United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[x] Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934 for the period ended
September 30, 1996
or
Transition Report Pursuant to Section 13 or
15(d) of the Securities
Exchange Act of 1934
For the Transition Period From to
Commission file number 1-13234
Ionic Fuel Technology, Inc.
(Exact name of registrant as specified in its charter)
Delaware 06-1333140
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
300 Delaware Avenue, Suite 1704
Wilmington, Delaware 19801-1622
(Address of principal executive offices (Zip Code)
(302)427-5957
(Registrant's telephone number, Including area code)
Not applicable
(Former name, former address and former year, if changed since last report)
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 periods 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
<PAGE>
Applicable Only to Issuers Involved in Bankruptcy Proceedings During the
Preceding Five Years
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by the court. Yes No
Applicable Only to Corporate Issuers
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practical date.
Common Stock, $.01 Par Value - 5,400,000 shares as of September 30, 1996
IONIC FUEL TECHNOLOGY, INC.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated balance sheets - September 30, 1996 and June 30, 1996
Consolidated statements of operations - Three months ended September 30,
1996 and 1995
Consolidated statements of cash flows - Three months ended
September 30, 1996 and 1995
Notes to consolidated financial statements - September 30, 1996
Item 2. Management' s Discussion and Analysis of Financial Condition and
Results of Operations
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities-
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
<PAGE>
PART I. FINANCIAL INFORMATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
September 30, June 30,
1996 1996
(Unaudited) (Audited)
Assets
Current assets:
Cash and cash equivalents (Note 2) $ 889,176 $1,173,088
Trade accounts receivable, net of allowance
for doubtful accounts of $44,808 at
September 30, 89,047 80,332
1996 and $43,791 at June 30, 1996 16,101 25,642
VAT and other receivables 457,426 464,093
Inventory (Note 3) 72,233 84,639
Prepaid expenses 1,523,983 1,827,794
Total current assets
Equipment and vehicles, net of accumulated
depreciation of $383,671 at September 30, 184,855 192,608
1996 and $361,212 at June 30, 1996
Patents, net 624,614 638,783
Total assets $2,333,452 $2,659,185
Liabilities and stockholders' equity
Current liabilities: $ 75,239 $ 87,739
Accounts payable 268,678 316,493
Accrued expenses 65,305 63,833
Provisions for warranties and returns 25,600 20,800
Accrued royalty, due to officer 16,322 16,509
Accrued salary, benefits and payroll taxes 451,144 505,374
Total current liabilities
Other long-term liabilities
377,138 380,900
Stockholders' equity:
Common stock, $.01 par value:
20,000,000 shares authorized; issued and
outstanding 5,400,000 shares 54,000 54,000
Capital in excess of par value 10,768,973 10,768,973
Accumulated deficit (9,170,159) (8,899,242)
Cumulative translation adjustment (147,644) 150,820
Total stockholders' equity 1,505,170 1,772,911
Total liabilities and stockholders' equity $ 2,333,452 $2,659,185
</TABLE>
<PAGE>
See accompanying notes
Note: The balance sheet at June 30, 1996 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted
accounting principles for complete financial statements.
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Three Months Ended
September 30,
1996 1995
Revenues:
Rental income $78,682 $ 93,728
Service income 28,795 26,860
Total revenues 107,477 120,588
Cost of revenues 181,416 84,922
(73,939) 35,666
Operating expenses:
General and administrative 160,788 390,225
Sales and marketing 31,827 91,134
Research and development 657 1,486
193,272 482,845
Operating (loss) (267,211) (447,179)
Other income (expense):
Interest income 10,531 38,418
Interest expense (14,237) (15,072)
( 3,706) (23,346)
Net (loss) $(270,917) $(423,833)
Net (loss) per share $(.05) $(0.08)
Weighted average number of
common shares 5,410,500 5,410,668
See accompanying notes
</TABLE>
<PAGE>
IONIC FUEL TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Three Months Ended
September 30,
1996 1995
Operating activities
Net (loss) $(270,917) $(423,833)
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation 20,252 34,603
Amortization 15,734 20,018
Accretion of interest - (13,949)
Changes in operating assets and liabilities:
Accounts receivable (7,973) (3,702)
Other receivables 8,906 7,730
Inventory 9,384 (5,945)
Prepaid expenses 12,866 (26,772)
Other assets - 1,554
Accounts payable and accrued expenses (56,746) 4,136
Net cash used in operating activities (268,494) (406,160)
Investing activities
Acquisition of equipment (11,387) (23,375)
Acquisition of patents (1,066) -
Proceeds from maturity of investments - 1,300,000
Net cash provided by (used in) investing
activities (12,453) 1,276,625
Financing activities
Principal payments under licensing agreement (3,763) (3,242)
Principal payments on capital leases - (7,715)
Cash used in financing activities (3,763) (10,957)
Effects of exchange rate differences on cash 798 458
Increase (decrease) in cash and cash equivalents (283,912) 859,966
Cash and cash equivalents, beginning of period 1,173,088 1,281,258
Cash and cash equivalents, end of period $889,176 $2,141,224
Interest paid $14,237 $15,072
See accompanying notes
</TABLE>
<PAGE>
IONIC FUEL TECHNOLOGY, INC.
Notes to Consolidated Financial Statements
(Unaudited)
September 30, 1996
1. Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form IO-Q and Article 10 of
Regulations S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three month period ended September 30,
1996 are not necessarily indicative of the results that may be expected for the
year ending June 30, 1997. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's annual
report on Form 10-K for the year ended June 30, 1996.
2. Cash Equivalents
The Company considers all highly liquid investments with maturities of three
months or less when purchased to be cash equivalents.
3. Inventory
Inventory is comprised of the following:
September 30, June 30,
1996 1996
Material and supplies $150,086 $152,721
Finished goods 307,340 311,372
$457,426 $464,093
Included in finished goods inventory are units, at customer sites, on a
short-term trial basis.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Three Months Ended September 30, 1996 and September 30, 1995
Total revenues decreased to approximately $107,000 during the three month period
ended September 30, 1996 from approximately $121,000 for the three month period
ended September 30, 1995.
The decrease of approximately $14,000 in revenues relates to a decrease in prior
year's rentals of approximately $26,000 and an increase of approximately $12,000
in new or additional rentals in the current quarter. The decreases are from one
site where toxic ambient air prevented normal operation of the IFT system, one
site shut down for boiler replacement, one site shifting from rental to
purchase, two sites where purchase was completed later in fiscal 1996, and
several small installations which were not profitable to maintain. The increased
revenues were spread across thirteen customers.
Gross profit decreased to a loss of approximately $(74,000) during the three
months ended September 30, 1996 (profit of $36,000 in 1995) due to the revised
classification of field engineering, installation and other field costs as cost
of sales effective April 1, 1996. Similar costs incurred in prior periods are
included in general and administrative expenses because extensive engineering
support was required to complete the sales process. This change is a result of
the change in responsibilities of certain employees caused by the maturing of
the Company's system.
General and administrative expenses decreased to approximately $161,000 during
the three months ended September 30, 1996 from approximately $390,000 during the
three months ended September 30, 1995. This decrease is primarily due to staff
and other cost reductions implemented in 1995 and 1996 and the revised
classifications described in the prior paragraph.
Sales and marketing expenses decreased to approximately $32,000 during the three
months ended September 30, 1996, from approximately $91,000 during the three
months ended September 30, 1995, a decrease of $59,000 principally due to
reduced sales commissions.
Other income (net) decreased to approximately $(3,700) of net expense during the
three months ended September 30, 1996 from approximately $23,000 of net income
during the same period in 1995, due to a decrease in interest Income.
Liquidity and Sources of Capital
Net cash used by operations was approximately $268,000 for the three months
ended September 30, 1996 and approximately $406,000 for the three months ended
September 30, 1995. Cash was utilized in all departments, i.e. sales, marketing,
administration and ongoing product enhancement in the United Kingdom and Europe.
Working capital was approximately $1.1 million at September 30, 1996 and
approximately $1.3 million at June 30, 1996. Working capital has been utilized
to fund operations.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Currency Fluctuation
Currency fluctuations were insignificant to the Company's operations for the
three months ended September 30, 1996 and 1995. The Company operates in the
United States and United Kingdom (Pound Sterling); sales and rentals may also be
denominated in other currencies, such as the French Franc, the Belgian Franc,
the Dutch Guilder and the German Mark. Changes in the exchange rates of these
currencies could affect the Company's operations and cash flows. Currently, the
Company does not enter into any derivative contracts to hedge these risks.
Inflation
Inflation has not had a significant impact on the results of the
Company's operations for the three months ended September 30, 1996 and 1995.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings (Not applicable)
Item 2. Changes in Securities (Not applicable)
Item 3. Defaults upon Senior Securities (Not applicable)
Item 4. Submission of Matters to a Vote of Security Holders (Not applicable)
Item 5. Other information (Not applicable)
Item 6. Exhibits and Reports on Form 8-K
The following exhibits are included herein:
(1) Statement re: computation of earnings per share
The Company did not file any reports on Form 8-K during the three
months ended September 30, 1996.
<PAGE>
IONIC FUEL TECHNOLOGY, INC.
COMPUTATION OF NET LOSS PER COMMON SHARE
Three Months Ended,
September 30,
1996 1995
Net Loss $(270,917) $(423,833)
Average common shares
outstanding 5,400,000 5,400,000
Incremental shares issuable
pursuant to SAB Topic 4D 10,500 10,668
Total shares 5,410,500 5,410,668
Net loss per common share $(.05) $(.08)
<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.
Ionic Fuel Technology, Inc.
(Registrant)
/s/ Douglas F. Johnston Chairman & Chief Financial November 15, 1996
(Name and Title) Officer
/s/ Anthony J.S. Garner President - Director November 15, 1996
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 889,176
<SECURITIES> 0
<RECEIVABLES> 149,956
<ALLOWANCES> 44,808
<INVENTORY> 457,426
<CURRENT-ASSETS> 1,523,983
<PP&E> 1,193,140
<DEPRECIATION> 385,671
<TOTAL-ASSETS> 2,333,452
<CURRENT-LIABILITIES> 451,144
<BONDS> 0
0
0
<COMMON> 54,000
<OTHER-SE> 1,451,170
<TOTAL-LIABILITY-AND-EQUITY> 2,333,452
<SALES> 0
<TOTAL-REVENUES> 107,477
<CGS> 181,416
<TOTAL-COSTS> 374,688
<OTHER-EXPENSES> (10,531)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,237
<INCOME-PRETAX> (270,917)
<INCOME-TAX> 0
<INCOME-CONTINUING> (270,917)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (270,917)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> (.05)
</TABLE>
