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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 March 31, 1999
[ ] 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) (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
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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 12, 1999
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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
---------------------
ITEM 1. FINANCIAL STATEMENTS
ICHOR CORPORATION
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1999
(Unaudited)
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ICHOR CORPORATION
Consolidated Balance Sheets
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
March 31, 1999 December 31, 1998
-------------- -----------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 694 $ 50
Accounts receivable, net 510 560
Notes receivable 1,400 2,080
Advances to affiliates 587 540
Other assets 50 51
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Total current assets 3,241 3,281
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$ 3,241 $ 3,281
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable and other liabilities $ 19 $ 8
Advance from an affiliate 1,092 1,132
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Total current liabilities 1,111 1,140
Shareholders' Equity
Preferred stock 5 5
Common stock 50 50
Additional paid-in capital on
preferred stock 4,400 4,400
Additional paid-in capital on
common stock 5,743 5,743
Retained deficit (7,997) (7,986)
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2,201 2,212
Less cost of shares of common stock
held in treasury (71) (71)
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Total equity 2,130 2,141
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$ 3,241 $ 3,281
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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, 1999 March 31, 1998
-------------- --------------
<S> <C> <C>
Revenues
Interest income $ 48 $ 1
Gain on disposal of a subsidiary - 437
Other income 13 -
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61 438
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Costs and expenses
General and administrative expenses 72 108
Interest expense - 101
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72 209
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Net (loss) income $ (11) $ 229
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Basic and diluted (loss) earnings
per share $ (0.01) $ 0.04
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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, 1999 March 31, 1998
-------------- --------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net (loss) income from continuing
operations $ (11) $ 229
Adjustments to reconcile net (loss)
income to net cash used in 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
Accounts receivable 50 (595)
Accounts payable and other liabilities 11 (61)
Advances to affiliates (47) -
Advances from affiliates (40) -
Other assets 1 -
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Net cash used in operating activities
of continuing operations (36) (719)
Cash Flows from Investing Activities:
Decrease in note receivable 680 -
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Net cash provided by investing
activities of continuing operations 680 -
Cash Flows from 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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Increase in cash and cash equivalents 644 1,511
Cash and cash equivalents, beginning
of period 50 127
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Cash and cash equivalents, end of period $ 694 $ 1,638
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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, 1999
(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, 1999, were of a
normal, recurring nature. The amounts presented for the three months ended
March 31, 1999 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, 1998, and
the interim period financial statements contained herein should be read in
conjunction with such annual report.
Certain reclassifications have been made to the prior period's financial
statements to conform with the current period's 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
three months ended March 31, 1999 and 1998, respectively. The weighted
average number of shares outstanding were 4,907,520 for the three months ended
March 31, 1999 and 1998, 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 three
months ended March 31, 1999 and 1998, respectively, since the exercise of such
options and warrants would be anti-dilutive.
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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, 1999 should be read in conjunction with the
Corporation's consolidated financial statements and related notes included
elsewhere herein.
Results of Operations - Three Months Ended March 31, 1998
- ---------------------------------------------------------
Revenues for the three months ended March 31, 1999 decreased to $61,000 from
$0.4 million for the comparative period of 1998. The Corporation reported
interest income of $48,000 in the three months ended March 31, 1999, compared
to $1,000 in the three months ended March 31, 1998, as a result of interest
received on a loan.
Costs and expenses decreased to $72,000 in the three months ended March 31,
1999 from $0.2 million in the three months ended March 31, 1998, primarily as
a result of a decrease in general and administrative expenses resulting from
the sale by the Corporation of Ichor Services, Inc. ("Services"), a wholly-
owned subsidiary of the Corporation, in the first quarter of 1998. Interest
expense was nil in the three months ended March 31, 1999, compared to $0.1
million in the comparative period of 1998, as a result of the sale of Services
which had financed certain receivables for work performed under certain
Florida State rehabilitation programs.
The Corporation reported a net loss of $11,000, or $0.01 per share, in the
three months ended March 31, 1999, compared to net income of $0.2 million, or
$0.04 per share, in the three months ended March 31, 1998.
Liquidity and Capital Resources
- -------------------------------
The Corporation had cash and cash equivalents of $0.7 million at March 31,
1999, compared to $50,000 at December 31, 1998. 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 March 31,
1999.
Net cash used in operating activities was $36,000 in the three months ended
March 31, 1999, compared to $0.7 million in the three months ended March 31,
1998. Operating activities in the three months ended March 31, 1999 used cash
primarily as a result of an increase in advances to affiliates and a decrease
in advances from affiliates. A decrease in accounts receivable provided cash
of $50,000 in the three months ended March 31, 1999, compared to an increase
in accounts receivable using cash of $0.6 million in the comparable period of
1998.
Investing activities provided cash of $0.7 million in the three months ended
March 31, 1999, as a result of payment received on a note receivable. On
October 20, 1998, the Corporation entered into an agreement (the "Purchase
Agreement") to acquire all of the issued and outstanding shares of common
stock of Nazca Holdings Ltd. ("Nazca") from eight shareholders (the
"Vendors").
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Drummond Financial Corporation ("Drummond") and Logan International Corp.
("Logan"), two major shareholders of the Corporation, entered into an
agreement (the "Agreement" and with the Purchase Agreement, the "Agreements")
with the Vendors pursuant to which each of Drummond and Logan agreed to
transfer a certain number of shares of common stock of the Corporation held by
each of them to the Vendors as partial consideration for the Vendors entering
into the Purchase Agreement with the Corporation. The obligation to transfer
the shares of common stock was contingent upon Nazca meeting certain
performance criteria on or before March 31, 1999. Effective March 31, 1999,
Logan, Drummond, the Corporation and the Vendors entered into an agreement to
amend the terms of the Agreements to extend the time for the satisfaction of
the performance criteria and the delivery of the shares of common stock of the
Corporation to May 31, 1999. For further details regarding the amending
agreement, see the Corporation's Form 8-K dated April 9, 1999.
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.
Year 2000
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Many of the world's computer systems currently record years in a two-digit
format. These computer systems will be unable to properly interpret dates
beyond the year 1999, which could lead to business disruptions and is commonly
referred to as the "Year 2000" issue. Based on its current information,
management of the Corporation has determined that the Year 2000 issue will not
pose significant operational problems for its computer systems as it only
utilizes commercially available software and personal computers, which are
Year 2000 compliant. The total cost to the Corporation of Year 2000
compliance activities has not been and is not currently anticipated to be
material to its financial position or results of operations in any given year.
In addition, management of the Corporation has initiated communications with
clients to ascertain their Year 2000 readiness and develop contingency plans
as required, and management intends to address this issue with any prospective
client. The determination by management and costs relating to the Year 2000
issue are based on management's best estimates, which were derived utilizing
numerous assumptions of future events. However, there can be no assurance
that these estimates will be achieved and actual results could vary materially
from those anticipated.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
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PART II. OTHER INFORMATION
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ITEM 1. LEGAL PROCEEDINGS
The Corporation is not presently subject to any material 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 1999
Form 10-Q.
(b) Reports on Form 8-K
The Corporation filed the following reports with respect to the indicated
items:
Form 8-K/A dated April 9, 1999:
Item 2. Acquisition or Disposition of Assets.
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 13, 1999 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
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27 Article 5 - Financial Data Schedule for the 1st Quarter
1999 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-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 694
<SECURITIES> 0
<RECEIVABLES> 1,910
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,241
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,241
<CURRENT-LIABILITIES> 1,111
<BONDS> 0
0
5
<COMMON> 50
<OTHER-SE> 2,075
<TOTAL-LIABILITY-AND-EQUITY> 3,241
<SALES> 0
<TOTAL-REVENUES> 61
<CGS> 0
<TOTAL-COSTS> 72
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (11)
<INCOME-TAX> 0
<INCOME-CONTINUING> (11)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (11)
<EPS-PRIMARY> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
