<PAGE>
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: June 30, 2000
Commission file No. 0-23336
ELECTRIC FUEL CORPORATION
--------------------------------------------------------
Exact name of registrant as specified in its charter
Delaware 954302784
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
120 Wood Avenue South, Suite 300, Iselin, New Jersey 08830
(Address of principal executive offices) (Zip Code)
(732) 635-7100
--------------------------------------------------------
(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
-
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares outstanding of the issuer's common stock
as of June 30, 2000 was 20,144,066.
<PAGE>
ELECTRIC FUEL CORPORATION
INDEX
<TABLE>
<S> <C>
PART I - FINANCIAL INFORMATION:
Item 1 - INTERIM FINANCIAL STATEMENTS (Unaudited):
-------------------------------------------------
Consolidated Balance Sheets at June 30, 2000 and
December 31, 1999 3-4
Consolidated Statements of Operations for the Six Months
Ended June 30, 2000 and 1999 5
Consolidated Statements of Changes in Stockholders' Equity
for the Six Months Ended June 30, 2000 6
Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 2000 and 1999 7-8
Notes to the Consolidated Financial Statements 9
Item 2 - Management's Discussion and Analysis of Financial
----------------------------------------------------------
Condition and Results of Operations 10-15
-----------------------------------
Item 3 - Quantitative and Qualitative Disclosures About Market
--------------------------------------------------------------
Risk 16
----
PART II - OTHER INFORMATION:
Item 2 - Change in Securities 17
-----------------------------
Item 6 - Exhibits and Reports on Form 8-K 17
-----------------------------------------
SIGNATURES 18
</TABLE>
Page 2
<PAGE>
ELECTRIC FUEL CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
==========================================================================================================================
June 30, December 31,
2000 1999
------------ ----------------
ASSETS (Unaudited) (Audited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $13,448,533 $ 2,555,645
Marketable debt securities
Accounts receivable:
Trade 645,448 498,077
Other 2,358,981 950,390
------------ -----------
Inventories 1,651,724 1,045,480
------------ -----------
Total current assets 18,104,686 5,049,592
NOTES RECEIVABLE FROM STOCKHOLDERS 753,777
------------ -----------
FIXED ASSETS:
Cost 8,334,931 7,676,698
Less - accumulated depreciation and amortization 3,709,399 3,510,929
------------ -----------
4,625,532 4,165,769
------------ -----------
Severance Pay Fund 923,037 813,535
------------ -----------
$24,407,032 $10,028,896
============ ===========
</TABLE>
The accompanying notes are an integral part of the Financial Statements.
Page 3
<PAGE>
ELECTRIC FUEL CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
===================================================================================================================
June 30, December 31,
2000 1999
------------- ------------------
(Unaudited) (Audited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS EQUITY
CURRENT LIABILITIES
Accounts payable and accruals
Trade $ 1,971,827 $ 2,026,175
Other 2,058,900 1,400,763
-------------- --------------
Total current liabilities 4,030,727 3,426,938
LIABILITY FOR EMPLOYEE RIGHTS UPON RETIREMENT 2,534,232 2,359,599
-------------- --------------
Total Liabilities 6,564,959 5,786,537
-------------- --------------
STOCKHOLDERS' EQUITY:
Common stock -- $0.01 par value; authorized -- 28,000,000 shares; issued
- 15,728,387 shares and 20,149,399 shares as of December 31, 1999 and
June 30, 2000 respectively: outstanding - 15,723,054 shares and
20,144,066 shares as of December 31, 1999 and June 30, 2000
respectively. 201,494 * 157,284
Preferred stock - $0.01 par value; authorized - 1,000,000 shares, no
shares outstanding
Additional paid-in capital 78,983,805 * 58,678,015
Accumulated deficit (56,802,956) (51,468,715)
Treasury stock, at cost (common stock - 5,333 shares) (37,731) * (37,731)
Notes receivable from stockholders (4,502,539) (3,086,494)
-------------- --------------
Total Stockholders' Equity 17,842,073 4,242,359
============== ==============
$ 24,407,032 $ 10,028,896
============== ==============
===================================================================================================================
* Reclassified
</TABLE>
The accompanying notes are an integral part of the Financial Statements.
Page 4
<PAGE>
ELECTRIC FUEL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
====================================================================================================================================
Six months ended June 30, Three months ended June 30,
----------------------------------- --------------------------------
2000 1999 2000 1999
--------- -------- --------- ----------
<S> <C> <C> <C> <C>
REVENUES $ 1,285,487 $ 1,120,149 $ 632,541 $ 572,177
----------- ----------- ----------- -----------
RESEARCH AND DEVELOPMENT
EXPENSES AND COST OF REVENUES 3,953,252 3,719,237 1,863,031 1,583,187
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 2,803,860 1,530,089 1,771,948 655,761
----------- ----------- ----------- -----------
6,757,112 5,249,326 3,634,979 2,238,948
----------- ----------- ----------- -----------
OPERATING LOSS (5,471,625) (4,129,177) (3,002,438) (1,666,771)
FINANCIAL INCOME (EXPENSES), NET 137,384 122,725 141,944 46,952
----------- ----------- ----------- -----------
LOSS BEFORE TAXES ON INCOME (5,334,241) (4,006,452) (2,860,494) (1,619,819)
TAXES ON INCOME 6,017 (2,250)
----------- ----------- ----------- -----------
LOSS FOR THE PERIOD $(5,334,241) $(4,012,469) $(2,860,494) $(1,617,569)
=========== =========== =========== ===========
LOSS PER SHARE $ (0.3) $ (0.29) $ (0.15) $ (0.12)
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING 18,048,108 14,048,054 18,935,208 14,048,054
=========== =========== =========== ===========
===================================================================================================================================
</TABLE>
The accompanying notes are an integral part of the Financial Statements.
Page 5
<PAGE>
ELECTRIC FUEL CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
====================================================================================================================================
Common Stock
---------------
Additional paid-in Accumulated Treasury
Shares Amount capital deficit stock
--------- --------- ------------------ ------------- ----------
<S> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 2000 - AUDITED * 15,728,387 * $157,284 * $58,678,015 $(51,468,715) * $(37,731)
CHANGES DURING THE SIX MONTH
PERIOD ENDED JUNE 30, 2000:
Accrued Interest on notes receivable from
stockholders
Issuance of shares, net 4,421,012 $ 44,210 $20,305,790
Loss $ (5,334,241)
------------ --------- -------------- ------------ ---------
BALANCE AT
JUNE 30, 2000 - UNAUDITED 20,149,399 $201,494 $78,983,805 $(56,802,956) $(37,731)
============ ========= ============== ============ =========
<CAPTION>
Notes receivable
from shareholders Total
-------------------- -------
<S> <C> <C>
BALANCE AT JANUARY 1, 2000 - AUDITED $ (3,086,494) $ 4,242,359
CHANGES DURING THE SIX MONTH
PERIOD ENDED JUNE 30, 2000:
Accrued Interest on notes receivable from
stockholders $ (48,916) $ (48,916)
Issuance of shares, net $ (1,367,129) $18,982,871
Loss $(5,334,241)
--------------- -----------
BALANCE AT
JUNE 30, 2000 - UNAUDITED $ (4,502,539) $17,842,073
=============== ===========
====================================================================================================================================
* Reclassified
</TABLE>
The accompanying notes are an integral part of the Financial Statements.
Page 6
<PAGE>
ELECTRIC FUEL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
<TABLE>
<CAPTION>
==============================================================================================================================
Six months ended June 30,
------------------------------------------
2000 1999
--------------- -----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Loss for the period $(5,334,241) $(4,012,469)
=========== ===========
Adjustments required to reconcile loss to net cash used in operating activities:
Depreciation and amortization 285,053 440,337
Expenses due to options granted to suppliers 107,000
Interest accrued on notes from stockholders (69,634) (19,586)
Liability for employee rights upon retirement, net 65,131 (233,528)
Loss on sale of marketable securities 1,943
Changes in operating asset and liability items:
(Increase) Decrease in accounts receivable (1,030,962) 74,314
Increase in inventories (606,244) (104,445)
Increase in accounts payable and accruals 603,789 358,157
Decrease in advances from customers (125,736)
----------- -----------
Net cash used in operating activities (5,980,109) (3,621,013)
=========== ===========
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets (744,816) (1,059,346)
Loans granted to shareholders (733,059)
Sale of marketable debt securities, net 3,700,575
----------- -----------
Net cash (used in) provided by investing activities (1,477,875) 2,641,229
=========== ===========
----------- -----------
FORWARD $(7,457,983) $ (979,784)
=========== ===========
</TABLE>
The accompanying notes are an integral part of the Financial Statements.
Page 7
<PAGE>
ELECTRIC FUEL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
<TABLE>
<CAPTION>
===============================================================================================================================
Six months ended June 30,
-------------------------------------------
2000 1999
--------------- ---------------
<S> <C> <C>
FORWARD $(7,457,983) $ (979,784)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of share capital, net 13,062,500
Proceeds from exercise of options and warrants $ 5,288,372
----------- -----------
Net cash provided by financing activities 18,350,872
----------- -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 10,892,888 (979,784)
BALANCE OF CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 2,555,645 5,242,555
----------- -----------
BALANCE OF CASH AND CASH EQUIVALENTS AT END OF PERIOD $13,448,533 $ 4,262,771
=========== ===========
SUPPLEMENTARY INFORMATION ON ACTIVITIES NOT
INVOLVING CASH FLOW :
Issuance of share capital (including additional paid-in capital)
upon notes receivable $ 3,698,575
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION - CASH (PAID) RECEIVED DURING THE PERIOD FOR:
Interest $ 178,924 $ (3,760)
=========== ===========
Advances to income tax authorities $ (25,300) $ (17,702)
=========== ===========
</TABLE>
================================================================================
The accompanying notes are an integral part of the Financial Statements.
Page 8
<PAGE>
ELECTRIC FUEL CORPORATION
NOTE TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
GENERAL
The interim financial statements of Electric Fuel Corporation ("the
Company") reflect all adjustments, consisting only of normal recurring accruals,
which are, in the opinion of the Company's management, necessary for a fair
statement of results for the periods presented. Operating revenue and expenses
for any interim period are not necessarily indicative of results for a full
year.
For the purpose of these interim financial statements, certain information
and disclosures normally included in financial statements have been condensed or
omitted. These unaudited statements should be read in conjunction with the
Company's audited financial statements and notes thereto for the year ended
December 31, 1999.
Page 9
<PAGE>
ELECTRIC FUEL CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the financial statements and notes thereto appearing elsewhere in this Quarterly
Report. Amounts reported here have been rounded to the nearest thousand, unless
such amounts are more than 1.0 million, in which event such amounts have been
rounded to the nearest hundred thousand.
General
During 2000, the Company accelerated its efforts on the development and the
commercialization of its disposable ZincAir batteries for cellular phones. These
batteries use the proprietary high-rate primary zinc-air technology developed by
the Company in the last three years for portable electronic devices.
During the quarter, the Company added several more regional aftermarket
retailers such as Car Toys (with 30 outlets in the U.S. northwest), Triton PCS,
an AT&T wireless affiliate with over 50 retail outlets principally in the
southwestern U.S. and most recently the first national chain, CompUSA, with over
200 locations throughout the U.S. Additionally, the Company opened a sales and
marketing subsidiary in the United Kingdom to serve the over 24,000,000 mobile
phone customers in that market.
The Company's line of existing products includes batteries for Nokia
5100/6100/7100 phones, Motorola MicroTAC phones, an auxiliary battery for the
Motorola StarTAC and batteries for the Ericsson 600/800/1000.
On June 28, 2000 the Company announced that it had started production with
its new automated cell production line. When fully operational it is projected
that the Company's production equipment will be capable of providing sufficient
zinc-air cells to produce approximately 500,000 batteries per month.
During 2000, the Company continued to invest in strengthening its
intellectual property position. The Company has more than 30 patents issued
covering general aspects and various applications of its ZincAir technology.
The Company also filed a significant number of new applications focusing
specifically on ZincAir batteries for consumer electronic devices and
cellphones.
The Company continues to develop other applications for its disposable
ZincAir batteries, including devices for the telecommunications, hand handled
computers and defense markets.
The Safety Products Division of the Company is continuing with the
introduction of the new emergency lights for the marine life jackets market, and
sales are gradually growing. Sales of emergency lights for the aviation market
are stable with a potential for an increase, assuming contracts currently under
negotiation materialize.
Page 10
<PAGE>
ELECTRIC FUEL CORPORATION
The Electric Vehicle Division is continuing its American all-electric
transit bus development project in Nevada, supported by the Federal Transit
Administration ("FTA") and the Israel-US Binational Industrial Research and
Development (BIRD) Foundation. On July 12, 2000 the Company announced that it
has successfully completed the first actual driving tests of its all-battery
electric bus. This event successfully completed phase I of the FTA program. The
Company is now negotiating the next phase of the program.
The Company has experienced significant fluctuations in the sources and
amounts of its revenues and expenses, and the Company believes that the
following comparisons of results of operations for the periods presented do not
provide a meaningful indication of the development of the Company. During these
periods, the Company has received periodic lump-sum payments relating to
licensing and other revenue relating to specific projects and sales. These
payments have been based on the achievement of certain milestones, rather than
ratably over time. The Company's expenses primarily have been based upon meeting
contractual requirements under its agreements as well as meeting specific
technology development, production and commercial milestones, therefore, have
also varied according to the timing of activities, such as the need to provide
prototype products and to establish and engineer production processes and
equipment. The Company's research and development expenses have been offset, to
a limited extent, by the periodic receipt of research grants from the Israeli
Chief Scientist and Bird Foundation. The Company expects that, because of these
and other factors, including general economic conditions and delays due to
legislation and regulatory and other processes and the development of competing
technologies, future results of operations may not be meaningfully compared with
those of current and prior periods. Thus, the Company believes that period-to-
period comparisons with its past results of operations should not be relied upon
as indications of future performance.
The Company incurred significant operating losses for the years ended
December 31, 1999, 1998 and 1997 and the first half of 2000. While the Company
expects to continue to derive revenues from the sale of batteries for portable
electronic devices, components of the Electric Fuel Electric Vehicle System,
including refueling and Electric Fuel services and defense and safety products
manufactured by the Company, as well as from licensing rights to the Electric
Fuel technology to third parties, there can be no assurance that the Company
will ever derive significant revenues or achieve profitability.
Functional Currency
The Company's management considers the United States dollar to be the
currency of the primary economic environment in which the Company's Israeli
subsidiary, Electric Fuel (E.F.L) Limited ("EFL") operates. EFL has therefore
adopted and is using the United States dollar as its functional currency.
Further, the Company believes that the operations of EFL's subsidiaries are an
integral part of the Israeli operations. Transactions and balances originally
denominated in U.S. dollars are presented at the original amounts. Gains and
losses arising from non-dollar transactions and balances are included in net
income.
Page 11
<PAGE>
ELECTRIC FUEL CORPORATION
Forward-Looking Statements
When used in this discussion, the words "believes," "anticipated," "expect"
and similar expressions are intended to identify forward-looking statements.
Such statements are subject to certain risks and uncertainties which could cause
actual results to differ materially from those projected. See "Important
Factors Regarding Forward-Looking Statements" attached as Exhibit 99 to the
Company's Annual Report for the year ended December 31, 1999 on Form 10-K and
incorporated herein by reference. Readers are cautioned not to place undue
reliance on these forward-looking statements which speak only as of the date
hereof. The Company undertakes no obligation to publicly release the result of
any revisions to these forward-looking statements which may be made to reflect
events or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
Results of Operations
Three months ended June 30, 2000, compared to the three months ended June 30,
1999.
Revenues. Revenues for the second quarter of 2000 totaled $633,000 compared
with $572,000 in the comparable period in 1999, an increase of $61,000.
During the second quarter of 2000, revenues were $254,000 for the Defense
and Safety division (compared to $329,000 in 1999), $232,000 for the Electric
Vehicle division (compared to $219,000 for 1999) and $139,000 for the Consumer
Battery division (compared to $13,000 in 1999).
Research and development expenses and cost of revenues. Research and
development expenses and cost of revenues less royalty bearing grants for the
second quarter of 2000 were $1.9 million compared with $1.6 million for the
second quarter of 1999. The Company believes that, given the Company's stage of
development, it is not, at this time, meaningful to distinguish between R&D
expenses and cost of revenues.
The increase in expenses of $0.3 million from the second quarter of 1999 is
principally attributable to the Company's increased costs associated with
Consumer Battery development and the production of increased quantities of
Survivor Locator Lights in the Defense and Safety Division in the second quarter
of 2000. R&D expenses and cost of operations related to Consumer Battery and
Defense and Safety applications are expected to continue to increase for 2000,
as the Company intensifies its efforts in these areas.
The Company's 2000 grant applications have been approved by the Research
Committee of the Office of the Chief Scientist of the Ministry of Industry and
Trade. As a result, royalty-bearing grants of up to $570,000 will be available
to the company during 2000 to offset R&D expenses. $187,000 of these royalty-
bearing grants were recognized in the second quarter of 2000 ($545,000 in 1999).
Also, $47,000 of royalty bearing grants from the BIRD Foundation were recognized
in the second quarter of 2000 ($37,000 in 1999).
Direct expenses for segments for the second quarter were $294,000 ($363,000
in 1999), $314,000 ($780,000 in 1999), and $1,812,000 ($429,000 in 1999) in the
Defense and Safety, Electric Vehicle and Consumer Battery segments respectively.
Page 12
<PAGE>
ELECTRIC FUEL CORPORATION
Selling, general and administrative expenses. Selling, general and
administrative expenses for the second quarter of 2000 were $1,772,000 compared
with $656,000 in the second quarter of 1999. The Company expects further
increases in selling, general and administrative expenses, particularly with
respect to marketing expenses, as the Company markets its products to the
consumers and expands the applications for its technology.
In the second quarter the Company opened a sales office in London to
penetrate the UK market of 24,000,000 cellphone subscribers. On June 6, 2000,
the Company announced that Carphone Warehouse, the largest independent mobile
communications retailer in Europe, will begin selling its batteries through its
network of retail stores. Sales of products from Car Phone Warehouse started
late July 2000. In the US, the Company added Cartoys and Triton PCS to its
customers. To support the expanding customer base of the Company, the Company
program to develop a marketing, advertisement and public relations campaign to
accelerate consumer awareness.
Financial income. Financial income, net of interest expenses and exchange
differentials, totaled approximately $142,000 in the second quarter of 2000
compared to $47,000 financial income in the same quarter in 1999 due primarily
to higher balances of invested funds.
Net losses. Due to the factors cited above, the Company reported a net loss
of $2.9 million in the second quarter of 2000 compared with a net loss of $1.6
million in the second quarter of 1999.
Six months ended June 30, 2000, compared to the six months ended June 30, 1999.
Revenues. Revenues for the first six months of 2000 totaled $1,285,000
compared with $1,120,000 in the comparable period in 1999, an increase of
$165,000. During the first six months 2000, the Company recognized revenues from
the sale of Survivor Locator Lights, sale of consumer batteries and from
electric vehicle program.
During the first six months 2000, revenues were $540,000 for the Defense
and Safety division (compared to $585,000 in 1999), $232,000 for the Electric
Vehicle division (compared to $506,000 for 1999) and $503,000 for the Consumer
Battery division (compared to $13,000 in 1999).
Research and development expenses and cost of revenues. Research and
development expenses and cost of revenues less royalty bearing grants for the
first six months of 2000 were $4.0 million compared with $3.7 million for the
first six months of 1999. The Company believes that, given the Company's stage
of development, it is not, at this time, meaningful to distinguish between R&D
expenses and cost of revenues.
The increase in expenses of $0.3 million from the first six months of 1999
is principally attributable to the Company's increased costs associated with
Consumer Battery development and the production of increased quantities of
Survivor Locator Lights in the Defense and Safety Division in the first six
months of 2000. R&D expenses and cost of
Page 13
<PAGE>
ELECTRIC FUEL CORPORATION
operations related to Consumer Battery and Defense and Safety applications are
expected to continue to increase for 2000, as the Company intensifies its
efforts in these areas.
The Company's 2000 grant applications have been approved by the Research
Committee of the Office of the Chief Scientist of the Ministry of Industry and
Trade and royalty bearing grants have therefore been recognized in the first six
months of 2000 in the amount of $187,000. During the first six months of 1999,
royalty bearing grants in the amount of $545,000 were recognized.
Direct expenses for segments for the first six months of the year were
$506,000 (1999: $720,000), $459,000 million (1999: $1.4 million), and $3.7
million (1999: $1.8 million) in the Defense and Safety, Electric Vehicle and
Consumer Battery segments respectively.
Selling, general and administrative expenses. Selling, general and
administrative expenses for the first six months of 2000 were $2.8 million
compared with $1.5 million in the first six months of 1999. The Company expects
further increases in selling, general and administrative expenses, particularly
with respect to marketing expenses, as the Company markets its products to the
consumers and expands the applications for its technology.
Financial income. Financial income, net of interest expenses and exchange
differentials, totaled approximately $137,000 in the first six months of 2000
compared to $123,000 financial income in the first six months of 1999.
Net losses. Due to the factors cited above, the Company reported a net loss
of $5.3 million in the first six months of 2000 compared with a net loss of
$4.0 million in the first six months of 1999.
Liquidity and Capital Resources
As of June 30, 2000, the Company had cash and cash equivalents of
approximately $13.4 million compared with $2.6 million as of December 31, 1999.
The Company used available funds in the first six months of 2000 primarily
for continued research and development expenditures, and other working capital
needs. The Company increased its investment in fixed assets by $342,000,
primarily in the consumer battery division, during the quarter ended June 30,
2000.
On May 17, 2000, the Company entered into an agreement (the "Purchase
Agreement") with Koor Industries Ltd. ("Koor") pursuant to which Koor agreed to
purchase 1 million shares of the Company's common stock at $10 per share, for a
total cash investment of $10 million. Upon the completion of this investment by
Koor, also on May 17, 2000, the Company and Koor agreed, pursuant to a
Termination and Release Agreement dated as of that date, that the agreements
previously jointly announced on March 15, 2000 would be canceled and that the
Company would not proceed with the previously announced investment by Koor or
acquisition of Koor's subsidiary Tadiran Batteries Ltd.
Pursuant to the terms of the Purchase Agreement, if, within six months
after the making of the investment, the Company sell shares of our common stock
or securities
Page 14
<PAGE>
ELECTRIC FUEL CORPORATION
convertible into the Company's common stock (other than to the Company's
employees or consultants pursuant to the Company's stock option plans) at a
price below $10 per share, the Company will issue to Koor additional shares such
that the total number of shares issued to Koor multiplied by the lower stock
price equals $10 million. In addition, with respect to any portion of the shares
still held by Koor at the end of the six-month period following the investment,
if the Company's stock is at that time trading below $10 per share, the Company
will adjust the number of shares held by Koor in a similar manner based on the
average trading price over the preceding 30 days, but not to any price lower
than $6.75 per share.
EFL presently has a line of credit ("the Credit Facility") with the First
International Bank of Israel Ltd. ("FIBI"). Borrowings under the Credit
Facility bear interest at FIBI's prime rate + 2% per annum, are unconditionally
guaranteed by the Company and are secured by a pledge of foreign currency
deposits in the amount of NIS 3.8 million (approximately $930,000).
Additionally, the Credit Facility imposes financial and other covenants on EFC
and EFL. The agreement establishing the Credit Facility expired on January 20,
2000, and the Company is currently negotiating the renewal by FIBI. The Credit
Facility provides EFL with a line of credit in the maximum principal amount of
NIS 3.8 million (approximately $930,000), which can be used as credit support
for various obligations of EFL. The Company has an additional credit line of up
to $750,000 guaranteed by the Company's receivables (up to 75% of the
receivables total amount as determined from time to time). As of June 30, 2000,
FIBI had issued letters of credit and bank guarantees totaling approximately
$214,000. The increase in accounts receivable was primarily due to increase in
prepaid expenses and receivables from government institutions.
The Company has no long-term debt outstanding, and is using its cash
reserves and revenues from operations primarily to continue development of
batteries for consumer electronic devices, as well as to participate in the BIRD
and FTA Electric Vehicle programs. Furthermore, the Company established in the
second quarter of 2000 a commercial production line and is preparing for market
penetration of its new Zinc-Air batteries for several models of cellular
telephones.
The Company believes that its present cash position and cash flows from
operations will be sufficient to satisfy the Company's estimated cash
requirements for at least 12 months. The Company might seek additional funding
in order to accelerate its future plans.
Page 15
<PAGE>
ELECTRIC FUEL CORPORATION
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company is exposed to the impact of interest rate changes and foreign
currency fluctuations due to its international sales, production and funding
requirements.
The Company's research, development and production activities are primarily
carried out EFL, at its facility in Beit Shemesh, and accordingly the Company
has sales and expenses in new Israeli shekels. However, the majority of the
Company's sales are made outside Israel in U.S dollars, and a substantial
portion of the Company's costs are incurred in U.S. dollars. Therefore, the
Company's functional currency is the U.S. dollar.
Although the Company has a line of credit that may be affected by interest
rate changes, given the Company's level of borrowing, the Company does not
believe the market risk from interest rate changes is material.
Page 16
<PAGE>
ELECTRIC FUEL CORPORATION
PART II
ITEM 2. CHANGES IN SECURITIES.
In June 2000, the Company issued 35,000 shares of the company's common stock to
Ceba Ltd. in consideration of certain marketing services to be provided by Ceba
Ltd. in the United Kingdom. The shares were not registered under the Securities
Act of 1933, as amended (the "Act"), and were issued in reliance on the
exemption from registration provided by section 4(2) of the Act as transaction
by an issuer not involving a public offering. The shares were subsequently
registered for resale pursuant to a Registration Statement on Form S-3, which
was declared effective by the Securities and Exchange Commission on June 27,
2000.
ITEM 6.
(a) Exhibits filed herewith:
Exhibit 27 - Financial Data Schedule
(b) The following report on Form 8-K was filed during the second quarter of
2000:
Date Item Reported
May 23, 2000 Investment in the Company by Koor
Industries Ltd.
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ELECTRIC FUEL CORPORATION
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.
ELECTRIC FUEL CORPORATION
(Registrant)
By: /s/ Robert S. Ehrlich
--------------------
Name: Robert S. Ehrlich
Title: Chairman of the Board and
Chief Financial Officer
Dated: August 8, 2000
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