<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1995
Commission File Number 1-0096
STRIKER INDUSTRIES, INC.
(Exact name of small business issuer as specified in its charter)
DELAWARE 84-0834953
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
ONE RIVERWAY, SUITE 2450
HOUSTON, TEXAS 77056
(Address of principal executive offices)
(713) 622-4092
(Issuer's telephone number)
NOT APPLICABLE
(Former name if changed since last report)
Indicate by check mark 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
past 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 ___
As of August 14, 1995, there were 10,599,564 shares of Common Stock, par value
$0.20 per share, outstanding and no shares of Preferred Stock, par value $0.20
per share, were outstanding.
Transitional Small Business Disclosure Format (check one)
Yes ______ No ___[X]___
Page 1 of 14
<PAGE> 2
INDEX TO QUARTERLY REPORT ON FORM 10-QSB
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE NO.
------- --------------------- --------
<S> <C> <C>
Item 1. Financial Statements
Consolidated Balance Sheet 3
Consolidated Statements of Operations 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
PART II. OTHER INFORMATION
-------- -----------------
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 12
Item 3. Defaults Upon Senior Securities 12
Item 4. Submission of Matters to a
Vote of Security Holders 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURES 14
----------
</TABLE>
Page 2 of 14
<PAGE> 3
PART I - FINANCIAL INFORMATION
Item 1: Financial Statements
STRIKER INDUSTRIES, INC., AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
June 30,
1995
--------
(Unaudited)
ASSETS
<S> <C>
CURRENT ASSETS:
Cash $ 595,539
Marketable Securities 431,822
Accounts receivable -
Trade 801,519
Other 226,330
Inventories -
Raw materials 78,465
Finished goods 103,451
Spare parts and supplies 223,048
Prepaid expenses and other current assets 262,278
-----------
Total current assets 2,722,452
PROPERTY AND EQUIPMENT, net 14,516,098
DEFERRED ACQUISITION COSTS AND OTHER, net 350,315
-----------
Total assets $17,588,865
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Trade accounts payable $ 1,216,074
Accrued liabilities 439,465
Revolving Line of Credit 538,617
Insurance Premium Note Payable 94,705
Fixed-Asset Line of Credit, current portion 118,200
Current obligations under capital leases 53,235
-----------
Total current liabilities 2,460,296
LONG-TERM LIABILITIES:
Capital leases, net of current portion 71,607
10.25% Subordinated Notes Payable 1,200,000
Fixed-Asset Line of Credit, net of current portion 471,800
COMMITMENTS AND STOCKHOLDERS' EQUITY:
Common stock, $0.20 par value, 25,000,000 shares
authorized, 10,599,564 shares issued at June 30, 2,119,913
1995
Stock Subscriptions Receivable (450,000)
Warrants 100,000
Additional paid-in capital 13,896,283
Retained deficit (2,281,034)
----------
Total stockholders' equity 13,385,162
-----------
Total liabilities and stockholders' equity $17,588,865
===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
Page 3 of 14
<PAGE> 4
STRIKER INDUSTRIES, INC., AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES $2,186,794 $2,149,323 $4,098,556 $ 3,962,941
COST OF SALES 1,958,996 2,390,242 3,322,592 3,981,028
---------- ---------- ---------- -----------
Gross margin 227,798 (240,919) 775,964 (18,087)
SELLING, GENERAL AND
ADMINISTRATIVE 393,871 467,360 755,540 839,984
---------- ---------- ---------- -----------
Operating profit/(loss) (166,073) (708,279) 20,424 (858,071)
OTHER INCOME (EXPENSE):
Interest expense, net (62,581) (139,901) (69,711) (200,344)
---------- ---------- ---------- -----------
Other income, net 17,416 2,477 17,631 5,941
---------- ---------- ---------- -----------
PROFIT/(LOSS) BEFORE INCOME TAXES AND
EXTRAORDINARY ITEM (211,238) (845,703) (31,656) (1,052,474)
---------- ---------- ---------- -----------
INCOME TAXES - - - -
---------- ---------- ---------- -----------
NET PROFIT/(LOSS) BEFORE
EXTRAORDINARY ITEM $ (211,238) $ (845,703) $ (31,656) $(1,052,474)
---------- ---------- ---------- -----------
EXTRAORDINARY ITEM - GAIN
ON EXTINGUISHMENT OF DEBT - 2,101,495 - 2,101,495
---------- ---------- ---------- -----------
NET INCOME (LOSS) $ (211,238) $1,255,792 $ (31,656) $ 1,049,021
========== ========== ========== ===========
INCOME (LOSS) PER SHARE
Before Extraordinary Item (0.07) (0.09) (0.01) (0.11)
Extraordinary Item - 0.23 - 0.23
---------- ---------- ---------- -----------
Net Income (Loss) Per Share $ $ $ $
========== ========== ========== ===========
(0.02) 0.14 (0.01) 0.12
========== ========== ========== ===========
AVERAGE NUMBER OF
COMMON SHARES
OUTSTANDING 9,629,707 9,007,416 9,161,011 9,007,416
========== ========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
Page 4 of 14
<PAGE> 5
STRIKER INDUSTRIES, INC., AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1995 1994
-------------------------------
<S> <C> <C>
NET INCOME (LOSS) $ (31,656) $ 1,049,021
Adjustments to reconcile net income(loss) to net cash used in
operating activities -
Extraordinary Gain -- (2,101,495)
Depreciation and amortization 344,219 274,158
Reimbursement for executive salaries (66,000) --
Changes in assets and liabilities -
Increase in accounts receivable (486,489) ( 70,863)
Increase in related party receivable -- (130,765)
Decrease/(increase) in inventories 189,969 (615,579)
(Increase)/Decrease in prepaid expenses and other current assets (67,829) 22,835
Increase in accounts payable and accrued liabilities 434,502 683,550
Increase in Dry Felt Obligation -- 425,308
----------- -----------
Total adjustments to net income (loss) 348,372 (1,512,851)
----------- -----------
Net cash provided/(used) in operating activities $ 316,716 $ (463,830)
=========== ===========
CASH FLOWS FROM INVESTING ACTIVITIES:
Gain on pulp hedge (467,774) --
Purchases of property and equipment (2,396,187) (909,996)
Decrease (Increase) in deferred costs and other 238,540 (285,012)
Appreciation on marketable securities 6,822 --
Purchase of marketable securities (425,000) --
Redemption (purchase) of certificate of deposit -- 250,000
----------- -----------
Net cash used in investing activities (3,043,599) (945,008)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from convertible subordinated notes -- 2,500,000
Proceeds from issuance of 10.25% 1995 subordinated notes 1,200,000
Proceeds from issuance of 1995 warrants, net 879,000
Proceeds from the exercise of the 1995 warrants, net 973,336
Shareholder advances 1,188,500 500,000
Repayment of shareholder advances (2,005,618) (500,000)
Payments on treasury stock purchase obligation -- (1,000,000)
Proceeds of revolving line of credit 1,865,000 --
Repayment of revolving line of credit (1,338,404) (499,140)
Proceeds from fixed-asset line of credit 590,000 --
Payments received on stock subscriptions receivable -- 700,000
Payments under insurance premium note payable (23,408) (55,236)
Principal payments under capital leases (24,723) 2,984
----------- -----------
Net cash provided by financing activities 3,303,683 1,648,608
------------ ------------
NET INCREASE (DECREASE) IN CASH 576,800 239,770
CASH, beginning of period 18,739 49,947
----------- -----------
CASH, end of period $ 595,539 $ 289,717
=========== ===========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Reimbursement of executive salaries from an affiliate in the form
of forgiveness of notes payable 66,000
Gain on pulp hedge contract with an affiliate in the form of
forgiveness of notes payable 467,774
Issuance of stock in consideration of acquisition of property and
equipment 7,401,845
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
Page 5 of 14
<PAGE> 6
STRIKER INDUSTRIES, INC., AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL:
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the
Company after the elimination of all material intercompany accounts and
transactions.
Interim Financial Information
The consolidated interim financial statements included herein are unaudited;
however, they include all adjustments of a normal recurring nature which, in
the opinion of management, are necessary to present fairly the consolidated
financial position of the Company at June 30, 1995, and the consolidated
results of operations and consolidated cash flows for the three-month and
six-month periods ended June 30, 1995, and 1994.
2. DEBT:
<TABLE>
<CAPTION>
June 30,
1995
---------
(Unaudited)
<S> <C>
Subordinated notes payable, 10.75% interest, due 12/31/98 1,200,000
Fixed-asset line of credit, prime + 3% interest, due 5/31/98 590,000
Revolving line of credit, prime + 3% interest 538,617
Capitalized lease obligations bearing interest at rates from 10%
to 24%, maturing between 1995 and 1998, secured by underlying
machinery, vehicles and computer equipment. $ 124,842
------------
2,453,459
Less - Current maturities (710,052)
-------------
$ 1,743,407
============
</TABLE>
Interest paid for the six months ended June 30, 1995, and 1994, was $10,982 and
$258,665, respectively.
On May 4, 1995, the Company entered into a financing agreement consisting of a
term loan based upon the liquidation value of certain of the Company's fixed
assets at the Stephens mill and a revolving line of credit based upon eligible
accounts receivable (collectively "the Stephens Facility"). Advances under the
Facility are limited to $2,500,000 in the aggregate and bear interest at prime
plus 3%.
3. STOCKHOLDERS' EQUITY
During the quarter ended March 31, 1995, the Registrant authorized the issuance
of 1,000,000 Warrants to purchase one share each of Common Stock of the
Registrant at a Warrant Price of $1.50 per Warrant and an Exercise Price of
$2.00 per share escalating to $2.65 per share over the term of the Warrant which
expires on February 28, 1997. During the quarter ended March 31, 1995,
$850,000 was received by the Registrant upon issuance of 566,668 Warrants.
During April, 1995, an additional $100,000 was received upon issuance of 66,667
Warrants.
Page 6 of 14
<PAGE> 7
During the quarter ended June 30, 1995, $1,133,336 was received by the
Registrant upon the exercise of 566,668 warrants. As of June 30, 1995, 66,667
warrants remained outstanding.
The Company paid $231,000, $71,000 upon the issuance and $160,000 upon the
exercise, in commissions to an affiliate of the Company in connection with the
placement and exercise of the Warrants during the six months ended June 30,
1995. The Company reflected the commissions paid as a reduction of Additional
Paid in Capital as of June 30, 1995.
4. COMMITMENTS
During the quarter ended June 30, 1995, the Company entered into sales
contracts (the Sales Contracts) with three of its major customers. Under terms
of the Sales Contracts, the customers are required to purchase at least 1900
tons of dry felt, in the aggregate, for a period of eighteen months at prices
based upon the mix of raw materials used in the manufacture of the dry felt and
the market price of the raw materials.
5. PULP HEDGE CONTRACT
During the six months ended June 30, 1994, certain traditional sources of raw
materials used by Striker Paper Corporation (SPC) were not able to provide the
quantity of raw materials required to meet SPC's level of production of dry
felt at a satisfactory price. Accordingly, SPC experienced a dramatic increase
in the cost of its raw materials. In an effort to mitigate its exposure to
rising raw material costs, the Company created a new subsidiary, Striker
Services Corporation (SSC), to obtain one component of the raw materials, old
corrugated cardboard (OCC), in sufficient quantities to meet its production
requirements. Quantities of OCC obtained in excess of that required to meet
SPC's production level may be sold to third parties at market prices which are
expected to be in excess of SSC's estimated costs.
As a result of continued concern about rising raw material costs and the
uncertainty of the success of the OCC gathering operations of SSC, the
Company entered into a Pulp Hedge Contract (the Hedge) to effectively hedge
against rising raw material prices. The terms of the Hedge provide for a term
of five years and for a fixed notional amount which is an approximation of
SPC's pulp needs for production in Stephens, Arkansas. The Hedge provides that
the amount of net gain or loss, as applicable, if equivalent to the difference
between the designated strike price, as set forth in the Hedge agreement, and
the Company's imputed cost. The Hedge provides that SSC's imputed cost will
be the lesser of: (i) SSC's cash cost (as defined) or (ii) as percent of the
market price for OCC as quoted in industry publications. During the three and
six months ended June 30, 1995, the Company received $156,950 and $467,774,
respectively, pursuant to the Hedge. The Company accounts for the Pulp Hedge
as a reduction of the raw materials costs and is offset against related party
receivables/payables from/to related parties.
6. ASSET PURCHASE OF THOROLD MILL
On May 5, 1995, the asset purchase transaction of the land, building and
equipment of Northern Globe Building Materials, Inc.'s idled dry felt mill in
Thorold, Ontario, Canada pursuant to the Asset Purchase Agreement between
Northern Globe Building Materials, Inc. (Northern), an independent third party
unrelated to the Registrant or any of its affiliates, and the Registrant dated
March 10, 1995 was consummated. The purchase price of the assets purchased was
1,345,790 shares of common stock of the Registrant and $250,000 cash. The
assets purchased were recorded at the lower of the estimated fair value of the
assets acquired and the sum of the estimated market value of the shares of
Common Stock issued ($5.50 per share), cash paid and acquisition costs incurred
in connection with the purchase. The assets purchased were recorded at
$8,323,237.
Page 7 of 14
<PAGE> 8
The physical properties and assets purchased had formerly been used to
manufacture dry felt paper, but had not been in operation and had been idled
and wholly inactive for more than two years preceding their purchase by the
Registrant. The Registrant has reactivated the idled dry felt mill and will
produce dry felt at Thorold, Ontario, Canada for sale to Northern and
independent third parties in the roofing industry. Sales to Northern will be
pursuant to a supply agreement entered into between the Registrant and Northern
pursuant to which the Registrant will supply Northern's three operating
Canadian shingle and rolled roofing facilities with a minimum of 15,000 tons of
dry felt paper per year, seasonally adjusted, for the period commencing on or
about July 1, 1995 through December 31, 2000. The dry felt purchase price set
forth in the supply agreement is based on the mix of the raw materials used in
the manufacture of the dry felt and the market price of the raw materials.
7. SUBSEQUENT EVENTS
Effective July 26, 1995, the Company entered into an agreement with the Sierra
Club (Sierra) and the Arkansas Department of Pollution Control and Ecology
(ADPCE) to settle claims brought by those parties concerning non-toxic
discharges in excess of state water permits for the Stephens, Arkansas mill.
The Company paid to ADPCE a civil penalty in the amount of $15,000 for excess
discharges beyond permit allowances into Smackover Creek, near the Stephens,
Arkansas mill. In addition, the Company agreed with ADPCE and Sierra to
contribute $55,000 for environmental projects in the state of Arkansas. The
Company has been working with environmental engineering companies to put in
place the plans and equipment necessary to improve and ultimately eliminate the
non-toxic discharges. The Company has preliminary approval from the ADPCE and
the state health department to begin construction of a closed loop system which
is expected to be in place by February 1996. The $15,000 civil penalty and the
$55,000 contribution for environmental projects have been reflected as other
expense in the accompanying consolidated statements of operations for the three
and six month periods ended June 30, 1995.
On July 28, 1995, the Company's Canadian Subsidiary, Striker Paper Canada,
Inc., entered into a financing agreement with a Canadian lender. The financing
agreement consists of a term loan based upon the liquidation value of certain
of the Subsidiary's fixed assets and a revolving line of credit based upon
eligible accounts receivable (collectively "the Canadian Facility"). Advances
under the Canadian Facility are limited to $2,000,000 Canadian in the aggregate
and bear interest at Canadian prime + 2.5%. The Canadian Facility requires the
Subsidiary to keep a $500,000 Canadian certificate of deposit at the Canadian
lender as additional collateral. On July 28, 1995, the Subsidiary received
$500,000 Canadian of advances under the Canadian Facility, consisting solely of
advances under the term loan.
Page 8 of 14
<PAGE> 9
Item 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------- ---------------------------
1995 1994 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues $2,186,794 $2,149,323 $4,098,556 $3,962,941
Costs of Sales 1,958,996 2,390,242 3,322,592 3,981,028
---------- ---------- ---------- ----------
Gross Margin 227,798 (240,919) 775,964 (18,087)
Selling, General and Administrative 393,871 467,360 755,540 839,984
---------- ---------- ---------- ----------
Operating Profit/(Loss) (166,073) (708,279) 20,424 (858,071)
Interest Expense, Net (62,581) (139,901) (69,711) (200,344)
Other Income 17,416 2,477 17,631 5,941
---------- ---------- ---------- ----------
Net Income/(Loss) Before Income
Taxes and Extraordinary Item (211,238) (845,703) (31,656) (1,052,474)
---------- ---------- ---------- ----------
Extraordinary Item - Extinguishment
of Debt - 2,101,495 - 2,101,495
---------- ---------- ---------- ----------
Net Income $ (211,238) $1,255,792 $ (31,656) $1,049,021
========== ========== ========== ==========
</TABLE>
This discussion should be read in conjunction with the Financial Statements of
the Company included elsewhere in this 10-QSB.
In order to concentrate on maximizing the potentially more profitable sales of
dry felt paper, during August 1994, the Company temporarily suspended the
manufacturing of asphalt saturated felt. This action has resulted in
significant decreases in payroll-related expenses as well as reductions in
other components of factory overhead. During the six month periods ended June
30, 1995, the Company has exclusively manufactured dry felt for sale to its
customer base. All sales of saturated felt have come from existing inventories
of previously manufactured saturated felt. For the three and six month periods
ended June 30, 1994, the Company manufactured both saturated felt and dry felt.
Comparison of Quarters Ended June 30, 1995 and 1994
Sales for the quarter ended June 30, 1995, were $2,186,794 an increase of 1.7%
from sales of $2,149,323 for the quarter ended June 30, 1994. This increase
was due primarily to the change in the product mix in 1994 and the increase of
sales prices for dry felt in 1995.
Gross margin increased to $227,798 (10.4% of total sales for the quarter ended
June 30, 1995) from a negative gross margin of $240,919 (11.2% of total sales
for the quarter ended June 30, 1994). This increase was due to the switch in
product mix as discussed above and the reduced cost of raw materials as a
result of the hedge agreement. Additionally, the Company has experienced
reductions in payroll related costs and utilities due to the exclusive
manufacture of dry felt.
Selling, general and administrative expenses decreased by $73,489 (15.7%) to $
393,871 for the quarter ended June 30, 1995, from $467,360 for the quarter
ended June 30, 1994. This decrease was due to several factors. Legal fees
decreased as the company employed an in-house counsel reducing outside legal
fees. Professional fees have decreased as the Company has reduced the number
and scope of outside consultants. Travel expenses have decreased due to the
Company redirecting its marketing efforts to telephone contact versus direct
contact.
Page 9 of 14
<PAGE> 10
Interest expense, net, decreased to $62,581 for the quarter ended June 30,
1995, from $139,901 for the quarter ended June 30, 1994. This decrease is
primarily due to less debt outstanding and more favorable interest rates than
in prior periods.
Because the Company has been in a loss position for financial and income tax
reporting purposes, no current or deferred income tax benefits have been
provided due to the uncertainty of realization of the net operating loss
carryforward.
Comparison of Six Months Ended June 30, 1995 and 1994.
Sales for the six months ended June 30, 1995 were $4,098,556 an increase of
3.4% from sales of $3,962,941 for the six months ended June 30, 1994. This
increase was due primarily to the change in the product mix in 1994 and the
increase of sales prices for dry felt in 1995.
Gross margin increased to $775,964 (18.9% of total sales for the six months
ended June 30, 1995) from a negative gross margin of $18,087 (0.5% of total
sales for the six months ended June 30, 1994). This increase was due to the
switch in product mix as discussed above and the reduced cost of raw materials
as a result of the hedge agreement. Additionally, the Company has experienced
reductions in payroll related costs and utilities due to the exclusive
manufacture of dry felt.
Selling, general and administrative expenses decreased by $84,444 (10.1%) to
$755,540 for the six months ended June 30, 1995 from $839,984 for the six
months ended June 30, 1994. This decrease was due to several factors. Legal
fees decreased as the company employed an in-house counsel reducing outside
legal fees. Professional fees have decreased as the Company has reduced the
number and scope of outside consultants. Travel expenses have decreased due to
the Company redirecting its marketing efforts to telephone contact versus
direct contact.
Interest expense, net, decreased to $69,711 for the six months ended June 30,
1995 from $200,344 for the six months ended June 30, 1994. This decrease is
primarily due to less debt outstanding and more favorable interest rates than
in prior periods.
Because the Company has been in a loss position for financial and income tax
reporting purposes, no current or deferred income tax benefits have been
provided due to the uncertainty of realization of the net operating loss
carryforward.
Cash Flows - Comparison of Six Months ended June 30, 1995 and 1994.
Cash flows provided in operating activities increased to $316,716 for the six
months ended June 30, 1995, from cash flows used in operating activities of
$463,830 for the six months ended June 30, 1994. The increase was primarily
the result of a decrease in inventory. The decrease in inventory is primarily
due to production quantities being sold out and efficient shipping of product
to customers.
Cash flows used in investing activities increased from $945,008 for the six
months ended June 30, 1994, to $3,043,599 for the six months ended June 30,
1995. This increase was due primarily to more expenditures for fixed assets
and fixed asset improvements and the gain on the pulp hedge.
Cash flows provided by financing activities increased $1,655,075 from
$1,648,608 for the six months ended June 30, 1994, to $3,303,683 for the six
months ended June 30, 1995. This increase is due primarily to the
subordinated debt offering, the placement of the warrants and the Facility
financing. The increase in cash flows provided by financing activities has
been utilized for expansion and working capital needs.
Page 10 of 14
<PAGE> 11
Liquidity and Capital Resources
Certain stockholders of the Company have agreed to provide additional financial
support in the event the Company does not have available cash or cash
equivalents to meet its then current obligations and continue its normal
business operations. This additional support, not exceeding in the aggregate
$3,000,000 during a 18-month period ending September 30, 1996, would only be
provided if liquid assets or financing from other sources cannot be arranged. As
of June 30, 1995, no advances have been received from stockholders pursuant to
this agreement.
During the quarter ended March 31, 1995, the Registrant authorized the issuance
of 1,000,000 Warrants to purchase one share each of Common Stock of the
Registrant at a Warrant Price of $1.50 per Warrant and an Exercise Price of
$2.00 per share escalating to $2.65 per share over the term of the Warrant
which expires on February 28, 1997. During the quarter ended March 31, 1995,
$850,000 was received by the Registrant upon issuance of 566,668 Warrants and
during April 1995, an additional $100,000 was received upon the issuance of
66,667 Warrants. The Warrants are identical in form and content, varying only
as to their dates of issuance. Warrants covering an aggregate of 566,668
shares of the Registrant's Common Stock were exercised during the quarter ended
June 30, 1995 at the Exercise Price of $2.00 per share and the Registrant
received $1,133,336 upon the exercise thereof. As of June 30, 1995, 66,667
warrants remained outstanding. The Warrants contain an undertaking of the
Registrant to effect a "shelf registration" with respect to shares of the
Registrant issuable upon the exercise thereof. Pursuant to such undertaking,
the Registrant filed a Registration Statement on Form S-3 with the Securities
and Exchange Commission during the quarter ended June 30, 1995, which
Registration Statement had not yet become effective as of June 30, 1995. The
Company paid $231,000, $71,000 upon the issuance and $160,000 upon the
exercise, in commissions to an affiliate of the Company in connection with the
placement and exercise of the Warrants during the six months ended June 30,
1995.
On May 4, 1995, the Company entered into a financing agreement consisting of a
term loan based upon the liquidation value of certain of the Company's fixed
assets at the Stephens mill and a revolving line of credit based upon eligible
accounts receivable (collectively "the Stephens Facility"). Advances under the
Stephen's Facility are limited to $2,500,000 in the aggregate and bear interest
at prime plus 3%.
On July 28, 1995, the Company's Canadian Subsidiary, Striker Paper Canada,
Inc., entered into a financing agreement with a major Canadian lender. The
financing agreement consists of a term loan based upon the liquidation value of
certain of the Subsidiary's fixed assets and a revolving borrowing line of
credit based upon eligible accounts receivable (collectively "the Canadian
Facility). Advances under the Canadian Facility are limited to $2,000,000
Canadian in the aggregate and bear interest at Canadian prime + 2.5%. The
Canadian Facility requires the Subsidiary to keep a $500,000 Canadian
certificate of deposit at the Canadian lender as additional collateral. On
July 28, 1995, the Subsidiary received $500,000 Canadian of advances under the
Canadian Facility, consisting solely of advances under the term loan.
The Company believes its existing funds, cash generated by anticipated
operations, collections on sales, and its existing financial arrangements will
adequately fund the cash needs of the Company's anticipated operations during
the next year. However, to continue to expand its business and meet working
capital requirements, the Company may need to borrow additional amounts or
obtain an additional third-party credit facility. The Company remains flexible
to pursue alternate financing arrangements which might include private or
public sales of equity or debt securities and participation in municipal or
government bond financing programs.
The ability of the Company to achieve successful operations and realize its
assets is dependent upon many factors including successful operation of the dry
felt (and ultimately its saturating) lines, penetration of existing markets at
profitable margins and volume levels, and continued cash liquidity.
Page 11 of 14
<PAGE> 12
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
The Registrant is not a party to any pending legal proceeding, nor is
any of its property subject to any pending legal proceeding.
Item 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
(a) The Annual Meeting of Stockholders of the Registrant was held in
Chicago, Illinois on May 26, 1995 pursuant to Notice and a solicitation of
proxies pursuant to Regulation 14A under the Securities and Exchange Act of
1934.
(b) Not applicable (since (i) proxies were solicited pursuant to
Regulation 14A, (ii) there was no solicitation in opposition to management's
nominees as listed in the Proxy Statement, and (iii) all of such nominees were
elected).
(c) Other than the election of management's slate of three Directors, the
only matter voted upon at the Meeting was the proposition to approve the
Registrant's 1994 Amended and Restated Incentive Stock Plan (the "1994 Stock
Plan") providing for and permitting, the grant of Incentive Awards covering
4,000,000 shares of Common Stock of the Registrant to key employees, including
officers (whether or not they are directors), of the Registrant and its
subsidiaries, all as more fully summarized in the Proxy Statement and described
in detail in the full text of the 1994 Stock Plan attached as Exhibit A to the
Proxy Statement.
The vote on approval of the 1994 Stock Plan was as follows:
<TABLE>
<CAPTION>
For Against Abstained Not Voted
--- ------- --------- ---------
<S> <C> <C> <C>
7,381,975 341,379 35,197 26,225
</TABLE>
(d) Not applicable.
Item 5. Other Information.
(1) During the quarter ended March 31, 1995, the Registrant authorized
the issuance of 1,000,000 Warrants to purchase one share each of Common
Stock of the Registrant at a Warrant Price of $1.50 per Warrant and an Exercise
Price of $2.00 per share escalating to $2.65 per share over the term of the
Warrant which expires on February 28, 1997. During the quarter ended March 31,
1995, $850,000 was received by the Registrant upon issuance of 566,668 Warrants
and during April 1995, an additional $100,000 was received upon the issuance of
66,667 Warrants. The Warrants are identical in form and content, varying only
as to their dates of issuance. Warrants covering an aggregate of 566,668 shares
of the Registrant's Common Stock were exercised during the quarter ended June
30, 1995 at the Exercise Price of $2.00 per share and the Registrant received
$1,133,336 upon the exercise thereof. As of June 30, 1995, 66,667 Warrants
remained outstanding. The Warrants contain an undertaking of the
Registrant to effect a "shelf registration" with respect to shares of the
Registrant issuable upon the exercise thereof. Pursuant to such undertaking, the
Registrant filed a Registration Statement on Form S-3 with the Securities and
Exchange Commission during the quarter ended June 30, 1995, which Registration
Statement had not yet become effective as of June 30, 1995.
Page 12 of 14
<PAGE> 13
(2) On May 4, 1995, the Company entered into a financing agreement
consisting of a term loan based upon the liquidation value of certain of the
Company's fixed assets at the Stephens mill and a revolving line of credit
based upon eligible accounts receivable (collectively "the Stephens Facility").
Advances under the Facility are limited to $2,500,000 in the aggregate and bear
interest at prime plus 3%.
(3) Effective July 26, 1995, the Company entered into an agreement with
the Sierra Club (Sierra) and the Arkansas Department of Pollution Control and
Ecology (ADPCE) to settle claims brought by those parties concerning non-toxic
discharges in excess of state water permits for the Stephens, Arkansas mill.
The Company paid to ADPCE a civil penalty in the amount of $15,000 for excess
discharges beyond permit allowances into Smackover Creek, near the Stephens,
Arkansas mill. In addition, the Company agreed with ADPCE and Sierra to
contribute $55,000 for environmental projects in the state of Arkansas. The
Company has been working with environmental engineering companies to put in
place the plans and equipment necessary to improve and ultimately eliminate the
non-toxic discharges. The Company has preliminary approval from the ADPCE and
the state health department to begin construction of a closed loop system which
is expected to be in place by February 1996. The $15,000 civil penalty and the
$55,000 contribution for environmental projects have been reflected as other
expense in the accompanying consolidated statements of operations for the three
and six month periods ended June 30, 1995.
(4) On July 28, 1995, the Company's Canadian Subsidiary, Striker Paper
Canada, Inc., entered into a financing agreement with a major Canadian lender.
The financing agreement consists of a term loan based upon the liquidation
value of certain of the Subsidiary's fixed assets and a revolving borrowing
line of credit based upon eligible accounts receivable (collectively "the
Canadian Facility). Advances under the Canadian Facility are limited to
$2,000,000 Canadian in the aggregate and bear interest at Canadian prime +
2.5%. The Canadian Facility requires the Subsidiary to keep a $500,000
Canadian certificate of deposit at the Canadian lender as additional
collateral. On July 28, 1995, the Subsidiary received $500,000 Canadian of
advances under the Canadian Facility, consisting solely of advances under the
term loan.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Financial Data Schedule.
(b) Reports on Form 8-K:
The following reports on Form 8-K were filed by the Registrant during
the quarter ended June 30, 1995:
(1) Form 8-K dated May 18, 1995, reporting (i) the consummation of the
asset purchase transaction of the land, building and equipment of
Northern Globe Building Materials, Inc.'s idled dry felt mill in
Thorold, Ontario, Canada under the provisions of the Asset Purchase
Agreement between Northern Globe Building Materials, Inc.
("Northern", an independent third party unrelated to the Registrant or
any of its affiliates) and the Registrant dated March 10, 1995. The
purchase price of the assets acquired was 1,345,790 shares of Common
Stock of the Registrant and $250,000 cash, and was the result of
direct negotiation between the parties, and (ii) the intent of the
Registrant to reactivate the idled dry felt mill and produce dry felt
at Thorold, Ontario, Canada for sale to Northern (pursuant to a supply
agreement between Northern and the Registrant, under which the
Registrant will supply Northern's three operating Canadian shingle and
rolled roofing facilities with a minimum of 15,000 tons of dry felt
paper per year, seasonally adjusted, for the period commencing on or
about July 1, 1995 through December 31, 2000) and to independent third
parties in the roofing industry. Filed with such 8-K Report was the
Pro Forma Consolidated Balance Sheet of the Registrant and
Subsidiaries as of March 31, 1995.
Page 13 of 14
<PAGE> 14
SIGNATURES:
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned, hereunto duly authorized.
STRIKER INDUSTRIES, INC.
DATE: August 14, 1995 BY: David A. Collins
------------------------- ------------------------------------
David A. Collins
Chief Executive Officer
DATE: August 14, 1995 BY: Matthew D. Pond
------------------------- ------------------------------------
Matthew D. Pond
Chief Financial Officer
Page 14 of 14
<PAGE> 15
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
----------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 595,539
<SECURITIES> 431,822
<RECEIVABLES> 1,027,849
<ALLOWANCES> 0
<INVENTORY> 404,964
<CURRENT-ASSETS> 2,772,452
<PP&E> 15,960,360
<DEPRECIATION> 1,444,262
<TOTAL-ASSETS> 17,588,865
<CURRENT-LIABILITIES> 2,460,296
<BONDS> 0
<COMMON> 2,119,913
0
0
<OTHER-SE> 11,265,249
<TOTAL-LIABILITY-AND-EQUITY> 17,588,865
<SALES> 4,098,556
<TOTAL-REVENUES> 4,098,556
<CGS> 3,322,592
<TOTAL-COSTS> 4,078,132
<OTHER-EXPENSES> (17,631)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 69,711
<INCOME-PRETAX> (31,656)
<INCOME-TAX> (31,656)
<INCOME-CONTINUING> (31,656)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (31,656)
<EPS-PRIMARY> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
