<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended MARCH 31, 2000
Commission file number 1-4530
ASTREX, INC.
(Exact name of small business issuer as specified in its charter)
DELAWARE 13-1930803
(State of incorporation) (IRS Employer Identification No.)
205 EXPRESS STREET, PLAINVIEW, NEW YORK 11803
(Address of principal executive offices) (Zip Code)
516 - 433-1700
(Issuer's telephone number, including area code)
Securities registered pursuant to Section 12 (b) of the Act: None
SECURITIES REGISTERED PURSUANT TO 12 (g) OF THE ACT:
COMMON STOCK, $.01 PAR VALUE
(Title of class)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 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 each filing requirements for the
past 90 days. YES X No.
---
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. /X/
State issuer's revenues for its most recent fiscal year. $16,512,451.
State the aggregate market value of the voting and non-voting common equity
held by non-affiliates computed by reference to the price at which the stock
was sold, or the average bid and asked prices of such stock, as of a
specified date within the past 60 days. $ 1,246,797 AS OF JUNE 15, 2000 (SEE
ITEM 5).
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date. 5,626,777 SHARES OF COMMON
STOCK AS OF JUNE 15, 2000.
<PAGE>
ASTREX, INC.
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
ITEM REQUIRED BY FORM 10-KSB LOCATION OF ITEM
---------------------------- ----------------
<S> <C>
Item 1. - Description of Business Item 1. Business
Item 2. - Description of Property Item 2. Description of Property
Item 3. - Legal Proceedings Item 3. Legal Proceedings
Item 4. - Submission of Matters to a Item 4. Submission of Matter to a
Vote of Security Holders Vote of Security Holders
Item 5. - Market for Common Equity Item 5. Market for Registrant's Common Equity
and Related Shareholder and Related Shareholder Matters
Matters
Item 6. - Management's Discussion and Item 6. Management's Discussion and Analysis of
Analysis or Plan of Operation Financial Condition and Results of Operation
Item 7. - Financial Statements Item 13. Exhibits, Financial Statements and Reports
on Form 8-K
Item 8. - Changes In and Disagreements Item 8. Changes in and Disagreements with
With Accountants on Accounting Accountants on Accounting
and Financial Disclosure and Financial Disclosure
Item 9. - Directors, Executive Officers, Item 9. Directors and Executive Officers
Promoters and Control Persons, of the Company;
Compliance with Section 16(a) Compliance with Section 16(a)
of the Exchange Act of the Exchange Act
Item 10. - Executive Compensation Item 10. Executive Compensation
Item 11. - Security Ownership of Certain Item 11. Security Ownership of Certain Beneficial
Beneficial Owners and Owners and Management
Management
Item 12. - Certain Relationships and Item 12. Certain Relationships and Related
Related Transactions Transactions
Item 13. - Exhibits and Reports on Item 13. Exhibits, Financial Statements and
Form 8-K Reports on Form 8-K
</TABLE>
1
<PAGE>
PART I
Item 1. BUSINESS.
GENERAL
Astrex, Inc., a Delaware corporation (the "Company" or "Astrex"), is
a value-added distributor of electronic components used to connect, control,
regulate or store electricity in equipment. The principal products assembled
and sold by Astrex are "connectors." Connectors link a wire or group of wires
to another wire or group of wires. Other products sold include relays,
switches, and LEDs.
The Company (including its wholly owned subsidiaries T.F. Cushing,
Inc. and AVest, Inc.) has 60 employees, principally at facilities in
Plainview, New York and West Springfield, Massachusetts and carries in
inventory over 25,000 different electronic parts from approximately 20
manufacturers, including Amphenol Corporation, Hirose Electric (USA), Inc.,
ITT Cannon, ITW Switches, Litton Winchester Electronics, Micro Switch
(division of Honeywell, Inc.), Packard Hughes Interconnect, and WPI Salem
Division (Wire Pro). While the Company sells a portion of this inventory
without any further value enhancements, a significant portion of its sales
consists of components assembled to customer specifications. The Company's
sales are worldwide with a concentration in the Northeast and Mid-Atlantic
States. The Company serves more than 3,200 customers representing a broad
range of electronics users from major original equipment manufacturers, to
engineering firms and research and educational institutions. The Company's
largest industry markets include the defense, aerospace, industrial
equipment, and computer industries.
Approximately 82% of the products sold by the Company are
connectors. A connector links electronic components together and generally
consists of a shell, insert, contacts and adaptive hardware. Each of these
four parts has many variations and can be assembled together in almost
unlimited combinations. Connectors range in price, depending on design,
complexity, use, and availability from $0.25 to $2,500 a connector. The
Company has traditionally emphasized the sale of connectors that meet a
higher standard of reliability and performance including those meeting United
States military specifications. Most of the connectors sold by the Company
range in price from $5 to $70 each.
The Company has the capacity to both assemble and test connectors to
customer's specifications, which is a capability that some of its competitors
do not have. The assembly capability also enables the Company to inventory
fewer finished parts and to deliver a wider variety of finished connectors,
substantially enhancing service to its customers. During the fiscal year
ended March 31, 2000, connector sales represented 82% of total sales.
Approximately 61% of those connector sales were connectors assembled by the
Company, approximately 33% of those sales were connectors not requiring
Company assembly, and approximately 6% of those sales were unassembled
connector parts.
The other products sold by the Company, representing approximately
18% of Company's total sales, are devices that control or regulate the flow
of electricity to or within components, including relays and switches that
control current by opening or closing an electric circuit.
Assembly of military specification connectors, a significant part of
the Company's business, usually requires government approval. The Company has
such approvals as are necessary for the
2
<PAGE>
military specification connectors it assembles and does not foresee any
future problems with respect to such approvals. The nature of the Company's
business does not require significant expenditures for product research and
development and the Company's expenditures in that regard over the past two
years have been nominal.
The Company markets the products of approximately 20 manufacturers.
Its four largest suppliers, ITT Cannon, Amphenol Corporation, ITW Switches
and Packard Hughes Interconnect accounted for approximately 48% of the
purchases for fiscal year ended March 31, 2000, as compared to 44% for the
fiscal year ended March 31, 1999.
The Company has satisfactory relations with its suppliers, most of
which have done business with the Company for over 15 years. The Company
believes that most of the products it presently sells are available from
other sources at competitive prices. Most of the products sold by the Company
are pursuant to franchise agreements that are typically cancelable at any
time.
As of March 31, 2000 the Company's net inventory aggregated
approximately $4,436,000 of which approximately 89% consisted of connectors.
While manufacturers generally do not give distributors, such as the Company,
the absolute right to return unsold inventory, it is the policy of many
manufacturers to protect or partially protect franchised distributors, such
as the Company, against the potential write-down of inventories due to
technological change or manufacturer's price reductions. Similarly, a
manufacturer who elects to terminate a franchise may be required to purchase
from the distributor a substantial, if not the total, amount of its product
carried in inventory. No assurance can be given however, that these industry
practices will continue.
The Company serves more than 3,200 customers representing a broad
spectrum of electronic users ranging from major original equipment
manufacturers to engineering firms and research and educational institutions.
Such customers include manufacturers in the aerospace, industrial, defense
and computer industries. No single customer accounted for more the 10% of
sales, during years ended 2000 and 1999.
Many of the Company's customers require delivery schedules, which
are generally not available on direct purchase from manufacturers. The
Company offers its customers the convenience of diverse and extensive local
inventories and rapid deliveries. In addition, because of its expertise in
connectors, the Company can offer its customers technical advice and support,
and innovative solutions to customer problems. The Company believes that its
has good long-term relationships with its customers extending, in some cases,
over a period of more than 20 years.
For the fiscal year ended March 31, 2000 and 1999, 73% and 79% of
the Company's sales, respectively, were in the Northeast and Mid-Atlantic
States, 16% of sales in both years were to other parts of the country and 11%
and 5% of sales, respectively were for export.
Sales are generated by the Company's field sales force, which covers
specific geographic territories and customers; by the Company's inside
telephone and internet sales force; and by independent sales representatives.
These sales efforts are supported by an internet web site and by the use of
space advertising in industry publications. Sales are managed and coordinated
by regional sales managers and by product managers located in the Company's
Plainview, New York or West Springfield, Massachusetts facilities.
3
<PAGE>
When used herein, the words "believe," "anticipate," "think,"
"intend," "will be," "expect," "foresee" and similar expressions identify
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Such statements speak only as of the date
hereof, are not guarantees of future performance, events or trends and
involve certain risks and uncertainties including those discussed herein,
which could cause actual results to differ materially from those in the
forward-looking statements. Readers are cautioned not to place undue reliance
on the forward-looking statements. Readers are also urged carefully to review
and consider the various disclosures made by the Company which attempt to
advise interested parties of the factors which affect the Company's business,
including, without limitation, the disclosures made under the caption
"Management's Discussion and Analysis of Financial Condition and Results of
Operation." All references to fiscal year are to the Company's fiscal year
which ends March 31.
RECENT DEVELOPMENTS
During fiscal year ended March 31, 2000, the Company continued
expanding its product offerings from existing suppliers, by adding assembly
capabilities in ITT Cannon (D-Subminiature connectors and microminiature
D-Subs), and Hypertronics (N-Series of industrial, commercial connectors).
The Company also added ITT RF Products (formerly ITT Sealectro) to its roster
of franchised lines.
Fiscal year ended March 31, 2000 also saw the realization of our
goal to grow our export sales. Export sales grew from $682,000 in fiscal year
ended March 31, 1999 to $1,790,000 in fiscal year ended March 31, 2000, a
gain of 162%. In order to continue pursuing sales growth in export sales, the
Company added another full time export sales account manager as of April 3,
2000.
The Company owns an 8% equity interest in Enigma Energy Company,
L.L.C. ("Enigma"), a Texas based producer of natural gas and oil. In October,
1999 the equity holders of Enigma, including Astrex, optioned their
respective Enigma equity interests to Comanche Energy Inc., a public company
principally engaged in the production of oil and gas ("Comanche"). Comanche
advises that it exercised the option in January 2000 with the transaction to
close during the present fiscal year ending March 31, 2001. Astrex received
115,253 shares of Comanche common stock in consideration for the option and
is to receive an additional 268,925 shares in consideration for its equity
interest in Enigma when the transaction closes.
On June 29, 2000 the Board of Directors declared a dividend on the
Company's Common Stock of one share of a new Series B Convertible Preferred
Stock for every three shares of Common Stock held as of 5:00 p.m. EDT July 7,
2000 ("Record Date"). The ex dividend date is July 5, 2000. The dividend
shares are to be mailed on July 17, 2000 or as soon thereafter as possible to
holders of record as of the Record Date. Fractional Preferred Stock shares
will not be issued, rather to the extent a holder would otherwise be entitled
to a fractional share that share will be rounded up to a whole share.
In declaring the dividend the Board took into account not only the
Company's strong performance of the fiscal year ended March 31, 2000 but also
the Company's need to preserve capital
4
<PAGE>
for future growth, the relatively low Common Stock 'float', the desire to
better protect the Company's net operating loss federal tax loss carry
forwards, and to better allow any future 'acquisition for stock' and capital
raising opportunities to be free from management stability issues. For these
reasons a dividend of a newly defined Series B Convertible Preferred Stock
with special characteristics was decided upon.
The characteristics of the Series B Convertible Preferred Stock
("Preferred Stock") are definitively delineated in the "Astrex, Inc.
Certificate Of Designations, Preferences And Rights Of Series B Convertible
Preferred Stock" ("Certificate") which should be reviewed for a full and
controlling description but in summary, the principal characteristics are:
1. The Preferred Stock will not be entitled to any preferential dividends,
but will be entitled to any dividend declared on the Common Stock, and
the Common Stock will be entitled to any dividend declared on the
Preferred Stock.
2. Each share of the Preferred Stock will have a liquidation right of
twenty five cents.
3. The Preferred Stock will be entitled to vote on all matters that the
Common Stock is entitled to vote on and will have twelve votes per
Preferred Stock share.
4. Beginning on July 31, 2001 and essentially at all times thereafter the
Preferred Stock will be convertible at the option of the holder into
Common Stock on a share for share basis.
5. The Preferred Stock is subject to significant and very limiting
restrictions on transfer by sale or otherwise. The restrictions
are set fourth in detail in the Certificate but in essence the
Preferred Stock is (i) only transferable to a person or entity who
upon transfer will be the bona fide beneficial owner, or trustee
for the beneficial owner (as opposed to a 'nominee' or 'street
name' holder) of the shares, and further (ii) the transferee
must be closely related (as defined in the Certificate) to the
transferor. Additionally, prior to July 31, 2001 any such
transfers will also be at the sole discretion of the Company and
will only be allowed to the extent, in the sole opinion of the
Company, the transfer will not impair or make it more difficult
to preserve any tax attributes of the Company (including without
limitation, net operating losses, or the rate of use of the same
under the United States Income Tax laws). (Preferred Stock
shares initially dividended to a holder who is not the
beneficial owner, upon application to the Company may be
transferred to the person or entity who was the beneficial owner on
the dividend record date).
The foregoing is only a brief summary of some of the terms of the
Certificate and in all matters the Certificate and not this summary controls.
The Certificate is available from the Company without charge upon request and
is also on public file with the Secretary of State of the State of Delaware.
With this dividend there are presently approximately 5,690,000 shares of
Common Stock and approximately 1,900,000 shares of Series B Convertible
Preferred Stock outstanding. These are the only securities of the Company of
any sort outstanding. Since the dividend has been made equally to all holders
(with some slight variations as a nominal consequence of rounding) there has
been no change in the economic or voting interest of any holder. However,
because the Preferred Stock shares have multiple votes, the holders of those
shares collectively have voting control of the Company and to the extent a
holder converts Preferred Stock shares to Common Stock they will lose those
multiple votes (but gain freely transferable shares). Prior to the dividend
present management of the Company held more then a majority of the Common
Stock and the dividend does not change that control. In the future the
5
<PAGE>
Preferred Stock may make it easier or more difficult for non management stock
holders to effect a 'hostile take over' depending upon to what extent present
management converts or holds that stock. Since the Preferred Stock has only
very limited transferability a 'market' for those shares will not develop,
effectively making conversion of those shares to Common Stock after July 31,
2001 the only alternative for those holders who do not wish to continue to
hold the Preferred Stock or transfer the same to closely related persons or
entities.
COMPETITION
The Company operates in a highly competitive environment. The sale
and distribution of products sold by the electronics distribution industry is
extremely competitive, particularly with regard to price and product
availability. The Company competes with numerous local, regional, and
national distributors, many of which have greater financial resources and
sales than the Company. To a certain extent, the Company also competes with
manufacturers of electronic parts and components, including some of its
suppliers, which are involved in the direct sales of their products.
BACKLOG
At April 1, 2000, the Company's total backlog of confirmed, unfilled
orders was approximately $4,018,000, an increase of 6% over the April 1, 1999
backlog of $3,801,000. The Company expects almost the entire backlog to be
shipped before the end of the fiscal year ending March 31, 2001. The backlog
at year-end is not necessarily indicative of sales for any specific
subsequent period.
COMPLIANCE WITH ENVIRONMENTAL LAWS
In the fiscal years ended March 31, 2000 and 1999 the Company
expended less than $10,000 in order to comply with environmental laws with
respect to the Plainview building. The Company has had no other expenditures
with respect to such laws in that time period.
EMPLOYEES
As of March 31, 2000 the Company had 60 employees. The Company has
senior operating personnel at both its Plainview, New York and West
Springfield, Massachusetts facilities, some of whom have been with the
Company or a subsidiary for more than 15 years. Management believes that its
relations with its employees are satisfactory.
6
<PAGE>
Item 2. PROPERTIES.
Through its wholly owned subsidiary, AVest, Inc., the Company owns a
22,000 square foot building at 205 Express Street, Plainview, New York. The
Company's principal executive offices occupy approximately 750 square feet of
that building with the balance of the building space constituting office,
warehouse and assembly facilities for the Company. The property is adequately
covered by insurance and there are at present no significant renovation,
improvement or development plans with respect to the facility. The Company's
T.F. Cushing, Inc. subsidiary occupies 3,500 square feet in West Springfield,
Massachusetts at an annual rent of $20,760 under a lease that expires August
31, 2000. In addition the Company presently maintains sales offices in
Endwell, New York (1,500 square feet, $15,000 annual rent, under a lease that
expires December 31, 2000), Willow Grove, Pennsylvania (1,323 square feet,
$21,955 annual rent, month-to-month occupancy under a lease which expired
June 1, 1999) and Woburn, Massachusetts (1,058 square feet, $20,985 annual
rent, under a lease that expires November 30, 2000). All of the Company's
premises are adequate for the Company's current and foreseeable requirements.
The Company has no present plans to significantly renovate or improve any of
its leased properties.
During fiscal year ended March 31, 1998 the Company made a long-term
investment of $50,000 in a real estate investment partnership (which owns and
leases commercial property) which represents an immaterial amount of the
Company's assets. The Company is not presently or does not plan to engage in
other real estate activities but reserves the right to engage in any such
activities in the future (generally without stockholder approval).
Item 3. LEGAL PROCEEDINGS.
As of March 31, 2000 and the date hereof there was no litigation
pending against or on behalf of the Company or its properties.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
7
<PAGE>
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
The Company's common stock ("Astrex Common Stock") trades on the
over-the-counter market under the symbol "ASXI". The following table sets
forth the high and low closing bids for Astrex Common Stock. These
over-the-counter market quotations reflect inter-dealer prices without retail
mark-up, mark-down or commission, are approximate and may not necessarily
represent actual transactions.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
CALENDAR YEAR
& QUARTER HIGH CLOSING BID LOW CLOSING BID
--------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1998 First Quarter 5/16 5/16
--------------------------------------------------------------------------------------------
Second Quarter 11/32 5/16
--------------------------------------------------------------------------------------------
Third Quarter 11/32 9/32
--------------------------------------------------------------------------------------------
Fourth Quarter 9/32 27 cents
--------------------------------------------------------------------------------------------
1999 First Quarter 27 cents 1/4
--------------------------------------------------------------------------------------------
Second Quarter 9/32 3/16
--------------------------------------------------------------------------------------------
Third Quarter 7/16 9/32
--------------------------------------------------------------------------------------------
Fourth Quarter 1/2 .37
--------------------------------------------------------------------------------------------
2000 First Quarter 1.01 3/8
--------------------------------------------------------------------------------------------
</TABLE>
For purposes of the disclosure of the aggregate market value of the
voting stock held by non-affiliates as set forth on page 1 of this Report,
the Company has used the price of .52 cents per share, which is the average
of the reported closing bid and ask prices on June 15, 2000.
No dividends have been paid on common stock since April 1978 and the
Company does not anticipate paying cash dividends with respect to common
stock in the foreseeable future.
As of June 15, 2000 there were 5,626,777 shares of the Company's
common stock outstanding and held by 344 holders of record.
8
<PAGE>
Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION.
Results of Operations
The Company had net income of approximately $456,000 for fiscal year
ended March 31, 2000 versus a net loss of approximately $236,000 for fiscal
year ended March 31, 1999. The improved performance for the fiscal year ended
March 31, 2000 was primarily attributable to a $2.1 million increase in sales
and to a lesser extent due to both a decrease in sales, general and
administrative expenses and the absence of any investment write down (in the
fiscal year ended March 31, 1999 the Company wrote down an investment
unrelated to its core business of $232,500).
The Company's gross margins remained constant at 22.7% in fiscal
years ended March 31, 2000 and March 31, 1999.
Net sales for the fiscal year ended March 31, 2000 increased $2.1
million to approximately $16.5 million as compared to approximately $14.4
million for the fiscal year ended March 31, 1999. Approximately $1.1 million
of this increase was due to improved export sales with the balance primarily
the result of product expansion within existing lines.
At April 1, 2000, the Company's total backlog of confirmed, unfilled
orders was approximately $4,018,000 an increase of 6% over the April 1, 1999
backlog of $3,801,000.
Selling, general and administrative expenses decreased approximately
$51,000, or 2%, for the fiscal year ended March 31, 2000, to $3,069,531 from
$3,120,462 for the fiscal year ended March 31, 1999. This decrease was
primarily the result tighter cost controls.
Interest expense increased to $183,438 in fiscal year ended March
31, 2000 from $115,452 in fiscal year ended March 31, 1999. This was due to
an increase in interest rates as well as an increase in borrowings in the
first three quarters of fiscal year 2000.
Liquidity and Capital Resources
The Company generated approximately $376,000 in cash from operations
to reduce payables and its loan balance. At March 31, 2000, the Company had
working capital of $5,037,085 and its stockholders' equity was $3,654,240.
The Company believes that its present working capital, cash generated from
operations and amounts available under its present credit facility discussed
below will be sufficient to meet its cash needs during the next year.
9
<PAGE>
The Company's principal credit facility is a line of credit ("Line")
entered into on July 9, 1997. The Line is secured by substantially all of
the Company's assets, and since May 14, 1999, includes a term loan
collateralized by a mortgage on the 205 Express Street property. Borrowings
under the Line, other than with respect to the mortgage, is based on the
Company's inventory and receivables. During the fiscal year ended March 31,
1999 the provisions of the Line were modified to reduce the interest rate,
increase the maximum availability and extend the then term. Since that
time, on May 14, 1999, the Line was further modified to increase the
overall borrowing availability by converting a negative pledge on the
Company's 205 Express Street property to a mortgage securing a term loan
and extending the term of the Line generally to April 30, 2002.
On March 31, 2000, the Company owed $2,250,000 on the Line. The
Company's relationship with its secured lender is satisfactory and the
Company believes that the lending arrangement will be adequate for the
foreseeable future.
The Company has successfully completed its program to prepare
systems and applications for the year 2000. The costs associated with this
program did not have a material effect on its financial position and have
been incurred.
The Company believes that the relatively moderate rates of
inflation in the year 2000 and 1999 have not had a significant impact on
sales and profitability.
Item 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Pages F-1 et. seq. of this Form 10-KSB are by this reference
incorporated herein.
Item 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
On March 30, 1999 Astrex, Inc. (the "Company") engaged Grant
Thornton LLP ("New Auditor") to audit the Company's financial statements for
the fiscal year to ended March 31, 1999. For the past several fiscal years
prior to the fiscal year ended March 31, 1999, KPMG LLP ("Former Auditor")
performed the Company's annual audit. The Company elected to change auditors
with the approval of its Board of Directors in order to keep its audit costs
reasonably near prior levels while maintaining the same level and quality of
services.
Pursuant to Regulation S-B 228.304 of the Securities and Exchange
Commission, the Company further advises that (a) its Former Auditor did not
resign or decline to stand for re-election and neither
10
<PAGE>
was it dismissed. Rather with the approval of the Company's Board of
Directors, the Company chose to engage its New Auditor for the fiscal year to
end March 31, 1999 audit as opposed to entering into a new engagement with
its Former Auditor; (b) the Former Auditor's accountant's reports on the
financial statements for the Company for each of the past two (2) fiscal
years did not contain an adverse opinion or disclaimer of opinion and were
not qualified as to uncertainty, audit scope, or accounting principles; (c)
during the past two fiscal years and subsequent interim period there have
been no resolved or unresolved disagreements between the Company and the
Former Auditor on any matter of accounting principals or practices, financial
statement disclosure, auditing scope or procedures, which, if not resolved to
the Former Auditor's satisfaction, would have caused it to make reference to
the subject matter of the disagreement(s) in connection with its report; (d)
during the past two fiscal years and subsequent interim period there have
been no events described in Regulation S-B 228.304 (a) (1) (iv) (B); and (e)
upon review of the foregoing the Former Auditors furnished the Company with a
letter addressed to the Securities and Exchange Commission indicating no
disagreement with the foregoing.
PART III
Item 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT.
The following table sets forth for current officers and directors,
(i) that person's name, (ii) if applicable the Director Class elected to,
(iii) all positions with the Company held by that person, (iv) that person's
age, (v) that person's principal occupation for the past five years and (vi)
with respect to directors the date on which that person first became a
director of the Company. Unless otherwise indicated, each person has held the
position shown, or has been associated with the named employer in an
executive capacity, for more than five years. The terms of the current
directors are for three years or until their respective successors are
elected and qualified. The terms of the classes of directors are staggered in
order of roman numeral class number so that one class of directors is elected
each year. The terms of officers expire at the pleasure of the Board of
Directors.
11
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, CAL. YEAR FIRST
BECAME A DIRECTOR OR OFFICER &
DIRECTOR CLASS IF APPLICABLE. PRINCIPAL OCCUPATION FOR PAST FIVE YEARS
----------------------------- ----------------------------------------
<S> <C>
Howard Amster Private investor and registered representative with Ramat Securities,
Director Inc., Cleveland, Ohio previously First Union Securities and predecessor
52 - since 1992 - Class III firms 1979-2000. Director, Geauga Savings Bank, a northern Ohio savings
and loan.
John C. Loring Attorney and private investor, Chicago, Illinois. Director of Geauga
Director and Chairman Savings Bank, a northern Ohio savings and loan, and formerly: Vice
55 - since 1988 - Class III Chairman and a director of GalVest, Inc., a Houston oil and gas company,
director of Weatherford International, a Houston well servicing company,
director of Fleet Aerospace, Inc., a Toronto manufacturer of components for
the aerospace market, and director of Guardian Bankcorp., Inc., a former
Los Angeles Bank.
Michael McGuire Mr. McGuire joined the Company in 1969. Prior to becoming CEO and
Director, CEO and President President he was the Company's General Manager and Director of
45 - since 1991 - Class I Operations. Mr. Michael McGuire and Mr. Robert McGuire are not related.
Robert McGuire Mr. Robert McGuire joined the Company in 1981. Prior to becoming an
Executive Vice President Executive Vice President he held the position of Warehouse Manager. He
50 - since 1997 has worked in the distribution industry since 1976. Mr. Robert McGuire
and Mr. Michael McGuire are not related.
Wayne Miller Mr. Wayne Miller joined the Company in 1996 as the Director of New
Executive Vice President Business Development. Prior to joining the Company Mr. Miller was
45 - since 1997 Director of Sales for Summit Radio Corporation for a year and a half and
prior to that time General Manager of Time Electronics, Inc. a division
of Avnet, Inc., for fifteen years. He has worked in the electronics
distribution industry since 1975.
Lori A. Sarnataro Ms. Lori Sarnataro joined the Company in 1998. Prior to joining the
CFO, Executive Vice President, Company in 1998, Ms. Sarnataro, a Certified Public Accountant, was
Treasurer and Secretary employed with Physician Computer Network, Inc. for five years as Manager
35 - since 1998 of Corporate Accounting and Systems Implementation. Prior to that she
was employed with KPMG LLP for five years as a Senior Auditor and Tax
Specialist.
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, CAL. YEAR FIRST
BECAME A DIRECTOR OR OFFICER &
DIRECTOR CLASS IF APPLICABLE. PRINCIPAL OCCUPATION FOR PAST FIVE YEARS
----------------------------- ----------------------------------------
<S> <C>
Mark Schindler Mr. Schindler is a self-employed consultant, private investor, and a
Director partner in Madison Venture Capital II, Inc., New York, New York. Mr.
78 - since 1960 - Class II Schindler is also a Vice President, Secretary and Director of Kushi
Natural Foods Corp. and formerly owned his own electronics distribution
business. Mr. Schindler was formerly a Director of Natural Child Care,
Inc./Winners All International, Ltd./Erecotes Industries, Inc., Light
Savers U.S.A., Inc. which became Hospitality Worldwide Services, Inc.
and later became Hotel Works.com, Servtex International Inc. which
became Hymedix, Inc. and Director and Treasurer of KMC which became APGI
and later became Tal Wireless Networks, Inc.. Mr. Schindler founded
Astrex, Inc.
Nancy Shields Ms. Nancy Shields joined the Company in 1990. Prior to becoming Vice
Executive Vice President President she was the Corporate Product Manager. Ms. Shields has worked
43 - since 1995 in the electronics distribution industry since 1977.
David S. Zlatin Chief Operating Officer of Ramat Securities, Ltd., Rabbi and private
Director investor.
48 - since 1993 - Class II
</TABLE>
Messrs. Amster, Loring and Michael McGuire are members of the
Board's Executive Committee. In addition John Loring is Chairman and
Secretary of the Company's wholly owned subsidiary AVest, Inc. and David
Zlatin is President and Treasurer of AVest, Inc. They are also AVest's two
directors. The directors of T.F. Cushing, Inc. are the same as for the
Company, and Mr. Michael McGuire is its President and Ms. Sarnataro is its
Treasurer and Secretary.
The Company is not aware of any person who failed to file on a timely
basis any reports relating to the Company required by Section 16(a) of the
Securities Exchange Act during the fiscal year that ended March 31, 2000.
Item 10. EXECUTIVE COMPENSATION.
The following table shows information concerning the compensation paid
or awarded by the Company and its subsidiaries for services to its Chief
Executive Officer and its Executive Vice President of Sales during fiscal years
ended March 31, 2000, 1999 and 1998. Other then Mr. Michael McGuire and Mr.
Miller there were no executive officers of the Company whose compensation was or
exceeded
13
<PAGE>
$100,000. The Company (i) has no retirement, pension, profit sharing,
stock option, stock appreciation rights or long term incentive plans for the
years in question, (ii) has not awarded any bonuses during or for the years in
question, except as set forth in the table below, and to two other executive
officers, and (iii) has no employment contracts or termination of employment and
change of control arrangements for any of the Company's executive officers.
In the first quarter of fiscal year ended March 31, 1997, the Company
awarded 135,000 unregistered forfeitable shares of the Company's common stock to
19 employees (including Mr. Michael McGuire who received 15,000 shares), none of
whom received more than 15,000 shares. The award provided that to the extent an
employee ceased to be employed by the Company prior to April 1, 2000 (other than
on account of death) the shares awarded to said employee were forfeited to the
Company. At March 31, 2000, 100,000 shares of the original 135,000 shares vested
according to the terms of the award, 35,000 shares having been previously
forfeited by persons leaving the employ of the Company during the four year
vesting period. It is not expected that any cash dividends will be paid on these
shares for the foreseeable future.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
NAME AND ANNUAL COMPENSATION COMPENSATION AWARDS
PRINCIPAL POSITION FISCAL YEAR SALARY ($) BONUS ($) RESTRICTED STOCK
AWARDS ($)
----------------------------------- ------------- ------------------ ------------------- --------------------
<S> <C> <C> <C> <C>
Michael McGuire 2000 $231,438 $86,000(1) - (2)
----------------------------------- ------------- ------------------ ------------------- --------------------
CEO & President 1999 $164,577 $61,000 -
----------------------------------- ------------- ------------------ ------------------- --------------------
1998 $161,000 $57,360 -
----------------------------------- ------------- ------------------ ------------------- --------------------
Wayne Miller 2000 $113,305 $18,000 - (2)
----------------------------------- ------------- ------------------ ------------------- --------------------
Executive Vice President of Sales 1999 $105,023 - -
----------------------------------- ------------- ------------------ ------------------- --------------------
1998 $101,506 - -
----------------------------------- ------------- ------------------ ------------------- --------------------
</TABLE>
(1) Bonus is subject to final Board of Directors approval.
(2) Mr. McGuire and Mr. Miller were each given 15,000 unregistered forfeitable
shares of Common stock as compensation in fiscal year 1997 with a fair
market value of 31 cents per share. These shares were forfeitable to the
extent they ceased to be employed by the Company (other than on account of
death) before April 1, 2000. At March 31, 2000 the fair market value of
the 30,000 shares were 84 cents per share for an aggregate fair value of
$25,200.
The Board of Directors held 2 meetings during fiscal year ended March
31, 2000. Each of the directors of the Company attended each of those meetings
except for Mr. Howard Amster who was excused from one meeting. Other than the
Executive Committee there were no active standing committees of the Board of
Directors during that fiscal year. During that fiscal year the Board of
Directors fee for each director who is not a full time employee of the Company
was $1,500 plus a `per meeting' fee of $750. Pursuant to this arrangement each
of the directors other than Mr. McGuire, received $3,000 except for Mr. Howard
Amster who received $2,250. In addition, during the fiscal year ended March 31,
2000 (i) Mr. Loring for services as Chairman of the Board and the Executive
Committee received $29,333 and $47,000 respectively, and (ii) Mr. Amster for his
services on the
14
<PAGE>
Executive Committee received $47,000. During the fiscal year ended March 31,
1999 Mr. Loring received $25,000 for services as Chairman of the Board and
$15,000 for services with respect to the Enigma transaction and certain other
matters and Messrs. Amster and Loring each received $29,500 for services with
respect to the Executive Committee.
Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth the number and percentage of shares of
the Company's common stock beneficially owned as of June 15, 2000 by persons who
are known (based on the Company's review of Forms 13G and 13D delivered to the
Company) by the Company to be the beneficial owners of more than 5% of the
Company's outstanding common stock as of that date, and the directors of the
Company and its chief executive officer, and all officers and directors of the
Company as a group. For purposes of this Report, beneficial ownership is defined
in accordance with Rule 13d-3 of the Securities and Exchange Commission to mean
generally the power to vote or dispose of shares, regardless of any economic
interest therein. The persons listed have direct sole voting power and direct
sole dispositive power with respect to all shares set forth in the table unless
otherwise specified in the footnotes to the table.
15
<PAGE>
BENEFICIAL HOLDERS OF MORE THAN 5% OF COMMON STOCK
<TABLE>
<CAPTION>
---------------------------------------------- ----------------------- -------------------
NAME AND ADDRESS OF BENEFICIAL OWNERS AMOUNT AND NATURE OF PERCENTAGE (1)
BENEFICIAL OWNERSHIP OF CLASS
---------------------------------------------- ----------------------- -------------------
<S> <C> <C>
Howard Amster(2) 885,425(2) 15.74%
205 Express Street
Plainview, New York 11803
---------------------------------------------- ----------------------- -------------------
FMR, Corp. (3) 565,723(3) 10.05%
82 Devonshire Street
Boston, Massachusetts 02109
---------------------------------------------- ----------------------- -------------------
Herzog, Heine, Geduld, Inc. 646,426 11.49%
26 Broadway
New York, New York 10004
---------------------------------------------- ----------------------- -------------------
John C. Loring(4) 1,808,780(4) 32.15%
205 Express Street
Plainview, New York 11803
------------------------------------------------------------------------------------------
</TABLE>
OFFICER AND DIRECTOR HOLDINGS OF COMMON STOCK
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
NAME AND ADDRESS OF BENEFICIAL OWNERS AMOUNT AND NATURE OF PERCENTAGE(1)
BENEFICIAL OWNERSHIP OF CLASS
---------------------------------------------- ----------------------- -------------------
<S> <C> <C>
Howard Amster(2) 885,425(2) 15.74%
---------------------------------------------- ----------------------- -------------------
John C. Loring(4) 1,808,780(4) 32.15%
---------------------------------------------- ----------------------- -------------------
Michael McGuire(5) 262,975(5) 4.67%
---------------------------------------------- ----------------------- -------------------
Mark Schindler 1,449 *
---------------------------------------------- ----------------------- -------------------
David S. Zlatin 0 *
---------------------------------------------- ----------------------- -------------------
Wayne Miller 44,000 *
---------------------------------------------- ----------------------- -------------------
All Other Officers 35,000 *
---------------------------------------------- ----------------------- -------------------
All Officers and Directors as a group
(9 persons)(2,4,&5) 3,037,629(2,4,&5) 53.99%
---------------------------------------------- ----------------------- -------------------
</TABLE>
(*) Less than 1%.
(1) Based on 5,626,777 shares outstanding.
(2) Does not include 281,025 shares owned by The Madav IX Foundation.
Howard Amster is a director of The Madav IX Foundation but disclaims any
beneficial ownership of its shares.
(3) 565,723 shares are beneficially owned by Fidelity Equity Income Fund,
its wholly owned subsidiary.
(4) Includes 271,970 shares owned by his spouse's IRA, the beneficial
ownership of which he disclaims.
(5) Includes 104,537 shares owned by his spouse's IRA, the beneficial ownership
of which he disclaims.
16
<PAGE>
Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
During the Fiscal Year ended March 31, 1999, in July 1998, in order
to fund a business acquisition the Company privately placed 1,200,000
initially (and still) unregistered shares of Astrex common stock with its
Chairman of the Board and certain members of his family at twenty five cents
a share for a total consideration of $300,000. At that time the per share
market price of registered Astrex common stock was reported to have been
11/32 bid and 7/16 asked. The subscription agreement provided among other
things that in the event the Company did not make a rights offering on
similar terms to substantially all its shareholders by November 1998 (which
in fact did not occur) then the Company would have an option, but not the
obligation to buy back the 1,200,000 shares during February 1999 for $318,000
(which, if the private placement/option was viewed as a loan would have
suggested a 10% interest rate on an annualized basis). In February 1999 the
Board of Directors, without the participation in any way of Mr. Loring,
determined that it would not be in the best interests of the Company to
exercise the Company's option for those 1,200,000 shares.
PART IV
Item 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
<TABLE>
<CAPTION>
(a) (1) Financial Statements PAGE NO.
-------------------- --------
<S> <C>
Reports of Independent Certified Public Accountants F-1
Consolidated Balance Sheet as of March 31, 2000 F-2
Consolidated Statements of Operations for the years ended March 31, 2000 and 1999 F-3
Consolidated Statements of Shareholders' Equity F-4
for the years ended March 31, 2000 and 1999
Consolidated Statements of Cash Flows for the years ended March 31, 2000 and 1999 F-5
Notes to Consolidated Financial Statements F-6-F-15
</TABLE>
17
<PAGE>
(a)(3) EXHIBITS
The exhibits listed on the accompanying Exhibit Index are filed as
part of this report.
<TABLE>
<CAPTION>
Previously Filed and Incorporated
Exhibit Description by reference or Filed Herewith
------- ----------- ------------------------------
<S> <C> <C>
3 (a) Certificate of Incorporation of Astrex, Inc., as amended Filed as Exhibit 3(a) to the Form 10-QSB
(a Delaware corporation) of the Company for the quarter ended
September 30, 1997
3 (b) By-Laws of Astrex, Inc., as amended Filed as Exhibit 3(b) to the Form 10-QSB
of the Company for the quarter ended
September 30, 1996
10(a) Amended and Restated Credit and Security Agreement Filed as Filed as Exhibit 10(c) to the Form 10-
Exhibit 10(c) to the Form (Revolver) between Astrex, Inc. QSB of the Company for the quarter ended
and Fleet National Bank 10-QSB of the Company for the September 30, 1998
quarter dated August 31, 1998 ended September 30, 1998
10 (b) Amendment No. 1 To Credit and Security Agreement between Filed as Exhibit 10(d) to the Form
Astrex, Inc. and Fleet National Bank dated August 31, 1998 10-QSB of the Company for the quarter
ended September 30, 1998
10(c) Appendix A to Credit and Security Agreement (Revolver) Filed as Exhibit 10(b) to the Form
between Astrex, Inc. and Fleet National Bank dated July 9, 10-QSB of the Company for the quarter
1997 ended September 30, 1997
10(d) Pledge Agreement between Astrex, Inc. and Fleet National Filed as Exhibit 10(c) to the Form
Bank dated July 9, 1997 10-QSB of the Company for the quarter
ended September 30, 1997
10(e) Revolving Credit Promissory Note between Astrex, Inc. Filed as Exhibit 10(d) to the Form
and Fleet National Bank dated July 9, 1997 10-QSB of the Company for the quarter
ended September 30, 1997
10(f) Guaranty Agreement between AVest, Inc. and Fleet National Filed as Exhibit 10(e) to the Form
Bank dated July 9, 1997 10-QSB of the Company for the quarter
ended September 30, 1997
10(g) Guaranty Agreement between T.F. Cushing, Inc. and Fleet Filed as Exhibit 10(f) to the Form
National Bank dated July 9, 1997 10-QSB of the Company for the quarter
ended September 30, 1997
10(h) Guaranty Confirmation Agreement between T.F. Cushing, Filed as Exhibit 10(d) to the Form
Inc. and Avest, Inc. and Fleet National Bank dated 10-QSB of the Company for the quarter
August 31,1998 ended September 30, 1998
10(i) Purchase and Option Agreement between Astrex, Inc., Filed as Exhibit 10(a) to the Form 10-QSB of
Enigma Energy Company and Members dated June 6, 1998 the Company for the quarter ended June 30, 1998
18
<PAGE>
10(j) Subscription and Stock Purchase Agreement between Astrex, Filed as Exhibit 10(b) to the Form 10-QSB of
Inc. and John C. Loring and Elizabeth S. Loring dated the Company for the quarter ended June 30, 1998
July 15, 1998
10(k) Amendment No. 3 To Credit and Security Agreement dated Filed as Exhibit 10(a) to the Form
May 14,1999. 10-QSB of the Company for the quarter
ended June 30, 1999
10(l) Second Amended and Restated Revolving Credit Promissory Filed as Exhibit 10(b) to the Form 10-QSB of the
Note dated May 14, 1999 Company for the quarter ended June 30, 1999
10(m) Term Loan Promissory Note, dated May 14, 1999 Filed as Exhibit 10(c) to the Form
10-QSB of the Company for the quarter
ended June 30, 1999
10(n) Guaranty Confirmation Agreement (With Modifications), Filed as Exhibit 10(d) to the Form 10-QSB of
dated May 14, 1999 the Company for the quarter ended June 30, 1999
10(o) Mortgage from Avest, Inc. To Fleet National Bank, dated Filed as Exhibit 10(e) to the Form
May 14, 1999 10-QSB of the Company for the quarter
ended June 30, 1999
21 Subsidiaries of the registrant Filed as Exhibit 21 to Form 10-KSB/A-1
of the Company for the year ended March
31, 1998
27 Financial Data Schedule Filed herewith
</TABLE>
(b) No Current Reports on Form 8-K were filed by the Company.
19
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Shareholders
ASTREX, INC.
We have audited the accompanying consolidated balance sheet of Astrex, Inc.
and subsidiaries (the "Company") as of March 31, 2000 and the related
consolidated statements of earnings, shareholders' equity and cash flows for
the years ended March 31, 2000 and 1999. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. 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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Astrex, Inc. and subsidiaries as of March 31, 2000 and the results of
their operations and their cash flows for the years ended March 31, 2000 and
1999 in conformity with accounting principles generally accepted in the
United States of America.
GRANT THORNTON LLP
Melville, New York
June 1, 2000
F-1
<PAGE>
Astrex, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEET
March 31, 2000
ASSETS
<TABLE>
<S> <C>
CURRENT ASSETS
Cash $ 57,001
Accounts receivable (net of allowance for doubtful
accounts of $79,000) 2,299,277
Inventory 4,436,621
Prepaid expenses and other current assets 46,336
-----------
Total current assets 6,839,235
FIXED ASSETS, NET 702,975
INVESTMENTS 164,181
----------
$7,706,391
==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $1,172,119
Accrued liabilities 598,414
Current portion of capital lease obligations 31,618
-----------
Total current liabilities 1,802,151
LONG-TERM DEBT 2,250,000
SHAREHOLDERS' EQUITY
Preferred stock, Series A - par value $5 per share; authorized,
200,000 shares; issued, none -
Preferred stock, Series B - par value $.01 per share; authorized,
10,000,000 shares; issued, none -
Common stock - par value $.01 per share; authorized, 15,000,000
shares; issued and outstanding, 6,540,363 shares 65,404
Additional paid-in-capital, net 3,902,342
Accumulated deficit (48,566)
Treasury stock - 913,586 shares, at cost (264,940)
----------
3,654,240
----------
$7,706,391
==========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS STATEMENT.
F-2
<PAGE>
Astrex, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
---------------------------------
2000 1999
----------- -----------
<S> <C> <C>
Net sales $16,512,451 $14,373,403
Cost of sales 12,771,309 11,112,958
----------- ----------
Gross profit 3,741,142 3,260,445
Selling, general and administrative expenses 3,069,531 3,120,462
----------- -----------
Income from operations 671,611 139,983
Write-down of investment (232,500)
Interest expense (183,438) (115,452)
Other income, net 29
----------- -------------
Income (loss) before provision
for income taxes 488,173 (207,940)
Provision for income taxes 31,858 28,413
----------- -------------
NET INCOME (LOSS) $ 456,315 $ (236,353)
=========== =============
Net income (loss) per share
Basic and diluted $ .08 $ (.05)
=== ====
Weighted-average common shares and common
equivalent shares outstanding
Basic 5,526,777 5,181,572
========= =========
Diluted 5,626,777 5,181,572
========= =========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
F-3
<PAGE>
Astrex, Inc. and Subsidiaries
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Years ended March 31, 2000 and 1999
<TABLE>
<CAPTION>
Common stock,
par value $.01 per share Additional Deferred
--------------------------- paid-in compen-
Shares Amount capital sation
----------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
Balance, March 31, 1998 4,459,277 $53,729 $3,620,359 $(14,272)
Amortization of deferred compensation - - - 7,320
Shares issued to fund Enigma
transaction 1,200,000 12,000 288,000 -
Shares forfeited under deferred
compensation arrangement (30,000) (300) (6,210) 6,510
Net loss - - - -
-------------- ----------- ---------------- ---------
Balance, March 31, 1999 5,629,277 65,429 3,902,149 (442)
Amortization of deferred compensation - - - 610
Shares forfeited under deferred
compensation arrangement (2,500) (25) (518) 543
Net income - - - -
-------------- ----------- ---------------- --------
BALANCE, MARCH 31, 2000 5,626,777 $65,404 $3,901,631 $ 711
========= ======= ========== ========
</TABLE>
<TABLE>
<CAPTION>
Accu-
mulated Treasury
deficit stock Total
---------------- --------- -----------
<S> <C> <C>
$(268,528) $(264,940) $3,126,348
- - 7,320
- - 300,000
- - -
(236,353) - (236,353)
-------- -------------- ----------
(504,881) (264,940) 3,197,315
- - 610
- - -
456,315 - 456,315
-------- -------------- ---------
$ (48,566) $(264,940) $3,654,240
========= ======== =========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS STATEMENT.
F-4
<PAGE>
Astrex, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended March 31,
-------------------------------
2000 1999
--------- ------------
<S> <C> <C>
Cash flows from operating activities
Net income (loss) $ 456,315 $ (236,353)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities
Depreciation and amortization 91,792 92,596
Amortization of deferred stock compensation 610 7,320
Write-down of investment - 232,500
Changes in assets and liabilities
(Increase) decrease in accounts receivable, net (406,714) (390,808)
Decrease (increase) in inventory 3,491 (1,057,249)
Decrease (increase) in prepaid expenses and other
current assets 18,737 (3,245)
(Decrease) increase in accounts payable 192,938 (5,495)
Increase (decrease) in accrued liabilities 19,239 244,966
--------- -----------
Net cash provided by (used in) operating activities 376,408 (1,115,768)
--------- -----------
Cash flows from investing activities
Capital expenditures (88,272) (26,819)
Investments - (322,330)
--------- -----------
Net cash used in investing activities (88,272) (349,149)
--------- -----------
Cash flows from financing activities
(Repayments) proceeds of loan payable (162,768) 1,212,768
Proceeds from issuance of common stock - 300,000
Principal payments under capital lease obligations (46,016) (47,851)
Deferred financing costs (24,351) -
--------- -----------
Net cash provided by (used in) financing activities (233,135) 1,464,917
--------- -----------
NET CHANGE IN CASH 55,001 -
Cash, beginning of year 2,000 2,000
--------- -----------
Cash, end of year $ 57,001 $ 2,000
========= ===========
Supplemental disclosures of cash flow information:
Cash paid during the year for
Interest $ 167,731 $ 117,649
========== ===========
Income taxes $ 4,892 $ 14,350
========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
F-5
<PAGE>
Astrex, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000 and 1999
NOTE A - DESCRIPTION OF BUSINESS
Astrex, Inc. and subsidiaries (the "Company") sells, assembles and
distributes electronic parts and components in one business segment.
Approximately 82% and 81% of the Company's sales in fiscal 2000 and 1999,
respectively, consist of connectors that link electronic components
together and generally consists of a shell, insert, contacts and adaptive
hardware. The other products sold by the Company, which comprise the
remaining 18% and 19% of sales in fiscal 2000 and 1999, respectively, are
devices that control or regulate the flow of electricity to or within
components. The Company's largest markets include the defense, aerospace,
industrial and computer industries, which sales are worldwide with a
concentration in the Northeast and Mid-Atlantic states.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies applied in the preparation
of the accompanying consolidated financial statements is as follows:
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Astrex, Inc.
and its subsidiaries, all of which are wholly-owned. All significant
intercompany accounts and transactions have been eliminated.
The Company has an 8% equity interest in a limited liability company (see
Note G) and an 8.52% interest in a limited partnership ("nonequity
affiliates"). These investments are accounted for by the cost method,
whereby the Company's interest in the net income of these affiliates is
recognized upon the receipt of cash distributions. Such investments are
reflected in "Investments" in the consolidated balance sheet at March 31,
2000.
FINANCIAL INSTRUMENTS AND BUSINESS CONCENTRATIONS
Financial instruments which potentially subject the Company to
concentration of credit risk consist principally of accounts receivable.
Concentration of credit risk with respect to accounts receivable is
generally mitigated due to the large number of entities comprising the
Company's customer base and their dispersion across geographic areas and
industries. The Company routinely addresses the financial strength of its
customers and, as a consequence, believes that its accounts receivable
credit risk exposure is limited. No single customer accounted for more than
10% of the Company's sales and accounts receivable in fiscal 2000 and 1999.
F-6
<PAGE>
Astrex, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
March 31, 2000 and 1999
NOTE B (CONTINUED)
Statement of Financial Accounting Standards No. 107 ("SFAS No. 107"), "Fair
Value of Financial Instruments," requires disclosure of the estimated fair
value of an entity's financial instrument assets and liabilities. The
Company's principal financial instrument consists of a line of credit and
term loan facility and an interest rate swap agreement, expiring April 30,
2002, with one participating bank. The Company believes that the carrying
amounts of such debt and the interest rate swap agreement approximate the
fair value as the interest rates approximate the current prevailing
interest rates.
The Company generally purchases products from manufacturers pursuant to
nonexclusive distributor agreements. The Company's top four suppliers
accounted for 48% and 44% of purchases for the fiscal years ended March 31,
2000 and 1999, respectively. There can be no assurance that, in the event a
supplier cancels its distributor agreement with the Company, the Company
will be able to replace the sales with sales of other products.
USE OF ESTIMATES
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements, as well as the reported amounts of revenues and
expenses during the reporting period.
REVENUE RECOGNITION
The Company recognizes revenue as products are shipped and title passes to
customers. Right of return exists only for damaged products.
INVENTORY
Inventory, consisting principally of finished goods, is stated at the lower
of cost or market. Cost is determined using the first-in, first-out method.
LONG-LIVED ASSETS
The Company monitors the recoverability of long-lived assets, including
investments and fixed assets, based on estimated use factors such as future
asset utilization, business climate and future undiscounted cash flows
expected to result from the use of the related assets or realized upon
sale. The Company's policy is to write down assets to their net recoverable
amount in the period when it is determined that the carrying amount of the
asset is not likely to be recoverable.
F-7
<PAGE>
Astrex, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
March 31, 2000 and 1999
NOTE B (CONTINUED)
FIXED ASSETS
Depreciation of fixed assets is computed by the straight-line method over
the estimated useful lives of the assets. Equipment held under capital
leases is amortized on the straight-line method over the shorter of the
lease term or estimated useful life of the asset.
DERIVATIVE FINANCIAL INSTRUMENTS
Derivative financial instruments are used by the Company principally in the
management of its foreign currency and interest rate exposures. Amounts to
be paid or received under interest rate swap agreements are accrued as
interest rates change and are recognized over the life of the swap
agreements as an adjustment to interest expense. The fair value of the
swaps agreements is not recognized in the accompanying consolidated
financial statements since they are accounted for as hedges.
ADVERTISING
Advertising costs are expensed as incurred and totaled $28,000 and $32,000
for the fiscal years ended March 31, 2000 and 1999, respectively.
INCOME TAXES
Deferred income taxes are recognized for temporary differences between
financial statement and income tax bases of assets and liabilities and net
operating loss carryforwards for which income tax expenses or benefits are
expected to be realized in future years. A valuation allowance has been
established to reduce deferred tax assets as it is more likely than not
that all, or some portion, of such deferred tax assets will not be
realized. The effect on deferred taxes of a change in tax rates is
recognized in income in the period that includes the enactment date.
INCOME (LOSS) PER COMMON SHARE
Statement of Financial Accounting Standards No. 128 ("SFAS No. 128"),
"Earnings Per Share," replaced the calculation of primary and fully diluted
earnings (loss) per share with basic and diluted earnings per share.
Pursuant to SFAS No. 128, earnings (loss) per common share is computed by
dividing net income (loss) available to common stockholders by the weighted
average number of shares outstanding during the period. Diluted earnings
per share reflect the potential dilution that could occur if securities or
other contracts to issue common stock were exercised or converted into
common stock or resulted in the issuance of common stock. For the fiscal
year ended March 31, 1999, there is no difference between basic and diluted
weighted-average common shares and common equivalent shares
F-8
<PAGE>
Astrex, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
March 31, 2000 and 1999
NOTE B (CONTINUED)
outstanding. Potential common shares were excluded in computing basic and
diluted net loss per share for 1999 as their effects would be antidilutive.
The following table sets forth the reconciliation of the weighted average
number of common shares:
<TABLE>
<CAPTION>
2000 1999
----------- --------------
<S> <C> <C>
Basic 5,526,777 5,181,572
Effect of dilutive securities 100,000 -
----------- --------------
Diluted 5,626,777 5,181,572
========= ==============
</TABLE>
NOTE C - FIXED ASSETS
Fixed assets consist of the following at March 31, 2000:
<TABLE>
<CAPTION>
Estimated
useful life
---------------
<S> <C> <C>
Land $ 128,836
Building and improvements 2 to 30 years 614,557
Equipment, furniture and fixtures 5 to 10 years 492,563
----------
1,235,956
Less accumulated depreciation 532,981
-----------
$ 702,975
===========
</TABLE>
Included in equipment, furniture and fixtures are assets recorded under
capitalized leases at March 31, 2000 for $30,678.
F-9
<PAGE>
Astrex, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
March 31, 2000 and 1999
NOTE D - LOANS PAYABLE
The Company's collateralized lending agreement with its bank (the
"Agreement"), as amended, provides the Company with a line of credit equal
to 85% of its eligible accounts receivable and 25% of its eligible net
inventory up to a maximum of $3,150,000, through April 2002, and provides a
term loan of $850,000 collateralized by a mortgage on the 205 Express
Street property, with a maturity date of April 2002. Interest is payable
monthly at short-term, fixed-rate borrowings, for fixed amounts at LIBOR
plus 1-1/2%, or daily borrowing at the bank's prime rate or a mixture of
the two. Debt outstanding at March 31, 2000, amounted to $2,250,000 and has
been classified according to the repayment terms of this Agreement. The
Agreement contains certain financial covenants relating to the maintenance
of various financial ratios and restrictions on the payment of dividends by
the Company.
On July 1, 1999, the Company entered into a swap agreement expiring in
April 2002 for an aggregate amount of $2,250,000 to limit the effect of
increases in the interest rates on any floating rate debt. The swap
agreement is a contract to exchange floating rate for fixed interest
payments periodically over the life of the agreement without the exchange
of the underlying amount. The effect of this agreement is to limit the
interest rate exposure on the Company's debt to 6.2% plus 1-1/2% on
$2,250,000 (reduced by $750,000 every year thereafter until April 30,
2002).
NOTE E - INCOME TAXES
The provision for income tax expense for the years ended March 31, 2000 and
1999 consists principally of state and local income taxes. Federal income
tax expense in 2000 has been offset by the utilization of net operating
loss carryforwards available to the Company.
F-10
<PAGE>
Astrex, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
March 31, 2000 and 1999
NOTE E (CONTINUED)
Total income tax expense for fiscal 2000 and 1999 differed from the amounts
computed by applying the United States Federal income tax rate of 34% to
income before income taxes as a result of the following:
<TABLE>
<CAPTION>
2000 1999
---------- ----------
<S> <C> <C>
Computed "expected" tax (benefit)/expense $ 165,979 $ (71,000)
State income taxes, net 21,026 18,700
Other 4,369 (9,287)
Utilization of net operating loss carryforwards (159,516) -
Valuation allowance 90,000
---------- ----------
$ 31,858 $ 28,413
========== ==========
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at March
31, 2000 and 1999 are presented below:
<TABLE>
<CAPTION>
2000 1999
------------- -----------
<S> <C> <C>
Deferred tax assets
Net operating loss and other carryforwards $ 2,229,000 $ 2,171,000
Inventory 537,000 603,000
Write-down of investment 63,000 93,000
Bad debts 32,000 32,000
Compensation and other 53,000 21,000
----------- -----------
Total gross deferred tax assets 2,914,000 2,920,000
Less valuation allowance (2,852,000) (2,859,000)
----------- -----------
62,000 61,000
Deferred tax liabilities
Depreciation and other (62,000) (61,000)
----------- -----------
$ - $ -
=========== ===========
</TABLE>
F-11
<PAGE>
Astrex, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
March 31, 2000 and 1999
NOTE E (CONTINUED)
Primarily due to competitive pricing pressures in the Company's industry
and their potential impact on operating results, the Company does not
believe that it is more likely than not that it will utilize its deferred
tax assets. As a result, the Company established a valuation allowance
against its net deferred tax assets at March 31, 2000. The amount of
deferred tax assets and corresponding valuation allowance decreased by
$7,000 during the fiscal year ended March 31, 2000.
At March 31, 2000, the Company has a net operating loss carryforward
available for Federal income tax purposes of approximately $6,546,000,
expiring through 2019. During 1992, the Company experienced an ownership
change, as defined by Section 382 of the Internal Revenue Code of 1986, as
amended, and Section 383 of the Code. As a result of this event, the
Company will be limited in its ability to use net operating loss
carryforwards in future years (the annual limitation is $453,000). The net
operating loss carryforwards not subject to limitation amounted to
approximately $4,125,000 at March 31, 2000.
NOTE F - RETIREMENT PLAN
The Company has a defined contribution plan which is qualified under
Section 401(k) of the Internal Revenue Code. All regular full-time
employees are eligible for voluntary participation upon completing one year
of service and having attained the age of twenty-one. The Company retains
the right to make optional contributions for any plan year. Employer
contributions to the plan have not been made for fiscal 2000 and 1999.
NOTE G - IMPAIRMENT OF ASSETS
On July 20, 1998, the Company entered into an agreement with Enigma Energy
Company, L.L.C. ("Enigma") and its members to purchase an 8% equity
interest in Enigma with an option ("Option") to purchase the remaining
equity interest at a later date. The purchase price for the 8% equity
interest in Enigma and the Option was $300,000 ($225,000 attributed to the
equity interest and $75,000 attributed to the Option). In order to fund
this transaction, the Company privately placed 1,200,000 initially
unregistered shares of the Company's common stock with its Chairman of the
Board and his family at twenty-five cents per share for a total
consideration of $300,000. The Private Placement Agreement provided in part
that if the Company did not make a rights offering of registered shares on
similar terms by November 1998, which it did not, then the Company would
have the option of repurchasing those
F-12
<PAGE>
Astrex, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
March 31, 2000 and 1999
NOTE G (CONTINUED)
privately placed shares. In February 1999, the Board of Directors, without
the participation of its Chairman, determined that it would not be in the
best interest of the Company to exercise the repurchase option. On December
15, 1998, the Company determined, in light of Enigma's post-1998 drilling
results and the depressed energy market, that it would not exercise the
Option. As a consequence of this decision, the Company recognized an
impairment charge of $232,500 for the fiscal year ended March 31, 1999,
with $150,000 of the total charge recorded in the fourth quarter of fiscal
1999 with respect to this asset.
In October 1999, the equity holders of Enigma, including Astrex, optioned
their respective equity interests to Comanche Energy Inc. ("Comanche"), a
nonreporting public company. Astrex received 115,253 shares of Comanche
common stock in consideration for the option and will receive an additional
268,925 shares for its entire equity interest upon final settlement of the
agreement. No gain or loss was recognized on the exchange and,
accordingly, the carrying value of the Company's total cost investment in
both Enigma and Comanche is approximately $90,000 at March 31, 2000.
NOTE H - SHAREHOLDERS' EQUITY
In April 1996, the Company awarded 135,000 registered, forfeitable shares
of the Company's common stock to nineteen employees, none of whom received
more than 15,000 shares. Each employee's shares were subject to forfeiture
in the event the employee ceased to be employed by the Company, for reasons
other than death, prior to April 1, 2000. Pursuant to that forfeiture
provision, 35,000 shares were forfeited (2,500, 30,000 and 2,500 in fiscal
1998, 1999 and 2000, respectively), and the remaining 100,000 shares vested
at March 31, 2000. The fair value at the time of the April 1996 grant of
the shares has been amortized to selling, general and administrative
expenses over the four-year vesting period. Amortization expense amounted
to $610 and $7,320 in fiscal 2000 and 1999, respectively.
In fiscal 1997, the Company also purchased 913,586 shares of its common
stock for $264,940 from one of its principal shareholders. These shares are
being held as treasury shares.
F-13
<PAGE>
Astrex, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
March 31, 2000 and 1999
NOTE I - CAPITAL LEASES
The Company finances the purchase of certain computer and telephone
equipment through capital leases. The Company's minimum future obligations
under these capital leases are as follows:
<TABLE>
<S> <C>
Total minimum lease payments for the
fiscal year ending March 31, 2001 $32,724
Less amount representing interest 1,106
-------
Present value of net minimum lease payments $31,618
=======
</TABLE>
NOTE J - COMMITMENTS
LEASES
The Company is obligated under noncancellable operating leases covering
office facilities and equipment through 2001. At March 31, 2000, minimum
annual future rental commitments under these leases are as follows:
<TABLE>
<S> <C>
Fiscal year ending March 31, 2001 $40,888
=======
</TABLE>
Rent expense (for leased property and equipment) included in selling,
general and administrative expenses for the years ended March 31, 2000 and
1999 was $97,575 and $93,430, respectively.
PRESIDENT'S COMPENSATION PLAN
For fiscal year ended March 31, 2000, the President is entitled to receive
a bonus equal to 25% of the Company's pretax net income, before such bonus
accrual, above $250,000 adjusted for certain income and expense items as
defined. In fiscal 2000, the President earned a bonus of $86,000 under this
plan.
NOTE K - EXPORT SALES
Export sales were $1,790,000 and $682,000 in 2000 and 1999, respectively,
representing an aggregate of 11% and 5% of the Company's net sales in 2000
and 1999, respectively.
F-14
<PAGE>
Astrex, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
March 31, 2000 and 1999
NOTE L - EVENT SUBSEQUENT TO AUDITORS' REPORT (UNAUDITED)
On June 29, 2000 the Board of Directors declared a dividend on the
Company's common stock of one share of a new Series B Convertible Preferred
Stock ("the Preferred Stock") for every three shares of common stock held
as of July 3, 2000. The terms of the Preferred Stock are as follows:
1. The Preferred Stock is not entitled to any preferential dividends,
but is entitled to any dividend declared on the common stock and the
common stock will be entitled to any dividend declared on the
Preferred Stock.
2. Each share of the Preferred Stock has a liquidation right of twenty-
five cents.
3. The Preferred Stock is entitled to vote on all matters that the common
stock is entitled to vote on and will have twelve votes per Preferred
Stock share.
4. Subsequent to July 30, 2001, the Preferred Stock will be convertible at
the option of the holder into common stock on a share for share basis.
5. The Preferred Stock is subject to restrictions on transfer by sale or
otherwise, as defined.
As a result of this dividend, approximately 1,900,000 shares of the
Preferred Stock will be outstanding.
The capital structure and net income (loss) per share as reported in the
accompanying consolidated financial statements as of March 31, 2000 and for
the years ended March 31, 2000 and 1999 are based on the capital structure
of the Company prior to this dividend.
F-15
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ASTREX, INC.
(Registrant)
by /s/ Michael Mcguire
--------------------------
Michael McGuire, President
and Chief Executive Officer
(principal executive officer)
Dated: June 26, 2000
-------------
In accordance with the Exchange Act, this report has been signed
below by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated.
<TABLE>
<S> <C>
/s/ John C. Loring /s/ Michael McGuire
------------------ ---------------------
John C. Loring, Chairman of the Board Michael McGuire, Director,
and Director
Dated: June 26, 2000 Dated: June 26, 2000
-------------- -------------
/s/ Howard Amster /s/ Mark Schindler
----------------- ------------------
Howard Amster, Director Mark Schindler, Director
Dated: June 26, 2000 Dated: June 26, 2000
--------------- --------------
/s/ David S. Zlatin /s/ Lori A. Sarnataro
------------------- ---------------------
David S. Zlatin, Director Lori A. Sarnataro, CFO, Executive Vice
President, Treasurer and Secretary
Dated: June 26, 2000 (principal financial and accounting officer)
-------------
Dated: June 26, 2000
--------------
</TABLE>
