GLOBAL FOOD TECHNOLOGIES, INC. - FORM 10-Q

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EX-31.1 - EXHIBIT 31.1 - GLOBAL FOOD TECHNOLOGIES, INC.	v238884_ex31-1.htm
EXCEL - IDEA: XBRL DOCUMENT - GLOBAL FOOD TECHNOLOGIES, INC.	Financial_Report.xls
EX-31.2 - EXHIBIT 31.2 - GLOBAL FOOD TECHNOLOGIES, INC.	v238884_ex31-2.htm
EX-32.1 - EXHIBIT 32.1 - GLOBAL FOOD TECHNOLOGIES, INC.	v238884_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, 2011

o	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 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, non-accelerated filer, or a smaller reporting company.

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

Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yeso 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, 2011
Common stock, par value $0.0001		31,171,605

GLOBAL FOOD TECHNOLOGIES, INC.

QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2011

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 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	18
ITEM 3. DEFAULTS UPON SENIOR SECURITIES	18
ITEM 4. (REMOVED AND RESERVED)	18
ITEM 5. OTHER INFORMATION	18
ITEM 6. EXHIBITS	20

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

GLOBAL FOOD TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

ASSETS	September 30, 2011 (Unaudited)			December 31, 2010
Current Assets
Cash	$	143,421		$	1,004,654
Accounts receivable		848			30,939
Inventory		101,430			124,141
Prepaid expenses		48,009			44,285
Total Current Assets		293,708			1,204,019

Fixed Assets – net		964,607			1,020,964

Other Asset		23,189			23,189

TOTAL ASSETS	$	1,281,504		$	2,248,172

LIABILITIES AND STOCKHOLDERS’ DEFICIT

Current Liabilities
Accounts payable	$	156,693		$	104,047
Accrued liabilities		989,306			693,096
Notes payable – related parties		640,000			640,000
Note payable – others		246,000			246,000
Trade finance notes payable		1,005,797			1,179,297
Short term convertible note payable		1,300,000			1,300,000
Total Current Liabilities		4,337,796			4,162,440

Commitments and Contingencies

Stockholders’ Deficit:
Preferred stock, $.0001 par value, 20,000,000 shares authorized, Series A and B, none issued and outstanding, Series C, 399,613 shares issued and outstanding at September 30, 2011 and December 31, 2010.		40			40
Common stock, $.0001 par value, 100,000,000 shares authorized, 31,171,605 and 30,400,014 shares issued and outstanding at September 30, 2011 and December 31, 2010, respectively.		3,117			3,040
Additional paid-in capital		64,205,601			62,442,754
Accumulated deficit		(67,265,050	)		(64,360,102	)
Total Stockholders’ Deficit		(3,056,292	)		(1,914,268	)

TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT	$	1,281,504		$	2,248,172

See accompanying notes to condensed consolidated financial statements

GLOBAL FOOD TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2011			2010			2011			2010

Revenues	$	5,936		$	297,455		$	107,374		$	933,255
Cost of goods sold		5,774			291,783			95,264			937,178
Gross profit (loss)		162			5,672			12,110			(3,923	)
Operating Expenses
Marketing		194,001			272,986			662,782			906,971
General and administrative		455,121			290,287			1,128,630			1,009,965
Research and development		235,750			238,292			758,642			602,113
Depreciation		18,433			20,981			56,357			62,943
Interest		104,449			41,074			310,647			103,871
Total Operating Expenses		1,007,754			863,620			2,917,058			2,685,863

NET LOSS	$	(1,007,592	)	$	(857,948	)	$	(2,904,948	)	$	(2,689,786	)

Undeclared dividends on Preferred Stock		11,988			11,988			35,965			34,118

Net loss available to Common Stockholders		(1,019,580	)		(869,936	)		(2,940,913	)		(2,723,904	)

Loss per common share, basic and diluted	$	(0.03	)	$	(0.03	)	$	(0.10	)	$	(0.09	)

Weighted average common shares outstanding, basic and diluted		31,137,009			29,948,239			30,843,641			29,842,915

See accompanying notes to condensed consolidated financial statements

GLOBAL FOOD TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

For the Nine Months Ended September 30, 2011

(Unaudited)

	Preferred Stock				Common Stock				Additional Paid-in Capital		Accumulated Deficit			Total Stockholders’ Deficit
	Shares		Amount		Shares		Amount		Additional Paid-in Capital		Accumulated Deficit			Total Stockholders’ Deficit
Balance, December 31, 2010		399,613	$	40		30,400,014	$	3,040	$	62,442,754	$	(64,360,102	)	$	(1,914,268	)
Sales of common stock for cash, net of issuance costs		-		-		690,946		69		1,581,405		-			1,581,474
Common stock issued for services		-		-		80,645		8		181,442		-			181,450
Net loss		-		-		-		-		-		(2,904,948	)		(2,904,948	)
Balance, September 30, 2011		399,613	$	40		31,171,605	$	3,117	$	64,205,601	$	(67,265,050	)	$	(3,056,292	)

See accompanying notes to condensed consolidated financial statements

GLOBAL FOOD TECHNOLOGIES, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

	For the Nine Months Ended September 30,
	2011			2010
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(2,904,948	)	$	(2,689,786	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		56,357			62,943
Stock issued for services		181,450			385,881
Changes in operating assets and liabilities:
Accounts receivable		30,091			118,315
Inventory		22,711			388,275
Prepaid expenses		(3,724	)		9,088
Other asset		-			3,400
Accounts payable		52,646			(366,226	)
Accrued liabilities		296,210			487,596
Cash used in operating activities		(2,269,207	)		(1,600,514	)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from trade financing notes payable		69,000			283,297
Repayment of trade financing notes payable		(242,500	)		-
Sale of preferred stock		-			640,758
Sale of common stock, net of issuance costs		1,581,474			805,057
Net cash provided by financing activities		1,407,974			1,729,112

CHANGE IN CASH		(861,233	)		128,598

CASH – BEGINNING OF PERIOD		1,004,654			22,135

CASH – END OF PERIOD	$	143,421		$	150,733

SUPPLEMENTAL DISCLOSURES
Cash paid for interest	$	75,597		$	79,633

See accompanying notes to condensed consolidated financial statements

GLOBAL FOOD TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2011

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

Global Food Technologies, Inc. (the “Company”, “we” , “our” or “us”) is a life sciences company focused on 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 technology called the “iPura™ Food Processing System”. The System is installed in processor factories in foreign countries with the product currently sold in the United States. 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 is a registrant under rules and regulations of the Securities and Exchange Commission but has not yet obtained a listing on any stock exchange.

Going concern

The accompanying condensed consolidated 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. At September 30, 2011, the Company has accumulated losses totaling $67,265,050, negative working capital of $4,044,088, and negative cash flows from operations of $2,269,207 for the nine months ended September 30, 2011. The Company’s ability to continue as a going concern is predicated on its ability to raise additional capital, increase sales and margins, 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 condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis of presentation

The accompanying unaudited condensed consolidated 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 year ended December 31, 2010, filed with the SEC on March 31, 2011. 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 consolidated balance sheet as of December 31, 2010 and any related disclosures have been derived from the December 31, 2010 audited financial statements filed in the Company’s 2010 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; b) delivery has occurred or services have been rendered; c) the Company’s price to the buyer is fixed or determinable; and d) collectability is reasonably assured. To date, all of the orders from our customers have met these criteria and therefore, 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. Not used in the computation since their effect would be antidilutive, were 399,613 shares of Preferred Stock and 9,453,951 Common Stock purchase warrants.

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. Management reviews the carrying value of inventory in relation to its sales history and industry trends to determine an estimated net realizable value. No reserve has been recorded as of September 30, 2011.

2. Inventory

At September 30, 2011, inventory consists of frozen tilapia fish available for sale or payments against purchase orders being processed. Fish is classified as finished goods and is recorded at delivered cost.

3. Trade Finance Notes Payable

As an alternative to commercial trade financing, leasing and factoring, we previously instituted our own form of trade finance 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%. In September 2010, the equipment financing program was discontinued and the remaining equipment financing debt was converted to trade financing debt. The funds are received and controlled by a third-party custodian to be disbursed only for third-party costs of inventory. At September 30, 2011, the Company owed $1,005,797 in trade financing debt. Individual notes mature on their anniversaries throughout the year and based on past renewal activity, we expect that the majority will be renewed upon maturity.

4. Notes Payable - Others

In July 2009, we borrowed $126,000 from a third party. The note has a one year term, has been renewed until July 2012, bears interest at 9% and is convertible into common stock at the option of the lender at any time at a price of $4.50 per share. An additional $120,000 was borrowed from the same third party in 2010 in two one-year notes bearing interest of 5% and 9%, respectively. Such notes are due on demand. Currently, the Company does not have the ability or resources to repay such loans if a demand is made for repayment in full at scheduled maturities.

5. Notes Payable - Related Parties

Shareholder loan

In 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. 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.

Director loan

In 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. 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. In August 2006, we arranged for a fourth loan, a six month bridge loan, for $100,000 from the same Director bearing interest at 8%. The loan was renewed each subsequent maturity for an additional six months and now matures in November 2011. Such loans aggregating $290,000 are unsecured. In January 2008, the note holder was awarded 78,000 shares of common stock valued at $351,000 as additional consideration for extending the maturity of the loans.

In November 2009, for the same 12% interest rate, the Company borrowed an additional $100,000 from such director, due on demand. Such loan is unsecured.

The current indebtedness to the Director is $390,000.

Currently, the Company does not have the ability or resources to repay such loans if a demand is made for repayment in full.

6. Short Term Convertible Note Payable

On November 22, 2010, a stockholder resident in the United Kingdom loaned the Company $1,300,000 on a six month note bearing interest at 18% per year. The note has been extended for an additional six months. Interest is payable at maturity in shares of Company common stock at the rate of $2.25 per share.

At the sole option of the lender, the principal may also be converted into shares of Company common stock at the rate of $2.25 per share. The Note is secured by all of the assets of the Company and is subordinate to the 2006 shareholder loan of $250,000. Currently, the Company does not have the ability or resources to repay such loan if a demand is made for repayment in full at scheduled maturity in November 2011.

7. Stockholders’ Deficit

Preferred Stock Issuance

During the nine months ended September 30, 2011, there were no issuances of preferred stock.

Common Stock Issuances

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

In the three months ended September 30, 2011, a total of 9,993 shares of common stock and 9,993 warrants to purchase common stock were issued in private placements for total proceeds of $34,975.All units were priced at $3.50 per share unit.

In the nine months ended September 30, 2011, a total of 690,946 shares of common stock were issued in a private placement for proceeds of $1,581,474, net of issuance costs of $3,500. This represented five sales, three for $84,974 priced at $3.50 per share, the others priced at $2.25 per share were to the same individual in tranches of $500,000 and $1,000,000. There were warrants combined with stock sales beginning the third quarter and 9,993 warrants were issued for two of the sales at the $3.50 rate.

During the three months ended September 30, 2011, a total of 59,200 shares of common stock were issued for services received from consultants and employees in China totaling $133,200.

During the nine months ended September 30, 2011, a total of 80,645 shares of common stock were issued for services received from consultants totaling $181,450.

Warrants

There are 9,453,951 warrants outstanding as of September 30, 2011 exercisable from 2 to 5 years at $3.00 to $7.00, in conjunction with sales of common and preferred stock and awards for services.

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.

ITEM 2.

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

Company Overview

Our iPura® System is the physical on-site processing element of the “iPura® Food Safety Program”, which combines various food safety elements described below. Our latest generation iPura® System is designed to process seafood, with certain customization required for different types of seafood and the specific requirements of a given installation site.

In 2009, we completed the installation of our iPura® System at a food processor located in China, Tongwei (Hainan) Aquatic Products Co., and began producing our first order of inventory and selling it in the United States. We completed installation of another, larger iPura® System with a processor in Vietnam in early 2010, and expect production to begin at this facility in 2011. We have a second system on site at the China processor and another system at our California shop able to be installed as capacity is required.

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. At September 30, 2011, the Company has accumulated losses totaling $67,265,050, negative working capital of $4,044,088, and negative cash flows from operations of $2,269,207 for the nine months ended September 30, 2011. 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.

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 addition to selling to retail chains on a wholesale basis, we are promoting a private label program to large retailers to exclusively source iPura labeled products to protect their own brand. In our vision, an established leader would enthusiastically “champion” the iPura® brand by promoting the iPura® logo next to its name on their product packaging, with the iPura® seal also displayed on the individually wrapped fillets inside the package (“iPura® inside”). This would communicate to customers that the retailer is doing everything possible to improve food safety, food quality and sustainability of natural resources. Our value proposition to retailers is that sourcing iPura® products will allow the retailer to increase control & trust of foreign suppliers, protect their brand and company image, and increase sales with repeat purchases due to superior products. Our private label program is a cost plus price model, earning a gross profit per pound with full transparency on cost of raw materials, the iPura® Program, logistics ands a gross profit for the Company.

The iPura® seal is anchored with a descriptive and lasting slogan: “The Highest Standard in Food Safety™”.

·	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.

Distribution and Marketing Plan

Management believes it is commercially feasible to create recurring revenue streams through service, sales, and licensing to capitalize on the potential of our proprietary technologies, market opportunities and human resources. We have identified four price-per-pound revenue models and in each model, GFT will provide the daily on-site service to maintain control of The Highest Standard in Food Safety and Quality.

We are proceeding to validate iPura® with sales in the U.S. markets through the “importer model” of filling wholesaler orders from inventory. This has allowed the iPura® brand to gain a limited amount of market recognition which management believes will lead to important private label brand manufacturing sales. After the private label business is proven, we intend to pursue growth by adding more food products and by licensing strategic partners to distribute iPura® labeled products internationally, thereby creating additional streams of recurring revenue. Market entry begins with the most popular aquaculture products: tilapia, striped pangasius (swai), catfish, salmon, and shrimp. Farmed tilapia and swai are available now, guaranteed to have been processed with the iPura® Food Safety Program.

The marketing materials that target large distributors and retailers make a point that iPura® promotes their brand by differentiating their product from all others in the marketplace. The materials point out that iPura® addresses brand protection and critical food safety and quality assurance issues at a level unmatched in the industry. Marketing materials also point out that today’s consumers expect a higher degree of food safety and most believe that not enough is being done to protect their health. The iPura® seal represents the highest standards in food safety, quality, and sustainability.

Promotion of the brand, of course, includes advertising. We advertise in trade publications such as:

Seafood Business, Seafood International, Intrafish, GAA Magazine, Progressive Grocer, Food Safety Magazine and Chef.

One of the most important direct marketing opportunities of the year is presented at the International Boston Seafood Show, held in March of 2011. We had a large presence and were fully staffed with the sales and marketing team. We had the opportunity to meet with top executives from our target prospect list, as well as to conduct interviews with media to promote the iPura® brand and private label business. We believe that this direct approach to large distributors and retailers, combined with media coverage and a limited amount of consumer marketing will result in the market acceptance of the iPura® brand.

Consumer marketing currently is limited to a social media presence and our contract with Global Media Fund, LLC to place articles describing iPura® food safety in various newspapers throughout the U.S. Currently, most of our retail sales, such as at grocery stores, are made to customers without any prominent iPura® branding. We hope to improve point-of-sale branding and have developed descriptive brochures and educational materials for display at various supermarkets where seafood with the iPura® seal is sold. The Social Media core tools: Facebook, Twitter, YouTube and Blogger are used to publicize iPura® within industry thought leaders and directly to consumers.

Processor and Distribution Agreements

We have executed contracts for the installation of our iPura® Systems with three seafood processors, two in Vietnam and one in China. Two systems have been installed, one at the processor in China and with one of the processors in Vietnam. All of the current agreements are structured pursuant to our “importer” model, 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 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. In one instance, 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.

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 to date. There is a second iPura® System located at this same processor in China that is available for future installation if sales levels require it. We have also completed installation of a larger iPura® System with one processor in Vietnam. This unit is not yet in production, although we expect it to be by the end of fiscal year 2011.

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. With this “importer” sales model, 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. The marketing focus is now on the private label business with these same retailers and is expected to require much less inventory carrying cost and to yield an assured gross profit with a cost plus pricing model.

Liquidity and Capital Resources

Historically, our primary source of cash has been the sale of equity instruments to investors, with debt financings from time to time as well. Although we expect to generate increasing revenue from increased sales of seafood processed with our 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, 2011, we are in need of immediate additional financing to fund our current working capital requirements. Furthermore, we believe that we will need approximately $3 million to manufacture iPura® Systems and cover operating expenses during the next twelve months, in addition to a financing vehicle or a line of credit 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, 2011, we had trade indebtedness in the ordinary course of business as well as other debt in the form of continuing short term loans of $640,000 from a Director and a shareholder due on demand, and one-year notes from a third party in the amount of $246,000, due in 2011.

On November 22, 2010, a company in the United Kingdom loaned the Company $1,300,000 on a six month note bearing interest at 18% per year. The note has been extended for an additional six months. Interest is payable at maturity in shares of Company common stock at the rate of $2.25 per share and is recorded as current interest expense. At the sole option of the lender, the principal may also be converted into shares of Company common stock at the rate of $2.25 per share. Pursuant to a security agreement, the Note is secured by all of the assets of the Company and is subordinate to the 2006 related party note of $250,000. Currently, we do not have the ability or resources to repay such loans if a demand is made for repayment in full. In such event, this secured lender could foreclose on all of our assets as part of its security interest.

As an alternative to commercial trade financing, leasing and factoring, we previously instituted our own form of trade finance 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%. In September 2010, the equipment financing program was discontinued and the remaining equipment financing debt of $97,000 was converted to trade financing debt. The funds are received and controlled by a third party custodian to be disbursed only for third party costs of inventory. At September 30, 2011, the Company had $1,005,797 in trade financing debt on one year notes. They mature on their anniversaries throughout the year and based on past renewal activity we expect that the majority will be renewed upon maturity.

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 critical to fund the distribution of our products and generate 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 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, with sales of $343,179 recorded for the year ended December 31, 2009. In the quarter ended September 30, 2011, sales were $5,936, all of which were to The Meat Market, a regional distributor. In the comparable quarter in 2010, sales were $107,374 of which 39% were to Safeway, Inc. This constitutes a decrease of 98% , which is attributable to the absence of sales to Safeway and Inland Seafood during the quarter ended September 30, 2011.

For the nine months ended September 30, 2011 the decrease was 88% compared to the nine month period ended September 30, 2010, with $933,255 in sales during the nine month period in 2010 and sales of $107,374 during the comparable nine months period in 2011. While we expect sales to Safeway and Inland to resume with the introduction of our private label program, the non-Safeway sales have been minimized until adequate margins can be anticipated with the introduction of iPura® branded product in a new two pound package. We are emphasizing a cost plus pricing approach with the private label program that we believe will allow us to recapture warehousing and transportation costs, which previously undermined margins realized. Our gross margin for the three months ended September 30, 2010 was $162 (3%) compared to $5,672 in the comparable 2010 quarter on much reduced volume reflecting the narrow margins to smaller distributors caused by high warehousing and transportation costs. We anticipate our margins to improve further as the private label / cost plus pricing is implemented in the larger retailers and distributors.

Expenses:

Our net loss for the quarter ended September 30, 2011 was $1,007,592, compared to $857,948 for the comparable quarter in 2010, a $149,644 increase. The additional loss can be attributable to the non-cash charge to G&A for common stock issued for services as a one time bonus to our employees in China. The increase in G&A was $165,000 or 57%. This is partially offset by a reduction in marketing spending of $78,000 or 29%. R&D expense and depreciation expense remained relatively flat. Interest expense increased between the three month periods by $63,000, attributable to the non-cash accrual for the $1,300,000 convertible note. For the nine months ended September 30, 2011, the loss increased 8% over the comparable 2010 period, from $2,689,786 to $2,904,948, due to the increase in G&A, R&D and interest expenses not fully offset by a reduction on marketing expense.

The stability of the net loss between the nine month comparative periods is a combination of an approximate 27% ($244,000) decrease in Marketing expenses due to a reduction in print and collateral materials from the 2010 period as well as the non repeat of non cash common stock issuances for services. Research and Development spending increased 26% ($157,000) primarily due to spending on costs to to upgrade the design of the iPura hardware system as well as significant spending on the evaluation of an improved antimicrobial solution. Interest expense increased by 199% ($206,000), representing the increased level of short term financing between the periods. The new interest component for the convertible note of $1,300,000 is $58,500 per quarter, but is accrued and not payable in cash but in common stock at maturity.

Depreciation expense remained relatively constant between both the comparable three and six month periods, with only one iPura system having been installed and depreciated, but will increase as additional systems are installed. Interest expense increased approximately 199% between the three month comparative periods reflecting the new debt of $1,300,000 with an interest rate of 18%, which is payable only in common stock. The cash used in operations increased by approximately 42% from $1,600,514 to $2,269,207 between the nine month periods ended September 30, resulting from a substantial pay-down in 2011 of accounts payable and accrued liabilities utilizing the debt financing received late in 2010 and early 2011.

Off Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Customer and Supplier Concentration

Our revenue for the three months ended September 30, 2011 was derived from a single customer, The Meat Market. We expect this customer concentration with The Meat Market as well as Inland Seafood and Safeway, Inc. to continue in the short-term as we seek to expand our sales with these major customers, but anticipate that customer concentration will eventually begin to decline if we are able to expand our customer base and effectively market and brand iPura.

All of our inventory for the quarter ended September 30, 2011 was derived from one supplier at its processing plant in China. As described above, subject to financial resources and obtaining purchase orders, we anticipate purchasing and processing additional inventory from another supplier located in Vietnam by the fourth quarter of 2011. Therefore, we anticipate continued dependence upon a very small number of suppliers. The future loss of any major customer or supplier could have a material adverse effect on our business, financial condition and results of operations.

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 material weakness has been due to our limited number of personnel and, therefore, segregation of duties.

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 to finance inventory costs, and the terms on which we will be able to obtain this financing, if at all;

·	whether we will be able to charge a premium for our products and generate adequate gross margins on our sales;

·	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 dependence on a small number of customers and suppliers;

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

·	our ability to obtain brand related premium pricing to yield an acceptable sales margin;

·	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, our customers and 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.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

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.

During the three months ended September 30, 2011, a total of 9,993 shares of common stock and 9,993 warrants to purchase common stock were issued in a private placement for total proceeds of $34,974.

During the three months ended September 30, 2011, we also issued a total of 59,200 shares of common stock for services received from consultants and employees in China, valued at $133,200.

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, 2011, 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. However, as noted above under “Liquidity and Capital Resources” in Part I, Item 2, we have certain notes that are due upon demand, and we do not currently have the resources to repay such notes if demands for immediate payment in full were made.

ITEM 4. REMOVED AND RESERVED

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 has 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)	Restated Certificate of Incorporation dated October 18, 2005.
3.2 (1)	Second Amended and Restated Bylaws as of August 31, 2005
3.4 (2)	Certificate of Designation of Rights, Preferences and Privileges – Series B Preferred Stock
3.5 (3)	Certificate of Designation of Rights, Preferences and Privileges – Series C Preferred Stock
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

101.INS ‡‡		XBRL Instance Document

101.SCH ‡‡		XBRL Taxonomy Schema

101.CAL ‡‡		XBRL Taxonomy Calculation Linkbase

101.DEF ‡‡		XBRL Taxonomy Definition Linkbase

101.LAB‡‡		XBRL Taxonomy Label Linkbase

101.PRE ‡‡		XBRL Taxonomy Presentation Linkbase

*	Filed herewith
‡	Furnished herewith
‡‡	XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

(1) Filed on November 23, 2005 as an exhibit to our Quarterly Report on Form 10-QSB for the quarterly period ended September 30, 2005 and incorporated herein by reference.

(2) Filed on July 15, 2009, as an exhibit to our Report on Form 8-K and incorporated herein by reference.

(3) Filed on December 11, 2009, as an exhibit to our Report on Form 8-K 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 5, 2011	By: /s/ Keith Meeks
	Keith Meeks, President and
	Chief Executive Officer
	(PRINCIPAL EXECUTIVE OFFICER)


Dated: November 5, 2011	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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