<PAGE>
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 DECEMBER 31, 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
IONIC FUEL TECHNOLOGY, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 06-1333140
- ---------------------------------------------- -------------------------------
(State or other jurisdiction of incorporation (I.R.S. Employer Identification
or organization) No.)
300 Delaware Avenue, Suite 1704
WILMINGTON, DELAWARE 19801-1622
- ---------------------------------------------- -------------------------------
(Address of principal executive offices) (Zip Code)
(302) 427-5957
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
NOT APPLICABLE
- --------------------------------------------------------------------------------
(Former name, former address and former year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter periods
that the registrant was required to file such reports), and (2) has
been subject to such filing requirements, for the past 90 days.
Yes |X| No |X|
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 December 31,
1999
<PAGE>
IONIC FUEL TECHNOLOGY, INC.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated balance sheets - December 31, 1999 and June 30, 1999
Consolidated statements of operations - Three months ended December
31, 1999 and 1998; six months ended December 31, 1999 and 1998
Consolidated statements of cash flows - Six months ended December 31,
1999 and 1998
Notes to consolidated financial statements - December 31, 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
<PAGE>
PART I. FINANCIAL INFORMATION
IONIC FUEL TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31 JUNE 30
1999 1999
------------ ------------
ASSETS (UNAUDITED) (AUDITED)
<S> <C> <C>
Current assets
Cash and cash equivalents (Note 3) $ 17,029 $ 312,277
Trade accounts receivable 330,540 344,986
Inventory (Note 4) 346,168 363,264
Prepaid expenses 52,251 66,126
Stock subscriptions receivable 48,705 --
------------ ------------
Total current assets 794,693 1,086,653
Equipment and vehicles, net of accumulated
depreciation of $557,115 at December 31, 1999
and $508,330 at June 30, 1999 255,448 248,254
------------ ------------
TOTAL ASSETS $ 1,050,141 $ 1,334,907
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 169,595 $ 141,853
Accrued expenses 227,935 211,627
Provisions for warranties and returns 134,297 159,939
Accrued royalty 27,200 24,000
Current portion of royalty agreement 27,000 24,915
Accrued salary, benefits and payroll taxes 24,478 23,166
Current portion of capital lease obligations 40,571 35,436
------------ ------------
Total current liabilities 651,076 620,936
Long-term liabilities
Long-term obligations less current portion 9,912 30,527
Other long-term liabilities 294,115 300,099
------------ ------------
Total long-term liabilities 304,027 330,626
Stockholders' equity Common stock, $.01 par value:
20,000,000 shares authorized; issued and
outstanding 11,283,289 shares 112,833 112,833
Common stock subscribed 46,685 --
Capital in excess of par value 13,834,354 13,647,614
Accumulated deficit (13,746,913) (13,209,264)
Accumulated other comprehensive income -
cumulative translation adjustment (151,921) (167,838)
------------ ------------
Total stockholders' equity 95,038 383,345
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,050,141 $ 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)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31 DECEMBER 31
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues
Sales $ 82,461 $ 3,023 $ 119,895 $ 60,507
Rentals 85,464 86,270 171,902 164,678
------------ ------------ ------------ ------------
Total revenues 167,925 89,293 291,797 225,185
Cost of revenues
Sales 62,797 44,870 104,502 99,129
Rentals 93,045 138,092 247,298 302,074
------------ ------------ ------------ ------------
Total cost of revenues 155,842 182,962 351,800 401,203
------------ ------------ ------------ ------------
12,083 (93,669) (60,003) (176,018)
Operating expenses
General and administrative 138,966 232,346 320,941 427,954
Sales and marketing 72,303 85,996 150,523 165,865
Research and development 37 2,414 132 13,043
------------ ------------ ------------ ------------
211,306 320,756 471,596 606,862
------------ ------------ ------------ ------------
Operating (loss) (199,223) (414,425) (531,599) (782,880)
Other income (expense)
Interest income 190 5,948 2,051 15,262
Interest (expense) adjustment 4,014 (12,738) (8,101) (25,668)
------------ ------------ ------------ ------------
4,204 (6,790) (6,050) (10,406)
------------ ------------ ------------ ------------
Net (loss) $ (195,019) $ (421,215) $ (537,649) $ (793,286)
============ ============ ============ ============
Net (loss) per share $ (0.02) $ (0.07) $ (0.05) $ (0.12)
============ ============ ============ ============
Weighted average number
of common shares 11,283,289 6,444,955 11,283,289 6,444,955
============ ============ ============ ============
</TABLE>
SEE ACCOMPANYING NOTES
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<PAGE>
IONIC FUEL TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31
1999 1998
--------- ---------
<S> <C> <C>
OPERATING ACTIVITIES
Net (loss) $(537,649) $(793,286)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 35,335 35,573
Amortization -- 33,146
(Increase) decrease in:
Accounts receivable 25,974 (48,400)
Other receivables -- 10,145
Inventory 3,870 45,058
Prepaid expenses 15,990 35,661
Increase in:
Accounts payable and accrued expenses 4,960 16,936
--------- ---------
Net cash used by operating activities (451,520) (665,167)
INVESTING ACTIVITIES
Acquisition of equipment (11,041) (74,194)
Acquisition of patents -- (17,122)
--------- ---------
Cash used by investing activities (11,041) (91,316)
FINANCING ACTIVITIES
Principal payments on capital leases (17,576) (17,191)
Principal payments under licensing agreement (3,899) (10,332)
Proceeds from common stock subscriptions 184,720 --
--------- ---------
Net cash provided (used) by financing activities 163,245 (27,523)
Effects of exchange rate differences on cash 4,068 (2,799)
--------- ---------
Decrease in cash and cash equivalents (295,248) (786,805)
Cash and cash equivalents, beginning of period 312,277 1,082,872
Cash and cash equivalents, end of period $ 17,029 $ 296,067
========= =========
Interest paid $ 8,101 $ 25,668
========= =========
Noncash financing activity:
Stock subscriptions receivable $ 48,705 $ --
========= =========
</TABLE>
SEE ACCOMPANYING NOTES
- 5 -
<PAGE>
IONIC FUEL TECHNOLOGY, INC.
Notes to Consolidated Financial Statements
(Unaudited)
December 31, 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 period, the principal use of the Company's cash has been to
fund its operating losses. The Company has been utilizing approximately
$75,000 per month to fund operations. To fund operations, the Company raised
$233,425 of additional capital through the issuance of 4,668,500 stock
subscriptions at a price of $0.05 per share. Subsequent to December 31,
1999, the Company obtained new bank financing, secured by trade accounts
receivable, totaling approximately $240,000; however, additional capital or
profitable operations will be needed in the fourth quarter or it will be
necessary to substantially curtail 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 six month period ended December 31, 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 Form 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:
<TABLE>
<CAPTION>
DECEMBER 31 JUNE 30
1999 1999
----------- --------
<S> <C> <C>
Material and supplies $152,340 $151,540
Finished goods 193,828 211,724
-------- --------
$346,168 $363,264
======== ========
</TABLE>
Included in finished goods inventory are units, at customer sites, on a
short-term trial basis.
- 6 -
<PAGE>
IONIC FUEL TECHNOLOGY, INC.
Notes to Consolidated Financial Statements
(Unaudited)
December 31, 1999
(Continued)
5. COMPREHENSIVE INCOME
The Company's comprehensive income is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED,
DECEMBER 31 DECEMBER 31
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net loss $(195,019) $(421,215) $(537,649) $(793,286)
Foreign currency translation
adjustment (5,635) (10,233) 15,917 (4,072)
--------- --------- --------- ---------
Total comprehensive loss $(200,654) $(431,448) $(521,732) $(797,358)
========= ========= ========= =========
</TABLE>
- 7 -
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Six Months Ended December 31, 1999 and December 31, 1998
Total revenues increased to approximately $292,000 during the six month
period ended December 31, 1999 from approximately $225,000 for the six month
period ended December 31, 1998.
The increase of approximately $67,000 in revenues related primarily to
a increase in sales revenue.
Gross profit increased to a loss of approximately $60,000 during the
six months ended December 31, 1999 (loss of $176,000 in 1998) due to decreases
in service department and manufacturing costs and a decrease in the provision
for returns.
General and administrative expenses decreased to approximately $321,000
during the six months ended December 31, 1999 from approximately $428,000 during
the six months ended December 31, 1998.
The decrease of approximately $107,000 in general and administrative
expenses related to a decrease in financial public relations expenses, royalty
expenses, vehicle and travel expense and the elimination of amortization of
patent costs written off at June 30, 1999.
Research and development decreased approximately $13,000 during the six
months ended December 31, 1999 due to elimination of new product development.
Other expense (net) decreased to approximately $(6,000) during the six
months ended December 31, 1999 from approximately $(10,000) of net expenses
during the same period in 1998, due to a decrease in interest expense, partly
offset by a decrease in interest income.
Three Months Ended December 31, 1999 and December 31, 1998
Total revenues increased to approximately $168,000 during the three
month period ended December 31, 1999 from approximately $89,000 for the three
month period ended December 31, 1998.
The increase of approximately $79,000 in revenues related to an
increase in sales revenue.
Gross profit increased to a profit of approximately $12,000 during the
three months ended December 31, 1999 (loss of $94,000 in 1998) due to decreases
in service department and manufacturing costs and a decrease in the provision
for returns.
General and administrative expenses decreased to approximately $139,000
during the three months ended December 31, 1999 from approximately $232,000
during the three months ended December 31, 1998.
The decrease of approximately $93,000 in general and administrative
related to decreases in professional fees, royalty and financial public relation
expenses and the elimination of amortization of patent costs written off at June
30, 1999.
- 8 -
<PAGE>
Research and development expenses decreased approximately $2,000 during
the three months ended December 31, 1999 due to elimination of new product
development.
Other expense (net) decreased approximately $11,000 during the three
months ended December 31, 1999 due to decreases in interest income and a
reversal of interest expense accrued in the prior quarter.
LIQUIDITY AND SOURCES OF CAPITAL
Net cash used by operations was approximately $450,000 for the six
months ended December 31, 1999 and approximately $665,000 for the six months
ended December 31, 1998. Cash was utilized in all departments, i.e. sales,
marketing and administration in the United Kingdom and Europe. Working capital
was approximately $144,000 at December 31, 1999 and approximately $466,000 at
June 30, 1999. Working capital has been utilized primarily to fund operations.
In December 1999, the Company accepted subscriptions for the private
placement of 4,688,500 shares of newly issued, unregistered, common stock par
value $.01. As a result, the Company raised $233,425.
CURRENCY FLUCTUATION
Currency fluctuations were insignificant to the Company's operations
for the six months ended December 31, 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 the Euro, French Franc, the Belgian
Franc, the Dutch Guilder and the German Mark. Changes in the exchange rates of
these 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 six months ended December 31, 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
updated its hardware and software applications utilizing internal resources and
the Company's software is currently Year 2000 compliant. The Company has not
experienced any impact on its financial reporting or on its operations related
to the Year 2000 issue.
- 9 -
<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: FEBRUARY 11, 2000 ANTHONY J.S. GARNER
-------------------------------------
President and Chief Executive Officer
- 10 -
<PAGE>
IONIC FUEL TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED THREE MONTHS ENDED
DECEMBER 31 DECEMBER 31
1999 1998 1999 1998
------------ ------------ ------------ ------------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Revenues
Sales $ 119,895 $ 60,507 $ 82,461 $ 3,023
Rental 171,902 164,678 85,464 86,270
------------ ------------ ------------ ------------
Total revenues 291,797 225,185 167,925 89,293
Cost of revenues 351,800 401,203 155,842 182,962
------------ ------------ ------------ ------------
(60,003) (176,018) 12,083 (93,669)
Operating expenses 471,596 606,862 211,306 320,756
------------ ------------ ------------ ------------
Loss from operations (531,599) (782,880) (199,223) (414,425)
Other income (expense) (6,050) (10,406) 4,204 (6,790)
------------ ------------ ------------ ------------
Net (loss) $ (537,649) $ (793,286) $ (195,019) $ (421,215)
============ ============ ============ ============
Net loss per share $ (0.05) $ (.12) $ (0.02)$ (.07)
============ ============ ============ ============
Weighted average number
of common shares 11,283,289 6,444,955 11,283,289 6,444,955
============ ============ ============ ============
</TABLE>
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31 JUNE 30
1999 1999
---------- ----------
(UNAUDITED) (AUDITED)
<S> <C> <C>
Assets
Current assets $ 794,693 $1,086,653
Equipment and vehicles, net 255,448 248,254
---------- ----------
Total assets $1,050,141 $1,334,907
========== ==========
Liabilities and stockholders' equity
Current liabilities $ 651,076 $ 620,936
Long-term liabilities 304,027 330,626
---------- ----------
Total liabilities 955,103 951,562
Stockholders' equity 95,038 383,345
---------- ----------
Total stockholders' equity $1,050,141 $1,334,907
========== ==========
</TABLE>
<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 six months ended
December 31, 1998.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> OCT-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 17,029
<SECURITIES> 0
<RECEIVABLES> 330,540
<ALLOWANCES> 0
<INVENTORY> 346,168
<CURRENT-ASSETS> 794,693
<PP&E> 812,563
<DEPRECIATION> 557,115
<TOTAL-ASSETS> 1,050,141
<CURRENT-LIABILITIES> 651,076
<BONDS> 0
0
0
<COMMON> 112,833
<OTHER-SE> (17,795)
<TOTAL-LIABILITY-AND-EQUITY> 1,050,141
<SALES> 82,461
<TOTAL-REVENUES> 167,925
<CGS> 62,797
<TOTAL-COSTS> 304,351
<OTHER-EXPENSES> (190)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (4,014)
<INCOME-PRETAX> (195,019)
<INCOME-TAX> 0
<INCOME-CONTINUING> (195,019)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (195,019)
<EPS-BASIC> (0.02)
<EPS-DILUTED> (0.02)
</TABLE>
<PAGE>
Exhibit 99.1
IONIC FUEL TECHNOLOGY, INC.
COMPUTATION OF NET LOSS PER COMMON SHARE
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31 DECEMBER 31
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net loss $ (195,019) $ (421,215) $ (537,649) $ (793,286)
Average common shares
outstanding 11,283,289 6,444,955 11,283,289 6,444,955
------------ ------------ ------------ ------------
Net loss per common share $ (0.02) $ (0.07) $ (0.05) $ (0.12)
============ ============ ============ ============
</TABLE>
- 11 -
