U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
/X/ Quarterly Report Under Section 13 or 15(d) of the Securities Act of 1934,
For the quarterly period ended September 30, 1995, or
/ / Transition report under Section 13 or 15(d) of the Exchange Act, for the
transition period from to
COMMISSION FILE NUMBER 0-8482
ASTROCOM CORPORATION
(Exact name of small business issuer as specified in its charter)
MINNESOTA 41-0946755
(State or other jurisdiction (I.R.S. Employer Ident. No.)
of incorporation or organization)
2700 SUMMER STREET N.E. 55413-2820
MINNEAPOLIS, MINNESOTA (zip code)
(Address of principal executive office)
(612) 378-7800
(Issuer's telephone number)
NOT APPLICABLE
(Former name, address and former fiscal year, if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes /X/ No / /
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to
be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution
of securities under a plan confirmed by a court
Yes / / No / /
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date: 5,170,023
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<TABLE>
<CAPTION>
ASTROCOM CORPORATION
STATEMENT OF OPERATIONS (UNAUDITED)
Three Months Ended September 30
1995 1994
<S> <C> <C>
Net Revenues $ 769,000 $ 488,000
Cost of Products Sold 473,000 464,000
Net Profit $ 296,000 $ 24,000
Expenses:
Selling and administrative expense 272,000 256,000
Research and development expense 113,000 79,000
Interest expenses 29,000 19,000
Total Expenses 414,000 354,000
Income (loss) before taxes $ (118,000) $(330,000)
Income tax 0 0
Net income (loss) $ (118,000) $(330,000)
Net income (loss) per share $ ( .02) $( .08)
Shares used in the computation 5,170,023 4,198,773
See notes to financial statements
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<CAPTION>
ASTROCOM CORPORATION
STATEMENTS OF OPERATIONS (UNAUDITED)
Nine Months Ended September 30
1995 1994
<S> <C> <C>
Net Revenues $2,177,000 $2,557,000
Cost of Products Sold 1,361,000 1,777,000
Net Profit $ 816,000 $ 780,000
Expenses:
Selling and administrative expense 851,000 961,000
Research and development expense 324,000 221,000
Interest expense 79,000 46,000
Total Expenses 1,254,000 1,228,000
Income (loss) before taxes $ (438,000) $(448,000)
Income tax 0 0
Net income (loss) $ (438,000) $(448,000)
Net income (loss) per share $ ( .09) $ ( .11)
Shares used in the computation 4,995,957 4,190,303
See notes to financial statements
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<CAPTION>
ASTROCOM CORPORATION
BALANCE SHEETS (UNAUDITED)
September 30, December 31,
1995 1994
ASSETS:
CURRENT ASSETS
<S> <C> <C>
Cash $ 2,000 $ 8,000
Accounts receivable, less allowance
for doubtful accounts of $15,000 at 9/30/95
and $15,000 at 12/31/94 571,000 468,000
Inventories
Finished products and work in process 254,000 342,000
Purchased parts, materials and supplies 238,000 392,000
Total Inventories 492,000 734,000
Prepaid expenses 11,000 15,000
TOTAL CURRENT ASSETS 1,076,000 1,225,000
OTHER ASSETS
Other 18,000 20,000
Demonstration, sample & repair inventory 91,000 94,000
PLANT AND EQUIPMENT
Buildings 1,000 1,000
Machinery and equipment 1,266,000 1,173,000
Office furniture and fixtures 639,000 639,000
Allowances for depreciation and
amortization (1,560,000) (1,433,000)
TOTAL PLANT AND EQUIPMENT 346,000 380,000
TOTAL ASSETS $1,531,000 $1,719,000
See notes to financial statements
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<CAPTION>
September 30, December 31,
1995 1994
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES
Notes payable $ 540,000 $ 394,000
Accounts payable 409,000 326,000
Employee compensation and other accrued 40,000 52,000
expenses
Current maturities of long-term debt 132,000 156,000
and capital leases
TOTAL CURRENT LIABILITIES 1,121,000 928,000
LEASE-SETTLEMENT COSTS 36,000 57,000
SUBORDINATED DEBT - NOTE B 200,000 200,000
STOCKHOLDERS' EQUITY
Common Stock, par value $.10 a share - 480,000 486,000
authorized 10,000,000 shares - Note B
Additional paid in capital 3,517,000 3,433,000
Retained earnings (deficit) (3,823,000) (3,385,000)
TOTAL STOCKHOLDERS' EQUITY 174,000 534,000
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,531,000 $1,719,000
Note: The balance sheet at December 31, 1994 has been derived from the
audited financial statements at that date.
See notes to financial statements
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<CAPTION>
ASTROCOM CORPORATION
STATEMENTS OF CASH FLOWS
Nine Months Ended September 30,
1995 1994
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ (438,000) $ (448,000)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation 130,000 96,000
Changes in operating assets and liabilities:
Accounts receivable (103,000) 190,000
Reorganization and contingent liabilities (18,000) (21,000)
Inventories and prepaid expenses 246,000 289,000
Accounts payable and accrued expenses 47,000 (107,000)
Other assets 2,000 23,000
Net cash provided by operating activities (134,000) 22,000
INVESTING ACTIVITIES
Purchases of plant and equipment (93,000) (21,000)
Net cash (used in) provided by investing activities (93,000) (21,000)
FINANCING ACTIVITIES
Proceeds from subordinated note payable 0 85,000
Conversion of debt to equity 78,000 0
Proceeds from sales of stock 0 5,000
Proceeds (payments) on bank notes payable 146,000 (107,000)
Payments on capital lease obligations (3,000) (12,000)
Net cash (used in) provided by financing activities 221,000 (29,000)
Increase (Decrease) in cash (6,000) (28,000)
Cash at beginning of quarter 8,000 55,000
Cash at end of quarter $ 2,000 $ 27,000
See notes to financial statements
</TABLE>
<PAGE>
ASTROCOM CORPORATION
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
NOTE A - ACCOUNTING POLICIES
The accompanying financial statements have been prepared in accordance with the
instructions to Form 10-QSB. Accordingly, they do not include all information
and footnotes necessary for a complete presentation of financial position,
results of operations and statement of cash flows. In the opinion of
management, all adjustments necessary for a fair presentation of results have
been made and registrant believes such presentation is adequate to make the
information presented not misleading. For further information, refer to the
financial statements and footnotes included in registrant's annual report on
Form 10-KSB for the year ended December 31, 1994.
NOTE B - TRANSACTION WITH HANROW FINANCIAL GROUP, LTD.
Registrant has an $200,000 subordinated note payable to a related party, Hanrow
Financial Group, Ltd. (Hanrow). The note bears interest at 13% and matures on
April 5, 1996. The note is secured by a second security position in all
assets of registrant, and contains various covenants relating to registrant's
operations, financial condition and payment of dividends. As of December 31,
1994, registrant was in violation of certain covenants related to working
capital, capital base and the allowance for doubtful accounts. Registrant was
granted a waiver for the covenant violations as of December 31, 1994 and for
the period from December 31, 1994 to January 1, 1996. As a result of the
covenant violations being waived, the subordinated note continues to be
classified as a long-term liability.
During 1994, registrant issued 13,000 shares of common stock in Hanrow in lieu
of a cash payment of $6,000 for accrued interest on the subordinated note.
NOTE C - TRANSACTION WITH RELATED PARTY.
Effective November 18, 1994, registrant entered into a debenture purchase
agreement with a related party. Under the terms of the Agreement, the related
investor purchased $66,000 of registrants' unsecured debentures. The
debentures were due on December 31, 1995, but, at holder's option, could be
converted into common stock at the rate of $.25 per share, prior to
December 31, 1995. On June 30, 1995, the holder converted $66,000 of the
debentures into shares of registrant and received a warrant to purchase
132,000 shares of registrant, at the rate of $.50 per share.
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Management's Discussion and Analysis of the Results of Operations.
Comparison of Third Quarters 1995 and 1994
SALES. Net revenues for the quarter ended September 30, 1995,
totaled $769,000, an increase of 58% from the total of $488,000 for the same
quarter of 1994. The increase was the result of a higher volume of unit
sales. The gross margin increased from 5% in 1994 to 38% in 1995. The
increase can be attributed to a higher volume of revenue during the third
quarter of 1995.
EXPENSES. Selling and administrative expenses increased 6% from
$256,000 in the quarter ended September 30, 1994, to $272,000 in the quarter
ended September 30, 1995. The increase was due primarily to an increase in
the number of sales and administrative personnel during the period ending
September 30, 1995. Research and development expenses increased 43% from
$79,000 in 1994 to $113,000 in 1995, due primarily to increased staff during
the period ending September 30, 1995 and a higher level of spending on
engineering prototype materials. Interest expenses increased 53% from $19,000
in 1994 to $29,000 in 1995, due to higher borrowing levels and higher interest
rate in 1995.
NET INCOME (LOSS). Registrant reported a net loss from operations of
$118,000 for the quarter ended September 30, 1995, as compared to a net loss
of $330,000 in the third quarter of 1994. The reduced loss can be attributed
primarily to the increase in revenues in the third quarter of 1995.
<PAGE>
COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 1995
WITH THE NINE MONTHS ENDED SEPTEMBER 30, 1994
SALES. Net revenues for the nine months ended September 30, 1995,
totaled $2,177,000, a decrease of 15% from the total of $2,557,000 for the same
period of 1994. Gross margins remained stable from 31% in 1994 to 37% in 1995.
EXPENSES. Selling and administrative expenses decreased 11% from
$961,000 in the first nine months of 1994, to $851,000 in the first nine months
of 1995. The decrease was due primarily to a reduction in the number of
administrative personnel during the first nine months of 1995. Research
and development expenses increased 47% from $221,000 in 1994 to $324,000 in
1995, due primarily to increased staff during the first nine months and a
higher level of spending on engineering prototype materials. Interest
expense increased 72% from $46,000 during the first nine months of 1994 to
$79,000 in the first nine months of 1995. This increase can be attributed to
higher borrowing levels and higher interest rates in 1995.
NET INCOME (LOSS). Registrant reported a net loss of $438,000 for the
first nine months of 1995, as compared to a net loss of $448,000 in the first
nine months of 1994.
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CORPORATE LIQUIDITY. During the first nine months of 1995, registrant
was not in compliance with the Hanrow subordinated debt loan covenants.
Hanrow has not declared a default under the agreement.
Liquidity was maintained during the first nine months of 1995 by funding
from the bank line of credit. Management believes it will maintain short-
term liquidity in 1995 by managing inventory, and factoring International
Accounts Receivable. Long-term liquidity is dependent upon returning to
profitable operations that generate adequate cash flow to meet its current
obligations on a timely basis.
<PAGE>
PART II OTHER INFORMATION
ITEM 5
1. The position of Vice President of Engineering was eliminated on
October 19, 1995, and Donald L. Lucas was terminated as an employee on
November 3, 1995.
2. Thomas J. Carter was elected as Chief Operating Officer on October 19,
1995.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: November 14, 1995 ASTROCOM CORPORATION
(Registrant)
By:S. Albert D. Hanser
S. Albert D. Hanser, President
and Chief Executive Officer
By:Brien W. Johnson
Brien W. Johnson,
Vice President of Finance
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<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
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<RECEIVABLES> 571
<ALLOWANCES> 0
<INVENTORY> 492
<CURRENT-ASSETS> 1,076
<PP&E> 1,906
<DEPRECIATION> (1,560)
<TOTAL-ASSETS> 1,531
<CURRENT-LIABILITIES> 1,121
<BONDS> 0
<COMMON> 4,801
0
0
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<TOTAL-LIABILITY-AND-EQUITY> 1,531
<SALES> 2,177
<TOTAL-REVENUES> 2,177
<CGS> 1,361
<TOTAL-COSTS> 1,361
<OTHER-EXPENSES> 1,175
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<INCOME-TAX> 0
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<CHANGES> 0
<NET-INCOME> (438)
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