SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A
(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 _______
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)
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
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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
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Page 2.
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PART I. FINANCIAL INFORMATION:
ITEM I. FINANCIAL STATEMENTS:
EAC INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
- ASSETS -
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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 19,160 26,142
------------- -------------
TOTAL CURRENT LIABILITIES 479,142 489,394
------------- -------------
LONG-TERM LIABILITIES - NET OF CURRENT PORTION 152,583 158,520
------------- -------------
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 (9,934,204) (10,107,607)
------------- -------------
901,126 727,723
Less: Common stock in treasury, 7,298 shares at cost at
July 31, and January 31, 1999 (48,602) (48,602)
------------- -------------
852,524 679,121
------------- -------------
$ 1,484,249 $ 1,327,035
============= =============
The accompanying notes are an integral part of these consolidated statements.
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Page 3.
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EAC INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
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For The Three Months For The Six Months
Ended July 31, Ended 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 19,582 1,916 21,468 4,711
----------- ----------- ----------- -----------
18,230 (18,682) 18,638 (17,831)
----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES 3,359 (78,901) (32,079) (169,432)
Income taxes, net of operating loss carryforward - - - -
----------- ----------- ----------- -----------
INCOME (LOSS) FROM CONTINUING OPERATIONS 3,359 (78,901) (32,079) (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) $ 3,359 (166,997) $ 173,403 $ (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
=========== =========== =========== ===========
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The accompanying notes are an integral part of these consolidated statements.
Page 4.
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EAC INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
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For The Six Months
Ended July 31,
1999 1998
---------- ----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS:
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 173,403 $ (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 (116,999) 94,082
---------- ----------
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)
---------- ----------
NET CASH PROVIDED BY INVESTING ACTIVITIES 192,214 357,422
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from sale of common stock - 101,019
Payments of long-term debt (6,919) (106,027)
---------- ----------
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
========== ==========
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The accompanying notes are an integral part of these consolidated statements.
Page 5.
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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% and (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.
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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
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Page 6.
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EAC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - DISCONTINUED OPERATIONS (CONTINUED):
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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
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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.
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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 $3,359 compared to a net loss of
$78,901 for the comparative period of the prior year. However, the
Company continued to operate at a loss for the quarter, with higher
interest income and lower interest expense the principal factors for
the small net gain for the quarter. For the six month periods ended
July 31, 1999 and 1998, the Company reflected a net loss from
operations of $32,079 and $169,432, respectively. This decrease in the
operating loss was primarily due to the reduced operating overhead as
mentioned above.
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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 $512,000 compared
to working capital of $446,000 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 planned capital expenditures for the next
year in the amount of approximately $50,000, which can be funded from
existing resources.
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.
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
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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.
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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
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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
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<LEGEND>
The schedule contains summary financial information extracted from the
consolidated financial statements for the six months ended July 31, 1999 and is
qualified in its entirety by reference to such statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-Mos
<FISCAL-YEAR-END> Jan-31-2000
<PERIOD-START> Feb-01-1999
<PERIOD-END> Jul-31-1999
<CASH> 621,419
<SECURITIES> 0
<RECEIVABLES> 216,280
<ALLOWANCES> 20,000
<INVENTORY> 62,460
<CURRENT-ASSETS> 991,251
<PP&E> 393,553
<DEPRECIATION> 180,386
<TOTAL-ASSETS> 1,484,249
<CURRENT-LIABILITIES> 479,142
<BONDS> 152,583
<COMMON> 289,282
0
0
<OTHER-SE> 563,242
<TOTAL-LIABILITY-AND-EQUITY> 1,484,249
<SALES> 754,748
<TOTAL-REVENUES> 754,748
<CGS> 487,359
<TOTAL-COSTS> 805,465
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,830
<INCOME-PRETAX> (32,079)
<INCOME-TAX> 0
<INCOME-CONTINUING> (32,079)
<DISCONTINUED> 205,482
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 173,403
<EPS-BASIC> .06
<EPS-DILUTED> .06
</TABLE>
