U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended June 30, 2002
OR
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-4530
ASTREX, INC.
(Exact name of small business issuer as specified in its charter)
Delaware |
| 13-1930803 |
(State or other jurisdiction of |
| (I.R.S. Employer Identification No.) |
incorporation or organization) |
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205 Express Street, Plainview, New York |
| 11803 |
(Address of principal executive offices) |
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(516) 433-1700 | ||
(Issuer’s telephone number, including area code) | ||
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Not Applicable | ||
(Former name, former address and former fiscal year, if changed since last report) |
Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date. As of July 30, 2002 common shares outstanding were 5,648,842 (does not include Convertible Preferred Stock).
Transitional Small Business Disclosure Format (check one) Yes o No ý
ASTREX, INC.
INDEX
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Item 1. Financial Statements: | ||
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Item 2. Management's Discussion and Analysis or Plan of Operations | ||
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PART I - Financial Information
ASTREX, INC. AND SUBSIDIARIES
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| June 30, 2002 |
| March 31, 2002 | �� | ||
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Current Assets: |
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Cash and cash equivalents |
| $ | 3 |
| $ | 4 |
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Accounts receivable (net of allowance for doubtful accounts of $91 at June 30, 2002 and $93 at March 31, 2002) |
| 1,675 |
| 1,907 |
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Inventory |
| 5,083 |
| 5,019 |
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Prepaid expenses and other current assets |
| 240 |
| 57 |
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Deferred tax asset |
| 290 |
| 290 |
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Total current assets |
| 7,291 |
| 7,277 |
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Property, plant and equipment at cost (net of accumulated depreciation of $701 at June 30, 2002 and $684 at March 31, 2002) |
| 701 |
| 698 |
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Other long-term assets |
| 48 |
| 52 |
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Total Assets |
| $ | 8,040 |
| $ | 8,027 |
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Current Liabilities: |
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Accounts payable |
| 846 |
| 1,040 |
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Accrued liabilities |
| 635 |
| 723 |
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Total current liabilities |
| 1,481 |
| 1,763 |
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Long-term debt |
| 1,694 |
| 1,529 |
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Shareholders' Equity: |
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Preferred Stock, Series A - issued, none |
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| ¾ |
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Convertible Preferred Stock, Series B - $.01 par value; authorized, 10,000,000; 1,691,816 and 1,699,151 shares issued and outstanding at June 30, 2002 and March 31, 2002 (liquidation preference of $.25 a share) |
| 17 |
| 17 |
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Common Stock - par value $.01 par value; authorized, 15,000,000 shares; issued, 6,810,928 and 6,803,594 at June 30, 2002 and March 31,2002 |
| 68 |
| 68 |
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Additional paid-in capital |
| 3,928 |
| 3,928 |
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Retained earnings |
| 1,190 |
| 1,061 |
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Deferred compensation |
| 0 |
| (1 | ) | ||
Treasury stock, at cost (1,162,086 shares at June 30, 2002 and March 31, 2002) |
| (338 | ) | (338 | ) | ||
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Total shareholders' equity |
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| 4,865 |
| 4,735 |
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Total liabilities and shareholders' equity |
| $ | 8,040 |
| $ | 8,027 |
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See accompanying notes to unaudited consolidated financial statements.
1
ASTREX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
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| THREE MONTHS ENDED |
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| JUNE 30, |
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| 2002 |
| 2001 |
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Net sales |
| $ | 3,753 |
| $ | 4,876 |
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Cost of sales |
| 2,805 |
| 3,780 |
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Gross profit |
| 948 |
| 1,096 |
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Selling, general and administrative expenses |
| 797 |
| 831 |
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Income from operations |
| 151 |
| 265 |
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Interest expense |
| 14 |
| 39 |
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Income before provision for income taxes and discontinued operations |
| 137 |
| 226 |
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Provision for income taxes |
| 8 |
| 6 |
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Income from continuing operations |
| 129 |
| 220 |
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Loss from discontinued operations |
| ¾ |
| (36 | ) | |||||
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Net income |
| $ | 129 |
| $ | 184 |
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Per share data for the three months ended June 30, 2002 and 2001 are as follows: |
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Weighted average common shares and common equivalent shares outstanding: |
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Basic |
| 5,607,459 |
| 5,471,552 |
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Diluted |
| 7,340,658 |
| 7,433,933 |
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Net income per share: |
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Basic |
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Income from continuing operations |
| $ | 0.02 |
| $ | 0.04 |
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Loss from discontinued operations |
| ¾ |
| (0.01 | ) | |||||
Net income per common share |
| $ | 0.02 |
| $ | 0.03 |
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Diluted |
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Income from continuing operations |
| $ | 0.02 |
| $ | 0.03 |
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Loss from discontinued operations |
| ¾ |
| 0.00 |
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Net income per common share |
| $ | 0.02 |
| $ | 0.03 |
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See accompanying notes to unaudited consolidated financial statements.
2
ASTREX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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| FOR THE THREE MONTHS ENDED JUNE 30, |
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| 2002 |
| 2001 |
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Cash flows from operating activities: |
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Net income |
| $ | 129 |
| $ | 184 |
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Net income from continuing operations |
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Adjustments to reconcile net income to net cash used in operating activities: |
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Depreciation and amortization |
| 17 |
| 16 |
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Amortization of deferred stock compensation |
| 1 |
| 4 |
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Changes in assets and liabilities: |
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Decrease/(increase) in accounts receivable, net |
| 232 |
| (168 | ) | ||
Increase in prepaid expenses and other current assets |
| (183 | ) | (133 | ) | ||
(Increase)/Decrease in inventory |
| (64 | ) | 125 |
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Decrease/(increase) in non-current assets |
| 4 |
| (7 | ) | ||
Decrease in accounts payable |
| (194 | ) | (30 | ) | ||
Decrease in accrued liabilities |
| (88 | ) | (180 | ) | ||
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Net cash used in continuing operations |
| (146 | ) | (189 | ) | ||
Net operating activities from discontinued operations |
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| 36 |
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Net cash used in operating activities |
| (146 | ) | (153 | ) | ||
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Cash flows used in investing activities: |
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Purchases of property and equipment |
| (20 | ) | (10 | ) | ||
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Net cash used in investing activities |
| (20 | ) | (10 | ) | ||
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Cash flows from financing activities: |
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Purchase of Treasury Stock |
| ¾ |
| (5 | ) | ||
Deferred financing costs |
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| 3 |
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Proceeds from loans payable, net |
| 165 |
| 180 |
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Net cash provided by financing activities |
| 165 |
| 178 |
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Net change in cash and cash equivalents |
| (1 | ) | 15 |
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Cash and cash equivalents - beginning of period |
| 4 |
| 8 |
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Cash and cash equivalents - end of period |
| $ | 3 |
| $ | 23 |
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See accompanying notes to unaudited consolidated financial statements.
3
ASTREX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - UNAUDITED FINANCIAL STATEMENTS
The consolidated balance sheet as of June 30, 2002 and the consolidated statements of income and the statement of cash flows for the three months ended June 30, 2002 and 2001, have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normally recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows at June 30, 2002 (and for all periods presented) have been made.
Certain information and note disclosures, normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America, have been condensed or omitted. It is suggested that these consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Annual Report on Form 10-KSB for the year ended March 31, 2002 filed by the Company. The results of operations for the periods ended June 31, 2002 and 2001 are not necessarily indicative of the operating results for the respective full years.
NOTE B — DISCONTINUED OPERATIONS
On November 1, 2001, the measurment date, the Company approved a plan to close TF Cushing, Inc., (TF Cushing) a wholly owned subsidiary of the Company. The decision was made based on TF Cushing’s declining sales over the past several years, and the Company’s opinion that a return to profitability was unlikely. The Company also felt that TF Cushing’s customer base, supplier base, and business focus (MRO (Maintenance Repair Organization) vs OEM(Original Equipment Manufacturer)) were significantly different from the Company’s core business and therefore not easily integrated into the Company’s core operations. The Company recognized a loss for the period ended December 31, 2001 from discontinued operations of approximately $80,000 (net of state net worth tax of $1,400) for the seven months up to the measurement date. The Company recognized a loss from disposal of its discontinued operations of approximately $265,000 from the measurement date to December 31, 2001. The loss on disposal included operating losses from the measurement date of approximately $44,000, loss on disposal of inventory of approximately $70,000 and estimates for further impairment of inventory caused by the disposal decision of $100,000.
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The remainder of the disposal loss included liabilities for severance and estimates for miscellaneous expenses related to the disposal of its TF Cushing subsidiary. The Company retained TF Cushing’s remaining assets and assumed its liabilities at December 31, 2001, consisting of net accounts receivable of approximately $44,000, net inventory of approximately $15,000 and liabilities of approximately $59,000. For the three months ended June 30, 2001, the Company incurred a loss from discontinued operations of $36,000.
NOTE C — EARNINGS PER COMMON SHARE
The following table sets forth the reconciliation of the weighted average number of common shares:
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| Three months ended |
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| 2002 |
| 2001 |
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Basic |
| 5,607,459 |
| 5,471,552 |
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Effect of Series B Convertible Preferred Stock |
| 1,691,199 |
| 1,897,381 |
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Effect of dilutive securities (non-vested restricted stock) |
| 40,000 |
| 65,000 |
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Diluted |
| 7,340,658 |
| 7,433,933 |
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5
ASTREX, INC. AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATIONS
RESULTS OF OPERATIONS
During the quarter ending December 31, 2001, the Company approved and implemented a plan to close its wholly owned subsidiary, TF Cushing. TF Cushing had operated as a separate Maintenance Repair Organization (“MRO”) distributor of electronic, electrical, and industrial supplies, with a customer base, supplier base and business focus (MRO vs Original Equipment Manufacturer (“OEM”)), significantly different from the Company’s core business. Based on several years of declining sales, the potential of its two key franchises, the Company’s opinion that a return to profitability was extremely unlikely, and the Company’s opinion that TF Cushing’s business could not be efficiently integrated into its core business, the decision was made to discontinue operations.
The following discussion of results of operations is from continuing operations and, except as indicated, exclusive of the Company’s TF Cushing subsidiary.
Income from continuing operations for the three months ended June 30, 2002 was approximately $129,000, a decrease of $91,000 or 41% from the same three month period last fiscal year. This decrease is principally the result of the lower sales volume. For the three months ended June 30, 2001, the Company incurred a loss from discontinued operations of $36,000. As a result, net income for the three months ended June 30, 2002 was $129,000 as compared to net income of $184,000 in the comparable quarter a year ago. Given the severe downturn generally experienced in the electronic industry, the Company is pleased with these results. Future results are somewhat dependent on the recovery in the overall electron component market, although the Company’s non-reliance on any one market segment helps mitigate any future negative impact.
Sales decreased by approximately $1,123,000 or 23%, for the three months ended June 30, 2002, from the comparable three month period in 2001. To a significant extent “Sales” reflect shipping of past confirmed orders (i.e. “backlog”) as opposed to placement of orders during the quarter (i.e. “bookings”). During the quarter ended June 30, 2002 backlog decreased approximately 30% with confirmed but unshipped orders at June 30, 2002 of approximately $2,851,000 as compared to approximately $4,096,000 at June 30, 2001. Bookings for the quarter ended June 30, 2002 decreased by 18% as compared to the comparable quarter in 2001, $3,642,000 compared to $4,417,000.
The Company’s gross margin improved to 25.3% for the three months ended June 30, 2002 as compared to 22.5% for the same period last year. The change is attributable to improved sales from higher margin product lines as well as reductions in sales from lower margin product lines.
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Selling, general and administrative expenses decreased by approximately $34,000, or 4%, for the three months ended June 30, 2002 from the comparable previous three month period in 2001. This decrease was primarily the result of increased reimbursement of advertising costs received by the Company from various vendors.
Interest expense decreased by approximately $25,000 for the three months ended June 30, 2002, from the previous comparable three month period in 2001 due to a reduction in interest rates as well as a reduction in borrowings by the Company.
The provision for income taxes for the three months ended June 30, 2002 and 2001 consists principally of state and local taxes.
LIQUIDITY AND CAPITAL RESOURCES
The Company utilized approximately $146,000 for its operating activities during the three months ended June 30, 2002. At June 30, 2002, the Company had working capital of $5,810,000 and its stockholders’ equity was $4,865,000. The Company believes that its present working capital, cash generated from operations and amounts available under the loan agreement will be sufficient to meet its cash needs during the next year. The Company’s principal credit facility is a line of credit and a term loan from the same bank lender (“Line”). The Line is secured by substantially all of the Company’s assets including a mortgage on the 205 Express Street property. The term of the Line runs to April 30, 2005. Borrowings under the line of credit portion of the Line, are based on the Company’s inventory and receivables. On June 30, 2002, the Company owed $1,694,000 on the Line. The Company’s relationship with its secured lender is satisfactory and the Company believes that the lending arrangement will be adequate for the foreseeable future. The Company currently has no significant commitments for capital expenditures.
CAUTIONARY LANGUAGE REGUARDING FORWARD LOOKING STATEMENTS
When used herein, the words “believe,” “anticipate,” “think,” “intend,” “will be,” “expect” and similar expressions identify forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are not guarantees of future performance and involve certain risks and uncertainties discussed herein, which could cause actual results to differ materially from those in the forward-looking statements. Readers are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date hereof. Readers are also urged carefully to review and consider the various disclosures made by the Company which attempt to advise interested parties of the factors which affect the Company’s business, including, without limitation, the disclosures made in the Company’s Annual Report on Form 10-KSB for the fiscal year ended March 31, 2002 under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operation.”
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Item 1. Legal Proceedings.
none
Item 2. Changes in Securities.
none
Item 3. Default Upon Senior Securities.
none
Item 4. Submission of Matters to a Vote of Security Holders.
none
Item 5. Other Information
In the three months ended June 30, 2001, the Company purchased 15,000 shares of its stock on the open market. These shares were recorded as treasury stock at their aggregate cost of approximately $5,000.
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Item 6. Exhibits and Reports on Form 8–K.
none
(A) Exhibits
Exhibit | Description | Previously Filed and Incorporated |
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| by reference or Filed Herewith |
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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
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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
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(B) Reports on Form 8-K:
None
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In accordance with the requirements of Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf, thereunto duly authorized.
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| ASTREX, INC. | |
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Date: | August 12, 2002 |
| By: | s/ Michael McGuire | |
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| Michael McGuire | |
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| Director, President and | |
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| Chief Executive Officer | |
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| CHIEF FINANCIAL OFFICER | |
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| OF ASTREX, INC. | |
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Date: | August 12, 2002 |
| By: | s/ Joseph Looney | |
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| Joseph Looney | |
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| Chief Financial Officer |
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CERTIFICATION OF PERIODIC REPORT
I, Michael McGuire, President and Chief Executive Officer of Astrex, Inc. (the “Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:
1. The Quarterly Report of Form 10-QSB of the Company for the quarterly period ended June 30, 2002 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d); and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
August 12, 2002 |
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| s/ Michael McGuire |
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| Michael McGuire | |
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| President and CEO |
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CERTIFICATION OF PERIODIC REPORT
I, Joseph Looney, Chief Financial Officer of Astrex, Inc. (the “Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:
1. The Quarterly Report of Form 10-QSB of the Company for the quarterly period ended June 30, 2002 (the “Report���) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d); and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
August 12, 2002 |
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| s/ Joseph Looney |
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| Joseph Looney | |
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| Chief Financial Officer |
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