<PAGE>
UNITED STATES
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) November 8, 1999
ERLY Industries Inc.
(Exact Name of Registrant as Specified in Charter)
California 001-07894 95-231-2900
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No)
8641 United Plaza Boulevard
Baton Rouge, Louisiana 70809
(Address of Principal Executive (Zip Code)
Offices)
Registrant's telephone number, including area code (225) 922-4664
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
Item 5. Other Events.
On or about March 1, 1999, Postlethwaite & Netterville, APAC ("P&N") was
appointed by the bankruptcy court in ERLY Industries, Inc.'s ("ERLY's")
bankruptcy proceedings to prepare the tax returns of ERLY. On or about August
16, 1999, ERLY engaged P&N as its principal accountant to audit its balance
sheet upon the effectiveness of its Chapter 11 Plan of Reorganization. P&N
completed its audit of ERLY's balance sheet at August 20, 1999 and issued its
report on October 4, 1999.
Item 7. Financial Statements and Exhibits.
The following exhibits are filed with this report:
Exhibit Description
- ------- -----------
23 Consent of Postlethwaite & Netterville, APAC.
27 Financial Data Schedule.
99 ERLY Industries, Inc. Consolidated Balance Sheet as of August 20,
1999, with accompanying Independent Auditors' Report.
2
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this Current Report on Form 8-K to be
signed on its behalf by the undersigned hereunto duly authorized.
ERLY INDUSTRIES, INC.
---------------------
(Registrant)
Date: November 11, 1999 By: /s/ Nanette N. Kelley
---------------------------------
Nanette N. Kelley
Chairman, President and
Chief Executive Officer
3
<PAGE>
Exhibit 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the use of our report dated November 8, 1999, in ERLY
Industries, Inc's Current Report (Form 8-K) dated November 12, 1999.
/s/ Postlethwaite & Netterville, APAC
Baton Rouge, Louisiana
November 12, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AS OF AUGUST 20, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> AUG-20-1999
<PERIOD-END> AUG-20-1999
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
<PAGE>
EXHIBIT 99
- --------------------------------------------------------------------------------
ERLY INDUSTRIES, INC.
---------------------
CONSOLIDATED BALANCE SHEET
--------------------------
AUGUST 20, 1999
----------------
- --------------------------------------------------------------------------------
P&N
Postlethwaite & Netterville
(A Professional Accounting Corporation)
CERTIFIED PUBLIC ACCOUNTANTS
BATON ROUGE . DONALDVILLE . GONZALES . NEW ORLEANS . ST. FRANCISVILLE
LOUISIANA
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Report 1
Consolidated Balance Sheet 2
Notes to Consolidated Balance Sheet 3 - 6
</TABLE>
<PAGE>
[LETTERHEAD APPEARS HERE]
INDEPENDENT AUDITORS' REPORT
----------------------------
The Board of Directors
ERLY Industries, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheet of ERLY Industries,
Inc. and Subsidiaries as of August 20, 1999. This financial statement is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall consolidated balance sheet
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the consolidated balance sheet referred to in the first
paragraph presents fairly, in all material respects, the consolidated financial
position of ERLY Industries, Inc. and Subsidiaries as of August 20, 1999, in
accordance with generally accepted accounting principles.
/s/ Postlethwaite & Nettervile
November 8, 1999
Baton Rouge, Louisiana
<PAGE>
ERLY INDUSTRIES AND SUBSIDIARIES
--------------------------------
CONSOLIDATED BALANCE SHEET
--------------------------
AUGUST 20, 1999
---------------
ASSETS $ 0
- ------ -----
LIABILITIES $ 0
- ----------- -----
STOCKHOLDERS' EQUITY $ 0
- -------------------- -----
The accompanying notes are an integral part of this statement.
-2-
<PAGE>
EARLY INDUSTRIES AND SUBSIDIARIES
---------------------------------
NOTES TO CONSOLIDATED BALANCE SHEET
-----------------------------------
1. Organization, Basis of Presentation, and Principles of Consolidation
--------------------------------------------------------------------
ERLY Industries, Inc.(ERLY) filed for a voluntary petition of
reorganization under Chapter 11 of the U.S. Bankruptcy Code, in the U.S.
Bankruptcy Court for the Southern District of Texas, Corpus Christi
Division (the Bankruptcy Court) on September 28, 1998 (see Note 2). Watch-
Edge International, Inc. (WEI) (formerly known as Chemonics Industries,
Inc.), a wholly owned subsidiary of ERLY, also filed a voluntary petition
for reorganization under Chapter 11 of the bankruptcy code on November 30,
1998 in the Bankruptcy Court. Both Companies continued to operate since the
filing of their petitions as debtor-in-possession. Other subsidiaries of
ERLY included in the August 20, 1999 consolidated balance sheet presented
include The Beverage Source, Inc. and ERLY Juice, Inc. Other subsidiaries
of WEI included in the consolidated balance sheet presented include
Chemonics Fire-Trol, Inc. and Chemonics International, Inc. (Collectively
referred to as the Company)
At the date ERLY filed its petition for bankruptcy, it held 81% of the
voting power of American Rice, Inc. (ARI), comprised of 32% direct common
stock equity interest and an additional 49% voting preferred stock
interest. ERLY previously included ARI in its consolidated balance sheet
with appropriate adjustments to reflect the minority interest. ERLY's 81%
stock interest in ARI has also been pledged by ERLY to ARI's creditors. ARI
filed for bankruptcy under Chapter 11 of the Bankruptcy Code on August 11,
1998. (Case No. 98-21895 before the Bankruptcy Court). ARI filed a Plan of
Reorganization was confirmed and made effective October 1, 1999 provides no
distribution or continuing ownership to ERLY or ARI's other shareholders.
Accordingly, ERLY has not included ARI, or ARI's wholly-owned subsidiaries,
in the consolidated balance sheet presented at August 20, 1999.
As described in Note 3, the Bankruptcy Court's confirmation of the
Company's Joint Plan of Reorganization became effective August 20, 1999.
This completed a significant financial restructuring which resulted in the
Company retaining no assets of value and a discharge of liabilities. The
Company has accounted for the restructuring in accordance with the American
Institute of Certified Public Accountants Statement of Position 90-7,
Financial Reporting by Entities in Reorganization under the Bankruptcy
Code, which requires that assets and liabilities be adjusted to their fair
values ("fresh-start" values) and a new reporting entity created.
Accordingly, the consolidated balance sheet at August 20, 1999 reflects the
assets and liabilities at the fair value assessed by management of zero
(see Notes 3 and 4 for additional discussion) and reclassified the value of
common stock to eliminate a deficit retained earnings.
The preparation of a consolidated balance sheet in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities at the date of the
balance sheet. Actual results could differ from those estimates.
-3-
<PAGE>
EARLY INDUSTRIES AND SUBSIDIARIES
---------------------------------
NOTES TO CONSOLIDATED BALANCE SHEET
-----------------------------------
2. Bankruptcy Proceedings
----------------------
On August 9, 1999, the Bankruptcy Court confirmed a Chapter 11 Joint Plan
of Reorganization as Modified filed by ERLY and WEI (the Debtors) and
ERLY's Creditor's Committee (the Plan) in the above referenced bankruptcy
proceedings. The Confirmation Order provides that all entities who have
held, hold or may hold a claim are permanently enjoined on or after the
confirmation date from making demand on, commencing, or continuing in any
manner any action or proceeding of any kind with respect to any such claim
against the Debtors.
The Plan was effective on August 20, 1999 and provides that all of the
assets of ERLY and WEI (except certain contracts and assets, which
management has determined to be of no value, necessary for the Debtors to
continue operations involving a sublease and Terminal Service Agreement in
connection with the WEI operations in Phoenix, Arizona, net operating
losses and carryovers, and stock of WEI) are to be paid, transferred and
assigned to a newly formed limited partnership for the benefit of the
creditors. The purpose of the limited partnership is to liquidate assets of
the Debtors and to distribute those proceeds to the Creditors.
All claims and causes of action of ERLY and WEI existing as of and
subsequent to the petition date were preserved and inure to the benefit of
the reorganized Debtors and are not extinguished by the Confirmation Order.
In full and final satisfaction of all claims against the Debtors, the
Confirmation Order shall automatically (i) vest all property of the Debtors
and their Estates, including the Debtors' actions (ii) transfer and/or
assign to the limited partnership for the benefit of the Debtors'
Creditors, and all property of the Debtors' estates and their subsidiaries,
except the exceptions in the preceding paragraph.
On August 20, 1999, all intercompany claims by and among the Debtors or Old
Chemonics were eliminated, all guarantees executed by the Debtors or Old
Chemonics were deemed to have been one obligation of ERLY payable solely by
the limited partnership and any claim filed or to be filed against the
Debtors were deemed one claim against ERLY payable solely by the limited
partnership, all remaining assets of Old Chemonics were either assigned to,
paid, or otherwise vest and assigned to the limited partnership.
3. Income Taxes
------------
Company is not presently able to determine its net operating loss (NOL)
carryforwards at March 31, 1998 or August 20, 1999; however, it could be
significant on a consolidated tax return basis. The NOL is subject to
certain tax sharing agreements and continuing disputes with its former
subsidiary, American Rice, Inc., which have thus far prohibited the
preparation of these tax returns and the assessment of any NOLs. Management
does not know whether the NOL will have any significant value after any
adjustments for events occurring during the bankruptcy proceedings
including the sale of assets, forgiveness of indebtedness, as well as the
possible de-consolidation of American Rice, Inc. for income tax purposes.
-4-
<PAGE>
EARLY INDUSTRIES AND SUBSIDIARIES
---------------------------------
NOTES TO CONSOLIDATED BALANCE SHEET
-----------------------------------
3. Income Taxes (continued)
------------
Due to the inability of management to ascertain the amount of any NOLs
available to the Company as well as the uncertainty of future taxable
income during the NOL carryover period, management has established a full
valuation allowance at August 20, 1999. Due to the inability to determine
the amount of any NOL, the valuation allowance is established as any amount
necessary to reduce the tax benefit of any NOL to zero.
4. Specific Contracts and Leases
-----------------------------
WEI leases a parcel of property in Phoenix, Arizona under a quarter to
quarter tenancy that was paid through September 30, 1999. WEI has subleased
the property to two entities. WEI is also party to a Terminal Service
Agreement whereby WEI provides certain equipment and services. These leases
and agreements remain with the reorganized Debtors on August 20, 1999.
Management sold all equipment at this location for approximately $750 and
terminated these leases and contracts on September 30, 1999.
Management has determined that there is no value to these leases or
agreements at August 20, 1999 and accordingly has reduced the carrying
value of these assets to zero in the presented consolidated balance sheet.
5. Stockholders' Equity
--------------------
At August 20, 1999, ERLY had 6,000 shares of $100 par value preferred stock
authorized but unissued.
At August 20, 1999, ERLY had 15,000,000 shares of $.01 par value common
stock authorized and 5,762,088 shares issued and outstanding.
In the fiscal year ended March 31, 1996, ERLY granted stock options to a
key employee for 88,500 shares at a price of $4.55 per share (as adjusted
for stock dividends). These options were to expire on their own terms in
the year 2001. These options were cancelled by action of ERLY's Board of
Directors and are not deemed outstanding at August 20, 1999.
6. Significant Litigation
----------------------
The Company has been involved in significant litigation related to actions
brought prior to its bankruptcy petition and as a part of its bankruptcy
proceedings. Based on management's assessment of these proceedings, and
considering the Confirmation Order discussed in Note 2, the balance sheet
presented provides no liabilities for such litigation and asserted or
unasserted contingent liabilities at August 20, 1999.
-5-
<PAGE>
EARLY INDUSTRIES AND SUBSIDIARIES
---------------------------------
NOTES TO CONSOLIDATED BALANCE SHEET
-----------------------------------
7. Uncertainty Related to Future Business Operations
-------------------------------------------------
The Company has emerged from voluntary bankruptcy with no assets,
liabilities, or equity and has no ongoing operations. Management is
evaluating various business plans and alternatives strategies for the
Company to pursue.
Management believes, but cannot assure, that sufficient capital will be
raised to enable the Company to develop its business plan, commence
operations, and become profitable. There can be no assurance offered that
ERLY will be successful in obtaining the capital necessary to carry out a
business plan or to continue as a going concern.
-6-
