SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934.
For the quarter ended: March 31, 1996
Commission file No. 0-23336
ELECTRIC FUEL CORPORATION
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Exact name of registrant as specified in its
charter
Delaware 95-4302784
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(State or other jurisdiction (I.R.S. Employer
incorporation or organization) Identification No.)
885 Third Avenue, New York, New York 10022 - Suite 2900
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(Address of principal executive offices)
(Zip Code)
(212) 230-2172
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(Registrant's telephone number, including area
code)
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 period 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 CORPORATE ISSUERS:
The number of shares outstanding of the issuer's common stock
as at March 31, 1996 was 12,425,947.
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ELECTRIC FUEL CORPORATION
INDEX
Page
----
PART I - FINANCIAL INFORMATION:
Item 1 - INTERIM FINANCIAL STATEMENTS (UNAUDITED):
-------------------------------------------------
Consolidated Balance Sheets at March 31, 1996 and
December 31, 1995 3-4
Consolidated Statements of Operations for the Three Months
Ended March 31, 1996 and 1995 5
Consolidated Statements of Changes in Stockholders' Equity
for the Three Months Ended March 31, 1996 6
Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 1996 and 1995 7-8
Notes to the Consolidated Financial Statements 10
Item 2 - Management's Discussion and Analysis of Financial
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Condition and Results of Operations
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PART II - Other Information
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ELECTRIC FUEL CORPORATION
CONSOLIDATED BALANCE SHEETS
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December 31, March 31,
1995 1996
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ASSETS (Audited) (Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 5,364,867 $ 23,102,528
Marketable debt securities (at fair market value) 4,215,518 3,152,481
Accounts receivable:
Trade 398,535 413,984
Other 2,421,804 1,931,034
Inventories 535,208 367,977
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Total current assets 12,935,932 28,968,004
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INVESTMENTS:
Investee company 35,849 35,849
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FIXED ASSETS:
Cost 6,639,926 7,491,141
Less - accumulated depreciation and amortization 654,391 843,875
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5,985,535 6,647,266
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OTHER ASSETS AND DEFERRED CHARGES net of accumulated
amoritzation 743,885 30,833
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$ 19,701,201 $ 35,681,952
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ELECTRIC FUEL CORPORATION
CONSOLIDATED BALANCE SHEETS
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December 31, March 31,
1995 1996
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(Audited) (Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accruals:
Trade $ 2,743,539 $ 1,719,703
Other 6,357,706 5,586,330
Advances from Customers 4,223,066 3,327,600
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Total current liabilities 13,324,311 10,633,633
LIABILITY FOR EMPLOYEE RIGHTS UPON RETIREMENT
net of amount funded 555,908 649,335
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Total Liabilities 13,880,219 11,282,968
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STOCKHOLDERS' EQUITY:
Common stock--$0.01 par value;
authorized--14,000,000 shares issued - 11,328,110
shares as of December 31, 1995 and 12,425,947
as of March 31, 1996; outstanding--8,675,947
shares as of December 31, 1995 and 12,425,947
shares as of March 31, 1996 113,282 124,260
Preferred stock - $0.01 par value; authorized -
1,000,000 shares, no shares outstanding
Additional paid-in capital 24,168,108 45,568,576
Accumulated deficit (16,873,340) (19,869,761)
Unrealized gain on available-for-sale securities 29,048 18,851
Treasury stock, at cost (common stock--2,652,163
shares as of December 31, 1995) (193,174)
Notes receivable from stockholders (1,422,942) (1,442,942)
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Total Stockholders' Equity 5,820,982 24,398,984
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$19,701,201 $35,681,952
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ELECTRIC FUEL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
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Three months ended March 31,
----------------------------
1995 1996
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REVENUES $ 282,662 $ 1,265,855
RESEARCH AND DEVELOPMENT
EXPENSES AND COST OF REVENUES
Expenses incurred 1,654,337 3,749,647
Less - royalty-bearing grants 223,673
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1,430,664 3,749,647
PROVISION FOR ANTICIPATED PROGRAM
LOSSES 1,500,000
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 602,919 627,922
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3,533,583 4,377,569
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OPERATING LOSS (3,250,921) (3,111,714)
FINANCIAL INCOME - NET 198,505 130,033
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LOSS BEFORE TAXES ON INCOME (3,052,416) (2,981,681)
TAXES ON INCOME 14,740
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LOSS FROM THE OPERATION OF THE
COMPANY & ITS CONSOLIDATED (3,052,416) (2,996,421)
SHARE IN LOSS OF ASSOCIATED
COMPANY (18,000)
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LOSS FOR THE PERIOD $(3,070,416) $(2,996,421)
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LOSS PER SHARE $ (0.36) $ (0.28)
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WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 8,413,668 10,757,815
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ELECTRIC FUEL CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITIED)
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Common Stock Unrealized gain
------------------- Additional paid-in on available-for-
Shares Amount capital Accumulated deficit sale securities
---------- ---------- ---------------------- ---------------------- --------------------
BALANCE AT JANUARY 1, 1996 11,328,110 $ 113,282 $ 24,168,108 $ (16,873,340) $ 29,048
CHANGES DURING THE THREE
MONTH PERIOD ENDED
MARCH 31, 1996:
Shares issued in a public of
offering 3,750,000 37,500 21,567,120 *
Treasury stock retired (2,652,163) (26,522) (166,652)
Accrued Interest on notes receivable
from stockholders
Unrealized loss on available-for-sale
securities
Loss (2,996,421)
---------- ---------- ---------------------- ---------------------- --------------------
BALANCE AT
MARCH 31, 1996 12,425,947 $124,260 $ 45,568,576 $ (19,869,761) $ 18,851
========== ========== ====================== ====================== ====================
(UNAUDITED)
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Treasury Notes receivable
Stock from shareholders Total
---------------- ---------------------- ----------------
BALANCE AT JANUARY 1, 1996 $ (193,174) $ (1,422,942) $ 5,820,982
CHANGES DURING THE THREE
MONTH PERIOD ENDED
MARCH 31, 1996:
Shares issued in a public
offering 21,604,620
Treasury stock retired 193,174 0
Accrued Interest on notes receivable
from stockholders (20,000) (20,000)
Unrealized loss on available-for-sale
securities (10,197)
Loss (2,996,421)
---------------- ---------------------- ----------------
BALANCE AT
MARCH 31, 1996 $0 $ (1,442,942) $ 24,398,984
================ ====================== ================
* Net of $ 2,690,540 - offering expenses
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ELECTRIC FUEL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
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Three months ended
March 31,
-----------------------------
1995 1996
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CASH FLOWS FROM OPERATING ACTIVITIES:
Loss for the period ($3,070,416) $ (2,996,421)
Adjustments required to reconcile loss to net cash used in operating
activities:
Loss relating to investment in investee company 18,000
Depreciation and amortization 68,132 209,820
Amortization of premium net of accrued interest and gain from
sale of marketable debt securities 17,322 15,840
Capital loss from disposal of fixed assets 777
Liability for employee rights upon retirement--net 61,753 93,427
Interest accrued on notes and loan to stockholders (21,840) (20,000)
Changes in operating asset and liability items:
Decrease (Increase) in accounts receivable 1,216,010 501,855
Decrease (Increase) in inventories (7,590) 167,231
Increase in accounts payable and accruals 2,066,171 (1,084,660)
Changes in related parties--net 10,141
Increase (Decrease) in advances from customers 1,262,740 (895,466)
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Net cash provided by (used in) operating activities $ 1,620,423 $ (4,007,597)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets (644,789) (897,733)
Proceeds from disposal of marketable debt securities 995,610
Purchase of marketable debt securities
Proceeds from disposal of fixed assets 1,371
Proceeds from sale of marketable debt securities 1,037,000
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Net cash provided by investing activities $ 350,821 $ 140,638
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FORWARD $ 1,971,244 $ (3,866,959)
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ELECTRIC FUEL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
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Three months ended
March 31,
-----------------------------
1995 1996
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FORWARD $ 1,971,244 $ (3,866,959)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Issue of share capital (including additional paid in capital),
net of offering expenses 21,604,620
Purchase of treasury stock (46,987)
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Net cash provided by (used in) financing activities (46,987) 21,604,620
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INCREASE IN CASH AND CASH EQUIVALENTS 1,924,257 17,737,661
BALANCE OF CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 1,307,855 5,364,867
BALANCE OF CASH AND CASH EQUIVALENTS AT END OF
PERIOD $ 3,232,112 $ 23,102,528
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION--CASH PAID DURING THE PERIOD FOR:
Interest $ 338 $ 618
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Advances to income tax authorities $ 14,315 $ 73,295
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Page 8
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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1. The interim financial statements of Electric Fuel Corporation ("the
Company") reflect all adjustments, consisting only of normal recurring
accruals, which are, in the opinion of the Company's management,
necessary for a fair statement of results for the periods presented.
Operating revenue and expenses for any interim period are not necessarily
indicative of results for a full year.
For the purpose of these interim financial statements, certain information
and disclosures normally included in the financial statements have been
condensed or omitted. These unaudited statements should be read in
conjunction with the audited financial statements and notes thereto for the
year ended December 31, 1995.
1. In February 1995, the Company completed a public offering of 3,750,000 shares
of its common stock of par value of $0.01 per share, at an offering price of
$6.50 per share.
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ELECTRIC FUEL CORPORATION
Management's Discussion and Analysis of
Financial Condition and Results of Operations
---------------------------------------------
The following discussion and analysis should be read in conjunction with the
financial statements and notes thereto appearing elsewhere in this Quarterly
Report. Amounts reported here have been rounded to the nearest thousand.
Forward Looking Statements
When used in this discussion, the words "believes", "anticipated" and similar
expressions are intended to identify forward looking statements. Such statements
are subject to certain risks and uncertainties which could cause actual results
to differ materially from those projected. See "Important Factors Regarding
Forward-Looking Statements" attached as Exhibit 99 to the Company's Annual
Report For the year ended December 31, 1995 on Form 10K and incorporated herein
by reference . Readers are cautioned not to place undue reliance on these
forward-looking statements which speak only as of the date hereof. The Company
undertakes no obligation to publicly release the result of any revisions to
these forward-looking statements which may be made to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
Results of Operations:
Three months ended March 31, 1996 compared to the three months ended March 31,
1995.
Revenues:
Revenues for the first quarter of 1996 totaled $1,266,000 compared with $283,000
in the comparable period in 1995, an increase of $983,000. Revenues for the
first quarter of 1996 were principally derived from activities relating to the
Deutsche Post AG (Deutsche Post) field test program. Additionally, the company
continued to recognize revenues from its agreement with STN Atlas Elektronic
GmbH to develop a high power zinc oxygen battery for torpedoes. First quarter
1995 revenues were attributable to the completion and delivery of certain
outstanding orders from Edison Termoelettrica, SpA ("Edison"), as well as
beginning recognition of revenues related to the Deutsche Post field test. The
Company anticipates a significant portion of the remaining expected revenues
related to the field test to be recognized in 1996 and the beginning of 1997, as
the regeneration plant becomes fully operational, batteries are delivered and
operations begin. Revenues in connection with the operation of the field test
fleet are expected to continue throughout 1997.
Expenses
Research and development expenses and cost of revenues were $3,750,000 compared
Page 10
with $1,654,000 for the first quarter of 1995. The Company believes that, given
the Company's stage of development, it is not, at this time, meaningful to
distinguish between R&D expenses and cost of revenues. The increase in expenses
of $2,096,000 from the first quarter of 1995 is principally attributable to:
expenses in connection with the Deutsche Post field test; costs associated with
the continued growth of the Company, including the operation of the Company's
production and development facilities in Israel, and increased personnel costs
relating to the foregoing. With regard to the Company's R&D program, for the
first quarter of 1995, $224,000 of royalty bearing grants were recognized, which
reduced R&D expenses during this period. Since the Company's 1996 grant
application has not yet been approved by the Research Committee of the Office of
the Chief Scientist of the Ministry of Industry and Trade, no royalty bearing
grants have been recognized in the first quarter of 1996. Expenses related to
the field test are expected to increase through the rest of 1996 and into 1997
as the Company continues to deliver batteries and operates the Bremen
regeneration plant.
In the first quarter of 1995, the Company increased its provision for
anticipated program losses on the Deutsche Post field test by $1.5 million.
Management currently estimates that previously recorded provisions for
anticipated program losses are sufficient and accordingly no increase to the
provision was recorded in the first quarter of 1996. The balance of the
provision for the uncompleted portions of the program amounts to $3.6 million as
at March 31, 1996. The remaining provision reflects anticipated losses from the
field test based on the most recent estimates of costs related to the field
test, and may be offset by future revenues or increased to reflect any future
revised estimates of project costs. The overall provision includes cost
estimates based on the Company's production experience to date for the supply of
the battery-vehicle interface equipment, batteries, the estimated service
expenses for the field test fleet and the 100 kg/hour regeneration plant being
completed in Bremen, Germany. Since the plant is currently dedicated to the
field test, the cost of the plant (net of anticipated residual value) is
reflected as a current expense.
Selling, general and administrative expenses for the first quarter of 1996 were
$628,000 compared with $603,000 in the first quarter of 1995. As the Company
expands its activities it expects increases in selling, general and
administrative expenses, particularly with respect to marketing expenses.
The Company reported a net loss of $2,996,000 in the first quarter of 1996
compared with a net loss $3,070,000 in the first quarter of 1995 due to the
factors sighted above.
Liquidity and Capital Resources
Battery and vehicle deliveries for the field test are expected to continue
during 1996 and the beginning of 1997. Accordingly, most of the Company's
revenues and expenses related to the field test are expected to be recognized
during these periods. Total consideration to the Company for the batteries,
equipment and services to be supplied in connection with the field test
(including DM 1.0 million from Vattenfall AB) is expected to be DM 22.0 million
(approximately $15.2 million), less a contribution to the costs of the field
test by the Company of DM 7.0 million (approximately $4.8 million), leaving a
Page 11
net balance of approximately DM 15.0 million (approximately $10.4 million),
which the Company does not believe will be sufficient to offset its related
expenses.
The Company expects that, in connection with the expansion of its activities and
the engineering and establishment of the Electric Fuel System, the Company's
R&D, operational and selling, general and administrative expenses will continue
to increase.
In the first quarter of 1996, the Company completed a public offering of
3,750,000 shares of its Common Stock at an offering price of $6.50 per share.
The offering resulted in net proceeds to the company of approximately $21.6
million. As of March 31, 1996, the Company had cash, cash equivalents and
investments of approximately $26.3 million compared with $9.6 million as of
December 31, 1995.
The Company used available funds in the first three months of 1996 primarily for
the advancement of its commitments with regard to the field test, continued R&D
expenditures, and other working capital needs. The Company increased its
investment in fixed assets by $898,000 to $7.5 million during the three months
ended March 31, 1996. Fixed assets include $2.6 million related to the value of
the Bremen facility after its use in the field test, based on construction costs
to date. The Company currently anticipates that the total residual value of the
Bremen facility will be approximately $3.6 million.
Also during the first quarter of 1996, the Company's Israeli subsidiary,
Electric Fuel Ltd. ("EFL"), established a line of credit with the First
International Bank of Israel Ltd. ("FIBI") (the "Credit Facility"). Borrowings
under the Credit Facility will bear interest at FIBI's prime rate + 2% per
annum, be unconditionally guaranteed by Electric Fuel Corporation ("EFC") and be
secured by a pledge of foreign currency deposits in the amount of NIS 750,000
(approximately $240,000). Additionally the Credit Facility imposes financial and
other covenants on EFC and EFL and will expire on May 31, 1996, at which
time the Credit Facility will be reviewed for renewal by FIBI. The Credit
Facility provides EFL with a line of credit in the maximum principal amount of
NIS 3.8 million (approximately $1.2 million), which is expected to be used as
credit support for various obligations of the Company, and will enable EFL to
enter into up to U.S. $ 4.0 million in currency hedging forward contracts with a
5% collateral requirement. As of March 31, 1996 the bank had issued letters of
credit and bank guarantees totaling approximately $455,000, and there were
approximately $677,000 of open foreign currency forward contracts entered into
for hedging purposes.
The Company has no long term debt outstanding and expects that its cash flow
from operations together with present cash reserves and amounts available under
the Credit Facility, will be sufficient to fund the Company's activities through
1997. However, costs related to the field test have exceeded, and may continue
to exceed, budgeted amounts and while the Company, in accordance with the terms
of the Partnership Agreement, intends to request additional funding from the
Deutsche Post, there can be no assurance that it will obtain any such additional
funding. As a result, the Company might have to reduce, or defer, its
anticipated future commitments. Furthermore, if the field test is successful and
Deutsche Post, or any other participant in the field test, begins to convert all
or a portion of their fleets, to the Electric Fuel System, the Company could be
required
Page 12
to produce batteries in increased quantities as well as to construct new
regeneration and refueling facilities or expand its existing facility to
commercial capacity. Moreover additional strategic alliances may also require
the establishment or expansion of facilities in Israel or elsewhere. In
addition, the Company may determine that it should invest in certain programs,
such as additional electric vehicle demonstration programs, which it believes
will advance the development and commercialization of the Electric Fuel System.
Accordingly, the Company may be required to seek additional financing during
this period.
Actual cash requirements will depend in part upon actual and anticipated sales
and licenses. The Company may also be able to finance some portion of its fixed
asset and equipment needs through Approved Enterprise grants from the Government
of Israel.
Page 13
Part II
Item 6.
(b) No reports on Form 8-K were filed during the first quarter of 1996.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ELECTRIC FUEL CORPORATION
(Registrant)
By: /s/ Robert S. Ehrlich
-----------------------------
Name: Robert S. Ehrlich
Title: Chief Financial Officer
Dated: May 15, 1995
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