PRELIMINARY COPY
IONIC FUEL TECHNOLOGY, INC.
300 DELAWARE AVENUE
WILMINGTON, DELAWARE 19801
Notice of Annual Meeting of Stockholders
To our Stockholders:
The Annual Meeting of Stockholders of Ionic Fuel Technology, Inc., a
Delaware corporation, will be held on November 12, 1998, at 10:00 a.m. local
time, at the Fleet Bank, 345 Park Ave., New York, N.Y. to consider and act upon
the following matters, each of which is explained more fully in the following
Proxy Statement. A proxy card for your use in voting on these matters is also
enclosed.
1. Electing four (4) directors for a term expiring in 1999 as
recommended by the Board of Directors.
2. Ratifying the appointment of independent auditors to examine
and report on the financial statements of the Corporation for
fiscal 1999, as recommended by the Board of Directors.
3. Ratifying an amendment to the Company's 1992 Stock Option
Plan, as recommended by the Board of Directors.
4. Transacting any other business that may properly come before
the meeting or any adjournment thereof.
Only common stockholders of record at the close of business on October
9, 1998, are entitled to notice of and to vote at the meeting.
Dated: October 9, 1998
By Order of the Board of Directors
Duane L. Berlin
Secretary
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ANNUAL MEETING OF STOCKHOLDERS
OF
IONIC FUEL TECHNOLOGY, INC.
NOVEMBER 12, 1998
-----------------
PROXY STATEMENT
-----------------
GENERAL INFORMATION
Proxy Solicitation
This Proxy Statement is furnished to the holders of Common
Stock, $.01 par value per share ("Common Stock"), of Ionic Fuel Technology, Inc.
("Company") in connection with the solicitation of proxies on behalf of the
Board of Directors of the Company for use at the Annual Meeting of Stockholders
("Annual Meeting") to be held Thursday, November 12,1998, at 10:00 A.M. local
tome at the Fleet Bank, 345 Park Avenue, New York, N.Y., or at any continuation
or adjournment thereof, pursuant to the accompanying Notice of Annual Meeting of
Stockholders. The purpose of the meeting and the matters to be acted upon are
set forth in the accompanying Notice of Annual Meeting of Stockholders. The
Board of Directors knows of no other business which will come before the
meeting.
Proxies for use at the meeting will be mailed to stockholders
on or about October 12, 1998 and will be solicited chiefly by mail, but
additional solicitation may be made by telephone, telegram or other means of
telecommunications by directors, officers, consultants or regular employees of
the Company. The Company may enlist the assistance of brokerage houses,
fiduciaries, custodians and other like parties in soliciting proxies. All
solicitation expenses, including costs of preparing, assembling and mailing the
proxy material, will be borne by the Company.
Revocability and Voting of Proxy
A form of proxy for use at the meeting and a return envelope
for the proxy are enclosed. Stockholders may revoke the authority granted by
their execution of proxies at any time before their effective exercise by filing
with the Secretary of the Company a written revocation or duly executed proxy
bearing a later date or by voting in person at the meeting. Shares represented
by executed and unrevoked proxies will be voted in accordance with the choice or
instructions specified thereon. If no specifications are given, the proxies
intend to vote "FOR" each of the nominees for director as described in Proposal
No. 1; "FOR" the ratification of the independent auditors as described in
Proposal No. 2; and "For" ratification of an amendment to the Company's 1992
Stock Option Plan as described in Proposal No.3. Proxies marked as
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abstaining will be treated as present for purposes of determining a quorum for
the Annual Meeting, but will not be counted as voting in respect of a matter as
to which abstinence is indicated. If any other matters properly come before the
meeting or any continuation or adjournment thereof, the proxies intend to vote
in accordance with their best judgment.
Record Date and Voting Rights
Only stockholders of record at the close of business on
October 9, 1998 are entitled to notice of and to vote at the Annual Meeting of
Shareholders or any continuation or adjournment thereof. Each share of Common
Stock is entitled to one vote per share. Any share of Common Stock held of
record on October 9, 1998 shall be assumed, by the Board of Directors, to be
owned beneficially by the record holder thereof for the period shown on the
Company's stockholder records. The affirmative vote of a majority of the
shareholders present in person or by proxy at the meeting is required for the
election of the directors to be elected by such shares and for each other matter
to be presented at the meeting. The present directors and officers of the
Company hold approximately 19% of the outstanding Common Stock of the Company
and have indicated that they will vote "FOR" the slate of directors, "FOR" the
ratification of the appointment of the independent auditors and "FOR" the
amendment to the 1992 Stock Option Plan.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The By-Laws of the Company provide for a Board of Directors of
not less than three (3) members. The Board of Directors currently consists of
four (4) members. At the meeting, four directors will be re-elected to serve
until the 1999 Annual Meeting of Stockholders and until their successors have
been elected and qualified. Present vacancy or vacancies which occur during the
year may be filled by the Board of Directors, and any directors so appointed
must stand for reelection at the next annual meeting of stockholders. The
nominees to be voted on by stockholders are Messrs. Johnston, Garner,
Hollendoner and Sullivan.
All current directors have been nominated for re-election by
the Company's present directors. All nominees have consented to be named and
have indicated their intent to serve if elected. The Company has no reason to
believe that any of these nominees are unavailable for election. However, if any
of the nominees become unavailable for any reason, the persons named as proxies
may vote for the election of such person or persons for such office as the Board
of Directors of the Company may recommend in the place of such nominee or
nominees. It is intended that proxies, unless marked to the contrary, will be
voted in favor of the election of Messrs. Johnston, Garner, Hollendoner and
Sullivan.
The Board of Directors recommends that the stockholders vote "FOR" the
election of the following four nominees (Item No. 1 on the proxy card).
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NOMINEES FOR ELECTION
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. since the
Company's inception. From December 1990 until October 1991, Mr. Garner was a
private investor. From October 1991 to December 1991 Mr. Garner performed a due
diligence investigation on the Wentworth Technology in conjunction with Messrs.
Johnston and O'Neill, as set forth in Mr. Johnston's biography. From June 1988
until December 1990, Mr. Garner was Chief Executive Officer and managing
director of Sigma Corp. Ltd., a manufacturer of custom gauges for the aerospace
industry. He served as Chief Executive Officer of Winchmore PLC, a distributor
of commercial boilers and air conditioners. Mr. Garner has the U.K. equivalent
of a B.S. in Mechanical Engineering.
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. Mr. Hollendoner holds a BA in
Economics from Georgetown University and an MBA from Stanford University School
of Business.
Henry W. Sullivan, 58, 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
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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.
Compliance With Section 16(a) of the Exchange Act
Under United States securities laws, the Company's directors and
officers and persons who own more than ten percent of the Company's Common Stock
are required to file initial reports of ownership and reports of changes in
ownership with the Securities and Exchange Commission. Based solely on its
review of copies of such reports received or written representations from
certain reporting persons, the Company believes that during the fiscal year
ended June 30, 1998, all filing requirements under section 16(a) of the
Securities Exchange Act of 1934 applicable to its directors and officers and
holders of more than 10% Common Stock were complied with.
During fiscal 1998 the Board of Directors held 10 meetings and acted
twice by unanimous written consent.
The Company has two committees of the Board: a Compensation Committee consisting
of Mr. Sullivan as Chairman and Messrs. Johnston and Hollendoner as members and
an Audit Committee consisting of Mr. Hollendoner as Chairman and Messrs. Garner
and Sullivan as members.
No directors received cash compensation for serving as directors during
the fiscal year ended June 30, 1998. It is anticipated that no existing
directors will receive cash compensation for serving in such capacity during the
fiscal year ending June 30, 1999.
PROPOSAL NO. 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Since the Company's inception, the firm of Ernst & Young LLP,
independent auditors, has examined and reported on the Company's financial
statements. The Board of Directors has appointed Ernst & Young LLP as
independent auditors to examine and report on the consolidated financial
statements of the Company for the current year ending June 30, 1999, subject to
stockholder approval.
During the year ended June 30, 1998, Ernst & Young LLP provided the
Company with audit services, including examinations of and reporting on the
Company's consolidated financial statements, as well as those of its
subsidiaries. Audit services also included a review of filings with the
Securities and Exchange Commission and the annual report to shareholders.
Ratification of the appointment of Ernst & Young LLP as independent
auditors requires the affirmative vote a majority of the votes cast at the
meeting by holders of the Corporation's Common Stock.
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No representative of Ernst & Young LLP will be present at the Annual
Meeting.
The Board of Directors recommends that the stockholders vote "FOR"
ratification of this appointment (Item No. 2 on the proxy card).
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
On October 9, 1998, there were 6,417,655 shares of Common
Stock outstanding. The following table sets forth as of October 9, 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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Amount and
Nature of Percent of
Beneficial Outstanding Shares
Name and Address Ownership(1) of Common Stock
Douglas F. Johnston...... 1,033,800 16.1%
114 Forest Street
New Canaan, CT 06840
Paul C. O'Neill ......... 464,000 7.2%
95 Eaton Square
London SW 1W 9DD
England
Anthony J.S. Garner ..... 330,000(2) 5.1%
96 Thorpe Hall Ave
Thorpe Bay, Essex SSl 3AS
England
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Frank J. Hollendoner 25,000 (3) *
c/o Independent Care
26 Eccleston Square
London, England SWIV INS
Henry W. Sullivan 16,000 (4) *
10814 Jaycee Lane
Houston, Tx. 77024
Donald M. Kleban 446,100(5) 6.9%
2 Sutton Place South
New York, N.Y. 10022
Ira Sochet 344,203 5.3%
9350 S. Dixie Highway
Suite 1260
Miami Fl. 33156
All Officers and Directors
as a Group (4 persons) .. 1,230,800 19%
- -------------------
* Less than 1%
</TABLE>
(l) Beneficial ownership is determined in accordance with Rule 13d-3 under
the Securities Exchange Act of 1934 and generally includes voting or
investment power with respect to securities. Shares of Common Stock
issuable upon the exercise of options, warrants and convertible notes
currently exercisable or convertible within sixty days are deemed
outstanding for computing the percentage ownership of the person
holding such options or warrants, but are not deemed outstanding for
computing the percentage of ownership of any other person.
Unless otherwise indicated, the Company believes that all persons named
in the table have sole investment and voting power with respect to the
shares of Common Stock beneficially owned by them.
(2) Includes 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.
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(3) Includes 2,000 shares of Common Stock and immediately exercisable
options to purchase 14,000 shares of Common Stock at $1.6875 per share.
(4) Includes 2,000 shares of Common Stock and immediately exercisable
options to purchase 14,000 shares of Common Stock at $1.75 per share.
(5) Includes 259,100 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, 271,000 Series B Warrants to purchase 135,500 shares of
Common Stock, and 25,000 Private Warrants to purchase 25,000 shares of
Common Stock at $3.50 per share, until March 15, 2001. Certain of the
foregoing information is reported in a Schedule 13D filed by Mr. Kleban
with the Company dated September 18, 1998. Mr. Kleban is currently
of counsel to the law firm of Lev, Berlin & Dale, general counsel
to the Company.
EXECUTIVE COMPENSATION
Compensation
No executive officer received aggregate compensation exceeding $100,000
in the fiscal year 1998.
CERTAIN TRANSACTIONS
The Company is obligated to pay Douglas F. Johnston a $60,000 per year
royalty for the duration of the patents contemplated by the Royalty Agreement,
one of which lasts until 2007. In March, 1998, the Company issued to Mr.
Johnston 21,800 shares of Common Stock in satisfaction of an accrued royalty
liability of $54,500.
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PROPOSAL NO. 3
AMENDMENT TO COMPANY'S 1992 STOCK OPTION PLAN
On December 1, 1992, the Company adopted its Incentive Stock Option
Plan and Non-Statutory Stock Option Plan (the "Plan"), pursuant to which the
Company may grant options to purchase up to an aggregate of 450,000 shares of
Common Stock. Such options may qualify as "incentive stock options" within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended, or they
may not qualify under such section ("Non-Qualified Options").
The Board of Directors has adopted an amendment to the Plan which will
increase the number of shares by 500,000 pursuant to which the Company may have
authority to grant options to an aggregate of 950,000 shares of Common Stock.
The Plan shall also be amended to provide for 100,000 of the additional 500,000
shares of Common Stock to be granted as options exclusively to non-employee
directors of the Company.
Incentive Stock Options may be granted to any key management employee
of the Company or any of its affiliated companies. Non-Qualified Options may be
granted to any key management employee, any non-employee director of the Company
or any of its affiliated companies and any person who performs consulting
services for the Company or any of its affiliated companies.
The Plan is administered by the Board of Directors of the Company,
which has the authority to determine the persons to whom the options may be
granted, the number of shares of Common Stock to be covered by each option, the
time or times at which options may be granted or exercised, and other terms and
provisions of the options. The exercise price of Incentive Stock Options granted
under the Plan may not be less than the fair market value of a share of Common
Stock on the date of grant (110% of such value if granted to a person owning in
excess of 10% of the Company's securities). Options under the Plan may not have
a term longer than 10 years from the date of grant (5 years if granted to a
person owning in excess of 10% of the Company's securities) and may not be
granted more than 10 years from the date of adoption of the Plan.
There are currently 382,400 shares subject to outstanding options at
prices ranging from $.28 per share to $5.00 per share.
The Board of Directors recommends that the stockholders vote "FOR"
ratification of this amendment to the Company's 1992 Stock Option Plan (Item No.
3 on the proxy card).
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<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Total Return To Shareholder's
(Dividends reinvested monthly)
ANNUAL RETURN PERCENTAGE
Quarter Ending
Company / Index Sep94 Dec94 Mar95 Jun95 Sep95 Dec95
- ----------------------------------------------------------------------------------------------------------------------------
IONIC FUEL TECHNOLOGY INC -40.00 12.50 -68.52 0.00 -64.69 -33.33
S&P 500 INDEX 2.46 -0.02 9.74 9.55 7.95 6.02
WASTE MANAGEMENT-500 1.02 -9.25 9.54 5.29 -5.35 4.51
INDEXED RETURNS
Base Quarter Ending
Period
Company / Index 28-Jul-94 Sep94 Dec94 Mar95 Jun95 Sep95 Dec95
- ---------------------------------------------------------------------------------------------------------------------------
IONIC FUEL TECHNOLOGY INC 100 60.00 67.50 21.25 21.25 7.50 5.00
S&P 500 INDEX 100 102.46 102.44 112.42 123.15 132.94 140.94
WASTE MANAGEMENT-500 100 101.02 91.68 100.42 105.73 100.08 104.59
An IPO price of $5.00 was used to calculate the return for Ionic Fuel Technology
Inc This price was supplied by the registrant company.
<PAGE>
Total Return To Shareholder's
(Dividends reinvested monthly)
ANNUAL RETURN PERCENTAGE
Quarter Ending
Company / Index Mar96 Jun96 Sep96 Dec96 Mar97 Jun97
- ------------------------------------------------------
IONIC FUEL TECHNOLOGY INC 162.40 219.21 4.44 -47.14 110.81 -7.67
S&P 500 INDEX 5.37 4.49 3.09 8.34 2.68 17.46
WASTE MANAGEMENT-500 6.60 -0.26 -1.48 1.73 1.69 7.27
INDEXED RETURNS
Base Quarter Ending
Period
Company / Index Mar96 Jun96 Sep96 Dec96 Mar97 Jun97
- ----------------------------------------------------------------------------------------------------------------------
IONIC FUEL TECHNOLOGY INC 13.13 41.90 43.76 23.13 48.76 45.02
S&P 500 INDEX 148.51 155.17 159.97 173.30 177.95 209.01
WASTE MANAGEMENT-500 111.50 111.21 109.57 111.47 113.35 121.59
An IPO price of $5.00 was used to calculate the return for Ionic Fuel Technology
Inc This price was supplied by the registrant company.
<PAGE>
Total Return To Shareholder's
(Dividends reinvested monthly)
ANNUAL RETURN PERCENTAGE
Quarter Ending
Company / Index Sep97 Dec97 Mar98 Jun98
- ------------------------------------------------------
IONIC FUEL TECHNOLOGY INC 24.98 42.25 -25.00 -35.40
S&P 500 INDEX 7.49 2.87 13.95 3.30
WASTE MANAGEMENT-500 11.17 -14.84 3.83 11.75
INDEXED RETURNS
Base Quarter Ending
Period
Company / Index Sep97 Dec97 Mar98 Jun98
- ---------------------------------------------------------------------------------------------
IONIC FUEL TECHNOLOGY INC 56.26 80.03 60.03 38.78
S&P 500 INDEX 224.67 231.12 263.36 272.05
WASTE MANAGEMENT-500 135.16 115.11 119.51 133.55
</TABLE>
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OTHER BUSINESS TO BE TRANSACTED
As of the date of this Proxy Statement, the Board of Directors knows of
no other business to be presented for action at the Annual Meeting of
Stockholders. As for any business that may properly come before the Annual
Meeting or any continuation or adjournment thereof, the Proxies confer
discretionary authority to the person named therein. These persons will vote or
act in accordance with their best judgment with respect thereto.
ANNUAL REPORT TO STOCKHOLDERS
The Annual Report to Stockholders for the year ended June 30, 1998 is
being mailed to stockholders with this Proxy Statement.
STOCKHOLDER PROPOSAL - 1999 ANNUAL MEETING
Any stockholder proposals to be considered by the Company for inclusion
in the proxy material for the 1999 Annual Meeting of Stockholders must be
received by the Company at its principal executive offices by July 30, 1999.
The prompt return of your proxy will be appreciated and helpful in
obtaining the necessary vote. Therefore, whether or not you expect to attend the
meeting, please sign the proxy and return it in the enclosed envelope.
BY ORDER OF
THE BOARD OF DIRECTORS
Duane L. Berlin, Secretary
New York, New York
October 9, 1998
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IONIC FUEL TECHNOLOGY, INC.
P R O X Y
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Douglas F. Johnston and
Anthony J.S. Garner Proxies, each with the power to appoint his substitute, and
hereby authorizes them to represent and to vote, as designated below, all the
shares of the common stock of Ionic Fuel Technology, Inc. held of record by the
undersigned on October 9, 1998, at the annual meeting of shareholders to be held
on November 12, 1998, or any adjournment thereof.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
1. ELECTION OF DIRECTORS
For all nominees listed below Withhold Authority to
(Except as Marked to the Vote All Nominees Listed
Contrary) ___ Below ___
Douglas F. Johnston; Frank J. Hollendoner; Henry W. Sullivan and
Anthony J.S. Garner
2. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. RATIFICATION OF AMENDMENT OF 1992 STOCK OPTION PLAN
FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE
MANNER DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO
DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS 1,2, AND
</TABLE>
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3. Please sign name exactly as appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, as executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
Dated: , 1998
Signature
Signature, if held jointly
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY USING THE ENCLOSED
ENVELOPE
