As far as I can tell, the company that was involved in making the film (MOONTRAP LIMITED PARTNERSHIP) had a legal argument with the company funding the production; SGE ENTERTAINMENT in which they were accused of having
improperly distributed to its principals, funds that were designated
for the payment of production expenses.
and that as a result of the judgement (which cancelled the distribution contract)
[the] defendant will lose the benefits of an agreement to distribute
the film in perpetuity.
You can read the full judgement at http://statecasefiles.justia.com/documents/michigan/court-of-appeals-unpublished/19981218_C185564(0077)_185564.OPN.PDF?ts=1383754926
Regardless of the rights or wrongs of the legal battle (which seems to have ended in something of a stalemate) it follows that if either party now attempt to distribute the film, that would breach the judgement reached and result in immediate legal action on both sides.
EDIT/UPDATE - It looks like a company called DigiDreams has secured the rights to distribute the film in Germany. They've acquired a 35MM source (slightly higher quality than the VHS copy) and have upscaled it to Bluray quality as well as adding a director's commentary and an interview with the actors. It's described as :
"not perfect (there are some jump cuts in the print where footage has
been repaired) but certainly a improvement on the VHS version we’ve
been wearing out since it was first released."
There doesn't appear to be a US or UK release yet, but the German copy has the full US soundtrack on it, so you can always purchase it from overseas.