U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-KSB
(Mark One)
[x] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended June 30, 1995
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission file number 0-3344
ASTROSYSTEMS, INC.
(Name of small business issuer in its charter)
Delaware 13-5691210
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Six Nevada Drive, Lake Success, NY 11042
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number (516) 328-1600
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on which
Title of each class registered
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.10 per share
(Title of Class)
Check whether the issuer (1) filed all reports required to
be filed by Section 13 or 15(d) of the Securities 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..........
Check if no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is 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.
The Registrant's revenues for fiscal year ended June 30,
1995 were $12,319,000.
The aggregate market value of the Registrant's Common Stock
held by nonaffiliates of the Registrant is $14,745,741 (as of
August 31, 1995).
(ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PAST FIVE YEARS):
Check whether the issuer has filed all documents and
reports required to be filed by Section 12, 13 or 15 (d) of the
Securities Exchange Act after the distribution of securities
under a plan confirmed by a court. YES .......... NO ...N/A...
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
The number of shares outstanding of the Registrant's Common
Stock is 4,581,727 (as of August 31, 1995).
DOCUMENTS INCORPORATED BY REFERENCE
Proxy Statement for 1995 Annual Meeting of Stockholders
(Part III)
<PAGE>
PART I
Item 1. Description of Business
(a) Business Development. Astrosystems, Inc. ("Registrant"
or "Company") designs and manufactures power conversion devices
and electronic products for measurement and display. The
Company's Industrial Products Division produces electronic and
electromechanical devices for precision motion measurement and
control. A wholly owned subsidiary, Behlman Electronics, Inc.,
produces commercial AC power sources.
The Company's subsidiary, AstroPower, Inc., is engaged
in the development of a new process for manufacturing low cost,
thin film polycrystalline solar cells for the direct conversion
of sunlight into electricity. The Company currently owns 32.3%
of the common stock of AstroPower, Inc. Assuming certain
convertible preferred stock is converted to common stock, the
Company's interest in AstroPower could be reduced to 22.8%.
Registrant is a corporation originally incorporated in
the State of New York in 1959. In April, 1987 Registrant changed
its state of incorporation to Delaware.
(b) Business of Issuer.
(1) Principal Products. Reference is made to Item
1(a) above.
(2) Distribution Methods. Defense products are
marketed by the Company's Program Managers and other management
personnel. Commercial products are marketed by the Company's
Regional Sales Managers, manufacturer's representatives, and
in some cases, non-exclusive distributors.
(3) New Product Development. Inapplicable.
(4) Competition. In the marketing of its electronic
and electromechanical products, Registrant estimates that it
competes regularly with approximately fifteen companies and, on
an irregular basis, with a much larger number of companies.
Competition in these fields depends on such factors as price,
product reliability and performance, engineering and production.
In particular, due primarily to budgetary restraints and program
cutbacks, competition in the Company's government markets has
been increasingly severe and price has become the major
overriding factor in contract and subcontract awards. To the
best of Registrant's knowledge, some of its regular competitors
are much larger companies with substantially greater capital
resources and far larger engineering, administrative, sales, and
production staffs. Registrant does not believe that it is a
significant factor in any of its markets.
In the field of photovoltaic solar cells (see Item 1(a)
above), Registrant's subsidiary, AstroPower, Inc., competes with
established manufacturers, as well as with other sources of
energy and the companies involved therewith. In addition, a
number of larger concerns, including major oil companies, have
already entered or are expected to enter this field, all of which
have considerably greater financial, marketing and technological
strengths than Registrant. A number of smaller concerns are also
actively pursuing this market.
(5) Sources of Supply. Registrant designs and
assembles substantially all of its products. It purchases parts
and components, however, from widely diversified sources, and at
times it has employed subcontractors to fabricate portions of its
products. The Registrant is not materially dependent on any one
supplier for such items and Management believes that, barring any
unusual shortages or economic conditions, it could develop
alternate suppliers for such items.
(6) Customers. During the year ended June 30, 1995,
approximately 8% of Registrant's sales were made directly to
government agencies as prime contractors, 46% were made to other
manufacturers as a subcontractor pursuant to government contracts
and 46% were made to commercial users. The following table sets
forth the approximate extent to which Registrant's sales were
made to military or commercial customers (and in the case of
military sales, whether made by Registrant as prime contractor
or subcontractor) for each of the fiscal years ended June 30,
1994 and June 30, 1995.
Fiscal Military Sales Commercial Total
Year Prime Contractor Subcontractor Sales (1) Sales
1994 $2,394,000 $6,525,000 $4,498,000 $13,417,000
1995 992,000 5,658,000 5,669,000 12,319,000
(1) Commercial sales are primarily catalog items sold
to other manufacturers. For Behlman sales, these manufacturers
include defense contractors who may use such goods for test of
military products.
During the year ended June 30, 1995, General Motors
Hughes Aircraft Corporation accounted for approximately 43% of
gross sales. Production orders for this customer are scheduled
for completion in October 1995.
(7) Patents, Trademarks and Licenses. The Company's
subsidiary, AstroPower Inc., has been assigned 7 patents that
cover various aspects of its continuing solar cell development
activities. In 1983, the Company acquired a 16 year license from
the University of Delaware covering a new process for the
manufacture of solar cells and has exclusively sublicensed the
patents and technology to AstroPower Inc. (see Note D[4] to the
Financial Statements). Effective December 1993, the term of the
license agreement was extended to 2006.
(8) Government Approval. Inapplicable.
(9) Special Features of Government Contracts. The
extensive involvement of Registrant in government-related defense
contracts subjects Registrant to several potentially adverse
factors affecting defense contractors in general.
As noted above, approximately 54% of Registrant's sales
during the year ended June 30, 1995 were related, directly or
indirectly, to government defense programs, and any substantial
overall reduction in defense expenditures adversely affects the
business of Registrant.
Orders under government prime or subcontracts are
customarily subject to termination at the convenience of the
government, in which event the contractor is normally entitled to
reimbursement for allowable costs and a reasonable allowance for
profits unless the termination of a contract was due to a default
on the part of the contractor. During the fiscal years ended
June 30, 1995 and June 30, 1994, no government prime contracts
were cancelled.
(10) Research and Development. For the years ended
June 30, 1995 and 1994, the amounts expended for research and
development were not material.
(11) Environmental Regulation Compliance. Registrant
is of the belief that compliance with Federal, state and local
provisions which may have been enacted or adopted regulating the
discharge of materials into the environment, or otherwise
relating to the protection of the environment, will have no
material effect upon its capital expenditures, earnings and
competitive position.
(12) Number of Employees. Registrant currently has 113
full time employees. Management believes its relations with its
employees are good. No employees are represented by a collective
bargaining agreement.
Item 2. Description of Property.
Registrant's principal executive offices and
engineering, manufacturing and testing facilities are located in
Lake Success, Long Island, New York, where Registrant occupies
approximately 46,550 square feet of usable space. The premises
are leased from an unaffiliated party through August 31, 1996
(cancelable upon ninety days notice) at an annual rental of
approximately $505,000, which includes common area maintenance,
plus real estate taxes of approximately $143,000 (at 1995 rates).
Registrant's subsidiary, Behlman Electronics, Inc.,
leases space in Ventura, California at an annual rental of
$13,300. The lease expires December 31, 1995.
Registrant's subsidiary, AstroPower, Inc., leases
40,000 square feet of space from the University of Delaware under
a 20 year lease starting July 1, 1991. Current lease payments
are $178,000 per year.
Item 3. Legal Proceedings.
There are no material pending legal proceedings to
which Registrant or any of its subsidiaries is a party or of
which any of their property is the subject.
Item 4. Submission of Matters to a Vote of Security Holders.
There were no matters submitted to a vote of security
holders during the three month period ended June 30, 1995.
<PAGE>
PART II
Item 5. Market for Common Stock and Related Stockholder
Matters.
(a) Registrant's Common Stock is traded in the over-the-
counter market (NASDAQ symbol: ASTR). The following table sets
forth the quarterly high and low bid prices for the last two
fiscal years, as reported by the National Association of
Securities Dealers, Inc. The quotations set forth below
represent interdealer quotations (which exclude retail markups,
markdowns and commissions) and do not necessarily reflect actual
transactions.
Bid
Quarterly Period High Low
July 1993 - September 1993 4 11/16 4 1/8
October 1993 - December 1993 4 1/2 3 7/8
January 1994 - March 1994 5 1/4 4
April 1994 - June 1994 4 5/8 4 1/8
July 1994 - September 1994 4 5/8 4 1/8
October 1994 - December 1994 4 3/8 3 7/8
January 1995 - March 1995 4 5/16 3 7/8
April 1995 - June 1995 5 3/8 4
(b) The number of stockholders of record of the
Registrant's Common Stock, par value $.10 per share, as of June
30, 1995 was 1,055.
(c) Registrant has not paid any cash dividends since its
inception in 1959. Any decision as to the future payment of
dividends will depend on the future financial requirements of
Registrant.
Item 6. Management's Discussion and Analysis or Plan of
Operation.
Liquidity, Capital Resources and Impact of Inflation
Cash and Cash Equivalents, plus Marketable Securities,
and U.S. Treasury Notes increased from $33,306,000 to $34,779,000
since the beginning of the fiscal year. This increase was
primarily due to increased interest on investments.
Accounts Receivable - Claims are the estimated billings
associated with terminations and changes on government contracts
and subcontracts. These receivables normally require a period of
negotiation before a final price is established.
The Company announced on October 23, 1992 a Board of
Directors authorization for the repurchase of up to 500,000
shares of Common Stock to be made from time to time through open
market and privately negotiated transactions. Since that time
408,727 shares have been repurchased. The Company did not
repurchase any of its Common Stock for the fiscal year ended June
30, 1995.
Inflation has not materially impacted the operations of
the Company.
Results of Operations
Comparison of Fiscal 1995 vs Fiscal 1994 - The
Company's sales for the year ended June 30, 1995 declined from
the prior equivalent period by $1,098,000 or 8.2%. Defense
Electronics Sales had an expected substantial decline which was
partly offset by a 48.5% increase in Behlman Electronics sales.
Industrial Automation sales also declined.
Defense Electronics sales are expected to continue to
decrease due to the current defense procurement environment with
its declining budgets and resulting fierce price competition.
Production deliveries of ADCAP Torpedo Power Supplies, which were
the Company's major defense product, have been completed. The
Company is attempting to offset a decline in Defense Electronics
revenue by increased commercial sales for Industrial Automation
Products and Behlman Electronics. In addition, the Company is
seeking niche Defense Electronics markets such as repair and
maintenance of the Company's products as well as products of
other manufacturers. Behlman Electronics during fiscal 1995
accomplished a major increase in revenue. However, there is no
assurance that the Company's strategy will be successful in the
long run and the Company anticipates a further substantial
decrease in total sales during fiscal 1996.
Cost of Sales as a percentage of revenue for the year
ended June 30, 1995 was 72.3% of revenue versus 69.9% for the
prior equivalent period. The Company's Cost of Sales includes
fixed expenses such as rent; in addition, the Company's
Government contracts and subcontracts require certain expenses
such as quality assurance personnel, which cannot be reduced in
proportion to revenue. Therefore, unless the Company can reverse
its revenue decline, the long term Cost of Sales percentage will
increase.
Selling, General and Administrative Expenses did not
decrease in proportion to revenue due to certain fixed expenses
which could not be reduced, as well as the necessity to maintain
the Company's sales and marketing force.
Investment income for the comparative periods is shown
below:
Fiscal Year Ended June 30,
1995 1994
Interest & Dividend Income $1,700,000 $1,205,000
(Loss) on Securities (52,000) (217,000)
__________ __________
Investment Income $1,648,000 $ 988,000
========= =======
Interest and Dividend Income increased due to higher interest
rates on invested funds. The Loss on Securities in Fiscal Year
1995 was primarily due to a realized loss in a U.S. Treasury
mutual fund; the loss in Fiscal Year 1994 was primarily due to an
unrealized loss on the same U.S. Treasury mutual fund.
Income taxes for the year ended June 30, 1995 were
approximately 28% of pretax income which is lower than the
Federal statutory rate of 34% principally due to a change in
New York State tax law permitting utilization of net operating
loss carryforwards in computing New York State franchise tax
under the minimum taxable income base, which resulted in
subjecting the Company's income to New York State franchise tax
under the entire net income base.
Income tax benefit for the year ended June 30, 1994 included
$392,000 from the reversal of a tax reserve no longer required.
Net earnings for the fiscal year ended June 30, 1995 were
$623,000 or $.13 per share.
Net earnings for the fiscal year ended June 30 ,1994 were
$1,135,000 or $.22 per share which includes $404,000 or $.08 per
share from the cumulative effect of a change in accounting
principle relating to accounting for income taxes (SFAS No. 109)
and $392,000 or $.07 per share relating to the effect of the
reversal of income tax reserves no longer required.
Item 7. Financial Statements.
<PAGE>
RICHARD A. EISNER & COMPANY, LLP
Accountants and Consultants
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Shareholders
Astrosystems, Inc.
Lake Success, New York
We have audited the accompanying consolidated balance sheets
of Astrosystems, Inc. and subsidiaries as at June 30, 1995 and
June 30, 1994, and the related consolidated statements of
operations, changes in shareholders' equity and cash flows for
each of the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally
accepted auditing standards. 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 financial statements enumerated above
present fairly, in all material respects, the consolidated
financial position of Astrosystems, Inc. and subsidiaries as at
June 30, 1995 and June 30, 1994, and the results of their
operations and cash flows for each of the years then ended in
conformity with generally accepted accounting principles.
Richard A. Eisner & Company, LLP
New York, New York
September 8, 1995
575 Madison Avenue, New York, NY 10022-2597
Member of Summit International Associates, Inc.
New York, NY Melville, NY Cambridge, MA Florham Park, NJ
<PAGE>
ASTROSYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30,
1995 1994
ASSETS
Current assets:
Cash and cash equivalents $13,119,000 $22,916,000
Marketable securities
(Notes A[3] and C) 8,680,000 10,390,000
Accounts receivable (less estimated
doubtful accounts of $58,000
in 1995 and $58,000 in 1994)
(Notes A[6] and I[1]) 4,099,000 1,977,000
Accounts receivable - claims 360,000 1,108,000
Inventories (Notes A[4] and B) 3,528,000 4,618,000
Prepaid expenses and other
current assets 437,000 227,000
__________ _________
Total current assets 30,223,000 41,236,000
U.S. Treasury Notes (Notes A[3] and C) 12,980,000
Long-term investments (Note E) 275,000 275,000
Factory, laboratory and other equipment
(net of accumulated depreciation
and amortization of $2,599,000
in 1995 and $2,414,000 in 1994)
(Note A[5]) 198,000 362,000
Excess of cost over the fair value of
net assets acquired, net of
accumulated amortization
(Note A[7]) 230,000 277,000
Other assets 351,000 233,000
__________ ___________
TOTAL $44,257,000 $42,383,000
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 354,000 $ 352,000
Accrued payroll and employee benefits 304,000 296,000
Other accrued liabilities (Note J) 1,034,000 347,000
Income taxes payable 3,000 11,000
__________ __________
Total current liabilities 1,695,000 1,006,000
Deferred income taxes (Note G) 8,240,000 8,000,000
__________ __________
Total liabilities 9,935,000 9,006,000
__________ __________
Contingencies and commitments (Note D)
SHAREHOLDERS' EQUITY (Notes D[3] and F)
Capital stock - common - authorized
10,000,000 shares, $.10 par value;
issued and outstanding 4,581,727
shares in 1995 and 4,548,848
shares in 1994 458,000 455,000
Additional paid-in capital 6,848,000 6,529,000
Retained earnings 27,016,000 26,393,000
__________ __________
Total shareholders' equity 34,322,000 33,377,000
__________ __________
TOTAL $44,257,000 $42,383,000
========== ==========
See accompanying notes to financial statements.
<PAGE>
ASTROSYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Common
Shares Issued
Number Additional
of Par Paid- in Retained
Shares Value Capital Earnings
Balance-June 30, 1993 4,551,525 $455,000 $6,526,000 $25,258,000
Net earnings for the year 1,135,000
Shares issued to retire-
ment plan (Note D[2]) 31,700 3,000 132,000
Compensation attribu-
table to extending
of stock options 40,000
Exercise of stock
options 20,500 2,000 56,000
Purchase and retirement
of shares (54,877) (5,000) (225,000)
_________ _______ _________ __________
Balance-June 30, 1994 4,548,848 455,000 6,529,000 26,393,000
Net earnings for the year 623,000
Shares issued to retire-
ment plan (Note D[2]) 32,179 3,000 133,000
Compensation attribu-
table to extending
of stock options 184,000
Exercise of stock
options 700 2,000
_________ _______ _________ __________
BALANCE-JUNE 30, 1995 4,581,727 $458,000 $6,848,000 $27,016,000
See accompanying notes to financial statements.
<PAGE>
ASTROSYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended June 30,
1995 1994
Sales (Notes A[6] and I[1]) $12,319,000 $13,417,000
Cost of sales 8,901,000 9,380,000
Selling, general and administrative
expenses 4,203,000 4,329,000
__________ __________
13,104,000 13,709,000
__________ __________
(Loss) from operations (785,000) (292,000)
Investment income (Note I[2]) 1,648,000 988,000
__________ __________
Earnings before taxes on income 863,000 696,000
__________ __________
Income taxes (benefit) (Notes A[8] and G):
Current (535,000)
Deferred 240,000 500,000
__________ __________
240,000 (35,000)
__________ __________
Earnings before cumulative effect
of change in accounting principle 623,000 731,000
Cumulative effect of change in
accounting principle - adoption
of SFAS No. 109 (Note A[8]) 404,000
__________ __________
NET EARNINGS $ 623,000 $1,135,000
========== =========
Primary and fully diluted earnings
per share (Note H):
Earnings before cumulative effect of
change in accounting principle $.13 $.14
Cumulative effect of change in
accounting principle .08
___ ___
Net earnings per share $.13 $.22
See accompanying notes to financial statements.
<PAGE>
ASTROSYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended June 30,
1995 1994
Cash flows from operating activities:
Net earnings $ 623,000 $ 1,135,000
Adjustments to reconcile net
earnings to net cash provided by
operating activities:
Cumulative effect of a change in
accounting principle (404,000)
Depreciation and amortization 232,000 204,000
Increase in provision for un-
realized loss on securities 222,000
Reversal of income tax reserves
no longer required (392,000)
Deferred taxes 240,000 500,000
(Loss) on sale of securities (52,000)
Options extended 184,000 40,000
Other 8,000
Shares issued to retirement plan 136,000 135,000
Changes in operating assets
and liabilities:
(Increase) decrease in accounts
receivable (1,374,000) 3,915,000
Decrease in inventories 1,090,000 189,000
(Increase) decrease in prepaid
expenses, other current assets,
and other assets (328,000) 53,000
Increase (decrease) in accounts
payable 2,000 (295,000)
(Decrease) in taxes payable (8,000) (21,000)
Increase in accrued payroll,
employee benefits and other
accrued liabilities 695,000 107,000
_________ _________
Net cash provided by operating
activities 1,440,000 5,396,000
_________ _________
Cash flows from investing activities:
Sale and maturities of marketable
securities 6,404,000 3,598,000
Purchases of marketable securities (17,622,000) (5,145,000)
Acquisition of equipment (21,000) (107,000)
Liquidation of minority interest (48,000)
Distribution from investment 62,000
_________ _________
Net cash (used in)
investing activities (11,239,000) (1,640,000)
Cash flows from financing activities:
Proceeds from exercise of stock options 2,000 58,000
Purchase and retirement of common shares (230,000)
_________ _________
Net cash provided by (used in)
financing activities 2,000 (172,000)
_________ _________
NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS (9,797,000) 3,584,000
Cash and cash equivalents, beginning
of year 22,916,000 19,332,000
__________ __________
CASH AND CASH EQUIVALENTS, END OF YEAR $13,119,000 $22,916,000
========== ==========
Supplemental disclosures of cash flow information:
Cash paid during the year
for income taxes $ 15,000 $ 11,000
Income tax refunds received 56,000 73,000
See accompanying notes to financial statements.
<PAGE>
ASTROSYSTEMS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE A) - Summary of Significant Accounting Policies:
[1] Principles of consolidation:
The consolidated financial statements include the
accounts of the Company and its subsidiaries. Material
inter-company transactions and account balances have been
eliminated in consolidation.
[2] Statement of cash flows:
For purposes of the statement of cash flows, the
Company considers all highly liquid debt instruments purchased
with a maturity of three months or less to be cash equivalents.
[3] Marketable securities:
In July 1994, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 115 "Accounting
for Certain Investments in Debt and Equity Securities" (SFAS
115). This standard requires the Company to classify its
investments as held-to-maturity, available for sale, or trading.
The Company classifies all of its securities as held-to-maturity
which are carried at amortized cost. The adoption of SFAS 115
had no significant impact on the Company's financial statements
at June 30, 1995. At June 30, 1995 marketable securities
consisted of U.S. Treasury obligations, of which $8,680,000 is
current, and $12,980,000 matures through 1998.
[4] Inventories:
Inventories are stated at the lower of cost (first-in,
first-out) or market.
[5] Factory, laboratory, and other equipment:
Equipment is depreciated over estimated useful lives
of 3 to 8 years, computed primarily on the straight-line method.
Leasehold improvements are amortized on the straight-
line method over the life of the improvement, or the term of the
lease, whichever is shorter.
[6] Revenue and revenue recognition:
The Company is engaged in the manufacture and sale of
electronic and electromechanical devices for measurement,
display, control and power input. The Company records its sales
when the manufacturing process is substantially complete, and,
accordingly, accrues all additional costs required to complete
the units.
The Company's warranty on commercial sales is normally
90 days except for certain products and customers where the
warranty is one year. The warranty provisions on military sales
are normally negotiated for each major contract. Warranty
expense has been minimal in recent years.
[7] Excess of cost over the fair value of net assets
acquired:
The excess of cost over the fair value of net assets
acquired is being amortized on a straight line basis over ten
years.
[8] Income taxes:
The Company changed its method of accounting for
income taxes, effective as of July 1, 1993, to comply with the
provisions of Statement of Financial Accounting Standards No. 109
(SFAS 109), "Accounting for Income Taxes." Deferred income taxes
are based on the liability method as prescribed by SFAS 109,
which requires an adjustment to the deferred tax liability to
reflect income tax rates currently in effect rather than
historical rates. When income tax rates increase or decrease, a
corresponding adjustment to income tax expense is recorded
currently by applying the rate change to the cumulative temporary
differences. The cumulative effect of adopting SFAS 109 through
June 30, 1993 was $404,000, which is included in the accompanying
Statement of Operations for the year ended June 30, 1994.
(NOTE B) - Inventories:
Inventories comprise the following:
June 30,
1995 1994
Raw material $1,762,000 $2,100,000
Work in process 1,766,000 2,518,000
_________ _________
TOTAL $3,528,000 $4,618,000
========= =========
Work in process includes materials, labor, and
manufacturing overhead.
(NOTE C) - Marketable Securities:
At June 30, 1995 and June 30, 1994 marketable
securities included in current assets had a cost of $8,680,000
and $10,637,000, respectively (which includes U.S. Treasury
obligations at a cost of $8,680,000 and $7,989,000,
respectively).
(NOTE D) - Contingencies and Commitments:
[1] The Company has a profit-sharing plan which provides
benefits upon retirement, death, incapacity or separation of
eligible employees. There was no profit-sharing expense for the
years ended June 30, 1995 and June 30, 1994.
[2] The Company has a Retirement Savings Plan which allows
participants to make contributions by salary reduction pursuant
to section 401(k) of the Internal Revenue Code of 1986. The
Company is obligated to make contributions (either in cash or
Company stock) equal to 50% of the employees' contribution. The
Company's contributions to the plan for the years ended June 30,
1995 and June 30, 1994 consisted of the Company's common stock
which it valued at $136,000 and $135,000, respectively.
Employees vest immediately in their contribution and in the
Company's contribution.
[3] The Company and its three principal officers are
parties to a stock retirement agreement which requires the
Company, upon the death of any of these officers, to purchase
30% of his holdings of the Company's common stock at a price
equal to the greater of the average market price over the last
six months or the book value. The Company has life insurance
policies on the lives of the aforementioned officers to fund
substantially all of its obligations in the event of their death.
[4] In 1983, the Company acquired a 16-year license from
the University of Delaware covering a new process for the
manufacture of solar cells. In connection with the acquisition
of the aforementioned license, the Company issued a $20,000,000
nonrecourse note originally due in 1993 and bearing interest at
14% per year. The note is secured by the Company's rights under
the license and is to be paid prior to its due date solely on the
basis of 4% of sales of products developed by this process,
subject to certain minimum quarterly payments of $11,250 to
$12,500. An amendment to the License Agreement extended the term
of the license agreement to 2006 as well as extended the due date
of the note to May 1999. As consideration for the amendment, the
Company paid $115,000 in cash, which was charged to operations
for the year ended June 30, 1994, and transferred 35,000 shares
of stock in its investment in AstroPower, Inc. For the year
ended June 30, 1995, the Company paid $34,000 in quarterly
payments. The Company, for financial reporting purposes, has not
recorded the note and will charge operations with any payments.
No payments based on sales were required to be made through June
30, 1995. To the extent that any lump-sum payment is made, the
license cost would be amortized from that date forward, thus
matching the cost of the license against sales from that date
forward. (See Note E).
[5] The Company is obligated for minimum annual rentals
under leases for office and factory space expiring in fiscal 1997
as follows:
Year ending
June 30,
1996 352,000
1997 58,000
_______
TOTAL $410,000
=======
The terms of the leases include escalation clauses for
increases in real estate taxes and certain operating expenses.
Total rent expense aggregated $527,000 and $505,000 for the years
ended June 30, 1995 and June 30, 1994, respectively. In August
1995, the Company extended its Lake Success lease through August
31, 1996, cancelable upon ninety days notice.
[6] Employment contracts with the officers of the Company,
which may be terminated by the Company on not less than three
years prior notice, provide for minimum annual total compensation
of approximately $748,000. In the event of death or disability
of the Company's principal officers while employed, the contracts
call for payments of 50% of compensation paid in the preceding
fiscal year for the three years following such event.
[7] Concentration of Credit Risk: Most of the Company's
customers are large prime contractors with the U.S. Government or
various departments and agencies of the U.S. Government (see
Note I[1]).
The Company maintains its operating cash account at
one bank. Other cash and cash equivalents are held in dollar
denominated mutual funds which invest in United States Treasury
obligations.
Marketable securities are United States Treasury
obligations.
(NOTE E) - Long-term Investments:
The Company owned 81% of a subsidiary corporation,
ASI Solar Energy Corporation, which was liquidated in June 1994.
That corporation's major asset was an investment in AstroPower,
Inc., which was distributed as part of the liquidation. The
Company, as a result of this transaction and the transfer of
AstroPower, Inc. shares described in Note D[4], owns 32.3% of the
common stock of AstroPower, Inc. Assuming certain convertible
preferred stock is converted to common stock, Astrosystems'
interest in AstroPower, Inc. would be reduced to 22.8%. Such
investment was accounted for on the equity method and,
accordingly, the Company recorded its share in the losses of this
entity as a reduction of its investment. This investment was
fully written down to zero in prior years.
The long-term investment shown on the accompanying
balance sheets represents an investment in a venture capital
limited partnership. The estimated fair value of the investment
at June 30, 1995 is at least equal to the carrying value.
(NOTE F) - Stock Options
The Company's 1981 Stock Option Plan provided for the
granting of options to purchase up to 1,000,000 shares of its
common stock to eligible employees and non-employee directors.
Such plan expired in April 1991.
The Company's 1991 Stock Option Plan provides for the
granting of options to purchase up to 1,500,000 shares of its
common stock to eligible employees, non- employee directors,
consultants and advisors.
A summary of stock option activity related to the
Company's stock option plans is as follows:
Number of
Number of Option Price Shares
Shares Per Share Exercisable
Outstanding at
June 30, 1993 1,357,297 $2.88 - $3.38 1,115,006
=========
Exercised (20,500) $2.88
Granted 305,000 $3.88 - $4.00
_________
Outstanding at
June 30, 1994 1,641,797 $2.88 - $4.00 1,233,464
=========
Exercised (700) $2.88
Granted 3,500 $3.88
_________
Outstanding at
June 30, 1995 1,644,597 $2.88 - $4.00 1,334,222
=========
During the years ended June 30, 1995 and June 30,
1994, 150,000 and 24,500 stock options, respectively, were
extended. The extended options are considered to have been
granted pursuant to the 1991 Stock Option Plan. A charge was
made to operations for approximately $184,000 and $40,000
respectively, which represents the difference between the option
price and the market value at the time of their extension.
As at June 30, 1995, options for the purchase of
378,213 shares were available for future grant.
(NOTE G) - Taxes on Income:
The components of the provision for taxes on income
are as follows:
Year Ended June 30,
1995 1994
Federal income taxes:
Current $(115,000)
Deferred $500,000 400,000
State and local taxes:
Current (420,000)
Deferred (260,000) 100,000
_______ _______
$240,000 $ (35,000)
A reconciliation between the Company's effective rate
and the U.S. Federal income tax rate is as follows:
Year Ended June 30,
1995 1994
Statutory rate 34.0% 34.0%
Reversal of reserves no longer required (56.6)
Federal income tax related to the
liquidation of a subsidiary 6.2
State taxes (benefit), net of federal
benefit (expense) (14.0) 9.5
Investment income not subject to tax (1.5)
Nondeductible expenses 6.8 5.2
Other, net 1.0 (1.8)
____ ____
Actual tax rate 27.8% (5.0)%
===== ======
The deferred tax liability at June 30, 1995 is as follows:
Deferred tax liability:
Difference between financial reporting and tax
bases of University of Delaware license and
related note (see Note D[4]) $11,419,000
__________
Deferred tax (asset):
Utilization of net operating loss carryforward $(2,751,000)
Utilization of the percentage of completion
method of revenue recognition for tax purposes (233,000)
Utilization of capital loss carryforward (111,000)
Utilization of compensation deduction (71,000)
Expenses for financial reporting not yet
deductible for taxes (13,000)
__________
$(3,179,000)
__________
Net deferred tax liability - June 30, 1995 $ 8,240,000
==========
Deferred tax expense results from temporary
differences in the recognition of revenue and expense for tax and
financial reporting purposes. The principal sources of these
differences were amortization and accrued interest referred to in
Note D[4], the tax effect of which was $240,000 and $500,000 for
the years ended June 30, 1995 and June 30, 1994, respectively.
At June 30, 1995, the Company had available net
operating loss carryforwards for income tax reporting purposes as
follows:
Expiring in
Year Ended Net Operating Loss Year Ending
June 30, Carry Forwards June 30,
1990 $1,302,000 2005
1991 3,252,000 2006
1993 596,000 2008
1994 578,000 2009
1995 1,200,000 2010
_________
$6,928,000
=========
(NOTE H) - Per Share Amounts:
Per share amounts are computed using the weighted
average number of common shares outstanding and common equivalent
shares outstanding during each period utilizing the modified
treasury stock method.
(NOTE I) - Other Matters:
[1] Major Customers:
During the years ended June 30, 1995 and June 30,
1994, $6,650,000 (54%) and $8,919,000 (66%), respectively, of the
Company's sales arose from United States government contracts
under which the Company was either a prime contractor or a
subcontractor.
In fiscal 1995, approximately $5,254,000 (43%) of the
Company's revenues were from one customer. In 1994 approximately
$5,092,000 (38%) and $2,402,000 (18%) of the Company's revenues
were from the customer referred to above and a second customer,
respectively.
At June 30, 1995 and June 30, 1994, accounts
receivable included $2,390,000 and $1,404,000 from its major
customer.
[2] Investment Income:
Year Ended June 30,
1995 1994
Interest on investments $1,700,000 $1,166,000
Dividends 39,000
(Increase) in provision for
unrealized loss on securities (222,000)
(Loss) gain on sale of securities (52,000) 5,000
_________ _________
TOTAL $1,648,000 $988,000
========= =======
(NOTE J) Other Accrued Liabilities:
Other accrued liabilities consist of the following:
June 30,
1995 1994
Commissions payable $ 205,000 $ 87,000
Customer credit balances 671,000
Accrued professional fees 101,000 117,000
Other accrued liabilities 57,000 143,000
_________ _________
TOTAL $1,034,000 $347,000
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
Inapplicable.
<PAGE>
PART III
Item 9. Directors, Executive Officers, Promoters and Control
Persons; Compliance with Section 16(a) of the Exchange
Act.
The information called for hereunder has been omitted
pursuant to Paragraph E(3) of the General Instructions inasmuch
as the Company intends to file definitive proxy materials
containing such information with the Securities and Exchange
Commission prior to the expiration of 120 days following the
close of the Company's fiscal year which is the subject of
this Annual Report.
Item 10. Executive Compensation.
The information called for hereunder has been omitted
pursuant to Paragraph E(3) of the General Instructions inasmuch
as the Company intends to file definitive proxy materials
containing such information with the Securities and Exchange
Commission prior to the expiration of 120 days following the
close of the Company's fiscal year which is the subject of
this Annual Report.
Item 11. Security Ownership of Certain Beneficial Owners and
Management.
The information called for hereunder has been omitted
pursuant to Paragraph E(3) of the General Instructions inasmuch
as the Company intends to file definitive proxy materials
containing such information with the Securities and Exchange
Commission prior to the expiration of 120 days following the
close of the Company's fiscal year which is the subject of
this Annual Report.
Item 12. Certain Relationships and Related Transactions.
The information called for hereunder has been omitted
pursuant to Paragraph E(3) of the General Instructions inasmuch
as the Company intends to file definitive proxy materials
containing such information with the Securities and Exchange
Commission prior to the expiration of 120 days following the
close of the Company's fiscal year which is the subject of
this Annual Report.
Item 13. Exhibits, List and Reports on Form 8-K.
(a) Exhibits:
(3) (a) Certificate of Incorporation and Certificate
of Amendment thereto - incorporated by
reference to Exhibit 3(a) to Registrant's
Annual Report on Form 10-KSB for its fiscal
year ended June 30, 1993.
(b) Bylaws - incorporated by reference to Exhibit
3(b) to Registrant's Annual Report on Form
10-KSB for its fiscal year ended June 30, 1993.
(10)(a) Lease with regard to 6 Nevada Drive, Lake
Success, NY premises - incorporated by
reference to Exhibit 10 to Registrant's Annual
Report on Form 10-K for its fiscal year ended
June 30, 1991.
(b) Lease with regard to AstroPower, Inc., Delaware
premises - incorporated by reference to Exhibit
10 to Registrant's Annual Report on Form 10-K
for its fiscal year ended June 30, 1990.
(c) 1991 Stock Option Plan - incorporated by
reference to Exhibit A to Registrant's
definitive Proxy Statement dated December 12,
1990.
(d) Settlement Agreement with Internal Revenue
Service - incorporated by reference to Exhibit
10 to Registrant's Annual Report on Form 10-K
for its fiscal year ended June 30, 1991.
(e) Stock Retirement Agreement dated August 31,
1980 among Registrant and Messrs. Barth,
Bergman and G. Steinberg - incorporated by
reference to Exhibit 10 to Registrant's Annual
Report on Form 10-K for its fiscal year ended
June 30, 1991.
(f) Employment Agreement dated as of April 18,
1994 between Registrant and Seymour Barth -
incorporated by reference to Exhibit 10 to
Registrant's Annual Report on Form 10-KSB for
its fiscal year ended June 30, 1994.
(g) Employment Agreement dated as of April 18,
1994 between Registrant and Elliot Bergman -
incorporated by reference to Exhibit 10 to
Registrant's Annual Report on Form 10-KSB for
its fiscal year ended June 30, 1994.
(h) Employment Agreement dated as of April 18,
1994 between Registrant and Gilbert H.
Steinberg - incorporated by reference to
Exhibit 10 to Registrant's Annual Report on
Form 10-KSB for its fiscal year ended June 30,
1994.
(i) Third Lease Modification Agreement with regard
to 6 Nevada Drive, Lake Success, NY premises.
(11) Computation of Earnings Per Common Share.
(21) Subsidiaries of Registrant.
(23) Consent of Richard A. Eisner & Company, LLP
(b) Reports on Form 8-K:
No Report on Form 8-K was filed during the three months
ended June 30, 1995.
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act,
the Registrant caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
ASTROSYSTEMS, INC.
BY:
/S/
Seymour Barth,
President
September 27, 1995
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.
/S/
Seymour Barth, President, Principal Executive
Officer and Director September 27, 1995
/S/
Elliot J. Bergman, Vice President, Secretary
and Director September 27, 1995
/S/
Gilbert Steinberg, Vice President, Treasurer,
Principal Financial and
Accounting Officer and
Director September 27, 1995
/S/
Elliot D. Spiro, Director September 27, 1995
/S/
Walter Steinberg, Director September 27, 1995
<PAGE>
EXHIBIT 10-i
THIRD LEASE MODIFICATION AGREEMENT
AGREEMENT made this 31 day of August, 1995 by and between We're
Associates Company, a partnership with its principal office at
100 Jericho Quadrangle, Jericho, New York ("Landlord"), and
Astrosystems, Inc., a New York corporation with offices located
at 6 Nevada Drive, Lake Success, New York ("Tenant").
WITNESSETH:
WHEREAS, Tenant presently leases from landlord approximately
46,550 rentable square feet of space (the "demised premises")
located in the building known as Building "C", Lake Success
Quadrangle, Lake Success, New York, pursuant to an Agreement of
Lease dated as of September 22, 1966 between Landlord's
predecessor in interest, Hyde Park Associates, as Landlord, and
Tenant, as tenant, as same were modified by First Lease
Modification Agreement dated May 14, 1986, the Second Lease
Modification dated July 9, 1990 (said lease, letter agreement,
and lease modification agreements being hereinafter together
referred to as the "Lease"): and
WHEREAS, Landlord and Tenant desire to extend the term of the
Lease for a period of one (1) year expiring August 31, 1996;
NOW, THEREFORE, the parties hereto agree as follows:
1. Article "2" of the Lease is hereby amended to provide that
the term of the Lease shall expire on August 31, 1996.
2. The Tenant shall have the right to cancel the lease at any
time during the remaining term provided that Tenant shall notify
Landlord by certified mail of its intention to do so; and stating
a date that is three months or later after the date of the notice
(the "Cancellation Effective Date" which must be the last day of
the month), Tenant shall continue to be and shall remain liable
hereunder for rent and additional rent due, owing, or accruing to
and including the Cancellation Effective Date. Rent and
additional rent shall be equal to the rent and additional rent
payable by Tenant for the month of August 1995.
3. Landlord shall have the right to cancel the lease at any
time during the remaining term provided that Landlord shall
notify Tenant by certified mail of its intention to do so and
stating a date that is three months or later after the date of
the Notice (the "Cancellation Effective Date" which must be the
last day of the month).
4. Tenant represents and warrants to Landlord that no broker
brought about the transaction covered hereby. Tenant hereby
agrees to indemnify, defend and hold harmless from and against
any loss, cost, claim, damage, expense or liability (including
without limitation, attorney's fees and disbursements) arising
from any person, firm or entity claiming any commission or other
compensation in connection with this transaction.
Except as amended hereby, the Lease remains, and shall remain, in
full force and effect and each and every term, condition, and
provision thereof is hereby confirmed, ratified, and continued.
IN WITNESS WHEREOF, the parties hereto have hereunto set their
hands and seals the day and year first above written.
WE'RE ASSOCIATES COMPANY
By: /S/
Gary Wexler
ASTROSYSTEMS, INC.
By: /S/
Gilbert H. Steinberg
<PAGE>
EXHIBIT 11
ASTROSYSTEMS, INC. AND SUBSIDIARIES
COMPUTATION OF SHARES USED FOR EARNINGS PER SHARE
Year Ended June 30,
1995 1994
Computation of adjusted net earnings:
Net earnings $ 623,000 $1,135,000
Additional interest earned
(net of tax effect) attributable
to utilization of assumed proceeds
from exercise of options in excess
of amount required to repurchase
20% of the outstanding common stock
at applicable market value 79,000 29,000
_________ _________
Adjusted net earnings $ 702,000 $1,164,000
========== =========
Shares used for computation:
Weighted average number of shares
outstanding 4,561,876 4,537,751
Shares issuable upon assumed
exercise of options in excess of
shares assumed to be repurchased
with the proceeds 728,397 739,473
_________ _________
Shares used for computation 5,290,273 5,277,224
========== =========
Primary and fully diluted earnings
per share $ .13 $ .22
========== =========
<PAGE>
EXHIBIT 21
SUBSIDIARIES
NAME STATE OF INCORPORATION
Astrosub, Inc. Delaware
AstroPower, Inc. (1) Delaware
Behlman Electronics, Inc. New York
(1) Registrant owns 32.3 of outstanding common stock
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in Registration
Statements No. 2- 76955, No. 33-26638, No. 33-44539 and No.
33-52816 on Form S-8 of our report dated September 8, 1995 on
the consolidated financial statements included in the Annual
Report on Form 10-KSB of Astrosystems, Inc. as at and for the
year ended June 30, 1995.
/S/
Richard A. Eisner & Company, LLP
New York, New York
September 27, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000008065
<NAME> ASTROSYSTEMS, INC.
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> JUN-30-1995 JUN-30-1994
<PERIOD-START> JUL-01-1994 JUL-01-1993
<PERIOD-END> JUN-30-1995 JUN-30-1994
<CASH> 13,119 22,916
<SECURITIES> 8,680 10,390
<RECEIVABLES> 4,849 3,085
<ALLOWANCES> 58 58
<INVENTORY> 3,528 4,618
<CURRENT-ASSETS> 30,613 41,236
<PP&E> 2,797 2,776
<DEPRECIATION> 2,599 2,414
<TOTAL-ASSETS> 44,647 42,383
<CURRENT-LIABILITIES> 2,085 1,006
<BONDS> 0 0
<COMMON> 458 455
0 0
0 0
<OTHER-SE> 0 0
<TOTAL-LIABILITY-AND-EQUITY> 44,647 42,383
<SALES> 12,319 13,417
<TOTAL-REVENUES> 12,319 13,417
<CGS> 8,901 9,380
<TOTAL-COSTS> 13,104 13,709
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 863 696
<INCOME-TAX> 240 (35)
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 404
<NET-INCOME> 623 1,135
<EPS-PRIMARY> .13 .22
<EPS-DILUTED> .13 .22
</TABLE>
