SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, For Use of the Commission
[X] Definitive Proxy Statement Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-12
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INTERNATIONAL FUEL TECHNOLOGY, INC.
(Name of Registrant as Specified in its Charter)
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Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
INTERNATIONAL FUEL TECHNOLOGY, INC.
7777 BONHOMME AVANUE, SUITE 1920
ST. LOUIS, MISSOURI 63105
(314) 727-3333
October 17, 2003
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
International Fuel Technology, Inc., to be held at 9:00 a.m., local time, on
Monday, November 17, 2003, at the Radisson Hotel Clayton, located at 7750
Carondelet Avenue, St. Louis, Missouri.
At the meeting you will be asked to vote on the election of seven directors
of the Company and the ratification of the selection of BDO Seidman, LLP as the
Company's independent accountants for the year 2003. In addition, we will be
pleased to report on the affairs of the Company and a discussion period will be
provided for questions and comments of general interest to stockholders.
We look forward to greeting personally those stockholders who are able to
be present at the meeting; however, whether or not you plan to be with us at the
meeting, it is important that your shares be represented. Accordingly, you are
requested to sign and date the enclosed proxy and mail it in the envelope
provided at your earliest convenience.
Thank you for your cooperation.
Very truly yours,
/s/ Jonathan R. Burst
Jonathan R. Burst
Chairman of the Board of Directors
TABLE OF CONTENTS
Notice of Annual Meeting
Proxy Solicitation ........................................................................ 1
Revocability and Voting Proxy ............................................................. 1
Record Date and Voting Rights ............................................................. 1-2
Stockholder Proposals ..................................................................... 2
PROPOSAL NO. 1: ELECTION OF DIRECTORS ..................................................... 3-4
PROPOSAL NO. 2: RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS ....................... 5
Report of the Audit Committee of the Board of Directors ................................... 6
Beneficial Ownership of Common Stock ...................................................... 7
Certain Relationships and Related Transaction ............................................. 8
Compensation of Directors ................................................................. 9
Compensation of Executive Officers ........................................................ 9-10
Consultant and Employee Stock Compensation Plan ........................................... 10
Employment Agreements ..................................................................... 11
Report of the Compensation Committee of the Board Of Directors on Executive Compensation .. 11-12
Performance Measurement Comparison ........................................................ 13
Other Matters ............................................................................. 14
INTERNATIONAL FUEL TECHNOLOGY, INC.
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 17, 2003
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To the Stockholders of International Fuel Technology, Inc:
Notice is hereby given that the Annual Meeting of the Stockholders of
International Fuel Technology, Inc. (the "Company") will be held on Monday,
November 17, 2003 at 9:00 a.m., local time, at the Radisson Hotel Clayton,
located at 7750 Carondelet Avenue, St. Louis, Missouri, for the following
purposes:
(1) To elect seven directors to serve until the 2004 Annual Meeting of
Stockholders.
(2) To ratify the appointment of BDO Seidman, LLP as independent auditors
for the year ending December 31, 2003.
(3) To transact such other business as may properly come before the Annual
Meeting or any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on October 6, 2003,
as the record date for determining the stockholders entitled to notice of and to
vote at this Annual Meeting and at any adjournment or postponement thereof.
Whether or not you expect to attend the annual meeting in person, you are
urged to mark, sign, date and return the enclosed proxy card as promptly as
possible in the postage-prepaid envelope provided to ensure your representation
and the presence of a quorum at the annual meeting. If you send in your proxy
card and then decide to attend the annual meeting to vote your shares in person,
you may still do so. Your proxy is revocable in accordance with the procedures
set forth in the proxy statement.
By Order of the Board of Directors,
Michael F. Obertop
Secretary
St. Louis, Missouri
October 17, 2003
INTERNATIONAL FUEL TECHNOLOGY, INC.
7777 BONHOMME AVENUE, SUITE 1920
ST. LOUIS, MISSOURI 63105
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PROXY STATEMENT
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GENERAL INFORMATION
Proxy Solicitation
This Proxy Statement is furnished to stockholders of International Fuel
Technology, Inc., a Nevada corporation (the "Company"), in connection with the
solicitation by the Board of Directors (the "Board") of the Company of proxies
in the accompanying form for use in voting at the Annual Meeting of Stockholders
of the Company to be held on Monday, November 17, 2003 at 9:00 a.m., local time,
at the Radisson Hotel Clayton, 7750 Carondelet Avenue, St. Louis, Missouri or at
any adjournment or postponement thereof. The purposes of the meeting and the
matters to be acted upon are set forth in the accompanying Notice of Annual
Meeting of Stockholders. The Board is not currently aware of any other matters
which will come before the meeting.
Proxies for use at the meeting are being solicited by the Board. Proxies
will be mailed to stockholders on or about October 17, 2003 and will be
solicited principally by mail. The Company has made arrangements with Automatic
Data Processing Investor Communications Services ("ADP") to send proxies and
proxy materials to the stockholders entitled to vote at the meeting, and the
Company will reimburse them for their expenses in so doing. Should it appear
desirable to do so in order to ensure adequate representation of shares at the
meeting, officers, agents, and employees of the Company may communicate with
stockholders, banks, brokerage houses and others by telephone, facsimile or in
person to request that proxies be furnished. All expenses incurred in connection
with this solicitation will be borne by the Company. The Company has no present
plans to hire special employees or paid solicitors to assist in obtaining
proxies, but reserves the option of doing so if it should appear that a quorum
otherwise might not be obtained.
Revocability and Voting Proxy
A form of proxy for use at the Annual Meeting of Stockholders and a return
envelope for the proxy are enclosed. Stockholders may revoke the authority
granted by their execution of proxies at any time before their effective
exercise by filing with ADP a written notice of revocation or a duly executed
proxy bearing a later date, or by voting in person at the meeting. Shares of the
Company's Common Stock represented by executed and unrevoked proxies will be
voted in accordance with the choice or instructions specified thereon. If no
specifications are given, the proxies intend to vote the shares represented
thereby to approve Proposals No. 1 and No. 2 as set forth in the accompanying
Notice of Annual Meeting of Stockholders and in accordance with their best
judgment on any other matters which may properly come before the meeting.
Record Date and Voting Rights
Only stockholders of record at the close of business on October 6, 2003 are
entitled to notice of and to vote at the Annual Meeting or any and all
adjournments or postponements thereof. On October 7, 2003, there were 70,304,687
shares of Common Stock outstanding, each of which is entitled to one vote on
each of the matters to be presented at the Annual Meeting.
A list of stockholders entitled to vote will be available at the meeting.
In addition, you may contact the Company's Secretary, Michael F. Obertop, at the
Company's address as set forth in the notice appearing before this proxy
statement, to make arrangements to review a copy of the stockholder list at the
Company's offices located at 7777 Bonhomme Avenue, Suite 1920, St. Louis,
Missouri, 63105, before the meeting, between the hours of 9:00 a.m. and 5:00
p.m., local time, on any business day from November 10th, 2003 up to the time of
the meeting.
A majority of the outstanding shares entitled to vote must be represented
in person or by proxy at the meeting in order to conduct the election of
directors and other matters mentioned in this Proxy Statement. If such a
majority is represented at the meeting, then the seven nominees for director who
receive the highest number of votes cast will be elected. The other matters
require the approving vote of at least a majority of the votes cast. The holders
of a majority of the outstanding shares of Common Stock, present in person or by
proxy and entitled to vote, will constitute a quorum at the Annual Meeting.
Abstentions and broker non-votes will be counted for purposes of determining the
presence or absence of a quorum. "Broker non-votes" are shares held by brokers
or nominees which are present in person or represented by proxy, but which are
not voted on a particular matter because instructions have not been received
from the beneficial owner.
Stockholder Proposals
All stockholder proposals which are intended to be presented at the 2004
Annual Meeting of Stockholders must be received by the Company no later than
December 1, 2003 for inclusion in the Board of Directors' proxy statement and
form of proxy relating to that meeting.
Shareholders of record who do not submit proposals for inclusion in the
proxy statement but who intend to submit a proposal at the 2004 Annual Meeting,
and shareholders of record who intend to submit nominations for directors at the
meeting, must provide written notice. Such notice should be addressed to the
Corporate Secretary and received at the Company's principal executive offices by
January 19, 2004.
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PROPOSAL NO. 1 -- ELECTION OF DIRECTORS
By resolution of the Board, the number of directors of the Company has been
fixed at seven as of the date of the Annual Meeting. Unless otherwise specified,
the enclosed proxy will be voted in favor of the persons named below to serve
until the next annual meeting of stockholders and until their successors shall
have been duly elected and shall qualify. In the event any of these nominees
shall be unable to serve as a director, the shares represented by the proxy will
be voted for the person, if any, who is designated by the Board to replace the
nominee. All nominees have consented to be named and have indicated their intent
to serve if elected. The Board has no reason to believe that any of the nominees
will be unable to serve or that any vacancy on the Board will occur.
Mr. Ian Williamson resigned as a Director in May 2003.
Certain information about the Director nominees, is furnished below:
Jonathan R. Burst, 45, Mr. Burst has served as Chief Executive Officer of
the Company since July 1999 and as the President of the Company from July 1999
to February 2000 and January 2002 to present. Mr. Burst has also served as a
director of the Company since February 2000 and Chairman of the Board since
2000. Mr. Burst founded Burcor International in 1998 and has served as President
since its inception. From 1992 to 1998, Mr. Burst served as Executive Vice
President and Managing Director of mergers and acquisitions at Aon Risk
Services. Mr. Burst received his Bachelor of Arts degree in Economics from the
University of Missouri in 1981.
Rex Carr, 76, Mr. Carr has served as a Director of the Company since August
2002. In addition, Mr. Carr has been the senior partner of a 36 man law firm,
CarrKoreinTillery, with offices in Missouri and Illinois, for more than five
years. He and his firm specialize in a trial practice representing plaintiffs in
complex litigation, class actions, and injury actions. He is admitted to
practice in the U.S. Supreme Court and the Illinois and Missouri Supreme Courts.
His business ventures include RC Holding Company, which owns and operates five
hotel boats in France; Art Company London, which manufactures and sells art
reproduced on canvas; the Carlyle Limited Partnership, which operates a marina
at Carlye Lake in Illinois; and numerous apartment complexes in Illinois.
Tony Cross, 55, Mr. Cross has served as a Director of the Company since
October 2002. Mr. Cross is a graduate Chemical Engineer from the University of
Sheffield, UK. He spent 17 years with Exxon Chemical, in Australia, Belgium and
the UK where he was marketing Manager for the Solvents Business Division. In
1987, he joined the board of Carless Refining & Marketing Ltd., an independent
UK refiner, as Marketing Director. Following its take-over by Repsol, Spain's
leading oil company, he was made Managing Director in 1996 overseeing the
subsequent sale of the company as part of Repsol's divestment program in 2000.
Harry Demetriou, 59, Mr. Demetriou has served as a Director of the Company
since February 2000. Mr. Demetriou is currently the Chairman for Observor
Acceptances, Ltd., an investment company which invests in securities in the
international markets. Mr. Demetriou served as Director and Chairman for United
House Realty until December 1998. Mr. Demetriou was a ship owner of bulk
carriers for over 25 years, however, he has since retired from active management
in the shipping industry.
Gary Kirk, 41, Mr. Kirk is a nominee for Director. Mr. Kirk has served as
Director of Sales and Marketing since January 1, 2003. Mr. Kirk has 23 years
(1980 to present) of experience in the petroleum industry, all with Petrochem
Carless Ltd., a United Kingdom based refiner and marketer of petroleum products.
Mr. Kirk spent his first eight years as a research chemist and the last fifteen
years in the marketing department. Mr. Kirk reported directly to the President
as the Marketing Manager for Performance Fuels, covering accounts in Europe and
the rest of the world.
David B. Norris, 55, Mr. Norris has served as a Director of the Company
since April 1999. Mr. Norris founded and owns Addicks Services, Inc., a
construction company, and has served as its' President since 1983.
John Stupp Jr., 53, Mr. Stupp has served as a Director of the Company since
May 2001. From 1992 to 1995, Mr. Stupp served as the President of Stupp
Corporation, and since 1995 as the Chief Executive Officer of Stupp Corporation,
the steel pipe manufacturing division of Stupp Bros. Since 1985, he has been a
director of Atrion Corporation, a publicly traded company involved in the
medical device and component industry, and since has
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been an Advisory Board member of Midwest BankCentre, a regional bank
institution. Mr. Stupp holds a Bachelor of Science degree in Business and
Economics from Leigh University, and is actively involved in working with a
number of non-profit institutions and charitable organizations throughout the
greater St. Louis region.
All directors hold office until the next annual meeting of the stockholders
of the Company or until their successors are elected and qualified. At present,
the Company's Articles of Incorporation provide for not less than one nor more
than nine directors. Currently there are six directors of the Company.
Vote Required
The seven nominees receiving the highest number of affirmative votes of the
shares present in person or represented by proxy and entitled to vote for them,
a quorum being present, shall be elected as directors. Only votes cast for a
nominee will be counted, except that the accompanying proxy will be voted for
all nominees in the absence of instruction to the contrary. Abstentions, broker
non-votes and instructions on the accompanying proxy card to withhold authority
to vote for one or more nominees will result in the respective nominees
receiving fewer votes. However, the number of votes otherwise received by the
nominee will not be reduced by such action.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
IN FAVOR OF EACH NAMED NOMINEE
Board Committees and Meetings
During the fiscal year ended December 31, 2002, the Board held two meetings
and acted by unanimous written consent twice. The Board has an Audit Committee
and a Compensation Committee.
The Audit Committee meets with the Company's independent auditors at least
annually to review the results of the annual audit and discuss the financial
statements; recommends to the Board the independent auditors to be retained;
oversees the independence of the independent auditors; evaluates the independent
auditors' performance; consults with the independent auditors and discusses with
senior management the scope and quality of controls; and receives and considers
the cooperation received by the independent auditors during their audit
examination. The Audit Committee is composed of three independent non-employee
directors: Messrs. Stupp, Carr and Norris. The Audit Committee has adopted a
written charter. The audit committee held 4 meetings in 2002.
The Compensation Committee makes recommendations concerning salaries and
incentive compensation, awards stock grants to employees and consultants under
the Company's Consultant and Employee Stock Compensation Plan and otherwise
determines compensation levels and performs such other functions regarding
compensation as the Board may delegate. The Compensation Committee is composed
of two non-employee directors: Messrs. Demetriou and Norris, and one employee
director: Mr. Burst. It met once during the last fiscal year.
During the fiscal year ended December 31, 2002, each Board member attended
100% of the meetings of the Board and of the committees of the Board on which
each served in fiscal year 2002.
4
PROPOSAL NO. 2 -- RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has selected BDO Seidman, LLP, Chicago, Illinois to
audit the financial statements of the Company for the year ending 2003 and
recommends that the stockholders ratify such selection. In the event that a
majority of the shares are not voted in favor of ratification, the Board will
reconsider its selection. Unless otherwise instructed, the proxy holders will
vote the proxies they receive for the ratification of BDO Seidman, LLP as the
independent auditors for the year ending 2003. A representative of BDO Seidman,
LLP will be present at the Annual Meeting and will have an opportunity to make a
statement if he desires to do so, and will be available to respond to
appropriate questions from stockholders.
Services Provided by the Company's Auditors
Audit Fees
BDO Seidman, LLP billed the Company an aggregrate of $70,367 in fees for
professional services rendered in connection with the audit of the Company's
financial statements for the year ended December 31, 2002.
Financial Information Systems Design and Implementation Fees
BDO Seidman, LLP did not bill the Company for any professional services
rendered to the Company for the year ended December 31, 2002 in connection with
financial information systems design or implementation.
All Other Fees
BDO Seidman, LLP billed the Company an aggregate $5,000 in fees for other
services rendered to the Company for the year ended December 31, 2002. A
substantial portion of the fees in the other services category relates to
services traditionally provided by auditors, including work performed in
connection with registration statements, due diligence procedures performed in
connection with mergers and acquisitions, and income tax services.
The Company's audit committee has considered whether the non-audit services
provided by the Company's auditors in connection with the year ended December
31, 2002 were compatible with the auditors' independence.
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REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
The following is the report of the audit committee with respect to the
Company's audited financial statements for the fiscal year ended December 31,
2002, which include the balance sheets of the Company as of December 31, 2002
and 2001, and the related statements of operations, stockholders' deficit and
cash flows for the twelve months ended December 31, 2002, 2001 and 2000. The
information contained in this report shall not be deemed to be "soliciting
material" or to be "filed" with the Securities and Exchange Commission, nor
shall such information be incorporated by reference into any future filing under
the Securities Act of 1933, as amended, or the 1934 Securities Exchange Act, as
amended, except to the extent that the Company specifically incorporates it by
reference in such filing.
Review With Management
The audit committee has reviewed and discussed the Company's audited
financial statements with management.
Review and Discussion with Independent Auditors
The audit committee has discussed with BDO Seidman, LLP, the Company's
independent auditors, the matters required to be discussed by SAS 61 and SAS 90
(Codification of Statements on Accounting Standards), that includes, among other
items, matters related to the conduct of the audit of the Company's financial
statements.
The audit committee has also received written disclosures and the letter
from BDO Seidman, LLP required by Independence Standards Board No. 1 (that
relates to the accountant's independence from the Company and its related
entities) and has discussed with BDO Seidman, LLP its independence from the
Company.
Conclusion
Based on the review and discussions referred to above, the audit committee
recommended to the Board of Directors that the Company's audited financial
statements be included in the Company's Annual Report of Form 10-K for the
fiscal year ended December 31, 2002.
Audit Committee
John P. Stupp Jr.
Rex Carr
David B. Norris
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BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth certain information regarding the ownership
of the Company's Common Stock as of October 7, 2003 by: (I) each person known by
the Company to own beneficially more than five percent of the Company's common
stock; (ii) each director and nominee for director of the Company; (iii) each
executive officer named in the Summary Compensation Table (see "Executive
Compensation"); and (iv) all directors and executive officers of the Company as
a group. Except as otherwise specified, the named beneficial owner has sole
voting and investment power over the shares listed.
Name of Amount and Nature of Percent of
Beneficial Owner Beneficial Ownership Common Stock
- --------------------------------------------------------- ---------------------- -------------
Jonathan R. Burst(2) .................................... 6,886,000 9.2%
David B. Norris ......................................... 1,096,562 1.5%
Harry F. Demetriou(3) ................................... 5,172,778 6.9%
John P. Stupp Jr. ....................................... 318,233* 0.4%
Rex Carr ................................................ 14,903,889 20.0%
Tony Cross .............................................. 0* 0.0%
Gary Kirk ............................................... 0* 0.0%
All directors and executive officers as a group ......... 28,377,462 38.0%
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* Represents less than 1% of outstanding shares of common stock.
(1) This table is based upon information supplied by officers, directors and
principal stockholders. Unless otherwise indicated in the footnotes to this
table and subject to community property laws where applicable, the Company
believes that each of the stockholders named in this table has sole voting
and investment power with respect to the shares indicated as beneficially
owned. Unless otherwise indicated, the principal address of each of the
stockholders named in this table is: c/o International Fuel Technology,
Inc., 7777 Bonhomme Avenue, Suite 1920, St. Louis, Missouri, 63105.
Applicable percentages are based on 70,304,687 shares outstanding and
4,385,000 vested options on October 7, 2003.
(2) Includes 50,000 shares owned by Burcor Capital, LLC of which Mr. Burst is
an executive officer and deemed to be the beneficial owner of such shares.
(3) Includes 5,172,778 shares owned by Observor Acceptances, Ltd. of which Mr.
Demetriou is the sole owner and deemed to be the beneficial owner of such
shares.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's executive officers and directors, and
persons who beneficially own more than ten percent of the Company's common
stock, to file initial reports of ownership and reports of changes in ownership
with the SEC. Executive officers, directors and greater than ten percent
beneficial owners are required by SEC regulations to furnish the Company with
copies of all Section 16(a) forms they file. Based upon a review of the copies
of such forms furnished to the Company and written representations from the
Company's executive officers and directors, the Company believes that during
fiscal year 2002 Forms 4 and 5 were filed on a timely basis for IFT's executives
officers and directors.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In January 2002, IFT sold 600,000 restricted shares of common stock at a
price of $.25 per share to Harry Demetriou, a Director. IFT recorded payroll
expense of $150,000 relating to the excess of the trading price of IFT's stock
over the proceeds. In August 2002, IFT issued an additional 2,000,000 shares to
this Director and recorded payroll expense of $460,000 based on the closing
stock price at the date of grant. In January 2002, 500,000 shares of IFT's
common stock were removed from the Interfacial escrow account and canceled. The
shares were removed because Interfacial failed to pay liabilities it had
incurred prior to being bought by IFT.
In January 2002, IFT issued 125,000 shares of common stock to a Director.
These shares had been accrued as payroll expense and additional paid in capital
as of December 31, 2001.
In February 2002, IFT sold 250,000 restricted shares of common stock at a
price of $.20 per share to a consultant. IFT recorded consulting expense of
$40,000 relating to the excess of the trading price of IFT's stock over the
proceeds.
In April and May 2002, IFT issued a total of 340,000 shares of common stock
to consultants for services. IFT recorded consulting expense of $104,900 based
on the closing stock price at the date of the grant.
In July 2002, IFT entered into a consulting agreement with Sabita Dhingra
in which IFT issued 1,250,000 shares of common stock upon inception of the
agreement, and will issue an additional 1,250,000 shares at a mutually agreed
upon time. The consulting agreement, for which IFT will receive strategic
planning and general business consulting, is for a one-year term expiring July
31, 2003. IFT has recorded consulting expense of $140,625 through December 31,
2002 in connection with this agreement. IFT is recording the value of these
shares ratably over the term of the consulting agreement.
In July 2002, IFT issued 500,000 shares of common stock to a consultant for
services. The consulting agreement is for a one-year term expiring June 30,
2003. IFT has recorded consulting expense of $52,500 through December 31, 2002
in connection with this agreement. IFT is recording the value of these shares
ratably over the term of the consulting agreement.
In September 2002, IFT issued 1,555,555 shares of common stock to convert
advances of $280,000 from stockholders and recorded deemed interest of $77,778
due to the fair value of the stock on the date of extinguishment exceeding the
carrying value by this amount.
In September 2002, IFT issued 960,000 shares of common stock to four
consultants pursuant to two-year consulting agreements with these individuals,
and recorded consulting expense of $216,000. IFT recorded a reduction in
consulting expense of ($278,833) due to a reduction in value of 980,000 shares
to be issued in May 2003 under these agreements.
In August 2002, IFT secured $2.5 million in new capital from the sale of
13,888,889 shares of restricted common stock to R.C. Holding Company. Rex Carr,
a director of IFT, is the principal owner of R.C. Holding Company. The new
capital consisted of a cash payment of $500,000 and $2,000,000 guaranteed notes
to be paid in three installments. As of December 31, 2002, IFT has received
$100,000 in proceeds for repayments of the notes receivable. The notes have been
classified as a reduction of stockholders' equity on the accompanying balance
sheet.
In August 2002, IFT granted an additional 4,850,000 stock options to
employees. 3,000,000 of these options vested immediately, and the remaining
options will vest after 12 or 24 months. The options have exercise prices
ranging from $0.25 to $0.75, and expire in August 2007. IFT applied the
intrinsic value method under APB Opinion 25 and related interpretations in
accounting for these options. Accordingly, no compensation cost has been
recognized.
During the twelve months ended December 31, 2002, IFT recorded $298,964 in
compensation expense relating to shares that were to be issued to employees on
various anniversary dates of their employment. These shares were never issued,
and were replaced with grants of options to purchase an aggregate of 510,000
shares of common stock at exercise prices ranging from $0.14 to $0.25 per share,
vesting immediately, and expiring in August 2007.
8
During the twelve months ended December 31, 2002, IFT recorded consulting
expense of $174,167 in connection with the granting of 3,000,000 stock options
to non-employees. 1,000,000 of these options vested immediately and were
recorded as consulting expense at that time. The remaining 2,000,000 options
will vest after 12 and 24 months, and the fair value of these options are being
recorded as consulting expense ratably over the vesting period. The options have
exercise prices ranging from $0.25 to $0.75, and expire in August 2007.
EXECUTIVE COMPENSATION
Compensation of Directors
Directors do not receive any cash compensation for their services as
members of the Board of Directors, although they are reimbursed for certain
expenses incurred in connection with attendance at Board and committee meetings.
From time to time, certain non-employee directors of the Company have received
grants of restricted common stock.
On February 23, 2000, the Board of Directors adopted the Director's Stock
Compensation Plan, which provides for an annual award of 10,000 shares of the
Company's common stock to the Board members as reimbursement for attendance at
Company Board meetings. Each Board member will be awarded an additional 1,000
shares of the Company's common stock for every three-telephone conference call
Board meetings attended.
Compensation of Executive Officers
The following table sets forth information concerning all cash and non-cash
compensation paid or to be paid by the Company as well as certain other
compensation awarded, earned by and paid, during the fiscal years indicated, to
the Chief Executive Officer and for each of the Company's other executive
officers whose annual salary and bonus exceeds $100,000 for such period in all
capacities in which they served.
Summary Compensation Table
Long Term
Annual Compensation Compensation
-------------------------------------- ---------------------------
Restricted Securities
Name and Period Other Stock underlying All Other
Principal Position Ended Salary Bonus Compensation (1) Awards (2) Options/SARs Compensation
- --------------------- ------------ ----------- ------- ------------------ ------------ -------------- -------------
Jonathan R. Burst, .. 12/31/2002 $250,000 $0 $0 $ 0 $0 $0
CEO 12/31/2001 $200,000 $0 $0 $555,000 $0 $0
12/31/2000 $180,000 $0 $0 $834,067 $0 $0
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(1) Perquisites and other personal benefits are omitted because they do not
exceed either $50,000 or 10% of the total of annual salary and bonus for
the named executive officer.
(2) Amounts represent the market value of restricted stock based on the closing
price per share of the Company's common stock on the date of grant. The
market value and the aggregate number of all restricted stock held by the
named executive officer as of December 31, 2002, the last business day of
the fiscal year (based on the $0.10 closing price per share of common stock
on that day), was $170,000. Dividends are paid to holders with respect to
these shares of restricted stock at the same rate as is paid on all other
shares of common stock.
9
The following table sets forth certain information concerning options
granted during the fiscal year ended December 31, 2002 to the Named Executives
by IFT. IFT did not grant any share appreciation rights during 2002.
Number of Percent of Total Potential Realized
Securities Options/SARS Value of Assumed
Underlying Granted to Exercise Annual Rates of Stock
Options Granted Employees in or Base Expiration Price Appreciation for
Name and Principal (A) Fiscal Year Price Date Option Term
- ---------------------------- -------------------- ------------------ ---------- ------------ ----------------------------
5% 10%
------------- --------------
Jonathan R. Burst,.......... 1,000,000 (a) 19% $ 0.25 8/19/2007 $43,545 $120,417
CEO 1,000,000 (a) 19% $ 0.50 8/19/2007 (d) (d)
1,000,000 (a) 19% $ 0.75 8/19/2007 (d) (d)
250,000 (a) 6% $ 0.14 8/19/2007 $3,288 $13,315
750,000 (b) 14% $ 0.50 8/19/2007 (d) (d)
750,000 (c) 14% $ 0.50 8/19/2007 (d) (d)
--------- --
4,750,000 91%
========= ==
- ------------
(a) 3,250,000 options are exercisable at December 31, 2002
(b) 750,000 options vest and become exercisable on August 19, 2003
(c) 750,000 options vest and become exercisable on August 19, 2004
(d) Exercise price exceeds the potential realized value of assumed annual rates
of stock price appreciation for option term.
None of the options granted to Mr. Burst are in-the-money at December 31, 2002
Consultant and Employee Stock Compensation Plan
The Board of Directors adopted a Consultant and Employee Stock Compensation
Plan that became effective January 14, 2000. The Board of Directors will be
responsible for the administration of this Plan, and will grant stock awards
under this plan. Subject to the express provisions of the Plan, the Board of
Directors shall have full authority and sole and absolute discretion to
interpret and amend this Plan, to prescribe, amend and rescind rules and
regulations relating to it, and to make all other determinations which it
believes to be necessary or advisable in administering this Plan. The
determinations of the Board of Directors on the matters referred to in this
Section shall be conclusive. No member of the Board of Directors shall be liable
for any act or omission in connection with the administration of this Plan
unless it resulted from the member's willful misconduct.
The maximum number of shares of common stock as to which awards may be
granted under this Plan, subject to subsequent amendments, is 5,000,000 shares.
The common stock which is issued on grant of awards may be authorized but
unissued shares or shares which have been issued and reacquired by the Company.
The Board of Directors may increase the maximum number of shares of common stock
as to which awards may be granted at such time as it deems advisable. Awards may
be granted to employees or consultants of the Company in their individual
capacity only.
The Board of Directors shall have complete discretion to determine when and
to which employees or consultants awards are to be granted, and the number of
shares of common stock as to which awards granted to each employee or consultant
will relate. No grant will be made if, in the judgment of the Board of
Directors, such a grant would constitute a public distribution within the
meaning of the Securities Act of 1933, as amended (the "Act"), or the rules and
regulations promulgated thereunder. Stock grants totaling 2,000,000 common
shares were made during the last fiscal year.
On October 23, 2001, the Board of Directors adopted International Fuel
Technology, Inc.'s Long-term Incentive Plan. The Board of Directors will be
responsible for the administration of this Plan, and will grant Awards under
this Plan. Subject to the express provisions of the Plan, the Board of Directors
shall have full authority and sole and absolute discretion to interpret and
amend this Plan, to prescribe, amend and rescind rules
10
and regulations relating to it, and to make all other determinations which it
believes to be necessary or advisable in administering this Plan. The
determinations of the Board of Directors on the matters referred to in this
Section shall be conclusive. No member of the Board of Directors shall be liable
for any act or omission in connection with the administration of this Plan
unless it resulted from the member's willful misconduct.
The maximum number of shares of common stock as to which awards may be
granted under this Plan, subject to subsequent amendments, is 17,500,000 shares.
The common stock which is issued on grant of awards may be authorized except for
unissued shares or shares which have been issued and reacquired by IFT. The
Board of Directors may increase the maximum number of shares of common stock as
to which awards may be granted at such time as it deems advisable. Awards may be
granted to employees or consultants of IFT in their individual capacity only.
Employment Agreements
In January 2003, IFT 2003, IFT entered into an employment agreement with
Mr. Burst to serve as Chief Executive Officer with an annual base salary of
$250,000 and a bonus award as deemed appropriate by the Board of Directors. The
agreement will expire on December 31, 2004
Compensation Committee Interlocks and Insider Participation
The Company's Compensation Committee is composed of two non-employee
directors: Messrs. Demetriou and Norris, and one employee director: Mr. Burst.
One current member of the Compensation Committee is an officer or employee of
the Company and no executive officer of the Company serves as a member of a
compensation committee of any other entity that has one or more executive
officers serving as a member of the Compensation Committee.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD
OF DIRECTORS ON EXECUTIVE COMPENSATION
Introduction
The Company's executive compensation policies and practices are approved by
the Compensation Committee of the Board of Directors (the "Committee). The
Committee consists of two directors who are not employees of the Company and one
director who is an employee of the Company. The Committee's determinations on
compensation of the Chief Executive Officer and other executive officers are
reviewed with all of the non-employee directors.
Philosophy
The Committee has implemented compensation policies, plans and programs
that seek to enhance stockholder value by aligning the financial interests of
the executive officers with those of its stockholders. Annual base salaries are
generally set at market-based competitive median levels. The Company relies
heavily on annual incentive compensation and restricted stock grants to attract,
retain, motivate and reward executive officers and other key employees and the
Committee believes that the Chief Executive Officer's equity incentives should
be above the median for Chief Executive Officers of similar companies. Incentive
compensation is variable and tied to corporate performance. The policies are
designed to provide an incentive to management to grow revenues, provide quality
returns on investment, enhance stockholder value and contribute to the long-term
growth of the Company. All incentive compensation policies are reviewed at least
annually to ensure they meet the current strategies and needs of the business.
Compensation Plans
The Company's executive compensation is based on two components, each of
which is intended to support the overall compensation philosophy.
11
Base Salary
Salaries for executive officers are reviewed by the Committee on an annual
basis and may be changed based on the individual's performance or a change in
competitive pay levels in the marketplace.
The Committee reviews with the Chief Executive Officer an annual salary
plan for the Company's executive officers. The salary plan is modified as deemed
appropriate and approved by the Committee. The annual salary plan is developed
by the Company's Chief Executive Officer based on publicly available information
on organizations with similar characteristics and on performance judgments as to
the past and expected future contributions of the individual executive. The
Committee reviews and establishes the base salary of the Chief Executive Officer
based on similar competitive compensation data and the Committee's assessment of
his past performance and its expectation as to his future contributions in
directing the long-term success of the Company.
Equity Incentives
Long-term equity incentives are provided through the grants of restricted
stock to executive officers and other key employees. The stock component of
compensation is intended to retain and motivate employees to improve long-term
stockholder value. The restricted stock awards are granted at fair market value
and have increased value only if the Company's stock price increases. The
Committee believes this element of the total compensation program directly links
the participant's interests with those of the stockholders and the long-term
performance of the Company.
The Committee believes that the programs described above provide
compensation that is competitive with comparable emerging companies, links
executives and stockholder interests and provides the basis for the Company to
attract and retain qualified executives. The Committee will continue to monitor
the relationship among executive compensation, the Company's performance and
stockholder value.
Deductibility of Compensation
Section 162(m) of the Internal Revenue Code denies a deduction for
compensation in excess of $1 million paid to certain executive officers, unless
certain performance, disclosure, and stockholder approval requirements are met.
Restricted stock grants under the Company's Employee and Consultant Stock
Compensation Plan are intended to qualify as "performance-based" compensation
not subject to the Section 162(m) deduction limitation.
Compensation Committee
Jonathan R. Burst, Chairman
Harry Demetriou
David B. Norris
12
Performance Measurement Comparison
The Stock Price Performance Graph below shall not be deemed incorporated by
reference by any general statement incorporating by reference this proxy
statement into any filing under the Securities Act or under the Exchange Act,
except to the extent the Company specifically incorporates this information by
reference, and shall not otherwise be deemed filed under such Acts.
[The following table was depicted as a mountain chart in the printed material.]
International Fuel Technology, Inc. Russell 2000 Index (hundreds of US$) S&P 600 Small Cap (hundreds of US$)
----------------------------------- ------------------------------------ -----------------------------------
2-Dec-02 0.1 3.8297 1.9662
1-Nov-02 0.09 4.052 2.0365
1-Oct-02 0.12 3.7141 1.9374
3-Sep-02 0.13 3.6534 1.8786
1-Aug-02 0.17 3.9165 2.0026
1-Jul-02 0.17 4.0015 1.9855
3-Jun-02 0.24 4.5665 2.3136
1-May-02 0.24 4.8702 2.441
2-Apr-02 0.32 5.0137 2.5483
1-Mar-02 0.35 5.0356 2.4792
1-Feb-02 0.41 4.7243 2.2991
2-Jan-02 0.34 4.7689 2.341
3-Dec-01 0.47 4.8145 2.3218
1-Nov-01 0.5 4.5892 2.1761
1-Oct-01 0.5 4.2559 2.0294
4-Sep-01 0.51 3.9106 1.9277
1-Aug-01 0.55 4.6987 2.2304
2-Jul-01 0.51 4.8484 2.2842
1-Jun-01 0.45 4.998 2.3166
1-May-01 0.53 4.9739 2.2432
2-Apr-01 0.28 4.8166 2.2027
1-Mar-01 0.45 4.4155 2.0478
1-Feb-01 0.4 4.8262 2.1477
2-Jan-01 0.49 5.0997 2.2889
1-Dec-00 0.34 4.8523 2.1959
1-Nov-00 0.44 4.5718 1.9564
2-Oct-00 0.81 4.8063 2.1854
1-Sep-00 0.5 5.1588 2.1729
1-Aug-00 0.88 5.3082 2.2349
3-Jul-00 0.45 4.9573 2.0543
1-Jun-00 0.51 5.1473 2.107
1-May-00 0.94 4.6954 1.9905
3-Apr-00 1.5 4.8485 2.0528
1-Mar-00 2.5 5.3389 2.0895
1-Feb-00 2.12 5.5766 2.1709
3-Jan-00 3.26 5.0953 1.9158
1-Dec-99 4.38 4.9769 1.9779
1-Nov-99 3.85 4.5834 1.8288
1-Oct-99 2.75 4.2136 1.7567
1-Sep-99 4.15 4.2003 1.762
2-Aug-99 4.94 4.3016 1.7557
1-Jul-99 5.44 4.4277 1.838
1-Jun-99 0.29 4.5137 1.8552
3-May-99 0.32 4.3373 1.7565
1-Apr-99 0.18 4.3287 1.7162
1-Mar-99 0.34 3.9892 1.6107
1-Feb-99 0.41 3.937 1.5914
4-Jan-99 0.5 4.2377 1.7506
1-Dec-98 0.72 4.1102 1.7736
The above graph compares the performance of the Company from December 1998,
the quarter that the Company's common stock commenced trading on the OTC
Bulletin Board, through December 31, 2002, against the performance of the
Russell 2000 Index and the S&P 600 Small Cap Index for the same period.
Historical stock price performance is not necessarily indicative of future stock
price performance. The graph assumes an investment of $100 on December 31, 1998
in the Company's common stock (at the last reported sale price on such date),
the Russell 2000 Index and the S&P 600 Small Cap Index and assumes the
reinvestment of any dividends.
13
OTHER MATTERS
The Board of Directors knows of no other matters that will be presented for
consideration at the Annual Meeting. However, if other matters are properly
brought before the meeting, it is the intention of the persons named in the
accompanying proxy to vote on such matters in accordance with their best
judgment.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K WILL BE SENT WITHOUT
CHARGE TO ANY STOCKHOLDER REQUESTING IT IN WRITING FROM: INTERNATIONAL FUEL
TECHNOLOGY, INC., ATTENTION: MICHAEL F. OBERTOP, 7777 BONHOMME AVENUE, SUITE
1920, ST. LOUIS, MISSOURI 63105.
By Order of the Board of Directors,
Michael F. Obertop
Secretary
Dated October 17, 2003
14