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 March 31, 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 April
28, 1998 is 5,826,803.
ASTROSYSTEMS, INC. AND SUBSIDIARIES
INDEX
Page No.
________
Part I - FINANCIAL INFORMATION
_____________________
Item 1. Consolidated Statement of Net Assets in Liquidation 4
March 31, 1998
Consolidated Statement of Changes in 5
Net Assets in Liquidation
Nine Months Ended March 31, 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 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
Company's financial statements included in the Company's Form 10-KSB for the
year ended June 30, 1997.
Page 3
ASTROSYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF NET ASSETS IN LIQUIDATION
(Amounts in thousands, except per share amounts)
(Unaudited)
March 31,
1998
_________
Assets
______
Cash and cash equivalents $13,369
U.S. government securities 1,978
AstroPower, Inc. stock 6,743
Other assets 2,161
_______
24,251
Liabilities
___________
Deferred income taxes 7,224
Accrued expenses/contingency reserve 4,153
_______
Net assets in liquidation $12,874
=======
Number of common and common equivalent shares outstanding 5,827
=====
Net assets in liquidation per share $2.21
=====
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)
Nine months Nine months
ended ended
March 31 March 31,
1998 1997
____________ ___________
Net assets in liquidation - beginning of period $ 5,497 $34,469
Increase in estimated liquidation values of
net assets over liabilities 7,377 740
_______ _______
Net assets in liquidation - end of period $12,874 $35,209
======= =======
The accompanying notes are an integral part of these statements.
Page 5
Astrosystems, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Month Periods ended March 31, 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 March 31, 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
Nine Month Periods ended March 31, 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:
March 31, March 31,
1998 1997
_________ _________
(in thousands) (in thousands)
Proceeds from exercise of stock options $2,070 -
Valuation of AstroPower, Inc. stock 6,943 -
Adjustment to Accounts Payable 946 -
Additional interest earned and estimated on
cash and cash equivalents 504 $1,279
Change in deferred and estimated taxes (2,510) (479)
Change in the estimate of shut-down costs (283) -
Other adjustments (93) (60)
______ _____
Increase in estimated liquidation values
of net assets over liabilities $7,377 $ 740
====== ======
NOTE C - ACCRUED EXPENSE/CONTINGENCY RESERVE
____________________________________________
Accrued expenses at March 31, 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 March 31, 1998 consist of (amounts in thousands):
Accounts payable, accrued expenses and miscellaneous $1,758
Minimum payments on nonrecourse obligation 75
Shutdown costs and estimated operating costs
(including compensation) to administer the Plan
through dissolution 1,975
Estimated interest income (467)
Estimated tax benefit of losses through dissolution (538)
Reserve for other contingencies 1,350
______
$4,153
======
Page 7
Astrosystems, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Month Periods ended March 31, 1998 and 1997
NOTE C (continued)
______
Accounts payable, accrued expenses and miscellaneous consist of deferred
compensation payable to the officers of the Company, commissions payable,
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
being held in escrow to provide for indemnification claims that may be asserted
against the Company. At June 30, 1997, the amount held in escrow was reduced
to approximately $773,000. On August 21, 1997, approximately $276,000 was
released to the Company.
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 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 $5.69 per share as at March 31,
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). 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. The value
of $5.69 per share was established by an outside appraiser with due notice
being given to marketability as well as the other factors described above. 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; 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 $500,000 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.
Page 9
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. The estimated fairmarket
value of $6,743,000 for the Company's unregistered stock was established by an
outside appraiser with due notice being given to marketability as well as the
other factors described above. 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 July 1, 1997 to March 31, 1998 there was an increase in Net Assets in
Liquidation of $7,377,000. 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.
Page 10
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 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 will not have a material effect on the Company's
financial results.
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.
May 14, 1998 BY: /S/
___________________ ___________________________________
Date Gilbert H. Steinberg, Vice President
May 14, 1998 /S/
___________________ ____________________________________
Date Gilbert H. Steinberg, Treasurer and
Chief Financial Officer
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