SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 20, 1999
EA Industries, Inc.
(Exact name of registrant as specified in its charter)
New Jersey
(State or other jurisdiction of incorporation)
1-4680 21-0606484
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(Commission File Number) (IRS Employer Identification No.)
106 Apple Street, Tinton Falls, New Jersey 07724
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(Address of principal executive offices, including zip code)
(732) 219-9411
(Registrant's telephone number)
185 Monmouth Parkway, West Long Branch, New Jersey 07764-9989
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(Former name or former address, if changed since last report.)
Item 5. Other Events.
Tanon Bankruptcy
On December 2, 1998, Tanon Manufacturing, Inc. ("Tanon"), the principal
operating subsidiary of the Registrant filed a voluntary proceeding (the "Tanon
Bankruptcy Case") under Chapter 11 of the United States Bankruptcy Code in the
United States Bankruptcy Court for the Northern District of California (the
"Tanon Court"). After a court approved bidding process, on February 1, 1999,
Tanon sold certain assets (the "Assets") and (ii) granted certain rights to
acquire other assets (the "Rights") to nominees of Smartflex Systems, Inc.
("Smartflex"), a Delaware corporation. These nominees are wholly-owned
subsidiaries of Smartflex, which are not related to the Registrant or Tanon.
The Assets sold included (i) the right to provide services to all
customers of Tanon (ii) all work-in-process inventory ("WIP") of Tanon at
closing related to customers acquired by Smartflex, (iii) substantially all of
the equipment owned by Tanon (the "Equipment"), and (iv) such contractual rights
of Tanon as specified by Smartflex. The Rights that were granted include the
right to purchase raw materials ("Raw Materials") in the inventory of Tanon for
a ninety day period after closing at a price equal to sixty percent (60%) of the
lesser of (a) the cost to Tanon of such inventory or (b) its market value.
The purchase price was $10,900,000 paid at Closing which included the
purchase price for the Equipment and an estimate of the WIP Inventory. There
will be an additional purchase price for the Raw Materials acquired by Smartflex
and an additional payment of a minimum of $2,500,000 and a maximum of $3,000,000
if the revenues in 1999 of the customers acquired by Smartflex exceed certain
revenue targets. Tanon retained its accounts receivable, which exceeded $6.1
million, net of reserves, and also retained any inventory or equipment which was
not sold to Smartflex. These assets are being sold by Tanon and the net proceeds
of the sale to Smartflex and the sale of such assets would be available to the
creditors of Tanon.
Proceeds from Sale
The Registrant is currently a creditor of Tanon and has asserted a
claim exceeding $30 million. Tanon currently owes approximately $15 million to
its creditors in addition to the amounts owed by Tanon to the Registrant and
Schroder and excluding possible claims by equipment lessors and the lessor's of
the real property leased by Tanon based on future lease obligations. The
disposition of the Registrant's claim by the Tanon Court is uncertain and the
Registrant at this time is unable to determine whether or how much it will
receive with respect to such claim or the timing of any such payment. Payment of
the Registrant's claim and the claims of other creditors are subject to approval
of the Tanon Court.
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Sale of SAI.
On May 20, 1999, Service Assembly, Inc. ("SAI"), a wholly-owned
subsidiary of completed the sale of substantially all of its assets for
$2,000,000 plus the assumption of all normal ongoing obligations of that
business. SAI retained its liability for Federal Income Tax payments and other
liabilities incurred before closing. Certain of the creditors of the Registrant
hold a security interest in SAI and would be legally entitled to the net
proceeds from its sale.
Bankruptcy Filing
On May 21, 1999, EA Industries, Inc. (the "Registrant") filed a
voluntary proceeding (the "EAI Bankruptcy Case") under Chapter 11 of the United
States Bankruptcy Code in the United States Bankruptcy Court for the Northern
District of New Jersey (the "Court"). The Registrant has had discussions with an
informal committee formed by certain of its major creditors concerning potential
reorganization plans, but the Registrant has not yet formulated such a plan. No
assurance can be given that the Registrant will be successful in formulating
such a plan, in implementing such a plan or of the effects on the shareholders
or the Creditors of such a plan or of the EAI Bankruptcy Case.
The Registrant had intended to utilize substantially all of its assets
and other resources to commercialize the software products and services (the
"Products") under development by its subsidiary, SupplyPoint Solutions, Inc.
("SPS") The Registrant currently owes in excess of $15 million to various
creditors, noteholders and debenture holders (collectively, the "Creditors").
The Registrant's ability to implement such a plan depended, among other factors,
on its completing the sale of SAI at a higher price and on reaching agreements
with the Creditors to restructure the terms of their loans to the Registrant.
The Registrant does not believe that such a plan is feasible at this time and is
exploring the sale of some or all of SPS to obtain additional value to satisfy
creditor claims.
Any reorganization plan implemented by the Registrant would likely
result in substantial dilution or elimination of the equity ownership of current
shareholders of the Registrant. .Any plan would be subject to approval of
creditors and the EAI Court. No assurance can be given that the Registrant will
be successful in achieving any or all of such results. In addition, no assurance
can be given of the effects on the shareholders or the Creditors of the EAI
Bankruptcy Case.
Except for historical matters contained in this Report, statements made
in this Report are forward-looking and are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. Investors
are cautioned that these forward-looking statements reflect numerous assumptions
and involve risks and uncertainties which may affect the Company's business and
prospects and cause actual results to differ materially from these
forward-looking statements, including failure to recover on the claim against
Tanon, failure to reach satisfactory agreements with the Creditors, failure to
develop the Products in a timely manner, or increased costs to develop the
Products, unsuccessful marketing of the Products, economic, competitive,
technological, governmental, and other factors discussed in the Company's
filings with the Securities and Exchange Commission.
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 hereto duly authorized.
EA Industries, Inc.
Registrant
By:________________________________
Frank Brandenberg
Date: June 1, 1999 President and CEO
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