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, 1999
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
------------------------------- ------------------------------------
(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 offices) (Zip Code)
(302) 427-5957
----------------------------------------------------
(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 - 11,283,289 shares as of September 30, 1999
<PAGE>
IONIC FUEL TECHNOLOGY, INC.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated balance sheets - September 30, 1999 and June 30, 1999
Consolidated statements of operations - Three months ended
September 30, 1999 and 1998
Consolidated statements of cash flows - Three months ended
September 30, 1999 and 1998
Notes to consolidated financial statements - September 30, 1999
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
- 2 -
<PAGE>
PART I. FINANCIAL INFORMATION
IONIC FUEL TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, June 30,
1999 1999
------------- ------------
(Unaudited) (Audited)
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents (Note 3) $ 64,677 $ 312,277
Trade accounts receivable 299,609 344,986
Inventory (Note 4) 374,878 363,264
Prepaid expenses 63,665 66,126
------------ ------------
Total current assets 802,829 1,086,653
Equipment and vehicles, net of accumulated
depreciation of $546,976 at September 30, 1999
and $508,330 at June 30, 1999 242,138 248,254
------------ ------------
Total assets $ 1,044,967 $ 1,334,907
============ ============
Liabilities and stockholders' equity
Current liabilities
Accounts payable $ 163,626 $ 141,853
Accrued expenses 213,804 211,627
Provisions for warranties and returns 168,298 159,939
Accrued royalty, due to officer 27,200 24,000
Current portion of royalty agreement 31,860 24,915
Accrued salary, benefits and payroll taxes 24,930 23,166
Current portion of capital lease obligations 36,376 35,436
------------ ------------
Total current liabilities 666,094 620,936
Long-term liabilities
Long-term obligations less current portion 23,337 30,527
Other long-term liabilities 293,269 300,099
------------ ------------
Total long-term liabilities 316,606 330,626
Stockholders' equity
Common stock, $.01 par value:
20,000,000 shares authorized; issued and
outstanding 11,283,289 shares 112,833 112,833
Capital in excess of par value 13,647,614 13,647,614
Accumulated deficit (13,551,894) (13,209,264)
Accumulated other comprehensive income -
cumulative translation adjustment (146,286) (167,838)
------------ ------------
Total stockholders' equity 62,267 383,345
------------ ------------
Total liabilities and stockholders' equity $ 1,044,967 $ 1,334,907
============ ============
</TABLE>
See accompanying notes
Note: The balance sheet at June 30, 1999 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
-----------------------------------
1999 1998
------------ ------------
Revenues
Sales $ 37,434 $ 57,484
Rental 86,438 78,408
------------ ------------
Total revenues 123,872 135,892
Cost of revenues
Sales 41,705 54,259
Rental 154,253 163,982
------------ ------------
Total cost of revenues 195,958 218,241
------------ ------------
(72,086) (82,349)
Operating expenses
General and administrative 181,975 195,608
Sales and marketing 78,220 79,869
Research and development 95 10,629
------------ ------------
260,290 286,106
------------ ------------
Operating loss (332,376) (368,455)
Other income (expense)
Interest income 1,861 9,314
Interest expense (12,115) (12,930)
------------ ------------
(10,254) (3,616)
------------ ------------
Net loss $ (342,630) $ (372,071)
============ ============
Net loss per share (.03) (.06)
------------ ------------
Weighted average number of
common shares 11,283,289 6,444,955
============ ============
See accompanying notes
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<PAGE>
IONIC FUEL TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
September 30
-----------------------------
1999 1998
----------- -----------
<S> <C> <C>
Operating activities
Net loss $ (342,630) $ (372,071)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation 18,241 19,570
Amortization -- 16,431
(Increase) decrease in:
Accounts receivable 59,835 (51,072)
Other receivables -- 19,998
Inventory 8,840 31,170
Prepaid expenses 5,333 13,121
Decrease in:
Accounts payable and accrued expenses 17,558 31,493
----------- -----------
Net cash used by operating activities (232,823) (291,360)
Investing activities
Acquisition of equipment (5,549) (56,775)
Acquisition of patents -- (17,122)
----------- -----------
Cash used by investing activities (5,549) (73,897)
Financing activities
Principal payments on capital leases (9,054) (8,265)
Principal payments under licensing agreement (3,899) (5,070)
----------- -----------
Cash used by financing activities (12,953) (13,335)
Effects of exchange rate differences on cash 3,725 3,159
----------- -----------
Decrease in cash and cash equivalents (247,600) (375,433)
Cash and cash equivalents, beginning of period 312,277 1,082,872
----------- -----------
Cash and cash equivalents, end of period $ 64,677 $ 707,439
=========== ===========
Interest paid $ 12,115 $ 12,930
=========== ===========
</TABLE>
See accompanying notes
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<PAGE>
IONIC FUEL TECHNOLOGY, INC.
Notes to Consolidated Financial Statements
(Unaudited)
September 30, 1999
1. Going Concern
Ionic Fuel Technology, Inc. ("Company") has incurred recurring operating
losses, and its operations have not produced positive cash flow. As such,
this condition raises substantial doubt about the Company's ability to
continue as a going concern.
During the past year, the principal use of the Company's cash has been to
fund its operating losses. The Company has been utilizing approximately
$100,000 per month to fund operations. The Company is presently attempting
to raise additional capital to fund operations. If additional capital is
not secured within the next few weeks, it will be necessary to
substantially curtail or cease operations.
2. 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, 1999 are not necessarily
indicative of the results that may be expected for the year ending June 30,
2000. 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, 1999.
3. Cash Equivalents
The Company considers all highly liquid investments with maturities of
three months or less when purchased to be cash equivalents.
4. Inventory
Inventory is comprised of the following:
September 30 June 30
1999 1999
------------ --------
Material and supplies $157,322 $151,540
Finished goods 217,556 211,724
-------- --------
$374,878 $363,264
======== ========
Included in finished goods inventory are units, at customer sites, on a
short-term trial basis.
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<PAGE>
IONIC FUEL TECHNOLOGY, INC.
Notes to Consolidated Financial Statements
(Unaudited)
September 30, 1999
(Continued)
5. Comprehensive Income
The Company's comprehensive income is as follows:
Three Months Ended
September 30
--------------------------
1999 1998
--------- ---------
Net loss $(342,630) $(372,071)
Foreign currency translation adjustment 21,552 6,161
--------- ---------
Total comprehensive loss $(321,078) $(365,910)
========= =========
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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, 1999 and September 30, 1998
Total revenues decreased to approximately $124,000 during the three month
period ended September 30, 1999 from approximately $136,000 for the three month
period ended September 30, 1998.
The decrease of approximately $12,000 in revenues related to a decrease in
sales revenues.
Gross profit increased to a loss of approximately $(72,000) during the
three months ended September 30, 1999 (loss of $82,000 in 1998) due to a
decrease in service department and manufacturing costs.
General and administrative expenses decreased to approximately $182,000
during the three month period ended September 30, 1999 from approximately
$196,000 for the three month period ended September 30, 1998.
The decrease of approximately $14,000 in general and administrative
expenses related to a decrease in vehicles and travel expenses and the
elimination of amortization of patent costs written off at June 30, 1999.
Research and development expenses decreased by approximately $10,000 during
the three months ended September 30, 1999 due to the completion of new product
development.
Other expense (net) increased to approximately $(10,000) during the three
months ended September 30, 1999 from approximately $(4,000) of net expense
during the same period in 1998, due to a decrease in interest income.
Liquidity and Sources of Capital
Net cash used by operations was approximately $233,000 for the three months
ended September 30, 1999 and approximately $291,000 for the three months ended
September 30, 1998. Cash was utilized in all departments, i.e. sales, marketing,
and administration in the United Kingdom and Europe. Working capital was
approximately $139,000 at September 30, 1999 and approximately $466,000 at June
30, 1999. 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, 1999 and 1998. 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, 1999 and 1998.
Year 2000 Readiness
To date the Company has fully completed its assessment of all systems that
could be significantly affected by the Year 2000 Issue. The Company has begun to
update its hardware and software applications utilizing internal resources. A
majority of the Company's software is currently Year 2000 compliant, and the
Company expects that the Year 2000 issue will not have a material impact on the
Company's future financial or operational position. However, these expectations
are subject to uncertainties. These include, but are not limited to the ability
to assess suppliers and customers readiness, failure to identify all susceptible
systems and the availability and the cost of personnel necessary to remediate
any unforeseen problems.
As of September 30, 1999, the Company has expensed $13,000 on costs
associated with Year 2000 Issues, and is expecting to incur additional expenses
in the amount of $28,000. The Company believes that 80% of the remaining
procedures are complete, and does not foresee any problems in completing the
remaining 20% in a timely manner. The Company also does not foresee any problems
with its vendors, as the Company typically buys in small quantities, and they
believe that their inventory levels are adequate for any unforeseen
situations/occurrences.
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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, 1999.
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<PAGE>
EXHIBIT I
IONIC FUEL TECHNOLOGY, INC.
COMPUTATION OF NET LOSS PER COMMON SHARE
Three Months Ended
September 30
----------------------------
1999 1998
----------- ----------
Net loss $ (342,630) $ (372,071)
Average common shares outstanding 11,283,289 6,444,955
----------- ----------
Net loss per common share $ (.03) $ (.06)
=========== ==========
- 11 -
<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
------------------- -----------------------------------
(Name and Title)
Date
------------------- -----------------------------------
(Name and Title)
- 12 -
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 64,677
<SECURITIES> 0
<RECEIVABLES> 299,609
<ALLOWANCES> 0
<INVENTORY> 374,878
<CURRENT-ASSETS> 802,829
<PP&E> 789,114
<DEPRECIATION> 546,976
<TOTAL-ASSETS> 1,044,967
<CURRENT-LIABILITIES> 666,094
<BONDS> 0
0
0
<COMMON> 112,833
<OTHER-SE> (50,566)
<TOTAL-LIABILITY-AND-EQUITY> 1,044,967
<SALES> 37,434
<TOTAL-REVENUES> 123,872
<CGS> 41,705
<TOTAL-COSTS> 414,543
<OTHER-EXPENSES> (1,861)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,115
<INCOME-PRETAX> (342,630)
<INCOME-TAX> 0
<INCOME-CONTINUING> (342,630)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (342,630)
<EPS-BASIC> (.03)
<EPS-DILUTED> (.03)
</TABLE>
