United States Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 2000
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
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 of (I.R.S. Employer Identification No.)
incorporation or organization)
3500 Holly Lane North, Suite 60, Plymouth, Minnesota 55447-1284
(Address of principal executive office) (Zip Code)
(612) 378-7800
(Issuer's telephone number)
___________________________________________________
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has 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
Indicate by check mark 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
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 26,014,161
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Astrocom Corporation
Balance Sheets
<TABLE>
<CAPTION>
June 30, 2000 December 31, 1999
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 1,012,465 $ 557,637
Accounts receivable, less allowance 96,196 57,639
Inventories 536,358 289,985
Prepaid expenses 36,587 28,780
Total current assets 1,681,606 934,041
Property and equipment
Property and equipment 730,941 720,642
Accumulated depreciation (625,988) (597,394)
Net property & equipment 104,953 123,248
License agreements, net 69,755 62,900
Other assets 10,000 10,000
Total assets $ 1,866,314 $ 1,130,189
Liabilities and shareholders' equity
Current liabilities:
Accounts payable $ 131,664 $ 128,106
Accrued expenses 115,831 117,006
Current portion of lease settlement costs 25,185 33,881
Total current liabilities 272,680 278,993
Lease settlement costs -- 7,907
Shareholders' equity:
Preferred stock 200,000 200,000
Common stock 2,601,020 1,752,020
Additional paid-in-capital 9,066,877 8,331,887
Accumulated deficit (10,274,263) (9,440,618)
Total shareholders' equity 1,593,634 843,289
Total liabilities and shareholders' equity $ 1,866,314 $ 1,130,189
See accompanying notes to financial statements.
<PAGE>
<CAPTION>
Astrocom Corporation
Statements of Operations (Unaudited)
Three Months Ended June 30 Six Months Ended June 30
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Net sales $192,173 $438,987 $384,187 $968,289
Cost of products sold 180,573 268,646 339,969 646,566
Gross profit 11,600 170,341 44,218 321,723
Operating expenses
Selling and administrative 304,063 233,773 602,340 478,844
Research and development 146,569 117,462 293,486 258,185
Total operating expenses 450,632 351,235 895,826 737,029
Operating loss (439,032) (180,894) (851,608) (415,307)
Other income (expense)
Interest income 18,016 3,775 27,392 8,800
Interest expense (616) (1,157) (1,397) (3,749)
Other expense (266) (37,162) (634) (37,559)
Total other income (expense) 17,134 (34,544) 25,361 (32,508)
Net loss before taxes (421,898) (215,438) (826,247) (447,815)
Taxes 250 0 1,401 13
Net loss (422,148) (215,438) (830,648) (450,828)
Less preferred stock dividends 3,000 3,000 6,000 6,000
Loss applicable to common shares (425,148) (218,438) (833,648) (453,818)
Loss per common share - basic and diluted $(0.02) $(0.01) $(0.04) $(0.03)
Weighted average number of common
shares outstanding 26,014,161 14,999,161 23,163,996 14,999,161
See accompanying notes to financial statements.
<PAGE>
<CAPTION>
Astrocom Corporation
Statements of Cashflows (Unaudited)
Six Months Ended June 30,
2000 1999
<S> <C> <C>
Cash flows from operating activities
Net loss ($827,648) ($447,828)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 64,899 85,408
Loss on disposal of equipment 299 36,977
Changes in operating assets and liabilities:
Accounts receivable (38,557) 112,378
Inventories (246,372) 126,098
Prepaid expenses (7,807) 15,650
Other Assets 0 (2,428)
Accounts payable 3,559 6,204
Accrued expenses (7,174) 2,600
Net cash used in operating activities (1,058,801) (64,941)
Cash flows from investing activities
Purchases of equipment (13,929) (8,475)
Purchase of license agreements (39,829) (42,500)
Proceeds from sale of equipment 0 1,583
Net cash used in investing activities (53,758) (49,392)
Cash flows from financing activities
Proceeds from sale of stock 1,583,990 0
Payments on lease settlement obligations (16,603) (15,536)
Cash provided by financing activities 1,567,387 (15,536)
Net increase (decrease) in cash 454,828 (129,869)
Cash at beginning of period 557,637 549,337
Cash at end of period $1,012,465 $419,468
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Astrocom Corporation
Notes to Financial Statements
June 30, 2000
1. Basis of Presentation
The financial statements in this Form 10-QSB have been prepared by the
Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosure normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. In the opinion of management, the
financial statements reflect all adjustments necessary for a fair presentation
of financial position, results of operations and cash flows. These financial
statements should be read in conjunction with the financial statements and
notes included in the Company's annual report on Form 10-KSB for the year
ended December 31, 1999.
2. Inventories
Inventories are stated at the lower of cost or market, determined on an
average cost basis, and consisted of the following:
June 30, 2000 December 31, 1999
(unaudited)
Raw materials $459,028 $228,430
Work in process 237,799 208,144
Finished goods 84,999 98,962
Less obsolescence reserve (245,468) (245,551)
$536,358 $289,985
3. Loss Per Share
The Company follows Financial Accounting Standards Board Statement No. 128,
"Earnings Per Share." Basic earnings per share exclude the dilutive effect of
options, warrants and convertible securities, while diluted earnings per share
include such effects. For all periods presented, the Company's basic and
diluted loss per share are the same because the effects of all options,
warrants and convertible securities were antidilutive.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
This Report contains certain forward-looking statements that project or
estimate future events. When used in this Form 10-QSB, the words "believes,"
"expects," "anticipates," "intends," and similar expressions are intended to
identify forward-looking statements. These statements are subject to various
risks and uncertainties which could cause actual results to differ materially
from historical results or those currently projected. Readers are cautioned
not to place undue reliance on these forward-looking statements.
Results of Operations
The following table sets forth selected information derived from the Company's
interim statement of operations expressed as percentages of net sales:
Three Months Ended % Increase Six Months Ended %Increase
June 30, (Decrease) June 30, (Decrease)
2000 1999 2000 1999
Net Sales 100.0% 100.0% (56.2)% 100.0% 100.0% (60.3)%
Cost of Sales 94.0 61.2 (32.8) 88.5 66.8 (47.4)
Gross Profit 6.0 38.8 (93.2) 11.5 33.2 (86.3)
Selling and Admin. 158.2 53.3 30.1 156.8 49.4 25.8
Research and Devel. 76.3 26.7 24.8 76.4 26.7 13.7
Operating Loss (228.5) (41.2) 142.7 (221.7) (42.9) 105.1
Other Expense 8.9 (7.9) (149.6) 6.6 (3.3) (178.0)
Net Loss (219.6)% (49.1)% 95.9% (215.1)% (46.2)% 84.8%
Net Sales. Net sales for the three month and six month periods ended June 30,
2000 were $192,173 and $384,187, reflecting decreases of 56.2% and 60.3%,
respectively, over the comparable periods of 1999. The decline in sales is
the result of a continued slowdown from all customers for our CSU/DSU
products. The first products in our new family of Inverse Multiplexer
products became available for shipment in the quarter ended June 30, 2000; the
Company, however, does not expect significant revenue contribution from these
products until the last quarter of 2000. The Company is continuing the
training and support of the new Manufacturers' Representatives and believes
these efforts coupled with our new product offerings will improve revenues.
Gross Profit. Gross profit margin for the three and six month periods ended
June 30, 2000 was 6.0% and 11.5%, respectively, as compared to 38.8% and 33.2%
for the comparable periods of 1999. This decrease is attributable to the
reduced sales volume and the resulting increase in labor and overhead as a
percentage of sales dollars. While the Company has reduced labor expenses in
production, gross margins will continue to be affected by sales volume,
product mix and the sales channel used.
Operating Expenses. Selling and administrative expenses were $304,063 for the
three month period ended June 30, 2000, an increase of 30.1% from the
comparable period of 1999. For the six month period ended June 30, 2000,
selling and administrative expenses were $602,340, an increase of 25.8% from
the comparable period of 1999. Sales and Marketing expenses increased by 103%
and 154% in the first and second quarters, respectively, compared to the same
quarters in 1999; this increase is due to added sales staff, heightened sales
activity and expenses associated with training the network of
Manufacturers' Representatives. Administrative expenses decreased slightly
for each of the first two quarters of 2000 when compared to the same periods
in 1999.
Research and development expenses were $146,569 for the three month period
ended June 30, 2000, an increase of 24.8% from the comparable period in 1999.
For the six month period ended June 30, 2000, research and development
expenses were $293,486, an increase of 13.7% from the comparable period of
1999. The Company expects research and development expenses to continue to
increase in future quarters as we expand new product development.
Other Income and Expense. Other income, net, for the three month period ended
June 30, 2000 increased to $17,134 from $(34,544) in the comparable period in
1999. For the six month period ended June 30, 2000, other income, net,
increased to $25,361 from $(32,508) in the comparable period in 1999. Other
expense during 1999 included the disposal of $1,424,111 of obsolete equipment;
most of this equipment was fully depreciated so the result was a loss
amounting to $36,977.
Net Loss. The Company reported a net loss of $(422,148) and $(827,648),
respectively, for the three and six month periods ended June 30, 2000,
compared to a net loss of $(215,438) and $(447,828) for the comparable periods
of 1999. The increase loss is primarily the result of lower sales revenue and
increased expenditures in new product development and Sales and Marketing.
Liquidity and Capital Resources
From December 27, 1999, through March 13, 2000, the Company sold 11,000,000
shares (2,525,000 shares in 1999) of common stock to accredited investors in a
Regulation D private placement, resulting in net proceeds of $2,081,440. The
proceeds are being used primarily for working capital.
Net working capital decreased for the same period to $1,408,925 for the second
quarter from $1,823,882 on March 31, 2000. Cash decreased to $1,012,465 from
$1,610,763 on March 31, 2000
Management remains focused on running profitable operations that generate
adequate cash flow to meet current obligations on a timely basis. The Company
currently believes that its available sources of funds will be adequate to
finance current operations and anticipated investments for the next twelve
months.
<PAGE>
PART II. OTHER INFORMATION
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirement 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: 11 August 2000
ASTROCOM CORPORATION
By:___/S/_________________
Ronald B. Thomas
President and Chief Executive Officer
By:____/S/________________
John M. Bucher
Director of Operations and Corporate Controller
