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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 December 31, 2014

 

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: 000-55165

 

NEXT FUEL, INC.

(Exact name of registrant as specified in its charter)

 

NEVADA		35-2305768
(State or other jurisdiction of incorporation or organization)		(IRS Employee Identification No.)

 

821 Frank Street, Sheridan, WY 82801

(Address of Principal Executive Offices)

_______________

 

(307) 674-2145

(Registrant's Telephone number, including area code)

_______________

  

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 x 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 February 23, 2015: 15,347,500 shares of issued common stock.

 

 

NEXT FUEL, INC.

FORM 10-Q

December 31, 2014

 

INDEX

 

PART I-- FINANCIAL INFORMATION
Item 1.	Financial Statements	4
	Condensed Balance Sheets as of December 31, 2014 and as of September 30, 2014	4
	Condensed Statements of Operations for the Three Months Ended December 31, 2014 and 2013	5
	Condensed Statement of Changes in Stockholders' Equity for the Period from September 30, 2014 to December 31, 2014	6
	Condensed Statements of Cash Flows for the Three Months Ended December 31, 2014 and 2013	7
	Notes to Condensed Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27
Item 4.	Controls and Procedures	27
PART II-- OTHER INFORMATION
Item 1	Legal Proceedings	28
Item 1A	Risk Factors	28
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29
Item 3.	Defaults Upon Senior Securities	29
Item 4.	Mine Safety Disclosures	29
Item 5.	Other Information	29
Item 6.	Exhibits	29
SIGNATURE		30
Exhibit List		31

 

CERTAIN TERMS USED IN THIS REPORT

 

When this report uses the words “we,” “us,” “our,” “Next Fuel,” “NXFI,” and the “Company,” they refer to Next Fuel, Inc. “SEC” and the “Commission” refers to the Securities and Exchange Commission.

 

 

 

NEXT FUEL, INC.

 

CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

CONTENTS

 

PAGE	4	CONDENSED BALANCE SHEETS AS OF DECEMBER 31, 2014 AND AS OF SEPTEMBER 30, 2014
PAGE	5	CONDENSED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED DECEMBER 31, 2014 AND 2013
PAGE	6	CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY FOR THE PERIOD FROM SEPTEMBER 30, 2014 TO DECEMBER 31, 2014
PAGE	7	CONDENSED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED DECEMBER 31, 2014 AND 2013
PAGE	8 – 22	NOTES TO CONDENSED FINANCIAL STATEMENTS

 

 

ITEM 1.  FINANCIAL STATEMENTS

 

Next Fuel, Inc.

Condensed Balance Sheets

  

ASSETS
		December 31, 2014				September 30, 2014
		(Unaudited)				*
Current Assets
Cash		$	21,653			$	192,044
Prepaid Expenses			9,429				12,017
Security Deposit			75,424				75,352
Total Current Assets			106,506				279,413
Equipment, net			595,731				624,522
Intangibles (Notes 1(G) and 2(B))			280,000				295,000
Lease Acquisition Costs, net			133,333				145,833
Total Assets		$	1,115,570			$	1,344,768
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses		$	120,189			$	88,613
Accounts payable and accrued expenses - related party			56,287				32,104
Accrued lease origination costs, including $0 and $50,000 due to a related party, respectively			0				150,000
Accrued stock award due to an executive officer			0				525,000
Current portion of lease payable (Note 5)			60,709				48,650
Total Current Liabilities			237,185				844,367
Lease Payable (Note 5)			89,291				101,350
Total  Liabilities			326,476				945,717
Commitments and Contingencies (Note  5)
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, 15,047,500 and 13,997,500
issued and outstanding as of December 31, 2014 and September 30, 2014, respectively			1,505				1,400
Additional paid-in capital			30,328,869				29,590,617
Accumulated deficit			(29,541,280	)			(29,192,966	)
Total Stockholders' Equity			789,094				399,051
Total Liabilities and Stockholders' Equity		$	1,115,570			$	1,344,768

 

  * Derived from audited financial statements.

 

See accompanying notes to unaudited condensed financial statements

 

 

Next Fuel, Inc.

Condensed Statements of Operations

(Unaudited)

 

		For the Three Months Ended December 31,
		2014				2013
Revenues		$	-			$	-
Operating Expenses
Professional fees		$	77,745			$	192,564
Research and development costs			-				766
Salary Expense			103,636				179,845
General and administrative			162,837				98,962
Total Operating Expenses			344,218				472,137
Loss from Operations			(344,218	)			(472,137	)
Other Expenses
Interest Income			77				230
Interest Expense			(4,173	)			-
Total Other Income/(Expense)			(4,096	)			230
LOSS FROM CONTINUING OPERATIONS			(348,314	)			(471,907	)
LOSS FROM DISCONTINUED OPERATIONS			-				(111,080	)
NET LOSS		$	(348,314	)		$	(582,987	)
Net Loss Per Share - Basic and Diluted
Continuing Operations		$	(0.02	)		$	(0.04	)
Discontinued Operations			-				(0.01	)
Net Loss		$	(0.02	)		$	(0.05	)
Weighted average number of shares outstanding
during the year - Basic and Diluted			15,036,087				11,172,500

 

See accompanying notes to unaudited condensed financial statements

 

 

Next Fuel, Inc.

Condensed Statement of Changes in Stockholders' Equity

For the period from September 30, 2014 to December 31, 2014

(Unaudited)

 

		Common Stock								Additional								Total
										paid-in				Accumulated				Stockholder's
		Shares				Amount				capital				Deficit				Equity
Balance, September 30, 2014			13,997,500				1,400				29,590,617				(29,192,966	)			399,051
Share based compensation expense											63,357								63,357
Common stock issued for services			1,050,000				105				674,895								675,000
Net loss for the three months ended December 31, 2014			-				-				-				(348,314	)			(348,314	)
Balance, December 31, 2014			15,047,500			$	1,505			$	30,328,869			$	(29,541,280	)		$	789,094

 

See accompanying notes to unaudited condensed financial statements

 

 

Next Fuel, Inc.

Condensed Statements of Cash Flows

(Unaudited)

 

		For the Three Months Ended December 31,
		2014				2013
Cash Flows Used In Operating Activities:
Net Loss from continuing operations		$	(348,314	)		$	(471,907	)
Net Loss from discontinued operations			-				(111,080	)
Adjustments to reconcile net loss to net cash used in operations
Share based compensation - stock options			63,357				86,525
Depreciation and amortization expense			60,037				1,425
Changes in operating assets and liabilities:
Decrease (increase) in prepaid expenses			2,588				5,614
Increase in accounts payable and accrued expenses			31,576				15,850
Increase (decrease) in accounts payable - related parties			24,183				(4,588	)
Cash flows from operating activities of discontinued operations			-				(382	)
Net Cash Used In Operating Activities			(166,573	)			(478,543	)
Cash Flows Used in Investing Activities:
Purchase of Fixed Assets			(3,746	)			-
Deposit on equipment			-				(100,000	)
Security deposit			(72	)			(47	)
Net Cash Used In Investing Activities			(3,818	)			(100,047	)
Cash Flows From Financing Activities:			-				-
Net Decrease in Cash			(170,391	)			(578,590	)
Cash at Beginning of Year/Period			192,044				1,021,942
Cash at End of Year/Period		$	21,653			$	443,352
Supplemental disclosure of cash flow information:
None
Supplemental disclosure of non-cash investing and financing activities:
None

 

See accompanying notes to unaudited condensed financial statements

 

 

NEXT FUEL, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2014

(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. (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 has developed and will continue to develop and commercialize innovative technologies, such as water treatment technologies.  

 

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 as the University of Colorado and the University of Wyoming 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 & oil production resources to increase the efficiency of their operations.  We do not plan to own or develop natural gas or oil production projects.

 

The Company continues to develop and market the new technologies discussed above.

 

(B) Liquidity and Going Concern

 

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. The Company has incurred recurring net losses from operations and earned minimal revenues since inception. The Company has a net loss of $348,314, and net cash used in operations of $166,573 for the three months ended December 31, 2014. Additionally, as of December 31, 2014, the Company had $21,653 in cash and cash equivalents and $326,476 in liabilities. As of February 18, 2015, our cash balance was approximately $100,000. These conditions raise substantial doubt as to the Company’s ability to continue as a going concern. Due to the nature of current operations, and new license agreements and business activities (as described throughout the annual report and financial statements), the Company will require substantial funding to implement its new business operations, and it will need more financing than was previously required. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might be different should the Company be unable to continue as a going concern. The Company’s ability to continue as a going concern is dependent on the ability to obtain additional operating capital through equity or debt financing, and attain profitability. There can be no assurances that the Company will be able to obtain financing or achieve profitability.

 

 

NEXT FUEL, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2014

(UNAUDITED)

 

(C) 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 estimated lives of equipment and intangible assets, valuation of equity based compensation and valuation of deferred tax assets. Actual results could differ from those estimates.

 

(D) 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 December 31, 2014 and September 30, 2014, respectively, the Company had no cash equivalents.

 

(E) Loss Per Share

 

Basic net loss per common share is calculated by dividing the income (loss) available to common stockholders by the weighted average number of common shares outstanding for the period.

 

Diluted net loss per common share reflects the potential 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 loss per share.  For the three months ended December 31, 2014 and 2013 respectively, 250,000 and 0, shares issuable upon the exercise of warrants were not included in the computation of loss per share because their inclusion is anti-dilutive. For the three months ended December 31, 2014 and 2013 respectively, 976,666 and 2,540,000 shares issuable upon the exercise of stock options were not included in the computation of loss per share because their inclusion is anti-dilutive. 

 

 

NEXT FUEL, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2014

(UNAUDITED)

 

(F) 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 furniture and equipment and expects a five-year useful life for the Integra Disk Filtration Units described below.

 

On October 30, 2013, the Company made an initial deposit of $100,000 in connection with a non-binding letter of intent for the purchase of Integra Disk Filtration Units and Technology. This system and technology will allow for the removal of solids from waste water streams and has applications across a multitude of industries. On April 29, 2014, the Company entered into an agreement to purchase the Integra Disk Filtration Units and Technology and has capitalized the deposit of $100,000 together with the remaining purchase price of $800,000 for a total cost of $900,000, of which $600,000 has been allocated to the physical assets and $300,000 to the intangible assets. $650,000 of the remaining purchase price was paid in cash on September 5, 2014. The balance of $150,000 was financed in the form of a three-year equipment lease (See Note (5)).

 

(G) Intangible Assets

 

The Company amortizes intangible assets with a finite life over their life and reviews goodwill and intangible assets 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 2(B)).

 

(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.

 

 

NEXT FUEL, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2014

(UNAUDITED)

 

(I) Income Taxes

 

Deferred income taxes are provided using the liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of the changes in tax laws and rates as of the date of enactment.

 

The Company has no significant uncertain tax positions as of any date in the years ended September 30, 2014 or 2013 or as of December 31, 2014. The Company’s policy is to recognize accrued interest related to uncertain tax positions in interest expense, and to recognize tax penalties in operating expense. The Company made no provision for interest or penalties related to uncertain tax positions as of December 31, 2014. The Company files income tax returns in the U.S. federal jurisdiction. There are currently no federal or state income tax examinations underway, including all open tax years (2011 – 2014) for these jurisdictions.

 

(J) 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's revenue transactions include, which are presented within discontinued operations, the following: additives, consulting services, royalties, and intellectual property licensing.  The Company recognizes revenue when it is realized or realizable and earned.  The timing and the amount of revenue recognized from the licensing of intellectual property depend upon a variety of factors, including the specific terms of each agreement and the nature of the deliverables and obligations.  For the sale of multiple-element arrangements, including whereby additives, consulting or intellectual property is combined in a revenue generating transaction with other elements, the Company allocates to, and recognizes revenue from, the various elements based on their relative selling price. The Company allocates to, and recognizes revenue from, the various elements of multiple-element arrangements based on relative selling price of a deliverable, using: vendor-specific objective evidence, third-party evidence, and best estimated selling price in accordance with the selling price hierarchy.

 

 

NEXT FUEL, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2014

(UNAUDITED)

 

(K) 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 December 31, 2014 and September 30, 2014.

 

(L) Recent Accounting Pronouncements

 

ASU No. 2014-15, Presentation of Financial Statements – Going Concern (Subtopic 205-40): Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern. In August, 2014, the FASB issued ASU No. 2014-15. The amendments in this ASU provide guidance in GAAP about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures in order to reduce diversity in the timing and content of footnote disclosure. The amendments in this ASU are effective for the annual period ending after December 15, 2016, and for annual and interim periods thereafter. Early application is permitted. The Company will adopt the methodologies prescribed by this ASU by the date required, and does not anticipate that the ASU will have a material effect on its financial position or results of operations.

 

ASU No. 2014-09, Revenue from Contracts with Customers. In May, 2014, the FASB and IFRS jointly issued ASU No. 2014-09. The amendments in this ASU provide substantial enhancements to the quality and consistency of how revenue is reported. The new standard is for companies to recognize revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration to which the company expects to be entitled in exchange for those goods or services. The new standard also will result in enhanced disclosures about revenue, provide guidance for transactions that were not previously addressed comprehensively and improve guidance for multiple-element arrangements. For public entities, the ASU is effective for the first interim or annual period beginning on or after December 15, 2016 and are to be applied retrospectively. Early adoption by public entities is not permitted. The Company is still analyzing the revenue recognition standard and related potential impact.

 

 

NEXT FUEL, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2014

(UNAUDITED)

 

ASU No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. In April, 2014, the FASB issued ASU No. 2014-08. The amendments in this ASU change the requirements for reporting discontinued operations including disposals of components of an entity. For public entities, the ASU is effective for the first interim or annual period beginning on or after December 15, 2014 and are to be applied prospectively. Early adoption is only permitted for disposals that have not been reported in financial statements previously issued or available for issuance. The Company will adopt the methodologies prescribed by this ASU by the date required, and does not anticipate that the ASU will have a material effect on its financial position or results of operations.

 

(M) Discontinued Operations

 

In February 2014, the Company sold its CTG Technology to a related party and discontinued its operations outside the United States with respect to that technology. The technology was previously expensed as research and development and, therefore, there are no assets associated with the discontinued operations. There were no liabilities associated with the discontinued operations as of December 31, 2014 or September 30, 2014. There was no loss from discontinued operations for the three months ended December 31, 2014. Loss from discontinued operations for the three months ended December 31, 2013 was $111,080. There were no revenues from discontinued operations for the three months ended December 31, 2014 or 2013.

 

(N) Reclassifications

 

Certain amounts in the prior periods presented have been reclassified to conform to the current period financial statement presentation for discontinued operations. These reclassifications have no effect on previously reported net loss.

  

NOTE 2 EQUIPMENT, INTANGIBLES AND OTHER ASSETS

 

(A)

Equipment

 

At December 31, 2014 and September 30, 2014, equipment is as follows:

 

		December 31, 2014				September 30, 2014
Computer Equipment		$	12,093			$	15,755
Furniture & Equipment			17,653				15,153
Integra Disk Filtration Units			600,000				600,000
Vehicles			21,000				21,000
Less accumulated depreciation			(55,015	)			(27,386	)
		$	595,731			$	624,522

 

 

NEXT FUEL, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2014

(UNAUDITED)

 

Depreciation expense for the three months ended December 31, 2014 and 2013 was $32,537 and $1,425 respectively.

 

(B)

Intangibles

 

On April 29, 2014, the Company entered into an agreement to purchase existing patents and trademarks related to the Integra Disk Filtration Units previously described. On September 5, 2014, the purchase was completed. The acquisition of the patents and trademarks will allow the Company to produce additional units should the future need arise. The patents and trademarks have been valued at $300,000 and have been capitalized as intangible assets with a useful life of five years. Amortization expense for the three months ended December 31, 2014 was $15,000. Future amortization expense is as follows:

 

Fiscal year ending September 30
2015		$	45,000
2016			60,000
2017			60,000
2018			60,000
2019			55,000
			$280,000

  

On April 20, 2012, Next Fuel acquired the rights to certain intellectual property, as further described below. These rights were acquired with cash (see Note 7). The intellectual property rights that were acquired were in the form of rights to new technologies and assignment of U.S. Provisional Patent Application No. 61624313 entitled “Transition Metals Enhancement of Biogenic Natural Gas Production”, filed on April 15, 2012. Due to early stage and requirement for further development of these technologies, the fact that Next Fuel was a development stage company at the time of acquisition, and the 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. The CTG Technology in China was sold in February 2014 to a company owned by a shareholder/director of the Company in exchange for the return of 600,000 shares of the Company’s common stock (See Note 3(E)). The Company retained the rights to the CTG Technology for the United States.

 

 

NEXT FUEL, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2014

(UNAUDITED)

 

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. In February 2014, as described below, the Company sold its CTG Technology.

 

Coal-to-Gas (CTG) Technology

Next Fuel, Inc. is a technology provider and service company that assists owners of natural gas and oil production resources to increase the efficiency of their operations. In February 2014, the Company sold its Coal-to-Gas technology to Star Holding (U.K.) Ltd., which is controlled by Mr. Guangwei Guo, a member of the Board of Directors of the Company who also controls the Company’s China licensee. The primary terms of the sale were that Mr. Guo transferred 600,000 shares of common stock of the Company back to the Company and terminated the Company’s obligation to maintain a registration statement for resale of the remaining 1,851,666 shares of the Company’s common stock owned by Mr. Guo and his business associates. Due to the related party nature of this transaction, no gain was recorded related to the sale, and the transaction was accounted for as an equity transaction. Although the Company retains a license in the United States, the Company lacks financial resources to begin any United States Coal-to-Gas projects and is not currently in negotiations with any prospective partners or sub-licensees.

 

Low Energy-input Pervaporation (LPV) Technology

The Company expects to launch its LPV water treatment technology after completing tests later this calendar year. This LPV technology will provide the oil and gas industry with a new cost-effective method for treating waste water that contains the most challenging, high-salt and total dissolved solids used or produced in U.S. oil & gas operations to help the industry deal with environmental restrictions on operations.

 

Although the company has expensed the costs of the CTG and LPV 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 oil & gas produced water and carbon dioxide sequestration. Given the early stage of the acquired technologies, the company believes they will not make significant contributions to the company's business for several years.

 

 

NEXT FUEL, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2014

(UNAUDITED)

 

(C)

Other Current Assets

 

On November 6, 2012, the Company purchased a two-year Certificate of Deposit in the amount of $75,000 to be held as security for the issuance of Company credit cards. The Certificate of Deposit matured and was renewed on November 6, 2014 with a current interest rate of .15%. Interest earned and accumulated for the three months ended December 31, 2014 and 2013 was $72 and $47, respectively. As of December 31, 2014, the balance owed on the Company credit cards secured by the Certificate of Deposit was $62,095.

 

(D)

Lease Acquisition Costs

 

On October 30, 2013, the Company made an initial deposit of $100,000 in connection with a non-binding letter of intent for the purchase of Integra Water Filtration Units and Technology. On April 29, 2014, the Company entered into an agreement to purchase the Integra Water Filtration Units and Technology and has capitalized the deposit of $100,000 together with the remaining purchase price of $800,000 for a total cost of $900,000. The purchase was completed on September 5, 2014 for cash of $650,000 and a new Equipment Lease for the remaining $150,000. The Equipment Lease called for the issuance of 300,000 shares of the Company’s common stock valued at $.50 per share, which is being capitalized as Lease Acquisition Costs to be amortized over the life of the lease, which is three years. See Note 5 for a description of the lease.

 

NOTE 3 STOCKHOLDERS’ EQUITY

 

(A)

Common Stock Issued for Cash

 

On September 12, 2014, the Company issued 1,800,000 shares of common stock for $1,000,000 ($.556/share).

 

(B) Stock Issued for Services and Intellectual Property

 

On September 15, 2014, the Company granted 300,000 restricted shares of common stock ($.50/share) in connection with the Equipment Lease entered into on September 15, 2014. On October 1, 2014, the Company issued these shares.

 

On August 25, 2014, the Company granted 750,000 restricted shares of common stock ($.70/share) for services to an employee. On October 1, 2014, the Company issued these shares. The stock award was associated with acquiring a lease payment to complete the purchase of the Integra Disk Filtration System.

 

On April 1, 2014, the Company granted 1,475,000 restricted shares of the Company’s common stock, having a fair value of $1,991,250 ($1.35/share) on the grant date, for consulting services. On June 20, 2014, the Company issued these shares.

 

 

NEXT FUEL, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2014

(UNAUDITED)

 

On April 1, 2014, the Company issued 150,000 restricted shares of the Company’s common stock, having a fair value of $202,500 ($1.35/share) on the grant date, for compensation of directors.

 

(C)  Stock Warrants Issued for Services

 

On April 4, 2014, the Company granted 250,000 five year warrants having an exercise price of $0.90 per share. The warrants vest immediately.  The Company valued these warrants at their fair value using the Black-Scholes option pricing method.  The assumptions used were as follows:

 

Expected life:	5 years
Expected volatility:	118%
Risk free interest rate:	2.55%
Expected dividends:	0%

 

The following table summarizes all warrant grants as of December 31, 2014, and the related changes during the three months then ended:

 

		Number of Warrants				Weighted Average Exercise Price
Stock Warrants
Balance at September 30, 2014			250,000			$	0.90
Granted			-				-
Exercised			-				-
Expired			-				-
Balance at December 31, 2014			250,000			$	0.90
Warrants Exercisable at December 31, 2014			250,000			$	0.90
Weighted Average Fair Value of Warrants Granted During 2014						$	1.04

 

The following tables summarize information about stock warrants for the Company as of December 31, 2014:

 

December 31, 2014 Warrants Outstanding																Warrants Exercisable
Range of Exercise Price				Number Outstanding at December 31, 2014				Weighted Average Remaining Contractual Life				Weighted Average Exercise Price				Number Exercisable at December 31, 2014				Weighted Average Exercise Price
$	0.90				250,000				4.25			$	0.90				250,000			$	0.90

 

There were no warrants as of December 31, 2013.

 

(D)  Cancelation of Shares

 

During the year ended September 30, 2014, 600,000 shares of the Company’s common stock was returned to the Company in exchange for the sale of its CTG Technology in China (See Note 2(B)).

 

NOTE 4 STOCK OPTIONS

 

On August 23, 2014, the Company granted options to a director to purchase 250,000 shares of common stock at an exercise price of $.70 per share. 50,000 shares are to be vested annually at the end of each year of the five-year term of the option agreement.

 

On April 1, 2014, the Company granted options to directors to purchase 100,000 shares of common stock at an exercise price of $1.10 per share. All shares vested immediately.

 

On January 23, 2013, the Company granted options to employees to purchase 475,000 shares of common stock at an exercise price of $1.71 per share. 237,500 shares were vested immediately, 118,750 shares will be vested after one year of employment, and 118,750 shares will be vested after two years of employment. During the year ended September 30, 2014, 180,000 shares were forfeited and canceled due to the separation of three employees.

 

On January 23, 2013, the Company granted options to non-employees to purchase 45,000 shares of common stock at an exercise price of $1.71 per share. 22,500 shares were vested immediately, 11,250 shares will be vested after one year of service, and 11,250 shares will be vested after two years of service.

 

The Company has valued the above options at their fair value using the Black-Scholes option pricing method. In addition to the exercise and grant date prices of the options, certain assumptions that were used to estimate the fair value of the stock option grants are listed in the following tables:

 

 

NEXT FUEL, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2014

(UNAUDITED)

 

	Fiscal 2013 Employee  Stock Options	Fiscal 2013  Non-Employee  Stock Options	Fiscal 2014  Non-Employee  Stock Options
Expected term (years)	3	8.8	5
Expected volatility	89.43%	89.43%	118% - 166%
Risk-free interest rate	.37%	1.55%	1.68% - 2.55%
Expected dividends	0	0	0

 

During the three months ended December 31, 2014 and 2013, the Company recognized compensation expense related to stock options of $63,357 and $86,525, respectively.  

 

For the three months ended December 31, 2014, the Company recorded stock-based compensation expense of $23,645 related to vested employee stock options, $24,340 related to unvested employee stock options, $3,941 related to vested non-employee stock options, and $11,431 related to unvested non-employee stock options.

 

For the three months ended December 31, 2013, the Company recorded stock-based compensation expense of $22,319 related to vested employee stock options, $48,404 related to unvested employee stock options, $1,897 related to vested non-employee stock options, and $13,905 related to unvested non-employee stock options.

 

Stock options and warrants issued to consultants and other non-employees as compensation for services provided to the Company are accounted for based on the fair value of the services provided or the estimated fair market value of the option or warrant, whichever is more reliably measurable. The related expense is recognized when the performance commitment is reached.

 

A summary of the Company’s stock option plans as of December 31, 2014, and changes during the three months then ended is presented below:

 

		Three Months Ended December 31, 2014
		Number of Options				Weighted Average Exercise Price				Aggregate Intrinsic Value Per Share
Options outstanding at September 30, 2014			976,666			$	2.16
Options granted			-				-
Options expired			-				-
Options cancelled			-				-
Options outstanding at December 31, 2014			976,666			$	2.16			$	(1.66	)
Options exercisable at December 31, 2014			641,666			$	2.80			$	(2.30	)

 

 

NEXT FUEL, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2014

(UNAUDITED)

 

Changes in the Company’s unvested options for the three months ended December 31, 2014 are summarized as follows:

 

		Number of Options				Weighted Average Exercise Price				Weighted Average Grant Date Fair Value
Non-vested options at September 30, 2014			425,002			$	1.68			$	.97
Options granted			-				-				-
Options vested			(90,002	)			4.37				1.80
Options cancelled			-				-				-
Non-vested options at December 31, 2014			335,000			$	0.96			$	0.75

  

				Options Outstanding at December 31, 2014												Options Exercisable at December 31, 2014
								Remaining
								Average				Weighted								Weighted
Range of								Contractual				Average								Average
Exercise				Number				Life				Exercise				Number				Exercise
Price				Outstanding				(In Years)				Price				Exercisable				Price
$	4.68				75,000				1.88			$	4.68				75,000			$	4.68
	4.25				185,000				6.88				4.25				185,000				4.25
	4.20				10,000				6.88				4.20				10,000				4.20
	4.09				16,666				7.12				4.09				16,666				4.09
	1.71				340,000				6.88				1.71				255,000				1.71
	1.10				100,000				4.23				1.10				100,000				1.10
	.70				250,000				4.65				.70				-				.70
	Totals				976,666				5.66			$	2.16				641,666			$	2.80

 

NOTE 5 COMMITMENTS

 

On September 15, 2014, the Company entered into an agreement to lease equipment for a total of $150,000 plus 300,000 shares of the Company’s common stock. The lease calls for monthly payments of $4,900 for a period of three years with interest at a rate of 10.86% per annum. In lieu of cash payments, the Lessor will accept 15,000 shares of the Company’s common stock per month. On December 16, 2014, the agreement was amended to clarify the frequency of the stock grants in lieu of cash payments. It was agreed that the stock grants will be made on a semiannual basis with the first grant due by March 15, 2015. During the term of the lease, the lessor will retain title to the equipment. Title will transfer to the Company upon completion of the lease payments. Future minimum principal payments on the lease as of December 31, 2014 are as follows:

 

 

NEXT FUEL, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2014

(UNAUDITED)

 

Fiscal year ending September 30
2015		$	48,650
2016			50,256
2017			51,094
		$	150,000

 

On April 15, 2014, the Company entered into an agreement for consulting services. As an initial retainer fee, the Company issued 25,000 restricted shares of the Company’s common stock. Additionally, for any financing or capital brought to the Company by the Consultant, the Company will pay a 6% fee based on the net amount of funding, within 30 days of actual closing of the financing transaction. At such time as the Company has the financial resources, compensation will be at an hourly rate or fixed daily rate depending on the nature of the project. This Agreement shall remain in effect until April 15, 2015.

 

On October 7, 2013, the Company entered into an agreement for underwriting/brokerage services related to a proposed public offering. An initial, non-refundable, advisory fee was paid upon the signing of the engagement letter. The agreement calls for an underwriting fee of six percent (6%) of the amount raised in the public offering as well as warrants to purchase the aggregate number of shares as would be equal to three percent (3%) of the total number of shares sold pursuant to the public offering. The agreement also calls for payment of a success-based non-accountable expense allowance in the amount of two percent (2%) of the gross proceeds of the offering and reimbursement for incurred expenses.

 

On October 1, 2013, the Company entered into an agreement for exclusive financial advisory services related to potential acquisitions. The agreement calls for a placement success fee of eight percent (8%) of the gross proceeds of the placement as well as issuance of stock equal to three percent (3%) of the fully diluted shares outstanding, post-merger, including the shares from the capital raise. The agreement expired on December 31, 2013, but continues thereafter on a month to month basis unless cancelled by 30 days written notice.

 

On March 1, 2013, the Company entered into a 48 month operating lease agreement for office equipment beginning on April 1, 2013. The agreement calls for a monthly rental fee of $234. Lease expense related to this operating lease for the three months ended December 31, 2014 was $701. Future minimum lease payments as of December 31, 2014 are as follows:

 

 

NEXT FUEL, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2014

(UNAUDITED)

 

Fiscal year ending September 30
2015		$	2,104
2016			2,805
2017			1,403
		$	6,312

 

NOTE 6 REVENUE AND LICENSE AGREEMENTS

 

The Company entered into a License Agreement effective March 31, 2012 (as amended by Amendment No. 1 effective April 1, 2012 and Amendment No. 2 effective May 12, 2013) with Future Fuel Limited, a British Virgin Islands limited liability company (“Licensee”), which is affiliated with Mr. Guangwei Guo, a member of our Board of Directors and a shareholder who has purchased a substantial number of shares of our Common Stock. This Agreement has terminated with the Company’s sale of the Coal to Gas Technology to Star Holding, Ltd (See Note 2(B)).

  

NOTE 7 RELATED PARTY TRANSACTIONS

 

On September 15, 2014, the Company entered into an Equipment Lease Agreement with a lessor that is partially owned by a director of the Company. In connection with the Equipment Lease Agreement, 100,000 shares of the Company’s common stock with a face value of $50,000 ($.50/share) was granted to the director (Notes 5 & 2(D)).

 

On May 1, 2014, the Company began renting office space on a month-to-month basis from a shareholder/employee for $1,120 per month. The total rent paid to the shareholder/employee during the three months ended December 31, 2014 was $3,360.

 

On February 15, 2014, the Company entered into an agreement with a shareholder/director and his associated company for the sale of the CTG Technology outside of the United States in exchange for return of 600,000 shares of the Company’s common stock (See Notes 2(B) and 3(E)).

 

On December 13, 2013, the Company paid its Board of Directors an aggregate amount of $15,000 for services.

 

On November 1, 2013, the Company entered into a month to month rental agreement with a director/shareholder for the use of a 5^th Wheel Trailer by an employee for temporary lodging during field work. The rental agreement called for monthly rental payments of $1,200. This agreement terminated on January 31, 2014 and there were no payments to the related party for the three months ended December 31, 2014.

 

 

NEXT FUEL, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2014

(UNAUDITED)

 

On November 1, 2013, the Company entered into an agreement with a related party for consulting services. The agreement calls for a monthly retainer fee to be paid to the consultant of $5,000 and a monthly expense allowance of $500. The agreement shall terminate upon the completion of the services of the consultant or by either party upon 30 days’ notice. This agreement was terminated effective December 31, 2013 and a new agreement was entered into with this related party on March 15, 2014. In April, 2014, the Company issued 250,000 restricted shares of the Company’s common stock and 250,000 warrants as compensation for the consulting services. Additionally, at such time as the Company is in the financial position to do so, the Company shall pay a monthly retainer of $5,000 and a monthly expense allowance of $1,200. No payments were made to the related party for the three months ended December 31, 2014.

 

 NOTE 8 SUBSEQUENT EVENTS

 

On February 16, 2015, the Company issued 300,000 shares of common stock for $125,000 ($.4167/share).

 

 

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The information contained in this Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements. Actual results may materially differ from those projected in the forward-looking statements as a result of certain risks and uncertainties set forth in this discussion. Although management believes that the assumptions made and expectations reflected in the forward-looking statements are reasonable, there is no assurance that the underlying assumptions will, in fact, prove to be correct or that actual results will not be different from expectations expressed in this report.  Factors that might cause such a difference include, but are not limited to, those set forth in Item 1A. "Risk Factors" of this report and elsewhere in this report.

 

Our History

 

We were organized in the State of Nevada in August 2007 under the name Clinical Trials of the Americas, Inc. Our stock began trading on the Over-the-Counter Bulletin Board ("OTCBB") on June 11, 2008 under the trading symbol “CLLL.” We were not successful in raising sufficient capital to support a clinical trials business. On May 21, 2009, we changed our name to Next Fuel, Inc.

 

On March 31, 2011, we purchased certain technology and intellectual property, which we used as the first step toward building a business that provides a range of technology and services to the oil and gas industry.  More importantly, with the addition of our Low Energy Input Pervaporation (“LPV”) and other water treatment technologies, we believe we are on the right path to build a business targeting the multi-billion dollar water treatment industry.

 

Our principal office and mailing address is located at 821 Frank Street, Sheridan, Wyoming 82801 and our telephone number is (307) 674-2145.

 

Recent Events

 

Recent events you should be aware of about our business include the following events:

 

Dr. Song Jin, our President, Chief Operating Officer, and Chief Technology Officer resigned all of his positions effective as of January 31, 2015.

 

Pursuant to a subscription agreement dated February 17, 2015, the Company sold Three Hundred Thousand (300,000) shares of the Company’s Common Stock for $0.4167 per share for an aggregate dollar amount of One Hundred Twenty Five Thousand dollars ($125,000) to two individuals ( the “Investors”). The Company received the $125,000 from the Investors on February 17, 2015.

 

Plan of Operation

 

Next Fuel is a provider of water consulting, filtration technology and services to the oil and gas industry, as well as other industrial water users in agriculture and food processing. Through its Integra Disc Filtration Units and Technology (the “INTEGRA Disc Filtration System”), Next Fuel offers solutions for low cost, high volume commercial water treatment. Next Fuel aims to be the leader and standard in disc filtration technology by continued innovation in enhancing the INTEGRA Disc Filtration System and developing new technologies. The Company believes the INTEGRA offers reduced maintenance expenses, longer run time and reduced labor expenses when compared to other filtration systems currently being used by industry. After a successful pilot test of the INTEGRA agricultural facility in Oregon, the Company is negotiating with operators in the Permian Basin in Texas to initiate a pilot program for oil and gas produced waters.

 

We are examining and testing various other technologies and services that are in various stages of development or are being investigated by us as targets for acquisition.  None has generated substantial revenue for us to date and we face substantial challenges in completing development or acquisition of these technologies and services businesses.  These technology and services include:

 

●

LPV technology to clean up water used in oil and natural gas production, including Frack drilling.

 

●

Carbon Dioxide to Product (CTP) technology that targets the emerging market of carbon footprint elimination.

 

 

Raising capital to introduce the INTEGRA Disc Filtration System to various markets and operators will be a primary objective of the Company for 2015.

 

Results of Operations

 

Comparison for the three months ended December 31, 2014 and 2013

 

Three months ended December 31, 2014

 

For the three months ended December 31, 2014, we had no revenue from continuing operations.

 

Operating expenses from continuing operations for the three months ended December 31, 2014 totaled $344,218. During the three months ended December 31, 2014, we had net interest expense of $4,096.

 

We had a net loss from continuing operations of $348,314 during the three months ended December 31, 2014.

 

We had no gain or loss from discontinued operations during the three months ended December 31, 2014.

 

This resulted in a net loss of $348,314 during the three months ended December 31, 2014.

 

Operating expenses from continuing operations for the three months ended December 31, 2014 included $103,636 for salary expense, $77,745 for professional fees and $162,837 for general and administrative expenses. Most of the professional fees and expenses were for financial reporting compliance, depreciation and amortization on the INTEGRA Disc Filtration System and the cost of the acquiring the system as well as travel and other expenses related to field tests of the INTEGRA Disc Filtration System.

 

Three months ended December 31, 2013

 

For the three months ended December 31, 2013, we had no revenue from continuing operations.

 

Operating expenses from continuing operations for the three months ended December 31, 2013 totaled $472,137. During the three months ended December 31, 2013, net interest income totaled $230.

 

We had a net loss from continuing operations of $471,907 during the three months ended December 31, 2013.

 

For the three months ended December 31, 2013, we had no revenues from discontinued operations.

 

We had a net loss from discontinued operations of $111,080 during the three months ended December 31, 2013 which was related to the Coal-to-Gas technology.

 

This resulted in a net loss of $582,987 during the three months ended December 31, 2013.

 

Operating expenses from continuing operations for the three months ended December 31, 2013 included $179,845 for salary expense, $766 for research and development costs, $192,564 for professional fees and $98,962 for general and administrative expenses. Most of the professional fees and expenses were for financial reporting compliance as well as travel and other expenses related to the acquisition and testing of the Integra Disk Filtration Units.

 

Capital Resources and Liquidity

 

As of December 31, 2014, we had $21,653 in cash and $326,476 of liabilities. Cash and cash equivalents from inception to date have been sufficient to cover expenses involved in starting our business. However, because of the business activities described elsewhere in this report we will require substantially more funds to implement our new business during the next twelve months than we previously required.

 

 

We do not have enough cash to satisfy our expected minimum cash requirements to operate our business for the next twelve months and will be required to generate revenue through the sale of stock or debt financing. We also expect our operating expenses to increase before our revenues increase. Therefore, we will continue to depend on sales of capital stock or debt financing until we generate sufficient revenue.

 

Cash flows for Three Months ended December 31, 2014 and 2013

 

Net cash used in operating activities during the three months ended December 31, 2014 was $166,573 compared to $478,543 used in the three months ended December 31, 2013. Net cash flow used in investing activities during the three months ended December 31, 2014 was $3,818 compared to $100,047 used in the three months ended December 31, 2013. There was no cash provided by or used in financing activities during the three months ended December 31, 2014 or 2013. The following table summarizes our cash flows for the three months ended December 31, 2014 and 2013:

 

		For the Three Months Ended December 31,
		2014				2013
Net Cash Used In Operating Activities		$	166,573			$	478,543
Net Cash Used In Investing Activities		$	3,818			$	100,047
Net Cash Provided by Financing Activities		$	0			$	0
Decrease in Cash		$	170,391			$	578,590

 

Critical Accounting Policies

 

Revenue Recognition

 

The Company recognizes revenue on arrangements 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 the INTEGRA Disc Filtration System at the time the products are delivered and payment is received. 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.

 

Our revenue model for license agreements may include different types of payments: (1) upfront license fees; (2) payments for technical support or other services; and (3) payments for barrel of water treated. Each license provides for one or more of these types of payments. Not every license we enter into is expected to include all these forms of payments.

 

We will recognize each type of revenue as follows:

 

(1) Upfront license fees – These payments will be recognized in accordance with the License Agreement and may be deferred over the term of the agreement or the period of the estimated benefit to the customer.

 

(2) Payments for technical support or other services - These payments will be recognized in accordance with the License Agreement and could be deferred until all work is complete.

 

(3) Payments for water treated. These payments will be recognized in accordance with the License Agreement and should be recognized when we process the water on site.

 

 

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 December 31, 2014 and December 31, 2013, the Company had no cash equivalents.

 

Loss Per Share

 

Basic earnings (loss) per share is calculated by dividing the income (loss) available to common stockholders by the weighted average number of common shares outstanding for the period.

 

Diluted earnings (loss) per share reflected the potential 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 loss per share. For the three months ended December 31, 2014 and 2013 respectively, 250,000 and 0 shares issuable upon the exercise of warrants were not included in the computation of loss per share because their inclusion is anti-dilutive. For the three months ended December 31, 2014 and 2013 respectively, 976,666 and 2,540,000 shares issuable upon the exercise of stock options were not included in the computation of loss per share because their inclusion is anti-dilutive.

 

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. As such, 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. The Company applies this statement prospectively.

 

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 as defined in the ASC 505.

 

Income Taxes

 

Deferred 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.

 

Recent Accounting Pronouncements

 

ASU No. 2014-15, Presentation of Financial Statements – Going Concern (Subtopic 205-40): Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern. In August 2014, the FASB issued ASU No. 2014-15. The amendments in this ASU provide guidance in GAAP about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures in order to reduce diversity in the timing and content of footnote disclosure. The amendments in this ASU are effective for the annual period ending after December 15, 2016, and for annual and interim periods thereafter. Early application is permitted. The Company will adopt the methodologies prescribed by this ASU by the date required, and does not anticipate that the ASU will have a material effect on its financial position or results of operations.

 

 

ASU No. 2014-09, Revenue from Contracts with Customers. In May 2014, the FASB and IFRS jointly issued ASU No. 2014-09. The amendments in this ASU provide substantial enhancements to the quality and consistency of how revenue is reported. The new standard is for companies to recognize revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration to which the company expects to be entitled in exchange for those goods or services. The new standard also will result in enhanced disclosures about revenue, provide guidance for transactions that were not previously addressed comprehensively and improve guidance for multiple-element arrangements. For public entities, the ASU is effective for the first interim or annual period beginning on or after December 15, 2016 and are to be applied retrospectively. Early adoption by public entities is not permitted. The Company is still analyzing the revenue recognition standard and related potential impact.

 

ASU No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. In April 2014, the FASB issued ASU No. 2014-08. The amendments in this ASU change the requirements for reporting discontinued operations including disposals of components of an entity. For public entities, the ASU is effective for the first interim or annual period beginning on or after December 15, 2014 and are to be applied prospectively. Early adoption is only permitted for disposals that have not been reported in financial statements previously issued or available for issuance. The Company will adopt the methodologies prescribed by this ASU by the date required, and does not anticipate that the ASU will have a material effect on its financial position or results of operations. 

 

Off Balance Sheet Arrangements

 

We have no off-balance sheet arrangements.

 

Item 3.        Quantitative and Qualitative Disclosures About Market Risk

 

Not required for smaller reporting companies.

 

Item 4.        Controls and Procedures

 

(a) Evaluation of disclosure controls and procedures. At the conclusion of the period ended December 31, 2014 we conducted an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)). Based on this evaluation, our Chief Executive Officer and Chief Financial Officer determined that our controls to ensure that the accounting department has adequate training and experience for public company external reporting was not adequate. On April 23, 2013, the Company formed an Audit Committee to oversee the financial reporting process, but the Audit Committee does not have a charter and not all members meet regulatory standards for independence and financial expert experience. Accordingly, based on these material weaknesses, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this report, December 31, 2014, to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules.

 

The Company's management is addressing these weaknesses by starting the process of seeking to recruit independent Directors so that the Company's Audit Committee meets regulatory requirements for independence and financial expert experience. The Company also started the process of retaining additional staff to assist its internal staff with compliance issues. However, budgetary constraints make it unlikely that we will increase our internal staff until after we raise additional capital.

 

(b) Changes in internal control over financial reporting. During the period covered by this report, we did not make any changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that have materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

 

Because of inherent limitations, a system of internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate due to change in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

PART II OTHER INFORMATION

 

Item 1.        Legal Proceedings

 

We are not currently involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our companies officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect. See Item 1A "Risk Factors" of our Annual Report on Form 10-K filed with the Commission on January 13, 2015 (the “2014 10-K”) and of this report for a description of issues that we have identified as having the highest risks for our becoming involved in litigation or regulatory proceedings.

 

Item 1A.     Risk Factors

 

The description of our business and finances and other parts of this report contain forward-looking statements that involve risks and uncertainties. Our actual results may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such a difference include, but are not limited to, those described below and in prior reports filed with the Commission.

 

You should carefully consider the risk factors in our 2014 10-K, together with all of the other information included in this report, before investing in our common stock. The risks and uncertainties described below encompass many of the risks that could affect our business and the value of our stock. Not all risks and uncertainties are described. Risks that we do not know about could occur and issues we now view as minor could become more important. If any of these risks actually occur, our business, financial condition or results of operations could be materially and adversely affected. In that case, the trading price of our common stock could decline and you may lose all or part of your investment.

 

We refer you to our 2014 10-K for detailed discussion of the primary risks associated with our business and our securities.  We believe these risks have not materially changed since we filed our 2014 10-K.  These developments may adversely impact our ability to enter into other license agreements, to generate revenue and raise capital at acceptable valuations, all of which increase the risks to our shareholders.

 

 

FORWARD-LOOKING STATEMENTS

 

We believe that some of the information in this report constitutes forward-looking statements. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed in this report, particularly in “Risk Factors.” You can identify these statements by forward-looking words such as “might,” “expect,” "plan," “anticipate,” “contemplate,” “believe,” “estimate,” “intends,” and “continue” or similar words. You should read statements that contain these words carefully, because they:

 

	●	discuss future expectations;
	●	contain projections of future results of operations or financial condition; or
	●	state other “forward-looking” information.

 

 

We believe it is important to communicate our expectations to our stockholders. However, there may be events in the future that we are not able to predict accurately or over which we have no control. The risk factors and cautionary language discussed in this report provide examples of risks, uncertainties and events that may cause actual results to differ materially from the expectations described by us in our in our forward-looking statements.

 

You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report.

 

All forward-looking statements included herein attributable to us, or any person acting on our behalf, are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Except to the extent required by applicable laws, rules and regulations, we undertake no obligations to update these forward-looking statements to reflect events or circumstances after the date of this Report or to reflect the occurrence of unanticipated events.

 

Item 2.        Unregistered Sales of Equity Securities and Use of Proceeds.

 

None

 

Item 3.        Defaults Upon Senior Securities

 

None.

 

Item 4.        Mine Safety Disclosures

 

None.

 

Item 5.        Other Information

 

None

 

'Item 6.        Exhibits.

 

See Exhibit Index that follows the signature page of this report, which is incorporated by reference herein.

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

	NEXT FUEL, INC.
Date: February 23, 2015	By:	/s/ Robert H. Craig
		Robert H. Craig
		Chief Executive Officer (Principal Executive Officer)

 

Date: February 23, 2015	By:	/s/ Robin Kindle
		Robin Kindle
		Chief Financial Officer (Principal Financial and Accounting Officer)

  

 

EXHIBITS INDEX

 

Exhibit No.		Description
31.1 *		Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 *		Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 +		Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 +		Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	*	XBRL Instance Document
101.SCH	*	XBRL Taxonomy Extension Schema Document
101.CAL	*	XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB	*	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	*	XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF	*	XBRL Taxonomy Extension Definition Linkbase Document

  

* Filed herewith.

 

+ In accordance with SEC Release 33-8238, Exhibits 32.1 and 32.2 are being furnished and not filed.