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, 1999
_______________________________________________
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 May
4, 1999 is 5,930,972.
ASTROSYSTEMS, INC. AND SUBSIDIARIES
INDEX
Page No.
________
Part I - FINANCIAL INFORMATION
Item 1. Consolidated Statement of Net Assets in Liquidation 4
March 31, 1999
Consolidated Statements of Changes in
Net Assets in Liquidation 5
Nine Months Ended March 31, 1999 and 1998
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 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)
March 31,
1999
_________
Assets
______
Cash and cash equivalents $15,376
U.S. government securities 978
Investment in AstroPower, Inc. 9,187
Loans to officers 1,186
Other assets 385
_______
27,112
Liabilities
___________
Deferred income taxes 9,637
Accrued expenses/contingency reserve 1,896
_______
Net assets in liquidation $15,579
=======
Number of common and common equivalent shares outstanding 5,931
=====
Net assets in liquidation per share $2.63
=====
The accompanying notes are an integral part of this statement.
Page 4
ASTROSYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS IN LIQUIDATION
(In thousands)
(Unaudited)
Nine months Nine months
ended ended
March 31, March 31,
1999 1998
Net assets in liquidation - beginning of period $12,006 $5,497
Increase in estimated liquidation values of
net assets over liabilities 3,573 7,377
_______ _______
Net assets in liquidation - end of period $15,579 $12,874
======= =======
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, 1999 and 1998
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 stockholders 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, 1999, 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, 1999 and 1998
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,
1999 1998
(in thousands) (in thousands)
______________ ______________
Proceeds from exercise of stock options - $2,070
Gain on sale of AstroPower, Inc. stock $1,173 -
Change in valuation of
AstroPower, Inc. stock 4,495 6,743
Change in final inventory valuation for
sale of assets (353) -
Adjustment to accounts payable - 946
Additional interest earned and estimated
on cash and cash equivalents 390 504
Change in estimated tax benefits (1,905) (2,510)
Change in the estimate of shut-down costs (227) (283)
Other adjustments - (93)
______ ______
Increase in estimated liquidation values
of net assets over liabilities $3,573 $7,377
====== ======
NOTE C - ACCRUED EXPENSE/CONTINGENCY RESERVE
____________________________________________
Accrued expenses at March 31, 1999 include estimated 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, 1999 consist of (amounts in thousands):
Accounts payable, accrued expenses and miscellaneous $ 282
Minimum payments on nonrecourse obligation 13
Shutdown costs and estimated operating costs
(including compensation) to administer the Plan
through dissolution 632
Estimated interest income (239)
Estimated tax benefit of losses through dissolution (142)
Reserve for other contingencies 1,350
______
$1,896
======
Page 7
Astrosystems, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Month Periods ended March 31, 1999 and 1998
NOTE C - ACCRUED EXPENSE/CONTINGENCY RESERVE (continued)
____________________________________________
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 were made 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 placed in escrow to provide for indemnification
claims asserted against the Company. At March 31, 1999, the amount in
escrow was approximately $512,000. The Company had previously recorded a
receivable aggregating approximately $589,000 based upon the Company's
valuation of inventory sold. The value of certain inventory items was
disputed by the purchaser. A final valuation reduced this receivable to
$236,000 as of December 31, 1999.
NOTE E - ASTROPOWER, INC. STOCK
_______________________________
In March 1999, the Company sold 75,000 shares of AstroPower, Inc. stock at
$11.00 per share. The amount included in Net Assets in Liquidation as of
March 31, 1999 assumes an estimated fair market value of approximately
$10.58 per share as at March 31, 1999 for the Company's remaining 868,750
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
March 31, 1999, the Company determined that the fair value of its
investment in AstroPower, Inc. is $9,187,000 (approximately $10.58 per
share). The Company retained an outside independent appraiser to assist
management in adjusting AstroPower, Inc.'s quoted market value ($11.75 at
March 31, 1999) 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 results 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.
Page 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Forward-Looking Statements
__________________________
Certain information contained herein includes "forward-looking
statements" within the meaning of the Private Securities Reform Act of 1995
and is subject to the safe harbor created by that act. The Company cautions
readers that certain important factors may affect the Company's actual net
assets in liquidation and could cause such net assets to differ materially
from any forward-looking statements which may be deemed to have been made in
this report. For this purpose, any statements contained in this report that
are not statements of historical fact, including, without limitation,
statements as to the contingency reserve established by the Company, may be
deemed to be forward-looking statements. Without limiting the generality of
the foregoing, words such as "may," "will," "expect," "believe," anticipate,"
"intend," "could," "estimate," or "continue" or the negative variations
thereof or comparable terminology are intended to identify forward-looking
statements. Factors which may affect the Company's net assets include, but
are not limited to, the following: final sale and/or distribution of
AstroPower, Inc. stock, final corporate income tax liabilities, changes in
actual costs to execute the Plan of Complete Liquidation and Dissolution, and
possible claims against the Company's assets upon final dissolution.
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.
Page 9
Statement of Net Assets in Liquidation
______________________________________
As of March 31, 1999, the Company owned 868,750 unregistered 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). 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 approximately $9,187,000
for the Company's remaining 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
results 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.
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 March 31, 1999, there was an increase in net assets
in liquidation of $3,573,000. This increase was primarily due to a gain on
the sale of 325,000 shares of AstroPower, Inc. stock and an increase in the
estimated value of the Company's remaining investment in AstroPower, Inc. as
a result of an increase in the quoted 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.
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 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. Since
the Company has no material 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.
May 13, 1999 BY: /S/
__________________________ _________________________________
Date Gilbert H. Steinberg, Vice President
May 13, 1999 /S/
__________________________ _________________________________
Date Gilbert H. Steinberg, Treasurer and
Chief Financial Officer
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