<PAGE> 1
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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: 000-26354
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) (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 11, 1998
----- ------------------------------
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 SIX MONTHS ENDED JUNE 30, 1998
(Unaudited)
2
<PAGE> 3
LOGAN INTERNATIONAL CORP.
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 $ 854 $ 452
Cash held in escrow - 617
Accounts receivable, net 1,407 2,417
Notes receivable 2,080 680
Real estate held for development
and sale 4,169 4,544
Other assets 306 36
------------- -------------
Total current assets 8,816 8,746
Investments 11,703 7,014
------------- -------------
$ 20,519 $ $ 15,760
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Accounts payable $ 253 $ 327
Accrued liabilities 306 641
Due to affiliates 5,691 1,868
Debt 288 2,136
------------- -------------
Total current liabilities 6,538 4,972
Long-term Debt 1,900 646
------------- -------------
Total liabilities 8,438 5,618
Minority Interest 3,038 750
Shareholders' Equity
Common stock 108 108
Preferred stock 1 1
Additional paid-in capital 14,673 14,673
Net unrealized (loss) gain on
investment valuation (135) 6
Retained deficit (5,604) (5,396)
------------- -------------
Total equity 9,043 9,392
------------- -------------
$ 20,519 $ 15,760
============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 4
LOGAN INTERNATIONAL CORP.
Consolidated Statements of Operations and Deficit
(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>
Revenues
Sale of real estate $ 400 $ -
Dividend income 290 -
Gain on securities - 33
Other 227 186
-------------- --------------
917 219
-------------- --------------
Costs and expenses
Cost of real estate sold and
related selling costs 433 -
General and administrative expenses 525 476
Real estate taxes 21 49
Interest 225 536
-------------- --------------
1,204 1,061
-------------- --------------
Gain on disposal of a subsidiary 437 -
Minority interest (58) 275
-------------- --------------
Income (loss) from continuing
operations 92 (567)
Discontinued operations, net of
minority interest
Loss from discontinued operations - (235)
Gain on sale - 30
-------------- --------------
Loss from discontinued operations - (205)
-------------- --------------
Net income (loss) 92 (772)
Deficit, beginning of period (5,396) (2,605)
Dividend paid on preferred shares (300) (172)
-------------- --------------
Deficit, end of period $ (5,604) $ (3,549)
============== ==============
Loss per share
Loss from continuing operations $ (0.01) $ (0.07)
Loss from discontinued operations - (0.02)
-------------- --------------
$ (0.01) $ (0.09)
============== ==============
</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)
<TABLE>
<CAPTION>
For the Three For the Three
Months Ended Months Ended
June 30, 1998 June 30, 1997
-------------- --------------
(Restated)
<S> <C> <C>
Revenues
Sale of real estate $ 400 $ -
Loss on securities - (106)
Other 225 171
-------------- --------------
625 65
-------------- --------------
Costs and expenses
Cost of real estate sold
and related selling costs 433 -
General and administrative expenses 324 163
Real estate taxes 9 24
Interest 64 331
-------------- --------------
830 518
-------------- --------------
Minority interest (31) 98
-------------- --------------
Loss from continuing operations (236) (355)
Discontinued operations, net
of minority interest
Loss from discontinued operations - (167)
Gain on sale - 30
-------------- --------------
Loss from discontinued operations - (137)
-------------- --------------
Net loss (236) (492)
Deficit, beginning of period (5,368) (2,885)
Dividend paid on preferred shares - (172)
-------------- --------------
Deficit, end of period $ (5,604) $ (3,549)
============== ==============
Loss per share
Loss from continuing operations $ (0.03) $ (0.04)
Loss from discontinued operations - (0.01)
-------------- --------------
$ (0.03) $ (0.05)
============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
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LOGAN INTERNATIONAL CORP.
Statement of Comprehensive Income
(Unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
For the Six For the Six
Months Ended Months Ended
June 30, 1998 June 30, 1997
-------------- --------------
<S> <C> <C>
Net income (loss) $ 92 $ (772)
Other comprehensive loss:
Unrealized loss on securities (141) (14)
-------------- --------------
Total comprehensive loss $ (49) $ (786)
============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE> 7
LOGAN INTERNATIONAL CORP.
Statement of Comprehensive Income
(Unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
For the Three For the Three
Months Ended Months Ended
June 30, 1998 June 30, 1997
-------------- --------------
<S> <C> <C>
Net loss $ (236) $ (492)
Other comprehensive income (loss):
Unrealized income (loss) on
securities 121 (1)
-------------- ---------------
Total comprehensive loss $ (115) $ (493)
============== ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
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LOGAN INTERNATIONAL CORP.
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 $ 92 $ (567)
Adjustments to reconcile net
income (loss) to cash flows
from operating activities
Minority interest 58 (275)
Gain on securities - (33)
Gain on disposal of a subsidiary (437) -
Bad debt recovery (100) -
Other - 6
-------------- --------------
(387) (869)
Changes in current assets and
liabilities
Cash held in escrow 145 321
Real estate 375 (24)
Prepaid and other assets (274) (128)
Accounts receivable 988 (2,725)
Payables 3,692 2,593
-------------- --------------
4,539 (832)
Purchase of trading securities - (2,667)
Proceeds from sales of trading
securities - 3,309
-------------- --------------
Net cash provided by (used in)
operating activities of
continuing operations 4,539 (190)
Cash Flows from Investing Activities:
Purchase of available-for-sale
securities (4,830) -
Note receivable (1,400) -
-------------- --------------
Net cash used in investing
activities of continuing
operations (6,230) -
Cash Flows from Financing Activities:
Borrowing 465 1,190
Payment of debts (302) (1,334)
Issuance of preferred shares by
a subsidiary 2,230 -
Dividend (300) (172)
-------------- --------------
Net cash provided by (used in)
financing activities of
continuing operations 2,093 (316)
-------------- --------------
Net cash provided by (used in)
continuing operations 402 (506)
Net cash provided by
discontinued operations - 12
-------------- --------------
Increase (decrease) in cash and
cash equivalents 402 (494)
Cash and cash equivalents,
beginning of period 452 705
-------------- --------------
Cash and cash equivalents,
end of period $ 854 $ 211
============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
8
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LOGAN INTERNATIONAL CORP.
Notes to Consolidated Financial Statements
June 30, 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
United States 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. Effective March 31,
1998, Ichor sold its wholly-owned subsidiary, ICHOR Services, Inc. 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 six months ended June 30, 1998 and 1997,
respectively.
9
<PAGE> 10
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
six months and three months ended June 30, 1998, respectively, should be read
in conjunction with the consolidated financial statements and related notes
included elsewhere herein.
Results of Operations - Six Months Ended June 30, 1998
- ------------------------------------------------------
Revenues for the six months ended June 30, 1998 increased to $0.9 million
from $0.2 million for the six months ended June 30, 1997, primarily as a
result of the sale of real estate in the second quarter of 1998 and dividends
received.
Costs and expenses increased to $1.2 million in the six months ended June 30,
1998 from $1.1 million in the six months ended June 30, 1997, primarily as a
result of the cost of real estate sold and related selling costs. General
and administrative expenses were $0.5 million in the six months ended June
30, 1998 and 1997, respectively. Interest expense decreased to $0.2 million
in the six months ended June 30, 1998 from $0.5 million in the same period in
1997, as a result of reduced indebtedness in the current period.
Effective March 31, 1998, the Corporation's 50.9% owned subsidiary, ICHOR
Corporation ("Ichor"), sold its wholly-owned subsidiary, ICHOR Services, Inc.
("Ichor Services"), for $100. The Corporation recognized a gain of $0.4
million on the sale in the six months ended June 30, 1998, as a result of the
disposal of net liabilities of Ichor Services.
Income from continuing operations was $0.1 million, or a loss of $0.01 per
share after the accrual of dividends on the Corporation's preferred stock, in
the six months ended June 30, 1998, compared to a loss from continuing
operations of $0.6 million or $0.07 per share in the six months ended June
30, 1997. The Corporation reported a loss of $0.2 million or $0.02 per share
from discontinued operations in the six months ended June 30, 1997.
Net income in the six months ended June 30, 1998 was $0.1 million, or a net
loss of $0.01 per share after the accrual of dividends on the Corporation's
preferred stock, compared to a net loss of $0.8 million or $0.09 per share in
the six months ended June 30, 1997.
Results of Operations - Three Months Ended June 30, 1998
- --------------------------------------------------------
Revenues for the three months ended June 30, 1998 increased to $0.6 million
from $65,000 for the three months ended June 30, 1997, primarily as a result
of the sale of real estate in the second quarter of 1998.
10
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Costs and expenses increased to $0.8 million in the three months ended June
30, 1998 from $0.5 million in the three months ended June 30, 1997, primarily
as a result of the cost of real estate sold and related selling costs.
General and administrative expenses increased to $0.3 million in the three
months ended June 30, 1998 from $0.2 million in the comparative period of
1997. Interest expense decreased to $64,000 in the three months ended June
30, 1998 from $0.3 million in the same period in 1997, as a result of reduced
indebtedness in the current period.
The Corporation reported a loss from continuing operations of $0.2 million or
$0.03 per share in the three months ended June 30, 1998, compared to $0.4
million or $0.04 per share in the three months ended June 30, 1997. The
Corporation reported a loss from discontinued operations of $0.1 million or
$0.01 per share in the three months ended June 30, 1997.
The Corporation reported a net loss of $0.2 million or $0.03 per share in the
three months ended June 30, 1998, compared to $0.5 million or $0.05 per share
in the three months ended June 30, 1997.
Liquidity and Capital Resources
- -------------------------------
The Corporation had cash and cash equivalents of $0.9 million at June 30,
1998, compared to $0.5 million at December 31, 1997.
Continuing operating activities before any activities in trading securities
provided cash of $4.5 million in the six months ended June 30, 1998, compared
to cash used by operating activities of $0.8 million in the comparative
period of 1997. Net proceeds from sales of trading securities provided cash
of $0.6 million in the six months ended June 30, 1997. Net cash provided by
operating activities was $4.5 million in the six months ended June 30, 1998,
compared to net cash used in operating activities of $0.2 million in the six
months ended June 30, 1997. A decrease in accounts receivable provided cash
of $1.0 million in the six months ended June 30, 1998, compared to an
increase in accounts receivable using cash of $2.7 million in the same period
in 1997. An increase in payables in the current period provided cash of $3.7
million, compared to $2.6 million in the comparative period of 1997.
Investing activities used cash of $6.2 million in the six months ended June
30, 1998, as a result of the purchase of available-for-sale securities and an
increase in a note receivable.
Financing activities provided cash of $2.1 million in the six months ended
June 30, 1998, compared to using cash of $0.3 million in the six months ended
June 30, 1997. A net increase in indebtedness provided cash of $0.2 million
in the six months ended June 30, 1998, compared to a net decrease in
indebtedness using cash of $0.1 million in the comparative period of 1997.
The Corporation paid $0.3 million in dividends on its preferred stock in the
six months ended June 30, 1998, compared to $0.2 million in the comparative
period of 1997.
11
<PAGE> 12
At June 30, 1998, the Corporation had $1.7 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 June 30, 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 June 30, 1998:
Year Ending Dollars in
June 30, Thousands
----------- ------------
1999 $ 288
2000 41
2001 1,695
2002 41
2003 41
Thereafter 82
------------
$ 2,188
============
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.
The Corporation believes that its assets should enable the Corporation to
meet its current ongoing liquidity requirements.
12
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PART II. OTHER INFORMATION
-----------------
ITEM 1. LEGAL PROCEEDINGS
Ichor has agreed to pay $259,500 in settlement of a class action law suit
alleging that Ichor, 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 Ichor'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 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.
13
<PAGE> 14
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 12, 1998 LOGAN INTERNATIONAL CORP.
By: /s/ Michael J. Smith
----------------------------
Michael J. Smith, President,
Chief Financial Officer and
Director
14
<PAGE> 15
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> 854
<SECURITIES> 0
<RECEIVABLES> 3,487
<ALLOWANCES> 0
<INVENTORY> 4,169
<CURRENT-ASSETS> 8,816
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 20,519
<CURRENT-LIABILITIES> 6,538
<BONDS> 0
0
1
<COMMON> 108
<OTHER-SE> 8,934
<TOTAL-LIABILITY-AND-EQUITY> 20,519
<SALES> 400
<TOTAL-REVENUES> 917
<CGS> 433
<TOTAL-COSTS> 1,204
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 225
<INCOME-PRETAX> 92
<INCOME-TAX> 0
<INCOME-CONTINUING> 92
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 92
<EPS-PRIMARY> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
