UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C., 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) January 11, 2000
Commission file number 000-25367
INTERNATIONAL FUEL TECHNOLOGY, INC.
(Exact name of registrant as specified in charter)
Nevada 88-0357508
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
7777 Bonhomme, Suite 1920
St. Louis, MO 63105
(Address of Principal Executive Office) (Zip Code)
(314) 727-3333
(Registrant's Executive Office Telephone Number)
International Fuel Technology, Inc. - Page Two
Item No. 1. Changes in Control of Registrant.
No events to report
Item No. 2. Acquisition or Disposition of Assets.
No events to report,
Item No. 3. Bankruptcy or Receivership.
No events to report.
Item No. 4. Changes in Registrant's Certifying Accountant.
No events to report.
Item No. 5. Other Events.
Pursuant to the terms of the Merger Agreement with Blencathia Acquisition
Corporation, filed in an 8-K with the SEC on November 10, 1999, the Company
has completed its March 31, 1999 year-end Audited Financial Statements, its
Unaudited Financial Statements as of September 30, 1999 and for the six
months ending September 30, 1999,1998 and its Pro Forma Condensed Financial
Statements. Copies attached as exhibits filed herewith.
Item No. 6. Resignation of Registrant's Directors.
No events to report.
International Fuel Technology, Inc. - Page Three
Item No. 7. Financial Statements, Proforma Financial Information and
Exhibits.
Exhibits
1.1 March 31, 1999 Audited Financials.
1.2 September 30, 1999 Unaudited Financial Statements
1.3 Pro Forma Condensed Financial Statements
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
International Fuel Technology, Inc.
By:/s/ Jonathan Burst Dated: January 11, 2000
Jonathan Burst, President
By:/s/ Patty Foltz Dated: January 11, 2000
Patty Foltz, Secretary
EXHIBIT 1.1
INTERNATIONAL FUEL TECHNOLOGY, INC.
(A Development Stage Company)
FINANCIAL REPORT
MARCH 31, 1999
CONTENTS
INDEPENDENT AUDITOR'S REPORT 1
FINANCIAL STATEMENTS
Balance sheets 2
Statements of operations 3
Statements of stockholders' deficit 4-5
Statements of cash flows 6
Notes to financial statements 7-11
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
International Fuel Technology, Inc.
Las Vegas, Nevada
We have audited the accompanying balance sheets of International Fuel
Technology, Inc., a development stage company, as of March 31, 1999 and
1998, and the related statements of operations, stockholders' deficit and
cash flows for the years then ended and for the period from April 9, 1996,
the date of inception, to March 31, 1999. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of International Fuel
Technology, Inc. as of March 31, 1999 and 1998, and the results of its
operations and its cash flows for the years then ended and for the period
from April 9, 1996, the date of inception, to March 31, 1999 in conformity
with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will conduct operations as a going concern. As discussed in Note 7
to the financial statements, the Company has not yet commenced the
operations for which it was organized and its total liabilities exceed its
total assets. Furthermore, the Company may need to raise substantial
capital in order to implement its business plan. This raises substantial
doubt about the Company's ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 7.
The financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
As described in Note 9 to the financial statements, the March 31, 1998
financial statements have been restated to reflect certain consulting
services not previously recorded.
/s/ McGLADREY & PULLEN, LLP
Las Vegas, Nevada
September 27, 1999, except for the last two paragraphs
of Note 8 as to which the date is November 9, 1999
INTERNATIONAL FUEL TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
March 31, 1999 and 1998
ASSETS 1999 1998
Current Assets
Cash $ 488 $ 5,100
Prepaid insurance 590
-----------------------------
Total current assets 488 5,690
-----------------------------
Machinery and equipment 5,924 1,644
Accumulated depreciation (760)
----------------------------
5,164 1,644
-----------------------------
$ 5,652 $ 7,334
=============================
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Accounts payable $ 313,979 $
Accrued interest 93,270 7,461
Other accrued expenses 54,367 11,808
Due to related party 26,500 168,500
Notes payable to shareholders (Note 3) 357,973 134,830
Notes payable to others (Note 3) 314,581
----------------------------
Total current liabilities 1,160,670 322,599
----------------------------
Commitments and Contingencies (Note 7)
Stockholders' Deficit (Notes 2, 3, 4, 8 and 9)
Common stock, $.01 par value; authorized,
150,000,000 and
100,000,000 shares, in 1999 and 1998,
respectively
14,097,559 and 99,015,794 shares issued and
outstanding at March 31, 1999 and 1998,
respectively 140,976 990,158
Discount on common stock (81,692) (537,325)
Additional paid-in capital 8,060,590 667,041
Deficit accumulated during the development
stage (Note 9) (9,274,892) (1,435,139)
----------------------------
(1,155,018) (315,265)
----------------------------
$ 5,652 $ 7,334
============================
See Notes to Financial Statements.
INTERNATIONAL FUEL TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
Years Ended March 31, 1999 and 1998, and from April 9, 1996, the Date of
Inception, to
March 31, 1999
Inception
(April 9,
1996) to
March 31,
1999 1998 1999
Expenses:
Consulting (Notes 5 and 9) $ 6,342,000 $ 543,412 $ 7,063,264
Costs incurred in product development 842,905 330,089 1,212,724
Rent (Note 5) 146,000 49,276 243,276
Payroll 128,245 42,747 183,122
Interest (Note 5) 87,909 7,518 95,427
Professional services 84,634 21,094 129,816
Other payroll expenses 52,082 10,259 66,400
Travel 41,164 43,716 108,223
Other 35,782 3,682 39,515
Office 26,377 25,973 62,902
Telephone 23,171 12,900 40,739
Stock transfer fees 18,378 18,378
Advertising and marketing 11,106 11,106
--------------------------------------
Net loss $ 7,839,753 $ 1,090,666 $ 9,274,892
======================================
Basic and dilutive net loss
per common share $ 0.59 $ 0.20
==========================
See Notes to Financial Statements.
INTERNATIONAL FUEL TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' DEFICIT
Years Ended March 31, 1999 and 1998, and from April 9, 1996, the Date of
Inception, to March 31, 1999
Common Stock Discount Additiona Accumulate
on l d
Shares Amount Common Paid-In Deficit Total
Stock Capital
Iss
uan
ces
of
com
mon
sto
ck
for
cas
h 416,128 $ 4,161 $ - $ 145,215 $ - $ 149,376
Iss
uan
ces
of
com
mon
sto
ck
for
tec
hno
log
y
(No
te
4) 1,467,000 14,670 (14,670) - - -
Iss
uan
ces
of
com
mon
sto
ck
for
pre
fer
ent
ial
sto 85,000 850 - (850) - -
ck
div
ide
nd
(No
te
4)
Iss 846,228 8,462 - - - 8,462
uan
ces
of
com
mon
sto
ck
for
ser
vic
es
(No
te
4)
Iss 150,000 1,500 - - - 1,500
uan
ce
of
com
mon
sto
ck
for
com
pen
sat
ion
(No
te
4)
Net - - - - (344,473) (344,473)
los
s
Bal 2,964,356 $ 29,643 $ (14,670) $ 144,365 $ (344,473) $ (185,135)
anc
e,
Mar
ch
31,
199
7
Iss 1,583,493 15,835 - 272,017 - 287,852
uan
ces
of
com
mon
sto
ck
for
cas
h
Iss 53,209,521 532,095 (532,095 - - -
uan )
ces
of
com
mon
sto
ck
for
tec
hno
log
y
(No
te
4)
Iss
uan
ces
of
com
mon
sto
ck
for
pre
fer
ent
ial
sto 1,422,800 14,228 - (14,228) - -
ck
div
ide
nd
(No
te
4)
Iss 12,118,830 121,189 - - - 121,189
uan
ces
of
com
mon
sto
ck
for
ser
vic
es
(No
tes
4
and
5)
Exp
ens
e
rec
ord
ed
for
ser
vic
es
ren
der
ed
by - - - 169,980 - 169,980
sto
ckh
old
ers
(No
te
9)
Iss 701,000 7,010 - - - 7,010
uan
ce
of
com
mon
sto
ck
for
com
pen
sat
ion
(No
te
4)
Iss
uan
ces
of
com
mon
sto
ck
in
con
nec
tio
n
wit
h
the
acq
uis
iti
on
of
Uni
ted
Sta
tes
Fue
l
Tec
hno
log
y,
Inc 27,959,794 279,598 - 94,907 - 374,505
.
(No
te
2)
Can (944,000) (9,440) 9,440 - - -
cel
lat
ion
of
sha
res
(No
te
2)
Net - - - - (1,090,666) (1,090,666)
los
s
Bal 99,015,794 990,158 (537,325 667,041 (1,435,139 (315,265)
anc ) )
e,
Mar
ch
31,
199
8
Iss 2,000,000 20,000 980,000 1,000,000
uan
ces
of
com
mon
sto
ck
for
cas
h
Iss 12,000,000 120,000 5,880,000 6,000,000
uan
ces
of
com
mon
sto
ck
for
ser
vic
es
(No
tes
5
and
9)
Iss
uan
ces
of
com
mon
sto
ck
in
con
nec
tio
n
wit
h
the
acq
uis
iti
on
of
Sci
ent
ifi
c
Fue
l
Tec
hno
log
y,
LLC
(No 27,959,794 279,598 (279,598
te )
2)
Net (7,839,753) (7,839,753)
los
s
Bal 140,975,588 1,409,756 (816,923) 7,527,041 (9,274,892) (1,155,018)
anc
e,
Mar
ch
31,
199
9
One (126,878,029 (1,268,780 735,231 533,549
for ) )
ten
rev
ers
e
sto
ck
spl
it
(No
te
4)
14,097,559 $ 140,976 $ (81,692) $ 8,060,590 $ (9,274,892 $ (1,155,018
INTERNATIONAL FUEL TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
Years Ended March 31, 1999 and 1998, and from April 9, 1996, the Date of
Inception, to March 31, 1999
Inception
(April 9,
1996)
1999 1998 to March
31,
1999
Cash Flows from Operating Activities
Net (loss) $ (7,839,753) $ (1,090,666) $ (9,274,892)
Adjustments to reconcile net (loss)
to net cash
(used in) operating activities:
Depreciation 760 760
Stock issued and additional paid in
capital
recognized for services and 6,000,000 298,179 6,308,141
compensation
Change in assets and liabilities:
(Increase) decrease in prepaid 590 (590)
insurance
Increase in accounts payable 313,979 313,979
Increase in accrued expenses 128,368 19,269 147,637
--------------------------------------
Net cash (used in) operating
Activities (1,396,056) (773,808) (2,504,375)
--------------------------------------
Cash Flows from Investing Activities
Acquisition of machinery and (4,280) (4,280)
equipment
Cash acquired in connection with the
purchase of
United States Fuel Technology, Inc. 358 358
---------------------------------------
Net cash (used in) provided by
investing activities (4,280) 358 (3,922)
---------------------------------------
Cash Flows from Financing Activities
Increase (decrease) in amount due to
related party (142,000) 168,500 26,500
Increase in due to United States Fuel
Technology, Inc. 224,391 372,503
Proceeds from common stock issued 1,000,000 287,852 1,437,228
Proceeds from notes payable 828,895 86,500 963,725
Payment on notes payable (291,171) (291,171)
--------------------------------------
Net cash provided by financing
Activities 1,395,724 767,243 2,508,785
-------------------------------------
Net increase (decrease) in cash (4,612) (6,207) 488
Cash, beginning 5,100 11,307
--------------------------------------
Cash, ending $ 488 $ 5,100 $ 488
========================================
Supplemental Cash Flow Information
Interest paid $ 2,100 $ $ 2,100
========================================
See Notes to Financial Statements
Note 1. Nature of Business and Significant Accounting Policies
Nature of business
International Fuel Technology, Inc. (IFT) is a development stage company
which was incorporated under the laws of the State of Nevada on April 9,
1996 and was formerly known as MagnoDynamic Corporation. IFT was formed
primarily for the production of a family of proprietary fuels known as
PEERFUELS?. IFT developed a process which it believes will make diesel
fuel burn more efficiently and with less emissions. Currently, IFT is
testing the treated diesel fuel in the State of California and hopes the
test results will persuade the State of California to use IFT's product in
the State's diesel engines.
A summary of the Company's significant accounting policies follow:
Use of estimates in the preparation of financial statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statement and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Cash
The Company maintains cash in a bank account which, at times, exceeds
federally insured limits. The Company has experienced no losses relating
to these excess amounts of cash in a bank.
Machinery and equipment
Machinery and equipment are stated at cost. Depreciation is computed on
the straight-line method over the estimated useful lives of five years.
Deferred taxes
Deferred taxes are provided on a liability method whereby deferred tax
assets are recognized for deductible temporary differences, operating
losses and tax credit carry forwards and deferred tax liabilities are
recognized for taxable temporary differences. Temporary differences are
the differences between the reported amounts of assets and liabilities and
their tax bases. Deferred tax assets are reduced by a valuation allowance
when, in the opinion of management, it is more likely than not that some or
all of the deferred tax assets will not be realized. Deferred tax assets
and liabilities are adjusted for the effects of changes in tax laws and
rates on the date of enactment.
Note 1. Nature of Business and Significant Accounting Policies
(continued)
Basic and dilutive net loss per common share
The Company adopted Statement of Financial Accounting Standards No. 128
(SFAS 128), Earnings per Share. SFAS 128 establishes standards for
computing and presenting earnings per share and replaces primary earnings
per share with a presentation of basic and dilutive earnings per share.
Basic earnings per share is based upon the weighted average number of
common shares outstanding for the period. Dilutive earnings per share is
based upon the weighted average number of common and potentially dilutive
common shares outstanding for the period. Pursuant to SFAS 128, no
adjustment is made for diluted earnings per share purposes since the
Company is reporting a net loss and common stock equivalents would have an
anti-dilutive effect. Weighted average shares outstanding for the years
ended March 31, 1999 and 1998 are 13,390,417 and 5,351,089, respectively
and reflect adjustment for the effect of the April 1999 stock rights
offering (see Note 8) and July 1999 reverse stock split (see Note 4).
Fair value of financial instruments
Statement of Financial Accounting Standards FASB No. 107 (SFAS 107),
Disclosures about Fair Value of Financial Instruments, requires the
disclosure of fair value for all financial instruments as defined in SFAS
107 the for which it is practicable to estimate fair value.
The carrying amounts of accounts payable approximate fair value because of
their short maturity.
The fair value of notes payable approximate their carrying basis based on
the short term nature of these obligations and current interest rates
approximate stated interest rates.
Management has determined that it is not practicable to estimate the fair
value of the related party debt due to the related party nature of these
agreements.
Note 2. Acquisitions
On April 3, 1998, the stockholders approved a merger with United States
Fuel Technology, Inc. (USFT), effective March 31, 1998. USFT was formed
primarily to market PEERFUELS? in North America. As a result of the
merger, each non-dissenting holder of outstanding shares of USFT Common
Stock received one share of IFT Common Stock. This merger has been
accounted for as a purchase.
The assets and liabilities of USFT at March 31, 1998 consisted of:
Cash $ 358
Due from IFT 372,503
Computer equipment 1,644
------------
374,505
Liabilities -
-------------
$ 374,505
=============
Note 2. Acquisitions (continued)
Immediately after the merger with USFT, total shares outstanding were
99,959,794. However, 944,000 of these shares were USFT shares issued to
IFT in exchange for certain marketing rights valued at zero by IFT. These
944,000 shares were redeemed and canceled by IFT in connection with the
acquisition of USFT.
On May 29, 1998 the Company entered into an agreement and plan of merger
with Scientific Fuel Technology, LLC ("SFT"), a company related through
common ownership. The assets and liabilities of SFT consisted solely of an
agreement whereby SFT would receive certain payments in exchange for
providing various sales and marketing services to IFT. This marketing
agreement was valued at zero due to the uncertainty of the future revenues.
For the year ended March 31, 1998, SFT had no revenues or expenses. As a
result of the merger, 27,959,794 shares of IFT were exchanged for the
member interests in SFT.
Note 3. Notes Payable
All notes payable bear interest at 12%, are unsecured and are due at
various dates through March 2000. Subsequent to March 31, 1999, the
Company has offered the note holders the option of extending the due dates
of these notes for another two years at 12% interest or converting the
notes to common stock at a conversion price of not less than $2.00 per
share on a post-reverse split basis. Management expects that the note
holders will either agree to the extension or the conversion into common
stock.
Note 4. Common Stock
The Company issued shares to certain founding stockholders during fiscal
years 1998 and 1997 in exchange for the technology related to its diesel
fuel treatment business. This technology constituted research and
development expenditures to these stockholders and consistent with
Generally Accepted Accounting Principles, was not recorded as an asset but
rather was recorded as an expense by these shareholders. Because the
subsequent transfer of this technology to IFT was a transaction between
entities under common control, it was accounted for using the carrying
value of the technology which was zero. A discount on common stock was
recorded equal to the par value of the stock issued in exchange for the
technology.
The Company also issued shares to certain stockholders in exchange for
services and certain corporate officers were issued stock as additional
compensation. Management believes that valuing the stock at its par value
approximates the value of the services rendered by these officers and
stockholders.
Certain stockholders who purchased stock for cash were subsequently issued
additional shares of stock for no consideration prior to March 31, 1998.
These additional issuances of stock were recorded as preferential stock
dividends since not all stockholders received these shares. Since the
Company has no retained earnings, a charge to additional paid-in capital
was recorded to reflect the par value of the stock issued.
On July 7, 1999, the stockholders approved 1 for 10 reverse stock split.
The effect of the split is presented within stockholders' deficit at March
31, 1999 by transferring the par value for the reduction in shares issued
from the discount on common stock to additional paid in capital. The basic
and dilutive net loss per common share for the years ended March 31, 1999
and 1998 have been retroactively adjusted for the split as if it occurred
on April 1, 1997.
Note 5. Related Party Transactions
IFT rents its office space and equipment from Nevada Offshore Petroleum
Export Corp. (NOPEC), a company related through common ownership, under a
month-to-month agreement requiring monthly rentals of $4,000 through August
31, 1998 and $18,000 from September 1, 1998 to March 31, 1999. Total rent
incurred in connection with this lease was $146,000 and $48,000 for the
years ended March 31, 1999 and 1998, respectively, and $242,000 from the
date of inception through March 31, 1999.
IFT has consulting arrangements with certain stockholders and related
parties. Consulting expense includes $6,000,000 and $278,712 for the year
ended March 31, 1999 and 1998, respectively, paid through the issuance of
common stock at its then fair value by the Company and the Chairman of the
Company's Board of Directors (see Note 9).
Total interest incurred in connection with stockholders loans (Note 3) was
$34,452 and $7,461 for the years ended March 31, 1999 and 1998,
respectively, and $41,913 from the date of inception through March 31,
1999.
Note 6. Income Taxes
For income tax purposes substantially all of the Company's expenses are
considered start-up costs to be amortized over five years beginning with
the commencement of operations. Due to the inherent uncertainty in
forecasts of future events and operating results, the Company has provided
for a valuation allowance in an amount equal to the net deferred tax assets
which result from this temporary difference resulting in no net deferred
tax assets at March 31, 1999 and March 31, 1998. No income tax benefit has
been recorded in the statement of operations due to the valuation allowance
on the deferred tax assets.
Note 7. Ability to Continue as a Going Concern
The Company has incurred significant losses since inception and has limited
funds with which to operate. Management anticipates receiving diploma
certification in late 1999 or early 2000 from the California Air Resources
Board that its PEERDIESEL? product reduces polluting emissions from
internal combustion engines. Shortly thereafter IFT expects to begin
licensing its product which management believes will generate sufficient
revenue to continue the Company's operations. However, there is no
assurance that IFT will receive diploma certification or be able to
generate sufficient revenue through the licensing of its product to provide
sufficient working capital. Management does not have an estimate of the
amount of revenue necessary to attain positive cash flow nor the amount of
capital the Company may need to raise until sufficient revenue is
generated. In the event the Company is unable to generate sufficient
revenues or raise sufficient additional capital, management may be forced
to consider other alternatives including dissolution. The financial
statements do not include any adjustments which might result from this
uncertainty.
Note 8. Subsequent Events
On April 26, 1999 the Company offered all stockholders of record on March
31, 1999 the right to purchase 900 common shares at $ .50 per share on a
post-reverse split basis. The Company issued 787,500 shares and received
proceeds of $393,750 as a result of this offering which expired May 28,
1999.
In July 1999, the Company entered into an advisory agreement with OnKar
Corporation, Ltd. (OnKar) for various services including introduction to
brokers, dealers and potential investors and OnKar agrees to facilitate the
writing of a minimum of three research reports on the Company. As
consideration for the services OnKar received the right to purchase 1.5
million shares of restricted common stock at $.50 per share on a post-
reverse split basis. These rights were issued and exercised with the
Company receiving proceeds of $750,000. The issuance of these rights will
have a material effect on net income in the year ended March 31, 2000.
Effective October 28, 1999, the Company merged with and into Blencathia
Acquisition Corporation (Blencathia) wherein International Fuel Technology,
Inc. is the survivor corporation. Blencathia had 300,000 shares
outstanding at the time of the merger, which it redeemed and canceled in
exchange for 300,000 shares of the Company's common stock. Blencathia,
which was incorporated on December 3, 1997, had not commenced any
significant operations, and was considered a public "shell".
Note 9. Restatement
During the year ended March 31, 1998, the Company's then Board Chairman
issued 1,699,800 personally owned shares (post-reverse split basis) of the
Company's stock to certain other stockholders as compensation for
consulting services rendered to the Company. Generally Accepted Accounting
Principles require that the value of these services be recognized in the
financial statements as a charge to expense with an offsetting credit to
additional paid-in capital. The previously issued financial statements
omitted the recognition of these transactions.
Accordingly, the financial statements for the year ended March 31, 1998,
have been retroactively restated to correct this error. An expense has
been recorded based on the estimated fair value of the services rendered.
As a result of this restatement, the net loss for the year ended March 31,
1998 and accumulated deficit at March 31, 1998 increased by $169,980.
Basic and dilutive net loss per common share for the year ended March 31,
1998 increased by $0.03 as a result of this restatement.
During December 1998, the Board of Directors approved the reimbursement of
1,200,000 shares (post-reverse split basis) of the Company's stock to the
Company's former Board Chairman who issued the 1,699,800 shares. These
shares have been reflected in the financial statements at the estimated
fair value of the shares at the time the reimbursement was approved.
EXHIBIT 1.2
INTERNATIONAL FUEL TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET (UNAUDITED)
September 30, 1999
ASSETS
Current Assets
Cash $ 219,569
Prepaid insurance 20,350
Due from related party 25,000
---------------
Total current assets 264,919
---------------
Machinery and equipment, net 13,935
---------------
$ 278,854
===============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Accounts payable $ 120,746
Accrued interest 135,617
Other accrued expenses 9,167
Due to related party 26,500
Notes payable 677,754
---------------
Total current liabilities 969,784
---------------
Commitments and Contingencies
Stockholders' Deficit
Common stock 163,957
Discount on common stock (81,692)
Additional paid-in capital 12,736,880
Deficit accumulated during the development stage (13,510,075)
----------------
(690,930)
----------------
$ 278,854
===============
See Notes to Financial Statements.
INTERNATIONAL FUEL TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS (UNAUDITED)
Six Inception
Months (April 9,
1996)
Ended To
September 30, September
30,
1999 1998 1999
Expenses:
Professional services $ 3,524,399 $ 29,500 $ 3,654,215
Costs incurred in product development 279,824 275,195 1,492,548
Payroll and other payroll expenses 179,233 48,954 428,755
Consulting 135,000 125,500 7,198,264
Interest 42,347 32,610 137,774
Other 32,549 38,450 72,064
Rent 17,750 55,100 261,026
Advertising and marketing 11,059 663 22,165
Stock transfer fees 6,987 14,500 25,365
Travel 3,160 12,984 111,383
Telephone 1,932 16,002 42,671
Office 943 22,135 63,845
------------------------------------
Net loss $ 4,235,183 $ 671,593 $ 13,510,075
====================================
Basic and dilutive net loss
per common share $ 0.28 $ 0.05
========================
See Notes to Financial Statements.
INTERNATIONAL FUEL TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' DEFICIT (UNAUDITED)
Six Months Ended September 30, 1999 and 1998
Common Stock Discount Additiona Accumulate
on l d
Shares Amount Common Paid-In Deficit Total
Stock Capital
Balan 140,975,588 $ 1,409,756 $ (816,923 $ 7,527,041 $(9,274,892 $(1,155,018
ce, ) ) )
March
31,
1999
Issua 7,956,000 79,560 318,240 397,800
nces
of
commo
n
stock
for
cash
Issua 15,000,000 150,000 4,068,750 4,218,750
nces
of
commo
n
stock
for
servi
ces
and
cash
Issua 25,000 250 6,750 7,000
nces
of
commo
n
stock
for
compe
nsati
on
Accru 75,721 75,721
ed
stock
based
compe
nsati
on
Net (4,235,183 (4,235,183
loss ) )
One (147,560,929 (1,475,609 735,231 740,378
for ) )
ten
rever
se
stock
split
Balan 16,395,659 $ 163,957 $ (81,692) $ 12,736,88 $(13,510,07 $ (690,930)
ce, 0 5)
Septe
mber
30,
1999
Balan 99,015,794 $ 990,158 $ (537,325 $ 667,041 $(1,435,139 $ (315,265)
ce, ) )
March
31,
1998
Issua
nces
of
commo
n
stock
in
conne
ction
with
the
Acqui 27,959,794 279,598 (279,598
sitio )
n of
Scien
tific
Fuel
Techn
ology
, LLC
Net (671,593) (671,593)
loss
Balan 126,975,588 1,269,756 (816,923 667,041 (2,106,732 (986,858)
ce, ) )
Septe
mber
30,
1998
One (114,278,029 (1,142,780 735,231 407,549
for ) )
ten
rever
se
stock
split
12,697,559 $ 126,976 $ (81,692) $ 1,074,590 $(2,106,732 $ (986,858)
INTERNATIONAL FUEL TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS (UNAUDITED)
Six Inception
Months (April 9,
Ended 1996)
September 30, to
September
30,
1999 1998 1999
Cash Flows from Operating Activities
Net (loss) $ (4,235,183) $ (671,593 $ (13,510,075
Adjustments to reconcile net (loss)
to net cash
(used in) operating activities:
Depreciation 810 279 1,570
Stock issued and additional paid in
capital
recognized for services and 3,551,471 9,859,612
compensation
Change in assets and liabilities:
(Increase) in prepaid insurance (20,350) (9,410) (20,350)
Increase in due from related party (25,000) (25,000)
Increase (decrease) in accounts (193,233) 80,679 120,746
payable
Increase (decrease) in accrued (2,853) 25,352 144,784
expenses
-------------------------------------
Net cash (used in) operating activities (924,338) (574,693 (3,428,713)
-------------------------------------
Cash Flows from Investing Activities
Acquisition of machinery and (9,581) (4,450) (13,861)
equipment
Cash acquired in connection with the
purchase of
United States Fuel Technology, Inc. 358
-------------------------------------
Net cash (used in) investing activities (9,581) (4,450) (13,503)
-------------------------------------
Cash Flows from Financing Activities
Proceeds from common stock issued 1,147,800 2,585,028
Proceeds from notes payable 5,200 574,194 968,925
Payment on notes payable (291,171)
Increase in amount due to related 26,500
party
Increase in due to United States Fuel 372,503
Technology, Inc.
-------------------------------------
Net cash provided by financing 1,153,000 574,194 3,661,785
activities
-------------------------------------
Net increase (decrease) in cash 219,081 (4,949) 219,569
Cash, beginning 488 5,100
--------------------------------------
Cash, ending $ 219,569 $ 151 $ 219,569
======================================
Supplemental Cash Flow Information
Interest paid $ - $ - $ 2,100
See Notes to Financial Statements
Note 1. Basis of Presentation
The accompanying balance sheet as of September 30, 1999 and the statements
of operations, stockholders' deficit, and cash flows for the six months
ended June 30, 1999 and 1998, have not been audited. However, these
financial statements have been prepared in accordance with generally
accepted accounting principles for interim financial information.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In management's opinion, the accompanying interim financial
statements reflect all material adjustments (consisting only of normal
recurring accruals) necessary for a fair statement of the results for the
interim periods presented. The results for the six months ended September
30, 1999 are not necessarily indicative of the results which will be
reported for the entire year.
Note 2. Net Loss Per Common Share
Basic and dilutive net loss per common share has been computed on the basis
of the weighted-average of common shares outstanding during the six months
ended September 30, 1999 and 1998. Weighted average shares outstanding for
the six months ended September 30, 1999 and 1998 are 15,262,225 and
12,671,898, respectively. The incremental shares outstanding as computed
under the treasury stock method for the six months ended September 30, 1999
and 1998 were 61,032 and 0.
Note 3. Stockholders' Deficit
During the six months ended September 30, 1999 the International Fuel
Technology, Inc. (the Company) issued 1,500,000 shares of common stock
(post-split basis) to Onkar Corporation, Ltd. in exchange for various
services including introduction to brokers, dealers and potential investors
and for facilitating the writing of a minimum of three research reports on
the Company. The Company received $750,000 for these shares. The
$3,468,750 difference between the value of the shares using the market
price at the date of the agreement and the $750,000 of proceeds received
has been reflected in the statement of operations for the six months ended
September 30, 1999 as professional services expense
On July 13, 1999 the Company entered into employment agreements with its
Chief Executive Officer and Chief Operating Officer which expire January
31, 2000 with options to extend until July 31, 2000. Under the terms of
these agreements, these officers will each receive base pay of $1,000 per
month plus up to a combined total of 90,000 shares of the Company's stock
(post-split basis) payable at the end of the initial term of the
agreements. The stock based compensation earned through September 30, 1999
has been reflected in these financial statements as payroll expense and as
additional paid in capital, calculated based on the trading price of the
Company's stock at July 13, 1999.
Note 4. Ability to Continue as a Going Concern
The Company has incurred significant losses since inception and has limited
funds with which to operate. Management anticipates receiving diploma
certification in early 2000 from the California Air Resources Board that
its PEERDIESEL? product reduces polluting emissions from internal
combustion engines. Shortly thereafter IFT expects to begin licensing its
product which management believes will generate sufficient revenue to
continue the Company's operations. However, there is no assurance that IFT
will receive diploma certification or be able to generate sufficient
revenue through the licensing of its product to provide sufficient working
capital. Management does not have an estimate of the amount of revenue
necessary to attain positive cash flow nor the amount of capital the
Company may need to raise until sufficient revenue is generated. In the
event the Company is unable to generate sufficient revenues or raise
sufficient additional capital, management may be forced to consider other
alternatives including dissolution. The financial statements do not
include any adjustments which might result from this uncertainty.
EXHIBIT 1.3
INTERNATIONAL FUEL TECHNOLOGY, INC.
UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS
Effective October 28, 1999, the Company merged with Blencathia Acquisition
Corporation (Blencathia) wherein International Fuel Technology, Inc. is the
surviving corporation. Blencathia had 300,000 shares outstanding at the
time of the merger, which it redeemed and canceled in exchanged for 300,000
shares of the Company's common stock. Blencathia, which was incorporated on
December 3, 1997, had not commenced any significant operations, and was
considered a public "shell".
The accompanying pro forma condensed balance sheet is derived from the
historical financial statements of International Fuel Technology, Inc. and
Blencathia as of September 30, 1999. The accompanying pro forma statements
of operations are derived from the historical financial statements of
International Fuel Technology, Inc. for the year ended March 31, 1999 and
six months ended September 30, 1999 and of Blencathia for the year ended
December 31, 1998 and nine months ended September 30, 1999. The balance
sheet is presented as if the transaction occurred on September 30, 1999 and
the statements of operations are presented as if the transaction occurred
on April 1, 1998 and carried through to September 30, 1999. The unaudited
pro forma condensed financial statements do not necessarily indicate the
financial position or results of operations which would have occurred had
the merger been completed at such times, nor do they necessarily indicate
future results that may be expected. These statements should be read in
conjunction with the historical financial statements of International Fuel
Technology, Inc. and Blencathia, including notes thereto, included in their
audited financial statements.
INTERNATIONAL FUEL TECHNOLOGY, INC.
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
Year Ended March 31, 1999
Pro Forma
Internati Internati
onal onal
Fuel Blencathi Pro Fuel
a
Technolog Acquisiti Forma Technolog
y, on y,
Inc. Corporati Adjustme Inc.
on nt
Revenues $ - $ - $ - $ -
Expenses 7,839,753 156 843,750 8,683,659
---------------------------------------------
Net loss $ 7,839,753 $ 156 $ 843,750 $8,683,659
=============================================
Basic and dilutive loss per $ 0.59 $ 0.00 $ 0.63
share
===================== ===========
Weighted average number of 13,390,417 5,000,000 13,690,417
shares outstanding ===================== ===========
INTERNATIONAL FUEL TECHNOLOGY, INC.
PRO FORMA CONDENSED BALANCE SHEET
September 30, 1999
Pro Forma
Internation Internation
al al
Fuel Blenca Pro Fuel
thia
Technology, Acquis Forma Technology,
ition
ASSETS Inc. Corpor Adjustme Inc.
ation nts
Cash $ 219,569 $ 736 $ - $ 220,305
Prepaid insurance 20,350 - - 20,350
Due from related party 25,000 - - 25,000
Machinery and equipment 13,935 - - 13,935
-----------------------------------------------
Total assets $ 278,854 $ 736 $ - $ 279,590
===============================================
LIABILITIES AND STOCKHOLDERS' DEFICIT
Accounts payable $ 120,746 $ - $ - $ 120,746
Accrued expenses 144,784 - - 144,784
Due to related party 26,500 - - 26,500
Notes payable 677,754 - - 677,754
------------------------------------------------
969,784 - - 969,784
------------------------------------------------
Stockholders' Deficit
Common stock 163,957 500 2,500 166,957
Discount on common stock (81,692) - - (81,692)
Additional paid in capital 12,736,880 500 840,250 13,577,630
Deficit accumulated during (13,510,075 (264) (842,750 (14,353,089
the development stage
----------------------------------------------
(690,930) 736 - (690,194)
-----------------------------------------------
Total liabilities and $ 278,854 $ 736 $ - $ 279,590
stockholders' deficit
================================================
INTERNATIONAL FUEL TECHNOLOGY, INC.
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
Six Months Ended September 30, 1999
Pro Forma
Internation Internati
al onal
Fuel Blencathia Pro Fuel
Technology, Acquisition Forma Technolog
y,
Inc. Corporation Adjustme Inc.
nt
Revenues $ - $ - $ - $ -
Expenses 4,235,183 264 - 4,235,447
--------------------------------------------------
Net loss $ 4,235,183 $ 264 $ - $ 4,235,447
==================================================
Basic and dilutive loss per $ 0.28 $ 0.00 $ 0.27
share =========================== ============
Weighted average number of 15,262,225 5,000,000 15,562,225
shares outstanding =========================== ============
Balance Sheet Pro Forma Adjustments as of September 30, 1999:
(1) Common stock $ 3,000
Additional paid in capital 84,0750
------------
$ 843,750
============
To record the issuance of 300,000 shares of International Fuel Technology,
Inc. common stock at the October 28, 1999 closing price of $2.8125 per
share.
(2) Deficit accumulated during the development stage $ 10000
Common stock (500)
Additional paid in capital (500)
-----------
$ -
============
To record the redemption and cancellation of 300,000 shares of Blencathia
Acquisition Corporation common stock.
Statements of Operations Pro Forma Adjustments for the year ended March 31,
1999:
March
31,
1999
(1) Professional service expense $ 843,750
To record the issuance of 300,000 shares of International Fuel Technology,
Inc. common stock at the October 28, 1999 closing price of $2.8125 per
share.