*The following thoughts and opinions unless otherwise indicated are mine alone. You should not rely upon my thoughts as any type of advice, legal or financial. My Opinions are just my own, and my reasoning may be faulty or based upon incomplete or inaccurate information. Perform your own due duligence. My post is commentary and my opinion. I will correct any inaccurate information.
My Note: It's no secret that I am a shareholder in Advanced Photonix (along with several other companies which are developing and commercializing THz). It's also true that this blog tries to stay away from commentary relating to investing or regarding the management of any company.
I'm going to make an exception today to urge all readers who have an investment in API, to consider voting NO on proxy issue 4, and vote YES on 6. (I voted 2 years on issue 3 I voted NO on issues 2 & 5, but 4 is the main one I oppose). (You can read the company's description of the proxity vote below but see investor Charles Knowles counter-proxy opinion posted yesterday).
I voted to retain only Rob Risser on the Board of Directors. (Be careful, the default votes in favor of retaining all Directors. You have to make the selection to vote for specific Directors, and you check the ones you want to exclude. (This is counter-intuitive, so be carefull you withhold your vote on those Directors you don't want to retain .) You can change your vote any time until the day of the meeting.)
In the final analysis, I believe that all that the current unopposed directors need is one vote, so voting against them probably doesn't make a difference, other than to express your displeasure.
*Perform your own due diligence and make your own informed decisions* It's my understanding you can change your vote up until the date of the Annual meeting.
The following are my thoughts and opinions and I welcome any different viewpoint which can be included in the comment section below.
I am an investor in API because of the promise of the technology. My hat is off to the engineers and scientists working for API, such as IRL DULING, and DAVID ZIMDARS, along with the entire staff. The company has some true genius employed within it's ranks.
Historically, the acquisition by API of University of Michigan spin-off Picometrix in 2005, caused me to reconsider selling off the shares I had begun acquiring in 1999, in several photonics based companies. The sales of the very first THz systems to NASA, made me believe that API would quickly move to commercialize the use of Terahertz in a number of areas. Of course, world financial markets collapsed in 2008.
Unfortunately the Board received a significant boost in their incentives and pay in 2007.
While shareholders approved this increase, it was based upon statements from Mgt. such as the following comments by Rick Kurtz:
We expect to continue to experience high double-digit revenue growth for our products selling to the telecommunications market over the next 12 to 18 months. This will drive much of the near-term growth. Our Optosolutions solution products serve a variety of global original equipment manufacturing markets. API supports the customer from an initial concept from design of the semiconductor, hybridization and supporting electronics, packaging and signal conditioning for processing into prototypes through full-scale production, validation and test at our California and Wisconsin facilities. Markets for this product offering are typically referred to as high-reliability markets, like military, medical and some industrial applications.
http://seekingalpha.com/article/28857-advanced-photonix-ceo-speaks-about-his-company
As noted, the world financial market collapse occurred in 2008, but even so, the company has had very, very few quarters where any profit at all, has been shown since 2008.
The share price which rose to an intra-day high of $18.25, has dropped down below a dollar a share, which is lower than it was a decade ago. Unfortunately, the BOD continued their 2007 pay and incentive increase except over the last few quarters. This was even in light of the fact that the company and shareholders experienced years and years of anemic share price, as the company struggled to reestablish the foothold, that Mgt believed it was on the cusp of in 2007.
From my perspective a more responsible, more shareholder friendly approach would have been to cut BOD, salaries and incentives until profitablilty could be obtained. Sadly that hasn't happened except over the last two quarters.
The retail investment community has been vocal in their opposition to all of the proxy items with the exception of number 6. Here are some comments from various posters on the InvestorVillage stock message board page.
One poster on InvestorVillage posted the following regarding the BOD compensation package for 2007. (some portions containing highly inflamatory language have been redacted by me from this post):
· Per the 14A, it appears the director compensation was increased based upon these comparable companies in 2007 so I wanted to see what companies the size of API actually pay their directors. It is easy to find, you just look at the other companies 14A and they tell you all about it.
· I looked up the comparable companies mentioned in the API 14A and found that many do not exist today or are no longer public, like Logicvision, Hytec Microsystems, Tripath Technology, Sierra Monolythics, and Stratos. I have not had time to look up all of the companies mentioned but have done enough to form a solid opinion.
· I also found out that most of the “comparable” companies cited as comparable, were not comparable at all but were 10 times the size of API based on Yahoo finance information. For example American Science & Engineering had $242 million in revenue and $299 million in market capitalization; IPG Photonics had $736 million in revenue and $736 million in market capitalization; Oplink Communications had $132 million in revenue and $299 million in market capitalization; Energy Conversion Devices had $219 million in revenue and $213 million in market capitalization; Evergreen Solar had $294 million in revenue and $170 million in market capitalization; Hittite Microwave had $178 million in revenue and $1.35 billion in market capitalization; and Mindspeed had $144 million in revenue and $253 million in market capitalization. These ARE NOT COMPARABLE in my book since they at 10 or more times larger than API!
· I found that the non employee director’s compensation is very high. It seems to be based on the larger companies’ director compensation listed as “comparable” and is about 3 times higher than the named companies that are similar in size and thus are “comparable” to API. Companies like Micropac Industries that paid director retainers of $10,000 per year, $1,500 per meeting and no stock options and Alliance Fiber Optic Products that paid director retainers of $10,500 per year $3,000 per meeting attended or $1,500 per telephonic meeting and got stock options to purchase 10,000shares per year. Micropac had revenue of $17 million and a market capitalization of $13 million and AFOP had revenue of $30 million and a market capitalization of $59 million. This is more in line with the director compensation listed in the 14A in 2007, before the large raise the board gave themselves. A lot of the companies’ board of directors also cut their compensation in 2009 by 10% during their companies cost cutting measures, API’s “independent directors” board did not
· The compensation API non employee directors gave themselves of about $50,000 per year plus $25,000 of stock grants is outrageous, given that API is about $23 million in revenue and $12 million in market capitalization. ..(portions omitted)... At best the directors’ compensation should be at the 2007 level which was about $70,000 per year in cash, for all directors combined. plus some modest level of stock options per year. Even this should have been reduced due to the recession like responsible other public companies boards of directors actions, including many of those identified as comparable companies for compensation purposes in the 14A.
·The independent directors should cut back their salary to 1/3 of the current level, return the excessive compensation they received over the past few years ($600,000 by my calculation if you assume their 2007 compensation was about correct), and stop granting themselves stock. They actually get more stock as the stock price declines because they get $25,000 of stock, which means the lower the price, the more shares they get. Over the past few years, they would have received 3 times more shares than they would have in 2007, when they started giving themselves stock grants. Instead the directors should align themselves with the shareholders and ONLY get stock options, which would be worthless unless the stock price increases, which is in line with shareholders. That’s the way it should be, if they help shareholders make money, then the directors should make money because the stock price increases."
http://www.investorvillage.com/smbd.asp?mb=4804&mn=20961&pt=msg&mid=13033339
Another poster noted the following:
I think everyone is missing the point. They have a money/stock printing machine. They are not ever, ever, ever going to give that up. They have proven that their own pockets getting lined is more important than profits. They are fighting tooth and nail to keep us from having one person on the BOD. So, biggie, you can forget about them stepping down, never, ever happen. These are moderately successful guys that all have decided to rig the game and take money/stock that they don't deserve under any normal guidelines or rational. These petty little men would rather have an unsuccessful company that they can rape than have a successful company because they don't want to include one guy on the board that might fight for shareholders and what is best for the company. Ultimately, shareholders and employees will be hurt. Oddly, two guys that have the power to stop this debacle, Risser and Williamson, seemingly are going along with the cherade. Big week coming up. Do they compromise or fight with us? Do they want to be successful or more of the past decade? We shall see.
http://www.investorvillage.com/smbd.asp?mb=4804&mn=21031&pt=msg&mid=13051177
Yet another poster, on InvestorVillage noted the following about the current proxy proposal #4:
From the SEC document API's DEF 14A:2013:pages 28 and 29 and 42
I don't fully understand but these parts I find disturbing.If the plan is approved:
First: Non-employee Director Grants
· Automatic Annual Director Grants: On the first business day in each September, each then serving non-employee member of the Board will automatically receive a Stock Grant Award of 25,000 shares
· Discretionary Director Grants: The Compensation Committee, in its sole discretion, may grant non-employee directors discretionary Awards
I am against the automatic dilution of our shares by 25,000 per director. They may even hire two or more filtertec employees as directors.
The Discretionary Director Grants I really find disturbing. The Compensation Committee,
ADVANCED PHOTONIX, INC.
COMPENSATION COMMITTEE
M. Scott Farese (Chairman), Donald Pastor, Lance Brewer
in its sole discretion, may grant non-employee directors discretionary Awards.
Now to page 42:
7.(b)
Limit on all Awards. The number of shares of Stock as to which an Awardee may be granted Awards under the Plan during any calendar year shall not exceed 300,000 subject to the provisions of Section 10.
So there you have it an automatic Award of 25,000 shares with the possible addition of an additional 300,000 shares per year at THE SOLE DISCRETION of! With NO SHAREHOLDER APPROVAL REQUIRED http://www.investorvillage.com/smbd.asp?mb=4804&mn=20993&pt=msg&mid=13039242
Once again, if the information found in these posts is not correct, then I am happy to correct any inaccuracy found in the same, upon submission of such information with links to document more accurate information.
Concerns such as these are the primary reason I vote for new leadership or at least a right for shareholders to have a voice on the Board of Directors and a limit on Board compensation until sustained profitability can be obtained.
A couple more thoughts. On the July conference call I asked for comment on whether the current proxy included even more or additional compensation for the BOD. Here is my question, and the response from Rick Kurtz:
Unidentified Analyst (Randy Knudson)
I read on the message boards that there's apparently some proxy coming out with contemplating, increasing, as I'm reading, the compensation for the Board of Directors. What are the shareholders going to get out of that?
Richard D. Kurtz - Chief Executive Officer, President and Director
That has nothing to do with compensation for the shareholders -- for the Board, I mean. I'm sorry. There's nothing...
Unidentified Analyst (Randy Knudson)
It's not suggesting that the board is going to get some additional increase in their compensation?
Richard D. Kurtz - Chief Executive Officer, President and Director
No. We have a normal shareholder vote on our Board of Directors. We have an approval for a new equity plan that we can give shares and options to employees and we have the BDO.
http://seekingalpha.com/article/1530492-advanced-photonixs-ceo-discusses-f4q-2013-results-earnings-call-transcript?page=7&p=qanda&l=last
However, here is what the proxy says, (I will let readers make up their own minds if the BOD is seeking new fees under the proxy):
Director Fees
Our non-employee directors are entitled to receive the following standard compensation arrangements: a $40,650 annual retainer fee for services as a director, a fee of $1,000 for each Board and Committee meeting attended, a $250 quarterly retainer for the Chairman of the Compensation Committee, a $625 quarterly retainer for the Chairman of the Audit Committee, and reimbursement for expenses associated with travel to any Board or Committee meeting incurred by any out-of-town non-employee director. In addition, the Chairman of the Board received, subject to stockholder approval of the 2013 Equity Plan, an initial grant of 25,000 options under the 2013 Equity Plan upon his appointment, and is entitled to receive a quarterly retainer of $12,000, reimbursement of reasonable business expenses incurred in connection with Company business, and equity awards at the discretion of the Compensation Committee.
In connection with the NEO Salary Reduction Amendments, the non-employee directors voluntarily waived 20% of the fees that that would otherwise be payable with respect to the period commencing March 1, 2013 and ending July 31, 2013 to assist the Company in meeting certain liquidity requirements under the Company’s credit facilities with SVB and PFG.
Automatic Equity Grants
The Company’s non-employee directors participate in the 2007 Equity Plan. Under the 2007 Equity Plan, upon a non-employee director’s initial appointment to the Board, such director receives an automatic initial stock grant covering that number of shares of Common Stock having a fair market value on the date of grant of $25,000 (pro-rated for the period from the date of appointment to the following September 1), which fully vests on the six month anniversary of the grant date. On September 1 of each year, each then serving non-employee director will receive an automatic grant of options having a value of $25,000 on the grant date (calculated in accordance with the Black-Scholes option pricing model utilizing the same assumptions that the Company utilizes in preparation of its financial statements), which fully vests on the six month anniversary of the grant date. Notwithstanding the preceding, any non-employee director who received an initial option grant under any prior option plans of the Company that is not fully-vested on the date such director would otherwise receive an automatic stock grant or option grant, as applicable, will not be entitled to receive such stock grant or option grant, as applicable.
This is what the proxy states:
At the Annual Meeting we are proposing that the Company’s stockholders approve the adoption of the Company’s 2013 Equity Plan. In the event that the 2013 Equity Plan is adopted by our stockholders at the Annual Meeting, each non-employee director will be entitled to receive an automatic grant of 25,000 shares of Stock, which will vest in full on the six month anniversary of the grant date, and the automatic director grant provisions under the 2007 Equity Plan will automatically terminate. A full description of the terms of the 2013 Equity Plan is set forth on Page 28 of this Proxy Statement under “ Proposal 4 .”
To the Stockholders of Advanced Photonix, Inc.:
We are pleased to invite you to attend the 2013 Annual Meeting of Stockholders (the Annual Meeting ) of Advanced Photonix, Inc., which will be held at our principal office at 2925 Boardwalk, Ann Arbor, Michigan 48104, at 10:00 a.m., Eastern Time, on August 23, 2013. We are holding this meeting to:
(1)
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Elect the six directors nominated by the Board of Directors to hold office until the next Annual Meeting or until their respective successors are duly elected and qualified ( Proposal 1 );
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(2)
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Conduct an advisory vote on the compensation of the Company’s Named Executive Officers ( Proposal 2 or the Say-on-Pay Proposal );
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(3)
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Conduct an advisory vote on the frequency of future advisory votes on the compensation of the Company’s Named Executive Officers ( Proposal 3 or the Say-When-on-Pay Proposal );
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(4)
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Adopt the Company’s 2013 Equity Incentive Plan ( Proposal 4 or the Equity Plan Proposal );
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(5)
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Ratify the appointment of BDO USA, LLP as the Company’s independent registered public accounting firm for the fiscal year ending March 31, 2014 ( Proposal 5 );
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(6)
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Consider and act upon a stockholder proposal to amend our By-laws to allow stockholders to nominate director candidates for inclusion in our proxy materials, if properly presented at the Annual Meeting ( Proposal 6 or the Proxy Access Proposal ); and
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(7)
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Consider and act upon such other matters as may properly be brought before the meeting or any postponements or adjournments thereof by or at the direction of the Board.
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The Board of Directors has fixed the close of business on July 2, 2013 as the record date for the Annual Meeting. Only stockholders who owned our Class A Common Stock at the close of business on July 2, 2013 will be entitled to notice of, and to vote at, the Annual Meeting or any adjournments thereof. Shares of our Class A Common Stock can be voted at the Annual Meeting only if the holder is present in person or represented by proxy.
The Board of Directors is soliciting the accompanying proxy to vote at the Annual Meeting. This year we are again taking advantage of the Securities and Exchange Commission’s ( SEC ) “notice and access” rules that allow issuers to furnish proxy materials to stockholders via the Internet. This reduces the amount of paper necessary to produce these materials, as well as the costs associated with mailing these materials to all stockholders. In accordance with the SEC’s “notice and access” rules, we sent Notices of Internet Availability of Proxy Materials (the Notice ) to holders of our Class A Common Stock on or about July [ ], 2013. The Notice describes how you can access our proxy materials, including this Proxy Statement, beginning on July [ ], 2013.
Your vote is important. Whether or not you plan to attend the Annual Meeting, we hope you will vote as soon as possible. You may vote over the internet or, if you requested to receive printed proxy materials, by mailing a proxy or voting instruction card. Please review the instructions on each of your voting options described in this Proxy Statement, as well as in the Notice you received in the mail.
Thank you for your ongoing support and continued interest in Advanced Photonix, Inc. We look forward to seeing you at our Annual Meeting.
_____________________
This is how I voted on my proxy ballots:
Meeting Date: Friday, August 23, 2013
Here's how you voted:
1. DIRECTOR: On Directors:
RICHARD D. KURTZ: WithholdROBIN F. RISSER: ForSTEPHEN P.
SOLTWEDEL: WithholdDONALD
PASTOR: WithholdM. SCOTT FARESE: WithholdLANCE BREWER: WithholdI have asked for any responsive comment to an earlier draft of this post from management which I indicated I would post verbatim, but I heard nothing back. I still welcome such comments, and any effort to compromise this dispute.
Richard Kurtz, had the following comments on the company conference call August 12th, 2013. http://seekingalpha.com/article/1630292-advanced-photonix-management-discusses-q1-2014-results-earnings-call-transcript?part=single
(Richard Kurtz) I would like to take this opportunity to clear up what I believe is misinformation circulating on the Internet regarding the compensation paid to the independent members of the board. The compensation paid for the independent directors on the board has historically included an equity component, which, prior to the adoption of the company's 2007 Equity Incentive Plan, consisted solely of discretionary stock option grants.
At the 2007 Annual Meeting of Stockholders held in August of 2007, we asked our stockholders to approve the 2007 Equity Incentive Plan, which, among other things, permitted us to grant shares and restrict the stock in addition to stock options. And mandated, subject to certain exceptions, the issuance of automatic stock grants to each independent Director on an annual basis. In addition, while the 2007 Equity Incentive Plan does not prohibit the issuance of discretionary grants to our Independent Directors, we have not made any such grants under the 2007 Equity Incentive Plan. The automatic grant provisions of the 2000 [sic] (2007) Equity Incentive Plan provided that on September 1 of each year, beginning on September 1, 2008, each then-serving independent director would receive automatic stock grant having the fair market value of $25,000 on the date of the grant and less at the time of the grant. The independent director had an uninvested initial option granted under the company's prior plans. Their exclusion applied to both Lance Brewer and Donald Pastor, when the first round of automatic grant -- director grants were issued on September 1, 2008.
Consequently, in accordance with the terms of the 2007 equity plan, which again, the company's stockholders approved, we granted each of the independent directors shares of restricted stock having a fair market value of $25,000 on the date of grant in September of each year until September of 2012 when the 2007 equity plan was amended to replace the automatic grant of restricted shares having a fair market value of $25,000 on the date of grant with stock options having a Black-Scholes value of $25,000 on the date of grant.
That said, given the conditions of the company last year, the board reduced the value of stock options to them to $10,500. $4,200 of which is contingent upon approval of proposed 2013 Equity Incentive Plan. These actions effectively resulted in the board receiving less in cash and equity compensation in the fiscal 2013 than in the prior fiscal year. In addition, the board and management took a 20% reduction for the first quarter of fiscal 2014. In short, the facts do not support allegations circulating on the Internet to the effect that the board is increasing its compensation.
At the same time, as the board has reduced its compensation, it has been very active and has taken a number of actions over the last 18 months to help position API return to growth. Under the board's leadership, the company has one acquired substantially all of the operating assets of Silonex Incorporated, which in turn, was instrumental in driving the growth in our Test & Measurement market this quarter; two, established a new Asian-based, lower-cost manufacturing partners; three, elected an independent Chairman of the Board who has worked very closely with management to develop the company's business strategy; and five, completed a significant capital raised with partnership growth.
http://seekingalpha.com/article/1630292-advanced-photonix-management-discusses-q1-2014-results-earnings-call-transcript?all=true&find=%22Advanced%2BPhotonix%22
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So there you have it. Great cutting edge technology and a company which should be trading for much higher than the currerent .60 range.. Make up your own minds concerning the proxy vote. You know my feelings- tomorrow it's back to reposting cutting edge THz news and information.http://seekingalpha.com/article/1630292-advanced-photonix-management-discusses-q1-2014-results-earnings-call-transcript?all=true&find=%22Advanced%2BPhotonix%22
____
Randy Knudson
knudson.randy@gmail.com
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