<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 September 30, 1999
OR
[ ] 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 November 11, 1999
----- --------------------------------
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, 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 NINE MONTHS ENDED SEPTEMBER 30, 1999
(Unaudited)
2
<PAGE> 3
LOGAN INTERNATIONAL CORP.
Consolidated Balance Sheets
(Unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
September 30, 1999 December 31, 1998
------------------ -----------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 675 $ 595
Accounts receivable, net 544 632
Real estate held for development
and sale 3,754 3,785
Other assets 8 79
------------ ------------
Total current assets 4,981 5,091
Investments 11,077 10,992
------------ ------------
$ 16,058 $ 16,083
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 439 $ 323
Accrued liabilities 139 139
Due to affiliates 4,900 4,900
Debt 1,887 1,811
------------ ------------
Total current liabilities 7,365 7,173
Long-Term Debt 164 205
------------ ------------
Total liabilities 7,529 7,378
Shareholders' Equity
Common stock 108 108
Preferred stock 1 1
Additional paid-in capital 14,673 14,673
Net unrealized loss on
investment valuation (762) (847)
Deficit (5,491) (5,230)
------------ ------------
Total equity 8,529 8,705
------------ ------------
$ 16,058 $ 16,083
============ ============
</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 Nine For the Nine
Months Ended Months Ended
September 30, 1999 September 30, 1998
------------------ ------------------
<S> <C> <C>
Revenues
Sale of real estate $ 225 $ 400
Dividend income 274 300
Gain on disposal of a subsidiary - 437
Other 70 241
------------ ------------
569 1,378
------------ ------------
Costs and expenses
Cost of real estate sold and
related selling costs 95 433
General and administrative expenses 229 984
Real estate taxes 15 30
Interest 191 294
Bad debt recovery - (100)
------------ ------------
530 1,641
------------ ------------
Income (loss) before minority
interest and income tax 39 (263)
Minority interest - (95)
------------ ------------
Income (loss) before income tax 39 (358)
Income tax - (12)
------------ ------------
Net income (loss) 39 (370)
Deficit, beginning of period (5,230) (5,396)
Dividend paid on preferred shares (300) (300)
------------ ------------
Deficit, end of period $ (5,491) $ (6,066)
============ ============
Basic loss per share $ (0.02) $ (0.05)
============ ============
</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
September 30, 1999 September 30, 1998
------------------ ------------------
<S> <C> <C>
Revenues
Dividend income $ - $ 10
Other 57 114
------------ ------------
57 124
------------ ------------
Costs and expenses
General and administrative expenses 51 459
Real estate taxes 5 9
Interest 62 69
------------ ------------
118 537
------------ ------------
Loss before minority interest and
income tax (61) (413)
Minority interest - (37)
------------ ------------
Loss before income tax (61) (450)
Income tax - (12)
------------ ------------
Net loss (61) (462)
Deficit, beginning of period (5,430) (5,604)
------------ ------------
Deficit, end of period $ (5,491) $ (6,066)
============ ============
Basic loss per share $ (0.01) $ (0.05)
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 6
LOGAN INTERNATIONAL CORP.
Consolidated Statements of Comprehensive Income
(Unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
For the Nine For the Nine
Months Ended Months Ended
September 30, 1999 September 30, 1998
------------------ -------------------
<S> <C> <C>
Net income (loss) $ 39 $ (370)
Other comprehensive gain (loss):
Unrealized gain (loss) on securities 85 (1,986)
------------ ------------
Total comprehensive income (loss) $ 124 $ (2,356)
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE> 7
LOGAN INTERNATIONAL CORP.
Consolidated Statements of Comprehensive Income
(Unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
For the Three For the Three
Months Ended Months Ended
September 30, 1999 September 30, 1998
------------------ ------------------
<S> <C> <C>
Net loss $ (61) $ (462)
Other comprehensive gain (loss):
Unrealized gain (loss) on securities 819 (1,845)
------------ ------------
Total comprehensive income (loss) $ 758 $ (2,307)
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE> 8
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, 1999 September 30, 1998
------------------ ------------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income (loss) from operations $ 39 $ (370)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities
Minority interest - 95
Gain on disposal of a subsidiary - (437)
Bad debt recovery - (100)
Depreciation - 1
------------ ------------
39 (811)
Changes in current assets and
liabilities
Cash held in escrow - 145
Real estate 31 346
Prepaid and other assets 71 (133)
Accounts receivable 88 1,218
Payables 151 (133)
Due to affiliates - 3,823
------------ ------------
Net cash provided by
operating activities 380 4,455
Cash Flows from Investing Activities:
Purchase of available-for-sale
securities - (4,830)
Note receivable - (1,400)
Other - (75)
------------ ------------
Net cash used in investing
activities - (6,305)
Cash Flows from Financing Activities:
Borrowing - 465
Payment of debts - (343)
Issuance of preferred shares by
a subsidiary - 2,230
Dividend (300) (300)
------------ ------------
Net cash (used in) provided by
financing activities (300) 2,052
------------ ------------
Increase in cash and cash equivalents 80 202
Cash and cash equivalents,
beginning of period 595 452
------------ ------------
Cash and cash equivalents,
end of period $ 675 $ 654
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
8
<PAGE> 9
LOGAN INTERNATIONAL CORP.
Notes to Consolidated Financial Statements
September 30, 1999
(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, 1998. 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. Earnings (Loss) Per Share
- ----------------------------------
Basic earnings (loss) per share is computed by dividing income or loss
available to common shareholders by the weighted average number of shares
outstanding during the period. The weighted average number of shares
outstanding was 10,837,808 for the nine and three month periods ended
September 30, 1999 and 1998, respectively.
Note 3. Acquisitions and Dispositions
- --------------------------------------
Effective December 31, 1998, the Corporation transferred its 50.3% interest in
the shares of common stock of Ichor Corporation ("Ichor") to an affiliated
party. The Corporation's results of operations for the nine and three month
periods ended September 30, 1998 include the results of operations of Ichor.
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
financial condition of Logan International Corp. (the "Corporation") for the
nine and three month periods ended September 30, 1999 should be read in
conjunction with the consolidated financial statements and related notes
included elsewhere herein.
Effective December 31, 1998, the Corporation transferred its 50.3% interest in
the shares of common stock of Ichor Corporation ("Ichor") to an affiliated
party. The Corporation's results of operations for the nine and three month
periods ended September 30, 1998 include the results of operations of Ichor.
Results of Operations - Nine Months Ended September 30, 1999
- ------------------------------------------------------------
Revenues decreased to $0.6 million for the nine months ended September 30,
1999 from $1.4 million for the comparable period of 1998, primarily as a
result of lower sales of real estate and the disposition of the Corporation's
interest in Ichor.
Costs and expenses decreased to $0.5 million for the nine months ended
September 30, 1999 from $1.6 million for the nine months ended September 30,
1998, primarily as a result of lower real estate sales and the disposition of
the Corporation's interest in Ichor. Interest expense decreased to $0.2
million in the nine months ended September 30, 1999 from $0.3 million in the
same period of 1998, primarily as a result of reduced indebtedness in the
current period and the sale in the first quarter of 1998 by Ichor of its
wholly-owned subsidiary which had financed certain receivables.
Net earnings for the nine months ended September 30, 1999 were $39,000, or a
loss of $0.02 per share after dividends on the preferred shares, compared to a
net loss of $0.4 million, or $0.05 per share, for the nine months ended
September 30, 1998.
Results of Operations - Three Months Ended September 30, 1999
- -------------------------------------------------------------
Revenues decreased to $57,000 for the three months ended September 30, 1999
from $0.1 million for the comparable period of 1998, primarily as a result of
the disposition of the Corporation's interest in Ichor.
Costs and expenses decreased to $0.1 million for the three months ended
September 30, 1999 from $0.5 million for the three months ended September 30,
1998, primarily as a result of the disposition of the Corporation's interest
in Ichor. Interest expense decreased marginally to $62,000 in the three
months ended September 30, 1999 from $69,000 in the same period of 1998.
The net loss for the three months ended September 30, 1999 was $61,000, or
$0.01 per share, compared to $0.5 million, or $0.05 per share, for the three
months ended September 30, 1998.
10
<PAGE> 11
Liquidity and Capital Resources
- -------------------------------
The Corporation had cash and cash equivalents of $0.7 million at September 30,
1999, compared to $0.6 million at December 31, 1998.
Continuing operating activities provided cash of $0.4 million in the nine
months ended September 30, 1999, compared to $4.5 million in the nine months
ended September 30, 1998. A decrease in accounts receivable provided cash of
$0.1 million in the nine months ended September 30, 1999, compared to $1.2
million in the same period of 1998. An increase in payables in the nine
months ended September 30, 1999 provided cash of $0.2 million, compared to a
decrease in same using cash of $0.1 million in the comparative period of 1998.
Real estate sales provided cash of $31,000 in the nine months ended September
30, 1999, compared to $0.3 million in the comparative period of 1998.
In the nine months ended September 30, 1999, investing activities had no
effect on cash flows. In the nine months ended September 30, 1998, investing
activities used cash of $6.3 million, primarily as a result of the purchase of
available-for-sale securities.
Financing activities used cash of $0.3 million in the nine months ended
September 30, 1999, compared to providing cash of $2.1 million in the nine
months ended September 30, 1998. A net increase in indebtedness provided cash
of $0.1 million in the nine months ended September 30, 1998. The Corporation
paid $0.3 million in dividends on its preferred stock in the nine months ended
September 30, 1999 and 1998, respectively.
At September 30, 1999, 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 September 30, 1999, overdue property taxes on the Corporation's properties
amounted to $0.1 million. In addition, there were approximately $0.2 million
in assessments to local improvement districts ("LIDs"). Overdue property
taxes and LIDs accrue interest at approximately 12% per annum. Under
Washington State law, if property 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 property 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.
11
<PAGE> 12
The following table summarizes the repayment schedule of the Corporation's
debt obligations, LIDs and unpaid property taxes at September 30, 1999:
Year Ending Dollars in
September 30, Thousands
------------- ----------
2000 $ 1,887
2001 41
2002 41
2003 41
2004 41
----------
$ 2,051
==========
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 it to meet its current
ongoing liquidity requirements.
Year 2000
- ---------
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.
12
<PAGE> 13
PART II. OTHER INFORMATION
-----------------
ITEM 1. LEGAL PROCEEDINGS
Reference is made to the Corporation's annual report on Form 10-K for the
fiscal year ended December 31, 1998 for information concerning legal
proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Corporation held its annual meeting of shareholders on July 14, 1999. At
the meeting, Michael J. Smith was elected a Class I director of the
Corporation for a three-year term, as follows:
<TABLE>
<CAPTION>
ABSTENTIONS AND
VOTES FOR VOTES WITHHELD BROKER NON-VOTES
--------- -------------- ----------------
<S> <C> <C> <C>
Michael J. Smith 5,417,983 9,109 -
</TABLE>
Roland Waldvogel and Leonard Petersen continued their terms as directors of
the Corporation.
At the meeting, the shareholders of the Corporation approved an amendment to
the Articles of Incorporation of the Corporation to effect a reverse stock
split on a three for one basis by a vote of 5,312,832 for, 52,810 against, and
61,450 votes withheld in respect of the resolution relating to the amendment.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit
Number Description
------- -----------
27 Article 5 - Financial Data Schedule for the 3rd Quarter
1999 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: November 11, 1999 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 3rd 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-01-1999
<CASH> 675
<SECURITIES> 0
<RECEIVABLES> 544
<ALLOWANCES> 0
<INVENTORY> 3,754
<CURRENT-ASSETS> 4,981
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 16,058
<CURRENT-LIABILITIES> 7,365
<BONDS> 164
0
1
<COMMON> 108
<OTHER-SE> 8,420
<TOTAL-LIABILITY-AND-EQUITY> 16,058
<SALES> 225
<TOTAL-REVENUES> 569
<CGS> 95
<TOTAL-COSTS> 530
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 191
<INCOME-PRETAX> 39
<INCOME-TAX> 0
<INCOME-CONTINUING> 39
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 39
<EPS-BASIC> (0.02)
<EPS-DILUTED> (0.02)
</TABLE>
