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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 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 September
30, 2000 was 20,294,035.
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<PAGE>
INDEX
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION:
Item 1 - INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited):
<S> <C>
Consolidated Balance Sheets at September 30, 2000 and December 31, 1999............. 3-4
Consolidated Statements of Operations for the Nine Months Ended September 30, 2000 5
and 1999, and the Three Months Ended September 30, 2000 and 1999...................
Consolidated Statements of Changes in Stockholders' Equity during the Nine Month 6
Period Ended September 30, 2000....................................................
Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2000 7-8
and 1999...........................................................................
Notes to the Interim Consolidated Financial Statements.............................. 9
Item 2 - Management's Discussion and Analysis of Financial Condition and Results of 10-15
Operations.........................................................................
Item 3 - Quantitative and Qualitative Disclosures About Market Risk................. 16
PART II - OTHER INFORMATION:
Item 2 - Change in Securities....................................................... 17
SIGNATURES.......................................................................... 18
</TABLE>
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ELECTRIC FUEL CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------ ------------
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 10,257,476 $ 2,555,645
Trade receivables 698,915 498,077
Other receivables 2,076,626 950,390
Inventories 2,579,489 1,045,480
------------ ------------
TOTAL CURRENT ASSETS 15,612,505 5,049,592
NOTES RECEIVABLE FROM STOCKHOLDERS 943,342
------------ ------------
SEVERANCE PAY FUND 960,578 813,535
------------ ------------
FIXED ASSETS:
Cost 9,082,621 7,676,698
Less - accumulated depreciation and
amortization 3,951,924 3,510,929
------------ ------------
5,130,698 4,165,769
------------ ------------
$ 22,647,123 $ 10,028,896
============ ============
</TABLE>
The accompanying notes are an integral part of the Financial Statements.
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ELECTRIC FUEL CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------ ------------
(Unaudited) (Audited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade payables $ 2,222,386 $ 2,026,175
Other payables 1,694,046 1,400,763
------------ ------------
TOTAL CURRENT LIABILITIES 3,916,431 3,426,938
LIABILITY FOR EMPLOYEE RIGHTS UPON
RETIREMENT 2,608,926 2,359,599
------------ ------------
TOTAL LIABILITIES 6,525,357 5,786,537
------------ ------------
STOCKHOLDERS' EQUITY:
Common stock -- $0.01 par value;
authorized -- 28,000,000 shares;
issued - 15,728,387 shares and
20,294,035 shares as of December 31,
1999 and September 30, 2000
respectively: outstanding -
15,723,054 shares and 20,288,702
shares as of December 31, 1999
and September 30, 2000 respectively. 202,941 * 157,284
Preferred stock - $0.01 par value;
authorized - 1,000,000 shares, no
shares outstanding
Additional paid-in capital 79,567,540 * 58,678,015
Accumulated deficit (59,556,452) (51,468,715)
Treasury stock, at cost (common stock
- 5,333 shares) (37,731)* (37,731)
Notes receivable from stockholders (4,054,532) (3,086,494)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 16,121,766 4,242,359
------------ ------------
$ 22,647,123 $ 10,028,896
============ ============
</TABLE>
* RECLASSIFIED
The accompanying notes are an integral part of the Financial Statements.
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ELECTRIC FUEL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
NINE MONTHS ENDED SEPTEMBER 30, THREE MONTHS ENDED SEPTEMBER 30,
------------------------------- --------------------------------
2000 1999 2000 1999
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
REVENUES $ 1,851,854 $ 1,901,409 $ 566,367 $ 781,260
------------- ------------- ------------- -------------
RESEARCH AND DEVELOPMENT EXPENSES AND COST
OF REVENUES 5,730,634 5,356,423 1,777,390 1,637,186
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 4,628,779 2,249,691 1,824,919 719,602
------------- ------------- ------------- -------------
10,359,413 7,606,114 3,602,309 2,356,788
------------- ------------- ------------- -------------
OPERATING LOSS (8,507,559) (5,704,705) (3,035,942) (1,575,528)
FINANCIAL INCOME, NET 419,822 160,544 282,438 37,819
------------- ------------- ------------- -------------
LOSS BEFORE TAXES ON INCOME (8,087,737) (5,544,161) (2,753,504) (1,537,709)
TAXES ON INCOME 6,017
------------- ------------- ------------- -------------
LOSS FOR THE PERIOD $ (8,087,737) $ (5,550,178) $ (2,753,504) $ (1,537,709)
============= ============= ============= =============
LOSS PER SHARE $ (0.43) $ (0.40) $ (0.14) $ (0.11)
============= ============= ============= =============
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 18,776,071 14,048,054 20,231,991 14,048,054
============= ============= ============= =============
</TABLE>
The accompanying notes are an integral part of the Financial Statements.
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ELECTRIC FUEL CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
NOTES
COMMON STOCK ADDITIONAL RECEIVABLE
------------------- PAID-IN ACCUMULATED TREASURY FROM
SHARES AMOUNT CAPITAL DEFICIT STOCK SHAREHOLDERS TOTAL
------ ------ ------- ------- ----- ------------ -----
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 2000 - AUDITED 15,728,387* $ 157,284* $ 58,678,015 $ (51,468,715)* $ (37,731) $ (3,086,494) $ 4,242,359
CHANGES DURING THE NINE MONTH PERIOD
ENDED SEPTEMBER 30, 2000:
Accrued Interest on notes receivable
from stockholders (110,926) (110,926)
Issuance of shares, net 4,565,648 45,657 20,889,525 (857,112) 20,078,070
Loss (8,087,737) (8,087,737)
---------- --------- ------------ -------------- ---------- -------------- -----------
BALANCE AT
SEPTEMBER 30, 2000 - UNAUDITED 20,294,035 $ 202,941 $ 79,567,540 $ (59,556,452) $ (37,731) $ (4,054,532) $16,121,766
========== ========= ============ ============== ========== ============== ===========
</TABLE>
* RECLASSIFIED
The accompanying notes are an integral part of the Financial Statements.
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ELECTRIC FUEL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
<TABLE>
<CAPTION>
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NINE MONTHS ENDED SEPTEMBER 30,
-----------------------------------------------
2000 1999
--------------------- ------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Loss for the period $ (8,087,737) $ (5,550,178)
--------------------- ------------------------
Adjustments required to reconcile loss to net cash used in
operating activities:
Depreciation and amortization 527,578 578,734
Expenses due to options granted to suppliers 315,679
Interest accrued on notes from stockholders (149,630) (29,729)
Liability for employee rights upon retirement, net 102,284 (329,337)
Loss on sale of marketable securities 1,943
Changes in operating asset and liability items:
(Increase) Decrease in accounts receivable (802,074) 437,244
Increase in inventories (1,534,009) (107,049)
Increase in accounts payable and accruals 489,493 359,879
Decrease in advances from customers (136,549)
--------------------- ------------------------
NET CASH USED IN OPERATING ACTIVITIES (9,138,416) (4,775,042)
--------------------- ------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets (1,492,507) (1,168,068)
Loans granted to shareholders (904,638)
Sale of marketable debt securities, net 3,700,575
--------------------- ------------------------
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES (2,397,145) 2,532,507
--------------------- ------------------------
--------------------- ------------------------
FORWARD $ (11,535,561) $ (2,242,535)
--------------------- ------------------------
</TABLE>
The accompanying notes are an integral part of the Financial Statements.
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ELECTRIC FUEL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------------------------------
2000 1999
--------------------- ------------------------
<S> <C> <C>
FORWARD $(11,535,561) $ (2,242,535)
--------------------- ------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of share capital, net 13,062,500
Proceeds from exercise of options and warrants 6,174,891
--------------------- ------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 19,237,391
--------------------- ------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 7,701,831 (2,242,535)
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 $ 10,257,476 $ 3,000,020
===================== ========================
SUPPLEMENTARY INFORMATION ON ACTIVITIES NOT
INVOLVING CASH FLOW:
Issuance of share capital (including additional paid-in capital)
upon notes receivable $ 3,733,743
===================== ========================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION - CASH (PAID) RECEIVED DURING THE PERIOD FOR:
Interest $ 423,616 $ (13,506)
===================== ========================
Advances to income tax authorities $ (29,969) $ (17,973)
===================== ========================
</TABLE>
The accompanying notes are an integral part of the Financial Statements.
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ELECTRIC FUEL CORPORATION
NOTE TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
General
The interim consolidated 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 revenues and
expenses for any interim period are not necessarily indicative of results for a
full year.
For the purpose of these interim consolidated 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 consolidated financial statements and notes thereto
for the year ended December 31, 1999.
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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 interim 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.
SUBSEQUENT DEVELOPMENTS
In November 2000, the Wal-Mart chain of 1,000 stores nationwide in the
United States began marketing our batteries under its EverActive(TM) brand name.
GENERAL
During this past quarter, we accelerated our efforts to develop and
commercialize our disposable Instant Power(TM) ZincAir batteries for cellular
phones. These batteries use the proprietary high-rate primary zinc-air
technology that we developed in the last three years for use in portable
electronic devices.
Our line of existing products now includes batteries for Nokia
5100/6100/7100 phones, Motorola MicroTAC phones, the Ericsson 600/800/1000 line,
the Samsung SCH-3500 phone, and an auxiliary battery for the Motorola StarTAC.
During the third quarter of 2000 we substantially increased our marketing
presence with respect to our Instant Power(TM) line, particularly in the United
Kingdom (where our batteries are now carried by four different major U.K.
retailers) and Israel (where seven retail chains carry Instant Power(TM)
batteries).
As of September 30, 2000, we had more than 30 patents issued, covering
general aspects and various applications of our ZincAir technology. We also have
a significant number of new applications filed, focusing specifically on ZincAir
batteries for consumer electronic devices and cellphones.
We are continuing to develop other applications for our disposable ZincAir
batteries, including devices for the telecommunications, hand-held computer and
defense markets.
Our Safety Products Division is continuing with the introduction of the new
emergency lights for the marine life jackets market, and sales have already
exceed $1 million for the first time ever.
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, we announced that we had
successfully completed the first actual driving tests of our all-battery
electric bus. This event successfully completed phase I of the FTA program. We
are now negotiating the next phase of the program.
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ELECTRIC FUEL CORPORATION
We have experienced significant fluctuations in the sources and amounts of
our revenues and expenses, and we believe that the following comparisons of
results of operations for the periods presented do not necessarily provide a
meaningful indication of our development. During these periods, we have 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. Our expenses primarily
have been based upon meeting contractual requirements under our agreements, as
well as meeting specific technology development, production and commercial
milestones. Our expenses, 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. Our 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. We expect
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, we believe
that period-to-period comparisons with our past results of operations should not
necessarily be relied upon as indications of future performance.
We incurred significant operating losses for the years ended December 31,
1999, 1998 and 1997 and the first nine months of 2000. While we expect 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 that we
manufacture, as well as from licensing rights to the Electric Fuel technology to
third parties, there can be no assurance that we will ever derive significant
revenues or achieve profitability.
On May 17, 2000, we entered into an agreement (the "Purchase Agreement") with
Koor Industries Ltd. ("Koor") pursuant to which Koor agreed to purchase 1
million shares of our common stock at $10 per share, for a total cash investment
of $10 million. Pursuant to the terms of the Purchase Agreement, if, within 180
days after the closing under such agreement, we issue shares of our common stock
or securities convertible into our common stock (other than to our employees or
consultants pursuant to our stock option plans) at a price below $10 per share,
we 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 on the
day before the six-month anniversary of the closing (the "Calculation Date"), if
the average closing price of our common stock on the Nasdaq for the 30 trading
days immediately preceding the Calculation Date is below $10 per share (the
"Reduced Price"), then we will be obligated to issue to Koor additional shares
("Additional Shares"), up to a maximum of 481,481 shares, such that the value of
the shares originally purchased by Koor, valued at the Reduced Price, plus the
value of the Additional Shares, valued at the Reduced Price, equals $10 million;
this number of shares is then reduced, if necessary, pro rata based upon the
number of shares no longer held by Koor on the Calculation Date.
Functional Currency
We consider the United States dollar to be the currency of the primary
economic environment in which our Israeli subsidiary, Electric Fuel (E.F.L)
Limited ("EFL") operates. Further, we believe that the operations of EFL's
subsidiaries are an integral part of the Israeli operations. EFL has therefore
adopted and is using the United States dollar as its functional
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ELECTRIC FUEL CORPORATION
currency. 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.
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 that could cause
actual results to differ materially from those projected. See "Important Factors
Regarding Forward-Looking Statements" attached as Exhibit 99 to our 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 that speak only as of the date hereof. We undertake
no obligation to publicly release the result of any revisions to these forward-
looking statements that 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 September 30, 2000, compared to the three months ended
September 30, 1999.
REVENUES. Revenues for the third quarter of 2000 totaled $566,000 compared
with $781,000 in the comparable period in 1999, a decrease of $215,000, or
27.5%. This decrease was the result of the completion of phase I of the FTA
program and the concomitant drop-off in revenues in the Electric Vehicle
division attributable to that program, a decrease that was only partially offset
by an increase in revenues from the Consumer Battery division that resulted from
increased marketing of our ZincAir batteries for cellular phones.
During the third quarter of 2000, revenues were $269,000 for the Defense
and Safety division (compared to $331,000 in the comparable period in 1999),
$78,000 for the Electric Vehicle division (compared to $373,000 in the
comparable period in 1999) and $219,000 for the Consumer Battery division
(compared to $62,000 in the comparable period in 1999); there were no
miscellaneous revenues during the third quarter of 2000 (compared to $15,000 in
the comparable period in 1999.
RESEARCH AND DEVELOPMENT EXPENSES AND COST OF REVENUES. Research and
development expenses and cost of revenues less royalty bearing grants for the
third quarter of 2000 were $1.8 million compared with $1.6 million for third
quarter of 2000, an increase of 11.3%. The increase in expenses of $200,000 from
the third quarter of 1999 is principally attributable to our 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
third 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 we intensify our efforts in these areas.
Our 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. $178,000 of these royalty-bearing
grants was recognized in the third quarter of 2000
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ELECTRIC FUEL CORPORATION
($223,000 in 1999). Also, $148,000 of royalty bearing grants from the BIRD
Foundation was recognized in the third quarter of 2000 ($147,000 in 1999).
Direct expenses for segments for the third quarter of 2000 were $293,000
for the Defense and Safety division ($243,000 in 1999), $48,000 for the Electric
Vehicle division ($691,000 in 1999), and $2,142,000 for the Consumer Battery
division ($713,000 in 1999). The shift in expenses from the Electric Vehicle
division to the Consumer Battery division was the result of the completion of
phase I of the FTA program and the increased marketing of our ZincAir batteries
for cellular phones, as discussed above.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for the third quarter of 2000 were $1,825,000 compared
with $720,000 in the third quarter of 1999, an increase of 153.5%, primarily
attributable to increased sales and marketing expenses in the Consumer Battery
division. We expect further increases in selling, general and administrative
expenses, particularly with respect to marketing expenses, as we continue to
market our products to consumers and expand the applications for our technology.
FINANCIAL INCOME. Financial income, net of interest expenses and exchange
differentials, totaled approximately $282,000 in the third quarter of 2000
compared to $38,000 financial income in the same quarter in 1999, an increase of
642.1%, due primarily to higher balances of invested funds as a result of the
deposit of the proceeds of the private placement of our securities to Koor
described above.
NET LOSSES. Due to the factors cited above, we reported a net loss of $2.8
million in the third quarter of 2000, compared with a net loss of $1.5 million
in the third quarter of 1999, an increase of 86.7%.
Nine months ended September 30, 2000, compared to the nine months ended
September 30, 1999.
REVENUES. Revenues for the first nine months of 2000 totaled $1,852,000,
compared with $1,901,000 in the comparable period in 1999, a decrease of
$49,000, or 2.6%. During the first nine months of 2000, we recognized revenues
from the sale of Survivor Locator Lights, sale of consumer batteries and from
electric vehicle program.
During the first nine months of 2000, revenues were $809,000 for the
Defense and Safety division (compared to $915,000 in the comparable period in
1999), $310,000 for the Electric Vehicle division (compared to $879,000 in the
comparable period in 1999) and $722,000 for the Consumer Battery division
(compared to $75,000 in the comparable period in 1999); there were miscellaneous
revenues of $11,000 during the first nine months of 2000 (compared to $32,000 in
the comparable period in 1999. The decrease in revenues attributable to the
Electric Vehicle division was the result of the completion of phase I of the FTA
program and the concomitant drop-off in revenues from such program. The increase
in revenues from the Consumer Battery division resulted from increased marketing
of our ZincAir batteries for cellular phones.
RESEARCH AND DEVELOPMENT EXPENSES AND COST OF REVENUES. Research and
development expenses and cost of revenues less royalty bearing grants for the
first nine months of 2000 were $5.7 million, compared with $5.4 million for the
first nine months of 1999, an increase of 5.6%. The increase in expenses of $0.3
million from the first nine months of 1999 is principally
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ELECTRIC FUEL CORPORATION
attributable to our 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 nine months 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 we intensify our
efforts in these areas.
Our 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 first nine months of 2000 in
the amount of $546,000. During the first nine months of 1999, royalty-bearing
grants in the amount of $1,041,000 were recognized.
Direct expenses for segments for the first nine months of the year were
$745,000 for the Defense and Safety division (compared with $963,000 in the
comparable period in 1999), $507,000 for the Electric Vehicle division (compared
with $2.1 million in the comparable period in 1999), and $6.0 million for the
Consumer Battery division (compared with $2.5 million in the comparable period
in 1999). The shift in expenses from the Electric Vehicle division to the
Consumer Battery division was the result of the completion of phase I of the FTA
program and the increased marketing of our ZincAir batteries for cellular
phones, as discussed above.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for the first nine months of 2000 were $4.6 million,
compared with $2.2 million in the first nine months of 1999, an increase of
109.1%, primarily attributable to increased sales and marketing expenses in the
Consumer Battery division. We expect further increases in selling, general and
administrative expenses, particularly with respect to marketing expenses, as we
market our products to consumers and expand the applications for our technology.
FINANCIAL INCOME. Financial income, net of interest expenses and exchange
differentials, totaled approximately $420,000 in the first nine months of 2000
compared to $161,000 financial income in the first nine months of 1999, an
increase of 160.1%, due primarily to higher balances of invested funds as a
result of the deposit of the proceeds of the private placement of our securities
to Koor described above.
NET LOSSES. Due to the factors cited above, we reported a net loss of $8.1
million in the first nine months of 2000, compared with a net loss of $5.6
million in the first nine months of 1999, an increase of 44.6%.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2000, we had cash and cash equivalents of approximately
$10.3 million, compared with $2.6 million as of December 31, 1999. The increase
in cash was the result of the private placement of our securities to Koor
described above
We used available funds in the first nine months of 2000 primarily for
continued research and development expenditures, and other working capital
needs. We increased our investment in fixed assets by $749,000, primarily in the
consumer battery division, during the quarter ended September 30, 2000.
Our Israeli subsidiary 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
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ELECTRIC FUEL CORPORATION
and are secured by a pledge of foreign currency deposits in the amount of NIS
3.8 million (approximately $943,000). Additionally, the Credit Facility imposes
financial and other covenants on EFC and EFL. We are 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 $943,000), which can
be used as credit support for various obligations of EFL. We have an additional
credit line of up to $750,000 guaranteed by our receivables (up to 75% of the
receivables total amount as determined from time to time). As of September 30,
2000, FIBI had issued letters of credit and bank guarantees totaling
approximately $628,000. The increase in accounts receivable was primarily due to
increase in prepaid expenses and receivables from government institutions.
We have no long-term debt outstanding, and we are using our 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, we in the third quarter of 2000 we
established a commercial production line and we are preparing for market
penetration of our new Zinc-Air batteries for several models of cellular
telephones.
We believe that our present cash position and cash flows from operations
will be sufficient to satisfy our estimated cash requirements for approximately
the next year. We might seek additional funding in order to accelerate our
future plans.
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ELECTRIC FUEL CORPORATION
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We are exposed to the impact of interest rate changes and foreign currency
fluctuations due to our international sales, production and funding
requirements.
Our research, development and production activities are primarily carried
out EFL, at its facility in Beit Shemesh, and we market some of our products in
Israel; accordingly we have sales and expenses in New Israeli Shekels. However,
the majority of our sales are made outside Israel in U.S. dollars, and a
substantial portion of our costs are incurred in U.S. dollars or in New Israeli
Shekels linked to the U.S. dollar. Therefore, our functional currency is the
U.S. dollar. Although we have a line of credit that may be affected by interest
rate changes, given our level of borrowing, we do not believe the market risk
from interest rate changes is material.
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ELECTRIC FUEL CORPORATION
PART II
ITEM 2. CHANGES IN SECURITIES.
During the third quarter of 2000, we issued 114,161 shares of our common
stock to certain consultants in consideration of services that were provided by
them.
We also issued 10,000 shares of our common stock upon exercise of warrants
that were issued to investors in December 1999.
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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: November 13, 2000
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