------------------------
David E. Chymiak, Chairman of the Board
of Directors
Date: December 30, 2002 /S/ Kenneth A. Chymiak
---------------------------------------
Kenneth A. Chymiak, President, Chief
Executive Officer and Director (Principal
Executive Officer and Principal Financial
Officer)
|
<
Date: December 30, 2002 /S/ Adam R. Havig
---------------------------------------
Adam R. Havig, Controller (Principal
Accounting Officer)
Date: December 30, 2002 /S/ Gary W. Young
---------------------------------------
Gary W. Young, Director
Date: December 30, 2002 /S/ Stephen J. Tyde
---------------------------------------
Stephen J. Tyde, Director
Date: December 30, 2002 /S/ Freddie H. Gibson
---------------------------------------
Freddie H. Gibson, Director
Date: December 30, 2002 /S/ Randy L. Weideman
---------------------------------------
Randy L. Weideman, Director
|
CERTIFICATION
I, Kenneth A. Chymiak, certify that:
1. I have reviewed this annual report on Form 10-KSB of ADDvantage Technologies Group, Inc, (the "Company");
2. Based on my knowledge, this annual 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 annual report;
3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this annual report;
4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the Company and have;
a. Designed such disclosure controls and procedures to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
b. Evaluated the effectiveness of the Company's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and
c. Presented in this annual report my conclusions about the effectiveness of the disclosure controls and procedures based on my evaluation as of the Evaluation Date;
5. I have disclosed, based on my most recent evaluation, to the Company's auditors and the audit committee of the Company's board of directors (or persons performing the equivalent functions):
a. All significant deficiencies in the design or operation of internal controls which could adversely affect the Company's ability to record, process, summarize and report financial data and have identified for the Company's auditors any material weakness in internal controls; and
b. Any fraud, whether or not material that involves management or other employees who have a significant role in the Company's internal controls; and
6. I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of my most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date: January 9, 2003
/s/ Kenneth A. Chymiak
_______________________________________
Kenneth A. Chymiak
Chief Executive Office and Chief Financial
Officer
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INDEX TO EXHIBITS
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 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
-40-
|
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. The
Registrant undertakes to furnish supplementally to the
Commission upon request a copy of any omitted schedule or
exhibit listed in the Exhibit Index set forth elsewhere
herein.
3.1 Certificate of Incorporation of the Company and
amendments.
3.2 Bylaws of the Company, as amended.
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.
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
-41-
|
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 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.
10.4 Form of promissory notes issued by TULSAT to David Chymiak and
to Ken Chymiak Revocable Trust and Susan C. Chymiak Revocable
Trust dated as of February 7, 2000.
10.5 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.
99.1 Certification of Chief Executive Officer and Chief Financial
Officer pursuant to U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
|
CERTIFICATE OF INCORPORATION
OF
ADDVANTAGE MEDIA GROUP, INC.
ARTICLE I
NAME
The name of the Corporation is ADDvantage Media Group, Inc.
ARTICLE II
REGISTERED OFFICE AND AGENT
The registered office of the Corporation in the State of Oklahoma is located at Baker, Roster, McSpadden, Clark, Rasure & Slicker, 800 Kennedy Building, 321 South Boston Avenue, Tulsa, Oklahoma 74103. The Corporation's registered agent at that office is Craig W. Hoster.
ARTICLE III
PURPOSE
The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Oklahoma.
ARTICLE IV
CAPITALIZATION
The total number of shares which this Corporation is authorized to issue is 10,000 shares, consisting of 10,000 shares of Common Stock, par value $1.00 per share.
ARTICLE V
NO CUMULATIVE VOTING OR PREEMPTIVE RIGHTS
The holders of record of the Common Stock shall have one vote for each share held of record. Cumulative voting for the election of directors or otherwise is not permitted.
No holder of record of Common Stock shall have a preemptive right or be entitled as a matter of right to subscribe for or purchase (i) any shares of capital stock of the Corporation of any class whatsoever, or (2) warrants, options or rights of the Corporation, or (3) securities convertible into, or carrying warrants, options or rights to subscribe for or purchase, capital stock of the Corporation of any class whatsoever, whether now or hereafter authorized or outstanding.
ARTICLE VI
INCORPORATOR
The name and address of the incorporator is Craig W. Hoster, 800 Kennedy_ Building, 321 South Boston Avenue, Tulsa, Oklahoma 74103.
ARTICLE VII
BOARD OF DIRECTORS
The number of directors of the Corporation shall be fixed by the bylaws, but shall not be less than one (1) nor more than nine (9).
ARTICLE VIII
AMENDMENT OF BYLAWS
The Board of Directors of the Corporation is expressly authorized and empowered to make, alter, amend or repeal the bylaws of the Corporation or to adopt new bylaws.
ARTICLE IX
POSSIBLE CONFLICTS OF INTEREST
No agreement or transaction involving the Corporation or any other corporation, partnership, association or other entity in which the Corporation owns an interest or any properties thereof in which one or more director or officer of the Corporation has a financial interest shall be void or voidable solely for this reason or solely because such directors or officers are present at or participate in the contract or transaction is approved.
ARTICLE X
INDEMNIFICATION
To the full extent not prohibited by the laws of Oklahoma as in effect from time to time, the Corporation shall indemnify any person (and the heirs, executors and administrators of such person) who is or was a director, officer, employee or agent of the Corporation, or who, at the request of this Corporation, is or was a director, officer, employee, agent, partner, or trustee, as the case may be, of any other corporation, foreign or domestic, or of any partnership, proprietorship, trust, association or other entity in which this Corporation owns an interest, against any and all liabilities and reasonable expenses incurred by him in connection with or resulting from any claim, action, suit or proceeding, whether brought by or in the right of the Corporation or otherwise and whether civil, criminal, administrative or investigative in nature, or in connection with an appeal relating thereto, in which he has become involved as a party or is threatened to be made a party or otherwise, by reason
of being or having been such a director, officer, employee or agent.
ARTICLE XI
NO DIRECTOR LIABILITY IN CERTAIN CASES
To the maximum extent permitted by law, no director of the Corporation shall be liable to the Corporation or its shareholders for monetary damages for breach of any fiduciary duty as a director, provided that this provision shall not eliminate or limit the liability of a director (i) for any breach of the director's duty of loyalty to the Corporation or its shareholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 1053 of Title 18 of Oklahoma Statutes as in effect from time to time for unlawful payment of dividends or stock redemptions, or (iv) for any transaction from which the director derived an improper personal benefit.
ARTICLE XII
CERTAIN COMPROMISES
Whenever a compromise or arrangement is proposed between this Corporation and its creditors or any class of them and/or between this Corporation and its shareholders or any class of them, any court of equitable jurisdiction within the State of Oklahoma, on the application in a summary way of this Corporation or of any creditor or shareholder thereof, or on the application of any receiver or receivers appointed for this Corporation under the provisions of Section 1106 of Title 18 of the Oklahoma Statutes as in effect from time to time or on the application of trustees in dissolution or of any receiver or receivers appointed for this Corporation under the provisions of Section 1100 of Title 18 of the Oklahoma Statutes as in effect from time to time, may order a meeting of the creditors or class of creditors, and/or of the shareholders or class of shareholders of this Corporation, as the case may be, to be summoned in such manner as the court directs. If a majority in number representing three- fourths (3/4ths) in value of the creditors or class of creditors, and/or of the shareholders or class of shareholders of this Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this Corporation as consequence of such compromise or arrangement, the compromise or arrangement and the reorganization shall, if sanctioned by the court to which the application has been made, be binding on all the shareholders or class of shareholders of this Corporation, as the case may be, and also on this Corporation.
SIGNATURES
For the purpose of forming a corporation under the General Corporation Law of Oklahoma, the undersigned, the sole incorporator, declares and certifies that the facts stated above are true as of this 19th day of September, 1989.
/s/ Craig W. Hoster ------------------------------ Craig W. Hoster, Incorporator |
AMENDED CERTIFICATE OF INCORPORATION
OF
ADDVANTAGE MEDIA GROUP, INC.
To The Secretary of State of the
State of Oklahoma:
The undersigned Oklahoma corporation, for the purpose of amending its Certificate of Incorporation, hereby certifies that at a meeting of the Board of Directors, the Directors duly adopted a resolution setting forth the following amendments to the Certificate of Incorporation of the Corporation, declaring the amendments advisable and calling a meeting of the shareholders of the Corporation to consider the following amendments;
That thereafter, pursuant to the resolution of the Board of Directors, the Directors duly called and held a meeting of the shareholders of the Corporation, at which meeting the necessary number of shares of capital stock voted in favor of the amendments; and therefore, that the Corporation has duly adopted the following amendments in accordance with Section 1077 of the Oklahoma General Corporation Act.
ARTICLE IV
CAPITALIZATION
A. As filed
The total number of shares which this Corporation is authorized to issue is 10,000 shares, consisting of 10,000 shares of Common Stock, par value $1.00 per share.
B. As amended
The total number of shares which this Corporation is authorized to issue is 20,000 shares, consisting of 20,000 shares of Common Stock, par value $1.00 per share.
ARTICLE VII
BOARD OF DIRECTORS
A. As filed
The number of directors of the Corporation shall be fixed by the bylaws, but shall not be less than one (1) nor more than nine (9).
B. As amended
The number of directors of the Corporation shall be such as from time to time shall be fixed by or in the manner provided in the bylaws.
IN WITNESS WHEREOF, this Corporation has caused this Certificate to be signed by its President and attested by its Secretary, this 13th , day of December , 1990.
ADDVANTAGE MEDIA GROUP, INC.,
an Oklahoma corporation
By /s/ Charles H. Hood
---------------------------
Charles H. Hood, President
ATTEST:
/s/ C. Jan Tucker
-----------------------------------
C. Jan Tucker, Assistant Secretary
[SEAL]
|
SECOND AMENDMENT TO THE
CERTIFICATE OF INCORPORATION
OF ADDVANTAGE MEDIA GROUP, INC.
TO: THE SECRETARY OF STATE OF OKLAHOMA
State Capitol Building
Oklahoma City, Oklahoma 73105
The undersigned Oklahoma corporation, for the purpose of amending its Amended Certificate of Incorporation as filed on December 14, 1990, as provided by Section 1077 of the Oklahoma General Corporation Act, hereby states as follows:
1. That the name of the corporation is:
ADDVANTAGE MEDIA GROUP, INC.
2. The date of filing of its original Certificate of Incorporation with the Secretary of State was September 20, 1989, and was thereafter amended on December 14, 1990, which changed the number of authorized shares of the Corporation.
3. That Article Four is hereby amended to read as follows:
A. Present version:
ARTICLE IV
CAPITALIZATION
The total number of shares which this Corporation is authorized to issue is 20,000 shares, consisting of 20,000 shares of Common Stock par value $1.00 per share.
B. As amended:
ARTICLE IV
CAPITALIZATION
The total number of shares of all classes of stock which the Corporation shall have authority to issue is 5,000,000 shares, each of the shares having a par value of $0.01, all of which shares shall be Common Stock.
4. All other provisions of the Amended Certificate of Incorporation of the Corporation, not amended hereby shall remain in full force and effect.
5. This Second Amendment to the Certificate of Incorporation was set forth in a resolution duly adopted by the Board of Directors which declares the adoption of the Amendment to be advisable and which ordered that the Amendment be considered by the shareholders of the Corporation entitled to vote thereon.
Such Second Amendment was duly adopted in accordance with
Section 1073 and Section 1077 of the Oklahoma General Corporation
Act by the written consent of the shareholders of all the issued
and outstanding shares of capital stock of the Corporation in
lieu of a special meeting thereof held on February 4, 1991.
IN WITNESS WHEREOF, said ADDVANTAGE MEDIA GROUP, INC. has caused its corporate seal to be affixed hereto and this Second Amendment to be signed by its President and Secretary this 13th day of February, 1991.
ADDVANTAGE MEDIA GROUP, INC.
ATTEST.
By /s/ Lynnwood R. Moore, Jr. By /s/ Charles H. Hood --------------------------------- -------------------------- Lynnwood R. Moore, Jr., Secretary Charles H. Hood, President |
[CORPORATE SEAL]
STATE OF OKLAHOMA )
) SS.
COUNTY OF TULSA )
|
BEFORE ME, a Notary Public in and for said State, on this 4th day of February, 1991, the undersigned officer, personally appeared Charles H. Hood and Lynnwood R. Moore, Jr., known personally to me to be the President and Secretary, respectively, of the above named corporation, and that they, as such officers, being authorized to do so, executed the foregoing instrument for the purposes therein contained, by signing the name of the corporation by themselves as such officers.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
/S/ Melissa Fox
-------------------
Notary Public
My Commission Expires:
8-23-94
-------------
[SEAL]
|
THIRD AMENDMENT TO THE
CERTIFICATE OF INCORPORATION
OF ADDVANTAGE MEDIA GROUP. INC.
TO: THE SECRETARY OF STATE OF OKLAHOMA
State Capitol Building
Oklahoma City, Oklahoma 73105
The undersigned Oklahoma corporation, for the purpose of amending its Amended Certificate of Incorporation as filed on February 14, 1991, as provided by Section 1077 of the Oklahoma General Corporation Act, hereby states as follows:
1. That the name of the corporation is:
ADDVANTAGE MEDIA GROUP, INC.
2. The date of filing of its original Certificate of Incorporation with the Secretary of State was September 20, 1989, and was thereafter amended on December 14, 1990, and February 14, 1991, respectively; both amendments which changed the number of authorized shares of the Corporation.
3. That Article Four is hereby amended to read as follows:
A. Present version:
ARTICLE IV
CAPITALIZATION
The total number of shares of all classes of stock which the Corporation shall have authority to issue is 5,000,000 shares, each of the shares having a par value of $0.01, all of which shares shall be Common Stock.
B. As amended:
ARTICLE IV
CAPITALIZATION
The aggregate number of shares of all classes of stock which the Corporation shall have authority to issue is 5,500,000, of which 5,000,000 shares shall be Common Stock with a par value of $.0l per share, and 500,000 shares shall be Preferred Stock with a par value of $1.00 per share.
The designations and preferences, voting powers, restrictions, limitations as to dividends, qualifications and terms and conditions of redemption, conversion and other rights of the shares of each class of stock are as follows:
Preferred Stock
The Preferred Stock may be issued from time to time by the Board of Directors as shares of one or more series. The description of shares of each series of Preferred Stock, including any preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications and terms and conditions of redemption shall be as set forth in resolutions adopted by the Board of Directors and in a Certificate of Designations filed as required by law from time to time prior to the issuance of any shares of such series.
The Board of Directors is expressly authorized, prior to issuance, by adopting resolutions providing for the issuance of, or providing for a change in the number of, shares of any particular series of Preferred Stock and, if and to the extent from time to time required by law, by filing a Certificate of Designations to set or change the number of shares to be included in each series of Preferred Stock and to set or change in any one or more respects the designations, preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications or terms and conditions of redemption relating to the shares of each such series. Notwithstanding the foregoing, the Board of Directors shall not be authorized to change the right of the Common Stock of the Corporation to vote one vote per share on all matters submitted for shareholder action. The authority of the Board of Directors with respect to each series of Preferred Stock shall include, but not be limited to, setting or changing the following:
(a) the distinctive serial designation of such series and the number of shares constituting such series (provided that the aggregate number of shares constituting all series of Preferred Stock shall not exceed 500,000);
(b) the annual dividend rate on shares of such series, whether dividends shall be cumulative and, if so, from which date or dates;
(c) whether the shares of such series shall be redeemable and, if so, the terms and conditions of such redemption, including the date or dates upon and after which such shares shall be redeemable, and the amount per share payable in case of redemption, which amount may vary under different conditions and at different redemption dates;
(d) the obligation, if any, of the Corporation to retire shares of such series pursuant to a sinking fund;
(e) whether shares of such series shall be convertible into, or exchangeable for, shares of stock of any other class or classes and, if so, the terms and conditions of such conversion or exchange, including the price or prices or the rate or rates of conversion or exchange and the terms of adjustment, if any;
(f) whether the shares of such series shall have voting rights, in addition to the voting rights provided by law, and, if so, the terms of such voting rights;
(g) the rights of the shares of such shares in the event of voluntary or involuntary liquidation, dissolution or winding-up of the Corporation; and
(h) any other relative rights, powers, preference, qualifications, limitations or restrictions thereof relating to such series.
The shares of Preferred Stock of any one series shall be identical with each other in all respects as to the dates from and after which dividends thereon shall cumulate, if cumulative.
Common Stock
Subject to all of the rights of the Preferred Stock as expressly provided herein, by law or by the Board of Directors pursuant to this ARTICLE IV, the Common Stock of the Corporation shall possess all such rights and privileges as are afforded to capital stock by applicable law in the absence of any express grant of rights or privileges herein, including, but not limited to, the following rights and privileges:
(a) dividends may be declared and paid or set apart for payment upon the Common Stock out of any assets or funds of the Corporation legally available for the payment of dividends;
(b) the holders of Common Stock shall have the right to vote for the election of directors and on all other matters requiring shareholder action, each share being entitled to one vote; and
(c) upon the voluntary or involuntary liquidation, dissolution or winding-up of the Corporation, the net assets of the Corporation shall be distributed pro rata to the holders of the Common Stock in accordance with their respective rights and interests.
4. All other provisions of the Amended Certificate of Incorporation of the Corporation, not amended hereby shall remain in full force and effect.
5. This Third Amendment to the Certificate of Incorporation was set forth in a resolution duly adopted by the Board of Directors which declares the adoption of the Amendment to be advisable and which ordered that the Amendment be considered by the shareholders of the Corporation entitled to vote thereon.
Such Third Amendment was duly adopted in accordance with
Section 1073 and Section 1077 of the Oklahoma General Corporation
Act by the written consent of the shareholders of the majority of
the issued and outstanding shares of capital stock of the
Corporation in lieu of a special meeting thereof on June 19,
1991.
IN WITNESS WHEREOF, said ADDVANTAGE MEDIA GROUP, INC. has caused its corporate seal to be affixed hereto and this Third Amendment to be signed by its President and Secretary this 20th day of June, 1991.
ADDVANTAGE MEDIA GROUP, INC.
ATTEST:
By /S/ Lynnwood R. Moore, Jr. By /S/ Charles H. Hood --------------------------------- ---------------------------- Lynnwood R. Moore, Jr., Secretary Charles H. Hood, President |
[CORPORATE SEAL]
STATE OF OKLAHOMA )
) SS.
COUNTY OF TULSA )
|
BEFORE ME, a Notary Public in and for said State, on this 20th day of June, 1991, the undersigned officer, personally appeared Charles H. Hood and Lynnwood R. Moore, Jr., known personally to me to be the President and Secretary, respectively, of the above named corporation, and that they, as such officers, being authorized to do so, executed the foregoing instrument for the purposes therein contained, by signing the name of the corporation by themselves as such officers.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
/S/ Melissa Fox
-----------------
Notary Public
My Commission Expires:
8-23-94
[SEAL]
|
CERTIFICATE OF FOURTH AMENDMENT TO THE
CERTIFICATE OF INCORPORATION
OF ADDVANTAGE MEDIA GROUP. INC.
TO: THE SECRETARY OF STATE OF OKLAHOMA
State Capitol Building
Oklahoma City, Oklahoma 73105
The undersigned Oklahoma corporation, for the purpose of amending its Amended Certificate of Incorporation as filed on June 20, 1991, as provided by Section 1077 of the Oklahoma General Corporation Act, hereby certifies:
1. That the name of the corporation is:
ADDVANTAGE MEDIA GROUP, INC.
2. The date of filing of its original Certificate of Incorporation with the Secretary of State was September 20, 1989, and was thereafter amended on December 14, 1990, February 14, 1991, and June 20, 1991, respectively, all of which amendments changed the number of authorized shares of the Corporation.
3. That Article IV is hereby amended to provide that the aggregate number of authorized shares, itemized by class and par value of shares is:
Number of Shares Par Value Per Share
Common 10,000,000 $0.01
Preferred 1,000,000 $1.00
|
4. All other provisions of Article IV and the rest of the Amended Certificate of Incorporation of the Corporation not amended hereby shall remain unchanged and in full force and effect.
That at a meeting of the Board of Directors, a resolution was only adopted setting forth the foregoing proposed amendment to the Certificate of Incorporation of said corporation, declaring said amendment to be advisable and calling a meeting of the shareholders of said corporation for consideration thereof.
That thereafter, pursuant to said resolution of its Board of Directors, a meeting of the shareholders of said corporation was duly called and held on June 25, 1992, at which meeting the necessary number of shares as required by statute were voted in favor of the amendment.
SUCH AMENDMENT WAS DULY ADOPTED IN ACCORDANCE WITH 18 O.S.
1077.
IN WITNESS WHEREOF, said ADDVANTAGE MEDIA GROUP, INC. has caused its corporate seal to be affixed hereto and this Fourth Amendment to be signed by its President and Secretary this 30th day of June, 1992.
ADDVANTAGE MEDIA GROUP, INC.
ATTEST:
By /S/ Lynnwood R. Moore, Jr. By /S/ Gary W. Young
---------------------------------- --------------------------
Lynnwood R. Moore, Jr., Secretary Gary W. Young,
Executive V President -
Finance and Administration
|
[CORPORATE SEAL]
STATE OF OKLAHOMA )
) SS.
COUNTY OF TULSA )
|
BEFORE ME, a Notary Public in and for said State, on this 30th day of June, 1992, the undersigned officer, personally appeared Charles H. Hood and Lynnwood R. Moore, Jr., known personally to me to be the President and Secretary, respectively, of the above named corporation, and that they, as such officers, being authorized to do so, executed the foregoing instrument for the purposes therein contained, by signing the name of the corporation by themselves as such officers.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
/S/ Melissa Fox
----------------
Notary Public
My Commission Expires:
August 23, 1994
----------------
[SEAL]
|
CERTIFICATE OF FIFTH AMENDMENT
TO THE CERTIFICATE OF INCORPORATION
OF ADDVANTAGE MEDIA GROUP, INC.
ADDvantage Media Group, Inc., an Oklahoma corporation (the "Corporation"), for the purpose of amending the Certificate of Incorporation of the Corporation, hereby certifies that:
1. The name of the Corporation is ADDvantage Media Group, Inc.
2. The Corporation's original Certificate of Incorporation was filed with the Secretary of State of the State of Oklahoma on September 20, 1989. The Corporation's Certificate of Incorporation was thereafter amended on December 14,1990, February 14,1991, June 20,1991 and July 8, 1992.
3. Article IV of the Certificate of Incorporation of the Corporation is hereby amended to include the following text after the last paragraph thereof.
Reverse Stock Split of Common Stock
Effective as of the close of business on the date of
filing this Certificate of Fifth Amendment to the
Certificate of Incorporation (the "Effective Time"),
the filing of this Certificate of Fifth Amendment shall
effect a reverse stock split (the "Reverse Stock
Split") pursuant to which each four (4) shares of
issued and outstanding Common Stock, par value $.01 per
share, of the Corporation shall be combined into one
(1) validly issued, fully paid and nonassessable share
of Common Stock, par value $.0l per share, of the
Corporation. The number of authorized shares and the
par value of the Common Stock shall not be affected by
the Reverse Stock Split. Each stock certificate that
prior to the Effective Time represented shares of
Common Stock shall, following the Effective Time,
represent the number of shares into which the shares of
Common Stock represented by such certificate shall be
combined. The Corporation shall not issue fractional
shares or scrip as a result of the Reverse Stock Split,
but shall (i) round up to the nearest whole share those
share holdings which as a consequence of the Reverse
Stock Split would result in fractional positions of .5
shares or more and (ii) round down to the nearest whole
share those share holdings which as a consequence of
the Reverse Stock Split would result in fractional
positions of less than .5 shares.
4. All other remaining provisions of the Corporation's Certificate of Incorporation not amended hereby shall remain unchanged and in full force and effect.
5. The Amendment to the Certificate of Incorporation will become effective at the later of the date of its filing in accordance with the Oklahoma General Corporation Act or 5:00 p.m., C.D.T., on October 8, 1998.
The Amendment to the Certificate of Incorporation was set forth in resolutions duly adopted by the Board of Directors which declared the adoption of the Amendment to be advisable and which ordered that a special meeting of the stockholders be called for consideration of the Amendment by the stockholders of the Corporation.
Such Amendment was duly adopted in accordance with
Section 1077 of the Oklahoma General Corporation Act by the
affirmative vote of the holders of the necessary number of shares
of capital stock of the Corporation required by statute at a
Special Meeting of the stockholders held on October 7, 1998.
THE UNDERSIGNED, being the President of the Corporation, for the purpose of amending the Certificate of Incorporation of the Corporation, does make this amendment to the Certificate of Incorporation of the Corporation, hereby declaring and certifying that this is my act and deed and the facts herein stated are true, and accordingly, have hereunto set my hand as of this 7th day of October, 1998.
ADDVANTAGE MEDIA GROUP, INC.
By: /S/ Charles H. Hood
---------------------------
Name: Charles H. Hood
Title: President
ATTEST:
/S/ Lynnwood R. Moore, Jr.
------------------------------------
Name: Lynnwood R, Moore, Jr.
Title: Secretary
|
CERTIFICATE OF SIXTH AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION OF
ADDVANTAGE MEDIA GROUP, INC.
TO: THE SECRETARY OF STATE OF OKLAHOMA
State Capitol Building
Oklahoma City, Oklahoma 73105
The undersigned Oklahoma corporation, for the purpose of amending its Certificate of Incorporation as originally filed on September 20, 1989, as provided by Section 1077 of the Oklahoma General Corporation Act, hereby states as follows:
1. The name of the corporation is: ADDvantage Media Group, Inc.
2. The date of filing its original Certificate of Incorporation with the Secretary of State of Oklahoma was September 20, 1989. Said Certificate of Incorporation was thereafter amended on December 14, 1990, February 14, 1991, June 20, 1991, July 8, 1992, September 14, 1992, and October 8, 1998.
3. Article I is hereby amended to read as follows:
"ARTICLE I
NAME
The name of the Corporation is ADDvantage Technologies Group, Inc."
4. All other provisions of the Amended Certificate of Incorporation of the Corporation not amended hereby shall remain in full force and effect.
5. This Sixth Amendment to the Certificate of Incorporation was set forth in a resolution duly adopted by the Board of Directors, which declared the adoption of the Amendment to be advisable and which ordered that the Amendment be considered by the shareholders of the Corporation entitled to vote thereon.
Such Sixth Amendment was duly adopted in accordance with Sections 1073 and 1077 of the Oklahoma General Corporation Act by the written consent of the holders of a majority of the issued and outstanding shares of voting stock of the Corporation in lieu of a special meeting thereof, on November 10, 1999.
6. Such Sixth Amendment shall not become effective until December 30, 1999.
IN WITNESS WHEREOF, said ADDvantage Media Group, Inc. has caused its corporate seal to be affixed hereto and this Sixth Amendment to be signed by its President and Secretary this 8th day of December, 1999.
ADDVANTAGE MEDIA GROUP, INC.
ATTEST:
By /S/ Lynnwood R. Moore, Jr. By /S/ Kenneth A. Chymiak
--------------------------------- ----------------------------
Lynnwood R. Moore, Jr., Secretary Kenneth A. Chymiak,
President
|
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION OF
ADDVANTAGE TECHNOLOGIES GROUP, INC.
TO: THE SECRETARY OF STATE OF OKLAHOMA
State Capitol Building
Oklahoma City, Oklahoma 73105
The undersigned Oklahoma corporation, for the purpose of amending its Certificate of Incorporation as originally filed on September 20, 1989, as provided by Section 1077 of the Oklahoma General Corporation Act, hereby states as follows:
1. The name of the corporation is: ADDvantage Technologies Group, Inc.
2. The date of filing its original Certificate of Incorporation with the Secretary of State of Oklahoma was September 20, 1989. Said Certificate of Incorporation was thereafter amended on December 14, 1990, February 14, 1991, June 20, 1991, July 8, 1992, September 14, 1992, October 8, 1998, September 30, 1999, November 22, 1999, and December 9, 1999.
3. The first sentence of Article IV is hereby amended to read as follows:
"The aggregate number of shares of all classes of stock which the Corporation shall have authority to issue is 35,000,000, of which 30,000,000 shares shall be Common Stock with a par value of $0.01 per share and 5,000,000 shares shall be Preferred Stock with a par value of $1.00 per share."
4. All other provisions of the Amended Certificate of Incorporation of the Corporation not amended hereby shall remain in full force and effect.
5. This Amendment to the Amended Certificate of Incorporation was set forth in a resolution duly adopted by the Board of Directors, which declared the adoption of the Amendment to be advisable and which ordered that the Amendment be considered by the shareholders of the Corporation entitled to vote thereon.
Thereafter, at the Annual Meeting of the shareholders of the Corporation duly called and held on March 2, 2000, the necessary number of shares as required by statute were voted in favor of the Amendment.
Thus, this Amendment to the Amended Certificate of Incorporation was duly adopted in accordance with Sections 1067 and 1077 of the Oklahoma General Corporation Act.
IN WITNESS WHEREOF, said ADDvantage Technologies Group, Inc. has caused its corporate seal to be affixed hereto and this Amendment to be signed by its President and Secretary this 2nd day of March, 2000.
ADDVANTAGE TECHNOLOGIES GROUP, INC.
ATTEST:
By s\ Lynnwood R. Moore, Jr. By /S/ Kenneth A. Chymiak
------------------------------------ -------------------------
Lynnwood R. Moore, Jr., Secretary Kenneth A. Chymiak,
President
|
B Y L A W S
OF
ADDVANTAGE MEDIA GROUP, INC.
ARTICLE I
OFFICES
SECTION 1.01. Registered Office and Registered Agent. The registered office and registered agent shall be designated in duly adopted actions of the Board of Directors. Each registered office and registered agent may be changed from time to time by a duly adopted action of the Board of Directors, and the Corporation shall file an appropriate statement of change of registered office or registered agent promptly after the taking of such action in accordance with applicable law.
SECTION 1.02. Other Offices. The Corporation may also have offices at such other places within or without the state of incorporation of the Corporation as the Board of Directors may from time to time determine or the business of the Corporation requires.
ARTICLE II
SHAREHOLDERS
SECTION 2.01. Place of Meeting. All meetings of the shareholders of the Corporation shall be held at the principal executive office of the Corporation unless otherwise determined by the Board of Directors and specified in the notice of meeting, in which event the meeting shall be held at the place within or without the state of incorporation as shall be designated in the notice of such meeting.
SECTION 2.02. Annual Meeting. The Board of Directors may fix the date and time of the annual meeting of the shareholders, but if no such date and time is fixed by the Board, the annual meeting shall be held on a fourth Tuesday in January, if not a legal holiday, and if a legal holiday then on the next succeeding business day, at 10:00 a.m. local time. At the annual meeting, the shareholders then entitled to vote shall elect directors and shall transact such other business as may properly be brought before the meeting.
SECTION 2.03. Special Meetings. Special meetings of the shareholders of the Corporation may be called for any purpose or purposes for which meetings may lawfully be called at any time by the President or by a majority of the Board of Directors, and shall be called after the Corporation's receipt of the request in writing of shareholders owning one-fourth of the amount of the entire capital stock of the Corporation issued and outstanding and entitled to vote. Every request for a special
meeting shall state the specific purpose or purposes of the meeting. The date of the meeting shall be held at such date and time as the Board of Directors may fix, not less than 10 nor more than 60 days after the receipt of the request, and the Secretary shall give due notice thereof. If the Board of Directors shall neglect or refuse to fix the time and date of such meeting and cause the Secretary to give notice thereof, the person or persons calling the meeting may do so.
SECTION 2.04. Notice of Meetings. Written notice of the place, date and hour of every meeting of the shareholders, whether annual or special, shall be given to each shareholder of record entitled to vote at the meeting not less than 10 nor more than 60 days before the date of the meeting. Every notice of a special meeting shall state the purpose or purposes thereof.
SECTION 2.05. Quorum and Adjournment Meeting. The record holders of a majority of the stock issued and outstanding (not including treasury stock) and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the shareholders for the transaction of business, except as otherwise provided by law, by the Corporation's Certificate of Incorporation or by these Bylaws. If, however, such quorum shall not be present or represented at any meeting of the shareholders, the shareholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At any such adjourned meeting, at which a quorum shall be present in person or represented by proxy, any business may be transacted which might have been transacted at the meeting as originally notified. When a quorum is present at any meeting, the vote of the holders of the majority of the stock having voting power present in person or represented by proxy shall decide all questions brought before such meeting, unless the question is one upon which, by expressed provision of applicable law, the Corporation's Certificate of Incorporation or these Bylaws, a different vote is required, in which case such expressed provision shall govern and control the decision of such question. The shareholders present in person or represented by proxy at a duly organized meeting at which a quorum is present may continue to do business until adjournment, notwithstanding withdrawal of enough shareholders to leave less than a quorum.
SECTION 2.06. Conduct of Meetings. All annual and special meetings of shareholders shall be conducted in accordance with such rules and procedures as the Board of Directors may determine subject to the requirements of applicable law and, as to matters not governed by such rules and procedures, as the chairman of such meetings shall determine. The Chairman of any annual or special meeting of shareholders shall be the President of the Corporation. The Secretary, or in the absence of the Secretary, a person designated by the chairman of the meeting, shall act as secretary of the meeting.
SECTION 2.07. Voting. At every meeting of the shareholders, each shareholder shall be entitled to one vote in person or by proxy for each share of capital stock having voting power held of record by such shareholder. No proxy shall be voted on after three years from its date, unless the proxy provides for a longer period.
SECTION 2.08. Consent of Shareholders in Lieu of Meeting. Any action required to be taken at any annual or special meeting of shareholders of the Corporation, or any action which may be taken at any annual or special meeting of such shareholders, may be taken without a meeting, without prior notice and without a vote, if a consent in writing
setting forth the action so taken shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize the taking of such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of action by the shareholders without a meeting by less than unanimous written consent shall be given to those shareholders entitled to vote on the action who have not consented in writing to such action.
SECTION 2.09. Voting Lists. The Secretary shall cause the Corporation to prepare at least ten (10) days before every meeting of shareholders a complete list of the shareholders entitled to vote at the meeting. The list shall be arranged in alphabetical order showing the address of each shareholder and the number of shares registered in the name of each shareholder. Such list shall be open to the examination of any shareholder for any lawful purpose during ordinary business hours for a period of at least ten (10) days prior to the meeting either at the principal executive office of the Corporation or at the place where the meeting is to be held. The list shall also be available and open for inspection during the whole time of the meeting and may be inspected by any shareholder or authorized representative who is present.
ARTICLE III
BOARD OF DIRECTORS
SECTION 3.01. Powers. The Board of Directors shall have full power to manage the business and affairs of the Corporation; and all, powers of the Corporation, except those specifically reserved to the shareholders by law, the Certificate of Incorporation or these Bylaws, are hereby granted to and vested in the Board of Directors.
SECTION 3.02. Number, Qualifications and Term of Office. The Board of Directors shall consist of such number of directors as may be determined from time to time by resolution of the Board of Directors; provided that the Board shall consist of not less than one (1) nor more than nine (9) persons. No director need be an officer or shareholder of the Corporation but each director shall be a natural person 21 years of age or older. Each Director shall serve until the next annual meeting of the shareholders or until his successor shall have been duly elected and qualified, except in the event of his death, resignation or removal.
SECTION 3.03. Vacancies. Any director may be removed, either for or without cause, at any meeting of shareholders by the affirmative vote of a majority in number of shares of the shareholders present in person or by proxy at such meeting and entitled to vote for the election of such director, provided notice of the intention to act upon such matter shall have been given in the notice calling such meeting. Vacancies and newly created directorships resulting from any increase in the authorized number of Directors may be filled by a majority of the Directors then in office, though less than a quorum, or by a sole remaining Director, and any Director so chosen shall hold office until the next annual election or until his successor is duly elected and qualified. If there are no Directors in office, then an election of Directors may be held in the manner provided by law. If, at the time of filling any vacancy or any newly created directorship, the Directors then in office shall constitute
less than a majority of the whole Board (as constituted immediately prior to any such increase), a court of competent jurisdiction may, upon application of shareholders holding of record at least 10 percent of the total number of the shares at the time outstanding having the right to vote for such Directors, summarily order an election to be held to fill any such vacancies or newly created directorships or to replace the Directors chosen by the Directors then in office.
SECTION 3.04. Resignations. Any Director of the Corporation may resign at any time by giving written notice to the Board of Directors, the President or the Secretary of the Corporation. Such resignation shall take effect upon receipt by the Corporation of such notice or at any later time specified therein and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.
SECTION 3.05. Organization. At every meeting of the Board of Directors, the Director chosen by a majority of the Directors present, shall preside, and the Secretary, or, in his absence, the person appointed by the chairman of the meeting, shall act as secretary of the meeting.
SECTION 3.06. Place of Meeting. The Board of Directors may hold its meetings, both regular and special, at such place or places within or without the state of incorporation as the Board of Directors may from time to time select, as designated in the notice calling the meeting.
SECTION 3.07. Organizational Meeting. The first meeting of each newly elected Board of Directors shall be held without notice immediately following the annual meeting of shareholders, unless the shareholders shall determine otherwise.
SECTION 3.08. Regular Meetings. Regular meetings of the Board of Directors may be held without notice at such time and place as shall be designated from time to time by a duly adopted action of the Board of Directors.
SECTION 3.09. Special Meetings. Special meetings of the Board of Directors shall be held whenever called by two or more of the Directors. Notice of each special meeting shall be given to each director by telephone, telegram, telecopy, in writing or in person at least 24 hours (in the case of notice by telephone, in person or actual notice however received) or 48 hours (in the case of notice by telegram, or telecopy or similar wire communication) or five (5) days (in the case of notice by mail or otherwise) before the time at which the meeting is to be held. Each such notice shall state the date, time and place of the meeting to be so held.
SECTION 3.10 Quorum and Adjourned Meetings. At all meetings of the Board a majority of the Directors shall constitute a quorum for the transaction of business, and the act of a majority of the Directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, except as may be otherwise specifically provided by law or by the Certificate of Incorporation. If a quorum shall not be present at any meeting of the Board of Directors, a majority of the Directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present.
SECTION 3.11. Unanimous Consent of Directors in Lieu of Meeting. Unless otherwise restricted by law the Certificate of Incorporation or these Bylaws, any action required or permitted to be taken at any meeting of the Board of Directors or of any Committee thereof may be taken without a meeting, without prior notice and without a vote if all members of the Board or the Committee, as the case may be, consent thereto in writing either before or after the taking of action with respect thereto. The written consent shall be filed with the minutes of proceedings of the Board or the Committees.
SECTION 3.12. Executive and Other Committees. The Board of
Directors may, by resolution adopted by a majority of the whole Board,
designate an Executive Committee and one or more other committees, each
committee to consist of one or more Directors. Any such Committee to the
extent provided in the resolution establishing such Committee and not
otherwise restricted or limited by applicable law or the Certificate of
Incorporation or the Bylaws, shall have and may exercise all the power
and authority of the Board of Directors in the management of the business
and affairs of the Corporation, including the power or authority to
declare a dividend, to authorize the issuance of stock, to adopt a
certificate of ownership and merger and to authorize the seal of the
Corporation to be affixed to all papers which may require it; but no such
Committee shall have the power or authority in reference to (1) amending
the Certificate of Incorporation (except that a Committee may, to the
extent authorized in the resolution or resolutions providing for the
issuance of shares of the stock adopted by the Board of Directors, as
permitted by applicable law, fix any of the preferences or rights of such
shares relating to dividends, redemption, dissolution, any distribution
of assets of the Corporation or the conversion into, or the exchange of
such shares for, shares of any other class or classes or any other series
of the same or any other class or classes of stock of the Corporation),
(2) adopting an agreement of merger or consolidation, recommending to the
shareholders the sale, lease or exchange of all or substantially all of
the Corporation's property and assets, (3) recommending to the
shareholders the dissolution of the Corporation or a revocation of a
dissolution, or (4) amending the Bylaws of the Corporation. Such
Committee or Committees shall have such name or names as may be
determined from time to time by resolution adopted by the Board of
Directors. Each Committee shall keep regular minutes of its meetings and
file the same with the minutes of the Board of Directors.
SECTION 3.13. Compensation of Directors. Unless otherwise restricted by law, the Certificate of Incorporation or these Bylaws, the Board of Directors shall have the authority to fix the compensation of Directors. The Directors shall be reimbursed their actual reasonable expenses, if any, of attendance at any meeting of the Board of Directors and any Committee thereof and may be paid a fixed sum for attendance at each such meeting or a fixed salary as determined by the Board of Directors. No such payment shall preclude any Director from serving the Corporation in any other capacity and receiving compensation therefor.
ARTICLE IV
NOTICES OF MEETINGS
SECTION 4.01. Notice. Whenever notice is required to be given to any Director or shareholder, it shall not be construed to mean personal notice, but such notice may be given in writing, by mail, addressed to such Director or shareholder, at his address as it appears on the records of the Corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Notice to Directors may also be given in accordance with Section 3.09 of Article III hereof.
SECTION 4.02. Waivers of Notice. Whenever any notice is required to be given, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. Except in the case of a special meeting of shareholders and as otherwise required by law, neither the business to be transacted at, nor the purpose of, any regular or special meeting of the shareholders, Directors, or Committee of Directors need be specified in any written waiver of notice of such meeting.
SECTION 4.03. Conference Telephone Meetings. One or more shareholders, Directors or members of a Committee of Directors may participate in a meeting of the shareholders, Board, or of a Committee of the Board, by means of conference telephone or similar communications equipment provided that all persons participating in the meeting can hear each other and participate in discussions thereof. Participation in a meeting pursuant to this section shall constitute presence in person at such meeting.
ARTICLE V
OFFICERS
SECTION 5.01 Number, Qualifications and Designation. The officers of the Corporation shall be chosen by the Board of Directors and may include a President, one or more Vice Presidents, a Secretary, a Treasurer, and such other officers as may be elected in accordance with the provisions of Section 5.03 of this Article. One person may hold more than one office. Officers may be, but need not be, Directors or shareholders of the Corporation. The Board of Directors may from time to time elect such other officers as it deems necessary or appropriate, who shall exercise such powers and perform such duties as are provided in these Bylaws and as the Board of Directors may from time to time determine.
SECTION 5.02 Election, Term of Office and Removal. The officers of the Corporation shall be elected annually by the Board of Directors, and each such officer shall hold his office until his successor shall have been elected and qualified, or until his earlier death, resignation, or removal. Any officer may resign at any time upon written notice to the Corporation. Such resignation shall take effect upon receipt by the Corporation of such notice.
SECTION 5.03 Removal of Officers. Any officer or agent elected or appointed by the Board of Directors may be removed at any time, with or without cause, by the affirmative vote of a majority of the whole Board of Directors. If any office becomes vacant for any reason, the vacancy may be filled by the Board of Directors.
SECTION 5.04 The President. The President shall be the Chief Executive Officer of the Corporation and shall have general supervisory responsibility over all operations of the Corporation, subject to the control of the Board of Directors. He shall execute and deliver, in the name of the Corporation, deeds, mortgages, bonds, contracts, powers of attorney or other instruments, authorized by the Board of Directors, except in cases where the signing and execution thereof shall be expressly delegated by the Board of Directors or by these Bylaws to some other officer or agent of the Corporation; and, in general, the President shall perform all duties incident to the office of Chief Executive Officer of the Corporation, and such other duties as from time to time may be assigned to him by the Board of Directors.
SECTION 5.05 The Vice Presidents. The Vice Presidents in the order of the designation by the Board of Directors, shall perform the duties of the President in his absence and such other duties as may from time to time be assigned to them by the Board of Directors or by the President.
SECTION 5.06 The Secretary. The Secretary shall attend all meetings of the shareholders, the Board of Directors and Committees thereof shall record the minutes of the proceedings thereat and shall keep a current and complete record thereof. The Secretary shall publish, keep and maintain records and reports of the Corporation as required by law; shall be the custodian of the seal of the Corporation and see that it is affixed to all documents to be executed on behalf of the Corporation under its seal; and, in general, shall perform all duties incident to the office of Secretary and such other duties as may from time to time be assigned to him by the Board of Directors or the President. Each Assistant Secretary shall have such powers and perform such duties as the Board of Directors or the President may from time to time prescribe.
SECTION 5.07 The Treasurer. The Treasurer shall be the Chief Financial Officer of the Corporation; shall have responsibility for the proper care and custody of all corporate funds and securities; shall keep full, accurate and complete records, receipts and disbursements of the Corporation; and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors. He shall disburse the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render a report to the Board of Directors, whenever requested, of the financial condition of the Corporation, and shall perform such other duties as the Board of Directors may prescribe. Each Assistant Treasurer shall have such powers and perform such duties as the Board of Directors or the President may from time to time delegate.
SECTION 5.08 Assistant Officers. The Board of Directors may appoint one or more assistant officers. Each assistant officer shall, at the request of or in the absence or disability of the officer to whom he is an assistant, perform the duties of such officer and shall have such other authority and perform such other duties as the Board of Directors may prescribe.
SECTION 5.09 Bonds. If required by the Board of Directors, any officer shall give the Corporation a bond in such form, in such sum, and with such surety or sureties as shall be satisfactory to the Board, for the faithful performance of the duties of his office and for the restoration to the Corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in their possession or under their control belonging to the Corporation.
SECTION 5.10 Salaries. The salaries of the officers of the Corporation shall be fixed from time to time by the Board of Directors.
ARTICLE VI
CERTIFICATES OF STOCK
SECTION 6.01 Issuance. Each shareholder shall be entitled to a certificate or certificates representing shares of stock of the Corporation owned of record by him upon his request therefor. The stock certificates of the Corporation shall be numbered and registered in the stock ledger and transfer books of the Corporation as issued. Certificates shall be signed by the President or a Vice President and by the Secretary, an Assistant Secretary, the Treasurer or an Assistant Treasurer, and shall bear the corporate seal. Any or all of the signatures and the corporate seal upon such certificate may be a facsimile, engraved or printed. In case any officer, transfer agent or registrar who has signed, or whose facsimile signature has been placed upon, any share certificate shall have ceased to be such officer, transfer agent or registrar, the certificate shall be valid and of the same force and effect as if he continued to be such officer, transfer agent or registrar.
SECTION 6.02 Transfer. Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignation or authority to transfer, it shall be the duty of the Corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. No transfer shall be made which would be inconsistent with law.
SECTION 6.03 Stock Certificates. Stock certificates of the Corporation shall be in such form as provided by statute and approved by the Board of Directors. The stock transfer books and the blank stock certificate books shall be kept by the Secretary or by any agency designated by the Board of Directors for that purpose.
SECTION 6.04 Lost, Stolen, Destroyed or Mutilated Certificates. The Board of Directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Corporation alleged to have been lost, stolen or destroyed upon the receipt by the Corporation of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing issuance of a replacement certificate or certificates, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed
certificate or certificates, or his legal representative, to give the Corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost, stolen or destroyed.
SECTION 6.05. Record Holder of Shares. The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the record and beneficial owner of shares to receive dividends, to exercise voting rights and for all purposes; and the Corporation shall not be bound to recognize any equitable or other claim to or interest in such shares on the part of any other- person, even if the Corporation shall have notice thereof.
SECTION 6.06. Determination of Record Date. In order that the Corporation may determine the shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or to receive payment of any dividend or other distribution or allotment of any rights, or to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix a record date, which shall not be more than 60 nor less than 10 days before the date of such meeting or any other action.
If no record date is fixed:
(1) The record date for determining shareholders entitled to notice of or to vote at a meeting of shareholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held.
(2) The record date for determining shareholders entitled to express consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is necessary, shall be the day on which the first written consent is expressed.
(3) The record date for determining shareholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.
A determination of shareholders of record entitled to notice of or to vote at a meeting of shareholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.
ARTICLE VII
INDEMNIFICATION OF DIRECTORS, OFFICERS AND
OTHER AUTHORIZED REPRESENTATIVES
SECTION 7.01. Indemnification of Authorized Representatives in Third Party Proceedings. To the maximum extent not prohibited by law, the Corporation shall indemnify any person who was or is an "authorized representative" of the Corporation (which shall mean for purposes of this
Article a Director or officer of the Corporation, or a person serving at the request of the Corporation as a director, officer, partner or trustee of another corporation, partnership, joint venture, trust or other business enterprise) and who was or is a "party" (which shall include for purposes of this Article the giving of testimony or similar involvement) or is threatened to be made a party to any "third party proceeding" (which shall mean for purposes of this Article any threatened, pending or completed action, suit or proceeding, whether civil, criminal, arbitration, administrative or investigative other than an action by or in the right of the Corporation) by reason of the fact that such person was or is an authorized representative of the Corporation, against expenses (which shall include for purposes of this Article attorneys' fees and expenses), judgments, penalties, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such third party proceeding if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation and, with respect to any criminal third party proceeding (which could or does lead to a criminal third party proceeding) had no reasonable cause to believe such conduct was unlawful. The termination of any third party proceeding by judgment, order, settlement, indictment, conviction or upon a plea of nolo contendere or its equivalent shall not of itself create a presumption that the authorized representative did not act in good faith and in a manner which such person reasonably believed to be in or not opposed to the best interests of the Corporation and, with respect to any criminal third party proceeding, had reasonable cause to believe that such conduct was unlawful.
SECTION 7.02. Indemnification of Authorized Representatives in Corporate Proceedings. The Corporation shall indemnify any person who was or is an authorized representative of the Corporation and who was or is a party or is threatened to be made a party to any "corporate proceeding" (which shall mean for purposes of this Article any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor or investigative proceeding by the Corporation) by reason of the fact that such person was or is an authorized representative of the Corporation, against expenses actually and reasonably incurred by such person in connection with the defense or settlement of such corporate action if such person acted in good faith and in a manner reasonably believed to be in or not opposed to the best interests of the Corporation; except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation, unless and only to the extent that a court of competent jurisdiction shall determine that, despite the adjudication of liability but in view of all the circumstances of the case, such authorized representative is fairly and reasonably entitled to be indemnified to the extent such court shall order.
SECTION 7.03. Mandatory Indemnification of Authorized Representatives. To the extent that an authorized representative of the Corporation has been successful on the merits or otherwise in defense of any third party proceeding or corporate proceeding or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses actually and reasonably incurred by such person in connection therewith.
Section 7.04. Determination of Entitlement to Indemnification. Any indemnification under Section 7.01, 7.02 or 7.03 of this Article (unless
ordered by a court) shall be made by the Corporation only as authorized
in the specific case upon a determination that indemnification of the
authorized representative is proper in the circumstances because such
person has either met the applicable standards of conduct set forth in
Section 7.01 or 7.02 or has been successful on the merits or otherwise as
set forth in Section 7.03 and that the amount requested has been actually
and reasonably incurred. Such determination shall be made:
(1) By the Board of Directors by a majority of a quorum consisting of Directors who were not parties to such third party or corporate proceeding; or
(2) If such a quorum is not obtainable, or, even if obtainable, a majority vote of such a quorum so directs, by independent legal counsel in a written opinion; or
(3) By the shareholders.
SECTION 7.05. Advancing Expenses. Expenses actually and reasonably incurred in defending a third party or corporate proceeding shall be paid on behalf of an authorized representative by the Corporation in advance of the final disposition of such third party or corporate proceeding as authorized in the manner provided in Section 7.04 of this Article upon receipt of an undertaking by or on behalf of the authorized representative to repay such amount unless it shall ultimately be determined that such person is entitled to be indemnified by the Corporation as authorized in this Article. The financial ability of such authorized representative to make such repayment shall not be a prerequisite to the making of an advance.
SECTION 7.06. Employee Benefit Plans. For purposes of this Article,- the Corporation shall be deemed to have requested an authorized representative to serve an employee benefit plan where the performance by such person of duties to the Corporation also imposes duties on, or otherwise involves services by, such person to the plan or participants or beneficiaries of the plan; excise taxes assessed on an authorized representative with respect to an employee benefit plan pursuant to applicable law shall be deemed "fines"; and action taken or omitted by such person with respect to an employee benefit plan in the performance of duties for a purpose reasonably believed to be in the interest of the participants and beneficiaries of the plan shall be deemed to be for a purpose which is not opposed to the best interests of the Corporation.
SECTION 7.07. Scope of Article. The indemnification of and advancement of expenses to authorized representatives, as authorized by this Article, shall (1) not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any statute, agreement, vote of shareholders or disinterested Directors or otherwise, both as to action in an official capacity and as to action in another capacity, (2) continue as to a person who has ceased to be an authorized representative and (3) inure to the benefit of the heirs, executors and administrators of such a person.
SECTION 7.08. Reliance on Provisions. Each person who shall act as an authorized representative of the Corporation shall be deemed to be doing so in reliance upon rights of indemnification provided by this Article.
SECTION 7.09. Insurance. The Corporation may but shall not be obligated to purchase and maintain insurance at its expense on behalf of any person who is or was an authorized representative against any liability asserted against him in such capacity or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.01. Dividends. Dividends upon the capital stock of the Corporation, subject to the provisions of the Certificate of Incorporation, if any, may be declared by the Board of Directors at any regular or special meeting only out of funds or property lawfully available therefor, pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock of the Corporation, subject to the provisions of the Certificate of Incorporation. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the Directors from time to time, in its absolute discretion, thinks proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purpose as the Directors shall think conducive to the interest of the Corporation, and the Board of Directors may modify or abolish any such reserve in the manner in which it was created.
SECTION 8.02. Annual Statements. The Board of Directors, through the officers of the Corporation, shall present at each annual meeting, and at any special meeting of the shareholders when called for by vote of the shareholders, a full and clear statement of the business and condition of the Corporation.
SECTION 8.03. Contracts. Except as otherwise provided in these Bylaws, the Board of Directors may authorize any officer or officers or any agent or agents to enter into any contract or to execute and deliver any instrument on behalf of the Corporation and such authority may be general or confined to specific instances.
SECTION 8.04. Checks. All checks, notes, bills of exchange or other orders in writing shall be signed by such person or persons as the Board of Directors may from time to time designate.
SECTION 8.05. Corporate Seal. The corporate seal shall have inscribed thereon the name of the Corporation, the year of its organization and the words "Corporate Seal", and the state of incorporation of the Corporation. The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise.
SECTION 8.06. Deposits. All funds of the Corporation shall be deposited from time to time to the credit of the Corporation in such banks, trust companies, or their depositories as the Board of Directors
may approve or designate; and all such funds may be withdrawn only upon checks or withdrawal requests signed by such one or more officers or employees as the Board of Directors shall from time to time determine.
SECTION 8.07. Amendment of Bylaws. These Bylaws may be altered, amended or repealed or new bylaws may be adopted by the shareholders or by the Board of Directors, at any regular meeting of the shareholders or of the Board of Directors or at any special meeting of the shareholders or of the Board of Directors if notice of such alteration, amendment, repeal or adoption of new bylaws be contained in the notice of such special meeting.
SECTION 8.08. Fiscal Year. The fiscal year of the Corporation shall begin on the first day of October and end on the last day of September, unless otherwise provided by resolution of the Board of Directors.
SECTION 8.09. Interested Directors. No contract or transaction between the Corporation and one or more of its Directors or officers, or between the Corporation and any other company, partnership, association or other organization in which one or more of its Directors or officers are directors or officers or have a financial interest, shall be void or voidable solely for this reason, or solely because the Director or officer is present at or participates in the meeting of the Board of Directors or Committee thereof which authorizes the contract or transaction, or solely because his or their vote is counted for such purpose; if: (1) the material facts as to his relationship or interest are disclosed to the Board or the Committee, and the Board or Committee in good faith authorizes the contract or transaction by the affirmative vote of a majority of the disinterested Directors, even though the disinterested Directors be less than a quorum; or (2) the material facts as to his relationship or interest are disclosed to the shareholders entitled to vote therein, and the contract or transaction is specifically approved in good faith by vote of the shareholders; or (3) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified by the Board of Directors or a Committee thereof or the shareholders. Common or interested Directors may be counted in determining the presence of a quorum at a meeting of the Board or of a Committee which authorizes the contract or transaction.
SECTION 8.10. Form of Records. Any records maintained by the Corporation in the regular course of its business, including its stock ledger, books of account and minute books, may be kept on, or be in the form of, punch cards, magnetic tape, photographs, microphotographs or any other information storage device, provided that the records so kept can be converted into clearly legible form within a reasonable time. The Corporation shall convert any records so kept upon the request of any person entitled to inspect the same.
BYLAW AMENDMENT
By unanimous consent to action in lieu of a special meeting
of the Board of Directors of ADDvantage Media Group, Inc., dated
January 31, 1992, the Directors of the Corporation amended
Section 2.02 Article II of the Bylaws to read as follows
"The Board of Directors may fix the date and time of the annual meeting of the shareholders, but if no such date and time is fixed by the Board, the annual meeting shall be held on the fourth Tuesday in May, if not a legal holiday, and if a legal holiday then on the next succeeding business day, at 10:00 a.m. local time."
The original signed consent can be found under the tab marked "Minutes" in date order. A copy of the consent can be found behind the Bylaws.
EXHIBIT 21.1
SUBSIDIARIES OF ADDVANTAGE TECHNOLOGIES GROUP, INC.
1. TULSAT Corporation An Oklahoma corporation - 100% owned
2. LEE CATV Corporation A Nebraska corporation - 100% owned
3. NCS Industries, Inc. A Pennsylvania corporation - 100% owned
4. ADDVantage Technologies Group of Missouri dba "Comtech" A Missouri corporation - 100% owned
5. ADDvantage Technologies Group of Texas ("TULSAT - Texas") A Texas corporation - 100% owned
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation of our report dated December 12, 2002 on the financial statements of ADDvantage Technologies Group, Inc. as of September 30, 2002, and for the years ended September 30, 2002 and 2001, included in this Form 10-KSB Annual Report of ADDvantage Technologies Group, Inc. as of September 30, 2002, into ADDvantage Technologies Group Inc.'s previously Filed Registration Statement on Form S-8 (File No. 333-12641).
/S/ Tullius Taylor Sartain & Sartain LLP January 9, 2003 |
Exhibit 99.1
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
In connection with the Annual Report of ADDvantage Technologies Group, Inc. (the "Company") on Form 10-KSB for the fiscal year ending September 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Kenneth A. Chymiak, Chief Executive Officer and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Sec 1350, as adopted pursuant to Sec 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 in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/S/ Kenneth A. Chymiak
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Kenneth A. Chymiak
Chief Executive Officer and Chief Financial Officer
January 9, 2003
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