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U.S. 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 September 30, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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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)
(604) 683-5312
(Registrant's telephone number, including area code)
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
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Indicate the number of shares outstanding of each of the Registrant's classes
of common stock, as of the latest practicable date:
Class Outstanding at November 10, 1997
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Common Stock, $0.01 4,907,520
par value
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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 NINE MONTHS ENDED SEPTEMBER 30, 1997
(Unaudited)
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ICHOR CORPORATION
Consolidated Balance Sheets
(Unaudited)
(dollars in thousands)
September 30, 1997 December 31, 1996
------------------ -----------------
(Restated)
ASSETS
Current Assets
Cash and cash equivalents $ 93 $ 628
Cash held in escrow 763 1,254
Accounts receivable, less allowance
for doubtful accounts 725 434
Costs and estimated earnings in excess
of billings on uncompleted contracts - 419
Prepaid expenses and other 287 157
Net assets of discontinued operations - 71
-------------- --------------
Total current assets 1,868 2,963
Property and Equipment, net 4,087 3,544
Other Assets 146 39
-------------- --------------
$ 6,101 $ 6,546
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 869 $ 531
Other accrued liabilities 450 282
Due to affiliate 683 420
Current portion of long-term debt 32 454
-------------- --------------
Total current liabilities 2,034 1,687
Long-term Liabilities
Debt 1,029 492
Due to parent company 825 1,425
Other 1,166 955
-------------- --------------
3,020 2,872
-------------- --------------
Total liabilities 5,054 4,559
Shareholders' Equity
Preferred stock 600 -
Common stock 50 50
Additional paid-in capital 5,743 5,743
Retained deficit (5,275) (3,754)
-------------- --------------
1,118 2,039
Less cost of shares of common
stock held in treasury (71) (52)
-------------- --------------
Total equity 1,047 1,987
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$ 6,101 $ 6,546
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The accompanying notes are an integral part of these financial statements.
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ICHOR CORPORATION
Consolidated Statements of Operations
(Unaudited)
(dollars in thousands except per share amounts)
For the Nine For the Nine
Months Ended Months Ended
September 30, 1997 September 30, 1996
------------------ ------------------
(Restated)
Revenues $ 2,034 $ -
Cost of sales 2,229 -
---------------- ---------------
(195) -
Selling, general and
administrative expenses 525 806
---------------- ---------------
Loss from operations (720) (806)
Interest expense (574) (312)
---------------- ---------------
Loss from continuing operations
before income taxes (1,294) (1,118)
Provision for income taxes - 15
---------------- ---------------
Loss from continuing operations
after income taxes (1,294) (1,103)
Discontinued operations:
Loss from operations (286) (478)
Gain (loss) on disposal 59 (840)
---------------- ---------------
(227) (1,318)
---------------- ---------------
Net loss $ (1,521) $ (2,421)
================ ===============
Net loss per common share:
Continuing operations $ (0.26) $ (0.45)
Discontinued operations (0.05) (0.53)
---------------- ---------------
$ (0.31) $ (0.98)
================ ===============
The accompanying notes are an integral part of these financial statements.
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ICHOR CORPORATION
Consolidated Statements of Operations
(Unaudited)
(dollars in thousands except per share amounts)
For the Three For the Three
Months Ended Months Ended
September 30, 1997 September 30, 1996
------------------ ------------------
(Restated)
Revenues $ 1,078 $ -
Cost of sales 1,172 -
---------------- ----------------
(94) -
Selling, general and
administrative expenses 181 294
---------------- ----------------
Loss from operations (275) (294)
Interest expense (196) (105)
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Loss from continuing operations
before income taxes (471) (399)
Provision for income taxes - 15
---------------- ----------------
Loss from continuing operations
after income taxes (471) (384)
Loss from discontinued operations (86) (68)
---------------- ----------------
Net loss $ (557) $ (452)
================ ================
Net loss per common share:
Continuing operations $ (0.09) $ (0.15)
Discontinued operations (0.02) (0.03)
---------------- ----------------
$ (0.11) $ (0.18)
================ ================
The accompanying notes are an integral part of these financial statements.
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ICHOR CORPORATION
Consolidated Statements of Cash Flows
(Unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
For the Nine For the Nine
Months Ended Months Ended
September 30, 1997 September 30, 1996
------------------ ------------------
(Restated)
<S> <C> <C>
Cash Flows from Continuing
Operating Activities:
Net loss from continuing operations $ (1,294) $ (1,103)
Adjustments to reconcile net loss to cash
flows from continuing operating activities
Depreciation and amortization 118 168
Provision for losses on accounts receivable - 260
Changes in current assets and liabilities
Cash held in escrow 491 81
Accounts receivable (291) 1,057
Costs and estimated earnings in excess of
billings on uncompleted contracts 419 764
Prepaid expenses and other (130) -
Accounts payable 11 (103)
Billings in excess of costs and estimated
earnings on uncompleted contracts - 23
Due to affiliates 263 (123)
Other accrued liabilities 168 (37)
Other (107) (185)
--------------- ---------------
Net cash (used in) provided by operating
activities of continuing operations (352) 802
Cash Flows from Continuing Investing Activities:
Purchase of property and equipment (334) (124)
--------------- ---------------
Net cash used in investing activities of
continuing operations (334) (124)
Cash Flows from Continuing Financing Activities:
Purchase of stock held in treasury (19) -
Proceeds from debt 763 39
Principal payments on debt (437) (19)
--------------- ---------------
Net cash provided by financing activities
of continuing operations 307 20
--------------- ---------------
Net cash (used in) provided by continuing
operations (379) 698
Net cash used in discontinued operations (156) (478)
--------------- ---------------
(Decrease) increase in cash and
cash equivalents (535) 220
Cash and cash equivalents, beginning of period 628 18
--------------- ---------------
Cash and cash equivalents, end of period $ 93 $ 238
=============== ===============
The accompanying notes are an integral part of these financial statements.
</TABLE>
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ICHOR CORPORATION
Notes to Consolidated Financial Statements
September 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 nine months ended
September 30, 1997, respectively, were of a normal, recurring nature. The
amounts presented for the three months and the nine months ended September 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 nine months ended September 30, 1997 and 1996, respectively. The
weighted average number of shares was 4,914,369 and 2,470,000 for the nine
months ended September 30, 1997 and 1996, respectively, and 4,907,783 and
2,470,000 for the three months ended September 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 nine
months ended September 30, 1997 and 1996, respectively, since the exercise of
such options and warrants would be anti-dilutive.
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NOTE 4. PREFERRED STOCK
On September 30, 1997, the parent company of the Corporation agreed to convert
part of its loan due from the Corporation into non-redeemable shares of
preferred stock of the Corporation, subject to all necessary approvals,
including those of the independent directors. The conversion has been
reflected in the balance sheet as at September 30, 1997, and the preferred
stock has been reserved for issuance.
NOTE 5. 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 6. 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.
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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 nine months ended September 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 September 30, 1996 have been restated to conform to this
method of presentation.
Results of Operations - Nine Months Ended September 30, 1997
- ------------------------------------------------------------
Revenues for the nine months ended September 30, 1997 were $2.0 million,
compared to nil for the nine months ended September 30, 1996. Cost of sales
for the period ended September 30, 1997 were $2.2 million, compared to nil for
the period ended September 30, 1996.
Selling, general and administrative expenses for the current period of 1997
decreased to $0.5 million from $0.8 million in the comparative period of 1996,
principally due to the downsizing of the Corporation's head office.
Interest expense was $0.6 million in the period ended September 30, 1997,
compared to $0.3 million in the period ended September 30, 1996, primarily as
a result of an increase in long-term debt and in the amounts advanced under
the Sirrom Agreements (as herein defined) in the current period of 1997.
The Corporation reported a loss from continuing operations of $1.3 million in
the nine months ended September 30, 1997, compared to $1.1 million for the
nine months ended September 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.
The Corporation had an operating loss from discontinued operations of $0.3
million in the current period of 1997, compared to $0.5 million in the
comparative period of 1996. The Corporation had a
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gain on the disposal of its environmental remediation services assets of
$59,000 in the nine months ended September 30, 1997 and a loss on the disposal
of its thermal treatment facility of $0.8 million for the period ended
September 30, 1996.
The Corporation's net loss for the nine months ended September 30, 1997 was
$1.5 million or $0.31 per share, compared to $2.4 million or $0.98 per share
for the period ended September 30, 1996.
Results of Operations - Three Months Ended September 30, 1997
- -------------------------------------------------------------
Revenues for the three months ended September 30, 1997 were $1.1 million,
compared to nil for the three months ended September 30, 1996. Cost of sales
for the period ended September 30, 1997 was $1.2 million, compared to nil for
the period ended September 30, 1996.
Selling, general and administrative expenses for the current period of 1997
decreased to $0.2 million from $0.3 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 September 30,
1997, compared to $0.1 million in the three months ended September 30, 1996,
primarily as a result of an increase in long-term debt and in the amounts
advanced under the Sirrom Agreements in the current period of 1997.
The Corporation reported a loss from continuing operations of $0.5 million in
the three months ended September 30, 1997, compared to $0.4 million in the
quarter ended September 30, 1996. 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 $86,000
in the quarter ended September 30, 1997, compared to $68,000 in the
comparative period of 1996.
The Corporation's net loss for the three months ended September 30, 1997 was
$0.6 million or $0.11 per share, compared to $0.5 million or $0.18 per share
for the period ended September 30, 1996.
Liquidity and Capital Resources
- -------------------------------
At September 30, 1997, the Corporation's cash and cash equivalents totaled
$0.1 million, a net decrease of $0.5 million from $0.6 million at December 31,
1996. The Corporation maintains two lines of credit in the amount of $0.8
million each to fund the working capital requirements of the McCook Facility,
which was brought on-line in the second quarter of 1997. The Corporation had
approximately $0.1 million unutilized under these lines of credit at September
30, 1997. Both lines of credit are with affiliates.
At September 30, 1997, under two agreements with Sirrom Environmental Funding,
LLC (the "Sirrom Agreements"), the Corporation had funded the amounts billed
and outstanding under certain Florida State rehabilitation programs in the
amount of $4.0 million, at rates of prime plus 2% and 3%, respectively. The
Corporation holds $0.8 million in escrow to cover potential disallowances and
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future interest costs relating to the Sirrom Agreements. Due to an
accelerated payment program, the amounts billed and outstanding are expected to
be paid in the fourth quarter of 1997 and be discounted at the rate of 3.5%
effective January 1, 1997 with the present value determined from the actual
settlement date of a reimbursement application rather than the original
settlement date. The Corporation will not be able to determine the impact of
discounting and any disallowances on its operating results and financial
condition until payment amounts and dates have been established. The
Corporation may be required to record an adjustment to reflect any negative
impact.
Net cash used in continuing operating activities was $0.4 million for the
period ended September 30, 1997, compared to net cash provided of $0.8 million
for the period ended September 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 nine months ended September 30, 1997, an increase
in accounts receivable used cash of $0.3 million, compared to a decrease in
accounts receivable providing cash of $1.1 million in the nine months ended
September 30, 1996. A release of cash held in escrow provided $0.5 million in
the current period, compared to $0.1 million in the period ended September 30,
1996.
Investing activities of continuing operations used cash of $0.3 million in the
period ended September 30, 1997, and $0.1 million in the period ended
September 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 September 30, 1997, compared to $20,000 in the period ended
September 30, 1996. A net increase in debt in the nine months ended September
30, 1997 provided cash of $0.3 million, compared to $20,000 in the nine months
ended September 30, 1996. On September 30, 1997, the Corporation's parent
company agreed to convert part of its loan due from the Corporation into non-
redeemable shares of preferred stock of the Corporation, subject to all
necessary approvals. The Corporation has reserved the preferred stock for
issuance.
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 cash requirements and
continues to implement cost reductions and conserve cash as necessary.
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PART II. OTHER INFORMATION
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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 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit
Number Description
- ------- -----------
27 Article 5 - Financial Data Schedule for the 3rd Quarter 1997
Form 10-Q.
(b) Reports on Form 8-K
None
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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: November 13, 1997 ICHOR CORPORATION
By: /s/ Michael J. Smith
----------------------------------
Michael J. Smith, President, Chief
Financial Officer and Treasurer
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EXHIBIT INDEX
Exhibit
Number Description
- ------- -----------
27 Article 5 - Financial Data Schedule for the 3rd 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 93
<SECURITIES> 0
<RECEIVABLES> 725
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,868
<PP&E> 4,087
<DEPRECIATION> 0
<TOTAL-ASSETS> 6,101
<CURRENT-LIABILITIES> 2,034
<BONDS> 1,029
0
600
<COMMON> 50
<OTHER-SE> 397
<TOTAL-LIABILITY-AND-EQUITY> 6,101
<SALES> 2,034
<TOTAL-REVENUES> 2,034
<CGS> 2,229
<TOTAL-COSTS> 2,229
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 574
<INCOME-PRETAX> (1,294)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,294)
<DISCONTINUED> (227)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,521)
<EPS-PRIMARY> (0.31)
<EPS-DILUTED> (0.31)
</TABLE>
