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, 2000
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.
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(Exact name of registrant as specified in its charter)
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New York 21-0702336
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
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2111 CLARIDGE LANE, NORTHBROOK, IL 60062
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(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.
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Class Outstanding at April 30, 2000
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Common Stock, par value $.10 per share 2,885,521 shares
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- INDEX -
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Page(s)
PART I. Financial Information:
ITEM 1. Financial Statements
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Consolidated Condensed Balance Sheets - April 30, 2000 (Unaudited)
and January 31, 2000 3.
Consolidated Condensed Statements of Operations (Unaudited) -
Three Months Ended April 30, 2000 and 1999 4.
Consolidated Condensed Statements of Cash Flows (Unaudited) -
Three Months Ended April 30, 2000 and 1999 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 27 - Financial Data Schedule
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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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April 30, January 31,
2000 2000
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(unaudited)
CURRENT ASSETS:
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Cash $ 487,789 $ 552,096
Notes and accounts receivable - net of allowance for doubtful accounts
of $20,000 at April 30, and January 31, 2000, respectively 163,063 159,666
Inventories 95,449 74,746
Prepaid expenses 11,524 22,672
Due from buyer (Note 2) 106,423 110,000
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TOTAL CURRENT ASSETS 864,248 919,180
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PROPERTY, PLANT AND EQUIPMENT, NET 250,450 260,668
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OTHER ASSETS:
Due from buyer (Note 2) 60,000 60,000
Costs in excess of net assets acquired - net 144,636 148,233
Other assets 5,184 5,184
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209,820 213,417
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$ 1,324,518 $ 1,393,265
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- LIABILITIES AND SHAREHOLDERS' EQUITY -
CURRENT LIABILITIES:
Accounts payable $ 164,924 $ 154,613
Accrued expenses 267,418 279,402
Long-term liabilities - current portion 12,000 63,436
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TOTAL CURRENT LIABILITIES 444,342 497,451
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LONG-TERM LIABILITIES - NET OF CURRENT PORTION 332,685 319,175
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COMMITMENTS AND CONTINGENCIES (Note 4)
SHAREHOLDERS' EQUITY:
Common stock, $.10 par value; 20,000,000 shares authorized, 2,892,819
shares issued at April 30, and January 31, 2000 289,282 289,282
Capital in excess of par value 10,546,048 10,546,048
Accumulated deficit (10,239,237) (10,210,089)
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596,093 625,241
Less: Common stock in treasury, 7,298 shares at cost at
April 30, and January 31, 2000 (48,602) (48,602)
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547,491 576,639
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$ 1,324,518 $ 1,393,265
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The accompanying notes are an integral part of these consolidated statements.
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EAC INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
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For The Three Months
Ended April 30,
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2000 1999
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NET SALES $376,013 $346,533
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COSTS AND EXPENSES:
Cost of products sold 242,755 238,404
Selling, general and administrative expenses 180,538 143,975
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TOTAL COSTS AND EXPENSES 423,293 382,379
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(LOSS) FROM OPERATIONS (47,280) (35,846)
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OTHER INCOME (EXPENSES):
Interest expense (1,558) (1,478)
Interest and other income 19,690 9,017
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18,132 7,539
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(LOSS) BEFORE PROVISION FOR INCOME TAXES (29,148) (28,307)
Provision for income taxes - -
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(LOSS) FROM CONTINUING OPERATIONS (29,148) (28,307)
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DISCONTINUED OPERATIONS (Note 2):
(Loss) from operations of discontinued subsidiaries - net of taxes - (34,736)
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Gain on disposal of operating assets of discontinued subsidiary - net of taxes - 240,218
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- 205,482
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NET INCOME (LOSS) $(29,148) $177,175
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BASIC INCOME (LOSS) PER SHARE (Note 3):
Continuing operations $(.01) $(.01)
Discontinued operations - .07
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$(.01) $ .06
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WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 2,885,521 2,885,521
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The accompanying notes are an integral part of theseconsolidated statements.
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EAC INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
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For The Three Months
Ended April 30,
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2000 1999
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INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS:
CASH FLOWS FROM OPERATING ACTIVITIES:
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Net income (loss) $ (29,148) $ 177,175
Adjustments to reconcile net income (loss) to cash used by operating activities:
Depreciation and amortization 13,816 15,137
Gain on sale of assets - (238,435)
Change in assets and liabilities:
Decrease (increase) in accounts and notes receivable 2,523 (56,356)
(Increase) decrease in inventories (20,703) 164,984
(Increase) in prepaid expenses and other assets (5,693) (5,684)
(Decrease) in accounts payable, accrued expenses
and accrued income taxes (12,580) (117,135)
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Net cash (used) by operating activities ( 51,785) (60,314)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of assets 3,577 200,000
Capital expenditures - (6,926)
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Net cash provided by investing activities 3,577 193,074
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CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of long-term debt (16,099) (3,909)
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Net cash (used) by financing activities (16,099) (3,909)
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NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (64,307) 128,851
CASH AND CASH EQUIVALENTS, AT BEGINNING OF YEAR 552,096 467,910
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CASH AND CASH EQUIVALENTS, AT END OF PERIOD $ 487,789 $ 596,761
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The accompanying notes are an integral part of these consolidated statements.
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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 April 30, 2000 and the results of its operations
and cash flows for the three month periods ended April 30, 2000
and 1999.
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, 2000, 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, 2000 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%.
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.
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EAC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE 4 - CONTINGENCY:
Goodren 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 would 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%. 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. As of January 31, 1999, the Company recorded
a write-down of $200,000 in order to reflect this liability at
its fair value of $149,379. 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.
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 April 30, 2000 and
January 31, 2000; (ii) Consolidated condensed statements of
operations for the three month periods ended April 30, 2000 and
1999 and (iii) Consolidated condensed statements of cash flows for
the three month periods ended April 30, 2000 and 1999.
Results of Continuing Operations:
Sales for the three-month period ended April 30, 2000 were
$376,000 as compared to $347,000 for the comparable period of the
prior year, reflecting an increase of $29,000. Cost of sales as a
percentage of sales was 64.6% for the three-month period ended
April 30, 2000 as compared to 68.8% for the three-month period
ended April 30, 1999.
Selling, general and administrative expenses increased by $37,000
(from $144,000 to $181,000) when comparing the three-month periods
ended April 30, 2000 and 1999.
For the three months ended April 30, 2000 and 1999 the Company
reflected a net loss from continuing operations of $29,148 and
$28,307, respectively.
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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. See
Note 2 of Notes to the Consolidated Financial Statements for a
further description of these transactions.
For the quarter ended April 30, 1999, Goodren reported a loss from
operations of $34,736. The gain realized from the sale of the
assets of Goodren during that period aggregated $240,218.
Liquidity and Capital Resources:
At April 30, 2000, the Company's working capital was $420,000
compared to working capital of $422,000 at its year ended January
31, 2000. Cash amounted to $488,000 at April 30, 2000 compared to
$552,000 at January 31, 2000.
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.
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: June 14, 2000 Peter B. Fritzsche
Chief Executive Officer and Principal
Accounting Officer
