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 March 31, 2009
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 No. 000-16534
Digital Fuel, Inc.
-----------------
(Exact Name of Registrant as Specified in its Charter)
Delaware 45-0375367
-------- ----------
(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
-------------
(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, 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 shell company (as defined
in Rule 12b-2 of the Exchange Act.)
Yes [ ] No [ X ]
Number of shares of common stock outstanding: 4,343,262 Shares of Common
Stock, par value $.01 per share, were outstanding as of May 13, 2009.
-1-
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS (UNAUDITED)
DIGITAL FUEL, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONDENSED BALANCE SHEETS
March 31,
2009 December 31,
(Unaudited) 2008
--------- ----
ASSETS
Current assets
Cash and cash equivalents $ 193,599 $ 119,938
--------- ---------
Total current assets 193,599 119,938
Investments (Note 4) -- --
--------- ---------
Total assets $ 193,599 $ 119,938
========= =========
LIABILITIES AND STOCKHOLDERS' (DEFICIENCY)
Current liabilities
Accounts payable - related parties $ 2,266 $ --
Accounts payable 6,436 651
Accrued expenses 2,894 --
Notes payable, related parties (Note 2) 3,300,438 3,205,587
Notes payable, other (Note 3) 654,933 636,112
--------- ---------
Total current liabilities 3,966,967 3,842,350
--------- ---------
Stockholders' (deficiency)
Preferred stock, $.01 par value,
10,000,000 shares authorized,
0 shares issued and outstanding -- --
Common stock, $.01 par value,
20,000,000 shares authorized,
4,343,262 shares issued and
outstanding at March 31, 2009
and December 31, 2008 43,433 43,433
Additional paid-in capital 2,378,981 2,378,981
(Deficit) accumulated prior to the
development stage (5,142,516) (5,142,516)
(Deficit) accumulated during the
development stage (1,053,266) (1,002,310)
--------- ---------
Total stockholders' (deficiency) (3,773,368) (3,722,412)
--------- ---------
Total liabilities and stockholders'
(deficiency) $ 193,599 $ 119,938
========= =========
The accompanying notes are an integral part
of these condensed financial statements.
-2-
DIGITAL FUEL, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Three Months Cumulative Period
Ended Ended January 1, 2004
March 31, March 31, to
2009 2008 March 31, 2009
---- ---- --------------
(Restated)
Revenue $ -- $ -- $ --
------- ------- ---------
Operating expenses
Rent 316 316 6,626
Accounting 13,506 -- 65,854
Management fees 2,894 18,440 84,221
General and administrative 5,397 375 59,235
------- ------- ---------
Total operating expenses 22,113 19,131 215,936
------- ------- ---------
Income (loss) from operations (22,113) (19,131) (215,936)
------- ------- ---------
Other income (expense), net
Interest (expense) - related party (94,850) (91,613) (1,586,687)
Interest (expense) - other (18,822) (18,536) (310,463)
Gain on forgiveness of liabilities -- 20,235 20,235
Gain on sale of investment 84,829 941,693 1,039,585
------- ------- ---------
Total other income (expense), net (28,843) 851,779 (837,330)
------- ------- ---------
Income (loss) before taxes (50,956) 832,648 (1,053,266)
Provision for income taxes -- -- --
------- ------- ---------
Net income (loss) $(50,956) $832,648 $(1,053,266)
======= ======= =========
Net income (loss) per share, basic and diluted $(0.01) $0.19
==== ====
Weighted average number of common shares
outstanding, basic and diluted 4,343,262 4,343,262
========= =========
The accompanying notes are an integral part
of these condensed financial statements.
-3-
DIGITAL FUEL, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF STOCKHOLDERS' (DEFICIENCY)
Period from January 1, 2004 to March 31, 2009
(Unaudited)
(Deficit) (Deficit)
Accumulated Accumulated
Common Stock Additional Prior to the During the
------------------- Paid-in Development Development
Shares Amount Capital Stage Stage Total
--------- ------ --------- --------- --------- ---------
Balances, January 1, 2004 4,343,262 $43,433 $2,378,981 $(5,142,516) $ (--) $(2,720,102)
Net (loss)(unaudited) (--) (--) (--) (--) (297,435) (297,435)
--------- ------ --------- --------- --------- ---------
Balances, December 31, 2004 4,343,262 43,433 2,378,981 (5,142,516) (297,435) (3,017,537)
Net (loss)(unaudited) (--) (--) (--) (--) (331,762) (331,762)
--------- ------ --------- --------- --------- ---------
Balances, December 31, 2005 4,343,262 43,433 2,378,981 (5,142,516) (629,197) (3,349,299)
Net (loss)(restated) (--) (--) (--) (--) (368,776) (368,776)
--------- ------ --------- --------- --------- ---------
Balances, December 31, 2006 4,343,262 43,433 2,378,981 (5,142,516) (997,973) (3,718,075)
Net (loss) (restated) (--) (--) (--) (--) (410,791) (410,791)
--------- ------ --------- --------- --------- ---------
Balances, December 31, 2007 4,343,262 43,433 2,378,981 (5,142,516) (1,408,764) (4,128,866)
Net income (--) (--) (--) (--) 406,454 406,454
--------- ------ --------- --------- --------- ---------
Balances, December 31, 2008 4,343,262 43,433 2,378,981 (5,142,516) (1,002,310) (3,722,412)
--------- ------ --------- --------- --------- ---------
Net (loss) (--) (--) (--) (--) (50,956) (50,956)
--------- ------ --------- --------- --------- ---------
Balances, March 31, 2009 4,343,262 $43,433 $2,378,981 $(5,142,516) $(1,053,266) $(3,773,368)
========= ====== ========= ========= ========= =========
The accompanying notes are an integral part
of these financial statements.
-4-
DIGITAL FUEL, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Three Months Cumulative Period
Ended Ended January 1, 2004
March 31, March 31, to
2009 2008 March 31, 2009
---- ---- --------------
(Restated)
Cash flows from operating activities:
Net income (loss) $(50,956) $832,648 $(1,053,266)
Adjustments to reconcile net income (loss)
to cash provided (used) by operating
activities:
Gain on sale of investment (84,829) (941,693) (1,039,585)
Change in operating liabilities:
Increase (decrease) in accounts
payable, related parties 2,266 (45,238) (47,189)
Increase (decrease) in accounts payable 5,785 (50,132) (104,508)
Increase in accrued interest 113,672 109,782 1,900,272
Increase (decrease) in accrued expenses 2,894 (269,173) (263,278)
------- ------- ---------
Net cash provided (used) by operating
activities (11,168) (363,806) (607,554)
------- ------- ---------
Cash flows from investing activities:
Proceeds from sale of investment 84,829 941,693 1,039,585
------- ------- ---------
Net cash provided by investing
activities 84,829 941,693 1,039,585
------- ------- ---------
Cash flows from financing activities:
Proceeds from notes payable-related parties -- -- 36,450
Repayments to notes payable-related parties -- -- (229,765)
Repayments to notes payable-other -- -- (45,235)
------- ------- -------
Net cash provided by financing
activities -- -- (238,550)
------- ------- -------
Net increase (decrease) in cash 73,661 577,887 193,481
Cash, beginning of period 119,938 70 118
------- ------- -------
Cash, end of period $193,599 $577,957 $193,599
======= ======= =======
Supplemental disclosure of non-cash investing
and financing activities:
Interest paid $(--) $(--) $2,209
== == =====
The accompanying notes are an integral part
of these condensed financial statements.
-5-
DIGITAL FUEL, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Note 1. Basis of Presentation
The financial statements of Digital Fuel, Inc. (the "Company") included
in this Form 10-Q have been prepared without audit in accordance with
the rules and regulations of the Securities and Exchange Commission.
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 audited financial statements and notes
included in the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 2008.
In the opinion of management, all adjustments, including normal
recurring adjustments, necessary for a fair presentation of the results
of operations for the three-month periods ended March 31, 2009 and 2008
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.
There has not been any change in the significant accounting policies of
the Company for the periods presented.
Recent Accounting Pronouncements
We have reviewed all other recently issued, but not yet effective,
accounting pronouncements and do not believe the future adoption of any
such pronouncements may be expected to cause a material impact on our
financial condition or the results of our operations.
Going Concern Considerations
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. The Company has incurred
net operating losses in 2009 and 2008, and has a working capital
deficiency of $3,773,368 and a stockholders' deficiency of $3,773,368 at
March 31, 2009. These conditions raise substantial doubt about the
Company's ability to continue as a going concern. 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
outcome of these uncertainties. Management's plans in regard to these
matters include:
a. Continued financing of certain operating transactions through the
use of related party debt (Note 2).
b. Seeking additional working capital through debt and/or equity
offerings, which will be used to further market and develop its
licensing agreements and/or other potential investment
opportunities.
-6-
DIGITAL FUEL, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Note 2. Notes Payable, Related Parties
As of March 31, 2009 and December 31, 2008, the Company has the
following Notes Payable arrangements with related parties:
March 31, December 31,
2009 2008
---- ----
Farley Family Partnership, 12%, unsecured,
due 12/31/2000, in default $ 163,812 $ 163,812
Forrest L. Metz, 12%, unsecured,
due 12/31/2000, in default 122,859 122,859
Metz Trust multiple advance promissory note,
maximum borrowings of $150,000, 12%,
unsecured, due 12/31/2000, in default 147,656 147,656
Grant Papanikolas multiple advance promissory note,
maximum borrowings of $100,000, 12%, unsecured,
due 12/31/2000, in default 69,620 69,620
Michael Farley multiple advance promissory note,
maximum borrowings of $100,000, 12%, unsecured,
due 12/31/2000, in default 53,772 53,772
Farley & Associates multiple advance promissory
note, maximum borrowings of $800,000, 12%,
unsecured, due 12/31/2000, in default 482,361 482,361
Interest accrued to note balances 2,260,358 2,165,507
--------- ---------
$3,300,438 $3,205,587
========= =========
During the three months ended March 31, 2009 and 2008, the Company
accrued and charged to interest expense $94,850 and $91,613,
respectively. There were no advances under the notes during the three
months ended March 31, 2009 and 2008.
-7-
DIGITAL FUEL, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Note 3. Notes Payable, Other
As of March 31, 2009 and December 31, 2008, the Company has the
following Notes Payable, other:
March 31, December 31,
2009 2008
---- ----
Townsdin, 12%, unsecured, due 12/31/2000,
in default $163,812 $163,812
Torrance, 12%, unsecured, due 12/31/2000,
in default 40,953 40,953
Interest Accrued to note balances 450,168 431,347
------- -------
$654,933 $636,112
======= =======
During the three months ended March 31, 2009 and 2008, the Company
accrued and charged to interest expense $18,822 and $18,536,
respectively. There were no advances under the notes during the three
months ended March 31, 2009 and 2008.
Note 4. Investments
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. As a result of
the acquisition, 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, the
Company received a cash payment of $941,693 in February 2008, which is
included in other income (expense). A portion of the purchase price,
$181,142, was placed in an escrow account to be released to the Company
in increments within eighteen months after the closing of the merger in
the event that Novell does not seek indemnification for inaccuracies
contained in the representations and warranties of SiteScape in the
merger agreement. The first escrow payment was received in October 2008
in the amount of $13,063 and the second escrow payment was received in
March 2009 in the amount of $84,829, which are included in other income
(expense). The recognition of future remaining payments held in escrow
of $83,250 will occur as payments are received.
-8-
DIGITAL FUEL, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Note 5. Related Party Activity
During the three months ended March 31, 2009 and 2008, the Company
accrued and charged to interest expense for the notes payable to related
parties $94,850 and $91,613, respectively. There were no advances under
the notes during the three months ended March 31, 2009 and 2008. The
notes payable to related parties and accrued interest balances at March
31, 2009 and December 31, 2008 were $3,300,438 and $3,205,587,
respectively.
As of March 31, 2009, the Company owed $2,894 to officers of the Company
for unpaid management fees. Additionally, the Company owed $2,266 to
officers of the Company for expenses incurred on the Company's behalf at
March 31, 2009.
-9-
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
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 Part II, Item 1A,
"Risk Factors."
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.
Effecting a Business Combination
We are currently in the process of identifying and evaluating targets for an
initial transaction. We have not entered into any definitive business
combination agreements. We have virtually unrestricted flexibility in
identifying and selecting a prospective acquisition candidate. Accordingly,
there is no basis for investors to evaluate the possible merits or risks of
the target business with which we may ultimately complete a business
combination. Although our management will endeavor to evaluate the risks
inherent in a particular target business, we cannot assure you that we will
properly ascertain or assess all significant risk factors.
Investment in Preferred Stock Shares of SiteScape, Inc.
Effective September 1, 1999, the new management completed an agreement with
Farley & Associates, Inc., an Arizona corporation ("F&A"), 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 F&A
an option to purchase 516,667 shares of Series A Preferred Stock of SiteScape,
Inc. ("SiteScape"). 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 collaboration software
that provides ways to communicate, share resources and collaborate with groups
of people within a company or across organizations.
-10-
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 F&A of
up to $800,000, bearing interest at 9% and due on demand (the "F&A Note"). The
option to purchase the SiteScape Series A Convertible Preferred Stock was
originally agreed to through negotiations between F&A and SiteScape and allows
F&A (or its designee) to purchase 516,667 shares of SiteScape Preferred Stock
at an exercise price of $1.9354 per share.
Prior to September 1999, F&A 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 F&A's rights to this deposit in exchange for a $400,000
draw on the F&A 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.
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 of 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 was 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 5 for 1. We
then 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 6.5% of
SiteScape on a fully diluted basis.
In addition, both the Series A and Series B Convertible Preferred Stock were
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. No dividends were declared
by SiteScape.
-11-
SiteScape Acquisition by Novell, Inc.
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. As a result of the acquisition, 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, the Company received a cash payment of
$941,693 in February 2008, which is included in other income (expense). A
portion of the purchase price, $181,142, was placed in an escrow account to be
released to the Company in increments within eighteen months after the closing
of the merger in the event that Novell does not seek indemnification for
inaccuracies contained in the representations and warranties of SiteScape in
the merger agreement. The first escrow payment was received in October 2008 in
the amount of $13,063 and the second escrow payment was received in March 2009
in the amount of $84,829, which are included in other income (expense). The
recognition of future remaining payments held in escrow of $83,250 will occur
as payments are received.
Results of Operations
Analysis of three months ended March 31, 2009 and 2008:
We have neither engaged in any operation nor generated any revenue since
reverting to the development stage on January 1, 2004. Our entire activity
since January 1, 2004 has been to identify and investigate targets for a
potential business combination. We will not generate any operating revenue
until consummation of a business combination. During the three months ended
March 31, 2009 and 2008, we incurred $22,113 and $19,131, respectively, in
total operating expenses.
We incurred interest expense for the three months ended March 31, 2009 and
2008 of $113,672 and $110,149, respectively, in connection with our
outstanding debt. As of March 31, 2009, entities controlled by Mr. Farley and
Mr. Farley personally have loans outstanding totaling $699,945 for certain
investment transactions and our ongoing cash needs. As of March 31, 2009, an
entity controlled by Mr. Metz and Mr. Metz personally have loans outstanding
totaling $270,515 for certain investment transactions and our ongoing cash
needs.
Liquidity and Capital Resources
As of March 31, 2009, the Company had assets equal to $193,599, comprised
exclusively of cash and cash equivalents. The Company's current liabilities as
of March 31, 2009 totaled $3,966,967 comprised of $2,266 of accounts payable
to related parties, $6,436 of accounts payable, $2,894 of accrued expenses,
$3,300,438 of notes payable and accrued interest due to related parties, and
$654,933 of other notes payable and accrued interest.
-12-
The following is a summary of the Company's cash flows provided by (used in)
operating, investing and financing activities:
Cumulative
Three Months Period From
Ended January 1, 2004 to
March 31, 2009 March 31, 2009
-------------- --------------
Net cash provided (used) by
operating activities $(11,168) $(607,554)
Net cash provided by investing
activities $84,829 $1,039,585
Net cash provided (used) by
financing activities -- $(238,550)
Net increase in cash $73,661 $193,481
Cumulative
Three Months Period From
Ended January 1, 2004 to
March 31, 2008 March 31, 2008
-------------- --------------
Net cash provided (used) by
operating activities $(363,806) $(400,304)
Net cash provided by investing
activities $941,693 $941,693
Net cash provided by financing
activities -- $36,450
Net increase in cash $577,887 $577,839
The Company has nominal assets and has generated no revenues since re-entering
the development stage on January 1, 2004. The Company is also dependent upon
the receipt of capital investment or other financing to fund its ongoing
operations and to execute its business plan of seeking a combination with a
private operating company. In addition, the Company is dependent upon certain
related parties to provide continued funding and capital resources. If
continued funding and capital resources are unavailable at reasonable terms,
the Company may not be able to implement its plan of operations.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
-13-
Item 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that
information required to be disclosed in the reports filed or submitted by the
Company under the Exchange Act of 1934, as amended, is recorded, processed,
summarized and reported within the time periods specified in the rules and
forms of the SEC. Disclosure controls and procedures include, without
limitation, controls and procedures designed to ensure that information
required to be disclosed in the reports filed under the Exchange Act is
accumulated and communicated to the Company's management, including its
officers, as appropriate, to allow timely decisions regarding required
disclosure.
The Company carried out an evaluation, under the supervision and
with the participation of its officers, of the effectiveness of the design and
operation of the Company's disclosure controls and procedures as of the end of
the period covered by this report. Based upon and as of the date of that
evaluation, the Company's officers concluded that the Company's disclosure
controls and procedures are not effective to ensure that information required
to be disclosed in the reports the Company files and submits under the
Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the SEC's rules and forms.
(b) Management's Report on Internal Control over Financial Reporting
Our officers are responsible for establishing and maintaining
adequate internal control over financial reporting as defined in Rules 13a-
15(f) and 15d-15(f) under the Exchange Act. Internal control over financial
reporting refers to the process designed by, or under the supervision of, our
officers, and affected by our Board of Directors, to provide reasonable
assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally
accepted accounting principles.
The Company is not in compliance with Section 404 of the Sarbanes-
Oxley Act of 2002, and as of March 31, 2009 cannot state whether or not our
internal controls over financial reporting are effective as we did not
document such controls nor test such controls.
(c) Changes in Internal Control Over Financial Reporting
There have been no significant changes in our internal controls over
financial reporting as defined in Rules 13a-15(f) or 15d-15(f) under the
Exchange Act during the three months ended March 31, 2009, that materially
affected, or are reasonably likely to materially affect, our internal controls
over financial reporting.
-14-
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% in
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.
Item 1A. RISK FACTORS
There have been no material changes to the risk factors previously disclosed
in the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 2008.
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 SECURITYHOLDERS
None
Item 5. OTHER INFORMATION
None
Item 6. EXHIBITS
(a) Exhibit Description:
31.1 -- Certification of Michael R. Farley pursuant to Exchange Act
Rule 13a-14(a)/15d-14(a).
32.1 -- Certification of Michael R. Farley pursuant to 18 U.S.C.
Section 1350 as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DIGITAL FUEL, INC.
By: /s/ Michael R. Farley
-------------------------
Michael R. Farley
Chief Executive Officer
Date: May 13, 2009
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