Nevada
|
88-0357508
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(State or other jurisdiction of incorporation or organization)
|
(I.R.S. Employer Identification No.)
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7777 Bonhomme, Suite 1920
St. Louis, Missouri
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63105
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(Address of principal executive offices)
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(Zip Code)
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(314) 727-3333
(Registrant’s telephone number, including area code)
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PART I. FINANCIAL INFORMATION
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PAGE NO.
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Item 1. Financial Statements
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2
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3
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4
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5
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6
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11
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20
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PART II. OTHER INFORMATION
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21
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22
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22
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INTERNATIONAL FUEL TECHNOLOGY, INC.
|
||||||||
BALANCE SHEETS
|
||||||||
June 30,
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December 31,
|
|||||||
2011
|
2010
|
|||||||
ASSETS
|
(Unaudited)
|
|||||||
Current assets
|
||||||||
Cash and cash equivalents
|
$ | 52,817 | $ | 751,911 | ||||
Accounts receivable, net
|
11,891 | 110,464 | ||||||
Inventory
|
87,912 | 112,430 | ||||||
Prepaid expenses and other assets
|
17,587 | 39,399 | ||||||
Total Current Assets
|
170,207 | 1,014,204 | ||||||
Property and equipment
|
||||||||
Machinery, equipment and office furniture
|
63,706 | 63,706 | ||||||
Accumulated depreciation
|
(63,706 | ) | (62,284 | ) | ||||
Net Property and Equipment
|
- | 1,422 | ||||||
Goodwill
|
2,211,805 | 2,211,805 | ||||||
Total Assets
|
$ | 2,382,012 | $ | 3,227,431 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
|
||||||||
Current liabilities
|
||||||||
Accounts payable
|
$ | 261,580 | $ | 183,239 | ||||
Accrued compensation
|
94,709 | 17,915 | ||||||
Deferred revenue (Note 7)
|
2,998,242 | 2,998,242 | ||||||
Note payable to a related party (Note 6)
|
50,000 | - | ||||||
Other accrued expenses (Note 5)
|
190,000 | 190,000 | ||||||
Total Current Liabilities
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3,594,531 | 3,389,396 | ||||||
Deferred income taxes (Note 8)
|
562,000 | 530,000 | ||||||
Total Liabilities
|
4,156,531 | 3,919,396 | ||||||
Commitments and contingencies
|
||||||||
Stockholders' equity (deficit) (Notes 4 and 5)
Common stock, $0.01 par value; 150,000,000 shares authorized; 101,492,284 and 101,342,284 (net of 1,440,000 shares held in treasury) shares issued and outstanding at June 30, 2011 and December 31, 2010, respectively
|
1,029,323 | 1,027,823 | ||||||
Treasury stock (Notes 6 and 9)
|
(664,600 | ) | (664,600 | ) | ||||
Discount on common stock
|
(819,923 | ) | (819,923 | ) | ||||
Additional paid-in capital
|
65,023,991 | 64,990,874 | ||||||
Accumulated deficit
|
(66,343,310 | ) | (65,226,139 | ) | ||||
Total Stockholders' Equity (Deficit)
|
(1,774,519 | ) | (691,965 | ) | ||||
Total Liabilities and Stockholders' Equity (Deficit)
|
$ | 2,382,012 | $ | 3,227,431 | ||||
See Notes to Financial Statements.
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INTERNATIONAL FUEL TECHNOLOGY, INC.
|
||||||||||||||||
STATEMENTS OF OPERATIONS
|
||||||||||||||||
(Unaudited)
|
Three Months Ended
|
Six Months Ended
|
||||||||||||||
June 30,
|
June 30,
|
June 30,
|
June 30,
|
|||||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||||||
Revenues
|
$ | 45,574 | $ | 175,395 | $ | 108,504 | $ | 224,091 | ||||||||
|
||||||||||||||||
Operating expenses:
|
||||||||||||||||
Cost of operations (exclusive of depreciation)
|
30,363 | 47,275 | 74,070 | 83,324 | ||||||||||||
Selling, general and administrative expense (including non-cash stock-based compensation expense) (Note 4)
|
592,670 | 582,533 | 1,118,620 | 1,233,110 | ||||||||||||
Depreciation
|
431 | 1,150 | 1,422 | 2,298 | ||||||||||||
Total operating expenses
|
623,464 | 630,958 | 1,194,112 | 1,318,732 | ||||||||||||
Net loss from operations
|
(577,890 | ) | (455,563 | ) | (1,085,608 | ) | (1,094,641 | ) | ||||||||
|
||||||||||||||||
Interest income
|
43 | 3,847 | 437 | 8,561 | ||||||||||||
Net loss before income taxes
|
(577,847 | ) | (451,716 | ) | (1,085,171 | ) | (1,086,080 | ) | ||||||||
|
||||||||||||||||
Income tax provision (Note 8)
|
16,000 | 16,333 | 32,000 | 32,666 | ||||||||||||
Net loss
|
$ | (593,847 | ) | $ | (468,049 | ) | $ | (1,117,171 | ) | $ | (1,118,746 | ) | ||||
Basic and diluted net loss per common share
|
$ | (0.01 | ) | $ | (0.00 | ) | $ | (0.01 | ) | $ | (0.01 | ) | ||||
Weighted-average common shares outstanding, basic and diluted
|
102,815,251 | 102,735,251 | 102,798,859 | 102,733,776 | ||||||||||||
See Notes to Financial Statements.
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Common Stock Shares
|
Common Stock Amount
|
Treasury
Stock
|
Discount on Common Stock
|
Additional Paid-in Capital
|
Accumulated Deficit
|
Total
|
||||||||||||||||||||||
Balance, December 31, 2010
|
102,782,284 | $ | 1,027,823 | $ | (664,600 | ) | $ | (819,923 | ) | $ | 64,990,874 | $ | (65,226,139 | ) | $ | (691,965 | ) | |||||||||||
Expense relating to non-cash stock-based compensation (Note 4)
|
150,000 | 1,500 | - | - | 33,117 | - | 34,617 | |||||||||||||||||||||
Net loss
|
- | - | - | - | - | (1,117,171 | ) | (1,117,171 | ) | |||||||||||||||||||
Balance, June 30, 2011
|
102,932,284 | $ | 1,029,323 | $ | (664,600 | ) | $ | (819,923 | ) | $ | 65,023,991 | $ | (66,343,310 | ) | $ | (1,774,519 | ) |
Six Months Ended
June 30,
2011
|
Six Months Ended
June 30,
2010
|
|||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (1,117,171 | ) | $ | (1,118,746 | ) | ||
Adjustments to reconcile net loss to net cash used in
|
||||||||
operating activities:
|
||||||||
Bad debt provision
|
88,655 | - | ||||||
Depreciation
|
1,422 | 2,298 | ||||||
Non-cash stock-based compensation
|
34,617 | 213,927 | ||||||
Deferred income tax provision
|
32,000 | 32,666 | ||||||
Change in assets and liabilities:
|
||||||||
Accounts receivable, net
|
9,918 | (165,542 | ) | |||||
Accrued interest receivable
|
- | 8,083 | ||||||
Inventory
|
24,518 | 17,698 | ||||||
Prepaid expenses and other assets
|
21,812 | 8,797 | ||||||
Accounts payable
|
78,341 | (19,921 | ) | |||||
Accrued compensation
|
76,794 | (7,112 | ) | |||||
Other accrued expenses
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- | (90,000 | ) | |||||
Net cash used in operating activities
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(749,094 | ) | (1,117,852 | ) | ||||
|
||||||||
Cash flows from investing activities:
|
||||||||
Redemptions of certificates of deposit
|
- | 1,000,000 | ||||||
Net cash provided by investing activities
|
- | 1,000,000 | ||||||
Cash flows from financing activities:
|
||||||||
Note payable from related party
|
50,000 | - | ||||||
Net cash provided by financing activities
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50,000 | - | ||||||
|
||||||||
Net decrease in cash and cash equivalents
|
(699,094 | ) | (117,852 | ) | ||||
Cash and cash equivalents, beginning
|
751,911 | 1,828,024 | ||||||
Cash and cash equivalents, ending
|
$ | 52,817 | $ | 1,710,172 | ||||
See Notes to Financial Statements.
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Three Months Ended June 30, 2011
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Three Months Ended June 30, 2010
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Six Months Ended June 30, 2011
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Six Months Ended June 30, 2010
|
|||||||||||||
Awards to employees/Directors
|
$ | - | $ | 90,657 | $ | - | $ | 178,201 | ||||||||
Awards to non-employees
|
30,447 | 9,000 | 30,447 | 9,000 | ||||||||||||
Stock option modifications
|
2,085 | 6,520 | 4,170 | 26,726 | ||||||||||||
Total non-cash stock-based compensation expense
|
$ | 32,532 | $ | 106,177 | $ | 34,617 | $ | 213,927 |
·
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mi Technology, United Kingdom;
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·
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Southwest Research Institute, United States;
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·
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Forest Engineering Research Institute of Canada – FERIC;
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·
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Motive Power, United States;
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·
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Gerotek, South Africa;
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·
|
Prodrive Ltd, United Kingdom;
|
·
|
Technological Institute for Development - LacTec, Brazil;
|
·
|
Technological Research Institute (IPT) of São Paulo, Brazil;
|
·
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MTEC, Thailand; and
|
·
|
Tsinghua University, China.
|
·
|
BfB Laboratories, Belgium;
|
·
|
National Institute of Technology – INT, Brazil; and
|
·
|
Montana State University – Northern, United States.
|
·
|
railroads;
|
·
|
stationary power generation operators;
|
·
|
centrally-fueled truck/bus fleets; and
|
·
|
marine vessel operators.
|
·
|
Multisol: We signed a manufacturing, marketing and distribution agreement with Multisol in July 2008 providing Multisol with distribution rights to market and sell IFT’s products in France, Spain, Portugal and Belgium. Multisol is selling our additive formulations to numerous accounts, including prominent fuel additive companies who are re-packaging the formulations for resale into retail markets.
|
·
|
Unipart Rail: We signed a marketing and distribution agreement with Unipart in June 2011 providing Unipart with the rights to sell IFT’s products to the U.K. rail market. Unipart and IFT have already had numerous joint meetings with prospective end-user accounts.
|
·
|
Nordmann Rassmann (“Nordmann”): We signed a marketing and distribution agreement with Nordmann in August 2008 providing Nordmann with the right to market and sell IFT’s products in Germany, Austria, Switzerland, Sweden, Norway, Finland, Denmark, Poland, The Czech Republic, Slovakia, Slovenia, Hungary, Serbia, Romania and Bulgaria. Nordmann has introduced our products to numerous customers and made sales of the PerfoLiFTTM BD-Series during the first two quarters of 2011 and during 2010.
|
·
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Caldic U.K. (“Caldic”): We signed a marketing and distribution agreement with Caldic in May 2008 providing Caldic with distribution rights to IFT’s products in the United Kingdom. Caldic has introduced our products to numerous end-user customers and is in the process of running field-based demonstration trials with selected end-users.
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·
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Tide Water Oil Co. India Ltd (“Tidewater”): Headquartered in India, Tidewater is a prominent manufacturer and distributor of additives and lubricants to the automotive and industrial markets. Tidewater purchases and then re-packages DiesoLiFTTM 10 for sale into these targeted markets in India: power generation set users; tractor operators; the agricultural industry; and retail distribution markets. Tidewater made several purchases of DiesoLiFTTM 10 in 2010.
|
·
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Nulon India (“Nulon”): We signed a marketing and distribution with Nulon in March 2007 providing Nulon with the right to market and sell IFT’s products in India. Nulon has conducted numerous field-based demonstration trials with DiesoLiFTTM 10, realizing positive results. Nulon had limited success selling our products in 2010 but expects volumes to increase in 2011.
|
·
|
an increase in bad debt expense ($88,655) related to product previously sold to a distributor for which we have not yet collected payment;
|
·
|
an increase in legal fees ($32,097) primarily due to increased intellectual property efforts in Asia and the Far East;
|
·
|
a decrease in non-cash stock-based compensation expense ($73,645) primarily due to certain option grants made to employees during 2009 that had no further expense recognition upon their June 30, 2010 vesting (approximately $91,000 of expense recorded during the second quarter of 2010) and a second quarter 2010 non-employee equity grant in which we immediately recorded $9,000 and had no subsequent expense recognition, partially offset by second quarter 2011 equity grants to non-employees that immediately triggered approximately $30,000 of related expense; and
|
·
|
a decrease in research and development expense ($30,623) primarily due to extensive United Kingdom rail testing performed during the second quarter of 2010; and
|
·
|
a decrease in other consulting fees ($15,600) due to a reduction in scope effective August 2010 for certain commercial activities in North and South America.
|
·
|
a decrease in non-cash stock-based compensation expense ($179,310) primarily related to the certain option grants made to employees during 2009 that had no further expense recognition upon their June 30, 2010 vesting (approximately $178,000 of expense recorded during the first two quarters of 2010);
|
·
|
a decrease in other consulting fees ($31,200) due to a reduction in in scope effective August 2010 for certain commercial activities in North and South America;
|
·
|
a decrease in research and development expense ($26,603) primarily due to extensive United Kingdom rail testing performed during the second quarter of 2010;
|
·
|
an increase in bad debt expense ($88,655) related to product previously sold to a distributor for which we have not yet collected payment; and
|
·
|
an increase in legal expense ($43,598) primarily due to increased intellectual property efforts in Asia and the Far East during the second quarter of 2011 and increased SEC legal fees related to our 2011 equity raise efforts.
|
1.
|
Significant under-performance relative to expected historical or projected future operating results;
|
2.
|
Significant changes in the manner of our use of the acquired assets or the strategy for our overall business;
|
3.
|
Significant negative industry or economic trends;
|
4.
|
Significant decline in our stock price for a sustained period; and
|
5.
|
Our market capitalization relative to net book value.
|
INTERNATIONAL FUEL TECHNOLOGY, INC.
(Registrant)
|
||||
By: | /s/ Jonathan R. Burst | Date: | August 15, 2011 | |
Jonathan R. Burst | ||||
Chief Executive Officer | ||||
(Principal Executive Officer) | ||||
By: | /s/ Stuart D. Beath | Date: | August 15, 2011 | |
Stuart D. Beath | ||||
Chief Financial Officer | ||||
(Principal Financial and Accounting Officer) | ||||
1.
|
I have reviewed this quarterly report on Form 10-Q of International Fuel Technology, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
August 15, 2011 | By: |
/s/ Jonathan R. Burst
Jonathan R. Burst
Chief Executive Officer
|
|
1.
|
I have reviewed this quarterly report on Form 10-Q of International Fuel Technology, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
August 15, 2011 | By: |
/s/ Stuart D. Beath
Stuart D. Beath
Chief Financial Officer
|
|
August 15, 2011 | By: |
/s/ Jonathan R. Burst
Jonathan R. Burst
Chief Executive Officer
|
|
August 15, 2011 | By: |
/s/ Stuart D. Beath
Stuart D. Beath
Chief Financial Officer
|
|
BALANCE SHEETS (Parenthetical) (USD $)
|
Jun. 30, 2011
|
Dec. 31, 2010
|
---|---|---|
Balance Sheets | Â | Â |
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 150,000,000 | 150,000,000 |
Common stock, shares issued | 102,932,284 | 102,782,284 |
Common stock, shares outstanding | 101,492,284 | 101,342,284 |
Treasury stock, shares | 1,440,000 | 1,440,000 |
STATEMENTS OF OPERATIONS (Unaudited) (USD $)
|
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2011
|
Jun. 30, 2010
|
Jun. 30, 2011
|
Jun. 30, 2010
|
|
Statements Of Operations | Â | Â | Â | Â |
Revenues | $ 45,574 | $ 175,395 | $ 108,504 | $ 224,091 |
Operating expenses: | Â | Â | Â | Â |
Cost of operations (exclusive of depreciation) | 30,363 | 47,275 | 74,070 | 83,324 |
Selling, general and administrative expense (including non-cash stock-based compensation expense) (Note 4) | 592,670 | 582,533 | 1,118,620 | 1,233,110 |
Depreciation | 431 | 1,150 | 1,422 | 2,298 |
Total operating expenses | 623,464 | 630,958 | 1,194,112 | 1,318,732 |
Net loss from operations | (577,890) | (455,563) | (1,085,608) | (1,094,641) |
Interest income | 43 | 3,847 | 437 | 8,561 |
Net loss before income taxes | (577,847) | (451,716) | (1,085,171) | (1,086,080) |
Income tax provision (Note 8) | 16,000 | 16,333 | 32,000 | 32,666 |
Net loss | $ (593,847) | $ (468,049) | $ (1,117,171) | $ (1,118,746) |
Basic and diluted net loss per common share | $ (0.01) | $ 0.00 | $ (0.01) | $ (0.01) |
Weighted-average common shares outstanding, basic and diluted | 102,815,251 | 102,735,251 | 102,798,859 | 102,733,776 |
Document and Entity Information
|
6 Months Ended | |
---|---|---|
Jun. 30, 2011
|
Aug. 11, 2011
|
|
Document And Entity Information | Â | Â |
Entity Registrant Name | INTERNATIONAL FUEL TECHNOLOGY INC | Â |
Entity Central Index Key | 0001078723 | Â |
Document Type | 10-Q | Â |
Document Period End Date | Jun. 30, 2011 | |
Amendment Flag | false | Â |
Current Fiscal Year End Date | --12-31 | Â |
Is Entity a Well-known Seasoned Issuer? | No | Â |
Is Entity a Voluntary Filer? | No | Â |
Is Entity's Reporting Status Current? | Yes | Â |
Entity Filer Category | Smaller Reporting Company | Â |
Entity Common Stock, Shares Outstanding | Â | 101,792,284 |
Document Fiscal Period Focus | Q2 | Â |
Document Fiscal Year Focus | 2011 | Â |
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Equity Commitment from a Related Party and Related Party Transactions
|
6 Months Ended |
---|---|
Jun. 30, 2011
|
|
Notes to Financial Statements | Â |
Equity Commitment from a Related Party | Note 6 - Equity Commitment and Related Party Transactions
Effective December 11, 2007, we received an investment commitment from Rex Carr, a Director of IFT and a holder of over 5% of our common stock. Pursuant to the terms of the commitment, Mr. Carr has agreed to invest up to an aggregate of $1,000,000 in IFT, at such time or times as we may request, in the form of a purchase or purchases of restricted common stock of IFT. IFT may elect to draw from the commitment at one time or from time to time; provided, however, that the aggregate of such draws may not exceed $1,000,000. If and when we elect to utilize available commitment funds, we will issue to Mr. Carr that number of shares of restricted common stock of IFT equal to the value of the investment then provided to IFT. The number of shares to be issued will be calculated based on the closing price of our common stock as quoted on The OTC Bulletin Board on the date of the sale. There is no stipulation regarding the duration of this commitment. The total amount available under this commitment is $1,000,000 as of June 30, 2011.
On June 30, 2011, Jonathan R. Burst, our Board chairman and chief executive officer, loaned us $50,000. In exchange for the receipt by us of $50,000, we delivered to Mr. Burst a promissory note in favor of Mr. Burst in the principal amount of $50,000. The promissory note was to be repaid at the earlier of (i) receipt of proceeds from an equity capital raise that was expected to be ongoing during the second and third quarters of 2011, or (ii) August 1, 2011. Pursuant to the terms of the promissory note, the note would not bear interest unless both parties agreed at a future date that the note should begin accruing interest. We repaid the loan in full on July 25, 2011, upon our receipt of equity funding, and the promissory note was canceled. |
Ability to Continue as a Going Concern
|
6 Months Ended |
---|---|
Jun. 30, 2011
|
|
Notes to Financial Statements | Â |
Ability to Continue as a Going Concern | Note 2. Ability to Continue as a Going Concern
Our financial statements are presented on the going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. We have incurred significant losses since inception and currently have and previously from time to time have had limited funds with which to operate. Management is in the process of executing a strategy based upon marketing technologies that offer enhanced engine performance and greater fuel economy along with pollution control benefits. We have several technologies in the commercialization phase and in development. We have received necessary regulatory and commercial acceptance for our products currently in the commercialization phase. During the first quarter of 2002, we began selling our products directly to the commercial marketplace. We expect to increase our sales to the marketplace, eventually generating a level of revenues sufficient to meet our cash flow and earnings requirements. While we cannot make any assurances as to the accuracy of our projections of future capital needs, we believe that based on our recent equity raise efforts as disclosed in Note 10 (cash proceeds of $1,000,000 received subsequent to June 30, 2011), projected sales for 2011 and 2012 and a remaining equity commitment of $1,000,000 (entered into with a related party Board member and significant shareholder of IFT during 2008), we have adequate cash and cash equivalents balances and commitments to fund operations through at least June 2012. If we are unable to meet our projections and generate positive and sustainable operating cash flows by this time, we may need to raise additional capital to fund our future operations. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of IFT to continue as a going concern.
|
Income Taxes
|
6 Months Ended |
---|---|
Jun. 30, 2011
|
|
Notes to Financial Statements | Â |
Income Taxes |
Note 8 Income Taxes
We file income tax returns in various federal, state and local jurisdictions. At June 30, 2011, and December 31, 2010, we had potential federal and state income tax benefits from net operating loss carry-forwards, which expire in various years beginning in 2012 and ending in 2030. Net operating loss carry-forwards available to us for Federal tax purposes are approximately $42 million as of June 30, 2011.
A valuation allowance must be established for a deferred income tax asset if it is more likely than not that a tax benefit may not be realized from the asset in the future. We have established a valuation allowance to the extent of our deferred income tax asset since it is not yet certain that absorption of the asset through future earnings will occur. The basis difference created from our goodwill has an indefinite life and is not treated as an offset when establishing our valuation allowance. As a result, we have recorded a deferred tax liability that increases by approximately $16,000 from the non-cash deferred income tax expense recorded each quarter.
No uncertain tax positions have been identified through June 30, 2011. If we did identify any uncertain tax positions, any accrued interest related to unrecognized tax expenses and penalties would be recorded in income tax expense. |
Treasury Stock
|
6 Months Ended |
---|---|
Jun. 30, 2011
|
|
Notes to Financial Statements | Â |
Treasury Stock | Note 9 Treasury Stock
During 2008, we received $200,000 from Mr. Carr for the sale of common stock pursuant to an equity commitment arrangement between Mr. Carr and IFT. We repurchased these shares from Mr. Carr during the second quarter of 2009, recognizing $54,400 of non-cash stock-based compensation expense associated with this treasury stock repurchase, representing the excess of the payment over the fair values of the shares.
During the fourth quarter of 2007, we obtained an unsecured $500,000 loan from Harry F. Demetriou, who was then a Director of IFT and the holder of over 5% of our common stock. All IFT obligations related to this note were extinguished effective March 31, 2008 with the issuance of 1,040,000 restricted common shares of IFT stock to Mr. Demetriou.
During the second quarter of 2008, IFT purchased 520,000 shares of its common stock from Mr. Demetriou for $250,000. We applied the cost method to account for this treasury stock transaction in our financial statements. Because the amount paid by IFT was less than the fair market value of the stock on the date of purchase (the closing price of our stock was $0.79 on June 18, 2008), the difference was recorded to additional paid-in capital as Mr. Demetriou was considered a holder of economic interest in IFT in accordance with ASC 718-10. During the first quarter of 2009, IFT repurchased the remaining 520,000 shares granted for the debt settlement for $250,000 and recognized $126,000 of non-cash based stock compensation expense associated with this treasury stock repurchase representing the excess of the payment over the fair value of the shares. |
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Deferred Revenue
|
6 Months Ended |
---|---|
Jun. 30, 2011
|
|
Notes to Financial Statements | Â |
Deferred Revenue | Note 7 Deferred Revenue
On February 26, 2009, we received the first purchase order pursuant to a Memorandum of Understanding (MOU) with Libya Oil Holdings Limited, Tamoil, Libya Africa Investment Portfolio and Vision Oil Services Ltd (VOS). Pursuant to the MOU, VOS paid for the purchase of 600 metric tons of DiesoLiFT 10 at a price of 6,000 Euros (approximately $7,600) per metric ton from IFT. We received cash proceeds of approximately $3 million from VOS in February 2009, net of the related selling expenses, for this purchase order and would expect a net cash margin of approximately $1.5 million if the product is ever manufactured and delivered. We will recognize gross revenues of approximately $4.5 million if the product is ever delivered. No such revenues have been recorded and we have had no communication with VOS in over twenty-four months and believe they have ceased all activities on behalf of IFT. It is our belief that we will never deliver this product, nor will we be requested to do so. Nonetheless, the financial statements continue to reflect this deferred revenue pending a more formal resolution or expiration of relevant statutes of limitations. |
New Accounting Pronouncements
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6 Months Ended |
---|---|
Jun. 30, 2011
|
|
Notes to Financial Statements | Â |
New Accounting Pronouncements | Note 3 New Accounting Pronouncements
New Accounting Pronouncements Adopted
There have been no accounting pronouncements adopted during fiscal year 2011 that had a material impact on our financial position, results of operations or cash flows.
Recently Issued Accounting Pronouncements
There are no recently issued accounting standards that are expected to have a material effect on our financial position, results of operations or cash flows. |
Stock-based Compensation
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6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2011
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Notes to Financial Statements | Â | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-based Compensation |
Note 4 Stock-based Compensation
Non-cash stock-based compensation expense recorded in the three and six months ended June 30, 2011 and June 30, 2010 is as follows:
|
Blencathia Merger
|
6 Months Ended |
---|---|
Jun. 30, 2011
|
|
Notes to Financial Statements | Â |
Blencathia Merger | Note 5 Blencathia Merger
Effective October 27, 1999, we merged with Blencathia Acquisition Corporation (Blencathia). Blencathia was a public shell company with immaterial assets and liabilities and 312,000 shares outstanding at the time of the merger, which it redeemed and cancelled upon the merger. In exchange, we issued 312,000 of our common shares to the prior Blencathia owner with the contractual understanding that such shares were to be sold by that owner to achieve gross cash proceeds of $500,000. Any excess proceeds were to be returned to us and any deficiency was to be made up by us issuing additional shares or paying the difference in cash. As we believed that we controlled the ultimate timing of the sale of these 312,000 shares by the prior Blencathia owner, we did not consider these shares as issued or outstanding for purposes of computing earnings per share.
In 2006, we learned that the prior Blencathia owner had, in fact, sold the 312,000 shares for aggregate proceeds of approximately $150,000, without our consent. Accordingly, in the fourth quarter of 2006, we recorded $500,000 of general expenses (representing the cost of the 1999 merger) and the deemed issuance of approximately $150,000 of common stock. The remaining $350,000 obligation was reflected as a current accrued expense. We are in negotiations with the prior Blencathia owner to resolve this obligation and may ultimately settle the obligation with either cash or equity securities with a lower market value. Beginning in 2006, the 312,000 shares have been reflected as outstanding for earnings per share computations. Since the second half of 2009, we have made payments totaling $160,000 to the prior Blencathia owner, reducing the related current accrued expense balance to $190,000 as of June 30, 2011. |
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT) (Unaudited) (USD $)
|
Common Stock
|
Treasury Stock
|
Discount on Common Stock
|
Additional Paid-In Capital
|
Accumulated Deficit
|
Total
|
---|---|---|---|---|---|---|
Balance Begining at Dec. 31, 2010 | $ 1,027,823 | $ (664,600) | $ (819,923) | $ 64,990,874 | $ (65,226,139) | $ (691,965) |
Balance Begining, Shares at Dec. 31, 2010 | 102,782,284 | 1,440,000 | 101,342,284 | |||
Expense relating to non-cash stock-based compensation (Note 4) | 1,500 | 33,117 | 34,617 | |||
Expense relating to non-cash stock-based compensation (Note 4), shares | 150,000 | 150,000 | ||||
Net loss | (1,117,171) | (1,117,171) | ||||
Balance Ending at Jun. 30, 2011 | $ 1,029,323 | $ (664,600) | $ (819,923) | $ 65,023,991 | $ (66,343,310) | $ (1,774,519) |
Balance Ending, Shares at Jun. 30, 2011 | 102,932,284 | 1,440,000 | 101,492,284 |
Basis of Presentation
|
6 Months Ended |
---|---|
Jun. 30, 2011
|
|
Notes to Financial Statements | Â |
Basis of Presentation | Note 1 Basis of Presentation
International Fuel Technology, Inc. ("IFT") is a company that was incorporated under the laws of the State of Nevada on April 9, 1996. We have developed a family of fuel additive product formulations. These unique fuel blends have been created to improve fuel economy, enhance lubricity (reducing engine wear and tear) and lower harmful engine emissions, while decreasing reliance on petroleum-based fuels through the use of more efficient, alternative and renewable fuels.
We began transitioning from a development stage technology company to a commercial entity during 2002 and have been increasing our product marketing and sales efforts since. We are now focused on continuing to develop the body of evidence of the efficacy of our products applicable to a wide range of markets and industries within these markets through additional industry specific laboratory testing and customer field-based demonstration trials. In addition, we are continuing to strengthen our distributor and customer contact base. Marketing and sales efforts, in conjunction with the additional industry specific testing, will complete our transition to a commercial enterprise.
The interim financial statements included herein have been prepared by IFT, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP) have been condensed or omitted pursuant to such rules and regulations, although we believe that the disclosures are adequate to make the information presented not misleading.
These statements reflect all adjustments, consisting of normal recurring adjustments, which in the opinion of management are necessary for fair presentation of the information contained therein. Interim results are not necessarily indicative of results for a full year. We suggest that these financial statements be read in conjunction with the financial statements and notes thereto included in our annual report on Form 10-K for the year ended December 31, 2010 (the 2010 10-K). We follow the same accounting policies in preparation of interim reports as we do in our annual reports. We have evaluated subsequent events through August 15, 2011, the date these financial statements were issued.
Basic earnings per share are based upon the weighted-average number of common shares outstanding for the period. Diluted earnings per share are based upon the weighted-average number of common and potentially dilutive common shares outstanding for the period. Pursuant to the Financial Accounting Standards Boards (FASB) Accounting Standards Codification subtopic (ASC) No. 260-10, Earnings per Share, no adjustment is made for diluted earnings per share purposes since we are reporting a net loss, and common stock equivalents would have an anti-dilutive effect. As of June 30, 2011 and June 30, 2010, 21,543,720 and 22,583,634 shares, respectively, of common stock equivalents were excluded from the computation of diluted net loss per share since their effect would be anti-dilutive. |
Subsequent Events
|
6 Months Ended |
---|---|
Jun. 30, 2011
|
|
Notes to Financial Statements | Â |
Subsequent Events | Note 10 Subsequent Events
On August 9, 2011, we completed the sale of 10,283,000 restricted shares of IFT common stock, along with warrants to purchase an additional 2,570,750 shares of our common stock to a small group of accredited investors (Investors) for an aggregate purchase price of $1,028,300 (the Equity Transaction). |