ADDvantage Technologies Group, Inc. Proxy Statement for Year Ended September
30, 2006.
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20649
SCHEDULE
14A
(Rule
14a - 101)
Proxy
Statement Pursuant to Section 14(a) of the Securities
Exchange
Act of 1934 (Amendment No. 1)
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by the Registrant T
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o Preliminary
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o Confidential,
for Use of the Commission Only (as permitted by Rule
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T
Definitive Proxy Statement |
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o
Definitive Additional
Materials |
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o
Soliciting Material Pursuant to §
240.14a-12
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ADDvantage
Technologies Group, Inc.
(Name
of Registrant As Specified In Its Charter)
(Name
of Person(s) Filing Proxy Statement, if other than the Registrant)
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of Filing Fee (Check the appropriate box):
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to each class of securities to which transaction
applies:
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___________________________________________________________________________
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number of securities to which transaction
applies:
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unit price or other underlying value of transaction computed pursuant
to
Exchange Act Rule 0- 11 (set forth the amount
on
which the filing fee is calculated and state how it was
determined):
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maximum aggregate value of
transaction:
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box if any part of the fee is offset as provided by Exchange Act
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paid previously. Identify the previous filing by registration statement
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1) Amount
Previously Paid:
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3) Filing
Party:
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4) Date
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ADDvantage
Technologies Group, Inc.
1221
East Houston
Broken
Arrow, Oklahoma 74012
NOTICE
OF ANNUAL MEETING
Date:
Tuesday, March 6, 2007
Time:
10:00 A.M.
Place:
Corporate Office of ADDvantage Technologies Group, Inc.
1221
East
Houston
Broken
Arrow,
Oklahoma 74012
Matters to be voted on:
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1. Election
of five directors.
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2. Ratification
of the
appointment of Hogan & Slovacek as our independent auditors for
2007.
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3. Any other business
properly brought before the shareholders at the
meeting |
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By
Order of the Board of Directors,
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/s/:
Daniel E.
O'Keefe
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Daniel
E. O'Keefe, Chief Financial Officer and
Secretary
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January
19, 2007
PROXY
STATEMENT
Your
vote at the annual meeting is important to us. Please vote your shares of common
stock by completing the enclosed proxy card and returning it to us in the
enclosed envelope. This proxy statement has information about the annual meeting
and was prepared by our management for the Board of Directors. This proxy
statement is first being sent to shareholders on or about February 5, 2007.
Please note that our annual report accompanies this mailing of the proxy
statement.
ADDvantage
Technologies Group, Inc.
1221
East Houston
Broken
Arrow, Oklahoma 74012
PROXY
STATEMENT FOR 2007 ANNUAL MEETING
Who
can attend the annual meeting?
All
stockholders of the record date, January 17, 2007.
Who
can vote?
You
can vote your shares of common stock if our records show that you owned the
shares on January 17, 2007. A total of 10,233,756 shares of common stock can
vote at the annual meeting. You get one vote for each share of common stock.
We
do not recognize cumulative voting for the election of our directors. The
enclosed proxy card shows the number of shares you can vote.
How
do I vote by proxy?
Follow
the instructions on the enclosed proxy card to vote on each proposal to be
considered at the annual meeting. Sign and date the proxy card and mail it
back
to us in the enclosed envelope. The proxyholders named on the proxy card will
vote your shares as you instruct. If you sign and return the proxy card but
do
not vote on a proposal, the proxyholders will vote for you on that proposal.
Unless you instruct otherwise, the proxyholders will vote for
each of the five directors and for
the ratification of Hogan & Slovacek as independent auditors.
What
if other matters come up at the annual meeting?
The
matters described in this proxy statement are the only matters we know will
be
voted on at the annual meeting. If other matters are properly presented at
the
meeting, the proxyholders will vote your shares as they see fit.
Can
I change my vote after I return my proxy card?
Yes.
At any time before the vote on a proposal, you can change your vote either
by
giving our secretary a written notice revoking your proxy card or by signing,
dating and returning to us a new proxy card. We will honor the proxy card with
the latest date. Attendance at the annual meeting will not, by itself, revoke
your proxy card.
Can
I vote in person at the annual meeting rather than by completing the proxy
card?
Although
we encourage you to complete and return the proxy card to ensure that your
vote
is counted, you can attend the annual meeting and vote your shares in person.
If
your shares are held in the name of your broker, a bank, or other nominee,
that
party should give you instructions for voting your shares.
How
are votes counted?
We
will hold the annual meeting if holders of a majority of the shares of common
stock entitled to vote either sign and return their proxy cards or attend the
meeting. If you sign and return your proxy card, your shares will be counted
to
determine whether we have a quorum even if you abstain or fail to vote on any
of
the proposals listed on the proxy card. Votes will be tabulated by an inspector
of election appointed by our Board of Directors. Abstentions from voting, which
you may specify on the ratification of the appointment of Hogan & Slovacek
as independent auditors, will have the effect of a negative vote.
If
your shares are held in the name of a nominee, and you do not tell the nominee
how to vote your shares (so-called “broker nonvotes”), the nominee may vote them
on the proposals to elect directors and to ratify the appointment of Hogan
&
Slovacek as our independent auditors. Additionally, broker nonvotes will be
counted as present to determine if a quorum exists.
What
percentage of stock are the directors and executive officers entitled to vote
at
the annual meeting?
Together,
they own 4,519,000 shares of our common stock, or 44.2% of the stock entitled
to
vote at the Annual Meeting.
Who
are the largest principal stockholders?
Kenneth
A. Chymiak, our Chief Executive Officer, beneficially owns 2,046,000 shares
of
our common stock, or 20.0% of the stock entitled to vote at the Annual Meeting.
David E. Chymiak, our Vice President and Chairman of the Board, beneficially
owns 2,414,000 shares of our common stock, or 23.6% of the stock entitled to
vote at the Annual Meeting.
Who
pays for this proxy solicitation?
The
accompanying proxy is solicited by and on behalf of our Board of Directors,
and
the entire cost will be paid by us. In addition to sending you these materials,
some of our employees may contact you by telephone, by mail or in person. None
of these employees will receive any extra compensation for doing this, but
they
may be reimbursed for their out-of-pocket expenses incurred while assisting
us
in soliciting your proxy.
We
have three executive officers. Our officers are elected by our Board of
Directors and serve at the pleasure of the board.
David
E. Chymiak
Biographical
information for Mr. Chymiak, the Chairman of our Board since 1999, is set forth
below in Proposal No. 1, Election of Directors.
Kenneth
A. Chymiak
Biographical
information for Mr. Chymiak, our President and Chief Executive Officer since
1999, is set forth below in Proposal No. 1, Election of Directors.
Daniel
E. O'Keefe
Daniel
E. O'Keefe, 38, has been our Vice President, Chief Financial Officer and
Secretary since March 6, 2006. Mr. O'Keefe has approximately 16 years of finance
and management experience. Prior to joining us, Mr. O'Keefe served as president
of Interstate Express, Inc., a subsidiary of LinkAmerica Corporation, from
2001
through December 2005. Under Mr. O’Keefe’s leadership, revenue for Interstate
Express climbed to $30 million in 2005 from $13 million in 2001. From 1997-2001,
Mr. O’Keefe served as the corporate controller for LinkAmerica Corporation, a
private company with revenues of $130 million in 2001.
Mr.
O'Keefe also served as a senior accountant for PricewaterhouseCoopers from
1990
to 1993, where he was responsible for the review of financial statements, audit
activities, preparation of management reports including recommendations for
enhanced reporting systems and controls, and more, on behalf of numerous private
and publicly traded companies. Mr. O'Keefe graduated with a B.S. in accounting
from the University of Kansas in 1990 and became a C.P.A. in the state of
Oklahoma in 1993.
BENEFICIAL
OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The
following table shows the number of shares of common stock or preferred stock
beneficially owned (as of January 17, 2007) by:
· |
each
person known by us who beneficially owns more than 5% of any class
of our
voting stock;
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· |
each
director and nominee for director;
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· |
each
executive officer named in the Summary Compensation Table on page
11;
and
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· |
our
directors and executive officers as a
group.
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Except
as otherwise indicated, the beneficial owners listed in the table have sole
voting and investment powers of their shares.
Beneficial
Ownership
Name
and Address of
Beneficial
Owner
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Number
of Shares of
Common
Stock
Beneficially
Owned (1)
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Percent
of
Class (1)
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Number
of Shares
of
Series B Preferred
Stock
Beneficially
Owned
|
Percent
of
Class
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David
E. Chymiak
1221
East Houston
Broken
Arrow, OK 74012
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2,429,000
(2)
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23.7%
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150,000
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50.0%
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Kenneth
A. Chymiak
1221
East Houston
Broken
Arrow, OK 74012
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2,061,000
(2)(7)
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20.1%
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150,000
(10)
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50.0%
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Susan
C. Chymiak
1221
East Houston
Broken
Arrow, OK 74012
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2,061,000
(2)(8)
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20.1%
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150,000
(11)
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50.0%
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Freddie
H. Gibson
8008
S. Erie Avenue
Tulsa,
OK 74136
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15,000
(4)
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*
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-0-
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-0-
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Henry
F. McCabe
7225
S. 85th E. Avenue
Tulsa,
OK 74133
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12,000
(5)
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*
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-0-
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-0-
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Daniel
E. O'Keefe
1221
East Houston
Broken
Arrow, OK 74012
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7,500
(6)
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*
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-0-
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-0-
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Stephen
J. Tyde
1900
Sandwedge Place
Wilmington,
NC 28405
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35,000
(3)(9)
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*
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-0-
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-0-
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All
Executive Officers and Directors as a group
(7
persons)
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4,559,500
(12)
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44.4%
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300,000
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100%
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_____________________________
*
Less than one percent.
(1)
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Shares
which an individual has the right to acquire within 60 days pursuant
to
the exercise of options are deemed to be outstanding for the purpose
of
computing the percentage ownership of such individual, but are not
deemed
to be outstanding for the purpose of computing the percentage ownership
of
any other person shown in the table or the percentage ownership of
all
officers and directors as a group.
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(2)
Includes 15,000 shares subject to stock options which are fully exercisable.
(3)
Includes 11,000 shares subject to stock options which are fully
exercisable.
(4)
Includes 12,000 shares subject to stock options which are fully exercisable.
(5)
Includes 10,000 shares subject to stock options which are fully
exercisable.
(6)
Includes 2,500 shares subject to stock options which will become exercisable
on
March 6, 2007.
(7)
Of the shares beneficially owned by Mr. Chymiak, 265,000 are held of record
by
him as trustee of the Ken Chymiak Revocable Trust and 1,796,000 are held of
record by his spouse, Susan C. Chymiak as trustee of the Susan Chymiak Revocable
Trust. Mr. Chymiak has sole voting and investment power over those shares held
of record by him. Mr. Chymiak disclaims beneficial ownership of the shares
held
by his wife.
(8)
Of the shares beneficially owned by Ms. Chymiak, 1,796,000 are held of record
by
her as trustee of the Susan Chymiak Revocable Trust and 265,000 are held of
record by her spouse, Kenneth A. Chymiak as trustee of the Ken Chymiak Revocable
Trust. Ms. Chymiak has sole voting and investment power over those shares held
of record by her. Ms. Chymiak disclaims beneficial ownership of the shares
held
by her husband.
(9)
Includes 7,000 shares owned by Mr. Tyde's wife.
(10)
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Of
the shares beneficially owned by Mr. Chymiak, 75,000 are held of
record by
him as trustee of the Ken Chymiak Revocable Trust and 75,000 are
held of
record by his spouse, Susan C. Chymiak as trustee of the Susan Chymiak
Revocable Trust.
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(11)
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Of
the shares beneficially owned by Ms. Chymiak, 75,000 are held of
record by
her as trustee of the Susan Chymiak Revocable Trust and 75,000 are
held of
record by her spouse, Kenneth A. Chymiak as trustee of the Ken Chymiak
Revocable Trust.
|
(12)
Includes 66,500 shares subject to stock options of which 64,000 are fully
exercisable and 2,500 become exercisable on March 6, 2007.
Plan
Category
|
Number
of securities to be issued upon exercise of outstanding options,
warrants
and rights
(a)
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Weighted-average
exercise price of outstanding options, warrants and rights
(b)
|
Number
of securities remaining available for future issuance under equity
compensation plans (excluding securities reflected in column
(a)(c)
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Equity
compensation plans approved by security holders
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104,750
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$3.83
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759,652
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Equity
compensation plans not approved by security holders
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0
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0
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0
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Total
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104,750
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$3.83
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759,652
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Election
of Directors
Our entire
Board of Directors will be elected at the annual meeting. The directors will
be
elected for one-year terms expiring at the next annual meeting. Our bylaws
provide that our Board shall consist of not less than one nor more than nine
directors, as determined from time to time by board resolution. Our Board has
established the number of directors at five.
Vote
Required. The
five nominees receiving the highest number of votes will be elected. Votes
withheld for a nominee will not be counted. You get one vote for each of your
shares of common stock for each of the directorships.
Nominations.
At
the annual meeting, we will nominate as directors the persons named in this
proxy statement. Although we do not know of any reason why one of these nominees
might not be able to serve, our Board of Directors will propose a substitute
nominee if any nominee is unavailable for election.
General
Information About the Nominees. All
of the nominees are currently directors of ADDvantage. Each has agreed to be
named in this proxy statement and to serve as director if elected. The ages
listed for the nominees are as of January 19, 2007.
David
E. Chymiak Director
since 1999
David
E. Chymiak, 61, has been the Chairman of our Board since 1999. He is also the
President and a director of our wholly owned subsidiary, Tulsat Corporation,
which he acquired with Kenneth A. Chymiak in 1985. David E. Chymiak is the
brother of Kenneth A. Chymiak, our President and Chief Executive Officer.
Kenneth
A. Chymiak Director
since 1999
Kenneth
A. Chymiak, 60, has been our President and Chief Executive Officer since 1999.
He has also been the Executive Vice President and a director of our wholly
owned
subsidiary, Tulsat Corporation, which he acquired with David E. Chymiak in
1985.
Kenneth A. Chymiak is the brother of David E. Chymiak, our Chairman of the
Board
since 1999.
Freddie
H. Gibson Director
since 1999
Freddie
H. Gibson, 59, has been with the Heat Transfer Equipment Company in Tulsa,
Oklahoma since 1988. First as President and now CEO, he has served since 1994
with responsibilities for the financial and accounting controls, financial
reporting, management of staff coordination and short and long-term planning.
Prior to his tenure with Heat Transfer Equipment, Mr. Gibson served as President
of Interactive Computer Systems from 1980-1988. He also served as the Controller
and Systems Manager for two other companies and began his career with Arthur
Andersen & Co. in their administrative services division. Mr. Gibson holds a
Bachelor of Science degree in Business Administration from Oklahoma State
University.
Stephen
J. Tyde Director
since 1999
Stephen
J. Tyde, 59, is the founder of The Pump & Motor Works, Inc., a
re-manufacturer of industrial pumps, motors, transformers and switchgear (to
20,000 hp). After 20 years in the turbo machinery business, Mr. Tyde started
The
Pump & Motor Works in 1989 and developed it to a multi-million dollar
operation before his divestiture in 2001. During that time, Mr. Tyde oversaw
all
aspects of the company and retained personal responsibility for financial
planning, reporting and controls. He continues to serve on a part-time basis
as
Vice President. Since 2001, Mr. Tyde has served as the sole owner and Chief
Operating Officer of P&MW Holding, Inc., an industrial real estate company.
Stephen J. Tyde received an undergraduate degree in Business Administration
from
The Ohio State University, a Masters Degree in Business Administration from
George Washington University, and has studied engineering at the University
of
Pittsburgh. Mr. Tyde is the Chairman of our Audit, Compensation and Corporate
Governance and Nominating committees.
Henry
F. McCabe Director
since 2004
Henry
F. McCabe, 84, is chairman of the board of McCabe Industrial Minerals Inc.
in
Tulsa, Oklahoma, where he has served as Chief Executive Officer since 1976.
McCabe Industrial Minerals operates manufacturing and processing plants in
Nebraska, Kansas and Oklahoma, which provide granules for asphalt shingle
manufacturers. Mr. McCabe was Co-Founder of the company in 1976 and engages
in
numerous other business enterprises.
Board
of Directors
Board
Independence.
The Board of Directors has determined that Messrs. Gibson, Tyde and McCabe
have
no relationship with us that would interfere with the exercise of independent
judgment in carrying out the responsibilities of a director and that such
individuals are independent under the rules and listing standards of the
American Stock Exchange ("AMEX").
Committees
of the Board.
The Board of Directors has three committees, the Audit Committee, the
Compensation Committee and the Corporate Governance and Nominating Committee.
The following describes the functions and membership of each committee and
the
number of times it met during our fiscal year ended September 30,
2006:
Audit
Committee
The
functions and members of the Audit Committee are set forth below. Stephen J.
Tyde is the chairman of the Audit Committee. The Audit Committee met four times
during fiscal 2006. Each meeting was held prior to the reporting of our
quarterly financial results.
Functions
Members
· |
Selects
the firm that will serve as our
independent auditors Stephen
J. Tyde
|
· |
Reviews
scope and results of audits with
independent Freddie
H. Gibson
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auditors,
compliance with any of our accounting policies
and
procedures and the adequacy of our system of
internal Henry
F. McCabe
controls
· |
Oversees
quarterly reporting
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· Performs
the other functions listed in the Charter of the Audit
Committee
which may be found on our website at www.addvantagetech.com.
Report
of the Audit Committee
The
Audit Committee of our Board of Directors is comprised of three directors who
are not officers. Under currently applicable rules, all members are
“independent” as defined under the American Stock Exchange listing standards.
The Audit Committee reviews our financial reporting process on behalf of the
Board of Directors. The Audit Committee’s policy is to submit all proposed
non-audit services to the Audit Committee chairman, who considers and
pre-approves all engagements for audit or non-audit services rendered by our
independent auditors. The Audit Committee approved 100% of such services in
2006
under its pre-approval policy. Management has the primary responsibility for
the
financial statements and the reporting process, including the system of internal
controls.
In
connection with its function to oversee and monitor our financial reporting
process, the Audit Committee has done the following:
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selected
Hogan and Slovacek as our independent accountants for the audit of
the
fiscal 2006 financial statements. The Audit Committee’s decision to change
our independent accountant as described herein under “Change in Company’s
Certifying Accountant.”
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- |
reviewed
and discussed the audited financial statements for the fiscal year
ended
September 30, 2006, with
management;
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discussed
with the independent auditors the matters required to be discussed
by
Statement on Auditing Standards No. 61 (Codification of Statements
on
Auditing Standards, AU Section
380);
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- |
received
the written disclosures and the letter from the independent accountants
required by Independence Standards Board Standard No. 1 (Independence
Discussions with Audit Committees) and has discussed with the independent
accountant the independent accountant's independence;
and
|
- |
based
on the review and discussions referred to above, recommended to the
Board
that the audited financial statements be included in our Annual Report
on
Form 10-K for fiscal year 2006 for filing with the Securities and
Exchange
Commission (the "SEC").
|
Stephen J. Tyde Freddie
H. Gibson Henry
F. McCabe
Audit
Committee Financial Expert
The
SEC has adopted rules pursuant to the provisions of the Sarbanes-Oxley Act
requiring audit committees to include an “audit committee financial expert,”
defined as a person who has the following attributes:
1)
an understanding of generally accepted accounting principles and financial
statements;
2)
the ability to assess the general application of such principles in connection
with the accounting for estimates, accruals and reserves;
3)
experience preparing, auditing, analyzing or evaluating financial statements
that present a breadth and level of complexity of accounting issues that are
generally comparable to the breadth and complexity of issues that can reasonably
be expected to be raised by the registrant’s financial statements, or experience
actively supervising one or more persons engaged in such
activities;
4) an understanding of internal control over financial reporting;
and
5)
an understanding of audit committee functions.
The
financial expert will have to possess all of the attributes listed above to
qualify as an audit committee financial expert. Our Board of Directors has
determined that each Audit Committee member is financially literate under the
current listing standards of the American Stock Exchange. The Board also
determined that Stephen J. Tyde and Freddie H. Gibson, both independent
directors, qualify as "audit committee financial experts" as defined by the
SEC
in rules adopted pursuant to the Sarbanes-Oxley Act of 2002.
Compensation
Committee
The
functions and members of the Compensation Committee are set forth below. Stephen
Tyde is Chairman of the Compensation Committee, which met twice during fiscal
2006.
Functions
Members
· |
Reviews
and monitors performance of
our officers Stephen
J. Tyde
|
Freddie
H. Gibson
· |
Approves
compensation and benefits programs of our
officers
|
Henry F. McCabe
Report
of the Compensation Committee
The
Compensation Committee of our Board of Directors is comprised of three directors
who are not officers. Under currently applicable rules, all members are
“independent” as defined under the American Stock Exchange listing standards.
The Compensation Committee is responsible for the review of the performance
of
our Chief Executive Officer and other key executive officers. The Compensation
Committee subscribes to a total compensation program composed of three
elements:
In
formulating and implementing compensation policy and structure and making
recommendations, the committee has adopted a philosophy that a substantial
portion of the total compensation should be related to our financial
performance. Accordingly, the compensation program recommended and approved
this
year has been structured to include annual incentive compensation based upon
achieving a minimum revenue growth threshold and minimum growth of our earnings
before interest and taxes (EBIT). The committee believes that the
performance-based incentive program approved is crucial in attracting high
caliber executives necessary for the successful conduct of our business.
A
goal of the committee is maintaining total compensation on a basis consistent
with similar companies that generate similar revenues and achieve similar EBIT
margins, as well as other strategic and performance characteristics. The
committee reviews the salary of Kenneth A. Chymiak, President and Chief
Executive Officer (CEO) and David E. Chymiak, Vice President and Chairman of
the
Board (VP and Chairman) and reviews the recommendations of Messrs. Chymiak
regarding the compensation for the other executive officers.
2006
Executive Officer Total Compensation Review
From
fiscal 2001 to 2005, there were no material increases in salary or other
compensation paid to the CEO, VP and Chairman or other key executive
officers.
During
fiscal 2006, the Committee met to review the adequacy of the compensation of
CEO
and VP and Chairman. The review included analyzing the compensation packages
of
key executives who work for outside companies of similar size and/or industry.
The comparison also included a breakdown of the total compensation by type
including base pay, bonus pay and equity compensation, including stock options.
The Committee concluded the base pay of Kenneth A. Chymiak and David E. Chymiak
was at the lower end of the comparable range of total compensation paid to
other
executives of similar companies. The Committee recommended and approved a
$100,000 base pay increase for these two positions but the proposed increase
was
denied by these two executives. The Committee then recommended and approved
a
compensation increase for these two executives of 11 percent, to $250,000,
and
recommended and approved the Senior Management Incentive Compensation Plan
to
provide further incentives for our key executives.
The
Senior Management Incentive Compensation Plan provides an annual bonus of
varying amounts from 25% up to 100% of the CEO’s base pay, and corresponding
varying awards to other executives, based on achieving a revenue growth hurdle
and exceeding historical earnings before interest and taxes (EBIT). In order
for
any executive to earn the initial bonus level, we must achieve a Sales Threshold
of at least 12.5% growth in total revenues over our previous year and reach
an
EBIT Target, calculated by multiplying the average EBIT percentage of revenue
for the previous three years by the Sales Threshold. The bonus is increased
in
varying amounts to the percentage the EBIT Target is exceeded. The maximum
bonus
of 100% is awarded to the CEO if we meet the Sales Threshold and exceed the
EBIT
Target by more than 150%. The minimum Sales Threshold was not achieved during
fiscal 2006. As such, no annual bonus awards were made under the Senior
Management Incentive Compensation Plan.
We
maintain our 1998 Incentive Stock Plan for the purpose of making long term
incentive awards to our CEO, other executive officers, directors and employees.
The plan is administered by the Board of Directors and any awards made are
considered by the Compensation Committee in evaluating the total compensation
of
the CEO and other executive officers. Stock options were granted to the CEO
and
other executive officers during fiscal 2006 as described herein under “Summary
Compensation Table,” and to directors as described herein under “Compensation of
Directors.”
Our
future compensation policies will be developed in light of our profitability
and
with the goal of rewarding members of management for their contributions to
our
success.
Stephen
J. Tyde
Freddie
H. Gibson
Henry
F. McCabe
Compensation
Committee Interlocks and Insider Participation
During
2006, the Compensation Committee was comprised of Stephen J. Tyde, Freddie
H.
Gibson and Henry F. McCabe, all of whom are non-employee directors. During
2006,
none of our executive officers served on the board of directors or on the
compensation committee of any other entity who had an executive officer that
served either on our Board of Directors or on its Compensation
Committee.
Corporate
Governance and Nominating Committee
The
functions and members of the Corporate Governance and Nominating Committee
are
set forth below. Stephen Tyde is Chairman of the Corporate Governance and
Nominating Committee. The Committee met one time during fiscal
2006.
Functions
Members
· |
Provides
oversight of the governance of the Board of
Directors Stephen
J. Tyde
|
· |
Makes
recommendations to the Board as a whole concerning board
size,
|
make-up
structure and compensation
Freddie
H. Gibson
· |
Identifies
individuals qualified to become Board
members
|
· |
Selects
or recommends that the Board select the director
nominees
Henry
F. McCabe
|
to
stand for election at the annual meeting of shareholders
· |
Recommends
to the Board nominees for the positions of
Chairman
|
of
the Board, chairmen of the various committees of the board, and members
of
the various committees of the board
· |
Reviewing,
monitoring and approving compliance with our Code of
Business
|
Conduct
and Ethics
· |
Considering,
reviewing and approving potential conflict of interests
involving
|
Board
members or corporate officers
· |
Performs
other functions listed in the Charter of the Corporate Governance
and
Nominating
Committee
which may be found on our website at
www.addvantagetech.com.
|
The
Corporate Governance and Nominating Committee is comprised of three directors
who are not officers. Under currently applicable rules, all members are
“independent” as defined under the American Stock Exchange listing
standards.
The
Corporate Governance and Nominating Committee’s criteria and process for
identifying and evaluating the candidates that it selects, or recommends to
the
full Board for selection, as director nominees, are: (i) regular review of
composition and size of the board; (ii) review of qualifications of candidates
properly recommended or nominated by any qualifying shareholder; (iii)
evaluation of the performance of the Board and qualification of members of
the
Board eligible for re-election: and (iv) consideration of the suitability of
each candidate, including current members of the board, in light of the size
and
composition of the board. After such review and consideration, the Corporate
Governance and Nominating Committee will recommend a slate of director
nominees.
While
the Corporate Governance and Nominating Committee has not established specific
minimum requirements for director candidates, other than they be at least 21
years of age, the committee believes that candidates and nominees must reflect
a
board that is comprised of directors who: (i) are predominantly independent;
(ii) are of high integrity; (iii) have qualifications that will increase overall
board effectiveness; and (iv) meet other requirements as may be required by
applicable rules, such as financial literacy or financial expertise with respect
to audit committee members.
The
Corporate Governance and Nominating Committee has adopted a policy with regard
to the consideration of director candidates recommended by shareholders. The
Corporate Governance and Nominating Committee will consider director candidates
recommended by any shareholder holding 10,000 shares of our common stock for
at
least 12 months prior to the date of submission of the recommendation or
nomination. Additionally, a recommending shareholder shall submit a written
statement in support of the candidate, particularly within the context of the
criteria for board membership, including issues of character, judgment, age,
independence, expertise, corporate experience, length of service, other
commitments and the like, personal references, and a written indication by
the
candidate of his/her willingness to serve, if elected, and evidence of the
nominating person’s ownership of our stock sufficient to meet any applicable
stock ownership requirements set forth in our corporate governance
guidelines.
Board
Meetings
Our
Board held four meetings during fiscal 2006. Each director attended all meetings
of the Board and the committees on which he served.
Shareholder
Communication with the Board of Directors and Committees
Communication
with the Board of Directors or any of the Committees should be directed to
the
attention of Stephen J. Tyde. Written correspondence to Mr. Tyde may be
delivered to our executive offices, 1221 East Houston, Broken Arrow, Oklahoma,
74012. All security holder communications directed to Mr. Tyde will be promptly
forwarded to him. All Board members are encouraged, but not required, to attend
our annual meeting. Last year, all of our Board members attended our annual
meeting.
Code
of Ethics
We
have adopted a Code of Business Conduct and Ethics which is applicable to all
of
our directors, officers and employees. A copy of our Code of Business Conduct
and Ethics is posted on our website at www.addvantagetech.com.
In
fiscal 1999, Chymiak Investments, L.L.C., which is owned by David E. Chymiak
and
Kenneth A. Chymiak, purchased from Tulsat Corporation on September 30, 1999,
the
real estate and improvements comprising the headquarters and a substantial
portion of the other office and warehouse space of Tulsat Corporation for a
price of $1,286,000. The price represented the appraised value of the property
less the sales commission and other sales expenses that would have been incurred
by Tulsat Corporation if it had sold the property to a third party in an
arm’s-length transaction. Tulsat Corporation entered into a five-year lease
commencing October 1, 1999 with Chymiak Investments, L.L.C. covering the
property. This lease was renewed on October 1, 2004. During 2006 we relocated
our corporate offices to our new location, described later herein. We continue
to use this facility as an overflow warehouse and, as such, we continue to
lease
this facility under the terms of the existing lease agreement which will expire
on September 30, 2008.
During
fiscal
2006, we leased eight separate properties in Broken Arrow, Oklahoma from
two
companies owned by David E. Chymiak and Kenneth A. Chymiak, including the
property described in the preceding paragraph. The combined lease payments
made
during fiscal 2006 on these properties totaled $465,840. During the fiscal
year,
we began consolidating our operations into a new larger facility, discussed
below, and as a result have vacated six of these leased properties. We currently
continue to lease the remaining two properties as overflow
warehouses.
Future
minimum lease payments under these leases are as follows:
2007 $
321,840
2008
321,840
$
643,680
On
November 20, 2006, we purchased real estate, consisting of an office and
warehouse facility located on ten acres in Broken Arrow, OK, from Chymiak
Investments, LLC for $3,250,000. The office and warehouse facility is currently
being utilized as our headquarters and the office and warehouse of our
subsidiary, Tulsat Corporation. The office and warehouse facility contains
approximately 100,000 square feet of gross building area and was recently
renovated and modified for our specific use. This transaction was reviewed
by
our Corporate Governance and Nominating Committee. The Committee evaluated
several options for leasing the building from Chymiak Investments, LLC and
financing options related to purchasing the real estate. In determining whether
to lease the property from Chymiak Investments, LLC or purchase the property
the
Committee reviewed a "Lease vs. Buy" analysis performed by our management
showing the costs associated with leasing the property would be greater than
the
costs associated with owning the real estate. Based on the review of our
liquidity and the financial benefits associated with owning the property, the
Committee recommended that we purchase the property for a fair and reasonable
price. In evaluating the reasonableness of the purchase price, the Committee
reviewed a detail of the expenses paid by Chymiak Investments LLC identifying
the money spent to purchase the building and modify it for our specific use
totaling approximately $3.250 million, a third party independent appraisal
showing the appraised value at $3.420 million and an insurance report from
a
third party property insurer identifying the replacement cost for the real
estate at $5.4 million. Based on the evaluation, the Committee recommended,
and
the Board of Directors approved, the purchase of the real estate by us for
$3.25
million.
Section
16(a) of the Securities Exchange Act of 1934 requires our directors and
executive officers, and persons who own more than 10% of our common stock to
report their initial ownership of our common stock and any subsequent changes
in
that ownership to the SEC and to furnish us with a copy of each of these
reports. SEC regulations impose specific due dates for these reports and we
are
required to disclose in this proxy statement any failure to file by these dates
during fiscal 2006.
Based
solely on the review of the copies of these reports furnished to us and written
representations that no other reports were required, during and with respect
to
the fiscal year ended September 30, 2006, we believe that these persons have
complied with all applicable filing requirements.
Compensation
of Directors
We
pay our three non-employee directors $500 per quarter and $500 for each board
meeting and $250 for each committee meeting or telephonic board or committee
meeting the director attends. The chairman of the audit committee receives
an
additional $250 per quarter. In addition, directors are eligible to receive
awards of options to purchase shares of our common stock each year after the
annual shareholders meeting. These annual rewards have ranged between 1,000
and
5,000 shares. We reimburse all directors for out-of-pocket expenses incurred
by
them in connection with their service on our Board and any Board committee.
During the fiscal year ended September 30, 2006, Henry McCabe, Fred Gibson
and
Steve Tyde received directors' fees of $5,750, $5,750 and $6,750, respectively.
In addition, each of the directors received an award of stock options on March
6, 2006 to purchase 5,000 shares of common stock at an exercise price of $5.78
per share. Directors who were our employees received no additional cash
compensation for their services on our Board of Directors.
|
Annual
Compensation
|
Long-Term
Compensation
|
|
|
|
|
|
Number
of Shares
|
Name
and
|
|
Salary
|
Bonus
|
Other
Annual
|
Under
lying Options
|
Principal
Position
|
Year
|
($)(1)
|
($)(2)
|
Compensation
|
Granted
|
|
|
|
|
|
|
David
E. Chymiak
|
2006
|
239,232
|
-0-
|
11,211
|
5,000
|
Chairman
|
2005
|
225,000
|
-0-
|
10,500
|
5,000
|
|
2004
|
225,000
|
-0-
|
10,837
|
1,000
|
|
|
|
|
|
|
Kenneth
A. Chymiak
|
2006
|
239,232
|
-0-
|
11,211
|
5,000
|
President
and Chief Executive Officer
|
2005
|
225,000
|
-0-
|
10,500
|
5,000
|
|
2004
|
225,000
|
-0-
|
10,837
|
1,000
|
|
|
|
|
|
|
Daniel
E. O'Keefe
|
2006
|
75,000
|
-0-
|
-0-
|
10,000
|
Vice
President and Chief Financial Officer
|
|
|
|
|
|
_______
(1) |
These
amounts represent the salaries paid to these officers by Tulsat
Corporation, our wholly owned
subsidiary.
|
(2) |
Other
annual compensation in 2006, 2005, and 2004 represents our contributions
on behalf of each of the individuals to their 401(k) Plan
accounts.
|
(3)
The salary for Mr. O'Keefe is from his hire of March 6th,
2006.
Option
Grants During Fiscal 2006
The
following table sets forth information regarding options granted during fiscal
2006 to named executive officers.
Name
|
Shares
Under lying
Options
Granted
|
%
of Total Options
Granted
to Employees
in
Fiscal
Year
|
Exercise
Price
($/Sh)
|
Expiration
Date
|
Potential
Realizable Value at Annual Rates of Stock Price Appreciation
for
Option
Term (3)
5%
10%
|
Kenneth
A. Chymiak
|
5,000(1)
|
14.3%
|
$
5.78
|
3/6/16
|
$18,175
|
$46,059
|
David
E. Chymiak
|
5,000(1)
|
14.3%
|
$
5.78
|
3/6/16
|
$18,175
|
$46,059
|
Daniel
E. O'Keefe
|
10,000(2)
|
28.6%
|
$
5.78
|
3/6/16
|
$36,350
|
$92,118
|
(1)
These options are fully vested and exercisable at date of
grant.
(2)
These options vest over four years in equal increments of 2,500 shares per
year.
(3)
The dollar amounts under these columns represent the potential realizable value
of each grant of option assuming that the market price of our common stock
appreciates in value from the date of grant at the 5% and 10% annualized rates
prescribed by the SEC for purposes of this table and are not intended to
forecast possible future appreciation, if any, of the price of our common
stock.
Option
Exercises and Year-End Option Value Table
There
were no stock options exercised by the named executive officers during fiscal
2006. The following table sets forth information regarding the value of
unexercised stock options held by each of the named executive officers as of
the
year ended September 30, 2006.
Name
|
Number
of Shares Acquired on Exercise
|
Value
Realized
|
Number
of Shares of Common Stock Underlying Unexercised Options at September
30,
2006
Exercisable
Unexercisable
|
Value
of Unexercised In-the-Money Options at September 30, 2006
Exercisable Unexercisable
|
Kenneth
A. Chymiak
|
-
|
-
|
15,000
-
|
$ 8,795
-
|
David
E. Chymiak
|
-
|
-
|
15,000 -
|
$ 8,795
-
|
Daniel
E. O'Keefe
|
-
|
-
|
2,500(1) 7,500
|
-
-
|
(1)
Shares become exercisable on March 6, 2007.
Set
forth below is a line graph comparing the yearly percentage change in the
cumulative total shareholder return on our common stock (symbol: AEY) against
the cumulative total return of the American Stock Exchange (symbol: XAX) and
the
Index for the Nasdaq Telecommunications Stocks (symbol: IXUT) for the period
of
five fiscal years commencing October 1, 2001 and ending September 30, 2006.
The
graph assumes that the value of the investment in our common stock and each
index was $100 on September 30, 2001.
COMPARISON
OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among
ADDvantage Technologies Group, Inc., and the NASDAQ Telecommunications Index
and
the American Stock Exchange Index
*
$100 invested on September 30, 2001 in our stock or on September 30, 2001 in
each index -
including
reinvestment of dividends.
|
Cumulative
Total Return
|
|
9/28/01
|
9/30/02
|
9/30/03
|
9/30/04
|
9/30/05
|
9/30/06
|
|
|
|
|
|
|
|
ADDvantage
Technologies Group, Inc.
|
$100.00
|
$68.63
|
$372.55
|
$377.45
|
$381.37
|
$411.76
|
|
|
|
|
|
|
|
American
Stock Exchange
|
100.00
|
102.29
|
122.51
|
157.25
|
214.76
|
235.77
|
|
|
|
|
|
|
|
Nasdaq
Telecommunications
|
100.00
|
43.54
|
76.88
|
85.18
|
94.58
|
101.85
|
Ratification
Of Independent Auditors
We
recommend that you vote for the ratification of the appointment of Hogan &
Slovacek.
Our
Audit Committee has selected the accounting firm of Hogan & Slovacek as our
independent auditors to examine our financial statements for the fiscal year
ending September 30, 2007. Hogan & Slovacek has been our independent auditor
since they were engaged by our Audit Committee on January 26, 2006. Prior to
their engagement, Tullius Taylor Sartain & Sartain had been our independent
auditor since 1994.
Representatives
from Hogan and Slovacek will attend
the Annual Meeting to answer appropriate questions and make statements if they
desire.
Change
in Company's Certifying Accountant
On
January 17, 2006, we and the Chairman of the Audit Committee of our Board of
Directors were advised by letter of the same date that Tullius Taylor Sartain
& Sartain LLP ("Tullius"), the principal accountant engaged to audit our
financial statements, would resign as our independent registered public
accounting firm. The effective date of the resignation was the date of
completion of Tullius' review of our Quarterly Report on Form 10-Q for the
first
quarterly period ended December 31, 2005, which we filed on February 13,
2006.
The
reports of Tullius on our consolidated financial statements for each of the
two
fiscal years ended September 30, 2005, did not contain an adverse opinion or
a
disclaimer of opinion, and were not qualified as to uncertainties, audit scope
or accounting principles.
The
Audit
Committee was informed of, but neither recommended nor approved, the termination
of the client-auditor relationship with Tullius.
During
our two fiscal years ended September 30, 2005, and for the period from October
1, 2005, through the date of Tullius' letter of resignation, there were no
disagreements with Tullius on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of Tullius, would have caused
them to make reference to the subject matter of their disagreement in their
reports on our consolidated financial statements for such periods.
During
the period of October 1, 2005, through the date of Tullius' letter of
resignation, there were no reportable events as defined by paragraph (a)(1)(v)
of Item 304 of Regulation S-K promulgated by the SEC.
We
provided Tullius with copies of both of our Current reports on Form 8-K
reporting this event and asked Tullius to furnish us with letters addressed
to
the SEC stating whether Tullius agrees with the statements we made by and,
if
not, stating the respects in which it does not agree. Tullius furnished such
letters to us, indicating to the SEC that it was in agreement with our
statements concerning Tullius.
On
January
26, 2006, the Audit Committee engaged Hogan & Slovacek to serve as the
principal accountant to audit our financial statements for the current fiscal
year.
During
our two fiscal years ended September 30, 2005, and for the period from October
1, 2005, through the date of such engagement, we did not consult with Hogan
& Slovacek regarding the application of accounting principles to a specific
transaction, either completed or proposed, or the type of audit opinion that
might be rendered on our financial statements, or any other matters or
reportable events described in Items 304(a)(2)(i) and (ii) of Regulation
S-K.
PRINCIPAL
ACCOUNTING FEES AND SERVICES
Hogan
& Slovacek ("Hogan") served as our independent auditor since they were
engaged by our Audit Committee on January 26, 2006 and examined our financial
statements for the fiscal year ended September 30, 2006. Tullius served as
our
independent auditor from 1994 until its resignation discussed above, and
examined our financial statements for the fiscal year ended September 30, 2005.
Our Audit Committee considered whether the provisions for the tax services
and
other services by both Hogan and Tullius were compatible with maintaining their
independence and determined that they were.
Fees
Incurred by the Company for Tullius Taylor Sartain & Sartain LLP and Hogan
& Slovacek
The
following table shows the fees for professional audit services provided by
Hogan
and Tullius for the audits of our annual financial statements for the years
ended September 30, 2006 and 2005 and fees billed for other services during
those periods.
|
|
2006
|
2005
|
|
|
|
Hogan
|
|
|
Tullius
|
|
|
Hogan
|
|
|
Tullius
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Audit
Fees
|
|
$
|
71,500
|
|
$
|
8,600
|
|
|
-
|
|
$
|
63,710
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Audit
-Related Fees
|
|
|
3,600
|
|
|
3,000
|
|
|
-
|
|
|
1,410
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax
Fees
|
|
|
18,620
|
|
|
0
|
|
|
-
|
|
|
9,275
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All
Other Fees
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
93,720
|
|
$
|
11,600
|
|
|
-
|
|
$
|
74,395
|
|
Notes
to Table:
(1)
|
Audit
fees represent fees for professional services provided in connection
with
the audit of our financial statements and review of our quarterly
financial statements and audit services provided in connection with
the
issuance of comfort letters, consents, and assistance with review
of
documents filed with the SEC.
|
Policy
on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services
of
Independent Auditor
Consistent
with SEC policies regarding auditor independence, the Audit Committee has
responsibility for appointing, setting compensation and overseeing the work
of
the independent registered public accounting firm. In recognition of this
responsibility, the Audit Committee has established a policy to pre-approve
all
audit and permissible non-audit services provided by the independent registered
public accounting firm. During the year the Audit Committee approved all of
the
services performed by the independent accounting firms. The fees billed for
these services approximated 100% of the pre-approved amounts.
Before
engagement of the independent registered public accounting firm for the next
year’s audit, management will submit a list of services and related fees
expected to be rendered during that year within each of the following four
categories of services to the Audit Committee for approval:
1.
|
Audit
services
include audit work performed on the financial statements, internal
control
over financial reporting, as well as work that generally only the
independent registered public accounting firm can reasonably be expected
to provide, including comfort letters, statutory audits, and discussions
surrounding the proper application of financial accounting and/or
reporting standards.
|
2.
|
Audit-Related
services
are for assurance and related services that are traditionally performed
by
the independent registered public accounting firm, including due
diligence
related to mergers and acquisitions, employee benefit plan audits,
and
special procedures required to meet certain regulatory requirements.
|
3.
|
Tax
services
include all services, except those services specifically related
to the
audit of the financial statements, performed by the independent registered
public accounting firm’s tax personnel, including tax analysis; assisting
with coordination of execution of tax related activities, primarily
in the
area of corporate development; supporting other tax related regulatory
requirements; and tax compliance and reporting.
|
4.
|
Other
Fees are
those associated with services not captured in the other categories.
We
generally don’t request such services from the independent registered
public accounting firm.
|
Before
engagement, the Audit Committee pre-approves the independent registered public
accounting firm’s services within each category. During the year, circumstances
may arise when it may become necessary to engage the independent registered
public accounting firm for additional services not contemplated in the original
pre-approval categories. In those instances, the Audit Committee requires
specific pre-approval before engaging the independent registered public
accounting firm.
The
Audit Committee may delegate pre-approval authority to one or more of its
members. The member to whom such authority is delegated must report, for
informational purposes only, any pre-approval decisions to the Audit Committee
at its next scheduled meeting.
If
you want to include a shareholder proposal in the proxy statement for the 2008
annual meeting, it must be delivered to our executive offices, 1221 East
Houston, Broken Arrow, Oklahoma, 74012, on or before October 8, 2007. In
addition, if you wish to present a proposal at the 2008 annual meeting that
will
not be included in our proxy statement and you fail to notify us by December
22,
2007, then the proxies solicited by our Board for the 2008 annual meeting will
include discretionary authority to vote on your proposal in the event that
it is
properly brought before the meeting.
At
the date of mailing of this proxy statement, we are not aware of any business
to
be presented at the annual meeting other than the proposal discussed above.
If
other proposals are properly brought before the meeting, any proxies returned
to
us will be voted as the proxyholders see fit.
You
can obtain a copy of our Annual Report on Form 10-K for the year ended September
30, 2006 at no charge by writing to us at 1221 East Houston, Broken Arrow,
Oklahoma, 74012. This document and other information may also be accessed from
our website at www.addvantagetech.com.
Only
one annual report and proxy statement are being delivered to multiple
shareholders who share one address, unless we have received instructions to
the
contrary. We will provide a separate copy of the annual report and proxy
statement to a shareholder at a shared address to which single copies were
delivered upon request sent in writing to 1221 East Houston, Broken Arrow,
Oklahoma, 74012, or by calling (918) 251-9121. If you wish to receive a separate
annual report and proxy statement in the future, or if you currently receive
multiple copies of the annual report and proxy statement and wish to request
delivery of only single copies, you may notify us at the same address or phone
number.