SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-KSB/A
Annual Report Under Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the fiscal year ended Commission file
December 31, 1996 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
PART II
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
Astrocom, a public company (O.T.C., ATCC), was incorporated in 1968 to design,
manufacture and distribute telecommunications products to serve the
short-haul communication market by providing line drivers and other
equipment for local area networks (LANs). In 1989 the Company developed
high speed digital access communication equipment for wide area networks
(WANs). Astrocom's CSU/DSUs (Channel Service Unit/Digital Service Unit)
function to interface high handwidth telephone company services for such
applications as high-speed Internet access, video conferencing and
corporate internetworking. Astrocom multiplexers reduce telecommunications
costs by combining up to seven separate data paths into a single
communication line. Astrocom products are used by internet service
providers, telephone service providers, government and educational
entities, private enterprises and others. Astrocom sells its products
through a direct sales force, as well as an international network of
distributors, value-added resellers (VARs) and original equipment
manufacturers (OEMs).
COMPARISON OF 1996 WITH 1995
REVENUES increased 3.4% to $3,287,000 from $3,178,000 in 1995. This increase
in sales was primarily attributable to an increase in sales of the NX-1
product and the introduction of the T-series product in late 1996. Gross
profit (before inventory write-off) declined to $832,000 in 1996
from $1,141,000 in 1995. The gross margin declined from 35.9% in 1995
to 25.3% in 1996, because of a combination of competitive pricing pressure
and product cost issues. The Company hopes to increase the gross margin
in 1997 by reducing its manufacturing costs.
RESEARCH AND DEVELOPMENT EXPENSES increased by 0.7% from $442,000 in 1995 to
$445,000 in 1996. Astrocom substantially increased its research and
development efforts in the fourth quarter by recruiting several experienced
telecommunications engineers and accelerating development efforts on two
new product families, the T-1000 and SP100, which are full-featured T1 and
fractional T1 CSU/DSUs. Expenses related to product development and testing
also contributed to the increase. Astrocom will continue its focus on
product development in 1997, and expects that research and development
expenses will increase accordingly.
SELLING AND ADMINISTRATIVE EXPENSES increased by 23.5% from $1,274,000 in 1995
to $1,574,000 in 1996. A combination of increased sales and marketing
expenditures and additions to management accounted for the increases.
Sales and marketing efforts were enhanced by the addition of experienced
sales personnel, reorganization of the distributor network and increased
advertising and promotional activities. Increased administrative expense
stemmed from the addition of a chief operating officer and other senior
managers. These expenses are ongoing and will be in effect for all of
1997.
INTEREST EXPENSES were $97,000 for 1996, a 14% decrease from $112,000 in
1995, a result of lower levels of borrowing in the final months of 1996 due
to the Company's securities offering.
RESTATEMENT
Subsequent to December 31, 1996, the Company determined that its December 31,
1996 inventories were overstated. As a result, the Company has restated its
financial statements for the year ended December 31, 1996.
The restatement resulted in a decrease in inventories and an increase in
previously reported cost of products sold, net loss and accumulated
deficit by $218,000. Additionally, the net loss per common share has been
increased from $(.16) to $(.19).
As reported As restated
Loss applicable to common $(1,064,000) $(1,282,000)
stock
Net loss per common share $(.16) $(.19)
LIQUIDITY AND RESOURCES
During 1996 the Company financed its operations through a combination of
sources: a private placement of equity securities, usage of a bank line of
credit and short-term notes to certain shareholders. The Company raised
$3,046,000 in net proceeds from the sale of common stock in 1996. Sources
and uses of cash from operations were approximately neutral.
Capital expenditures for property and equipment were approximately $206,000 in
1996, up significantly from $80,000 in 1995. Large purchases in 1996
included an integrated manufacturing software package, a telephone system,
testing devices and computer design equipment. The Company expects to
purchase additional computer and design equipment in 1997.
The bank line of credit, as of March 31, 1997, allowed the Company to borrow up
to $600,000. The Company expects to renew the line relationship when it
expires on April 30, 1997.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern, which contemplates the realization of assets
and the satisfaction of liabilities in the normal course of business. The
Company has experienced operating losses in each of fiscal years 1994 through
1996, and has continued to operate at a loss through the six-months ended June
30, 1997, depleting most of its available capital. The Company is dependent on
future financing activities to continue as a going concern. Management is
evaluating financing alternatives; however, there can be no assurance that the
Company will be successful in obtaining financing on terms favorable to the
Company.
Because of uncertainties regarding the achievability of management's plans, no
assurance can be given about the Company's ability to continue in existence.
The financial statements do not include any adjustments to reflect the
possible future effects on the recoverability and classification of assets or
the amounts and classification of liabilities that may result from the
possible inability of the Company to continue as a going concern.
ITEM 7. FINANCIAL STATEMENTS
ASTROCOM CORPORATION
DECEMBER 31, 1996 AND 1995
<PAGE>
<PAGE>
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>
<PAGE>
Report of Independent Auditors
Board of Directors
Astrocom Corporation
We have audited the accompanying balance sheet of Astrocom
Corporation as of December 31, 1996, 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, 1996, 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.
The accompanying financial statements have been prepared assuming Astrocom
Corporation will continue as a going concern. As more fully described in Note
13, the Company has experienced continued operating losses in each of
fiscal years 1994 through 1996, and has continued to operate at a loss through
the six months ended June 30, 1997, depleting most of its available capital.
These conditions raise substantial doubt about the Company's ability
to continue as a going concern. The financial statements do not include any
adjustments to reflect the possible future effects on the recoverability and
classification of assets or the amounts and classification of liabilities that
may result from the outcome of this uncertainty.
/s/ Ernst & Young LLP
Minneapolis, Minnesota
March 6, 1997, except as to Notes 12 and 13 as to which the date is
August 29, 1997
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Astrocom Corporation
Balance Sheet
December 31, 1996
(Restated)
<S> <C>
Assets
Current assets:
Cash $ 979,000
Accounts receivable, less allowance of $15,000 594,000
Inventories 695,000
Prepaid expenses 32,000
Total current assets 2,300,000
Buildings, machinery, and equipment:
Buildings 5,000
Machinery and equipment 1,243,000
Office furniture and fixtures 830,000
Total buildings, machinery and equipment 2,078,000
Accumulated depreciation (1,638,000)
440,000
Demonstration, sample and repair inventory 55,000
Other assets 11,000
Total assets $2,806,000
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Liabilities and shareholders' equity
<S> <C>
Current liabilities:
Notes payable to bank $ 444,000
Accounts payable 367,000
Accrued expenses 69,000
Current portion of lease settlement costs 30,000
Total current liabilities 910,000
Lease settlement costs 62,000
Long-term debt 1,000
Shareholders' equity:
Preferred stock, $1.00 par value:
Authorized share - 5,000,000
Issued and outstanding shares - 200,000 200,000
Common stock, $.10 par value:
Authorized shares - 50,000,000
Issued and outstanding shares - 9,597,163 959,000
Additional paid-in capital 6,426,000
Accumulated deficit (5,752,000)
Total shareholders' equity 1,833,000
Total liabilities and shareholders' equity $2,806,000
See accompanying notes.
</TABLE>
<PAGE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Astrocom Corporation
Statements of Operations
Year ended December 31
1996 1995
(Restated)
<S> <C> <C>
Net sales $ 3,287,000 $ 3,178,000
Cost of products sold 2,455,000 2,037,000
Write-off of inventory 398,000
Gross profit 832,000 743,000
Selling and administrative expenses 1,574,000 1,274,000
Research and development expenses 445,000 442,000
Operating expenses 2,019,000 1,716,000
Operating loss (1,187,000) (973,000)
Other income (expense):
Interest income 11,000
Interest expense (97,000) (112,000)
Net loss (1,273,000) (1,085,000)
Less preferred stock dividends 9,000
Loss applicable to common stock $(1,282,000) $(1,085,000)
Net loss per common share $ (.19) $ (.21)
Weighted average number of common
shares outstanding 6,605,169 5,053,995
See accompanying notes.
</TABLE>
PAGE
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Astrocom Corporation
Statements of Shareholders' Equity (Deficit)
Additional
Preferred Common Stock Paid-In Accumulated
Stock Shares Amount Capital Deficit Total
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1994 $ $4,854,773 $ 486,000 $ 3,433,000 $ (3,385,000) $ 534,000
Issuance of common stock for
retirement plan 14,013 1,000 4,000 5,000
Issuance of common stock 756,666 76,000 151,000 227,000
Issuance of common stock for
debt conversion and
settlement of litigation 314,000 31,000 53,000 84,000
Issuance of common stock for
services 30,000 3,000 15,000 18,000
Issuance of common stock for
Directors' fees 45,000 4,000 4,000 8,000
Exercise of stock options 1,250
Net loss (1,085,00) (1,085,000)
Balance, December 31, 1995 6,015,702 601,000 3,660,000 (4,470,000) (209,000)
Issuance of common stock, net of
offering costs of $455,000 3,501,000 350,000 2,696,000 3,046,000
Issuance of preferred stock for
debt conversion 200,000 200,000
Issuance of common stock for
retirement plan 3,961 8,000 8,000
Issuance of common stock in
connection with the
exercise of warrants 31,500 3,000 9,000 12,000
Issuance of common stock for
Directors' fees 45,000 5,000 53,000 58,000
Dividends on preferred stock (9,000) (9,000)
Net loss (1,273,000) (1,273,000)
Balance, December 31, 1996 $200,000 9,597,163 $959,000 $6,426,000 $(5,752,000) $1,833,000
(Restated)
See accompanying notes.
</TABLE>
PAGE
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Astrocom Corporation
Statements of Cash Flows
Year ended
December 31
1996 1995
(Restated)
<S> <C> <C>
Cash flows from operating activities
Net loss $(1,273,000) $(1,085,000)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 135,000 146,000
Issuance of stock to directors and 66,000 49,000
employees
Changes in assets and liabilities:
Accounts receivable 22,000 (148,000)
Inventories (408,000) 447,000
Prepaid expenses (18,000) 1,000
Demonstration, sample and repair
inventory (2,000) (2,000)
Other assets (2,000) (1,000)
Accounts payable (237,000) 278,000
Accrued expenses 3,000 29,000
Net cash used in operating activities (1,714,000) (286,000)
Cash flows from investing activities
Purchases of equipment (206,000) (80,000)
Net cash used in investing activities (206,000) (80,000)
Cash flows from financing activities
Proceeds from sale of stock 3,046,000 227,000
Cash received from exercise of warrants 12,000
Dividends paid (9,000)
Net proceeds on revolving credit agreement 122,000
Proceeds from notes payable 90,000
Payments on notes payable and capital
lease obligations (231,000)
Net cash provided by financing activities 2,818,000 439,000
Increase in cash 898,000 73,000
Cash at beginning of year 81,000 8,000
Cash at end of year $ 979,000 $ 81,000
Supplemental cash flow information
Conversion of subordinated debt into
preferred stock $ 200,000
See accompanying notes.
</TABLE>
<PAGE>
<PAGE>
Astrocom Corporation
Notes to Financial Statements
December 31, 1996
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, Europe and Asia.
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 1997, 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, 1997. 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 5 to 10 years using the
straight-line or double declining balance methods.
1. Nature of Business and Significant Accounting Policies (continued)
Demonstration, Sample and Repair Inventory
This equipment is not 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 has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (Statement 123), but applies Accounting Principles
Board Opinion No. 25 (APB 25) and related interpretations in accounting
for its plans. 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 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 applicable to common stock by the weighted average
number of common shares outstanding during the period.
2. Inventories
Inventories consisted of the following:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Purchased parts, materials and supplies $ 392,000 $ 92,000
Work in process 107,000
Finished products 231,000 210,000
Less obsolescence reserve (35,000) (15,000)
$ 695,000 $ 287,000
</TABLE>
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 $600,000,
depending upon levels of accounts receivable, at 4% over the
prime lending rate (10.25% at December 31, 1996) 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, 1997, but may be
withdrawn at the option of the bank. The outstanding balance
under the line of credit agreement was $444,000 at December
31, 1996.
Bridge Loans:
During 1996, the Company borrowed $225,000 through bridge
loan agreements, including $75,000 from Hanrow Business
Finance. The bridge loan agreements bore interest at rates
between 12%-13%. In connection with the bridge loans, the
Company issued warrants to purchase 225,000 shares of common
stock. The warrants are exercisable at $1.50 per share and
remain outstanding until 2001. The bridge loans were repaid
in 1996.
3. Debt (continued)
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 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>
1997 $ 36,000
1998 66,000
Total minimum settlement payments 102,000
Less amount representing interest 10,000
92,000
Less current portion 30,000
Long-term portion $ 62,000
</TABLE>
The carrying amounts of the Company's debt instruments in
the balance sheet at December 31, 1996 approximate their
fair value.
4. Operating Leases
The Company has a non-cancelable operating lease agreement
for a building that expires in March 1999. Rental expense
included in operations for this lease for the years ended
December 31, 1996 and 1995 totaled $82,033 and $18,193,
respectively. Future minimum rentals under the operating
lease agreement are as follows:
Years ending:
<TABLE>
<CAPTION>
<S> <C>
1997 $ 84,000
1998 84,000
1999 21,000
$189,000
</TABLE>
5. Shareholders' Equity
Preferred Stock
In March 1996, the Company converted the Hanrow Financial
Group $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.
Common Stock
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.
In September 1996, the Company sold 3,501,000 units in a
private placement of its common stock, resulting in net
proceeds to the Company of $3,046,000. Each unit sold in the
private placement consisted of one share of common stock and
one redeemable warrant. Each redeemable warrant entitles the
holder to purchase one share of common stock at $1.50 per
share. The Company may redeem the redeemable warrants at
$.01 per share of common stock at any time subsequent to 180
days after the issuance of the redeemable warrant if the
closing price of the Company's common stock is above
$2.00 per share for twenty consecutive days subsequent to
the date the redeemable warrants are first redeemable. The
redeemable warrants expire in September 1999. In connection
with the private placement, the Company granted the selling
agent a warrant to purchase 350,100 shares of common stock
at an exercise price of $1.00 per share. The warrant expires
five years after the date of grant.
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. Options granted generally vest
over a period of 48 months.
6. Stock Options and Warrants (continued)
A summary of outstanding options is as follows:
<TABLE>
<CAPTION>
Weighted
Shares Average
Reserved Options Exercise
For Outstand - Price Per
Grant ing Share
<S> <C> <C> <C>
Balance, December 31, 1994 453,750 570,000 $ .39
Granted (677,500) 677,500 .49
Terminated (179,250) .36
Exercised (1,250) .27
Increase in shares reserved
for grant 1,000,000
Balance, December 31, 1995 776,250 1,067,000 .46
Granted 367,500 367,500 1.32
Terminated (204,000) .55
Canceled/expired (10,000) .88
Increase in shares reserved
for grant 500,000
Balance, December 31, 1996 908,750 1,220,500 $ .70
</TABLE>
As of December 31, 1996 there were 775,000 options
outstanding with exercise prices between $.27 and $.50,
206,000 options outstanding with exercise prices between
$.56 and $1.00 and 239,500 options outstanding with exercise
prices between $1.56 and $1.88. At December 31, 1996
outstanding options had a weighted-average remaining
contractual life of 4 years.
The number of options exercisable as of December 31, 1996
and 1995 were 673,875 and 485,625, respectively, at weighted
average exercise prices of $.54 and $.42 per share,
respectively.
The weighted average fair value of options granted during
the years ended December 31, 1996 and 1995 was $.92 and $.32
per share, respectively.
6. Stock Options and Warrants (continued)
Pro Forma Disclosures
Pro forma information regarding net income and earnings per
share is required by Statement 123, and has been determined
as if the Company had accounted for its employee stock
options under the fair value method of that Statement. The
fair value for these options was estimated at the date of
grant using a Black-Scholes option pricing model with the
following weighted-average assumptions for 1996 and 1995,
respectively: risk-free interest rate of 5.5%; no dividend
yield; volatility factor of the expected market price of the
Company's common stock of .846%; and a weighted-average
expected life of the option of 4 years.
The Black-Scholes option valuation model was developed for
use in estimating the fair value of traded options which
have no vesting restrictions and are fully transferable. In
addition, option valuation models require the input of
highly subjective assumptions including the expected stock
price volatility. Because the Company's employee stock
options have characteristics significantly different from
those of traded options, and because changes in the
subjective input assumptions can materially affect the fair
value estimate, in management's opinion, the existing models
do not necessarily provide a reliable single measure of the
fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair
value of the options is amortized to expense over the
options' vesting period. The Company's pro forma information
follows:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Pro forma loss applicable to common shares $(1,127,000) $(1,108,000)
Pro forma loss per common share $(.17) $(.22)
</TABLE>
Note: the pro forma effect on the net loss for 1996 and 1995
is not representative of the pro forma effect on net income
(loss) in the future years because it does not take into
consideration pro forma compensation expense related to
option grants made prior to 1995.
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 2002.
Information with respect to warrants granted as of December
31, 1996 and 1995 is summarized as follows:
<TABLE>
<CAPTION>
Warrant
Shares Price Per
Share
<S> <C> <C>
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
Granted 4,153,335 .88 to $1.88
Canceled
Exercised (31,500) .38
Balance, December 31, 1996 5,414,905 $.30 to $1.88
</TABLE>
Of the warrants granted during 1996, 3,501,000 are
redeemable warrants granted in connection with the private
placement of common stock (see Note 5).
7. Income Taxes
Deferred tax assets and liabilities consisted of the
following:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Net operating loss carryforwards $3,652,000 $3,064,000
Tax credit carryforwards 130,000 130,000
Inventory 14,000 48,000
Other 51,000 39,000
Deferred tax assets 3,760,000 3,281,000
Depreciation 73,000 65,000
Deferred tax liability 73,000 65,000
3,833,00 3,216,000
Less valuation allowance (3,920,000) (3,216,000)
Net deferred tax assets $ 0 $ 0
</TABLE>
7. Income Taxes (continued)
The Company has net operating loss carryforwards and tax
credit carryforwards at December 31, 1996 of approximately
$9,132,000 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 2011.
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 to a maximum of 3% of the employee's annual
salary. Employees vest immediately in their contribution and
vest in the Company's contribution after one year of
service. The Company's contribution to the plan in 1996 and
1995 was 3,961 and 14,013 shares of common stock,
respectively, with fair market values of approximately
$8,000 and $5,000, respectively, 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 $273,303 and $315,430 for
the years ended December 31, 1996 and 1995, respectively.
The sales were primarily to customers located in Europe.
The Company has one product family that accounted for
approximately 61% and 58% of total sales for the years ended
December 31, 1996 and 1995, respectively.
For the year ended December 31, 1996, the Company had net
sales to two customers which totaled 45% of the total net
sales for the year. The receivable balance due from these
customers was $328,809 at December 31, 1996.
10. Supplemental Cash Flow Information
The Company made interest payments of $104,000 and $106,000
for the years ended December 31, 1996 and 1995,
respectively.
11. Related Party Transactions
In 1996, the Company's officers advanced the Company $68,000
against the collection of certain receivables and received a
3% fee for the advances. The receivables were subsequently
collected and the advances were repaid.
12. Restatement
The Company has determined that its inventories at December
31, 1996 were overstated, and accordingly has restated its
1996 financial statements. The restatement resulted in a
decrease in inventories and an increase of the previously
reported cost of products sold, net loss and accumulated deficit
by $218,000. Additionally, the net loss per common share has
been increased from $(.16) to $(.19). The restatement resulted
primarily from a compilation error in the Company's physical
inventory procedures.
As reported As restated
Loss applicable to common $(1,064,000) $(1,282,000)
stock
Net loss per common share $(.16) $(.19)
13. Going Concern
The accompanying financial statements have been prepared assuming
the Company will continue as a going concern, which contemplates the
realization of assets and the satisfaction of liabilities in the normal
course of business. The Company has experienced operating losses in
each of fiscal years 1994 through 1996, and has continued to operate
at a loss through the six-months ended June 30, 1997, depleting most
of its available capital. The Company is dependent on future financing
activities to continue as a going concern. Management is evaluating
financing alternatives; however, there can be no assurance that the
Company will be successful in obtaining financing on terms favorable to
the Company.
Because of uncertainties regarding the achievability of management's
plans, no assurance can be given about the Company's ability to
continue in existence. The financial statements do not include any
adjustments to reflect the possible future effects on the
recoverability and classification of assets or the amounts and
classification of liabilities that may result from the possible
inability of the Company to continue as a going concern.
<PAGE>
<PAGE>
PART III
ITEM 13. EXHIBITS
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 6, 1997, except as to Notes 12 and 13 as to which the
date is August 29, 1997, with respect to the financial statements
incorporated by reference in this Annual Report on Form 10-KSB/A of
Astrocom Corporation for the year ended December 31, 1996.
/s/ Ernst & Young LLP
Minneapolis, Minnesota
September 5, 1997
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
Dated: September 5, 1997 ASTROCOM CORPORATION
(Registrant)
By:Ronald B. Thomas
Ronald B. Thomas,
Chief Executive Officer
By:M. Claire Canavan
M. Claire Canavan
Chief Financial Officer
