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, 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
incorporation or organization) Identification No.)
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 December 31, 2000
IONIC FUEL TECHNOLOGY, INC.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated balance sheets - December 31, 2000 and June 30, 2000
Consolidated statements of operations - Three months ended December
31, 2000 and 1999; six months ended December 31, 2000 and 1999
Consolidated statements of cash flows - Six months ended December 31,
2000 and 1999
Notes to consolidated financial statements - December 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
DECEMBER 31 JUNE 30
2000 2000
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(UNAUDITED) (AUDITED)
ASSETS
Current assets
Cash and cash equivalents (Note 3) $ 72,614 $ 231,202
Trade accounts receivable 394,147 264,362
Inventory (Note 4) 333,941 333,472
Prepaid expenses 75,785 58,048
Stock subscriptions receivable 1,000 -
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Total current assets 877,487 887,084
Equipment and vehicles, net of accumulated
depreciation of $364,008 at December 31, 2000
and $361,097 at June 30, 2000 149,612 141,311
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TOTAL ASSETS $ 1,027,099 $ 1,028,395
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Bank overdraft $ 98,926 $ 217,587
Current portion of long term debt 37,343 -
Accounts payable 249,065 266,050
Accrued expenses 196,506 91,676
Provisions for warranties and returns 103,279 134,066
Provision for refurbishment and inventory 133,951 103,714
Accrued royalty 27,200 27,200
Current portion of royalty agreement 12,600 18,900
Accrued salary, benefits and payroll taxes 24,670 28,360
Current portion of capital lease obligations 13,701 7,538
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Total current liabilities 897,241 895,091
Long-term liabilities
Long term debt, less current portion 74,685 -
Long-term capital lease obligations, less current portion 43,305 4,427
Long term royalty agreement obligations, less current portion 299,125 299,125
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Total long-term liabilities 417,115 303,552
Stockholders' equity
Common stock, $.01 par value:
50,000,000 shares authorized; issued and
outstanding 21,261,789 shares at December 31, 2000
and 15,951,789 at June 30, 2000 212,618 159,518
Common stock subscribed 12,570 33,100
Capital in excess of par value 14,414,312 14,096,041
Accumulated deficit (14,769,895) (14,311,623)
Accumulated other comprehensive income -
cumulative translation adjustment (156,862) (147,284)
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TOTAL STOCKHOLDERS' EQUITY (287,257) (170,248)
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Total liabilities and stockholders' equity $ 1,027,099 $ 1,028,395
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SEE ACCOMPANYING NOTES
Note: The balance sheet at June 30, 2000 has been derived from the
auited 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 SIX MONTHS ENDED
DECEMBER 31 DECEMBER 31
2000 1999 2000 1999
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Revenues
Sales $ 12,276 $ 82,461 $ 36,895 $ 119,895
Rentals 88,526 85,464 161,113 171,902
Engineering consulting 231,843 - 350,546 -
----------- ----------- ----------- -----------
Total revenues 332,645 167,925 548,554 291,797
Cost of revenues
Sales 1,989 62,797 7,246 104,502
Rentals 80,383 93,045 256,530 247,298
Engineering 155,271 - 198,528 -
----------- ----------- ----------- -----------
Total cost of revenues 237,644 155,842 462,304 351,800
----------- ----------- ----------- -----------
95,002 12,083 86,250 (60,003)
Operating expenses
General and administrative 168,342 138,966 361,887 320,941
Sales and marketing 126,606 72,303 173,035 150,523
Research and development - 37 - 132
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294,948 211,306 534,922 471,596
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Operating (loss) (199,946) (199,223) (448,672) (531,599)
Other income (expense)
Interest income 2,100 190 2,100 2,051
Interest (expense) adjustment (5,850) 4,014 (11,700) (8,101)
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(3,750) 4,204 (9,600) (6,050)
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Net (loss) $ (203,696) $ (195,019) $ (458,272) $ (537,649)
============ =========== ============ ===========
Weighted average number
of common shares 21,261,789 11,283,289 19,889,126 11,283,289
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SEE ACCOMPANYING NOTES
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IONIC FUEL TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED
DECEMBER 31
2000 1999
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OPERATING ACTIVITIES
Net (loss) $ (458,272) $ (537,649)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 25,176 35,335
Loss on disposal of vehicle 11,967 -
(Increase) decrease in:
Accounts receivable (132,586) 25,974
Inventory 5,232 3,870
Prepaid expenses (18,213) 15,990
Increase in:
Accounts payable and accrued expenses 87,014 4,960
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Net cash used by operating activities (479,682) (451,520)
INVESTING ACTIVITIES
Acquisition of equipment (10,740) (11,041)
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Cash used by investing activities (10,740) (11,041)
FINANCING ACTIVITIES
Reduction of bank overdraft (118,661) -
Principal payments on capital leases (6,029) (17,576)
Principal payments under licensing agreement (6,300) (3,899)
Proceeds from long term debt 112,028 -
Proceeds from sale of stock 349,841 184,720
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Net cash provided (used) by financing activities 330,879 163,245
Effects of exchange rate differences on cash 955 4,068
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Decrease in cash and cash equivalents (158,588) (295,248)
Cash and cash equivalents, beginning of period 231,202 312,277
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Cash and cash equivalents, end of period $ 72,614 $ 17,029
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Interest paid $ 11,700 $ 8,101
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NONCASH FINANCING ACTIVITY:
Acquisition of vehicles with capital leases $ 51,706 $ -
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Stock subscriptions receivable $ 1,000 $ 48,705
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SEE ACCOMPANYING NOTES
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IONIC FUEL TECHNOLOGY, INC.
Notes to Consolidated Financial Statements
(Unaudited)
December 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 and to bring its new products to market. The
Company has been utilizing approximately $80,000 per month to fund
operations. To fund operations, the Company raised approximately $150,000 of
additional capital through the issuance of 1,257,007 stock subscriptions at
a price of $0.12 per share. The Company is presently attempting to raise
additional capital to fund operations. If additional capital is not secured
within the next few months, it will be necessary to substantially curtail or
cease operations.
In the six month period to December 31, 2000 the Company has issued
5,310,000 shares of common stock at a price of $0.10 per share. Of these
shares issued, subscriptions for 3.310,000 had been received by the Company
prior to June 30, 2000.
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, 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:
DECEMBER 31 JUNE 30
2000 2000
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Material and supplies $126,755 $131,609
Finished goods 207,186 201,863
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$333,941 $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)
December 31, 2000
(Continued)
5. COMPREHENSIVE INCOME
The Company's comprehensive income is as follows:
THREE MONTHS ENDED SIX MONTHS ENDED,
DECEMBER 31 DECEMBER 31
2000 1999 2000 1999
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Net loss $(203,696) $(195,019) $(458,272) $(537,649)
Foreign currency translation
adjustment (924) (5,635) (9,578) 15,917
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Total comprehensive loss $(204,620) $(200,654) $(467,850) $(521,732)
========= ========= ========= =========
6. EARNINGS PER SHARE
Net (loss) $ 203,696) $(195,019) $(458,272) $(537,649)
========= ========= ========= =========
Net (loss) per share $ (0.01) $ (0.02) $ (0.02) $(0.05)
========= ========= ========= =========
Weighted average number
of common shares 21,261,789 11,283,289 19,889,126 11,283,289
========== ========== ========== ==========
During the six month period ended December 31, 2000, the Company issued
139,000 share options to employees and 150,000 to a financial public relations
firm in lieu of a $30,000 fee for services carried out in the period to April
30, 2001. All were at a fair market value of $0.20. At December 31, 2000 the
total number of options outstanding was 795,500. No share options have been
included in the calculation of earnings per share as their effect is
anti-dilutive.
7. SEGMENT REPORTING
The Company adopted SFAS No. 131, Disclosures About Segments of an Enterprise
and Related Information in 1998, which changes the way the Company reports
information about its operating segments. All prior year's information has been
restated to conform with the current year presentation.
The Company has two segments, determined geographically and is made up of the
operations of the United States and Europe. The European segment makes up a
majority of the Company's operations, as it is engaged in the design and
assembly of its patented IFT system.
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IONIC FUEL TECHNOLOGY, INC.
Notes to Consolidated Financial Statements
(Unaudited)
December 31, 2000
(Continued)
7. SEGMENT REPORTING (CONTINUED)
Segment Reporting of the Company is as follows:
UNITED STATES EUROPE TOTAL
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Three months ended December 31, 2000
Revenues:
Sales $ - $ 12,276 $ 12,276
Rental - 88,526 88,526
Engineering consultancy - 231,843 231,843
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Total revenue $ - $ 332,645 $ 332,645
========================================================
Segment loss $ (45,201) $ (158,495) $ (203,696)
Three months ended December 31, 1999
Revenues:
Sales $ - $ 82,461 $ 82,461
Rental - 85,464 85,464
Engineering consultancy - - -
--------------------------------------------------------
Total revenue $ - $ 167,925 $ 167,925
========================================================
Segment loss $ (5,620) $ (189,399) $ (195,019)
Six months ended December 31, 2000
Revenues:
Sales $ - $ 36,895 $ 36,895
Rental - 161,113 161,113
Engineering consultancy - 350,546 350,546
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Total revenue $ - $ 548,554 $ 548,554
========================================================
Segment loss $ (115,894) $ (342,378) $ (458,272)
Six months ended December 31, 1999
Revenues:
Sales $ - $ 119,895 $ 119,895
Rental - 171,902 171,902
Engineering consultancy - - -
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Total revenue $ - $ 291,797 $ 291,797
========================================================
Segment loss $ (74,913) $ (462,736) $ (537,649)
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Six Months Ended December 31, 2000 and December 31, 1999
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TOTAL REVENUES INCREASED TO APPROXIMATELY $549,000 DURING THE SIX MONTH
PERIOD ENDED DECEMBER 31, 2000 FROM APPROXIMATELY $292,000 FOR THE SIX MONTH
PERIOD ENDED DECEMBER 31, 1999.
THE INCREASE OF APPROXIMATELY $257,000 IN REVENUES RELATED PRIMARILY TO
AN INCREASE IN ENGINEERING CONSULTING REVENUE WHICH IS AN ADDITIONAL PRODUCT
THIS YEAR.
GROSS PROFIT IMPROVED FROM A LOSS OF APPROXIMATELY $60,000 DURING THE
SIX MONTHS ENDED DECEMBER 31, 1999 TO A PROFIT OF APPROXIMATELY $86,000 DURING
THE SIX MONTHS ENDED DECEMBER 31, 2000 DUE TO INCREASED REVENUE FROM OUR NEW
ENGINEERING CONSULTING ACTIVITIES.
GENERAL AND ADMINISTRATIVE EXPENSES INCREASED TO APPROXIMATELY $361,000
DURING THE SIX MONTHS ENDED DECEMBER 31, 2000 FROM APPROXIMATELY $321,000 DURING
THE SIX MONTHS ENDED DECEMBER 31, 1999.
THE INCREASE OF APPROXIMATELY $40,000 IN GENERAL AND ADMINISTRATIVE
EXPENSES RELATED TO AN INCREASE IN LEGAL AND PROFESSIONAL EXPENSES AND STOCK
MARKET RELATED EXPENSES.
SALES AND MARKETING EXPENSES INCREASED TO APPROXIMATELY $173,000 DURING
THE SIX MONTH PERIOD ENDED DECEMBER 31, 2000 FROM APPROXIMATELY $150,000 FOR THE
SIX MONTH PERIOD ENDED DECEMBER 31, 1999. THIS INCREASE OF APPROXIMATELY $23,000
IS DUE TO ADDITIONAL SALES COST ASSOCIATED WITH PROMOTING THE NEW PRODUCTS.
Three Months Ended December 31, 2000 and December 31, 1999
- ----------------------------------------------------------
Total revenues increased to approximately $333,000 during the three
month period ended December 31, 2000 from approximately $168,000 for the three
month period ended December 31, 1999. The increase of approximately $165,000 in
revenues is primarily due to new sales of engineering consulting services.
Gross profit increased to a profit of approximately $95,000 during the
three months ended December 31, 2000 (profit of approximately $12,000 in 1999)
due to increased sales of engineering services.
General and administrative expenses increased to approximately $168,000
during the three months ended December 31, 2000 from approximately $139,000
during the three months ended December 31, 1999.
The increase of approximately $29,000 in general and administrative
related to increases in legal and professional expenses, royalty and stock
market related expenses.
Sales and marketing expenses rose to approximately $127,000 for the
three months ended December 31, 2000 from approximately $72,000 for the three
months ended December 31,1999. This increase of $55,000 relates to additional
sales costs associated with promoting the new products.
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LIQUIDITY AND SOURCES OF CAPITAL
Net cash used by operations was approximately $480,000 for the six
months ended December 31, 2000 and approximately $450,000 for the six months
ended December 31, 1999. Cash was utilized in all departments, i.e. sales,
marketing and administration in the United Kingdom and Europe. Working capital
was approximately $(21,000) at December 31, 2000 and approximately $(8,000) at
June 30, 2000. Working capital has been utilized primarily to fund operations.
In December 2000, the Company accepted subscriptions for 1,257,007
shares of common stock par value $.01. As a result, the Company raised
approximately $150,000. The Company also raised $200,000 through the issue of
shares of common stock in the three months ended September 30, 2000. The Company
is presently attempting to raise additional capital to fund operations. If
additional capital is not raised within the next three months, it will be
necessary to substantially curtail or cease operations.
CURRENCY FLUCTUATION
Currency fluctuations were insignificant to the Company's operations
for the six months ended December 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.
However, the principal revenues are generated in sterling which for the
6 months ended December 31, 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 six months ended December 31, 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:
(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, 2000.
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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 February 8, 2001 /s/ Anthony J.S. Garner
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Anthony J.S. Garner
C.E.O. and C.F.O
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