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 September 30, 1996, 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: 9,808,369
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<CAPTION>
ASTROCOM CORPORATION
STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended September 30
1996 1995
<S> <C> <C>
Net Revenues $ 802,000 $ 769,000
Cost of Products Sold 519,000 473,000
283,000 296,000
Expenses:
Selling and administrative expense 351,000 272,000
Research and development expense 79,000 113,000
Interest expense 29,000 29,000
Total Expenses 459,000 414,000
Income (loss) before taxes (176,000) (118,000)
Income tax 0 0
Net income (loss) $ (176,000) $(118,000)
Net income (loss) per share $ ( .02) $( .02)
Share used in the computation 7,058,798 5,170,023
See notes to financial statements
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<CAPTION>
STATEMENTS OF OPERATIONS (UNAUDITED)
ASTROCOM CORPORATION
Nine Months Ended Sept 30
1996 1995
<S> <C> <C>
Net Revenues $2,454,000 $2,177,000
Cost of Products Sold 1,570,000 1,361,000
884,000 816,000
Expenses:
Selling and administrative expense 970,000 851,000
Research and development expense 259,000 324,000
Interest expense 95,000 79,000
Total Expenses 1,324,000 1,254,000
Income (loss) before taxes (440,000) (438,000)
Income tax 0 0
Net income (loss) $ (440,000) $(438,000)
Net income (loss) per share $ ( .07) $ ( .09)
Share used in the computation 6,380,796 4,995,957
See notes to financial statements
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<CAPTION>
BALANCE SHEETS (UNAUDITED)
ASTROCOM CORPORATION
September 30, December 31,
1996 1995
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash $ 1,798,000 $ 81,000
Accounts receivable, less allowance
for doubtful accounts 442,000 616,000
Inventories 669,000 287,000
Prepaid expenses 31,000 14,000
TOTAL CURRENT ASSETS 2,940,000 998,000
OTHER ASSETS
Other 419,000 9,000
Demonstration, sample & repair inventory 74,000 74,000
PLANT AND EQUIPMENT
Machinery and equipment 2,021,000 1,899,000
Allowances for depreciation and
amortization (1,645,000) (1,551,000)
TOTAL PLANT AND EQUIPMENT 376,000 348,000
TOTAL ASSETS $3,809,000 $1,429,000
See notes to financial statements
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<CAPTION>
September 30, December 31,
1996 1995
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES
Notes payable $ 360,000 $ 566,000
Accounts payable 300,000 604,000
Employee compensation and other accrued 93,000 66,000
expenses
Current maturities of long-term debt
and capital leases 101,000 109,000
Subordinated Debt 0 200,000
TOTAL CURRENT LIABILITIES 854,000 1,545,000
LEASE-SETTLEMENT COSTS 95,000 93,000
Long-Term Debt 24,000 0
Total Stockholders' Equity (deficit)
Preferred Stock 200,000 0
Common Stock 933,000 601,000
Additional Paid in Capital 6,604,000 3,660,000
Accumulated Deficit (4,901,000) (4,470,000)
Total Stockholders' Equity 2,836,000 (209,000)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $3,809,000 $1,429,000
Note: The balance sheet at December 31, 1995 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
Nine Months Ended Sept 30
1996 1995
<S> <C> <C>
Operating Activities
Net income (loss) $ (440,000) $ (320,000)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation 94,000 66,000
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable (339,000) 105,000
Decrease (increase in Inventories and
prepaid expenses 277,000 61,000
Decrease (increase) in Accounts payable
and accrued expenses 94,000 80,000
Decrease (increase) in other assets (410,000) 0
Net cash provided by operating activities (1,258,000) (8,000)
INVESTING ACTIVITIES
Purchases of plant and equipment (122,000) (43,000)
Net cash (used in) provided by investing activities (122,000) (43,000)
Financing Activities
Proceeds from (payments) on long term debt 26,000 56,000
Proceeds from (payments) on bank notes (206,000) 10,000
Proceeds from sales of stocks 3,285,000 0
Payments on capital lease obligations (8,000) (21,000)
Net cash (used in) provided by financing activities 3,097,000 45,000
Increase (Decrease) in cash 1,717,000 (6,000)
Cash at beginning of quarter 81,000 8,000
Cash at end of quarter $1,798,000 $ 2,000
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NOTES TO FINANCIAL STATEMENTS
ASTROCOM CORPORATION
September 30, 1996
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, 1995.
NOTE B - TRANSACTION WITH HANROW FINANCIAL GROUP, LTD.
In March 1996, the registrant signed a letter of intent with the Hanrow
Financial Group to convert a $200,000 subordinated note into 200,000
shares of preferred stock. The preferred stock is callable by registrant
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 12 months.
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
estor 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 Third Quarters 1996 and 1995
SALES. Net revenues for the quarter ended September 30, 1996, totaled
$802,000, an increase of 4% from the total of $769,000 for the same quarter
of 1995. The increase was due to increased sales and marketing efforts.
The gross margin decreased from 38% in 1995 to 35% in 1996. The decrease can
be attributed to higher product costs in 1996.
EXPENSES. Selling and administrative expenses increased 29% from
$272,000 in the quarter ended September 30, 1995 to $351,000 in the quarter
ended September 30, 1996. Selling and administrative expenses increased due
to increased marketing efforts. Research and development expenses decreased
30% from $113,000 in 1995 to $79,000 in 1996. Research and development
expenses decreased due to a lower level of spending on engineering prototype
materials. Interest expenses remained the same, i.e. $29,000 in 1995
and 1996.
NET LOSS. Registrant reported a net loss from operations of $176,000
for the quarter ended September 30, 1996 as compared to a net loss of $118,000
in the third quarter of 1995. The difference can be attributed primarily to
increased selling and administrative expenses.
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COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 1996
WITH THE NINE MONTHS ENDED SEPTEMBER 30, 1995
SALES. Net revenues for the nine months ended September 30, 1996,
totaled $2,454,000, an increase of 13% from the total of $2,177,000 for the
same period of 1995. Gross margins decreased 1% from 37% in 1995 to 36%
in 1996.
EXPENSES. Selling and administrative expenses increased 14% from
$851,000 in the first nine monnths of 1995, to $970,000 in the first nine
months of 1996. The increase was due primarily to a larger number of sales
and administrative personnel during the first nine months of 1996. Research
and development expenses decreased 20% from $324,000 in 1995 to $259,000 in
1996, due primarily to a lower level of spending on engineering prototype
materials. Interest expense increased 20% from $79,000 during the first nine
months of 1995 to $95,000 in the first nine months of 1996. This increase
can be attributed to higher borrowing levels and higher interest rates in
1996.
NET LOSS. Registrant reported a net loss of $440,000 for the first
nine months of 1996, as compared to a net loss of $438,000 in the first nine
months of 1995. The difference can be attributed primarily to increased
selling and administrative expenses in the first nine months of 1996.
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PART II OTHER INFORMATION
ITEM 5
During the period from July 31, 1996 through October 25, 1996
registrant sold 3,501,000 Units (consisting of one share of registrant's
common stock and a redeemable warrant to purchase one share of registrant's
common stock) in a private placement to accredited investors, at a price
of $1.00 per Unit.
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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: November 14, 1996 ASTROCOM CORPORATION
(Registrant)
By:S. Albert D. Hanser
S. Albert D. Hanser, President
By:Brien W. Johnson
Brien W. Johnson,
Vice President of Finance
