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 December 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
January 29, 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
December 31, 1998
Consolidated Statements of Changes in Net Assets
in Liquidation 5
Six Months Ended December 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 Registrant's financial statements included in the
Company's Form 10-KSB for the year ended June 30, 1998.
ASTROSYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF NET ASSETS IN LIQUIDATION
(Amounts in thousands, except per share amounts)
(Unaudited)
December 31,
1998
____________
Assets
_______
Cash and cash equivalents $14,513
U.S. government securities 978
Investment in AstroPower, Inc. 7,721
Loans to officers 1,186
Other assets 410
_______
24,808
Liabilities
___________
Deferred income taxes 8,893
Accrued expenses/contingency reserve 1,804
_______
Net assets in liquidation $14,111
=======
Number of common and common equivalent shares outstanding 5,931
=====
Net assets in liquidation per share $2.38
=====
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)
Six months Six months
ended ended
December 31, December 31,
1998 1997
___________ ___________
Net assets in liquidation -
beginning of period $12,006 $5,497
Increase in estimated liquidation values
of net assets over liabilities 2,105 2,822
_______ ______
Net assets in liquidation - end of period $14,111 $8,319
======= ======
The accompanying notes are an integral part of these statements.
Page 5
Astrosystems, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Month Periods ended December 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 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 December 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
Six Month Periods ended December 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:
December 31, December 31,
1998 1997
(in thousands) (in thousands)
____________ ____________
Proceeds from exercise of stock options - $2,070
Gain on sale of AstroPower, Inc. stock $ 753 -
Change in valuation of AstroPower, Inc.
stock 2,623 -
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 437 425
Change in estimated tax benefits (1,114) (322)
Change in the estimate of shut-down costs (242) (356)
Other adjustments 1 59
______ ______
Increase in estimated liquidation
values of net assets over
liabilities $2,105 $2,822
====== ======
NOTE C - ACCRUED EXPENSE/CONTINGENCY RESERVE
____________________________________________
Accrued expenses at December 31, 1998 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 December 31, 1998 consist of (amounts in
thousands):
Accounts payable, accrued expenses and miscellaneous $ 105
Minimum payments on nonrecourse obligation 25
Shutdown costs and estimated operating costs
(including compensation) to administer the
Plan through dissolution 952
Estimated interest income (440)
Estimated tax benefit of losses through dissolution (188)
Reserve for other contingencies 1,350
______
$1,804
======
Page 7
Astrosystems, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Month Periods ended December 31, 1998 and 1997
NOTE C (continued)
______
Accounts payable, accrued expenses and miscellaneous consist of accrued
professional fees and other accrued liabilities.
The Company has set aside, as reserve for other contingencies, an
amount believed to be adequate for payment of likely and quantifiable
contingent obligations, including potential tax obligations. Any
portion of the reserve for other contingencies which the Company
determines is no longer required will be made available for
distribution to its stockholders. In the event that the reserve for
other contingencies account is not adequate for payment of the
Company's expenses and liabilities, each stockholder could be held
liable for pro rata payments to creditors in an amount not to exceed
the stockholder's prior distributions from the Company.
NOTE D - SALE OF OPERATING ASSETS
_________________________________
As of February 7, 1996, all of the Company's operating assets were sold
to two purchasers. The purchase prices 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 December 31,
1998, the amount in escrow was approximately $512,000.
As of December 31, 1998, the Company recorded a receivable aggregating
approximately $594,000 based upon the Company's valuation of inventory
sold. The value of certain inventory items was disputed by the
purchaser. A final valuation has reduced this receivable to $236,000.
NOTE E - ASTROPOWER, INC. STOCK
_______________________________
In December 1998, the Company sold 250,000 shares of AstroPower, Inc.
stock at $8.41 per share. The amount included in Net Assets in
Liquidation as of December 31, 1998 assumes an estimated fair market
value of approximately $8.18 per share as at December 31, 1998 for the
Company's remaining 943,750 shares 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 December 31, 1998, the Company determined that
the fair value of its investment in AstroPower, Inc. is approximately
$7,721,000 (approximately $8.18 per share). The Company retained an
outside independent appraiser to assist management in adjusting
AstroPower, Inc.'s quoted market value ($9.63 at December 31, 1998) to
fair value with due notice being given to marketability as well as other
factors. As the Company has a zero basis in this stock, any sale or
transfer 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
Page 9
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 was made
dependent upon a final fixed asset and inventory valuation. The value of
certain inventory items was disputed along with a number of other items
such as warranty costs. Certain of these disputes are subject to ongoing
arbitration; however, the Company does not believe that the final result
will have a material effect on the value of the net assets in liquidation.
In connection with the sale of the Military and Behlman operations,
approximately $512,000 of the purchase price currently is being held in
escrow to provide for certain indemnification claims that the buyer may
assert against the Company under the sale agreement.
The Company owns 943,750 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 $7,721,000 for the
Company's remaining unregistered stock (after a sale in December 1998 of
250,000 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.
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, 1998 to December 31, 1998 there was an increase in net
assets in liquidation of $2,105,000. This increase was primarily due to a
gain on the sale of 250,000 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.
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. 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.
February 12, 1999 BY: /S/
___________________________ ____________________________________
Date Gilbert H. Steinberg, Vice President
February 12, 1999 /S/
___________________________ ____________________________________
Date Gilbert H. Steinberg, Treasurer and
Chief Financial Officer
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