.. 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
For the fiscal year ended June 30, 1998
_______________________________________________
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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 incorporation or (I.R.S. Employer
organization) Identification No.)
1220 Market Street, Suite 603, Wilmington, DE 19801
________________________________________________ ____________________
(Address of Principal Executive Offices) (Zip Code)
Issuer's telephone number (302) 652-3115
_______________________________________
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which 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. YES....X.... NO..........
The Registrant's revenues for fiscal year ended June 30, 1998 were $0.
The aggregate market value of the Registrant's Common Stock held by
nonaffiliates of the Registrant is $5,692,252 (as of September 15, 1998).
(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
5,933,576 (as of September 15, 1998).
DOCUMENTS INCORPORATED BY REFERENCE
None
PART I
Item 1. Description of Business
_______________________
(a) Business Development.
____________________
(1) General. Prior to February 7, 1996, Astrosystems, Inc. (the
"Company") had three operating divisions: Behlman Electronics, Inc.
("Behlman"), a wholly-owned subsidiary of the Company which produced
commercial AC power supplies, the Defense Electronics Division which designed
and manufactured power conversion devices and the Industrial Automation
Division which produced industrial control products.
Since its inception, the Company's primary business had been in
efense electronics. The Company's revenues decreased every year since fiscal
year 1992 from $18,100,000 in the fiscal year ended June 30, 1992 to
$12,300,000 in the fiscal year ended June 30, 1995. The decline was
primarily due to a continuing decline in defense budgets and severe price
competition from lower cost geographical areas and corporate consolidations.
In addition, high fixed overhead costs necessitated by defense contracts
coupled with a declining business base were tending to make the Company non-
competitive. The Company attempted to offset this decline by increasing
sales for its commercial and industrial products and although the results
showed some promise, they were not expected to be sufficient.
In view of the decline described above, the Board of Directors
(the "Board") considered various alternatives for maximizing the Company's
value and decided that a planned liquidation was in the best interest of the
stockholders. In the opinion of the Board, the Company's common stock
historically had traded at a discount from the net value of its assets and
the liquidation would allow the Company to distribute its real tangible
value. A Plan of Complete Liquidation and Dissolution (the "Plan") for the
Company was therefore submitted to the stockholders and approved on February
2, 1996. Pursuant to the Plan, the Company consummated the sale of the
assets of its three operating divisions, as described below (see "Asset
Purchase Agreements").
Since February 2, 1996, the Company has been engaged in
implementing the Plan. Some of its ongoing activities are: 1) implementing
the asset purchase agreements (see "Asset Purchase Agreements" below); 2)
relocating the Company to Delaware (see "Other Matters" below); 3)
distributing benefit plan funds; 4) completing open contracts and collecting
accounts receivable; 5) engaging in negotiations, litigation and other
methods of dispute resolution regarding final price determination for the
asset sales; 6) engaging a new auditor (see "Other Matters" below); 7)
determining and implementing an initial distribution to stockholders; 8)
seeking to realize stockholder value for the solar cell license and
AstroPower, Inc. assets (see "Solar Cell Assets" below) and 9) preparing
federal and state tax returns, SEC filings and additional federal and state
filings necessary for the dissolution process.
On June 30, 1997, the Company declared an initial cash
distribution of $5.00 per share to stockholders of record as of August 15,
1997. On September 8, 1997, the distribution was made. No date has been set
for further distributions. Under the terms of the Plan, the Company has
until February 2, 2000 to complete the liquidation by making distributions
directly to its stockholders or to a liquidating trust.
(2) Asset Purchase Agreements. Effective February 6, 1996,
pursuant to a certain Asset Purchase Agreement dated as of January 11, 1996
(the "Orbit Agreement") by and among the Company, Behlman, Orbit
International Corp. ("Orbit") and Cabot Court, Inc. ("Cabot"), a wholly-owned
subsidiary of Orbit, the Company sold to Cabot certain assets of its Defense
Electronics Division and Behlman sold to Cabot certain of its assets for an
aggregate purchase price of $3,706,700. The purchase price was made subject
to adjustment based upon a valuation of the transferred inventory and
equipment as of the closing date. Pursuant to the Orbit Agreement, a portion
of the purchase price is being held in escrow to provide for indemnification
claims that Cabot may assert against the Company or Behlman thereunder. As of
June 30, 1998, the amount in escrow was approximately $512,000.
The value of certain inventory items under the Orbit Agreement
currently 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 materially affect Net Assets in Liquidation.
Effective February 7, 1996, pursuant to an Asset Purchase
Agreement of such date by and between the Company and North Atlantic
Instruments, Inc. ("North Atlantic"), the Company sold to North Atlantic
certain assets of its Industrial Automation Division for a purchase price of
$704,500. Based upon a valuation of the transferred inventory and equipment
as of the closing date, the purchase price was later adjusted to
approximately $596,700.
(3) Solar Cell Assets. In 1983, the Company acquired a 16-year
license (the "License") from the University of Delaware covering a new
process for the manufacture of solar cells. In connection with the
acquisition of the License, the Company issued a $20,000,000 nonrecourse note
(the "Note"), originally due in 1993 and bearing interest at the rate of 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. To date, there have been no amounts paid
under the Note other than the minimum quarterly payments. Concurrently with
the grant of the License, a sublicense for the process was given to
AstroPower, Inc. ("AstroPower"), a company engaged in photovoltaic research
and production. An amendment to the license agreement extended its term to
2006; concurrently, the due date of the Note was extended to May 1999. The
Company, for financial reporting purposes, has not recorded the Note.
The Company currently owns 1,193,750 shares of AstroPower, Inc.
common stock. On February 12, 1998, AstroPower, Inc. successfully completed
an initial public issue and its stock is currently listed on the NASDAQ
National Market (symbol APWR). In connection with the initial public issue,
the Company entered into an agreement with the underwriter not to sell or
otherwise transfer any of its stock for six months after the date of the
issue. As of June 30, 1998, the Company determined that the fair value of its
investment in AstroPower, Inc. is approximately $6,448,000 ($5.40 per share).
The Company retained an outside independent appraiser to assist management in
adjusting AstroPower, Inc.'s quoted market value ($8.375 at June 30, 1998) to
fair value after considering such factors as the Company's agreement with the
underwriter, statutory restrictions limiting sales by the Company of its
holdings in AstroPower, Inc. and 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.
(4) Other Matters. On December 18, 1996, the Company's
independent auditor, Richard A. Eisner & Company LLP, resigned citing an
independence issue. The Company instituted a search for a new auditor and in
June 1997, Grant Thornton LLP was retained. The Company filed its Form 10-KSB
for the fiscal year ended June 30, 1996 with unaudited financials. Due to
the unaudited nature of such filing and the fact that the Company was in
liquidation, NASDAQ removed the Company from listing on its stock market.
The Company's stock continues to be publicly traded on the NASD OTC
Electronic Bulletin Board.
The Company vacated its manufacturing and office space in Lake
Success, New York, prior to June 30, 1996, in accordance with the terms of
its lease. The Company relocated to a new office in Wilmington, Delaware.
The Company is a corporation originally incorporated in the State
of New York in 1959. In April, 1987, the Company changed its state of
incorporation to Delaware.
(b) Business of Issuer. Since February 2, 1996, the Company's sole
business has been the implementation of its Plan of Complete Liquidation and
Dissolution.
(1) Special Features of Government Contracts. In accordance
with the asset purchase agreements governing the asset sales, certain
government contracts previously awarded to the Company were novated to the
purchasers. Under the standard terms of the novation agreements, the Company
remains jointly liable with the purchasers for performance under these
contracts. In addition, a number of contracts were not novated and the
Company has subcontracted performance under these contracts to the purchaser
of its defense-related assets. Management does not believe that the final
results of these transactions will have a material effect on the Company's
Net Assets in Liquidation.
(2) Solar Cell License. The Company has a license covering a
new process for the manufacture of solar cells (see "Solar Cell Assets" under
Item 1(a) above).
(3) Environmental Regulation Compliance. The Company 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 on the Company's assets.
(4) Number of Employees. The Company currently has four
employees, three of whom are 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.
_______________________
The Company's office is located in Wilmington, Delaware, where
the Company occupies approximately 1,100 square feet of usable space. The
premises are leased from an unaffiliated party through May 31, 1999 at an
annual rental of approximately $23,000, which includes common area
maintenance and real estate taxes.
Item 3. Legal Proceedings.
_________________
There are no material pending legal proceedings to which the
Company 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.
____________________________________________________
On June 29, 1998, the Company held an annual meeting of
stockholders at which a board of five directors was elected. The number of
affirmative votes and negative votes with regard to the foregoing were as
follows:
Voted for Withheld Proxy
Nominee Election to vote for Election
_________________________ _________ ____________________
Seymour Barth 4,137,565 20,362
Gilbert H. Steinberg 4,137,565 20,362
Elliot J. Bergman 4,136,423 21,504
Elliot D. Spiro 4,136,523 21,404
Walter Steinberg 4,136,423 21,504
PART II
Item 5. Market for Common Stock and Related Stockholder Matters.
________________________________________________________
(a) The Company's Common Stock is traded in the over-the-counter
market (symbol: ASTR). The following table sets forth the quarterly high
and low bid prices for the last two fiscal years. 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 1996 - September 1996 6 3/8 5 3/8
October 1996 - December 1996 6 4 3/8
January 1997 - March 1997 5 1/2 4 3/4
April 1997 - June 1997 5 5/8 5
July 1997 - September 1997 5 3/4 1/4
October 1997 - December 1997 1 3/8 1/4
January 1998 - March 1998 2 1/2 1 1/4
April 1998 - June 1998 2 3/8 2
Certain of the quotations set forth above represent quarterly
periods prior to payment by the Company of the liquidating distribution
discussed below and do not reflect market prices following the distribution.
(b) The number of stockholders of record of the Registrant's Common
Stock, par value $.10 per share, as of June 30, 1998 was 811.
(c) 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.
Item 6. Management's Discussion and Analysis or Plan of Operation.
_________________________________________________________
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.
Since that date, the Company has been operating under the Plan and its
financial reporting is being made in accordance with the liquidation basis of
accounting. Therefore, the following discussion relates to financial
statements presented on a liquidation basis since statements presented on a
going concern basis are no longer material to stockholder value.
Liquidity, Capital Resources and Impact of Inflation.
____________________________________________________
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. No shares
were repurchased during fiscal years 1998 or 1997.
The repurchase authorization remains in force and the Company
will, from time to time, repurchase shares in accordance with applicable law
when it is consistent with maximizing stockholder distributions under the
Plan.
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; however, the Company does not believe that the final
result will affect materially 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 shares of AstroPower, Inc. common
stock. On February 12, 1998, AstroPower, Inc. successfully completed an
initial public issue and its stock is currently listed on the NASDAQ National
Market (symbol APWR). In connection with the initial public issue, the
Company entered into an agreement with the underwriter not to sell or
otherwise transfer any of its stock for six months after the date of the
issue. As of June 30, 1998, the Company determined that the fair value of its
investment in AstroPower, Inc. is approximately $6,448,000 ($5.40 per share).
The Company retained an outside independent appraiser to assist management in
adjusting AstroPower, Inc.'s quoted market value ($8.375 at June 30, 1998) to
fair value after considering such factors as the Company's agreement with the
underwriter, statutory restrictions limiting sales by the Company of its
holdings in AstroPower, Inc. and 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.
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 June 30, 1997 to June 30, 1998 there was an increase in Net
Assets in Liquidation of $6,509,000. This increase was primarily due to the
net effect of the valuation of AstroPower, Inc. stock and the exercise of
stock options.
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 Board declared an initial liquidating
distribution of $5.00 per share to stockholders of record as of August 15,
1997, which was paid September 8, 1997. The Board has not yet established
the precise amount of any further distributions pursuant to the Plan. The
actual amount and timing of, and record date for, all such 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.
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.
Item 7. Financial Statements.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
____
Report of Independent Certified Public Accountants F-2
Financial Statements
Consolidated Statements of Net Assets
(Liquidation Basis) F-3
Consolidated Statements of Changes in Net Assets
(Liquidation Basis) F-4
Notes to Consolidated Financial Statements
(Liquidation Basis) F-5 - F-16
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
Astrosystems, Inc.
We have audited the accompanying consolidated statements of net assets
(liquidation basis) of Astrosystems, Inc. (a Delaware corporation) and its
subsidiaries (the "Company") as of June 30, 1998 and 1997, and the related
consolidated statements of changes in net assets (liquidation basis) for 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.
As described in Note A to the financial statements, the stockholders of
Astrosystems, Inc. approved a plan of liquidation on February 2, 1996, and
the Company sold its operating businesses shortly thereafter. As a result,
the Company has changed its basis of accounting for periods subsequent to
February 2, 1996 from a going concern basis to a liquidation basis.
In our opinion, the financial statements referred to above present fairly, in
all material respects, its consolidated net assets in liquidation as of June
30, 1998 and 1997, and the changes in its consolidated net assets in
liquidation for the years then ended, in conformity with generally accepted
accounting principles applied on the bases described in the preceding
paragraph.
GRANT THORNTON LLP
Melville, New York
August 18, 1998
F-2
Astrosystems, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF NET ASSETS
(LIQUIDATION BASIS)
June 30, June 30,
ASSETS 1998 1997
______ ________ ________
Cash and cash equivalents $14,459,000 $33,911,000
U.S. Government securities 978,000 5,978,000
Investment in AstroPower, Inc. 6,448,000
Loans to officers 1,186,000 3,698,000
Other assets 1,056,000 1,187,000
___________ ___________
24,127,000 44,774,000
LIABILITIES
___________
Liquidation distribution payable 29,138,000
Deferred income taxes 8,015,000 5,400,000
Accrued expenses/contingency reserve 4,106,000 4,739,000
___________ ___________
Net assets in liquidation $12,006,000 $ 5,497,000
=========== ===========
Number of common and common equivalent shares
outstanding 5,826,800 5,827,600
========= =========
Net assets in liquidation per share $2.06 $1.39
===== =====
The accompanying notes are an integral part of these statements.
F-3
Astrosystems, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
(LIQUIDATION BASIS)
Year ended Year ended
June 30, June 30,
1998 1997
__________ __________
Net assets in liquidation - beginning of period $ 5,497,000 $34,469,000
Liquidation distributions declared (29,138,000)
Increase in estimated liquidation values of net
assets over liabilities 6,509,000 166,000
___________ ___________
Net assets in liquidation - end of period $12,006,000 $ 5,497,000
=========== ===========
The accompanying notes are an integral part of these statements.
F-4
Astrosystems, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(LIQUIDATION BASIS)
June 30, 1998 and 1997
NOTE A - BASIS OF PRESENTATION AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES
_____________________________________________
A Plan of Complete Liquidation and Dissolution (the "Plan") was adopted
by the Company's Board of Directors 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 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. See Note F - Liquidating
Distribution.
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 and $1,250,000 at June 30, 1998 and
1997, respectively, which will be made available for distribution to
stockholders 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.
F-5
Astrosystems, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(LIQUIDATION BASIS)
June 30, 1998 and 1997
NOTE A (continued)
__________________
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
estimates, 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.
A summary of other significant accounting policies applied in the
preparation of the accompanying consolidated financial statements
follows:
1. Principles of Consolidation
The consolidated financial statements include the accounts of the
Company and its subsidiaries. Material intercompany transactions and
account balances have been eliminated in consolidation.
2. Cash Equivalents
Cash equivalents consist of the Company's investments in money market
funds.
3. U.S. Government Securities
The Company holds investments in U.S. Government securities which
consist of United States Treasury Notes which are reported at fair
value. As these securities mature, the Company is not reinvesting
the funds. At June 30, 1998, there is one United States Treasury
Note outstanding with a face amount of $1,000,000 which matures on
March 31, 2001.
4. Income Taxes
Deferred income taxes are recognized for temporary differences
between the financial statement and income tax bases of assets and
liabilities and loss carryforwards for which income tax benefits are
expected to be realized in future years. The effect on deferred
taxes of a change in tax rates is recognized in income in the period
that includes the enactment date.
F-6
Astrosystems, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(LIQUIDATION BASIS)
June 30, 1998 and 1997
NOTE B - INVESTMENT IN ASTROPOWER, INC.
_______________________________________
The Company owns 1,193,750 shares of the common stock of AstroPower, Inc.
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.
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). In connection with the initial public issue, the
Company entered into an agreement with the underwriter not to sell or
otherwise transfer any of its stock for six months after the date of the
issue.
At June 30, 1998, the Company has determined that the fair value of its
investment in AstroPower, Inc. is approximately $5.40 per share as of
June 30, 1998. The Company retained an outside independent appraiser to
assist management in adjusting AstroPower, Inc.'s quoted market value
($8.375 at June 30, 1998) to fair value after considering such factors as
the Company's agreement with the underwriter, statutory restrictions
limiting sales by the Company of its holdings in AstroPower, Inc. and
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. A provision for such taxes has been made in Deferred
Income Taxes based on the current estimated fair value.
NOTE C - LOANS TO OFFICERS
__________________________
Loans made to officers of the Company aggregated $1,186,000 and
$3,698,000 at June 30, 1998 and 1997, respectively, and bear interest at
the rate of 6% per annum.
F-7
Astrosystems, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(LIQUIDATION BASIS)
June 30, 1998 and 1997
NOTE D - OTHER ASSETS
_____________________
Other assets consist of the following:
June 30, June 30,
1998 1997
___________ __________
Accounts receivable - net $ 225,000 $ 228,000
Due from purchasers of assets (Note I) 589,000 594,000
Due from related party 96,000
Prepaid insurance 15,000 26,000
Accrued interest and dividends 16,000 97,000
Long-term investment (1) 185,000 113,000
Other 26,000 33,000
___________ __________
$1,056,000 $1,187,000
========== ==========
1. The long-term investment represents an investment in a limited
partnership and is recorded at its fair value.
NOTE E - ACCRUED EXPENSE/CONTINGENCY RESERVE
____________________________________________
Accrued expenses at June 30, 1998 and 1997 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.
F-8
Astrosystems, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(LIQUIDATION BASIS)
June 30, 1998 and 1997
NOTE E (continued)
______
Existing and estimated liabilities at June 30, 1998 and 1997 consist of:
1998 1997
__________ __________
Accounts payable, accrued expenses and
miscellaneous $1,933,000 $2,187,000
Minimum payments on nonrecourse
obligation 50,000 100,000
Shutdown costs and estimated operating
costs (including compensation) to
administer the Plan through dissolution 1,542,000 3,122,000
Estimated interest income (345,000) (696,000)
Estimated tax benefit of losses through
dissolution (424,000) (1,224,000)
Reserve for other contingencies 1,350,000 1,250,000
__________ __________
$4,106,000 $4,739,000
========== ==========
Accounts payable, accrued expenses and miscellaneous consist of deferred
compensation payable to the officers of the Company, commissions payable,
customer balances, 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.
F-9
Astrosystems, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(LIQUIDATION BASIS)
June 30, 1998 and 1997
NOTE F - LIQUIDATING DISTRIBUTION
_________________________________
Pursuant to the Plan, the Company will distribute pro rata to the
Company's stockholders all of its remaining property and assets,
including the proceeds of any sale, exchange or disposition, except such
property or assets as are required for paying or making provision for the
claims and obligations of the Company. Such distributions may occur all
at once or in a series of distributions and may be in cash or in kind, in
such manner, and at such time or times, as the Board of Directors may
determine.
On June 30, 1997, the Board of Directors declared a liquidating
distribution to holders of record of the Company's common stock on August
15, 1997, in the amount of $5.00 per share. This liquidating
distribution was paid on September 8, 1997.
NOTE G - NET ASSETS IN LIQUIDATION PER SHARE
____________________________________________
Number of common shares for net assets in liquidation per share assumes
the exercise of all dilutive stock options. At June 30, 1997, dilutive
options aggregated 716,765 with an average exercise price of
approximately $2.89. At June 30, 1998, there were no outstanding stock
options. The effect of these options in 1997 is shown below:
June 30, June 30,
1998 1997
_________ _________
Number of common and common equivalent
shares - outstanding 5,826,800 5,827,600
========= =========
Net assets in liquidation $12,006,000 $5,497,000
Proceeds from the exercise of dilutive
stock options 2,070,000
Estimated tax benefit of compensatory
stock options 545,000
___________ _________
Adjusted net assets in liquidation $12,006,000 $8,112,000
=========== ==========
Net assets in liquidation per share $2.06 $1.39
===== =====
F-10
Astrosystems, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(LIQUIDATION BASIS)
June 30, 1998 and 1997
NOTE H - CHANGES IN NET ASSETS IN LIQUIDATION
_____________________________________________
Changes in net assets in liquidation represent changes since adoption of
the Plan of Complete Liquidation and Dissolution on February 2, 1996.
The changes in the estimated liquidation values of net assets over
liabilities are as follows:
June 30, June 30,
1998 1997
__________ __________
Adjustments to accounts payable $1,061,000 $ -
Proceeds from exercise of stock options 2,070,000 -
Additional interest earned on cash
and cash equivalents 667,000 1,683,000
Purchase of common stock - (768,000)
Change in the estimate of shut-down costs (289,000) (635,000)
Valuation of AstroPower, Inc. stock 6,448,000 -
Change in the estimate of tax benefit (3,415,000) (216,000)
Change in the estimate of contingent
liabilities (100,000) 50,000
Other adjustments 67,000 52,000
__________ __________
Increase in estimated liquidation
values of net assets over
liabilities $6,509,000 $ 166,000
========== ==========
NOTE I - 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 being held in escrow to provide for
indemnification claims that may be asserted against the Company. At June
30, 1998 and 1997, the amount held in escrow was reduced to approximately
$512,000 and $773,000, respectively.
The proceeds from the sale of assets to one purchaser is dependent upon
the final asset and inventory valuation. 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 agreed-upon valuation, which is currently subject to ongoing
arbitration, will have a material effect on the value of the net assets
in liquidation.
F-11
Astrosystems, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(LIQUIDATION BASIS)
June 30, 1998 and 1997
NOTE J - CONTINGENCIES AND COMMITMENTS
______________________________________
1. The Company leases office space in Wilmington, Delaware, and is
obligated for minimum annual rentals of $21,000 during the year ended
June 30, 1999.
The last year's lease payment has been paid in advance by the
Company. This prepaid rent is included in other assets in the
accompanying consolidated statement of net assets at June 30, 1998
and 1997.
Rent expense was approximately $23,000 during the years ended June
30, 1998 and 1997.
2. Employment contracts with the officers of the Company 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.
In June 1996, each of the Company's officers was given three years'
notice, as required by the employment agreements, of the termination
of his employment agreement with the Company.
3. In accordance with the asset purchase agreements governing the asset
sales, certain government contracts previously awarded to the Company
were novated to the purchasers. Under the standard terms of the
novation agreements, the Company remains jointly liable with the
purchasers for performance under these contracts. In addition, a
number of contracts were not novated and the Company has
subcontracted performance under these contracts to the purchaser of
its defense-related assets. Management does not believe that the
final results of these transactions will have a material effect on
the value of the net assets in liquidation.
4. The Company is a party to various litigations that arose in the
ordinary course of its prior business. On the basis of information
furnished by counsel and others, management believes that none of
these litigations will have a material effect on the value of the net
assets in liquidation.
F-12
Astrosystems, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(LIQUIDATION BASIS)
June 30, 1998 and 1997
NOTE J (continued)
______
5. In 1983, the Company acquired a sixteen-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 annum.
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. The
Company made quarterly payments of $50,000 and $49,000 during the
years ended June 30, 1998 and 1997, respectively.
The Company, for financial reporting purposes, has not recorded the
note and has provided for expected payments pursuant to the license
agreement. No payments based on sales were required to be made
through June 30, 1998.
6. The Company has a profit-sharing plan which provides benefits upon
retirement, death, incapacity or separation of eligible employees.
There were no profit-sharing expenses for the years ended June 30,
1998 and 1997, respectively.
7. The Company maintains a Retirement Savings Plan which allows
participants to make contributions by salary reductions 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. At June 30, 1998, the
Company owed the Retirement Savings Plan approximately 111,500 shares
of its common stock for past contributions. Such shares were
transferred to the Plan subsequent to June 30, 1998. Employees vest
immediately in their contribution and in the Company's contribution.
NOTE K - STOCK OPTIONS AND OTHER STOCK TRANSACTIONS
___________________________________________________
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, nonemployee directors, consultants and advisors. The fair
value and pro forma effects on the Company's net assets in liquidation
and net assets in liquidation per share are not presented, as the fair
value of the options granted (determined pursuant to Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation") has no effect on the liquidation basis consolidated
financial statements.
F-13
Astrosystems, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(LIQUIDATION BASIS)
June 30, 1998 and 1997
NOTE K (continued)
______
A summary of stock option activity related to the Company's stock option
plan is as follows:
Weighted
Number Option average Number of
of price exercise shares
shares per share price exercisable
_______ _____________ _______ ___________
Outstanding at
February 3, 1996 507,300 $2.88 - $4.00 $3.58 504,675
=======
Exercised (467,300) $2.88 - $4.00 $3.62
________
Outstanding at
June 30, 1997 40,000 $2.88 - $4.00 $3.04 40,000
======
Exercised (40,000) $2.88 - $4.00 $3.04
_______
Outstanding at
June 30, 1998 - -
======= ======
During the period February 3, 1996 to June 30, 1996, options for the
purchase of 499,998 shares were exercised, which options were granted
other than pursuant to the Company's stock option plan. These options
had a weighted average exercise price of $3.08.
On September 10, 1996, the Company granted its two outside directors an
aggregate of 4,000 options to purchase shares of the Company's common
stock at an option price of $3.50 per share. These options were not
granted pursuant to the Company's stock option plan.
At June 30, 1997, there were outstanding 676,765 nonincentive stock
options, which options were granted other than pursuant to the Company's
stock option plan. These options had a weighted average exercise price
of $2.88 and were exercised in July 1997. See Note C - Loans to
Officers.
In March 1996, the Company announced that its Board of Directors
authorized the purchase of up to 500,000 shares of its common stock,
under a stock repurchase program. (This repurchase program was in
addition to the 500,000 shares previously authorized on October 23,
1993.) The purchases may be made by the Company from time to time on the
open market at the Company's discretion.
There were no purchases of common stock during the years ended June 30,
1998 and 1997.
F-14
Astrosystems, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(LIQUIDATION BASIS)
June 30, 1998 and 1997
NOTE L - TAXES ON INCOME
________________________
All income tax accounts have been restated to reflect the liquidation
basis of accounting. Upon any distribution of its property to its
shareholders, the Company will generally recognize a gain or loss as if
the distributed property were sold to the shareholders at its fair market
value. The Company will provide shareholders and the Internal Revenue
Service with a statement of the amount of cash distributed to its
shareholders and its best estimate as to the value of any property
distributed to them during the year. There can be no assurance that the
Internal Revenue Service will not challenge the tax characterization of
any such distribution, including such valuation. As a result of such a
challenge, the amount of gain or loss recognized by the Company and/or
its shareholders might be changed.
In addition, the Company's income tax returns for certain years remain
subject to examination. Accordingly, additional assessments of income
taxes are possible.
The deferred tax liability is as follows:
June 30, June 30,
1998 1997
___________ ___________
Deferred tax liability
Difference between financial reporting
and tax bases of University of
Delaware note $12,361,000 $11,669,000
AstroPower, Inc. stock 2,257,000 -
___________ ___________
14,618,000 11,669,000
Deferred tax (asset)
Utilization of net operating loss
carry-forward (5,860,000) (4,994,000)
Utilization of compensation deduction (651,000) (1,048,000)
Other (92,000) (227,000)
___________ ___________
(6,603,000) (6,269,000)
___________ ___________
Net deferred tax liability $ 8,015,000 $ 5,400,000
=========== ===========
F-15
Astrosystems, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(LIQUIDATION BASIS)
June 30, 1998 and 1997
NOTE L (continued)
______
Deferred taxes result from temporary differences in the recognition of
revenue and expense for tax and financial reporting purposes. The
principal sources of these differences were net operating loss
carryforwards, compensation expenses and amortization and accrued
interest relating to the license from the University of Delaware (see
Note J). In addition, during the fourth quarter of fiscal 1998, the
Company adjusted deferred taxes to reflect actual compensation expense
associated with employee stock options.
At June 30, 1998, the Company had available net operating loss
carryforwards for income tax reporting purposes as follows:
Net operating Expiring in
loss year ending
Period ended carryforwards June 30,
____________ _____________ ___________
June 30, 1990 $ 1,302,000 2005
June 30, 1991 3,252,000 2006
June 30, 1993 596,000 2008
June 30, 1994 605,000 2009
June 30, 1995 525,000 2010
June 30, 1996 7,662,000 2011
June 30, 1997 240,000 2012
June 30, 1998 2,558,000 2013
___________
$16,740,000
===========
F-16
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
________________________________________________________________
On December 18, 1996, Richard A. Eisner & Company, LLP ("Eisner")
resigned as the independent public accountants for the Company since, as it
indicated, it was no longer independent with respect to the Company. Eisner
had served as the Company's independent public accountants since 1967.
Eisner's report on the Company's financial statements as of June
30, 1995 and 1994 and for the years then ended neither contain an adverse
opinion or a disclaimer of opinion nor is modified as to uncertainty, audit
scope or accounting principles.
During the period from July 1, 1995 to December 18, 1996 and the
fiscal years ended June 30, 1995 and 1994, there were no disagreements with
Eisner on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which, if not resolved
to the satisfaction of such firm, would have caused it to make reference to
the subject matter of the disagreement in connection with its report.
On June 17, 1997, the Company engaged Grant Thornton LLP as its
independent public accountants with respect to the fiscal years ended June
30, 1997 and 1996. The engagement of Grant Thornton LLP was approved by the
Audit Committee of the Company.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Securities Exchange Act.
_____________________________________________________________
Year Became Positions held
Name a Director Age with Registrant
___________________ ___________ ___ _______________
Seymour Barth 1959 70 President and Director
Gilbert H. Steinberg 1964 67 Vice President, Treasurer
and Director
Elliot J. Bergman 1964 72 Vice President, Secretary
and Director
Walter A. Steinberg 1989 71 Director
Elliot D. Spiro 1994 69 Director
The term of each Director extends until the next annual meeting
of the Company's stockholders and until his successor is elected and
qualified.
Seymour Barth has served as President of the Company since 1964
and as a Director of the Company since its inception in 1959.
Gilbert H. Steinberg has served as a Director, Vice President and
Treasurer of the Company since 1964.
Elliot J. Bergman has served as a Director, Vice President and
Secretary of the Company since 1964.
Walter A. Steinberg has been an independent engineering
consultant for more than the past five years and has served as a Director of
the Company since 1989.
Elliot D. Spiro has served as Chairman and Chief Executive
Officer of Branch Insurance Agency, a property/casualty and financial
services insurance agency, for more than the past five years and has served
as a Director of the Company since 1994.
There is no family relationship among any of the Company's
Directors and executive officers.
Section 16(a) Beneficial Ownership Reporting Compliance.
________________________________________________________
To the Company's knowledge, based on a review of written
representations that no reports were required, during the fiscal year ended
June 30, 1998, all Section 16(a) filing requirements applicable to the
Company's officers, Directors and 10% stockholders were complied with.
Item 10. Executive Compensation.
_______________________
(a) Summary Compensation Table.
___________________________
Annual Compensation Long-Term Compensation
___________________ __________________________
Awards Payouts
__________________________
Shares
Name and Principal Underlying All Other
Position Year Salary Bonus Options Compensation
__________________ ____ ______ _____ __________ _____________
Seymour Barth 1998 $310,807 0 0 0
President 1997 $310,807 0 0 $71,088(4)
1996 $310,807 0 390,921 (1) $ 6,262(5)
Elliot Bergman 1998 $218,716 0 0 0
Vice President & 1997 $218,716 0 0 $69,545(4)
Secretary 1996 $218,716 0 390,921 (2) $ 6,921(5)
Gilbert Steinberg 1998 $218,716 0 0 0
Vice President & 1997 $218,716 0 0 $69,340(4)
Treasurer 1996 $218,716 0 390,921 (3) $ 6,935(5)
(1) Issued concurrently with the cancellation of options for the
purchase of 371,607 shares.
(2) Issued concurrently with the cancellation of options for the
purchase of an equal number of shares.
(3) Issued concurrently with the cancellation of options for the
purchase of 374,769 shares.
(4) Includes 35,591 shares contributed by the Company to the accounts of
each of Messrs. Barth, Bergman and G. Steinberg for Fiscal 1997
pursuant to the terms of its 401(k) Plan. Also includes $66,342,
$64,799 and $64,594 for Messrs. Barth, Bergman and G. Steinberg,
respectively, in connection with the exercise of certain stock
options at the Company's request.
(5) Represents 1,138, 1,254 and 1,256 shares contributed by the Company
to the accounts of Messrs. Barth, Bergman and G. Steinberg,
respectively, for Fiscal 1996 pursuant to the terms of its 401(k)
Plan.
The options which were cancelled for Messrs. Barth and Steinberg
were "incentive options" which required the exercise price to be ten percent
above market price. These were replaced by "nonqualified" options and were,
accordingly, repriced to market price at the time of the original grant.
(b) Option Grants Table.
____________________
Inapplicable.
(c) Aggregated Option Exercises in Last Fiscal Year.
________________________________________________
Name Shares Acquired on Exercise Value Realized
(#)
__________________ ___________________________ ______________
Seymour Barth 224,255 $504,574
Elliot Bergman 224,255 $504,574
Gilbert Steinberg 224,255 $504,574
No options were held by Messrs. Barth, Bergman or G. Steinberg as of
June 30, 1998.
(d) Compensation of Directors.
__________________________
Messrs. W. Steinberg and Spiro are entitled to receive $5,000 per
year for their services as a Director plus an additional $750 for each
meeting of the Board attended in person and $100 per meeting attended by
conference telephone. No other Directors receive compensation for their
services as such.
(e) Employment Contracts and Termination of Employment and Change-in-
Control Arrangements.
_________________________________________________________________
Employment Agreements
In April 1994, the Company entered into Employment Agreements with
each of Messrs. Barth, G. Steinberg and Bergman which provided for, among
other things, the following: (i) minimum annual compensation of $304,116 for
Mr. Barth and $214,008 for each of Messrs. G. Steinberg and Bergman
(effective September 5, 1994, the annual compensation payable to Messrs.
Barth, G. Steinberg and Bergman was increased to $310,807, $218,716 and
$218,716, respectively); (ii) a term ending upon the earliest to occur of the
following: (a) the employee's death or incapacity; (b) "cause", as defined in
the Employment Agreement; (c) at the election of the Company, upon not less
than three years' prior written notice to the employee; or (d) at the
election of the employee, upon not less than six months' prior written notice
to the Company; and (iii) in the event the employee's employment shall
terminate as a result of death or incapacity, the Company would be obligated
to make annual payments to the employee or his estate or representative for a
period of three years in an amount equal to 50% of the compensation paid or
payable to the employee with respect to the fiscal year immediately preceding
the fiscal year in which his employment terminated.
In June 1996, each of Messrs. Barth, G. Steinberg and Bergman was
given three years' notice, as required by the Employment Agreements, of the
termination of his Employment Agreement with the Company.
Item 11. Security Ownership of Certain Beneficial Owners and
Management.
___________________________________________________
The following table sets forth, to the knowledge of the Company,
certain information regarding the Company's outstanding Common Stock
beneficially owned as of September 15, 1998 (i) by each person who is known
by the Company to own beneficially or exercise voting or dispositive control
over more than 5% of the Company's Common Stock, (ii) by each of the
Company's Directors, and (iii) by all executive officers and Directors as a
group:
Approximate
Name and Number of Shares Percentage of
Address of and Nature of Outstanding
Beneficial Owner Beneficial Ownership Shares (1)
____________________ ____________________ _____________
Seymour Barth....... 1,545,635 (1)(2) 26.0% (1)(2)
1220 Market Street
Suite 603
Wilmington, Delaware
Gilbert H. Steinberg 1,185,491 (1) 20.0% (1)
1220 Market Street
Suite 603
Wilmington, Delaware
Elliot J. Bergman... 1,070,598 (1)(3) 18.0% (1)(3)
1220 Market Street
Suite 603
Wilmington, Delaware
Morris Barth,....... 335,849 (4) 5.7% (4)
c/o Astrosystems, Inc.
1220 Market Street
Suite 603
Wilmington, Delaware
Elliot D. Spiro..... 12,100 *
71 South Central Avenue
Valley Stream, New York
Walter A. Steinberg. 2,000 *
111 Eddy Drive
Huntington Station, New York
All Directors and..... 3,458,684 (1)(2)(3) 58.3% (1)(2)(3)
executive officers
as a group (5 persons)
* Less than 1%
(1) Includes for each of Messrs. Barth, G. Steinberg and Bergman 178,570
shares over which they have voting power as trustees under the Company's
401(k) and profit-sharing plans (including 61,208, 58,817 and 57,119 shares
allocated to the accounts of Messrs. Barth, G. Steinberg and Bergman,
respectively).
(2) Includes 250,000 shares held in trust for the benefit of Mr. Barth's
family, as to which trust Mr. Barth serves as co-trustee. Excludes 110,000
shares held in trust for the benefit of Mr. Barth's children, as to which
shares Mr. Barth disclaims any beneficial interest.
(3) Includes 225,000 shares held in various trusts for the benefit of Mr.
Bergman's family, as to which trusts Mr. Bergman serves as co-trustee.
(4) Includes 300,000 shares held in various trusts for the benefit of the
descendants of Seymour Barth, as to which trusts Morris Barth serves as co-
trustee.
Item 12. Certain Relationships and Related Transactions.
_______________________________________________
In June 1996, Messrs. Barth, G. Steinberg and Bergman exercised
stock options and each was loaned $912,498, payable, with interest at the
rate of 6% per annum, on December 31, 1997 or earlier demand by the Company,
for use in the exercise. The exercise of these options resulted in tax
benefits to the Company. Each of Messrs. Barth, G. Steinberg and Bergman was
later loaned an additional $292,515, payable, with interest at the rate of 6%
per annum, on December 31, 1997 or earlier demand by the Company, in
connection with the aforementioned exercise of stock options.
In July, 1997, each of the above mentioned individuals was further
loaned $644,733, payable, with interest at the rate of 6% per annum, on
September 30, 1997 or earlier demand by the Company, for use in the exercise
of additional stock options, the exercise of which resulted in additional tax
benefits to the Company.
All of the above loans, including interest thereon, were repaid to
the Company in full as of September 29, 1997.
In December, 1997, the above named individuals were loaned
additional amounts in connection with tax obligations arising from the
aforementioned exercise of stock options, as follows: $432,803 to Mr. Barth,
$395,019 to Mr. Bergman and $358,183 to Mr. G. Steinberg, in each case
payable, with interest at the rate of 6% per annum, on June 30, 1999 or
earlier demand by the Company..
Item 13. Exhibits, List 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 and Certificate of Amendment
thereto - incorporated by reference to Exhibit 3(a) to
the Company's Annual Report on Form 10-KSB for its fiscal
year ended June 30, 1993 (File No. 0-3344).
(b) Bylaws - incorporated by reference to Exhibit 3(b) to the
Company's Annual Report on Form 10-KSB for its fiscal year
ended June 30, 1993 (File No. 0-3344).
(10)(a) Lease with regard to AstroPower, Inc., Delaware premises -
incorporated by reference to Exhibit 10 to the Company's
Annual Report on Form 10-K for its fiscal year ended June 30,
1990 (File No. 0-3344).
(b) 1991 Stock Option Plan - incorporated by reference to Exhibit
A to the Company's definitive Proxy Statement dated December
12, 1990 (File No. 0-3344).
(c) Settlement Agreement with Internal Revenue Service -
incorporated by reference to Exhibit 10 to the Company's
Annual Report on Form 10-K for its fiscal year ended June 30,
1991 (File No. 0-3344).
(d) Employment Agreement dated as of April 18, 1994 between the
Company and Seymour Barth - incorporated by reference to
Exhibit 10 to theCompany's Annual Report on Form 10-KSB for
its fiscal year ended June 30, 1994 (File No. 0-3344).
(e) Employment Agreement dated as of April 18, 1994 between the
Company and Elliot Bergman - incorporated by reference to
Exhibit 10 to the Company's Annual Report on Form 10-KSB for
its fiscal year ended June 30, 1994 (File No. 0-3344).
(f) Employment Agreement dated as of April 18, 1994 between the
Company and Gilbert H. Steinberg - incorporated by reference
to Exhibit 10 to the Company's Annual Report on Form 10-KSB
for its fiscal year ended June 30, 1994 (File No. 0-3344).
(g) Asset Purchase Agreement dated as of January 11, 1996 by and
among the Company, 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).
(21) Subsidiaries of the Company.
(27) Financial Data Schedule
(b) Reports on Form 8-K:
____________________
No report on Form 8-K was filed by the Company during the quarter ended
June 30, 1998.
SIGNATURES
In accordance with Section 13 or 15(d) 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 28, 1998
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.
President, Principal Executive
/S/ Officer and Director September 28, 1998
_____________________
Seymour Barth
Vice President, Secretary
/S/ and Director September 28, 1998
_____________________
Elliot J. Bergman
Vice President, Treasurer,
Principal Financial and
Accounting Officer and September 28, 1998
/S/ Director
______________________
Gilbert Steinberg
/S/ Director September 28, 1998
______________________
Elliot D. Spiro
/S/ Director September 28, 1998
_____________________
Walter Steinberg
EXHIBIT 21
SUBSIDIARIES
NAME STATE OF INCORPORATION
____ ______________________
Astrosub, Inc. Delaware
AstroPower, Inc. (1) Delaware
(1) Registrant owns 14.0% of outstanding common stock
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