U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
___________________________________________
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended to
Commission File Number: 0-3344
__________________________________________________
ASTROSYSTEMS, INC.
__________________________________________________________________________
(Exact name of registrant as specified in its charter)
Delaware 13-5691210
___________________________________________________ ___________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1220 Market Street, Suite 603, Wilmington, Delaware 19801
___________________________________________________ ___________________
(Address of principal executive offices) (Zip Code)
(302) 652-3115
__________________________________________________________________________
(Registrant's telephone number, including area code)
N/A
__________________________________________________________________________
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) has filed all reports required to be
filed by Section 13 or 15 (d) of the Exchange Act during the past 12
months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Check whether the issuer has filed all documents and reports required
to be filed by Sections 12, 13 or 15 (d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court. Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares outstanding of the issuer's common stock as of
November 7, 1998 is 5,933,576.
ASTROSYSTEMS, INC. AND SUBSIDIARIES
INDEX
Page No.
Part I - FINANCIAL INFORMATION
Item 1. Consolidated Statement of Net Assets in Liquidation 4
September 30, 1998
Consolidated Statement of Changes in Net Assets
in Liquidation 5
Three Months Ended September 30, 1998 and 1997
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis or Plan of
Operation 9
Part II - OTHER INFORMATION
Item 2. Changes in Securities 12
Item 6. Exhibits and Reports on Form 8-K 12
PART I - FINANCIAL INFORMATION
ASTROSYSTEMS, INC. AND SUBSIDIARIES
The financial information herein is unaudited. However, in the
opinion of management, such information reflects all adjustments
(consisting of normal recurring accruals and revisions to estimations)
necessary to a fair presentation for the period being reported.
On February 2, 1996, the Stockholders of the Company approved a Plan
of Complete Liquidation and Dissolution (the "Plan"). Therefore, the
financial statements are presented in accordance with the liquidation
basis of accounting. Under the liquidation basis of accounting, assets
are stated at their estimated net realizable values and liabilities are
stated at their anticipated settlement amounts. Certain information and
footnote disclosures normally included in financial statements prepared
in accordance with the liquidation basis of accounting have been
condensed or omitted. Accordingly, these condensed financial statements
should be read in conjunction with the Registrant's financial statements
included in the Company's Form 10-KSB for the year ended June 30, 1998.
Page 3
ASTROSYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF NET ASSETS IN LIQUIDATION
(Amounts in thousands, except per share amounts)
(Unaudited)
September 30,
1998
_____________
Assets
_______
Cash and cash equivalents $12,806
U.S. government securities 978
Investment in AstroPower, Inc. 5,640
Loans to officers 1,186
Other assets 757
_______
21,367
Liabilities
___________
Deferred income taxes 7,626
Accrued expenses/contingency reserve 2,219
_______
Net assets in liquidation $11,522
=======
Number of common and common equivalent shares outstanding 5,934
=====
Net assets in liquidation per share $1.94
=====
The accompanying notes are an integral part of this statement.
Page 4
ASTROSYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS IN LIQUIDATION
(In thousands)
(Unaudited)
Three months Three months
ended ended
September 30, September 30,
1998 1997
_____________ _____________
Net assets in liquidation - beginning
of period $12,006 $5,497
(Decrease)/increase in estimated liquidation
values of net assets over liabilities (484) 2,807
_______ ______
Net assets in liquidation - end of period $11,522 $8,304
The accompanying notes are an integral part of these statements.
Page 5
Astrosystems, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three Month Periods ended September 30, 1998 and 1997
NOTE A - BASIS OF PRESENTATION
______________________________
A Plan of Complete Liquidation and Dissolution (the "Plan") was adopted
by the Company's Board of Directors (the "Board") on October 26, 1995 and
approved by the holders of a majority of the Company's outstanding shares
of common stock on February 2, 1996. The Plan provides for: (1) the
payment of or provision for all of the Company's liabilities and
obligations, (2) the distribution to the Company's shareholders in kind
or of the proceeds from sale or other disposition of all of the Company's
assets, (3) the transfer of any remaining assets to a liquidating trust
by February 2, 2000, if applicable, and (4) the dissolution of the
Company.
The Company has adopted the liquidation basis of accounting for all
periods subsequent to February 2, 1996. Under the liquidation basis of
accounting, assets are stated at their estimated net realizable values
and liabilities are stated at their anticipated settlement amounts.
Therefore, historical financial information is not comparable to the
liquidation period financial information.
The Company has set aside, as Accrued expenses/contingency reserve, an
amount believed to be adequate for payment of all expenses and other
known liabilities, as well as likely and quantifiable contingent
obligations, including potential tax obligations. A portion of the
Accrued expenses/contingency reserve is a reserve for other contingencies,
aggregating $1,350,000 at September 30, 1998, which could be made
available for distribution to stockholders if and when the Company
determines it is no longer required. In the event that the reserve for
other contingencies is not adequate for payment of the Company's expenses
and liabilities, each stockholder could be held liable for pro rata
payments to creditors in an amount not to exceed the stockholder's prior
distributions from the Company.
The valuation of assets and liabilities necessarily requires many
estimates and assumptions, and there are substantial uncertainties in
carrying out the provisions of the Plan. The actual value of any
liquidating distributions will depend upon a variety of factors
including, among others, the actual market prices of any securities
distributed in kind, the proceeds from the sale of any of the Company's
assets and the actual timing of distributions. The valuations presented
in the accompanying statement of net assets in liquidation represent
forecasts, based on present facts and circumstances, of the estimated
realizable values of assets, net of liabilities and estimated costs
associated with carrying out the provisions of the Plan. The actual
values and costs could be higher or lower than the amounts recorded.
On June 30, 1997, the Company declared an initial liquidating distribution
of $5.00 per share in cash to stockholders of record as of August 15, 1997.
The distribution was paid on September 8, 1997. The Board of
Directors is currently unable to predict the precise amount or timing of
any future distributions pursuant to the Plan. The actual amount and
timing of, and record date for, all distributions will be determined by
the Board of Directors, in its sole discretion, and will depend in part
upon the Board's determination as to whether particular assets are to be
distributed in kind or otherwise disposed of, and the amounts deemed
necessary by the Board to pay or provide for all the Company's
liabilities and obligations.
Page 6
Astrosystems, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three Month Periods ended September 30, 1998 and 1997
NOTE B - CHANGES IN NET ASSETS IN LIQUIDATION
______________________________________________
The changes in the estimated liquidation values of net assets over
liabilities are as follows:
September 30, September 30,
1998 1997
(in thousands) (in thousands)
______________ ______________
Proceeds from exercise of stock options - $2,070
Change in valuation of AstroPower, Inc. stock (808) -
Adjustment to Accounts Payable - 946
Estimated taxes on above adjustment - (322)
Change in estimated tax benefits 250 -
Additional interest earned and estimated on
cash and cash equivalents 204 299
Change in the estimate of shut-down costs (130) (256)
Other adjustments - 70
_____ ______
(Decrease)/increase in estimated
liquidation values of net assets
over liabilities $(484) $2,807
===== ======
NOTE C - ACCRUED EXPENSE/CONTINGENCY RESERVE
____________________________________________
Accrued expenses at September 30, 1998 include estimates of costs to be
incurred in carrying out the Plan. The actual costs could vary
significantly from the related provisions due to uncertainty related to
the length of time required to complete the Plan and complexities and
contingencies which may arise.
Existing liabilities at September 30, 1998 consist of (amounts in thousands):
1998
______
Accounts payable, accrued expenses and
Miscellaneous $ 315
Minimum payments on nonrecourse
Obligation 38
Shutdown costs and estimated operating
costs (including compensation) to
administer the Plan through dissolution 1,175
Estimated interest income (374)
Estimated tax benefit of losses through dissolution (285)
Reserve for other contingencies 1,350
______
$2,219
======
Astrosystems, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three Month Periods ended September 30, 1998 and 1997
NOTE C (continued)
__________________
Accounts payable, accrued expenses and miscellaneous consist of accrued
professional fees and other accrued liabilities.
The Company has set aside, as reserve for other contingencies, an amount
believed to be adequate for payment of likely and quantifiable contingent
obligations, including potential tax obligations. Any portion of the
reserve for other contingencies which the Company determines is no longer
required will be made available for distribution to its stockholders. In
the event that the reserve for other contingencies account is not
adequate for payment of the Company's expenses and liabilities, each
stockholder could be held liable for pro rata payments to creditors in an
amount not to exceed the stockholder's prior distributions from the
Company.
NOTE D - SALE OF OPERATING ASSETS
_________________________________
As of February 7, 1996, all of the Company's operating assets were sold to
two purchasers. The purchase prices are subject to adjustment based upon
a final valuation of the transferred inventory and equipment. Pursuant
to one of the purchase agreements, $1,000,000 of the purchase price of
$3,706,700 was held in escrow to provide for indemnification claims that
may be asserted against the Company. At September 30, 1998, the amount
in escrow was approximately $512,000.
The proceeds from the sale of assets to one purchaser is dependent upon
the final asset and inventory valuation. At September 30, 1998, the
Company has recorded a receivable aggregating approximately $594,000
based upon the Company's valuation of inventory sold. The value of
certain inventory items is currently being disputed; however, the Company
does not believe that the final valuation, which is currently subject to
ongoing arbitration, will have a material effect on the value of the net
assets in liquidation.
NOTE E - ASTROPOWER, INC. STOCK
_______________________________
Assumes an estimated fair market value of $4.73 per share as at September
30, 1998 for the Company's 1,193,750 shares of unregistered common stock
in AstroPower, Inc. On February 12, 1998, AstroPower, Inc. successfully
completed an initial public issue and the stock is currently listed on
the NASDAQ National Market (symbol APWR). The Company's agreement with
the underwriter not to sell or otherwise transfer this stock expired on
August 12, 1998. As of September 30, 1998, the Company determined that the
fair value of its investment in AstroPower, Inc. is approximately
$5,640,000 ($4.73 per share). The Company retained an outside independent
appraiser to assist management in adjusting AstroPower, Inc.'s quoted
market value ($6.75 at September 30, 1998) to fair value with due notice
being given to marketability as well as other factors. As the Company has
a zero basis in this stock, any sale or transfer will result in a
corporate tax based on the value of the stock at that time. Provision for
such taxes has been made in Deferred Income Taxes based on the estimated
fair market value.
Page 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Liquidity, Capital Resources and Impact of Inflation
____________________________________________________
The Board of Directors adopted, and the stockholders approved on
February 2, 1996, a Plan of Complete Liquidation and Dissolution (the
"Plan") of the Company. See "Plan of Complete Liquidation and
Dissolution" below.
The Company announced on March 26, 1996 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 (in addition to the 500,000 shares previously authorized on
October 23, 1992). To date, 676,404 shares have been repurchased.
On June 30, 1997, the Company declared an initial liquidating
distribution of $5.00 per share in cash to stockholders of record as of
August 15, 1997. The distribution was paid on September 8, 1997.
Although the Company has not established a firm timetable for additional
liquidating distributions to stockholders, the Company will, subject to
exigencies inherent in winding up the Company's business, make such
distributions consistent with maximizing stockholder value. The actual
amount and timing of, and record date for, all additional distributions
will be determined by the Board of Directors, in its sole discretion, and
will depend in part upon the Board's determination as to whether
particular assets are to be distributed in kind or otherwise disposed of,
and the amounts deemed necessary by the Board to pay or provide for all
the Company's liabilities and obligations.
Statement of Net Assets in Liquidation
______________________________________
Pursuant to the Plan, the Company consummated the sales of the assets
of its three operating units (Military Division, Behlman Electronics
subsidiary and Industrial Automation Division) as of February 7, 1996.
The exact amount of the proceeds to the Company of such sales is
dependent upon a final fixed asset and inventory valuation. The value of
certain inventory items is being disputed along with a number of other
items such as warranty costs; however, the Company does not believe that
the final result will have a material effect on the value of the Net
Assets in Liquidation. In connection with the sale of the Military and
Behlman operations, approximately $512,000 of the purchase price
currently is being held in escrow to provide for certain indemnification
claims that the buyer may assert against the Company under the sale
agreement.
The Company owns 1,193,750 unregistered shares of AstroPower, Inc.
common stock. On February 12, 1998, AstroPower, Inc. successfully
Page 9
completed an initial public issue and its stock is currently listed on
the NASDAQ National Market (symbol APWR). The Company's agreement with
the underwriter not to sell or otherwise transfer this stock expired on
August 12, 1998. The current estimated fair value of $5,640,000 for the
Company's unregistered stock was established by an outside appraiser with
due notice being given to marketability as well as other factors. As the
Company has a zero basis in this stock, any sale or transfer will result
in a corporate tax based on the value of the stock at that time.
Provision for such taxes has been made in Deferred Income Taxes based on
the current estimated fair value.
The Company has set aside, as Accrued expenses/contingency reserve,
an amount believed to be adequate for payment of all expenses and other
known liabilities as well as likely and quantifiable contingent
obligations, including potential tax obligations. Any portion of the
contingency reserve which the Company determines is no longer required
will be made available for distribution to its stockholders. In the
event that the Accrued expenses/contingency reserve account is not
adequate for payment of the Company's expenses and liabilities, each
stockholder could be held liable for pro rata payments to creditors in an
amount not to exceed the stockholder's prior distributions from the
Company. The Company has therefore adopted a conservative policy in
retaining sufficient assets to insure against any unforeseen and non-
quantifiable contingencies.
Statement of Changes in Net Assets in Liquidation
_________________________________________________
From July 1, 1998 to September 30, 1998 there was a decrease in Net
Assets in Liquidation of $484,000. This decrease was primarily due to a
change in the estimated value of the Company's investment in AstroPower,
Inc. caused by a decline in the market price of AstroPower, Inc. stock.
Plan of Complete Liquidation and Dissolution
____________________________________________
On February 2, 1996, the stockholders of the Company approved a Plan
of Complete Liquidation and Dissolution for the Company. Pursuant to the
Plan, the Company has sold its three operating units and intends to sell
such of its remaining assets as are not to be distributed in kind to its
stockholders. The Company intends to provide for payment of all
expenses, liabilities and obligations of the Company and liquidate via
distributions to stockholders.
On June 30, 1997, the Company declared an initial liquidating
distribution of $5.00 per share in cash to stockholders of record as of
August 15, 1997. The distribution was paid on September 8, 1997. The
Board is currently unable to predict the precise amount of any additional
distributions pursuant to the Plan. The actual amount and timing of, and
record date for, all such distributions will be determined by the Board
Page 10
of Directors, in its sole discretion, and will depend in part upon the
Board's determination as to whether particular assets are to be
distributed in kind or otherwise disposed of, and the amounts deemed
necessary by the Board to pay or provide for all the Company's liabilities
and obligations.
Year 2000 Issue
_______________
The Year 2000 issue is the result of computer programs using a two-
digit format as opposed to four digits to indicate the year. Such computer
systems will be unable to interpret dates beyond 1999 which could cause a
system failure or other computer errors leading to disruptions in
operations. The Year 2000 issue will not have a material effect on the
Company's financial position.
Page 11
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
_________________________________
(a) Exhibits.
_________
2. Plan of Complete Liquidation and Dissolution -
incorporated by reference to Exhibit A to Proxy Statement of
the Company dated January 12, 1996 with respect to Annual
Meeting of Stockholders held February 2, 1996
(File No. 0-3344).
3 (a) Certificate of Incorporation - incorporated
by reference to Exhibit 3(a) to the Company's Annual Report
on Form 10-KSB for the fiscal year ended June 30, 1993
(File No. 0-3344).
(b) By-Laws - incorporated by reference to
Exhibit 3(b) to the Company's Annual Report on Form 10-KSB
for the fiscal year ended June 30, 1993 (File No. 0-3344).
10. Asset Purchase Agreement dated as of January 11,
1996 by and among Astrosystems, Inc., Behlman Electronics,
Inc., Orbit International Corp. and Cabot Court, Inc. -
incorporated by reference to Exhibit B to Proxy Statement of
the Company dated January 12, 1996 with respect to Annual
Meeting of Stockholders held February 2, 1996
(File No. 0-3344).
27. Financial Data Schedule
(b) Reports on Form 8-K.
____________________
None.
No other reportable items
Page 12
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.
November 12, 1998 BY: /S/
___________________________ ____________________________________
Date Gilbert H. Steinberg, Vice President
November 12, 1998 /S/
___________________________ ____________________________________
Date Gilbert H. Steinberg, Treasurer and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000008065
<NAME> ASTROSYSTEMS, INC.
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> JUN-30-1999 JUN-30-1998
<PERIOD-START> JUL-01-1998 JUL-01-1997
<PERIOD-END> SEP-30-1998 SEP-01-1997
<CASH> 12,806 12,903
<SECURITIES> 978 3,978
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 21,367 17,790
<PP&E> 0 0
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 21,367 17,790
<CURRENT-LIABILITIES> 2,219 4,311
<BONDS> 0 0
0 0
0 0
<COMMON> 5,934 5,828
<OTHER-SE> 0 0
<TOTAL-LIABILITY-AND-EQUITY> 0 0
<SALES> 0 0
<TOTAL-REVENUES> 0 0
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 0 0
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 0 0
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
