PINX:NXFI Next Fuel Inc Quarterly Report 10-Q Filing - 3/31/2012

Effective Date 3/31/2012

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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 quarterly period ended March 31, 2012
 
o  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 For the transition period from ______to______.
 
Commission File Number: 333-148493
 
NEXT FUEL, INC.
 (Exact name of registrant as specified in it's charter)
 
NEVADA
 
 32-2305768
(State or other jurisdiction of
incorporation or organization)
 
(IRS Employee Identification No.)
 
 
122 North Main Street, Sheridan, WY 82801
 (Address of Principal Executive Offices)
 _______________
 
     (307) 674-2145
 (Registrant's Telephone number, including area code)
_______________
 
821 Frank Street Sheridan WY 82801
 (Former Address of Principal Executive Offices, if changed since last report)
 _______________
 
Indicate by check mark whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x No o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). 
 Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company filer.  See definition of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act (Check one):
 
Large Accelerated Filer o
Accelerated Filer o     
Non-Accelerated Filer o
Smaller Reporting Company x

Indicate by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the Exchange Act.
Yes o No x
Indicate the number of shares issued and outstanding of each of the issuer’s classes of common stock, as of May 3, 2012:  10,485,500 shares of issued common stock. 
 
 
 

 
 
NEXT FUEL, INC.

FORM 10-Q
 
March  31, 2012
 
INDEX
 
PART I-- FINANCIAL INFORMATION
 
Item 1. Financial Statements 2
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
28
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
34
Item 4.
Control and Procedures
34
 
PART II-- OTHER INFORMATION
 
Item 1
Legal Proceedings
35
Item 1A
Risk Factors
35
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
39
Item 3.
Defaults Upon Senior Securities
40
Item 4.
Removed and Reserved
40
Item 5.
Other Information
40
Item 6.
Exhibits
40
 
SIGNATURE
 
 
 

 
 

NEXT FUEL, INC.
 (A DEVELOPMENT STAGE COMPANY)
CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
 
CONTENTS
 
PAGE
2
CONDENSED BALANCE SHEETS AS OF MARCH 31, 2012 AND AS OF SEPTEMBER 30, 2011
     
PAGE
3
CONDENSED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS AND SIX MONTHS ENDED MARCH 31, 2012 AND 2011, AND FOR THE PERIOD FROM AUGUST 14, 2007 (INCEPTION) TO MARCH 31, 2012
     
PAGE
4
CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY/DEFICIENCY FOR THE PERIOD FROM AUGUST 14, 2007 (INCEPTION) TO MARCH 31, 2012
     
PAGE
5
CONDENSED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED MARCH 31, 2012 AND 2011, AND FOR THE PERIOD FROM AUGUST 14, 2007 (INCEPTION) TO MARCH 31, 2012
     
PAGE
6
NOTES TO CONDENSED FINANCIAL STATEMENTS
 
 
 

 
 
 
Next Fuel, Inc.
 
(A Development Stage Company)
 
Condensed Balance Sheets
 
             
             
ASSETS
 
             
   
March 31, 2012
   
September 30, 2011
 
   
(Unaudited)
       
Current Assets
           
Cash
  $ 1,121,427     $ 2,117,927  
Stock subscription receivable
    1,525,000       -  
Accounts Receivable, net of allowance for doubtful accounts
    48,142       -  
Inventory, net
    -       -  
Employee Advances
    8,904       5,583  
Prepaid Expenses
    22,935       28,873  
  Total Current Assets
    2,726,408       2,152,383  
                 
Equipment, net
    6,002       6,470  
Intangibles (Note 2(B))
    -       -  
                 
Total Assets
  $ 2,732,410     $ 2,158,853  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY/(DEFICIENCY)
 
                 
Current Liabilities
               
Accounts payable and accrued expenses
  $ 35,703     $ 167,776  
Accounts payable - related party
    3,101       -  
Deferred Revenue
    -       40,000  
Total  Liabilities
    38,804       207,776  
                 
Commitments and Contingencies
    -       -  
                 
Stockholders' Equity
               
  Preferred stock, $0.0001 par value; 100,000,000 shares authorized,
               
none issued  and outstanding
    -       -  
Common stock, $0.0001 par value; 100,000,000 shares authorized, 12,978,500 and 12,052,500
         
issued and outstanding, respectively
    1,298       1,206  
  Additional paid-in capital
    23,468,395       21,636,928  
Less: Treasury stock; 2,500,000 and 2,500,000, respectively
    (93,000 )     (93,000 )
  Deficit accumulated during the development stage
    (20,683,087 )     (19,594,057 )
Total Stockholders' Equity
    2,693,606       1,951,077  
                 
Total Liabilities and Stockholders' Equity
  $ 2,732,410     $ 2,158,853  
                 
                 

 
2

 
Next Fuel, Inc.
 
(A Development Stage Company)
 
Condensed Statements of Operations
 
(Unaudited)
 
                               
                               
                               
   
For the Three Months Ended March 31,
   
For the Six Months Ended March 31,
   
For the Period from August 14, 2007
 
   
2012
   
2011
   
2012
   
2011
   
(Inception) to March 31, 2012
 
                               
Sales
  $ 96,285     $ -     $ 96,285     $ -     $ 107,775  
Consulting Income
    -       -       40,000       -       40,000  
Cost of Goods Sold
    (75,904 )     -       (75,904 )     -       (145,844 )
                                         
Gross Profit
    20,381       -       60,381       -       1,931  
                                         
Operating Expenses
                                       
Professional fees
  $ 118,116     $ 379,232     $ 243,244     $ 387,933     $ 1,326,391  
Research and development costs
    42,500       17,649,999       42,500       17,649,999       17,692,499  
Contribution Expense
    100       -       100       -       100,100  
Salary Expense
    219,107       1,300       499,528       2,600       505,614  
General and administrative
    246,162       4,089       365,666       5,403       957,323  
Total Operating Expenses
    625,985       18,034,620       1,151,038       18,045,935       20,581,927  
                                         
Loss from Operations
    (605,604 )     (18,034,620 )     (1,090,657 )     (18,045,935 )     (20,579,996 )
                                         
Other Expenses
                                       
Interest Income
    641       -       1,687       -       3,380  
Interest Expense
    (6 )     (56,412 )     (60 )     (62,824 )     (106,471 )
Total Other Income/(Expense)
    635       (56,412 )     1,627       (62,824 )     (103,091 )
                                         
                                         
LOSS BEFORE INCOME TAXES
    (604,969 )     (18,091,032 )     (1,089,030 )     (18,108,759 )     (20,683,087 )
                                         
Provision for Income Taxes
    -       -       -       -       -  
                                         
NET LOSS
  $ (604,969 )   $ (18,091,032 )   $ (1,089,030 )   $ (18,108,759 )   $ (20,683,087 )
                                         
Net Loss Per Share  - Basic and Diluted
  $ (0.05 )   $ (2.51 )   $ (0.09 )   $ (2.54 )        
                                         
Weighted average number of shares outstanding
                                       
  during the year - Basic and Diluted
    12,058,222       7,206,167       12,060,154       7,142,914          
                                         

 
3

 
 
 

Next Fuel, Inc.
 
(A Development Stage Company)
 
Condensed Statement of Changes in Stockholders' Equity/(Deficiency)
 
For the period from August 14, 2007 (Inception) to March 31, 2012
 
(Unaudited)
 
                                                       
                                                       
                                       
Deficit
             
                                        accumulated              
   
Preferred Stock
   
Common Stock
   
Additional
         
during the
         
Total
 
                           
paid-in
   
Treasury
   
development
   
Subscription
   
Stockholder's
 
   
Shares
   
Amount
   
Shares
   
Amount
   
capital
   
Stock
   
stage
   
Receivable
   
Equity/(Deficiency)
 
                                                       
Balance August 14, 2007
    -     $ -       -     $ -     $ -     $ -     $ -     $ -     $ -  
                                              -                          
 Common stock issued for services to founder ($0.0001)
    -       -       5,000,000       500       -       -       -       -       500  
                                              -                          
 Common stock issued for cash ($0.10/ per share)
    -       -       1,240,000       124       123,876       -       -       (85,000 )     39,000  
                                                                         
 In kind contribution of cash
    -       -       -       -       100       -       -       -       100  
                                                                         
 In kind contribution of services
    -       -       -       -       700       -       -       -       700  
                                                                         
 Net loss for the period August 14, 2007 (inception) to September 30, 2007
    -       -       -       -       -       -       (12,300 )     -       (12,300 )
                                                                         
 Balance, for the year ended September 30, 2007
    -       -       6,240,000       624       124,676       -       (12,300 )     (85,000 )     28,000  
                                                                         
 Common stock issued for cash ($0.10/ per share)
    -       -       197,500       20       19,730       -       -       -       19,750  
                                                                         
 Purchase of treasury stock
    -       -       -       -       -       (40,000 )     -       -       (40,000 )
                                                                         
Cash received for subscription receivable
    -       -       -       -       -       -       -       85,000       85,000  
                                                                         
 In kind contribution of services
    -       -       -       -       5,200       -       -       -       5,200  
                                                                         
Net loss for the year ended September 30, 2008
    -       -       -       -       -       -       (204,665 )     -       (204,665 )
                                                                         
 Balance, for the year ended September 30, 2008
    -       -       6,437,500       644       149,606       (40,000 )     (216,965 )     -       (106,715 )
                                                                         
 Common stock issued for cash ($0.10/ per share)
    -       -       275,000       27       27,473       -       -       -       27,500  
                                                                         
 Purchase of treasury stock
    -       -       -       -       -       (53,000 )     -       -       (53,000 )
                                                                         
 In kind contribution of interest
    -       -       -       -       16,118       -       -       -       16,118  
                                                                         
 In kind contribution of services
    -       -       -       -       5,200       -       -       -       5,200  
                                                                         
Net loss for the year ended September 30, 2009
    -       -       -       -       -       -       (181,654 )     -       (181,654 )
                                                                         
Balance, September 30, 2009
    -       -       6,712,500       671       198,397       (93,000 )     (398,619 )     -       (292,551 )
                                                                         
 Common stock issued for cash ($0.10/ per share)
    -       -       325,000       32       32,468       -       -       -       32,500  
                                                                         
 In kind contribution of interest
    -       -       -       -       25,506       -       -       -       25,506  
                                                                         
 In kind contribution of services
    -       -       -       -       5,200       -       -       -       5,200  
                                                                         
Net loss for the year ended September 30, 2010
    -       -       -       -       -       -       (64,822 )     -       (64,822 )
                                                                         
Balance,  September 30, 2010
    -       -       7,037,500       703       261,571       (93,000 )     (463,441 )     -       (294,167 )
                                                                         
 Common stock issued for cash ($0.10/ per share)
    -       -       50,000       5       4,995       -       -       -       5,000  
                                                                         
 Common stock issued for cash ($2/ per share) less stock offering costs
    -       -       50,000       5       95,957       -       -       -       95,962  
                                                                         
 Common stock issued for cash ($3/ per share)
    -       -       400,000       40       1,199,960       -       -       -       1,200,000  
                                                                         
 Common stock issued for cash ($2/ per share)
    -       -       1,000,000       100       1,999,875       -       -       -       1,999,975  
                                                                         
 Conversion of $50,000 convertible note  to 500,000 shares of stock
    -       -       500,000       50       49,950       -       -       -       50,000  
                                                                         
 Benefical conversion of convertible note payable
    -       -       -       -       50,000       -       -       -       50,000  
                                                                         
 Issuance of 3,010,000 shares in exchange for intellectual property
    -       -       3,010,000       301       13,394,199       -       -       -       13,394,500  
                                                                         
 Issuance of 1,000,000 warrants in exchange for intellectual property
    -       -       -       -       4,250,499       -       -       -       4,250,499  
                                                                         
 Common stock issued for services ($5.50/ per share)
    -       -       5,000       2       27,498       -       -       -       27,500  
                                                                         
 Value of service provided for the acquisition of intellectual property
    -       -       -       -       287,000       -       -       -       287,000  
                                                                         
 In kind contribution of interest
    -       -       -       -       12,824       -       -       -       12,824  
                                                                         
 In kind contribution of services
    -       -       -       -       2,600       -       -       -       2,600  
                                                                         
Net loss for the year ended September 30, 2011
    -       -       -       -       -       -       (19,130,616 )     -       (19,130,616 )
                                                                         
Balance, September 30, 2011
    -       -       12,052,500       1,206       21,636,928       (93,000 )     (19,594,057 )     -       1,951,077  
                                                                         
 Common stock issued for services ($5.50/ per share)
    -       -       1,000       -       5,500       -       -       -       5,500  
                                                                         
  Issuance of Stock Options
                                    216,059                               216,059  
                                                                         
   Exercise of 425,000 warrants ($.20 per share)
                    425,000       42       84,958                               85,000  
                                                                         
   Common stock issued for cash ($3.05 per share)
                    500,000       50       1,524,950                               1,525,000  
                                                                         
Net loss for the six months ended March 31, 2012
    -       -       -       -       -       -       (1,089,030 )     -       (1,089,030 )
                                                                         
Balance, March 31, 2012
    -     $ -       12,978,500     $ 1,298     $ 23,468,395     $ (93,000 )   $ (20,683,087 )   $ -     $ 2,693,606  

 
4

 

Next Fuel, Inc.
 
(A Development Stage Company)
 
Condensed Statements of Cash Flows
 
(Unaudited)
 
                   
                   
   
For the Six Months Ended March 31,
   
For the Period From August 14, 2007
 
   
2012
   
2011
   
(Inception) to March 31, 2012
 
Cash Flows Used In Operating Activities:
                 
Net Loss
  $ (1,089,030 )   $ (18,108,759 )   $ (20,683,087 )
Adjustments to reconcile net loss to net cash used in operations
         
    Common stock issued for services
    5,500       -       33,500  
    Common stock issued for intellectual property
    -       17,644,999       17,644,999  
    Beneficial conversion feature in stock conversion
    -       50,000       50,000  
    In-kind contribution of services
    -       289,600       305,900  
    In-kind contribution of interest
    -       12,824       54,448  
   Compensation expense on stock options
    216,059               216,059  
   Depreciation and amortization expense
    1,148       489       4,996  
   Impairment of inventory
    58,935               -  
  Changes in operating assets and liabilities:
                       
      Increase in accounts receivable
    (48,142 )     -       (48,142 )
      Increase in inventory
    (58,935 )             -  
      Decrease in prepaid
    5,938       -       (22,935 )
      Increase in employee advances
    (3,321 )             (8,904 )
      Decrease in accounts payable and accrued expenses
    (131,089 )     60,470       36,687  
      Increase in accounts payable - related parties
    2,117               2,117  
      Decrease in deferred revenue
    (40,000 )     -       -  
Net Cash Used In Operating Activities
    (1,080,820 )     (50,377 )     (2,414,362 )
                         
Cash Flows Used in Investing Activities:
                       
Purchase of Fixed Assets
    (680 )     -       (10,998 )
Net Cash Used In Investing Activities
    (680 )     -       (10,998 )
                         
Cash Flows From Financing Activities:
                       
Proceeds from loan payable
    -       -       325,750  
Proceeds from convertible note payabe
    -       50,000       50,000  
Repayments of loan payable
    -       -       (325,750 )
Purchase of treasury stock
    -       -       (93,000 )
Proceeds from issuance of common stock, net of offering costs
    85,000       962       3,589,787  
Net Cash Provided by Financing Activities
    85,000       50,962       3,546,787  
                         
Net (Decrease) in Cash
    (996,500 )     585       1,121,427  
                         
Cash at Beginning of Year/Period
    2,117,927       -       -  
                         
Cash at End of Year/Period
  $ 1,121,427     $ 585     $ 1,121,427  
                         
Supplemental disclosure of cash flow information:
                       
                         
Cash paid for interest
  $ 60     $ -     $ 1,810  
Cash paid for taxes
  $ -     $ -     $ 127  
                         
Supplemental disclosure of non-cash investing and financing activities:
         
                         
Stock issued in exchange for subscription receivable
  $ 1,525,000     $ 100,000     $ 1,625,000  
                         
During the year ended September 30, 2011 the Company converted
         
$50,000 of convertible note payable into 500,000 shares of common
         
stock at a conversion rate of $0.10 per share. The Company also
         
recongnized a $50,000 benefical conversion feature as an interest expesne
         
on the conversion.
                       
                         
                         

 
 
5

 
NEXT FUEL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
AS OF MARCH 31, 2012
(UNAUDITED)

 


NOTE 1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION

(A) Basis of Presentation

The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in The United States of America and the rules and regulations of the Securities and Exchange Commission for interim financial information.  Accordingly, they do not include all the information necessary for a comprehensive presentation of financial position and results of operations.

It is management's opinion, however that all material adjustments (consisting of normal recurring adjustments) have been made which are necessary for a fair financial statement presentation.  The results for the interim period are not necessarily indicative of the results to be expected for the year.

Next Fuel, Inc. (a development stage company) (the "Company") was incorporated under the laws of the State of Nevada on August 14, 2007.  Next Fuel, Inc. is a service-based firm that will develop and commercialize innovative technologies associated with renewable energy, such as unconventional natural gas production from lower grade coal, lignite, oil shale and other carbonaceous deposits.  We refer to this generally as Coal-to-Gas Technology.
 
We are also investigating opportunities to develop or acquire other advanced technologies with focus on clean renewable energy, such as novel systems for energy-related water treatment, and processes for carbon dioxide conversion and carbon loop closure, and biological fuel cells.  Collaborations with leading research institutes, such University of Colorado, University of Wyoming, and Peking University will allow the Company to focus on identifying and acquiring or developing a portfolio of growth opportunities with compelling market values and clean energy and environmental stewardship.
 
We are a technology provider and service company that assist owners of natural gas production resources to increase the efficiency of their operations by providing CTG technology and technical support services utilizing our CTG technology.  We do not plan to own or develop natural gas production projects.

Activities during the development stage include initiating pilot test work, finalizing the business plan and raising capital.

 
6

 


(B) Use of Estimates

In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported period. Significant estimates include the valuation of inventory, valuation of equity based compensation and valuation of deferred tax assets.  Actual results could differ from those estimates.
 
(C) Cash and Cash Equivalents

The Company considers all highly liquid temporary cash investments with an original maturity of three months or less to be cash equivalents.  At March 31, 2012 and September 30, 2011, respectively, the Company had no cash equivalents.
 
(D) Loss Per Share

Basic and diluted net loss per common share is computed based upon the weighted average common shares outstanding as defined by FASB Accounting Standards Codification Topic 260, “Earnings Per Share”.

Diluted income per share includes the dilutive effects of stock options, warrants, and stock equivalents.  To the extent stock options, stock equivalents and warrants are anti-dilutive; they are excluded from the calculation of diluted income per share.  For the six months ended March 31, 2012 and 2011 respectively, 575,000, and 0, shares issuable upon the exercise of warrants were not included in the computation of income per share because their inclusion is anti-dilutive.  For the six months ended March 31, 2012 and 2011 respectively, 3,720,000, and 0, shares issuable upon the exercise of stock options were not included in the computation of income per share because their inclusion is anti-dilutive. 
 
(E) Equipment

The Company values property and equipment at cost and depreciates these assets using the straight-line method over their expected useful life. The Company uses a five year life for computer equipment.

 
7

 

 
(F) Intangible Assets

In accordance with ASC No. 350, Intangibles, Goodwill and Other, the Company requires that intangible assets with a finite life be amortized over their life and requires that goodwill and intangible assets be reviewed for impairment annually or more frequently if impairment indicators arise.  Any other intangible assets deemed to have indefinite lives are not subject to amortization (See Note 3(A)).
 
(G) Inventory

Inventory is valued at the lower of cost or market value. Cost is determined using the first in first out (FIFO) method. Provision for potentially obsolete or slow moving inventory is made based on management analysis or inventory levels and future sales forecasts. During the six months ended March 31, 2012 and the year ended September 30, 2011, the Company recognized an impairment of $0 and $58,935 in inventory, respectively.

   
March 31, 2012
   
September 30, 2011
 
Inventory
  $ -     $ 58,935  
Reserve
  $ -     $ (58,935 )
Total
  $ -     $ -  
                 
                 

(H) Stock-Based Compensation

The Company measures the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognizes the costs in the financial statements over the period during which employees are required to provide services. Share-based compensation arrangements include stock options, restricted share plans, performance-based awards, share appreciation rights and employee share purchase plans.  Compensation cost is measured on the date of grant at their fair value.  Such compensation amounts, if any, are amortized over the respective vesting periods of the option grant.

Equity instruments (“instruments”) issued to persons other than employees are recorded on the basis of the fair value of the instruments.  In general, the measurement date for shares issued to non-employees is (a) when a performance commitment, as defined, is reached or (b) when the earlier of (i) the non-employee performance is complete or (ii) the instruments are vested. The measured value related to the instruments is recognized over a period based on the facts and circumstances of each particular grant.

 
8

 

 
(I) Income Taxes

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.  The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
 
(J) Business Segments

The Company operates in one segment and therefore segment information is not presented.
 
(K) Revenue Recognition

Revenue is recognized only when the price is fixed and determinable, persuasive evidence of an arrangement exists, the service is performed and collectability of the resulting receivable is reasonably assured.

The Company recognizes revenue from royalty agreements as the royalties are earned. The Company recognizes revenue from the sale of additives at the time the products are delivered, the price is fixed, and collection is reasonably assured.  The Company recognizes revenue under service agreements when the services are complete and the Company has no remaining obligations under the agreements.
 
(L) Fair Value of Financial Instruments

The carrying amounts reported in the balance sheet for prepaid expenses and accounts payable approximate fair value based on the short-term maturity of these instruments as of March 31, 2012 and September 30, 2011.

The following are the hierarchical levels of inputs to measure fair value:

 
Level 1: Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
 
Level 2: Inputs reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the assets or liabilities; or inputs that are derived principally from or corroborated by observable market data by correlation or other means.
 
Level 3: Unobservable inputs reflecting the Company’s assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available.


 
9

 

(M) Concentration of Credit Risk

At March 31, 2012, 100% of revenue was from one customer.

At times the Company has cash in bank accounts in excess of FDIC insurance limits. The Company had approximately $834,617 and $1,851,090 in excess of FDIC insurance limits as of March 31, 2012 and September 30, 2011, respectively.
 
(N) Recent Accounting Pronouncements

ASU No. 2011-04; Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs.   In May, 2011, the FASB issued ASU No. 2011-04. The amendments in this ASU generally represent clarifications of Topic 820, but also include some instances where a particular principle or requirement for measuring fair value or disclosing information about fair value measurements has changed.  This ASU results in common principles and requirements for measuring fair value and for disclosing information about fair value measurements in accordance with U.S. GAAP and IFRSs.  The amendments in this ASU are to be applied prospectively. For public entities, the amendments are effective during interim and annual periods beginning after December 15, 2011. Early application by public entities is not permitted.

The Company adopted the methodologies prescribed by this ASU in the current quarter and it did not have a material effect on its financial position or results of operations.

ASU No. 2011-05; Amendments to Topic 220, Comprehensive Income.  In June, 2011, the FASB issued ASU No. 2011-05. Under the amendments in this ASU, an entity has the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. This ASU eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders' equity. The amendments in this ASU do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income.

The amendments in this ASU should be applied retrospectively. For public entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011.  The adoption of the statement did not have a material effect on the Company’s financial statements.

On September 15, 2011, the FASB issued ASU 2011-08, Intangibles – Goodwill and Other, which simplifies how an entity is required to test goodwill for impairment. This ASU would allow an entity to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. Under the ASU, an entity would not be required to calculate the fair value of a reporting unit unless the entity determines, based on a qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount. The ASU includes a number of factors to consider in conducting the qualitative assessment.  The ASU is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011.  Early adoption is permitted. This standard did not have a material impact on the Company’s reported results of operations or financial position.

 
10

 


NOTE 2
EQUIPMENT AND INTANGIBLES

(A)   Equipment
At March 31, 2012 and September 30, 2011 equipment is as follows:
 

   
March 31, 2012
   
September 30, 2011
 
Computer Equipment
  $     9,498     $     8,818  
Website Costs
  $ 1,500     $      1,500  
Less accumulated depreciation and amortization                    
  $       (4,996 )   $  (3,848 )
    $ 6,002      $ 6,470   
 
Depreciation and amortization expense for the six months ended March 31, 2012 and 2011 and the period from August 14, 2007(Inception) to March 31, 2012 was $1148, $489 and $4,996 respectively.

 
 
11

 

(B)  Intangibles
On February 12, 2012 and March 28, 2011, Next Fuel acquired the rights to certain intellectual property, as further described below.  These rights were acquired through the issuance of stock options and minimal cash consideration in February 2012 (see Note 4) and the issuance of shares of the Company’s common stock and stock warrants in March 2011 (see Note 3).  The intellectual property rights that were acquired were in the form of the rights to new technologies.  Provisional patent applications were filed for each.  Due to early stage and requirement for further development of these technologies, the fact that Next Fuel is a development stage company, and the current significant uncertainty of recoverability in the future; the Company has expensed the costs of these transactions to research and development at the time of the acquisitions.

Although the company has expensed these technologies, the company believes that this intellectual property and associated patent applications were instrumental in the company’s ability to raise $1,525,000 in April 2012.   The company believes there is a large market for new green technology associated with clean coal initiatives and the acquired technology will position the company to take advantage and participate in this market if this market grows and we develop this technology.

 In February 2012, Next Fuel acquired the rights to two new technologies from individual inventors (LPV Technology and CTP Technology described below).  Both technologies are early stage and will require further development before we understand their full commercial potential. Provisional U. S. patent applications were filed for each.

Low Energy-input Pervaporation (LPV) Technology.
The LPV Technology we acquired brings an opportunity to expand our energy related technology to clean up water used in oil and natural gas production, including Frac drilling.  We believe this technology will allow us to treat water that contains the most challenging, high salt- and total dissolved solids used or produced in U. S. oil & gas operations.  This new technology could provide the oil and gas industry with a new cost-effective method for treating this type of waste water and dealing with environmental restrictions on their operations.  If the Government continues to strengthen environmental regulations for the oil and gas industry, we believe demand for new water treatment technologies are likely to increase.  Although we do not expect significant revenue during this fiscal year, the LPV Technology could begin producing revenue in 2013.

 
12

 

Carbon Dioxide to Product (CTP) Technology
The CTP Technology we acquired targets the emerging market of carbon footprint elimination.  Our CTP Technology will convert carbon dioxide from sources such as power plants and other fossil fuel burning industry into value added organic compounds.  This process will also close the carbon loop by returning carbon to sold form instead of releasing it into the air.  We expect that our CTP Technology will have minimum energy input and the feedstock is the waste gas from stack emissions.  If we bring this technology to the market, we expect to derive revenue both from the operators of power plants for cleaning the feedstock (carbon dioxide) and from selling the products the CTP Technology produces.  We currently do not have a plan or schedule for commercializing this very early stage technology.

Although the company has expensed these technologies, it is the company’s belief that this intellectual property and associated patent applications may provide growth opportunities for the company in the highly competitive markets associated with O&G produced water and CO2 sequestration.  Given the early stage of the two technologies acquired, the company believes they will not make significant contributions to the company's business for several years.


NOTE 3
STOCKHOLDERS’EQUITY/DEFICIENCY

(A)  Common Stock Issued for Cash
On March 30, 2012, the Company issued 425,000 shares of common stock for $85,000 ($.20/share) for exercise of stock warrants.

On March 26, 2012, the Company entered into a stock subscription agreement for the sale of up to 500,000 shares of common stock in two installments.  On March 27, 2012, the Company sold 100,000 shares of common stock for $305,000 ($3.05/share) as the first installment of the subscription agreement.  On March 30, 2012, the Company sold 400,000 shares of common stock for $1,220,000 ($3.05/share) as the second installment of the subscription agreement.  These transactions closed in April, 2012 and the funds were released at that time.

The March 26, 2012 stock subscription agreement included a registration rights agreement. The registration rights agreement stipulated a clause that the Company use commercially reasonable efforts to prepare and file a registration statement with the SEC within sixty (60) days after the closing for sale of the shares which occurred on April 12, 2012.  The Company intends to file such registration statement in accordance with the agreement.

On May 12, 2011, the Company issued 400,000 shares of common stock for $1,200,000 ($3/share).

 
13

 
 
On March 28, 2011, the Company entered into a stock subscription agreement for the sale of up to 1,000,000 shares of common stock in two installments.  On March 28, 2011, the Company sold 50,000 shares of common stock for $100,000 ($2/share) less $4,038 in stock offering costs. On May 20, 2011, the Company issued 950,000 shares of common stock for $1,899,975 ($2/share) as a second installment of the subscription agreement.

On October 14, 2010, the Company issued 50,000 shares of common stock for $5,000 ($0.10/share).

On August 10, 2010, the Company issued 50,000 shares of common stock for $5,000 ($0.10/share).

On July 20, 2010, the Company issued 50,000 shares of common stock for $5,000 ($0.10/share).

On April 13, 2010, the Company issued 75,000 shares of common stock for $7,500 ($0.10/share).

On February 17, 2010, the Company issued 50,000 shares of common stock for $5,000 ($0.10/share).

On November 4, 2009, the Company issued 100,000 shares of common stock for $10,000 ($0.10/share).

During March and April 2009, the Company issued 275,000 shares of common stock for $27,500 ($0.10/share).

During October and November 2007, the Company issued 197,500 shares of common stock for $19,750 ($0.10/share).

During October 2007, the Company collected $85,000 ($0.10/share) for the sale of 850,000 shares of common stock made during the period from August 14, 2007 (inception) through September 30, 2007.

For the year ended September 30, 2007 the Company issued 390,000 shares of common stock for $39,000 ($0.10/share).

(B) In-Kind Contribution

For the year ended September 30, 2011 a principal stockholder of the Company contributed services on behalf of the Company related to the acquisition of the intellectual property with a fair value of $287,000 (See Note 8).
 
 
14

 

 
For the year ended September 30, 2011, a shareholder of the Company contributed services having a fair value of $2,600 (See Note 8).

For the year ended September 30, 2010, a shareholder of the Company contributed services having a fair value of $5,200 (See Note 8).

For the year ended September 30, 2011, the Company recorded contributed interest expense having a fair value of $12,824 (See Note 5).

For the year ended September 30, 2010, the Company recorded contributed interest expense having a fair value of $25,506 (See Note 5).

For the year ended September 30, 2009, the Company recorded contributed interest expense having a fair value of $16,118 (See Note 5).

For the year ended September 30, 2009 a shareholder of the Company contributed services having a fair value of $5,200 (See Note 8).

For the year ended September 30, 2008 a shareholder of the Company contributed services having a fair value of $5,200 (See Note 8).

For the period from August 14, 2007 (Inception) through September 30, 2007 a shareholder of the Company contributed services having a fair value of $700 (See Note 8).

For the period from August 14, 2007 (Inception) through September 30, 2007 a principal stockholder of the Company contributed cash of $100 (See Note 8).

(C) Stock Issued for Services and Intellectual Property

On October 15, 2011, the Company issued 1,000 shares of the Company's common stock, having a fair value of $5,500 ($5.50 per share) on the grant date (See Note 7).

On July 1, 2011, the Company issued 2,500 shares of the Company's common stock, having a fair value of $13,750 ($5.50 per share) on the grant date (See Note 7).

On April 1, 2011, the Company issued 2,500 shares of the Company's common stock, having a fair value of $13,750 ($5.50 per share) on the grant date (See Note 7).

On March 28, 2011, the Company issued 3,010,000 shares of the Company’s common stock, having a fair value of $13,394,500 on the grant date and 1,000,000 warrants having a fair value of $4,250,499(See Note 3(E)) in exchange for intellectual property.

On August 14, 2007, the Company issued 5,000,000 shares of common stock to its founders having a fair value of $500 ($0.0001/share) in exchange for services provided (See Note 8).

 
15

 

(D) Treasury Shares

During the year ended September 30, 2009, the Company re-purchased 1,424,731 shares of common stock for $53,000.

During the year ended September 30, 2008, the Company re-purchased 1,075,269 shares of common stock for $40,000.
 
(E)  Stock Warrants Issued for Intellectual Property

On March 28, 2011, the Company granted 1,000,000 two year warrants having an exercise price of $0.20 per share. The warrants vest immediately.  The Company has valued these warrants at their fair value using the Black-Scholes option pricing method.  The assumptions used were as follows:
 
         Expected life:
           1 year
         Expected volatility:
           29.1%
         Risk free interest rate:
           0.25%
         Expected dividends: 
           0%
 
 
 
16

 
 
The following table summarizes all warrant grants as of March 31, 2012, and the related changes during the six months then ended:
 
   
Number of Warrants
   
Weighted Average Exercise Price
 
Stock Warrants
           
Balance at September 30, 2011
   
1,000,000
   
$
0.20
 
Granted
   
-
     
                    -
 
Exercised
   
425,000
     
              0.20
 
Expired
   
-
     
                    -
 
Balance at March 31, 2012
   
575,000
   
$
0.20
 
Warrants Exercisable at March 31, 2012
   
575,000
   
$
0.20
 
Weighted Average Fair Value of Warrants Granted During 2011
         
$
0.20
 

 
17

 
 
The following tables summarize information about stock warrants for the Company as of March 31, 2012 and 2011:

March 31, 2012 Warrants Outstanding
 
Warrants Exercisable
 
Range of Exercise Price
   
Number
Outstanding at
March 31, 2012
   
Weighted Average Remaining Contractual Life
   
Weighted Average Exercise Price
 
Number
Exercisable at
March 31, 2012
 
Weighted Average Exercise Price
 
$
0.20
     
575,000
     
.99
   
$
0.20
 
575,000
 
$
0.20
 


  
March 31, 2011 Warrants Outstanding
 
Warrants Exercisable
 
Range of Exercise Price
   
Number
Outstanding at
March 31, 2011
   
Weighted Average Remaining Contractual Life
   
Weighted Average Exercise Price
 
Number
Exercisable at
March 31, 2011
 
Weighted Average Exercise Price
 
$
0.20
     
1,000,000
     
1.92
   
$
0.20
 
1,000,000
 
$
0.20
 
 


(F)  Conversion of Note Payable

During the year ended September 30, 2011, a related party stockholder converted a $50,000 loan into 500,000 shares of common stock.  In addition, the Company recognized a $50,000 beneficial conversion upon the issuance of the note payable (See Notes 6 and 8).
 
NOTE 4          STOCK OPTIONS

On February 12, 2012, the Company granted options to employees to purchase 2,900,000 shares of common stock at an exercise price of $4.09 per share.  500,000 shares will be vested if the Company raises an aggregate of Five Million ($5,000,000) in gross proceeds from the sales of securities after the grant date and on or before September 30, 2012.  1,200,000 shares will be vested if the Company has either (a) achieved greater than thirty (30) thousand cubic feet per day gas production from at least twenty production pumps on or before March 31, 2013, or (b) collected at least $1 million (USD) from licensees and other customers after the grant date and on or before March 31, 2013.  1,200,000 shares will be vested if the Company has both (a) achieved for any period consisting of four consecutive fiscal quarters aggregate gross revenue per share of at least Twenty ($.20) Cents, and (b) the Company’s shares shall have been listed/quoted for trading on NASDAQ’s Capital market on or before March 31, 2014.  The Company has determined that none of the performance conditions are probable of achievement as of the date of these financial statements and, therefore, no value has been recognized on these options.
 
 
18

 

 
On February 12, 2012, the Company granted options to employees to purchase 300,000 shares of common stock at an exercise price of $4.09 per share in connection with the purchase of technology and intellectual property (See Note 8).  The options will be vested if, on or before January 9, 2014, the acquired technology described in U.S. Provisional Patent Application No. 61/583,531 entitled “A Pervaporation system for treating industrial produced water”, filed on January 9, 2012 and any and all foreign counterpart patent applications currently existing or filed in the future will be commercialized by the Company.  The Company has determined that none of the performance conditions are probable of achievement as of the date of these financial statements and, therefore, no value has been recognized on these options.

On February 12, 2012, the Company granted options to a non-employee to purchase 50,000 shares of common stock at an exercise price of $4.09 per share.  16,666 shares were vested immediately, 16,666 shares will be vested when the Company files a Definitive Patent Application and it is determined that the non-employee has fulfilled his obligation to assist the Company in such endeavor.  16,667 shares will be vested when the Company has determined that the non-employee has fulfilled his obligation to assist the Company in obtaining patent protection for the acquired technology described in U.S. Provisional Patent Application No. 61/583,531 entitled “A Pervaporation system for treating industrial produced water”, filed on January 9, 2012 and any and all foreign counterpart patent applications currently existing or filed in the future.  Vesting is not conditioned upon the Company’s patent application resulting in the issuance of the patent.  The Company has valued these options at their fair value using the Black-Scholes option pricing method.  The assumptions used were as follows:

Expected Life:    1 – 3 years
Expected volatility:   71.34%
Risk free interest rate:   .35%
Expected dividends:   0%

 
19

 

On November 17, 2011, the Company granted an option to an employee to purchase 75,000  shares of common stock at an exercise price of $4.68 per share.  25,000 shares will be vested after one year of employment, 25,000 shares will be vested after two years of employment, and 25,000 shares will be vested after three years of employment.  The Company has valued these options at their fair value using the Black-Scholes option pricing method.  The assumptions used were as follows:

Expected life:   1 – 3 years
Expected volatility:  57.57%
Risk free interest rate:  0.40%
Expected dividends:  0%


On November 17, 2011, the Company granted options to employees to purchase 375,000 shares of common stock at an exercise price of $4.25 per share.  100,000 shares were vested immediately, 91,664 shares will be vested after one year of employment, 91,668 shares will be vested after two years of employment, and 91,668 shares will be vested after three years of employment.  The Company has valued these options at their fair value using the Black-Scholes option pricing method.  The assumptions used were as follows:

Expected life:   1 – 3 years
Expected volatility:  57.57%
Risk free interest rate:  0.40%
Expected dividends:  0%


On November 17, 2011, the Company granted an option to a non-employee to purchase 10,000 shares of common stock at an exercise price of $4.25 per share.  3,333 shares will be vested after one year of service, 3,333 shares will be veste