UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended June 30, 2008
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission File No. 000-16534
Digital Fuel, Inc.
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(Exact Name of Registrant as Specified in its Charter)
Delaware 45-0375367
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
6601 East Grant Road, Suite 101, Tucson, Arizona 85715
- ------------------------------------------------ -----
(Address of principal executive offices) (Zip code)
(520) 886-5354
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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 [ ]
Indicate by check mark whether the Registrant is a large accelerated filer,
an accelerated filer, or a non-accelerated filer. See definition of
"accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange
Act.
Large Accelerated Filer [ ] Accelerated Filer [ ]
Non-Accelerated Filer [ X ]
-1-
DIGITAL FUEL, INC.
Indicate by check mark whether the Registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act).
Yes [ ] No [ X ]
As of August 8, 2008, 4,343,262 shares of the issuer's common stock, par
value $.01, were outstanding.
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
MANAGEMENT STATEMENT REGARDING
FINANCIAL STATEMENTS
The accompanying balance sheet of Digital Fuel, Inc. as of June 30, 2008 and
the related statements of operations and statement of cash flows for the
three and six month periods then ended have not been reviewed.
We engaged the accounting firm of Gordon, Hughes & Banks, LLP as independent
auditors effective May 12, 2008, and the information which appears on the 8-K
form filed on May 28, 2008 is incorporated by reference. Previous to that, we
had been searching for an auditor that is registered with the Public Company
Accounting Oversight Board as required by Section 102 of the Sarbanes-Oxley
Act of 2002.
-2-
DIGITAL FUEL, INC.
CONDENSED BALANCE SHEET
JUNE 30, 2008
(Not Reviewed)
ASSETS
Current assets:
Cash $460,762
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Total current assets 460,762
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Other Assets (Note 4):
Holdback from Sale of SiteScape 181,142
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Total Assets $641,904
=======
LIABILITIES AND SHAREHOLDERS' EQUITY DEFICIENCY
Current liabilities:
Notes payable:
Related parties (Note 2) $1,269,845
Other (Note 3) 250,000
Accounts payable, other 199,055
Accrued interest expense, related parties (Note 2) 939,735
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Total current liabilities 2,658,635
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Shareholders' equity deficiency:
Preferred stock, $.01 par value;
authorized 10,000,000 shares;
issued -0- shares
Common stock, $.01 par value;
authorized 20,000,000 shares;
issued 4,343,262 shares 43,433
Capital in excess of par value 2,370,312
Accumulated deficit (4,430,476)
---------
Total shareholders' equity deficiency (2,016,731)
---------
Total Liabilities and Shareholders' Equity Deficiency $641,904
=======
See Notes to Financial Statements
-3-
DIGITAL FUEL, INC.
CONDENSED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2008 AND 2007
(Not Reviewed)
2008 2007
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Expenses:
General and administrative 53,457 9
Write off certain accounts payable (17,567) -
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Total operating expenses 35,890 9
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Operating loss (35,890) (9)
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Interest expense:
Related parties (Note 2) 28,511 28,511
Other (Note 3) 5,625 5,992
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Total interest expense 34,136 34,503
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Net loss $(70,026) $(34,512)
====== ======
Basic and diluted loss per common share $(.01) $*
Weighted average number of shares outstanding 4,343,262 4,343,262
========= =========
*less than $.01 per share
See Notes To Financial Statements
-4-
DIGITAL FUEL, INC.
CONDENSED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2008 AND 2007
(Not Reviewed)
2008 2007
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Income:
Sale of asset 1,122,835 -
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Total Income 1,122,835 -
Expenses:
General and administrative 69,779 78
Write off certain accounts payable (37,802) -
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Total operating expenses 31,977 78
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Operating income/loss 1,090,858 (78)
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Interest expense:
Related parties (Note 2) 57,022 56,776
Other (Note 3) 11,617 11,980
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Total interest expense 68,639 68,756
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Net income/loss $1,022,219 $(68,834)
========= ======
Basic and diluted income/loss per common share $.23 $(.02)
=== ===
Weighted average number of shares outstanding 4,343,262 4,343,262
========= =========
See Notes To Financial Statements
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DIGITAL FUEL, INC.
STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 2008 AND 2007
(Not Reviewed)
2008 2007
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Cash flows from operating activities:
Net income/loss $1,022,219 $(68,834)
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Adjustments to reconcile net loss
to net cash used in operations:
Change in operating liabilities:
Decrease in accounts payable (101,884) (4,586)
Increase in accrued interest 11,250 11,980
Decrease in accts payable, related parties (50,202) -
Increase in accrued interest, related parties 57,022 56,776
Decrease in accrued salaries (296,571) -
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Total adjustments (380,385) 64,170
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Net cash used in operating activities 641,834 (4,664)
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Cash flows from financing activities:
Proceeds from notes payable-related parties (Note 2) - 4,600
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Net cash provided by financing activities - 4,600
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Cash flows from investing activities:
Holdback from sale of interest in SiteScape (Note 4)(181,142) -
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Net cash provided by investing activities (181,142) -
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Increase/Decrease in cash 460,692 (64)
Cash, beginning 70 134
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Cash, ending $460,762 $ 70
======= ===
During the six months ended June 30, 2008, $0 was paid in interest.
-6-
DIGITAL FUEL, INC.
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 2008 AND 2007
Note 1. Basis of presentation:
The financial statements of Digital Fuel, Inc. (the "Company") included
in this Form 10-Q have not been reviewed. Although certain information
and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have
been condensed or omitted, the Company believes that the disclosures are
adequate to make the information presented not misleading. The
accompanying financial statements should be read in conjunction with the
Company's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 2007.
In the opinion of management, all adjustments, including normal recurring
adjustments, necessary for a fair presentation of the results of
operations for the six-month periods ended June 30, 2008 and 2007 have
been included. The results of operations for the interim periods
presented are not necessarily indicative of the results to be expected
for the full year.
On June 1, 2000, Deucalion held a Special Meeting of its stockholders to
consider and vote upon the reincorporation, recapitalization, and merger
of Deucalion with and into its wholly owned Delaware subsidiary, Digital
Fuel, Inc., as described in the Schedule 14C Information Statement filed
with the Securities and Exchange Commission on May 9, 2000 and
incorporated herein by reference. The effect of the transaction approved
at the Special Meeting included: changing the name of the Company from
Deucalion Research, Inc. to Digital Fuel, Inc.; effecting a one-for-6,800
reverse stock split; reducing the authorized capital of the Company from
1,500,000,000 shares to 30,000,000 shares; increasing the par value of
the Company's common stock from $.0001 to $.01 per share; and authorizing
the Board of Directors to issue up to 10,000,000 shares of blank check
preferred stock. All share and per share amounts in the accompanying
financial statements reflect the reverse stock split.
There has not been any change in the significant accounting policies of
the Company for the periods presented.
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DIGITAL FUEL, INC.
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 2008 AND 2007
Note 2. Notes payable, related parties:
Short-term:
Farley Family Partnership, 9%, unsecured,
due on demand $200,000
Forrest L. Metz, 9%, unsecured, due on demand 150,000
Multiple advance promissory note, Metz Trust,
maximum borrowings of $150,000, 9%, unsecured,
due on demand 180,275
Multiple advance promissory note, Grant Papanikolas,
maximum borrowings of $100,000, 9%, unsecured,
due on demand 85,000
Multiple advance promissory note, Michael R. Farley,
maximum borrowings of $100,000, 9%, unsecured,
due on demand 65,650
Multiple advance promissory note Farley &
Associates, Inc., maximum borrowings of $800,000,
9%, unsecured, due on demand 588,920
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$1,269,845
=========
Under the terms of the short-term notes, upon completion of the
recapitalization, the Company issued to Farley & Associates 100,000
shares, Farley Family Partnership 200,000 shares and Metz Trust 100,000
shares at par value of the Company's post recapitalization common stock.
Management believes that these shares have nominal market value based on
various factors including the Company's financial position and the fact
that there is no current market for the Company's stock.
The Farley Family Partnership note, entered into on September 30, 1999,
provided the Company with working capital. The Farley & Associates, Inc.
(F&A) note was entered into in connection with the Company's investment
activities. Farley Family Partnership and F&A are entities controlled by
Michael R. Farley, who is an officer, director and major shareholder of
the Company. The Metz Trust note, entered into on October 28, 1999,
provided the Company working capital. The Metz Trust is an entity
controlled by Forrest L. Metz, who was a member of the Board of Directors
until his resignation effective February 1, 2006 and is a major
shareholder of the Company. The Papanikolas note, entered into on
-8-
DIGITAL FUEL, INC.
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 2008 AND 2007
Note 2. Notes payable, related parties (continued):
February 22, 2000, provided the company with working capital. Papanikolas
is an officer of the Company.
The Farley note, entered into on April 28, 2000, provided the company
with working capital. Farley is an officer of the Company. On September
1, 1999, F&A contributed its interest in SiteScape, Inc. to Digital Fuel
in exchange for a note. When F&A purchased the interest in SiteScape on
June 22, 1999, $300,000 of the purchase price was borrowed from Horseshoe
Management Company, which is located in Tucson, Arizona. Both Mr. Metz
and Mr. Farley personally guaranteed the loan, and the loan became due in
January of 2006. Mr. Metz and Mr. Farley personally paid back the loan to
Horseshoe, and F&A transferred $150,000 of the principal due under its
note to Digital Fuel to Forrest L. Metz. The effect on the Company's
balance sheet is zero because the loan from F&A to Digital Fuel was
reduced by $150,000 plus accrued interest and a new note of $150,000 plus
accrued interest from the original date was given to Forrest L. Metz.
Since both Mr. Farley and Mr. Metz are related parties it had no net
effect on the Balance Sheet.
Note 3. Notes payable, other:
Short-term:
Townsdin, 9%, unsecured, due on demand $200,000
Torrance, 9%, unsecured, due on demand 50,000
------
$250,000
=======
The short-term notes were entered into during the three months ended
March 31, 2000, and provided the Company with working capital.
Under the terms of the short-term notes, upon completion of the
recapitalization, the Company issued to Townsdin 200,000 shares and
Torrance 50,000 shares at par value of the Company's post
recapitalization common stock. Management believes that these shares
have nominal market value based on various factors including the
Company's financial position and the fact that there is no current market
for the Company's stock. Additionally, Townsdin and Torrance had the
option to convert through December 31, 2000, all or part of any
outstanding principal to post recapitalization Units at the rate of $1.00
per Unit. Each Unit consists of one share of common stock and one share
of 8% preferred stock.
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DIGITAL FUEL, INC.
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 2008 AND 2007
Note 4. Other Asset - Investment in SiteScape:
In February 2000, the Company exercised the remaining one-half of its
SiteScape option shares and purchased 258,333 shares of Series A
Convertible Preferred Stock for $500,000. At completion of the
transaction, the Company owned 516,667 shares of SiteScape's Series A
Convertible Preferred Stock, which represented approximately 20% of the
voting stock of SiteScape.
SiteScape's Series A Convertible Preferred Stock had, among other rights,
the right to vote on general matters, the ability of a one for one
conversion into Class A Voting Common Stock of SiteScape, dividend
participation with common shares, and the right to elect two members to
the board of directors of SiteScape. The Series A Convertible Preferred
Stock was to be automatically converted to common stock if SiteScape
completed an initial public offering and realized at least $20 million.
The Series A Convertible Preferred Stock was also entitled to receive
dividends, if and when declared by SiteScape's Board of Directors, at the
cumulative rate of 8% per year compounded annually. Dividends were due
only if declared by the Board of Directors and the tangible net worth of
SiteScape exceeded $25 million. SiteScape is an Internet based start up
company that acquired AltaVista FORUM from Compaq Computer in April 1999.
AltaVista FORUM is a collaboration software, which provides ways to
communicate, share resources, and collaborate with groups of people
within a company or across organizations.
SiteScape was acquired by Novell pursuant to an Agreement and Plan of
Merger dated February 13, 2008 for approximately $18.5 million in cash
and SiteScape became a fully owned subsidiary of Novell (the "SiteScape
Merger"). As a result of the acquisition, additional shares were issued
to management of SiteScape which reduced our interest in SiteScape to
6.5%. All holders of outstanding shares of SiteScape were given the right
to receive a cash payment in exchange for their stock. As a holder of
6.5% of SiteScape's stock, on a fully diluted basis, we received a cash
payment of $941,693 at the closing of the SiteScape Merger. Additionally,
$181,142 was placed in an escrow account which will be released to us
eighteen (18) months after the closing of the SiteScape Merger, in the
event that Novell does not seek indemnification for inaccuracies
contained in the representations and warranties of SiteScape in the
merger agreement.
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DIGITAL FUEL, INC.
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 2008 AND 2007
Note 5. Stock Purchase Agreement:
Per the terms of the Stock Purchase Agreement, certain liabilities of
Deucalion were settled including $38,836 owed for legal fees and $93,412
owed for management service fees. These liabilities were settled through
the issuance of common stock equal to 1/2% or 10,538 shares and 1% or
21,076 shares, respectively, after completion of the reincorporation,
recapitalization, and merger. Effective August 31, 1999, the Stock
Purchase Agreement between the Company and Michael Farley and Forrest
Metz was closed. Under the agreement, Farley and Metz purchased
2,002,226 shares of common stock for $110,000. Effective August 31,
1999, the Company issued 147,766 shares in exchange for $100,000 and
after the reincorporation, recapitalization, and merger, the purchasers
were issued 1,855,460 additional shares of the Company's common stock in
exchange for the $10,000 in debt due to them.
Note 6. Extraordinary Income:
From 1992 until July 1999 the Company was inactive. The current
management embarked on settling certain outstanding payables that were on
the books in 1999. During the three months ended March 31, 2000 and the
three months ended September 30, 2000, the company settled accounts
payable with a carrying value of $42,370 for $6,500, resulting in
extraordinary income from the extinguishment of debt of $35,870. The
Company's net tax loss carryforward was reduced by this $35,870 gain.
In December 2000, the Company entered into an agreement with the original
license holders from whom license agreements were purchased in late 1999.
Because the Company was unable to successfully use this technology, the
licenses were returned to the original owners and the $45,000 financed by
the original owners was forgiven. In addition, the $205,000 due to the
licensor, M2Direct, Inc., for services that were never provided but
charged on the Company's books as an expense in 1999, was reversed
resulting in recognition of $205,000 of income in 2000. The $45,000 due
the original licensees was also recorded as income in 2000. The Company
has an agreement with the current licensees that should the legal
problems surrounding the licenses ever be resolved, the Company would
have the option to re-purchase the licenses under new terms and
conditions.
-11-
DIGITAL FUEL, INC.
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 2008 AND 2007
Note 7. Income taxes:
At December 31, 2007, the Company had a net operating loss carryforward
of approximately $4,858,453, which is available to offset future taxable
income, if any, through 2021. Based on statutory rates, the Company's
expected tax benefit arising from the net operating loss carryforward is
approximately $1,651,874. A valuation allowance has been provided to
reduce the deferred tax asset, as realization of the asset is not
assured. In addition, the Company's net operating loss carryforwards may
be subject to annual limitations which could reduce or defer the
utilization of the losses due to the Company's ownership changes that
occurred in 1999.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our condensed
financial statements and footnotes contained in this report.
Cautionary Notes Regarding the Forward Looking Statements
This report contains forward-looking statements that are based on our current
expectations, assumptions, beliefs, estimates and projections about our
company, our industry and other related industries. The forward-looking
statements are subject to various risks and uncertainties that could cause
actual results to differ materially from those described in the forward-
looking statements. Generally, these forward-looking statements can be
identified by the use of forward-looking terminology such as "anticipate,"
"believe," "estimate," "expect," "intend," "plan," "project," "should" and
variations of such words or similar expressions. These statements by their
nature involve substantial risks and uncertainties, certain of which are
beyond our control, and actual results may differ materially depending on a
variety of important factors, including those discussed under the captions
"Risks Related to Our New Business Ventures" and "Risks Related to the
Internet and the Internet Industry."
We caution you that reliance on any forward-looking statement involves risks
and uncertainties, and that although we believe that the assumptions on which
our forward-looking statements are based are reasonable, any of those
assumptions could prove to be inaccurate, and, as a result, the forward-
looking statements based on those assumptions could be incorrect. In light of
these and other uncertainties, you should not conclude that we will
necessarily achieve any plans and objectives or projected financial results
referred to in any of the forward-looking statements. We do not undertake to
release the results of any revisions of these forward-looking statements to
reflect future events or circumstances.
-12-
Management's Plan of Operation
Management will actively seek to acquire companies involved in the software
development business and/or Internet business. Because of the difficulty in
raising working capital, management believes there are a number of small
companies seeking an opportunity to expand their ability to raise capital by
becoming part of Digital Fuel. We plan to work with several investment
banking firms that can help actively seek companies that meet our
requirements and we have sufficient cash to operate for an additional two
years.
SiteScape, Inc. Investment
Effective September 1, 1999, management completed an agreement with Farley &
Associates, Inc., an Arizona corporation, wholly owned by Michael R. Farley
who is also chief executive officer, a director and a majority stockholder of
Digital Fuel, whereby Digital Fuel acquired from Farley & Associates an
option to purchase 516,667 shares of Series A Preferred Stock of SiteScape,
Inc. SiteScape is a provider of open collaboration software, including
teaming plus conferencing products and they acquired AltaVista FORUM from
Compaq Computer in April 1999. AltaVista FORUM is a collaboration software
that provides ways to communicate, share resources and collaborate with
groups of people within a company or across organizations.
We acquired this option to purchase shares of SiteScape in exchange for a
$200,000 draw on a multiple advance promissory note extended to us by Farley
& Associates of up to $800,000, bearing interest at 9% and due on demand (the
"Farley & Associates Note"). The option to purchase the SiteScape Series A
Convertible Preferred Stock was originally agreed to through negotiations
between Farley & Associates and SiteScape and allowed Farley & Associates (or
its designee) to purchase 516,667 shares of SiteScape Preferred Stock at an
exercise price of $1.9354 per share. The $200,000 represents reimbursement of
travel and other direct expenses incurred by Farley & Associates in
connection with their negotiations with SiteScape and also a fee for Farley &
Associates' services. The $200,000 was recorded as general and administrative
expense.
Prior to September 1999, Farley & Associates provided $400,000 to SiteScape
as a deposit on the option to purchase the Series A Convertible Preferred
Stock. On September 1, 1999, we acquired Farley & Associates' rights to this
deposit in exchange for a $400,000 draw on the Farley & Associates Note.
Effective November 5, 1999, we exercised one-half of the SiteScape option
shares and purchased 258,334 shares of Series A Convertible Preferred Stock
at a total cost of $500,000. We paid $100,000 cash directly to SiteScape and
applied the $400,000 SiteScape deposit described above. In February 2000, we
exercised the remaining one-half of the SiteScape option shares and purchased
258,333 shares of Series A Convertible Preferred Stock for $500,000. At that
point, we owned approximately 20% of the voting stock of SiteScape.
-13-
On June 30, 2001, SiteScape issued to us options to purchase 103,338 shares
of its common stock at $1.93 per share. Based on the SAIC Venture Capital
Corporation ("SAIC") investment described below, the common shares of
SiteScape had a value substantially less than the option price.
In October 2001, SiteScape received a term sheet from SAIC to purchase up to
$2.5 million of its Series B Convertible Preferred Stock. On March 12, 2002
the first transaction was closed. The Series B Convertible Preferred Stock
sold to the new investors were senior to our Series A Convertible Preferred
Stock in both payment of dividends and distribution. Each share of Series B
Convertible Preferred Stock was sold for $.4164 per share and will be
redeemed for $0.6246 per share or 1.5 times the original investment.
As part of the investment agreement, the domicile of SiteScape was changed to
Delaware and the Series A Convertible Preferred Stock was split five for one.
We owned 2,583,335 shares of Series A Convertible Preferred Stock which had,
among other rights, the right to vote on general matters and the election of
one member to the seven member Board of Directors of SiteScape, the ability
of a one for one conversion into the common stock of SiteScape and dividend
participation with common shares. We then owned approximately 7.9% of
SiteScape on a fully diluted basis.
In addition, both the Series A and Series B Convertible Preferred Stock were
also entitled to receive dividends if and when declared by SiteScape's Board
of Directors at the cumulative rate of 8% per year compounded annually.
Dividends were due only if the tangible net worth of SiteScape exceeded $25
million and if declared by the Board of Directors of SiteScape. As of
December 31, 2007, no dividends were declared by SiteScape. The Series A
dividends were junior to the Series B Convertible Preferred Stock dividends,
but senior to the common stock dividends.
SiteScape Acquisition by Novell, Inc.
Pursuant to an Agreement and Plan of Merger dated February 13, 2008, Novell,
Inc. acquired SiteScape for approximately $18.5 million in cash and SiteScape
became a fully owned subsidiary of Novell (the "SiteScape Merger"). As a
result of the acquisition, additional shares were issued to management of
SiteScape which reduced our interest in SiteScape to 6.5%. All holders of
outstanding shares of SiteScape were given the right to receive a cash
payment in exchange for their stock. As a holder of 6.5% of SiteScape's
stock, on a fully diluted basis, we received a cash payment of $941,693 at
the closing of the SiteScape Merger. Additionally, $181,142 was placed in an
escrow account which will be released to us eighteen (18) months after the
closing of the SiteScape Merger, in the event that Novell does not seek
indemnification for inaccuracies contained in the representations and
warranties of SiteScape in the merger agreement.
-14-
Results of Operations
From September 1992 until July 1999, the Company had no operations and
activities primarily consisted of maintaining the corporation's status as a
corporation in good standing with the state of North Dakota and negotiating
the Stock Purchase Agreement. From July 29, 1999 through June 30, 2008,
activities primarily consisted of bringing our filings under the Securities
and Exchange Act of 1934 current; closing the Stock Purchase Agreement;
effecting a reverse stock split, name change and reincorporation into
Delaware; seeking business opportunities in the software development and
Internet businesses, specifically the M2Direct licensing agreements and the
SiteScape investment; and accounting for these transactions. During the six
months ended June 30, 2008, we incurred general and administrative expenses
of $69,779 related to these activities.
We incurred interest expense for the six months ended June 30, 2008 of
$68,639 in connection with the various loans as described in the notes to the
financial statements. Through June 30, 2008, entities controlled by Mr.
Farley and Mr. Farley himself have made loans to the Company totaling
$854,570 for certain investment transactions and the ongoing cash needs of
the Company. Through June 30, 2008, an entity controlled by Mr. Metz and Mr.
Metz himself have made loans to the Company totaling $330,275 for certain
investment transactions and the ongoing cash needs of the Company.
We currently have no off balance sheet arrangements.
Liquidity and Capital Resources
As of June 30, 2008, we had a working capital deficiency of $2,016,731.
We anticipate an increased need for working capital during 2008 as it
continues to seek companies that are potential merger candidates that
have a requirement for additional capital. We are seeking additional
working capital through debt and/or equity offerings, which will be
used for the above-described purposes.
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
In August 2002, we entered into an agreement with Gelfond Hochstadt
Pangburn, PC, a company that previously provided accounting services
to us. We were required in the terms of the agreement to make
monthly payments to Gelfond Hochstadt Pangburn to pay down the
outstanding bills. In July 2005, we were unable to continue such
payments, and as a result, a judgment was filed with the District
Court in Denver County, Colorado against Digital Fuel, Inc. in the
amount of $19,592.74. We were required to pay that balance plus 8%
interest from June 30, 2006 until such time as the obligation has
been paid in full. On April 7, 2008, we agreed to settle all
outstanding obligations with Gelfond Hochstadt Pangburn for $15,000.
-15-
Item 2. UNREGISTERED SALES OF SECURITIES AND USE OF PROCEEDS
None
Item 3. DEFAULTS UPON SENIOR SECURITIES
None
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
Item 5. OTHER INFORMATION
None
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit Description:
15 Letter on unaudited interim financial information
(See Management Statement included herein).
(b) The Company filed Forms 8-K during the quarter
covered by this report, incorporated herein by reference.
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.
Dated: August 11, 2008
DIGITAL FUEL, INC.
(Registrant)
By: /s/Michael R. Farley
Michael R. Farley
Chief Executive Officer
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