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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 March 31, 1998
[ ] 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, Canada V6C 3A6
(Address of principal executive offices) (Zip Code)
(604) 683-5767
(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 May 14, 1998
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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, the 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
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ITEM 1. FINANCIAL STATEMENTS
ICHOR CORPORATION
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(Unaudited)
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ICHOR CORPORATION
Consolidated Balance Sheets
(Unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
March 31, 1998 December 31, 1997
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<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 1,638 $ 127
Cash held in escrow - 617
Accounts receivable, net 801 332
Notes receivable 680 680
Advance to an affiliate 270 270
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Total current assets 3,389 2,026
Other Assets 2 2
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$ 3,391 $ 2,028
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LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Accounts payable $ - $ 39
Accrued interest and
other liabilities 101 363
Advance from an affiliate 780 780
Current portion
of long-term liabilities - 757
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Total liabilities 881 1,939
Shareholders' Equity
Common stock 50 50
Preferred stock 27 2
Additional paid-in capital 10,121 7,916
Retained deficit (7,617) (7,808)
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2,581 160
Less cost of shares of common stock
held in treasury (71) (71)
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Total equity 2,510 89
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$ 3,391 $ 2,028
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</TABLE>
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)
<TABLE>
<CAPTION>
For the Three For the Three
Months Ended Months Ended
March 31, 1998 March 31, 1997
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<S> <C> <C>
Selling, general and
administrative expenses $ 108 $ 178
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Loss from operations (108) (178)
Other income (expense):
Interest expense (100) (180)
Other - 2
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(208) (356)
Gain on disposal of a subsidiary 437 -
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Income (loss) from continuing operations 229 (356)
Discontinued operations:
(Loss) from discontinued operations - (135)
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(Loss) from discontinued operations - (135)
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Net income (loss) $ 229 $ (491)
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Basic earnings (loss) per share:
Income (loss) from continuing operations $ 0.04 $ (0.07)
(Loss) from discontinued operations - (0.03)
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$ 0.04 $ (0.10)
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Diluted earnings (loss) per share:
Income (loss) from continuing operations $ 0.04 $ (0.07)
(Loss) from discontinued operations - (0.03)
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$ 0.04 $ (0.10)
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</TABLE>
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 Three For the Three
Months Ended Months Ended
March 31, 1998 March 31, 1997
-------------- --------------
<S> <C> <C>
Cash Flows from Continuing Operating Activities:
Net income (loss) from continuing operations $ 229 $ (356)
Adjustments to reconcile net income (loss) to
cash flows from continuing
operating activities
Gain on disposal of a subsidiary (437) -
Changes in current assets and liabilities,
net of effect of a subsidiary disposed
Cash held in escrow 145 168
Accounts receivable (595) -
Accounts payable (30) (44)
Payable to affiliate - (35)
Other accrued liabilities (31) (62)
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Net cash used in operating activities
of continuing operations (719) (329)
Cash Flows from Continuing Investing Activities:
- -
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Net cash provided by (used in) investing
activities of continuing operations - -
Cash Flows from Continuing Financing Activities:
Proceeds from issuance of
preferred shares, net 2,230 -
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Net cash provided by financing activities
of continuing operations 2,230 -
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Net cash provided by (used in)
continuing operations 1,511 (329)
Net cash (used in) discontinued operations - 129
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Increase (decrease) in cash and cash equivalents 1,511 (200)
Cash and cash equivalents, beginning of period 127 598
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Cash and cash equivalents, end of period $ 1,638 $ 398
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</TABLE>
The accompanying notes are an integral part of these financial statements.
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ICHOR CORPORATION
Notes to Consolidated Financial Statements
March 31, 1998
(Unaudited)
Note 1. Basis of Presentation
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The accompanying financial statements of ICHOR Corporation (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 for the
specified periods.
All adjustments made during the three months ended March 31, 1998 were of a
normal, recurring nature. The amounts presented for the three months ended
March 31, 1998 are not necessarily indicative of the results of operations
for a full year. Additional information is contained in the audited
consolidated financial statements and accompanying notes included in the
Corporation's annual report on Form 10-K for the fiscal year ended December
31, 1997, and should be read in conjunction with such annual report.
Certain reclassifications have been made to the prior year financial
statements to conform with the current year presentation.
Note 2. Net Earnings (Loss) Per Share
- --------------------------------------
Basic earnings (loss) per share is calculated by dividing the net income or
loss by the weighted average number of common shares outstanding during the
three months ended March 31, 1998 and 1997, respectively. The weighted
average number of shares outstanding was 4,907,520 and 4,922,553 for the
three months ended March 31, 1998 and 1997, respectively.
Diluted earnings per share takes into account common shares outstanding and
potentially dilutive common shares. Stock options and warrants have not been
reflected as exercised for purposes of computing the diluted loss per share
for the three months ended March 31, 1997, since the exercise of such options
and warrants would be anti-dilutive.
Note 3. Commitments and Contingencies
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As discussed in further detail in "Item 3. Legal Proceedings" contained in
the Corporation's annual report on Form 10-K for the year ended December 31,
1997, 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 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 the Corporation intends to
defend the action vigorously. However, if 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 of the Corporation.
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PART I. FINANCIAL INFORMATION
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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
financial condition of ICHOR Corporation (the "Corporation") for the three
months ended March 31, 1998 should be read in conjunction with the
Corporation's consolidated financial statements and related notes included
elsewhere herein.
The Corporation sold its environmental remediation services operations in
April 1997 and its waste oil recycling facility in December 1997, and these
operations have been accounted for as discontinued operations for the three
months ended March 31, 1998. The Corporation's comparative financial
statements for the three months ended March 31, 1997 have been restated to
conform to this method of presentation.
Results of Operations - Three Months Ended March 31, 1998
- ---------------------------------------------------------
Selling, general and administrative expenses for the three months ended March
31, 1998 decreased to $0.1 million from $0.2 million in the comparative
period of 1997, primarily as a result of the right-sizing of the corporate
office during the three months ended March 31, 1998. Interest expense
decreased to $0.1 million in the three months ended March 31, 1998 from $0.2
million in the three months ended March 31, 1997, primarily as a result of a
decrease in amounts funded by Sirrom Environmental Funding, LLC, through whom
ICHOR Services, Inc. ("Ichor Services"), a wholly-owned subsidiary of the
Corporation, had funded amounts billed and outstanding under certain Florida
State rehabilitation programs. The Corporation reported other income of
$2,000 in the three months ended March 31, 1997.
Effective March 31, 1998, the Corporation sold Ichor Services. The
Corporation recognized a gain of $0.4 million on the sale as a result of the
disposal of net liabilities of Ichor Services. In the three months ended
March 31, 1998, the Corporation commenced providing certain environmental
consulting services.
Income from continuing operations was $0.2 million or $0.04 per share in the
three months ended March 31, 1998, compared to a loss from continuing
operations of $0.4 million or $0.07 per share in the three months ended March
31, 1997. The Corporation reported a loss from discontinued operations of
$0.1 million or $0.03 per share for the three months ended March 31, 1997.
Net income was $0.2 million or $0.04 per share for the three months ended
March 31, 1998, compared to a net loss of $0.5 million or $0.10 per share for
the three months ended March 31, 1997.
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Liquidity and Capital Resources
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At March 31, 1998, the Corporation had cash and cash equivalents of $1.6
million, a net increase of $1.5 million from $0.1 million at December 31,
1997. The Corporation maintains one line of credit with an affiliate in the
amount of $0.8 million to fund working capital requirements. The line of
credit was fully utilized as at March 31, 1998.
Net cash used in continuing operating activities was $0.7 million in the
three months ended March 31, 1998, compared to $0.3 million for the three
months ended March 31, 1997. Operating activities used cash primarily as a
result of the sale of Ichor Services and an increase in accounts receivable.
A decrease in cash held in escrow provided cash of $0.1 million in the three
months ended March 31, 1998.
Financing activities provided cash of $2.2 million in the three months ended
March 31, 1998. In the first quarter of 1998, the Corporation completed the
issuance of an aggregate of 467,500 shares of 5% Cumulative Redeemable
Convertible Preferred Stock, Series 1 of the Corporation in consideration of
debt forgiveness of $2.2 million and cash of $2.5 million.
The Corporation believes that its cash on hand and lines of credit should
enable the Corporation to meet its ongoing liquidity requirements. The
Corporation anticipates that it may require substantial capital to pursue
current and future acquisitions of businesses and/or operating assets and
anticipates that such capital will be provided through debt and/or equity
financing.
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PART II. OTHER INFORMATION
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ITEM 1. LEGAL PROCEEDINGS
Reference is made to the Corporation's annual report on Form 10-K for the
fiscal year ended December 31, 1997 for information concerning certain legal
proceedings.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit
Number Description
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27 Article 5 - Financial Data Schedule for the 1st Quarter 1998
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, 1998:
Form 8-K Dated January 7, 1998:
Item 2. Acquisition or Disposition of Assets.
Item 7. Financial Statements and Exhibits.
Form 8-K Dated March 12, 1998:
Item 5. Other Events.
Item 7. Financial Statements and Exhibits.
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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 14, 1998
ICHOR CORPORATION
By: /s/ Michael J. Smith
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Michael J. Smith, President, Chief
Financial Officer and Treasurer
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EXHIBIT INDEX
Exhibit
Number Description
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27 Article 5 - Financial Data Schedule for the 1st Quarter 1998 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-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 1,638
<SECURITIES> 0
<RECEIVABLES> 1,481
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,389
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,391
<CURRENT-LIABILITIES> 881
<BONDS> 0
0
27
<COMMON> 50
<OTHER-SE> 2,433
<TOTAL-LIABILITY-AND-EQUITY> 3,391
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 108
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 100
<INCOME-PRETAX> 229
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 229
<EPS-PRIMARY> 0.04
<EPS-DILUTED> 0.04
</TABLE>
