SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A2
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 1999
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number: 1-4338
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EAC INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
New York 21-0702336
- ---------------------------- ------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2111 CLARIDGE LANE, NORTHBROOK, IL 60062
(Address of principal executive offices) (Zip Code)
(847) 509-8657
(Issuer's telephone number, including area code)
Check whether the Issuer (1) 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 [X] NO [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at July 31, 1999
- -------------------------------------- ----------------------------------
Common Stock, par value $.10 per share 2,885,521 shares
Page 1.
- INDEX -
PAGE(S)
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PART I. Financial Information:
ITEM 1. Financial Statements
Consolidated Condensed Balance Sheets - July 31, 1999 (Unaudited)
and January 31, 1999 3.
Consolidated Condensed Statements of Operations (Unaudited) -
Three and Six Months Ended July 31, 1999 and 1998 4.
Consolidated Condensed Statements of Cash Flows (Unaudited) -
Six Months Ended July 31, 1999 and 1998 5.
Notes to Interim Consolidated Condensed Financial Statements (Unaudited) 6.
ITEM 2. Management's Discussion and Analysis or Plan of Operation 8.
PART II. Other Information 11.
SIGNATURES 12.
EXHIBITS:
Exhibit 27 - Financial Data Schedule
Page 2.
PART I. FINANCIAL INFORMATION:
ITEM I. FINANCIAL STATEMENTS:
EAC INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
- ASSETS -
JULY 31, January 31,
1999 1999
---------------- ----------------
(UNAUDITED)
CURRENT ASSETS:
Cash $ 621,419 $ 467,910
Notes and accounts receivable - net of allowance for doubtful accounts
of $20,000 at July 31, and January 31, 1999, respectively 196,280 180,161
Inventories 62,460 60,041
Prepaid expenses 31,092 20,878
Due from buyer (Note 2) 80,000 -
Net assets of discontinued operations (Note 2) - 206,135
---------------- ----------------
TOTAL CURRENT ASSETS 991,251 935,125
---------------- ----------------
PROPERTY, PLANT AND EQUIPMENT, NET 213,167 224,885
---------------- ----------------
OTHER ASSETS:
Due from buyer (Note 2) 120,000 -
Costs in excess of net assets acquired - net 155,427 162,621
Other assets 4,404 4,404
---------------- ----------------
279,831 167,025
---------------- ----------------
$ 1,484,249 $ 1,327,035
================ ================
- LIABILITIES AND SHAREHOLDERS' EQUITY -
CURRENT LIABILITIES:
Accounts payable $ 155,031 $ 143,899
Accrued expenses 304,951 319,353
Long-term liabilities - current portion 17,128 23,745
---------------- ----------------
TOTAL CURRENT LIABILITIES 477,110 486,997
---------------- ----------------
LONG-TERM LIABILITIES - NET OF CURRENT PORTION 342,106 360,917
---------------- ----------------
COMMITMENTS AND CONTINGENCIES (NOTE 4)
SHAREHOLDERS' EQUITY:
Common stock, $.10 par value; 20,000,000 shares authorized, 2,892,819
shares issued at July 31, and January 31, 1999 289,282 289,282
Capital in excess of par value 10,546,048 10,546,048
Accumulated deficit (10,121,695) (10,307,607)
---------------- ----------------
713,635 527,723
Less: Common stock in treasury, 7,298 shares at cost at
July 31, and January 31, 1999 (48,602) (48,602)
---------------- ----------------
665,033 479,121
---------------- ----------------
$ 1,484,249 $ 1,327,035
================ ================
The accompanying notes are an integral part of these consolidated statements.
Page 3.
EAC INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
For The Three Months For The Six Months
Ended July 31, July 31,
------------------------------ ------------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
NET SALES $ 408,215 $ 390,503 $ 754,748 $ 778,871
------------ ------------ ------------ ------------
COSTS AND EXPENSES:
Cost of products sold 248,955 265,640 487,359 544,491
Selling, general and administrative expenses 174,131 185,082 318,106 385,981
------------ ------------ ------------ ------------
TOTAL COSTS AND EXPENSES 423,086 450,722 805,465 930,472
------------ ------------ ------------ ------------
OPERATING (LOSS) (14,871) (60,219) (50,717) (151,601)
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSES):
Interest expense (1,352) (20,598) (2,830) (22,542)
Interest and other income 24,960 1,916 33,977 4,711
------------ ------------ ------------ ------------
23,608 (18,682) 31,147 (17,831)
------------ ------------ ------------ ------------
INCOME (LOSS) BEFORE INCOME TAXES 8,737 (78,901) (19,570) (169,432)
Income taxes, net of operating loss carryforward - - - -
------------ ------------ ------------ ------------
INCOME (LOSS) FROM CONTINUING OPERATIONS 8,737 (78,901) (19,570) (169,432)
------------ ------------ ------------- ------------
DISCONTINUED OPERATIONS (NOTE 2):
(Loss) from operations of discontinued subsidiaries
- net of taxes - (88,096) (34,736) (101,065)
Gain on disposal of operating assets of
discontinued subsidiary - net of taxes - - 240,218 233,000
------------ ------------ ------------ ------------
- (88,096) 205,482 131,935
------------ ------------ ------------ ------------
NET INCOME (LOSS) $ 8,737 (166,997) $ 185,912 $ (37,497)
============ ============ ============ ============
INCOME (LOSS) PER SHARE (NOTE 3):
Continuing operations $ - $ (.03) $ (.01) $ (.06)
Discontinued operations - (.03) .07 .05
------------ ------------ ------------ ------------
$ - $ (.06) $ .06 $ (.01)
============ ============ ============ ============
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 2,885,521 2,885,521 2,885,521 2,815,569
============ ============ ============ ============
The accompanying notes are an integral part of these consolidated statements.
Page 4.
EAC INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For The Six Months
Ended July 31,
----------------------------
1999 1998
------------- ------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS:
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 185,912 $ (37,497)
Adjustments to reconcile net income to cash used by operating activities:
Depreciation and amortization 26,410 36,985
Gain on sale of assets (238,435) (270,855)
Change in assets and liabilities:
(Increase) in accounts and notes receivable (63,708) (51,174)
Decrease in inventories 189,990 5,781
(Increase) in prepaid expenses and other assets (2,447) (31,256)
(Decrease) increase in accounts payable, accrued expenses
and accrued income taxes (129,508) 94,082
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NET CASH (USED) BY OPERATING ACTIVITIES ( 31,786) (253,934)
------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of assets 200,000 385,100
Capital expenditures (7,786) (27,678)
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NET CASH PROVIDED BY INVESTING ACTIVITIES 192,214 357,422
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CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from sale of common stock - 101,019
Payments of long-term debt (6,919) (106,027)
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NET CASH (USED) BY FINANCING ACTIVITIES (6,919) (5,008)
------------- ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 153,509 98,480
CASH AND CASH EQUIVALENTS, AT BEGINNING OF YEAR 467,910 450,031
------------- ------------
CASH AND CASH EQUIVALENTS, AT END OF PERIOD $ 621,419 $ 548,511
============= ============
The accompanying notes are an integral part of these consolidated statements.
Page 5.
EAC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION:
In the opinion of management, the accompanying unaudited interim
consolidated condensed financial statements of EAC Industries,
Inc. (the "Company") and its subsidiaries, contain all
adjustments necessary (consisting of normal recurring accruals or
adjustments only) to present fairly the Company's financial
position as of July 31,1999 and the results of its operations for
the three and six month periods ended July 31, 1999 and 1998, and
its cash flows for the six month periods ended July 31, 1999 and
1998.
The accounting policies followed by the Company are set forth in
Note 3 to the Company's consolidated financial statements
included in its Annual Report on Form 10-KSB for the year ended
January 31, 1999, which is incorporated herein by reference.
Specific reference is made to this report for a description of
the Company's securities and the notes to consolidated financial
statements.
The results of operations for the three and six month periods
ended July 31, 1999 are not necessarily indicative of the results
to be expected for the full year.
NOTE 2 - DISCONTINUED OPERATIONS:
On March 1, 1999, the Company completed the sale of the operating
assets of Goodren Products Corporation ("Goodren") for a price of
$400,000 plus the assumption of all trade payable liabilities.
The payment terms are as follows: (i) $200,000 at closing, (ii)
$30,000 to be paid 180 days after closing plus interest accrued
at an annual rate of 7% (iii) $50,000 to be paid 360 days after
closing plus interest accrued at an annual rate of 7%, (iv)
$60,000 to be paid 540 days after closing plus interest accrued
at an annual rate of 7% (v) $60,000 to be paid 720 days after
closing plus interest accrued at an annual rate of 7%.
In June 1998, the Company completed the sale of substantially all
of the assets of Goodren Label Corporation (formerly Athena
Packaging Inc.) for an aggregate sale price of $277,000 including
inventory valued at the lower of cost or market.
Certain reclassifications have been made to the 1998 financial
statements in order to conform to the 1999 presentation. These
reclassifications relate to the disposition of assets as
disclosed above.
The accompanying financial statements have been presented to
reflect the results of the discontinued subsidiaries separately.
The following is a summary of the results of operations of
Goodren and Athena for the periods ended July 31, 1999 and 1998.
For The Six Months Ended July 31,
1999 1998
--------------- --------------
Goodren Products Corp.:
Revenues $ 181,928 $ 1,465,514
Income (loss) from operations (28,922) 102,387
Gain on sale of assets 240,218 -
Net income 211,296 102,387
Income per share $ .07 $ .04
Page 6.
EAC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - DISCONTINUED OPERATIONS (CONTINUED):
For The Six Months Ended July 31,
1999 1998
--------------- --------------
Goodren Label Corp. (Athena):
Revenues $ - $ 320,685
Loss from operations (5,814) (203,452)
Gain on sale of assets - 233,000
Net income (loss) (5,814) 29,548
Income (loss) per share $ - $ .01
NOTE 3 - EARNINGS (LOSS) PER SHARE:
Earnings per share has been computed on the basis of the weighted
average number of common shares outstanding during each period
presented, in accordance with the provisions of SFAS No. 128.
NOTE 4 - CONTINGENCY:
Goodren withdrew from participating in the District 65 Union
Pension Plan (the "Plan"), which withdrawal resulted in the
assessment of a withdrawal liability owed to the Plan by Goodren.
During the year ended January 31, 1995, the Company accrued a
reserve for an estimated liability of $560,000 which counsel to
the Company believed would be payable over a period of
approximately 22 years beginning approximately one year from the
withdrawal date. In March of 1996, the Company signed an
agreement with the Plan whereby they will make quarterly payments
of $7,548. At September 30, 1996, the Company and Goodren entered
into a Settlement Agreement with the Trustees of the union
pension plan whereby Goodren's pension fund liability was reduced
to $360,000 payable in 80 equal quarterly payments of $8,752
including annual interest at a rate of 8%. In December 1997, the
Company entered into a Hardship Settlement Agreement with the
Trustees whereby it was able to reduce its quarterly
payments/obligations to $3,000 because of the Company's poor
financial condition. If the Company's financial condition should
improve so that there would be no hardship in making future
payments (i.e. payment of the withdrawal liability does not
impede its ability to operate), then the Plan may terminate the
Hardship Settlement and require the Company to make all payments
due after the date of such improvement in accordance with the
original Settlement Agreement. Should this occur, then the
Company's quarterly payment would revert back to $8,752. The
Company continues to make quarterly payments of $3,000.
Page 7.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION:
INTRODUCTION:
EAC Industries, Inc., the Company, is a holding company with currently
one operating subsidiary, Flexible Printed Products, Inc.
("Flexible"). Flexible produces and prints on plastic, pre-cure,
in-mold heat transfer labels for the identification and decoration of
rubber and silicone hoses, belts and tire patches.
In June 1998, the Company completed the sale of substantially all of
the assets of Goodren Label Corporation (formerly Athena Packaging
Inc.). Goodren Label Corporation ("Athena"), a wholly owned subsidiary
of the Company, was in the business of producing printed, laminated,
embossed and hot stamped labels, wraps, seals and decals for the
cosmetics, pharmaceutical and health and beauty aids industries. The
aggregate sales price of $277,000 included inventory valued at the
lower of cost or market.
On March 1, 1999, the Company completed the sale of the operating
assets of Goodren Products Corporation ("Goodren"), a wholly-owned
subsidiary of the Company, for a price of $400,000 plus the assumption
of all trade payable liabilities. Goodren was in the business of
designing and providing point-of-purchase advertising displays and
wall decorations on semi-durable plastic.
The financial information presented herein includes: (i) Consolidated
condensed balance sheets as of July 31, 1999 and January 31, 1999;
(ii) Consolidated condensed statements of operations for the three and
six month periods ended July 31, 1999 and 1998 and (iii) Consolidated
condensed statements of cash flows for the six month periods ended
July 31, 1999 and 1998.
RESULTS OF CONTINUING OPERATIONS:
Sales for the three-month period ended July 31, 1999 were $408,000 as
compared to $390,000 for the comparable period of the prior year,
reflecting an increase of $18,000 or 4.6%. Cost of sales as a
percentage of sales was 61.0% for the three-month period ended July
31, 1999 as compared to 68.0% for the three-month period ended July
31, 1998. Sales for the six-month period ended July 31, 1999 were
$755,000 as compared to $779,000 for the comparable period of the
prior year, reflecting a decrease of $24,000 or 3.1%. Cost of sales as
a percentage of sales was 64.6% for the six-month period ended July
31, 1999 as compared to 69.9% for the three-month period ended July
31, 1998.
Selling, general and administrative expenses decreased by $11,000 and
$68,000 when comparing the three and six month periods ended July 31,
1999 and 1998. These decreases result from the implementation of cost
saving methods.
For the three months ended July 31, 1999 the Company reflected net
income from continuing operations of $8,737 compared to a net loss of
$78,901 for the comparative period of the prior year. For the six
month periods ended July 31, 1999 and 1998, the Company reflected a
net loss from operations of $19,570 and $169,432, respectively. This
decrease in the operating loss was primarily due to the reduced
operating overhead as mentioned above.
Page 8.
DISCONTINUED OPERATIONS:
In June 1998, the Company completed the sale of substantially all of the
assets of Goodren Label Corporation (formerly Athena Packaging Inc.) for an
aggregate sales price of $277,000 including inventory valued at the lower
of cost or market. The gain recognized on the sale of these assets
aggregated $233,000. On March 1, 1999, the Company completed the sale of
the operating assets of Goodren Products Corporation ("Goodren") for a
price of $400,000 plus the assumption of all trade payable liabilities. The
Company realized a gain of $240,218 upon the sale of Goodren's assets. See
Note 2 of Notes to the Consolidated Financial Statements for a further
description of these transactions.
For the six month period ended July 31, 1999, Goodren reported a loss from
operations of $34,736. The gain realized from the sale of the assets of
Goodren during the current period aggregated $240,218. For the six month
period ended July 31, 1998, Goodren and Athena reported a combined
operating loss of $101,065 and recognized a gain from the sale of equipment
of $233,000.
LIQUIDITY AND CAPITAL RESOURCES:
At July 31, 1999, the Company's working capital was $514,000 compared to
working capital of $448,000 at its year ended January 31, 1999. Cash
amounted to $621,000 at July 31, 1999 compared to $468,000 at January 31,
1998.
The Company believes that its cash on hand will be sufficient to fund
planned operations for at least the next 12-month period. The Company
(primarily Flexible) has no planned capital expenditures for the next year.
YEAR 2000 ISSUES
The Year 2000 ("Y2K") problem is the result of computer programs being
written using two digits (rather than four) to define the applicable year.
Any of the Company's programs that have time-sensitive software may
recognize a date using "00" as the year 1900 rather than the year 2000,
which could result in miscalculations or system failures. The Company has
instituted a Y2K compliance program, the objective of which is to determine
and assess the risks of the Y2K issue, and plan and institute mitigating
actions to minimize those risks. The Company's standard for compliance
requires that, for a computer system or business process to be Y2K
compliant, it must be designed to operate without error in date and
date-related data prior to, on and after January 1, 2000. The Company's
computer's hardware is Y2K compliant and it has purchased an
"off-the-shelf" business software program, for internal use, which is also
Y2K compliant. The Company has spent less than $10,000 to date and expects
that any further expenditures will be minimal.
CONTINGENCY PLANS
The Company's management is in the process of developing a "worst-case
scenario" with respect to Y2K noncompliance and to develop contingency
plans designed to minimize the effects of such scenario. Although
management believes that it is very unlikely that any of these worst-case
scenarios will occur, contingency plans will be developed and will address
both IT system and non-IT system failure.
Page 9.
The Company intends to request assurances of Y2K readiness from its
telephone and electrical suppliers. However, management has been informed
that some suppliers have either declined to provide the requested
assurances, or have limited the scope of assurances that they are willing
to give. If suppliers of services that are critical to the Company's
operations were to experience business disruptions as a result of their
lack of Y2K readiness, their problems could have a material adverse effect
on the financial position and results of operations of the Company. The
impact of a failure of readiness by critical suppliers cannot be estimated
with confidence, and the effectiveness of contingency plans to mitigate the
effect of any such failure is largely untested. Management cannot provide
any assurance that there will be no material adverse effects to the
financial condition or results of operations of the Company as a result of
Y2K issues.
OTHER:
This report contains forward-looking statements and information that is
based on management's beliefs and assumptions, as well as information
currently available to management. When used in this document, the words
"anticipate," "estimate," "expect," "intend" and similar expressions are
intended to identify forward-looking statements. Although the Company
believes that the expectations reflected in such forward-looking statements
are reasonable, it can give no assurance that such expectations will prove
to be correct. Such statements are subject to certain risks, uncertainties
and assumptions. Should one or more of these risks or uncertainties
materialize, or should the underlying assumptions prove incorrect, actual
results may vary materially from those anticipated, estimated or expected.
Among the key factors that may have a direct bearing on the Company's
operating results are fluctuations in the economy, the degree and nature of
competition, the risk of delay in product development and release dates and
acceptance of, and demand for, the Company's products.
Page 10.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports
(a) Exhibits:
(27) Financial Data Schedule
Page 11.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
EAC INDUSTRIES, INC.
--------------------
Registrant
/s/ Peter B. Fritzsche
----------------------
Date: September 14, 1999
Peter B. Fritzsche
Chief Executive Officer and Principal
Accounting Officer
Page 12.