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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
Commission File Number: 00-25132
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.)
300 Oxford Drive, Monroeville, Pennsylvania 15146
(Address of principal executive offices) (Zip Code)
(412) 856-6100
(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
--- ---
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 May 8, 1997
----- --------------------------
<S> <C>
Common Stock, $0.01 4,919,720
par value
</TABLE>
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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 THREE MONTHS ENDED MARCH 31, 1997
(Unaudited)
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ICHOR CORPORATION
Condensed Consolidated Balance Sheets
(Unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
--------- -----------
ASSETS
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 528 $ 628
Cash held in escrow 1,086 1,254
Accounts receivable, less allowance for
doubtful accounts 615 434
Costs and estimated earnings in excess
of billings on uncompleted contracts 198 419
Prepaid expenses 290 157
--------- ---------
Total current assets 2,717 2,892
Property and Equipment, at cost 4,266 3,674
Other Assets 58 42
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$ 7,041 $ 6,608
========= =========
</TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
<S> <C> <C>
Current Liabilities
Accounts payable $ 423 $ 531
Other accrued liabilities 490 282
Due to affiliate 387 420
Current portion of long-term debt 486 477
--------- ---------
Total current liabilities 1,786 1,710
Long-term Liabilities
Debt 2,591 1,956
Other 1,172 955
--------- ---------
3,763 2,911
--------- ---------
Total liabilities 5,549 4,621
Shareholders' Equity
Common stock 50 50
Additional paid-in capital 5,743 5,743
Retained deficit (4,245) (3,754)
--------- ---------
1,548 2,039
Less cost of shares of common stock
held in treasury (56) (52)
--------- ---------
Total equity 1,492 1,987
--------- ---------
$ 7,041 $ 6,608
========= =========
</TABLE> -3-
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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
March 31, 1997 March 31, 1996
-------------- ---------------
<S> <C> <C>
Contract revenues $ 489 $ 995
Contract costs 385 927
---------- ----------
104 68
Selling, general and administrative expenses 417 648
---------- ----------
Loss from operations (313) (580)
Other income (expense):
Interest expense (179) (94)
Other 1 3
---------- ----------
Loss from continuing operations
before income taxes (491) (671)
---------- ----------
Provision for income taxes - -
---------- ----------
Loss from continuing operations (491) (671)
Discontinued operation:
Loss from operations of soil
remediation facility - (36)
Loss on disposal of soil remediation
facility - (840)
---------- ----------
Loss from discontinued operations - (876)
---------- ----------
Net loss $ (491) $ (1,547)
========== ==========
Net loss per common share:
Loss from continuing operations $ (0.10) $ (0.27)
Discontinued operation - (0.35)
---------- ----------
$ (0.10) $ (0.62)
========== ==========
</TABLE>
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ICHOR CORPORATION
Consolidated Statements of Cash Flows
(Unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
For the Three For the Three
Months Ended Months Ended
March 31, 1997 March 31, 1996
-------------- --------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net loss $ (491) $ (1,547)
Adjustments to reconcile net loss to
cash flows from operating activities
Provision for disposal of discontinued
operation - 840
Depreciation and amortization 36 55
Provision for losses on accounts receivable - 255
Other (17) (5)
Changes in current assets and liabilities
Cash held in escrow 168 (104)
Accounts receivable (175) 999
Costs and estimated earnings in excess of
billings on uncompleted contracts 221 (111)
Prepaid expenses (84) -
Accounts payable (108) 144
Billings in excess of costs and estimated
earnings on uncompleted contracts - (22)
Due to affiliates (33) (43)
Net assets of discontinued operations - (15)
Other accrued liabilities 26 138
Other - (1)
----------- -----------
Net cash (used in) provided by operating
activities (457) 583
Cash Flows from Investing Activities:
Purchase of property and equipment (283) (26)
----------- -----------
Net cash used in investing activities (283) (26)
Cash Flows from Financing Activities:
Purchase of stock held in treasury (4) -
Proceeds from debt 763 19
Principal payments on debt (119) (4)
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Net cash provided by financing activities 640 15
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(Decrease) increase in cash and cash equivalents (100) 572
Cash and cash equivalents, beginning of period 628 18
----------- -----------
Cash and cash equivalents, end of period $ 528 $ 590
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</TABLE>
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ICHOR CORPORATION
Notes to Consolidated Financial Statements
March 31, 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 financial position, results of operations and cash flows.
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 three months ended March 31, 1997, were of a
normal, recurring nature. The amounts presented for the three months ended
March 31, 1997, 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, including
remediation and recycling. Its operations consist of providing remediation
services to assist commercial, industrial and government clients in complying
with environmental laws and regulations, and recycling petroleum waste
products and disposing of oily waste waters. The Corporation's remediation
services range from initial assessment of site contamination through the
design and implementation of remediation and treatment systems to remove
contamination. The Corporation's waste oil recycling facility was brought
on-line in April 1997, and can convert waste oil into distillate and other
recycled petroleum products and process and dispose 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 of common shares outstanding during the three months ended
March 31, 1997 and 1996.
Stock options and warrants have not been reflected as exercised for purposes
of computing the primary loss per share for the three months ended March 31,
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 would
likely have a material adverse effect on the business and operations of the
Corporation.
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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 ended March 31, 1997 should be read in conjunction with the
consolidated financial statements and related notes included elsewhere
herein.
Results of Operations - Three Months Ended March 31, 1997
- ----------------------------------------------------------
Contract revenues for the three months ended March 31, 1997 decreased to $0.5
million from $1.0 million for the three months ended March 31, 1996,
primarily as a result of the sale of the Corporation's Florida remediation
services operation effective November 1, 1996. The decrease in revenues was
partially offset by an increase in revenues under a large federal contract
with J. A. Jones Management Services, which accounted for approximately 62%
of the Corporation's revenues in the current period.
Contract costs for the period ended March 31, 1997 decreased to $0.4 million
from $0.9 million for the period ended March 31, 1996, primarily as a result
of lower revenues. The Corporation's gross margin increased to $0.1 million
or 21.3% of revenues for the three months ended March 31, 1997 from $68,000
or 6.8% of revenues for the three months ended March 31, 1996.
Selling, general and administrative expenses for the current period were $0.4
million, compared to $0.6 million for the comparative period of 1996. The
decrease in selling, general and administrative expenses is principally due
to the sale of the Florida remediation services operation.
The Corporation reported a loss from operations of $0.3 million in the three
months ended March 31, 1997, compared to $0.6 million for the three months
ended March 31, 1996.
Interest expense was $0.2 million in the period ended March 31, 1997,
compared to $0.1 million in the period ended March 31, 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.
The Corporation had a loss from discontinued operations of $36,000 and a loss
on the disposal of its thermal treatment facility of $0.8 million for the
period ended March 31, 1996, which occurred effective January 31, 1996.
The Corporation's net loss for the three months ended March 31, 1997 was $0.5
million or $0.10 per share, compared to $1.5 million or $0.62 per share for
the period ended March 31, 1996.
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Liquidity and Capital Resources
- -------------------------------
At March 31, 1997, the Corporation's cash and cash equivalents totaled $0.5
million, a net decrease of $0.1 million from $0.6 million at December 31,
1996. At March 31, 1997, the Corporation had $1.1 million held in escrow,
compared to $1.3 million at December 31, 1996.
The Corporation maintains two separate agreements with Sirrom Environmental
Funding, LLC (the "Sirrom Agreements") which have enabled the Corporation to
fund amounts billed under the Florida State funded site rehabilitation
program known as the "EDI Program" at the prime rate of interest (as defined)
plus 2% for amounts up to $0.8 million and prime plus 3% for additional
amounts up to $4.0 million. The Corporation has been advanced 100% of
amounts billed and outstanding and maintains a deposit of 10% and 34%,
respectively, of such amounts in an escrow account to cover potential
disallowances, future interest costs, and a commitment fee. At March 31,
1997, the Corporation had been advanced approximately $4.3 million as
aforesaid under the Sirrom Agreements.
In May 1996, the State of Florida passed legislation which provides for State
funding of the existing backlog under the EDI Program through the issuance of
bonds, thereby enabling reimbursement applications submitted under the EDI
Program to be paid on an accelerated basis. However, accelerated payments
are to be discounted at the rate of 3.5% effective January 1, 1997, and the
present value of an application will be based upon the accelerated settlement
date of a reimbursement application rather than the original settlement date.
The Corporation anticipates that this process will include the early release
of the cash which the Corporation holds in escrow, and the termination of
interest obligations in the third or fourth quarter of 1997. The Corporation
will not be able to determine the impact of discounting on its operating
results until a schedule of anticipated payment dates is established.
However, 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 operating activities was $0.5 million for the period ended
March 31, 1997, compared to cash provided of $0.6 million for the period
ended March 31, 1996. Operating activities used cash primarily as a result
of the net loss for the period and an increase in accounts receivable. In the
three months ended March 31, 1996, accounts receivable provided cash of $1.0
million.
Investing activities used cash of $0.3 million in the period ended March 31,
1997, compared to $26,000 in the period ended March 31, 1996, as a result of
the purchase of property and equipment. The Corporation intends to divest its
environmental remediation business in 1997 and build its waste oil recycling
and related operations.
Financing activities provided cash of $0.6 million in the period ended March
31, 1997, compared to $15,000 in the period ended March 31, 1996. In January
1997, the Corporation established a line of credit with Drummond Financial
Corporation in the amount of $0.3 million. The Corporation also established
a line of credit in January 1997 with another lender in the amount of $0.8
million to fund the working capital requirements of the Corporation's waste
oil recycling facility in McCook
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<PAGE> 10
Illinois, which was brought on-line in April 1997. The Corporation made
principal payments on debt of $0.1 million in the current period, compared to
$4,000 in the comparative period.
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.
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.
ITEMS 2 to 5.
Not Applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit
Number Description
- ------- -----------
27 Article 5 - Financial Data Schedule for the 1st Quarter
1997 Form 10-Q.
(b) Reports on Form 8-K
The Corporation filed the following reports with respect to the indicated
items during the three months ended March 31, 1997:
Form 8-K dated December 17, 1996
Item 1. Change in Control of Registrant.
Item 2. Acquisition or Disposition of Assets.
Item 3. Financial Statements and Exhibits.
Form 8-K/A dated December 17, 1996
Item 1. Change in Control of Registrant.
Item 7. Financial Statements and Exhibits.
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<PAGE> 11
Form 8-K dated January 10, 1996
Item 4. Changes in Registrant's Certified Accountant.
Item 5. Other Information.
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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: May 9, 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 1st 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 528
<SECURITIES> 0
<RECEIVABLES> 1,262
<ALLOWANCES> 647
<INVENTORY> 0
<CURRENT-ASSETS> 2,717
<PP&E> 4,546
<DEPRECIATION> 280
<TOTAL-ASSETS> 7,041
<CURRENT-LIABILITIES> 1,786
<BONDS> 2,591
0
0
<COMMON> 50
<OTHER-SE> 1,442
<TOTAL-LIABILITY-AND-EQUITY> 7,041
<SALES> 489
<TOTAL-REVENUES> 489
<CGS> 385
<TOTAL-COSTS> 385
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 179
<INCOME-PRETAX> (491)
<INCOME-TAX> 0
<INCOME-CONTINUING> (491)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (491)
<EPS-PRIMARY> (0.10)
<EPS-DILUTED> (0.10)
</TABLE>
