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, 1998
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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
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Ionic Fuel Technology, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 06-1333140
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
300 Delaware Avenue, Suite 1704
Wilmington, Delaware 19801-1622
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(Address of principal executive (Zip Code)
offices)
(302) 427-5957
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(Registrant's telephone number, including area code)
Not applicable
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(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 - 6,444,955 shares as of September 30, 1998
<PAGE>
IONIC FUEL TECHNOLOGY, INC.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated balance sheets - September 30, 1998 and June 30, 1998
Consolidated statements of operations - Three months ended September
30, 1998 and 1997
Consolidated statements of cash flows - Three months ended September 30,
1998 and 1997
Notes to consolidated financial statements - September 30, 1998
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
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<PAGE>
PART I. FINANCIAL INFORMATION
IONIC FUEL TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, June 30,
1998 1998
------------ ------------
Assets (Unaudited) (Audited)
<S> <C> <C>
Current assets
Cash and cash equivalents (Note 2) $ 707,439 $ 1,082,872
Trade accounts receivable 118,986 66,839
Inventory (Note 3) 445,063 348,496
Prepaid expenses 100,416 133,068
------------ ------------
Total current assets 1,371,904 1,631,275
Equipment and vehicles, net of accumulated
depreciation of $500,659 at September 30, 1998
and $480,174 at June 30, 1998 243,100 245,551
Patents, net 551,582 550,891
------------ ------------
Total assets $ 2,166,586 $ 2,427,717
============ ============
Liabilities and stockholders' equity
Current liabilities
Accounts payable $ 77,909 $ 87,324
Accrued expenses 233,773 115,920
Provisions for warranties and returns 20,412 20,272
Accrued royalty, due to officer 9,600 4,800
Current portion of royalty agreement 22,279 21,464
Accrued salary, benefits and payroll taxes 23,935 19,834
Current portion of capital lease obligations 38,849 38,121
------------ ------------
Total current liabilities 426,757 307,735
Long-term liabilities
Long-term obligations less current portion 60,004 68,362
Other long-term liabilities 319,129 325,014
------------ ------------
Total long-term liabilities 379,133 393,376
Stockholders' equity
Common stock, $.01 par value:
20,000,000 shares authorized; issued and
outstanding 6,444,955 and 5,401,600 shares 64,450 64,450
Capital in excess of par value 13,047,558 13,047,558
Accumulated deficit (11,623,894) (11,251,823)
Cumulative translation adjustment (127,418) (133,579)
------------ ------------
Total stockholders' equity 1,360,696 1,726,606
------------ ------------
Total liabilities and stockholders' equity $ 2,166,586 $ 2,427,717
============ ============
</TABLE>
See accompanying notes
Note: The balance sheet at June 30, 1998 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.
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<PAGE>
IONIC FUEL TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended
September 30,
1998 1997
----------- -----------
Revenues
Sales $ 57,484 $ 19,137
Rental 78,408 93,932
----------- -----------
Total revenues 135,892 113,069
Cost of revenues
Sales 54,259 50,787
Rental 163,982 123,822
----------- -----------
Total cost of revenues 218,241 174,609
----------- -----------
(82,349) (61,540)
Operating expenses
General and administrative 195,608 158,291
Sales and marketing 79,869 47,689
Research and development 10,629 11,499
----------- -----------
286,106 217,479
----------- -----------
Operating (loss) (368,455) (279,019)
Other income (expense)
Interest income 9,314 13,188
Interest expense (12,930) (13,632)
----------- -----------
(3,616) (444)
----------- -----------
Net (loss) $ (372,071) $ (279,463)
=========== ===========
Net (loss) per share $ (.06) $ (.05)
=========== ===========
Weighted average number of
common shares 6,444,955 6,064,370
=========== ===========
See accompanying notes
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<PAGE>
IONIC FUEL TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
September 30,
1998 1997
----------- -----------
Operating activities
Net (loss) $ (372,071) $ (279,463)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation 19,570 18,587
Amortization 16,431 15,869
Changes in operating assets and liabilities:
Accounts receivable (51,072) (43,715)
Other receivables 19,998 (537)
Inventory 31,170 2,053
Prepaid expenses 13,121 5,621
Accounts payable and accrued expenses 31,493 284
----------- -----------
Net cash used by operating activities (291,360) (281,301)
Investing activities
Acquisition of equipment (56,775) (4,539)
Acquisition of patents (17,122) --
----------- -----------
Cash used by investing activities (73,897) (4,539)
Financing activities
Principal payments on capital leases (8,265) --
Principal payments under licensing agreement (5,070) (4,367)
Net proceeds from issuance of stock -- 1,552,116
----------- -----------
Net cash provided (used) by financing activities (13,335) 1,547,749
Effects of exchange rate differences on cash 3,159 (7,847)
----------- -----------
Increase (decrease) in cash and cash equivalents (375,433) 1,254,062
Cash and cash equivalents, beginning of period 1,082,872 191,629
----------- -----------
Cash and cash equivalents, end of period $ 707,439 $ 1,445,691
=========== ===========
Interest paid $ 12,930 $ 13,632
=========== ===========
See accompanying notes
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<PAGE>
IONIC FUEL TECHNOLOGY, INC.
Notes to Consolidated Financial Statements
(Unaudited)
September 30, 1998
1. Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulations S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the three month period ended September 30, 1998 are not
necessarily indicative of the results that may be expected for the year
ending June 30, 1999. 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, 1998.
2. Cash Equivalents
The Company considers all highly liquid investments with maturities of
three months or less when purchased to be cash equivalents.
3. Inventory
Inventory is comprised of the following:
September 30, June 30,
1998 1998
---- ----
Material and supplies $166,835 $149,367
Finished goods 278,228 199,129
-------- --------
$445,063 $348,496
======== ========
Included in finished goods inventory are units, at customer sites, on a
short-term trial basis.
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Three Months Ended September 30, 1998 and September 30, 1997
Total revenues increased to approximately $136,000 during the three month
period ended September 30, 1998 from approximately $113,000 for the three month
period ended September 30, 1997.
The increase of approximately $23,000 in revenues related to an increase
in sales revenues.
Gross profit decreased to a loss of approximately $(82,000) during the
three months ended September 30, 1998 (loss of $62,000 in 1997) due to an
increase in service department personnel.
General and administrative expenses increased to approximately $196,000
during the three month period ended September 30, 1998 from approximately
$158,000 for the three month period ended September 30, 1997.
The increase of approximately $38,000 in general and administrative
expenses related to an increase in financial public relations expenses, legal
expenses, and vehicles and travel expense.
Sales and marketing expenses increased to approximately $80,000 during the
three months ended September 30, 1998, from approximately $48,000 during the
three months ended September 30, 1997, an increase of $32,000 principally due to
an increase in marketing promotion and an additional sales person.
Other expense (net) increased to approximately $(4,000) during the three
months ended September 30, 1998 from approximately $(400) of net expense during
the same period in 1997, due to a decrease in interest income.
Liquidity and Sources of Capital
Net cash used by operations was approximately $291,000 for the three
months ended September 30, 1998 and approximately $281,000 for the three months
ended September 30, 1997. 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 $950,000 at September 30, 1998 and
approximately $1.3 million at June 30, 1998. Working capital has been utilized
to fund operations.
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<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, 1998 and 1997. 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. Changes 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, 1998 and 1997.
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<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, 1998.
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<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 11-16-98 /s/ Duane L. Berlin / Secretary
------------------------------ -----------------------------------
(Name and Title)
Date
------------------------------ -----------------------------------
(Name and Title)
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EXHIBIT I
IONIC FUEL TECHNOLOGY, INC.
COMPUTATION OF NET LOSS PER COMMON SHARE
September 30,
1998 1997
----------- -----------
Net loss $ (372,071) $ (279,463)
Average common shares outstanding 6,444,955 6,064,370
----------- -----------
Net loss per common share $ (.06) $ (.05)
=========== ===========
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 707,439
<SECURITIES> 0
<RECEIVABLES> 118,986
<ALLOWANCES> 0
<INVENTORY> 445,063
<CURRENT-ASSETS> 1,371,904
<PP&E> 743,759
<DEPRECIATION> 500,659
<TOTAL-ASSETS> 2,166,586
<CURRENT-LIABILITIES> 426,757
<BONDS> 0
0
0
<COMMON> 64,450
<OTHER-SE> 1,296,246
<TOTAL-LIABILITY-AND-EQUITY> 2,166,586
<SALES> 57,484
<TOTAL-REVENUES> 135,892
<CGS> 218,241
<TOTAL-COSTS> 286,106
<OTHER-EXPENSES> (9,314)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,930
<INCOME-PRETAX> (372,071)
<INCOME-TAX> 0
<INCOME-CONTINUING> (372,071)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (372,071)
<EPS-PRIMARY> (.06)
<EPS-DILUTED> (.06)
</TABLE>
