-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HfJFH4TYzLEr+oHfoOULwYsEgjlbjtFLxdUQNCWxy83tGA5ioLY0TSwx1Sgje8yW WSDvWCNtiad9yCvYdU7a0A== 0000008065-98-000006.txt : 19980929 0000008065-98-000006.hdr.sgml : 19980929 ACCESSION NUMBER: 0000008065-98-000006 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980928 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ASTROSYSTEMS INC CENTRAL INDEX KEY: 0000008065 STANDARD INDUSTRIAL CLASSIFICATION: INDUSTRIAL INSTRUMENTS FOR MEASUREMENT, DISPLAY, AND CONTROL [3823] IRS NUMBER: 135691210 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10KSB SEC ACT: SEC FILE NUMBER: 000-03344 FILM NUMBER: 98715685 BUSINESS ADDRESS: STREET 1: 1220 MARKET STREET STREET 2: SUITE 603 CITY: WILMINGTON STATE: DE ZIP: 19801 BUSINESS PHONE: (302) 652- MAIL ADDRESS: STREET 1: 1220 MARKET STREET STREET 2: SUITE 603 CITY: WILMINGTON STATE: DE ZIP: 19801 10KSB 1 .. 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 EX-27 2
5 1,000 YEAR YEAR JUN-30-1998 JUN-30-1997 JUL-01-1997 JUL-01-1996 JUN-30-1998 JUN-30-1997 14,459 33,911 978 5,978 0 0 0 0 0 0 24,127 44,774 0 0 0 0 24,127 44,774 4,106 31,325 0 0 0 0 0 0 5,827 5,828 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
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