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, 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 incorporation (I.R.S. Employer
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 - 6,173,433 shares as of September 30, 1997
<PAGE>
IONIC FUEL TECHNOLOGY, INC.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated balance sheets - September 30, 1997 and June 30, 1997
Consolidated statements of operations - Three months ended
September 30, 1997 and 1996
Consolidated statements of cash flows - Three months ended
September 30, 1997 and 1996
Notes to consolidated financial statements - September 30, 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
Form 8-K for the period July 10, 1997 covering Items 5 & 7
Form 8-K for the period July 24, 1997 covering Item 5
Signatures
<PAGE>
PART I. FINANCIAL INFORMATION
IONIC FUEL TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
September 30, June 30,
1997 1997
------- --------
Assets (Unaudited) (Audited)
Current assets:
Cash and cash equivalents (Note 2) $ 1,445,691 $ 191,629
Trade accounts receivable 100,958 59,420
Inventory (Note 3) 477,095 482,446
Prepaid expenses 130,085 137,676
------- -------
Total current assets 2,153,829 871,171
Equipment and vehicles, net of accumulated
depreciation of $442,988 at September 30, 1997
and $442,105 at June 30, 1997 127,665 153,117
Patents, net 587,133 603,003
------- -------
Total assets $ 2,868,627 $ 1,627,291
========= =========
Liabilities and stockholders' equity Current liabilities:
Accounts payable $ 80,033 $ 87,155
Accrued expenses 227,784 239,827
Provisions for warranties and returns 18,621 16,380
Accrued royalty, due to officer 44,800 40,000
Current portion of royalty agreement 19,194 18,720
Accrued salary, benefits and payroll taxes 21,822 19,419
Current portion of capital lease obligations 18,010 14,984
------ ------
Total current liabilities 430,264 436,485
Other long-term liabilities 341,415 346,249
Stockholders' equity:
Common stock, $.01 par value:
20,000,000 shares authorized; issued and
outstanding 6,173,433 and 5,401,600 shares
respectively 61,734 54,016
Capital in excess of par value 12,381,805 10,837,407
Accumulated deficit (10,183,130) ( 9,903,667)
Cumulative translation adjustment ( 163,461) ( 143,199)
------------ -----------
Total stockholders' equity 2,096,948 844,557
--------- -------
Total liabilities and stockholders' equity $ 2,868,627 $ 1,627,291
========== ==========
See accompanying notes
Note: The balance sheet at June 30, 1997 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>
<PAGE>
IONIC FUEL TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Three Months Ended
September 30,
1997 1996
Revenues:
Rental income $ 84,354 $ 78,682
Service income 28,715 28,795
Total revenues 113,069 107,477
Cost of revenues 174,609 181,416
( 61,540) ( 73,939)
Operating expenses:
General and administrative 143,291 145,788
Sales and marketing 47,689 31,827
Royalty charges 15,000 15,000
Research and development 11,499 657
---
217,479 193,272
Operating (loss) ( 279,019) ( 267,211)
Other income (expense):
Interest income 13,188 10,531
Interest expense ( 13,632) ( 14,237)
----------
( 444) ( 3,706)
$( 279,463) $( 270,917)
========
Net (loss) per share $( .05) $( .05)
Weighted average number of
common shares 6,074,870 5,410,500
See accompanying notes
</TABLE>
<PAGE>
IONIC FUEL TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Three Months Ended
September 30,
1997 1996
Operating activities:
Net (loss) $( 279,463) $( 270,917)
Adjustments to reconcile net loss to net cash used by operating
activities:
Depreciation 18,587 20,252
Amortization 15,869 15,734
Changes in operating assets and liabilities:
Accounts receivable ( 43,715) ( 7,973)
Other receivables ( 537) 8,906
Inventory 2,053 9,384
Prepaid expenses 5,621 12,866
Accounts payable and accrued expenses 284 ( 56,746)
Net cash used by operating activities ( 281,301) ( 268,494)
Investing activities
Acquisition of equipment ( 4,539) ( 11,387)
Acquisition of patents - ( 1,066)
Cash used by investing activities ( 4,539) ( 12,453)
Financing activities
Principal payments under licensing agreement ( 4,367) ( 3,763)
Net proceeds from issuance of stock 1,552,116 -
Net cash provided (used) by financing activities 1,547,749 ( 3,763)
Effects of exchange rate differences on cash ( 7,847) 798
Increase (decrease) in cash and cash equivalents 1,254,062 ( 283,912)
Cash and cash equivalents, beginning of period 191,629 1,173,088
Cash and cash equivalents, end of period $ 1,445,691 $ 889,176
Interest paid $ 13,632 $ 14,237
See accompanying notes
</TABLE>
<PAGE>
IONIC FUEL TECHNOLOGY, INC.
Notes to Consolidated Financial Statements
(Unaudited)
September 30, 1997
1. Basis of Presentation a) 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 three month period ended September
30, 1997 are not necessarily indicative of the results that may be expected
for the year ending June 30, 1998. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's annual report on From 10-K for the year ended June 30, 1997.
2. Cash Equivalents a) 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,
1997 1997
---- ----
Material and supplies $153,497 $161,817
Finished goods 323,598 320,629
------- -------
$477,095 $482,446
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, 1997 and September 30, 1996
Total revenues increased to approximately $113,000 during the three
month period ended September 30, 1997 from approximately $107,000 for the three
month period ended September 30, 1996.
The increase of approximately $6,000 in revenues related to an increase
in rental revenues from new customers; there were no equipment sales in the
quarter and service income remained approximately the same.
Gross profit increased to a loss of approximately $(62,000) during the
three months ended September 30, 1997 (loss of $74,000 in 1996) due to lower
service costs.
General and administrative expenses remained approximately the same
during the three months ended September 30, 1997 compared to the three months
ended September 30, 1996.
Research and development expenses increased $11,000 related to
upgrading IFT equipment for hazardous zone locations.
Sales and marketing expenses increased to approximately $48,000 during
the three months ended September 30, 1997, from approximately $32,000 during the
three months ended September 30, 1996, an increase of $16,000 principally due to
an increase in professional costs.
Other expense (net) decreased to approximately $(400) during the three
months ended September 30, 1997 from approximately $(3,700) of net expense
during the same period in 1996, due to an increase in interest income.
Liquidity and Sources of Capital
Net cash used by operations was approximately $281,000 for the three
months ended September 30, 1997 and approximately $268,000 for the three months
ended September 30, 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 $1.7 million at September 30, 1997
and approximately $450,000 at June 30, 1997. Working capital has been utilized
to fund operations.
On July 14, 1997, the Company issued 771,833 units, each unit
consisting of one share of common stock, par value $.01 per share and one Series
C, Common Stock purchase warrant. As a result, the Company raised $1,552,116 net
of discounts, commissions and offering costs of $184,508.
<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, 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 French Franc, the Belgian
Franc, the Dutch Guilder and the German Mark. Change in the exchange rates of
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, 1997 and 1996.
<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, 1997.
<PAGE>
EXHIBIT I
IONIC FUEL TECHNOLOGY, INC.
COMPUTATION OF NET LOSS PER COMMON SHARE
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
September 30,
1997 1996
Net loss $( 279,463) $( 270,917)
Average common shares outstanding 6,064,370 5,400,000
Incremental shares issuable pursuant to SAB Topic 4D 10,500 10,500
Total shares 6,074,870 5,410,500
========= =========
Net loss per common share $( .05) $( .05)
============== ==============
</TABLE>
<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: November 6, 1997 Douglas Johnston
Chairman and Chief Financial Officer
(Name and Title)
Date: November 6, 1997 Anthony Garner
President, Chief Executive Officer and
Director
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements cointained 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-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 1,445,691
<SECURITIES> 0
<RECEIVABLES> 100,958
<ALLOWANCES> 0
<INVENTORY> 477,095
<CURRENT-ASSETS> 2,153,829
<PP&E> 570,653
<DEPRECIATION> 442,988
<TOTAL-ASSETS> 2,868,627
<CURRENT-LIABILITIES> 430,264
<BONDS> 0
0
0
<COMMON> 61,734
<OTHER-SE> 2,035,214
<TOTAL-LIABILITY-AND-EQUITY> 2,868,627
<SALES> 0
<TOTAL-REVENUES> 113,069
<CGS> 174,609
<TOTAL-COSTS> 217,479
<OTHER-EXPENSES> 13,632
<LOSS-PROVISION> (279,463)
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (279,463)
<INCOME-TAX> 0
<INCOME-CONTINUING> (279,463)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (279,463)
<EPS-PRIMARY> 0.05
<EPS-DILUTED> 0
</TABLE>
