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, 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
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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 offices) (Zip Code)
(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
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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 - 21,261,789 shares, 189,000 Underwriters'
warrants, 150,000 Consultant's Warrants, 270,200.059 Series D Warrants
and 100,000 Broker's Warrants outstanding as of September 30, 2000.
IONIC FUEL TECHNOLOGY, INC.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated balance sheets - September 30, 2000 and June 30, 2000
Consolidated statements of operations - Three months ended
September 30, 2000 and 1999
Consolidated statements of cash flows - Three months ended
September 30, 2000 and 1999
Notes to consolidated financial statements - September 30, 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
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PART I. FINANCIAL INFORMATION
IONIC FUEL TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, JUNE 30,
2000 2000
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ASSETS (UNAUDITED) (AUDITED)
Current assets
Cash and cash equivalents (Note 3) $ 63,785 $ 231,202
Trade accounts receivable 285,526 264,362
Inventory (Note 4) 331,801 333,472
Prepaid expenses 75,119 58,048
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Total current assets 756,231 887,084
Equipment and vehicles, net of accumulated
depreciation of $362,936 at September 30, 2000
and $361,097 at June 30, 2000 149,810 141,311
------------ ------------
TOTAL ASSETS $ 906,041 $ 1,028,395
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LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities
Accounts payable $ 137,908 $ 172,215
Accrued expenses 169,704 185,511
Bank overdraft 74,075 217,587
Current portion of note payable, bank 36,963 -
Provisions for warranties and returns 108,142 134,066
Provision for refurbishment and inventory 132,145 103,714
Accrued royalty, due to officer 27,200 27,200
Current portion of royalty agreement 22,050 18,900
Accrued salary, benefits and payroll taxes 27,736 28,360
Current portion of capital lease obligations 12,583 7,538
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Total current liabilities 748,506 895,091
Long-term liabilities
Note payable, bank, less current portion 73,925 -
Long-term obligations less current portion 24,263 4,427
Other long-term liabilities 292,825 299,125
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Total long-term liabilities 391,013 303,552
Stockholders' deficiency
Common stock, $.01 par value:
50,000,000 shares authorized; issued and
outstanding 21,261,789 shares 212,618 159,518
Common stock subscribed - 33,100
Capital in excess of par value 14,276,041 14,096,041
Accumulated deficit (14,566,199) (14,311,623)
Accumulated other comprehensive income -
cumulative translation adjustment (155,938) (147,284)
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Total stockholders' deficiency (233,478) (170,248)
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TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY $ 906,041 $ 1,028,395
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SEE ACCOMPANYING NOTES
Note: The balance sheet at June 30, 2000 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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IONIC FUEL TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED
SEPTEMBER 30
2000 1999
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Revenues
Engineering consulting $ 118,703 $ -
Sales 24,619 37,434
Rental 72,587 86,438
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Total revenues 215,909 123,872
Cost of revenues
Engineering consulting 43,256 -
Sales 5,257 41,705
Rental 176,148 154,253
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Total cost of revenues 224,661 195,958
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(8,752) (72,086)
Operating expenses
General and administrative 193,545 181,975
Sales and marketing 46,429 78,220
Research and development - 95
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239,974 260,290
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Operating loss (248,726) (332,376)
Other income (expense)
Interest income 0 1,861
Interest expense (5,850) (12,115)
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(5,850) (10,254)
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Net loss $ (254,576) $ (342,630)
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Net loss per share (.01) (.03)
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Weighted average number of
common shares 18,516,463 11,283,289
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SEE ACCOMPANYING NOTES
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IONIC FUEL TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED
SEPTEMBER 30
2000 1999
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OPERATING ACTIVITIES
Net loss $ (254,576) $ (342,630)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation 10,322 18,241
(Increase) decrease in:
Accounts receivable (25,030) 59,835
Inventory 3,868 8,840
Prepaid expenses (12,541) 5,333
Increase (decrease) in:
Accounts payable and accrued expenses (40,698) 17,558
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Net cash used by operating activities (318,655) (232,823)
INVESTING ACTIVITY
Acquisition of equipment (1,378) (5,549)
FINANCING ACTIVITIES
Principal payments on capital leases (2,411) (9,054)
Principal payments under licensing agreement (3,150) (3,899)
Reduction in bank overdraft (143,512) -
Proceeds from sale of stock 200,000 -
Proceeds from note payable, bank 111,223 -
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Net cash provided (used) by financing activities 162,150 (12,953)
Effects of exchange rate differences on cash (9,534) 3,725
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Decrease in cash and cash equivalents (167,417) (247,600)
Cash and cash equivalents, beginning of period 231,202 312,277
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Cash and cash equivalents, end of period $ 63,785 $ 64,677
========== ============
Interest paid $ 5,850 $ 12,115
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NONCASH INVESTING AND FINANCING ACTIVITIES:
Acquisition of vehicle with capital lease $ 27,544 $ -
========== ============
SEE ACCOMPANYING NOTES
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IONIC FUEL TECHNOLOGY, INC.
Notes to Consolidated Financial Statements
(Unaudited)
September 30, 2000
0
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 and to bring its new products and services to
market. The Company has been utilizing approximately $75,000 per month to
fund operations. The Company is presently considering attempting to raise
additional capital to fund operations. If additional capital is not secured
within the next few months, it may 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, 2000 are not necessarily
indicative of the results that may be expected for the year ending June 30,
2001. 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, 2000.
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
2000 2000
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Material and supplies $127,880 $131,609
Finished goods 203,921 201,863
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$331,801 $333,472
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Included in finished goods inventory are units, at customer sites, on a
short-term trial basis.
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IONIC FUEL TECHNOLOGY, INC.
Notes to Consolidated Financial Statements
(Unaudited)
September 30, 2000
(Continued)
5. COMPREHENSIVE INCOME
The Company's comprehensive income is as follows:
THREE MONTHS ENDED
SEPTEMBER 30
2000 1999
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Net loss $(254,576) $(342,630)
Foreign currency translation adjustment (8,654) 21,552
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Total comprehensive loss $(263,230) $(321,078)
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Three Months Ended September 30, 2000 and September 30, 1999
Total revenues increased to approximately $216,000 during the three
month period ended September 30, 2000 from approximately $124,000 for the three
month period ended September 30, 1999.
The increase of approximately $92,000 in revenues related principally
to the introduction of engineering consulting services which generated new
revenues for the company.
Gross profit increased to a loss of approximately $(9,000) during the
three months ended September 30, 2000 (loss of $72,000 in 1999) due to the
contribution to gross margins from new engineering consulting revenues.
General and administrative expenses increased to approximately $194,000
during the three month period ended September 30, 2000 from approximately
$182,000 for the three month period ended September 30, 1999.
The increase of approximately $12,000 in general and administrative
expenses related to an increase in stock market related costs.
Sales and marketing expenses decreased to approximately $46,000 during
the three month period ended September 30, 2000 from approximately $78,000 for
the three month period ended September 30, 1999. The decrease of approximately
$32,000 was due to reductions in staff and promotional costs.
Other expense (net) decreased to approximately $(6,000) during the
three months ended September 30, 2000 from approximately $(10,000) of net
expense during the same period in 1999, due to a decrease in royalty interest
paid.
LIQUIDITY AND SOURCES OF CAPITAL
Net cash used by operations was approximately $319,000 for the three
months ended September 30, 2000 and approximately $233,000 for the three months
ended September 30, 1999. Cash was utilized in all departments, i.e. sales,
marketing, and administration in the United Kingdom and Europe. Working capital
was approximately $8,000 at September 30, 2000 and approximately $(8,000) at
June 30, 2000. Working capital has been utilized to fund operations.
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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, 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 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.
However, the principal revenues are generated in sterling which for the
3 months ended September 30, 2000 have been translated to dollars at a rate of
$1.5/(pound)1. For the same period last year the conversion rate was
$1.6/(pound)1. The fluctuation in the exchange rate should be considered when
comparing the revenue for each period.
INFLATION
Inflation has not had a significant impact on the results of the
Company's operations for the three months ended September 30, 2000 and 1999.
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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:
Exhibit I. 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, 2000.
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EXHIBIT I
IONIC FUEL TECHNOLOGY, INC.
COMPUTATION OF NET LOSS PER COMMON SHARE
THREE MONTHS ENDED
SEPTEMBER 30
2000 1999
---------------------------------
Net loss $ (254,576) $ (342,630)
Average common shares outstanding 18,516,463 11,283,289
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Net loss per common share $ (.01) $ (.03)
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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.
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(Registrant)
Date NOVEMBER 10, 2000 /s/ ATHONY J.S. GARNER
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(Name and Title)
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