SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 1996
Commission file number 0-24852
ENERGY RESEARCH CORPORATION
(Exact name of registrant as specified in its charter)
New York 06-0853042
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification No.)
organization)
3 Great Pasture Road
Danbury, Connecticut 06813
(Address of principal (Zip code)
executive offices)
203-792-1640
(Registrant's telephone number including area code)
Indicate by check mark whether the registrant (1) has
filed all documents and 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.
X Yes No
Indicate the number of shares outstanding of each of
the issuer's classes of common stock, as of the latest
practicable date. The number of shares outstanding of
the Registrant's Common Stock, par value $.0001, as of
June 1, 1996 was 3,826,390.
<PAGE>
ENERGY RESEARCH CORPORATION
FORM 10-Q
INDEX
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PAGE NO.
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PART I - FINANCIAL INFORMATION
ITEM 1.
Unaudited Consolidated Condensed
Financial Statements:
Consolidated Condensed Balance Sheets
as of April 30, 1996 and October 31, 1995 2
Consolidated Condensed Statements of
Operations for the three months ended
April 30, 1996 and April 30, 1995 3
Consolidated Condensed Statements of
Operations for the six months ended
April 30, 1996 and April 30, 1995 4
Consolidated Condensed Statements of
Cash Flows for the six months ended
April 30, 1996 and April 30, 1995 5
Notes to Unaudited Consolidated Condensed
Financial Statements 6
Item 2.
Management's Discussion and Analysis
of Financial Condition and Results of
Operations 8
PART II - OTHER INFORMATION
Item 4.
Submission of matters to a Vote of Security
Holders 14
Item 6.
Exhibits and Reports on Form 8-K 15
Signatures 16
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<PAGE>
Part 1 - Financial Information
Item 1. Financial Statements
<TABLE>
ENERGY RESEARCH CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in thousands, except per share amounts)
(Unaudited)
<CAPTION>
April 30, Oct 31,
1996 1995
------- --------
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 6,040 $ 5,422
Marketable securities 3,854 3,900
Accounts receivable 2,703 3,203
Inventories 1,118 179
Deferred income taxes 215 215
Other current assets 345 87
------ ------
Total current assets 14,275 13,006
====== ======
Property, plant and equipment, net 6,703 7,263
Other assets, net 3,480 3,578
------ ------
Total Assets $24,458 $23,847
====== ======
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current Liabilities:
Current portion of long-term debt $ 3,448 $ 717
Accounts payable 2,259 2,383
Income taxes payable - 71
Accrued liabilities 1,544 1,524
Current portion of deferred license
fee income 270 95
------ ------
Total current liabilities 7,521 4,790
Long Term Liabilities:
Long-term debt 3,989 6,487
Capital lease obligation 17 25
Deferred license fee income 50 83
Deferred income taxes 214 224
------ ------
Total liabilities 11,791 11,609
------ ------
Shareholders' Equity:
Convertible preferred stock, Series
C ($.01 par value); 30,000 and 60,000
shares issued and outstanding at
April 30, 1996 and October 31, 1995,
respectively 600 1,200
------ ------
Common Shareholders' Equity:
Common stock,($.0001 par value);
8,000,000 shares authorized:
3,792,873 and 3,711,270 shares issued
and outstanding at April 30, 1996
and October 31, 1995, respectively - -
Additional paid-in capital 10,107 9,263
Retained earnings 1,960 1,775
------ ------
Total common shareholders' equity 12,067 11,038
------ ------
Total shareholders' equity 12,667 12,238
------ ------
Total Liabilities and Shareholders'
Equity $24,458 $23,847
====== ======
</TABLE>
See notes to consolidated condensed financial statements.
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<PAGE>
<TABLE>
ENERGY RESEARCH CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)
<CAPTION>
Three Months Ended
April 30,
1996 1995
==== ====
<S> <C> <C>
Revenues $ 7,840 $ 8,946
Costs and Expenses:
Cost of revenues 5,779 6,868
Administrative and selling expenses 1,155 1,095
Depreciation 511 472
Research and development 258 280
--------- ---------
7,703 8,715
--------- ---------
Income from operations 137 231
License fee income, net
(includes income from related parties
of $79 and $79 for the three
months ended April 30, 1996
and 1995, respectively) 89 89
Interest expense (150) (103)
Interest and other income, net 120 67
--------- ---------
Income before provision
for income taxes 196 284
Provision for income taxes 72 99
--------- ---------
Net income $ 124 $ 185
========= =========
Primary and fully diluted income
per common share $ .03 $ .05
========= =========
Weighted average common and common
equivalent shares outstanding 4,079,558 3,973,857
========= =========
</TABLE>
See notes to consolidated condensed financial statements.
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<PAGE>
<TABLE>
ENERGY RESEARCH CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)
<CAPTION>
Six Months Ended
April 30,
1996 1995
==== ====
<S> <C> <C>
Revenues $ 14,782 $ 18,788
Costs and Expenses:
Cost of revenues 10,899 14,719
Administrative and selling expenses 2,273 2,262
Depreciation 1,023 948
Research and development 424 511
--------- ---------
14,619 18,440
--------- ---------
Income from operations 163 348
License fee income, net
(includes income from related parties
of $158 and $158 for the six
months ended April 30, 1996
and 1995, respectively) 178 178
Interest expense (276) (198)
Interest and other income, net 225 88
--------- ---------
Income before provision
for income taxes 290 416
Provision for income taxes 105 137
--------- ---------
Net income $ 185 $ 279
========= =========
Primary and fully diluted income
per common share $ .05 $ .07
========= =========
Weighted average common and common
equivalent shares outstanding 4,034,540 3,970,916
========= =========
</TABLE>
See notes to consolidated condensed financial statements.
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<PAGE>
<TABLE>
ENERGY RESEARCH CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
FOR EACH OF THE SIX MONTHS ENDED APRIL 30,
(Dollars in thousands)
(Unaudited)
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Net cash flows from operating activities:
Net income $ 185 $ 279
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Bad debt (recovery) - (27)
Depreciation and amortization 1,197 1,170
Deferred income taxes (10) (10)
Conversion of accrued interest
to principal on long-term debt 55 59
(Gain) loss on disposal of property - 3
Realized loss on sale of
marketable securities - 64
Changes in operating assets and liabilities:
Accounts receivable 500 5,298
Inventories (939) (209)
Other current assets (258) (217)
Accounts payable (124) (1,289)
Accrued liabilities 20 1,663
Income taxes payable (71) 25
Deferred license fee income 142 175
Other - -
------- -------
Net cash provided by
operating activities 697 6,984
------- -------
Cash flows for investing activities:
Capital expenditures (463) (589)
Proceeds from sale of marketable securities - 2,341
Payments on other assets (32) (666)
Purchase of marketable securities - (29)
------- -------
Net cash provided by
(used in) investing activities (495) 1,057
------- -------
Cash flows from financing activities:
Repayments of long-term debt (388) (282)
Proceeds from long-term financing 776 709
Common stock issued 28 39
------- -------
Net cash provided by
financing activities 416 466
------- -------
Net increase in cash and
cash equivalents 618 8,507
Cash and cash equivalents,
beginning of period 5,422 2,038
------- -------
Cash and cash equivalents,
end of period $ 6,040 $10,545
======= =======
Supplemental disclosure of cash paid
during the period for:
Interest $215 $175
Income Taxes $356 $177
Noncash preferred stock conversion to
common stock $600 -
</TABLE>
See notes to consolidated condensed financial statements.
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<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ENERGY RESEARCH CORPORATION
NOTES TO UNAUDITED CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS
NOTE 1: BASIS OF PRESENTATION
The accompanying consolidated condensed financial
statements for Energy Research Corporation ("the
Registrant"), have been prepared in accordance with
generally accepted accounting principles for interim
financial information and with the instructions to Form
10-Q and Rule 10-01 of Regulation S-X. In the opinion of
management, all adjustments (consisting only of normal
recurring adjustments) necessary to present fairly the
financial position of the Company as of April 30, 1996
and the results of operations for the six months ended
April 30, 1996 and 1995 and cash flows for such six
month periods have been included.
Information included in the Consolidated Condensed
Balance Sheet as of October 31, 1995 has been derived
from audited financial statements included in the
Company's Annual Report on Form 10-KSB for the year
ended October 31, 1995, but does not include all
disclosures required by generally accepted accounting
principles.
The results of operations for the six months ended April
30, 1996 and 1995 are not necessarily indicative of the
results to be expected for the full year.
NOTE 2: COMMITMENTS/CONTINGENCIES
Following audits performed by the State of Connecticut
Department of Revenue Services ("DRS") for the period
from July 1, 1982 through December 31, 1992, the Company
has been assessed sales and use taxes of $800,000
together with penalties of $39,000 plus applicable
interest. The Company has filed a complaint against the
Commissioner of the DRS in the Connecticut Superior
Court, Judicial District of Hartford/New Britain at
Hartford, requesting that such assessments be set aside
on the basis that taxation of purchases of goods and
materials pursuant to contracts between the Company and
the U.S. Government is prohibited by the United States
Constitution. The Company and the DRS have agreed not to
pursue the action pending resolution of the case of
United Technologies Corporation v. Commissioner of
Revenue Services and Norden Systems, Inc. v.
Commissioner of Revenue Services (the "United Technology
Case") before the same Court. The United Technology
Case involves substantially similar facts and questions
of law as are being
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<PAGE>
disputed in the Company's pending action against the
DRS. On May 19, 1995, the Connecticut Superior Court,
Judicial District of Hartford/New Britain at Hartford
ruled in the United Technologies Case that use taxes
assessed by the DRS were owed by the plaintiffs
in that case, with the exception of certain engineering
services which the Court held were not taxable services
within the meaning of the State of Connecticut's sales
and use tax law. This decision has been appealed by the
plaintiffs to the Connecticut Appellate Court on June 7,
1995, with the further request that the appeal be heard
directly by the Connecticut Supreme Court. The
Company's action against the Commissioner of the DRS
will continue to remain pending subject to the final
decision in the United Technologies and Norden Systems
actions, after all appeals. Pursuant to a Stock Purchase
Agreement dated December 29, 1987, Fluor Corporation has
agreed to indemnify the Company for 100% of liabilities
through October 31, 1987 and 50% of any ultimate
liability for the period November 1, 1987 to October 31,
1989. The Company's maximum liability for taxes and
related penalties and interest if the DRS position is
sustained for periods through October 31, 1995 would be
approximately $499,000, on a pre-tax basis. However, it
is possible that these expenses could be recoverable
costs under the related government contracts.
Both the Company and Fluor Corporation intend to pursue
all legal remedies to effect a favorable resolution.
Management believes the resolution of this matter will
not have a material effect on the Company's results of
operations or financial position.
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<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
COMPARISON THREE MONTHS ENDED APRIL 30, 1996
AND APRIL 30, 1995
Revenues decreased 12% to $7,840,000 in the 1996 period
from $8,946,000 in the 1995 period. The decrease in
revenues was due primarily to the completion of the
manufacture of the fuel cell modules and the completion
of the construction of the balance-of-plant for the
commercial scale, two-megawatt direct fuel cell power
plant in Santa Clara, California. Testing of the
balance-of-plant was completed and the fuel cell power
plant began operating during the second quarter. The
expected decrease in revenues was partially offset by an
increase in billings under the Company's other
contracts. Revenues for the second half of the fiscal
year are expected to be similar to those realized in the
second half of fiscal year 1995.
Cost of revenues decreased 16% to $5,779,000 in the 1996
period from $6,868,000 in the 1995 period. The decrease
was due substantially to the decreased revenues
mentioned above.
Administrative and selling expenses increased 5% to
$1,155,000 in the 1996 period from $1,095,000 in the
1995 period, reflecting a slight increase in various
expenses. Depreciation increased 8% to $511,000 in the
1996 period from $472,000 in the 1995 period. The
increase was due primarily to the acquisition of
manufacturing equipment associated with the larger area
fuel cell stack design at the Company's manufacturing
facility. Research and development expense decreased 8%
to $258,000 in the 1996 period from $280,000 in the 1995
period. The decrease was due primarily to the
utilization of personnel on carbonate fuel cell and
battery contract activities.
Income from operations decreased 41% to $137,000 in the
1996 period from $231,000 in the 1995 period.
Approximately 46% of the decrease was due to lower cost
of money recovery associated with the lower revenues.
Cost of money is an imputed element of cost that is a
function of United States Treasury rates, certain assets
and various elements of cost. The remainder of the
decrease was due primarily to a reduction in activity
under a fee-bearing contract.
Interest expense increased 46% to $150,000 in the 1996
period from $103,000 in the 1995 period. The increase
was due primarily to the utilization of the credit
facility in the 1996 period. The Company did not use
the credit facility until late in the second period of
1995.
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<PAGE>
Interest and other income, net, increased 79% to
$120,000 in the 1996 period from $67,000 in the 1995
period. The increase was due primarily to increased
interest income. The interest income has increased due
to the availability of additional cash from working
capital resulting from a more favorable payment
procedure under the Company's cooperative agreements.
RESULTS OF OPERATIONS
COMPARISON SIX MONTHS ENDED APRIL 30, 1996
AND APRIL 30, 1995
Revenues decreased 21% to $14,782,000 in the 1996 period
from $18,788,000 the 1995 period. The decrease in
revenues was due primarily to the completion of the
manufacture of the fuel cell modules and the completion
of the construction of the commercial scale,
two-megawatt direct fuel cell power plant in Santa
Clara, California. Testing of the balance-of-plant was
completed and the fuel cell power plant began operating
late in the second quarter.
Cost of revenues decreased 26% to $10,899,000 in the
1996 period from $14,719,000 in the 1995 period. The
decrease was due primarily to the decreased revenues
mentioned above.
Administrative and selling expenses were relatively
unchanged at $2,273,000 in the 1996 period from
$2,262,000 in the 1995 period. Depreciation increased
8% to $1,023,000 in the 1996 period from $948,000 in the
1995 period. The increase was due primarily to the
acquisition of manufacturing equipment associated with
the larger area fuel cell stack design at the Company's
manufacturing facility. Research and development
expense decreased 17% to $424,000 in the 1996 period
from $511,000 in the 1995 period. The decrease was due
primarily to the utilization of personnel on carbonate
fuel cell and battery contract activities.
Income from operations decreased 53% to $163,000 in the
1996 period from $348,000 in the 1995 period. The
decrease was substantially associated with the decrease
in revenues mentioned above, including lower cost of
money recovery under the cooperative agreement to
manufacture the fuel cell modules. The remainder of the
decrease was due primarily to a reduction in activity
under a fee-bearing contract.
Interest expense increased 39% to $276,000 in the 1996
period from $198,000 in the 1995 period. The increase
was due primarily to the utilization of the credit
facility in the 1996 period. The Company did not use
the credit facility until late in the second period of
1995.
Interest and other income, net, increased 156% to
$225,000 in the 1996 period from $88,000 in the 1995
period. The increase was due primarily to increased
interest income. The interest income has increased due
to the availability of additional cash from working
capital resulting from a more favorable payment
procedure under the Company's cooperative agreements.
During the 1995 period a final charge against income was
taken due to the reduction in value of certain
investments.
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<PAGE>
As previously announced, the Company shut down the Santa
Clara demonstration power plant on May 9, 1996 due to
electrical anomalies that had occurred during the
plant's operation. Prior to the shut-down, the plant had
been operating well, exceeding the rated power
requirement of 1.8 MW by 7%, with low NOX output: 2PPM,
and fuel efficiency of 44%. The Company believes that
NOX and efficiency levels are substantially more
favorable than those for comparable sized conventional
electric power-generating plants. The Company believes
that it has identified the causes of the anomalies, has
begun the repair work and is replacing certain damaged
components. Based upon its initial assessment, the
Company believes that it will be able to restart the
plant in August. However, the restart of the plant
could be delayed if additional damage is discovered or
if there are delays in obtaining replacement components.
The allocation of costs for the repairs has not yet been
made and discussions with the appropriate project
sponsors are in progress. The Company is unable to
estimate at this time the impact, if any, that this
shut-down and the cost of repairs will have on second
- - -half earnings. However, the Company does not believe
that the impact will be material. The Company is making
available ongoing progress reports regarding the Santa
Clara project at the Company's World Wide Web site
(www.ercc.com) and by fax at 800-713-4370.
LIQUIDITY AND CAPITAL RESOURCES
Working capital at April 30, 1996 was $6,754,000,
including $6,040,000 of cash and cash equivalents and
$3,854,000 of short term investments, compared to
working capital of $8,216,000 at October 31, 1995,
including $5,422,000 of cash and cash equivalents and
$3,900,000 of short term investments. The Company also
has a $1,000,000 revolving loan facility from Fleet Bank
which expires on March 31, 1997, subject to annual
renewal at the discretion of Fleet Bank. At April 30,
1996, the Company had no balance outstanding under this
facility.
During the 1996 period, $697,000 of cash was provided by
the Company's operating activities. During that period,
accounts receivable decreased $500,000 and accounts
payable decreased $124,000 primarily due to decreased
revenues associated with the completion of the
manufacturing of the fuel cell modules for, and the
construction of, the Santa Clara power plant. Net cash
from operating activities also included the Company's
net income of $185,000 and an increase in accrued
liabilities of $20,000. These sources of cash were
partially offset by a $939,000 increase in inventory
primarily attributable to unbilled cost associated with
the fuel cell module manufacturing contract.
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<PAGE>
The Company's capital expenditures are incurred
primarily to support ongoing contracts and to replace
existing equipment. Capital expenditures for the 1996
period were $463,000. All of
these expenditures were financed from the
recovery of depreciation expense under cost-
reimbursement contracts and cooperative agreements.
During the 1995 period, the Company entered into a
$2,500,000 credit facility with MetLife Capital
Corporation, an affiliate of Metropolitan Life Insurance
Company. The credit facility bears interest at the 30-
day commercial paper rate plus 2.5 percent. The Company
had fully utilized the credit facility through the 1996
period to acquire machinery and equipment. The credit
facility provides for repayment over 36-50 months
commencing with the completion of the equipment
acquisition.
In fiscal year 1990, the Company borrowed $1,980,000
from MTU at a rate of 6% per annum. The payment of
principal and interest is deferred until November 30,
1996. The indebtedness, including deferred interest, as
of April 30, 1996 was $2,532,000. This loan is secured
by the pledge of FCMC stock and certain machinery,
equipment and leasehold improvements at the Torrington,
CT, facility. The accrued interest on the loan is
payable at the Company's option. The principal amount of
the loan may be converted at MTU's option, into the
Company's common stock at a conversion rate of $9 per
share prior to November 30, 1996. During December 1995,
MTU converted $216,000 of this loan into 24,000 shares
of common stock of the Company.
The Company obtains most of its funding for research and
development from cooperative agreements or contracts
with United States Government agencies. To continue to
obtain funding for these contracts, the Company must
continue to prove the benefits of its technologies and
be successful in its competitive bidding. Failure to
obtain these contracts could have an adverse effect upon
the Company. Because the Company receives a significant
portion of its revenues from contracts and cooperative
agreements with the Department of Energy and other
government agencies, future revenues and income of the
Company could be materially affected by changes in
procurement policies, a reduction in expenditures for
the services provided by the Company, and other risks
generally associated with government contracts. In
general, the Company's government contracts may be
terminated, in whole or in part, at the convenience of
the government. Recent proposals for 1997 U.S. deficit
reductions have included proposals to reduce the
Department of Energy (DOE) budgets. The Company cannot
predict whether any of these measures will be enacted,
or if enacted, whether funding of any of the Company's
existing contracts will be affected. Deficit reduction
measures could adversely affect the Company's existing
contract and its ability to obtain future government
contracts and grants. A reduction or delay in the
Company's government funding could have a material
adverse effect on the Company's ability to commercialize
its fuel cell technology.
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<PAGE>
Full 1996 funding was finally approved for the Company's
Cooperative Agreement with DOE under the 1996 budget
legislation. Additionally, Defense Advanced Research
Projects Agency funds in the amount of $6,500,000 have
been transferred to DOE for release by DOE to the
Company. So far neither of these funds have yet been
added to the Company's existing agreements but are
expected to be added in the third quarter of 1996.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995
The Company desires to provide the following information
under the new "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995 and is
including it in this Form 10-Q in order to do so. Many
of the following important factors discussed below have
been discussed in the Company's prior SEC filings and
readers are referred to those filings.
The Company wishes to caution readers that the following
important factors, among others, in some cases have
affected, and in the future could affect the Company's
actual consolidated results for the third quarter of
1996 and beyond, to differ materially from those
expressed in any forward looking statements made by, or
on behalf of, the Company.
- - - The absence of U.S. government appropriation
legislation for 1996 and beyond relative to funds for
the Company's projects, and/or recision or delays in
release of such funds by U.S. government administrative
agencies; the impact of deregulation initiatives on gas
and electric utilities decision to provide funds for
research, development and demonstration projects and/or
to provide funds for new equipment purchases; the impact
of perceived or real power surpluses on the decisions of
utilities to purchase new power generation equipment;
the ability and willingness of purchasers to substitute
other products or services for the Company's products or
services, the perceived absolute or relative overall
value of these products or services by the purchasers,
including the features, quality, and pricing compared to
other competitive products, the level of availability of
the Company's products and services and the ability and
willingness of purchasers to acquire newer or more
advanced models; the assessment of purchasers to derive
satisfactory after market parts and services from the
Company and/or its affiliates, if any.
- - - Underutilization of the Company's current or expanded
plants in the fuel cell and battery field resulting in
production inefficiencies and delays and reduced
recovery under cost-of-money provisions of certain
cooperative agreements and increases in depreciation
costs in connection with plant expansions.
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<PAGE>
- - - The amount, and rate of growth on the Company's
selling, general and administrative expenses, an
increase in non-allowable costs, including, but not
limited to, interest expenses, patent expenses on
certain government contracts and agreements, the
imposition of ceilings on general, administrative, bid
and proposal and internal research and development
expenses on certain government contracts or agreements;
the impact of unusual items resulting from the Company's
ongoing evaluation of its business strategies, asset
valuations, license valuations and organizational
structures.
- - - Additional or non-recoverable costs associated with
delays, repairs, overruns, warranties relating to the Santa Clara
Demonstration Project or commercial power plant
projects; additional or non-recoverable costs associated
with delays, overruns, warranties relating to nickel
zinc battery projects.
- - - Risks associated with the Santa Clara Demonstration
Project including technological or market acceptance
issues, performance failures, delivery schedule failures
for replacement stacks or parts, or other difficulties
by the Company, its subsidiaries or any subcontractors,
including the failure to restart the power plant or to
achieve satisfactory performance levels upon restarting
the power plant.
- - - Competition from mature conventional power plant
technologies, including but not limited to, diesel
engines, turbines, combined cycle power plants generally
available from large business corporations. Competition
from other fuel cell power plants such as proton
exchange membrane, phosphoric acid, solid oxide and
other molten carbonate types some of which are available
or being developed by much larger corporations.
- - - Competition from other battery technologies,
including, but not limited to lead acid, nickel cadmium,
nickel metal hydride, rechargeable lithium ion, and
rechargeable zinc-air, many of which are available from
large corporations.
- - - Difficulties in obtaining balance of plant components
on favorable terms, including but not limited to price,
delivery schedules, and quality for fuel cell power
plants; difficulties in obtaining raw materials,
supplies for fuel cell stacks and for nickel zinc
batteries.
- - - Difficulties or delays in the development of both
fuel cell and battery products, including, but not
limited to reducing cost, increasing endurance and life;
difficulties or delays in demonstration projects,
including, but not limited to failure to meet design
performance goals for fuel cells such as power output,
efficiency, life, and response time and for batteries
such as specific energy, specific power, and cycle life.
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Difficulties in production and marketing of products,
including, but not limited to, a failure to ship new
products and technologies when anticipated including
but not limited to, fuel cell power plants and nickel
zinc batteries; the failure of customers to accept these
products or technologies when planned.
- - - The acquisition of fixed or other assets, including
inventories; and the making of any expenditures or
incurring any expenses, including, but not limited to
depreciation, licenses, research and development
expenses; any re-valuation of assets or related
expenses.
- - - The effects and changes in trade policies, monetary
and fiscal policies, laws and regulations, other
activities of governments or lack thereof, activities of
regulators and state utilities commissions.
- - - The costs and other affects of legal and
administrative cases and proceedings (whether civil such
as environmental or product or criminal) settlements and
investigations, claims, developments or assertions by or
against the Company relating to intellectual property
rights and intellectual property licenses.
- - - The effects of changes within the Company's
organization or in compensation and benefit plans; loss
of key employees, the cessation of license agreements
wherein the Company is either licensee or licensor which
might deprive the Company of license or royalty income
or technology support.
PART II OTHER INFORMATION
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS
Energy Research Corporation's Annual shareholders'
Meeting was held on April 10, 1996.
The meeting involved an election of the following
directors to hold office until the next annual meeting
of shareholders and until a successor is elected and
qualified. All of the directors on the slate were
elected.
Bernard S. Baker Warren D. Bagatelle
Hansraj C. Maru Richard M.H. Thompson
Christopher R. Bentley Michael Bode
Thomas L. Kempner James D. Gerson
William A. Lawson
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<PAGE>
The following three items below were voted on at the
annual meeting:
ELECTION OF DIRECTORS
- - ---------------------
VOTES VOTES
NAME OF DIRECTOR FOR WITHHELD
- - ---------------- ----- --------
Bernard S. Baker 3,078,775 1,775
Hansraj C. Maru 3,078,775 1,775
Christopher R. Bentley 3,078,725 1,825
Thomas L. Kempner 3,078,475 2,075
William A. Lawson 3,078,775 1,775
Warren D. Bagatelle 3,078,775 1,775
Richard M.H. Thompson 3,078,685 1,865
Michael Bode 3,078,775 1,775
James D. Gerson 3,078,775 1,775
AMENDMENT OF 1988 STOCK OPTION PLAN
- - -----------------------------------
An amendment of the Company's 1988 Stock Option Plan was
presented at the meeting.
BROKER
VOTES FOR VOTES AGAINST ABSTAIN NON-VOTES
- - --------- ------------- ------- ---------
2,309,714 197,418 12,845 560,573
AMENDMENT OF SECTION 423 STOCK PURCHASE PLAN
- - --------------------------------------------
An amendment of the Company's Section 423 Stock
Purchase Plan was presented at the meeting.
BROKER
VOTES FOR VOTES AGAINST ABSTAIN NON-VOTES
- - --------- ------------- ------- ---------
3,047,916 8,507 10,245 13,882
Item 6 - Exhibits and Reports on Form 8
EXHIBIT INDEX
-------------
(a) EXHIBIT DESCRIPTION PAGE NO.
------------------- -------
EXHIBIT
No.
- - -------
10.41 Amendment No. 2 to the Energy Research 17
Corporation Section 423 Stock Purchase
Plan
10.42 Amendments to the Energy Research 18
Corporation 1988 Stock Option Plan
11 Computation of Earnings (Loss) Per 19
Share for the Three Months Ended
April 30, 1996 and 1995 and for the
Six Months Ended April 30, 1996 and
1995
(b) REPORTS ON FORM 8-K
-------------------
NONE
-15-
<PAGE>
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.
ENERGY RESEARCH CORPORATION
BY: /s/ Louis P. Barth
------------------
Louis P. Barth
Senior Vice President, CFO
Treasurer/Corporate Secretary
Dated: June 13, 1996
-16-
Exhibit No. 10.41
AMENDMENT NO. 2
TO
ENERGY RESEARCH CORPORATION
SECTION 423 STOCK PURCHASE PLAN
Energy Research Corporation, a New York corporation (the "Corporation"),
hereby adopts the following Amendment No. 2 to the Energy Research
Corporation Section 423 Stock Purchase Plan, effective as of April 10,
1996:
1. The Preamble Paragraph is amended by replacing the first
sentence with the following:
"The purpose of the Plan is to provide employees an
opportunity to purchase stock of Energy Research Corporation through
offerings to be made during the period commencing January 1, 1993 and
ending January 1, 2001."
Executed effective as of the date set forth above.
ENERGY RESEARCH CORPORATION
By: /s/ Louis P. Barth
---------------------
Name: Louis P. Barth
Title: Senior Vice President
Chief Financial Officer
Treasurer and Secretary
Exhibit No. 10.42
AMENDMENTS
TO
ENERGY RESEARCH CORPORATION
1988 STOCK OPTION PLAN
Energy Research Corporation, a New York corporation (the "Corporation"),
hereby adopts the following Amendment No. 1 to the Energy Research
Corporation 1988 Stock Option Plan, effective retroactively to the
Effective Date of the Plan:
1. Section 13 is amended by replacing the Section in its entirety
with the following:
"This Plan shall become effective on the Effective Date, and
options hereunder may be granted at any time on or after that date.
However, no option or Stock Appreciation Right may be exercised unless
this Plan is approved by a vote of the holders of a majority of the
Shares represented at a meeting of shareholders of the Company."
Energy Research Corporation, a New York corporation (the "Corporation"),
hereby adopts the following Amendment No. 2 to the Energy Research
Corporation 1988 Stock Option Plan, effective as of April 10, 1996:
1. Section 3 is amended by replacing the first sentence with the
following:
"The total number of Shares with respect to which options and
Stock Appreciation Rights may be granted under this Plan shall not
exceed in the aggregate 600,000 Shares."
Executed effective as of the dates set forth above.
ENERGY RESEARCH CORPORATION
By: /s/ Louis P. Barth
-------------------
Name: Louis P. Barth
Title: Senior Vice President
Chief Financial Officer
Treasurer and Secretary
<TABLE>
ENERGY RESEARCH CORPORATION
COMPUTATION OF INCOME (LOSS) PER COMMON SHARE
<CAPTION>
Three Months Six Months
Ended April 30, Ended April 30,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
PRIMARY
Shares outstanding,
beginning of period 3,758,573 3,711,270 3,728,914 3,699,683
Weighted average number of
shares issued, retired and
issuable share equivalents 320,985 262,587 305,626 271,233
--------- --------- --------- ---------
Weighted average number of
common and common equivalent
shares outstanding 4,079,558 3,973,857 4,034,540 3,970,916
========= ========= ========= =========
Net income $ 124,000 $ 185,000 $ 185,000 $ 279,000
========= ========= ========= =========
Net income per common share $ .03 $ .05 $ .05 $ .07
========= ========= ========= =========
FULLY DILUTED
Weighted average number of
common and common equivalent
sharesoutstanding as
adjusted for full dilution 4,275,558 4,193,857 4,230,540 4,190,916
Adjustment for interest,
net of tax, on convertible
long-term debt $ 19,000 $ 20,000 $ 38,000 $ 40,000
========= ========= ========= =========
Adjusted net income $ 143,000 $ 205,000 $ 223,000 $ 319,000
========= ========= ========= =========
Net income per
common share <F1> $ .03 $ .05 $ .05 $ .08
========= ========= ========= =========
<FN>
<F1> These calculations are submitted in accordance with SEC requirements,
although they are not in accordance with APB Opinion No. 15 because they are
anti-dilutive.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ENERGY
RESEARCH CORPORATION'S FORM 10-Q FOR THE QUARTERLY PERIOD ENDED APRIL 30,
1996 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> OCT-31-1996
<PERIOD-END> APR-30-1996
<CASH> 6040
<SECURITIES> 3854
<RECEIVABLES> 2703
<ALLOWANCES> 0
<INVENTORY> 1118
<CURRENT-ASSETS> 14275
<PP&E> 15766
<DEPRECIATION> 9063
<TOTAL-ASSETS> 24458
<CURRENT-LIABILITIES> 7521
<BONDS> 0
0
0
<COMMON> 12067
<OTHER-SE> 600
<TOTAL-LIABILITY-AND-EQUITY> 24458
<SALES> 14782
<TOTAL-REVENUES> 14782
<CGS> 10899
<TOTAL-COSTS> 14619
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (276)
<INCOME-PRETAX> 290
<INCOME-TAX> 105
<INCOME-CONTINUING> 185
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 185
<EPS-PRIMARY> .05
<EPS-DILUTED> .05
</TABLE>
