<PAGE>
CONSOLIDATED STATEMENTS OF
CASH FLOWS
________________________________________________________________________________
F A N T O M T E C H N O L O G I E S I N C.
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
March 31 (Unaudited) March 31 (Unaudited)
2000 1999 2000 1999
CASH PROVIDED BY (USED FOR):
<S> <C> <C> <C> <C>
Operations:
Net income $ 8,542,757 $ 10,854,080 $ 1,632,552 $ 3,985,901
Items not
requiring cash:
Depreciation 2,506,585 1,673,492 841,389 585,716
Deferred taxes 1,251,612 1,117,867 650,039 680,986
Amortization of deferred
development costs 261,964 -- 87,321 (51,049)
Change in non-cash
operating working
capital (14,766,810) (12,935,375) (11,132,872) (4,286,054)
Increase (decrease)
in currency hedging
exchange gains (3,114,347) 3,737,019 (489,156) 2,768,960
-------------------------------------------------------------------------------------------------------------------
(5,318,239) 4,447,083 (8,410,727) 3,684,460
Financing:
Payments on
capital leases (15,097) (194,102) (1,199) (55,837)
Issuance of common
shares and warrants 703,540 912,697 29,519 73,250
Increase in bank
loan payable 5,647,989 -- 5,647,989 --
Dividends paid (1,361,821) (810,502) (456,426) (540,409)
-------------------------------------------------------------------------------------------------------------------
4,974,611 (91,907) 5,219,883 (522,996)
Investments:
Additions to property,
plant and equipment (8,009,677) (8,179,045) (3,584,141) (3,131,692)
Additions to deferred
development costs (1,085,901) (784,781) (423,494) (29,941)
-------------------------------------------------------------------------------------------------------------------
(9,095,578) (8,963,826) (4,007,635) (3,161,633)
Decrease in cash
position (9,439,206) (4,608,650) (7,198,479) (169)
Cash position at
beginning of period 9,439,206 4,609,798 7,198,479 1,317
-------------------------------------------------------------------------------------------------------------------
Cash position
at end of period $ -- $ 1,148 $ -- $ 1,148
===================================================================================================================
</TABLE>
[LOGO]
WHAT MAKES US FANTOM?
DON'T FOLLOW WHERE THE PATH MAY LEAD.
GO WHERE THERE IS NO PATH AND LEAVE A TRAIL.
[LOGO] (R)
F A N T O M T E C H N O L O G I E S I N C.
Head office and Canadian manufacturing facility:
1110 Hansler Road, P.O. Box 1004
Welland, Ontario L3B 5S1
Voice: (905) 734-7476 Fax: (905) 734-9955
United States manufacturing facility:
102 Corporate Blvd., Carolina Center Business Park
West Columbia, South Carolina 29169
Voice: (803) 739-1151 Fax: (803) 939-0730
Toronto sales office:
Suite 414, 1 Eva Road, Toronto, Ontario M9C 4Z5
Voice: (416) 622-9740 Fax: (416) 626-0674
Toronto Stock Exchange: FTM NASDAQ: FTMTF
Website: www.fantom.com E-mail: [email protected]
Transfer Agent & Registrar:
CIBC Mellon Trust Company
320 Bay Street, P.O. Box 1, Toronto, Ontario M5H 4A1
FANTOM(R) is a trademark of Fantom Technologies Inc.
[GRAPHIC]
THIRD QUARTER
REPORT TO
SHAREHOLDERS
FOR THE NINE MONTHS
ENDED MARCH 31, 2000
[LOGO OF FANTOM(R)]
<PAGE>
TO OUR SHAREHOLDERS
________________________________________________________________________________
F A N T O M T E C H N O L O G I E S I N C.
For the three months ended March 31, 2000 (Q3 fiscal 2000), revenue was $57.4
million compared with $65.6 million for the year-earlier period. Net income
was $1.6 million or $0.18 per share (based on 9,099,181 shares outstanding)
compared with $4.0 million or $0.44 per share (based on 9,008,802 shares
outstanding) for the year-earlier period.
For the nine months ended March 31, 2000, revenue reached $175.3 million
compared with $180.7 million for the same period in the previous year. Net
income was $8.5 million or $0.94 per share (based on 9,080,971 shares
outstanding) compared with $10.9 million or $1.21 per share (based on
8,997,360 shares outstanding) for the year-earlier period.
On April 20, 2000 the Board of Directors declared a quarterly cash dividend of 5
cents per share payable on June 30, 2000 to shareholders of record at the
close of business on May 31, 2000.
The Company is experiencing more intensified competitive activity within the
bagless segment of the vacuum-cleaner market. Most competitors have now
introduced bagless systems. Despite the increasing competition, we were
successful in expanding distribution during the third quarter and our products
are presently featured across the United States at both Wal-Mart and Sam's
Club.
As our existing product line matures, we are preparing to introduce exciting new
appliances that incorporate leading-edge, proprietary technology. Our new
CALYPSO(TM) Microbiological Water Purifier is on track for launch this summer.
This is the first product resulting from the collaborative R & D efforts
between Fantom and Omachron Technologies, Inc. This innovative, counter-top
appliance utilizes activated oxygen, known as ozone, to kill micro-organisms.
This same process is used in more than 3,000 state-of-the-art municipal water-
treatment systems around the world. The CALYPSO(TM) appliance is receiving
accolades from both retailers and industry professionals.
Following the launch of the CALYPSO(TM) unit, we plan to introduce a major new
floor-care product in late fall designed to create a new market segment.
Several other new products are on the drawing boards.
On April 24, 2000 Fantom announced a breakthrough in power-control technology
arising from its R & D efforts with Omachron. This is a revolutionary new
physical concept and has profound implications for batteries and household
appliances. For instance, it can extend the output of batteries by as much as
40%, allow batteries to be recharged in minutes rather than hours, and
accurately determine the remaining capacity of batteries, something that is
problematic with many of the most modern batteries. It can also cut the
electricity use by many appliances by as much as 50%, by improving their
overall electromechanical efficiency.
The technology transfers energy between devices in the form of a specially-tuned
electronic signal, called a "pulse train," that is neither alternating nor
direct current. The pulse train can be delivered by means of a uniquely
programmed circuit board. Several patent applications have been filed covering
the scientific principles of the technology.
Fantom has acquired exclusive rights to the power-control technology for a wide
range of consumer products, and plans to offer licenses to allow the
technology to be used by other companies. Fantom will first apply the
technology to its new line of floor-care products planned for launch this
fall.
Since May 1998, sixty-nine utility patent applications have been filed for
technologies the Company is either acquiring or exclusively licensing through
its association with Omachron Technologies, Inc.
The foregoing information includes certain statements relating to the Company
which are forward-looking statements under Section 21E of the United States
Securities Exchange Act of 1934. The word "plan" and similar expressions, as
they relate to the Company or its management, are intended to identify
forward-looking statements. Such statements are based on assumptions made by,
and information available to, the Company. However, there are important
factors that could cause actual results to differ materially from those in
such forward-looking statements including, among others, the contingencies
arising from the uncertainties which are inherent in the development of new
technology and the unanticipated costs and time delays which often arise in
the process of developing new products based on innovative technology. The
Company does not intend, and assumes no obligation, to update the forward-
looking statements to reflect actual results, changes in assumptions or
changes in other factors affecting such statements.
On behalf of the Board,
/s/ Rikki Meggeson /s/ Allan Millman
Rikki Meggeson Allan D. Millman,
Chair of the Board President and Chief Executive Officer
May 11, 2000
CONSOLIDATED STATEMENTS OF
INCOME AND RETAINED EARNINGS
________________________________________________________________________________
F A N T O M T E C H N O L O G I E S I N C.
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
March 31 (Unaudited) March 31 (Unaudited)
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Sales $ 175,321,281 $ 180,748,331 $ 57,356,592 $ 65,628,821
Cost of goods sold 111,757,579 114,828,728 37,601,964 41,663,033
---------------------------------------------------------------------------------------------------------------------------------
63,563,702 65,919,603 19,754,628 23,965,788
Expenses:
Selling,
general and
administrative 49,060,564 47,371,735 17,005,093 17,084,328
Research and
development 1,044,552 1,634,875 108,249 637,315
Finance charges (96,171) (40,087) 55,940 25,244
---------------------------------------------------------------------------------------------------------------------------------
50,008,945 48,966,523 17,169,282 17,746,887
---------------------------------------------------------------------------------------------------------------------------------
Income before
income taxes 13,554,757 16,953,080 2,585,346 6,218,901
Income taxes 5,012,000 6,099,000 952,794 2,233,000
---------------------------------------------------------------------------------------------------------------------------------
Net income 8,542,757 10,854,080 1,632,552 3,985,901
Retained earnings
at beginning
of period 31,116,910 18,015,632 37,121,720 24,343,625
Dividends (1,361,821) (810,502) (456,426) (270,316)
Retained earnings
at end of period $ 38,297,846 $ 28,059,210 $ 38,297,846 $ 28,059,210
=================================================================================================================================
Net income
per share
- Basic* $ 0.94 $ 1.21 $ 0.18 $ 0.44
- Fully Diluted $ 0.90 $ 1.16 $ 0.18 $ 0.42
=================================================================================================================================
</TABLE>
* Basic net income per share has been calculated using the weighted average
number of common shares outstanding during the respective periods. For the
nine months ended March 31, these were 9,080,971 shares for 2000 and 8,997,360
shares for 1999. For the three months ended March 31, these were 9,099,181
shares for 2000 and 9,008,802 shares for 1999.
At April 30, 2000, there were 9,100,408 common shares and 665,200 common share
stock options outstanding. In addition, there is an outstanding warrant which
entitles the holder to purchase 20,000 common shares.
The company has a Shareholder Protection Rights Plan providing for the
issuance of rights to acquire common shares.
Certain comparative figures have been reclassified to conform with the
financial statement presentation adopted in the current year.
Financial information in this report is expressed in Canadian dollars, unless
otherwise noted.
CONSOLIDATED BALANCE SHEETS
--------------------------------------------------------------------------------
FANTOM TECHNOLOGIES INC.
2000
ASSETS
Current assets:
Cash and short term deposits $ --
Trade accounts receivable 43,752,418
Other receivables 2,816,519
Inventories 19,120,893
Prepaid expenses 3,495,305
Deferred income taxes 1,094,124
-------------------------------------------------------------------------------
70,279,259
Deferred development costs,
net amortization 2,886,114
Property, plant and equipment,
at cost 44,506,221
Less accumulated depreciation (9,992,990)
-------------------------------------------------------------------------------
34,513,231
-------------------------------------------------------------------------------
$ 107,678,604
===============================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Loan payable $ 5,647,989
Trade accounts payable 23,439,408
Other payables and accruals 5,052,385
Currency hedging exchange gains 2,879,274
Current portion of capital
lease obligations 6,759
-------------------------------------------------------------------------------
37,025,815
Currency hedging exchange gains --
Deferred income taxes 3,702,116
Shareholders' equity:
Share capital 28,652,827
Retained earnings 38,297,846
-------------------------------------------------------------------------------
66,950,673
-------------------------------------------------------------------------------
$ 107,678,604
===============================================================================
