SECURITIES & EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended June 30, 1999 Commission File Number: 0-5781
HAWKS INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Wyoming 83-0211955
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
913 Foster Road, Casper, Wyoming 82601
(Address of principal executive offices)
Registrant's telephone number, including area code (307) 234-1593
N/A
Former name, former address and former fiscal year, if changed since last report
Indicate by check mark whether the registrant (1) has 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 close of the period covered by this report.
Class Outstanding at June 30, 1999
Capital Stock, $.0l par value 1,295,338
<PAGE>
INDEX
-----
PAGE
PART I FINANCIAL INFORMATION 3
Consolidated Balance Sheets
June 30, 1999 and December 31, 1998 4
Consolidated Statements of Earnings
Three months and Six Months ended
June 30, 1999 and 1998 5
Consolidated Statements of Cash Flows
Six months ended June 30, 1999 and 1998 6
Notes to Consolidated Financial Statements 7
Management's Discussion and Analysis of
Financial Condition and Results of Operation 12
PART II OTHER INFORMATION 15
<PAGE>
PART 1: FINANCIAL INFORMATION
The accompanying unaudited Consolidated Financial Statements have been prepared
in accordance with the instructions to Form 10-Q and do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included.
These statements should be read in conjunction with the Financial Statements and
notes thereto included in the Company's Annual Report to Shareholders and Form
10-K for the year ending December 31, 1998.
This quarterly report contains some forward-looking statements about future
operations and expectations of Hawks Industries, Inc. and its Subsidiaries.
Management believes they are reasonable representations of Hawks Industries,
Inc., expected performance at this time. Actual results may vary from
Management's stated expectations and projections.
<PAGE>
<TABLE>
HAWKS INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
June 30, December 31,
1999 1998
<PAGE>
(unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 14,000 $ 60,000
Accounts receivable 790,000 425,000
Short-term investments 200,000 202,000
Costs on uncompleted contracts in excess of related billings 101,000 15,000
Other current assets 66,000 64,000
Total current assets 1,171,000 766,000
PROPERTY AND EQUIPMENT, net (successful efforts method) 1,625,000 1,703,000
INVESTMENTS AND OTHER ASSETS
Note receivable 31,000 35,000
Land investment 196,000 196,000
Available for sale investment 100,000 100,000
Other assets 245,000 257,000
572,000 588,000
$ 3,368,000 $ 3,057,000
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 288,000 $ 203,000
Current maturities of long-term debt 134,000 128,000
Accounts payable 273,000 195,000
Accrued liabilities 49,000 36,000
Total current liabilities 744,000 562,000
LONG-TERM DEBT 322,000 340,000
CONTINGENT LIABILITY ( See Note 4) - -
SHAREHOLDERS' EQUITY
Capital stock:
Preferred stock, $.01 par value; authorized 997,000
shares; no shares issued - -
Common stock, $.01 par value; authorized 5,000,000 shares;
Shares issued 1,351,513 in 1999 and 1998 13,000 13,000
Capital in excess of par value of common stock 2,879,000 2,880,000
Retained (deficit) (536,000 ) (731,000 )
Less Common stock held in treasury at cost, 56,175 and 6,175
Shares in 1999 and 1998, respectively (54,000 ) (7,000 )
2,302,000 2,155,000
$ 3,368,000 $ 3,057,000
<FN>
See Notes to Consolidated Financial Statements
</TABLE>
<PAGE>
<TABLE>
HAWKS INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
Three Months and Six Months Ended June 30, 1999 and 1998
(Unaudited)
<CAPTION>
<PAGE>
Three Months ended Six Months ended
June 30, June 30,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Operating revenue:
Oil and gas $ 37,000 $ 45,000 $ 71,000 $ 142,000
Environmental 787,000 716,000 1,499,000 1,120,000
Gain on sale of assets 1,000 - 1,000 3,000
825,000 761,000 1,571,000 1,265,000
Operating expenses:
Oil and gas 7,000 14,000 19,000 43,000
Environmental 548,000 525,000 1,075,000 922,00
Depreciation, depletion and 58,000 52,000 190,000 106,000
amortization 38,000 58,000 70,000 116,000
General and administrative 651,000 649,000 1,354,000 1,187,000
Operating Income from operations 174,000 112,000 217,000 78,000
Other income (expense):
Other income 1,000 3,000 3,000 13,000
Interest income 3,000 3,000 6,000 7,000
Interest expense (17,000) (20,000) (31,000) (39,000)
Sale of Buildings - 48,000 - 48,000
Income before taxes 161,000 146,000 195,000 107,000
Provision for taxes:
Current - - - -
Net Income $ 161,000 $ 146,000 $ 195,000 $ 107,000
Weighted average number of
common shares outstanding 1,310,945 1,351,513 1,290,283 1,351,513
Income per common share $ .12 $ .11 $ .15 $ .08
<FN>
See Notes to Consolidated Financial Statements
</TABLE>
<PAGE>
<TABLE>
HAWKS INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Six Months Ended June 30, 1999 and 1998
(Unaudited)
<CAPTION>
1999 1998
<S> <C> <C>
Cash flows from operating activities:
Income from operations $ 195,000 $ 107,000
Adjustment to reconcile net earnings to net cash provided:
Depreciation, depletion and amortization 190,000 106,000
Impairment of non producing oil and gas property - 3,000
Gain on sale of assets (1,000) (51,000 )
Changes in operating assets and liabilities:
Increase in accounts receivable (365,000) (323,000 )
Decrease in short-term investments 2,000 5,000
Increase in costs in excess of billings and other current
assets (88,000) (17,000 )
Increase (Decrease)in accounts payable and accrued
expenses 91,000 (26,000 )
Net cash flow provided by (used in) operating activities 24,000 (196,000 )
Cash flows from investing activities:
Purchases of property and equipment (113,000) (161,000 )
Proceeds from sale of properties 1,000 455,000
Decrease (increase) in other assets 12,000 (50,000 )
Decrease in note receivable 4,000 2,000
Decrease in land investment - 6,000
Increase in available for sale investments - (100,000 )
Net cash flow provided by (used in) investing activities (96,000) 152,000
Cash flows from financing activities:
Proceeds from debt obligations incurred 142,000 308,000
Reduction of debt obligations (69,000) (254,000 )
Purchase of common stock (47,000) -
Net cash provided by financing activities 26,000 54,000
Increase (Decrease) in cash and cash equivalents (46,000) 10,000
Cash and cash equivalents at beginning of year 60,000 30,000
Cash and cash equivalents at end of six months $ 14,000 $ 40,000
<FN>
See Notes to Consolidated Financial Statements.
<PAGE>
</TABLE>
HAWKS INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Property and Equipment
Property and equipment at June 30, 1999 and December 31, 1998 consists of the
following:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Nonproducing oil and gas properties, net of valuation allowance of
$2,000 in 1999 and $2,000 in 1998 $ 14,000 $ 14,000
Producing oil and gas properties 1,655,000 1,655,000
Furniture and fixtures 374,000 369,000
Transportation equipment 196,000 200,000
Buildings and leasehold improvements 371,000 371,000
Engineering and lab equipment 1,351,000 1,258,000
Other 59,000 59,000
4,020,000 3,926,000
Less accumulated depreciation and depletion 2,395,000 2,223,000
$ 1,625,000 $ 1,703,000
</TABLE>
Note 2. Notes Payable, Long-Term Debt and Pledged Assets
Notes payable at June 30, 1999 and December 31, 1998 are as follow:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Short-term note payable due bank, interest at 9.75% due July 2, 1999
collateralized by accounts receivable $ 23,000 $ -
Revolving line of credit $200,000, interest at 6.25 % maturing August
23, 1999, collateralized by certificate of deposit 200,000 138,000
Revolving line of credit $230,000 interest at Citibank Prime plus /%,
(8.5% at June 30, 1999) maturing July 13, 1999, collaterialized by
oil and gas properties 65,000 65,000
$ 288,000 $ 203,000
</TABLE>
Long-Term debt at June 30, 1999 and December 31, 1998 is as follow:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Mortgage notes payable to W.D. Hodges and Jim Ferris Properties,
interest at 9% payable $971 per month until September 17, 2013,
collateralized by building $ 93,000 $ 95,000
Mortgage note payable to bank, interest set at 4% above U.S. Treasury
Bill index for one year each June 1st, (8.66% at June 30, 1999),
payable $1,181 per month including interest until April 1, 2003,
collateralized by office building 93,000 96,000
</TABLE>
<PAGE>
HAWKS INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2. Notes Payable, Long-Term Debt and Pledged Assets (cont.)
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Note payable, State of Wyoming, interest at 4%, due in monthly
installments of approximately $1,000 including interest until paid,
unsecured $ - $ 6,000
Installment loans payable, due at various times from May 2001 to
April 2002, interest rates from 9.25% to 10%, secured by
equipment 79,000 37,000
Note payable Wyoming Industrial Development Corporation, interest at
7.33%, payable $3,991 per month including interest until October 5,
2002, collateralized by equipment. 139,000 157,000
Note payable Wyoming Industrial Development Corporation, interest at
6.96%, payable $4,475 per month including interest until June 15,
2000, collateralized by equipment. 52,000 77,000
456,000 468,000
Less current maturities 134,000 128,000
$ 322,000 $ 340,000
</TABLE>
Aggregate maturities of long-term debt are as follow:
<TABLE>
<S> <C>
1999 $ 66,000
2000 113,000
2001 81,000
2002 48,000
2003 13,000
Thereafter 135,000
$ 456,000
</TABLE>
Actual cash payments for interest during the periods ended June 30, 1999 and
1998 were $31,000 and $37,000 respectively.
<PAGE>
HAWKS INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 3. Financial Information Relating to Industry Segments
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Sales to unaffiliated customers:
Oil and gas industry $ 71,000 $ 142,000
Environmental testing and management industry 1,500,000 1,123,000
$ 1,571,000 $ 1,265,000
Operating profit or (loss):
Oil and gas industry $ (91,000) $ 18,000
Environmental testing and management industry 366,0000 148,000
Unallocated corporate expenses (58,000) (88,000 )
$ 217,000 $ 78,000
Identifiable assets:
Oil and gas industry $ 640,000 $ 808,000
Environmental testing and management industry 1,602,000 1,285,000
Corporate assets 1,126,000 1,236,000
$ 3,368,000 $ 3,329,000
Capital expenditures:
Oil and gas industry $ 1,000 $ 3,000
Environmental testing and management industry 112,000 158,000
$ 113,000 $ 161,000
Depreciation, depletion and amortization:
Oil and gas industry $ 124,000 $ 40,000
Environmental testing and management industry 58,000 52,000
Other depreciation, depletion and amortization 8,000 14,000
$ 190,000 $ 106,000
Interest Income:
Oil and gas industry $ - $ -
Environmental testing and management industry - -
Corporate interest 6,000 7,000
$ 6,000 $ 7,000
Interest Expense:
Oil and gas industry $ 3,000 $ 3,000
Environmental testing and management industry 19,000 18,000
Corporate interest 9,000 18,000
$ 31,000 $ 39,000
</TABLE>
<PAGE>
HAWKS INDUSTRIES, INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 4. Significant Events
Effective February 1, 1998, Registrant, Hawks Industries, Inc., and a third
party investor, entered into an agreement with the Company's President, Joseph
J. McQuade, whereby Mr. McQuade and his immediate family's stockholdings were
purchased by a third party investor at $.10 per share ($2.00 post-split). The
Company has entered into a severance agreement with Mr. McQuade which includes a
covenant not to compete. Under the terms of the Agreement, the Company will pay
$50,000 per year for four (4) years, payable in semi-monthly installments, to
McQuade in exchange for the non-compete provision. Mr. McQuade, effective on
the same date, resigned as President of the Company and Chairman of the Board of
Directors. Mr. Bruce A. Hinchey, was elected by the Board of Directors to be
the President of the Corporation and James E. Meador, Jr., was selected to be
the new Vice-President. No replacement for Mr. McQuade has been made as of the
date of this report.
The third party investor, the Anne D. Zimmerman Revocable Trust dated November
14, 1991 ("the Trust"), by acquiring Mr. McQuade's and his immediate family's
shares, has 153,167 shares and therefore has acquired 11.8% of the outstanding
shares of the Company. As such, the Trust is deemed to be a controlling person.
The Trustee of the Trust, Anne D. Zimmerman, will not sit on the Company's Board
of Directors, nor will she be an employee or officer of the Company.
Reverse Stock Split
At the Company's Annual Meeting held on January 8, 1998, the Company submitted
to a vote of security holders, through the solicitation of proxies or otherwise,
a proposal to effect a 20 for 1 reverse split which was approved. The reverse
split changed the number of shares outstanding from 27,028,194 to 1,351,513.
On November 9, 1998 the Board of Directors of Hawks Industries, Inc. authorized
the repurchase of up to forty thousand shares of Hawks Industries, Inc., common
stock on the open market or in negotiated transactions, depending upon market
conditions. On March 1, 1999 the Board of Directors of Hawks Industries, Inc.
authorized the repurchase of an additional thirty thousand shares of Hawks
Industries, Inc. stock. Through June 30, 1999 the Company holds as Treasury
Stock 56,175 shares or 4.3% of the outstanding common shares.
Note 5. Write Down of impaired oil and gas properties
During the first quarter of 1999, the Company recorded an $80,000 write down of
its producing oil and gas properties. This write down was recorded to
depreciation, depletion and amortization expense. The Company determined the
carrying value of these properties was more than future cash flows from the
properties due to performance and prices received for oil and gas at the present
time. Earnings per share were twenty-one cents for the six months ended June
30, 1999 prior to write down and fifteen cents after the write down.
<PAGE>
HAWKS INDUSTRIES, INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 6. Sales of Buildings
On May 26, 1998, the Company signed an agreement to sell its building located at
7345 6WN Road and 7383 6WN Road in Natrona County, Wyoming to WERCS, a non-
public Wyoming Corporation. As set forth in the agreement, the closing date was
June 1, 1998 and the total sales price for both buildings was $417,000.
The Company's cost in the buildings was $506,000. The Company's basis in the
building was $367,000. Therefore, the Company had an approximate $50,000 gain
resulting from the transaction.
The $417,000 was received as $317,000 cash and 10,000 shares WERCS 4% preferred
convertible stock, with a guaranteed resale value of $100,000.
The majority owner of WERCS, a Wyoming Corporation, is Dr. Gail D. Zimmerman
whose spouse, through the Anne D. Zimmerman Revocable Trust, owns 11.8% of the
outstanding shares of Hawks Industries, Inc.
Note 7. Change In Control of Company
On June 10, 1999, Hawks Industries, Inc. entered into an agreement with
Universal Equities LTD., David H. Piepers, The Cornerhouse Limited Partnership
and Winsome Limited Partnership (Collectively referred to as "Buyers") to secure
a controlling interest in Hawk's Common Stock through a private placement. The
value placed on Hawks' shares in the offer was $1.60 per share for at least
6,250,000 shares of common stock yielding the Company a consideration of
$10,000,000. The offer also included the right to buy additional 14,375,000
shares at the same price. The maximum consideration to be received by Hawks is
$33,000,000 if all the additional shares are purchased.
The Terms of the offer require a payment of at least $5,000,000 in cash, with
the remainder of the consideration being paid in cash and/or transfer of buyers
rights to a debt obligation from North Star Exploration, Inc. ("North Star"),
and/or North Star common stock, and/or Zeus Exploration, Inc. ("Zeus) common
stock. North Star is a private Nevada Corporation with options on mineral
rights covering approximately 7,000,000 acres in Alaska.
The Agreement also requires the redemption of shares in Hawks owned by Bruce A.
Hinchey, James E. Meador, Jr. and the Anne D. Zimmerman Revocable Trust in
exchange for certain assets of the Company.
The private placement and redemption of shares described above will be subject
to Hawks Shareholders approval at its Annual Meeting in September or October.
As a result of this transaction, the controlling interest in Hawks will be owned
by the Buyer Group which will focus on its mineral claims in Alaska.
<PAGE>
HAWKS INDUSTRIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Liquidity and Capital Resources:
- --------------------------------
During the first six months of 1999 net cash from operating activities increased
by $24,000 compared to a decrease of $196,000 in the corresponding period in
1998. This increase was the result of a 33% increase in sales from the
Company's environmental testing and management segment over the comparable
period in 1998. The increase in sales created $217,000 in net income from
operations for the Company as a whole, even if the increase in accounts
receivable reduced cash flows from operating activities by $365,000 for the
period. Depreciation, depletion and amortization for the six months ended June
30, 1999 was $84,000 higher than the six months ended June 30, 1998, largely due
to a one time write off of oil and gas properties through depreciation,
depletion and amortization. (See note 5 Write down of impared oil and gas
properties).
Capital expenditures for the six months ended June 30, 1999 were $142,000
compared to $161,000 in the first six months of 1998. The $113,000 equipment
purchased in the first six months of 1999 was mainly for equipment needed on
several large jobs in the Company's environmental testing and management segment
completed in that period.
Proceeds from debt obligations increased by $113,000 in the first six months of
1999 compared to $308,000 in the same period in 1998. The Company is still
using accounts receivable as collateral for short-term loans for current cash
demands in its environmental testing and management segment.
The following information is provided for the six months ended June 30, 1999 and
1998:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Working Capital $ 427,000 $ 152,000
Long-term debt to equity 1:7.1 1:5.4
Cash provided by (utilized by operations) $ 24,000 $ (196,000 )
Cash and short-term investments available $ 214,000 $ 240,000
</TABLE>
Results of operations:
- ---------------------
In the six months ended June 30, 1999 the Company reported $195,000 net income
compared to $107,000 net income in the six months ended June 30, 1998 or an 82%
increase. The Company also had $161,000 net income for the quarter ended June
30, 1999 compared to $146,000 in the corresponding quarter in 1998. The Company
has shown net income for five continuos quarters.
Environmental testing and management:
Environmental testing and management revenues increased to $1,499,000 in 1999
from $1,120,000 in 1998, a 33% increase for the six months ended June 30, 1999
over the same period in 1998. Revenues for the quarter ended June 30, 1999 were
$787,000 compared to $716,000 in 1998. The increase in 1999 was largely due to
the Company acquiring one large contract in the first six months while
maintaining the Company's regular clients. Environmental testing and
management's operating expenses were also higher by $153,000, a 17% increase
over the six months ended June 30, 1998. Operating expenses were $548,000 in
the quarter ended June 30, 1999, compared to $525,000 in the same period in
1998, a 4% increase. The increases in operating expenses were the result of
additional work as noted above. Shown below is a table showing net revenue and
operating expenses for the Company's environmental industry:
<PAGE>
<TABLE>
<CAPTION>
Six Months Ended Quarter Ended
June 30, June 30,
<S> <C> <C> <C> <C>
1999 1998 1999 1998
Sales 1,499,000 1,120,000 787,000 716,000
Operating Expenses 1,075,000 922,000 548,000 525,000
424,000 198,000 239,000 191,000
</TABLE>
Oil and gas:
Oil and Gas revenues declined from $142,000 in the six months ended June 30,
1998 to $71,000 for the six months ended June 30, 1999. Oil and gas revenues
declined by $8,000 in the quarter ended June 30, 1999 from the corresponding
quarter in 1998, an 18% decrease. This decrease was the result of lower prices
for the Company's oil and gas sales and declining production. During the first
six months of 1998 the Company collected on an after payout agreement, that
covered several years. Oil and gas expenditures were $19,000 in the six months
ended June 30, 1999 compared to $43,000 in the six months ended June 30, 1998.
Oil and gas expenditures were also lower for the quarter ended June 30, 1999 by
$7,000 from the corresponding quarter in 1998. This decline was mainly due to
fewer wells producing due to lower oil and gas prices.
Below is a table showing revenues and operating expense for the Company's oil
and gas segment:
<TABLE>
<CAPTION>
Six Months Ended Quarter Ended
June 30, June 30,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Sales 71,000 142,000 37,000 45,000
Operating Expenses 19,000 43,000 7,000 14,000
52,000 99,000 30,000 31,000
</TABLE>
Additional information:
The Company had depreciation, depletion and amortization (DD&A) of $190,000 in
the first six months of 1999 compared to $106,000 in the first six months of
1998. Eighty thousand dollars of this increase was from a write down of
impaired oil and gas properties (see Note 5-Write down of impaired oil and gas
properties). DD&A for the quarter ended June 30, 1999 was $6,000 higher than
the corresponding quarter in 1998 as DD&A was recorded on new purchases acquired
during the quarter.
General and administrative costs were $70,000 for the six months ended June 30,
1999 compared to $116,000 for the six months ended June 30, 1998. This decrease
was due to decreases in staff and other cost cutting efforts. General and
administrative costs were also down from $58,000 in 1998 to $38,000 in 1999;
this was also due to decreases in staff and other cost cutting efforts.
Interest expense was $31,000 for the six months ended June 30, 1999, compared to
$39,000 for the six months ended June 30, 1998. This decrease was due to the
Company selling its properties on 6WN Road in Natrona County, Wyoming in 1998
and no longer having the associated notes payable on these properties in the
first six months of 1999. Interest expense for the quarter ended June 30, 1999
and 1998 were relatively constant.
<PAGE>
Income taxes:
The Company has significant net operating loss carryforwards, investment tax
credit carryforwards and other carryforward items, and accordingly should not be
liable for ordinary income taxes.
In addition, should the Company utilize certain loss carryforwards, which were
earned prior to the date of the Company's quasi reorganization at December 31,
1988, Financial Accounting Statement No. 109 requires that deferred taxes be
provided. The Company has taken the position that to provide such disclosure is
not only meaningless but also somewhat distortive. As of the second quarter
1999 no such income tax provision would have been necessary.
Year 2000 Compliant
- -------------------
The Company computer systems, software and related technologies are affected by
the Year 2000 compliance issue. We have been identifying and correcting
applications to ensure that all of our key computer systems will be Year 2000
compliant by December 1999. The Company is also in the process of determining
if some of its accounting software should be replaced. We are also working with
our vendors and suppliers to ensure their compliance. It appears that the
Company will have no trouble meeting this goal. Cost to modify such
applications have and are estimated, to remain immaterial to our results of
operations or financial condition.
<PAGE>
Part 11 OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
Items filed on 8-K.
On June 10, 1999, Hawks Industries, Inc. entered into an agreement with
Universal Equities LTD., David H. Pipers, The Cornerhouse Limited Partnership
and Winsome Limited Partnership (Collectively referred to as "Buyers") to secure
a controlling interest in Hawks Common Stock through a private placement. The
value placed on Hawks' shares in the offer was $1.60 per share for at least
6,250,000 shares of common stock yielding the Company a consideration of
$10,000,000. The offer also included the right to buy an additional 14,375,000
shares at the same price. The maximum consideration to be received by Hawks is
$33,000,000 if all the additional shares are purchased.
The Terms of the offer require a payment of at least $5,000,000 in cash, with
the remainder of the consideration being paid in cash and/or transfer of buyers
rights to a debt obligation from North Star Exploration, Inc. (North Star),
and/or North Star common stock, and/or Zeus Exploration, Inc. ("Zeus) common
stock. North Star is a private Nevada Corporation with options on mineral
rights covering approximately 7,000,000 acres in Alaska.
The Agreement also requires the redemption of shares in Hawks owned by Bruce A.
Hinchey, James E. Meador, Jr. and the Anne D. Zimmerman Revocable Trust in
exchange for certain assets of the Company.
The private placement and redemption of shares described above will be subject
to Hawks Shareholders approval at its Annual Meeting in September or October.
As a result of this transaction, the controlling interest in Hawks will be owned
by the Buyer Group which will focus on its mineral claims in Alaska.
Exhibits
On March 1, 1999 the Board of Directors of Hawks Industries, Inc. authorized an
additional repurchase of 30,000 shares.
Through June 30, 1999, The Company has 56,175 shares or 4.3% of the outstanding
common shares held as Treasury Stock
<PAGE>
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.
HAWKS INDUSTRIES, INC. (Registrant)
Date: August 9, 1999 BY: \s\ Bruce A.Hinchey
Bruce A. Hinchey, President and
Chief Executive Officer
Date: August 9, 1999 BY: \s\ Bill Ukele
Bill Ukele, Controller and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 14,000
<SECURITIES> 200,000
<RECEIVABLES> 790,000
<ALLOWANCES> 0
<INVENTORY> 101,000
<CURRENT-ASSETS> 1,171,000
<PP&E> 4,020,000
<DEPRECIATION> 2,395,000
<TOTAL-ASSETS> 3,368,000
<CURRENT-LIABILITIES> 572,000
<BONDS> 0
0
0
<COMMON> 13,000
<OTHER-SE> 2,289,000
<TOTAL-LIABILITY-AND-EQUITY> 3,368,000
<SALES> 1,570,000
<TOTAL-REVENUES> 1,571,000
<CGS> 1,094,000
<TOTAL-COSTS> 1,354,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 31,000
<INCOME-PRETAX> 195,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 195,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 195,000
<EPS-BASIC> .15
<EPS-DILUTED> .15
</TABLE>
