<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A-2
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
- --- OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED: DECEMBER 31, 1995
TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d)
- --- OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 0-20179
RECYCLING INDUSTRIES, INC.
------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
COLORADO 84-1103445
- ------------------------------- ---------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
384 INVERNESS DRIVE SOUTH, SUITE 211
ENGLEWOOD, COLORADO 80112
- ------------------------------------------------ ----------
(Mailing Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (303) 790-7372
Securities Registered Pursuant to Section 12(b) of the Act: NONE
Securities Registered Pursuant to Section 12(g)
of the Act: COMMON STOCK, $.001 PAR VALUE
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, 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.
Number of Shares Outstanding As Of
Class December 31, 1995
- ----------------------------- ----------------------------------
Common Stock, $.001 Par Value 8,635,478
<PAGE>
TABLE OF CONTENTS
PART I -- FINANCIAL INFORMATION PAGE
----
ITEM 1. FINANCIAL STATEMENTS*
Consolidated Balance Sheets - December 31, 1995 (Unaudited)
and September 30, 1995 3-4
Consolidated Statements of Operations (Unaudited) for the
three months ended December 31, 1995 and 1994 5
Consolidated Statement of Stockholders' Equity
through December 31, 1995 (Unaudited) 6
Consolidated Statements of Cash Flows (Unaudited) for the
three months ended December 31, 1995 and 1994 7
Notes to the Consolidated Financial Statements 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
PART II -- OTHER INFORMATION
Items 1 through 6
Signatures
* The accompanying interim financial statements have not been audited by
an independent certified public accountant, and are so noted as
"Unaudited" where applicable. Only those statements corresponding to
a fiscal year-end (September 30) are audited.
-2-
<PAGE>
RECYCLING INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
===========================================
ASSETS
(SUBSTANTIALLY PLEDGED)
DECEMBER 31, SEPTEMBER 30,
1995 1995
------------ -------------
(UNAUDITED)
CURRENT ASSETS:
Cash $ 67,000 $ 184,000
Trade accounts receivable, less allowance
for doubtful accounts of $10,000 and
$15,000 respectively 1,010,000 1,026,000
Accounts receivable, related party 62,000 223,000
Inventories 1,963,000 497,000
Prepaid expenses 137,000 137,000
Deferred offering costs 126,000 -
----------- -----------
Total Current Assets 3,365,000 2,067,000
PROPERTY, PLANT AND EQUIPMENT, net 8,391,000 6,686,000
DEFERRED INCOME TAXES 1,241,000 800,000
OTHER ASSETS 3,786,000 744,000
----------- -----------
TOTAL ASSETS $16,783,000 $10,297,000
----------- -----------
----------- -----------
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-3-
<PAGE>
RECYCLING INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
===========================================
LIABILITIES AND STOCKHOLDERS' EQUITY
DECEMBER 31, SEPTEMBER 30,
1995 1995
------------ -------------
(UNAUDITED)
CURRENT LIABILITIES:
Notes payable $ 47,000 $ 61,000
Notes payable - related parties 2,857,000 -
Trade accounts payable 795,000 655,000
Trade accounts payable - related parties 5,000 73,000
Accrued liabilities:
Interest 30,000 22,000
Interest - related party - 8,000
Payroll and other 104,000 107,000
Income taxes payable 86,000 86,000
Due to factor, related party 327,000 197,000
Current portion of long-term debt 216,000 227,000
Current portion of long-term debt,
related parties 441,000 218,000
Current portion of obligation under
capital lease 324,000 37,000
----------- -----------
Total Current Liabilities 5,232,000 1,691,000
----------- -----------
LONG-TERM DEBT:
Long-term debt, net of current portion 130,000 132,000
Long-term debt - related parties, net of
current portion 2,917,000 1,979,000
Obligation under capital lease, net of
current portion 1,493,000 41,000
----------- -----------
Total Long-Term Debt 4,540,000 2,152,000
----------- -----------
Total Liabilities 9,772,000 3,843,000
----------- -----------
COMMITMENTS AND CONTINGENCIES:
STOCKHOLDERS' EQUITY :
Preferred stock, no par, 10,000,000
shares authorized:
Series A 13,000 shares issued and
outstanding 1,312,000 1,312,000
Series B -0- and 300,000 shares issued
and outstanding - 450,000
Common Stock, $.001 par value, 50,000,000
shares authorized, 8,635,478 and 8,395,785
shares issued and outstanding 8,000 8,000
Additional paid in capital 14,495,000 13,120,000
Accumulated (deficit) (8,804,000) (8,436,000)
----------- -----------
Total Stockholders' Equity 7,011,000 6,454,000
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $16,783,000 $10,297,000
----------- -----------
----------- -----------
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-4-
<PAGE>
RECYCLING INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
=============================================
FOR THE THREE MONTHS ENDED:
------------------------------------
DECEMBER 31, 1995 DECEMBER 31, 1994
----------------- -----------------
(UNAUDITED) (UNAUDITED)
REVENUES:
Sales $3,458,000 $3,402,000
Other income - 15,000
---------- ----------
Total Revenues 3,458,000 3,417,000
---------- ----------
COSTS AND EXPENSES:
Cost of sales 3,415,000 2,455,000
Personnel 431,000 146,000
Professional services 143,000 116,000
Travel 17,000 7,000
Occupancy 14,000 41,000
Depreciation and amortization 31,000 68,000
Interest 96,000 79,000
Other general and administrative 120,000 145,000
---------- ----------
Total Costs and Expenses 4,267,000 3,057,000
---------- ----------
INCOME (LOSS) BEFORE EXTRAORDINARY GAIN (809,000) 360,000
EXTRAORDINARY GAIN FROM SETTLEMENT OF DEBTS - 61,000
---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES (809,000) 421,000
(BENEFIT) FROM INCOME TAXES (441,000) -
---------- ----------
NET INCOME (LOSS) $ (368,000) $ 421,000
---------- ----------
---------- ----------
NET INCOME (LOSS) PER SHARE:
Before Extraordinary Item $ (0.04) $ .12
Extraordinary Item - .02
---------- ----------
NET INCOME (LOSS) PER SHARE $ (0.04) $ .14
---------- ----------
---------- ----------
Weighted Average Shares Outstanding 8,409,262 3,111,259
---------- ----------
---------- ----------
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-5-
<PAGE>
RECYCLING INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED SEPTEMBER 30, 1994 AND 1995
AND THE THREE MONTHS ENDED DECEMBER 31, 1995 (UNAUDITED)
===========================================
<TABLE>
PREFERRED STOCK COMMON STOCK ADDITIONAL OTHER
--------------------- ------------------ PAID-IN OPTION EQUITY ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL TO CEO SECURITY (DEFICIT) TOTAL
------- ---------- --------- ------ ----------- -------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balances, September 30,
1992 - $ - 2,367,728 $3,000 $ 5,905,000 $ - $ - $(6,844,000) $ (936,000)
Common stock issued
for services - - 20,000 - 149,000 - - - 149,000
Contribution of services - - - - 120,000 - - - 120,000
Dilution of predecessor
cost adjustment
property option - - - - 444,000 - - - 444,000
Net (loss) - - - - - - - (2,483,000) (2,483,000)
-------- ----------- --------- ------ ----------- -------- -------- ----------- -----------
Balances, September 30,
1993 - - 2,387,728 3,000 6,618,000 - - (9,327,000) (2,706,000)
Preferred stock issued
for debt 591,333 887,000 - - - - - - 887,000
Preferred stock issued
for acquisition of NRI 38,000 3,612,000 - - - - - - 3,612,000
Common stock issued
for cash - - 30,000 - 56,000 - - - 56,000
Common stock issued
for services - - 39,600 - 242,000 - - - 242,000
Common stock issued
for debt - - 548,376 - 1,351,000 - - - 1,351,000
Contribution to capital - - - - 2,000 - - - 2,000
Conversion of accrued
salary - - - - - - 246,000 - 246,000
Net (loss) - - - - - - - (924,000) (924,000)
-------- ----------- --------- ------ ----------- -------- -------- ----------- -----------
Balances, September 30,
1994 629,333 4,499,000 3,005,704 3,000 8,269,000 - 246,000 (10,251,000) 2,766,000
Redemption of
preferred stock
Series A (25,000) (2,300,000) - - - - - - (2,300,000)
Redemption of
preferred stock
Series B and
other equity for
Option to CEO (291,333) (437,000) - - - 683,000 (246,000) - -
Common stock issued
for acquisition
of MRI - - 120,000 - 1,200,000 - - - 1,200,000
Common stock issued
during private
offering, net of
offering costs of
$590,000 - - 3,746,400 4,000 2,778,000 - - - 2,782,000
Common stock issued
to retire debt - - 166,666 - 150,000 - - - 150,000
Common stock issued
for renegotiation
of payment terms
for a stockholder
loan - - 10,000 - - - - - -
Common stock issued
for services - - 10,000 - 25,000 - - - 25,000
Common stock issued
for interest on
bridge loans - - 17,351 - 16,000 - - - 16,000
Common stock issued
on exercise of
option to CEO - - 1,319,445 1,000 682,000 (683,000) - - -
Common stock rounding
due to stock split - - 219 - - - - - -
Net income - - - - - - - 1,815,000 1,815,000
-------- ----------- --------- ------ ----------- -------- -------- ----------- -----------
Balances, September 30,
1995 313,000 1,762,000 8,395,785 8,000 13,120,000 - - (8,436,000) 6,454,000
Common stock issued for
acquisition of Anglo
(unaudited) - - 227,693 - 925,000 - - - 925,000
Conversion of
preferred stock
series B
(unaudited) (300,000) (450,000) 12,000 - 450,000 - - - -
Net income for the
period (unaudited) - - - - - - - (368,000) (368,000)
-------- ----------- --------- ------ ----------- -------- -------- ----------- -----------
Balances, December 31,
1995 (unaudited) 13,000 $ 1,312,000 8,635,478 $8,000 $14,495,000 $ - $ - $(8,804,000) $ 7,011,000
-------- ----------- --------- ------ ----------- -------- -------- ----------- -----------
-------- ----------- --------- ------ ----------- -------- -------- ----------- -----------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-6-
<PAGE>
RECYCLING INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED:
-------------------------------------
DECEMBER 31, 1995 DECEMBER 31, 1994
----------------- -----------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM (TO) OPERATING ACTIVITIES:
Net income (loss) $ (368,000) $ 421,000
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Depreciation and amortization 202,000 226,000
Extraordinary gain from settlement of debts - (61,000)
Deferred income taxes (441,000) -
Changes in assets and liabilities:
Trade accounts receivable 16,000 (175,000)
Inventories (133,000) 82,000
Prepaid expenses - (11,000)
Other current assets (16,000) 9,000
Accounts payable 66,000 (180,000)
Accrued liabilities (68,000) 40,000
----------- ------------
Net Cash Provided (Used) by Operating Activities (742,000) 351,000
----------- ------------
CASH FLOWS FROM (TO) INVESTING ACTIVITIES:
Additions to equipment (50,000) (40,000)
Receivables - related party 161,000 32,000
Non competition agreement (200,000) -
Additions to acquisition costs and goodwill (227,000) (74,000)
----------- ------------
Net Cash Provided (Used) in Investing Activities (316,000) (82,000)
----------- ------------
CASH FLOWS FROM (TO) FINANCING ACTIVITIES:
Proceeds from borrowings 1,409,000 150,000
Principal payments on borrowings (367,000) (170,000)
Principal payments on borrowings - related parties - (232,000)
Principal payments on capital lease (132,000) -
Deferred offering costs (110,000) -
Proceeds from factor 11,000 -
Proceeds from factor - related party 2,041,000 1,335,000
Payments to factor - related party (1,911,000) (1,329,000)
Proceeds from issuance of common stock - 25,000
----------- ------------
Net Cash Provided (Used) by Financing Activities 941,000 (221,000)
----------- ------------
Increase (decrease) in Cash (117,000) 48,000
CASH, beginning of period 184,000 115,000
----------- ------------
CASH, end of period $ 67,000 $ 163,000
----------- ------------
----------- ------------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-7-
<PAGE>
RECYCLING INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
===========================================
GENERAL INFORMATION:
I. The financial statements included herein have been prepared by the Company
without audit except the September 30, 1995, balance sheet which was
audited by the Company's independent public accountants. The statements
have been prepared pursuant to the rules and regulations of the Securities
and Exchange Commission and reflect all adjustments, consisting of only
normal recurring accruals, which are, in the opinion of management,
necessary for a fair statement of the results of operations for the periods
shown. These statements do not include all information required by
generally accepted accounting principles to be included in a full set of
financial statements. These financial statements should be read in
conjunction with the financial statements and notes thereto included in the
Company's latest report on Form 10-K, dated September 30, 1995.
II. On September 13, 1995, the common stock of the Company was approved for
listing on the Nasdaq SmallCap Market under the trading symbol "RECY".
III. On December 11, 1995, the Company acquired substantially all of the assets
and the business of Anglo Metal, Inc. dba Anglo Iron & Metal (Anglo). The
assets acquired from Anglo consisted of a heavy duty automotive shredder,
inventories, metal shearing equipment, balers, heavy equipment, tools and
rolling stock used in the business of recycling ferrous and non-ferrous
metals. The Company also purchased from Anglo certain real property,
buildings and leasehold improvements used in the metal recycling business.
The purchase price for Anglo was $6,065,000 comprised of: $2,079,000 in
cash; $1,865,000 note which is to be paid in ten monthly installments of
$186,500 beginning in February 1996; a $446,000 secured promissory note
payable in 60 consecutive monthly installments of $9,000, including
interest; a $750,000 unsecured note payable in 72 equal consecutive monthly
installments of $10,400; and 227,693 shares of Common Stock valued at
$925,000.
Of the cash paid at the closing of the acquisition, $1,800,000 was obtained
through a sale-leaseback transaction with Ally Capital Corporation,
collateralized by all of Anglo's machinery and equipment, accounts
receivable and inventories, which has been recorded as a capital lease.
The terms of the sale-leaseback provide for 60 consecutive monthly lease
payments of $41,000 with a bargain purchase option at the end of the lease
term. The lease contained numerous covenants for maintaining certain
financial ratios and earnings levels. The remaining $279,000 paid at
closing was obtained from the operating cash reserves and working capital
of the Company.
The Company signed a consulting and non-competition agreement with the
president of Anglo. The term of the non-compete portion is for six years
and is valued at $1,000,000 which will be amortized over the term of the
agreement using the straight line method. The consulting portion is for a
term of six months and is payable $5,000 per month.
RII also entered into a sublease agreement with Anglo for three yard
facilities for $2,500 a month through December 10, 2005.
The real property acquired from Anglo and the Common Stock issued by the
Company have been placed in escrow to provide for the remediation of
environmental contamination related to the operations of Anglo prior to the
acquisition.
-8-
<PAGE>
RECYCLING INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
===========================================
The purchase price of Anglo has been allocated as follows:
Equipment under capital lease $ 1,800,000
Contract to acquire land and buildings 70,000
Covenant not to compete 1,000,000
Inventories 1,365,000
Purchase price in excess of net assets acquired 1,830,000
--------------
Total purchase price 6,065,000
Notes payable (3,061,000)
Common Stock (925,000)
--------------
Cash paid at closing 2,079,000
Capital lease obligation (1,800,000)
--------------
Cash paid from operating capital $ 279,000
--------------
--------------
The unaudited pro forma summary financial statements which follow have been
prepared assuming that the acquisition of Anglo occurred at the beginning of
the period for pro forma statement of operations.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
RECYCLING PRO FORMA
INDUSTRIES ANGLO PRO FORMA DECEMBER 31,
INC. IRON & METAL ADJUSTMENTS 1995
------------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Revenues $ 3,458,000 $ 3,347,000 $ (539,000) $ 6,266,000
Costs and expenses 4,267,000 3,238,000 (736,000) 6,769,000
------------- ------------- ------------ -------------
------------- ------------- ------------ -------------
Income (loss) before income taxes (809,000) 109,000 197,000 (503,000)
Provision (benefit) from
income taxes (441,000) 13,000 (13,000) (441,000)
------------- ------------- ------------ -------------
------------- ------------- ------------ -------------
Income (loss) from continuing
operations, net of
income taxes $ (368,000) $ 96,000 $ 210,000 $ (62,000)
------------- ------------- ------------ -------------
------------- ------------- ------------ -------------
Income (loss) from continuing
operations, net of
income taxes,
per common share $ (0.04) $ (.01)
------------- -------------
------------- -------------
Weighted Average Number of
Common Shares Outstanding 8,409,262 8,624,478
------------- -------------
------------- -------------
</TABLE>
-9-
<PAGE>
RECYCLING INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
===========================================
Prior to acquiring Anglo, the Company commissioned extensive environmental
studies on the Anglo sites. These environmental investigations resulted in
a determination that certain isolated areas of the facilities may contain
environmental contaminates. As a result, the Company established an
Environmental Escrow to cover the cost of potential clean up of these
areas. Additionally, during the Escrow Period, the Company will engage an
environmental engineer to determine the level of contamination on the real
property. The location of any contamination will be identified by a survey
and the legal description of the real property will be revised to provide
that the Company will not purchase any contaminated portion of the real
property.
If prior to the termination of the Escrow Period, the location of the
contamination cannot be determined or if the Company determines that there
is extensive contamination of the real property, all documents held in
escrow shall be destroyed and the Company shall enter into a lease
agreement for the real property, which lease shall be retroactive to the
Closing Date. The lease payments under such lease agreement shall be equal
to those that would otherwise have been due under the Secured Promissory
Note. Due to the escrow agreement, the real property has been recorded as
an intangible asset, Contract to Acquire Land.
IV. In December 1995 and January 1996, the Company borrowed $1,575,000 of
bridge financing represented by the notes payable - related parties with
interest at 10% per annum. Proceeds from the loans were used to finance
the Anglo acquisition and general corporate expenses. In January 1996,
principal of $1,125,000 and accrued interest of $13,000 were converted into
323,523 shares of Common Stock. In connection with the bridge financing,
the lenders were issued warrants to purchase a total of 359,250 shares of
Common Stock at $1.50 per share, exercisable through the end of a
three-year period commencing on the effective date of a registration
statement covering the underlying Common Stock. Principal and interest
related to the bridge loans, which were not converted into Common Stock,
are due in December, 1996 and January, 1997. If the Company defaults on
repayment of the loans, the notes are convertible to Common Stock at a
conversion price of the lesser of $2.00 or 50% of the average closing price
for the last 30 days after the default. First Equity Capital Securities,
Inc. received a finders fee of $79,000 in connection with the bridge loans.
V. On January 31, 1996 and April 8, 1996, the Company completed a Private
Placement of an aggregate of 1,454,156 shares of Common Stock at $2.75 per
share and issued warrants to purchase up to 727,078 shares of Common Stock
at $7.50 per share. Of the $3,998,934 raised, $1,137,000 was raised
through the conversion of the bridge financing indebtedness discussed
above. The remaining $438,000 of principal of the bridge indebtedness plus
accrued interest will be repaid from the proceeds of the proposed public
offering, discussed in Note VII below. The proceeds from these private
placements were used to complete the acquisition of Mid-America Shredding,
Inc., discussed in Note VI below and for general working capital purposes.
-10-
<PAGE>
RECYCLING INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
===========================================
VI. On April 15, 1996, the Company acquired substantially all of the assets
(excluding cash and accounts receivable) of Mid-America Shredding, Inc. The
assets acquired consist of real property, buildings, a heavy duty
automotive shredder mill, a wire chopping plant and heavy equipment and
tools used in the business of recycling ferrous and non-ferrous metals.
The purchase price totaled $1,925,000, settled through the assumption of
outstanding bank debt of $1,210,000, $660,000 cash paid at closing and
$55,000 note, payable over eight months. The purchase price is allocated
as follows:
Inventories $ 55,000
Land 310,000
Building and improvements 560,000
Machinery and equipment 1,000,000
------------
$ 1,925,000
------------
------------
VII. On March 27, 1996, the Company entered into a letter of intent with an
underwriter to sell 4,400,000 shares of the Company's Common Stock in a
public offering. Upon a registration statement being declared effective,
the 4,400,000 shares would be sold along with 492,448 shares which would
also be sold by certain security holders.
VIII. In April 1996, the Company reached agreement for the purchase of the
stock of Weissman Iron and Metal for cash of $12,400,000, subject to
adjustment at closing. Weissman operates in the business of recycling
ferrous and non-ferrous metals in and around Waterloo, Iowa. The
purchase price is anticipated to be funded through a combination of a
public offering of the Company's securities and bank debt.
IX. In April 1996, the Company entered into a letter of intent for a
$10,000,000 to $11,000,000 financing agreement. Advances would be
subject to certain asset eligibility computations and interest would
be at the Bank of America Reference Rate plus 2% except for the over
advance facility which would be plus 3%. The agreement would be
collateralized by a first security interest on all of the Company's
assets. Closing of the financing agreement is conditional upon
completion of the lender due diligence including, among other things,
appraisals, documentations and certain financial requirements.
X. For presentation purposes, the Statement of Operations for the three
months ended December 31, 1994, has been revised to reflect line item
consistency with the Statement of Operations provided in the September
30, 1995, 10-K.
XI. Inventories as of December 31, 1995 and September 30, 1995 consist of
the following:
DECEMBER 31, 1995 SEPTEMBER 30, 1995
----------------- ------------------
(UNAUDITED)
Raw materials $ 1,258,000 $ 350,000
Finished goods 705,000 147,000
------------- ------------
$ 1,963,000 $ 497,000
------------- ------------
------------- ------------
-11-
<PAGE>
RECYCLING INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
===========================================
XII. Property, plant and equipment as of December 31, 1995 and September 30,
1995 consists of the following:
DECEMBER 31, 1995 SEPTEMBER 30, 1995
----------------- ------------------
(UNAUDITED)
Land $ 1,640,000 $ 1,640,000
Building and improvements 365,000 365,000
Heavy machinery and equipment 1,472,000 1,472,000
Auto shredder mill 3,177,000 3,161,000
Transportation equipment 713,000 679,000
Office equipment 121,000 121,000
Assets under capital lease 1,800,000 -
------------- --------------
Total 9,288,000 7,438,000
Less accumulated depreciation
and amortization (897,000) (752,000)
------------- --------------
Total $ 8,391,000 $ 6,686,000
------------- --------------
------------- --------------
XIII. Other assets consists of the following at:
DECEMBER 31, 1995 SEPTEMBER 30, 1995
----------------- ------------------
(UNAUDITED)
Goodwill, net of accumulated $ 2,187,000 $ 188,000
amortization of $40,000 and
$29,000
Non compete agreement,
net of accumulated
amortization of $14,000 986,000 -
Investment in affiliate,
at cost 277,000 277,000
Engineering plans, net of
accumulated amortization
of $915,000 and $899,000 172,000 188,000
Contract to acquire land 70,000 -
Other assets 94,000 91,000
------------- ------------
$ 3,786,000 $ 744,000
------------- ------------
------------- ------------
XIV. During the quarter ended December 31, 1995, management determined that
the net operating losses generated from prior years, in the amount of
$1.3 million is more likely than not to be used in the near future due to
taxable income estimated to be generated by Anglo. Therefore an
additional net deferred tax asset of $441,000 has been recorded. Net
operating losses carryovers available for the future through the year
2009 are $7.9 million.
-12-
<PAGE>
RECYCLING INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
===========================================
XV. Supplemental information to statement of cash flows for noncash investing
and financing activities:
1995 1994
------------ ------------
Cash paid for interest $ 96,000 $ 79,000
------------ ------------
------------ ------------
Acquisition of subsidiaries
for stock $ 925,000 $ 1,200,000
------------ ------------
------------ ------------
Contract to acquire land $ 446,000 $ -
------------ ------------
------------ ------------
Acquisition of Anglo inventory
for note payable $ 1,865,000 $ -
------------ ------------
------------ ------------
Capital lease obligation incurred
to finance Anglo acquisition $ 1,800,000 $ -
------------ ------------
------------ ------------
Intangible acquired for a note
payable $ 750,000 $ -
------------ ------------
------------ ------------
Stock issued for conversion of
bridge financing $ - $ 150,000
------------ ------------
------------ ------------
-13-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Company's
consolidated financial statements and the notes thereto included elsewhere
herein.
OVERVIEW
The Company is a full-service metals recycler engaged in the collection and
processing of various ferrous and non-ferrous metals for resale to domestic
and foreign steel producers and other metal producers and processors. Prior
to May 1994, the Company was a development stage enterprise engaged in the
development of the technology related to the recycling of municipal solid
waste (the "MSW Technology").
The Company's current operations commenced in May 1994 with the acquisition
of its Nevada metals recycling facility. Since that time, the Company has
experienced significant growth from the acquisition of other metals recycling
facilities. On June 30, 1995, the Company acquired a 20% interest in a
metals recycling facility located in Georgia. On December 11, 1995, the
Company acquired its four southern Texas facilities. These acquisitions,
except for the 20% ownership interest in the Georgia facility, are accounted
for under the purchase method for business combinations and, accordingly, the
result of operations for such acquired businesses are included in the
Company's financial statements only from the applicable date of acquisition.
As a result, the Company's historical results of operations for the periods
presented are not directly comparable.
RESULTS OF OPERATIONS
THREE MONTHS ENDED DECEMBER 31, 1995 AND 1994
The results of operations for the three months ended December 31, 1995 were
impacted by a number of factors, including delays in processed scrap
shipments and declining gross margins at the Company's Nevada facility. In
addition, profitability was negatively affected by acquisition costs and
transition expenses incurred in conjunction with the acquisition of its
southern Texas facilities on December 11, 1995.
REVENUES. Revenues increased $41,000, or 1.2%, to $3.5 million for the three
months ended December 31, 1995 compared to $3.4 million for the same period
for the previous year primarily due to the acquisition of the Company's
southern Texas facilities on December 11, 1995. The operations of the
southern Texas facilities provided an additional $539,000 of revenues, which
was offset by a $498,000 decrease in revenues from the operations of the
Nevada facility. The main factors responsible for the decline in revenues at
the Nevada facility were the closing of certain steel mill customers for the
holidays in late December 1995, which had remained open in the comparable
period of 1994, combined with a shortage of rail cars which reduced the
Company's ability to ship product.
14
<PAGE>
For the three months ended December 31, 1995, ferrous scrap revenues
increased $444,000 or 27.2%, as shipments increased approximately 3,100 tons
to 17,200 tons and the average selling price rose approximately $7 per ton to
$120 per ton. Non-ferrous scrap revenues decreased approximately $200,000 or
13.8%, reflecting a $.09 per pound decrease in average non-ferrous selling
prices to $.52 per pound which was partially offset by a 30,400 pound
increase in non-ferrous shipments to 2.4 million pounds. Paper sales
decreased approximately $187,000 or 58.6%, for the three months ended
December 31, 1995 as average sales prices and volumes declined relative to
the comparable period of 1994.
COST OF SALES. The overall cost of sales increased $960,000, or 39.1%, to
$3.4 million for the three months ended December 31, 1995, compared to $2.4
million for the three months ended December 31, 1994, and increased as a
percentage of revenues to 98.8% from 71.2%. This increase in cost of sales
was primarily due to decreases in ferrous and non-ferrous sales prices at the
Company's Nevada facility, without corresponding declines in raw material and
direct production costs. In addition, increased raw material costs incurred
upon the acquisition of the Company's southern Texas facilities combined with
shipping delays at the facilities further increased costs of sales. As a
result, gross profit decreased to $43,000 for the three months ended December
31, 1995 compared with $962,000 for the three months ended December 31, 1994.
SELLING AND ADMINISTRATIVE EXPENSES. Selling and administrative expenses
increased to $756,000, or 21.9% of revenues for the three months ended
December 31, 1995, from $523,000, or 15.3% of revenues, for the three months
ended December 31, 1994. This increase resulted from additional expenses
associated with acquired operations and expenses incurred in connection with
the Company's increase in personnel in anticipation of additional
acquisitions. Specifically, $205,000 of the increase was attributable to
compensation paid upon consummation of the acquisition of the Company's
southern Texas facilities.
INTEREST EXPENSE. Interest expense was $96,000 for the three months ended
December 31, 1995 compared to $79,000 for the three months ended December 31,
1994. Interest expense increased primarily due to higher average interest
rates on the Company's debt as well as additional debt incurred to finance
the purchase of the southern Texas facilities in December 1995.
BENEFIT FROM INCOME TAXES. For the three months ended December 31, 1995, the
Company recorded an increase to its net deferred tax asset of $441,000 for a
total of $1.2 million and a benefit from deferred income taxes of $441,000.
During the three months ended December 31, 1995, management determined that
the net operating loss carryforward was more likely than not to be used in
the near future due to the future taxable income to be generated by the
Company's southern Texas facilities acquired on December 11, 1995. Net loss
for the three months ended December 31, 1995 generated an increase to net
operating loss carryforward in the amount of $900,000 for a total of $7.9
million available for the future through 2009. No benefit from deferred
income taxes was recognized for the three months ended December 31, 1994.
INCOME (LOSS) FROM CONTINUING OPERATIONS, NET OF INCOME TAXES. For the three
months ended December 31, 1995, the Company had losses from continuing
operations, net of income taxes of $368,000, or $.04 per share, compared to
income from continuing operations, net of income taxes of $360,000, or $.12
per share, for the three months ended December 31, 1994.
15
<PAGE>
NET INCOME. For the three months ended December 31, 1995, the Company had
net loss of $368,000, or $.04 per share, compared to net income of $421,000,
or $.14 per share, for the three months ended December 31, 1994.
LIQUIDITY AND CAPITAL RESOURCES
As the Company's business has grown, overall cash requirements for internal
growth and acquisitions have been met through a combination of private
placements of debt and equity securities, equipment and receivables financing
and cash flow from operations. Since commencement of its metals recycling
operations in May 1994, the Company has raised net cash proceeds of $6.3
million through the sale of equity securities. Through March 1995, the
Company was also funded in part by $887,000 of borrowings from First Dominion
Holdings, Inc., a company controlled by the Company's Chairman and Chief
Executive Officer ("First Dominion"), all of which has been repaid. At
December 31, 1995, the Company had $8.8 million of debt outstanding of which
$4.2 million is due in the next twelve months.
On May 11, 1994, the Company acquired its Nevada facility by purchasing all
of the outstanding common stock of Nevada Recycling, Inc. As restructured,
the purchase price for the Nevada facility consisted of debt of $5.0 million
and the issuance of 13,000 shares of the Company's Series A Convertible
Preferred Stock valued at $1.3 million. In addition, the Company issued to
the sellers a warrant to acquire 20,000 shares of Common Stock at an exercise
price of $1.25 per share.
On June 30, 1995, the Company acquired a 20% interest in a Georgia metals
recycling facility through its investment in The Loef Company ("Loef"). This
investment has been valued at $277,000, the amount of costs incurred by the
Company in pursuing its acquisition of Loef. The Company's ownership
interest in Loef will be reduced to 15% if the Company does not invest an
additional $200,000 in Loef by June 30, 1996. At this time, the Company has
not determined whether to make this payment nor has it negotiated an
extension of this deadline.
On December 11, 1995, the Company acquired its southern Texas facilities by
acquiring substantially all of the assets of Anglo Metals, Inc., d/b/a/ Anglo
Iron & Metal, for $6.1 million. The purchase price was paid as follows: (i)
$2.1 million in cash; (ii) $1.9 million Note which is to be paid in ten
monthly installments of $186,500 beginning in February 1996 (iii) a $446,000
secured promissory note bearing interest at 8% and payable in 60 monthly
installments of $9,000; (iv) a $750,000 unsecured promissory note and
non-compete agreement payable in 72 consecutive installments of $10,416; and
(v) 227,693 shares of Common Stock, valued at $925,000.
For the three months ended December 31, 1995, net cash used by operations was
$742,000. This use of cash was primarily the result of the net loss of
$368,000 and the change of deferred income tax of $441,000 which was offset
by depreciation and amortization of $202,000. In addition, increases in
inventory, prepaid expenses and accrued liabilities amounted to $217,000
offset by an increase in accounts payable of $66,000. Inventories and
accounts receivable increased primarily because of the acquisition of the
Company's southern Texas facilities on December 11, 1995.
For the three months ended December 31, 1995, the Company used net cash in
investing activities of $316,000 compared to $82,000 for the three months
ended December 31, 1994. This increase reflects $279,000 paid in connection
with the purchase of the Company's southern Texas facilities in December
1995.
16
<PAGE>
The Company had a positive net worth of approximately $7.0 million as of
December 31, 1995, compared to $6.5 million at September 30, 1995. This
improvement in net worth is due primarily to the acquisition of the
Company's southern Texas facility.
The Company had a working capital deficit at December 31, 1995 of $1.9
million as compared to a positive $376,000 at September 30, 1995. This
deficit was primarily a result of the debt incurred in connection with the
acquisition of its southern Texas facilities in December 1995.
INFLATION AND PREVAILING ECONOMIC CONDITIONS.
To date, inflation has not had a significant impact on the Company's
operations. The Company believes it should be able to implement price
increases sufficient to offset most raw material costs increases resulting
from inflation, although there may be some delay between raw material costs
increases and sales price increases and competitive factors may require the
Company to absorb at least a portion of these costs increases. Management
believes that a sustained economic slowdown would negatively impact the
operations and financial performance of the Company.
SEASONALITY
The Company believes that its operations can be adversely affected by
protracted periods of inclement weather which could reduce the volume of
material processed at its facilities. In addition, periodic maintenance
shutdowns by the Company's larger customers may have a temporary adverse
impact on the Company's operations.
NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board has recently issued SFAS No. 123
"Accounting for Stock Based Compensation." SFAS No. 123 encourages the
accounting for stock-based employee compensation programs to be reported
within the financial statements on a fair value-based method. If the fair
value-based method is not adopted, then SFAS No. 123 requires pro forma
disclosure of net income and earnings per share as if the fair value-based
method had been adopted. The Company has not yet determined how SFAS No. 123
will be implemented or its impact on the financial statements. SFAS No. 123
is effective for transactions entered into after December 15, 1995.
17
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not currently a party to any material litigation and is not
aware of any threatened litigation that could have a material adverse effect on
the Company's business, operating results or financial condition.
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 ON FORM 8-K
EXHIBITS:
3(i) Amended and Restated Articles of Incorporation. Incorporated by
reference to Exhibit 3(i).1 to the Company's Registration Statement on
Form S-1, Registration No. 33-97654 (the "Form S-1").
3(ii) Bylaws. Incorporated by reference to Exhibit 3(ii).1 to the Form S-1.
4 Certificate of Designations, Rights and Preferences for the Series A
Convertible Preferred Stock of Recycling Industries, Inc. with
Amendment. Incorporated by reference to Exhibit 4.1 to the Form S-1.
10.1 Agreements Related to the Acquisition of Nevada Recycling, Inc.:
10.1.1 Bill of Sale and Assumption Agreement dated April 30, 1995
between Nevada Recycling Corporation and Nevada Recycling, Inc.,
incorporated by reference to Exhibit (d)(1) to the Company's
Current Report on Form 8-K filed May 12, 1994, reporting an event
of May 10, 1994, Commission file No. 0-20179;
10.1.2 Real Estate Installment Sale Agreement dated May 10, 1994 by and
between Recycling Industries, Inc. and Nevada Recycling
Corporation, incorporated by reference to Exhibit (d)(2) to the
Company's Current Report on Form 8-K filed May 12, 1994,
reporting an event of May 10, 1994, Commission file No. 0-20179;
10.1.3 Stock Exchange Agreement dated May 10, 1994 between Recycling
Industries, Inc. and Nevada Recycling Corporation, incorporated
by reference to Exhibit (d)(3) to the Company's Current Report on
Form 8-K filed May 12, 1994, reporting an event of May 10, 1994,
Commission file No. 0-20179; and
18
<PAGE>
10.1.4 Sale and Security Agreement dated May 10, 1994 by and among
Recycling Industries, Inc. and Nevada Recycling Corporation,
incorporated by reference to Exhibit (d)(4) to the Company's
Current Report on Form 8-K filed May 12, 1994, reporting an event
of May 10, 1994, Commission file No. 0-20179.
10.2 Agreements related to the Restructuring of the Acquisition of Nevada
Recycling, Inc.:
10.2.1 Termination, Restructuring and Purchase Agreement, effective
December 30, 1994, between Recycling Industries, Inc., NR
Holdings, Inc., Nevada Recycling, Inc. and Nevada Recycling
Corporation, incorporated by reference to Exhibit (c)(2) to the
Company's Current Report on Form 8-K reporting an event of
December 30, 1994, as amended April 3, 1995 on Form 8-K/A, as
further amended May 1, 1995 on Form 8-K/A-2 and as further
amended June 5, 1995 on Form 8-K/A-3, Commission File
No. 0-20179;
10.2.2 Purchase Agreement, dated December 30, 1994, between NR Holdings,
Inc. and Nevada Recycling Corporation, incorporated by reference
to Exhibit (c)(3) to the Company's Current Report on Form 8-K
reporting an event of December 30, 1994, as amended April 3, 1995
on Form 8-K/A, as further amended May 1, 1995 on Form 8-K/A-2 and
as further amended June 5, 1995 on Form 8-K/A-3, Commission File
No. 0-20179;
10.2.3 Real Estate Installment Sale Agreement, dated December 30, 1994,
between NR Holdings, Inc. and Nevada Recycling corporation,
incorporated by reference to Exhibit (c)(4) to the Company's
Current Report on Form 8-K reporting an event of December 30,
1994, as amended April 3, 1995 on Form 8-K/A, as further amended
May 1, 1995 on Form 8-K/A-2 and as further amended June 5, 1995
on Form 8-K/A-3, Commission File No. 0-20179;
10.2.4 Security and Option Agreement, effective December 30, 1994,
between Recycling Industries, Inc., NR Holdings, Inc., Nevada
Recycling, Inc. and Nevada Recycling Corporation, incorporated by
reference to Exhibit (c)(5) to the Company's Current Report on
Form 8-K reporting an event of December 30, 1994, as amended
April 3, 1995 on Form 8-K/A, as further amended May 1, 1995 on
Form 8-K/A-2 and as further amended June 5, 1995 on Form 8-K/A-3,
Commission File No. 0-20179;
10.2.5 $2,000,000 Promissory Note; December 30, 1994, from NR Holdings,
Inc. to Nevada Recycling Corporation, incorporated by reference
to Exhibit (c)(6) to the Company's Current Report on Form 8-K
reporting an event of December 30, 1994, as amended April 3, 1995
on Form 8-K/A, as further amended May 1, 1995 on Form 8-K/A-2 and
as further amended June 5, 1995 on Form 8-K/A-3, Commission File
No. 0-20179;
10.2.6 $300,000 Promissory Note; December 30, 1994, from NR Holdings,
Inc. to Nevada Recycling Corporation, incorporated by reference
to Exhibit (c)(7) to the Company's Current Report on Form 8-K
reporting an event of December 30, 1994, as amended April 3, 1995
on Form 8-K/A, as further amended May 1, 1995 on Form 8-K/A-2 and
as further amended June 5, 1995 on Form 8-K/A-3, Commission File
No. 0-20179;
10.2.7 ERS Corporate Guaranty, dated December 30, 1994, by Recycling
Industries, Inc., incorporated by reference to Exhibit (c)(8) to
the Company's Current Report on Form 8-K reporting an event of
December 30, 1994, as amended April 3, 1995 on Form 8-K/A, as
further amended May 1,
19
<PAGE>
1995 on Form 8-K/A-2 and as further amended June 5, 1995 on
Form 8-K/A-3, Commission File No. 0-20179;
10.2.8 NRI Corporate Guaranty, dated December 30, 1994, by Nevada
Recycling, Inc., incorporated by reference to Exhibit (c)(9) to
the Company's Current Report on Form 8-K reporting an event of
December 30, 1994, as amended April 3, 1995 on Form 8-K/A, as
further amended May 1, 1995 on Form 8-K/A-2 and as further
amended June 5, 1995 on Form 8-K/A-3, Commission File
No. 0-20179; and
10.2.9 Subscription to Shares of NR Holdings, Inc., dated December 30,
1994, for 100 Shares of Common Stock, incorporated by reference
to Exhibit (c)(10) to the Company's Current Report on Form 8-K
reporting an event of December 30, 1994, as amended April 3, 1995
on Form 8-K/A, as further amended May 1, 1995 on Form 8-K/A-2 and
as further amended June 5, 1995 on Form 8-K/A-3, Commission File
No. 0-20179.
10.3 Agreements Related to the Acquisition of Metal Recovery, Inc.:
10.3.1 Memorandum of Understanding dated January 18, 1995 between
Recycling Industries, Inc., the ACI Principals, Sierra Holdings
Limited Partnership, Military Scrap, L.P. and Thomas J., Wiens,
incorporated by reference to Exhibit (c)(1) to the Company's
Current Report on Form 8-K reporting an event of December 30,
1994, as amended April 3, 1995 on Form 8-K/A, as further amended
May 1, 1995 on Form 8-K/A-2 and as further amended June 5, 1995
on Form 8-K/A-3, Commission File No. 0-20179;
10.3.2 ACI Option Agreement dated February 28, 1995 by and between
Recycling Industries, Inc., Ralph Paglieri, Peter Lukesch and
Scott Fischer;
10.3.3 Option Agreement by and between Thomas J. Wiens, Ralph Paglieri,
Peter Lukesch and Scott Fischer; and
10.3.4 Pledge and Hypothecation Agreement by and among Recycling
Industries, Inc., Nevada Recycling Corporation, Ralph Paglieri,
Peter Lukesch and Scott Fischer.
10.4 Warrant Solicitation Agreement between First Equity Capital
Securities, Inc. and Recycling Industries, Inc.
10.8 Agreements related to the Acquisition of Anglo Iron & Metal
10.8.1 Asset Purchase Agreement dated December 1, 1995 by and among
Recycling Industries of Texas, Inc., Recycling Industries, Inc.,
Anglo Metal, Inc. d/b/a Anglo Iron & Metal and Robert C. Rome,
incorporated by reference to the Company's current report on Form
8-K reporting an event of December 11, 1995, Commission File No.
0-20179.
10.8.2 First Addendum dated December 11, 1995 to the Asset Purchase
Agreement dated December 1, 1995 by and among Recycling
Industries of Texas, Inc., Recycling Industries, Inc., Anglo
Metal, Inc. d/b/a Anglo Iron & Metal and Robert C. Rome,
incorporated by reference to the Company's current report on Form
8-K reporting an event of December 11, 1995, Commission File No.
0-20179.
20
<PAGE>
10.8.3 Inventory Purchase Agreement dated December 11, 1995 by and
between Recycling Industries of Texas, Inc, and Anglo Metal, Inc.
d/b/a Anglo Iron & Metal, incorporated by reference to the
Company's current report on Form 8-K reporting an event of
December 11, 1995, Commission File No. 0-20179.
10.8.4 Consulting and Non-Compete Agreement dated December 11, 1995 by
and between Recycling Industries of Texas, Inc. and Robert C.
Rome, incorporated by reference to the Company's current report
on Form 8-K reporting an event of December 11, 1995, Commission
File No. 0-20179.
10.8.5 Real Estate Purchase Contract dated December 11, 1995 by and
between Recycling Industries of Texas, Inc. and Anglo Metal, Inc.
d/b/a Anglo Iron & Metal, incorporated by reference to the
Company's current report on Form 8-K reporting an event of
December 11, 1995, Commission File No. 0-20179.
10.8.6 Form of Proposed Remediation Escrow Agreement by and between
Recycling Industries of Texas, Inc., Recycling Industries, Inc.,
Anglo Metal, Inc. d/b/a Anglo Iron & Metal, incorporated by
reference to the Company's current report on Form 8-K reporting
an event of December 11, 1995, Commission File No. 0-20179.
10.8.7 Escrow Agreement dated December 11, 1995 by and between Recycling
Industries of Texas, Inc., Recycling Industries, Inc., Anglo
Metal, Inc. d/b/a Anglo Iron & Metal, Robert C. Rome and Stewart
Title of Hidalgo County, Inc., incorporated by reference to the
Company's current report on Form 8-K reporting an event of
December 11, 1995, Commission File No. 0-20179.
10.8.8 Master Lease Agreement dated December 12, 1995 by and among Ally
Capital Corporation as lessor and Recycling Industries of Texas,
Inc. and Recycling Industries, Inc. as co-lessees, incorporated
by reference to the Company's current report on Form 8-K
reporting an event of December 11, 1995, Commission File
No. 0-20179.
10.8.9 Equipment Schedule to the Master Lease Agreement dated December
12, 1995 by and among Ally Capital Corporation as lessor and
Recycling Industries of Texas, Inc. and Recycling Industries,
Inc. as co-lessees, incorporated by reference to the Company's
current report on Form 8-K reporting an event of December 11,
1995, Commission File No. 0-20179.
REPORTS ON FORM 8-K:
An 8-K dated December 22, 1995, describing the December 11, 1995,
acquisition by Recycling Industries of Texas, Inc. a wholly owned
subsidiary of the Company, of substantially all the assets of and the
business of Anglo Metal Inc. (d/b/a Anglo Iron & Metal), a privately held
metals and paper recycler with operations in Brownsville, Harlingen,
McAllen and San Juan Texas.
21
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant in the capacities and on the dates indicated.
Date: July 12, 1996 By: /s/ Thomas J. Wiens
-----------------------------------
Thomas J. Wiens, Chairman and Chief
Executive Officer
Date: July 12, 1996 By: /s/ Jerome B. Misukanis
------------------------------------
Jerome B. Misukanis, Chief Financial
Officer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 67,000
<SECURITIES> 0
<RECEIVABLES> 1,020,000
<ALLOWANCES> (10,000)
<INVENTORY> 1,963,000
<CURRENT-ASSETS> 263,000
<PP&E> 8,536,000
<DEPRECIATION> (145,000)
<TOTAL-ASSETS> 16,783,000
<CURRENT-LIABILITIES> 5,232,000
<BONDS> 0
0
1,312,000
<COMMON> 8,000
<OTHER-SE> 5,691,000
<TOTAL-LIABILITY-AND-EQUITY> 16,783,000
<SALES> 3,458,000
<TOTAL-REVENUES> 3,458,000
<CGS> 3,415,000
<TOTAL-COSTS> 4,267,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 96,000
<INCOME-PRETAX> (809,000)
<INCOME-TAX> 441,000
<INCOME-CONTINUING> (368,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (368,000)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> 0
</TABLE>
