ADDvantage Technologies Group, Inc.
1605 East Iola
Broken Arrow, Oklahoma 74012
________________________________________________________________________________
NOTICE OF ANNUAL MEETING
________________________________________________________________________________
Date: Thursday, March 4, 2004
Time: 10:00 a.m.
Place: Corporate Office of ADDvantage Technologies Group, Inc.
1605 E. Iola,
Broken Arrow, Oklahoma
Matters to be voted on:
1. Election of five directors.
2. Ratification of the appointment of Tullius Taylor Sartain & Sartain LLP as
our independent auditors for 2004.
3. Any other business properly brought before the shareholders at the meeting.
By Order of the Board of Directors,
/s/ Lynnwood R. Moore, Jr.
---------------------------------
Lynnwood R. Moore, Jr., Secretary
February 9, 2004
________________________________________________________________________________
CONTENTS
Page
____
General Information About Voting 2
Stock Ownership 3
Proposal No. 1: Election of Directors 4
Proposal No. 2: Appointment of Independent Auditors 10
Shareholder Proposals for 2005 Annual Meeting 11
Other Matters 11
Appendix A: Audit Committee Charter 12
________________________________________________________________________________
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 10th,
2004. Please note that our annual report accompanies this mailing of the proxy
statement.
1
2
ADDvantage Technologies Group, Inc.
1605 East Iola
Broken Arrow, Oklahoma 74012
PROXY STATEMENT FOR 2004 ANNUAL MEETING
GENERAL INFORMATION ABOUT VOTING
Who can vote?
You can vote your shares of common stock if our records show that you owned
the shares on January 23, 2004. A total of 10,022,484 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 Tullius Taylor Sartain & Sartain 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.
What do I do if my shares are held in "street name"?
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 Tullius,
Taylor, Sartain & Sartain 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
cannot vote them on any proposal. Broker nonvotes will be counted as present to
determine if a quorum exists but will not be counted as present and entitled to
vote on the election of directors or to ratify the appointment of Tullius Taylor
Sartain & Sartain LLP as our independent auditors.
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.
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STOCK OWNERSHIP
The following table shows the number of shares of common stock or preferred
stock beneficially owned (as of January 23, 2004) by:
o each person known by us who beneficially owns more than 5% of any class of
our voting stock;
o each director and nominee for director;
o each executive officer named in the Summary Compensation Table on page 7;
and
o our directors and executive officers as a group.
Except as otherwise indicated, the beneficial owners listed in the table have
sole voting and investment powers of their shares.
Beneficial Ownership
Number of Number of
Number of Shares of Shares of
Shares of Series A Series B
Common Preferred Preferred
Stock Percent Stock Percent Stock Percent
Name and Address of Beneficially of Beneficially of Beneficially of
Beneficial Owner Owned (1) Class (1) Owned (2) Class Owned Class
_________________________________________________________________________________________________________________
Gary W. Young (5) 160,708 (3) 1.6% -0- -0- -0- -0-
5905 S. Knoxville Ave.
Tulsa, OK 74135
David E. Chymiak 4,183,900 (4) 41.7% 100,000 50.0% 150,000 50.0%
1605 E. Iola
Broken Arrow, OK 74012
Kenneth A. Chymiak (6) 3,971,000 (4) 39.6% 100,000 50.0% 150,000 50.0%
1605 E. Iola
Broken Arrow, OK 74012
Stephen J. Tyde 21,000 (4) * -0- -0- -0- -0-
1900 Sandwedge Place
Wilmington, NC 28405
Freddie H. Gibson 4,000 (4) * -0- -0- -0- -0-
8008 S. Erie Avenue
Tulsa, OK 74136
All Executive Officers 8,340,608 (7) 83.2% 200,000 100% 300,000 100%
and Directors as a
group (5 persons)
_____________________________
* Less than one percent.
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(1) 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.
(2) Each share of Series A Cumulative Convertible Preferred Stock is
convertible into 10 shares of our common stock.
(3) Includes 29,000 shares subject to stock options which are fully
exercisable.
(4) Includes 4,000 shares subject to stock options which are fully exercisable.
(5) All of the shares beneficially owned by Mr. Young are held of record by the
GWYSEY General Partnership jointly owned by Mr. Young and his wife.
(6) All of the shares beneficially owned by Mr. Chymiak are held of record
50.5% by him as trustee of the Ken Chymiak Revocable Trust and 49.5% by his
wife as trustee of the Susan Chymiak Revocable Trust. Mr. Chymiak disclaims
beneficial ownership of the shares held by his wife.
(7) Includes 45,000 shares subject to stock options which are fully
exercisable.
PROPOSAL NO. 1
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 23, 2004.
David E. Chymiak Director since 1999
David E. Chymiak, 58, 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 and Kenneth A. Chymiak acquired in 1985. David E. Chymiak
is the brother of Kenneth A. Chymiak, our President and CEO.
Kenneth A. Chymiak Director since 1999
Kenneth A. Chymiak, 57, 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, since 1985. Kenneth A. Chymiak is the brother of David E.
Chymiak, our Chairman of the Board since 1999.
4
Freddie H. Gibson Director since 1999
Freddie H. Gibson, 56, has been with the Heat Transfer Equipment Company in
Tulsa, Oklahoma since 1988. First as CEO, he has served since 1994 as the
President with responsibilities for the financial and accounting controls,
financial reporting, management of staff coordination and short and long-term
planning. Previously, Mr. Gibson had been President of Interactive Computer
Systems from 1980-1988. Also, he was 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, graduating with
honors.
Stephen J. Tyde Director since 1999
Stephen J. Tyde, 57, 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. Mr. Tyde is currently the sole owner and COO of P&MW Holding, Inc.,
an industrial real estate company. Steven 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.
Gary W. Young Director since 1990
Gary W. Young, 62, served as our Executive Vice President - Finance and
Administration from 1990-1999. He is also the owner and President of Young Ideas
Inc., a financial consulting and investment company he founded in 1987.
Committees of the Board. The board of directors has two committees, the
Audit Committee and the Compensation Committee. The following chart describes
the function and membership of each committee and the number of times it met
during our fiscal year ended September 30, 2003:
Audit Committee - 1 Meeting
Functions Members
_________ _________________
o Reviews qualifications of our independent auditors and Gary W. Young
makes recommendations to our board about our independent
auditors Freddie H. Gibson
o Reviews scope and results of audits with independent Stephen J. Tyde
auditors, compliance with any of our accounting policies
and procedures and the adequacy of our system of internal
controls
o Oversees quarterly reporting
o Performs the other functions listed in the Charter of the Audit Committee
adopted by our board which is attached hereto as Appendix A and which may
be found on our website at www.addvantagetech.com.
5
Report of the Audit Committee
_____________________________
The Audit Committee of our board of directors is comprised of three
directors who are not officers of the Company. 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. 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:
- reviewed and discussed the audited financial statements for the fiscal year
ended September 30, 2003, with management;
- discussed with the independent auditors the matters required to be
discussed by Statement on Auditing Standards No. 61 (Communications with
Audit Committees);
- 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-KSB for fiscal year 2003 for filing with the Securities
and Exchange Commission.
Gary W. Young Freddie H. Gibson Stephen J. Tyde
Audit Committee Financial Expert
________________________________
The Securities and Exchange Commission 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.
An individual will have to possess all of the attributes listed above to qualify
as an audit committee financial expert. The Audit Committee member currently
serving in this capacity is Stephen J. Tyde, an independent director.
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Compensation Committee - No Meeting
Functions Members
__________ ________
o Reviews and monitors performance of our Gary W. Young
officers
Freddie H. Gibson
o Approves compensation and benefits programs
of our officers Stephen J. Tyde
Corporate Governance and Nominating Committee - No Meeting
Functions Members
_________ _______
o Provides oversight of the governance of the board of directors Gary W. Young
o Makes recommendations to the board as a whole concerning board size,
make-up structure and compensation Freddie H. Gibson
o Identifies individuals qualified to become board members
o Selects or recommends that the board select the director nominees for Stephen J. Tyde
the annual meeting of shareholders
o Recommends to the whole 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
The Corporate Governance and Nominating Committee has adopted a policy with
regard to the consideration of director candidates recommended by stockholders.
The Corporate Governance and Nominating Committee will consider director
candidates recommended by any stockholder 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 stockholder 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.
A stockholder that instead desires to nominate a person directly for
election to the board must meet the deadlines and other requirements set forth
in the Company's Bylaws and the rules and regulations of the Securities and
Exchange Commission.
The Corporate Governance and Nominating Committee's criteria and process
for evaluating and identifying the candidate 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 stockholder; (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, 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 is comprised of three
directors who are not officers of the Company. Under currently applicable rules,
all members are "independent" as defined under the American Stock Exchange
listing standards. A copy of the Corporate Governance and Nominating Committee
Charter is posted on our website at www.addvantagetech.com.
7
Board Meetings
Our board held two meetings during fiscal 2003 (and took action by
unanimous written consent four times). Each director attended all meetings of
the board and the committees on which he served.
Stockholder Communication with the Board of Directors
Communication with the board of directors should be directed to the
attention of Stephen J. Tyde. Written correspondence to Mr. Tyde may be
delivered to our executive offices, 1605 East Iola, 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 six 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.
Compensation of Directors
We pay our three non-employee directors $500 for each board meeting and
$250 for each committee meeting the director attends. In addition, directors are
eligible to receive awards of options to purchase 1,000 shares of our common
stock each year after the annual shareholders meeting. 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, 2003, each of the three non-employee directors received a
director's fee of $1,250. All of the directors received an award of stock
options to purchase 1,000 shares of common stock at an exercise price of $1.65
per share. Directors who were our employees received no additional cash
compensation for their services on our board of directors.
Certain Relationships and Related Party Transactions
Chymiak Investments, L.L.C., which is owned by David E. Chymiak our
Chairman of the Board and Kenneth A. Chymiak our President and Chief Executive
Officer and a director, purchased from our wholly owned subsidiary 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 represents 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. Lease payments for 2003 and 2002 were
$353,000 and $330,000, respectively.
On June 26, 2001, ADDvantage Technologies Group of Texas, a subsidiary of
the Company, borrowed $150,000 from Chymiak Investments, L.L.C for the purchase
of a building containing office and warehouse space at the location in Texas.
The note is payable at 7.5% over 10 years. Total interest paid in 2003 and 2002
was $9,869 and $10,694, respectively.
In fiscal 2002, ADDvantage Technologies Group of Missouri, a subsidiary of
the Company, completed additions at its location in Missouri and financed
$342,000 from Chymiak Investments, L.L.C for a building comprising of office and
warehouse space. The note is payable at 7.5% over 10 years. Total interest paid
in 2003 and 2002 was $23,371 and $21,657, respectively.
8
Chymiak Investments Inc., which is owned by Kenneth A. Chymiak and his
wife, Susan C. Chymiak, owns three other properties leased to TULSAT Corporation
for five-year terms all ending in 2004. Lease payments for these properties for
2003 and 2002 were $108,000 each year.
We have outstanding, unsecured stockholder loans of $800,000. Of this
amount, $650,000 is payable to revocable trusts for the benefit of Kenneth A.
Chymiak and his wife and $150,000 is payable to David E. Chymiak. The interest
rate on the notes is one and one-quarter percentage point below the Chase
Manhattan Bank Prime, which is the same rate as our bank line of credit. The
current rate on the notes is 2.75% and the total interest paid on the notes was
$30,323 in 2003 and $47,352 in 2002.
Future minimum lease payments under the above leases with Chymiak
Investments, L.L.C. and Chymiak Investments Inc. are as follows:
2004 384,840
2005 105,840
2006 17,640
_________
$ 508,320
=========
Related party rental expense under these 8 leases for the years ended September
30, 2003 and 2002 totaled $461,000 and $438,000, respectively.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires our directors
and executive officers, and persons who own more than 10% of our common stock to
report their initial ownership of our common stock and any subsequent changes in
that ownership to the SEC and to furnish us with a copy of each of these
reports. SEC regulations impose specific due dates for these reports and we are
required to disclose in this proxy statement any failure to file by these dates
during fiscal 2003.
To our knowledge, based solely on the review of the copies of these reports
furnished to us and written representations that no other reports were required,
during and with respect to fiscal 2003, all Section 16(a) filing requirements
applicable to our executive officers, directors and more than 10% shareholders
were complied with.
Summary Compensation Table
Executive Officers
Annual Compensation
____________________
Long-Term Compensation
Other Number
Annual of Shares
Compen- Under-lying
Name and Salary Bonus sation Options
Principal Position Year ($)(1) ($) ($) (2) Granted
__________________ ____ _______ _____ _______ _______
David E. Chymiak 2003 225,000 -0- 10,240 1,000
Chairman 2002 225,000 -0- 10,000 1,000
2001 213,463 -0- 8,500 1,000
Kenneth A. Chymiak 2003 225,000 -0- 10,240 1,000
President and 2002 225,000 -0- 10,000 1,000
Chief Executive Officer 2001 213,463 -0- 8,500 1,000
________________
(1) These amounts represent the salaries paid to these officers by TULSAT
Corporation, our wholly owned subsidiary.
(2) Other annual compensation represents, in 2003, 2002, and 2001 our
contributions on behalf of each of the individuals to our 401(k) Plan.
9
Option Grants During Fiscal 2003
The following table sets forth information regarding options granted during
fiscal 2003 to named executive officers.
% of Total Options
Number of Shares Granted to
Underlying Employees in
Name Options Granted Fiscal Year Exercise Price ($/Sh) Expiration Date
____ _______________ ___________ ____________________ _______________
Kenneth A. Chymiak 1,000 7.7% $ 1.65 3/1/13
David E. Chymiak 1,000 7.7% $ 1.65 3/1/13
Option Exercises and Year-End Value Table
There were no stock options exercised by the named executive officers
during fiscal 2003. 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, 2003.
Number of Number of Shares of Common Stock Value of Unexercised
Shares Underlying Unexercised Options at In-the-Money Options at
Acquired on Value September 30, 2003 September 30, 2003
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
____ ____________ ________ ___________ _____________ ___________ _____________
Kenneth A. Chymiak - - 4,000 - $8,115 -
David E. Chymiak - - 4,000 - $8,115 -
PROPOSAL NO. 2
Appointment Of Independent Auditors
We recommend that you vote for the ratification of the appointment of
Tullius Taylor Sartain & Sartain LLP.
We have appointed the accounting firm of Tullius Taylor Sartain & Sartain
LLP as our independent auditors to examine our financial statements for the
fiscal year ending September 30, 2004. Tullius Taylor Sartain & Sartain LLP has
been our independent auditor since 1994. Our Audit Committee has considered
whether the provision of the tax services and other services of Tullius Taylor
Sartain & Sartain LLP are compatible with maintaining their independence and
have determined that they are. Fees paid to the firm in relation to fiscal 2003
and 2002 were as follows:
Fee Category 2003 2002
____________ _________ __________
Audit Fees $ 41,750 $ 44,775
Audit-Related Fees 4,175 -
Tax Fees 40,190 -
All Other Fees 750 -
----------- ---------
Total $ 86,865 $ 44,775
=========== =========
Audit Fees. Consists of fees billed for professional services rendered for
the audit of the Company's consolidated financial statements and review of the
interim consolidated financial statements included in quarterly reports and
services that are normally provided by Tullius Taylor Sartain & Sartain LLP in
connection with statutory and regulatory filings or engagements.
10
Audit-Related Fees. Consists of fees billed for assurance and related
services that are reasonably related to the performance of the audit or review
of the Company's consolidated financial statements and are not reported under
"Audit Fees." These services include consultation and review of the Company's
responses to ordinary and routine inquiries by the SEC.
Tax Fees. Consists of fees billed for professional services for tax
compliance, tax advice and representation pursuant to an examination by the
Internal Revenue Service.
All Other Fees. Consists of fees billed for preparation and presentation of
information regarding the Sarbanes-Oxley Act to the Company's audit committee.
A resolution to ratify their appointment will be presented at the annual
meeting. A majority of the votes cast must vote in favor to ratify the
appointment. If the shareholders do not ratify the appointment, we will
reconsider our selection of Tullius Taylor Sartain & Sartain LLP. Although your
ratification of the appointment of our independent auditors is not required, we
are submitting the appointment of Tullius Taylor Sartain & Sartain LLP for your
ratification as a matter of good corporate practice.
A representative of Tullius Taylor Sartain & Sartain LLP will be present at
the annual meeting. The representative will have the opportunity to make a
statement if he or she desires to do so and will be available to answer
appropriate questions.
SHAREHOLDER PROPOSALS FOR 2005 ANNUAL MEETING
If you want to include a shareholder proposal in the proxy statement for
the 2005 annual meeting, it must be delivered to our executive offices, 1605
East Iola, Broken Arrow, Oklahoma, 74012, on or before October 13, 2004. In
addition, if you wish to present a proposal at the 2005 annual meeting that will
not be included in our proxy statement and you fail to notify us by December 27,
2004, then the proxies solicited by our board for the 2005 annual meeting will
include discretionary authority to vote on your proposal in the event that it is
properly brought before the meeting.
OTHER MATTERS
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 proposals
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-KSB for the year
ended September 30, 2003 at no charge by writing to us at 1605 East Iola, Broken
Arrow, Oklahoma, 74012. This document and other information may also be accessed
from our website at www.addvantagetech.com.
11
APPENDIX A
ADDVANTAGE TECHNOLOGIES GROUP, INC.
AUDIT COMMITTEE CHARTER
Purpose
_______
The Audit Committee is to act on behalf of the Board of Directors to provide
effective oversight of
o the financial reporting process and adequacy of internal financial and
accounting controls,
o relationships with external and internal auditors, and
o financial compliance issues.
In fulfilling these purposes, the Audit Committee shall have the duties, powers
and authority specified in this charter.
Composition and Independence
____________________________
The Audit Committee shall consist of no fewer than three Directors, all of whom
shall be independent as determined by the Board. Each member shall, in the
judgment of the Board, be able to read and understand fundamental financial
statements, or will become able to do so within a reasonable period of time
after his or her appointment to the Audit Committee. At least one member of the
Audit Committee must have, in the judgment of the Board, financial or accounting
expertise.
Operating Principles
____________________
1. The Audit Committee shall have the power to conduct or authorize
investigations into any matters within the Committee's scope of
responsibilities. The Committee shall have the authority to engage and determine
funding for independent counsel and other advisors.
2. The Audit Committee shall meet at least four times per year or more
frequently as circumstances require.
Committee Authority and Responsibility
______________________________________
In fulfilling its duties and responsibilities, the Audit Committee shall engage
in the following activities:
1. Review and approval of the Corporation's annual financial statements,
annual reports, registration statements, and material amendments to any of them,
as filed with the Securities and Exchange Commission, and make recommendations
to the Board regarding the Directors' execution of them.
2. Discuss with management, internal auditors, and external auditors the
effectiveness of the Corporation's system of internal controls for detecting
accounting and financial reporting errors, fraud, legal violations and
noncompliance with laws and regulations and the code of conduct. In this regard,
the Committee shall review and advise the Board with respect to the
Corporation's policies and procedures designed to promote compliance with
applicable laws and regulations including any material reports or inquiries
received from regulators or government agencies.
3. Establish and maintain procedures for (i) the receipt, retention and
treatment of complaints received by the Corporation regarding accounting,
internal accounting controls or auditory matters; and (ii) the confidential or
anonymous submission by employees of the Corporation of concerns regarding
questionable accounting or auditing matters.
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4. Determine annually the public accounting firm to be the external auditor
for the Company, and approve the appointment, compensation, and services of the
auditor. The appointed external auditor shall report directly to the Committee,
and shall provide copies of annual comments on accounting procedures and systems
of control.
5. Evaluate the independence of the external auditor. The Audit Committee
shall receive from the outside auditor(s) a formal written statement delineating
all relationships between the auditor(s) and the Corporation, consistent with
Independence Standards Board Standard 1, and it is the Audit Committee's
responsibility to actively engage in a dialogue with the auditor with respect to
any disclosed relationships or services that may impact the objectivity and
independence of the auditor and for taking or recommending that the full board
take, appropriate action to oversee the independence of the outside auditor.
6. Review, at least annually, the then current and future programs of the
Company's internal audit department, including the procedure for assuring
implementation of accepted recommendations made by the auditors.
7. Review the status of compliance with laws, regulations and internal
procedures. Contingent liabilities and risks that may be material to the
Company, the scope and status of systems designed to assure Company compliance
with laws, regulations and internal procedures, through receiving reports from
management, legal counsel and other third parties as determined by the Committee
on such matters, as well as major legislative and regulatory developments which
could materially impact the Company's contingent liabilities and risks.
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