Asian distribution powers Internationa= l Fuel

Brian R. Hook

International Fuel Technology Inc. has lande= d more than $1 million in funding for the last part of 2004 and has closed a deal = to distribute its product in Asia.

However, the company's independent auditor h= as expressed concern about whether the company can continue as a going concern= .

Jonathan Burst, president and chief executiv= e of IFT, said the Clayton-based company plans to be "cash-flow positive&qu= ot; by next year as the company works to strike deals across the globe, includi= ng Asia,= Africa, Europe, Latin America and North America. IFT develops fuel-additive formulas to increase fuel economy and reduce emissions.

IFT recently announced that First Asia Fuel = Corp. signed a distribution agreement with PT Prima Energy to distribute IFT prod= ucts to the motor vehicle and power industries throughout Indonesia. First Asia Fuel is IFT's exclusive distributor in Asia= . Consumption of fuel in <= st1:place>Indonesia in these sectors in 2003 totaled 18 billion gallons.=

Burst said he expects to announce similar agreements in other parts of the world over the next quarter or two. IFT al= so is in the process of hiring more employees.

"We are in hyper speed right now, which= is a very good thing, but stressful," Burst said.

IFT's current staff of 12 is involved in sales and marketi= ng, business development, and research and development. Seven are chemical engineers. The company is looking to add staff in business development and sales and marketing and will announce shortly the hiring of the head of its lube business segment, Burst said. IFT was formed in 1996, but none of the original founders are still involved, Burst said. The company has about 6,0= 00 shareholders, with slightly more than half insiders and the rest small investors, he said.

In contrast to traditional fuel additives, w= hich are derived from petroleum, IFT's proprietary technology is based on surfactant chemistry. When blended into fuel, the surfactant molecules alter the fuel's chemical makeup, resulting in better = fuel economy and a reduction of carbon monoxide emissions.

To cut costs and stay focused on developing = new technologies, IFT partners with other firms to distribute its products in b= ulk and outsources its manufacturing process to pri= vately held Tomah Products, based in Milton, Wis.

IFT has spent the last four years and $10 mi= llion on researching and developing its fuel blends, according to Burst. This continues to hit the bottom line at IFT. It recorded a net loss of $580,400= or 1 cent a share, in its third quarter ended Sept. 30, compared to a net loss= of $583,700 or 1 cent a share in the same quarter last year.

According to its latest filing with the U.S. Securiti= es and Exchange Commission, its net loss for the first nine months of 2004 totaled $1.77 million or 2 cents a share, compared with a net loss of $2.09 million= or 3 cents a share during the same period last year. Revenue in the third quar= ter this year totaled only $6,400, and reached $14,600 for the first nine month= s.

The independent auditor's report included with IFT's 2003 annual report said there was substantial d= oubt that IFT could continue as a going concern. But in its latest quarterly rep= ort, IFT said that it had secured $1.05 million in funding for the last three quarters of 2004, of which $600,000 already has been spent. IFT said the mo= ney was raised from a "significant shareholder and director."

Under the financing agreement, that shareholder will receive a minimum of 3 million restricted shares if all $1.05 million is fu= nded, which would bring the shareholder's ownership to 24.5 percent. If IFT recei= ves alternative sources of funding, the shareholder has the option of either funding or canceling the remaining amount.

Citing this additional funding and the distribution deal announced = by IFT, Kipley Lytel, an analyst at New York-based research firm Spelman Research Ltd., in an Oct. 28 report placed a speculative Buy rating on IFT shares, which are traded on the over-the-coun= ter market. IFT's 52-week range was between 9 cents= and 74 cents.

Lytel said he expects IFT shares to hit $1.40. He also cited high o= il prices as a potential revenue catalyst. "The revenue potential is phenomenal given the universal usefulness and benefits of IFT's additives," Lytel said.

Spelman initiated its cov= erage of IFT for one year after being paid $23,500 in advance by BlueCar Partners LLC, a venture capital firm in New York. BlueCar purchased the research as part of its d= ue diligence before investing in IFT.

Granger Whitelaw, managing director at BlueCar, said he started looking at IFT as a potential investment a little more than= two years ago when he was visiting his family in Ladue. "I thought the technology was unique," Whitelaw said.

Whitelaw declined to quantify Bl= ueCar's investment in IFT, saying the amount invested was "significant." =