IONIC FUEL TECHNOLOGY, INC.
300 DELAWARE AVENUE
WILMINGTON, DELAWARE 19801
Notice of Annual Meeting of Stockholders
To our Stockholders:
The Annual Meeting of Stockholders of Ionic Fuel Technology, Inc., a
Delaware corporation, will be held on Thursday, November 6, 1997, at 10:30 a.m.
local time, at the Fleet Bank, 345 Park Ave.,New York, N.Y. to consider and act
upon the following matters, each of which is explained more fully in the
following Proxy Statement. A proxy card for your use in voting on these matters
is also enclosed.
1. Electing five (5) directors for a term expiring in 1998 as
recommended by the Board of Directors.
2. Ratifying the appointment of independent auditors to examine
and report on the financial statements of the Corporation for
fiscal 1998, as recommended by the Board of Directors.
3. Transacting any other business that may properly come before
the meeting or any adjournment thereof.
Only Common stockholders of record at the close of business on
September 30, 1997, are entitled to notice of and to vote at the meeting.
Dated: September 30, 1997
By Order of the Board of Directors
DAVID W. SASS
Secretary
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ANNUAL MEETING OF STOCKHOLDERS
OF
IONIC FUEL TECHNOLOGY, INC.
NOVEMBER 6, 1997
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PROXY STATEMENT
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GENERAL INFORMATION
Proxy Solicitation
This Proxy Statement is furnished to the holders of Common
Stock, $.01 par value per share ("Common Stock"), of Ionic Fuel Technology, Inc.
("Company") in connection with the solicitation of proxies on behalf of the
Board of Directors of the Company for use at the Annual Meeting of Stockholders
("Annual Meeting") to be held November 6, 1997, or at any continuation or
adjournment thereof, pursuant to the accompanying Notice of Annual Meeting of
Stockholders. The purpose of the meeting and the matters to be acted upon are
set forth in the accompanying Notice of Annual Meeting of Stockholders. The
Board of Directors knows of no other business which will come before the
meeting.
Proxies for use at the meeting will be mailed to stockholders
on or about October 3, 1997 and will be solicited chiefly by mail, but
additional solicitation may be made by telephone, telegram or other means of
telecommunications by directors, officers, consultants or regular employees of
the Company. The Company may enlist the assistance of brokerage houses,
fiduciaries, custodians and other like parties in soliciting proxies. All
solicitation expenses, including costs of preparing, assembling and mailing the
proxy material, will be borne by the Company.
Revocability and Voting of Proxy
A form of proxy for use at the meeting and a return envelope
for the proxy are enclosed. Stockholders may revoke the authority granted by
their execution of proxies at any time before their effective exercise by filing
with the Secretary of the Company a written revocation or duly executed proxy
bearing a later date or by voting in person at the meeting. Shares represented
by executed and unrevoked proxies will be voted in accordance with the choice or
instructions specified thereon. If no specifications are given, the proxies
intend to vote "FOR" each of the nominees for director as described in Proposal
No. 1 and "FOR" the ratification of the independent auditors as described in
Proposal No. 2. Proxies marked as abstaining will be treated as present for
purposes of determining a quorum for the Annual Meeting, but will not be
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counted as voting in respect of any matter as to which abstinence is indicated.
If any other matters properly come before the meeting or any continuation or
adjournment thereof, the proxies intend to vote in accordance with their best
judgment.
Record Date and Voting Rights
Only stockholders of record at the close of business on
September 30, 1997 are entitled to notice of and to vote at the Annual Meeting
of Shareholders or any continuation or adjournment thereof. Each share of Common
Stock is entitled to one vote per share. Any share of Common Stock held of
record on September 30, 1997 shall be assumed, by the Board of Directors, to be
owned beneficially by the record holder thereof for the period shown on the
Company's stockholder records. The affirmative vote of a majority of the
shareholders present in person or by proxy at the meeting is required for the
election of the directors to be elected by such shares. The present directors
and officers of the Company holding approximately 29% of the outstanding Common
Stock of the Company intend to vote "FOR" the slate of directors and FOR the
ratification of the appointment of the independent auditors.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The By-Laws of the Company provide for a Board of Directors of
not less than three (3) members. The Board of Directors currently consists of
five (5) members. At the meeting, four directors will be elected to serve until
the 1998 Annual Meeting of Stockholders and until their successors have been
elected and qualified. Present vacancy or vacancies which occur during the year
may be filled by the Board of Directors, and any directors so appointed must
stand for reelection at the next annual meeting of stockholders. The nominees to
be voted on by stockholders are Messrs. Johnston, O'Neill, Hollendoner,Sullivan
and Garner.
All current directors have been nominated for reelection by
the Company's present directors. All nominees have consented to be named and
have indicated their intent to serve if elected. The Company has no reason to
believe that any of these nominees are unavailable for election. However, if any
of the nominees become unavailable for any reason, the persons named as proxies
may vote for the election of such person or persons for such office as the Board
of Directors of the Company may recommend in the place of such nominee or
nominees. It is intended that proxies, unless marked to the contrary, will be
voted in favor of the election of Messrs. Johnston, O'Neill, Hollendoner and
Garner.
The Board of Directors recommends that the stockholders vote "FOR" the
election of the following three nominees (Item No. 1 on the proxy card).
<PAGE>
NOMINEES FOR ELECTION
Name, Age and Principal Occupation
Douglas F. Johnston, 66, is a co-founder of the Company and has served
as Chairman and Chief Financial and Accounting Officer since its inception in
December 1991 and as President and Chief Executive Officer since inception until
January 1994. From July 1990 until April 1991, Mr. Johnston was a private
investor. From April 1991 until December 1991, Mr. Johnston, in conjunction with
Messrs. O'Neill and Garner, performed a due diligence investigation on the
Wentworth technology underlying the IFT System ("Wentworth Technology") to
determine whether to enter into the business. Such investigation included
reviewing the scientific literature regarding the effect of Ions on flame
chemistry, reviewing the legal status of Wentworth's patents, testing prototypes
of certain devices built by Wentworth, examining Wentworth's test procedures and
data and studying the feasibility of commercializing the Wentworth technology.
From September 1988 until July 1990, Mr. Johnston was President and Chief
Executive Officer and Director of Sudbury, Inc., a manufacturing company
principally serving the automotive industry with OEM parts. Mr. Johnston has an
S.B. in Industrial Administration from Yale University and an M.B.A. from
Harvard Business School.
Anthony J.S. Garner, 57, has served as a director and
President of the Company and also as Chairman and Chief Executive
Officer of IFT, Ltd. since the Company's inception. From December
1990 until October 1991, Mr. Garner was a private investor. From
October 1991 to December 1991 Mr. Garner performed a due diligence
investigation on the Wentworth Technology in conjunction with
Messrs. Johnston and O'Neill, as set forth in Mr. Johnston's
biography. From June 1988 until December 1990, Mr. Garner was Chief
Executive Officer and managing director of Sigma Corp. Ltd., a
manufacturer of custom gauges for the aerospace industry. He served
as Chief Executive Officer of Winchmore PLC, a distributor of
commercial boilers and air conditioners. Mr. Garner has the U.K.
equivalent of a B.S. in Mechanical Engineering.
Paul C. O'Neill, 71, is a co-founder of the Company and has served as
Treasurer and Director of the Company since the Company's inception. From April
1991 until December 1991, Mr. O'Neill was a private investor and performed a due
diligence investigation on the Wentworth Technology in conjunction with Messrs.
Johnston and Garner, as set forth in Mr. Johnston's biography. From May 1978
until April 1991, Mr. O'Neill served as Chairman of Ovington Securities Ltd., an
investment firm located in London, England.
Frank J. Hollendoner, 51, was named to the Company's Board of
Directors in January, 1997. Mr. Hollendoner also currently serves
as Chairman of three European companies: Doughty Hanson & Co., a
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money management concern; Independent Care Group, a firm that develops, owns and
operates private hospitals in Britain and Norden Pac Industries A.B., a Swedish
packaging equipment company. From 1986-1994, Mr. Hollendoner was a principal and
a managing director of Ovington Securities Ltd. Mr. Hollendoner holds a BA in
Economics from Georgetown University and an MBA from Stanford University School
of Business.
Henry W. Sullivan, 57, was named to the Company's Board of
Directors in August, 1997. Since 1991 Mr. Sullivan has been the
President and a Director of GAIA Technologies, Inc., a company
engaged in the chemical business. He was also the Vice Chairman and
a Director of Huntsman Chemical Corporation, the nation's largest
private chemical company from 1983 to 1991. Mr. Sullivan holds a
B.S. degree in Chemical Engineering from Cooper Union and a Masters
degree and Ph.D in Engineering from New York University.
During fiscal 1996 the Board of Directors held four meetings and acted
twice by unanimous written consent.
The Company has no committees of the Board.
No directors received cash compensation for serving as directors during
the fiscal year ended June 30, 1997. It is anticipated that no existing
directors will receive cash compensation for serving in such capacity during the
fiscal year ending June 30, 1998. Messrs. Hollendoner and Sullivan have each
received options to purchase 14,000 shares of Common Stock in accordance with
the Company's Stock Option Plan.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Since the Company's inception, the firm of Ernst & Young LLP
independent auditors, has examined and reported on the Company's financial
statements. The Board of Directors has appointed Ernst & Young LLP as
independent auditors to examine and report on the consolidated financial
statements of the Company for the current year ending June 30, 1998, subject to
stockholder approval.
During the year ended June 30, 1997, Ernst & Young LLP provided the
Company with audit services, including examinations of and reporting on the
Company's consolidated financial statements, as well as those of its
subsidiaries. Audit services also included a review of filings with the
Securities and Exchange Commission and the annual report to shareholders.
Ratification of the appointment of Ernst & Young LLP as independent
auditors requires the affirmative vote a majority of the votes cast at the
meeting by holders of the Corporation's Common Stock.
No representative of Ernst & Young LLP will be present at the
<PAGE>
Annual Meeting.
The Board of Directors recommends that the stockholders vote "FOR"
ratification of this appointment (Item No. 2 on the proxy card).
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
On September 30, 1997, there were 6,173,433 shares of Common
Stock outstanding. The following table sets forth as of September 30, 1997 the
number of shares of Common Stock of the Company and the percentage of that class
owned beneficially, within the meaning of Rule 13d-3 promulgated under the
Securities Exchange Act of 1934, as amended, and the percentage of the Company's
voting power owned by (i) all the directors of the Company who are stockholders;
(ii) all stockholders known by the Company to own more than five percent of the
Company's Common Stock; and (iii) all directors and officers as a group. All
shares set forth in the following table are entitled to one vote per share and
the named beneficial owner has sole voting and investment power.
Amount and
Nature of Percent of
Beneficial Outstanding Shares
Name and Address Ownership(1) of Common Stock
Douglas F. Johnston...... 932,000 15.10
114 Forest Street
New Canaan, CT 06840
Paul C. O'Neill ......... 504,000(2) 8.16
95 Eaton Square
London SW 1W 9DD
England
Aeon Management
Establishment........... 296,000 4.79
Aelestrasse 74
Vaduz FL 9490
Liechtenstein
Anthony J.S. Garner ..... 330,000(3) 5.34
96 Thorpe Hall Ave
Thorpe Bay, Essex SSl 3AS
England
Frank J. Hollendoner 16,000 (4) *
c/o Independent Care
26 Eccleston Square
<PAGE>
London, England SWIV INS
Henry W. Sullivan
10814 Jaycee Lane
Houston, Tx. 77024 16,000 (5)
Donald M. Kleban 312,900 (6) 5.06
2 Sutton Place South
New York, N.Y. 10022
All Officers and Directors
as a Group (5 persons) .. l,806,000(2)(3)(4)(5) 29.25%
- -------------------
* Less than 1%
(l) Beneficial ownership is determined in accordance with Rule
13d-3 under the Securities Exchange Act of 1934 and generally
includes voting or investment power with respect to
securities. Shares of Common Stock issuable upon the exercise
of options, warrants and convertible notes currently
exercisable or convertible within sixty days are deemed
outstanding for computing the percentage ownership of the
person holding such options or warrants, but are not deemed
outstanding for computing the percentage of ownership of any
other person.
Unless otherwise indicated, the Company believes that all persons named
in the table have sole investment and voting power with respect to the
shares of Common Stock beneficially owned by them.
(2) Includes 40,000 shares owned by Mr. O'Neill which others may purchase
from Mr. O'Neill at $1.875 to $3.125 per share until January 10, 1998.
(3) Includes immediately exercisable options to purchase 160,000
shares at $1.875 per share granted to Mr. Garner by Messrs.
Johnston and O'Neill from their personal holdings. Also
includes 170,000 shares of Common Stock held by Brutus
Investments Ltd., an investment company owned by Brutus Trust.
Mr. Garner is neither an officer or director of Brutus
Investments, Ltd. nor a settlor, trustee or currently a
beneficiary of Brutus Trust. To the extent he or any member
of his family may become a beneficiary of Brutus Trust in the
future, Mr. Garner disclaims any beneficial interest in such
shares.
(4) Includes 2,000 shares of Common Stock and immediately exercisable
options to purchase 14,000 shares of Common Stock at $1.6875 per share.
(5) Includes 2,000 shares of Common Stock and immediately exercisable
options to purchase 14,000 shares of Common Stock at $1.75 per share.
(6) Includes 179,000 shares of Common Stock (45,000 of which are
<PAGE>
subject to a purchase option exercisable at $8.25 per share until July
28, 1999 ("Option"), 53,000 Series A Warrants to purchase 26,500 shares
of Common Stock, 113,000 Series B Warrants to purchase 56,500 shares of
Common Stock (of which 45,000 shares of Common Stock are issuable upon
exercise of the Option), and 50,000 Private Warrants to purchase 50,000
shares of Common Stock. 25,000 of the Private Warrants entitle the
holder to purchase 25,000 shares of Common Stock at $2.25 per share and
the remaining 25,000 Private Warrants entitle the holder to purchase
25,000 shares of Common Stock at $3.50 per share, each until March 15,
2001. Certain of the foregoing information is reported in a Schedule
13D filed by Kleban with the Company dated as of May 7, 1997.
EXECUTIVE COMPENSATION
Compensation
No executive officer received aggregate compensation exceeding $100,000
in the fiscal year 1997.
CERTAIN TRANSACTIONS
The Company is obligated to pay Douglas F. Johnston a $60,000 per year
royalty for the duration of the patents contemplated by the Royalty Agreement,
one of which lasts until 2007.
Pursuant to a written agreement, the Company has engaged Perrin, Holden
and Davenport Capital Corp. ("PHD") as an investment banking advisor for a two
(2) year term expiring March 15, 1999. In consideration for providing such
advising services, the Company has granted PHD Warrants to purchase 150,000
shares of Common Stock expiring on March 15, 2001, 75,000 of such Warrants are
exercisable at $2.25 per share and the remaining 75,000 Warrants are exercisable
at $3.50 per share. Donald M. Kleban, a 5% shareholder of the Company, and a
managing director of PHD, was granted Warrants to purchase 50,000 shares of
Common Stock expiring March 15, 2001, 25,000 of such Warrants are exercisable at
$2.25 per share and the remaining 25,000 are exercisable at $3.50 per share. The
Company will also reimburse PHD for its out-of-pocket expenses incurred in
providing services to the Company.
The Company's general counsel is McLaughlin & Stern, LLP. David W.
Sass, the Company's Secretary, is a partner of such firm, to which the Company
paid legal fees of $2,000 during the year ended June 30, 1997.
<PAGE>
TOTAL SHAREHOLDER RETURNS - DIVIDENDS REINVESTED
Company/Index Annual Return Percentage
Sep94 Dec94 Mar95 Jun95
Ionic Fuel
Technology, Inc. -40.00 12.50 -68.52 0.00
S & P 500 Index 2.46 -0.02 9.74 9.55
Waste Management-500 1.02 -9.52 9.54 5.29
Sep95 Dec95 Mar96 Jun96
Ionic Fuel
Technology, Inc. -64.69 -33.33 162.40 219.21
S & P 500 Index 7.95 6.02 5.37 4.49
Waste Management-500 -5.35 4.51 6.60 -0.26
Sep96 Dec96 Mar97 Jun97
Ionic Fuel
Technology, Inc. 4.44 -47.14 110.81 -7.67
S & P 500 Index 3.09 8.34 2.68 17.46
Waste Management-500 -1.48 1.73 1.69 7.27
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Company/Index Jul94 Sep94 Dec94 Mar95
Ionic Fuel
Technology, Inc. 100 60.00 67.50 21.25
S & P 500 Index 100 102.46 102.44 112.42
Waste Management -500 100 101.02 91.68 100.42
Company/Index Jun95 Sep95 Dec95 Mar96 Jun96
Ionic Fuel
Technology, Inc. 21.25 7.50 5.00 13.13 41.90
S & P 500 Index 123.15 132.94 140.95 148.52 155.18
Waste Management
-500 105.73 100.08 104.59 111.49 111.20
Company/Index Sep96 Dec96 Mar97 Jun97
Ionic Fuel
Technology, Inc. 43.76 23.13 48.76 45.02
S & P 500 Index 159.97 173.30 177.95 209.01
Waste Management
-500 109.57 111.47 113.35 121.59
</TABLE>
<PAGE>
An IPO price of $5.00 was used to calculate the return for Ionic Fuel
Technology, Inc. This price was supplied by the company.
Prepared by Standard & Poor's Computstat - Custom Business Unit - 8/19/97.
OTHER BUSINESS TO BE TRANSACTED
As of the date of this Proxy Statement, the Board of Directors knows of
no other business to be presented for action at the Annual Meeting of
Stockholders. As for any business that may properly come before the Annual
Meeting or any continuation or adjournment thereof, the Proxies confer
discretionary authority to the person named therein. These persons will vote or
act in accordance with their best judgment with respect thereto.
ANNUAL REPORT TO STOCKHOLDERS
The Annual Report to Stockholders for the year ended June 30, 1997 is
being mailed to stockholders with this Proxy Statement.
STOCKHOLDER PROPOSAL - 1998 ANNUAL MEETING
Any stockholder proposals to be considered by the Company for inclusion
in the proxy material for the 1998 Annual Meeting of Stockholders must be
received by the Company at its principal executive offices by July 30, 1998.
The prompt return of your proxy will be appreciated and helpful in
obtaining the necessary vote. Therefore, whether or not you expect to attend the
meeting, please sign the proxy and return it in the enclosed envelope.
BY ORDER OF
THE BOARD OF DIRECTORS
DAVID W. SASS, Secretary
New York, New York
September 30, 1997
<PAGE>
IONIC FUEL TECHNOLOGY, INC.
P R O X Y
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Douglas F. Johnston and David
W. Sass as Proxies, each with the power to appoint his substitute, and hereby
authorizes them to represent and to vote, as designated below, all the shares of
the common stock of Ionic Fuel Technology, Inc. held of record by the
undersigned on September 30, 1997, at the annual meeting of shareholders to be
held on November 6, 1997, or any adjournment thereof.
1. ELECTION OF DIRECTORS
For all nominees listed below Withhold Authority to
(Except as Marked to the Vote All Nominees Listed
Contrary) ___ Below ______
Douglas F. Johnston; Paul C. O'Neill; Frank J. Hollendoner; Henry
W. Sullivan and Anthony J.S. Garner
2. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED FOR PROPOSALS 1 AND 2.
Please sign name exactly as appears below. When shares are held by
joint tenants, both should sign. When signing as attorney, as executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other authorized
officer. If a partnership, please sign in partnership name by authorized person.
Dated: , 1997
Signature
Signature, if held jointly
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY USING THE ENCLOSED
ENVELOPE
