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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, 1997
[ ] 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.)
#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
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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 August 11, 1997
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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, 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
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ITEM 1. FINANCIAL STATEMENTS
LOGAN INTERNATIONAL CORP.
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(Unaudited)
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LOGAN INTERNATIONAL CORP.
Consolidated Balance Sheets
(Unaudited)
(dollars in thousands)
June 30, 1997 December 31, 1996
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(Restated)
ASSETS
Current Assets
Cash $ 318 $ 809
Cash held in escrow 933 1,254
Accounts receivable, net 3,898 851
Investments 6,216 6,825
Real estate held for development and resale 6,109 6,086
Net assets of discontinued operations - 71
Other assets 389 638
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Total current assets 17,863 16,534
Long-term Assets
Investments 188 201
Property and equipment, at cost 4,111 3,544
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4,299 3,745
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$ 22,162 $ 20,279
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 1,082 $ 790
Accrued liabilities 566 668
Due to affiliates 3,555 683
Debt 1,288 2,998
Redeemable preferred stock 139 139
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Total current liabilities 6,630 5,278
Long-term Liabilities
Debt 2,579 810
Other 1,166 955
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3,745 1,765
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Total liabilities 10,375 7,043
Minority Interest 496 987
Shareholders' Equity
Preferred shares 1 1
Common shares 108 108
Additional paid-in capital 14,673 14,673
Net unrealized gain on investment valuation 58 72
Retained deficit (3,549) (2,605)
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Total equity 11,291 12,249
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$ 22,162 $ 20,279
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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)
For the Six For the Six
Months Ended Months Ended
June 30, 1997 June 30, 1996
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Revenues
Sale of real estate $ - $ 1,255
Sale of recycled oil products 956 -
Gain on securities 33 174
Other 186 9
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1,175 1,438
Costs and expenses
Cost of real estate sold and
related selling costs - 605
Cost of recycled oil products 1,057 -
Selling, general and administrative 638 244
Real estate taxes 49 54
Interest 536 173
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2,280 1,076
(Loss) income from operations before minority interest (1,105) 362
Minority interest (405) -
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(Loss) income from continuing operations (700) 362
Loss from discontinued operations, net of minority interest:
Loss from operations (102) -
Gain on sale 30 -
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(72) -
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(Loss) income before extraordinary item (772) 362
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Extraordinary item, Gain on debt extinguishment - 258
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Net (loss) earnings (772) 620
Deficit, beginning of period (2,605) (2,857)
Dividend paid on preferred shares (172) -
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Deficit, end of period $ (3,549) $ (2,237)
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(Loss) earnings per share:
Continuing operations $ (0.08) $ 0.05
Discontinued operations (0.01) -
Extraordinary item - 0.04
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$ (0.09) $ 0.09
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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)
For the Three For the Three
Months Ended Months Ended
June 30, 1997 June 30, 1996
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Revenues
Sale of recycled oil products $ 930 $ -
(Loss) gain on securities (106) 89
Other 169 -
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993 89
Costs and expenses
Cost of recycled oil products 1,042 -
Selling, general and administrative 283 132
Real estate taxes 24 14
Interest 332 68
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1,681 214
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Loss from operations before minority interest (688) (125)
Minority interest (214) -
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Loss from continuing operations (474) (125)
Loss from discontinued operations, net of minority interest:
Loss from operations (48) -
Gain on sale 30 -
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(18) -
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Loss before extraordinary item (492) (125)
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Extraordinary item, Gain on debt extinguishment - 2
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Net loss (492) (123)
Deficit, beginning of period (2,885) (2,114)
Dividend paid on preferred shares (172) -
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Deficit, end of period $ (3,549) $ (2,237)
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Loss per share:
Continuing operations $ (0.05) $ (0.02)
Discontinued operations - -
Extraordinary item - -
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$ (0.05) $ (0.02)
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The accompanying notes are an integral part of these financial statements.
</TABLE
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LOGAN INTERNATIONAL CORP.
Consolidated Statements of Cash Flows
(Unaudited)
(dollars in thousands)
For the Six For the Six
Months Ended Months Ended
June 30, 1997 June 30, 1996
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Cash flows from continuing operating activities:
(Loss) gain before extraordinary item $ (700) $ 362
Adjustments to reconcile net (loss) income
to net cash provided by operating activities:
Minority interest (405) -
Gain on securities (33) (174)
Amortization and depreciation 97 2
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(1,041) 190
Changes in working capital:
Cash held in escrow 321 -
Real estate (24) 552
Prepaid and other assets 235 (77)
Accounts receivable (3,040) -
Payables 2,824 37
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(725) 702
Purchases of trading securities (2,667) -
Proceeds from sales of trading securities 3,309 -
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(83) 702
Cash flows from continuing financing activities:
Borrowing 1,953 230
Payment of debts (1,771) (1,125)
Issuance of preferred shares - 6,000
Payment of dividend on preferred shares (172) -
Other (17) -
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(7) 5,105
Cash flows from continuing investing activities:
Purchases of property and equipment (331) -
Purchases of available-for-sale securities - (6,200)
Proceeds from sale of available-for-sale securities - 313
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(331) (5,887)
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Net cash used in continuing operations (421) (80)
Net cash used in discontinued operations (70) -
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Net decrease in cash (491) (80)
Cash, beginning of period 809 261
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Cash, end of period $ 318 $ 181
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The accompanying notes are an integral part of these financial statements.
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LOGAN INTERNATIONAL CORP.
Notes to Consolidated Financial Statements
June 30, 1997
(Unaudited)
Note 1. Basis of Presentation
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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. Acquisition
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In December 1996, the Registrant acquired a 50.3% interest in ICHOR
Corporation ("Ichor"), which operates in the environmental services business.
Ichor's results from operations, assets and liabilities have been included in
the Registrant's financial statements.
Note 3. Earnings per Share
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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 6,601,495 for the six months ended June 30, 1997 and 1996,
respectively.
Note 4. Discontinued Operations
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Effective April 30, 1997, Ichor sold substantially all of the assets of its
environmental remediation services operation for approximately $0.2 million.
As a result, the Registrant's balance sheet as at December 31, 1996 has been
restated to record the disposed business as discontinued operations.
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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
six months and quarter ended June 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's results from operations, assets and liabilities have been included in
the Corporation's financial statements. In April 1997, Ichor sold
substantially all of the assets of its environmental remediation services
business for approximately $0.2 million. As a result, the Corporation's
balance sheet as at December 31, 1996 has been restated to record the
disposed business as discontinued operations.
Results of Operations - Six Months Ended June 30, 1997
- ------------------------------------------------------
Revenues for the six months ended June 30, 1997 decreased to $1.2 million
from $1.4 million in the six months ended June 30, 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 of 1997 from $1.3 million
in the comparative period of 1996. Revenues from the sale of recycled oil
products were $1.0 million in the current period of 1997, compared to nil in
the comparative period of 1996, as a result of the inclusion of the results
of the Corporation's environmental services operations in the current period
of 1997.
Costs and expenses for the six months ended June 30, 1997 increased to $2.3
million from $1.1 million in the comparative period of 1996, primarily as a
result of the inclusion of the results of the Corporation's environmental
services operations in the current period of 1997. The cost of recycled oil
products was $1.1 million in the six months ended June 30, 1997, compared to
nil in the comparative period of 1996. Selling, general and administrative
expenses increased to $0.6 million in the current period of 1997 from $0.2
million in the comparative period of 1996. The cost of real estate sold and
related selling costs were nil in the six months ended June 30, 1997,
compared to $0.6 million in the six months ended June 30, 1996.
Interest expense in the six months ended June 30, 1997 increased to $0.5
million from $0.2 million in the six months ended June 30, 1996, primarily as
a result of interest on the indebtedness of the Corporation's environmental
services operations.
For the six months ended June 30, 1997, the loss from continuing operations
was $0.7 million or $0.08 per share, compared to income from continuing
operations of $0.4 million or $0.05 per share for the six months ended June
30, 1996.
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During the current period of 1997, the Corporation recorded an operating loss
from discontinued operations of $0.1 million and a gain on the sale of the
Corporation's environmental remediation services assets of $30,000, net of
minority interest.
The Corporation recognized an extraordinary gain of $0.3 million in the
period ended June 30, 1996, as a result of the transfer of 10 parcels of land
to a lender in exchange for the extinguishment of debt. No such gain was
recognized in the current period of 1997.
The Corporation had a net loss of $0.8 million or $0.09 per share in the
period ended June 30, 1997, compared to net income of $0.6 million or $0.09
per share in the period ended June 30, 1996, primarily as a result of the
decrease in the sale of real estate and the inclusion of the results of the
Corporation's environmental services operations in the current period of
1997.
Results of Operations - Three Months Ended June 30, 1997
- --------------------------------------------------------
Revenues for the three months ended June 30, 1997 increased to $1.0 million
from $89,000 for the three months ended June 30, 1996, primarily as a result
of the inclusion of the results of the Corporation's environmental services
operations in the current period of 1997. Revenues from the sale of recycled
oil products were $0.9 million in the current period of 1997, compared to nil
in the comparative period of 1996. The Corporation recorded a loss on
securities of $0.1 million in the three months ended June 30, 1997, compared
to a gain on securities of $89,000 in the three months ended June 30, 1996.
Costs and expenses for the three months ended June 30, 1997 increased to $1.7
million from $0.2 million in the comparative period of 1996, primarily as a
result of the inclusion of the results of the Corporation's environmental
services operations in the current quarter of 1997. The cost of recycled oil
products was $1.0 million in the three months ended June 30, 1997, compared
to nil in the comparative period of 1996. Selling, general and administrative
expenses increased to $0.3 million in the current quarter of 1997 from $0.1
million in the comparative quarter of 1996.
Interest expense in the three months ended June 30, 1997 increased to $0.3
million from $68,000 in the same period of 1996, primarily as a result of
interest on the indebtedness of the Corporation's environmental services
operations.
For the three months ended June 30, 1997, the loss from continuing operations
was $0.5 million or $0.05 per share, compared to $0.1 million or $0.02 per
share for the three months ended June 30, 1996.
The Corporation recorded an operating loss from discontinued operations of
$48,000 and a gain on the sale of the Corporation's environmental remediation
services assets of $30,000 in the current quarter of 1997, net of minority
interest.
The Corporation had a net loss of $0.5 million or $0.05 per share in the
period ended June 30, 1997, compared to a net loss of $0.1 million or $0.02
per share in the period ended June 30, 1996,
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primarily as a result of the inclusion of the results of the Corporation's
environmental services operations in the current period of 1997.
Liquidity and Capital Resources
- -------------------------------
The Corporation had cash of $0.3 million at June 30, 1997, compared to $0.8
million at December 31, 1996. At June 30, 1997, the Corporation had $0.9
million held in escrow in respect of the Corporation's environmental services
operations, compared to $1.3 million at December 31, 1996.
The Corporation has a $4.0 million line of credit which was not utilized as
at June 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.
During the current period of 1997, Ichor established two new lines of credit,
one with a subsidiary of the Corporation's parent in the aggregate amount of
$0.5 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 the second
quarter of 1997.
Continuing operating activities used cash of $83,000 in the six months ended
June 30, 1997, compared to providing cash of $0.7 million in the comparative
period of 1996. An increase in accounts receivable used cash of $3.0 million
in the current period of 1997, compared to nil in the six months ended June
30, 1996. An increase in payables provided cash of $2.8 million in the
current period of 1997, compared to $37,000 in the comparative period of
1996. Net sales of trading securities provided cash of $0.6 million in the
period ended June 30, 1997, compared to nil in the period ended June 30,
1996.
Continuing financing activities used cash of $7,000 in the six months ended
June 30, 1997, compared to providing cash of $5.1 million in the comparative
period of 1996. Borrowing provided cash of $2.0 million in the current
period of 1997, compared to $0.2 million in the six months ended June 30,
1996. The Corporation used $1.8 million to repay debts in the six months
ended June 30, 1997, compared to $1.1 million in the same period of 1996. In
the six months ended June 30, 1996, the Corporation sold $6.0 million of its
preferred stock.
Continuing investing activities used cash of $0.3 million in the period ended
June 30, 1997, as a result of the purchase of property and equipment for the
Corporation's environmental services operations. Investing activities in the
six months ended June 30, 1996 consisted of net purchases of available-for-
sale securities of $5.9 million.
At June 30, 1997, the Corporation had $1.6 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.
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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 six months ended June 30, 1997, two notes which were previously in
default were refinanced by other lenders.
In the six months ended June 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 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 which resolved the action.
At June 30, 1997, overdue 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 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 June 30, 1997:
Year Ending Dollars
June 30, in Thousands
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1998 $ 1,427
1999 2,206
2000 373
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$ 4,006
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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.
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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-KSB for the
year ended December 31, 1996 for information concerning certain legal
proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Corporation held its annual meeting of shareholders on June 27, 1997. At
the meeting, Roland Waldvogel was elected a Class II director of the
Corporation for a three year term, as follows:
Broker
Votes For Votes Withheld Non-Votes Abstentions
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Roland Waldvogel 7,799,486 37,996 - -
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit
Number Description
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27 Article 5 - Financial Data Schedule for the 2nd Quarter 1997
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: August 12, 1997 LOGAN INTERNATIONAL CORP.
By: /s/ Michael J. Smith
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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 2nd Quarter 1997
Form 10-Q.