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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: 000-26354
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) 683-5767
(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 10,837,808
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 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, 1998
(Unaudited)
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LOGAN INTERNATIONAL CORP.
Consolidated Balance Sheets
(Unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
March 31, 1998 December 31, 1997
-------------- -----------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 2,179 $ 452
Cash held in escrow - 617
Accounts receivable, net 1,224 2,417
Notes receivable 680 680
Real estate held for development
and sale 4,556 4,544
Other assets 76 36
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Total current assets 8,715 8,746
Investments 6,752 7,014
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$ 15,467 $ 15,760
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 219 $ 327
Accrued liabilities 499 641
Due to affiliates 791 1,868
Debt 1,147 2,136
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Total current liabilities 2,656 4,972
Long-term debt 646 646
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Total liabilities 3,302 5,618
Minority interest 3,007 750
Shareholders' Equity
Common stock 108 108
Preferred stock 1 1
Additional paid-in capital 14,673 14,673
Net unrealized gain on
investment valuation (256) 6
Retained deficit (5,368) (5,396)
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Total equity 9,158 9,392
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$ 15,467 $ 15,760
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</TABLE>
The accompanying notes are an integral part of these financial statements.
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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 Three For the Three
Months Ended Months Ended
March 31, 1998 March 31, 1997
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(Restated)
<S> <C> <C>
Revenues
Dividend income $ 290 $ -
Gain on securities - 139
Other 2 15
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292 154
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Costs and expenses
General and administrative expenses 201 313
Real estate taxes 12 25
Interest 161 205
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374 543
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Gain on disposal of a subsidiary 437 -
Minority interest (27) 177
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Income (loss) from continuing operations 328 (212)
Discontinued operations, net of
minority interest
(Loss) from discontinued operations - (68)
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(Loss) from discontinued operations - (68)
Net income (loss) 328 (280)
Deficit, beginning of period (5,396) (2,605)
Dividend paid on preferred shares (300) -
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Deficit, end of period $ (5,368) $ (2,885)
============== ==============
Basic earnings (loss) per share
Income (loss) from continuing operations $ 0.02 $ (0.02)
(Loss) from discontinued operations - (0.01)
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$ 0.02 $ (0.03)
============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
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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, 1998 March 31, 1997
-------------- --------------
(Restated)
<S> <C> <C>
Cash Flows from Operating Activities:
Net income (loss) from
continuing operations $ 328 $ (212)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities
Minority interest 27 (177)
Gain on securities - (139)
Gain on disposal of a subsidiary (437) -
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(82) (528)
Changes in current assets and liabilities
Cash held in escrow 145 168
Real estate (12) (14)
Prepaid and other assets (44) 54
Accounts receivable 1,071 -
Payables (1,049) 2,696
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29 2,376
Purchase of trading securities - (2,667)
Proceeds from sales of trading securities - 642
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Net cash provided by operating
activities of continuing operations 29 351
Cash Flows from Investing Activities - -
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- -
Cash Flows from Financing Activities:
Payment of debts (232) (539)
Issuance of preferred shares
by a subsidiary 2,230 -
Dividend (300) -
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Net cash provided by (used in)
financing activities of
continuing operations 1,698 (539)
Net cash provided by (used in) continuing
operations 1,727 (188)
Net cash (used in) discontinued operations - (14)
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Increase (decrease) in cash and
cash equivalents 1,727 (202)
Cash and cash equivalents,
beginning of period 452 809
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Cash and cash equivalents, end of period $ 2,179 $ 607
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</TABLE>
The accompanying notes are an integral part of these financial statements.
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LOGAN INTERNATIONAL CORP.
Notes to Consolidated Financial Statements
March 31, 1998
(Unaudited)
Note 1. Basis of Presentation
- ------------------------------
The interim period consolidated financial statements contained herein 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 audited consolidated financial statements
and accompanying notes included in the Registrant's latest annual report on
Form 10-K for the year ended December 31, 1997. In the opinion of the
Registrant, the unaudited consolidated financial statements contained herein
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 operated in the environmental services business.
Ichor sold its environmental remediation services operations in April 1997
and its waste oil recycling facility in December 1997. The consolidated
financial statements contained herein have been restated to record the
disposed businesses as discontinued operations. Ichor's results of
operations have been included in the consolidated financial statements
contained herein as discontinued operations.
Note 3. Earnings (Loss) Per Share
- ----------------------------------
Basic earnings (loss) per share is computed on the weighted average number of
shares outstanding during the period. The weighted average number of shares
outstanding was 10,837,808 for the three months ended March 31, 1998 and
1997, respectively.
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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 the
financial condition of Logan International Corp. (the "Corporation") for the
quarter ended March 31, 1998 should be read in conjunction with the
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, 1998 increased to $0.3 million
from $0.2 million for the three months ended March 31, 1997, as a result of
dividends received on shares held by the Corporation.
Costs and expenses decreased to $0.4 million in the three months ended March
31, 1998 from $0.5 million in the three months ended March 31, 1997,
primarily as a result of the sale by the Corporation's 50.9% owned
subsidiary, ICHOR Corporation ("Ichor"), of a wholly-owned subsidiary, ICHOR
Services, Inc. ("Ichor Services"), for $100. General and administrative
expenses decreased to $0.2 million in the three months ended March 31, 1998
from $0.3 million in the comparative period of 1997. Interest expense
decreased marginally in the three months ended March 31, 1998 from the same
period in 1997.
Effective March 31, 1998, Ichor sold Ichor Services and the Corporation
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 $0.02 per share in the
three months ended March 31, 1998, compared to a loss from continuing
operations of $0.2 million or $0.02 per share in the three months ended March
31, 1997. The Corporation reported a loss of $0.1 million or $0.01 per share
from discontinued operations in the three months ended March 31, 1997.
Net income in the three months ended March 31, 1998 was $0.3 million or $0.02
per share, compared to a net loss of $0.3 million or $0.03 per share in the
three months ended March 31, 1997.
Liquidity and Capital Resources
- -------------------------------
The Corporation had cash and cash equivalents of $2.2 million at March 31,
1998, compared to $0.5 million at December 31, 1997.
Net cash provided by operating activities before any activities in trading
securities was $29,000 in the three months ended March 31, 1998, compared to
$2.4 million in the comparative period of 1997. Net purchases of trading
securities used cash of $2.0 million in the three months ended March 31,
1997. Net cash provided by operating activities was $29,000 in the three
months ended March 31, 1998, compared to $0.4 million in the three months
ended March 31, 1997. A decrease in accounts receivable provided cash of
$1.1 million in the three months ended March 31, 1998. A
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decrease in payables used cash of $1.0 million in the three months ended
March 31, 1998, compared to providing cash of $2.7 million in the three
months ended March 31, 1997.
Financing activities provided cash of $1.7 million in the three months ended
March 31, 1998, compared to using cash of $0.5 million in the three months
ended March 31, 1997. In the first quarter of 1998, Ichor completed the
issuance of an aggregate of 467,500 shares of 5% Cumulative Redeemable
Convertible Preferred Stock, Series 1 in consideration of debt forgiveness of
$2.2 million and cash of $2.5 million. The Corporation paid $0.3 million in
dividends on its preferred stock in 1998.
At March 31, 1998, the Corporation had $1.2 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 obligated to make property tax and assessment
payments on the secured properties on a timely basis.
At March 31, 1998, overdue real estate taxes on the Corporation's properties
amounted to $0.1 million. In addition, there is approximately $0.1 million
in assessments to local improvement districts ("LIDs") which are overdue.
Certain of the Corporation's properties are subject to overdue LIDs and
property taxes. Overdue real estate taxes and LIDs accrue interest at
approximately 12% per annum. Under Washington State law, if real estate taxes
or LIDs remain delinquent for three years, the governing jurisdiction can
commence foreclosure proceedings against the property. The Corporation
anticipates that for the foreseeable future it will permit real estate taxes
to remain overdue, but may pay such taxes and LIDs as are necessary to
prevent foreclosure proceedings from occurring. No non-judicial or judicial
foreclosure actions have been commenced as a result of the Corporation's
failure to make property tax or assessment payments on a timely basis.
The following table summarizes the repayment schedule of the Corporation's
debt obligations, LIDs and unpaid property taxes at March 31, 1998:
Year Ending Dollars in
March 31, Thousands
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1998 1,147
1999 401
2000 41
2001 41
2002 41
Thereafter 122
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$ 1,793
========
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.
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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.
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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
- ------ -----------
27 Article 5 - Financial Data Schedule for the 1st Quarter 1998 Form
10-Q.
(b) Reports on Form 8-K
None.
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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: May 14, 1998 LOGAN INTERNATIONAL CORP.
By: /s/ Michael J. Smith
----------------------------------
Michael J. Smith, President, Chief
Financial Officer and Director
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EXHIBIT INDEX
Exhibit Number Description
- -------------- -----------
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> 2,179
<SECURITIES> 0
<RECEIVABLES> 1,904
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 8,715
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 15,467
<CURRENT-LIABILITIES> 2,656
<BONDS> 0
0
1
<COMMON> 108
<OTHER-SE> 9,049
<TOTAL-LIABILITY-AND-EQUITY> 15,467
<SALES> 0
<TOTAL-REVENUES> 292
<CGS> 0
<TOTAL-COSTS> 374
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 161
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 328
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 328
<EPS-PRIMARY> 0.02
<EPS-DILUTED> 0.02
</TABLE>
