**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 ended September 30, 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**

** **

**Commission file number 1-4530**

 

**ASTREX, INC.**

(Exactname of small business issuer as specified in its charter)

 

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

 

(Formername, former address and former fiscal year, if changed since last report)

 

 

Check whether the issuer (1) has filed all reports required to be filed bySection 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements for thepast 90 days.  Yes  ý No   o  

 

 

**APPLICABLE ONLY TO CORPORATEISSUERS**

 

State the number of shares outstanding ofeach of the registrant’s classes of common stock, as of the latest practicabledate.  As of  October 31, 2002 common shares outstanding were  5,654,844 (does not include ConvertiblePreferred Stock).

 

Transitional Small Business DisclosureFormat  (check one)        Yes o        No ý

 

 

 

 

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|                                                                                | **ASTREX, INC.**                                               |   |
|-------------------------------------------------------------------------------------|----------------------------------------------------------------|--------|
|                                                                                |                                                           |   |
|                                                                                | **INDEX**                                                      |   |
|                                                                                |                                                           |   |
|                                                                                |                                                           |   |
|                                                                                |                                                           |   |
| ***PART I: Financial  Information***                                                |                                                           |
|                                                                                |                                                           |   |
| **Item 1.  Financial  Statements:**                                            |                                                           |
|                                                                                |                                                           |   |
|                                                                                | Consolidated Balance Sheets                                    |   |
|                                                                                | September 30, 2002  (unaudited) and March 31, 2002             |   |
|                                                                                |                                                           |   |
|                                                                                | Consolidated  Statements of Income (unaudited)                 |   |
|                                                                                | Six months and three  months ended September 30, 2002 and 2001 |   |
|                                                                                |                                                           |   |
|                                                                                | Consolidated  Statements of Cash Flows (unaudited)             |   |
|                                                                                | Six months ended  September 30, 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**                        | Exhibit 99.1                                                   |
|                                                                                |
|                                                                                |
|                                                                                |
|                                                                                     |                                                                |        |  |

 

2

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**PART I — Financial Information**

 

**ASTREX, INC. AND SUBSIDIARIES**

**CONSOLIDATEDBALANCE SHEETS**

 
|                                                                                                                                                                                                                            |   | **September 30, 2002** | ** ** |               |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------|------------|--------------------|--------|
|                                                                                                                                                                                                                            |   | (Unaudited)            |       | **March 31, 2002** |   |
|                                                                                                                                                                                                                            |   | (000’s) Omitted   |       |
| Current Assets:                                                                                                                                                                                                                 |   |                   |       |               |   |
| Cash                                                                                                                                                                                                                            |   | $                      | 267        |               | $      | 4 |   |
|                                                                                                                                                                                                                            |   |                   |       |               |   |
| Accounts receivable (net of allowancefor doubtful accounts of $91 at September 30, 2002  and $93 at March 31, 2002)                                                                                                             |   | 1,699                  |       | 1,907              |   |
|                                                                                                                                                                                                                            |
|                                                                                                                                                                                                                            |
|                                                                                                                                                                                                                            |   |                   |       |               |   |
| Inventory                                                                                                                                                                                                                       |   | 4,822                  |       | 5,019              |   |
|                                                                                                                                                                                                                            |   |                   |       |               |   |
| Prepaid expenses and other  current assets                                                                                                                                                                                      |   | 188                    |       | 57                 |   |
| Deferred tax asset                                                                                                                                                                                                              |   | 290                    |       | 290                |   |
|                                                                                                                                                                                                                            |   |                   |       |               |   |
| Total current assets                                                                                                                                                                                                            |   | 7,266                  |       | 7,277              |   |
|                                                                                                                                                                                                                            |   |                   |       |               |   |
| Property, plant and equipment at cost (net of  accumulated depreciation of $719 at September 30,  2002 and $684 at March 31, 2002)                                                                                              |   | 695                    |       | 698                |   |
| Other long-term assets                                                                                                                                                                                                          |   | 50                     |       | 52                 |   |
|                                                                                                                                                                                                                            |   |                   |       |               |   |
| **Total Assets**                                                                                                                                                                                                                |   | $                      | 8,011      |               | $      | 8,027 |   |
|                                                                                                                                                                                                                            |   |                   |       |               |   |
| Current Liabilities:                                                                                                                                                                                                            |   |                   |       |               |   |
| Accounts payable                                                                                                                                                                                                                |   | 952                    |       | 1,040              |   |
| Accrued liabilities                                                                                                                                                                                                             |   | 357                    |       | 723                |   |
|                                                                                                                                                                                                                            |   |                   |       |               |   |
| Total current liabilities                                                                                                                                                                                                       |   | 1,309                  |       | 1,763              |   |
|                                                                                                                                                                                                                            |   |                   |       |               |   |
| Long-term debt                                                                                                                                                                                                                  |   | 1,816                  |       | 1,529              |   |
|                                                                                                                                                                                                                            |   |                   |       |               |   |
| Shareholders’ Equity:  Preferred Stock, Series A — issued, none                                                                                                                                                       |   | —                 |       | —             |   |
| Convertible Preferred Stock, Series B — $.01 par value;  authorized, 10,000,000; 1,685,815 and 1,699,151 shares issued and outstanding  at September 30, 2002 and March 31, 2002  (liquidation preference of $.25 a share) |   | 17                     |       | 17                 |   |
| Common Stock — par value $.01 par value; authorized,15,000,000 shares; issued, 6,816,930 and 6,803,594  at September 30, 2002 and March 31,2002                                                                            |   | 68                     |       | 68                 |   |
| Additional paid-in capital                                                                                                                                                                                                      |   | 3,928                  |       | 3,928              |   |
| Retained earnings                                                                                                                                                                                                               |   | 1,211                  |       | 1,061              |   |
| Deferred compensation                                                                                                                                                                                                           |   | —                 |       | (1                 | )      |
| Treasury stock, at cost (1,162,086 shares at September 30, 2002  and  March 31, 2002)                                                                                                                                      |   | (338                   | )          | (338               | )      |
|                                                                                                                                                                                                                            |   |                   |       |               |   |
| Total shareholders’ equity                                                                                                                                                                                                 |   |                   |       |               |   |
|                                                                                                                                                                                                                            |   | 4,886                  |       | 4,735              |   |
| **Total liabilities and shareholders’ equity**                                                                                                                                                                             |   |                   |       |               |   |
|                                                                                                                                                                                                                            |   | $                      | 8,011      |               | $      | 8,027 |   |

 

Seeaccompanying notes to unaudited consolidated financial statements.

 

3

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**ASTREX,INC. AND SUBSIDIARIES**

**CONSOLIDATED STATEMENTS OF INCOME**

**(Unaudited)**

 
|                                                                                                                                                                            |   | **SIX MONTHS  ENDED  SEPTEMBER 30,** |   | **THREE  MONTHS ENDED  SEPTEMBER 30,** |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------|--------|----------------------------------------|--------|
|                                                                                                                                                                            |   | **2002**                             |   | **2001**                               |   | **2002** |   | **2001** |   |
|                                                                                                                                                                            |   | (000)  Omitted                       |   | (000) Omitted                          |   |
|                                                                                                                                                                            |   |                                 |   |                                   |   |   |   |   |   |
| Net sales                                                                                                                                                                       |   | $                                    | 7,348  |                                   | $      | 9,093 |   | $ | 3,595 |   | $ | 4,217 |   |
| Cost of sales                                                                                                                                                                   |   | 5,581                                |   | 7,039                                  |   | 2,776 |   | 3,259 |   |
|                                                                                                                                                                            |   |                                 |   |                                   |   |   |   |   |   |
| Gross profit                                                                                                                                                                    |   | 1,767                                |   | 2,054                                  |   | 819 |   | 958 |   |
|                                                                                                                                                                            |   |                                 |   |                                   |   |   |   |   |   |
| Selling, general and  administrative expenses                                                                                                                                   |   | 1,570                                |   | 1,564                                  |   | 773 |   | 733 |   |
|                                                                                                                                                                            |   |                                 |   |                                   |   |   |   |   |   |
| Income from operations                                                                                                                                                          |   | 197                                  |   | 490                                    |   | 46 |   | 225 |   |
|                                                                                                                                                                            |   |                                 |   |                                   |   |   |   |   |   |
| Interest expense                                                                                                                                                                |   | 34                                   |   | 70                                     |   | 20 |   | 31 |   |
|                                                                                                                                                                            |   |                                 |   |                                   |   |   |   |   |   |
| Income before provision  for income taxes                                                                                                                                       |   | 163                                  |   | 420                                    |   | 26 |   | 194 |   |
|                                                                                                                                                                            |   |                                 |   |                                   |   |   |   |   |   |
| Provision for income taxes                                                                                                                                                      |   | 13                                   |   | 15                                     |   | 5 |   | 9 |   |
|                                                                                                                                                                            |   |                                 |   |                                   |   |   |   |   |   |
| Income from continuing  operations                                                                                                                                              |   | 150                                  |   | 405                                    |   | 21 |   | 185 |   |
|                                                                                                                                                                            |   |                                 |   |                                   |   |   |   |   |   |
| Loss from discontinued operations                                                                                                                                               |   | —                               |   | (66                                    | )      | — |   | (30 | ) |
|                                                                                                                                                                            |   |                                 |   |                                   |   |   |   |   |   |
| **Net income**                                                                                                                                                                  |   | $                                    | 150    |                                   | $      | 339 |   | $ | 21 |   | $ | 155 |   |
|                                                                                                                                                                            |   |                                 |   |                                   |   |   |   |   |   |
|                                                                                                                                                                            |   |                                 |   |                                   |   |   |   |   |   |
| Per share data for the six  and three months ended September 30, 2002 and 2001 are as follows:  Weighted average common shares and common share equivalent shares  outstanding: |
|                                                                                                                                                                            |   |                                 |   |                                   |   |   |   |   |   |
| Basic                                                                                                                                                                           |   | 5,629,796                            |   | 5,502,397                              |   | 5,652,133 |   | 5,538,124 |   |
| Diluted                                                                                                                                                                         |   | 7,340,658                            |   | 7,428,658                              |   | 7,340,658 |   | 7,428,658 |   |
|                                                                                                                                                                            |   |                                 |   |                                   |   |   |   |   |   |
| Net income per share:                                                                                                                                                           |   |                                 |   |                                   |   |   |   |   |   |
| Basic                                                                                                                                                                           |   |                                 |   |                                   |   |   |   |   |   |
| Income from continuing operations                                                                                                                                               |   | $                                    | 0.03   |                                   | $      | 0.07 |   | $ | 0.00 |   | $ | 0.03 |   |
| Loss from discontinued operations                                                                                                                                               |   | —                               |   | (0.01                                  | )      | — |   | 0.00 |   |
|                                                                                                                                                                            |   | $                                    | 0.03   |                                   | $      | 0.06 |   | $ | 0.00 |   | $ | 0.03 |   |
| Diluted                                                                                                                                                                         |   |                                 |   |                                   |   |   |   |   |   |
| Income from continuing operations                                                                                                                                               |   | $                                    | 0.02   |                                   | $      | 0.05 |   | $ | 0.00 |   | $ | 0.02 |   |
| Loss from discontinued operations                                                                                                                                               |   | —                               |   | (0.01                                  | )      | — |   | 0.00 |   |
|                                                                                                                                                                            |   | $                                    | 0.02   |                                   | $      | 0.05 |   | $ | 0.00 |   | $ | 0.02 |   |

 

Seeaccompanying notes to unaudited consolidated financial statements.

 

4

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**ASTREX,INC. AND SUBSIDIARIES**

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(Unaudited)**

 
|                                                                                                            |   | **FOR THE SIX MONTHS ENDED SEPTEMBER 30,** |       |
|-----------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------|------------|
|                                                                                                            |   | **2002**                                   |       | **2001** |   |
|                                                                                                            |   | (000) Omitted                              |       |
| Cash Flows From Operating Activities:                                                                           |   |                                       |       |   |   |
|                                                                                                            |   |                                       |       |   |   |
| Net income from continuing operations                                                                           |   | $                                          | 150        |   | $ | 405 |   |
|                                                                                                            |   |                                       |       |   |   |
| *Adjustments to reconcile net income from continuing  operations to net cash provided by operating activities:* |   |                                       |       |   |   |
| Depreciation and amortization                                                                                   |   | 35                                         |       | 33 |   |
| Amortization of deferred stock compensation                                                                     |   | 1                                          |       | 6 |   |
| *Changes in assets and liabilities:*                                                                            |   |                                       |       |   |   |
| Decrease in accounts receivable, net                                                                            |   | 208                                        |       | 384 |   |
| Increase in prepaid expenses and othercurrent assets                                                            |   | (131                                       | )          | (47 | ) |
| Decrease in inventory                                                                                           |   | 197                                        |       | 89 |   |
| Decrease (increase) in other long-term assets                                                                   |   | 2                                          |       | (5 | ) |
| Decrease in accounts payable                                                                                    |   | (88                                        | )          | (627 | ) |
| Decrease in accrued liabilities                                                                                 |   | (366                                       | )          | (210 | ) |
|                                                                                                            |   |                                       |       |   |   |
| Net cash provided by continuing operations                                                                      |   | 8                                          |       | 28 |   |
| Net operating activities from discontinued operations                                                           |   | —                                     |       | (16 | ) |
| **Net cash provided by opertions**                                                                              |   | **8**                                      | ** ** | **12** |   |
|                                                                                                            |   |                                       |       |   |   |
| Cash flows used in investing activities:  Capital expenditures                                                  |   | (32                                        | )          | (46 | ) |
|                                                                                                            |   |                                       |       |   |   |
| **Net cash used in investing activities**                                                                       |   | **(32**                                    | **)**      | **(46** | **)** |
|                                                                                                            |   |                                       |       |   |   |
| Cash flows from financing activities:                                                                           |   |                                       |       |   |   |
| Purchase of treasury stock                                                                                      |   | —                                     |       | (5 | ) |
| Deferred financing costs                                                                                        |   | —                                     |       | 6 |   |
| Payments/proceeds from loans payable, net                                                                       |   | 287                                        |       | 70 |   |
|                                                                                                            |   |                                       |       |   |   |
| **Net cash provided by financing activities**                                                                   |   | **287**                                    | ** ** | **71** |   |
|                                                                                                            |   |                                       |       |   |   |
| Net change in cash                                                                                              |   | 263                                        |       | 37 |   |
|                                                                                                            |   |                                       |       |   |   |
| Cash — beginning of period                                                                                 |   | 4                                          |       | 8 |   |
|                                                                                                            |   |                                       |       |   |   |
| Cash — end of period                                                                                       |   | $                                          | 267        |   | $ | 45 |   |

 

Seeaccompanying notes to unaudited consolidated financial statements.

 

5

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**ASTREX, INC. AND SUBSIDIARIES**

**NOTES TO CONSOLIDATED FINANCIALSTATEMENTS**

 

 

NOTE A - UNAUDITED FINANCIALSTATEMENTS

 

The consolidated balance sheet as ofSeptember 30, 2002, the consolidated statements of income for the six and threemonths ended September 30, 2002 and 2001 and the consolidated statements ofcash flows for the six months ended September 30, 2002 and 2001, have beenprepared by the Company without audit. In the opinion of management, all adjustments (which include onlynormally recurring adjustments) necessary to present fairly the financialposition, results of operations and cash flows at September 30, 2002 (and forall periods presented) have been made.

 

Certain information and note disclosures,normally included in financial statements prepared in accordance withaccounting principles generally accepted in the United States of America, havebeen condensed or omitted.  It issuggested that these consolidated financial statements be read in conjunctionwith the financial statements and notes thereto included in the Annual Reporton Form 10-KSB for the year ended March 31, 2002 filed by the Company.  The results of operations for the periodsended September 30, 2002 and 2001 are not necessarily indicative of theoperating results for the respective full years.

 

NOTE B — DISCONTINUEDOPERATIONS

 

On November 1, 2001, themeasurement date, the Company approved a plan to close TF Cushing, Inc., (“TFCushing”) a wholly owned subsidiary of the Company.  The decision was made based on TF Cushing’s declining sales overthe past several years, and the Company’s opinion that a return toprofitability was unlikely. The Company also felt that TF Cushing’s customerbase, supplier base, and business focus (MRO (Maintenance Repair Organization)vs OEM(Original Equipment Manufacturer)) were significantly different from theCompany’s core business and therefore not easily integrated into the Company’score operations. The Company recognized a loss for the period ended December31, 2001 from discontinued operations of approximately $80,000 (net of statenet 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.

 

6

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The remainder of thedisposal loss included liabilities for severance and estimates for miscellaneousexpenses related to the disposal of its TF Cushing subsidiary.  The Company retained TF Cushing’s remainingassets and assumed its liabilities at December 31, 2001, consisting of netaccounts receivable of approximately $44,000, net inventory of approximately$15,000 and liabilities of approximately $59,000. For the six and three monthsended September 30, 2001, the Company incurred a loss from discontinuedoperations of $66,000 and $30,000, respectively.

 

 

NOTE C — EARNINGS PER COMMONSHARE

 

The following table sets forth thereconciliation of the weighted average number of common shares:

 
|                                                          |   | **Six months ended   September 30,** |   |
|---------------------------------------------------------------|--------|--------------------------------------|--------|
|                                                          |   | **2002**                             |   | **2001** |   |
|                                                          |   | **(Unaudited)**                      |   | **(Unaudited)** |   |
|                                                          |   |                                 |   |   |   |
| Basic                                                         |   | 5,630,141                            |   | 5,502,397 |   |
|                                                          |   |                                 |   |   |   |
| Effect of Series B Convertible Preferred   Stock              |   | 1,690,517                            |   | 1,867,928 |   |
| Effect of dilutive securities (non-vested   restricted stock) |   | 20,000                               |   | 58,333 |   |
| Diluted                                                       |   | 7,340,658                            |   | 7,428,658 |   |

 

 

 

 

 
|                                                          |   | **Three months ended  September 30,** |   |
|---------------------------------------------------------------|--------|---------------------------------------|--------|
|                                                          |   | **2002**                              |   | **2001** |   |
|                                                          |   | **(Unaudited)**                       |   | **(Unaudited)** |   |
| Basic                                                         |   | 5,652,134                             |   | 5,538,124 |   |
|                                                          |   |                                  |   |   |   |
| Effect of Series B Convertible Preferred   Stock              |   | 1,688,524                             |   | 1,838,795 |   |
| Effect of dilutive securities (non-vested   restricted stock) |   | —                                |   | 51,739 |   |
| Diluted                                                       |   | 7,340,658                             |   | 7,428,658 |   |

 

7

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

 

**RESULTS OF OPERATIONS**

 

                Duringthe quarter ending December 31, 2001, the Company approved and implemented aplan to close its wholly owned subsidiary, TF Cushing.  TF Cushing had operated as a separateMaintenance Repair Organization (“MRO”) distributor of electronic, electrical,and industrial supplies, with a customer base, supplier base and business focus(MRO vs Original Equipment Manufacturer (“OEM”)), significantly different fromthe Company’s core business.  Based onseveral years of declining sales, the potential of its two key franchises, theCompany’s opinion that a return to profitability was extremely unlikely, andthe Company’s opinion that TF Cushing’s business could not be efficientlyintegrated into its core business, the decision was made to discontinueoperations.

 

                Thefollowing discussion of results of operations is from continuing operationsand, except as indicated, exclusive of the Company’s TF Cushing subsidiary.

 

Income from continuingoperations for the six months ended September 30, 2002 was approximately$150,000 as compared with $405,000 for the six months ended September 30,2001.  Income from continuing operationsfor the three months ended September 30, 2002 was approximately $21,000 ascompared with $185,000 for the three months ended September 30, 2001.  This decrease for both the six month andthree month periods is principally the result of the lower sales volume.  For the six and three months ended September30, 2001, the Company incurred a loss from discontinued operations of $66,000and $30,000, respectively.  As a result,net income for the six months ended September 30, 2002 was $150,000 as comparedwith net income of $339,000 in the comparable six month period a year ago.  In addition, net income for the three monthsended September 30, 2002 was $21,000 as compared with net income of$154,000  for the comparable quarter ayear ago.  Given the severe downturngenerally experienced in the electronic industry, the Company is pleased withthese results.  Future results aresomewhat dependent on the recovery in the overall electronic componentmarket,  although the Company’s non-relianceon any one market segment helps mitigate any future negative impact.

 

Salesdecreased by approximately $1,745,000 or 19%, for the six months endedSeptember 30, 2002, from the comparable six month period in 2001. Salesdecreased approximately $622,000 or 15%, for the three months ended September30, 2002, from the comparable three month period a year ago.  To a significant extent“Sales” reflect shipping of past confirmed orders (i.e. “backlog”) as opposedto placement of orders during the quarter (i.e. “bookings”). During the sixmonths ended September 30, 2002, backlog decreased approximately 31% withconfirmed but unshipped orders at September 30, 2002 of approximately$2,701,000 as compared to approximately $3,891,000 at September 30, 2001.Bookings for the quarter ended September 30, 2002 decreased by 19% as comparedto the same quarter in 2001, $3,412,000 compared to $4,189,000.

 

8

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TheCompany’s gross margin improved to 24.0% for the six months ended September 30,2002 as  compared to 22.6% for the sameperiod last year.  The change isattributable to improved sales from higher margin product lines as well asreductions in sales from lower margin product lines, particularly during thefirst quarter.  For the three monthsended September 30, 2002 gross margin as a percentage of sales increasedslightly to 22.8% as compared to 22.7% for the comparable quarter a yearago.  During both the six and threemonth periods gross margin dollars decreased primarily as a result of the lowersales volume discussed above.

 

Selling,general and administrative expenses increased by approximately $6,000, or lessthan 1%, for the six months ended September 30, 2002 from the comparableprevious six month period in 2001. For the three month period, selling, generaland administrative expenses increased by $40,000 or 5.5% as compared to thesame quarter a year ago.  The increase isprimarily the result of higher payroll and employee benefit costs.

 

Interestexpense decreased by approximately $36,000 or 51% for the six months endedSeptember  30, 2002 and decreased by$11,000, or 35%, for the three months ended September 30, 2002, as compared tothe previous six and three month periods in 2001 due to a reduction in interestrates as well as a reduction in borrowings by the Company.

 

**               **The provisionfor income taxes for the six and three months ended Septmeber 30, 2002 and 2001consists principally of state and local taxes.

# ** **

**LIQUIDITY AND CAPITAL RESOURCES**

 

TheCompany generated approximately $8,000 from its operating activities during thesix months ended September 30, 2002.  AtSeptember 30, 2002, the Company had working capital of $5,957,000 and itsstockholders’ equity was $4,886,000. The Company believes that its present working capital, cash generatedfrom operations and amounts available under the loan agreement will besufficient to meet its cash needs during the next year.

 

9

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### ** **

TheCompany’s principal credit facility is a line of credit and a term loan fromthe same bank lender (“Line”).  The Lineis secured by substantially all of the Company’s assets including a mortgage onthe 205 Express Street property.  Theterm of the Line runs to April 30, 2005. Borrowings under the line of credit portion of the Line, are based onthe Company’s inventory and receivables. On September 30, 2002, the Companyowed $1,816,000 on the Line. The Company has an option under the Line to fix aportion or portions of the loan balance at the currently prevailing LIBOR ratefor terms ranging from 30 to 180 days. As of September 30, 2002,  inorder to take advantage of the historically low interest rates currentlyavailable, the Company had $1,800,000 of the loan balance (including thelong-term amount of $850,000) fixed at LIBOR rates. The weighted averageinterest rate on the loans outstanding at September 30, 2002 was 3.45%.  Since these LIBOR loans are for fixed terms,the Company ended the quarter with a significantly higher cash balance atSeptember 30, 2002 ($267,000) than in prior quarters or year ends.  The Company’s relationship with its securedlender is satisfactory and the Company believes that the lending arrangementwill be adequate for the foreseeable future.

 

TheCompany currently has no significant commitments for capital expenditures.

 

Thefollowing table presents the Company’s expected cash requirements forcontractual obligations outstanding as of September 30, 2002:
|                                 |   | **Total** |      | **Due as of   9/30/03** |   | **Due as of  9/30/04 and  9/30/05** |   |
|--------------------------------------|--------|-----------|-----------|-------------------------|--------|-------------------------------------|--------|
| Line of Credit (1)                   |   | $         | 950,345   |                    |   |                                | $      | 950,435 |   |
| Long-Term Debt                       |   | 850,000   |      |                    |   | 850,000                             |   |
| Operating Leases                     |   | 43,000    |      | $                       | 38,000 |                                | 5,000  |   |
| Total Contractual Cash   Obligations |   | $         | 1,843,435 |                    | $      | 38,000                              |   | $ | 1,805,435 |   |

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(1)              TheCompany maintains a credit facility that, as amended in April 2002, providesfor borrowings of up to $3,150,000, primarily based upon eligible accountsreceivable and inventory, as defined therein. Approximately $1,700,000 is available under the line of  credit portion of the line, of which$950,435 is outstanding at September 30, 2002. The credit facility expires in April 2005.

 

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**CRITICALACCOUNTING POLICIES AND ESTIMATES**

 

TheCompany’s financial statements have been prepared in accordance with accountingprinciples generally accepted in the United States of America.  The preparation of these financialstatements requires the Company to make significant estimates and judgmentsthat affect the reported amounts of assets, liabilities, revenues and expensesand 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 bereasonable under the circumstances, the results of which form the basis formaking judgments about the carrying values of assets and liabilities that arenot readily apparent from other sources. Actual results may differ from these estimates under differentassumptions or conditions.

 

TheCompany believes the following critical accounting policies, among others,involve the more significant judgments and estimates used in the preparation ofits consolidated financial statements.

 

TheCompany recognizes revenue in accordance with SEC Staff Accounting Bulletin No.101, “Revenue Recognition in Financial Statements” (“SAB 101”).  Under SAB 101, revenue is recognized whenthe title and risk of loss have passed to the customer, there is persuasiveevidence of an arrangement, delivery has occurred or services have beenrendered, the sales price is determinable and collectibility is reasonableassured.  The Company recognizesrevenues at time of shipment of its products and sales are recorded net ofdiscounts and returns.

 

TheCompany maintains allowances for doubtful accounts for estimated baddebts.  If the financial condition ofthe Company’s customers were to deteriorate, resulting in an impairment oftheir ability to make payments, additional allowances might be required.

 

Inventoriesare recorded at the lower of cost or market. Write-downs of inventories to market value are based upon productfranchise agreements governing price protection, stock rotation and obsolescence,as well as assumptions about future demand and market conditions.  If assumptions about future demand/or actualmarket conditions are less favorable than those projected by management,additional write-downs of inventories could be required.

 

Thecarrying value of the Company’s deferred tax assets is dependent upon theCompany’s ability to generate sufficient future taxable income in certain taxjurisdictions.  Should the Companydetermine that it would not be able to realize all or part of its deferred taxassets in the future, an adjustment to the deferred tax assets would be chargedto income in the period such determination was made.

# ** **

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### **ITEM 3. CONTROLS AND PROCEDURES**

### ** **

### **(a)**              The Company’s Chief Executive Officer and Chief FinancialOfficer conclude that the Company’s disclosure controls and procedures (asdefined in SEC rules 13a-14(c) and 15d-14(c)) are effective based on anevaluation performed on October 24, 2002.

 

### **(b)**             No significant changes have been made to these controls andprocedures.

 

### **CAUTIONARYLANGUAGE REGUARDING FORWARD LOOKING STATEMENTS**

 

When used herein, thewords “believe,” “anticipate,” “think,” “intend,” “will be,” “expect” andsimilar expressions identify forward-looking statements within the meaning ofthe Private Securities Litigation Reform Act of 1995.  Such statements are notguarantees of future performance and involve certain risks and uncertainties discussedherein, which could cause actual results to differ materially from those in theforward-looking statements.  Readers arecautioned not to place undue reliance on the forward-looking statements, whichspeak only as of the date hereof. Readers are also urged carefully to review and consider the variousdisclosures made by the Company which attempt to advise interested parties ofthe factors which affect the Company’s business, including, without limitation,the disclosures made in the Company’s Annual Report on Form 10-KSB for thefiscal year ended March 31, 2002 under the caption “Management’s Discussion andAnalysis of Financial Condition and Results of Operation.”

 

# ** **

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**PART II - OTHER INFORMATION**

 

Item 1.  Legal Proceedings.

                none

 

Item 2.  Changes in Securities.

                none

 

Item 3.  Default Upon Senior Securities.

                none

 

Item 4.  Submission of Matters to a Vote of SecurityHolders.

 

                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)           Reportson Form 8-K

 

             None

 

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SIGNATURES

 

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

 

 

 
|                          | ASTREX, INC.            |
|-------------------------------|-------------------------|
|                          |                    |
| Date:  November 11, 2002 | By:                     | s/ Michael McGuire |
|                          | Michael McGuire         |
|                          | Director, President and |
|                          | Chief Executive Officer |

 

 

 

 

 
| Date:  November 11, 2002 | By:                     | s/  Joseph Looney |
|-------------------------------|-------------------------|-------------------|
|                          | Joseph  Looney          |
|                          | Chief Financial Officer |

 

 

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**CERTIFICATION OF PERIODIC REPORT**

 

I, Michael McGuire, President and ChiefExecutive 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.                     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 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 inthis quarterly 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 equivalentfunction):

 

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 anymaterial weakness in internal controls; and

 

 

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b.              Any fraud,whether or 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.

 
| November 11, 2002 |   |   |   |               |
|-------------------|--------|--------|--------|--------------------|
|              |   |   |   |               |
|              |   |   |   | s/ Michael McGuire |
|              |   |   |   | Michael McGuire    |
|              |   |   |   | President and CEO  |

 

# ** **

16

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# **ASTREX, INC. ANDSUBSIDIARIES**

 

# ** **

**CERTIFICATION OF PERIODIC REPORT**

 

I, Joseph Looney, President and ChiefExecutive 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.               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 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 inthis quarterly 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 equivalentfunction):

 

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 anymaterial weakness in internal controls; and

 

17

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b.              Any fraud,whether or 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.

 

 
| November 11, 2002 |   |   |   |                    |
|-------------------|--------|--------|--------|-------------------------|
|              |   |   |   |                    |
|              |   |   |   | s/ Joseph Looney        |
|              |   |   |   | Joseph Looney           |
|              |   |   |   | Chief Financial Officer |

 

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