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 MARCH 31, 2000
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
or organization) Identification 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 ___
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 - 15,951,789 shares as of March 31, 2000
IONIC FUEL TECHNOLOGY, INC.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated balance sheets - March 31, 2000 and June 30, 1999
Consolidated statements of operations - Three months ended March 31,
2000 and 1999; nine months ended March 31, 2000 and 1999
Consolidated statements of cash flows - Nine months ended March 31,
2000 and 1999
Notes to consolidated financial statements - March 31, 2000
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
PART I. FINANCIAL INFORMATION
IONIC FUEL TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
MARCH 31, JUNE 30,
2000 1999
--------------- --------------
ASSETS (UNAUDITED) (AUDITED)
Current assets
Cash and cash equivalents (Note 3) $ 29,385 $ 312,277
Trade accounts receivable 300,498 344,986
Inventory (Note 4) 373,892 363,264
Prepaid expenses 85,530 66,126
------------- -------------
Total current assets 789,305 1,086,653
Equipment and vehicles, net of accumulated
depreciation of $511,828 at March 31, 2000
and $508,330 at June 30, 1999 156,155 248,254
------------- -------------
TOTAL ASSETS $ 945,460 $ 1,334,907
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Bank overdraft $ 133,491 $ -
Accounts payable 264,547 141,853
Accrued expenses 204,896 211,627
Provisions for warranties and returns 123,935 159,939
Accrued royalty 27,200 24,000
Current portion of royalty agreement 11,550 24,915
Accrued salary, benefits and payroll taxes 30,696 23,166
Current portion of capital lease obligations 11,297 35,436
------------- -------------
Total current liabilities 807,612 620,936
Long-term liabilities
Long-term obligations less current portion 5,701 30,527
Other long-term liabilities 308,515 300,099
------------ ------------
Total long-term liabilities 314,216 330,626
------------ ------------
Total liabilities 1,121,828 951,562
Stockholders' equity (deficiency) Common stock, $.01 par value:
20,000,000 shares authorized; issued and outstanding 15,951,789 shares at
March 31, 2000 and
11,283,289 shares at June 30, 1999 159,518 112,833
Capital in excess of par value 13,834,354 13,647,614
Accumulated deficit (14,009,229) (13,209,264)
Accumulated other comprehensive income (161,011) (167,838)
------------ ------------
Total stockholders' equity (deficiency) (176,368) 383,345
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY) $ 945,460 $ 1,334,907
============ ===========
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.
- 3 -
IONIC FUEL TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31 MARCH 31
2000 1999 2000 1999
------------- ----------- ------------ ----------
Revenues
Sales $ 118,533 $ 137,407 $ 238,428 $ 197,914
Rental 98,702 88,335 270,604 253,013
------------- ----------- ------------ ----------
Total revenues 217,235 225,742 509,032 450,927
Cost of revenues
Sales 83,042 192,551 187,544 291,680
Rental 152,916 126,242 400,214 428,316
------------ ---------- ------------ ----------
Total cost of revenues 235,958 318,793 587,758 719,996
------------ ---------- ------------ ----------
(18,723) (93,051) (78,726) (269,069)
Operating expenses
General and administrative 152,362 203,559 473,303 631,513
Sales and marketing 67,929 57,925 218,452 223,790
Research and development -- 2,160 132 15,203
------------ ------------ --------------- -----------
220,291 263,644 691,887 870,506
------------ ---------- ------------ ----------
Operating (loss) (239,014) (356,695) (770,613) (1,139,575)
Other income (expense)
Interest income (adjustment) (259) 2,010 1,792 17,272
Interest expense (1,950) (12,536) (10,051) (38,204)
Loss on sale of vehicle (21,094) -- (21,094) --
------------- ----------- ------------- -----------
(23,303) (10,526) (29,353) (20,932)
------------- ----------- ------------- -----------
Net (loss) $ (262,317) $ (367,221) $ (799,966) $(1,160,507)
============ ========== ============ =========
Net (loss) per share $ (0.02) $ (0.06) $ (0.07) $ (0.18)
============ =========== ============ ===========
Weighted average number of
common shares 14,361,421 6,444,955 12,301,871 6,444,955
========== ========= ========== =========
SEE ACCOMPANYING NOTES
- 4 -
IONIC FUEL TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
NINE MONTHS ENDED
MARCH 31
2000 1999
-------------------------------
OPERATING ACTIVITIES
Net loss $(799,966) $(1,160,507)
Adjustments to reconcile net loss to net cash used
by operating activities:
Depreciation 53,011 50,329
Amortization -- 49,862
Loss on sale of vehicle 21,904 --
(Increase) decrease in:
Trade accounts receivable 49,185 (229,775)
Other receivables -- 19,904
Inventory 215 58,347
Prepaid expenses (26,690) 18,596
Increase in:
Accounts payable and accrued expenses 84,877 303,397
-------- ----------
Net cash used by operating activities (617,464) (889,847)
INVESTING ACTIVITIES
Acquisition of equipment (11,936) (87,517)
Acquisition of patents -- (17,122)
-------- -----------
Cash used by investing activities (11,936) (104,639)
FINANCING ACTIVITIES
Proceeds from sale of common stock 233,425 -
Principal payments on capital leases (24,343) (26,913)
Principal payments under licensing agreement (4,949) (15,795)
Net proceeds from issuance of stock subscriptions -- 648,439
-------- ----------
Net cash provided by financing activities 204,133 605,731
Effects of exchange rate differences on cash 8,884 (4,591)
--------- ------------
Increase (decrease) in cash and cash equivalents (416,383) (393,346)
Cash and cash equivalents, beginning of period 312,277 1,082,872
------- ---------
Cash and cash equivalents (net overdraft), end of period $(104,106) $ 689,526
======== ==========
Interest paid $ 10,051 $ 38,204
======== ===========
Noncash investing and financing activity:
Debt assumed by purchaser of vehicle $ 25,970
========
SEE ACCOMPANYING NOTES
- 5 -
IONIC FUEL TECHNOLOGY, INC.
Notes to Consolidated Financial Statements
(Unaudited)
March 31, 2000
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
$55,000 per month to fund operations for the quarter ended March 31, 2000.
To fund operations, the Company raised $233,425 of additional capital
through the issuance of 4,668,500 shares of stock at a price of $0.05 per
share. The Company also is in process of obtaining new bank financing, in
the amount of $240,000. However, additional capital or profitable
operations will be needed in the fourth quarter or 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 nine month period ended March 31, 2000 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:
MARCH 31 JUNE 30
2000 1999
-------- -------
Material and supplies $151,154 $151,540
Finished goods 222,738 211,724
------- -------
$373,892 $363,264
======= =======
Included in finished goods inventory are units, at customer sites, on a
short-term trial basis.
- 6 -
IONIC FUEL TECHNOLOGY, INC.
Notes to Consolidated Financial Statements
(Unaudited)
March 31, 2000
(Continued)
5. COMPREHENSIVE INCOME
The Company's comprehensive income is as follows:
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31 MARCH 31
2000 1999 2000 1999
----------- ----------- ----------- ------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Net loss $(262,317) $(367,221) $(799,966) $(1,160,507)
Foreign currency translation
adjustment (9,090) (14,953) 6,827 (19,025)
---------- --------- ---------- -----------
Total comprehensive loss $(271,407) $(382,174) $(793,139) $(1,179,532)
========== ========== ========== ============
- 7 -
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Nine Months Ended March 31, 2000 and March 31, 1999
Total revenues increased by $58,000 to approximately $509,000 during
the nine month period ended March 31, 2000 from approximately $451,000 for the
nine month period ended March 31, 1999.
This increase in revenues related primarily to an increase in sales
revenue.
Gross profit increased by $191,000 to a loss of approximately $78,000
during the nine months ended March 31, 2000 (loss of $269,000 in 1999) due to
decreases in service department and manufacturing costs and a decrease in the
provision for returns.
General and administrative expenses decreased by $158,000 to
approximately $473,000 during the nine months ended March 31, 2000 from
approximately $631,000 during the nine months ended March 31, 1999.
The decrease of approximately $158,000 in general and administrative
expenses related to a decrease in corporate head office costs, mainly royalty
expenses, vehicle and travel expense, the elimination of amortization of patent
costs written off at June 30, 1999 and reduced financial public relations
expenses.
Research and development decreased approximately $15,000 during the
nine months ended December March 31, 2000 due to completion of new product
development.
Other expense (net) increased to approximately $29,000 during the nine
months ended March 31, 2000 from approximately $21,000 of net expenses during
the same period in 1999, due to a loss on the sale of a vehicle.
Three Months Ended March 31, 2000 and March 31, 1999
Total revenues decreased to approximately $217,000 during the three
month period ended March 31, 2000 from approximately $226,000 for the three
month period ended March 31, 1999.
The decrease of approximately $9,000 in revenues related to a decrease
in sales revenue.
Gross profit increased by $74,000 to a loss of approximately $19,000
during the three months ended March 31, 2000 (loss of $93,000 in 1999) due to
decreases in service department and manufacturing costs and a decrease in the
provision for returns.
General and administrative expenses decreased to approximately $152,000
during the three months ended March 31, 2000 from approximately $204,000 during
the three months ended March 31, 1999.
The decrease of approximately $52,000 in general and administrative
related to decreases in corporate head office costs, mainly professional fees,
royalty expenses, the elimination of amortization of patent costs written off at
June 30, 1999 and reduced financial public relations expenses.
- 8 -
Research and development expenses decreased approximately $2,000 during
the three months ended March 31, 2000 due to completion of new product
development.
Other expense (net) increased to approximately $23,000 during the three
months ended March 31, 2000 from approximately $11,000 of net expenses during
the same period in 1999 due to the loss on the sale of a vehicle.
LIQUIDITY AND SOURCES OF CAPITAL
Net cash used by operations was approximately $617,000 for the nine
months ended March 31, 2000 and approximately $890,000 for the nine months ended
March 31, 1999. Cash was utilized in all departments, i.e. sales, marketing and
administration in the United Kingdom and Europe. Working capital (deficit) was
approximately $(18,000) at March 31, 2000 and approximately $466,000 at June 30,
1999. Working capital has been utilized primarily to fund operations.
CURRENCY FLUCTUATION
Currency fluctuations were insignificant to the Company's operations
for the nine months ended March 31, 2000 and 1999. 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 nine months ended March 31, 2000 and 1999.
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 -
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 nine months ended
March 31, 2000.
- 10 -
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 5-11-00 /s/
------------------ --------------------------------------
Anthony J. S. Garner
President and Chief Executive Officer
- 11 -