SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-KSB
Annual Report Under Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the fiscal year ended Commission file
December 31, 1995 number O-8482
ASTROCOM CORPORATION
(Name of small business issuer in its charter)
Minnesota 41-0946755
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2700 Summer Street N.E., Minneapolis, Minnesota 55413-2820
(Address of principal executive offices) (zip code)
Issuer's telephone number, including area code: (612) 378-7800
Securities registered pursuant to Section 12(g) of the Act:
Shares of Common Stock, par value $.10 per share
(Title of Class)
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, and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
Check if disclosure of delinquent filers pursuant to Item 405 of Regulation S-B
is not contained herein, and will not be contained, to the best of registrant's
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB.
[X]
Issuer's revenues for its most recent fiscal year were $3,178,000.
As of March 14, 1996, the aggregate market value of the voting stock held by
non-affiliates was $3,284,060, computed by reference to the average of the bid
and asked prices on such date, as reported in the over-the-counter market.
As of March 14, 1996, there were outstanding 6,015,702 shares of the
registrant's common stock, par value $.10 per share, its only class of stock.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the annual report to shareholders for the year ended
December 31, 1995, are incorporated by reference into Part II.
Portions of the proxy statement for the annual meeting of shareholders to
be held on May 23, 1996, are incorporated by reference into Part III.
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
(a) BUSINESS DEVELOPMENT.
Astrocom Corporation ("Astrocom") was incorporated in the State of
Minnesota on September 28, 1968. Astrocom has been engaged in the design,
development, manufacture, assembly and sale of electronic products used for
data communications since it commenced operations in 1968.
4300 Peavey Road Corporation, a wholly-owned, inactive subsidiary of
Astrocom, was formerly engaged in the manufacture and sale of printed circuit
boards.
As used in this Form 10-KSB report, the term "registrant" shall refer
to Astrocom Corporation and its wholly-owned subsidiary as a single entity,
unless the context indicates otherwise.
(b) BUSINESS OF REGISTRANT.
ELECTRONIC PRODUCTS. Registrant develops, manufactures, markets and
services electronic devices which address key areas of wide area data
communication networks. Registrant's products can be generally placed in the
following product categories: T1 and Fractional T1 CSU/DSU's, 56/64K bps DDS
CSU/DSU's, ISDN Terminal Adapters and Time Division Multiplexers (TDM). These
products contain all the features and functionality of their traditional
counterparts combined with application specific added value features which
specifically address the requirements of the Internet, Video Conferencing and
LAN Connect markets. All registrant's products are backed by a 5-year warranty
and support with their signature Customer Service program which provides 7 days
a week, 24 hours a day technical support.
Registrant's customers include end-users, integrators, distribution
end-users, integrators, distributors and original equipment manufacturers. Two
purchasers of registrant's products each accounted for more than 10% of
registrant's total net revenues during 1995.
The sales activities for registrant's electronic products are carried on
by three regional sales managers working through a network of approximately 40
domestic and approximately 15 international distributors who buy the products
for resale. Distributors employ sales people who contact customers and
prospects in principal areas of the United States and foreign markets.
Registrant provides marketing support through participation in selected
industry trade shows, through advertising in leading data communication
magazines and through the use of direct mail campaigns. Registrant has
international distributors in Europe, Canada and the Far East.
PRINTED CIRCUIT BOARDS. Registrant's wholly-owned subsidiary, Circuit
Board One, Inc. (since renamed 4300 Peavey Road Corporation), manufactured
printed circuit boards for registrant's use and for sale to outside customers
until the sale of its business and substantially all of its assets on May 29,
1990. Since that time, the subsidiary has been inactive.
MANUFACTURING. In 1995, registrant subcontracted over 95% of its
manufacturing operations to outside organizations specializing in
manufacturing. Registrant believes that there are several outside
organizations who could provide the specialized manufacturing services required
by registrant.
SOURCE AND AVAILABILITY OF MATERIALS. The outside organizations with
which registrant subcontracts to do its manufacturing purchase the necessary
components and raw materials. Registrant purchases a limited amount of
components and raw materials from an assortment of suppliers, manufacturers
and distributors throughout the United States. Registrant believes that there
are several sources of supply for the required components and raw materials.
PATENTS. Registrant has no patents, significant trademarks, exclusive
licenses, franchises or concessions which are of material importance to its
business.
BACKLOGS AND TURN-OVER. The backlog of unfilled orders for electronic
products as of March 15, 1996, was approximately $200,000, as compared to
approximately $150,000 on March 15, 1995. In addition to the respective
backlogs of unfilled orders on March 15, 1996, and March 15, 1995, registrant
also anticipated receiving lease revenues of $4,000 under existing leases
during each of the ensuing 12-month periods. Registrant normally fills its
orders for electronic products within ten days after receipt. Accordingly, the
backlog and anticipated lease revenue figures are not indicative of future
sales. There is no significant seasonal aspect to the backlog for electronic
products.
GOVERNMENT SALES. Registrant has for several years sold and leased
electronic products to various United States government agencies. Revenues
received from such sales and leases totaled approximately $12,455 in 1995 and
$15,000 in 1994.
COMPETITION. The business of registrant is highly competitive. Price
competition and service are the most significant features of the market in
which registrant competes. Registrant competes on a nationwide basis with many
other firms. Almost all of its competitors are larger and financially stronger
than registrant, including IBM. Management believes that registrant accounts
for only a very small portion of the respective national and local markets.
RESEARCH AND DEVELOPMENT. Registrant spent $312,000 in 1994 and $442,000
in 1995 for research and development.
Registrant deducts internal research and development costs as items of
expense as they occur.
Registrant recognizes that the sale of electronic products will require
continuous development of new products and refinement of established products.
GOVERNMENT REGULATION. Some of registrant's electronic products are used
in conjunction with the telephone network. Existing Federal Communications
Commission (FCC) regulations and local tariffs allow such products to be
interconnected with the telephone network. Certain of the products marketed by
registrant have been registered with the FCC and management believes they meet
all applicable FCC standards. Restrictive changes in interstate regulation (FCC
jurisdiction) or intrastate tariffs (state regulatory agency jurisdiction)
could limit the uses and hence the marketability of some of registrant's
products.
ENVIRONMENTAL ISSUES. Management believes that compliance with federal,
state and local provisions which have been enacted or adopted regulating the
discharge of materials in the environment or otherwise relating to the
protection of the environment should have no material effect upon the capital
expenditures, earnings and competitive position of registrant's operations.
EMPLOYEES. As of March 15, 1996, registrant had a total of 20 employees,
which includes four officers, eight technical and marketing employees, three
clerical employees and five production employees. Registrant's inactive
wholly-owned subsidiary has no employees.
No employees are currently represented by labor organizations and there
are no collective bargaining agreements. Registrant provides paid holidays and
vacations. In addition, registrant provides and partially funds group medical,
dental and life insurance.
FOREIGN OPERATIONS. Approximately 10% and 21% of registrant's revenues
from continuing operations were derived from customers in foreign countries in
1995 and 1994, respectively.
SALE OF SUBSIDIARY AND LEASE SETTLEMENT COSTS. On May 29, 1990,
registrant's wholly-owned subsidiary sold its business and substantially all of
its assets to Visi-Tour Vision, Inc. (subsequently renamed Circuit Board One,
Inc.). As a result of that transaction, all of the subsidiary's right, title
and interest in a real estate lease and various equipment leases were assigned
to Circuit Board One, Inc., but registrant remained contingently liable to the
respective lessors in the event of default by Circuit Board One, Inc. On
June 24, 1991, Circuit Board One, Inc. filed for protection under Chapter 11 of
the Bankruptcy Code. On July 28, l992, a plan of reorganization proposed by
Circuit Board One, Inc. was approved by the Bankruptcy Court. Circuit Board
One, Inc. ceased operations on October 8, l992.
The real estate lease assigned to Circuit Board One, Inc. covered a 29,867
square foot office, manufacturing and warehouse facility at 4300 Peavey Road,
Chaska, Minnesota. Registrant's guaranty of the lease remained in effect after
the assignment to Circuit Board One, Inc. After Circuit Board One, Inc. ceased
operations on October 8, 1992, the landlord asserted a claim against
registrant. This matter was settled during 1993, and the landlord and the
registrant agreed upon a settlement payment schedule. Registrant continues to
make payments pursuant to such payment schedule. See Note 4 of Notes to
Financial Statements.
Circuit Board One, Inc. assumed the obligations under a master equipment
lease (and six supplements thereto) between registrant and Norwest Equipment
Finance, Inc. Registrant was the lessee of the equipment, but the equipment
had been used by its wholly-owned subsidiary prior to the sale of the business
and assets of the subsidiary to Circuit Board One, Inc. Registrant was not
released from its obligations under the lease at the time of the assignment to
Circuit Board One, Inc. Circuit Board One, Inc. was in default under the
terms of the lease at the time it ceased operations. The lessor and the
registrant subsequently settled and agreed upon a payment schedule.
Registrant made its final payment in 1995. See Note 4 of Notes to Financial
Statements.
Circuit Board One, Inc. also assumed the obligations under certain
equipment leases entered into during 1989 by Paccom Leasing Corporation with
registrant's wholly-owned subsidiary. Registrant's guaranty of the leases
remained in effect after the assignment to Circuit Board One, Inc. On
November 13, 1991, Paccom Leasing Corporation commenced an action against
registrant following default by Circuit Board One, Inc. The lessor and
registrant subsequently settled and agreed upon a payment schedule.
Registrant made its final payment in 1995. See Note 4 of Notes to Financial
Statements.
TRANSACTIONS WITH HANROW FINANCIAL GROUP, LTD. On March 15, 1991,
registrant and Hanrow Financial Group, Ltd. ("Investor") entered into a
Purchase Agreement ("Agreement") pursuant to which Investor agreed to purchase
654,545 shares of common stock of registrant at $.55 per share, a $360,000
five year Subordinated Note bearing interest at 16% per annum and secured by a
second security position in all assets of registrant, and a Warrant enabling
Investor to purchase 180,000 shares of the common stock of registrant at $1.00
per share.
On March 15, 1991, registrant delivered to Hanrow Capital Fund Five, a
Minnesota limited partnership, the assignee of Investor, a certificate for
654,545 shares of common stock in exchange for payment of $360,000. On
April 5, 1991, registrant delivered the Subordinated Note and Warrant in
exchange for payment of an additional $360,000.
On April 5, 1992, the Subordinated Note was reduced by $60,000 in exchange
for 200,000 shares of common stock. Registrant also issued a Warrant enabling
Hanrow Capital Fund Five to purchase 50,000 shares of the common stock of
registrant at $.35 per share for a period of five years and the interest rate
on the remaining $300,000 subordinated debt balance was reduced to 13%.
On June 3, 1993, registrant borrowed $33,000 from Hanrow Capital Fund
Five. On June 30, 1993, Hanrow Capital Fund Five received 110,000 shares of
the common stock of registrant at $.30 per share in exchange for conversion of
the $33,000 loan. At that time, Hanrow Capital Fund Five also received an
additional 365,833 shares of the common stock of registrant at $.30 per share
in exchange for a $100,000 reduction in the Subordinated Note and conversion
of the interest payment in the amount of $9,750 to be owing to it by
registrant as of July 1, 1993.
On June 16, 1993, registrant issued a Warrant enabling Investor to
purchase 50,000 shares of the common stock of registrant at $.30 per share for
a period of five years. Registrant delivered the Warrant in consideration of
financial and management advisory services provided to registrant by Investor.
On June 30, 1994, Hanrow Capital Fund Five received 13,000 shares of the
common stock of registrant at $.50 per share in payment of the interest in the
amount of $6,500 to be owing to it by registrant as of July 1, 1994.
In August and September 1994, registrant borrowed an additional $65,785
from Hanrow Capital Fund X. On December 22, 1994, registrant issued a
Convertible Debenture covering the loaned amount. Said Convertible Debenture
was originally due on December 31, 1995, but the due date was subsequently
extended to June 30, 1996. The Convertible Debenture provides for interest at
13% per annum, payable monthly commencing January 31, 1995. Pursuant to the
Debenture, Hanrow Capital Fund X has the right to convert the principal amount
of the Debenture into shares of the common stock of registrant at $.25 per
share at any time between July 1, 1995 and the due date. On December 22,
1994, registrant also issued a Warrant enabling Hanrow Capital Fund X to
purchase 131,570 shares of the common stock of registrant at $.50 per share
from December 22, 1994 through December 31, 1999.
On March 15, 1995, registrant borrowed an additional $35,000 from Hanrow
Capital Fund X. A Convertible Debenture covering the additional loaned
amount, and containing the same terms and conditions as the
December 22, 1994 Convertible Debenture, was issued by registrant. The due
date of this Convertible Debenture was also subsequently extended to June 30,
1996. Registrant also issued a Warrant enabling Hanrow Capital Fund X to
purchase 70,000 shares of the common stock of registrant at $.50 per share from
March 15, 1995 through December 31, 1999.
The March 15, 1991 Agreement and related Security Agreement contained
various covenants relating to registrant's operations and financial condition.
From time to time in 1992, 1993, 1994 and 1995, registrant was in violation
of several of these covenants. By letter dated March 27, 1992, Investor waived
registrant's breach of covenants for the period ending December 31, 1991 and
agreed to modify various covenants for 1992. Investor delivered a First
Amendment to Purchase Agreement, Subordinated Promissory Note and Security
Agreement, dated March 26, 1992, setting forth the modifications to the
covenants. Investor waived registrant's breach of certain covenants for the
periods ending December 31, 1992, December 31, 1993 and December 31, 1994. By
letter dated March 18, 1996, Investor waived registrant's breach of certain
covenants for the period ending December 31, 1995. The letters do not modify
Investor's ability to declare registrant in default if registrant fails to
achieve the financial goals set forth in the Agreement and related Security
Agreement in the future.
On January 7, l993, registrant and Hanrow Business Finance Corp. ("HBF")
entered into a Factoring Agreement pursuant to which HBF agreed to purchase
certain international accounts receivable at 80% of face value. Of the funds
to be advanced to registrant, 5% will be retained as a factoring fee by HBF.
If any account purchased by HBF is not paid within 120 days of billing, HBF
may demand that registrant repurchase the unpaid account. In any event, HBF
will retain the factoring fee.
SEVERANCE LOAN AND SALE OF ADDITIONAL SHARES. On November 18, 1994,
registrant borrowed $66,000 from H. Leigh Severance, a major shareholder of
registrant, and issued a Convertible Debenture covering such amount. Said
Convertible Debenture provided for interest at 13% per annum, payable
quarterly commencing March 31, 1995. Pursuant to the Debenture, Mr. Severance
converted the entire principal amount of the Debenture into shares of the
common stock of registrant at $.25 per share on June 30, 1995. Upon such
conversion, Mr. Severance received a Warrant exercisable from the date of
conversion through December 31, 1999, whereby he is entitled to purchase, at
$.50 per share, one share of common stock of registrant for each two shares he
received upon conversion of the principal amount of the Debenture.
In December 1995, six investors, including Hanrow Capital Fund V and
Hanrow Financial Group, Ltd., purchased an aggregate 756,666 shares of common
stock of registrant at $.30 per share.
ITEM 2. DESCRIPTION OF PROPERTY.
ST. PAUL PROPERTIES. On June 1, 1992, registrant sold and assigned to
The Crepeau Company ("Crepeau") all rights, duties and liabilities registrant
had under a lease from the Port Authority which covered approximately 33,600
square feet of office and manufacturing space and 165,258 square feet of land
at 120 West Plato Boulevard, St. Paul, Minnesota, in the St. Paul Port
Authority's Riverview Industrial Area West. The lease from the Port Authority
runs through August 31, 2007. Registrant remains contingently liable to the
Port Authority in the event that Crepeau defaults under the terms of the
lease.
Registrant leases from the St. Paul Port Authority 81,568 square feet of
undeveloped land. The lease runs through August 31, 2007 and provides for
rental payments of $626 per month. On August 16, 1993, registrant subleased
said undeveloped land to Rutzick-Sheehy Office Center, a Minnesota general
partnership. The sublease runs through August 31, 2007, and provides for
payments of $626 per month during the entire term of the sublease. The
sublease further provides for payments of an additional $870 per month for a
12 month period which ended July 16, 1994. Subtenant also agreed to pay all
taxes, special assessments and other charges and expenses required to be paid
by registrant pursuant to its lease with the Port Authority.
On March 5, l993, registrant entered into a Lease Agreement with Summer
Business Center Partnership ("Summer") pursuant to which registrant leases
approximately 17,524 square feet of square feet of office and manufacturing
space at 2700 Summer Street NE, Minneapolis, Minnesota. The lease runs from
April 9, l993, through March 31, l999, and provides for escalating monthly
rental payments over the term of the lease, with registrant to pay all taxes
and insurance and utility, maintenance and other costs.
On February 21, 1995, registrant and Summer entered into an Amendment to
Lease providing that effective March 1, 1995, the leased premises would be
reduced by 2,262 square feet and redefined to be 15,262 square feet of office
and manufacturing space. The Amendment provides for rental payments of
$6,359.17 per month for the months of March 1995 through March 1996 and
$6,995.08 per month for the months of April 1996 through March 1999.
ITEM 3. LEGAL PROCEEDINGS.
On July 27, 1983, the Board of the Minnesota Pollution Control Agency
found registrant and 13 other corporations to be responsible persons under the
Minnesota Superfund Act and thereby secondarily liable for the cleanup of
hazardous wastes given to Ecolotech and Brian Carriere. Ecolotech collected
such waste materials from registrant during the period 1973 to 1978. On
January 25, 1984, registrant and the 13 other corporations entered into an
agreement to share the costs of cleanup and litigation in proportion to the
respective volumes of waste materials given by each to Ecolotech. As of
March 15, 1996, registrant had paid approximately $171,000 pursuant to the
agreement, none of which was paid during 1995. The cleanup was completed on
February 1, 1986. During February, 1987, a judgment was obtained in favor of
registrant and the 13 other corporations against Carriere Properties and
others. No estimate can be given as to the collectibility of said judgment.
Registrant believes that any costs or liabilities that it may incur in
connection with any latent problems will not have a material effect on the
financial condition of registrant.
In June 1988, registrant was informed by Mibco, the owner and lessor of
the Minnetonka facility where registrant's wholly-owned subsidiary was located
until March 6, 1989, that there were soil and groundwater contamination
problems at the facility. There currently appear to be seven companies
(including Mibco) which are potentially responsible parties. Registrant's
alleged involvement occurred during the period March 1972 through September
1973. The matter has been reported to the Minnesota Pollution Control Agency
(MPCA) which has made a preliminary assessment, conducted a followup site
investigation and included of the site on Minnesota's permanent list of
priorities. Registrant will participate in proceedings initiated by the MPCA.
Registrant believes that any costs or liabilities that it may incur in
connection with the proceedings before the MPCA will not have a material effect
on the financial condition of registrant.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS.
Registrant did not submit any matter to a vote of securities holders
during the last quarter of the fiscal year ended December 31, 1995.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The information regarding Market and Dividend Data included in
registrant's annual report to shareholders for the year ended December 31,
1995, is incorporated herein by reference.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
Management's Discussion and Analysis of Financial Condition and Results
of Operations included in registrant's annual report to shareholders for the
year ended December 31, 1995, are incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS.
The financial statements included in registrant's annual report to
shareholders for the year ended December 31, 1995, are incorporated herein by
reference.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
No disagreements with accountants have occurred within the two-year period
ended December 31, 1995, which required reporting on Form 8-K. Registrant
did, however, report a change in its certifying accountants on its Form 8-K
dated August 25, 1994.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
The information required by Item 9 is incorporated herein by reference
to the proxy statement to be filed within 120 days after year end.
ITEM 10. EXECUTIVE COMPENSATION.
The information required by Item 10 is incorporated herein by reference
to the proxy statement to be filed within 120 days after year end.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by Item 11 is incorporated herein by reference to
the proxy statement to be filed within 120 days after year end.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by Item 12 is incorporated herein by reference
to the proxy statement to be filed within 120 days after year end.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Listing of Exhibits:
3(i) Restated Articles of Incorporation of registrant
[incorporated by reference to Exhibit 19 to Form 10-Q for
the quarter ended June 30, 1984 (File No.0-8482)].
3(ii) Restated Bylaws of registrant [incorporated by reference
to Exhibit 3(ii) to Form 10-K for the year ended
December 31, 1984 (File No. 0-8482)].
3(iii) Amendment to Restated Bylaws of registrant adopted by the
directors on June 25, 1985 [incorporated by reference to
Exhibit 3(iii) to Form 10-K for the year ended December 31,
1986 (File No. 0-8482)].
3(iv) Amendment to Restated Articles of Incorporation of
registrant approved by shareholders at May 20, 1987 meeting
[incorporated by reference to Exhibit 3(iv) to Form 10-K
for the year ended December 31, 1987 (File No. 0-8482)].
3(v) Amendment to Restated Bylaws of registrant adopted by the
directors on February 21, 1988 [incorporated by reference
to Exhibit 3(iv) to Form 10-K for the year ended
December 31, 1988 (File 0-8482)].
3(vi) Amendment to Restated Bylaws of registrant adopted by the
directors on July 31, 1989 [incorporated by reference to
Exhibit 3(vi) to Form 10-K for the year ended December 31,
1989 (File 0-8482)].
10(i) 1988 Stock Option Plan of registrant as approved by
shareholders at May 25, 1988 meeting [incorporated by
reference to Exhibit 10(iv) to Form 10-K for the year ended
December 31, 1988 (File No. 0-8482)].
10(ii) Amendment to 1988 Stock Option Plan of registrant adopted
by the directors on October 17, 1988 [incorporated by
reference to Exhibit 10(v) to Form 10-K for the year ended
December 31, 1989 (File No. 0-8482)].
10(iii) Amendment to 1988 Stock Option Plan of registrant adopted
by the directors on January 25, 1996.
10(iv) Lease Agreement between registrant and Port Authority of
the City of St. Paul, dated September 1, 1977
[incorporated by reference to Exhibit 1 to Form 8-K Report
for September 27, 1977 (File No. 0-8482)].
10(v) Asset Sale Agreement between registrant's subsidiary,
Circuit Board One, Inc. and Visi-Tour Vision, Inc., dated
March 16, 1990 [incorporated by reference to Exhibit
10(viii) to Form 10-K Report for the year ended
December 31, 1989 (File No. 0-8482)].
10(vi) Agreement for Assignment and Assumption of Lease between
registrant and the Crepeau Company, dated January 16, 1992
[incorporated by reference to Exhibit 10(xi) to Form 10-K
Report for the year ended December 31, 1991 (File 0-8482)].
10(vii) Purchase Agreement between registrant and Hanrow Financial
Group, Ltd., dated March 15, 1991 [incorporated by
reference to Exhibit 10(x) to Form 10-K Report for the
year ended December 31, 1990 (File 0-8482)].
10(viii) Subordinated Promissory Note, Security Agreement and
Warrant, dated April 5, 1991, delivered to Hanrow Financial
Group, Ltd. [incorporated by reference to Exhibit 10(xiii)
to Form 10-K Report for the year ended December 31, 1991
(File 0-8482)].
10(ix) First Amendment to Purchase Agreement, Subordinated
Promissory Note and Security Agreement [incorporated by
reference to Exhibit 10(xv) to Form 10-K Report for the
year ended December 31, 1991 (File 0-8482)].
10(x) Lease Agreement between registrant and Summer Business
Center Partnership, dated March 5, 1993 [incorporated by
reference to Exhibit 10(xvi) to Form 10-KSB Report for the
year ended December 31, 1992 (File O-8482)].
10(xi) Factoring Agreement between registrant and Hanrow Business
Finance Corp., dated January 7, l993 [incorporated by
reference to Exhibit 10(xvii) to Form 10-KSB Report for the
year ended December 31, 1992 (File O-8482)].
10(xii) Sublease Agreement between registrant and Rutzick-Sheehy
Office Center, dated August 16, 1993 [incorporated by
reference to Exhibit 10(xiv) to Form 10-KSB Report for the
year ended December 31, 1993 (File O-8482)].
10(xiii) Warrant, dated June 16, 1993, delivered to Hanrow Financial
Group, Ltd. [incorporated by reference to Exhibit 10(xvi)
to Form 10-KSB Report for the year ended December 31, 1993
(File O-8482)].
10(xiv) Convertible Debenture and Warrant, dated December 22, 1994,
delivered to Hanrow Capital Fund X [incorporated by
reference to Exhibit 10(xix) to Form 10-KSB Report for the
year ended December 31, 1994 (File O-8482)].
10(xv) Warrant, dated June 30, 1995, delivered to H. Leigh
Severance.
10(xvi) Waiver letter dated March 18, 1996, from Hanrow Financial
Group, Ltd.
10(xvii) Amendment to Lease between registrant and Summer Business
Center Partnership, dated February 21, 1995 [incorporated
by reference to Exhibit 10(xxi) to Form 10-KSB Report for
the year ended December 31, 1994 (File O-8482)].
10(xviii) Letter from McGladrey & Pullen dated August 25, 1994,
regarding change in accountants [incorporated by reference
to Exhibit 1 to Form 8-K dated August 25, 1994 (File
O-8482)].
10(xix) Non-Employee Directors' Equity Compensation Plan to be
submitted to shareholders for approval at May 25, 1996
meeting.
13 Registrant's 1995 Annual Report to Shareholders.
22 List of registrant's subsidiaries.
23 Consent of Independent Auditors.
(b) Reports on Form 8-K filed in the fourth quarter of 1995:
No reports on Form 8-K were filed in the fourth quarter of 1995.
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
ASTROCOM CORPORATION
By: s/ S. Albert D. Hanser
S. Albert D. Hanser, President
and Chief Executive Officer
Dated: March 29, 1996.
By: s/ Brien W. Johnson
Brien W. Johnson, Principal
Financial Officer and Principal
Accounting Officer
In accordance with the Exchange Act, this report has been signed below by
the following persons, constituting a majority of the Board of Directors, on
behalf of the registrant and in the capacities and on the dates indicated.
Date
s/ S. Albert D. Hanser March 29, 1996
S. Albert D. Hanser, Director
s/ Dennis E. Evans March 29, 1996
Dennis E. Evans, Director
s/ Raymond F. Good March 29, 1996
Raymond F. Good, Director
s/ Roger V. Stageberg March 29, 1996
Roger V. Stageberg, Director
<PAGE>
Exhibit 10(iii) Amendment to 1988 Stock Option Plan
Exhibit 10(xv) Warrant, dated June 30, 1995, Delivered to H. Leigh
Severance
Exhibit 10(xvi) Waiver Letter dated March 18, 1996 from Hanrow Financial
Group, Ltd.
Exhibit 10(xix) Non-Employee Directors' Equity Compensation Plan
Exhibit 13 Registrant's 1995 Annual Report to Shareholders
Exhibit 22 List of registrant's subsidiaries
Exhibit 23 Consent of Independent Public Accountants
<PAGE>
Exhibit 10(iii)
AMENDMENT TO 1988 STOCK OPTION PLAN
RESOLVED, that the officers of the corporation are hereby authorized and
directed to prepare appropriate amendments to the 1988 Stock Option Plan of
Astrocom Corporation for presentation to the shareholders for approval at the
next meeting of the shareholders of the corporation, so as to amend the Plan
to increase the number of shares subject to the Plan from 1,000,000 shares to
1,500,000 shares; and that any action taken by the Board of Directors at its
meeting on October 19, 1995, is hereby amended to be consistent with this
resolution.
<PAGE>
Exhibit 10(xv)
WARRANT, DATED JUNE 30, 1995, DELIVERED TO
H. LEIGH SEVERANCE
WARRANT FOR PURCHASE OF COMMON STOCK
OF
ASTROCOM CORPORATION
(A Minnesota Corporation)
132,000 shares
This certifies that H. Leigh Severance (hereinafter the "holder"), is
entitled to purchase from Astrocom Corporation (hereinafter the "Company")
132,000 fully paid and nonassessable shares of Common Stock of the Company,
par value $.10 per share, pursuant to the terms and conditions hereinafter
set forth, at the price of $.50 per share.
1. The rights represented by this Warrant may be exercised at any time
from the date hereof through December 31, 1999 by the holder hereof, in whole
or in part (but not as to a fractional share of Common Stock), by the
surrender of this Warrant at the principal office of the Company and upon
payment to the Company by certified check or bank draft of the purchase price
for such shares as set forth above. The holder shall also execute and deliver
such agreements and representations concerning the holder's intention not to
distribute the Common Stock so obtained and such other matters as the Company
may reasonably request in order to permit issuance of the shares of Common
Stock pursuant to exemptions from registration under federal and state laws,
provided, however, that the unavailability of any such exemption shall not
affect the Company's obligation to issue shares of its Common Stock pursuant
hereto. Upon any exercise of the rights represented by this Warrant,
certificates for the shares of stock so purchased shall be delivered to the
holder hereof within a reasonable time, not exceeding fifteen (15) days, and,
unless this Warrant has expired, a new Warrant representing the number of
shares, if any, with respect to which this Warrant shall not then have been
exercised shall also be issued to the holder hereof within such time.
2. The Company covenants and agrees that all shares which may be issued
upon the exercise of the rights represented by this Warrant will, upon
issuance, be fully paid and nonassessable and free from all taxes, liens, and
charges with respect to the issuance thereof. The Company further covenants
and agrees that during the period within which the rights represented by this
Warrant may be exercised, the Company will at all times have authorized and
reserved for the purpose of issuance upon the exercise of the subscription
rights evidenced by this Warrant, a sufficient number of shares of its Common
Stock to provide for the exercise of the rights represented by this Warrant.
3. In the event that the Company shall, at any time prior to the
expiration date of this Warrant and prior to the exercise hereof: (a) declare
or pay to the holders of the Common
THIS WARRANT IS SUBJECT TO THE TERMS OF THE LEGEND SET FORTH ON THE
LAST PAGE
HEREOF.
Stock a dividend payable in any kind of shares of stock of the Company; or (b)
change or divide or otherwise reclassify its Common Stock into the same or a
different number of shares with or without par value, or into shares of any
class or classes; or (c) consolidate or merge with, or transfer its property
as an entirety or substantially as an entirety to, any other corporation;
then, upon the subsequent exercise of this Warrant, the holder hereof shall
receive for the exercise, such additional shares of stock of the Company, or
such reclassified shares of stock of the Company, or such shares or securities
of the Company or any other entity resulting from the occurrence of any such
event which he would have been entitled to receive had he exercised this
Warrant prior to the happening of any of the foregoing events.
4. The certificates representing the shares to be issued upon exercise
of the rights represented by this Warrant which have not been registered under
applicable federal and state laws will bear a legend substantially as follows:
"The securities represented by this
certificate have not been registered under
the Securities Act of 1933 or the securities
act of any state. The securities have been
acquired for investment and may not be sold,
transferred for value, pledged, hypothecated
or otherwise encumbered unless (1) pursuant
to an effective registration of them under
the Securities Act of 1933 and the applicable
securities act of any state, or (2) there is
presented to the corporation an opinion of
counsel acceptable to counsel for the corporation
to the effect that such registration is not
required."
By exercise of this Warrant the holder agrees to be bound by the terms of such
legend.
5. This Warrant shall not entitle the holder hereof to any voting rights
or other rights as a stockholder of the Company.
6. This Warrant shall not be transferable by the holder, other than by
Will or the laws of descent and distribution, and this Warrant shall be
exercisable, during holder's lifetime, only by holder.
7. In the event of the death of the holder prior to the expiration date
of this Warrant, and prior to its exercise, this Warrant shall be exercisable
within a period of one year after the date of death, but in no case later than
the expiration date of this Warrant, and then only by the executors
or administrators of the holder or by the persons to whom the holder's rights
shall pass by the holder's Will, or the laws of descent and distribution.
8. This Warrant is being executed and delivered in the State of
Minnesota, and this Warrant shall be construed in accordance with the laws of
such State.
9. This Warrant shall expire and be void unless exercised on or before
December 31, 1999.
WITNESS the signature of the Company's duly authorized officer as of the
30th day of June, 1995.
ASTROCOM CORPORATION
By /s S. Albert D. Hanser
S. Albert D. Hanser
Its President
THE WARRANT REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 ("THE ACT") OR UNDER APPLICABLE STATE LAWS. THE
WARRANT MAY NOT BE SOLD, TRANSFERRED, PLEDGED, OR HYPOTHECATED EXCEPT AS
PROVIDED ABOVE AND NO TRANSFER OF IT WILL BE MADE BY THE CORPORATION OR ITS
TRANSFER AGENT IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE
WARRANT UNDER THE ACT, AS AMENDED, A "NO ACTION" LETTER OF THE SECURITIES AND
EXCHANGE COMMISSION, OR AN OPINION OF COUNSEL ACCEPTABLE TO THE CORPORATION
THAT SUCH REGISTRATION IS NOT REQUIRED. FURTHERMORE THE WARRANT MAY NOT BE
SOLD, TRANSFERRED, PLEDGED, OR HYPOTHECATED EXCEPT AS PROVIDED ABOVE AND NO
TRANSFER OF IT WILL BE MADE BY THE CORPORATION OR ITS TRANSFER AGENT IN THE
ABSENCE OF AN OPINION OF COUNSEL ACCEPTABLE TO THE CORPORATION THAT SUCH
TRANSFER DOES NOT REQUIRE COMPLIANCE WITH APPLICABLE STATE LAW OR THAT SUCH
COMPLIANCE HAS BEEN EFFECTED.
<PAGE>
Exhibit 10(xvi)
WAIVER LETTER DATED MARCH 18, 1996,
FROM HANROW FINANCIAL GROUP, LTD.
March 18, 1996
S. Albert D. Hanser
Astrocom Corporation
2700 Summer Street NE
Minneapolis, MN 55413
Dear Mr. Hanser:
This letter will serve as our waiver of the defaults of the covenants under the
Purchase Agreement dated March 15, 1991 and the Security Agreement dated
April 5, 1991. Specifically, this letter covers the following paragraphs and
items:
Purchase Agreement
a. Section 7.1 relating to the issuance of shares of stock of the Company
of any class for a purchase price less than $0.55 per share (subject to
appropriate adjustments) as specified in the Agreement.
b. Section 7.4 relating to the maintenance of the Company's capital base (as
defined) at an amount of $1,500,000 or more.
Security Agreement
a. Section 11f relating to the maintenance of shareholder equity of at least
$1,500,000.
b. Section 11g relating to the maintenance of ratio of outstanding
indebtedness to Capital Base of no greater than 1.8 to 1.0.
c. Section 11j relating to the maintenance as of the end of each quarter of
a working capital ratio of at least 1.5 to 1.0.
The violations of the covenants in Section 7.1 and 7.4 of the Purchase
Agreement and Sections 11f, 11g and 11j of the Security Agreement as of and for
the year ended December 31, 1995 will not be considered as events of default
at least through January 1, 1997. Further, we agree to waive compliance with
all of the above covenants at least through January 1, 1997.
Very truly yours,
s/ Dennis E. Evans
Dennis E. Evans
<PAGE>
Exhibit 10(xix)
NON-EMPLOYEE DIRECTORS' EQUITY COMPENSATION PLAN
ASTROCOM CORPORATION
NON-EMPLOYEE DIRECTORS' EQUITY COMPENSATION PLAN
1. PURPOSE. The purpose of this Non-Employee Directors' Equity
Compensation Plan (the "Plan") is to provide for the payment of directors'
fees payable for services rendered during the calendar years 1995, 1996 and
1997 by the non-employee directors of Astrocom Corporation (the "Company") in
Common Stock, $.10 par value, of the Company ("Common Stock") in order to
further align the interests of such directors with the shareholders of the
Company and thereby promote the long-term profits and growth of the Company.
2. DIRECTORS' FEES.
(a) Any individual duly elected or chosen as a director of the
Company who is not also an employee of the Company and who serves as a
director at any time during the calendar years 1995, 1996 and 1997 shall
be covered by this Plan.
(b) Commencing December 15, 1995, and on December 15 of each year
thereafter during the term of this Plan, the Company shall issue and
deliver to each individual serving as a non-employee director of the
Company at any time during the calendar year shares of Common Stock in
payment for his or her services as a director of the Company. A director
serving all 12 months of the calendar year shall be entitled to receive
15,000 shares of Common Stock in payment of director's fees for that
year. To the extent that a director dies, resigns, is not reelected or
otherwise fails to serve for all 12 months of the calendar year, the
number of shares of Common Stock issued and delivered to such director
will be pro rated based upon the number of actual months served during
the calendar year. To the extent that the application of the foregoing
may result in fractional shares, no fractional shares shall be issued by
the Company pursuant to this Plan.
(c) Shares issued pursuant to this Plan shall be fully paid,
nonassessable shares of Common Stock. The Company shall pay any and all
fees incurred in connection with the issuance of shares pursuant to this
Plan.
(d) It shall be a condition to the receipt of any shares that the
director make arrangements satisfactory to the Company for the payment of
any federal, state or local taxes required to be withheld with respect to
the issuance of shares of Common Stock pursuant to this Plan.
3. RESTRICTIONS ON TRANSFERS OF RIGHTS TO SHARES. No rights to shares
of Common Stock which are to be issued pursuant to this Plan shall be assigned,
pledged, hypothecated or otherwise transferred by a director or any other
person, voluntarily or involuntarily, other than (i) by will or by the laws of
descent and distributions, or (ii) pursuant to a domestic relations order
meeting the definition of a qualified domestic relations order under Section
206(d)(3)(B) of ERISA.
4. ADJUSTMENTS; REORGANIZATION; LIQUIDATION.
(a) In the event of any change in the outstanding shares of Common
Stock by reason of any stock dividend or split, recapitalization,
reclassification, merger, consolidation, combination or exchange of
shares, or other similar corporate change, then if the Board of Directors
shall determine, in its sole discretion, that such change necessarily or
equitably requires an adjustment in the number of shares to be granted
pursuant to this Plan, such adjustments shall be made by the Board of
Directors and shall be conclusive and binding for all purposes of this
Plan. No adjustment shall be made in connection with the issuance by the
Company of any warrants, rights or options to acquire additional shares
of Common Stock or of securities convertible into Common Stock.
(b) If the Company shall become a party to any corporate merger,
consolidation, major acquisition of property for stock, reorganization or
liquidation, the Board of Directors shall have power to make any
arrangement it deems advisable with respect to outstanding directors'
fees, which shall be binding for all purposes of this Plan.
(c) Neither this Plan nor the issuance of shares pursuant to this
Plan shall affect in any way the right or power of the Company to make
adjustments, reclassifications, reorganizations or changes of its capital
or business structure or to merge or to dissolve, liquidate or sell or
transfer all or any part of its business or assets, or issue additional
shares of Common Stock or options.
5. AMENDMENT AND TERMINATION. This Plan shall be limited to the
recognition of services performed by non-employee directors in the calendar
years 1995, 1996 and 1997, and shall terminate on December 31, 1997.
Provided, however, that the Board of Directors of the Company may alter
or amend this Plan from time to time or may terminate it in its entirety at
any time; provided, further, that no such action shall, without the consent of
a director, affect the rights in any shares to be issued to such director as
of the effective date of any such amendment or termination; and provided,
further, that without further approval by the shareholders of the Company no
such action shall (i) increase the total number of shares of Common Stock to
be issued under this Plan as specified in paragraph 5 (except that adjustments
and additions expressly authorized by paragraph 4 shall not be limited by this
clause (i)), (ii) change the provisions of paragraph 2 that specify the timing
of the issuance or the number of shares to be issued to a director, or (iii)
cause Rule 16b-3 to become inapplicable to this Plan.
6. SHARES SUBJECT TO PLAN. Subject to adjustment as provided in this
Plan, the total number of shares of Common Stock, $.10 par value, which may
be issued under this Plan shall be 250,000.
7. APPROVAL BY SHAREHOLDERS. The Plan shall be submitted for approval
by the shareholders of the Company. If such approval has not been obtained
by June 30, 1996, this Plan shall be nullified and all issuances of shares and
deliveries of certificates therefor shall be rescinded, and the non-employee
directors shall receive in cash the fair market value of any shares issued
pursuant to this Plan as of the date of issuance in payment of their directors'
fees for calendar year 1995.
8. NO CONTINUING RIGHT AS DIRECTOR. Neither the adoption or operation
of this Plan, nor any document describing or referring to this Plan, or any
part thereof, shall confer upon any director any right to continue as a
director of the Company.
9. EXPENSES OF PLAN. The expenses of administering this Plan shall be
borne by the Company.
10. INDEMNIFICATION. Each person who is or shall have been a member of
the Board of Directors shall be indemnified and held harmless by the Company
against and from any loss, cost, liability or expense that may be imposed upon
or reasonably incurred by such person in connection with or resulting from any
claim, action, suit or proceeding to which he or she may be a party or in which
he or she may be involved by reason of any action taken or failure to act under
this Plan and against and from any and all amounts paid by such person in
settlement thereof, with the Company's approval, or paid by such person in
satisfaction of a judgment in any such action, suit or proceeding against such
person, provided he or she shall give the Company an opportunity, at its own
expense, to handle and defend the same before he or she undertakes to handle
and defend it on his or her own behalf. The foregoing right of indemnification
shall not be exclusive of any other rights of indemnification to which such
person may be entitled under the Company's Articles of Incorporation or Bylaws,
as a matter of law, or otherwise, or any power that the Company may have to
indemnify or hold him or her harmless.
11. LEGEND. The Company shall place a legend on the certificates
representing the shares issued pursuant to this Plan. Such legend shall be
substantially in the following form:
THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. WITHOUT
SUCH REGISTRATION, SUCH SECURITIES MAY NOT BE SOLD, PLEDGED,
HYPOTHECATED OR OTHERWISE TRANSFERRED, EXCEPT UPON DELIVERY TO THE
COMPANY OF AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT
REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND APPLICABLE STATE SECURITIES LAWS, AND THE RULES AND
REGULATIONS PROMULGATED THEREUNDER.
12. GOVERNING LAW. The provisions of this Plan shall be governed by and
construed in accordance with the laws of the State of Minnesota.
13. EFFECTIVE DATE. The effective date of this Plan is as of
December 13, 1995, the date of its adoption by the Board of Directors of the
Company.
<PAGE>
Exhibit 13
REGISTRANT'S 1995
ANNUAL REPORT TO SHAREHOLDERS
ASTROCOM CORPORATION
1995 ANNUAL REPORT
2700 Summer Street N.E.
Minneapolis, Minnesota 55413-2820
(612) 378-7800
<PAGE>
TO OUR SHAREHOLDERS:
Measured in terms of progress, 1995 was a very positive year. People,
products and events punctuated that progress. In the past we have been known
as a quiet company doing the tough jobs. We are now ready to tell our story.
This was our 28th year and we have been producing communications technology
with installations throughout the world numbering in the hundreds of thousands.
We continue to dedicate ourselves to our mission - serving our worldwide
customers through the delivery and support of digital access communication
products that meet or surpass industry standards for performance, quality,
value, service and reliability.
This year we fell short of our financial objectives; nevertheless, this
was a year of finishing the process of putting the building blocks in place.
We narrowed our focus to the following key growing markets: (1) Internet
providers, (2) video conferencing, (3) telemedicine and (4) long distance
education. As the Internet has exploded, so has the demand for our digital
access products. This has provided a dramatic new dimension to our customer
profile. Yet we still serve our stable customer base and provide the
legendary customer service that has become a hallmark of Astrocom.
Astrocom was fortunate to have attracted T.J. Carter as Chief Operating
Officer. T.J. was the first degreed engineer at Digi International
(DigiBoard). He eventually became Director of Engineering. At Astrocom most
departments now report to him. He has made a dramatic difference.
Cheryl Olseth was promoted to Vice President of Sales & Marketing and she
has built a professional sales team. Our focus remains a "customer driven"
company delivering quality and reliable products. We owe this quality, and
our new products, the first in four years, to our excellent engineering team.
1995 saw a reduction in the operating loss over 1994. Although at
year-end we wrote off obsolete inventory with a one-time charge, resulting in
a loss of $1,085,000 or ($.22) per share compared to ($655,000) or ($.15) per
share for 1994. Revenues were $3,178,000 vs. $3,226,000 for 1994. Engineering
expenses continued to increase as we completed a family of new CSU/DSU's
(Channel Service Unit/Digital Service Unit).
The WANMaster, our newest CSU/DSU, is a new modular CSU/DSU that provides
a required interface between user data and/or video communications equipment
and telephone company (telco) T1 and fractional T1 services operating at up to
1.544 Mbps. It includes integrated network management support via SNMP and
Telnet. Additional user data ports, Ethernet port and a second optional T1
port for drop and insert, backup or data rerouting functions are field
upgradable.
We also introduced the WANMaster BR1 integrated T1, which provides a
required interface between user communications equipment and ISDN (Integrated
Systems Digital Network Service) operating as either two 64 kbps "B" channels,
or as a single channel up to 128 kbps. These two new products were introduced
at the January 1996 ComNet show. Positive market response and new revenues are
already being seen as this letter goes to press.
While we have narrowed our product line in the past few years, it is
very complete and includes (in addition to those mentioned above):
* NX1 CSU/DSU - Connects user data and/or video communications equipment
with telco T1 and fractional T1 services operating at 1.544 Mbps. Also
provides an optional DSX/DSI1 port for PBX drop and insert to combine
voice communications with data and/or video.
* NX6456 CSU/DSU - A multiplexer CSU/DSU that provides the same capabilities
as the NX1 described above; also permits combining up to four data or
video fractional T1 communication paths into a single T1 line. Provides
an optional DSX/DS1 port for PBX drop and insert to combine voice
communications on the same T1 line.
* 2300 CSU/DSU - Provides a required interface between the user
communications equipment and DDS operating at up to 56 kbps, with optional
support for IBM's NetView network management system.
* 2356 CSU/DSU - Provides a required interface between user communications
equipment and DDS operating at 56 kbps.
* 2364 CSU/DSU - Provides a required interface between user communications
equipment and DDS operating at 56 kbps and 64 kbps; also provides an
interface to Switched 56 service.
* ASIM ES 3 Multiplexer - Combines three data communications paths onto a
single composite transmission link. Typically used with a modem or
Astrocom 2356 or 2364 CSU/DSU for wide area networks.
* ASIM ES 7 Multiplexer - Combines seven data communications paths onto a
single composite transmission link. Typically used with a modem or
Astrocom 2356 or 2364 CSU/DSU for wide area networks.
Astrocom products are used by private enterprises, health care providers,
Internet service providers and subscribers, and government and educational
entities that require high speed digital communications links between
facilities. Astrocom CSU/DSUs function as the interface to high bandwidth
telco services for applications such as fast Internet access, telemedicine,
teleradiology, interactive distance learning, headquarters to branch office
data, voice and video transfer, broadcast television interviews, corporate
videoconferencing, and more. Astrocom multiplexers reduce telecommunication
costs by combining up to seven separate data paths on a single communication
line.
The positive impact of the Telecom Reform Legislation will create an
environment of increased opportunity for our telecommunications products.
Additional applications are being developed at an accelerated pace. These
emerging technologies are growing rapidly as is the use of T1 and fractional
T1. Astrocom is now well situated to take advantage of these markets and has
a line of products capable of serving these new and growing applications.
In an attempt to position Astrocom for success we have changed our
paradigm, reacting aggressively to change, developing state of the art
technology, effectively downsizing, outsourcing manufacturing, driving down
inventories, boldly reintroducing Astrocom's name in the trade and enhancing
our reputation for excellent service.
OUTLOOK FOR 1996
Our financial results in 1996 will be influenced by a number of
activities. These will include:
* Success of the WANMaster
* Introduction of WANMaster Jr.
* Acceptance of the WANMaster BR1
* Development and release of two other new products
* Continued growth of our basic product offerings
* Enhancement of operation profit margins
* Further penetration into the exploding Internet
In our quest to create shareholder value we recognize the necessity of
good financial performance, essentially measured in terms of cash flow, as is
sales growth, operating profit margins, investments in plant and equipment and
certainly how expenses are managed; however, future expectations also influence
market valuation. We are enthusiastic about the future as we build an
organization to meet the challenges of "Uniting the Digital Universe."
We thank you, our loyal shareholders, our committed employees and our
growing list of customers.
Very truly yours,
s/ S. Albert D. Hanser
S. Albert D. Hanser
Chairman and C.E.O.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
COMPARISON OF 1995 WITH 1994
OVERVIEW
Astrocom, a public company (O.T.C, ATCC), incorporated in 1968 had a beginning
strategy to develop, manufacture and distribute telecommunication products to
serve the short-haul communication market by providing line drivers and other
equipment for local connections (LANs) of computer and computer tenants. In
1989 the Company developed high speed digital access communications equipment
linking facilities (WAN). Astrocom's CSU/DSUs (Channel Service Unit/Digital
Service Unit) function as interface to high bandwidth Telco services for
application such as fast Internet access; telemedicine; teleradiology;
interactive distance learning; headquarters to branch office data; voice and
video transfer; broadcast television interviews; corporate video conferencing;
and more. The Company's multiplexers reduce telecommunication cost by
combining up to seven separate data paths onto a single communication line.
The Company's products are used by private enterprises, health care providers,
Internet service providers and subscribers, and government and educational
entities. The Company sells its products through a worldwide network of
distributors and dealers providing services to customers using computer
technology integration (CTI), Internet, videoconferencing, telemedicine, and
computer networking services and has hundreds of thousands of installations
throughout the world.
REVENUES for the twelve months ended December 31, 1995 were $3,178,000 compared
to $3,226,000 for the same period ended December 31, 1994. The decrease can
be attributed primarily to a price reduction from sales of the Company's NX
product line. Gross profits as a percentage of sales decreased 23% from
$1,012,000 in 1994 to $743,000 in 1995. This decrease was a result of a one
time write-off of $398,000 relating to obsolete and excess inventory. The
company's gross profit from operations without consideration for the one-time
charge increased 13% from $1,012,000 in 1994 to $1,141,000 in 1995. This
increase was the result of cost cutting relating to the outsourcing of the
Company's product lines.
SELLING AND ADMINISTRATIVE EXPENSES for the twelve months ended December 31,
1995 increased 2% from $1,260,000 in 1994 to $1,291,000 in 1995. The increase
relates primarily to the additional sales and marketing efforts associated
with the sales of the Company's 2356 and 2364 product lines. The Company
plans to continue to expand its overall sales and marketing efforts and,
therefore, expects that selling and marketing expenses will continue to
increase as a percentage of revenue in light of new product information in
1996.
RESEARCH AND DEVELOPMENT EXPENSES increased by 39% from $312,000 in 1994 to
$442,000 in 1995. The increase in spending relates to expanded efforts in
the development of the Company's newest product, the WANMaster. The Company
expects to increase its research and development costs in 1996. The increase
will include the hiring of additional personnel in 1996.
INTEREST EXPENSES were $112,000 for the period ending December 31, 1995 or a
32% increase compared to $85,000 for the same period in 1994. The increase
is attributable to the Company's increased levels of borrowing. The Company
expects that borrowing levels will remain consistent.
LIQUIDITY AND CAPITAL RESOURCES.
During 1995 the Company financed its operations through private placements of
its common stock, short term borrowing from its bank, and a short term note to
a shareholder. The Company raised approximately $227,000 in net proceeds from
the sale of common stock during fiscal 1995.
Capital expenditures from property and equipment were approximately $58,000 and
$80,000 for the years ended December 31, 1994 and 1995. The expenditures have
generally consisted of computer and design equipment. The Company had no fixed
commitments for capital equipment purchases for 1996, but expects to purchase
additional computer equipment during 1996.
In January and February of 1996 the Company borrowed an additional $90,000
from a shareholder, increasing the amount owed to that shareholder to a total
of $101,000. The note delivered to the shareholder will expire on June 30,
1996. The Company is in negotiation to extend the note over a period of time.
The bank line of credit allows the Company to borrow up to $550,000. The line
of credit expires on May 1, 1996, at which time the Company expects to renew
the credit relationship.
Based upon anticipated working capital requirements, the Company believes that
the borrowings under its line of credit will be sufficient to finance
operations through 1996.
<PAGE>
FINANCIAL STATEMENTS
ASTROCOM CORPORATION
DECEMBER 31, 1995 AND 1994
<PAGE>
Astrocom Corporation
Financial Statements
December 31, 1995 and 1994
CONTENTS
Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . 1
Audited Financial Statements
Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Statements of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Statements of Shareholders Equity (Deficit) . . . . . . . . . . . . . . . . 5
Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . 7
<PAGE>
Report of Independent Auditors
Board of Directors
Astrocom Corporation
We have audited the accompanying balance sheet of Astrocom Corporation as of
December 31, 1995, and the related statements of operations, shareholders'
equity (deficit) and cash flows for each of the two years in the period then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Astrocom Corporation at
December 31, 1995, and the results of its operations and its cash flows for
each of the two years in the period then ended, in conformity with generally
accepted accounting principles.
/s Ernst & Young LLP
Ernst & Young LLP
Minneapolis, Minnesota
March 1, 1996
<PAGE>
<TABLE>
<CAPTION>
Astrocom Corporation
Balance Sheet
December 31, 1995
<S> <C>
ASSETS
Current assets:
Cash $ 81,000
Accounts receivable, less allowance of $16,000 616,000
Inventories 287,000
Prepaid expenses 14,000
Total current assets 998,000
Buildings, machinery, and equipment:
Buildings 1,000
Machinery and equipment 1,202,000
Office furniture and fixtures 696,000
Total buildings, machinery and equipment 1,899,000
Accumulated depreciation (1,551,000)
348,000
Demonstration, sample and repair inventory 74,000
Other assets 9,000
Total assets $1,429,000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
<S> <C>
Current liabilities:
Notes payable to bank $ 566,000
Accounts payable 604,000
Accrued expenses 66,000
Current portion of lease settlement costs and other
current debt 109,000
Subordinated debt 200,000
Total current liabilities 1,545,000
Lease settlement costs 93,000
Long-term debt 0
Shareholders' equity (deficit):
Common stock, $.10 par value:
Authorized shares - 10,000,000
Issued and outstanding shares - 6,015,702 601,000
Additional paid-in capital 3,660,000
Accumulated deficit (4,470,000)
Total shareholders' equity (deficit) (209,000)
Total liabilities and shareholders' equity (deficit) $1,429,000
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Astrocom Corporation
Statements of Operations
Year ended December 31
1995 1994
<S> <C> <C>
Net sales $ 3,178,000 $3,226,000
Cost of products sold 2,037,000 2,214,000
Write-off of inventory 398,000 0
Gross profit 743,000 1,012,000
Selling and administrative expenses 1,274,000 1,260,000
Research and development expenses 442,000 312,000
Operating expenses 1,716,000 1,572,000
Operating loss (973,000) (560,000)
Other income (expense):
Interest expense (112,000) (85,000)
Other expense 0 (10,000)
Net loss $(1,085,000) $ (655,000)
Net loss per common share $(.21) $(.15)
Weighted average number of common shares
outstanding 5,053,995 4,245,888
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Astrocom Corporation
Statements of Shareholders' Equity (Deficit)
Additional
Common Stock Unissued Paid-In Accumulated
Shares Amount Stock Capital Deficit Total
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1993 4,173,209 $417,000 $1,000 $3,314,000 $(2,730,000) $1,002,000
Issuance of common stock for retirement
plan 9,314 1,000 (1,000) 0 0 0
Exercise of stock options 16,250 2,000 0 3,000 0 5,000
Issuance of common stock 596,000 60,000 0 89,000 0 149,000
Issuance of common stock for interest
payment 13,000 1,000 0 5,000 0 6,000
Issuance of common stock for Directors'
fees 47,000 5,000 0 22,000 0 27,000
Net loss 0 0 0 0 (655,000) (655,000)
Balance, December 31, 1994 4,854,773 486,000 0 3,433,000 (3,385,000) 534,000
Issuance of common stock for retirement
plan 14,013 1,000 0 4,000 0 5,000
Issuance of common stock 756,666 76,000 0 151,000 0 227,000
Issuance of common stock for debt
conversion and settlement of litigation 314,000 31,000 0 53,000 0 84,000
Issuance of common stock for services 30,000 3,000 0 15,000 0 18,000
Issuance of common stock for Directors'
fees 45,000 4,000 0 4,000 0 8,000
Exercise of stock options 1,250 0 0 0 0 0
Net loss 0 0 0 0 (1,085,000) (1,085,000)
Balance, December 31, 1995 6,015,702 $601,000 $ 0 $3,660,000 $(4,470,000) $(209,000)
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Astrocom Corporation
Statements of Cash Flows
YEAR ENDED DECEMBER 31
1995 1994
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(1,085,000) $(655,000)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 146,000 177,000
Issuance of stock for services 49,000 33,000
Loss on sale of assets 0 3,000
Changes in assets and liabilities:
Accounts receivable (148,000) 77,000
Inventories 447,000 265,000
Prepaid expenses 1,000 (6,000)
Demonstration, sample and repair inventory (2,000) (48,000)
Other assets (1,000) 20,000
Accounts payable 278,000 (20,000)
Accrued expenses 29,000 (58,000)
Net cash used in operating activities (286,000) (212,000)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of equipment (80,000) (58,000)
Net cash used in investing activities (80,000) (58,000)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of stock 227,000 154,000
Net proceeds (payments) on revolving credit
agreement 122,000 (15,000)
Proceeds from notes payable 90,000 131,000
Payments on notes payable and capital lease
obligations 0 (47,000)
Net cash provided by financing activities 439,000 223,000
Increase (decrease) in cash 73,000 (47,000)
Cash at beginning of year 8,000 55,000
Cash at end of year $ 81,000 $ 8,000
See accompanying notes.
</TABLE>
<PAGE>
Astrocom Corporation
Notes to Financial Statements
December 31, 1995
1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS AND OPERATIONS
Astrocom Corporation (the "Company") designs, manufactures, and markets
advanced digital communications equipment for the data transmission needs of
corporations and other large organizations. The principal markets for the
Company's products are the United States and Europe.
The Company's management believes that the current credit facilities available
to it from the bank, which it expects to be able to renew upon its expiration
in April 1996, along with increased sales levels and continued focus on
controlling costs, will enable the Company to achieve profitability. As a
result, the Company believes that cash flows from operations, along with
available working capital financing under a renewed credit agreement, will
be sufficient to meet its cash requirements through December 31, 1996. If
the Company were unable to renew its existing credit facilities, management
believes that it would be able to obtain a similar credit facility with
another financial institution. The Company's financial results could be
adversely affected if it was unable to obtain other working capital financing.
CASH AND CASH EQUIVALENTS
For purposes of reporting cash flows, the Company considers all investments
with a maturity of three months or less when purchased to be cash equivalents.
INVENTORIES
Inventories are stated at the lower of cost or market, determined on an average
cost basis.
BUILDINGS, MACHINERY AND EQUIPMENT
Buildings, machinery and equipment, including assets under capital leases,
are carried at cost and depreciated over the expected economic life of the
assets using the straight-line or double declining balance methods.
<PAGE>
Astrocom Corporation
Notes to Financial Statements (continued)
1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
DEMONSTRATION, SAMPLE AND REPAIR INVENTORY
This equipment is held for sale and is amortized over an estimated useful
life of five years.
INCOME TAXES
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to temporary differences between the financial
statement carrying amounts of assets and liabilities and their respective tax
bases.
STOCK-BASED COMPENSATION
The Company follows Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" (APB 25) and related interpretations in accounting
for its employee stock options. Under APB 25, when the exercise price of
employee stock options equals the market price of the underlying stock on the
date of grant, no compensation expense is recognized.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates.
NET LOSS PER SHARE
Net loss per share of common stock is computed by dividing net loss by the
weighted average number of common shares outstanding during the period.
<PAGE>
Astrocom Corporation
Notes to Financial Statements (continued)
2. INVENTORIES
Inventories consisted of the following:
1995
Purchased parts, materials and supplies $ 92,000
Finished products 210,000
Less obsolescence reserve (15,000)
$287,000
3. DEBT
Notes Payable to Bank:
The Company has entered into a line of credit agreement with a bank, whereby
the Company may borrow up to $550,000, depending upon levels of accounts
receivable, at 4% over the prime lending rate (12.5% at December 31, 1995)
with a minimum interest rate of 10%. The bank has been granted a security
interest in substantially all assets of the Company. The agreement expires
April 1, 1996, but may be withdrawn at the option of the bank. The outstanding
balance under the line of credit agreement was $516,000 at December 31, 1995.
In addition, the Company has a $50,000 note payable with the bank. The note
bears interest at 4% over the prime lending rate (12.5% at December 31, 1995)
with a minimum interest rate of 10%. The note is secured by substantially
all the assets of the Company. The note is due April 1, 1996, but may be
withdrawn at the option of the bank. Interest is payable monthly.
Lease Settlement Costs:
In conjunction with the Company's sale of certain operations in 1990, the
Company remained contingently liable for certain leases on equipment and real
estate. The purchasers of these operations went bankrupt and the Company was
obligated on the lease guarantees. During 1993, the Company agreed to terms
with the lessors and
<PAGE>
Astrocom Corporation
Notes to Financial Statements (continued)
3. DEBT (CONTINUED)
recorded the settlement at its present value of $125,000 using an 8% interest
rate. During 1995, the Company renegotiated the settlement agreement extending
the payment terms through 1998. Future settlement payments are as follows:
<TABLE>
<CAPTION>
<S> <C>
1996 $ 14,000
1997 36,000
1998 64,000
Total minimum settlement payments 114,000
Less amount representing interest 15,000
99,000
Less current portion 6,000
Long-term portion $ 93,000
</TABLE>
Subordinated Note:
The Company has a $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 the Company, and contains various covenants relating to the Company's
operations, financial condition and payment of dividends.
During 1994, the Company issued 13,000 shares of common stock to Hanrow in lieu
of a cash payment of $6,000 for accrued interest.
Convertible Debentures:
Effective November 18, 1994, the Company entered into a Debenture Purchase
Agreement (the Agreement) with a related party. Under the terms of the
Agreement, the related investor purchased $66,000 of the Company's unsecured
debentures. During 1995, the debenture was converted into 264,000 shares of
the Company's Common Stock in accordance with the Agreement. Upon conversion,
the holder received a warrant to purchase 132,000 common shares of the Company,
at the rate of $.50 per share. The warrant is exercisable through December 31,
1999.
<PAGE>
Astrocom Corporation
Notes to Financial Statements (continued)
3. DEBT (CONTINUED)
The Company has an unsecured note payable to Hanrow Capital Fund X for
$101,000. The note bears interest at 13% per annum and is due June 30, 1996.
Interest is payable monthly. In connection with this loan, Hanrow Capital
Fund X was granted a warrant to purchase 70,000 shares of the Company's Common
Stock at $.50 per share. The warrant is exercisable through December 31, 1999.
The Company has entered into a capital lease of office equipment. The remaining
balance of $2,000 will be paid during 1996.
In March 1996, the Company signed a letter of intent with the Hanrow Financial
Group to convert the $200,000 subordinated note into 200,000 shares of
preferred stock. The preferred stock is callable by the Company on April 5,
2000. The preferred stock bears a coupon rate of 6% payable quarterly and is
convertible into common stock at $.46 per share. In addition, Hanrow retains
the option to convert 50,000 shares of preferred stock into a $50,000 note
payable bearing an interest rate of 10% per year on January 1, 1997. Payments
would begin on January 15, 1997 and continue for twelve months. Also, in
March 1996, the Company converted the $101,000 note payable to Hanrow into a
new note bearing interest at 10% per year. The new note is payable in
thirty-six equal payments beginning July 1, 1996.
The carrying amounts of the Company's debt instruments in the balance sheet
at December 31, 1995, approximate their fair value.
4. OPERATING LEASES
The Company has a non-cancelable operating lease agreement for the building
that expires in March 1999. Rental expense included in operations for this
lease for the years ended December 31, 1995 and 1994 totaled $78,000 and
$88,000, respectively. Future minimum rentals under the operating lease
agreement are as follows:
<TABLE>
<CAPTION>
Years ending:
<S> <C>
1996 $ 82,000
1997 84,000
1998 84,000
1999 21,000
$271,000
</TABLE>
<PAGE>
Astrocom Corporation
Notes to Financial Statements (continued)
5. COMMON STOCK
In December 1994, the Company sold 596,000 shares of its common stock at $.25
per share, resulting in proceeds to the Company of $149,000. In connection
with the sale, the Company issued warrants to purchase 298,000 shares of common
stock at $.50 per share. The warrants are exercisable through December 1999.
In December 1995, the Company sold 756,666 shares of its common stock at $.30
per share, resulting in proceeds to the Company of $227,000.
6. STOCK OPTIONS AND WARRANTS
The Company's stock option plans authorize the granting of incentive and
non-qualified stock options. Incentive stock options may be granted to key
employees at prices equal to the fair market value at the date of grant.
Non-qualified stock options may be granted to employees, members of the Board
of Directors, consultants, and other persons who provide services to the
Company.
Non-qualified options may be granted at prices not less than 85% of the fair
market value at the date of grant.
A summary of outstanding options is as follows:
<TABLE>
<CAPTION>
Shares
Reserved Options Price Per
for Grant Outstanding Share
<S> <C> <C> <C>
Balance, December 31, 1993 274,500 765,500 $.25 to $.88
Granted (100,000) 100,000 .31 to .56
Terminated 279,250 (279,250) .25 to .75
Exercised 0 (16,250) .27
Balance, December 31, 1994 453,750 570,000 .27 to .88
Granted (677,500) 677,500 .25 to .50
Terminated 179,250 (179,250) .27 to .65
Exercised 0 (1,250) .27
Incr. in shares reserved for grant 1,000,000 0
Balance, December 31, 1995 955,500 1,067,000 $.25 to $.88
At December 31, 1995, 485,625 were exercisable.
</TABLE>
<PAGE>
Astrocom Corporation
Notes to Financial Statements (continued)
6. STOCK OPTIONS AND WARRANTS (CONTINUED)
WARRANTS
The Company has granted warrants for the purchase of shares of the Company's
common stock to directors and certain debt and equity holders. The warrants
are fully vested upon issuance and expire in varying amounts through 1999.
Information with respect to warrants granted as of December 31, 1995 and 1994
is summarized as follows:
<TABLE>
<CAPTION>
Warrant Price
Shares Per Share
<S> <C> <C>
Outstanding at December 31, 1993 635,000 $.30 to $1.00
Granted 456,070 .50 to .69
Outstanding at December 31, 1994 1,091,070 .30 to 1.00
Granted 202,000 .50
Outstanding at December 31, 1995 1,293,070 $.30 to $1.00
</TABLE>
7. INCOME TAXES
Deferred tax assets and liabilities consisted of the following:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Net operating loss carryforwards $3,064,000 $2,559,000
Tax credit carryforwards 130,000 125,000
Inventory 48,000 140,000
Other 39,000 48,000
Deferred tax assets 3,281,000 2,872,000
Depreciation 65,000 57,000
Deferred tax liability 65,000 57,000
3,216,000 2,815,000
Less valuation allowance (3,216,000) (2,815,000)
Net deferred tax assets $ 0 $ 0
</TABLE>
<PAGE>
Astrocom Corporation
Notes to Financial Statements (continued)
7. INCOME TAXES (CONTINUED)
The Company has net operating loss carryforwards and tax credit carryforwards
at December 31, 1995 of approximately $7,660,000 and $130,000 respectively,
which are available to reduce income taxes payable in future years. These
carryforwards and credits will expire at various times through the year 2010.
8. RETIREMENT PLAN
The Company has a Retirement Savings Plan for its employees which allows
participants to make contributions by salary reduction pursuant to section
401(k) of the Internal Revenue Code. The Company may match up to 25% of the
employees' contributions up to a maximum of 3% of their annual salary.
Employees vest immediately in their contribution and vest in the Company's
contribution after one year of service. The Company did not make a
contribution to the Plan in 1994. The Company's contribution to the plan in
1995 was 14,013 shares of common stock with fair market value of approximately
$5,000 at the date of contribution. Future matching contributions will be
determined annually by the Board of Directors.
9. EXPORT SALES AND MAJOR CUSTOMERS
The Company had export sales of $315,430 and $667,000 for the years ended
December 31, 1995 and 1994, respectively. The sales were primarily to
customers located in Europe.
The Company has one product family that accounted for approximately 58% and
31% of total sales for the years ended December 31, 1995 and 1994,
respectively.
For the year ended December 31, 1995, the Company had net sales to two
customers which totaled 38% of the total net sales for the year. The
receivable balance due from these customers was $319,650 at December 31, 1995.
For the year ended December 31, 1994, the Company had no customer which
accounted for 10% of its net sales.
10. SUPPLEMENTAL CASH FLOW INFORMATION
The Company made interest payments of $106,000 and $85,000 for the years ended
December 31, 1995 and 1994, respectively.
<PAGE>
CORPORATE DATA
OFFICERS:
S. Albert D. Hanser
Chairman, President and Chief Executive Officer
Thomas J. Carter
Chief Operating Officer
Cheryl Olseth
Vice President - Marketing & Sales
Brien W. Johnson
Vice President - Finance
DIRECTORS:
S. Albert D. Hanser
Raymond F. Good
Executive Consultant
Roger V. Stageberg
Attorney Law, Lommen, Nelson, Cole & Stageberg, P.A.
Dennis E. Evans
President and Chief Executive Officer, Hanrow Financial Group, Ltd.
SHAREHOLDER INFORMATION
AUDITORS
Ernst & Young L.L.P.
1400 Pillsbury Center
Minneapolis, MN 55402
LEGAL COUNSEL
Lommen, Nelson, Cole & Stageberg, P.A.
1800 IDS Center
80 South Eighth Street
Minneapolis, MN 55402
REGISTRAR/TRANSFER AGENT
Norwest Stock Transfer
161 N. Concord Exchange
South St. Paul, MN 55075
FACILITY
Corporate Office
2700 Summer Street NE
Minneapolis, MN 55413
ANNUAL MEETING
The annual meeting of Astrocom shareholders will be held at 3:00 p.m. May 23,
1996 at Astrocom Headquarters, 2700 Summer Street N.E., Minneapolis,
Minnesota. Shareholders and other interested parties are encouraged to attend.
FORM 10-KSB
A copy of the annual report filed with the Securities and Exchange Commission
of Form 10-KSB is available to shareholders, without charge, upon written
request to Brien W. Johnson, Astrocom Corporation, 2700 Summer Street N.E.,
Minneapolis, Minnesota 55413.
MARKET AND DIVIDEND DATA:
The Common Stock of Astrocom Corporation was traded during 1995 on the
over-the-counter Bulletin Board under the symbol ATCC. The high and low
selling prices for the Common Stock were as follows:
<TABLE>
<CAPTION>
1994 1995
High Low High Low
<S> <C> <C> <C> <C>
First Quarter 7/8 7/16 1/2 5/16
Second Quarter 9/16 3/8 7/8 1/4
Third Quarter 1/2 1/4 43/64 1/4
Fourth Quarter 3/4 1/4 7/16 1/8
</TABLE>
The Company has never paid a cash dividend and is restricted from paying
dividends pursuant to a subordinated debt agreement dated April 5, 1991. The
Company intends to retain any earnings to finance the development of its
business and, accordingly, does not anticipate payment of a cash dividend in
the foreseeable future.
On March 30, 1996 the Company had approximately 670 shareholders of record.
<PAGE>
Exhibit 22
LIST OF SUBSIDIARIES
State or Percentage
Territory of Ownership of
Name Incorporation Address Registrant
4300 Peavey Road Minnesota 2700 Summer Street 100%
Corporation Minneapolis, MN 55413
<PAGE>
Exhibit 23
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 299184) pertaining to the 1988 Incentive Stock Option Plan of
our report dated March 1, 1996, with respect to the financial statements
incorporated by reference in this Annual Report on Form 10-KSB of Astrocom
Corporation for the year ended December 31, 1995.
s/Ernst & Young LLP
Ernst & Young LLP
Minneapolis, Minnesota
March 29, 1996
