United States Securities and Exchange Commission
Washington, D.C. 2054
FORM 10-Q/A
(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, 1997
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 - 6,297,155 shares as of
December 31, 1997
IONIC FUEL TECHNOLOGY, INC.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated balance sheets - December 31, 1997 and June 30, 1997
Consolidated statements of operations - Three months ended December
31, 1997 and 1996; six months ended December 31, 1997 and 1996
Consolidated statements of cash flows - Six months ended December 31,
1997 and 1996
Notes to consolidated financial statements - December 31, 1997
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,
1997 1997
----------------------------------
Assets (Unaudited) (Audited)
Current assets:
Cash and cash equivalents (Note 2) $ 1,433,994 $ 191,629
Trade accounts receivable 142,584 59,420
Inventory (Note 3) 482,689 482,446
Prepaid expenses 109,678 137,676
----------- -----------
Total current assets 2,168,945 871,171
Equipment and vehicles, net of accumulated
depreciation of $442,883 at December 31, 1997
and $442,105 at June 30, 1997 157,849 153,117
Patents, net 579,148 603,003
----------- -----------
Total assets $ 2,905,942 $ 1,627,291
========= =========
Liabilities and stockholders' equity Current liabilities:
Accounts payable $ 61,174 $ 87,155
Accrued expenses 254,742 239,827
Provisions for warranties and returns 33,532 16,380
Accrued royalty, due to officer 49,600 40,000
Current portion of royalty agreement 20,172 18,720
Accrued salary, benefits and payroll taxes 23,358 19,419
Current portion of long-term obligations 11,488 14,984
----------- -----------
Total current liabilities 454,066 436,485
Long-term liabilities
Long-term obligations less current portion 35,303 -
Other long-term liabilities 335,896 346,249
----------- -----------
Total long-term liabilities 371,199 346,249
Stockholders' equity:
Common stock, $.01 par value:
20,000,000 shares authorized; issued and
outstanding 6,297,155 and 5,401,600 shares
respectively 62,972 54,016
Capital in excess of par value 12,693,786 10,837,407
Accumulated deficit (10,527,767) ( 9,903,667)
Cumulative translation adjustment ( 148,314) ( 143,199)
------------ -----------
Total stockholders' equity 2,080,677 844,557
------------ -----------
Total liabilities and stockholders' equity $ 2,905,942 $ 1,627,291
=========== ==========
See accompanying notes
Note: The balance sheet at June 30, 1997 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 Six Months Ended
December 31, December 31,
1997 1996 1997 1996
------------ -------------- --------------
Revenues:
Rental income $ 72,272 $ 81,085 $ 156,626 $ 159,767
Service income 35,485 38,013 64,200 66,808
Equipment sales 15,917 151,751 15,917 151,751
Consulting income 23,818 - 23,818 -
--------------- ------------------- ------
Total revenues 147,492 270,849 260,561 378,326
Cost of revenues 196,062 213,957 370,671 395,373
----------- ---------- ---------- ----------
( 48,570) 56,892 ( 110,110) ( 17,047)
- -----------------
Operating expenses:
General and administrative 229,339 162,561 387,630 323,349
Sales and marketing 38,964 52,523 86,653 84,350
Research and development 25,195 146 36,694 803
---------- ---------- ---------- -----------
293,498 215,230 510,977 408,502
----------- ---------- ---------- ----------
Operating (loss) ( 342,068) ( 158,338) ( 621,087) ( 425,549)
-
Other income (expense):
Interest income 10,897 8,504 24,085 19,035
Interest expense ( 13,466) ( 14,094) ( 27,098) ( 28,331)
----------- ---------- ---------- ----------
( 2,569) ( 5,590) ( 3,013) ( 9,296)
------------ ----------- ----------- ------------
Net (loss) $( 344,637) $( 163,928) $( 624,100) $( 434,845)
========= ========= ======== =========
Net (loss) per share $( 0.06) $( 0.03) $( 0.10) $( 0.08)
============ ============ ============ =============
Weighted average number of
common shares 6,206,795 5,410,500 6,140,832 5,410,500
========= ========= ========= =========
See accompanying notes
- 4 -
IONIC FUEL TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended
December 31,
1997 1996
------------ --------
Operating activities:
Net (loss) $( 624,100) $( 434,845)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 11,042 41,351
Amortization 31,864 31,465
Changes in operating assets and liabilities:
Accounts receivable ( 83,577) ( 98,508)
Other receivables 6,667 16,103
Inventory 10,546 37,698
Prepaid expenses 20,599 29,918
Accounts payable and accrued expenses 22,495 ( 96,703)
---------- ----------
Net cash used by operating activities ( 604,464) ( 473,521)
Investing activities
Acquisition of equipment - ( 32,200)
Acquisition of patents ( 8,009) ( 1,066)
------------ -----------
Net cash used by investing activities ( 8,009) ( 33,266)
Financing activities
Principal payments under licensing agreement ( 8,901) ( 7,669)
Net proceeds from issuance of stock 1,865,335 -
--------- -------
Net cash provided (used) by financing activities 1,856,434 ( 7,669)
Effects of exchange rate differences on cash ( 1,596) 4,242
------------ ----------
Increase (decrease) in cash and cash equivalents 1,242,365 ( 510,214)
Cash and cash equivalents, beginning of period 191,629 1,173,088
----------- ---------
Cash and cash equivalents, end of period $ 1,433,994 $ 662,874
========= ==========
Supplemental Cash Flow Disclosures
Interest paid $ 27,098 $ 28,331
=========== ============
Noncash investing and financing activity:
Acquisition of equipment by incurring
additional indebtedness $ 29,139 $ -
============ =======
See accompanying notes
- 5 -
IONIC FUEL TECHNOLOGY, INC.
Notes to Consolidated Financial Statements
(Unaudited)
December 31, 1997
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, 1997 are not necessarily indicative
of the results that may be expected for the year ending June 30, 1998. 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, 1997.
In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, Earnings per Share ("Statement 128").
Statement 128 replaced the previously reported primary and fully diluted
earnings per share with basic and diluted earnings per share. Unlike primany
earnings per share, basic earnings per share excludes any dilutive effects of
options, warrants, and convertible securities. The Company's net loss per share
calculated under the basic earnings per share method is the same as under the
primary earnings per share method. Diluted earnings per share is very similar to
the previously reported fully diluted earnings per share. As a result of having
incurred losses, all dilutive securities have been omitted from the calculation
of diluted net loss per share since their inclusion would be anti-dilutive.
Therefore, basic and diluted net loss per share are the same for all periods.
Given this set of facts the Losses per Share as previously reported did not
require restatement.
Cash Equivalents
The Company considers all highly liquid investments with maturities of three
months or less when purchased to be cash equivalents.
Inventory
Inventory is comprised of the following:
December 31, June 30,
1997 1997
---- ----
Material and supplies $158,468 $161,817
Finished goods 324,221 320,629
------- -------
$482,689 $482,446
======= =======
Included in finished goods inventory are units, at customer sites, on a
short-term trial basis.
Long-term Obligations
Long-term obligations as of December 31, 1997 consists of a 10% chattel
note payable over 36 months beginning in December 1997, plus various capital
leases.
- 6 -
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Six Months Ended December 31, 1997 and December 31, 1996
Total revenues decreased to approximately $261,000 during the six month
period ended December 31, 1997 from approximately $378,000 for the six month
period ended December 31, 1996.
The decrease of approximately $136,000 in equipment sales revenues
relates to one purchase in the prior year not repeated in the current year.
An increase in consulting income of approximately $24,000 relates to a data
logging service for a major company. Service income and rental income remained
approximately the same.
Gross profit decreased to a loss of approximately $(110,000) during the six
months ended December 31, 1997 (loss of $(17,000) in 1996) due to the decline in
total revenues and cost of sales, which are primarily fixed, remaining
consistent with the comparable period of the prior year. Cost of sales was
relatively constant at $371,000 ($395,000 for 1996).
General and administrative expenses increased to approximately $388,000 during
the six months ended December 31, 1997 from approximately $323,000 during the
six months ended December 31, 1996. This increase is primarily due to: an
increase of approximately $20,000 in stock market related expenses, specifically
public relation fees and stock registration fees; an increase of approximately
$12,000 in legal and professional fees; and an increase of approximately $46,000
of general and administrative expenses that had been allocated to cost of sales
in 1996 but not in 1997 due to the lack of manufacturing activities.
Sales and marketing expenses remained approximately the same.
Research and development expenses increased to approximately $37,000 during
the six months ended December 31, 1997 from approximately $1,000 during the
six months ended December 31, 1996 related to upgrading IFT equipment for
hazardous zone locations.
Other expense (net) decreased to approximately $(3,000) of net expense
during the six months ended December 31, 1997 from approximately $(9,000) of net
expenses during the same period in 1996, due to an increase in interest income.
Three Months Ended December 31, 1997 and December 31, 1996
Total revenues decreased to approximately $147,000 during the three
month period ended December 31, 1997 from approximately $271,000 for the three
month period ended December 31, 1996.
The decrease of approximately $136,000 in equipment sales is described above.
Rental income decreased approximately $9,000 due to the mix of rental contracts.
An increase in consulting income of approximately $24,000 relates to the data
logging contract referred to above.
Gross profit decreased to a loss of approximately $(49,000) during the
three months ended December 31, 1997 (profit of $57,000 in 1996) due to a fall
in overall revenue for the quarter and cost of sales, which are primarily fixed,
remaining consistent with the comparable period of the prior year.
General and administrative expenses increased to approximately $229,000 during
the three months ended December 31, 1997 from approximately $163,000 during the
three months ended December 31, 1996. This increase is primarily due to: an
increase of approximately $22,000 in stock market related expenses, specifically
public relation fees and stock registration fees; an increase of approximately
$15,000 in legal and professional fees; and an increase of approximately $23,000
of general and administrative expenses that had been allocated to cost of sales
in 1996 but not in 1997 due to the lack of manufacturing activities.
- 7 -
Sales and marketing expenses decreased to approximately $39,000 during
the three months ended December 31, 1997, from approximately $53,000 during the
three months ended December 31, 1996, a decrease of $14,000 principally due to
the decline in sales commissions.
Research and development expenses increased to approximately $25,000
during the three months ended December 31, 1997 from less than $1,000 during the
three months ended December 31, 1996 due to continuing development of both
Zone 1 and multi-tiered IFT units.
Other expense (net) decreased to approximately $(3,000) of net expense
during the three months ended December 31, 1997 from approximately $(6,000) of
net expense during the same period in 1996, due to an increase in interest
income.
Liquidity and Sources of Capital
Net cash used by operations was approximately $600,000 for the six
months ended December 31, 1997 and approximately $475,000 for the six months
ended December 31, 1996. Cash was utilized in all departments, i.e. sales,
marketing, administration and ongoing product enhancement in the United Kingdom
and Europe. Working capital was approximately $1.7 million at December 31, 1997
and approximately $450,000 at June 30, 1996. Working capital has been utilized
to fund operations.
On July 14, 1997, the Company issued 771,833 units, each unit
consisting of one share of common stock, par value $.01 per share and one
Series C, Common Stock purchase warrant. As a result, the Company raised
$1,552,116 net of discounts, commissions and offering costs of $184,508.
During the three months ended December 31, 1997, 26,000 options and
97,722 warrants were exercised. As a result the Company raised $313,219.
Currency Fluctuation
Currency fluctuations were insignificant to the Company's operations
for the six months ended December 31, 1997 and 1996. 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 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, 1997 and 1996.
- 8 -
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, 1997.
- 9 -
EXHIBIT I
IONIC FUEL TECHNOLOGY, INC.
COMPUTATION OF NET LOSS PER COMMON SHARE
Three Months Ended Six Months Ended,
December 31, December 31,
1997 1996 1997 1996
---- ---- ---- ----
Net loss $( 344,637) $( 163,928) $( 624,100) $( 434,845)
---------
Average common shares
outstanding 6,196,295 5,400,000 6,130,332 5,400,000
Incremental shares issuable
pursuant to SAB Topic 4D 10,500 10,500 10,500 10,500
------------- ----------- ----------- ------------
Total shares 6,206,795 5,410,500 6,140,832 5,410,500
========= ========= ========= =========
Net loss per common share $( 0.06) $( 0.03) $( 0.10) $( 0.08)
============= ============ ============ =============
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: April 1, 1998 Douglas Johnston
Chairman and Chief Fiancial Officer
(Name and Title)
Date: April 1, 1998 Anthony Garner
President, Chief Executive Officer and
Director
(Name and Title)
- 11 -