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 March 31, 1997, 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: 9,667,113
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ASTROCOM CORPORATION
STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended March 31,
1997 1996
<S> <C> <C>
Net Revenues $ 839,000 $1,057,000
Cost of Products Sold 647,000 654,000
Expenses:
Selling and administrative expense 500,000 317,000
Research and development expense 199,000 87,000
Interest expense 12,000 30,000
Total Expenses 711,000 434,000
Income (loss) before taxes (519,000) (31,000)
Income tax 0 0
Net income (loss) $ (519,000) $ (31,000)
Net income (loss) per share $ ( .05) $( .01)
Weighted average shares outstanding 9,667,113 6,015,702
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<CAPTION>
BALANCE SHEETS (UNAUDITED)
ASTROCOM CORPORATION
ASSETS 31-Mar-97 31-Dec-96
CURRENT ASSETS
<S> <C> <C>
Cash $ 1,049,000 $ 979,000
Accounts receivable, less allowance
for doubtful accounts of $15,000 567,000 594,000
at 3/31/97 and 12/31/96
Inventories 764,000 913,000
Prepaid expenses 35,000 32,000
TOTAL CURRENT ASSETS 2,415,000 2,518,000
OTHER ASSETS
Other 71,000 66,000
PLANT AND EQUIPMENT
Machinery and equipment 2,107,000 2,078,000
Allowances for depreciation and
amortization (1,666,000) (1,638,000)
TOTAL PLANT AND EQUIPMENT 441,000 440,000
TOTAL ASSETS $2,927,000 $3,024,000
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31-Mar-97 31-Dec-96
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES
Notes payable $ 452,000 $ 444,000
Accounts payable 754,000 367,000
Employee compensation and other accrued 68,000 69,000
expenses
Current maturities of long-term debt
and capital leases 30,000 30,000
TOTAL CURRENT LIABILITIES 1,304,000 910,000
LEASE-SETTLEMENT COSTS 55,000 62,000
Long-Term Debt 0 1,000
Total Stockholders' Equity (deficit)
Preferred Stock 200,000 200,000
Common Stock, par value $.10/share 966,000 959,000
Additional Paid in Capital 6,455,000 6,426,000
Accumulated Deficit (6,053,000) (5,534,000)
Total Stockholders' Equity 1,568,000 2,051,000
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $2,927,000 $3,024,000
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STATEMENTS OF CASH FLOWS
ASTROCOM CORPORATION
Three Months Ended March 31,
1997 1996
<S> <C> <C>
Operating Activities
Net income (loss) $ (519,000) $ (31,000)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation 28,000 56,000
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable 27,000 (57,000)
Decrease (increase) in Inventories and
prepaid expenses 146,000 (11,000)
Decrease (increase) in Accounts payable
and accrued expenses 386,000 (38,000)
Decrease (increase) in other assets (5,000) 13,000
Net cash provided (used) by operating activities 554,000 (93,000)
INVESTING ACTIVITIES
Purchases of plant and equipment (29,000) (29,000)
Net cash (used in) provided by investing activities (29,000) (29,000)
Financing Activities
Increase in short term debt 8,000 (7,000)
Proceeds from (payments) on bank notes (7,000) (3,000)
Increase in long-term debt (1,000) 28,000
Proceeds from sales of common stock 36,000 0
Net cash (used in) provided by financing activities 36,000 18,000
Increase (Decrease) in cash 70,000 (79,000)
Cash at beginning of quarter 979,000 81,000
Cash at end of quarter $1,049,000 $ 2,000
See notes to financial statements.
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NOTES TO FINANCIAL STATEMENTS
ASTROCOM CORPORATION
March 31, 1997
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, 1996.
NOTE B - NET LOSS PER SHARE
Net loss per share is computed using the weighted average number of common
shares outstanding during the period. Common equivalent shares from stock
options and warrants are excluded from the computation as their effect is
antidilutive. In February 1997, the Financial Accounting Standards Board
(FASB) issued FASB Statement No. 128, "Earnings Per Share." This Statement
replaces the presentation of primary earnings per share (EPS) with basic
EPS and also requires dual presentation of basic and diluted EPS for
entities with complex capital structures. This Statement is effective for
the fiscal year ended December 31, 1997. For the quarter ended March 31,
1997, there is no difference between basic earnings per share under
Statement No. 128 and primary net loss per share as reported.
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Management's Discussion and Analysis of the Results of Operations.
Comparison of First Quarters 1997 and 1996
SALES. Net revenues for the quarter ended March 31, 1997, totaled
$839,000, a decrease of 21% from the total of $1,057,000 for the same quarter
of 1996. The decrease was the result of significantly lower sales of the
NX-1, the former leading CSU/DSU product, which was replaced in February by
the Astrocom SP-100. In the first quarter, revenues from sales of the new
product were not sufficient to offset the reduction of revenues from declining
sales of the old product.
GROSS PROFIT. Gross profit decreased 52% in first quarter to $192,000
from $403,000 in the first quarter of 1996. Gross margin decreased to 23.8%
of net sales in 1996 from 40.3% from in the same period last year. The
decrease can be attributed to a combination of an adverse change in product
mix (greater unit sales of the lower margin T-Series and SP-100 and a lower
volume of NX-1 sales) and start-up costs in the production of the new
product line. Management anticipates that gross margin will increase in
future quarters as product cost reduction measures are implemented.
EXPENSES. Selling and administrative expenses increased 57.8% to
$500,000 from $317,000 in the same period last year. Sales and marketing
expenses increased because of marketing activities related to the new
corporate image and product positioning, as well as additions to the sales
staff. Administrative expenses increased because of additions to the
operations and financial management staff.
Research and development expenses increased 128.7% from $87,000 in 1996
to $199,000 in 1997 due primarily to increased staff. A team of experienced
networking engineers was added to the staff in the fourth quarter of 1996 in
order to accelerate the new product development process. R&D expenses were
also increased in the first quarter of 1997 by higher spending on product
testing, prototype parts and outside services in connection with the new
product introduction. Interest expense declined because of reduced levels of
borrowing, as a consequence of the equity financing completed in the fourth
quarter of 1996.
NET LOSS. The company reported a net loss from operations of $519,000
for the quarter ended March 31, 1997, as compared to a net loss of $31,000
in the first quarter of 1996. The greater loss is attributable to a
combination of lower revenue, lower gross margin and higher selling,
administrative and R&D expenses.
LIQUIDITY AND CAPITAL RESOURCES. During the first quarter of 1997, the
Company's operations were funded by a combination of increases in short-term
liabilities and reductions in accounts receivable and inventories. In
addition, common stock and paid-in capital increased by a total of $36,000
because of the exercise of options and warrants.
The Company's working capital declined to $1,111,000 at 3/31/97 from
$1,608,000 at 12/31/96, as accounts payable increased and inventory
decreased to fund first quarter losses. Cash increased slightly from 12/31/96
to $1,049,000.
Management believes it will maintain short-term liquidity in 1997 by
reducing inventory and managing accounts receivable. In the longer term,
liquidity is dependent upon returning to profitable operations that
generate adequate cash flow to meet current obligations on a timely basis.
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PART II OTHER INFORMATION
ITEM 5
1. Douglas M. Pihl was elected a Class I director on January 31, 1997,
for a term expiring at the 1997 annual shareholders' meeting.
2. M. Claire Canavan was elected Vice President and Chief Financial
Officer on March 12, 1997.
3. Patricia M. Fischer was elected Vice President of Operations on
April 24, 1997.
4. Brien W. Johnson resigned as Vice President of Finance effective
April 25, 1997.
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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: May 14, 1997 ASTROCOM CORPORATION
(Registrant)
By:S. Albert D. Hanser
S. Albert D. Hanser, Chairman
and Chief Executive Officer
By:M. Claire Canavan
M. Claire Canavan,
Vice President and
Chief Financial Officer
