FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 10549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
Commission file number 2-96829-D
LOCH HARRIS, INC.,
(Exact name of registrant as specified in its charter)
Nevada 87-0418799
(State or other jurisdiction (MS Employer ID No.)
of incorporation or organization)
515 Capital of Texas Highway, #245
Austin, Texas 78746
(Address of principal executive offices)
Registrant's telephone number, including area code:
512-328-7808
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
As of September 30, 1997 there were 93,929,385 shares
of the Registrant's Common Stock outstanding.
Part 1 Financial Information
Item 1 Financial Statements "Exhibit X'
* Notes to Consolidated Financial Statements
* Forecast and Performa Financial "Exhibit B"
Management's Discussion and Analysis of Financial
Condition and Results of Operations and
Forecasted Consolidated Pro Forma.
It is the opinion of management that significant
growth in net worth has been added to the company,
and Loch Harris, Inc. continues to operate without
debt.
A. AgraTech International's bid was accepted to
acquire the largest herd of pureblood Tuli beef
cattle in the North American Continent. The accepted
bid , upon closing, will purchase the herd from court
appointed receivers. The herd, which includes 60
purebred bulls, 55 heifers and cows, and 400
cryogenically suspended pureblood embryos has been
conservatively appraised at $4,500,000.00. First year
revenue from the sale of embryos, pureblood bulls and
semen is forecasted at $2,500,000.
B. The Company has completed its addition of
Aerodyne Mexico S.A. and US Aerodyne, Ltd. has
begun delivery of the solar water pumps.
Approximately 1600 units will be delivered over the
next three years at an anticipated first year revenue
of $3,500,000. US Aerodyne, Ltd. received $
1,000,000.00 in equity transfer for
a ten percent (10%) stock ownership in US Aerodyne,
Ltd. (domestic company only).
C. PetroTech International, Inc. is presently in
negotiations to acquire a major Oklahoma oil
reclamation company. PetroTech has identified
additional reserves behind the pipe in its Oklahoma
leasehold and has begun operations of overhaul and
infield exploration. PetroTech anticipates first year
revenue of $900,000.00 from sale of crude and natural
gas and related business ventures.
D. P. C. Sentry 93000 has made significant
developmental strides in its graphical interface and
user-defined response conversion and real time data
acquisition and has informed management of its ability
to deliver the 1997 updated version by early 1998.
E. Substance Detection technology through Chemical
Detection Systems is nearing the end of
Stage 2 of Research and Development. It has developed
an extraordinary combination of cutting-edge sampling
and computer technology that enables immediate
monitoring of more than 25 chemical substances
simultaneously without physical separation or contact.
This is reported in status only as no asset base is
being reported at the present time until process is
completed into the company.
Loch Harris, Inc. is nearing the end of a four-year
acquisition, research and development program which
has positioned it as an aggressive incubator company
with the ability of each subsidiary to stand alone in
the market place. It is management's opinion that the
company can expect significant revenue to begin as
planned from all subsidiary companies within the next
quarter. The company has added management personnel
and is on schedule.
Part II Other Information
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits A Financial Statements
b) Reports on Form 8-K Submitted Simultaneously
SIGNATURES
Pursuant to the requirements of the Securities and
Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
LOCH HARRIS, INC., Registrant
Dr. R. B. Baker, President and CEO
Mark E. Baker, Secretary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1997
Principles of Consolidation
The accompanying financial statements include the
accounts of Loch Harris, Inc., and its wholly owned
subsidiaries US Aerodyne, Ltd., P.C. Sentry, Inc.,
AgraTech International, Inc, PetroTech Resources
International, Inc and InfoTech Systems International,
Inc. The consolidated balance sheet as of September
30,1997 and the related statements of income for the
three-month period then ended are unaudited.
In the opinion of management, all adjustments
necessary for a fair presentation of such financial
statements have been included. Such adjustments
consisted only of normal recurring items.
The addition by acquisition of the pureblood
Tuli beef cattle by AgraTech are reported at actual
cost basis and the addition of assets are reflected at
current market value in these notes:
US Aerodyne, Ltd.
April, 1997 the company acquired US Aerodyne, Ltd. an
Arizona based company with a successful track record
in marketing, assembly, field engineering, design,
installation and servicing project-oriented, custom
photovoltaic (solar) power and pumping systems. Loch
Harris is adding digital instrumentation and applying
the sophistication of PC Sentry 93000 technology to
the Aerodyne systems to multiply their applications
and markets.
Aerodyne has fielded and managed the largest
photovoltaic-powered water-pumping project in the
world. It is one of the most experienced private
sector companies in the industry in field engineering
and installation, including commercial, agricultural,
communications, residential, military, and oil and gas
photovoltaic applications. The company has created
numerous design innovations, including portable,
insulated battery storage vaults, portable
photovoltaic array structures, portable electronic
instrumentation shelter, a variety of electronic
devices to increase system efficiency, and a modular
power system that reduces electronics costs by up
to 30 percent, increases system reliability and allows
greater operating flexibility. Aerodyne recently
began delivery against orders for pumping units in
Mexico expected to exceed 1600 units at an average
price of $9,500.00 per unit. Delivery on the first
unit was September and the second is presently in
route.
Actual Current Value $2,450,000
Oklahoma and Texas Oil and Gas Leaseholds
On May 16, 1997, the company closed on the purchase of
19 producing oil and gas leaseholds in East Central
Oklahoma, containing approximately 1,800 contiguous
acres of producing, proved developed, proved
undeveloped and behind-the-pipe reserves. There are
approximately 8 billion cubic feet of gas (8 BCFG) and
956,000 barrels of oil, discounted at twelve percent
(12%). For book value the Company uses a figure of
$14.00/bbl. for oil and $2.50/mcf gas, with future
earnings conservatively estimated in excess of $30
million. Current prices for crude oil and natural gas
on the producing wells range from $18.50 to $21.00 per
barrel for crude and $2.40- $3.10 per mmcf for natural
gas. Current production cash flow will be used to
equip and produce additional wells. Current value has
been increased this quarter based on internal analysis
of the reserve studies.
Actual Current Value $38,384,000 *
(Proven Developed, Proven Undeveloped, Proven Behind-
the-Pipe)
* PetroTech's revenue, profitability, and future rate
of growth are substantially dependent upon
prevailing prices for natural gas, oil and condensate.
These prices are dependent upon numerous factors
beyond the Company's control, such as economic,
political and regulatory developments and competition
from other sources of energy. Energy markets have
historically been volatile, and there can be no
assurance that prices will not be subject to wide
fluctuations in the future.
AgraTech Tuli JV
In the last quarter the company announced and reported
a joint venture developing the gene pool of a
hybrid cattle. This venture was funded in the amount
of $ 75,000.00 cash. The asset was reported at a cost
basis of $ 325,000.00 representing additional internal
company cost On or about August 1, 1997, certain
irregularities were discovered in the transaction.
Evidence existed for a possible appropriation of funds
outside the scope of the authorized venture. Notice
of termination of the venture for cause was
transmitted. August 28, 1997 an 8-K was filed. Since
the filing of the 8K, Loch Harris has filed
appropriate court papers. There has been no
conclusion to the controversy. Accountants elected to
not change the reported base as the $ 75,000.00 has
been expended and an asset still exists pending
outcome of the ensuing litigation.
Actual Current Value $750,000
AgraTech International, Tuli Purchase
August 1997 and September 1997 AgraTech completed its
bid through the court appointed receivers for the
largest collection of Tuli pureblood cattle and
embryos on the North American Continent.
The herd consists of 60 Bulls and bull calves, 55
heifers and cows, and 400 cryogenically suspended
embryos. Actual Cash Value of this herd has been
estimated by known experts in the field and based on
comparable 1997 sales of live Tuli cattle and embryos
in the United States.
Actual Current Value $6,740,000
The actual value of Loch Harris, Inc is presently $
48,324,000 however the company reports using the cost
basis, which brings the company's value to
$13,019,677. No reservations have been made for
income tax, including the use of tax loss carry
forwards reported presently at $3,785,000. Tax loss
carry forward is based on tax losses incurred in
Natural Gas Exploration and Production and the change
as reported in the previous quarter represents the
natural loss of exemption due to non-use as determined
by the Internal Revenue Service.
The financial statements and notes are presented as
permitted by Form 10-Q and do not contain
certain information included in the company's annual
financial statements and notes.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997<F6>
<CASH> $385,950
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> $385,950
<PP&E> $12,921,309<F1><F2>
<DEPRECIATION> $(287,582)
<TOTAL-ASSETS> $13,019,677<F7>
<CURRENT-LIABILITIES> $203,500
<BONDS> 0
0
0
<COMMON> 93,929,385
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> $13,019,677<F1>
<SALES> $1,767,000<F1><F3>
<TOTAL-REVENUES> $1,767,000
<CGS> 0
<TOTAL-COSTS> $785,912<F4>
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> $981,088
<INCOME-TAX> $981,088<F5>
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> $981,088
<EPS-PRIMARY> 0.01
<EPS-DILUTED> 0.01
<FN>
<F1>This value includes Retained Earnings of $(3,861,358)
and Paid-in Capital of $16,583,606.
<F2>This value includes Fixed Assets for all current subsidiaries and
projects of Loch Harris, Inc., totaling $6,040,000, and Intangible Assets,
Software Development, and Intellectual Property of $6,335,809.
<F3>This Value includes Invested and Other Income.
<F4>This Value includes Operating Expenses incurred in each of the
current projects and subsidiaries of Loch Harris, Inc. and the Sales,
General, and Administrative Costs (i.e. overhead) of the parent
corporation.
<F5>No reservations have been made for Income Tax including the use of tax
loss carry forwards reported presently at $3,785,000. Tax loss carry
forwards are based on tax losses incurred in Natural Gas Exploration and
Production and the change as reported in the previous quarter represents
the natural loss of exemption due to non-use as determined by the Internal
Revenue Service.
<F6>These statements are presented as Pro Forma values, and are unaudtited.
They represent all fiscal activity for September 30, 1997 and the
three month period then ended. In the opinion of management, all
adjustments necessary for a fair presentation of such financial statements
have been included. Such adjustments consisted only of normal recurring
items.
<F7>All assets are calculated on a cost basis. The actual market value of
the assets of Loch Harris, Inc. and its subsidiaries is as follows:
US Aerodyne, Ltd. $ 2,450,000
Oklahoma and Texas Oil and Gas Leaseholds $38,384,000
(Proven Developed, Proven Undeveloped, and Behind-the-Pipe Reserves)
AgraTech Tuli Joint Venture $ 750,000
(See 8-K, August 28, 1997)
AgraTech International, Inc. Tuli Acquisition $ 6,740,000
The actual value of Loch Harris, Inc. is presently $48,324,000, but
the company reports on a cost basis, which totals $13,019,677.
</FN>
</TABLE>
