U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 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.)
P.O. Box 1639, Hockessin, Delaware 19707
___________________________________________________ __________________
(Address of principal executive offices) (Zip Code)
(302) 652-3115
____________________________________________________________________________
(Registrant's telephone number, including area code)
1220 Market Street, Suite 603, Wilmington, DE 19801
____________________________________________________________________________
(Former name, former address and former fiscal year, if changed since
last report)
Check whether the issuer (1) has filed all reports required to be filed
by Section 13 or 15 (d) of the Exchange Act during the past 12 months (or
for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past
90 days. Yes X No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Check whether the issuer has filed all documents and reports required
to be filed by Sections 12, 13 or 15 (d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court. Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares outstanding of the issuer's common stock as of
November 8, 1999 was 5,933,972.
ASTROSYSTEMS, INC. AND SUBSIDIARIES
INDEX
Page No.
________
Part I - FINANCIAL INFORMATION
Item 1. Consolidated Statement of Net Assets in Liquidation 4
September 30, 1999
Consolidated Statements of Changes in Net Assets in 5
Liquidation
Three Months Ended September 30, 1999 and 1998
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis or 9
Plan of Operation
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, 1999.
ASTROSYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF NET ASSETS IN LIQUIDATION
(Amounts in thousands, except per share amounts)
(Unaudited)
September 30,
1999
_____________
Assets
______
Cash and cash equivalents $19,518
U.S. government securities 978
Investment in AstroPower, Inc. 7,166
Loans to officers 1,186
Other assets 119
_______
$28,967
Liabilities
___________
Deferred income taxes 10,253
Accrued expenses/contingency reserve 2,333
_______
Net assets in liquidation $16,381
=======
Number of common and common equivalent shares outstanding 5,934
=====
Net assets in liquidation per share $2.76
=====
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)
Three months Three months
ended ended
September 30, September 30,
1999 1998
_____________ _____________
Net assets in liquidation - beginning of period $17,650 $12,006
Decrease in estimated liquidation values of
net assets over liabilities (1,269) (484)
_______ _______
Net assets in liquidation - end of period $16,381 $11,522
======= =======
The accompanying notes are an integral part of these statements.
PAGE 5
Astrosystems, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three Month Periods ended September 30, 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 September 30, 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. 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. 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
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three Month Periods ended September 30, 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:
September 30, September 30,
1999 1998
(in thousands) (in thousands)
_____________ ______________
Gain on sale of AstroPower, Inc. Stock $ 100 -
Change in valuation of AstroPower, Inc.
stock (2,107) $(808)
Additional interest earned and estimated
on cash and cash equivalents 25 204
Change in estimated tax benefits 689 250
Change in the estimate of shut-down costs 12 (130)
Other adjustments 12 -
______ ____
Decrease in estimated liquidation
values of net assets over liabilities $(1,269) ($484)
======= =====
NOTE C - ACCRUED EXPENSE/CONTINGENCY RESERVE
____________________________________________
Accrued expenses at September 30, 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.
Liabilities at September 30, 1999 consist of (amounts in thousands):
Accounts payable, accrued expenses and miscellaneous $ 662
Shutdown costs and estimated operating costs
(including compensation)to administer the Plan
through dissolution 670
Estimated interest income (175)
Estimated tax benefit of losses through dissolution (174)
Reserve for other contingencies 1,350
______
$2,333
======
PAGE 7
Astrosystems, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three Month Periods ended September 30, 1999 and 1998
NOTE C (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 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, the amount
held in escrow was reduced to approximately $512,000. All remaining
amounts held in escrow were settled during the year ended June 30, 1999.
The proceeds from the sale of assets to one purchaser was dependent upon
the final asset and inventory valuation which was the subject of ongoing
arbitration. In January 1999, the arbitrator issued a decision on the
inventory adjustment dispute and the parties exchanged general releases.
The arbitrator's decision resulted in a reduction of approximately
$440,000 in the proceeds from the sale of these assets.
NOTE E - ASTROPOWER, INC. STOCK
_______________________________
During July 1999, the Company sold 80,000 shares of AstroPower, Inc. stock
at $17.00 per share. The amount included in Net Assets in Liquidation as
of September 30, 1999 assumes an estimated fair market value of
approximately $12.17 per share as at September 30, 1999 for the Company's
remaining 588,750 shares of unregistered common stock in AstroPower, Inc.
The Company retained an outside independent appraiser to assist management
in adjusting AstroPower, Inc.'s quoted market value (approximately $12.81
at September 30, 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.
On October 13, 1999, the Company sold its remaining 588,750 shares of
AstroPower, Inc. stock as part of a public offering. The public offering
price was $13.375 per share. Underwriting commissions and discounts were
$.77 per share and the net proceeds to the Company totaled approximately
$7,421,000.
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. No date
PAGE 9
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. 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
______________________________________
As of September 30, 1999, the Company owned 588,750 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 estimated fair
market value of approximately $7,166,000 for the Company's remaining
unregistered shares 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. On October 13, 1999, the Company sold
its remaining 588,750 shares of AstroPower, Inc. stock as part of a public
offering. The public offering price was $13.375 per share. Underwriting
commissions and discounts were $.77 per share and the net proceeds to the
Company totaled approximately $7,421,000.
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.
PAGE 10
Statement of Changes in Net Assets in Liquidation
_________________________________________________
From July 1, 1999 to September 30, 1999, there was a decrease in net
assets in liquidation of approximately $1,269,000. This decrease was
primarily due to a decrease in the estimated value of the Company's
remaining investment in AstroPower, Inc. as a result of an decrease 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. The Company intends to
provide for payment of all expenses, liabilities and obligations of the
Company and liquidate via distributions to stockholders.
On June 30, 1997, the Company declared an initial liquidating
distribution of $5.00 per share in cash to stockholders of record as of
August 15, 1997. The distribution was paid on September 8, 1997. 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. 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.
November 15, 1999 BY: /S/
__________________________ ____________________________________
Date Gilbert H. Steinberg, Vice President
November 15, 1999 /S/
__________________________ ____________________________________
Date Gilbert H. Steinberg, Treasurer and
Chief Financial Officer
PAGE 13
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