|• QUARTERLY REPORT • CERTIFICATION • CERTIFICATION • EX-101.INS • EX-101.SCH • EX-101.CAL • EX-101.DEF • EX-101.LAB • EX-101.PRE|
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q /A
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)
122 North Main Street, Sheridan, WY 82801
(Address of Principal Executive Offices)
(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):
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.
We are filing this amendment to update our quarterly report on Form 10-Q for the period ended March 31, 2012 in order to properly accrue $ 70,000 of bonus compensation paid in the quarter ending June 30, 2012 that was subsequently determined to relate to the period ended March 31, 2012.
NEXT FUEL, INC.
March 31, 2012
PART I-- FINANCIAL INFORMATION
PART II-- OTHER INFORMATION
NEXT FUEL, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
NEXT FUEL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
AS OF MARCH 31, 2012
(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.
(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.
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.
(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)).
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.
(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.
(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:
(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.
At March 31, 2012 and September 30, 2011 equipment is as follows:
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.
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.
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.
(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).
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).
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).
(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:
The following table summarizes all warrant grants as of March 31, 2012, and the related changes during the six months then ended:
The following tables summarize information about stock warrants for the Company as of March 31, 2012 and 2011:
(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.
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