GLOBAL FOOD TECHNOLOGIES, INC. - FORM 10-Q

Attached files

file	filename
EX-31.2 - GLOBAL FOOD TECHNOLOGIES, INC.	v165789_ex31-2.htm
EX-31.1 - GLOBAL FOOD TECHNOLOGIES, INC.	v165789_ex31-1.htm
EX-32.1 - GLOBAL FOOD TECHNOLOGIES, INC.	v165789_ex32-1.htm

FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended SEPTEMBER 30, 2009

¨ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from____________ to _____________

Commission file number 000-31385

GLOBAL FOOD TECHNOLOGIES, INC.

(Exact name of registrant as specified in charter)

Delaware	52-2257546
(State incorporation)	(IRS Employer
	Identification No.)

113 Court Street, Hanford, California	93230
(Address of principal executive offices)	(zip code)

559-589-0100

(Issuer’s telephone number)

Indicate by check mark whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 ¨

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 [ ] No [ ] [Not applicable to smaller reporting companies]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, non-accelerated filer, or a smaller reporting company.

Large accelerated filer ¨ accelerated filer ¨ non accelerated filer ¨ smaller reporting company x

Indicate by check mark whether registrant is a shell company Yes¨ Nox

Indicate the number of shares outstanding of each issuer’s classes of common equity, as of the last practicable date:

Class		Outstanding as of September 30, 2009
Common stock, par value $0.0001		29,466,073

GLOBAL FOOD TECHNOLOGIES, INC.

(A DEVELOPMENT STAGE COMPANY)

QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2009

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION	3

ITEM 1. FINANCIAL STATEMENTS	3
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	10
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	15
ITEM 4. CONTROLS AND PROCEDURES	15
PART II - OTHER INFORMATION	16

ITEM 1. LEGAL PROCEEDINGS	16
ITEM 1A. RISK FACTORS	16
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES	18
ITEM 3. DEFAULTS UPON SENIOR SECURITIES	19
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	19
ITEM 5. OTHER INFORMATION	19
ITEM 6. EXHIBITS	20

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

GLOBAL FOOD TECHNOLOGIES, INC.

CONDENSED BALANCE SHEETS

	September 30, 2009 (Unaudited)			December 31, 2008
ASSETS
Current Assets
Cash	$	105,621		$	278,443
Accounts receivable		8,774			-
Inventory		473,132			-
Prepaid expenses		95,491			30,977
Total Current Assets		683,018			309,420

Fixed Assets – net		980,405			719,540

Other Asset		26,089			24,889

TOTAL ASSETS	$	1,689,512		$	1,053,849

LIABILITIES AND STOCKHOLDERS’ DEFICIT

Current Liabilities
Accounts payable	$	295,885		$	39,608
Accrued liabilities		555,042			1,134,232
Notes payable – related parties		640,000			540,000
Note payable		126,000			-
Notes payable – trade and equipment finance		602,000			-
Total Current Liabilities		2,218,927			1,713,840

Commitments and Contingencies

Stockholders’ Deficit:
Preferred stock, $.0001 par value, 20,000,000 shares authorized, Series A, none outstanding, Series B, 222,222 shares issued and outstanding at September 30, 2009		22			-
Common stock, $.0001 par value, 100,000,000 shares authorized, 29,466,073 shares issued and outstanding at September 30, 2009		2,948			2,899
Additional paid-in capital		58,376,743			53,495,490
Accumulated deficit		(58,909,128	)		(54,158,380	)
Total Stockholders’ Deficit		(529,415	)		(659,991	)

TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT	$	1,689,512		$	1,053,849

See accompanying notes to condensed financial statements

GLOBAL FOOD TECHNOLOGIES, INC.

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2009			2008			2009			2008

Sales	$	15,247		$	-		$	15,247		$	-
Cost of Sales		13,585			-			13,585			-
Gross profit		1,662			-			1,662			-
Expenses
Marketing		339,008			432,112			1,048,769			1,540,376
General and administrative		341,430			391,811			1,228,721			1,762,155
Research and development		229,409			271,745			575,664			1,246,428
Depreciation		20,981			3,689			59,403			11,067
Interest		36,605			12,831			61,443			38,415
Total Expenses		967,433			1,112,188			2,974,000			4,598,441

NET LOSS	$	(965,771	)	$	(1,112,188	)	$	(2,972,338	)	$	(4,598,441	)

Loss per common share, basic and diluted	$	(0.03	)	$	(0.04	)	$	(0.10	)	$	(0.17	)

Weighted average common shares outstanding, basic and diluted		29,413,416			28,265,162			29,270,582			27,661,448

See accompanying notes to condensed financial statements

GLOBAL FOOD TECHNOLOGIES, INC.

CONDENSED STATEMENTS OF STOCKHOLDERS’ DEFICIT

(Unaudited)

	Preferred Sock				Common Stock				Additional Paid-in		Accumulated			Total Stockholders’
	Shares		Amount		Shares		Amount		Capital		Deficit			Deficit
Balance December 31, 2007						27,307,881	$	2,731	$	44,819,965	$	(45,142,144	)	$	(319,448	)
Sales of stock for cash, net						1,090,889		109		4,735,623		-			4,735,732
Stock issued for services						245,301		24		1,103,830		-			1,103,854
Fair value of incentive stock issued						191,000		19		859,481		-			859,500
Stock issued for media contract						166,668		16		749,984		-			750,000
Fair value of warrants issued						-		-		1,226,607		-			1,226,607
Net loss						-		-		-		(9,016,236	)		(9,016,236	)
Balance, December 31, 2008						29,001,739		2,899		53,495,490		(54,158,380	)		(659,991	)
Sales of common stock and warrants for cash, net						251,332		25		1,130,971		-			1,130,996
Common stock issued for services and accrued liabilities						213,005		24		958,496		-			958,520
Sale of preferred stock		222,222	$	22		-		-		999,978		-			1,000,000
Fair value of warrants issued		-		-		-		-		13,398		-			13,398
Warrant distribution to cash investors		-		-		-		-		1,778,410		(1,778,410	)		-
Net loss		-		-		-		-		-		(2,972,338	)		(2,972,338	)
Balance, September 30, 2009		222,222	$	22		29,466,076	$	2,948	$	58,376,743	$	(58,909,128	)	$	(529,415	)

See accompanying notes to condensed financial statements

GLOBAL FOOD TECHNOLOGIES, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

	For the Nine Months Ended September 30,
	2009			2008
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(2,972,338	)	$	(4,598,441	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		59,403			11,067
Stock issued for services		261,020			734,968
Incentive Plan stock grants		-			33,750
Warrants issued for services		13,398			2,408
Stock issued for media services		-			562,500

Changes in operating assets and liabilities:
Accounts Receivable		(8,774	)		-
Inventory		(473,132	)		-
Prepaid expenses		(64,514	)		(21,362	)
Other assets		(1,200	)		-
Accounts payable and accrued liabilities		374,587			(91,886	)
Cash used in operating activities		(2,811,550	)		(3,366,996	)

CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of fixed assets		(320,268	)		(50,000	)

Net cash used in investing activities		(320,268	)		(50,000	)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable – related parties		100,000			200,000
Principal payments on notes payable – related parties		-			(200,000	)
Proceeds from notes payable		728,000			-
Sale of preferred stock		1,000,000			-
Sale of common stock		1,130,996			4,406,961

Net cash provided by financing activities		2,958,996			4,406,961

CHANGE IN CASH		(172,822	)		989,965

CASH – BEGINNING OF PERIOD		278,443			552,697

CASH – END OF PERIOD	$	105,621		$	1,542,662

SUPPLEMENTAL DISCLOSURES
Interest paid	$	21,978		$	11,781
Non-cash financing transactions:
Issuance of common stock for accrued liabilities	$	697,500		$	-

See accompanying notes to condensed financial statements

GLOBAL FOOD TECHNOLOGIES, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONDENSED FINANCIAL STATEMENTS

SEPTEMBER 30, 2009

1. Description and nature of the business, organization and basis of presentation

Global Food Technologies, Inc. (the “Company”, “we” or “us”) is a biotechnology company focused on the development of food safety processes for the food processing industry by using its proprietary scientific processes to substantially increase the shelf life of commercially packaged seafood and to make those products safer for human consumption. The Company has developed a process using its developed technology called the “iPura™ Food Processing System”. The Company’s ability to generate revenue will depend, among other things, on its ability to demonstrate the merits of the iPura™ system as well as brand development and establishing alliances with suppliers and vendors. The Company has generated nominal revenues to date.

Going Concern

The accompanying financial statements have been prepared on the basis that the Company will continue as a going concern, which assumes the realization of assets and the satisfaction of liabilities in the normal course of business. Since inception, the Company has primarily been engaged in product development and pre-operational activities. Sales began during the quarter ended September 30, 2009, however, minimal sales have been generated. At September 30, 2009, the Company has accumulated losses totaling $58,909,128 and negative working capital, and negative cash flows from operations of $2,811,550 from January 1, 2009 through September 30, 2009. The Company’s ability to continue as a going concern is predicated on its ability to raise additional capital, increase sales, and ultimately achieve sustained profitable operations. The uncertainty related to these conditions raises substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Development Stage

Since its inception, the Company has devoted substantially all of its efforts to business planning, research and development, recruiting management and technical staff, acquiring operating assets and raising capital. However, in January 2009, the first iPura™ Food Processing System was installed in a processor’s facility in China and was tested and made operational. The first iPura™ labeled product, in a limited, initial-run quantity, was received into inventory in the US in June 2009 and sales began in July 2009. Accordingly, the Company is considered to have left the development stage.

Basis of presentation

The accompanying unaudited condensed financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America for interim financial information and pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. These financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008, filed with the SEC on February 27, 2009. The results of operations for interim periods are not necessarily indicative of the results expected for a full year or for any future period. The condensed balance sheet as of December 31, 2008 and any related disclosures have been derived from the December 31, 2008 audited financial statements filed in the Company’s 2008 Form 10-K.

Accounting policies

Revenue Recognition

The Company recognizes revenues when all of the following conditions exist: a) persuasive evidence of an arrangement exists in the form of an accepted purchase order; b) delivery has occurred, based on shipping terms, or services have been rendered; c) the Company’s price to the buyer is fixed or determinable, as documented on the accepted purchase order; and d) collectibility is reasonably assured. The Company recognizes revenue when product is shipped to the customer.

Use of estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

Loss per common share - Loss per common share was computed using the weighted average number of shares of common stock outstanding during the period. Stock purchase options and warrants were not used in the computation since their effect would be antidilutive.

Income taxes - The Company has no significant income tax expense or benefit for the periods presented due to its tax net operating loss carryforwards and related 100% deferred tax asset valuation allowance.

Inventory

Inventory is stated at the lower of cost (first-in, first-out) or market. Market is determined by comparison with recent sales or net realizable value.

Subsequent Events

We evaluated our subsequent events through November 16, 2009, which is the date the financial statements were issued.

Estimated Fair Value of Financial Instruments and Certain Non-Financial Assets/Liabilities

The Company’s financial instruments include cash, accounts receivable, prepaid expenses, accounts payable, accrued liabilities, and notes payable. Except as described below, management believes that the fair value of these financial instruments approximates their carrying amounts based on current market indicators, such as prevailing interest rates and the short-term maturities of such financial instruments. The methods and significant assumptions used to estimate the fair value of the assets and liabilities referenced in this paragraph did not change to any material extent during the quarter ended September 30, 2009.

Management has concluded that it is not practical to estimate the fair value of notes payable to related parties because the transactions cannot be assumed to have been consummated at arm’s length, there are no quoted market values available for such instruments, and an independent valuation would not be practicable due to the lack of data regarding similar instruments (if any) and the associated potential cost.

The Company does not have any assets or liabilities that are measured at fair value on a recurring basis and, during the nine months ended September 30, 2009, and at December 31, 2008, did not have any non-financial assets or liabilities that were measured at fair value on a nonrecurring basis.

2. Inventory. At September 30, 2009, inventory consists of tilapia fish available for sale. It is classified as finished goods and is recorded at delivered cost. Five containers of iPura™ labeled Tilapia fish from China have been received and are available for sale.

3. Trade and Equipment Financing Debt. As an alternative to commercial trade financing, leasing and factoring, we have instituted a program of issuing promissory notes, secured by inventory or iPura equipment systems, in series of maturities from one to three years with annual interest rates from 8.2% to 9.8%. The funds are received and controlled by a third party custodian to be disbursed only for third party costs of inventory or equipment. As is typical of trade financing, the proceeds of sale of inventory by the Company upon collection will be prorated and be used to repay the financing. Equipment financing debt will be paid at maturity from working capital derived from the commercial operation of the equipment. At September 30, 2009, the Company owed $450,000 in trade financing debt and $152,000 in equipment financing debt, for a total of $602,000.

4. Notes Payable Originated

In July, a note for $126,000 was entered into with a third party independent of the trade and equipment financing debt program. The note has a one year term, bears interest of 5% and is convertible into common stock at any time at a price of $4.50 per share. Additionally, 14,000 warrants were issued to the note holder valued at $13,398, charged to interest expense in the period. The warrants have an exercise price of $7.00 and a term of 3 years.

5. Notes Payable to Related Parties.

On April 3, 2006, we arranged a 30 day bridge loan in the amount of $350,000 from a non-principal shareholder. The loan bears interest at eight percent (8%) per annum and is secured by all assets, including any intellectual assets, of the Company. Additional consideration included the issuance of warrants to purchase 35,000 shares of our common stock. The warrants are exercisable at $4.50 per share for two (2) years from the date of repayment. The Company determined the fair value of the warrants to be $49,245 based upon the Black-Scholes option pricing model with the following assumptions: expected volatility of 50%, a risk-free interest rate of 4.8%, an expected term of 2 years, and 0% dividend yield. In July 2006, $100,000 of principal was repaid. The remaining balance of $250,000 is due on demand. The loan is guaranteed by the President of the Company.

In April and May of 2006, we arranged for three loans aggregating $290,000 from a Director of the Company. Two of the loans aggregating $190,000 are demand loans and bear interest of 8%. The third loan for $100,000 matured July 18, 2006, and was repaid on its due date. The remaining balance of $190,000 is due on demand. Additional consideration for the three loans was approved by the Board in August 2006, in the form of warrants to purchase 29,000 shares of our common stock. The warrants are exercisable at $4.50 per share for two (2) years from the date of repayment. The Company determined the fair value of the warrants to be $40,803 based upon the Black-Scholes option pricing model with the following assumptions: expected volatility of 50%, a risk-free interest rate of 4.8%, an expected term of 2 years, and 0% dividend yield. In August 2006, we arranged for a fourth loan, a six month bridge loan, for $100,000 from the Director bearing interest at 8%. The loan was renewed each subsequent maturity for an additional six months and now matures in May 2009. Such loans are unsecured.

In January and May 2008, additional loans of $100,000 each were borrowed from a Director by way of a margin loan from his broker. The notes were for 30 and 60 days respectively and were repaid at their due dates, Interest at 12% was payable to the brokerage account.

In September, a director advanced $100,000 on a 30 day note bearing interest at 12% per annum.

6. Stockholders’ Deficit

Common Stock Issuances. We have been selling stock to fund operations since inception and expect to continue to sell stock to fund future continued operations.

In the nine months ended September 30, 2009, a total of 251,332 shares of common stock and 110,324 warrants to purchase common stock were issued in private placements for total proceeds of $1,130,996. All stock and unit sales were at $4.50 per share or unit. All warrants are exercisable at $7.00 and have a three year term.

In the nine months ended September 30, 2009, a total of 213,005 shares of common stock were issued for services to consultants and Directors. Total expense related to this issuance was $958,520, of which $697,500 was accrued for and recorded as expense in 2008 and $203,020 in the quarter ended September 30, 2009.

The above securities were issued under exemption from Regulation under either Regulation D or S promulgated by the Securities and Exchange Commission under the Securities Act of 1933.

Preferred Stock Issuance. We are authorized to issue 20,000,000 shares of preferred stock, with a par value of $.0001. There was no preferred stock outstanding at December 31, 2008. In April 2009, we designated a Series B preferred stock and authorized the issuance of 1,000,000 shares at a par value of $.0001. Also in April 2009, we issued 222,222 shares of such Series B Preferred Stock for $1,000,000 in cash. The Series B has preferential rights in liquidation over common stock and is convertible into common stock at a conversion rate of $4.50 per share. Mandatory conversion is required when the price of the common stock equals 150% of the conversion rate.

Warrants. At December 31, 2008, there were 6,373,451 warrants outstanding. In the nine months ended September 30, 2009, an additional 110,324 warrants were issued in conjunction with sales of common stock (as noted above), 14,000 warrants were issued in conjunction with a loan (with $13,398 being charged to interest expense) and an additional 1,891,926 were issued as discussed below.

During the quarter ended June 30, 2009, an equity program was implemented to reward stockholders, including indirect stockholders of our parent entity, for the longevity of their stock holdings since the Company has not provided public market liquidity. The Company issued common stock warrants based on cash investment and time of investment to existing stockholders using December 31, 2008 as the date of record. The award formula was to grant warrants to the stockholders in the amount of 2% of the share owned for each year or partial year of investment. The warrants have a term of three years, expire in April 2012, and have an exercise price of $7.00. A total of 1,891,926 warrants were issued under this program.

The Company has accounted for the warrants as a dividend and recorded approximately $1,778,000 as a charge to accumulated deficit during the quarter ended June 30, 2009. The $1,778,000 was based on the fair value of the warrants issued of $0.94 per warrant determined based on the Black Scholes pricing model with the following assumptions: expected volatility of 50%, a risk free interest rate of 1.0%, an expected term of 3 years and a 0% dividend yield.

There are 8,389,703 warrants outstanding as of September 30, 2009.

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following presentation of Management’s Plan of Operation has been prepared by internal management and should be read in conjunction with the financial statements and notes thereto included in Item 1 of this Quarterly Report on Form 10-Q. Except for the historical information contained herein, the discussion in this report contains certain forward-looking statements that involve risks and uncertainties, such as statements of our business plans, objectives, expectations and intentions as of the date of this filing. The cautionary statements about reliance on forward-looking statements made below in this document should be given serious consideration with respect to all forward-looking statements wherever they appear in this report. Our actual results could differ materially from those discussed here.

Plan of Operation

From the commencement of our research and development activities in 2001, we have raised substantial equity capital to fund the development of our iPura™ System (formerly referred to as the BEST Seafood Processing System). Our iPura™ System has been installed in China as the physical embodiment of The iPura™ Food Safety Program. Some customization of the iPura™ system will be required for each specific on-site installation and the type of seafood being processed. As of September 30, 2009, we have generated only nominal revenues and since inception we have incurred accumulated losses totaling $58,909,127 and have negative cash flows from operations of $2,811,550 from January 1, 2009 through September 30, 2009. Research on our first generation prototype was completed in 2004, and development and refinement on the commercial system design continued through 2005, especially adapting the system to processing salmon. Further development has resulted in a more efficient, less labor intensive and more easily maintained processing system. This system has been fabricated and installed in a processing facility in China in 2008, and has commenced limited commercial production in 2009.

GFT began promoting the iPura™ label through industry trade shows, trade publications, workshops, seminars, invited speaking engagements, and meetings sponsored on our behalf by various governmental agencies and industry trade associations. The Company is executing its marketing strategy by promoting the iPura™ brand to food processors and industry associations as the world’s first food safety label. In 2008, we commenced limited marketing of the iPura™ brand to consumers. The iPura™ seal is anchored with a descriptive and lasting slogan: “The Highest Standard in Food Safety™”. Namely,

· The science and marketing connect well with world food safety issues.

· The iPura™ label is a tool which communicates that exceptional food safety measures have been taken to protect consumer health.

· The label will serve to identify food products that have a higher level of safety and quality.

· GFT has filed trade marks for its brand and slogan in every major food producing and food consuming nation.

· Trade marks are expected to be listed on the primary registry at the USPTO and internationally, as a global trademark search by counsel found no prior marks or obstructions.

The iPura™ Food Safety Program is the constitution of the iPura™ food safety brand, which is anticipated to include:

· An organic pathogenic and spoilage microorganism “kill step” prior to packaging.

· Intelligent packaging of product.

· Product traceability of handling and temperature.

· An independent third party certification of standards.

· A unique product insurance that follows the iPura™ labeled product throughout the distribution chain.

· A distribution chain and consumer “pull through” marketing program promoting iPura™ as “The Highest Standard in Food Safety™.”

The iPura™ Food Safety Program is designed to help the food distribution chain grow their margins by increasing the quality, safety, and economic value of their products by reducing or eliminating the waste and liability associated with the distribution of contaminated food, and by increasing shelf life.

We plan to promote the iPuraTM brand utilizing a media and educational campaign focusing on the health and economic benefits of iPura™ treated products and the increased profit margins available to the entire distribution chain. GFT has entered into a media-buying agreement, financed with common stock, with its strategic partner Global Media Fund LLC. The agenda includes regular distribution of feature articles in the U.S. to over 10,000 newspapers, news, wire services, and radio spots to more than 6,000 radio stations, over a 24-month period, which began with a total advertising rate value of $54 million. GFT’s marketing campaign will begin with “Ask your grocer for iPura™”. Food safety is public health news and we anticipate that the iPura™ food safety brand will be publicized as news in media across the globe. These advertisements have been placed on a limited basis in the past and the frequency will be increased as the iPura™ product is available in the regional markets.

GFT has established relationships in three of the world’s largest seafood exporting countries: China, Vietnam and Chile. Each is among the world’s top 10 seafood exporting markets and potential customers as well as certain government agencies in each country have expressed interest in installing iPura™ systems. With the assistance of government and industry associations, GFT has presented to hundreds of processors in these countries. GFT anticipates expanding into other large seafood producing countries such as Norway, Thailand, India, Canada, and the United States in phase two. Seafood might be followed by poultry and pork, with the potential to develop a system for meat and possibly other food products marketed under the iPura™ label in the future. At this time, our focus is solely on seafood and we have not started any research or development on such other potential products, and cannot estimate their costs or a development schedule.

We will continue to market to consumers, primarily through our agreement with Global Media Fund described above, and to continue our direct marketing efforts to processors and industry associations to create awareness of our iPura™ brand, the iPura™ Seafood Processing System and other food processing technologies.

We also intend to participate in the following industry conferences:

Institute of Food Technologists Expo

Food Marketing Institute Annual Business Conference

Food Safety Conference (International Association for Food Protection)

National Food Policy Conference

Processor and Distribution Agreements

We have executed contracts with three seafood processors pursuant to which we will install our iPura™ System at the seafood processors’ facilities. All of the current agreements are structured pursuant to our “importer” model (see our Annual Report on Form 10-K for more details), with our wholly-owned subsidiary, iPura Food Distribution Company (IFD) responsible for ordering and purchasing the seafood from the processors, and then importing and distributing the seafood products to retailers or other distributors. IFD has also signed agreements with the same three processors outlining the exclusive purchase terms.

Under these agreements, GFT is generally responsible for the cost of manufacturing, fabricating and installing the iPura™ System at the processors’ facilities, with the processors providing power and utility connections and certain other operating expenses. Under these agreements, our iPura™ System would typically be installed onto one or two processing lines at the processors’ facilities. Our iPura™ System will be operated and supervised by GFT personnel, at GFT’s expense. Seafood processed through our iPura™ System will then be packaged and labeled with our iPura seal. IFD has the exclusive rights to buy and distribute the seafood processed with our iPura™ System and the processors therefore cannot sell such seafood to any other customers or distributors, or otherwise use our iPura™ System for any other seafood processing. The agreements have terms that range from one to three years from the date of completion of the installation of our iPura™ System at the respective processor’s facility. IFD has obtained most favored nations pricing with respect to seafood purchased under all of the agreements. None of the agreements have any minimum purchase requirements for IFD, although one agreement has a target volume schedule, with potential increases to the per pound seafood price if such targets are not met.

GFT has completed the China installation, and begun processing seafood at this facility, although in limited quantities to date. Sales of seafood in the U.S. from this facility accounted for all of our sales for the quarter ended September 30, 2009. There is a second iPura™ System located at the processor in China that is available for future installation if sales levels require it.

We have received limited purchase orders to date for our products and continue negotiations with certain select U.S. grocery store retailers, including negotiations with regional and national retailers. As discussed herein, we will need to obtain adequate financing in order to purchase the seafood from the processor and carry the seafood inventory costs until resold to a sub-distributor or retailer.

Liquidity and Capital Resources

Historically, our sole source of cash has been the sale of equity to investors. Although we expect to generate increased revenue from installing and operating the initial iPura™ Systems within the next 12 months, any funds generated from installing and operating our iPura™ Systems during the next 12 months are not expected to cover our operating expenses.

Based on our cash balance as of September 30, 2009, we are in need of immediate additional financing to fund our current working capital requirements. Furthermore, we believe that we will need approximately $5 million to manufacture iPura™ Systems and cover operating expenses during the next 12 months, in addition to a line of credit or other financing to finance the inventory of iPura™ product. As an alternative to a traditional commercial bank line of credit, we have implemented a program, described below, to finance inventory. The amount of capital required will vary depending on a variety of factors, many of which are beyond our control. We cannot assure you that funds from our future operations or funds provided by our current financing activities will meet the requirements of our operations, and in that event, we will continue to seek additional sources of financing to maintain liquidity. Any additional capital we raise may involve issuing additional shares of common stock or other equity securities, or obtaining debt financing. However, at this point, we have not specifically identified the type or sources of this funding.

As of September 30, 2009, we had debt other than trade indebtedness in the ordinary course of business in the form of short term loans of $640,000 from a Director and a shareholder due on demand and a one year note from a third party in the amount of $126,000. Currently, we do not have the ability or resources to repay such loans if a demand is made for repayment in full.

We have implemented a trade financing program for individual accredited investors as an alternative to traditional commercial inventory financing and factoring. This financing program consists of issuing promissory notes, secured by inventory, in series of maturities from one to three years with annual interest rates from 8.2% to 9.8%. The funds are received and controlled by a third party custodian to be disbursed only for third party costs of inventory. As is typical of trade financing, the proceeds of sale by the Company upon collection will prorate be used to repay the financing. At September 30, 2009, $450,000 in trade financing debt has been received.

We have also implemented an equipment financing program in July 2009 based on the same structure as the trade finance program using short term notes secured by the installed iPura™ equipment. At September 30, 2009, $152,000 in equipment financing debt has been received.

We are actively pursuing all potential financing options as we look to secure additional funds both to stabilize and to grow our business operations. Our management will review any financing options at their disposal, and will judge each potential source of funds on its individual merits. Since we have not located any commercial bank inventory financing, we are developing options for inventory debt financing with other private parties, as described in more detail above. Successful inventory financing is a critical need in order for us to begin distributing our products and generating revenue. We cannot assure you that we will be able to secure additional funds from debt or equity financing, as and when we need to, or if we can, that the terms of this financing will be favorable to us or our stockholders. We are exploring commercial and joint venture financing opportunities and relationships with potential processor/customers with sale and lease-back arrangements.

We believe that we have adequate plant capabilities and capacity and sufficient qualified personnel to achieve our planned operations over the next 12 months. Historically, the fabrication of major components of our iPura™ System have been outsourced. We will likely continue this practice, and may also elect to outsource the integration and installation of the units depending on the number of units installed and the logistics of a particular site. We will add non-technical support personnel as required to manage the increase in administrative activity.

Results of Operations

Sales:

We began sales in July 2009 and only nominal sales of $15,247 have been recorded from inception through September 30, 2009.

Expenses:

In the nine months period ended September 30, 2009, total expenses decreased 35% over the comparable period ended September 30, 2008, from $4,598,411 to $2,974,001. The Marketing and General and Administrative expense classifications decreased approximately 31% as a result of a lower level of activity and spending unrelated to personnel costs, which remained constant between the periods. Research and Development expense decreased 54% as spending was directed to commercial equipment rather the extensive prototyping in 2008 and prior periods. Depreciation expense increased with the commencement of the initial iPura™ System and will continue to increase as additional systems are installed. Interest expense increased 60% and is expected to increase substantially as the trade finance and equipment finance debt facilities are expanded.

In the three month period ended September 30, 2009, total expenses did not significantly change over the comparable period ended September 30, 2008. Marketing expenses did not decrease to the extent of the nine month comparison above due to the placement of more advertising in trade journals while Research and Development expenses represented the same level of spending but on pre production engineering in China and Vietnam rather than on prototyping. General and Administrative expense decrease 12% in the three month period ended September 30, 2009 compared to the comparable period in 2008. This was principally due to the timing of non-recurring issuances of common shares for services, while normal spending remained flat.

Critical Accounting policies

Inventory

Inventory is stated at the lower of cost (first-in, first-out) or market. Cost is determined on a average cost basis that approximates the first-in, first-out method. Market is determined by comparison with recent sales or net realizable value.

Loss per common share - Loss per common share was computed using the weighted average number of shares of common stock equivalents outstanding during the period. Stock purchase warrants were not used in the computation as their effect would be antidilutive.

Stock-based compensation – The cost resulting from all share-based payment transactions is recognized in the financial statements based on the fair value of the stock-based compensation instrument.

Revenue Recognition - Revenue is recorded upon transfer of title of product in response to customer purchase order terms.

Off Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

A smaller reporting company is not required to provide the information required by this Item.

ITEM 4. CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended, which we refer to as the Exchange Act) that are designed to ensure that information required to be disclosed in our periodic reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that this information is accumulated and communicated to our management, including our principal executive/financial officer, to allow timely decisions regarding required disclosure.

Our management, with the participation and supervision of our Chief Executive Officer and Chief Financial Officer (“Certifying Officers”), evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Based upon that evaluation, our Certifying Officers concluded that as of the end of the period covered by this Quarterly Report, our disclosure controls and procedures were not effective. Our primary deficiency has been due to our limited number of personnel and segregation of duties.

Changes in Internal Control Over Financial Reporting

Changes in internal control over financial reporting. There was no change in our internal control over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are not a party to any legal proceedings and, to our knowledge, no such proceedings are threatened or contemplated against us.

ITEM 1A.

RISK FACTORS

A smaller reporting company is not required to provide the information required by this Item. However, please note the following about Forward-Looking Statements and the following brief description of certain risks that could have a material, adverse impact on the Company and its operations.

Cautionary Information Regarding “Forward-Looking Statements”

This Quarterly Report on Form 10-Q includes certain statements about us that may be deemed to be “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements relate to matters such as, among other things, product development and acceptance, our anticipated financial performance, business prospects, technological developments, new products, future distribution or license rights, international expansion, possible strategic alternatives, new business concepts, capital expenditures, consumer trends and similar matters.

Forward-looking statements necessarily involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievement expressed or implied by these forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “intend,” “expect,” “anticipate,” “assume,” “hope,” “plan,” “believe,” “seek,” “estimate,” “predict,” “approximate,” “potential,” “continue” or the negative of these terms. Statements including these words and variations of these words, and other similar expressions, are forward-looking statements. Although we believe that the expectations reflected in our forward-looking statements are reasonable based upon our knowledge of our business, we cannot absolutely predict or guarantee any future results, levels of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of these statements.

We note that a variety of factors could cause our actual results and future experiences to differ materially from the anticipated results or other expectations expressed in these forward-looking statements. The risks and uncertainties that may affect our operations, performance, development and results include, but are not limited to, the following:

whether we will be able obtain additional financing to continue or expand operations and the terms on which we will be able to obtain this financing, if at all;

whether our initial system installation will perform as expected in commercial applications;

our ability to obtain any commercial financing to allow us to purchase seafood inventory for processing in our iPura™ System, and to obtain such financing in amounts required and on commercially reasonable terms;

our ability to negotiate contracts and purchase orders with distributors and retailers;

risks related to inventory costs, shipping and handling and spoilage;

our ability to obtain one or more third-party manufacturers for our system components and other products;

the cost at which we will be able to have our system components and other products manufactured, if at all, and the time it will take to have our system components and other products manufactured;

our ability to obtain all required components for our systems on a timely basis and at the prices we anticipate;

whether our systems and products are viewed as providing the benefits we claim and whether these benefits are marketable by any customers we may seek to obtain;

our ability to enter into additional contracts with food processors, the time it takes for us to enter into any of these contracts and the licensing or pricing models we are able to implement;

our systems and products performing in the manner we expect in customer applications and without any material modifications;

our ability to obtain all necessary governmental approvals for our systems and other products, including all required import-exporter licenses and permits;

whether the introduction of the iPura™ brand will succeed in creating preferences with the consuming public;

whether we will be able to apply our technology to products other than fish or use our technology in any other fields;

the pace at which we will utilize our existing working capital and whether our existing working capital will be sufficient for us to continue to develop our systems and products to the extent we anticipate;

our ability to protect our intellectual property and obtain and maintain patents and other protections for our intellectual property.

the possible impact from competing products or technologies;

possible reductions in consumer demand for fish and poultry, including as a result of any outbreaks of disease, including avian flu, or negative reports regarding the health benefits of fish and poultry;

our ability to hire, train and retain a consistent supply of reliable and effective employees, both domestically and in any countries in which we might be able to install one of our processing system;

the risk of non-payment by, and/or insolvency or bankruptcy of, any of our future customers or others with indebtedness to us;

the costs of complying with applicable labor laws and requirements, including, without limitation, with respect to health care;

economic and political instability in foreign countries or restrictive actions by the governments of foreign countries in which we may seek to conduct our business or obtain customers;

changes in tax laws or the laws and regulations governing food processing and on income generated outside the United States;

general economic, business and social conditions in the United States and in foreign countries where we may conduct our business;

fluctuation in interest rates, insurance, shipping, energy, fuel and other business utilities in any countries in which we conduct business;

the stability of and fluctuations in currencies in which we conduct business;

threats or acts of terrorism or war; strikes, work stoppages or slow downs by labor organizations in any countries in which we conduct business; and

natural or man-made disasters that could adversely impact the industries or countries in which we conduct business.

Forward-looking statements made by us are based upon knowledge of our business and the environment in which we operate. However, because of the factors listed above, actual results may differ from those in the forward-looking statements. Consequently, these cautionary statements qualify all of the forward-looking statements made in this report. We cannot assure you that the results or developments we anticipate will be realized or, even if substantially realized, that those results or developments will result in the expected consequences or otherwise affect us, our business or operations in the ways expected. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates, or on any subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf, all of which are expressly qualified in their entirety by these cautionary statements. Except to the extent required by law, we do not undertake any obligation to release or publish any revisions to our forward-looking statements, including without limitation those contained in this report, 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

Sales of Unregistered Securities

During the period covered by this Quarterly Report, we issued the following securities, discussed below, which were not registered under the Securities Act of 1933. We did not employ any form of general solicitation or advertising in connection with the offer and sale of the securities described below. In addition, we believe the purchasers of the securities are “accredited investors” for the purpose of Rule 501 of the Securities Act. For these reasons, among others, the offer and sale of the securities listed below were made in reliance on the exemption from registration provided by Section 4(2) of the Securities Act, Regulation D and/or Regulation S promulgated by the Securities and Exchange Commission under the Securities Act.

In the three months ended September 30, 2009, a total of 97,817 shares of common stock and 31,295 warrants to purchase common stock were issued in private placements for total proceeds of $440,174. All stock and unit sales were at $4.50 per share or unit. All warrants are exercisable at $7.00 and have a three year term.

In the three months ended September 30, 2009, a total of 7,500 shares of common stock were issued for services to consultants. Related expense of approximately $33,750 was recorded as operating expenses in the quarter ended September 30, 2009.

In the three months ended September 30, 2009, a total of 14,000 warrants were issued in conjunction with a loan with $13,398 being charged to interest expense.

Purchases of Equity Securities

We are required by the Securities Act of 1933 to disclose, in tabular format, any repurchases of our securities during this reporting period. We did not repurchase any of our securities during this reporting period, and accordingly, we have eliminated such table.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

During the three month period ended September 30, 2009, there were no material defaults in the payment of principal or interest, a sinking or purchase fund installment, or any other material default not cured within 30 days or with the consent of the lender, with respect to any of our indebtedness exceeding 5% of our total assets.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

ITEM 5. OTHER INFORMATION

(a) Information Required To Be Disclosed In A Report On Form 8-K, But Not Reported

None

(b) Item 407(c)(3) of Regulation S-K

During our fiscal quarter covered by this Quarterly Report on Form 10-Q, there have not been any material change to the procedures by which our security holders may recommend nominees to our Board of Directors.

ITEM 6. EXHIBITS

Exhibit No.		Description
3.1 (1)		Certificate of Amendment to Certificate of Incorporation dated August 18, 2005.
3.2 (2)		Certificate of Amendment to Certificate of Incorporation dated September 15, 2005.
3.3 (3)		Restated Certificate of Incorporation dated October 18, 2005.
3.4 (3)		Second Amended and Restated Bylaws as of August 31, 2005.
31.1*		Certification of Chief Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*		Certification of Chief Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1‡		Certification of Chief Executive Officer and Chief Financial Officer pursuant to pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

*	Filed herewith

‡	Furnished herewith

(1)	Filed on August 19, 2005 as an exhibit to Global Food’s Report on Form 8-K and incorporated herein by reference.

(2)	Filed on October 6, 2005 as an exhibit to Global Food’s Report on Form 8-K and incorporated herein by reference.

(3)	Filed on November 23, 2005 as an exhibit to Global Food’s Report on Form 10-QSB and incorporated herein by reference.

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

GLOBAL FOOD TECHNOLOGIES, INC.

Dated: November 16, 2009	By:	/s/ Keith Meeks
	Keith Meeks, President and
	Chief Executive Officer
	(PRINCIPAL EXECUTIVE OFFICER)

Dated: November 16, 2009	By:	/s/ Marshall F. Sparks
	Marshall F. Sparks, Chief Financial Officer
	(PRINCIPAL ACCOUNTING OFFICER)

Attached files

GLOBAL FOOD TECHNOLOGIES, INC. Reports

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