-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, E8DS4M1Fe2xhRmRuYZVoVWfXtS2JgvKvS0r+JrrTsEQ36YmUJQoQEB1Fn4XJ/Eoa NAgO1WzSTnNFPWlLzWdXvg== 0000215155-97-000010.txt : 19970912 0000215155-97-000010.hdr.sgml : 19970912 ACCESSION NUMBER: 0000215155-97-000010 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970908 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ASTROCOM CORP CENTRAL INDEX KEY: 0000215155 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER COMMUNICATIONS EQUIPMENT [3576] IRS NUMBER: 410946755 STATE OF INCORPORATION: MN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-08482 FILM NUMBER: 97676552 BUSINESS ADDRESS: STREET 1: 2700 SUMMER STREET N E CITY: MINNEAPOLIS STATE: MN ZIP: 55413-2820 BUSINESS PHONE: 6123787800 MAIL ADDRESS: STREET 2: 2700 SUMMER ST NE CITY: MINNEAPOLIS STATE: MN ZIP: 55413 10QSB 1 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 June 30, 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
ASTROCOM CORPORATION STATEMENTS OF OPERATIONS (UNAUDITED) Three Months Ended June 30, 1997 1996 Net Revenues $ 672,000 $ 595,000 Cost of Products Sold 632,000 394,000 Gross Profit 40,000 201,000 Expenses: Selling and administrative expense 489,000 310,000 Research and development expense 215,000 91,000 Total Expenses 704,000 401,000 Operating Loss (664,000) (200,000) Interest Expense (12,000) (35,000) Loss before income taxes (676,000) (235,000) Income tax 1,000 0 Net Loss $ (677,000) $(235,000) Net Loss per share $ ( .07) $( .04) Shares used in computation 9,801,595 6,046,375
ASTROCOM CORPORATION STATEMENTS OF OPERATIONS (UNAUDITED) Six Months Ended June 30, 1997 1996 Net Revenues $ 1,470,000 $ 1,653,000 Cost of Products Sold 1,350,000 1,048,000 Inventory Write-Off 329,000 Gross Profit (209,000) 605,000 Expenses: Selling and administrative expense 1,082,000 626,000 Research and development expense 458,000 179,000 Total Expenses 1,540,000 805,000 Operating Loss (1,749,000) (200,000) Interest Expense (24,000) (66,000) Income tax 1,000 0 Net Loss $ (1,774,000) $ (266,000) Net Loss per share $ ( .18) $ ( .04) Shares used in computation 9,738,970 6,031,038 BALANCE SHEETS ASTROCOM CORPORATION (UNAUDITED) June 30 December 31, 1997 1996 ASSETS CURRENT ASSETS Cash $ 245,000 $ 979,000 Accounts receivable, less allowance for doubtful accounts 311,000 594,000 Inventories 588,000 695,000 Prepaid expenses 2,000 32,000 TOTAL CURRENT ASSETS 1,146,000 2,300,000 OTHER ASSETS 67,000 66,000 Building, Machinery, and Equipment 2,108,000 2,078,000 Allowances for depreciation (1,681,000) (1,638,000) 427,000 440,000 TOTAL ASSETS $ 1,640,000 $2,806,000 June 30 December 31, 1997 1996 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Notes payable $ 224,000 $ 444,000 Accounts payable 1,080,000 367,000 Accrued expenses 68,000 69,000 Current maturities of long-term debt and capital leases 30,000 30,000 TOTAL CURRENT LIABILITIES 1,424,000 910,000 LEASE-SETTLEMENT COSTS 50,000 62,000 Long-Term Debt 0 1,000 Total Stockholders' Equity (deficit) Preferred Stock 200,000 200,000 Common Stock, par value $.10/share: 988,000 959,000 Issued and outstanding shares - 9,885,954 at 6-30-97 and 9,597,163 at 12-31-96 Additional Paid in Capital 6,504,000 6,426,000 Retained earnings (deficit) (7,526,000) (5,752,000) Total Stockholders' Equity 166,000 1,833,000 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,640,000 $2,506,000 STATEMENTS OF CASH FLOWS ASTROCOM CORPORATION Six Months Ended June 30, 1997 1996 Operating Activities Net loss $(1,774,000) $ (235,000) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation 43,000 56,000 Write-off of inventory 329,000 Changes in operating assets and liabilities: Accounts receivable 283,000 (57,000) Inventories and prepaid expenses (192,000) (11,000) Accounts payable and accrued expenses 734,000 (38,000) Other Assets (1,000) 13,000 Net cash used by operating activities (578,000) (272,000) INVESTING ACTIVITIES Purchases of equipment (30,000) (29,000) Net cash used by investing activities (30,000) (29,000) Financing Activities Decrease in short term debt (220,000) (7,000) Payments on lease settlement obligations (12,000) (3,000) Payment on long-term debt (1,000) 28,000 Proceeds from exercises of warrants and options 107,000 0 Net cash (used in) provided by financing activities (126,000) 18,000 Decrease in cash (734,000) (283,000) Cash at beginning of period 979,000 81,000 Cash at end of period $ 245,000 $ (202,000) See notes to financial statements.
NOTES TO FINANCIAL STATEMENTS ASTROCOM CORPORATION June 30, 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. The Balance Sheet at December 31, 1996 is derived from the audited financial statements at that date. 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 and six months ended June 30, 1997, there is no difference between basic earnings per share under Statement No. 128 and primary net loss per share as reported. Management's Discussion and Analysis of the Results of Operations. Comparison of the Quarters Ended June 30, 1997 and June 30, 1996 SALES. Net revenues for the quarter ended June 30, 1997, totaled $672,000, an increase of 13% from $595,000 for the same period of 1996. The increase was the result of increasing sales of the new T-1 products: the Astrocom T-series and the Astrocom SP-100, which were introduced in late 1996 and early 1997 respectively. Revenues from these products account for approximately 19% of first quarter revenue and 60% of second quarter revenue. GROSS PROFIT. Gross profit before the inventory write-off declined sharply due to initial costs associated with the introduction of the Astrocom SP-100, as well as higher overhead associated with the addition of a senior-level manager in the operations function. EXPENSES. Overall, operating expenses increased by $303,000 or 76% for the second quarter of 1997 compared with the same quarter of 1996. Selling, general and administrative expenses increased by 58% for the quarter ended June 30, 1997, compared with the same quarter of 1996. The increase was primarily due to increased sales and marketing expenses associated with new product introduction and promotion, but also to increased administrative expenses due to the addition of staff. Research and development expense was 136% higher than the second quarter of last year because of personnel expenses related to the development team added in late 1996. NET LOSS. For the second quarter, the net loss increased from ($235,000) in 1996 to ($677,000) in 1997, an increase of $442,000. The large loss was due primarily to an increase of $303,000 in operating expenses. Comparison of the Six Months Ended June 30, 1997 and June 30, 1996 SALES. Net revenues for the six months ended June 30, 1997, totaled $1,470,000, a decrease of 11% from $1,653,000 for the same period 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 late February by the Astrocom SP-100. Combined sales of T-1 products account for approximately 37% of revenues in the first half of 1997. GROSS PROFIT. Gross profit before the inventory write-off decreased 80% in the first six months to $120,000 from $605,000 in the same period of 1996 (8% and 37% of net sales, respectively). The decrease can be attributed to a combination of pricing pressures on the existing product line and higher initial costs in the production of the new product line. In the first quarter of 1997, the Company recorded a $329,000 write down of inventory due to: 1) reserves recorded from loss of a contract and ongoing product changes, and 2) inventory which could not be accounted for due to changes in the Company's accounting system and personnel changes. EXPENSES. Selling and administrative expenses increased 73% to $1,082,000 from $626,000 in the same period last year. Sales and marketing expenses increased because of marketing activities related to development of a 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, as well as consulting expenses related to the implementation of a new integrated management system. Research and development expenses increased 150% from $179,000 in 1996 to $458,000 in the first half of 1997, due primarily to increased staff. A team of experienced networking engineers was added to 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. Interest expense declined because of reduced levels of borrowing consequent to the equity financing completed in the fourth quarter of 1996. NET LOSS. For the first six months, the loss increased from $(266,000) to $(1,774,000). The greater loss is attributable to the combination of lower revenue, lower gross margin, and higher selling, administrative, and R&D expenses, as well as the write-off of inventory. LIQUIDITY AND CAPITAL RESOURCES. During the six month period ended June 30, 1997, the Company's operations were funded by cash on hand and accounts payable. Accordingly, working capital decreased to a deficit of $278,000 at 6/30/97 from working capital of $1,390,000 at 12/31/96. In addition, common stock increased modestly due to the exercise of options and conversion of warrants. Effective July 1, 1997 and August 1, 1997, the Company's bank line of credit was reduced to $500,000 and $250,000 respectively. The line of credit expires on September 30, 1997. Management is attempting to secure additional sources of funding. Management believes it will maintain short-term liquidity through the remainder of 1997 by procuring additional financing, continued management of accounts payable, and enhanced receivable collection. However, there can be no assurance that the Company will be able to obtain additional funding on satisfactory terms, or at all. 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. To that end, significant expense reductions have been enacted, including a reduction in personnel, as well as changes in pricing and distributor agreements in order to improve gross margins. PART II OTHER INFORMATION ITEM 5 1. Ronald B. Thomas was elected President, Chief Executive Officer and a director of the Company effective June 27, 1997. 2. S. Albert D. Hanser resigned as Chief Executive Officer, effective June 27, 1997. 3. T.J. Carter resigned as President, effective June 27, 1997. 4. Cheryl Olseth resigned as Vice President-Marketing and Sales, effective June 6, 1997. 5. Patricia M. Fischer resigned as Vice President-Operations, effective July 18, 1997. 6. M. Claire Canavan resigned as Vice President and Chief Financial Officer, effective September 12, 1997. 7. Fidelity Bank of Edina reduced the Company's line of credit to $250,000 as of August 1, 1997. The most recent extension of the line of credit will expire on September 30, 1997. 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 -----END PRIVACY-ENHANCED MESSAGE-----