<PAGE> 1
=============================================================================
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: 0-26354
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.)
#108 - 1201 SW 7th Street, P.O. Box 860, Renton WA 98055-0860
(Address of principal executive offices) (Zip Code)
(206) 271-3350
(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 10,837,808
par value
</TABLE>
=============================================================================
<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 THREE MONTHS ENDED MARCH 31, 1997
(Unaudited)
<PAGE> 3
LOGAN INTERNATIONAL CORP.
Consolidated Balance Sheets
(Unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
March 31, 1997 December 31, 1996
-------------- -----------------
ASSETS
<S> <C> <C>
Current assets
Cash $ 607 $ 809
Cash held in escrow 1,086 1,254
Accounts receivable 1,039 851
Investments 8,988 6,825
Real estate held for development and resale 6,100 6,086
Other assets 567 641
-------------- ----------------
Total current assets 18,387 16,466
Long-term assets
Investments 188 201
Property and equipment, at cost 4,266 3,674
-------------- ----------------
4,454 3,875
-------------- ----------------
$ 22,841 $ 20,341
============== ================
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 726 $ 790
Accrued liabilities 743 668
Due to affiliates 3,310 683
Debt
Secured 2,041 2,565
Other 486 456
Redeemable preferred stock 139 139
-------------- ----------------
Total current liabilities 7,445 5,301
Long-term liabilities
Debt 1,526 849
Other 1,171 955
-------------- ----------------
2,697 1,804
-------------- ----------------
Total liabilities 10,142 7,105
Minority interest 743 987
Shareholders' equity
Preferred shares 1 1
Common shares 108 108
Additional paid-in capital 14,673 14,673
Net unrealized gain on investment valuation 59 72
Retained deficit (2,885) (2,605)
-------------- ----------------
Total equity 11,956 12,249
-------------- ----------------
$ 22,841 $ 20,341
============== ================
</TABLE>
<PAGE> 4
LOGAN INTERNATIONAL CORP.
Consolidated Statements of Operations and Deficit
(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>
Revenue
Contract revenues $ 489 $ -
Sale of real estate - 1,255
Gain on securities 139 85
Other 15 9
------------- -------------
643 1,349
Costs and expenses
Contract costs 385 -
Cost of real estate sold and
related selling costs - 605
Selling, general and administrative 553 112
Real estate taxes 25 40
Interest 204 105
------------- -------------
1,167 862
------------- -------------
(Loss) income from operations (524) 487
Minority interest 244 -
------------- -------------
(Loss) income before extraordinary item (280) 487
Extraordinary item, gain on debt extinguishment - 256
------------- -------------
Net (loss) earnings (280) 743
Deficit, beginning of period (2,605) (2,857)
------------- -------------
Deficit, end of period $ (2,885) $ (2,114)
============= =============
(Loss) earnings per share
Loss (earnings) before extraordinary item $ (0.03) $ 0.07
Extraordinary item - 0.04
------------- -------------
$ (0.03) $ 0.11
============= =============
</TABLE>
<PAGE> 5
LOGAN INTERNATIONAL CORP.
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:
Gain (loss) before extraordinary item $ (280) $ 487
Adjustments to reconcile net loss to net
cash provided by operating activities:
Minority interest (244) -
Gain on securities (139) (85)
Amortization and depreciation 37 1
Other (15) -
------------- -------------
(641) 403
Changes in working capital:
Cash held in escrow 168 -
Real estate (14) 600
Prepaid and other assets 137 8
Accounts receivable (180) (1)
Payables 2,535 (164)
------------- -------------
2,005 846
Purchases of trading securities (2,667) -
Proceeds from sales of trading securities 642 -
------------- -------------
(20) 846
Cash flows from financing activities:
Borrowing 763 -
Payment of debts (658) (1,005)
Other (4) -
------------- --------------
101 (1,005)
Cash flows from investing activities:
Purchases of property and equipment (283) -
Proceeds from sale of available-for-sale
securities - 152
------------- --------------
(283) 152
------------- --------------
Net decrease in cash (202) (7)
Cash, beginning of period 809 261
------------- --------------
Cash, end of period $ 607 $ 254
============= ==============
</TABLE>
<PAGE> 6
LOGAN INTERNATIONAL CORP.
Notes to Consolidated Financial Statements
March 31, 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 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. Earnings per Share
------------------
Earnings per share is computed on the weighted average number of shares
outstanding during the period, after considering convertible securities,
warrants and options. The weighted average number of shares was 10,837,808
and 6,582,264 for the three months ended March 31, 1997 and 1996,
respectively.
<PAGE> 7
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
three months ended March 31, 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,
including remediation and recycling. Ichor's results from operations, assets
and liabilities have been included in the Corporation's financial statements.
Results of Operations - Three Months Ended March 31, 1997
- ---------------------------------------------------------
Revenues for the three months ended March 31, 1997 decreased to $0.6 million
from $1.3 million for the three months ended March 31, 1996, primarily as a
result of a reduction in the sale of real estate. Revenues from the sale of
real estate decreased to nil in the current period from $1.3 million in the
comparative period of 1996. Contract revenues increased to $0.5 million in
the current quarter from nil in the comparative quarter of 1996, as a result
of the inclusion of Ichor's results of operations in the current period.
Costs and expenses for the three months ended March 31, 1997 increased to $1.2
million from $0.9 million in the comparative period of 1996, primarily as a
result of the inclusion of Ichor's results of operations for the current
quarter. Contract costs increased to $0.4 million in the three months ended
March 31, 1997, compared to nil in the comparative period of 1996. Selling,
general and administrative expenses increased to $0.6 million in the current
quarter from $0.1 million in the comparative quarter of 1996.
Interest expense in the three months ended March 31, 1997 increased to $0.2
million from $0.1 million in the same period of 1996, primarily as a result of
interest on the indebtedness of Ichor.
The Corporation recognized an extraordinary gain of $0.3 million in the period
ending March 31, 1996 as a result of the transfer of 8 parcels of land to a
lender in exchange for the extinguishment of debt. No such gain was
recognized in the current period.
The Corporation had a net loss of $0.3 million or $0.03 per share in the
period ended March 31, 1997, compared to net income of $0.7 million or $0.11
per share in the period ended March 31, 1996.
Liquidity and Capital Resources
- -------------------------------
The Corporation had cash of $0.6 million at March 31, 1997, compared to $0.8
million at December 31, 1996. At March 31, 1997, the Corporation had $1.1
million held in escrow in respect of Ichor's environmental services
operations, compared to $1.3 million at December 31, 1996.
<PAGE> 8
The Corporation has a $4 million line of credit which was not utilized as at
March 31, 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 principle source of revenues is
the sale of real estate, and is therefore unpredictable, the Corporation
utilizes its credit facility to cover its cash shortfalls.
During the current period, Ichor established two new lines of credit, one with
Drummond Financial Corporation, which is a subsidiary of the Corporation's
parent, in the aggregate amount of $0.3 million and another with a separate
lender in the amount of $0.8 million, to fund the working capital requirements
of its waste oil recycling facility located in McCook, Illinois, which was
brought on-line in April 1997. At March 31, 1997, Ichor was funded in the
amount of $4.3 million under two agreements with Sirrom Environmental Funding,
LLC which enabled Ichor to fund amounts billed and outstanding under certain
Florida State rehabilitation programs at rates of prime plus 2% and prime plus
3%, respectively.
Operating activities used cash of $20,000 in the period ended March 31, 1997,
compared to providing cash of $0.8 million in the comparative period of 1996.
Payables provided cash of $2.5 million in the current period, compared to
using cash of $0.2 million in the comparative period of 1996. Net purchases
of trading securities used cash of $2.0 million in the period ended March 31,
1997, compared to nil in the period ended March 31, 1996.
Financing activities provided cash of $0.1 million in the three months ended
March 31, 1997, compared to using cash of $1.0 million in the comparative
period of 1996, primarily as a result of increased borrowing and a decrease in
debt payments.
Investing activities used cash of $0.3 million in the period ended March 31,
1997, compared to providing cash of $0.2 million in the same period of 1996,
primarily as a result of the purchase of property and equipment by Ichor.
Investing activities in the three months ended March 31, 1996 consisted of
proceeds from the sale of available-for-sale securities of $0.2 million.
At March 31, 1997, the Corporation had $1.2 million in outstanding notes which
are non-recourse to the Corporation and secured by deeds of trust on a portion
of the Corporation's real estate assets. 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. Two of the foregoing notes are in
default and the holders of such notes have the right to foreclose on the
properties securing same. In the event that any such holder commences a non-
judicial foreclosure action, under Washington State law the Corporation has
the right to cure its default by paying all past due taxes and assessments at
any time prior to 10 days before the foreclosure sale. In the event that a
holder of a note commences a judicial foreclosure action, under Washington
State law the Corporation will not have the right to cure the default by
paying the past due obligations. If such a holder is successful in a judicial
foreclosure action, the property will be sold at a sheriff's sale and the
Corporation will have an eight month period following such sale to redeem the
property by paying the sheriff's sale price plus interest at 8% per annum.
<PAGE> 9
As of the date hereof, 56.6 acres of the Corporation's Gig Harbour property
(which totals 102.6 acres with a total book value of $3.1 million) is subject
to a legal foreclosure action by the holder of a $0.6 million note secured by
the subject property. As a result, the Corporation has until July 15, 1997 to
pay all of the outstanding principal and interest due on the note, otherwise
title to the subject property will pass to the lender. The Corporation
initially had an option agreement to sell the subject property to Triad
Investment Corporation ("Triad") which the Corporation believed had expired
and was the subject of a court action. The Corporation and Triad have reached
an agreement in principle to resolve the action and the Corporation does not
intend to lose title to the property under the foreclosure action.
Except as aforesaid, 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.
At March 31, 1997, delinquent real estate taxes on the Corporation's
properties amounted to $0.7 million. In addition, there is approximately $0.5
million in assessments to local improvement districts ("LIDs") which are
delinquent. Substantially all of the Corporation's properties are subject to
delinquent LIDs and property taxes. Delinquent real estate taxes and LIDs
accrue interest at approximately 12% per annum. Under Washington State law,
if real estate taxes or LIDs remain delinquent 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 delinquent, but may pay such taxes and LIDs as are
necessary to prevent foreclosure proceedings from occurring.
The following table summarizes the repayment schedule of the Corporation's
secured debt obligations, LIDs and unpaid property taxes at March 31, 1997:
<TABLE>
<CAPTION>
Year Ending Dollars
March 31, in Thousands
----------- ------------
<S> <C>
1998 $ 2,666
1999 1,153
2000 373
-----------
$ 4,192
===========
</TABLE>
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.
The Corporation continues to seek controlling interests in operating
businesses as opportunities arise. The Corporation has acquired one such
interest to date, but may divest itself of such interest. 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.
<PAGE> 10
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.
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
None.
<PAGE> 11
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: May 9, 1997
LOGAN INTERNATIONAL CORP.
By: /s/ Michael J. Smith
----------------------------------
Michael J. Smith, President, Chief
Financial Officer and Director
<PAGE> 12
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> 607
<SECURITIES> 8,988
<RECEIVABLES> 1,686
<ALLOWANCES> 647
<INVENTORY> 6,100
<CURRENT-ASSETS> 18,387
<PP&E> 4,546
<DEPRECIATION> 280
<TOTAL-ASSETS> 22,841
<CURRENT-LIABILITIES> 7,445
<BONDS> 1,526
139
1
<COMMON> 108
<OTHER-SE> 11,847
<TOTAL-LIABILITY-AND-EQUITY> 22,841
<SALES> 489
<TOTAL-REVENUES> 643
<CGS> 385
<TOTAL-COSTS> 1,167
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 204
<INCOME-PRETAX> (280)
<INCOME-TAX> 0
<INCOME-CONTINUING> (280)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (280)
<EPS-PRIMARY> (0.03)
<EPS-DILUTED> (0.03)
</TABLE>
