SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
[x] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 (Fee Required)
For the fiscal year ended June 30, 1997 or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 (No Fee Required)
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 Identification
incorporation) No.)
300 Delaware Avenue, #1704, Wilmington, Delaware 19801-1622
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (302) 427-5957
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock, par value $.01 Boston Stock Exchange
Series A Redeemable Common
Stock Purchase Warrant ("A Warrants") Boston Stock Exchange
Series B Redeemable Common
Stock Purchase Warrant ("B Warrants") Boston Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
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 twelve (12)
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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 ninety (90) days. Yes: x No:
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [x]
State the aggregate market value of the voting stock held by non-affiliates of
the registrant. The aggregate market value shall be computed by reference to the
price at which the stock was sold, or the average bid and asked prices of such
stock, as of a specified date within 60 days prior to the date of filing.
Aggregate market value of securities held by non-affiliates as of September 17,
1997 - $8,236,000.
Indicate the number of shares outstanding of each of the registrant's class of
common stock, as of the latest practicable date. At September 15, 1997, there
were 6,173,433 common shares, 1,200,000 Series A Warrants, 1,200,000 Series B
Warrants and 189,000 Underwriters' Warrants, 771,883 Series C Warrants, 150,000
Consultant's Warrants outstanding.
List hereunder the following documents if incorporated by reference and the Part
of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is
incorporated: (1) any annual report to security-holders; (2) any proxy or
information statement; and (3) any prospectus filed pursuant to Rule 424(b) or
(c) under the Securities Act of 1933. The listed documents should be clearly
described for identification purposes (e.g., annual report to security-holders
for fiscal year ended December 24, 1980)
1. Part IV, Item 14, incorporated by reference the following Exhibits: 3.1, 3.2,
4.1, 4.2, 4.3 and 10.1.
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PART I
Item 1. BUSINESS
INTRODUCTION
The Company is an environmental technology company engaged in the
design, assembly, marketing, sale and leasing of its patented, proprietary IFT
System designed to reduce harmful airborne emissions from and increase fuel
efficiency of heating and power generation systems. The Company currently
markets the System to various industries in the U.K. and Europe.
The IFT System, which is attached to a customer's heating or power
generation equipment, produces negatively charged ions ("Ions") by passing an
air flow over a body of vibrating liquid and into the combustion chamber or air
intake of the customer's machinery. The ionized air supply accelerates the
normal combustion process. As a result of the improved combustion, the amount of
air and fuel supplied to the burner can be reduced while still maintaining a
constant measure of power output. This reduction of air and fuel decreases fuel
consumption as well as the production of NOX CO and CO2 and when burning fuel
oil, fireside coking and particulate emissions are also reduced.
THE SYSTEM
The IFT System is self contained in a cube-shaped metal cabinet. The
System's interior mechanism vibrates the surface of a liquid contained inside
the cabinet. The vibrating liquid releases negatively charged Ions that are then
delivered to the customer's equipment through a connection placed either
adjacent to the boiler's combustion chamber or to the boiler's air intake
mechanism.
The System is available in eight sizes ranging from 15" x 12" x 16" to 43"
x 3 1-5" x 35". Such sizes are suitable for boilers generating from
approximately 1,000 lbs. of steam per hour to approximately 96,000 lbs. of steam
per hour. Multiple Systems are used when either the boiler has more than one
burner or the boiler's power generating capacity exceeds the capacity of the
largest IFT System. The System generally requires only a routine servicing every
six months and may be leased or purchased.
Typical performance results of the System reveal a reduction in
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NOx. emissions ranging from 6% to 60%, a reduction in CO emissions ranging from
6% to 80%, a reduction in CO2 emissions ranging from 2 1/2% to 7%, a reduction
in particulate emissions ranging from 6% to 40% and a reduction in fuel
consumption ranging from 2 1/2% to 7%. The exact performance of the System
depends upon the customer's existing equipment and desired objectives; customers
may achieve less favorable results or no improvement if their equipment requires
repair or if fuel and air flows cannot be closely controlled. If NOx and CO
emissions have been reduced by the use of other equipment, the System may be
used to reduce CO2 emissions and fuel consumption. CO2 emission reduction
correlates directly with the fuel savings which the IFT System provides.
MARKETING AND SALES
Performance Trials
The Company initially sought to performance test its System in locations
where a sales or lease contract could result. It also has performance tested the
System in certain locations solely to develop performance test data. The Company
has now phased out uncompensated performance testing because the Company's data
from its numerous sites supports the claims regarding the benefits offered by
the IFT System. The Company has now developed new application software enabling
on site performance to be evaluated in real time to show the immediate
improvements to the customer resulting in reducing the lead time between
performance trials and customer acceptance of the System.
The performance trial results obtained at a customer's location enable the
Company to use such results to confirm the price of the IFT System to such
customer. In setting the price, the Company considers the potential fuel savings
and emissions reduction to be realized by that customer from use of the System,
thereby enabling a customer to offset the cost of the System.
The Company has also participated in a laboratory test conducted by The
Building Services Research and Information Association ("BSRIA"), an independent
U.K. organization. The BSRIA test was instigated and primarily funded by the
British government to generate data on the emissions of various power generation
systems and ancillary equipment. BSRIA rendered a favorable report on the IFT
System and such report was disseminated to BSRIA's members.
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Tests were conducted at the Lowenbrau brewery by the German test
authority TUV and showed that with IFT System the boiler was able to operate
with less combustion air thereby improving the thermal efficiency. A review on
ionization processes conducted by Portsmouth University sponsored by the Energy
Technical Support Unit, ETSU, reported that fuel savings could be achieved by
use of the IFT technology.
Marketing
The Company currently markets the IFT System to (a) large scale commercial
power plant and industrial manufacturers such as breweries, oil refiners,
textile plants, chemical plants and paper mills and (b) commercial industrial
heat processors including municipal authorities and universities.
The Company had found that its technology was often not
readily understood by power plant managers who therefore hesitated to test the
IFT System. The Company devised a four step approach to educate the power
generation community about its technology. First, it employed people experienced
in boiler and burner applications to market the System. Second, the Company has
marketed the System to large multiple plant users, with emphasis on well known
international companies, so that such companies may be used as references for
other potential customers and also that such customers will consider using the
IFT System in their other plants. Third, the Company utilizes the services of a
recognized authority in flame chemistry to specifically explain the scientific
principles behind the System. Fourth the Company has introduced a reporting
system using sophisticated statistical modeling to present the test results to
potential customers in a succinct, concise manner. This reporting system
computerizes data derived from testing flue gases, monitors fuel to steam
performance and then presents in graphic form the benefits offered by the IFT
System to the customer.
Sales and Rentals
The Company has adopted two approaches to its sales efforts. First, it
sells directly to industrial users with its own employees in the UK and Belgium
supplemented by the use of independent sales agents. Secondly the Company sells
the System through dealers who are assigned a specific territory and compensated
on a commission basis. This marketing method is generally used in Europe.
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More recently the company has been working with energy management
companies who undertake to operate a customer's power or boiler plant, the
benefit to these companies is to reduce their operating costs by reducing their
fuel bills. Generally these organizations prefer to rent the IFT System, as
their payback is immediate.
The Company will rent or sell the System. In the general industrial
market customers prefer to rent, in the oil and petrochemical industry the
preference is to purchase.
Warranty and Service
The Company provides a one year warranty on parts and labor to
purchasers of the System and thereafter servicing under a service contract.
Lessees of the system receive service without additional charge within the terms
of the rental agreement.
Assembly and Suppliers
The IFT System is assembled in the U.K. at the Company's facility in
Laindon, Essex under strict quality control procedures. Although there have been
no sourcing problems, the Company has a policy of dual sourcing where this is
deemed advantageous for cost and continuity of supply. Single sourcing is
currently confined to vibrators and air pumps that are widely produced for use
in other industries and therefore readily available.
Research and Development
The Company's research and development efforts are a continuing process
and are focused primarily on refining the vibration technology that forms the
basis of the IFT System. To that end, the Company has studied such areas as the
interaction of the charged particles and the combustion process, the delivery of
the charged particles to the combustion chamber, the optimum volume of the
charge, the optimum ratio of air to liquid surface and the impact of pressure
and temperature on delivery of the charge. The Company's efforts resulted in an
enhancement to the patented vibration technology for which a European patent
application was filed in January 1994.
The Company's research and development costs are written off as
incurred. Employees engaged in engineering and manufacturing also perform R & D
functions, therefore it is unrealistic to isolate these specific costs since
they were not material in
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1997.
Patents
The first U.S. Patent for the Ion generating technology utilized by the
IFT System was issued in 1975 to F.A. Wentworth, Jr. ("Wentworth"). This
original technology employed a "bubble" process whereby the air was "bubbled"
through liquid to release Ions at the surface of the liquid. A subsequent patent
was issued to Wentworth in December 1990 employing a "vibration" process which
substantially enhanced the commercial potential of the technology by increasing
the negative charge. The "vibration" technology involves vibrating the surface
of the water to release the Charged Particles. In January 1994, an additional
patent application was filed in Europe on behalf of the Company covering an
enhancement to the vibration technology. This improved "Vibration" technology
allows for a more powerful and more consistent negative charge than the initial
Wentworth vibration patent. This improvement has been incorporated into the IFT
System. The Company filed counterpart applications to its latest European patent
application in the United States and several other foreign countries in 1995.
The Company entered into a Royalty Agreement ("Royalty Agreement") dated
June 2, 1994 (effective as of December 5, 1991) with Wentworth pursuant to which
Wentworth sold all of his interest in the patents relating to the ion generating
technology to the Company. As consideration for the assignment and sale,
Wentworth received a $50,000 initial payment and a $6,000 per month royalty fee
during the life of the patents. In addition, Wentworth purchased 80,000 shares
of the Company's Common Stock at S. 125 per share in December 1991. Wentworth
has retained a security interest in the patent rights transferred to the Company
pursuant to the Royalty Agreement.
The Company owns six U.S. Patents, twelve foreign patents and five foreign
patent applications covering, in the aggregate, up to twenty different
countries. Several of the earlier "bubble" technology patents have expired.
However, improvement patents covering the "bubble" technology still exist in the
United States and several foreign countries, and the more important "vibration"
technology patents, which form the basis of the IFT System, run to at least
2007. The Company was also granted a patent in Japan.
While the Company intends to vigorously enforce its patent rights against
infringement by third parties, no assurance can be
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given that such rights will be enforceable or will provide the Company with
meaningful protection from competitors or that any pending patent applications
will be allowed. Even if a competitor's products were to infringe patents owned
by the Company, it could be damaging to the Company to enforce its rights
because such action would divert funds and resources which otherwise could be
used in the Company's operations. No assurance can be given that the Company
would be successful in enforcing such rights, that the Company's products or
processes do not infringe the patent or intellectual property rights of a third
party, or that, if the Company is not successful in a suit involving patents or
other intellectual property rights of a third party, a license for such
technology from such third party would be available on commercially reasonable
terms, if at all.
Regulations
Concern over environmental pollution has led to legislation introducing
tougher and tighter controls on emissions. NOx, for example, is now understood
to be a key element in the formation of ground level ozone, widely recognized as
a hazard to health and a precursor to urban smog. The problem for industry is to
reduce NOx levels as is currently demanded while not increasing emissions of the
equally undesirable carbon monoxide or reducing power generation capacity.
According to available statistics, approximately 55% of the 20 million tons of
annual Nox production comes from utilities, industrial boilers and furnaces the
balance is from motor vehicles.
The Federal Clean Air Act, initially adopted in 1970 and extensively
amended in 1990 and European Community regulations require compliance with
specified air quality standards and empower government to establish and enforce
limits on the emission of various pollutants from specific types of industrial
facilities. In the USA, the states have primary responsibility for implementing
these standards, and, in some cases, have adopted standards more stringent than
those established by Federal regulation.
In general, emitters of pollution are required to obtain permits issued by
the appropriate environmental agency. A typical permit would set forth the
amount of pollutants that the "source" may emit, mandatory emission control
device description and installation deadlines plus monitoring/reporting
requirements. Pollution sources maybe charged a fee proportional to the amount
of pollution the source creates each year. This provides an incentive
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for the polluter to acquire technology which will reduce its emissions. IFT is
attempting to work with customers on an individual basis prior to and during its
process of negotiating permits in an attempt to have the System "accepted" by
such regulatory agencies.
Domestic and international environmental laws and regulations are, and
will continue to be, a principal factor affecting demand for the IFT System.
Although the Company believes there is a trend toward increasing regulation and
enforcement by all levels of government, a decline in enforcement and related
expenditures by businesses subject to such laws and regulations could have a
significant adverse effect on the demand for the IFT System. In addition, there
can be no assurance that the IFT System currently, or as adjusted or enhanced,
will enable others to comply with specified or yet unspecified emissions
standards implemented by any amendments to present laws and regulations or any
future legislation.
Competition
While most other pollution control technologies are aimed at reducing
airborne emissions, the Company is not aware of any technology which enhances
combustion efficiency and reduces noxious emissions. The technology used by the
Company's competitors can be divided into three categories: pre-combustion,
combustion and post-combustion.
Pre-combustion techniques include chemical additives, low NOx burners, and
water/steam injection added to the fuel. Such techniques can achieve reduction
in particulate and NOx emissions but do not result in material fuel savings.
Combustion techniques include air/fuel control systems, chemical additives
(i.e. urea injection) and flue gas recirculation. These methods reduce NOx
emissions but may result in higher particulate emissions and/or reduced boiler
efficiency. Furthermore, they are generally more expensive to install than the
IFT System.
Post-combustion systems include precipitators, bag filters and scrubbers.
These systems require large capital expenses often involve high maintenance and
operating costs and do not address fuel efficiency. Some have the added
disadvantage of producing by-products which may present disposal problems.
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The IFT technology is not, by itself, a solution to all emissions
problems. More frequently the technology is complementary to solutions a
customer may wish to utilize. For example, to achieve extremely low NOx
emission, ammonia injection might be selected. IFT could enhance combustion
efficiency so that less NOx is produced and subsequently less ammonia required
to achieve the final lower NOx level.
While the Company believes that its System enjoys significant advantages
as compared to its competitors' products, many of the Company's competitors have
greater resources, both financial and otherwise, than the Company and therefore
may be capable of testing, enhancing, marketing and distributing their products
on a wider basis than the Company. In addition, future technological
developments and novel approaches in the flame combustion field as well as
enhancements of current technology will, in all likelihood, create new products
and services that directly compete with the IFT System. There can be no
assurance that the Company would not be adversely affected by such technological
change.
Item 2. PROPERTY
The Company leases approximately 10,000 square feet of space for its
principal executive offices, manufacturing and research and development
facilities in Laindon, Essex, U.K. This lease expires in December 1997, the
terms for renewal are currently being negotiated. The base rent for this
facility is approximately $6,000 per month for 1995, approximately $6,655 per
month for 1996 and approximately $7,375 per month for 1997.
The Company maintains one office in New Canaan, Connecticut on a month to
month basis at $105 per month and a sales office in Gent, Belgium pursuant to a
three year lease at $360 per month plus utilities.
The Company maintains its corporate office in Wilmington, Delaware
pursuant to an annual lease with an annual rental of approximately $3,000 plus
utilities. Such lease is renewed annually.
The Company believes that its facilities are adequate for its present
and anticipated needs.
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Item 3. LEGAL PROCEEDINGS
Not applicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
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PART II
Item 5. MARKET FOR REGISTRANT'S SECURITIES AND RELATED
STOCKHOLDER MATTERS
The Company's common stock, Class A and Class B Warrants are quoted on
the Nasdaq SmallCap Market and Boston Stock Exchange under the symbols "IFTI",
"IFTIW", and "IFTIZ" respectively.
The table set forth below shows, for the period indicated, the high and
low bid quotations on the Nasdaq SmallCap Market for the Company's Securities.
These amounts represent quotation between dealers in securities, and do not
include retail mark-ups, mark-downs or commissions and may not represent actual
transactions.
Bid
Period Ended Type of Security High Low
September 1995 Common Stock 1 3/16 11/32
Class A Warrant 5/32 3/32
Class B Warrant 3/32 3/32
December 1995 Common Stock 7/16 1/4
Class A Warrant 3/32 1/64
Class B Warrant 3/32 1/64
March 1996 Common Stock 1 1/8 1/4
Class A Warrant 3/16 3/32
Class B Warrant 5/32 3/32
June 1996 Common Stock 2 25/32 5/8
Class A Warrant 9/32 5/32
Class B Warrant 7/32 1/8
September 1996 Common Stock 2 3/4 1
Class A Warrant 1/4 3/32
Class B Warrant 1/4 3/16
December 1996 Common Stock 21/2 1
Class A Warrant 1/8 3/32
Class B Warrant 3/16 3/32
March 1997 Common Stock 2 3/4 1 5/32
Class A Warrant 3/16 1/16
Class B Warrant 3/16 3/32
June 1997 Common Stock 3 13/16 2 1/8
Class A Warrant 1/8 1/16
Class B Warrant 7/32 1/8
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At September 19, 1997 the number of shareholders of record and in
street name of the Company's common stock and Class A Warrants and Class B
Warrants were 99, 28 and 29, respectively. The Company has not paid any cash
dividends.
Item 6. SELECTED FINANCIAL DATA
Statement of Six Months
Operations Year Ended Ended
Data: December 31, 1992 June 30,1993(1)
Revenues.... $ 22,751 $17,025
Cost of
Revenues... 131,793 121,828
Operating
Expenses... 1,485,644 999,771
Net (loss).. (1,573,706) (1,101,056)
Net (loss) per
share...... $ (.44) $ (.27)
Weighted average
number of common
shares..... 3,546,668 3,957,540
Cash dividend
per common share..
Balance Sheet
Data: December 31, 1992 June 30, 1993 (1)
----------------- -------------
Total assets.. $2,063,110 $3,965,244
Working capital. 765,500 2,670,427
Long-term
liabilities. 437,464 437,108
Total
liabilities. 806,732 758,335
Accumulated
deficit..... (1,579,788) (2,680,844)
Cumulative
translation
adjustment... (148,467) (166,806)
Stockholders'
equity...... 1,256,378 3,206,909
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<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Year Ended Year Ended Year Ended Year Ended
June 30, 1994 June 30, 1995 June 30, 1996 June 30, 1997
Statement of
Operations Data:
Revenues $1,190,291 $ 476,161 $ 593,959 $628,694
Cost of Revenues 445,355 344,868 537,110 723,327
Operating Expenses 2,631,912 2,974,998 1,669,145 882,524
Net Loss (1,928,987) (2,725,744) (1,563,667) 1,004,425
Net Loss per
share $ (.46) $ (.51) $ (.29) $ (.19)
Weighted average
number of 4,210,668 5,318,445 5,410,500 5,412,100
common shares
Cash Dividend
per common share --- ---- --- ---
Balance Sheet:
Total Assets $2,601,471 $4,463,543 $2,659,185 $1,627,291
Working Capital 636,096 2,687,338 1,306,293 434,686
Long-term
liabilities 422,521 394,625 364,773 346,249
Total
liabilities 1,318,560 1,106,581 886,274 782,734
Accumulated
deficit (4,609,831) (7,335,575) (8,899,242) (9,903,667)
Cumulative
translation
adjustment (161,817) (130,436) (150,820) (143,199)
Stockholders'
Equity 1,282,911 3,356,962 1,772,911 844,557
</TABLE>
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Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Overview
The Company commenced operations in late December 1991. During 1992,
the Company's primary focus was completing the design and testing of the IFT
System. In 1993, the first production equipment was made available and a
customer testing program was commenced. Simultaneously, the Company stepped-up
its marketing and promotional activities.
In 1993, the Company changed its year end to June 30. During Fiscal
1994 the Company increased its staffing levels and acquired the Vapormid
business from EcoLab, BVBA, a distributor of the Company's earlier "bubble
technology".
On July 18, 1994 the Company's Initial Public Offering was completed
generating net proceeds of $4,768,414. In conjunction with the public offering,
the Company increased its operational and marketing activities in an effort to
achieve cash flow break even by fiscal year end. This objective was not
accomplished in part because of long lead times experienced between initial
sales presentations and invoicing, together with a lack of positive test data on
three very large pulverized coal facilities. Therefore a sharp reduction in
expenses, including staff cuts, was implemented in May which reduced annual
costs by approximately $1,200,000 during fiscal 1996. A leading international
oil company completed testing the IFT System in its central research facility
with positive results and recommendations to its operating units to utilize the
technology. As a consequence the Company has installed an IFT System on a large
Texaco boiler with follow on orders expected in Fiscal '98. Likewise initial
installations have been completed at sites with British Petroleum and Amoco. An
average size refinery or petrochemical plant could utilize IFT technology and
equipment valued at approximately $1,000,000. With this large market
opportunity, fiscal '98 revenues are estimated to be higher than in the past
year providing positive cash flow and net income. The additional volume of
business can be accommodated within the existing capacity of the Company
allowing for increases in material purchases. The attainment of positive cash
flow remains the Company's primary financial objective and the immediate focus
of operations will be the European Community where the IFT technology has
achieved market recognition.
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Year ended June 30, 1997 and June 30, 1996
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Total revenues increased to approximately $629,000 during the year
ended June 30, 1997 from $594,000 in the fiscal year ended June 30, 1996. The
net increase relates to a decrease in rental income to approximately $307,000
($347,000 in 1996), an increase in system sales to approximately $171,000
($123,000 in 1996) and an increase in service income to approximately $151,000
($124,000 in 1996). The decrease in rental income is due to rentals being
converted to sales during the year. The increase in system sales is primarily
attributable to UK activity in 1997 where larger companies may prefer to
purchase the IFT System rather than rent, however, system sales occur on an
irregular basis. The increase in service income reflects increased installation
fees in 1997.
There was a gross loss of approximately $95,000 during the year ended
June 30, 1997 compared to a profit of $57,000 during the year ended June 30,
1996. The gross loss related primarily to field engineering and service costs of
approximately $269,000 in 1997 which in the previous year were classified, for
nine months, in general and administrative expenses. Total field engineering and
service costs were $716,000 in 1996 and $443,000 in 1997. The reduction of
$273,000 was from staff reductions in the United States and Belgium and the
transfer of support activities to England. Other items in cost of goods sold in
aggregate, were reduced $83,000 for the year ended June 30, 1997. The different
classification relates to the maturing of the Company's technology from a
development state requiring extensive engineering support to complete the sales
process to a mature product. The Company has discontinued free or conditional
testing and all trial installations are paid for by the customer.
General and administrative expenses decreased to approximately $657,000
during the year ended June 30, 1997 from approximately $1,230,000 in the year
ending June 30, 1996, a reduction of $573,000. Field engineering and service
costs of $541,000 which represents nine months of charges in the year ended June
30, 1996 are no longer classified as general and administrative as stated above.
Other items in aggregate were reduced $32,000.
Sales and marketing expenses decreased to $161,000 during the year
ended June 30, 1997 from approximately $362,000 during the year ended June 30,
1996. The decrease of $201,000 is primarily due to the termination of sales and
marketing arrangements in Eastern Europe and Germany and the substitution of
geographic coverage by existing sales staff and top management.
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Other income was a loss of approximately $27,000 during the year ended
June 30, 1997 from a profit of $49,000 during the year ended June 30, 1995, a
decrease of $75,000 primarily due to the use of funds in operations of the
Company and reduced interest income.
Year ended June 30, 1996 and June 30, 1995
Total revenues increased to approximately $594,000 during the year
ended June 30, 1996. The increase relates to an increase in rental income to
approximately $347,000 ($277,000 in 1995), an increase in system sales to
approximately $123,000 ($81,000 in 1995) and an increase in service income to
approximately $124,000 ($118,000 in 1995). The increase in rental income is due
to trials being converted to normal rentals during the year. The increase in
system sales is primarily attributable to UK activity in 1996 where larger
companies may prefer to purchase the IFT system rather than rent. System sales
occur on an irregular basis. The increase in service income reflects the
increased sales and rentals in 1996.
Gross profit decreased to approximately $57,000 during the year ended
June 30, 1996 from $131,000 during the year ended June 30, 1995. The decrease
related to field engineering, installation and other field costs of
approximately $176,000 incurred during the final quarter of the year ended June
30, 1996 which had been classified as cost of revenues; in previous periods,
these costs have been classified as sales and marketing expenses. The different
classification relates to the maturing of the Company's system from a
development state requiring extensive engineering support to complete the sales
process to a mature product. In January, the Company discontinued free or
conditional testing and by the fourth quarter all previously free tests had been
completed.
General and administrative expenses decreased to approximately
$1,230,000 during the year ended June 30, 1996 from approximately $1,855,000
during the year ended June 30, 1995, a decrease of $625,000 due to internal
staff and other cost reductions implemented in May 1995. A total one-time cost
of $198,000 was incurred in May 1995, related to the personnel reductions.
Sales and marketing expenses decreased to approximately $362,000 during
the year ended June 30, 1996 from approximately $853,000 during the year ended
June 30, 1995. The decrease of $491,000 is due to cost reductions implemented in
May 1995, and continuing through 1996, as well as approximately $176,000 of
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engineering and other technical costs incurred in the fourth quarter of the year
ended June 30, 1996, which were included in cost of revenues. These technical
costs were included in sales and marketing expenses during the year ended June
30, 1995 and the first three quarters of the year ended June 30, 1996. This
change is a result of the change in responsibilities of certain employee's
caused by the maturing of the Company's system from a developmental state to a
mature product.
Other income decreased to approximately $49,000 during the year ended
June 30, 1996 from approximately $118,000 during the year ended June 30, 1995, a
decrease of $69,000 primarily due to the use of funds in operations of the
Company.
Liquidity and Capital Resources
Since inception, the Company's funding requirements have been met
through the initial public offering of equity securities totaling approximately
$4.8 million, the private placement of equity securities totaling approximately
$6 million, and revenue generated from operations. On July 14, 1997 the Company
sold an additional 771,833 common shares with gross proceeds of $1,736,624.
Net cash used in operations was approximately $900,000, $1.3 million,
and $2.6 million for the years ended June 30, 1997, 1996 and 1995. The principal
use of cash was to fund operating losses incurred by the Company in developing
the IFT System and sales, marketing and promotional activities. Working capital
was approximately $435,000, $1.3 million, and $2.7 million at June 30, 1997,
1996 and 1995, respectively. Fluctuations in working capital have been primarily
due to increases in accounts receivable and inventory offset by increases in
accounts payable and other accruals.
The Company liquidated its U.S. Treasury investments during the year
ended June 30, 1996. The Company's primary investing activity in the year ended
June 30, 1995 involved the acquisition and sale of U.S. Treasury obligations.
Capital expenditures amounted to approximately $29,000 and $100,000 during
fiscal years "97 and "95, respectively. There were no capital expenditures
during the year ended June 30, 1996. Capital expenditures were associated with
the purchase of equipment used in manufacturing as well as expenditures incurred
to produce rental equipment. The Company has no plans for a significant
investment in capital
18
<PAGE>
equipment in fiscal 1998.
Under an Assignment and Royalty Agreement with the inventor of the
Technology utilized by the Company's System ("Royalty Agreement"), the Company
is required to make payments of $6,000 per month to the inventor over the
remaining life of patents relating to the technology. In conjunction with
Royalty Agreement, the Company pays an executive officer/director of the Company
a royalty override of $5,000 per month.
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 $1,571,960 net
of discounts, commissions and offering costs of $164,664.
The Company believes that the proceeds from the above offering together
with anticipated funds from operations, will satisfy the Company's working
capital requirements and capital expenditures through fiscal 1998. The Company
intends to focus its operations primarily on continued expansion with the
European Community.
Currency Fluctuation
The Company's revenues are invoiced primarily in Pounds Sterling and
also currencies of other European countries (Belgium, Austria and Germany).
Changes in exchange rates of these currencies relative to the U.S. dollar could
affect the Company's operations and cash flow. During the fiscal years ended
June 30, '97 and '96, currency fluctuations were not significant and were not an
influence on Company revenues and expenses. Currently, the Company does not
enter into derivative contracts to hedge currency risks.
During the year ended June 30, 1997, the average rate of exchange used
to translate revenues and expenses denominated in Pounds Sterling has increased
from approximately $1.55 U.S. dollars to 1 Pound to approximately $1.65 U.S.
dollars to 1 Pound.
Inflation
The Company does not believe that inflation has had a significant
impact on the results of its operations since inception.
19
<PAGE>
Forward-Looking Statements
Forward-looking statements made in this Annual Report are made pursuant
to the safe harbor provisions of the Private Securities Litigation Reform Act of
1995. Investors are cautioned that all forward-looking statements involve risks
and uncertainties including without limitation risks in technology development,
risks in product development and market acceptance of and demand for the
Company's products, risks associated with competition and competitive pricing
pressures, risks associated with foreign sales and other risks detailed in the
Company's filings with the Securities and Exchange Commission.
20
<PAGE>
Impact of Year 2000
The Year 2000 Issue is the result of computer programs being written
using two digits rather than four to define the applicable year. Any computer
programs that have time or date sensitive software may recognize a date defined
as "00" as being the Year 1900 rather than the Year 2000. This could cause
system failure, miscalculations or other disruptions of operations, including,
among other things an inability to process transactions, obtain supplies or raw
materials from vendors or otherwise engage in normal business activities.
The Company has reviewed the impact of the Year 2000 on both the
hardware and software applications affecting the Company's operations. Based on
such review, management does not expect the cost of any required software
changes to have a material impact on the Company's operations and such changes
can be implemented prior to the Year 2000 in the normal course of business.
Management cannot predict the impact of the Year 2000 on its vendors business or
whether such impact will have a material effect on the Company's operations.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See the consolidated financial statements and the financial statement
schedule set forth in Item 14 of this annual report.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable
21
<PAGE>
PART III
Item 10. Directors and Officers of the Registrant
Douglas F. Johnston ............................. CFO/Chairman
Anthony J.S. Garner ................... President/CEO/Director
Paul C. O'Neill............................ Treasurer/Director
Frank J. Hollendoner ................................ Director
Henry W. Sullivan ................................... Director
Name, Age and Principal Occupation
Douglas F. Johnston, 67, 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, 58, has served as a director and President of the
Company and also as Chairman and Chief Executive Officer of IFT, Ltd., the
Company's U.K. subsidiary, since the Company's inception and as CEO of the
Company since May 15, 1996. 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.
22
<PAGE>
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, 72, 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, 52, 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
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. Since 1994, Mr. Hollendoner has been
a private investor. 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 1997 the Board of Directors held four meetings and acted
twice by unanimous written consent.
The Company has two committees of the Board, an audit committee and a
compensation committee, both of which are comprised of a majority of outside
directors.
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
23
<PAGE>
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.
24
<PAGE>
Item 11. Executive Compensation
The following table sets forth the cash and cash equivalents paid
during the fiscal years ended June 30, 1995, 1996 and 1997 to the Company's
Chief Executive Officer during the last fiscal year. No other officer is
compensated at a rate in excess of $100,000 per year.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SUMMARY COMPENSATION TABLE
Name and Year Annual Compensation long-term
Principal Position Compensation
Awards Payouts
Salary Bonus Other Restricted Options/
($) ($) ($) Stock SARS LTIP All
Awards OTHER
------------------ ---------------
Anthony J.S. 1997 76,950
Garner/CEO 1996 72,900
1995 70,000
</TABLE>
Mr. Garner is currently being compensated at the rate of $99,000
per year.
25
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and
Management
On February 28, 1998, there were 6,297,155 shares of Common
Stock outstanding. The following table sets forth as of February 28, 1998 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 14.80%
114 Forest Street
New Canaan, CT 06840
Paul C. O'Neill ......... 464,000 7.37%
95 Eaton Square
London SW 1W 9DD
England
Anthony J.S. Garner ..... 330,000 (2) 5.24%
96 Thorpe Hall Ave
Thorpe Bay, Essex SSl 3AS
England
Frank J. Hollendoner ...... 20,000 *
c/o Independent Care
26
<PAGE>
26 Eccleston Square
London, England SWIW 1NS
Henry W. Sullivan ........16,000 (3) *
10814 Jaycee Lane
Houston, TX 77024
Donald M. Kleban ......... 335,400(4) 5.22%
2 Sutton Place South
New York, NY 10022
Ira Sochet ...............319,203(5) 5.07%
9350 S. Dixie Highway
Suite 1260
Miami, FL 33156
All Officers and Directors
as a Group (5 persons) .. 1,602,000(2)(3) 25.44%
-------------------
* 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.
27
<PAGE>
(2) 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.
(3) Includes 2,000 shares of Common Stock and immediately
exercisable options to purchase 14,000 shares of Common Stock
at $1.75 per share.
(4) Includes 202,400 shares of Common Stock (45,000 of which
are 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, 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.
(5) Consists of 319,203 shares of Common Stock. The foregoing
information is as reported in a Schedule 13D filed by Sochet
with the Company dated as of January 23, 1998.
Item 13. Certain Relationships and Related Transactions.
The Company is obligated to pay Douglas F. Johnston, the Company's
Chairman, a $60,000 per year royalty for the duration of the patents
contemplated by the Royalty Agreement, one of which lasts until 2007.
28
<PAGE>
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.
29
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement
Schedules and Reports on Form 8-K
Page
A. (1) Financial Statements
Report of Independent Auditors F-1
Consolidated Balance Sheet - June 30, 1997 and 1996 F-2
Consolidated Statement of Operations - Years Ended F-3
June 30, 1997, 1996 and 1995
Consolidated Statement of Stockholders' Equity - F-4
Years Ended June 30, 1997, 1996 and 1995
Consolidated Statement of Cash Flows - Years Ended F-5
June 30, 1997, 1996 and 1995
Notes to Consolidated Financial Statements F-6
The following consolidated financial statement schedule of Ionic
Fuel Technology, Inc. is included in Item 14(d):
Schedule II - Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable and therefore have
been omitted.
(3) Exhibits
30
<PAGE>
3.1 Certificate of Incorporation
Incorporated by reference to the filing of such Exhibit with
Registrants Annual Report on Form 10-K for the fiscal year
ended June 30, 1996.
3.2 By-Laws
Incorporated by reference to the filing of such Exhibit with
Registrants Annual Report on Form 10-K for the fiscal year
ended June 30, 1996.
4.1 Specimen Certificate of Common Stock
Incorporated by reference to the filing of such Exhibit with
Registrants Annual Report on Form 10-K for the fiscal year
ended June 30, 1996.
4.2 Specimen Certificate of A Warrant
Incorporated by reference to the filing of such Exhibit with
Registrants Annual Report on Form 10-K for the fiscal year
ended June 30, 1996.
4.3 Specimen Certificate of B Warrant
Incorporated by reference to the filing of such Exhibit with
Registrants Annual Report on Form 10-K for the fiscal year
ended June 30, 1996.
10.1 Stock Option Plan
Incorporated by reference to the filing of such Exhibit with
Registrants Annual Report on Form 10-K for the fiscal year
ended June 30, 1996.
27 Financial Data Schedule
B. Reports on Form 8-K
Form 8-K dated July 10, 1997 electronically filed and
accepted on July 15, 1997; Accession No. 0001012118-97-000095.
Reference Item 5. Other Events: On July 10, 1997, the Registrant
concluded a private placement of Units pursuant to Regulation S
promulgated under the Securities Act of 1933, as amended.
31
<PAGE>
Form 8-K dated July 24, 1997 electronically filed and
accepted on July 24, 1997; Accession No. 0001012118-97-000105. Item
5, Other Events: Extending the expiration date of the Class A
Warrants.
32
<PAGE>
Report of Independent Auditors
To the Board of Directors and Stockholders
Ionic Fuel Technology, Inc.
We have audited the accompanying consolidated balance sheet of Ionic Fuel
Technology, Inc. as of June 30, 1997 and 1996, and the related consolidated
statements of operations, stockholders' equity, and cash flows for each of the
three years in the period ended June 30, 1997. Our audits also included the
financial statement schedule listed in the Index at Item 14(a). These financial
statements and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Ionic Fuel Technology, Inc. at June 30, 1997 and 1996, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended June 30, 1997, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects, the information set forth therein.
/s/ Ernst & Young LLP
Stamford, Connecticut
September 5, 1997
F-1
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Ionic Fuel Technology, Inc.
Consolidated Balance Sheet
June 30
1997 1996
Assets
Current assets:
Cash and cash equivalents (Note 1) $ 191,629 $1,173,088
Trade accounts receivable (net of allowances of $0 and 59,420 80,332
$43,791, respectively)
VAT and other receivables - 25,642
Inventory (Note 2) 482,446 464,093
Prepaid expenses 137,676 84,639
Total current assets 871,171 1,827,794
Equipment and vehicles, net (Notes 1 and 3) 153,117 192,608
Patents, net (Notes 1 and 4) 603,003 638,783
Total assets $ 1,627,291 $2,659,185
Liabilities and stockholders' equity Current liabilities:
Accounts payable $ 87,155 $ 87,739
Accrued expenses 239,827 316,493
Provisions for warranties and returns 16,380 63,833
Accrued royalty - due to officer (Note 4) 40,000 20,800
Current portion of royalty agreement (Note 4) 18,720 16,127
Accrued salary, benefits and payroll taxes 19,419 16,509
Current portion of capital lease obligations (Note 5) 14,984 -
Total current liabilities 436,485 521,501
Other long-term liabilities (Note 4) 346,249 364,773
Stockholders' equity (Notes 7 and 10): Common stock, $.01 par value:
20,000,000 shares authorized; issued and outstanding 5,401,600 and
5,400,000 shares, respectively (Note 7)
54,016 54,000
Capital in excess of par value 10,837,407 10,768,973
Accumulated deficit (9,903,667) (8,899,242)
Cumulative translation adjustment (Note 1) (143,199) (150,820)
Total stockholders' equity 844,557 1,772,911
Total liabilities and stockholders' equity $ 1,627,291 $ 2,659,185
=========================== ============================
See accompanying notes.
</TABLE>
F-2
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Ionic Fuel Technology, Inc.
Consolidated Statement of Operations
Year ended June 30
1997 1996 1995
Revenues (Note 1):
Equipment sales $ 171,079 $ 122,671 $ 80,788
Service income 150,755 124,084 118,035
Rental income 306,860 347,204 277,338
Total revenue 628,694 593,959 476,161
Cost of revenues 723,327 537,110 344,868
(94,633) 56,849 131,293
Operating expenses:
General and administrative 657,133 1,229,969 1,854,880
Sales and marketing 161,418 361,644 853,093
Restructuring charges (Note 9) - - 198,006
Royalty charges 60,000 60,000 60,000
Research and development 3,973 17,532 9,019
882,524 1,669,145 2,974,998
------------------------------------------------------------------------
Loss from operations (977,157) (1,612,296) (2,843,705)
Other income (expense):
Interest income 28,801 106,905 161,787
Miscellaneous income - - 16,145
Interest expense (56,069) (58,276) (59,971)
(27,268) 48,629 117,961
--------------------------------------------------------------------------
Net (loss) $(1,004,425) $(1,563,667) $(2,725,744)
Net (loss) per share (Note 1) $ (0.19) $ (0.29) $ (0.51)
====================================================== ==================
Weighted average number of common
shares
5,412,100 5,410,500 5,318,445
(Note 1)
=========================================================================
See accompanying notes.
</TABLE>
F-3
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Ionic Fuel Technology, Inc.
Consolidated Statement of Stockholders' Equity
Common Stock Capital in
--------------------------------------
Shares Par Excess of Par
Value Value
Balance at June 30, 1994 4,200,000 $42,000 $ 6,012,559
Issuance of common stock 1,200,000 12,000 4,756,414
Net loss
Translation adjustment
------------------- -------------------------------------------
Balance at June 30, 1995 5,400,000 54,000 10,768,973
Net loss
Translation adjustment
Balance at June 30, 1996 5,400,000 54,000 10,768,973
Net loss
Issuance of compensatory
stock options and warrants
68,000
Exercise of stock options 1,600 16 434
Translation adjustment
------------------- -------------------------------------------
Balance at June 30, 1997 5,401,600 $54,016 $10,837,407
=================== ===========================================
See accompanying notes.
F-4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Ionic Fuel Technology, Inc.
Consolidated Statement of Stockholders' Equity
Cumulative
Accumulated Translation
Deficit Adjustment
Total
Balance at June 30, 1994 $(4,609,831) $(161,817) $ 1,282,911
Issuance of common stock 4,768,414
Net loss (2,725,744) (2,725,744)
Translation adjustment 31,381 31,381
------------------------ ----------------------- ---------------------
Balance at June 30, 1995 (7,335,575) (130,436) 3,356,962
Net loss (1,563,667) (1,563,667)
Translation adjustment (20,384) (20,384)
Balance at June 30, 1996 (8,899,242) (150,820) 1,772,911
Net loss (1,004,425) (1,004,425)
Issuance of compensatory
stock options and
warrants 68,000
Exercise of stock options 450
Translation adjustment 7,621 7,621
------------------------ ----------------------- ---------------------
Balance at June 30, 1997 $(9,903,667) $(143,199) $ 844,557
======================== ======================= =====================
See accompanying notes.
F-5
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Ionic Fuel Technology, Inc.
Consolidated Statement of Cash Flows
Year ended June 30
1997 1996 1995
----------------------- ---------------------- --------------------
Operating activities
Net (loss) $(1,004,425) $(1,563,667) $(2,725,744)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation 66,241 111,316 67,763
Amortization 62,661 85,653 79,414
Non cash compensation 16,000 - -
Changes in operating assets and liabilities:
Accounts receivable 26,128 112,352 (77,870)
Other receivables 8,674 2,311 5,039
Inventory 43,464 (9,058) (89,498)
Prepaid expenses 19,211 61,750 (62,966)
Deferred charges - - 327,614
Other assets 2,195 33,374 (6,267)
Accounts payable and accrued expenses (131,121) (174,440) (165,866)
Net cash used in operating activities (890,972) (1,340,409) (2,648,381)
Investing activities
Acquisition of investments - - (6,063,303)
Acquisition of patents and license (25,885) (18,703) (38,219)
Acquisition of equipment (29,239) - (100,283)
Accretion of interest - (13,949) (122,161)
Proceeds from maturity of investments - 1,300,000 4,899,413
Net cash (used in) provided by investing (55,124) 1,267,348 (1,424,553)
activities
Financing activities
Principal payments on capital leases - (14,707) (30,911)
Principal payments under licensing agreement (15,931) (13,725) (11,824)
Net proceeds from issuance of stock 450 - 4,768,414
Net cash (used in) provided by financing (15,481) (28,432) 4,725,679
activities
----------------------- ---------------------- ------------------
Effects of exchange rate differences on cash (19,882) (6,677) 9,810
----------------------- ---------------------- --------------------
(Decrease) increase in cash (981,459) (108,170) 662,555
Cash, beginning of year 1,173,088 1,281,258 618,703
Cash, end of year $ 191,629 $ 1,173,088 $ 1,281,258
======================= ====================== ====================
Interest paid $ 56,069 $ 58,276 $ 59,971
======================= ====================== ====================
See accompanying notes.
</TABLE>
F-6
<PAGE>
Ionic Fuel Technology, Inc.
Notes to Consolidated Financial Statements
1. Summary of Significant Accounting Policies
Basis of Presentation
Ionic Fuel Technology, Inc. ("Company"), a Delaware corporation formed on
December 10, 1991, manufactures ion generating equipment for sale or lease to
entities in various industries, in the United Kingdom and Europe, to reduce
airborne emissions and fuel consumption.
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries, Ionic Fuel Technology USA, Inc. ("IFT, USA"),
a company incorporated in the U.S. and Ionic Fuel Technology Ltd. ("IFT Ltd."),
a company incorporated in the United Kingdom. All significant intercompany
accounts and transactions have been eliminated in consolidation.
Concentration of Credit Risk
At June 30, 1997 and 1996, the Company maintained cash balances of
approximately $69,000 and $980,000, respectively, at a bank in excess of the
insurance limits ($100,000) of the Federal Deposit Insurance Corporation.
The Company performs periodic evaluations of its customers financial
condition and generally does not require collateral.
Cash Equivalents
The Company considers all highly liquid investments with maturities of
three months or less when purchased to be cash equivalents.
Inventory
Inventory is valued at the lower of cost, determined by the first-in,
first-out method, or net realizable value.
Equipment and Vehicles
Equipment and vehicles are stated at cost less accumulated depreciation
and amortization provided on the straight-line basis over the estimated useful
lives of the assets, which range from three to ten years. Equipment under lease
to third parties is depreciated over the life of the lease, generally five
years.
F-7
<PAGE>
Ionic Fuel Technology, Inc.
Notes to Consolidated Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Intangible Assets
Patents are carried at acquisition cost , less accumulated amortization
provided on the straight-line basis over the estimated useful lives of the
assets which range from five to fifteen years. Amortization expense of these
intangible assets amounted to $62,661, $61,732 and $59,410 for the years ended
June 30, 1997, 1996 and 1995, respectively. Accumulated amortization amounted to
$322,272 and $259,611 at June 30, 1997 and 1996, respectively. The carrying
value of the patents are reviewed by management on a periodic basis and when
facts and circumstances suggest the value may be impaired. If this review
indicates that the carrying amounts will not be recoverable, as determined based
on the undiscounted cash flows of revenues generated as a result of such patents
over the remaining amortization period, management will reduce the carrying
amount by the estimated shortfall in cash flows.
The value of rental and maintenance contracts acquired was amortized over
the lives of the contracts, which ranged from one to four years. The original
lives of all contracts purchased expired in 1996. This amortization expense
amounted to $23,921 and $20,004 for the years ended June 30, 1996 and 1995,
respectively.
Income Taxes
The Company accounts for income taxes under the liability method in
accordance with Statement of Financial Accounting Standards (SFAS) No. 109,
"Accounting for Income Taxes." Under this method, deferred income taxes are
recognized for the tax consequences of "temporary differences" by applying
enacted statutory tax rates applicable to future years to differences between
the financial statement carrying amounts and the tax bases of existing assets
and liabilities. Under SFAS 109, the effect upon deferred taxes of a change in
tax rates is recognized in income in the period that includes the enactment
date.
Fair Value
Cash and cash equivalents, accounts receivable and accounts payable: The
carrying amounts reported in the balance sheet for cash and cash equivalents,
accounts receivable and accounts payable approximate their fair value.
Stock Compensation
The Company accounts for stock option grants in accordance with Accounting
Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to
Employees". Under the Company's current plan, options may be granted at not less
than the fair market value on the date of grant and therefore, no compensation
expense is recognized for the stock options granted. In the year ended June 30,
1997, the Company adopted the disclosure provisions of SFAS No. 123, "Accounting
for Stock-Based Compensation".
Per Share Data
Net loss per share of common stock is computed using the treasury stock
method based on the weighted average number of shares of common stock and
dilutive common equivalent shares outstanding during the period.
F-8
<PAGE>
Ionic Fuel Technology, Inc.
Notes to Consolidated Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Foreign Currencies
Adjustments resulting from the translation of the financial statements of
the Company's foreign subsidiary are excluded from the determination of income
(loss) and are accumulated in a separate component of stockholders' equity.
Revenue Recognition
Rental income under operating leases is recognized on a straight-line
basis over the lease term. The equipment leased is owned by the Company and,
accordingly, the Company bears all repairs and maintenance costs incurred. The
lease term is generally five years with an option for renewal. Equipment sales
are recognized upon shipment of the equipment and are recorded net of an
allowance for returns.
Warranty Costs
Estimated warranty costs are provided for when the product is sold.
Field Engineering Costs
Cost of revenues reflects approximately $176,000 of field engineering,
installation, and other field costs incurred in the fourth quarter of the year
ended June 30, 1996. Similar costs incurred prior to these periods were included
in sales and marketing expenses because extensive engineering support was
required to complete the sales process. This change was a result of the change
in responsibilities of certain employee's caused by the maturing of the
Company's system from a developmental state to a mature product.
Reclassification
Certain amounts at year ended June 30, 1996 have been reclassified to
conform to the presentation at the year ended June 30, 1997.
Use of Estimates
The consolidated financial statements have been prepared in accordance
with generally accepted accounting principles and as such, include amounts based
on judgments and estimates made by management, which may differ from actual
results.
F-9
<PAGE>
Ionic Fuel Technology, Inc.
Notes to Consolidated Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Accounting Pronouncements
In February 1997, the Financial Accounting Standards Board (FASB) issued
SFAS No. 128 "Earnings per Share" which the Company will adopt for it second
quarter ending December 31, 1997. SFAS No. 128 requires the Company to change
the method it currently uses to compute earnings per share and requires
restatement of all prior periods. Under the new requirements, the dilutive
effect of stock options are excluded from computing "basic" earnings per share
and remain in the diluted computation. The impact of SFAS No. 128 is not
expected to be material.
2. Inventory
Inventory is comprised of the following:
June 30
1997 1996
Material and supplies $161,817 $152,721
Finished goods 320,629 311,372
$482,446 $464,093
================== =======================
Included in finished goods inventory are units, at customer sites, on a
short-term trial basis.
3. Equipment and Vehicles
Equipment and vehicles are comprised of the following:
June 30
1997 1996
Equipment $ 440,540 $ 404,994
Vehicles 35,015 22,754
475,555 427,748
Accumulated
depreciation (394,708) (321,242)
80,847 106,506
------------------- -----------------------
Equipment under lease 119,667 126,072
Accumulated
depreciation (47,397) (39,970)
72,270 86,102
------------------- -----------------------
$ 153,117 $ 192,608
=================== ======================
Amortization expense included in depreciation expense, relating to the
leased equipment, amounted to $15,247, $20,898 and $18,208 for the years ended
June 30, 1997, 1996 and 1995, respectively.
F-10
<PAGE>
Ionic Fuel Technology, Inc.
Notes to Consolidated Financial Statements (continued)
4. Royalty Agreement
Under an agreement effective as of December 1991, the Company purchased
certain patents and inventions for $50,000 and agreed to make payments of $6,000
per month over the remaining life of the patents (initially 15 years). The
Company has valued these patent rights ($428,698) based upon the present value
of the future minimum royalty payments using an interest rate of 15% per annum.
The remaining balance of this obligation, less amounts currently due, is
included in other long-term obligations and has the following maturities:
Year ending June 30:
1998 $18,720
1999 21,733
2000 25,246
2001 29,281
2002 33,989
thereafter $236,000
$364,969
If certain annual profitability levels are achieved, an additional
royalty of $24,000 per annum will be payable. In conjunction with this
agreement, the Company granted the inventor a security interest in the patents
and inventions during the royalty period.
The Company's Chairman, Douglas F. Johnston, receives an override royalty
of $5,000 per month until the last of the patents expires in 2007. This expense
amounted to $60,000 for each of the years ended June 30, 1997, 1996 and 1995.
Commencing in 1995, $1,600 per month of this override royalty was deferred
resulting in an accrued royalty expense of $40,000 and $20,800 at June 30, 1997
and 1996, respectively.
5. Leases
The Company leases its facility under a noncancelable operating lease
expiring in 1997. The future minimum lease payments under operating and capital
leases as of June 30, 1997 are as follows:
Operating Capital
leases leases
Year ending June 30:
1998 $102,723 $ 2,491
1999 9,130 2,913
2000 3,043 3,146
2001 - 3,399
2002 - 3,039
------------------------- --------------
Total minimum lease payments $114,896 $14,988
========================= ================
The cost of assets under capital leases amounted to $15,247 at June 30,
1997. There was no cost of assets under capital leases at June 30, 1996.
F-11
<PAGE>
Ionic Fuel Technology, Inc.
Notes to Consolidated Financial Statements (continued)
Rent expense amounted to $166,118, $135,720 and $102,439 for the years
ended June 30, 1997, 1996 and 1995, respectively.
The future minimum lease payments receivable under noncancelable operating
leases as of June 30, 1997 are as follows:
Operating
leases
Year ending June 30:
1998 $134,223
1999 66,871
2000 4,926
-------------------------
Total minimum lease payments receivable $206,020
=========================
6. Income Taxes
At June 30, 1997, the Company has available operating loss carryforwards
for United States federal income tax purposes of $2,045,157 which are available
to offset future taxable income, if any, through the indicated years: $6,082 in
2006, $54,766 in 2007, $95,812 in 2008, $600,574 in 2009, $615,511 in 2010,
$380,431 in 2011 and $291,981 in 2012. The amount and timing upon which the
Company may realize future tax benefits from its net operating loss is affected
by prior changes in ownership of the Company. The Company's subsidiary has
unused operating loss carryforwards, with no expiration date, for United Kingdom
income tax purposes, of $7,728,104 at June 30, 1997. The statutory tax rates
during the year ended June 30, 1997 are 34% and 24% in the U.S. and U.K. During
the years ended June 30, 1996 and 1995 the statutory tax rates were 34% and 25%
in the U.S. and U.K., respectively.
Significant components of the Company's deferred tax assets and
liabilities are as follows:
June 30
1997 1996
--------- ----------
Deferred tax liabilities:
Total deferred tax liabilities $ 16,904 $ -
Deferred tax assets:
Benefit of net operating loss carryforwards - 695,353 598,180
U.S.
Benefit of net operating loss carryforwards -
U.K.
1,854,745 1,636,330
Other 41,477 58,899
Total deferred tax assets 2,591,575 2,293,409
Valuation allowance (2,574,671) (2,293,409)
Net deferred tax assets 16,904 -
Total net deferred tax assets (liabilities) $ - $ -
======================= ==============
F-12
<PAGE>
Ionic Fuel Technology, Inc.
Notes to Consolidated Financial Statements (continued)
7. Stockholders' Equity
Effective March 28, 1994, an amendment and restatement of the Company's
Restated Certificate of Incorporation was approved by the Board of Directors of
the Company providing for an increase in the authorized common stock of the
Company to 20,000,000 shares.
On July 28, 1994, the Company issued 1,200,000 units, each unit consisting
of one share of common stock, par value $.01 per share, one Series A redeemable
common stock purchase warrant and one Series B redeemable common stock purchase
warrant. Two Series A Warrants entitle the holder, to purchase one share of
Common Stock for $6.50, which rights been extended for a year until July 28,
1998. Two Series B Warrants entitle the holder, to purchase one share of Common
Stock for $7.50 until July 28, 1999. Each Series of Redeemable Warrants is
redeemable at the Company's option at a price of $.01 per two Redeemable
Warrants, upon not less than 30 days prior written notice, if the last sale
price of the Common Stock has been at least $9.50 with respect to the Series A
Warrants and $10.50 with respect to the Series B Warrants for the 20 consecutive
trading days ending on the third day prior to the notice of redemption. As a
result of the offering, the Company raised $4,768,414, net of discounts,
commissions and offering costs of $1,231,586.
Stock Options
The Company's 1992 Stock Option Plan, as amended, (the "Plan"), provides
for the granting of qualified or nonqualified options to acquire up to 450,000
common shares by certain key employees of the Company or its subsidiary. Options
are exercisable one year after the date of grant at a rate of 20% per annum, on
a cumulative basis. Options may be granted through November 30, 2002, although
the Plan may be terminated at any time.
Pro forma information regarding net income and net loss per share is
required by SFAS No. 123, which also requires that the information be determined
as if the Company had accounted for its employee stock options granted
subsequent to June 30, 1995 under the fair value method of that Statement. The
fair value of these options was estimated at the date of grant using a
Black-Scholes option pricing model with the following weighted-average
assumptions for the years ended June 30, 1997 and 1996, respectively; risk-free
interest rates of 6.7% and 6.0%; volatility factors of the expected market price
of the Company's common stock of 129% and 164% and a weighted-average expected
life for the options of 10.0 years in both years.
The Black-Scholes option pricing model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option pricing models require the input of
highly subjective assumptions including the expected stock price volatility.
Because the Company's employee stock options have characteristics significantly
different from those of traded options and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its stock options.
For purposes of pro forma disclosures, the estimated fair value of the
options and warrants are amortized to expense over the vesting periods. The
Company's pro forma net loss would have been approximately $1,010,203 and
$1,563,937 and pro forma net loss per share would have been $(0.19) and $(0.29)
for the years ended June 30, 1997 and 1996, respectively.
F-13
<PAGE>
Ionic Fuel Technology, Inc.
Notes to Consolidated Financial Statements (continued)
In accordance with the provisions of SFAS No. 123, the pro forma
disclosures include only the effect of stock options granted in the years ended
June 30, 1996 and 1997. These pro forma effects may not be representative of the
effects of SFAS No. 123 on future years because of the fact that options vest
over several years and new grants generally are made each year.
The following presents a summary of the Company's stock option activity
and related information:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Weighted-
average
Number Option price exercise price
per share per share
of shares
Options outstanding at June 30, 1994 198,000 $2.81-$5.00 $4.51
Granted 28,000 $2.13 $2.13
Exercised --
Canceled (136,000) $2.81-$4.69 $4.47
Options outstanding at June 30, 1995 90,000 $2.13-$5.00 $3.18
Granted 36,000 $.28 $ .28
Exercised --
Canceled --
-----------------------
Options outstanding at June 30, 1996 126,000 $ .28-$5.00 $2.35
Granted 206,000 $1.06-$4.00 $3.31
Exercised (1,600) $ .28 $ .28
Canceled --
Options outstanding at June 30, 1997 330,400 $ .28-$5.00 $2.96
=======================
At June 30, 1997, options for 119,600 shares were available for future
grants and 212,000 options were exercisable.
</TABLE>
F-14
<PAGE>
Ionic Fuel Technology, Inc.
Notes to Consolidated Financial Statements (continued)
The following table summarizes information concerning outstanding and
exercisable options, excluding the 150,000 options issued to a public relations
firm, as of January 30, 1997.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Options Outstanding Options Exercisable
Weighted-
Average
Remaining Weighted- Weighted-
Range of Number Contractual Life Average Exercise Number Average Exercise
Exercise Price Outstanding (in years) Price Exercisable Price
$0.01-$1.00 34,400 8.57 $0.28 5,600 $0.28
$1.01-$2.00 56,000 9.53 $1.13 0 $0.00
$2.01-$3.00 32,000 7.31 $2.22 15,200 $2.31
$4.01-$5.00 58,000 6.29 $4.74 41,200 $4.74
---------------------------------------------------------------------------------------------------------
180,400 7.91 $2.32 62,000 $3.74
</TABLE>
The weighted-average fair value of options granted during the years ended
June 30, 1997 and 1996 was $1.10 and $0.09, respectively.
In April 1997, the Company issued 150,000 options to a financial public
relations firm in lieu of a $20,000 fee required under a written contract for
annual services commencing January 1, 1997. The options were divided into thirds
and are exercisable at $2, $3 and $4 a share, respectively. They are exercisable
immediately and expire on December 31, 2002. For the year ended June 30, 1997,
the Company has recognized compensation expense for the fair value of these
options of $10,000.
Warrants
In April 1997, the Company issued 150,000 warrants to a financial
consultant in lieu of present and future compensation for services. Each warrant
entitles the holder to purchase one share of Common Stock. The exercise price of
75,000 of the warrants is $2.25 per warrant and the exercise price of the
remaining 75,000 warrants is $3.50 per warrant. The warrants were exercisable
immediately and expire in March 15, 2001. The fair value of the warrants,
$48,000 was based on contract value of the services to be provided. Compensation
expense of $6,000 was recognized for the year ended June 30, 1997.
F-15
<PAGE>
Ionic Fuel Technology, Inc.
Notes to Consolidated Financial Statements (continued)
8. Results of Foreign Operations
Geographic operations of the Company are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Adjustments
and
United States Europe Eliminations Consolidated
Year ended June 30, 1997
Total revenue $601,408 $ 27,286 $628,694
Loss from operations $(263,664) (709,309) (4,184) (977,157)
Other income (expense), net (27,268)
Net (loss) (1,004,425)
Identifiable assets 10,039,427 904,452 (9,316,588) 1,627,291
Year ended June 30, 1996
Total revenue 593,959 593,959
Loss from operations (449,066) (1,197,933) 34,703 (1,612,296)
Other income (expense), net 48,629
Net (loss) (1,563,667)
Identifiable assets 10,266,606 1,001,869 (8,609,290) 2,659,185
Year ended June 30, 1995
Total revenue 477,783 (1,622) 476,161
Loss from operations (761,325) (2,082,380) (2,843,705)
Other income (expense), net 117,961
Net (loss) (2,725,744)
Identifiable assets 10,560,001 1,315,409 (7,411,867) 4,463,543
</TABLE>
F-16
<PAGE>
Ionic Fuel Technology, Inc.
Notes to Consolidated Financial Statements (continued)
9. Restructuring Charges
During 1995, IFT Ltd. undertook a fundamental restructuring, leading to
the termination of over half of its workforce. Other costs relating to this
restructuring included inventory write downs and early termination payments on
certain motor vehicle leases.
10. Subsequent Event
On July 14, 1997, the Company completed a private offering of 771,833
shares of its common stock and Series C Warrants at a price of $2.25 per unit.
Each unit is comprised of one share of common stock, par value $0.01 per share
and one warrant to purchase one share of common stock at a price of $2.95,
expiring July 10, 2000. The Company granted 71,183 Series C Warrants to their
broker in exchange for the services provided. The Company received total
proceeds of $1,736,624 which, net of offering expenses of $165,965, will be used
for general working capital.
F-17
<PAGE>
Ionic Fuel Technology, Inc.
Schedule II-Valuation and Qualifying Accounts
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Additions/Deductions
----------------------------------------
Balance Charged Write-
at Beginning to Costs and Offs Net of
of Period Expenses Recoveries Balance
at End of
Description Period
------------------- -------------------- -------------------- -------------------
For the year ended June 30, 1995
Allowance for doubtful accounts $43,565 $45,004
For the year ended June 30, 1996
Allowance for doubtful $45,004 $43,791
accounts
For the year ended June 30, 1997
Allowance for doubtful $43,791 $
accounts -
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(b) 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.
Dated: April 1, 1998
IONIC FUEL TECHNOLOGY, INC.
By:
Douglas F. Johnston
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant in the capacities and on the date indicated.
Name Titles Date
Douglas F. Johnston Chairman & Chief Financial April 1, 1998
Officer
Anthony J.S. Garner President, Chief Executive April 1, 1998
Officer and Director
Paul C. O'Neill Treasurer and Director April 1, 1998
Frank J. Hollendoner Director April 1, 1998
Henry W. Sullivan Director April 1, 1998
