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 March 31, 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)
2700 Summer Street N.E., Minneapolis, Minnesota 55413-2820
(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
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
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ASTROCOM CORPORATION
BALANCE SHEETS
March 31, 2000 December 31, 1999
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Assets
Current assets:
Cash and cash equivalents 1,610,763 557,637
Accounts receivable, less allowance 96,613 57,639
Inventories 424,739 289,985
Prepaid expenses 31,031 28,780
Total current assets 2,163,146 934,041
Property and equipment
Property and equipment 717,794 720,642
Accumulated depreciation (611,191) (597,394)
Net property & equipment 106,603 123,248
License agreements, net 76,766 62,900
Other assets 10,000 10,000
Total assets 2,356,515 1,130,189
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable 186,361 128,106
Accrued expenses 117,803 117,006
Current portion of lease settlement costs 33,570 33,881
Total current liabilities 337,734 278,993
Lease settlement costs 0 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 (9,849,116) (9,440,618)
Total shareholders' equity 2,018,781 843,289
Total liabilities and shareholders' equity 2,356,515 1,130,189
See accompanying notes to financial statements.
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<CAPTION>
Astrocom Corporation
Statements of Operations (Unaudited)
Three Months Ended March 31
2000 1999
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Net Sales 192,014 529,302
Cost of products sold 159,395 377,920
Gross profit 32,619 151,382
Operating expenses
Selling and administrative 298,277 245,071
Research and development 146,918 140,724
Total operating expenses 445,195 385,795
Operating loss (412,576) (234,413)
Other income (expense)
Interest income 9,376 5,025
Interest expense (781) (2,592)
Other expense (368) (397)
Total other income (expense) 8,227 2,036
Net loss before taxes (404,349) (232,377)
Taxes 1,151 13
Net loss (405,500) (232,390)
Less preferred stock dividends 3,000 3,000
Loss applicable to common shares (408,500) (235,390)
Loss per common share - basic and diluted (0.02) (0.02)
Weighted average number of common
shares outstanding 20,313,831 14,999,161
See accompanying notes to financial statements.
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<CAPTION>
Astrocom Corporation
Statements of Cashflows (Unaudited)
Three Months Ended March 31,
2000 1999
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CASH FLOWS FROM OPERATING ACTIVITIES
Net loss (405,500) (232,390)
Adjustments to reconcile net less to net
cash used in operating activities:
Depreciation and amortization 36,719 41,036
Loss on disposal of equipment 299 0
Changes in operating assets and liabilities:
Accounts receivable (38,975) (38,906)
Inventories (134,753) 91,064
Prepaid expenses (2,250) 17,865
Accounts payable 58,255 2,708
Accrued expenses (2,203) 8,386
Net cash used in operating activities (488,406) (110,237)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of equipment (2,931) (2,682)
Purchase of license agreements (31,009) (25,000)
Proceeds from sale of equipment (299) 0
Net cash used in investing activities (34,239) (27,682)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of stock 1,583,990 0
Payments on lease settlement obligations (8,219) (7,690)
Cash provided by financing activities 1,575,771 (7,690)
Net decrease in cash 1,053,126 (145,609)
Cash at beginning of period 557,637 549,337
Cash at end of period 1,610,763 403,728
See accompanying notes to financial statements.
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Astrocom Corporation
Notes to Financial Statements
March 31, 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. Inventories at March 31, 2000 and December 31, 1999
consisted of the following:
March 31, 2000 December 31, 1999
Raw materials 355,271 228,430
Work in process 204,877 208,144
Finished goods 113,975 98,962
Less obsolescence reserve (249,383) (245,551)
424,740 289,985
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.
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.
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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
March 31, (Decrease)
2000 1999
Net Sales 100.0 100.0 (63.7)
Cost of Sales 83.0 71.4 (57.8)
Gross Profit 17.0 28.6 (78.5)
Selling and Administrative 155.3 46.3 21.7
Research and Development 76.5 26.6 4.4
Operating Loss (214.9) (44.3) 76.0
Other Expense 4.3 0.4 304.0
Net Loss (211.2) (43.9) 74.5
Net Sales. Net sales for the quarter ended March 31, 2000 totaled $192,014,
a decrease of 63.7% from $529,302 for the same quarter of 1999. The decline
in sales was the result of reduced demand from a few significant customers and
a continued slowdown from all customers. To address this decline, the Company
is continuing to focus on new product development targeted at a niche market
strategy. This strategy will reposition the Company's products to a market
where manufacturing, sales channel size and pricing are less important
competitive factors. The Company is also in the process of engaging and
training a network of Manufacturers' Representatives. The Company expects
that shipment of new products in future quarters will reverse this trend of
declining sales.
Gross Profit. Gross profit margin decreased to 17.0% in the first quarter
from 28.6% for the same period last year. This decrease is attributable to
the lower sales volume and the resulting increase in labor and overhead as a
percentage of sales. Gross margins will continue to be affected by sales
volume, product mix and the distribution channel used.
Operating Expenses. Selling and administrative expenses increased 21.7% to
$298,277 from $245,071 in the same period last year. Administrative
expenses decreased slightly because of reduced reliance on outside
professional services. Sales and Marketing expenses increased by 103% in the
first quarter of 1999, due to increased sales activity and training of the
network of Manufacturers' Representatives.
Research and development expenses increased 4.4% to $146,918 in the first
quarter of 2000 from $140,724 during the same period in 1999. The Company
expects research and development expenses to increase in future quarters as we
further expand new product development.
Other Income and Expense. Other income, net, was $8,227 for the period
ending March 31, 2000 compared to $2,036 for the same period in 1999; interest
expense also decreased to $781 from $2,592, respectively, for the same
periods. The higher interest income was due to an increased amount of cash
earning interest in the first quarter of 2000; the higher interest expense for
the same period in 1999 is attributable to payment of interest to a supplier.
Net Loss. The Company reported a net loss of $405,500 for the quarter
ended March 31, 2000, compared to a net loss of $232,290 in the first quarter
of 1999. The increased loss is primarily the result of reduced sales and
increased expenditures on 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 will be used primarily for working capital. Of said 11,000,000
shares, 4,560,000 shares were sold by R.J. Steichen Co. pursuant to the terms
of an Agency Agreement under which the Company paid R.J. Steichen & Co. a
commission of $118,560 and issued to it an Agent's Warrant for 456,000 shares
of the Company's common stock.
Net working capital increased to $1,823,882 for the quarter from $655,048 on
December 31, 1999. Cash increased to $1,610,763 on March 31, 2000 from
$557,637 on December 31, 1999.
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.
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PART II. OTHER INFORMATION
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-k
None.
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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: May 15, 2000
ASTROCOM CORPORATION
By:___/S/_________________
Ronald B. Thomas
President and Chief Executive Officer
By:___/S/_________________
John M. Bucher
Director of Operations and Corporate Controller
