<PAGE> 1
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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 ________
Commission File Number: 000-26354
LOGAN INTERNATIONAL CORP.
(Exact name of Registrant as specified in its charter)
Washington 91-1636980
(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)
(604) 683-5312
(Registrant's telephone number, including area code)
#108 - 1201 SW 7th Street, P.O. Box 860, Renton WA 98055-0860
(Former name, former address and former fiscal year,
if changed since last report)
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 November 10, 1997
----- --------------------------------
Common Stock, $0.01 10,837,808
par value
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<PAGE> 2
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 and regulatory 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
LOGAN INTERNATIONAL CORP.
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(Unaudited)
2
<PAGE> 3
LOGAN INTERNATIONAL CORP.
Consolidated Balance Sheets
(Unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
September 30, 1997 December 31, 1996
------------------ -----------------
(Restated)
ASSETS
<S> <C> <C>
Current Assets
Cash $ 150 $ 181
Accounts receivable, net 427 417
Investments 6,973 6,825
Real estate held for development
and resale 5,966 6,086
Net assets of discontinued operations 1,632 2,425
Other assets 259 23
---------------- ----------------
Total current assets 15,407 15,957
Long-term Assets
Investments 172 201
---------------- ----------------
172 201
---------------- ----------------
$ 15,579 $ 16,158
================ ================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued
liabilities $ 415 $ 645
Due to affiliates 1,087 263
Debt 933 2,502
Redeemable preferred stock 139 139
---------------- ----------------
Total current liabilities 2,574 3,549
Long-term Liabilities
Debt 2,180 360
---------------- ----------------
2,180 360
---------------- ----------------
Total liabilities 4,754 3,909
Shareholders' Equity
Preferred shares 1 1
Common shares 108 108
Additional paid-in capital 14,673 14,673
Net unrealized gain on investment
valuation 42 72
Retained deficit (3,999) (2,605)
---------------- ----------------
Total equity 10,825 12,249
---------------- ----------------
$ 15,579 $ 16,158
================ ================
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
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LOGAN INTERNATIONAL CORP.
Consolidated Statements of Operations and Deficit
(Unaudited)
(dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
For the Nine For the Nine
Months Ended Months Ended
September 30, 1997 September 30, 1996
------------------ ------------------
<S> <C> <C>
Revenues
Sale of real estate $ 250 $ 2,643
Gain on securities 40 175
Other 211 9
---------------- -----------------
501 2,827
Costs and expenses
Cost of real estate sold and
related selling costs 222 1,879
General and administrative 400 581
Real estate taxes 72 78
Interest 255 239
---------------- -----------------
949 2,777
---------------- -----------------
(Loss) income from continuing
operations (448) 50
---------------- -----------------
Loss from discontinued operations,
net of minority interest:
Loss from operations (804) -
Gain on sale 30 -
---------------- -----------------
(774) -
---------------- -----------------
(Loss) income before
extraordinary item (1,222) 50
---------------- -----------------
Extraordinary item, Gain on debt
extinguishment - 258
---------------- -----------------
Net (loss) earnings (1,222) 308
Deficit, beginning of period (2,605) (2,857)
Dividend paid on preferred shares (172) -
---------------- -----------------
Deficit, end of period $ (3,999) $ (2,549)
================ =================
(Loss) earnings per share:
Continuing operations $ (0.06) $ (0.01)
Discontinued operations (0.07) -
---------------- -----------------
Before extraordinary item (0.13) (0.01)
Extraordinary item - 0.04
---------------- -----------------
$ (0.13) $ 0.03
================ =================
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 5
LOGAN INTERNATIONAL CORP.
Consolidated Statements of Operations and Deficit
(Unaudited)
(dollars in thousands except per share amounts)
For the Three For the Three
Months Ended Months Ended
September 30, 1997 September 30, 1996
------------------ ------------------
Revenues
Sale of real estate $ 250 $ 1,388
Gain on securities 7 1
Other 25 -
---------------- ----------------
282 1,389
Costs and expenses
Cost of real estate sold and
related selling costs 222 1,274
General and administrative 106 337
Real estate taxes 23 24
Interest 97 66
---------------- ----------------
448 1,701
---------------- ----------------
Loss from continuing operations (166) (312)
Loss from discontinued operations,
net of minority interest (284) -
---------------- ----------------
Net loss (450) (312)
Deficit, beginning of period (3,549) (2,237)
---------------- ----------------
Deficit, end of period $ (3,999) $ (2,549)
================ ================
Loss per share:
Continuing operations $ (0.02) $ (0.06)
Discontinued operations (0.03) -
---------------- ----------------
$ (0.05) $ (0.06)
================ ================
The accompanying notes are an integral part of these financial statements.
5
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LOGAN INTERNATIONAL CORP.
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
------------------ ------------------
<S> <C> <C>
Cash flows from continuing operating
activities:
(Loss) gain before extraordinary item $ (448) $ 50
Adjustments to reconcile net (loss)
income to net cash provided by operating
activities:
Write-down of property - 205
Gain on securities (40) (175)
Amortization and depreciation 12 2
---------------- ----------------
(476) 82
Changes in working capital:
Real estate 120 1,809
Prepaid and other assets (256) (23)
Accounts receivable (3) -
Payables 435 -
---------------- ----------------
(180) 1,868
Purchases of trading securities (3,438) -
Proceeds from sales of trading securities 3,329 -
---------------- ----------------
(289) 1,868
Cash flows from continuing financing
activities:
Borrowing 1,820 330
Payment of debts (1,371) (1,164)
Issuance of preferred shares - 6,000
Issuance of common shares - 22
Payment of dividend on preferred shares (172) -
---------------- ----------------
277 5,188
Cash flows from continuing investing activities:
Purchases of available-for-sale securities - (6,200)
Proceeds from sale of available-for-sale
securities - 313
---------------- ----------------
- (5,887)
---------------- ----------------
Net cash used in continuing operations (12) 1,169
Net cash used in discontinued operations (19) -
---------------- ----------------
Net (decrease) increase in cash (31) 1,169
Cash, beginning of period 181 261
---------------- ----------------
Cash, end of period $ 150 $ 1,430
================ ================
</TABLE>
The accompanying notes are an integral part of these financial statements.
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LOGAN INTERNATIONAL CORP.
Notes to Consolidated Financial Statements
September 30, 1997
(Unaudited)
Note 1. Basis of Presentation
---------------------
The interim period consolidated financial statements have been prepared by the
Registrant pursuant to the rules and regulations of the U.S. Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations. These interim period statements should be read
together with the statements and the accompanying notes included in the
Registrant's latest annual report on Form 10-KSB. In the opinion of the
Registrant, the accompanying unaudited interim consolidated financial
statements contain all adjustments necessary in order to present a fair
statement of the results for the interim periods presented.
Note 2. Acquisition and Disposition
---------------------------
In December 1996, the Registrant acquired a 50.3% interest in ICHOR
Corporation ("Ichor"), which operates in the environmental services business.
Effective April 30, 1997, Ichor sold substantially all of the assets of its
environmental remediation services operation for approximately $0.2 million.
As at September 30, 1997, the Registrant approved a plan to dispose of the
environmental services business. Accordingly, the Registrant adopted
Accounting Principles Board Opinion No. 30, "Reporting the Results of
Operations - Discontinued Events and Extraordinary Items", to report its
investment in, and the results of, the environmental services business. As a
result, the Registrant's balance sheet as at December 31, 1996 has been
restated to record the disposed business as discontinued operations. Ichor's
results from operations have been included in the Registrant's financial
statements as discontinued operations.
Note 3. Earnings per Share
------------------
Earnings per share is computed on the weighted average number of shares
outstanding during the period. The weighted average number of shares was
10,837,808 and 6,608,117 for the nine months ended September 30, 1997 and
1996, respectively.
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<PAGE> 8
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 Logan International Corp. (the "Corporation") for the
nine months and quarter ended September 30, 1997 should be read in conjunction
with the consolidated financial statements and related notes included
elsewhere herein.
In December 1996, the Corporation acquired a 50.3% interest in ICHOR
Corporation ("Ichor"), which operates in the environmental services business.
Ichor sold substantially all of the assets of its environmental remediation
services business for approximately $0.2 million in April 1996. In September
1997, the Corporation approved a plan to dispose of Ichor's remaining
environmental services business. As a result, the Corporation's balance sheet
as at December 31, 1996 has been restated to record Ichor's environmental
services business as discontinued operations. Ichor's results from operations
have been included in the Corporation's financial statements as discontinued
operations.
Results of Operations - Nine Months Ended September 30, 1997
- ------------------------------------------------------------
Revenues for the nine months ended September 30, 1997 decreased to $0.5
million from $2.8 million in the nine months ended September 30, 1996,
primarily as a result of a reduction in the sale of real estate. Revenues from
the sale of real estate decreased to $0.3 million in the current period of
1997 from $2.6 million in the comparative period of 1996.
Costs and expenses for the nine months ended September 30, 1997 decreased to
$0.9 million from $2.8 million in the comparative period of 1996, primarily as
a result of a reduction in the sale of real estate. The cost of real estate
sold and related selling costs were $0.2 million in the nine months ended
September 30, 1997, compared to $1.9 million in the nine months ended
September 30, 1996. General and administrative expenses decreased to $0.4
million in the current period of 1997 from $0.6 million in the comparative
period of 1996, primarily as a result of a write-down of property of $0.2
million in the nine months ended September 30, 1996.
Interest expense in the nine months ended September 30, 1997 increased to $0.3
million from $0.2 million in the nine months ended September 30, 1996.
For the nine months ended September 30, 1997, the loss from continuing
operations was $0.4 million or $0.06 per share, compared to income from
continuing operations of $50,000 for the nine months ended September 30, 1996,
primarily as a result of the decrease in the sale of real estate. Results of
operations for the comparative period of 1996 included a gain of $0.3 million
on the transfer of real estate to a lender in extinguishment of debt.
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Results of Operations -Three Months Ended September 30, 1997
- ------------------------------------------------------------
Revenues were $0.3 million for the three months ended September 30, 1997,
compared to $1.4 million in the comparative period of 1996, primarily as a
result of a reduction in the sale of real estate. Revenues from the sale of
real estate decreased to $0.3 million in the quarter ended September 30, 1997
from $1.4 million in the quarter ended September 30, 1996.
Costs and expenses for the three months ended September 30, 1997 decreased to
$0.4 million from $1.7 million in the comparative period of 1996, primarily as
a result of a reduction in the sale of real estate. The cost of real estate
sold and related selling costs were $0.2 million in the quarter ended
September 30, 1997, compared to $1.3 million in the quarter ended September
30, 1996. General and administrative expenses decreased to $0.1 million in
the three months ended September 30, 1997 from $0.3 million in the three
months ended September 30, 1996, primarily as a result of a write-down of
property of $0.2 million in the quarter ended September 30, 1996.
Interest expense was $0.1 million in the three months ended September 30, 1997
and 1996, respectively.
The Corporation had a loss from continuing operations of $0.2 million or $0.02
per share in the period ended September 30, 1997, compared to $0.3 million or
$0.06 per share in the period ended September 30, 1996.
Liquidity and Capital Resources
- -------------------------------
The Corporation had cash of $0.2 million at September 30, 1997 and December
31, 1996, respectively. The Corporation has a $4.0 million line of credit
which was not utilized as at September 30, 1997. The line of credit is secured
by certain parcels of real estate, matures on December 30, 1997 and bears
interest at a rate of prime plus 4% per annum. Since the Corporation's
principal sources of revenues are relatively unpredictable, the Corporation
maintains its credit facility to cover any cash shortfalls.
Continuing operating activities used cash of $0.3 million in the nine months
ended September 30, 1997, compared to providing cash of $1.9 million in the
comparative period of 1996, primarily as a result of the reduction in the sale
of real estate. In the current period of 1997, an increase in payables
provided cash of $0.4 million, compared to nil in the comparative period of
1996. Net purchases of trading securities used cash of $0.1 million in the
period ended September 30, 1997.
Continuing financing activities provided cash of $0.3 million in the nine
months ended September 30, 1997, compared to $5.2 million in the comparative
period of 1996. A net increase in indebtedness provided cash of $0.4 million
in the current period of 1997, compared to a net decrease in indebtedness
using cash of $0.8 million in the nine months ended September 30, 1996. The
Corporation paid $0.2 million in dividends on its preferred shares in the
current period of 1997. In the nine months ended September 30, 1996, the
Corporation sold $6.0 million of its preferred stock.
9
<PAGE> 10
Continuing investing activities used cash of nil in the period ended September
30, 1997. Investing activities in the nine months ended September 30, 1996
consisted of net purchases of available-for-sale securities of $5.9 million.
At September 30, 1997, the Corporation had $2.2 million in outstanding notes
which are secured by deeds of trust on a portion of the Corporation's real
estate assets and are non-recourse to the Corporation. Pursuant to such deeds
of trust, the Corporation is obliged to make property tax and assessment
payments on the secured properties on a timely basis. During the nine months
ended September 30, 1997, two notes which were previously in default were
refinanced by other lenders.
In the nine months ended September 30, 1997, the Corporation paid all
outstanding principal and interest due to the holder of a $0.6 million note
secured by 56.6 acres of the Corporation's property. As a result, the legal
foreclosure action relating to the property was settled. The Corporation and
Triad Investment Corporation reached an agreement which resolved a court
action relating to an option agreement to sell the subject property, which the
Corporation believed had expired.
At September 30, 1997, overdue real estate taxes on the Corporation's
properties amounted to $0.4 million. In addition, there is approximately $0.5
million in assessments to local improvement districts ("LIDs") which are
overdue. Certain of the Corporation's properties are subject to overdue LIDs
and property taxes. Overdue real estate taxes and LIDs accrue interest at
approximately 12% per annum. Under Washington State law, if real estate taxes
or LIDs remain overdue for three years, the governing jurisdiction can
commence foreclosure proceedings against the property. The Corporation
anticipates that for the foreseeable future it will permit real estate taxes
to remain overdue, but may pay such taxes and LIDs as are necessary to prevent
foreclosure proceedings from occurring. No non-judicial or judicial
foreclosure actions have been commenced as a result of the Corporation's
failure to make property tax or assessment payments on a timely basis.
The following table summarizes the repayment schedule of the Corporation's
debt obligations, LIDs, unpaid property taxes and redeemable preferred stock
at September 30, 1997:
Year Ending Dollars
September 30, in Thousands
------------- ------------
1998 $ 1,072
1999 1,190
2000 990
------------
$ 3,252
============
The Corporation has no commitments for capital expenditures in relation to its
undeveloped real estate, although it may need to provide funds for pre-
development work on certain parcels in order to enhance their marketability
and sale value. Based upon appraisals prepared for the Corporation, the
Corporation believes that the value of its undeveloped real estate assets
substantially exceeds the amount of indebtedness related thereto. All of the
Corporation's real estate assets are undeveloped, which makes the appraisal
process inherently less certain than with developed properties.
10
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The Corporation continues to seek controlling interests in operating
businesses as opportunities arise. The Corporation anticipates that it may
require substantial capital to pursue any such opportunities and anticipates
that such capital will be provided through the sale or exchange of assets, or
through debt or equity financing.
11
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PART II. OTHER INFORMATION
-----------------
ITEM 1. LEGAL PROCEEDINGS
Reference is made to the Corporation's annual report on Form 10-KSB for the
year 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.
12
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SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934,
the Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: November 13, 1997 LOGAN INTERNATIONAL CORP.
By: /s/ Michael J. Smith
---------------------------
Michael J. Smith, President, Chief
Financial Officer and Director
13
<PAGE> 14
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> 150
<SECURITIES> 6,973
<RECEIVABLES> 427
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 15,407
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 15,579
<CURRENT-LIABILITIES> 2,574
<BONDS> 2,180
0
1
<COMMON> 108
<OTHER-SE> 10,716
<TOTAL-LIABILITY-AND-EQUITY> 15,579
<SALES> 250
<TOTAL-REVENUES> 501
<CGS> 222
<TOTAL-COSTS> 949
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 255
<INCOME-PRETAX> (488)
<INCOME-TAX> 0
<INCOME-CONTINUING> (488)
<DISCONTINUED> (744)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,222)
<EPS-PRIMARY> (0.13)
<EPS-DILUTED> (0.13)
</TABLE>
