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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, 1998
[ ] 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, Canada V6C 3A6
(Address of principal executive offices) (Postal 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
----- -----
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 August 7, 1998
----- -----------------------------
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
---------------------
ITEM 1. FINANCIAL STATEMENTS
ICHOR CORPORATION
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(Unaudited)
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ICHOR CORPORATION
Consolidated Balance Sheets
(Unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
June 30, 1998 December 31, 1997
------------- -----------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 62 $ 127
Cash held in escrow - 617
Accounts receivable, net 980 332
Notes receivable 2,080 680
Advance to an affiliate 270 270
------------- -------------
Total current assets 3,392 2,026
Other Assets 2 2
------------- -------------
$ 3,394 $ 2,028
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Accounts payable $ - $ 39
Accrued interest and other liabilities 134 363
Advance from an affiliate 780 780
Current portion
of long-term liabilities - 757
------------- -------------
Total liabilities 914 1,939
Shareholders' Equity
Common stock 50 50
Preferred stock 27 2
Additional paid-in capital 10,121 7,916
Retained deficit (7,647) (7,808)
------------- -------------
2,551 160
Less cost of shares of common stock
held in treasury (71) (71)
------------- -------------
Total equity 2,480 89
------------- -------------
$ 3,394 $ 2,028
============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
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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, 1998 June 30, 1997
-------------- --------------
(Restated)
<S> <C> <C>
Selling, general and administrative
expenses $ 294 $ 182
-------------- --------------
Loss from operations (294) (182)
Other income (expense):
Interest expense (100) (380)
Interest income 28 2
Bad debt recovery 100 -
Fee income 84 -
-------------- --------------
(182) (560)
Gain on disposal of a subsidiary 437 -
-------------- --------------
Income (loss) from continuing
operations 255 (560)
Discontinued operations:
Loss from discontinued operations - (463)
Gain on disposal - 59
-------------- --------------
Loss from discontinued operations - (404)
-------------- --------------
Net income (loss) $ 255 $ (964)
============== ==============
Basic and diluted earnings (loss)
per share:
Income (loss) from continuing
operations $ 0.03 $ (0.11)
Loss from discontinued operations - (0.08)
-------------- --------------
$ 0.03 $ (0.19)
============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
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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, 1998 June 30, 1997
-------------- --------------
(Restated)
<S> <C> <C>
Selling, general and administrative
expenses $ 186 $ 4
-------------- --------------
Loss from operations (186) (4)
Other income (expense):
Interest expense - (200)
Interest income 28 -
Bad debt recovery 100 -
Fee income 84 -
-------------- --------------
26 (204)
-------------- --------------
Income (loss) from continuing
operations 26 (204)
Discontinued operations:
Loss from discontinued operations - (328)
Gain on disposal - 59
-------------- --------------
Loss from discontinued operations - (269)
-------------- --------------
Net income (loss) $ 26 $ (473)
============== ==============
Basic and diluted loss per share:
Loss from continuing operations $ (0.01) $ (0.04)
Loss from discontinued operations - (0.05)
-------------- --------------
$ (0.01) $ (0.09)
============== ==============
</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 Six For the Six
Months Ended Months Ended
June 30, 1998 June 30, 1997
-------------- --------------
(Restated)
<S> <C> <C>
Cash Flows from Operating Activities:
Net income (loss) from continuing
operations $ 255 $ (560)
Adjustments to reconcile net income
(loss) to cash flows from
operating activities
Gain on disposal of a subsidiary (437) -
Bad debt recovery (100) -
Changes in current assets and
liabilities, net of effect of a
subsidiary disposed
Cash held in escrow 145 325
Accounts receivable (674) (42)
Accounts payable (30) (197)
Payable to affiliate - 90
Other accrued liabilities (54) 24
-------------- --------------
Net cash used in operating
activities of continuing
operations (895) (360)
Cash Flows from Investing Activities:
Note receivable (1,400) -
-------------- --------------
Net cash used in investing
activities of continuing operations (1,400) -
Cash Flows from Financing Activities:
Proceeds from issuance of preferred
shares, net 2,230 -
-------------- --------------
Net cash provided by financing
activities of continuing operations 2,230 -
-------------- --------------
Net cash used in continuing operations (65) (360)
Net cash provided by discontinued
operations - 7
-------------- --------------
Decrease in cash and cash equivalents (65) (353)
Cash and cash equivalents, beginning
of period 127 524
-------------- --------------
Cash and cash equivalents, end of period $ 62 $ 171
============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE> 7
ICHOR CORPORATION
Notes to Consolidated Financial Statements
June 30, 1998
(Unaudited)
Note 1. Basis of Presentation
- -----------------------------
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.
The Corporation sold its environmental remediation services operations in
April 1997 and its waste oil recycling facility in December 1997. In
addition, the Corporation sold its wholly-owned subsidiary, ICHOR Services,
Inc., effective March 31, 1998. These operations have been accounted for as
discontinued operations for the six months and three months ended June 30,
1998, respectively. The Corporation's comparative financial statements for
the six months and three months ended June 30, 1998, respectively, have been
restated to conform to this method of presentation.
All adjustments made during the six months and three months ended June 30,
1998, respectively, were of a normal, recurring nature. The amounts presented
for the six months and three months ended June 30, 1998, respectively, 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. 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
six months and three months ended June 30, 1998 and 1997, respectively. The
weighted average number of shares outstanding was 4,907,520 and 4,917,716 for
the six months ended June 30, 1998 and 1997, respectively, and 4,907,520 and
4,912,933 for the three months ended June 30, 1998 and 1997, respectively.
Diluted earnings per share takes into account common shares outstanding,
potentially dilutive common shares and preferred shares convertible into
common shares. Stock options and warrants have not been reflected as
exercised for purposes of computing the diluted loss per share for the six
months and three months ended June 30 1997, respectively, since the exercise
of such options and warrants would be anti-dilutive.
Note 3. Commitments and Contingencies
- -------------------------------------
The Corporation has agreed to pay $259,500 in settlement of a class action
law suit alleging that the Corporation, its former parent, certain of its
officers and directors, and the underwriters of its initial public offering
violated certain federal securities laws. The action was initiated by the
persons and
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entities purchasing the Corporation's common stock from February
9, 1995 through May 23, 1995. The settlement is subject to the execution of
the settlement documents and court approval. See "Item 3. Legal
Proceedings" contained in the Corporation's annual report on Form 10-K for
the year ended December 31, 1997 for further details with respect to the
action.
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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
financial condition of ICHOR Corporation (the "Corporation") for the six
months and three months ended June 30, 1998, respectively, should be read in
conjunction with the Corporation's consolidated financial statements and
related notes included elsewhere herein.
Results of Operations - Six Months Ended June 30, 1998
- ------------------------------------------------------
Selling, general and administrative expenses for the six months ended June
30, 1998 increased to $0.3 million from $0.2 million in the comparative
period of 1997, primarily as a result of an increase in legal and consulting
fees. Interest expense decreased to $0.1 million in the six months ended
June 30, 1998 from $0.4 million in the six months ended June 30, 1997,
primarily as a result of the sale of the Corporation's subsidiary, Ichor
Services, Inc. ("Ichor Services"), in the first quarter of 1998, which had
financed certain receivables for work performed under certain Florida State
rehabilitation programs. In the six months ended June 30, 1998, the
Corporation reported income of $0.1 million from consulting fees collected
for providing certain environmental consulting services and income of $0.1
million from the recovery of bad debts.
Effective March 31, 1998, the Corporation sold Ichor Services and recognized
a gain of $0.4 million on the sale as a result of the disposal of net
liabilities of Ichor Services.
Income from continuing operations was $0.3 million or $0.03 per share in the
six months ended June 30, 1998, compared to a loss from continuing operations
of $0.6 million or $0.11 per share in the six months ended June 30, 1997.
Net income was $0.3 million or $0.03 per share for the six months ended June
30, 1998, compared to a net loss of $1.0 million or $0.19 per share for the
six months ended June 30, 1997.
Results of Operations - Three Months Ended June 30, 1998
- --------------------------------------------------------
Selling, general and administrative expenses for the three months ended June
30, 1998 increased to $0.2 million from $4,000 in the comparative period of
1997, primarily as a result of an increase in legal and consulting fees.
Interest expense was nil in the three months ended June 30, 1998, compared to
$0.2 million in the three months ended June 30, 1997, primarily as a result
of the sale of Ichor Services in the first quarter of 1998. In the three
months ended June 30, 1998, the Corporation reported income of $0.1 million
from consulting fees collected for providing certain environmental consulting
services and income of $0.1 million from the recovery of bad debts.
Income from continuing operations was $26,000, or a loss of $0.01 per share
after the accrual of dividends on the Corporation's preferred shares, in the
three months ended June 30, 1998, compared
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<PAGE> 10
to a loss from continuing operations of $0.2 million or $0.04 per share in
the three months ended June 30, 1997.
Net income was $26,000, or a net loss of $0.01 per share after the accrual of
dividends on the Corporation's preferred shares, for the three months ended
June 30, 1998, compared to a net loss of $0.5 million or $0.09 per share for
the three months ended June 30, 1997.
Liquidity and Capital Resources
- -------------------------------
The Corporation had cash and cash equivalents of $62,000 at June 30, 1998,
compared to $0.1 million at December 31, 1997. The Corporation maintains a
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
June 30, 1998.
Net cash used in continuing operating activities was $0.9 million in the six
months ended June 30, 1998, compared to $0.4 million for the six months ended
June 30, 1997. Operating activities in the six months ended June 30, 1998
used cash primarily as a result of an increase in accounts receivable. A
decrease in cash held in escrow provided cash of $0.1 million in the six
months ended June 30, 1998, compared to $0.3 million in the period ended June
30, 1997.
Net cash used in investing activities was $1.4 million in the six months
ended June 30, 1998, as a result of an increase in a note receivable.
Financing activities provided cash of $2.2 million in the six months ended
June 30, 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 assets and line of credit should enable the
Corporation to meet its current ongoing requirements. The Corporation
anticipates that it may require substantial capital to pursue current and
future acquisitions of businesses and/or operating assets and will seek such
capital through debt and/or equity financing.
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<PAGE> 11
PART II. OTHER INFORMATION
-----------------
ITEM 1. LEGAL PROCEEDINGS
The Corporation has agreed to pay $259,500 in settlement of a class action
law suit alleging that the Corporation, its former parent, certain of its
officers and directors, and the underwriters of its initial public offering
violated certain federal securities laws. The action was initiated by the
persons and entities purchasing the Corporation's common stock from February
9, 1995 through May 23, 1995. The settlement is subject to the execution of
the settlement documents and court approval. See "Item 3. Legal
Proceedings" contained in the Corporation's annual report on Form 10-K for
the year ended December 31, 1997 for further details with respect to the
action.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
In March 1998, in reliance on exemptions from registration under the Securities
Act of 1933, as amended (the "Securities Act") as transactions not involving
a public offering under Section 4(2) of the Securities Act, the Corporation
issued an aggregate of 467,500 shares of 5% Cumulative Redeemable Convertible
Preferred Stock, Series 1 (the "Preferred Shares") as follows: (i) 317,500
Preferred Shares were issued to creditors of the Corporation in satisfaction
of indebtedness of $2.4 million and a release of a guarantee of $0.8 million;
and (ii) 150,000 Preferred Shares were issued for proceeds of $1.5 million
pursuant to an agency placement by MFC Merchant Bank S.A. (the "Agent") for
which the Agent was paid a fee of $250,000 and reimbursed for certain expenses.
The Preferred Shares may be converted into shares of common stock of the
Corporation at a price equal to 90% of the 20-day average closing trading price
of the common stock on The NASDAQ SmallCap Market.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit
Number Description
------- -----------
27 Article 5 - Financial Data Schedule for the 2nd Quarter 1998
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: August 11, 1998
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 2nd 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 62
<SECURITIES> 0
<RECEIVABLES> 3,060
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,392
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,394
<CURRENT-LIABILITIES> 914
<BONDS> 0
0
27
<COMMON> 50
<OTHER-SE> 2,403
<TOTAL-LIABILITY-AND-EQUITY> 3,394
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 294
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 100
<INCOME-PRETAX> 255
<INCOME-TAX> 0
<INCOME-CONTINUING> 255
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 255
<EPS-PRIMARY> 0.03
<EPS-DILUTED> 0.03
</TABLE>
