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 Exchange
Act of 1934, for the quarterly period ended June 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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<CAPTION>
ASTROCOM CORPORATION
STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended June 30
1995 1994
<S> <C> <C>
Net Revenues $ 582,000 $ 854,000
Cost of Products Sold 402,000 572,000
Net Profit 180,000 282,000
Expenses:
Selling and administrative expense 299,000 341,000
Research and development expense 102,000 66,000
Interest expense 28,000 19,000
Total Expenses 429,000 426,000
Income (loss) before taxes (249,000) (144,000)
Income tax 0 0
Net income (loss) $ (249,000) $(144,000)
Net income (loss) per share $ ( .05) $( .04)
Share used in the computation 4,908,924 4,193,416
See notes to financial statements
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<CAPTION>
STATEMENTS OF OPERATIONS (UNAUDITED)
ASTROCOM CORPORATION
Six Months Ended June 30
1995 1994
<S> <C> <C>
Net Revenues $1,408,000 $2,069,000
Cost of Products Sold 888,000 1,300,000
Net Profit 520,000 769,000
Expenses:
Selling and administrative expense 579,000 706,000
Research and development expense 211,000 142,000
Interest expense 50,000 39,000
Total Expenses 840,000 887,000
Income (loss) before taxes (320,000) (118,000)
Income tax 0 0
Net income (loss) $ (320,000) $(118,000)
Net income (loss) per share $ ( .06) $ ( .03)
Share used in the computation 4,907,482 4,185,998
See notes to financial statements
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<CAPTION>
BALANCE SHEETS (UNAUDITED)
ASTROCOM CORPORATION
June 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 3/31/95
and $15,000 at 12/31/94. 363,000 468,000
Inventories
Finished products and work in-process 328,000 342,000
Purchased parts, materials and supplies 344,000 392,000
Total Inventories 672,000 734,000
Prepaid expenses 16,000 15,000
TOTAL CURRENT ASSETS 1,053,000 1,225,000
OTHER ASSETS
Other 20,000 20,000
Demonstration, sample & repair inventory 94,000 94,000
PLANT AND EQUIPMENT
Buildings 1,000 1,000
Machinery and equipment 1,184,000 1,173,000
Office furniture and fixtures 639,000 639,000
Allowances for depreciation and
amortization (deduction) (1,467,000) (1,433,000)
TOTAL PLANT AND EQUIPMENT 357,000 380,000
TOTAL ASSETS $1,524,000 $1,719,000
See notes to financial statements
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<CAPTION>
June 30, December 31,
1995 1994
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES
Notes payable $ 404,000 $ 394,000
Accounts payable 437,000 326,000
Employee compensation and other accrued 21,000 52,000
expenses
Current maturities of long-term debt 134,000 156,000
and capital leases
TOTAL CURRENT LIABILITIES 996,000 928,000
LEASE-SETTLEMENT COSTS 36,000 57,000
SUBORDINATED DEBT - NOTE B 200,000 200,000
STOCKHOLDERS' EQUITY
Common Stock, par value $.10 a share - 506,000 486,000
authorized 10,000,000 shares - Note B
Additional paid-in capital 3,491,000 3,433,000
Retained earnings (deficit) (3,705,000) (3,385,000)
TOTAL STOCKHOLDERS' EQUITY 292,000 534,000
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,524,000 $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>
STATEMENTS OF CASH FLOWS
ASTROCOM CORPORATION
Six Months Ended June 30
1995 1994
<S> <C> <C>
OPERATING EXPENSES
Net income (loss) $ (320,000) $ (118,000)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation 66,000 66,000
Changes in operating assets and liabilities:
Accounts receivable 105,000 5,000
Reorganization and contingent liabilities 61,000 0
Inventories and prepaid expenses 80,000 152,000
Accounts payable and accrued expenses (27,000) (135,000)
Other assets 0 20,000
Net cash provided by operating activities (8,000) (10,000)
INVESTING ACTIVITIES
Purchases of plant and equipment (43,000) (6,000)
Net cash (used in) provided by investing activities (43,000) (6,000)
FINANCING ACTIVITIES
Conversion of debt to equity - Note C 66,000 0
Payments on bank notes payable 10,000 (24,000)
Payments on capital lease obligations (31,000) (12,000)
Net cash (used in) provided by financing activities 45,000 (31,000)
Increase (Decrease) in cash (6,000) (47,000)
Cash at beginning of quarter 8,000 55,000
Cash at end of quarter $ 2,000 $ 8,000
See notes to financial statements
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NOTES TO FINANCIAL STATEMENTS
ASTROCOM CORPORATION
JUNE 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 registrant's 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 Second Quarters 1995 and 1994
SALES. Net revenues for the quarter ended June 30, 1995, totaled
$582,000, a decrease of 32% from the total of $854,000 for the same quarter
of 1994. The decrease was the result of a lower volume of unit sales, due
primarily to decreased orders from one of registrant's major customers. The
gross margin decreased from 33% in 1994 to 31% in 1995. The decrease can be
attributed to higher parts costs and a lower volume of revenue during the
second quarter of 1995.
EXPENSES. Selling and administrative expenses decreased 12% from
$341,000 in the quarter ended June 30, 1994 to $299,000 in the quarter ended
June 30, 1995. The decrease was due primarily to a reduction in the number of
sales and administrative personnel during the first six months of 1995.
Research and development expenses increased 55% from $66,000 in 1994 to
$102,000 in 1995, due primarily to an increase in personnel during the first
six months of 1995 and a higher level of spending on engineering prototype
materials. Interest expense increased 47% from $19,000 in 1994 to $28,000 in
1995, due to higher borrowing levels and higher interest rates in 1995.
NET LOSS. Registrant reported a net loss from operations of $249,000
for the quarter ended June 30, 1995, as compared to a net loss of $114,000 in
the second quarter of 1994. The difference can be attributed primarily to the
reduction in revenues in the second quarter of 1995.
CORPORATE LIQUIDITY. During the first half 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 half 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 current obligations on a
timely basis.
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COMPARISON OF SIX MONTHS ENDED JUNE 30, 1995
WITH THE SIX MONTHS ENDED JUNE 30, 1994
SALES. Net revenues for the six months ended June 30, 1995, totaled
$1,408,000, a decrease of 32% from the total of $2,069,000 for the same period
of 1994. Gross margins remained stable from 37% in 1994 to 37% in 1995.
EXPENSES. Selling and administrative expenses decreased 18% from
$706,000 in the first six months of 1994, to $579,000 in the first six months
of 1995. The decrease was due primarily to a reduction in the number of sales
and administrative personnel during the first six months of 1995. Research
and development expenses increased 49% from $142,000 in 1994 to $211,000 in
1995, due primarily to an increase in personnel during the first six months
and a higher level of spending on engineering prototype materials. Interest
expense increased 28% from $39,000 during the first six months of 1994 to
$50,000 in the first six months of 1995. This increase can be attributed to
higher borrowing levels and higher interest rates in 1995.
NET LOSS. Registrant reported a net loss of $320,000 for the first six
months of 1995, as compared to a net loss of $118,000 in the first six months
of 1994. The difference can be attributed primarily to the reduction in
revenues in the first six months of 1995.
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PART II OTHER INFORMATION
ITEM 5
1. Robert Brandenberg resigned as Vice President of Sales and Marketing on
June 30, 1995.
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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: August 11, 1995 ASTROCOM CORPORATION
(Registrant)
By:S. Albert D. Hanser
S. Albert D. Hanser, President
By:Brien W. Johnson
Brien W. Johnson,
Vice President of Finance
