**U.S. SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

**FORM 10-QSB**

 

**(Mark One)**

 
| **ý** |   | **QUARTERLY  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF  1934.** |
|------------|--------|------------------------------------------------------------------------------------------------|

 

**For the quarterly period endedDecember 31, 2002**

 

**OR**

 
| **o** |   | **TRANSITION  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|-------|--------|-----------------------------------------------------------------------------------------------|

 

**For the transition period from                         to                          **

 

**Commissionfile number 1-4530**

 

**ASTREX, INC.**

(Exact name of smallbusiness issuer as specified in its charter)

 

| **Delaware**                                                    |   | **13-1930803**                        |
|-----------------------------------------------------------------|--------|---------------------------------------|
| (State or other  jurisdiction of incorporation or organization) |   | (I.R.S. Employer  Identification No.) |
|                                                            |   |                                  |
| **205 Express Street, Plainview, New  York  11803**        |
| (Address of principal  executive offices)                       |
|                                                            |   |                                  |
| **(516) 433-1700**                                              |
| (Issuer’s telephone  number, including area code)          |

 

(Former name, formeraddress 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 theSecurities Exchange Act of 1934 during the preceding 12 months (or for suchshorter 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  ý  No  o

 

**APPLICABLE ONLY TO CORPORATE ISSUERS**

 

State the number of shares outstanding of each of the registrant’sclasses of common stock, as of the latest practicable date.  As of January 31, 2003 common shares outstanding were  5,660,912 (does not include ConvertiblePreferred Stock).

 

Transitional Small Business Disclosure Format  (check one)       Yes  o   No  ý

 

 

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**ASTREX, INC.**

 

**INDEX**

 
| ***PART I:  Financial Information***                                      |                                                                                                          |   |
|--------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------|--------|
|                                                                           |                                                                                                          |   |
| **Item 1.  Financial Statements:**                                        |                                                                                                          |   |
|                                                                           |                                                                                                          |
|                                                                           | Consolidated Balance Sheets  December 31, 2002 (unaudited) and March 31, 2002                                 |   |
|                                                                           |                                                                                                          |   |
|                                                                           | Consolidated  Statements of Income (unaudited)  Nine months and three months ended December 31, 2002 and 2001 |   |
|                                                                           |                                                                                                          |   |
|                                                                           | Consolidated  Statements of Cash Flows (unaudited)  Nine months ended December 31, 2002 and 2001              |   |
|                                                                           |                                                                                                          |   |
|                                                                           | Notes to  Consolidated Financial Statements (unaudited)                                                       |   |
|                                                                           |                                                                                                          |
| **Item  2.  Management's Discussion and  Analysis or Plan of Operations** |                                                                                                          |   |
|                                                                           |                                                                                                          |   |
| **Item 3.  Controls and Procedures**                                      |                                                                                                          |   |
|                                                                           |                                                                                                          |   |
| ***PART II:  Other Information***                                         |                                                                                                          |   |
|                                                                           |                                                                                                          |   |
| **Item 6.  Exhibits and Reports on Form 8-K**                             |                                                                                                          |   |
|                                                                           |                                                                                                          |   |
| **Signatures**                                                                 |                                                                                                          |   |
|                                                                           |                                                                                                          |   |
| **Certifications of  Periodic Reports**                                        |                                                                                                          |   |
|                                                                           |                                                                                                          |   |
| **Certifications Required Under  Sarbanes-Oxley Act of 2002**                  |                                                                                                          |   |
|                                                                                |                                                                                                               |        |  |

 

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**PART I -Financial Information**

 

**ASTREX, INC. AND SUBSIDIARIES**

**CONSOLIDATEDBALANCE SHEETS**

 
|                                                                                                                                                                                                                            |   | **December  31, 2002** |      | **March 31,  2002** |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------|-----------|---------------------|--------|
|                                                                                                                                                                                                                            |   | **(Unaudited)**        |      |                |   |
|                                                                                                                                                                                                                            |   | **(000's) Omitted**    |      |
| Current Assets:                                                                                                                                                                                                                 |   |                   |      |                |   |
| Cash                                                                                                                                                                                                                            |   | $                      | 249       |                | $      | 4 |   |
|                                                                                                                                                                                                                            |   |                   |      |                |   |
| Accounts  receivable (net of allowance for doubtful accounts of $103 at December 31,  2002 and $93 at March 31, 2002)                                                                                                           |   | 1,343                  |      | 1,907               |   |
|                                                                                                                                                                                                                            |   |                   |      |                |   |
| Inventory                                                                                                                                                                                                                       |   | 4,646                  |      | 5,019               |   |
|                                                                                                                                                                                                                            |   |                   |      |                |   |
| Prepaid expenses  and other current assets                                                                                                                                                                                      |   | 123                    |      | 57                  |   |
| Deferred tax  asset                                                                                                                                                                                                             |   | 290                    |      | 290                 |   |
|                                                                                                                                                                                                                            |   |                   |      |                |   |
| Total current  assets                                                                                                                                                                                                           |   | 6,651                  |      | 7,277               |   |
|                                                                                                                                                                                                                            |   |                   |      |                |   |
| Property, plant  and equipment at cost (net of accumulated depreciation of $741 at December  31, 2002 and $684 at March 31, 2002)                                                                                               |   | 749                    |      | 698                 |   |
| Other long-term  assets                                                                                                                                                                                                         |   | 50                     |      | 52                  |   |
|                                                                                                                                                                                                                            |   |                   |      |                |   |
| **Total  Assets**                                                                                                                                                                                                               |   | **$**                  | **7,450** | ** **          | **$**  | **8,027** |   |
|                                                                                                                                                                                                                            |   |                   |      |                |   |
| Current  Liabilities:                                                                                                                                                                                                           |   |                   |      |                |   |
| Accounts payable                                                                                                                                                                                                                |   | 709                    |      | 1,040               |   |
| Accrued  liabilities                                                                                                                                                                                                            |   | 273                    |      | 723                 |   |
|                                                                                                                                                                                                                            |   |                   |      |                |   |
| Total current  liabilities                                                                                                                                                                                                      |   | 982                    |      | 1,763               |   |
|                                                                                                                                                                                                                            |   |                   |      |                |   |
| Long-term debt                                                                                                                                                                                                                  |   | 1,678                  |      | 1,529               |   |
|                                                                                                                                                                                                                            |   |                   |      |                |   |
|                                                                                                                                                                                                                            |   |                   |      |                |   |
| Shareholders'  Equity:                                                                                                                                                                                                          |   |                   |      |                |   |
| Preferred Stock,  Series A - issued, none                                                                                                                                                                                       |   | —                 |      | —              |   |
| Convertible  Preferred Stock, Series B - $.01 par value; authorized 10,000,000 shares;  1,679,747 and 1,699,151 shares issued and outstanding at December 31, 2002  and March 31, 2002 (liquidation preference of $.25 a share) |   | 17                     |      | 17                  |   |
| Common Stock -  $.01 par value; authorized, 15,000,000 shares; issued, 6,822,998 and  6,803,593 shares at December 31, 2002 and March 31,2002                                                                                   |   | 68                     |      | 68                  |   |
| Additional  paid-in capital                                                                                                                                                                                                     |   | 3,928                  |      | 3,928               |   |
| Retained  earnings                                                                                                                                                                                                              |   | 1,115                  |      | 1,061               |   |
| Deferred  compensation                                                                                                                                                                                                          |   | —                 |      | (1                  | )      |
| Treasury stock,  at cost (1,162,086 shares at December 31, 2002 and  March 31, 2002)                                                                                                                                       |   | (338                   | )         | (338                | )      |
|                                                                                                                                                                                                                            |   |                   |      |                |   |
| Total  shareholders' equity                                                                                                                                                                                                     |   | 4,790                  |      | 4,735               |   |
|                                                                                                                                                                                                                            |   |                   |      |                |   |
| **Total  liabilities and shareholders' equity**                                                                                                                                                                                 |   | **$**                  | **7,450** |                | **$**  | **8,027** |   |

 

See accompanying notes tounaudited consolidated financial statements.

 

1

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**ASTREX, INC. AND SUBSIDIARIES**

**CONSOLIDATEDSTATEMENTS OF INCOME**

**(Unaudited)**

 
|                                                                                           |   | **NINE  MONTHS ENDED  DECEMBER 31,** |   | **THREE  MONTHS ENDED  DECEMBER 31,** |   |
|------------------------------------------------------------------------------------------------|--------|--------------------------------------|--------|---------------------------------------|--------|
|                                                                                           |   | **2002**                             |   | **2001**                              |   | **2002** |   | **2001** |   |
|                                                                                           |   | **(000's)  Omitted**                 |   | **(000's****)****Omitted**            |   |
|                                                                                           |   |                                 |   |                                  |   |   |   |   |   |
| Net sales                                                                                      |   | $                                    | 10,511 |                                  | $      | 12,601 |   | $ | 3,163 |   | $ | 3,508 |   |
| Cost of sales                                                                                  |   | 8,002                                |   | 9,775                                 |   | 2,421 |   | 2,736 |   |
|                                                                                           |   |                                 |   |                                  |   |   |   |   |   |
| Gross profit                                                                                   |   | 2,509                                |   | 2,826                                 |   | 742 |   | 772 |   |
|                                                                                           |   |                                 |   |                                  |   |   |   |   |   |
| Selling, general  and administrative expenses                                                  |   | 2,388                                |   | 2,254                                 |   | 818 |   | 690 |   |
|                                                                                           |   |                                 |   |                                  |   |   |   |   |   |
| Income (loss)  from operations                                                                 |   | 121                                  |   | 572                                   |   | (76 | ) | 82 |   |
|                                                                                           |   |                                 |   |                                  |   |   |   |   |   |
| Interest expense                                                                               |   | 48                                   |   | 95                                    |   | 14 |   | 25 |   |
|                                                                                           |   |                                 |   |                                  |   |   |   |   |   |
| Income (loss)  before provision for income taxes                                               |   | 73                                   |   | 477                                   |   | (90 | ) | 57 |   |
|                                                                                           |   |                                 |   |                                  |   |   |   |   |   |
| Provision for  income taxes                                                                    |   | 19                                   |   | 21                                    |   | 6 |   | 6 |   |
|                                                                                           |   |                                 |   |                                  |   |   |   |   |   |
| Income (loss)  from continuing operations                                                      |   | 54                                   |   | 456                                   |   | (96 | ) | 51 |   |
|                                                                                           |   |                                 |   |                                  |   |   |   |   |   |
| Discontinued  operations:                                                                      |   |                                 |   |                                  |   |   |   |   |   |
| Loss from  discontinued operations, net                                                        |   | —                               |   | (80                                   | )      | — |   | (14 | ) |
| Loss from disposal,  net                                                                       |   | —                               |   | (265                                  | )      | — |   | (265 | ) |
|                                                                                           |   |                                 |   |                                  |   |   |   |   |   |
| **Net  income (loss)**                                                                         |   | **$**                                | **54** | ** **                            | **$**  | **111** | ** ** | **$** | **(96** | **)** | **$** | **(228** | **)** |
|                                                                                           |   |                                 |   |                                  |   |   |   |   |   |
| Per share data for the nine and three months ended  December 31, 2002 and 2001 are as follows: |
| Weighted average common shares and common share equivalent  shares outstanding:                |
| Basic                                                                                          |   | 5,639,704                            |   | 5,547,880                             |   | 5,659,520 |   | 5,635,037 |   |
| Diluted                                                                                        |   | 7,340,658                            |   | 7,418,509                             |   | 5,659,520 |   | 7,395,006 |   |
|                                                                                           |   |                                 |   |                                  |   |   |   |   |   |
| Net income (loss) per share:                                                                   |   |                                 |   |                                  |   |   |   |   |   |
| Basic                                                                                          |   |                                 |   |                                  |   |   |   |   |   |
| Income (loss)  from continuing operations                                                      |   | $                                    | 0.01   |                                  | $      | 0.08 |   | $ | (0.02 | ) | $ | 0.01 |   |
| Loss from  discontinued operations, net                                                        |   | —                               |   | (0.01                                 | )      | — |   | — |   |
| Loss from  disposal, net                                                                       |   | —                               |   | (0.05                                 | )      | — |   | (0.05 | ) |
|                                                                                           |   | $                                    | 0.01   |                                  | $      | 0.02 |   | $ | (0.02 | ) | $ | (0.04 | ) |
| Diluted                                                                                        |   |                                 |   |                                  |   |   |   |   |   |
| Income (loss)  from continuing operations                                                      |   | $                                    | 0.01   |                                  | $      | 0.06 |   | $ | (0.02 | ) | $ | 0.01 |   |
| Loss from  discontinued operations, net                                                        |   | —                               |   | (0.01                                 | )      | — |   | — |   |
| Loss from  disposal, net                                                                       |   | —                               |   | (0.04                                 | )      | — |   | (0.04 | ) |
|                                                                                           |   | $                                    | 0.01   |                                  | $      | 0.01 |   | $ | (0.02 | ) | $ | (0.03 | ) |

 

See accompanying notes tounaudited consolidated financial statements.

 

2

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**ASTREX, INC. AND SUBSIDIARIES**

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(Unaudited)**

 
|                                                                                                             |   | **FOR THE  NINE MONTHS ENDED DECEMBER 31,** |       |
|------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------|------------|
|                                                                                                             |   | **2002**                                    |       | **2001** |   |
|                                                                                                             |   | **(000's)  Omitted**                        |       |
|                                                                                                             |   |                                        |       |   |   |
| Cash Flows From  Operating Activities:                                                                           |   |                                        |       |   |   |
| Net income from  continuing operations                                                                           |   | $                                           | 54         |   | $ | 456 |   |
| *Adjustments  to reconcile net income from continuing operations to net cash provided by  operating activities:* |   |                                        |       |   |   |
| Depreciation and  amortization                                                                                   |   | 57                                          |       | 52 |   |
| Amortization of  deferred stock compensation                                                                     |   | 1                                           |       | 8 |   |
| *Changes  in assets and liabilities:*                                                                            |   |                                        |       |   |   |
| Decrease in  accounts receivable, net                                                                            |   | 564                                         |       | 848 |   |
| Increase in  prepaid expenses and other current assets                                                           |   | (66                                         | )          | (23 | ) |
| Decrease in  inventory                                                                                           |   | 373                                         |       | 125 |   |
| Decrease in  other long-term assets                                                                              |   | 2                                           |       | — |   |
| Decrease in  accounts payable                                                                                    |   | (331                                        | )          | (888 | ) |
| Decrease in  accrued liabilities                                                                                 |   | (450                                        | )          | (187 | ) |
|                                                                                                             |   |                                        |       |   |   |
| Net cash  provided by continuing operations                                                                      |   | 204                                         |       | 391 |   |
| Net operating  activities from discontinued operations                                                           |   | —                                      |       | (35 | ) |
| **Net  cash provided by operating activities**                                                                   |   | **204**                                     | ** ** | **356** | ** ** |
|                                                                                                             |   |                                        |       |   |   |
| Cash flows used  in investing activities:                                                                        |   |                                        |       |   |   |
| Capital  expenditures                                                                                            |   | (108                                        | )          | (54 | ) |
|                                                                                                             |   |                                        |       |   |   |
| **Net  cash used in investing activities**                                                                       |   | **(108**                                    | **)**      | **(54** | **)** |
|                                                                                                             |   |                                        |       |   |   |
| Cash flows from  financing activities:                                                                           |   |                                        |       |   |   |
| Purchase of  treasury stock                                                                                      |   | —                                      |       | (18 | ) |
| Deferred  financing costs                                                                                        |   | —                                      |       | 6 |   |
| Payments/proceeds  from loans payable, net                                                                       |   | 149                                         |       | (100 | ) |
|                                                                                                             |   |                                        |       |   |   |
| **Net  cash provided by (used in) financing activities**                                                         |   | **149**                                     | ** ** | **(112** | **)** |
|                                                                                                             |   |                                        |       |   |   |
| Net change in  cash                                                                                              |   | 245                                         |       | 190 |   |
|                                                                                                             |   |                                        |       |   |   |
| Cash - beginning  of period                                                                                      |   | 4                                           |       | 8 |   |
|                                                                                                             |   |                                        |       |   |   |
| Cash - end of  period                                                                                            |   | $                                           | 249        |   | $ | 198 |   |

 

See accompanying notes tounaudited consolidated financial statements.

 

3

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**ASTREX, INC. AND SUBSIDIARIES**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

 

NOTE A – UNAUDITED FINANCIAL STATEMENTS

 

The consolidated balance sheet as of December 31,2002, the consolidated statements of income for the nine and three months endedDecember 31, 2002 and 2001 and the consolidated statements of cash flows forthe nine months ended December 31, 2002 and 2001, have been prepared by theCompany without audit.  In the opinionof management, all adjustments (which include only normally recurringadjustments) necessary to present fairly the financial position, results ofoperations and cash flows at December 31, 2002 (and for all periods presented)have been made.

 

Certain information and note disclosures, normallyincluded in financial statements prepared in accordance with accountingprinciples generally accepted in the United States of America, have beencondensed or omitted.  It is suggestedthat these consolidated financial statements be read in conjunction with thefinancial statements and notes thereto included in the Annual Report on Form10-KSB for the year ended March 31, 2002 filed by the Company.  The results of operations for the periodsended December 31, 2002 and 2001 are not necessarily indicative of theoperating results for the respective full years.

 

NOTE B – DISCONTINUED OPERATIONS

 

On November 1, 2001, the measurement date, the Companyapproved a plan to close TF Cushing, Inc., (“TF Cushing”) a wholly ownedsubsidiary of the Company.  The decisionwas made based on TF Cushing’s declining sales over the past several years, andthe Company’s opinion that a return to profitability was unlikely. The Companyalso felt that TF Cushing’s customer base, supplier base, and business focus(MRO (Maintenance Repair Organization) vs OEM (Original EquipmentManufacturer)) were significantly different from the Company’s core businessand therefore not easily integrated into the Company’s core operations. TheCompany recognized a loss for the period ended December 31, 2001 fromdiscontinued operations of approximately $80,000 (net of state net taxes of$1,400) for the seven months up to the measurement date.  The Company recognized a loss from disposalof its discontinued operations of approximately $265,000 from the measurementdate to December 31, 2001.  The loss ondisposal included operating losses from the measurement date of approximately$44,000, loss on disposal of inventory of approximately $70,000 and estimatesfor further impairment of inventory caused by the disposal decision of$100,000.

 

The remainder of the disposal loss includedliabilities for severance and estimates for miscellaneous expenses related tothe disposal of TF Cushing.  The Companyretained TF Cushing’s remaining assets and assumed its liabilities at December31, 2001, consisting of net accounts receivable of approximately $44,000, netinventory of approximately $15,000 and liabilities of approximately $59,000.For the nine and three months ended December 31, 2001, the Company incurred aloss from discontinued operations of $80,000 and $14,000, respectively.

 

4

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NOTE C – EARNINGS PER COMMON SHARE

 

The following table sets forth the reconciliation of the weightedaverage number of common shares:

 
|                                                         |   | **Nine months ended  December 31,**  |   |
|--------------------------------------------------------------|--------|--------------------------------------|--------|
|                                                         |   | **2002**                             |   | **2001** |   |
|                                                         |   | **(Unaudited)**                      |   | **(Unaudited)** |   |
| Basic                                                        |   | 5,639,704                            |   | 5,547,880 |   |
| Effect of Series B Convertible Preferred Stock               |   | 1,687,621                            |   | 1,816,756 |   |
| Effect of dilutive securities (non-vested restricted  stock) |   | 13,333                               |   | 53,873 |   |
| Diluted                                                      |   | 7,340,658                            |   | 7,418,509 |   |
|                                                         |   |                                 |   |   |   |
|                                                         |   |                                 |   |   |   |
|                                                         |   | **Three months ended  December 31,** |   |
|                                                         |   | **2002**                             |   | **2001** |   |
|                                                         |   | **(Unaudited)**                      |   | **(Unaudited)** |   |
| Basic                                                        |   | 5,659,520                            |   | 5,635,037 |   |
| Effect of Series B Convertible Preferred Stock               |   | —                               |   | 1,714,969 |   |
| Effect of dilutive securities (non-vested restricted  stock) |   | —                               |   | 45,000 |   |
| Diluted                                                      |   | 5,659,520                            |   | 7,395,006 |   |

 

For the three months ended December 31, 2002,1,681,138 shares of Seriex B Preferred Stock were excluded from the calcualtionof diluted loss per share as their inclusion would have been anti-dilutive.

 

NOTE D – ACCOUNTING FOR STOCK BASED COMPENSATION

 

In December 2002, the FASBissued SFAS No. 148, “Accounting for Stock-Based Compensation-Transition andDisclosure” which addresses financial accounting and reporting for recordingexpenses for the fair value of stock options. SFAS 148 provides alternativemethods of transition for a voluntary change to fair value based method ofaccounting for stock-based employee compensation. Additionally, SFAS 148requires more prominent and more frequent disclosures in financial statementsabout the effects of stock-based compensation. The provisions of this Statementare effective for fiscal years ending after December 15, 2002, with earlyapplication permitted in certain circumstances. The interim disclosureprovisions are effective for financial reports containing financial statementsfor interim periods beginning after December 15, 2002. The Company does notexpect the adoption of this Statement to have a material impact on itsfinancial position or results of operations

 

5

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**ASTREX, INC. AND SUBSIDIARIES**

 

ITEM 2. MANAGEMENT’SDISCUSSION AND ANALYSIS OR PLAN OR OPERATIONS

 

**RESULTS OF OPERATIONS**

 

During the three months ended December 31, 2001, theCompany approved and implemented a plan to close its wholly owned subsidiary,TF Cushing.  TF Cushing had operated asa separate Maintenance Repair Organization (“MRO”) distributor of electronic,electrical, and industrial supplies, with a customer base, supplier base andbusiness focus (MRO vs Original Equipment Manufacturer (“OEM”)), significantlydifferent from the Company’s core business. Based on several years of declining sales, the potential of its two keyfranchises, the Company’s opinion that a return to profitability was extremelyunlikely, and the Company’s opinion that TF Cushing’s business could not beefficiently integrated into its core business, the decision was made todiscontinue operations.

 

The following discussion of results of operations isfrom continuing operations and, except as indicated, exclusive of the Company’sTF Cushing subsidiary.

 

Income from continuing operations for the nine monthsended December 31, 2002 was approximately $54,000 as compared with $456,000 forthe nine months ended December 31, 2001. Loss from continuing operations for the three months ended December 31,2002 was approximately $96,000 as compared with income of $51,000 for the threemonths ended December 31, 2001.  Thisdecrease for both the nine month and three month periods is principally theresult of the lower sales volume and higher expenses.  For the nine and three months ended December 31, 2001, theCompany incurred a loss from discontinued operations of $80,000 and $14,000,respectively, as well as a loss from disposal of discontinued operations of$265,000.  As a result, net income forthe nine months ended December 31, 2002 was $54,000 as compared with net incomeof $111,000 in the comparable nine month period in the prior year.  In addition, net loss for the three monthsended December 31, 2002 was $96,000 as compared with net loss of $228,000  for the comparable three month period a yearago.  These results are reflective ofthe severe downturn that continues in the electronics industry. Future resultsare somewhat dependent on the recovery in the overall electronic componentmarket,  although the Company’snon-reliance on any one market segment helps mitigate any future negativeimpact.

 

While the Company’s business is not seasonal, it issubject to factory production schedules (both of its suppliers as well as itscustomers).  Such production schedulesgenerally result in reductions in activity during pre-scheduled holiday(December) and vacation (July/August) shut downs.

 

6

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Sales decreased by approximately $2,090,000 or 17%,for the nine months ended December 31, 2002, from the comparable nine monthperiod in 2001. Sales decreased approximately $345,000 or 10%, for the threemonths ended December 31, 2002, from the comparable three month period a yearago.  To a significant extent “Sales”reflect shipping of past confirmed orders (i.e. “backlog”) as opposed toplacement of orders during the quarter (i.e. “bookings”). During the ninemonths ended December 31, 2002, backlog decreased approximately 4.3% withconfirmed but unshipped orders at December 31, 2002 of approximately $2,807,000as compared to approximately $2,932,000 at March 31, 2002. Bookings for thequarter ended December 31, 2002 decreased by slightly as compared to the samequarter in 2001, $3,207,000 in 2002 compared to $3,248,000 in 2001.

 

The Company’s gross marginimproved to 23.9% for the nine months ended December 31, 2002 as  compared to 22.4% for the same period lastyear.  The change is attributable to improvedsales from higher margin product lines as well as reductions in sales fromlower margin product lines, particularly during the three month period endedJune 30, 2002.  For the three monthsended December 31, 2002 gross profit margin as a percentage of sales increasedto 23.5% as compared to 22.0% for the comparable period a year ago.  During both the nine and three month periodsended December 31, 2002, gross margin dollars decreased primarily as a resultof the lower sales volume discussed above.

 

Selling, general andadministrative expenses increased by approximately $134,000, or 5.9%, for thenine months ended December 31, 2002 from the comparable previous nine monthperiod in 2001. For the three month period ended December 31, 2002, selling,general and administrative expenses increased by $128,000 or 18.6% as comparedto the three months ended December 31, 2001. The increase is primarily the result of increased payroll and employeebenefit and insurance costs as well as an increase in bad debts expense.

 

Interest expense decreasedby approximately $47,000 or 49.5% for the nine months ended December  31, 2002 and decreased by $11,000, or 44.0%,for the three months ended December 31, 2002, as compared to the previous nineand three month periods ended December 31, 2001 due to a reduction in interestrates as well as a reduction in borrowings by the Company.

 

The provision for incometaxes for the nine and three months ended December 31, 2002 and 2001 consistsprincipally of state and local taxes.

# ** **

# **7**

# ****

 

**LIQUIDITY AND CAPITAL RESOURCES**

 

The Company generated approximately $204,000 from itsoperating activities during the nine months ended December 31, 2002.  At December 31, 2002, the Company hadworking capital of $5,669,000 and its stockholders’ equity was $4,790,000.  The Company believes that its presentworking capital, cash generated from operations and amounts available under theloan agreement will be sufficient to meet its cash needs during the next year.

### ** **

The Company’s principal credit facility is a line ofcredit and a term loan from the same bank lender (“Line”).  The Line is secured by substantially all ofthe Company’s assets including a mortgage on the Company’s 205 Express Streetproperty.  The term of the Line runs toApril 30, 2005.  Borrowings under theline of credit portion of the Line, are based on the Company’s inventory andreceivables. On December 31, 2002, the Company owed $1,678,000 on the Line.Approximately $1,472,000 is available under the line of credit portion of theline at December 31, 2002.  The Companyhas an option under the Line to fix a portion or portions of the loan balanceat the currently prevailing LIBOR rate for terms ranging from 30 to 180days.  As of December 31, 2002,  in order to take advantage of thehistorically low interest rates currently available, the Company had $1,650,000of the loan balance (including the long-term amount of $850,000) fixed at LIBORrates. The weighted average interest rate on the loans outstanding at December31, 2002 was 3.17%.  Since these LIBOR loansare for fixed terms, the Company ended the quarter with a significantly highercash balance at December 31, 2002 ($249,000) than in certain priorperiods.  The Company’s relationshipwith its secured lender is satisfactory and the Company believes that thelending arrangement will be adequate for the foreseeable future.

 

The Company currently has no significant commitmentsfor capital expenditures.

 

8

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The following table presents the Company’s expectedcash requirements for contractual obligations outstanding as of December 31,2002:

 
|                                |   | **Total** |      | **Due as of  12/31/03** |   | **Due as of  12/31/04 and  12/31/05** |     |
|-------------------------------------|--------|-----------|-----------|-------------------------|--------|---------------------------------------|----------|
|                                |   |      |      |                    |   |                                  |     |
| Line of Credit  (1)                 |   | $         | 828,000   |                    |   |                                  | $828,000 |   |
| Long-Term Debt                      |   | 850,000   |      |                    |   | 850,000                               |     |
| Operating Leases                    |   | 30,000    |      | $                       | 30,000 |                                  | —   |   |
| Total  Contractual Cash Obligations |   | $         | 1,708,000 |                    | $      | 30,000                                |     | $ | 1,678,000 |   |
|                                     |        |           |           |                         |        |                                       |          |  |  |  |

 

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(1)              The Companymaintains a credit facility that, as amended in April 2002, provides forborrowings of up to $3,150,000, primarily based upon eligible accountsreceivable and inventory, as defined therein. Approximately $2,300,000 is available under the line of  credit portion of the line, of which$828,000 is outstanding at December 31, 2002. The credit facility expires in April 2005.

 

**CRITICALACCOUNTING POLICIES AND ESTIMATES**

 

The Company’s financial statements have been preparedin accordance with accounting principles generally accepted in the UnitedStates of America.  The preparation ofthese financial statements requires the Company to make significant estimatesand judgments that affect the reported amounts of assets, liabilities, revenuesand expenses and related disclosure of contingent assets and liabilities.  The Company evaluates its estimates,including those related to bad debts, inventories, intangible assets, incometaxes and contingincies and litigation, on an ongoing basis.  The Company bases its estimates onhistorical experience and on various other assumptions that are believed to be reasonableunder the circumstances, the results of which form the basis for makingjudgments about the carrying values of assets and liabilities that are notreadily apparent from other sources. Actual results may differ from these estimates under differentassumptions or conditions.

 

The Company believes the following critical accountingpolicies, among others, involve the more significant judgments and estimatesused in the preparation of its consolidated financial statements.

 

9

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The Company recognizes revenue in accordance with SECStaff Accounting Bulletin No. 101, “Revenue Recognition in FinancialStatements” (“SAB 101”).  Under SAB 101,revenue is recognized when the title and risk of loss have passed to thecustomer, there is persuasive evidence of an arrangement, delivery has occurredor services have been rendered, the sales price is determinable andcollectibility is reasonable assured. The Company recognizes revenues at time of shipment of its products andsales are recorded net of discounts and returns.

 

The Company maintains allowances for doubtful accountsfor estimated bad debts.  If thefinancial condition of the Company’s customers were to deteriorate, resultingin an impairment of their ability to make payments, additional allowances mightbe required.

 

Inventories are recorded at the lower of cost ormarket.  Write-downs of inventories tomarket value are based upon product franchise agreements governing priceprotection, stock rotation and obsolescence, as well as assumptions aboutfuture demand and market conditions.  Ifassumptions about future demand/or actual market conditions are less favorablethan those projected by management, additional write-downs of inventories couldbe required.

 

The carrying value of the Company’s deferred taxassets is dependent upon the Company’s ability to generate sufficient futuretaxable income in certain tax jurisdictions. Should the Company determine that it would not be able to realize all orpart of its deferred tax assets in the future, an adjustment to the deferredtax assets would be charged to income in the period such determination wasmade.

 

In December 2002, the FASB issued SFAS No. 148,“Accounting for Stock-Based Compensation-Transition and Disclosure” whichaddresses financial accounting and reporting for recording expenses for thefair value of stock options. SFAS 148 provides alternative methods oftransition for a voluntary change to fair value based method of accounting forstock-based employee compensation. Additionally, SFAS 148 requires moreprominent and more frequent disclosures in financial statements about theeffects of stock-based compensation. The provisions of this Statement areeffective for fiscal years ending after December 15, 2002, with earlyapplication permitted in certain circumstances. The interim disclosureprovisions are effective for financial reports containing financial statementsfor interim periods beginning after December 15, 2002. The Company does notexpect the adoption of this Statement to have a material impact on itsfinancial position or results of operations.

 

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ITEM 3. CONTROLS ANDPROCEDURES

### ** **

### **(a)**              The Company’s Chief Executive Officer andChief Financial Officer conclude that the Company’s disclosure controls andprocedures (as defined in SEC rules 13a-14(c) and 15d-14(c)) are effectivebased on an evaluation performed on January 24, 2003.

 

### **(b)**             No significant changes have been made tothese controls and procedures.

 

CAUTIONARY LANGUAGE REGUARDING FORWARD LOOKING STATEMENTS

 

When used herein, the words “believe,” “anticipate,” “think,” “intend,”“will be,” “expect” and similar expressions identify forward-looking statementswithin the meaning of the Private Securities Litigation Reform Act  of 1995. Such statements are not guarantees of future performance and involvecertain risks and uncertainties discussed herein, which could cause actualresults to differ materially from those in the forward-looking statements.  Readers are cautioned not to place unduereliance on the forward-looking statements, which speak only as of the datehereof.  Readers are also urgedcarefully to review and consider the various disclosures made by the Companywhich attempt to advise interested parties of the factors which affect theCompany’s business, including, without limitation, the disclosures made in theCompany’s Annual Report on Form 10-KSB for the fiscal year ended March 31, 2002under the caption “Management’s Discussion and Analysis of Financial Conditionand Results of  Operation.”

 

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# **ASTREX, INC. AND SUBSIDIARIES**

**PARTII - OTHER INFORMATION**

 

Item 1.  Legal Proceedings.

none

 

Item 2.  Changes in Securities.

none

 

Item 3.  Default Upon SeniorSecurities.

none

 

Item 4.  Submission of Mattersto a Vote of Security Holders.

none

 

Item 5.  Other Information

none

 

Item6.  Exhibits and Reports on Form 8-K.

 

(A)          Exhibits

 

                 
| **Exhibit** |   | **Description**                                                                                                          |   | **Previously  Filed and Incorporated  by reference or Filed Herewith**                            |   |
|-------------|--------|--------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------|--------|
| 3 (a)       |   | Certificate of Incorporation of Astrex, Inc., as  amended (a Delaware corporation)                                       |   | Filed as Exhibit 3(a) to the Form 10-QSB of the  Company for the quarter ended September 30, 1997 |   |
|        |   |                                                                                                                     |   |                                                                                              |   |
| 3 (b)       |   | By-Laws of Astrex, Inc., as amended                                                                                      |   | Filed as Exhibit 3(b) to the Form 10-QSB of the  Company for the quarter ended September 30, 1996 |   |
|        |   |                                                                                                                     |   |                                                                                              |   |
| 4           |   | Astrex, Inc. Certificate of Designations,  Preferences and Rights of Series B Convertible Preferred Stock                |   | Filed as Exhibit 4 to the Form 10-QSB of the Company  for the quarter ended June 30, 2000         |   |
|        |   |                                                                                                                     |   |                                                                                              |   |
| 99.1        |   | Certifications Pursuant to 18 U.S.C. Section 1350,  as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |   | Filed Herewith                                                                                    |   |

 

(B)           Reports on Form 8-K:

 

None

 

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# **ASTREX, INC. AND SUBSIDIARIES**

 

SIGNATURES

 

In accordance with the requirements of Securities Exchange Act of 1934,the registrant has duly caused this report to be signed on its behalf,thereunto duly authorized.

 

 
|                           |   |   | ASTREX, INC. |                    |
|--------------------------------|--------|--------|--------------|-------------------------|
|                           |   |   |         |                    |   |
|                           |   |   |         |                    |   |
| Date:   February 11, 2003 |   |   | By:          | /s/ Michael McGuire     |   |
|                           |   |   |         | Michael McGuire         |   |
|                           |   |   |         | Director, President and |   |
|                           |   |   |         | Chief Executive Officer |   |
|                           |   |   |         |                    |   |
|                           |   |   |         |                    |   |
|                           |   |   |         |                    |   |
| Date:   February 11, 2003 |   |   | By:          | /s/ Joseph Looney       |   |
|                           |   |   |         | Joseph Looney           |   |
|                           |   |   |         | Chief Financial Officer |   |

 

13

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# **ASTREX,INC. AND SUBSIDIARIES**

 

**CERTIFICATIONOF PERIODIC REPORT**

 

I, Michael McGuire, President and Chief Executive Officer of Astrex,Inc. (the “Company”), certify that:

 

1.                     I havereviewed this quarterly report on Form 10QSB of Astrex, Inc.:

 

2.                     Based on myknowledge, this quarterly report does not contain any untrue statement of amaterial fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, notmisleading with respect to the period presented in this quarterly report;

 

3.                     Based on myknowledge, the financial statements, and other financial information includedin this quarterly report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, andfor, the periods presented in this quarterly report;

 

4.                     Theregistrant’s other certifying officer and I are responsible for establishingand maintaining  disclosure controls andprocedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for theregistrant and we have:

 

a.               Designed suchdisclosure controls and procedures to ensure that material information relatingto the registrant, including its consolidated subsidiaries, is made known to usby others within those entities, particularly during the period in which thisquarterly report is being prepared;

 

b.              Evaluated theeffectiveness of the registrant’s disclosure controls and procedures as of adate within 90 days prior to the filing date of this quarterly report (the“Evaluation Date”); and

 

c.               Presented in thisquarterly report our conclusions about the effectiveness of the disclosurecontrols and procedures based on our evaluation as of the Evaluation Date;

 

5.                     Theregistrant’s other certifying officer and I have disclosed, based on our mostrecent evaluation, to the registrant’s auditors and the audit committee of theregistrant’s board of directors (or persons performing the equivalent function):

 

a.               All significantdeficiencies in the design or operation of internal controls which couldadversely affect the registrant’s ability to record, process, simmarize andreport financial data and have identified for the registrant’s auditor’s any materialweakness in internal controls; and

 

14

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b.              Any fraud, whetheror not material, that involves management or other employees who have asignificant role in the registrant’s internal controls; and

 

6.                     Theregistrant’s other certifying officer and I have indicated in this quarterlyreport whether or not there were significant changes in internal controls or inother factors that could significantly affect internal controls subsequent tothe date of our most recent evaluation, including any corrective action withregard to significant deficiencies and material weaknesses.

 

 
| February 11, 2003 |   |   |   |                |   |   |
|-------------------|--------|--------|--------|---------------------|--------|--------|
|              |   |   |   |                |   |   |
|              |   |   |   |                |   |   |
|              |   |   |   | /s/ Michael McGuire |   |   |
|              |   |   |   | Michael McGuire     |   |   |
|              |   |   |   | President and CEO   |   |   |

 

15

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I, Joseph Looney, Chief Financial Officer of Astrex, Inc. (the“Company”), certify that:

 

1.               I have reviewedthis quarterly report on Form 10QSB of Astrex, Inc.:

 

2.               Based on myknowledge, this quarterly report does not contain any untrue statement of amaterial fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, notmisleading with respect to the period presented in this quarterly report;

 

3.               Based on myknowledge, the financial statements, and other financial information includedin this quarterly report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, andfor, the periods presented in this quarterly report;

 

4.               The registrant’sother certifying officer and I are responsible for establishing andmaintaining  disclosure controls andprocedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrantand we have:

 

a.               Designed suchdisclosure controls and procedures to ensure that material information relatingto the registrant, including its consolidated subsidiaries, is made known to usby others within those entities, particularly during the period in which thisquarterly report is being prepared;

 

b.              Evaluated theeffectiveness of the registrant’s disclosure controls and procedures as of adate within 90 days prior to the filing date of this quarterly report (the“Evaluation Date”); and

 

c.               Presented in thisquarterly report our conclusions about the effectiveness of the disclosurecontrols and procedures based on our evaluation as of the Evaluation Date;

 

5.               The registrant’sother certifying officer and I have disclosed, based on our most recentevaluation, to the registrant’s auditors and the audit committee of theregistrant’s board of directors (or persons performing the equivalentfunction):

 

a.               All significantdeficiencies in the design or operation of internal controls which could adverselyaffect the registrant’s ability to record, process, simmarize and reportfinancial data and have identified for the registrant’s auditor’s any materialweakness in internal controls; and

 

16

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b.              Any fraud, whetheror not material, that involves management or other employees who have asignificant role in the registrant’s internal controls; and

 

6.               The registrant’sother certifying officer and I have indicated in this quarterly report whetheror not there were significant changes in internal controls or in other factorsthat could significantly affect internal controls subsequent to the date of ourmost recent evaluation, including any corrective action with regard tosignificant deficiencies and material weaknesses.

 

 
| February 11, 2003 |   |   |   |                    |   |   |   |
|-------------------|--------|--------|--------|-------------------------|--------|--------|--------|
|              |   |   |   |                    |   |   |   |
|              |   |   |   |                    |   |   |   |
|              |   |   |   | /s/ Joseph Looney       |   |   |   |
|              |   |   |   | Joseph Looney           |   |   |   |
|              |   |   |   | Chief Financial Officer |   |   |   |

 

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