<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 1998
OR
( ) 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: 1-4338
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)
22 BLACKSTONE AVENUE, BRANFORD, CT 06405
(Address of principal executive offices) (Zip Code)
(203) 315-8020
(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.
<TABLE>
<CAPTION>
Class Outstanding at April 30, 1998
<S> <C>
Common Stock, par value $.10 per share 3,030,588 shares
</TABLE>
<PAGE> 2
- INDEX -
<TABLE>
<CAPTION>
PAGE(S)
-------
<S> <C> <C>
PART I. Financial Information:
ITEM 1. Financial Statements
Consolidated Condensed Balance Sheets - April 30, 1998 (Unaudited)
and January 31, 1998 3.
Consolidated Condensed Statements of Operations (Unaudited) -
Three Months Ended April 30, 1998 and 1997 4.
Consolidated Condensed Statements of Cash Flows (Unaudited) -
Three Months Ended April 30, 1998 and 1997 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 10.
SIGNATURES 11.
EXHIBITS:
Exhibit 11 - Earnings Per Share
Exhibit 27 - Financial Data Schedule
</TABLE>
Page 2.
<PAGE> 3
PART I. FINANCIAL INFORMATION:
ITEM I. FINANCIAL STATEMENTS:
EAC INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
- ASSETS -
APRIL 30, January 31,
1998 1998
---- ----
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash $ 624,532 $ 450,031
Notes and accounts receivable - net of allowance for doubtful accounts
of $45,566 at April 30, and January 31, 1998, respectively 724,835 775,748
Inventories 378,744 293,089
Prepaid taxes and expenses 52,540 42,244
------------ ------------
TOTAL CURRENT ASSETS 1,780,651 1,561,112
------------ ------------
PROPERTY, PLANT AND EQUIPMENT, NET 472,884 472,291
------------ ------------
OTHER ASSETS:
Costs in excess of net assets acquired - net 263,537 269,269
Other assets 8,586 4,182
------------ ------------
272,123 273,451
------------ ------------
$ 2,525,658 $ 2,306,854
============ ============
- LIABILITIES AND SHAREHOLDERS' EQUITY -
CURRENT LIABILITIES:
Accounts payable $ 538,239 $ 434,383
Accrued expenses 452,304 580,528
Long-term liabilities - current portion 76,114 78,414
Income taxes payable 2,200 2,200
------------ ------------
TOTAL CURRENT LIABILITIES 1,068,857 1,095,525
------------ ------------
LONG-TERM LIABILITIES - NET OF CURRENT PORTION 384,977 393,197
------------ ------------
COMMITMENTS AND CONTINGENCIES (NOTE 3)
SHAREHOLDERS' EQUITY (NOTE 4):
Common stock, $.10 par value; 20,000,000 shares authorized, 3,030,588 and
2,319,285 shares issued at April 30, and January 31, 1998, respectively 303,059 231,929
Capital in excess of par value 10,506,842 10,504,380
Accumulated deficit (9,738,077) (9,867,577)
------------ ------------
1,071,824 868,732
Less: Common stock in treasury, 0 and 7,598 shares at cost at
April 30, and January 31, 1998, respectively -- (50,600)
------------ ------------
1,071,824 818,132
------------ ------------
$ 2,525,658 $ 2,306,854
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
Page 3.
<PAGE> 4
EAC INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
For The Three Months
Ended April 30,
------------------------
1998 1997
---- ----
<S> <C> <C>
NET SALES $ 1,334,397 $ 1,742,656
----------- -----------
COSTS AND EXPENSES:
Cost of products sold 1,035,740 1,240,253
Selling, general and administrative expenses 369,580 476,036
----------- -----------
TOTAL COSTS AND EXPENSES 1,405,320 1,716,289
----------- -----------
OPERATING (LOSS) INCOME (70,923) 26,367
----------- -----------
OTHER INCOME (EXPENSES):
Gain on sale of fixed assets 197,000 --
Interest expense (1,944) (10,556)
Interest and other income 5,367 2,136
----------- -----------
200,423 (8,420)
----------- -----------
INCOME BEFORE INCOME TAXES 129,500 17,947
Income taxes, net of operating loss carryforwards -- --
----------- -----------
NET INCOME $ 129,500 $ 17,947
=========== ===========
INCOME PER SHARE (NOTE 2) $ .05 $ (.01)
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
Page 4.
<PAGE> 5
EAC INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For The Three Months
Ended April 30,
-----------------------
1998 1997
---- ----
<S> <C> <C>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS:
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 129,500 $ 17,947
Adjustments to reconcile net income to cash provided from operating activities:
Depreciation and amortization 31,715 40,502
Gain on sale of fixed assets (197,000) --
Change in assets and liabilities:
Decrease (increase) in accounts and notes receivable 50,913 (139,542)
(Increase) in inventories (85,655) (67,282)
(Increase) in prepaid expenses and other assets (14,700) (10,292)
(Decrease) increase in accounts payable, accrued expenses
and accrued income taxes (12,576) 167,224
--------- ---------
NET CASH (USED) PROVIDED BY OPERATING ACTIVITIES (97,803) 8,557
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of fixed assets 197,000 --
Capital expenditures (26,576) (4,550)
--------- ---------
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES 170,424 (4,550)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from sale of common stock 124,192 --
Net decrease in short-term debt -- (8,032)
Payments of long-term debt (22,312) (146,936)
--------- ---------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 101,880 (154,968)
--------- ---------
NET INCREASE (DECREASE ) IN CASH AND CASH EQUIVALENTS 174,501 (150,961)
CASH AND CASH EQUIVALENTS, AT BEGINNING OF YEAR 450,031 594,412
--------- ---------
CASH AND CASH EQUIVALENTS, AT END OF PERIOD $ 624,532 $ 443,451
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
Page 5.
<PAGE> 6
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 April 30, 1998 and the results of its operations
and cash flows for the three month periods ended April 30, 1998
and 1997.
The accounting policies followed by the Company are set forth in
Note 2 to the Company's consolidated financial statements
included in its Annual Report on Form 10-KSB for the year ended
January 31, 1998, 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-month period ended April
30, 1998 are not necessarily indicative of the results to be
expected for the full year.
NOTE 2 - 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 3 - CONTINGENCY:
Goodren Products Corp., a subsidiary of the Company, withdrew
from participating in the District 65 Union Pension Plan (the
"Plan"). This 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. On
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%. The Company applied for relief
as a "hardship case" pursuant to the Settlement Agreement and
received approval to reduce its quarterly obligations to $3,000
until such time as the Company is out of hardship.
Page 6.
<PAGE> 7
EAC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 4 - COMMON STOCK:
In November 1997, the Company filed a statement with the Securities and
Exchange Commission to register 2,283,551 shares of its common stock to
be issued upon exercise of the rights to subscribe for such shares,
"the Rights Offering". Shareholders holding 100 shares of common stock
or more at the close of business on November 10, 1997 (the record date)
received one non-transferable Right for each share of common stock
held. Each Right entitles the holder to purchase one share of Company
common stock at an exercise price of $.22 per share. Simultaneously
with the closing, the Company effected (i) a 100 to 1 reverse split of
its common stock through a reclassification of its common stock and
(ii) an immediate subsequent reclassification with a forward stock
split pursuant to which each holder of the reclassified common stock
would receive 99 additional shares of reclassified common stock. The
effect of this was to eliminate all holders of less than 100 shares
(pre-reverse split) of common stock, such stockholders receiving cash
of $.28125 per share in lieu of their fractional interests.
This offering was successfully consummated in February 1998. The
Company issued 718,901 shares of common stock and realized net proceeds
aggregating $124,192.
NOTE 5 - SUBSEQUENT EVENT:
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 $229,000 plus inventory valued at
the lower of cost or market. The buyer will pay the sales price as
follows: (i) $167,000 at closing, (ii) buyer to pay for inventory 90
days after the closing plus interest accrued at an annual rate of 7%
and (iii) $62,500 to be received 180 days after closing plus accrued
interest at 7% per annum.
Page 7.
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION:
INTRODUCTION:
EAC Industries, Inc., the Company, is a holding company with three
operating subsidiaries: Goodren Products Corporation ("Goodren"),
Goodren Label Corporation, formerly Athena Packaging, Inc. ("Athena")
and Flexible Printed Products, Inc. ("Flexible"). Goodren designs and
provides point-of-purchase advertising displays and wall decorations on
semi-durable plastic. In December 1997, the Company decided to cease
Goodren's production operations and establish an outsourcing
arrangement with another manufacturer. Goodren still continues to
market and distribute these products. Athena produces printed,
laminated embossed and hot-stamped labels, wraps, seals and decals for
the cosmetics, pharmaceutical and health and beauty aids industries.
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.
See Note 5 of Notes to Financial Statements regarding subsequent sale
of assets of Athena.
The financial information presented herein includes: (i) Consolidated
condensed balance sheets as of April 30, 1998 and January 31, 1998;
(ii) Consolidated condensed statements of operations for the three
month periods ended April 30, 1998 and 1997 and (iii) Consolidated
condensed statements of cash flows for the three month periods ended
April 30, 1998 and 1997.
RESULTS OF OPERATIONS:
Sales for the three-month period ended April 30, 1998 were $1,334,000
as compared to $1,743,000 for the comparable period of the prior year,
reflecting a decrease of $409,000 or 23%. Cost of sales as a percentage
of sales was 77.6% for the three-month period ended April 30, 1998 as
compared to 71.2% for the three-month period ended April 30, 1997. This
decrease in sales and the resulting increase in cost of sales is a
result (i) higher raw material and labor costs experienced by Flexible
and (ii) Goodren shifting the focus of its operations from
manufacturing to a sales oriented business.
Selling, general and administrative expenses decreased by $106,000
(from $476,000 to $370,000) when comparing the three-month periods
ended April 30, 1997 and 1998. These expenses remained at a constant
27% of sales for both periods.
For the three-month period ended April 30, 1998, the Company realized a
gain of $197,000 from the sale of manufacturing equipment no longer
being used by Goodren.
For the three months ended April 30, 1998 and 1997, the Company
reflected net income of $129,500 and $17,947, respectively. This
increase in earnings was primarily due to the gain on sale of fixed
assets net of the decrease in gross profit and reduced operating
overhead as mentioned above.
LIQUIDITY AND CAPITAL RESOURCES:
At April 30, 1998, the Company's working capital was $712,000 compared
to working capital of $466,000 at its year ended January 31, 1998. Cash
amounted to $625,000 at April 30, 1998 compared to $450,000 at January
31, 1997.
Page 8.
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
(CONTINUED):
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED):
During the three-month period ended April 30, 1998, the Company
successfully completed an offering of its shares of common stock and
realized net proceeds of approximately $124,000.
See Note 4 of Notes to Financial Statements.
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) is anticipating capital expenditures of
approximately $50,000, during the next year. Management believes that
these expenditures can be funded from existing resources.
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 9.
<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:
(11) Computation of Earnings per Common Share
(27) Financial Data Schedule
Page 10.
<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: June 19, 1998
Peter B. Fritzsche
Chief Executive Officer and
Principal
Accounting Officer
Page 11.
<PAGE> 1
EAC INDUSTRIES, INC.
EXHIBIT 11
COMPUTATION OF EARNINGS PER COMMON SHARE
(UNAUDITED)
<TABLE>
<CAPTION>
For The Three Months
Ended April 30,
-----------------------
1998 1997
---- ----
<S> <C> <C>
NET INCOME $ 129,500 $ 17,947
========== ==========
SHARES:
Weighted average shares outstanding 2,790,954 2,311,687
Other - options, warrants etc -- --
---------- ----------
2,790,954 2,311,687
========== ==========
PRIMARY EARNINGS PER SHARE $ .05 $ .01
========== ==========
</TABLE>
- Exhibit 11 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated financial statements for the three months ended April 30, 1998 and
is qualified in its entirety by reference to such statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> APR-30-1998
<CASH> 624,532
<SECURITIES> 0
<RECEIVABLES> 770,401
<ALLOWANCES> 45,566
<INVENTORY> 378,744
<CURRENT-ASSETS> 1,780,651
<PP&E> 1,343,852
<DEPRECIATION> 870,968
<TOTAL-ASSETS> 2,525,658
<CURRENT-LIABILITIES> 1,068,857
<BONDS> 384,977
0
0
<COMMON> 303,059
<OTHER-SE> 768,765
<TOTAL-LIABILITY-AND-EQUITY> 2,525,658
<SALES> 1,334,397
<TOTAL-REVENUES> 1,334,397
<CGS> 1,035,740
<TOTAL-COSTS> 1,035,740
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,944
<INCOME-PRETAX> 129,500
<INCOME-TAX> 0
<INCOME-CONTINUING> 129,500
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 129,500
<EPS-PRIMARY> .05
<EPS-DILUTED> .05
</TABLE>
