** **

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, DC  20549**

** **

**FORM 10-KSB**

** **

**ANNUALREPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934**

** **

**For the fiscal year ended March 31,2003**

** **

**Commission file number 1-4530**

** **

**ASTREX,INC.**

(Exact name ofsmall business issuer as specified in its charter)

 

| **DELAWARE**                                                                          |   | **13-1930803**                     |
|---------------------------------------------------------------------------------------|--------|------------------------------------|
| (State of  incorporation)                                                             |   | (IRS Employer  Identification No.) |
|                                                                                  |   |                               |
| **205 Express Street, Plainview, New  York 11803**                                    |
| (Address of principal  executive offices)  (Zip Code)                            |
|                                                                                  |   |                               |
| **516 - 433-1700**                                                                    |
| (Issuer’s telephone  number, including area code)                                |
|                                                                                  |   |                               |
| Securities registered  pursuant to Section 12 (b) of the Exchange Act:  **None** |
|                                                                                  |
| **SECURITIES REGISTERED PURSUANT TO  12 (g) OF THE EXCHANGE ACT:**                    |
|                                                                                  |   |                               |
| **Common Stock, $.01 Par Value**                                                      |
| (Title of class)                                                                      |

 

Check whether the issuer (1) has filed all reportsrequired to be filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the past 12 months (or for such shorter period that the registrantwas required to file such reports), and (2) has been subject to each filingrequirements for the past 90 days.  **Yes ****ý** No. o

 

Check if there is no disclosure of delinquent filersin response to Item 405 of Regulation S-B contained in this form, and nodisclosure will be contained, to the best of registrant’s knowledge, indefinitive proxy or information statements incorporated by reference in PartIII of this Form 10-KSB or any amendment to this Form 10-KSB.  o

 

State issuer’s revenues for its most recent fiscalyear*. ***$13,745,687.**

 

State the aggregate market value of the voting andnon-voting common equity held by non-affiliates computed by reference to theprice at which the stock was sold, or the average bid and asked prices of suchstock, as of a specified date within the past 60 days. **$935,357 as of June 18, 2003 [assumesconversion of Convertible Preferred Stock (See Item 5)].**

 

State the number of shares outstanding of each of theissuer’s classes of common equity, as of the latest practicable date: ** 5,691,053 shares of Common Stock and1,628,156 shares of Series B Convertible Preferred Stock as of June 18 2003.**

 

 

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**ASTREX, INC.**

 

**CROSSREFERENCE SHEET**

 
| **Item  required by Form 10-KSB** |   | **Location  of Item**                                                                                            |
|-----------------------------------|--------|------------------------------------------------------------------------------------------------------------------|
|                              |   |                                                                                                             |   |   |   |   |
| Item 1.                           | – | Description of Business                                                                                          |   | Item 1. |   | Business |
|                              |   |                                                                                                             |   |   |   |   |
| Item 2.                           | – | Description of Property                                                                                          |   | Item 2. |   | Description of Property |
|                              |   |                                                                                                             |   |   |   |   |
| Item 3.                           | – | Legal Proceedings                                                                                                |   | Item 3. |   | Legal Proceedings |
|                              |   |                                                                                                             |   |   |   |   |
| Item 4.                           | – | Submission of Matters to a Vote of Security Holders                                                              |   | Item 4. |   | Submission of Matter to a Vote of Security Holders |
|                              |   |                                                                                                             |   |   |   |   |
| Item 5.                           | – | Market for Common Equity and Related Shareholder  Matters                                                        |   | Item 5. |   | Market for Registrant’s Common Equity and Related  Shareholder Matters |
|                              |   |                                                                                                             |   |   |   |   |
| Item 6.                           | – | Management’s Discussion and Analysis or Plan of  Operation                                                  |   | Item 6. |   | Management’s Discussion and Analysis of Financial  Condition and Results of Operation |
|                              |   |                                                                                                             |   |   |   |   |
| Item 7.                           | – | Financial Statements                                                                                             |   | Item 13. |   | Exhibits, Financial Statements and Reports on Form 8-K |
|                              |   |                                                                                                             |   |   |   |   |
| Item 8.                           | – | Changes In and Disagreements With Accountants on  Accounting and Financial Disclosure                            |   | Item 8. |   | Changes in and Disagreements with Accountants on  Accounting and Financial Disclosure |
|                              |   |                                                                                                             |   |   |   |   |
| Item 9.                           | – | Directors, Executive Officers, Promoters and Control  Persons, Compliance with Section 16(a) of the Exchange Act |   | Item 9. |   | Directors and Executive Officers of the Company;  Compliance with Section 16(a) of the Exchange Act |
|                              |   |                                                                                                             |   |   |   |   |
| Item 10.                          | – | Executive Compensation                                                                                           |   | Item 10. |   | Executive Compensation |
|                              |   |                                                                                                             |   |   |   |   |
| Item 11.                          | – | Security Ownership of Certain Beneficial Owners and  Management                                                  |   | Item 11. |   | Security Ownership of Certain Beneficial Owners and  Management |
|                              |   |                                                                                                             |   |   |   |   |
| Item 12.                          | – | Certain Relationships and Related Transactions                                                                   |   | Item 12. |   | Certain Relationships and Related Transactions |
|                              |   |                                                                                                             |   |   |   |   |
| Item 13.                          | – | Exhibits and Reports on Form 8-K                                                                                 |   | Item 13. |   | Exhibits, Financial Statements and Reports on  Form 8-K |
|                              |   |                                                                                                             |   |   |   |   |
| Item 14.                          | – | Controls and Procedures                                                                                          |   | Item 14. | – | Controls and Procedures |

** **

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**PartI**

When used herein, the words “believe,” “anticipate,”“think,” “intend,” “will be,” “expect,” “foresee” and similar expressionsidentify forward-looking statements within the meaning of the PrivateSecurities Litigation Reform Act of 1995. Such statements speak only as of the date hereof, are not guarantees offuture performance, events or trends and involve certain risks anduncertainties including those 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. 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 under the caption “Management’s Discussion and Analysis ofFinancial Condition and Results of Operation.” All references to fiscal year are to the Company’s fiscal year whichends on March 31.

 

Item 1. ** Business.**

 

**General**

 

Astrex, Inc., a Delaware corporation (the “Company” or“Astrex”), is a value-added distributor of electronic components used toconnect, control, regulate or store electricity in equipment.  The principal products assembled and sold byAstrex are “connectors.”  Connectorslink a wire or group of wires to another wire or group of wires.  Other products sold include relays,switches, and LEDs.

 

The Company has 48employees, principally at its facility in Plainview, New York and carries ininventory over 25,000 different electronic parts from approximately 20manufacturers, including Amphenol Corporation, Hirose Electric (USA), Inc.,Hypertronics Corporation, ITT Cannon, ITW Switches, Litton WinchesterElectronics, Micro Switch (division of Honeywell, Inc.), Packard HughesInterconnect, and WPI Salem Division (Wire Pro).  While the Company sells a portion of this inventory without anyfurther value enhancements, a significant portion of its sales consists ofcomponents assembled to customer specifications. The Company’s sales areworldwide with a concentration in the Northeast and Mid-Atlantic States.  The Company serves more than 2,000 activecustomers representing a broad range of electronics users from major originalequipment manufacturers, to engineering firms and research and educationalinstitutions.  The Company’s largestindustry markets include the defense, aerospace, industrial equipment, andcomputer industries.

 

Approximately 89% of theproducts sold by the Company are connectors. A connector links electronic components together and generally consistsof a shell, insert, contacts and adaptive hardware.  Each of these four parts has many variations and can be assembledtogether in almost unlimited combinations. Connectors generally range in price, depending on design, complexity,use, and availability from a few cents to $2,500 a connector.  The Company has traditionally emphasized thesale of connectors that meet a higher standard of reliability and performanceincluding those meeting United States military specifications.  Most of the connectors sold by the Companyrange in price from $5 to $150 each.

 

The Company has thecapacity to both assemble and test connectors to customer’s specifications,which is a capability that some of its competitors do not have.  The assembly capability also enables the

 

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Company to inventory fewer finished parts and todeliver a wider variety of finished connectors, substantially enhancing serviceto its customers.  During the fiscalyear ended March 31, 2003, connector sales represented 89% of total sales.

 

The other products soldby the Company, representing approximately 11*%*****of Company’s total sales,are devices that control or regulate the flow of electricity to or withincomponents, including relays and switches that control electric current byopening or closing an electric circuit.

 

Assembly of militaryspecification connectors, a significant part of the Company’s business, usuallyrequires government approval to manufacture, and sell certain products forgovernment use.  The Company has suchapprovals as are necessary for the military specification connectors itassembles and does not foresee any future problems with respect to suchapprovals.

 

The nature of the Company’sbusiness does not require significant expenditures for product research anddevelopment and the Company’s expenditures in that regard over the past twoyears have been nominal.

 

The Company hassatisfactory relations with its suppliers, most of which have done businesswith the Company for over 15 years.  TheCompany believes that most of the products it presently sells are availablefrom other sources at competitive prices. Most of the products sold by the Company are pursuant to franchiseagreements that are typically cancelable at any time.

 

As of March 31, 2003 theCompany’s net inventory aggregated approximately $4,492,000 of whichapproximately 97*%*****consisted of connectors.  While manufacturers generally do not givedistributors, such as the Company, the absolute right to return unsoldinventory, it is the policy of many manufacturers to protect or partiallyprotect franchised distributors, such as the Company, against the potentialwrite-down of inventories due to technological change or manufacturer’s pricereductions. Similarly, a manufacturer who elects to terminate a franchise maybe required to purchase from the distributor a substantial, if not the total,amount of its product carried in inventory. No assurance can be given however,that these industry practices will continue.

 

The Company serves morethan 2,000 active customers representing a broad spectrum of electronic usersranging from major original equipment manufacturers to engineering firms andresearch and educational institutions. Such customers include manufacturers in the aerospace, industrial,defense and computer industries.  Nosingle customer accounted for more than 10% of sales, during the years ended2003 and 2002.

 

Many of the Company’scustomers require delivery schedules, which are generally not available ondirect purchase from manufacturers.  TheCompany offers its customers the convenience of diverse and extensive localinventories and rapid deliveries.  Inaddition, because of its expertise in connectors, the Company can offer itscustomers technical advice and support, and innovative solutions to customerproblems.  The Company believes that itshas good long-term relationships with its customers extending, in some cases,over a period of more than 20 years.

 

For the fiscal year endedMarch 31, 2003 and 2002, 62% and 70% of the Company’s sales, respectively, werein the Northeast and Mid-Atlantic States with 27*%* and 18% of sales,respectively to other parts of the country. Export sales were 11% and 12% of the Company’s net sales in 2003 and2002, respectively.

 

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Sales are generated bythe Company’s field sales force, which covers specific geographic territoriesand customers; by the Company’s inside telephone and internet sales force; andby independent sales representatives. These sales efforts are supported by an internet web site and by the useof space advertising in industry publications. Sales are managed and coordinated by regional sales managers and byproduct managers located in the Company’s Plainview, New York facility.

 

**Recent Developments**

 

On November 1, 2001, theCompany approved a plan to close TF Cushing, Inc., (TF Cushing) a wholly ownedsubsidiary of the Company.  TF Cushingwas primarily a Maintenance Repair Organization (“MRO”) seller ofswitches.  The decision was made basedon TF Cushing’s declining sales over the past several years, and the Company’sopinion that a return to profitability was unlikely. The Company also felt thatTF Cushing’s customer base, supplier base, and business focus (MRO vs OriginalEquipment Manufacturer, “OEM”) were significantly different from the Company’score business and therefore not easily integrated into the Company’s coreoperations. At December 31, 2001, the Company recognized a loss fromdiscontinued operations of approximately $80,000 (net of taxes of approximately$1,400) for the period April 30, 2001 through 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 includes 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 includes liabilities for severanceand estimates for miscellaneous expenses related to the disposal of TF Cushing.

 

During the fiscal yearended March 31, 2003, the Company purchased an additional 21,449 shares of itscommon stock for $5,041 in a private transaction.  This is in addition to the 103,000 shares of its common stock theCompany purchased during the fiscal year ended March 31, 2002 for $29,825 inopen market transactions.

 

**Competition**

 

The Company operates in a highly competitiveenvironment.  The sale and distributionof products sold by the electronics distribution industry is extremelycompetitive, particularly with regard to price and product availability.  The Company competes with numerous local,regional, and national distributors, many of which have greater financialresources and sales than the Company. To a certain extent, the Company also competes with manufacturers ofelectronic parts and components, including some of its suppliers, which areinvolved in the direct sales of their products.

 

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**Backlog**

 

At April 1, 2003, theCompany’s total backlog of confirmed, unfilled orders, was approximately$2,855,000*,*a decrease of 2.6*%* from the April 1, 2002 backlog of $2,932,000.  The Company expects almost the entirebacklog to be shipped before the end of the fiscal year ending March 31,2004.  The backlog at year-end is notnecessarily indicative of sales for any specific subsequent period.

 

**Compliance with Environmental Laws**

 

In the fiscal years endedMarch 31, 2003 and 2002 the Company expended less than $10,000 in order tocomply with environmental laws with respect to the Plainview building.  The Company has had no other expenditureswith respect to such laws in that time period.

 

**Employees**

 

As of March 31, 2003 theCompany had 48 employees.  The Company’ssenior operating personnel are located at its Plainview, New York, some of whomhave been with the Company for more than 15 years.  Management believes that its relations with its employees aresatisfactory.

 

Item 2. ** Properties.**

 

Through its wholly ownedsubsidiary, AVest, Inc., the Company owns a 22,000 square foot building at 205Express Street, Plainview, New York which is subject to a mortgage described inmore detail below in Item 6, Management’s Discussion and Analysis of FinancialCondition and Results of Operation, Liquidity and Capital Resources.  The Company’s principal executive officesoccupy approximately 750 square feet of that building with the balance of thebuilding space constituting office, warehouse and assembly facilities for theCompany.  The property is adequatelycovered by insurance and there are at present no significant renovation,improvement or development plans with respect to the facility**. **In addition the Company presentlymaintains sales offices in Endwell, New York (1,500 square feet, $475 monthlyrent, with a month-to-month occupancy under a lease that expired December 31,2000), Willow Grove, Pennsylvania (1,323 square feet, $1,838 monthly rent,month-to-month occupancy under a lease which expired June 1, 1999) and Woburn,Massachusetts (1,058 square feet, $34,000 annual rent, under a lease thatexpires November 30, 2005, with annual rent reduced to $21,000 beginning onDecember 1, 2003).  All of the Company’spremises are adequate for the Company’s current and foreseeablerequirements.  The Company has nopresent plans to significantly renovate or improve any of its leasedproperties.

 

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During fiscal year endedMarch 31, 1998 the Company made a long-term investment of $50,000 in a realestate investment partnership, which owns and leases commercial property.  The investment is being held for incomegenerated from it’s interest in the partnership.  The income was approximately $12,000 and $11,000 for fiscal years2003 and 2002, respectively.  TheCompany may engage in such investments in the future but has no present plansto do so and has formulated no policies with respect to any possible futurereal estate investments.

 

Item 3. ** LegalProceedings.**

 

As of March 31, 2003 andthe date hereof there was no litigation pending against or on behalf of theCompany or its properties.

 

Item 4.  **Submissionof Matters to a Vote of Security Holders.**

 

At the February 11, 2003Annual Meeting of the Company for the fiscal year ended March 31, 2002, Mr.Howard Amster and Mr. John C. Loring were elected as Class III directors for aterm of three years and until a successor is elected and shall have beenqualified to so serve.  The other Astrexdirectors are Mark Schindler, David S. Zlatin and Michael McGuire.  The voting tally at the meeting was asfollows:

** **
|               |   | **For**    |   | **Against** |   | **Abstain  & Broker Nonvotes** |   |
|--------------------|--------|------------|--------|-------------|--------|------------------------------------|--------|
| Mr. Howard  Amster |   |       |   |        |   |                               |   |
| Common votes       |   | 5,248,320  |   | 103,951     |   | 0                                  |   |
| Preferred votes    |   | 14,061,672 |   | 27,828      |   | 0                                  |   |

 
|                |   | **For**    |   | **Against** |   | **Abstain  & Broker Nonvotes** |   |
|---------------------|--------|------------|--------|-------------|--------|------------------------------------|--------|
| Mr. John C.  Loring |   |       |   |        |   |                               |   |
| Common votes        |   | 5,248,292  |   | 103,979     |   | 0                                  |   |
| Preferred votes     |   | 14,063,568 |   | 25,932      |   | 0                                  |   |

 

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In addition, at the February 11, 2003 Annual Meetingof the Company, the Company’s shareholders ratified the adoption of the Astrex,Inc. 2003 Incentive and Non-Incentive Stock Option Plan.  The vote tally for such ratification was asfollows:

 
|                     |   | **For**    |   | **Against** |   | **Abstain  & Broker Nonvotes** |   |
|--------------------------|--------|------------|--------|-------------|--------|------------------------------------|--------|
| Ratification of the Plan |   |       |   |        |   |                               |   |
| Common votes             |   | 3,670,557  |   | 78,655      |   | 32,338                             |   |
| Preferred votes          |   | 13,848,480 |   | 124,164     |   | 116,856                            |   |

 

**PartII**

 

Item 5. ** Market for Registrant’s Common Equity andRelated Stockholder Matters.**

 

The Company’s commonstock (“Astrex Common Stock”) trades on the over-the-counter market,“electronic Bulletin Board” under the symbol “ASXI”. The following table setsforth the high and low closing bid prices for Astrex Common Stock. Theseover-the-counter market quotations reflect inter-dealer prices without retailmark-up, mark-down or commission, are approximate and may not necessarilyrepresent actual transactions.

 
| **Fiscal Year  & Quarter** |           | **High  Closing Bid** |   | **Low  Closing Bid** |   |
|--------------------------------|----------------|-----------------------|--------|----------------------|--------|
| 2002                           | First Quarter  |                  | .35    |                 | .27    |   |
|                           | Second Quarter |                  | .33    |                 | .28    |   |
|                           | Third Quarter  |                  | .29    |                 | .27    |   |
|                           | Fourth Quarter |                  | .30    |                 | .25    |   |
| 2003                           | First Quarter  |                  | .26    |                 | .21    |   |
|                           | Second Quarter |                  | .48    |                 | .21    |   |
|                           | Third Quarter  |                  | .30    |                 | .21    |   |
|                           | Fourth Quarter |                  | .34    |                 | .22    |   |

 

For purposes of thedisclosure of the aggregate market value of the voting stock held bynon-affiliates as set forth on page 1 of this Report, the Company has used theprice of .29 cents per share,

 

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which is the average of the reported closing bid andask prices on June 18, 2003 and assumes the conversion of Preferred Stock.

 

The Company’sshareholders ratified the adoption of the 2003 Incentive and Non-Incentive StockOption Plan at the annual shareholders meeting held on February 11, 2003.  The Plan provides for an aggregate of1,000,000 shares of the Company’s Common Stock upon the exercise of optionsgranted under the Plan.  To date nooptions have been granted under the Plan.

 

The Company is not awareof any contractual or similar restrictions that limit its ability to paydividends on common equity, currently or in the future.

 

On June 29, 2000 theBoard of Directors declared a dividend on the Company’s common stock of oneshare of a new Series B Convertible Preferred Stock for every three shares ofCommon Stock held as of 5:00 p.m. EDT July, 2000.  Other than that dividend of Preferred Stock no dividends havebeen paid on common stock since April 1978 and the Company does not anticipatepaying either cash or non cash dividends with respect to either its preferredor common stock in the foreseeable future.

 

As of March 31, 2003,220,546 shares of Series B Convertible Preferred Stock have been converted intothe Company’s common stock.

 

As of June 18, 2003, notincluding treasury shares, there were 5,691,053 shares of the Company’s commonstock outstanding and held by 328****holders of record and 1,628,156 shares ofthe Company’s preferred stock outstanding and held by 751 holders of record.

 

Item 6.  **Management’s Discussion and Analysis of FinancialCondition and Results of Operation.**

 

Results of Operations

 

During the quarter ending December 31, 2001 theCompany approved and implemented a plan to close its wholly owned subsidiary,TF Cushing. TF Cushing had operated as a separate Maintenance RepairOrganization (“MRO”) distributor of electronic, electrical, and industrialsupplies, with a customer base, supplier base and business focus (MRO vsOriginal Equipment Manufacturer (“OEM”)), significantly different from theCompany’s core business.  Based onseveral years of declining sales, the potential loss of 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.

 

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The following discussion of results of operations isfrom continuing operations and exclusive of the Company’s TF Cushingsubsidiary.

 

The Company’s earningsfrom operations for the fiscal year ended March 31, 2003 was approximately$139,000 versus approximately $706,000 for the fiscal year ended March 31,2002.  Earnings before income taxexpense (benefit) and discontinued operations was approximately $82,000 for thefiscal year ended March 31, 2003 versus approximately $563,000 for the fiscalyear ended March 31, 2002.  The decreasein income is primarily attributable to a decrease in net sales of 18.6%.  Net sales for the fiscal year ended March31, 2003 decreased approximately $3.2 million or 18.6% from approximately $16.9million for the fiscal year ended March 31, 2002 to approximately $13.7 million**. **Given the severe downturngenerally experienced in the electronic distribution industry the Companybelieves that these results compare very favorably with the results of othercompanies in the electronics distribution industry.** **Future results are somewhat dependent on the overallelectronic component market, although the Company’s non-reliance on any onemarket segment should help to mitigate future negative impact.

 

At April 1, 2003, the Company’s total backlog ofconfirmed, unfilled orders was approximately $2,855,000 a decrease of 2.6% fromthe April 1, 2002 backlog of $2,932,000.

 

The Company’s grossprofit improved as a percentage of revenues from 23.0% in fiscal 2002 to 23.9%for the fiscal year ended March 31, 2003. The improvement is attributable primarily to an increase in sales ofproducts with a higher gross margin. The decrease in absolute gross profit is primarily attributable to thedecrease in net sales as noted above.

 

Selling,general and administrative expenses decreased by approximately 2% or approximately$64,000 for the fiscal year ended March 31, 2003, as compared to the fiscalyear ended March 31, 2002**. **Thedecrease is due to lower salaries and advertising costs partially offset byhigher employee benefits and insurance costs.

 

Interest expense, netdecreased to approximately $57,000 in fiscal year ended March 31, 2003 from$118,000 in fiscal year ended March 31, 2002. This was due to a decrease in interest rates as well as a decrease inborrowings in fiscal year 2003.

 

Liquidity and Capital Resources

 

The Company generatedapproximately $266,000 in cash from operations in fiscal year 2003.  At March 31, 2003, the Company had workingcapital of $5,400,000 and its shareholders’ equity was approximately$4,800,0000.  The Company believes thatits present working capital, cash generated from operations and amountsavailable under its present credit facility discussed below will be sufficientto meet its cash needs during the next year.

 

The Company’s principalcredit facility (“Line”) is a collateralized borrowing agreement with a bank,which was entered into on July 9, 1997. This Line includes a line of credit, with borrowings based on eligibleaccounts receivable and inventory, and, since May 14, 1999, a term loancollateralized by a mortgage on the 205 Express Street property.  The Line is secured by substantially all ofthe

 

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Company’s assets. During the fiscal year ended March 31, 1999 the provisions of the Linewere modified to reduce the interest rate, increase the maximum availabilityand extend the then term.  Since thattime, on May 14, 1999, the Line was further modified to increase the overallborrowing availability by converting a negative pledge on the Company’s 205Express Street property to a mortgage securing a term loan and extending theterm of the Line to April 30, 2002.

 

On April 30, 2002, theCompany renewed its collateralized lending agreement with its bank, as amended,with the same terms and conditions as above except for an increase in theinventory availablity maximum from $1,000,000 to $1,500,000.  The Company’s credit facility allows forborrowings of up to 85% of its eligible accounts receivable and 25% of itseligible net inventory up to a maximum of $3,150,000 under the line of credit,and provides a term loan of $850,000 collateralized by a mortgage on the 205Express Street property.  The term loanand the mortgage both mature on April 30, 2005.  Interest is payable monthly at short-term, fixed-rate borrowings,for fixed amounts at LIBOR plus 1-1/2%, or daily borrowing at the bank’s primerate or a mixture of the two.

 

At March 31, 2003 theCompany had outstanding borrowings of $1,403,000 which included $553,000 on theline of credit and $850,000 on the term loan. At March 31, 2003, the Company and had approximately $2.0 millionavailable under the line of credit portion of the Line.  The Company has the option under the Line tofix a portion or portions of the loan balance at the currently prevailing LIBORrate for terms ranging from 30 to 180 days. As of March 31, 2003, in order to take advantage of historically lowinterest rates currently available, the Company had $1,350,000 of the loanbalance (including the long-term amount of $850,000) fixed at LIBOR rates.  The weighted average interest rate on theloans outstanding at March 31, 2003 was 3.03%. The Company’s relationship with its secured lender is satisfactory andthe Company believes that the lending arrangement will be adequate for theforeseeable future.

 

The Company believes thatthe relatively moderate rates of inflation in the year 2003 and 2002 have nothad a significant impact on sales and profitability.

 

The Company currently has no significant commitments for capitalexpenditures.

 

The following table presents the Company’s expected cash requirementsfor contractual obligations outstanding as of March 31, 2003:

 
|                                |   | **Total** |      | **Due as of  3/31/04** |   | **Due as of  3/31/05 and  3/31/06** |   |
|-------------------------------------|--------|-----------|-----------|------------------------|--------|-------------------------------------|--------|
|                                |   |      |      |                   |   |                                |   |
| Line of Credit(1)                   |   | $         | 553,000   |                   |   |                                | $      | 553,000 |   |
| Term Loan                           |   | 850,000   |      |                   |   | 850,000                             |   |
| Operating Leases                    |   | 44,000    |      | $                      | 30,000 |                                | 14,000 |   |
| Total Contractual Cash  Obligations |   | $         | 1,447,000 |                   | $      | 30,000                              |   | $ | 1,417,000 |   |

 

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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 $2,000,000 is available for future borrowings under theline of credit, of which $553,000 is outstanding at March 31, 2003.  The credit facility expires in April 2005.

 

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CRITICAL ACCOUNTING 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, income taxes andcontingincies and litigation, on an ongoing basis.  The Company bases its estimates on historical experience and onvarious other assumptions that are believed to be reasonable under thecircumstances, the results of which form the basis for making judgments aboutthe carrying values of assets and liabilities that are not readily apparentfrom other sources.  Actual results maydiffer from these estimates under different assumptions or conditions.

 

TheCompany believes the following critical accounting policies, involve the moresignificant judgments and estimates used in the preparation of its 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’s accounts receivable are due from businesses and governmental agenciesprimarily in the defense, aerospace, industrial equipment and computer industrymarkets. Credit is extended based on evaluation of a customers’ financial conditionand, generally, collateral is not required. Accounts receivable are due within 30 days and are stated at amounts duefrom customers net of an allowance for doubtful accounts.  Accounts outstanding longer than thecontractual payment terms are considered past due. Estimates are used indetermining the allowance for doubtful accounts based on the Company’shistorical collections experience, current trends, credit policy and apercentage of its accounts receivable by aging category. In determining thesepercentages, the Company looks at historical write-offs of its receivables. TheCompany also looks at the credit quality of its customer base as well aschanges in its credit policies. The Company continuously monitors collectionsand payments from its customers. The Company writes off accounts receivablewhen they become uncollectible, and payments subsequently received on suchreceivables are credited to the allowance for doubtful accounts.

 

Inventoriesare recorded at the lower of cost or market. Write-downs of inventories to market value are based upon product franchise agreements governing price protection, stockrotation and obsolescence, as well as assumptions about future demand andmarket conditions.  If assumptions aboutfuture demand/or actual market conditions are less favorable than thoseprojected by management, additional write-downs of inventories could berequired.

 

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.

 

11

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**RECENTLY ISSUED ACCOUNTINGSTANDARDS**

 

InApril 2002, the FASB issued Statement of Financial Accounting Standards No. 145(“SFAS No. 145”), “Rescission of FASB Statements No. 4, 44, and 64, Amendmentof FASB Statement No. 13, and Technical Corrections.”  SFAS No. 145 eliminates the current requirement that gains andlosses on debt extinguishment must be classified as extraordinary items in the incomestatement. Instead, such gains and losses will be classified as extraordinaryitems only if they are deemed to be unusual and infrequent, in accordance withthe current criteria for extraordinary classification. Additionally, any gainor loss on extinguishment of debt that was classified as an extraordinary itemin prior periods presented that does not meet the criteria in APB Opinion No.30 for classification as an extraordinary item shall be reclassified. Inaddition, SFAS No. 145 eliminates an inconsistency in lease accounting by requiringthat modifications of capital leases that result in reclassification asoperating leases be accounted for consistent with sale-leaseback accountingrules.  SFAS No. 145 also contains othernonsubstantive corrections to authoritative accounting literature.  The changes related to debt extinguishmentwere effective for fiscal years beginning after May 15, 2002, and the changesrelated to lease accounting were effective for transactions occurring after May15, 2002. SFAS No. 145 has not had, and is not expected to have a materialimpact on the financial position and results of operations of the Company.

 

InJune 2002, the FASB issued Statement of Financial Accounting Standards No. 146(“SFAS No. 146”), “Accounting for Costs Associated with Exit or Disposal Activities,”which addresses accounting for restructuring and similar costs.  SFAS No. 146 supersedes previous accountingguidance, principally Emerging Issues Task Force (“EITF”) Issue No. 94-3.  SFAS No. 146 requires that the liability forcosts associated with an exit or disposal activity be recognized when theliability is incurred.  Under EITF No.94-3, a liability for an exit cost was recognized at the date of a company’scommitment to an exit plan.  SFAS No.146 also establishes that the liability should initially be measured andrecorded at fair value. SFAS No. 146 is effective for disposal activitiesinitiated after December 31, 2002. The adoption of SFAS No. 146 had no impacton the financial position and results of operations of the Company.

 

InDecember 2002, the FASB issued SFAS No. 148, “Accounting for Stock-BasedCompensation-Transition and Disclosure” which addresses financial accountingand reporting for recording expenses for the fair value of stockoptions. SFAS No. 148 provides alternative methods of transition for a voluntary change to fairvalue based method of accounting for stock-based employee compensation.Additionally, SFAS No. 148 requires more prominent and more frequentdisclosures in financial statements about the effects of stock-basedcompensation. The provisions of this Statement are effective for fiscal yearsending after December 15, 2002, with early application permitted in certaincircumstances. The interim disclosure provisions are effective for financialreports containing financial statements for interim periods beginning afterDecember 15, 2002. The adoption of SFAS No. 148 had no impact on the financialposition and results of operations of the Company.

 

In April 2003, the FASBissued Statement of Financial Accounting Standards No. 149 (“SFAS No. 149”),“Amendment of Statement 133 on Derivative Instruments and Hedging Activities,”which amends and clarifies financial accounting and reporting for derivativeinstruments, including certain derivative instruments embedded in othercontracts and for hedging activities under SFAS No. 133.  SFAS No. 149 iseffective for contracts entered into or modified after June 30, 2003 except forthe provisions that were cleared by the FASB in prior pronouncements.  TheCompany is currently evaluating the effect of the adoption of SFAS No. 149 onits financial position and results of operations.

 

12

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InMay 2003, the FASB issued Statement of Financial Accounting Standards No. 150(“SFAS No. 150”), “Accounting for Certain Financial Instruments withCharacteristics of both Liabilities and Equity.”  This statement establishes standards for how an issuer classifiesand measures in its statement of financial position certain financialinstruments with characteristics of both liabilities and equity.  Inaccordance with the standard, financial instruments that embody obligations forthe issuer are required to be classified as liabilities. This Statement shallbe effective for financial instruments entered into or modified after May 31,2003, and otherwise shall be effective for the year ended December 31, 2003.The Company is currently evaluating the effect of the adoption of SFASNo. 150 on its financial position and results of operations.

 

InNovember 2002, the FASB issued FASB Interpretation No. 45 (“FIN No. 45”),“Guarantor’s Accounting and Disclosure Requirements for Guarantees,Including Indirect Guarantees of Indebtedness of Others.”  FIN No. 45 requires that uponissuance of a guarantee, a guarantor must recognize a liability forthe fair value of an obligation assumed under a guarantee. FIN No. 45 alsorequires additional disclosures by a guarantor in its interim and annualfinancial statements about the obligations associated with guarantees issued.  The recognition provisions of FIN No. 45 areeffective for any guarantees issued or modified after December 31,2002.  The disclosure requirements areeffective for financial statements for periods ending after December 15,2002.  The adoption of FIN No. 45 didnot have a material impact on the Company’s financial position or results ofoperations.

 

InJanuary 2003, the FASB issued FASB Interpretation No. 46 “Consolidation ofVariable Interest Entities.”  Ingeneral, a variable interest entity is a corporation, partnership, trust, orany other legal structure used for business purposes that either (a) does nothave equity investors with voting rights or (b) has equity investors that donot provide sufficient financial resources for the entity to support itsactivities.  A variable interest entityoften holds financial assets, including loans or receivables, real estate orother property.  A variable interestentity may be essentially passive or it may engage in activities on behalf ofanother company.  Until now, a companygenerally has included another entity in its consolidated financial statementsonly if it controlled the entity through voting interests.  FIN No. 46 changes that by requiring avariable interest entity to be consolidated by a company if that company issubject to a majority of the risk of loss from the variable interest entity’sactivities or entitled to receive a majority of the entity’s residual returns or both.  FIN No. 46’s consolidation requirementsapply immediately to variable interest entities created or acquired afterJanuary 31, 2003.  The consolidation requirements apply to olderentities in the first fiscal year or interim period beginning after June 15,2003.  Certain of the disclosurerequirements apply to all financial statements issued after January 31, 2003,regardless of when the variable interest entity was established.  The Company has adopted the disclosureprovisions of FIN No. 46 effective January 31, 2003.  The Company does not anticipate that the adoption of the consolidationrequirements of FIN No. 46 will have a material impact on the Company’sconsolidated financial condition or results of operations taken as a whole.

 

InNovember 2002, the Emerging Issues Task Force reached a consensus opinion ofEITF 00-21, “Revenue Arrangements with Multiple Deliverables”.  That consensus provides that revenuearrangements with multiple deliverables should be divided into separate unitsof accounting if certain criteria are met. The consideration of the arrangement should be allocated to the separateunits of accounting based on their relative fair values, with differentprovisions if the fair value is contingent on delivery of specified items orperformance conditions.  Applicable revenuecriteria should be considered separately for each separate unit ofaccounting.  EITF 00-21 is effective forrevenue arrangements entered into in fiscal periods beginning after June 15,2003.  Entities may elect to report thechange as a

 

13

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cumulative effect adjustmentin accordance with APB Opinion 20, “Accounting Changes.”  The Company is still evaluating the impactof the adoption of EITF 00-21 on its financial statements.

 

Item 7.   **FinancialStatements and Supplementary Data.**

 

Pages F-1 et. seq. ofthis Form 10-KSB are by this reference incorporated herein.

 

Item 8.  ** Changes in and Disagreements with Accountantson Accounting and Financial Disclosure.**

 

None

**Part III**

 

Item 9. ** Directors andExecutive Officers of the Company; Compliance with Section 16(a) of theExchange Act.**

 

The following table sets forth for current officersand directors: (i) that person’s name, (ii) if applicable the Director Classelected to, (iii) all positions with the Company held by that person, (iv) thatperson’s age, (v) that person’s principal occupation for the past five yearsand (vi) with respect to directors, the date on which that person first becamea director of the Company.  Unlessotherwise indicated, each person has held the position shown, or has been associatedwith the named employer in an executive capacity, for more than fiveyears.  The terms of the currentdirectors are for three years or until their respective successors are electedand qualified.  The Class I, Class IIand Class III expire in 2003, 2004 & 2005, respectively.  The terms of the classes of directors arestaggered in order of roman numeral class number so that one class of directorsis elected each year.    The terms ofofficers expire at the pleasure of the Board of Directors.

 

14

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| **Name, Age, Cal. Year First  Became a Director or Officer &  Director Class if applicable** |   | **Principal  Occupation**                                                                                                                                                                                                                                                                                                                                                                                     |
|--------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Howard Amster  Director  54 - since 1992  Class III  Director                               |   | Principle with Ramat Securities, LTD., Beachwood,  Ohio.  Director, Geauga Savings Bank,  a northern Ohio savings and loan; Director, Horizon Group Properties Inc.,  Chicago, IL, a real estate company; Director of Prime Retail, Inc.,  Baltimore,MD, a retail outlet and a Director of Wilshire Financial Services,  Portland, OR a savings and loan.                                                |
|                                                                                             |   |                                                                                                                                                                                                                                                                                                                                                                                                          |
| John C. Loring  Director and Chairman  57 - since 1988   Class III  Director                |   | Attorney and private investor, Chicago,  Illinois.  Director of Geauga Savings  Bank, a northern Ohio savings and loan.                                                                                                                                                                                                                                                                                  |
|                                                                                             |   |                                                                                                                                                                                                                                                                                                                                                                                                          |
| Michael McGuire  Director, CEO  and President   47 - since 1991   Class I Director               |   | Mr. Michael McGuire joined the Company in 1969.  Prior to becoming CEO and President he was  the Company’s General Manager and Director of Operations.  Mr. Michael McGuire is not related to Mr.  Robert McGuire.                                                                                                                                                                             |
|                                                                                             |   |                                                                                                                                                                                                                                                                                                                                                                                                          |
| Robert   McGuire   Executive Vice President  51 - since 1997                                |   | Mr. Robert McGuire joined the Company in 1981.  Prior to becoming an Executive Vice  President he held the position of Warehouse Manager.  He has worked in the distribution industry  since 1976.  Mr. Robert McGuire is not  related to Mr. Michael McGuire.                                                                                                                                 |
|                                                                                             |   |                                                                                                                                                                                                                                                                                                                                                                                                          |
| Joseph Looney   CFO, Executive Vice President,  Treasurer and Secretary   45 - since 2002        |   | Mr. Looney, a Certified Public Accountant, joined  the Company in 2002.  From 1996-2002  he was the CFO, VP Finance and Assistant Secretary of Manchester  Technologies, Inc., a network integrator and reseller of computer products.  From 1984-1996 he was employed by KPMG LLP , at increasing levels of  responsibility including as a Senior Audit Manager at the end of his tenure  at such firm. |
|                                                                                             |   |                                                                                                                                                                                                                                                                                                                                                                                                          |
| Mark Schindler  Director   80**-**  since 1960   Class II Director                               |   | Mr. Schindler is a self-employed consultant, private  investor, and had been a partner in Madison Venture Capital II, Inc., New  York, New York.  Mr. Schindler is also  a Vice President, Secretary and Director of Kushi Natural Foods Corp. and  formerly owned his own electronics distribution business.  Mr. Schindler was one of the original  founders of Astrex, Inc.                      |
|                                                                                             |   |                                                                                                                                                                                                                                                                                                                                                                                                          |
| David S. Zlatin  Director  50 - since 1993  Class II Director                                    |   | Chief Operating Officer of Ramat Securities, Ltd.,  Rabbi and private investor.                                                                                                                                                                                                                                                                                                                               |

 

15

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Messrs. Loring, MichaelMcGuire and Zlatin are members of the Board’s Executive Committee.  In addition John Loring is Chairman andSecretary of the Company’s wholly owned subsidiary AVest, Inc. and David Zlatinis President and Treasurer of AVest, Inc. They are also AVest’s two directors.

 

The Company has adopted aCode of Ethics.  Any person may requesta copy of the Company’s Code of Ethics free of charge by sending a postcard orletter to the Company by regular mail requesting a copy and including a returnaddress.

 

The Company is notrequired to have an audit committee at this time.  The Company believes that the cost and expense of maintaining anaudit committee would be significant and the board has sufficient independentdirectors with financial background to represent public stockholders in mattersinvolving the financial statements, reporting and audit issues.  The Company also believes that thecumulative financial expertise of the current independent directors willproperly represent the interests of the public stockholders with respect to financialissues that arise and that the cost of retaining an additional financial expertis outweighed by the cumulative financial knowledge currently represented onthe Board of Directors.

 

Section (16a) BeneficialOwnership Reporting Requirement

 

The Company is not awareof any person who failed to file on a timely basis any reports relating to theCompany required by Section 16(a) of the Securities Exchange Act during thefiscal year that ended March 31, 2003.

 

Item 10. ** ExecutiveCompensation.**

 

The following table showsinformation concerning the compensation paid or awarded by the Company and itssubsidiaries for services to its Chief Executive Officer, its Executive VicePresident of Sales and Marketing and its Chief Financial Officer during fiscalyears ended March 31, 2003, 2002 and 2001.  Other then Mr. Michael McGuire, Mr. Miller and Mr. Looney therewere no executive officers of the Company whose compensation was or exceeded$100,000.  The Company (i) has no retirement,pension, profit sharing, stock option, stock appreciation rights or long termincentive plans for the years in question, (ii) has not awarded any bonuses during or for the years in question,except as set forth in the table below, and to two other executive officers,and  (iii) has no employment contractsor termination of employment and change of control arrangements for any of theCompany’s executive officers.

 

In the first quarter offiscal year ended March 31, 1997, the Company awarded 135,000 unregisteredforfeitable shares of the Company’s common stock to 19 employees (including Mr.Michael McGuire who received 15,000 shares), none of whom received more than15,000 shares.  The award provided thatto the extent an employee ceased to be employed by the Company prior to April1, 2000 (other than on account of death) the shares awarded to said employeewere forfeited to the Company.  At March31, 2000, 100,000 shares of the original 135,000 shares vested according to theterms of the award, 35,000 shares having been previously forfeited by personsleaving the employ of the Company

 

16

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during the four year vesting period.   It is not expected that any cash dividendswill be paid on these shares for the foreseeable future.

 

On July 5, 2000, 20,000and 10,000 shares of the Company’s Common Stock were awarded to Mr. MichaelMcGuire and Mr. Wayne Miller, respectively. These shares are subject to forfeiture to the extent they leave theemploy of the Company prior to June 30, 2002.  All of these shares vested on June 30, 2002.  Mr. Michael McGuire received an additional20,000 shares of the Company’s Common Stock subject to forfeiture if he takescertain actions prior to July 31, 2001. These shares became fully vested onAugust 1, 2001.  All Common Stockissued in July 2000 participated in the Preferred Stock dividend.

 

**SUMMARY COMPENSATION TABLE**

 
|                               |   | **Annual  Compensation** |   | **Long Term  Compensation  Awards** |    |
|------------------------------------|--------|--------------------------|--------|-------------------------------------|---------|
| **(a)**                            |   | **(b)**                  |   | **(c)**                             |    | **(d)** |   | **(f)** |   |
| **Name and  Principal Position**   |   | **Fiscal  Year**         |   | **Salary ($)**                      |    | **Bonus ($)** |   | **Restricted  Stock  Awards ($)** |   |
| Michael McGuire                    |   | 2003                     |   | $                                   | 286,991 |   | — |   | — |   |
| CEO &  President               |   | 2002                     |   | $                                   | 244,798 |   | $ | 88,000 |   | — |   |
|                               |   | 2001                     |   | $                                   | 240,869 |   | $ | 177,260 |   | $ | 28,050 | (1)(2) |
|                               |   |                     |   |                                |    |   |   |   |   |
| Wayne Miller(3)                    |   | 2003                     |   | $                                   | 119,435 |   | — |   | — |   |
| Executive Vice  President of Sales |   | 2002                     |   | $                                   | 121,471 |   | — |   | — |   |
| & Marketing                    |   | 2001                     |   | $                                   | 113,305 |   | $ | 26,600 |   | $ | 15,450 | (1)(2) |
|                               |   |                     |   |                                |    |   |   |   |   |
| Joseph Looney(4)                   |   | 2003                     |   | $                                   | 167,477 |   | $ | 25,000 | (5) | — |   |
| CFO, Executive  Vice President,    |   | 2002                     |   | —                              |    | — |   | — |   |
| Treasurer and  Secretary           |   | 2001                     |   | —                              |    | — |   | — |   |

 

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(1)          Mr. McGuire and Mr. Miller were each given 15,000unregistered forfeitable shares of Common stock as compensation in fiscalyear  1997 with a fair market value of31 cents per share at the time.  Theseshares were forfeitable to the extent they ceased to be employed by the Company  (other than on account of death) beforeApril 1, 2000.  On April 1, 2000 thefair market value of the 30,000 shares were 75 cents per share for an aggregatefair value of $11,250 to each.

(2)          On June 29, 2000 Mr. Miller and Mr. McGuire wereawarded 10,000 and 20,000 shares of Common stock, respectively.  These shares are forfeitable to the extentthey cease to be employed by the Company (other than on account of death)before July 1, 2002.  These shares onJune 29, 2000 were valued at 42 cents per share for an aggregate fair value of$4,200 and $8,400, respectively. In addition, on June 29, 2000, Mr. McGuirereceived an additional 20,000 shares of Common stock which are forfeitable ifhe takes certain actions prior to July 31, 2001.  On June 29, 2000 these shares were valued at 42 cents per sharefor an aggregate fair market value of $8,400. In addition, on June 29, 2000,Mr. McGuire received an additional 20,000 shares of Common stock which wereforfeitable if he took certain actions prior to July 31, 2001.  On June 29, 2000 these shares were valued at42 cents per share for an aggregate fair market value of $8,400 (incl.above).  On August 1, 2001 these sharesbecame vested at 33 cents per share for an aggregate fair market value of$6,600.

(3)          Mr. Miller resigned hisposition with the Company in January 2003.

(4)          Mr. Looney began employmentwith the Company in July 2002.

(5)          Mr. Looney has been awarded a bonus of $25,000 inconnection with his employment with the Company.  Such bonus will be paid through the issuance of 93,000 shares ofAstrex, Inc. common stock, subject to Board of Directors approval.

 

The Board of Directorsheld 2 formal meetings during fiscal year ended March 31, 2003.  Each of the directors of the Companyattended each of those meetings.  Duringthat fiscal year the Board of Directors had one active standing committee, theExecutive Committee, composed of Messrs. Amster (through fall of 2002), Loring,McGuire and Zlatin (beginning fall of 2002). For the fiscal year ended March 31, 2003 each director not a full timeemployee of the Company received reimbursement of actual 

 

17

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expenses and a director fee of $5,000 paid in twoinstallments.  In addition, during thefiscal year ended March 31, 2003, Mr. Loring for services as Chairman of theBoard and as a member of the Executive Committee received $35,000 and $55,000respectively and $5,000 for ordinary office expenses, and Mr. Amster forservices as a member of the Executive Committee received $36,667. During thefiscal year ended March 31, 2002, Messrs. Amster and Loring were also eachawarded a bonus of $22,000.

 

At the Annual Meeting ofStockholders of Astrex, Inc. held on February 11, 2003, the Company’sstockholders ratified the approval by the Board of Directors of the Incentiveand Non-Incentive Stock Option Plan (“Plan”). To date no options have been granted under the Plan.  See Items 5 and 11 for additionalinformation on this Plan.

 

Item 11. **Security Ownership of Certain Beneficial Owners andManagement.**

 

The following table setsforth the number and percentage of shares of the Company’s common stockbeneficially owned as of June 18, 2003 by persons who are known (based on theCompany’s review of Forms 13G and 13D delivered to the Company) by the Companyto be the beneficial owners of more than 5% of the Company’s outstanding commonstock as of that date, and the directors of the Company and its chief executiveofficer, and all officers and directors of the Company as a group.  For purposes of this Report, beneficialownership is defined in accordance with Rule 13d-3 of the Securities andExchange Commission to mean generally the power to vote or dispose of shares,regardless of any economic interest therein. The persons listed have direct sole voting power and direct soledispositive power with respect to all shares set forth in the table unlessotherwise specified in the footnotes to the table.

 

***Beneficial HoldersOf More Than 5% Of Common Stock and Preferred Stock, Series B***

 
| **Title and  Class** |   | **Name and  Address of Beneficial Owners**                              |   | **Amount and  Nature of  Beneficial Ownership** |      | **Percentage  Of Class** |   |
|----------------------|--------|-------------------------------------------------------------------------|--------|-------------------------------------------------|-----------|--------------------------|--------|
| Common Stock         |   | Howard Amster (9)  205 Express Street   Plainview, New York  11803 |   | 1,180,565                                       | (1)       | 19.88                    | %(2)   |
| Common Stock         |   | John C. Loring(9)  205 Express Street  Plainview, New York  11803  |   | 2,401,710                                       | (3)(4)(5) | 38.47                    | %(2)   |
| Common Stock         |   | Michael McGuire(9)  205 Express Street  Plainview, New York  11803 |   | 483,967                                         | (6)(7)(8) | 8.43                     | %(2)   |

 

18

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***Officer and DirectorHoldings Of Common Stock and Preferred Stock, Series B***

 
| **Title and  Class** |   | **Name and  Address of Beneficial Owners**                                      |   | **Amount and  Nature of  Beneficial Ownership** |      | **Percentage  Of Class** |   |
|----------------------|--------|---------------------------------------------------------------------------------|--------|-------------------------------------------------|-----------|--------------------------|--------|
| Common Stock         |   | Howard Amster (9)                                                               |   | 1,180,565                                       | (1)       | 19.88                    | %(2)   |
| Common Stock         |   | John C. Loring(9)                                                               |   | 2,401,710                                       | (3)(4)(5) | 38.47                    | %(2)   |
| Common Stock         |   | Michael McGuire(9)                                                              |   | 483,967                                         | (6)(7)(8) | 8.43                     | %(2)   |
| Common Stock         |   | Mark Schindler(9)                                                               |   | 1,932                                           | (10)      | *                        | (2)    |
| Common Stock         |   | David S. Zlatin                                                                 |   | 0                                               |      | *                        | (2)    |
| Common Stock         |   | All Other Officers(9)                                                           |   | 26,667                                          | (11)      | *                        | (2)    |
| Common Stock         |   | All Officers and Directors as a group (6  persons)(1)(3)(4)(5)(6)(7)(8)(10)(11) |   |  

4,093,841                               |      | 61.60                    | %(2)   |

** **

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* Less than 1%.

(1) Includes 295,140shares of common stock issuable upon conversion of an equal number of shares ofConvertible Preferred Series B stock which is eligible to convert.

(2)  Based on 5,648,842 Common sharesoutstanding and the shareholder’s Convertible Preferred Series B outstanding.

(3) Includes 271,970Common shares owned by his spouse’s IRA, the beneficial ownership of which hedisclaims.

(4)Includes90,657 Convertible Preferred Series B shares owned by his spouse’s IRA, thebeneficial ownership of which he disclaims.

(5)Includes600,430 shares of common stock issuable upon conversion of an equal number ofshares of Convertible Preferred Series B stock which is eligible to convert.

(6)  Includes 104,537 Common shares owned by hisspouse’s IRA, the beneficial ownership of which he disclaims.

(7)  Includes 34,846  Convertible Preferred, Series B shares owned by his spouse’s IRA,the beneficial ownership of which he disclaims.

(8)  Includes 100,992 shares of commonstock issuable upon conversion of an equal number of shares of ConvertiblePreferred Series B stock which is eligible to convert.

(9)The CommonStock is entitled to one vote per share, Preferred Stock, Series B is entitledto vote on all matters which the Common Stock can vote on and is entitled totwelve votes per share.  Beginning onJuly 31, 2001 and thereafter, at the option of the holder, a share of thePreferred Stock is convertible into a share of the Common Stock.

(10)  Includes 483 shares of common stockissuable upon conversion of an equal number of shares of Convertible PreferredSeries B stock which is eligible to convert.

(11)  Includes 6,667 shares of common stockissuable upon conversion of an equal number of shares of Convertible PreferredSeries B stock which is eligible to convert.

 

19

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***Equity CompensationPlan Information***

 
| **Plan Category**                                         |   | **Number of  Securities to be  issued upon exervise of  outstanding options,  warrants or rights** |   | **Weighted  Average Exercise  Price of outstanding  Options, Warrants and   Rights** |   | **Number of  Securities  Available for Future  Issuance** |   |
|-----------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------|--------|-----------------------------------------------------------|--------|
|                                                      |   | **(a)**                                                                                            |   | **(b)**                                                                              |   | **(c)**                                                   |   |
| Equity compensation plans approved by security holders    |   | 1,000,000  options to   purchase common stock                                                      |   | -0-                                                                                  |   | 1,000,000  options to   purchase common stock             |   |
| Equity compensation plans no approved by security holders |   | -0-                                                                                                |   | -0-                                                                                  |   | -0-                                                       |   |
| Total                                                     |   | 1,000,000  options to   purchase common stock                                                      |   | -0-                                                                                  |   | 1,000,000  options to   purchase common stock             |   |

 

Item 12.  **CertainRelationships and Related Transactions.**

 

None

 

**PARTIV**

 

Item 13.  **Exhibits,Financial Statement Schedules and Reports on Form 8-K.**

 
| (a) (1) | Financial Statements                                                                             |   |
|---------|--------------------------------------------------------------------------------------------------|--------|
|    |                                                                                             |   |
|    | Reports  of Independent Certified Public Accountants                                             |   |
|    |                                                                                             |   |
|    | Consolidated Balance Sheet  as of March 31, 2003                                                 |   |
|    |                                                                                             |   |
|    | Consolidated  Statements of Earnings for the years ended March 31, 2003 and 2002                 |   |
|    |                                                                                             |   |
|    | Consolidated  Statement of Shareholders’ Equity for the years ended March 31, 2003 and 2002 |   |
|    |                                                                                             |   |
|    | Consolidated  Statements of Cash Flows for the years ended March 31, 2003 and 2002               |   |
|    |                                                                                             |   |
|    | Notes to  Consolidated Financial Statements                                                      |   |
|    |                                                                                             |   |
| (a)(3)  | Exhibits                                                                                         |   |

 

 

 

 

20

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The exhibits listed onthe accompanying Exhibit Index are filed as part of this report.

 
| **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         |
|        |   |                                                                                                      |   |                                                                                              |
| 10(a)       |   | Amendment No. 3 To Credit and Security  Agreement  dated May 14,1999.                                |   | Filed as Exhibit 10(a) to the Form 10-QSB of the  Company for the quarter ended June 30, 1999     |
|        |   |                                                                                                      |   |                                                                                              |
| 10(b)       |   | Second Amended and Restated Revolving Credit  Promissory Note dated May 14, 1999                          |   | Filed as Exhibit 10(b) to the Form 10-QSB of the  Company for the quarter ended June 30, 1999     |
|        |   |                                                                                                      |   |                                                                                              |
| 10(c)       |   | Term Loan Promissory Note, dated May 14, 1999                                                             |   | Filed as Exhibit 10(c) to the Form 10-QSB of the  Company for the quarter ended June 30, 1999     |
|        |   |                                                                                                      |   |                                                                                              |
| 10(d)       |   | Guaranty Confirmation Agreement (With  Modifications), dated May 14, 1999                                 |   | Filed as Exhibit 10(d) to the Form 10-QSB of the  Company for the quarter ended June 30, 1999     |
|        |   |                                                                                                      |   |                                                                                              |
| 10(e)       |   | Mortgage from Avest, Inc. To Fleet National Bank,  dated May 14, 1999                                     |   | Filed as Exhibit 10(e) to the Form 10-QSB of the  Company for the quarter ended June 30, 1999     |
|        |   |                                                                                                      |   |                                                                                              |
| 10(f)       |   | Amendment No. 4 To Credit and Security Agreement  dated April 30, 2002.                                   |   | Filed herewith as Exhibit 10(a)                                                                   |
|        |   |                                                                                                      |   |                                                                                              |
| 10(g)       |   | Third Amended and Restated Revolving Credit  Promissory Note dated April 30, 2002.                        |   | Filed herewith as Exhibit 10(b)                                                                   |
|        |   |                                                                                                      |   |                                                                                              |
| 10(h)       |   | Amended and Restated Term Loan Promissory Note,  dated April 30, 2002                                     |   | Filed herewith as Exhibit 10(c)                                                                   |

 

21

----

 
| 10(i)  |   | Guaranty Confirmation Agreement, dated April 30,  2002                                                                   |   | Filed herewith as Exhibit 10(d)                                                           |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------|
|   |   |                                                                                                                     |   |                                                                                      |
| 21     |   | Subsidiaries  of the registrant                                                                                          |   | Filed  as Exhibit 21 to Form 10-KSB/A-1 of the Company for the year ended March 31,  1998 |
|   |   |                                                                                                                     |   |                                                                                      |
| 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)                                 NoCurrent Reports on Form 8-K were filed by the Company.

 

### Item 14.** ****Controls And Procedures**

###  

Within the 90 day period prior to the filing of thisAnnual Report on Form 10-KSB, the Company's management, including the ChiefExecutive Officer and Chief Financial Officer, conducted an evaluation (the“Evaluation”) of the effectiveness of the design and operation of itsdisclosure controls and procedures, as defined in Rule 13a-14(c) of theSecurities Exchange Act of 1934.

 

The Company's management, including its ChiefExecutive Officer and Chief Financial Officer, does not expect that itsdisclosure controls and procedures will prevent all error and all fraud.  A control system, no matter how welldesigned and operated, can provide only reasonable, not absolute, assurancethat the control system's objectives will be met.  Further, the design of a control system must reflect the factthat there are resource constraints, and the benefits of controls must beconsidered relative to their costs. Because of the inherent limitations in all control systems, noevaluation of controls can provide absolute assurance that all control issuesand instances of fraud, if any, within the Company will be detected.  The inherent limitations include therealities that judgments in decision-making can be faulty, and that breakdownscan occur because of simple errors or mistakes.  Controls can also be circumvented by the individual acts of somepersons, by collusion of two or more people, or by management override of thecontrols.  The design of any system ofcontrols is based in part upon certain assumptions about the likelihood offuture events, and there can be no assurance that any design will succeed inachieving its stated goals under all potential future conditions.  Over time, controls may become inadequatebecause of changes in conditions or deterioration in the degree of compliancewith its policies or procedures. Because of the inherent limitations in a cost-effective control system,misstatements due to error or fraud may occur and not be detected.

 

Based upon the Evaluation of disclosure controls andprocedures, the Chief Executive Officer and Chief Financial Officer of theCompany have concluded that, subject to the limitations noted above, theCompany's disclosure controls and procedures were effective to ensure thatmaterial information relating to the Company and the Company's consolidatedsubsidiary would be made known to them by others within those entities to allowtimely decisions regarding required disclosures.  There have been no significant changes in internal controls, orin other factors that could significantly affect internal controls, subsequentto the date the Chief Executive Officer and the Chief Financial Officercompleted their evaluation, including any corrective actions with regard tosignificant deficiencies and material weaknesses.

 

 

22

----

 

**Signatures**

 

In accordance withSection 13 or 15(d) of the Exchange Act, the registrant has duly caused thisreport to be signed on its behalf by the undersigned, thereunto dulyauthorized.

 
|   | **ASTREX, INC.**               |                      |
|--------|--------------------------------|---------------------------|
|   | (Registrant)                   |                      |
|   |                           |                      |
|   | by                             | /s/  Michael McGuire |   |
|   | Michael McGuire,  President    |                      |
|   | and Chief Executive  Officer   |                      |
|   | (principal executive  officer) |                      |
|   |                           |                      |
| Dated: | June 30, 2003             |                      |   |   |
|        |                                |                           |  |  |  |

 

In accordance with the Exchange Act, this report hasbeen signed below by the following persons on behalf of the Registrant and inthe capacities and on the dates indicated.

 
| /s/ John C. Loring                   |                                                                         | /s/  Michael  McGuire |   |
|--------------------------------------|------------------------------------------------------------------------------|----------------------------|--------|
| John C. Loring Chairman of the Board | Michael McGuire, Director,                                                   |
| and Director                         |                                                                         |
|                                 |                                                                         |
|                                 |                                                                         |
| Dated:                               | June 30, 2003                                                           |                       | Dated: | June 30, 2003 |   |
|                                 |                                                                         |
|                                 |                                                                         |
| /s/ Howard Amster                    |                                                                         | s/ Mark Schindler          |   |
| Howard Amster, Director              | Mark Schindler, Director                                                     |
|                                 |                                                                         |
|                                 | Dated:                                                                       | June 30, 2003         |   |
| Dated:                               | June 30, 2003                                                           |                       |   |
|                                 |                                                                         |
|                                 |                                                                         |
| /s/ David S. Zlatin                  |                                                                         | /s/ Joseph Looney          |   |
| David S. Zlatin, Director            | Joseph Looney, CFO, Executive Vice President,  Treasurer and Secretary  |
|                                 | (principal financial and accounting officer)                                 |
| Dated:                               | June 30, 2003                                                           |                       |   |
|                                 | Dated:                                                                       | June 30, 2003         |   |
|                                      |                                                                              |                            |        |  |  |  |  |  |  |  |  |

 

23

----

 

# ASTREX,INC. AND SUBSIDIARIES

 

CERTIFICATION OF ANNUAL REPORT

 

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

 

1.                     I havereviewed this annual report on Form 10-KSB of Astrex, Inc.:

 

2.                     Based on myknowledge, this annual 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 covered by this annual report;

 

3.                     Based on myknowledge, the financial statements, and other financial information includedin this annual 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 annual 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 thisannual 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 annual report (the“Evaluation Date”); and

 

c.               Presented in thisannual 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,

 

24

----

 

summarize and reportfinancial data and have identified for the registrant’s auditor’s any materialweaknesses in internal controls; and

 

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 annualreport 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.

 

 
| June 30, 2003 |   |   |   |   |   |               |   |
|--------------------|--------|--------|--------|--------|--------|--------------------|--------|
|               |   |   |   |   |   |               |
|               |   |   |   |   |   | s/ Michael McGuire |   |
|               |   |   |   |   |   | Michael McGuire    |
|               |   |   |   |   |   | President and CEO  |
|                    |        |        |        |        |        |                    |        |  |

 

25

----

 

# ASTREX,INC. AND SUBSIDIARIES

 

 

CERTIFICATIONOF ANNUAL REPORT

 

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

 

1.               I have reviewedthis annual report on Form 10-KSB of Astrex, Inc.:

 

2.               Based on myknowledge, this annual 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 covered by this annual report;

 

3.               Based on myknowledge, the financial statements, and other financial information includedin this annual 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 annual 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 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 thisannual 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 annual report (the“Evaluation Date”); and

 

c.               Presented in thisannual 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 couldadversely affect the registrant’s ability to record, process, summarize andreport financial data and have identified for the registrant’s auditor’s anymaterial weaknesses in internal controls; and 

 

26

----

 

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 annual report whether ornot 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.

 

 
| June  30, 2003 |   |   |   |   |   |                    |   |
|---------------------|--------|--------|--------|--------|--------|-------------------------|--------|
|                |   |   |   |   |   |                    |
|                |   |   |   |   |   | s/ Joseph Looney        |   |
|                |   |   |   |   |   | Joseph Looney           |
|                |   |   |   |   |   | Chief Financial Officer |
|                     |        |        |        |        |        |                         |        |  |

 

27

----

 

**REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS**

 

 

The Board of Directors and Shareholders

**Astrex, Inc.**

 

 

Wehave audited the accompanying consolidated balance sheet of Astrex, Inc. andsubsidiaries (the “Company”) as of March 31, 2003 and the related consolidatedstatements of earnings, shareholders’ equity and cash flows for each of the twoyears in the period ended March 31, 2003. These consolidated financial statements are the responsibility of theCompany’s management.  Ourresponsibility is to express an opinion on these consolidated financialstatements based on our audits.

 

We conducted our audits in accordance with auditing standards generallyaccepted in the United States of America. Those standards require that we plan and perform the audit to obtainreasonable assurance about whether the financial statements are free ofmaterial misstatement.  An auditincludes examining, on a test basis, evidence supporting the amounts anddisclosures in the financial statements. An audit also includes assessing the accounting principles used andsignificant estimates made by management, as well as evaluating the overallfinancial statement presentation.  Webelieve that our audits provide a reasonable basis for our opinion.

 

In our opinion, the consolidated financial statements referred to abovepresent fairly, in all material respects, the consolidated financial positionof Astrex, Inc. and subsidiaries as of March 31, 2003 and the results of theiroperations and their cash flows for each of the two years in the period endedMarch 31, 2003 in conformity with accounting principles generally accepted inthe United States of America.

 

 
| /s/ GRANT THORNTON LLP |   |
|------------------------|--------|
|                   |
|                   |
| Melville, New York     |
| May 30, 2003           |

 

F-1

----

 

Astrex, Inc. andSubsidiaries

 

**CONSOLIDATEDBALANCE SHEET**

 

March 31, 2003

 
| ASSETS                                                                                                                                                                   |   |      |      |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------|-----------|
|                                                                                                                                                                     |   |      |      |
| CURRENT ASSETS                                                                                                                                                           |   |      |      |
| Cash                                                                                                                                                                     |   | $         | 1,950     |   |
| Accounts  receivable (net of allowance for doubtful accounts of $67,660)                                                                                                 |   | 1,613,432 |      |
| Inventory                                                                                                                                                                |   | 4,492,172 |      |
| Prepaid expenses  and other current assets                                                                                                                               |   | 99,254    |      |
| Deferred tax  asset                                                                                                                                                      |   | 290,000   |      |
|                                                                                                                                                                     |   |      |      |
| Total current  assets                                                                                                                                                    |   | 6,496,808 |      |
|                                                                                                                                                                     |   |      |      |
| FIXED ASSETS,  NET                                                                                                                                                       |   | 755,361   |      |
|                                                                                                                                                                     |   |      |      |
| INVESTMENTS                                                                                                                                                              |   | 50,000    |      |
|                                                                                                                                                                     |   |      |      |
|                                                                                                                                                                     |   | $         | 7,302,169 |   |
|                                                                                                                                                                     |   |      |      |
| LIABILITIES AND SHAREHOLDERS’ EQUITY                                                                                                                                |   |      |      |
|                                                                                                                                                                     |   |      |      |
| CURRENT  LIABILITIES                                                                                                                                                     |   |      |      |
| Accounts payable                                                                                                                                                         |   | $         | 635,171   |   |
| Accrued payroll                                                                                                                                                          |   | 131,716   |      |
| Accrued bonus                                                                                                                                                            |   | 25,000    |      |
| Accrued inventory                                                                                                                                                        |   | 236,084   |      |
| Accrued other                                                                                                                                                            |   | 83,517    |      |
|                                                                                                                                                                     |   |      |      |
| Total current  liabilities                                                                                                                                               |   | 1,111,488 |      |
|                                                                                                                                                                     |   |      |      |
| LONG-TERM DEBT                                                                                                                                                           |   | 1,403,440 |      |
|                                                                                                                                                                     |   |      |      |
| SHAREHOLDERS’  EQUITY                                                                                                                                               |   |      |      |
| Preferred stock,  Series A - par value $5 per share; authorized, 200,000 shares; issued, none                                                                            |   | —    |      |
| Preferred stock,  Series B - par value $.01 per share; authorized, 10,000,000 shares; issued  and outstanding, 1,676,835 shares (liquidation preference of $.25 a share) |   | 16,769    |      |
| Common stock -  par value $.01 per share; authorized, 15,000,000 shares; issued and  outstanding, 6,804,460 shares                                                       |   | 68,045    |      |
| Additional  paid-in capital                                                                                                                                              |   | 3,922,967 |      |
| Retained  earnings                                                                                                                                                       |   | 1,117,267 |      |
| Treasury stock -  1,162,086 shares, at cost                                                                                                                              |   | (337,807  | )         |
|                                                                                                                                                                     |   |      |      |
|                                                                                                                                                                     |   | 4,787,241 |      |
|                                                                                                                                                                     |   |      |      |
|                                                                                                                                                                     |   | $         | 7,302,169 |   |

* *

*Theaccompanying notes are an integral part of this statement.*

 

F-2

----

 

Astrex, Inc. andSubsidiaries

 

**CONSOLIDATED STATEMENTS OF EARNINGS**

 
|                                                                      |   | **Year ended  March 31,** |           |
|---------------------------------------------------------------------------|--------|---------------------------|----------------|
|                                                                      |   | **2003**                  |           | **2002** |   |
|                                                                      |   |                      |           |   |   |
| Net sales                                                                 |   | **$**                     | **13,745,687** |   | $ | 16,894,123 |   |
| Cost of sales                                                             |   | **10,498,247**            |           | 13,015,259 |   |
|                                                                      |   |                      |           |   |   |
| Gross profit                                                              |   | **3,247,440**             |           | 3,878,864 |   |
|                                                                      |   |                      |           |   |   |
| Selling, general  and administrative expenses                             |   | **3,108,475**             |           | 3,172,958 |   |
|                                                                      |   |                      |           |   |   |
| Earnings from  operations                                                 |   | **138,965**               |           | 705,906 |   |
|                                                                      |   |                      |           |   |   |
| Write-down of  investment                                                 |   | **—**                |           | (24,830 | ) |
| Interest  expense, net                                                    |   | **(57,389**               | **)**          | (117,973 | ) |
|                                                                      |   |                      |           |   |   |
| Earnings before  income tax expense (benefit) and discontinued operations |   | **81,576**                |           | 563,103 |   |
|                                                                      |   |                      |           |   |   |
| Income tax  expense (benefit)                                             |   | **25,800**                |           | (76,706 | ) |
|                                                                      |   |                      |           |   |   |
| Earnings from  continuing operations                                      |   | **55,776**                |           | 639,809 |   |
|                                                                      |   |                      |           |   |   |
| Loss from  discontinued operations                                        |   | **—**                |           | (80,477 | ) |
|                                                                      |   |                      |           |   |   |
| Loss from  disposal of discontinued operations                            |   | **—**                |           | (265,178 | ) |
|                                                                      |   |                      |           |   |   |
| Net earnings                                                              |   | **$**                     | **55,776**     |   | $ | 294,154 |   |
|                                                                      |   |                      |           |   |   |
| Net earnings per  common share:                                           |   |                      |           |   |   |
| Basic                                                                     |   |                      |           |   |   |
| Earnings from  continuing operations                                      |   | **$**                     | **0.01**       | ** ** | **$** | **0.11** | ** ** |
| Loss from  discontinued operations                                        |   | **0.00**                  | ** **     | **(0.01** | **)** |
| Loss from  disposal of discontinued operations                            |   | **0.00**                  | ** **     | **(0.05** | **)** |
| Net earnings per  common share                                            |   | **$**                     | **0.01**       | ** ** | **$** | **0.05** | ** ** |
|                                                                      |   |                      |           |   |   |
| Diluted                                                                   |   |                      |           |   |   |
| Earnings from  continuing operations                                      |   | **$**                     | **0.01**       | ** ** | **$** | **0.09** | ** ** |
| Loss from  discontinued operations                                        |   | **0.00**                  | ** **     | **(0.01** | **)** |
| Loss from  disposal of discontinued operations                            |   | **0.00**                  | ** **     | **(0.04** | **)** |
| Net earnings per  common share                                            |   | **$**                     | **0.01**       | ** ** | **$** | **0.04** | ** ** |
|                                                                      |   |                      |           |   |   |
| Weighted-average  common shares and common equivalent shares outstanding  |   |                      |           |   |   |
| Basic                                                                     |   | **5,643,518**             |           | 5,569,140 |   |
|                                                                      |   |                      |           |   |   |
| Diluted                                                                   |   | **7,338,602**             |           | 7,308,291 |   |

 

*Theaccompanying notes are an integral part of these statements.*

 

F-3

----

 

Astrex, Inc. and Subsidiaries

 

# CONSOLIDATED STATEMENT OFSHAREHOLDERS’ EQUITY

 

Years ended March 31,2003 and 2002

 
|                                                           |   | **Preferred  stock, Series B  par value $.01 per share** |       | **Common  stock,  par value $.01 per share** |                       | **Additional  paid-in  capital** |          |       |       | **Retained  Earnings/  (deficit)** |       | **Treasury  stock,** |          |       |       |
|----------------------------------------------------------------|--------|----------------------------------------------------------|------------|----------------------------------------------|----------------------------|----------------------------------|---------------|------------|------------|------------------------------------|------------|----------------------|---------------|------------|------------|
|                                                           |   |                                                     |       |                                         | **Deferred  compensation** |                             |          |       |       | **at cost  Amount**                |       |                 |          |
|                                                           |   | **Shares**                                               |       | **Amount**                                   |                       | **Shares**                       |          | **Amount** |       |                               |       |                 | **Shares**    |       |       | **Total** |   |
|                                                           |   |                                                     |       |                                         |                       |                             |          |       |       |                               |       |                 |          |       |       |   |   |   |   |   |   |
| Balance, April 1, 2001                                         |   | 1,897,381                                                |       | $                                            | 18,974                     |                             | 6,605,363     |       | $          | 66,054                             |       | $                    | 3,927,794     |       | $          | (11,641 | ) | $ | 767,337 |   | 1,059,086 |   | $ | (307,982 | ) | $ | 4,460,536 |   |
|                                                           |   |                                                     | ** ** |                                         | ** **                 |                             | ** **    |       | ** ** |                               | ** ** |                 | ** **    |       | ** ** |   | ** ** |   | ** ** |   | ** ** |
| Amortization of deferred compensation                          |   | —                                                   |       | —                                       |                       | —                           |          | —     |       | —                             |       | 11,000               |          | —     |       | — |   | — |   | 11,000 |   |
| Conversion of Series B Preferred  stock into common Stock |   | (198,230                                                 | )          | (1,982                                       | )                          | 198,230                          |          | 1,982      |       |                               |       |                 |          |       |       |   |   |   |   |   |   |
| Purchase of treasury stock for retirement                      |   | —                                                   |       | —                                       |                       | —                           |          | —     |       | —                             |       | —               |          | —     |       | 103,000 |   | (29,825 | ) | (29,825 | ) |
| Net earnings                                                   |   | —                                                   |       | —                                       |                       | —                           |          | —     |       | —                             |       | —               |          | 294,154    |       | — |   | — |   | 294,154 |   |
|                                                           |   |                                                     |       |                                         |                       |                             |          |       |       |                               |       |                 |          |       |       |   |   |   |   |   |   |
| Balance, March 31, 2002                                        |   | 1,699,151                                                |       | 16,992                                       |                       | 6,803,593                        |          | 68,036     |       | 3,927,794                          |       | (641                 | )             | 1,061,491  |       | 1,162,086 |   | (337,807 | ) | 4,735,865 |   |
|                                                           |   |                                                     |       |                                         |                       |                             |          |       |       |                               |       |                 |          |       |       |   |   |   |   |   |   |
| Amortization of deferred compensation                          |   | —                                                   |       | —                                       |                       | —                           |          | —     |       | —                             |       | 641                  |          | —     |       | — |   | — |   | 641 |   |
| Conversion of Series B Preferred  stock into common Stock |   | (22,316                                                  | )          | (223                                         | )                          | 22,316                           |          | 223        |       |                               |       |                 |          |       |       |   |   |   |   |   |   |
| Purchase and retirement of treasury stock                      |   | —                                                   |       | —                                       |                       | (21,449                          | )             | (214       | )          | (4,827                             | )          | —               |          | —     |       | — |   | — |   | (5,041 | ) |
| Net earnings                                                   |   | —                                                   |       | —                                       |                       | —                           |          | —     |       | —                             |       | —               |          | 55,776     |       | — |   | — |   | 55,776 |   |
|                                                           |   |                                                     |       |                                         |                       |                             |          |       |       |                               |       |                 |          |       |       |   |   |   |   |   |   |
| **Balance,  March 31, 2003**                              |   | **1,676,835**                                            | ** ** | **$**                                        | **16,769**                 | ** **                       | **6,804,460** | ** ** | **$**      | **68,045**                         | ** ** | **$**                | **3,922,967** | ** ** | **$**      | **—** | ** ** | **$** | **1,117,267** | ** ** | **1,162,086** | ** ** | **$** | **(337,807** | **)** | **$** | **4,787,241** | ** ** |

 

*Theaccompanying notes are an integral part of this statement*

 

F-4

----

 

Astrex, Inc. andSubsidiaries

 

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

 
|                                                                                |   | **Year ended  March 31,** |       |
|-------------------------------------------------------------------------------------|--------|---------------------------|------------|
|                                                                                |   | **2003**                  |       | **2002** |   |
| Cash flows from  operating activities                                               |   |                      |       |   |   |
| Net earnings                                                                        |   | **$**                     | **55,776** |   | $ | 294,154 |   |
|                                                                                |   |                      |       |   |   |
| Net earnings from  continued operations                                             |   |                      |       |   |   |
| Adjustments to  reconcile net earnings to net cash provided by operating activities |   |                      |       |   |   |
| Loss from  discontinued operations                                                  |   | **—**                |       | 80,477 |   |
| Loss from  disposal of discontinued operations                                      |   | **—**                |       | 265,178 |   |
| Depreciation and  amortization                                                      |   | **80,371**                |       | 65,914 |   |
| Amortization of  deferred stock compensation                                        |   | **641**                   |       | 11,000 |   |
| Amortization of  deferred financing costs                                           |   | **1,874**                 |       | 11,239 |   |
| Deferred tax  asset                                                                 |   | **—**                |       | (90,000 | ) |
| Write-down of  investment                                                           |   | **—**                |       | 24,830 |   |
| Changes in  assets and liabilities                                                  |   |                      |       |   |   |
| Decrease in  accounts receivable, net                                               |   | **293,777**               |       | 414,123 |   |
| Decrease in  inventory                                                              |   | **526,800**               |       | 38,692 |   |
| (Increase)  decrease in prepaid expenses and other current assets                   |   | **(42,208**               | **)**      | 1,354 |   |
| Decrease  in accounts payable                                                  |   | **(404,368**              | **)**      | (464,663 | ) |
| Decrease in  accrued liabilities                                                    |   | **(246,912**              | **)**      | (58,124 | ) |
|                                                                                |   |                      | ** ** |   |   |
| Net cash  provided by continuing operations                                         |   | **265,751**               | ** ** | 594,174 |   |
| Net cash used in  discontinued operations                                           |   | **—**                | ** ** | (34,109 | ) |
| Net cash  provided by operating activities                                          |   | **265,751**               | ** ** | 560,065 |   |
|                                                                                |   |                      | ** ** |   |   |
| Cash flows from  investing activities                                               |   |                      | ** ** |   |   |
| Purchases of  property and equipment                                                |   | **(138,134**              | **)**      | (62,574 | ) |
| Net cash used in  investing activities                                              |   | **(138,134**              | **)**      | (62,574 | ) |
|                                                                                |   |                      | ** ** |   |   |
| Cash flows from  financing activities                                               |   |                      | ** ** |   |   |
| Repayments of  loan payable                                                         |   | **(125,075**              | **)**      | (471,485 | ) |
| Purchase of  treasury stock                                                         |   | **(5,041**                | **)**      | (29,825 | ) |
|                                                                                |   |                      |       |   |   |
| Net cash used in  financing activities                                              |   | **(130,116**              | **)**      | (501,310 | ) |
|                                                                                |   |                      | ** ** |   |   |
| Net decrease in  cash                                                               |   | **(2,499**                | **)**      | (3,819 | ) |
|                                                                                |   |                      |       |   |   |
| Cash at  beginning of year                                                          |   | **4,449**                 |       | 8,268 |   |
|                                                                                |   |                      |       |   |   |
| Cash at end of  year                                                                |   | **$**                     | **1,950**  |   | $ | 4,449 |   |
|                                                                                |   |                      |       |   |   |
| Supplemental  disclosures of cash flow information:                                 |   |                      |       |   |   |
| Cash paid during  the year for                                                      |   |                      |       |   |   |
| Interest                                                                            |   | **$**                     | **68,546** |   | $ | 127,555 |   |
| Income taxes                                                                        |   | **$**                     | **23,189** |   | $ | 29,739 |   |

 

*Theaccompanying notes are an integral part of these statements.*

 

F-5

----

 

Astrex, Inc. andSubsidiaries

 

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

 

March 31, 2003 and 2002

 

**NOTE A -DESCRIPTION OF BUSINESS**

 

Astrex, Inc. and subsidiaries (the “Company”) sells,assembles and distributes electronic parts and components in one businesssegment.  Approximately 89% and 85% ofthe Company’s sales in fiscal 2003 and 2002, respectively, consist ofconnectors that link electronic components together and generally consist of ashell, insert, contacts and adaptive hardware. The other products sold by the Company, which comprise the remaining 11%****and15% of sales in fiscal 2003 and 2002, respectively, are devices that control orregulate the flow of electricity to or within components.  The Company’s largest markets include thedefense, aerospace, industrial and computer industries, which sales areworldwide with a concentration in the Northeast and Mid-Atlantic states.

 

**NOTE B -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

 

A summary of the significant accounting policiesapplied in the preparation of the accompanying consolidated financialstatements are as follows:

 

*Principles of Consolidation*

 

The consolidated financial statements include theaccounts of Astrex, Inc. and its subsidiaries, all of which arewholly-owned.  All significantintercompany accounts and transactions have been eliminated.

 

*Financial Instruments and Business Concentrations*

 

Financial instruments which potentially subject theCompany to concentration of credit risk consist principally of accountsreceivable.  Concentration of creditrisk with respect to accounts receivable is generally mitigated due to thelarge number of entities comprising the Company’s customer base and theirdispersion across geographic areas and industries.  The Company routinely addresses the financial strength of itscustomers and, as a consequence, believes that its accounts receivable creditrisk exposure is limited.  No singlecustomer accounted for more than 10% of the Company’s sales and accountsreceivable in fiscal 2003 and 2002.

 

Statement of Financial Accounting Standards No. 107(“SFAS No. 107”), “Fair Value of Financial Instruments,” requires disclosure ofthe estimated fair value of an entity’s financial instrument assets andliabilities.  The Company’s principalfinancial instrument consists of a line of credit and term loan facility,expiring April 30, 2005, with one participating bank.  The Company believes that the carrying amounts of such debtapproximates the fair value as the interest rates approximate the currentprevailing interest rates.

 

The Company generally purchases products frommanufacturers pursuant to nonexclusive distributor agreements.  The Company’s top four suppliers accountedfor 49**%**and 57% of purchases for the fiscal years ended March 31, 2003 and 2002,respectively.  There can be no assurancethat, in the event a supplier cancels its distributor agreement with theCompany, the Company will be able to replace the sales with sales of otherproducts.

 

F-6

----

 

*Use of Estimates*

 

In preparing financial statements in conformity withaccounting principles generally accepted in the United States of America,management is required to make estimates and assumptions that affect thereported amounts of assets and liabilities and disclosure of contingent assetsand liabilities at the date of the financial statements, as well as thereported amounts of revenues and expenses during the reporting period.  Actual results could differ from thoseestimates.

 

*Revenue Recognition*

 

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.

 

*Accounts Receivable*

 

The Company’s accounts receivable are due frombusinesses and governmental agencies primarily in the defense, aerospace,industrial equipment and computer industry markets. Credit is extended based onevaluation of a customers’ financial condition and, generally, collateral isnot required.  Accounts receivable aredue within 30 days and are stated at amounts due from customers net of anallowance for doubtful accounts. Accounts outstanding longer than the contractual payment terms areconsidered past due. Estimates are used in determining the allowance fordoubtful accounts based on the Company’s historical collections experience,current trends, credit policy and a percentage of its accounts receivable byaging category. In determining these percentages, the Company looks athistorical write-offs of its receivables. The Company also looks at the creditquality of its customer base as well as changes in its credit policies. TheCompany continuously monitors collections and payments from its customers. TheCompany writes off accounts receivable when they become uncollectible, andpayments subsequently received on such receivables are credited to theallowance for doubtful accounts.

 

Changes in the Company’s allowance for doubtfulaccounts during the year ended March 31, 2003 are as follows:

 

| Beginning balance                            |   | $       | 92,967 |   |
|----------------------------------------------|--------|---------|--------|--------|
| Reduction in provision for doubtful accounts |   | (25,000 | )      |
| Recoveries                                   |   | (307    | )      |
|                                         |   |    |   |
| Ending balance                               |   | $       | 67,660 |   |

 

F-7

----

 

*Shipping and Handling Costs*

 

Pursuant to EITF 00-10, “Accounting for Shipping andHandling Fees and Costs,” the Company includes fees billed to a customerrelating to shipping and handling costs in net sales.  All shipping and handling expenses incurred by the Company areincluded in cost of sales.

 

*Investments*

 

Investments in companies where the Company holds lessthan a 20% voting interest are accounted for using the cost method, because theCompany does not exercise significant influence over financial or operatingpolicies of these companies.

 

*Inventory*

 

Inventory, consisting principally of finished goods,is stated at the lower of cost or market. Cost is determined using the first-in, first-out method.  Write-downs of inventory  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 andactual market conditions are less favorable than those projected by management,additional write-downs of inventories could be required.

 

*Long-Lived Assets*

 

The Company monitors the recoverability of long-livedassets, including investments and fixed assets, based on estimated use factorssuch as future asset utilization, business climate and future undiscounted cashflows expected to result from the use of the related assets or realized uponsale. The Company’s policy is to write down assets to their net recoverableamount in the period when it is determined that the carrying amount of theasset is not likely to be recoverable.

 

*Fixed Assets*

 

Fixed assets are stated at cost less accumulateddepreciation.  Depreciation of fixedassets is computed by the straight-line method over the estimated useful livesof the assets.

 

*Advertising*

 

Advertising costs are expensed as incurred and totaled$53,357 and $83,334 for the fiscal years ended March 31, 2003 and 2002,respectively and are included in selling, general and administrative expensesin the accompanying  ConsolidatedStatements of Earnings.

 

F-8

----

 

*Income Taxes*

 

Deferred income taxes are recognized for temporarydifferences between financial statement and income tax bases of assets andliabilities and net operating loss carryforwards for which income tax expensesor benefits are expected to be realized in future years.  A deferred tax asset has been established asit is more likely than not that all, or some portion, of such deferred taxassets will be realized.  The effect ondeferred taxes of a change in tax rates is recognized in earnings in the periodthat includes the enactment date.

 

*Net Earnings Per Common Share*

 

Net earnings per common share is computed by dividingnet earnings available to common stockholders by the weighted average number ofshares outstanding during the period. Diluted earnings per share reflect thepotential dilution that could occur if securities or other contracts to issuecommon stock were exercised or converted into common stock or resulted in theissuance of common stock.

 

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

 
|                                      |   | **2003**      |   | **2002**  |   |
|-------------------------------------------|--------|---------------|--------|-----------|--------|
|                                      |   |          |   |      |   |
| Basic                                     |   | **5,643,518** |   | 5,569,140 |   |
| Effect of  Convertible Series B Preferred |   | **1,685,222** |   | 1,699,151 |   |
| Effect of  restricted shares              |   | **9,863**     |   | 40,000    |   |
|                                      |   |          |   |      |   |
| Diluted                                   |   | **7,338,602** |   | 7,308,291 |   |

 

*Recently Issued Accounting Standards*

 

In June 2001, the Financial Accounting Standards Board(“FASB”) issued SFAS No. 143, “Accounting for Assets Retirement Obligations”(“SFAS No. 143”).  SFAS No. 143addresses financial and reporting obligations associated with the retirement ofintangible long-lived assets and the associated asset retirement costs.  It applies to legal obligations associatedwith retirement of long-lived assets that result from acquisition,construction, development and/or the normal operation of long-lived assets, exceptfor certain obligations of lessees. SFAS No. 143 is effective for financial statements issued for fiscalyears beginning after June 15, 2002. There will be no material impact on the Company’s financial position andresults of operations as a result of the adoption of this statement.

 

F-9

----

 

In April 2002, the FASB issued Statement of FinancialAccounting Standards No. 145 (“SFAS No. 145”), “Rescission of FASB StatementsNo. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections.”  SFAS No. 145 eliminates the currentrequirement that gains and losses on debt extinguishment must be classified asextraordinary items in the income statement. Instead, such gains and losseswill be classified as extraordinary items only if they are deemed to be unusualand infrequent, in accordance with the current criteria for extraordinaryclassification. Additionally, any gain or loss on extinguishment of debt thatwas classified as an extraordinary item in prior periods presented that does notmeet the criteria in APB Opinion No. 30 for classification as an extraordinaryitem shall be reclassified. In addition, SFAS No. 145 eliminates aninconsistency in lease accounting by requiring that modifications of capitalleases that result in reclassification as operating leases be accounted forconsistent with sale- leaseback accounting rules.  SFAS No. 145 also contains other nonsubstantive corrections toauthoritative accounting literature. The changes related to debt extinguishment will be effective for fiscalyears beginning after May 15, 2002, and the changes related to lease accountingwere effective for transactions occurring after May 15, 2002. SFAS No. 145 hasnot had, and is not expected to have a material impact on the financialposition and results of operations of the Company.

 

In June 2002, the FASB issued Statement of FinancialAccounting Standards No. 146 (“SFAS No. 146”), “Accounting for Costs Associatedwith Exit or Disposal Activities,” which addresses accounting for restructuringand similar costs.  SFAS No. 146supersedes previous accounting guidance, principally Emerging Issues Task Force(“EITF”) Issue No. 94-3.  SFAS No. 146requires that the liability for costs associated with an exit or disposalactivity be recognized when the liability is incurred.  Under EITF No. 94-3, a liability for an exitcost was recognized at the date of a company’s commitment to an exit plan.  SFAS No. 146 also establishes that theliability should initially be measured and recorded at fair value. SFAS No. 146is effective for disposal activities initiated after December 31, 2002. Theadoption of SFAS No. 146 had no impact on the financial position and results ofoperations of the Company.

 

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 No. 148 provides alternative methods oftransition for a voluntary change to fair value based method of accounting forstock-based employee compensation. Additionally, SFAS No. 148 requires moreprominent and more frequent disclosures in financial statements about theeffects of stock-based compensation. The provisions of this Statement are effectivefor fiscal years ending after December 15, 2002, with early applicationpermitted in certain circumstances. The interim disclosure provisions areeffective for financial reports containing financial statements for interimperiods beginning after December 15, 2002. The adoption of SFAS No. 148 had noimpact on the financial position and results of operations of the Company.

 

In April 2003, the FASB issued Statement of FinancialAccounting Standards No. 149 (“SFAS No. 149”), “Amendment of Statement 133 onDerivative Instruments and Hedging Activities,” which amends and clarifiesfinancial accounting and reporting for derivative instruments, includingcertain derivative instruments embedded in other contracts and for hedgingactivities under SFAS No. 133.

 

F-10

----

 

SFAS No. 149 is effective for contracts entered intoor modified after June 30, 2003 except for the provisions that were cleared bythe FASB in prior pronouncements.  The Company is currently evaluating theeffect of the adoption of SFAS No. 149 on its financial position and results ofoperations.

 

In May 2003, the FASB issued Statement of FinancialAccounting Standards No. 150 (“SFAS No. 150”), “Accounting for CertainFinancial Instruments with Characteristics of both Liabilities andEquity.”  This statement establishesstandards for how an issuer classifies and measures in its statement offinancial position certain financial instruments with characteristics of bothliabilities and equity.  In accordance with the standard, financialinstruments that embody obligations for the issuer are required to beclassified as liabilities. This Statement shall be effective for financialinstruments entered into or modified after May 31, 2003, and otherwise shall beeffective for the year ended December 31, 2003. The Company is currentlyevaluating the effect of the adoption of SFAS No. 150 on its financial positionand results of operations.

 

In November 2002, the FASB issued FASBInterpretation No. 45 (“FIN No. 45”), “Guarantor’s Accounting andDisclosure Requirements for Guarantees, Including Indirect Guarantees ofIndebtedness of Others.” FIN No. 45 requires that upon issuance of a guarantee, aguarantor must recognize a liability for the fair value of an obligationassumed under a guarantee. FIN No. 45 also requires additional disclosures by aguarantor in its interim and annual financial statements about the obligationsassociated with guarantees issued.  Therecognition provisions of FIN No. 45 are effective for any guarantees issued ormodified after December 31, 2002.  Thedisclosure requirements are effective for financial statements for periodsending after December 15, 2002. The adoption of FIN No. 45 did not have a material impact on theCompany’s financial position or results of operations.

 

In January 2003, the FASBissued FASB Interpretation No. 46 “Consolidation of Variable InterestEntities.”  In general, a variable interest entity is a corporation, partnership, trust,or any other legal structure used for business purposes that either (a) doesnot have equity investors with voting rights or (b) has equity investors thatdo not provide sufficient financial resources for the entity to support itsactivities.  A variable interest entityoften holds financial assets, including loans or receivables, real estate orother property.  A variable interestentity may be essentially passive or it may engage in activities on behalf ofanother company.  Until now, a companygenerally has included another entity in its consolidated financial statementsonly if it controlled the entity through voting interests.  FIN No. 46 changes that by requiring avariable interest entity to be consolidated by a company if that company issubject to a majority of the risk of loss from the variable interest entity’sactivities or entitled to receive a majority of the entity’s residual returnsor both.  FIN No. 46’s consolidationrequirements apply immediately to variable interest entities created oracquired after January 31, 2003.  Theconsolidation requirements apply to older entities in the first fiscal year orinterim period beginning after June 15, 2003. Certain of the disclosure requirements apply to all financial statementsissued after January 31, 2003, regardless of when the variable interestentity was established.  The Company hasadopted the disclosure provisions of FIN No. 46 effective January 31,2003.  The Company does not anticipatethat the adoption of the consolidation requirements of

 

F-11

----

 

FIN No. 46 will have amaterial impact on the Company’s consolidated financial condition or results ofoperations taken as a whole.

 

In November 2002, theEmerging Issues Task Force reached a consensus opinion of EITF 00-21, “RevenueArrangements with Multiple Deliverables”. That consensus provides that revenue arrangements with multipledeliverables should be divided into separate units of accounting if certaincriteria are met.  The consideration ofthe arrangement should be allocated to the separate units of accounting basedon their relative fair values, with different provisions if the fair value iscontingent on delivery of specified items or performance conditions.  Applicable revenue criteria should beconsidered separately for each separate unit of accounting.  EITF 00-21 is effective for revenuearrangements entered into in fiscal periods beginning after June 15, 2003.  Entities may elect to report the change as acumulative effect adjustment in accordance with APB Opinion 20, “AccountingChanges.”  The Company is stillevaluating the impact of the adoption of EITF 00-21 on its financialstatements.

 

**NOTE C –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 ofMaintenance Repair Organization (“MRO”) versus Original Equipment Manufacturer(“OEM”) were significantly different from the Company’s core business andtherefore not easily integrated into the Company’s core operations. At December31, 2001, the Company recognized a loss from discontinued operations ofapproximately $80,000 (net of taxes of approximately $1,400) for the periodApril 1, 2001 through the measurement date. The Company recognized a loss from disposal of discontinued operationsof approximately $265,000 from the measurement date to December 31, 2001.  The loss on disposal includes operatinglosses from the measurement date of approximately $44,000, loss on disposal ofinventory of approximately $70,000 and estimates for further impairment ofinventory caused by the disposal decision of $100,000. The remainder of thedisposal loss includes liabilities for severance and estimates formiscellaneous expenses related to the disposal of TF Cushing.  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. There were no net assets forTF Cushing at March 31, 2003 and 2002.

 

F-12

----

 

**NOTE D -FIXED ASSETS**

 

Fixed assets consist of the following at March 31,2003:

 
|                               |   | **Estimated  useful life** |   |      |    |
|------------------------------------|--------|----------------------------|--------|-----------|---------|
|                               |   |                       |   |      |    |
| Land                               |   |                       |   | $         | 128,836 |   |
| Building and  improvements         |   | 2 to 30 years              |   | 655,299   |    |
| Equipment,  furniture and fixtures |   | 5 to 10 years              |   | 735,296   |    |
|                               |   |                       |   |      |    |
|                               |   |                       |   | 1,519,431 |    |
|                               |   |                       |   |      |    |
| Less accumulated  depreciation     |   |                       |   | 764,070   |    |
|                               |   |                       |   |      |    |
|                               |   |                       |   | $         | 755,361 |   |

 

Depreciationexpense on fixed assets was $ 80,371 and $65,914 for the years ended March 31,2003 and 2002, respectively.

 

**NOTE E -LOANS PAYABLE**

 

The Company’s collateralized lending agreement withits bank (the “Agreement”), as amended, provides the Company with a line ofcredit, secured by substantially all the assets of the Company, equal to 85% ofits eligible accounts receivable and 25% of its eligible net inventory up to amaximum of $3,150,000, through April 2005, and provides a term loan of $850,000collateralized by a mortgage on the 205 Express Street property, with amaturity date of April 2005.  Neitherthe line of credit nor the term loan requires any principal repayments prior tothe April 2005 maturity date.  Interestis payable monthly at short-term, fixed-rate borrowings, for fixed amounts atLIBOR plus 1-1/2%, or daily borrowing at the bank’s prime rate or a mixture ofthe two.  The weighted average interestrate on the loans outstanding at March 31, 2003 was 3.03%.  Debt outstanding under the Agreement atMarch 31, 2003, amounted to $1,403,440, which was comprised of $553,000 on theline of credit and $850,000 on the term loan. At March 31, 2003, the Company had approximately $2,000,000 availablefor future borrowings under the agreement. The Agreement contains certain financial covenants relating to themaintenance of various financial ratios and restrictions on the payment ofdividends by the Company.

 

F-13

----

 

**NOTE F -INCOME TAXES**

 

Total income tax benefit for fiscal 2003 and 2002differed from the amounts computed by applying the United States Federal incometax rate of 34% to earnings before income taxes as a result of the following:

 
|                                             |   | **2003**    |       | **2002** |   |
|--------------------------------------------------|--------|-------------|------------|----------|--------|
|                                             |   |        |       |     |   |
| Computed  “expected” tax               |   | **$**       | **28,000** |     | $      | 73,932 |   |
| State income  taxes, net                         |   | **13,000**  |       | 11,991   |   |
| Other                                            |   | **(15,200** | **)**      | 1,303    |   |
| Utilization of  net operating loss carryforwards |   | **—**  |       | (73,932  | )      |
| Valuation  allowance                             |   | **—**  |       | (90,000  | )      |
|                                             |   |        |       |     |   |
|                                             |   | **$**       | **25,800** |     | $      | (76,706 | ) |

 

The tax effects of temporary differences that giverise to significant portions of the deferred tax assets and deferred taxliabilities at March 31, 2003 and 2002 are presented below:

 
|                                        |   | **2003**       |          | **2002**   |   |
|---------------------------------------------|--------|----------------|---------------|------------|--------|
| Deferred tax  assets                        |   |           |          |       |   |
| Net operating  loss and other carryforwards |   | **$**          | **2,082,000** |       | $      | 1,975,000 |   |
| Inventory                                   |   | **373,000**    |          | 459,000    |   |
| Write-down of  investment                   |   | **99,000**     |          | 89,000     |   |
| Bad debts                                   |   | **41,000**     |          | 37,000     |   |
| Depreciation,  compensation and other       |   | **36,000**     |          | 87,000     |   |
|                                        |   |           |          |       |   |
| Total gross  deferred tax assets            |   | **2,631,000**  |          | 2,647,000  |   |
|                                        |   |           |          |       |   |
| Less valuation  allowance                   |   | **(2,341,000** | **)**         | (2,299,000 | )      |
|                                        |   |           |          |       |   |
|                                        |   | **290,000**    |          | 348,000    |   |
|                                        |   |           |          |       |   |
| Deferred tax  liabilities                   |   |           |          |       |   |
| Depreciation and  other                     |   | **—**     |          | (58,000    | )      |
|                                        |   |           |          |       |   |
|                                        |   | **$**          | **290,000**   |       | $      | 290,000 |   |

 

Inprior years, primarily due to competitive pricing pressures in the Company’sindustry and their potential impact on operating results, the Company did notbelieve that it was more likely than not that it would utilize its deferred taxassets. However, as a result of favorable operations in three successive years,the Company recognized an additional deferred tax asset in the amount of$90,000 at March 31, 2002.

 

F-14

----

 

At March 31, 2003, the Company has a net operatingloss carryforward available for Federal income tax purposes of approximately$6,100,000, expiring beginning in 2004 through 2023.  During 1992, the Company experienced an ownership change, asdefined by Section 382 of the Internal Revenue Code of 1986, as amended, andSection 383 of the Code.  As a result ofthis event, the Company will be limited in its ability to use net operatingloss carryforwards in future years (the annual limitation is $453,000).  The net operating loss carryforwards notsubject to limitation amounted to approximately $4,760,000 at March 31, 2003.

 

**NOTE G -RETIREMENT PLAN**

 

The Company has a defined contribution plan which isqualified under Section 401(k) of the Internal Revenue Code.  All regular full-time employees are eligiblefor voluntary participation upon completing six months of service and havingattained the age of twenty-one.  TheCompany may provide a discretionary match of employee contributions to theplan.  No matching contributions weremade for the year ended March 31, 2003. For the year ended March 31, 2002, the Company made a matching contributionof $11,540.

 

**NOTE H -IMPAIRMENT OF ASSETS**

 

On July 20, 1998, the Company entered into anagreement with Enigma Energy Company, L.L.C. (“Enigma”) and its members topurchase an 8% equity interest in Enigma with an option (“Option”) to purchase theremaining equity interest at a later date. The purchase price for the 8% equity interest in Enigma and the Optionwas $300,000 ($225,000 attributed to the equity interest and $75,000 attributedto the Option).

 

On December 15, 1998, the Company determined, in lightof Enigma’s post-1998 drilling results and the depressed energy market, that itwould not exercise the Option.  As aconsequence of this decision, the Company recognized an impairment charge of$232,500 for the fiscal year ended March 31, 1999.

 

In October 1999, the equity holders of Enigma,including Astrex, optioned their respective equity interests to Comanche EnergyInc. (“Comanche”), a nonreporting public company.  Astrex received 115,253 shares of Comanche common stock inconsideration for the option and received an additional 268,925 shares for itsentire equity interest upon final settlement of the agreement.  No gain or loss was recognized on theexchange.  At March 31, 2001, theCompany reduced the carrying value of the Comanche common stock by$65,000.  During the year ended March31, 2002, the Company determined that the carrying amount of this asset was notlikely to be recoverable and wrote off this investment in Comanche andrecognized an additional impairment charge of approximately $25,000.

 

F-15

----

 

**NOTE I - SHAREHOLDER'S EQUITY**

 

During the years ended March 31, 2003 and 2002, theCompany purchased 21,449 and 103,000 shares of its common stock for $5,041 and$29,825, respectively.  The purchases infiscal 2002 were open market transactions.

 

On February 11, 2003, the Company’s shareholdersratified the adoption of the 2003 Incentive and Non-Incentive Stock Option Plan(the “2003 Plan”) which provides for the issuance of incentive stock options(“ISO’s”) to officers and employees and nonqualified stock options todirectors, officers, employees, consultants, agents and independentcontractors.  Up to 1,000,000 shares ofcommon stock have been reserved for issuance under the 2003 Plan.  The terms of the options are generally tenyears, except for ISO’s granted to any employee, whom prior to the granting ofthe option, owns stock representing more than 10% of the voting rights, forwhich the option term will be five years. The exercise price for nonqualified stock options outstanding under the2003 Plan can generally be no less than 85% of the fair market value, asdefined, of the Company’s common stock at the date of grant.  For ISO’s, the exercise price can generallybe no less than the fair market value of the Company’s common stock at the dateof grant, with the exception of any employee who prior to the granting of theoption, owns stock representing more than 10% of the voting rights, for whichthe exercise price can be no less than 110% of fair market value of theCompany’s common stock at the date of grant. As of March 31, 2003, no optionshave been granted under the 2003 Plan.

 

On June 29, 2000, the Board of Directors declared adividend on the Company’s common stock of one share of a new Series BConvertible Preferred Stock (the “Preferred Stock”) for every three shares ofcommon stock held as of July 7, 2000. On July 17, 2000, the Company issued 1,897,381 shares of PreferredStock. The characteristics of the Series B Convertible Preferred Stock(“Preferred Stock”) are definitively delineated in the “Astrex, Inc.Certificate of Designations, Preferences and Rights of Series B ConvertiblePreferred Stock” (“Certificate”), which should be reviewed for a full andcontrolling description, but, in brief summary, the principal terms of thePreferred Stock are as follows:

 

1.               The Preferred Stockis not entitled to any preferential dividends, but is entitled to any dividenddeclared on the common stock and the common stock will be entitled to anydividend declared on the Preferred Stock.

 

2.               Each share of thePreferred Stock has a liquidation right of twenty-five cents.

 

3.               The Preferred Stockis entitled to vote on all matters that the common stock is entitled to vote onand will have twelve votes per Preferred Stock share.

 

4.               Subsequent to July30, 2001, the Preferred Stock will be convertible at the option of the holderinto common stock on a share-for-share basis.

 

5.               The Preferred Stockis subject to severe restrictions on transfer by sale or otherwise, as defined.

 

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Beginning July 31, 2001, holders of thesepreferred shares have the option of converting shares of the Preferred Stockfor an equal number of shares of Common Stock. The declaration of this dividenddid not have any economic impact on the capital structure of the Company, andaccordingly, the par value of the Preferred Stock aggregating $18,974 wasrecorded through a reduction in retained earnings.

 

During the years ended March 31, 2003 and 2002, 22,316and 198,230 shares of Series B Convertible Preferred Stock, respectively, havebeen converted into the Company’s common stock.

 

On June 29, 2000, the Company granted 40,000registered, forfeitable shares of the Company’s common stock, which were issuedon July 5, 2000 to several employees. Each employee’s shares are subject to forfeiture in the event theemployee ceases to be employed by the Company, for reasons other than death,prior to June 30, 2002.  On the date ofgrant, the Company recorded deferred compensation aggregating $16,500 which isbased on the unadjusted quoted market price of the Company’s common stock atthe date of grant.  Such deferredcompensation was charged to compensation expense ratably over the two-yearvesting period.  All 40,000 shares werefully vested on June 30, 2002.

 

**NOTE J -COMMITMENTS**

 

*Leases*

 

The Company is obligated under non-cancellableoperating leases covering an office facility through November 2004.  At March 31, 2003, minimum annual futurerental commitments under these leases are as follows:

 

| **Fiscal  year ending March 31,** |   |   |   |
|-----------------------------------|--------|--------|--------|
| 2004                              |   | $      | 30,000 |   |
| 2005                              |   | 14,000 |   |
|                              |   |   |   |
|                              |   | $      | 44,000 |   |

 

The Company maintains two other leases for officefacilities on a month-to-month basis. Rent expense (for leased property and equipment) included in selling,general and administrative expenses for the years ended March 31, 2003 and 2002was $57,495 and $63,328, respectively.

 

**NOTE K -EXPORT SALES**

 

Export sales were $1,557,000 and $1,980,000 in 2003and 2002, respectively, representing an aggregate of 11% and 12% of theCompany’s net sales in 2003 and 2002, respectively.

 

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