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 March 31, 1997
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
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 March 31, 1997
<PAGE>
IONIC FUEL TECHNOLOGY, INC.
INDEX
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated balance sheets - March 31, 1997 and June 30, 1996
Consolidated statements of operations - Three months ended March 31,
1997 and 1996; nine months ended March 31, 1997 and 1996
Consolidated statements of cash flows - Nine months ended March 31, 1997
and 1996
Notes to consolidated financial statements - March 31, 1997
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
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
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
IONIC FUEL TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
March 31, June 30,
1997 1996
------------- --------
Assets (Unaudited) (Audited)
Current assets:
Cash and cash equivalents (Note 2) $ 444,506 $ 1,173,088
Trade accounts receivable, net of allowance
for doubtful accounts of $43,791 at
June 30, 1996 127,867 80,332
VAT and other receivables - 25,462
Inventory (Note 3) 475,771 464,093
Prepaid expenses 97,386 84,639
------- -------
Total current assets 1,145,530 1,827,794
Equipment and vehicles, net of accumulated
depreciation of $429,503 at March 31, 1997
and $361,212 at June 30, 1996 154,283 192,608
Patents, net 598,120 638,783
-------- -------
Total assets $ 1,897,933 $ 2,659,185
========= =========
Liabilities and stockholders' equity Current liabilities:
Accounts payable $ 87,069 $ 87,739
Accrued expenses 306,503 316,493
Provisions for warranties and returns 19,119 63,833
Accrued royalty, due to officer 35,200 20,800
Accrued salary, benefits and payroll taxes 21,807 16,509
------- -------
Total current liabilities 469,698 505,374
Other long-term liability 369,178 380,900
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 ( 9,635,508) ( 8,899,242)
Cumulative translation adjustment ( 128,408) ( 150,820)
---------- ----------
Total stockholders' equity 1,059,057 1,772,911
---------- ----------
Total liabilities and stockholders' equity $ 1,897,933 $ 2,659,185
========== ==========
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.
</TABLE>
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<PAGE>
IONIC FUEL TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Three Months Ended Nine Months Ended
March 31, March 31,
1997 1996 1997 1996
----------- ------------ ------------ --------
Revenues:
Rental income $ 71,154 $ 93,776 $ 230,921 $ 267,068
Service income 39,632 17,369 106,440 96,319
Equipment sales 19,328 - 171,079 121,817
-- ------ --------- ---------
Total revenues 130,114 111,145 508,440 485,204
Cost of revenues 202,709 83,939 598,082 280,728
-------- ------- -------- --------
( 72,595) 27,206 ( 89,642) 204,476
Operating expenses:
General and
administrative 191,060 328,211 514,409 1,113,716
Sales and marketing 25,402 85,006 109,752 294,201
Research and development 4,665 10,387 5,468 13,806
----------- ------ ------- ----------
Operating (loss) ( 293,722) ( 396,398) ( 719,271) (1,217,247)
Other income (expense):
Interest income 6,247 24,078 25,282 87,943
Interest expense ( 13,946) ( 14,508) ( 42,277) ( 43,901)
--------- --------- --------- ---------
( 7,699) 9,570 ( 16,995) 44,042
--------- --------- --------- -------
Net (loss) $(301,421) $(386,828) $(736,266) $(1,173,205)
========= ========= ========= =========
Net (loss) per share $(0.06) $(0.07) $(0.14) $(0.22)
========= ========= ========= =========
Weighted average number of
common shares 5,410,500 5,410,668 5,410,500 5,410,668
========= ========= ========= =========
See accompanying notes
</TABLE>
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<PAGE>
IONIC FUEL TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Nine Months Ended
March 31,
1997 1996
------------ --------
Operating activities
Net (loss) $( 736,266) $(1,173,205)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 59,358 87,592
Amortization 46,700 61,379
Accretion of interest - ( 13,949)
Changes in operating assets and liabilities:
Accounts receivable ( 41,979) 74,202
Other receivables 16,857 7,479
Inventory 43,595 (510)
Prepaid expenses 513 ( 21,747)
Other assets - 30,390
Accounts payable and accrued expenses ( 60,569) ( 55,727)
--------- ---------
Net cash used by operating activities ( 671,791) (1,004,096)
Investing activities
Acquisition of equipment ( 40,154) ( 630)
Acquisition of patents ( 5,041) ( 9,681)
Proceeds from maturity of investments - 1,300,000
---------- ---------
Net cash provided (used) by investing activities ( 45,195) 1,289,689
Financing activities
Principal payments under licensing agreement ( 11,723) ( 10,100)
Principal payments on capital leases - ( 14,179)
---------- ---------
Cash used by financing activities ( 11,723) ( 24,279)
Effects of exchange rate differences on cash 127 ( 9,783)
------- ---------
Increase (decrease) in cash and cash equivalents ( 728,582) 251,531
Cash and cash equivalents, beginning of period 1,173,088 1,281,258
--------- ---------
Cash and cash equivalents, end of period $ 444,506 $ 1,532,789
======== =========
Interest paid $ 42,277 $ 43,901
======= =======
See accompanying notes
</TABLE>
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IONIC FUEL TECHNOLOGY, INC.
Notes to Consolidated Financial Statements
(Unaudited)
March 31, 1997
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 10-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 nine month period ended March 31, 1997 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:
March 31, June 30,
1997 1996
---------- --------
Material and supplies $155,983 $152,721
Finished goods 319,788 311,372
------- -------
$475,771 $464,093
======= =======
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Nine Months Ended March 31, 1997 and March 31, 1996
Total revenues increased to approximately $508,000 during the nine month
period ended March 31, 1997 from approximately $485,000 for the nine month
period ended March 31, 1996.
The increase of approximately $49,000 in equipment sales revenues relates to new
orders and also to existing rental customers converting to purchase with a
corresponding reduction of approximately $36,000 in rental revenues. A increase
of approximately $10,000 in service income relates to increased test fees.
Certain customers prefer to purchase following the initial rental period
generally ranging from 6 to 12 months and the company does not discount the
purchase price when this conversion occurs.
Gross profit decreased to a loss of approximately $(90,000) during the
nine month ended March 31, 1997 (profit of $205,000 in 1996) 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 $514,000
during the nine months ended March 31, 1997 from approximately $1,114,000 during
the nine months ended March 31, 1996. This decrease is primarily due to
continued tight control of expenses commensurate with business
requirements and the revised classification described in the prior paragraph.
Sales and marketing expenses decreased to approximately $110,000 during
the nine months ended March 31, 1997, from approximately $294,000 during the
nine months ended March 31, 1996, a decrease of $184,000 principally due to
reduced sales commissions.
Other income (net) decreased to approximately $(17,000) of net expense
during the nine months ended March 31, 1997 from approximately $44,000 of net
income during the same period in 1996, due to a decrease in interest income.
Three Months Ended March 31, 1997 and March 31, 1996
Total revenues increased to approximately $130,000 during the three month
period ended March 31, 1997 from approximately $111,000 for the three month
period ended March 31, 1996.
The increase of approximately $19,000 in equipment sales is due to new
customers and some existing customers converting to purchase from rental.
Rental revenues decreased due to conversion of prior rentals to sales.
Increased service income reflects additional testing of the system and
related fees.
Gross profit decreased to a loss of approximately $(73,000) during the
three months ended March 31, 1997 (profit of $27,000 in 1996) due to the revised
classification of costs referred to above.
- 7 -
<PAGE>
General and administrative expenses decreased to approximately $191,000
during the three months ended March 31, 1997 from approximately $328,000 during
the three months ended March 31, 1996. This decrease is primarily due to cost
controls and the revised classifications described on the preceding page.
Sales and marketing expenses decreased to approximately $25,000 during
the three months ended March 31, 1997, from approximately $85,000 during the
three months ended March 31, 1996, a decrease of $60,000 principally due to
reduced sales commissions.
Other income (net) decreased to approximately $(8,000) of net expense
during the three months ended March 31, 1997 from approximately $10,000 of net
income during the same period in 1996, due to a decrease in interest income.
Liquidity and Sources of Capital
Net cash used by operations was approximately $672,000 for the nine
months ended March 31, 1997 and approximately $1,004,000 for the nine months
ended March 31, 1996. 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 $700,000 at March 31, 1997 and
approximately $1.3 million at June 30, 1996. Working capital has been utilized
to fund operations.
Currency Fluctuation
Currency fluctuations were insignificant to the Company's operations for
the nine months ended March 31, 1997 and 1996. 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 nine months ended March 31, 1997 and 1996.
- 8 -
<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 nine months ended
March 31, 1997.
<PAGE>
EXHIBIT 1
IONIC FUEL TECHNOLOGY, INC.
COMPUTATION OF NET LOSS PER COMMON SHARE
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Three Months Ended, Six Months Ended,
March 31, March 31,
1997 1996 1997 1996
----- ---- ---- ----
Net loss $(301,421) $(386,828) $(736,266) $(1,173,205)
Average common shares
outstanding 5,400,000 5,400,000 5,400,000 5,400,000
Incremental shares issuable
pursuant to SAB Topic 4D 10,500 10,668 10,500 10,668
------- ------- ------- -------
Total shares 5,410,500 5,410,668 5,410,500 5,410,668
========= ========= ========= =========
Net loss per common share $(0.06) $(0.07) $(0.14) $(0.22)
========= ======== ========= =========
</TABLE>
- 10 -
<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)
Date: May 14, 1997
- 11 -
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
the financial statements contained in the Company's Form 10-Q and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> MAR-31-1997
<CASH> 444,506
<SECURITIES> 0
<RECEIVABLES> 127,867
<ALLOWANCES> 0
<INVENTORY> 475,771
<CURRENT-ASSETS> 1,145,530
<PP&E> 583,786
<DEPRECIATION> 429,503
<TOTAL-ASSETS> 1,897,933
<CURRENT-LIABILITIES> 469,698
<BONDS> 0
0
0
<COMMON> 54,000
<OTHER-SE> 1,005,057
<TOTAL-LIABILITY-AND-EQUITY> 1,897,933
<SALES> 0
<TOTAL-REVENUES> 508,440
<CGS> 0
<TOTAL-COSTS> 598,082
<OTHER-EXPENSES> 629,629
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 42,277
<INCOME-PRETAX> (736,266)
<INCOME-TAX> 0
<INCOME-CONTINUING> (736,266)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (736,266)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<PAGE>
</TABLE>
