<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
-------- --------
Commission File Number: 000-25132
ICHOR CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 25-1741849
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Suite 1250, 400 Burrard Street
Vancouver, British Columbia V6C 3A6
(Address of principal executive offices) (Zip Code)
(412) 858-4750
(Registrant's telephone number, including area code)
300 Oxford Drive, Monroeville, Pennsylvania, 15146
(Former name, former address, and former
fiscal year,if changed since last report)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
----- -----
Indicate the number of shares outstanding of each of the Registrant's classes
of common stock, as of the latest practicable date:
<TABLE>
<CAPTION>
Class Outstanding at August 11, 1997
----- ------------------------------
<S> <C>
Common Stock, $0.01 4,909,295
par value
</TABLE>
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<PAGE> 2
FORWARD-LOOKING STATEMENTS
Statements in this report, to the extent that they are not based on
historical events, constitute forward-looking statements. Forward-looking
statements include, without limitation, statements regarding the outlook for
future operations, forecasts of future costs and expenditures, evaluation of
market conditions, the outcome of legal proceedings, the adequacy of reserves
or other business plans. Investors are cautioned that forward-looking
statements are subject to an inherent risk that actual results may vary
materially from those described herein. Factors that may result in such
variance, in addition to those accompanying the forward-looking statements,
include changes in interest rates, prices and other economic conditions;
actions by competitors; natural phenomena; actions by government authorities;
uncertainties associated with legal proceedings; technological development;
future decisions by management in response to changing conditions; and
misjudgments in the course of preparing forward-looking statements.
PART I. FINANCIAL INFORMATION
---------------------
ITEM 1. FINANCIAL STATEMENTS
ICHOR CORPORATION
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(Unaudited)
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<PAGE> 3
ICHOR CORPORATION
Consolidated Balance Sheets
(Unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
June 30, 1997 December 31, 1996
------------- -----------------
(Restated)
ASSETS
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 280 $ 628
Cash held in escrow 933 1,254
Accounts receivable, less allowance for
doubtful accounts 790 434
Costs and estimated earnings in excess
of billings on uncompleted contracts - 419
Prepaid expenses 105 157
Net assets of discontinued operations - 71
------------- -------------
Total current assets 2,108 2,963
Property and Equipment, net 4,111 3,544
Other Assets 146 39
------------- -------------
$ 6,365 $ 6,546
============= =============
</TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
<S> <C> <C>
Current Liabilities
Accounts payable $ 769 $ 531
Other accrued liabilities 405 282
Due to affiliate 533 420
Current portion of long-term debt 32 454
------------- -------------
Total current liabilities 1,739 1,687
Long-term Liabilities
Debt 1,029 492
Due to parent company 1,425 1,425
Other 1,166 955
------------- -------------
3,620 2,872
------------- -------------
Total liabilities 5,359 4,559
Shareholders' Equity
Common stock 50 50
Additional paid-in capital 5,743 5,743
Retained deficit (4,718) (3,754)
------------- -------------
1,075 2,039
Less cost of shares of common stock held
in treasury (69) (52)
------------- -------------
Total equity 1,006 1,987
------------- -------------
$ 6,365 $ 6,546
============= =============
The accompanying notes are an integral part of these financial statements.
</TABLE>
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<PAGE> 4
ICHOR CORPORATION
Consolidated Statements of Operations
(Unaudited)
(dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
For the Six For the Six
Months Ended Months Ended
June 30, 1997 June 30, 1996
------------- -------------
(Restated)
<S> <C> <C>
Revenues $ 956 $ -
Cost of sales 1,057 -
------------- -------------
(101) -
Selling, general and administrative expenses 344 512
------------- -------------
Loss from operations (445) (512)
Interest expense (378) (207)
------------- -------------
Loss from continuing operations (823) (719)
Discontinued operations:
Loss from operations (200) (410)
Gain (loss) on disposal 59 (840)
------------- -------------
(141) (1,250)
------------- -------------
Net loss $ (964) $ (1,969)
============= =============
Net loss per common share:
Continuing operations $ (0.17) $ (0.29)
Discontinued operations (0.03) (0.51)
------------- -------------
$ (0.20) $ (0.80)
============= =============
The accompanying notes are an integral part of these financial statements.
</TABLE>
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<PAGE> 5
ICHOR CORPORATION
Consolidated Statements of Operations
(Unaudited)
(dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
For the Three For the Three
Months Ended Months Ended
June 30, 1997 June 30, 1996
------------- -------------
(Restated)
<S> <C> <C>
Revenues $ 930 $ -
Cost of sales 1,042 -
------------- -------------
(112) -
Selling, general and administrative expenses 128 240
------------- -------------
Loss from operations (240) (240)
Interest expense (199) (114)
------------- -------------
Loss from continuing operations (439) (354)
Discontinued operations:
Loss from operations (93) (68)
Gain on disposal 59 -
------------- -------------
(34) (68)
Net loss $ (473) $ (422)
============= =============
Net loss per common share:
Continuing operations $ (0.09) $ (0.14)
Discontinued operations (0.01) (0.03)
------------- -------------
$ (0.10) $ (0.17)
============= =============
The accompanying notes are an integral part of these financial statements.
</TABLE>
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<PAGE> 6
ICHOR CORPORATION
Consolidated Statements of Cash Flows
(Unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
For the Six For the Six
Months Ended Months Ended
June 30, 1997 June 30, 1996
------------- -------------
(Restated)
<S> <C> <C>
Cash Flows from Continuing Operating Activities:
Net loss $ (823) $ (719)
Adjustments to reconcile net loss to cash flows
from continuing operating activities
Depreciation and amortization 91 114
Provision for losses on accounts receivable - 260
Changes in current assets and liabilities
Cash held in escrow 321 (111)
Accounts receivable (356) 1,505
Costs and estimated earnings in excess of billings
on uncompleted contracts 419 (220)
Prepaid expenses 52 -
Accounts payable (89) 169
Billings in excess of costs and estimated earnings
on uncompleted contracts - (23)
Due to affiliates 113 (109)
Other accrued liabilities 123 127
Other (107) (108)
------------- -------------
Net cash (used in) provided by operating activities
of continuing operations (256) 885
Cash Flows from Continuing Investing Activities:
Purchase of property and equipment (331) (105)
------------- -------------
Net cash used in investing activities of continuing
operations (331) (105)
Cash Flows from Continuing Financing Activities:
Purchase of stock held in treasury (17) -
Proceeds from debt 763 39
Principal payments on debt (437) (19)
------------- -------------
Net cash provided by financing activities of continuing
operations 309 20
------------- -------------
Net cash (used in) provided by continuing operations (278) 800
Net cash used in discontinued operations (70) (449)
------------- -------------
(Decrease) increase in cash and cash equivalents (348) 351
Cash and cash equivalents, beginning of period 628 18
------------- -------------
Cash and cash equivalents, end of period $ 280 $ 369
============= =============
The accompanying notes are an integral part of these financial statements.
</TABLE>
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<PAGE> 7
ICHOR CORPORATION
Notes to Consolidated Financial Statements
June 30, 1997
(Unaudited)
NOTE 1. BASIS OF PRESENTATION
The accompanying financial statements of ICHOR Corporation, formerly PDG
Remediation, Inc. (the "Corporation") are unaudited. However, in the opinion
of management, they include all adjustments necessary for a fair presentation
of the financial position, results of operations and cash flows of the
Corporation with respect to the specified periods.
On September 4, 1996, the Corporation's Board of Directors voted to change
the Corporation's fiscal year end from January 31 to December 31.
All adjustments made during the three months and the six months ended June
30, 1997, respectively, were of a normal, recurring nature. The amounts
presented for the three months and the six months ended June 30, 1997,
respectively, are not necessarily indicative of results of operations for a
full year. Additional information is contained in the statements and
accompanying notes included in the Corporation's Transition Report on Form
10-K for the 11 months ended December 31, 1996, and should be read in
conjunction with this quarterly report.
Certain reclassifications have been made to the prior year financial
statements to conform with the current year presentation.
NOTE 2. BUSINESS ACTIVITIES
The Corporation is in the environmental services business of recycling
petroleum waste products and disposing of oily waste waters. The Corporation
operates a waste oil recycling facility located in McCook, Illinois which was
brought on-line in the second quarter of 1997 and converts waste oil into
distillate and other recycled petroleum products and processes and disposes
of oily waste waters.
NOTE 3. NET LOSS PER SHARE
Primary earnings per share are calculated by dividing the net loss by the
weighted average number of common shares outstanding during the three months
and the six months ended June 30, 1997 and 1996, respectively. The weighted
average number of shares was 4,917,716 and 2,470,000 for the six months ended
June 30, 1997 and 1996, respectively, and 4,912,933 and 2,470,000 for the
three months ended June 30, 1997 and 1996, respectively.
Stock options and warrants have not been reflected as exercised for purposes
of computing the primary loss per share for the three months and the six
months ended June 30, 1997 and 1996, respectively, since the exercise of such
options and warrants would be anti-dilutive.
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NOTE 4. COMMITMENTS AND CONTINGENCIES
As discussed in further detail in "Item 3. Legal Proceedings" contained in
the Corporation's Transition Report on Form 10-K for the 11 months ended
December 31, 1996, the Corporation, its former parent company, certain of its
officers and directors, and the underwriters of its initial public offering
have been named as defendants in a purported class action lawsuit involving
the purchase by all persons and entities of the Corporation's common stock
from February 9, 1995 through May 23, 1995. The action alleges that the
defendants violated certain federal securities laws.
The Corporation believes that the allegations are without merit or that there
are meritorious defenses to the allegations, and intends to defend the action
vigorously. If, however, the plaintiff is successful in its claims, a
judgment rendered against the Corporation and the other defendants may have a
material adverse effect on the business and operations of the Corporation.
NOTE 5. DISCONTINUED OPERATIONS
Effective April 30, 1997, the Corporation sold substantially all of the
assets of its environmental remediation services operation for approximately
$0.2 million.
-8-
<PAGE> 9
PART I. FINANCIAL INFORMATION
---------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and analysis of the results of operations and the
financial condition of ICHOR Corporation (the "Corporation") for the three
months and the six months ended June 30, 1997, respectively, should be read
in conjunction with the consolidated financial statements and related notes
included elsewhere herein.
The Corporation is focusing on the development of its waste oil recycling
business and related operations, which consist primarily of a waste oil
recycling facility located in McCook, Illinois that converts waste oil into
distillate and other recycled petroleum products and processes and disposes
of oily waste waters (the "McCook Facility"). This facility was brought on-
line in the second quarter of 1997. The Company also plans to expand through
the acquisition of related businesses.
Effective April 30, 1997, the Corporation sold substantially all of the
assets of its environmental remediation services operation for approximately
$0.2 million. This operation has been classified separately within the
Corporation's financial statements as "discontinued operations" and is
excluded from the amounts of revenues and expenses of the Corporation's
continuing operations. The Corporation's comparative financial statements
for the periods ended June 30, 1996 have been restated to conform to this
method of presentation.
Results of Operations - Six Months Ended June 30, 1997
- ------------------------------------------------------
Revenues for the six months ended June 30, 1997 were $1.0 million, compared
to nil for the six months ended June 30, 1996. Cost of sales for the period
ended June 30, 1997 was $1.1 million, compared to nil for the period ended
June 30, 1996.
Selling, general and administrative expenses for the current period of 1997
decreased to $0.3 million from $0.5 million in the comparative period of
1996, principally due to the downsizing of the Corporation's head office.
Interest expense was $0.4 million in the period ended June 30, 1997, compared
to $0.2 million in the period ended June 30, 1996, primarily as a result of
an increase in long-term debt and in the amounts funded under the Sirrom
Agreements (as hereinafter defined) in the current period of 1997.
The Corporation reported a loss from continuing operations of $0.8 million in
the six months ended June 30, 1997, compared to $0.7 million for the six
months ended June 30, 1996, primarily as a result of the increase in interest
expense and the start-up of the McCook Facility, which was partially offset
by the decrease in selling, general and administrative expenses in the
current period of 1997.
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<PAGE> 10
The Corporation had an operating loss from discontinued operations of $0.2
million in the current period of 1997, compared to $0.4 million in the
comparative period of 1996. The Corporation had a gain on the disposal of
its environmental remediation services assets of $59,000 in the six months
ended June 30, 1997 and a loss on the disposal of its thermal treatment
facility of $0.8 million for the period ended June 30, 1996.
The Corporation's net loss for the six months ended June 30, 1997 was $1.0
million or $0.20 per share, compared to $2.0 million or $0.80 per share for
the period ended June 30, 1996.
Results of Operations - Three Months Ended June 30, 1997
- --------------------------------------------------------
Revenues for the three months ended June 30, 1997 were $0.9 million, compared
to nil for the three months ended June 30, 1996. Cost of sales for the
period ended June 30, 1997 was $1.0 million, compared to nil for the period
ended June 30, 1996.
Selling, general and administrative expenses for the current period of 1997
decreased to $0.1 million from $0.2 million in the comparative period of
1996, principally due to the downsizing of the Corporation's head office.
Interest expense was $0.2 million in the three months ended June 30, 1997,
compared to $0.1 million in the three months ended June 30, 1996, primarily
as a result of an increase in long-term debt and in the amounts funded under
the Sirrom Agreements in the current period of 1997.
The Corporation reported a loss from continuing operations of $0.4 million in
the three months ended June 30, 1997 and 1996, respectively. The decrease in
selling, general and administrative expenses in the current period of 1997
was offset by the increase in interest expense and the start-up of the McCook
Facility.
The Corporation had an operating loss from discontinued operations of $93,000
in the quarter ended June 30, 1997, compared to $68,000 in the comparative
period of 1996. The Corporation had a gain on the disposal of its
environmental remediation services assets of $59,000 in the current period of
1997.
The Corporation's net loss for the three months ended June 30, 1997 was $0.5
million or $0.10 per share, compared to $0.4 million or $0.17 per share for
the period ended June 30, 1996.
Liquidity and Capital Resources
- -------------------------------
At June 30, 1997, the Corporation's cash and cash equivalents totaled $0.3
million, a net decrease of $0.3 million from $0.6 million at December 31,
1996. At June 30, 1997, the Corporation had $0.9 million held in escrow,
compared to $1.3 million at December 31, 1996.
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<PAGE> 11
At June 30, 1997, the Corporation was funded in the amount of $4.3 million
under two agreements with Sirrom Environmental Funding, LLC (the "Sirrom
Agreements") which enabled the Corporation to fund amounts billed and
outstanding under certain Florida State rehabilitation programs at rates of
prime plus 2% and prime plus 3%, respectively. The Corporation anticipates
that the amounts funded will be paid in the fourth quarter of 1997
and, as a result, the cash which it holds in escrow to cover potential
disallowances, future interest costs and a commitment fee will be released.
However, the payments are to be discounted at the rate of 3.5% effective
January 1, 1997, and the present value of a reimbursement application will be
based upon the actual settlement date of the application rather than the
original settlement date. The Corporation will not be able to determine the
impact of this discounting on its operating results until a schedule of
anticipated payment dates is established. The Corporation may be required to
record an adjustment to reflect the negative impact of the discounting on its
results of operations and financial condition.
Net cash used in continuing operating activities was $0.3 million for the
period ended June 30, 1997, compared to cash provided of $0.9 million for the
period ended June 30, 1996. Operating activities used cash primarily as a
result of the net loss for the period and an increase in accounts receivable.
In the six months ended June 30, 1997, an increase in accounts receivable
used cash of $0.4 million, compared to a decrease in accounts receivable
providing cash of $1.5 million in the six months ended June 30, 1996.
Investing activities of continuing operations used cash of $0.3 million in
the period ended June 30, 1997, and $0.1 million in the period ended June 30,
1996, as a result of the purchase of property and equipment.
Financing activities of continuing operations provided cash of $0.3 million
in the period ended June 30, 1997, compared to $20,000 in the period ended
June 30, 1996. The Corporation maintains two lines of credit, one with an
affiliate in the amount of $0.5 million and one with another lender in the
amount of $0.8 million, to fund the working capital requirements of the
McCook Facility, which was brought on-line in the second quarter of 1997. A
net increase in debt in the six months ended June 30, 1997 provided cash of
$0.3 million, compared to $20,000 in the six months ended June 30, 1996.
The Corporation believes that the cash generated from operations and its
lines of credit should enable the Corporation to meet its ongoing liquidity
requirements. The Corporation is closely monitoring its liquidity
requirements and continues to implement cost reductions and conserve cash as
necessary.
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<PAGE> 12
PART II. OTHER INFORMATION
-----------------
ITEM 1. LEGAL PROCEEDINGS
Reference is made to the Corporation's transition report on Form 10-K for the
11 months ended December 31, 1996 for information concerning certain legal
proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Corporation held its annual meeting of shareholders on June 27, 1997. At
the meeting, Leonard Petersen was elected a Class III director of the
Corporation for a three year term, as follows:
<TABLE>
<CAPTION>
Broker
Votes For Votes Withheld Non-Votes Abstentions
--------- -------------- --------- -----------
<S> <C> <C> <C> <C>
Leonard Petersen 4,141,595 - - -
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit
Number Description
- ------- -----------
27 Article 5 - Financial Data Schedule for the 2nd Quarter
1997 Form 10-Q.
(b) Reports on Form 8-K
None
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<PAGE> 13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: August 12, 1997 ICHOR CORPORATION
By: /s/ Michael J. Smith
----------------------------------
Michael J. Smith, President, Chief
Financial Officer and Treasurer
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<PAGE> 14
EXHIBIT INDEX
Exhibit
Number Description
- ------- -----------
27 Article 5 - Financial Data Schedule for the 2nd Quarter
1997 Form 10-Q.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS AND NOTES INCLUDED IN THIS FORM 10-Q AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 280
<SECURITIES> 0
<RECEIVABLES> 1,234
<ALLOWANCES> 444
<INVENTORY> 0
<CURRENT-ASSETS> 2,108
<PP&E> 4,301
<DEPRECIATION> (190)
<TOTAL-ASSETS> 6,365
<CURRENT-LIABILITIES> 1,739
<BONDS> 1,029
0
0
<COMMON> 50
<OTHER-SE> 956
<TOTAL-LIABILITY-AND-EQUITY> 6,365
<SALES> 956
<TOTAL-REVENUES> 956
<CGS> 1,057
<TOTAL-COSTS> 1,057
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 378
<INCOME-PRETAX> (823)
<INCOME-TAX> 0
<INCOME-CONTINUING> (823)
<DISCONTINUED> (141)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (964)
<EPS-PRIMARY> (0.20)
<EPS-DILUTED> (0.20)
</TABLE>
