NETFONE INC - FORM 10-Q - November 21, 2011

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2011

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to ________

Commission File No. 000-52317

ITP Energy Corporation

(Exact name of registrant as specified in its charter)

Nevada	98-0438201
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

Via Federico Zuccari, 4, Rome, Italy 00153

(Address of principal executive offices) (zip code)

+ 39 (06) 5728 8176

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

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 [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	[ ]		Accelerated filer	[ ]
Non-accelerated filer	[ ]	(Do not check if a smaller reporting company)	Smaller reporting company	[X]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Check whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after distribution of securities under a plan confirmed by a court. Yes [ ] No [ ]

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: As of November 15, 2011, there were 36,107,500 shares of common stock outstanding.

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements	4

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33

Item 4.	Controls and Procedures	35

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	36

Item 1A.	Risk Factors	36

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36

Item 3.	Defaults Upon Senior Securities	36

Item 4.	(Removed and Reserved)	36

Item 5.	Other Information	36

Item 6.	Exhibits	36

SIGNATURES		37

Forward Looking Statements

This Quarterly Report on Form 10-Q (this “Report”) contains some forward-looking statements. Forward-looking statements give our current expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historical or current facts. Forward-looking statements are generally identifiable by use of the words “may,” “will,” “should,” “anticipate,” “estimate,” “plans,” “potential,” “projects,” “continuing,” “ongoing,” “expects,” “management believes,” “we believe,” “we intend,” or the negative of these words or other variations on these words or comparable terminology. These statements may be found under “Management's Discussion and Analysis of Financial Condition and Results of Operations”, as well as in this Report generally. In particular, these include statements relating to future actions, prospective product approvals, future performance or results of current and anticipated sales efforts, expenses, the outcome of contingencies such as legal proceedings, and financial results.

These forward-looking statements include, among other things, statements relating to:

our business being exposed to risks associated with the weakened global economy and political conditions;

the illegal behavior by any of our employees or agents could have a material adverse impact on our consolidated operating results, cash flows, and financial position as well as on our reputation and our ability to do business;

operations in emerging markets expose us to risks associated with conditions in those markets;

our undertaking long-term, fixed price or turnkey projects exposes our businesses to risk of loss should our actual costs exceed our estimated or budgeted costs;

our international operations expose us to the risk of fluctuations in currency exchange rates;

our discussions of accounting policies and estimates;

increases in costs or limitation of supplies of raw materials may adversely affect our financial performance;

indicated trends in the level of oil and gas exploration and production and the effect of such conditions on our results of operations;

future uses of and requirements for financial resources (see “—Liquidity and Working Capital”);

impact of bookings on future revenues and anticipated backlog levels;

our anticipated growth strategies and our ability to manage the expansion of our business operations effectively;

our ability to maintain or increase our market share in the competitive markets in which we do business;

our ability to keep up with rapidly changing technologies and evolving industry standards, including our ability to achieve technological advances;

our ability to diversify our services and product offerings and capture new market opportunities;

our ability to source our needs for skilled labor, machinery and raw materials economically;

the loss of key members of our senior management; and

uncertainties with respect to legal and regulatory environment.

Any or all of our forward-looking statements in this Report may turn out to be inaccurate, as a result of inaccurate assumptions we might make or known or unknown risks or uncertainties. Therefore, although we believe that these statements are based upon reasonable assumptions, including projections of operating margins, earnings, cash flows, working capital, capital expenditures and other projections, no forward-looking statement can be guaranteed. Our forward-looking statements are not guarantees of future performance, and actual results or developments may differ materially from the expectations they express. You should not place undue reliance on these forward-looking statements. Actual results may differ materially from those in the forward-looking statements contained in this Report for reasons including, but not limited to: market factors such as pricing and demand for petroleum related products, the level of petroleum industry exploration and production expenditures, the effects of competition, the availability of a skilled labor force, world economic conditions, the level of drilling activity, the legislative environment in the United States and other countries, energy policies of OPEC, conflict involving the United States or in major petroleum producing or consuming regions, acts of war or terrorism, technological advances that could lower overall finding and development costs for oil and gas, weather patterns and the overall condition of capital markets in countries in which we operate.

Information regarding market and industry statistics contained in this Report is included based on information available to us which we believe is accurate. We have not reviewed or included data from all sources, and cannot assure stockholders of the accuracy or completeness of this data. Forecasts and other forward-looking information obtained from these sources are subject to these qualifications and the additional uncertainties accompanying any estimates of future market size, revenue and market acceptance of products and services.

These statements also represent our estimates and assumptions only as of the date that they were made and we expressly disclaim any duty to provide updates to them or the estimates and assumptions associated with them after the date of this filing to reflect events or changes in circumstances or changes in expectations or the occurrence of anticipated events.

We undertake no obligation to publicly update any predictive statement in this Report, whether as a result of new information, future events or otherwise. You are advised, however, to consult any additional disclosures we make in reports we file with the SEC on Form 10-K, Form 10-Q and Form 8-K.

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

Consolidated Condensed Balance Sheets

ASSETS	Periods Ended
	September 30, 2011			December 31, 2010
	(Unaudited)			(Audited)
	(in USD thousand)

Cash and cash equivalents	$	3,938		$	11,934
Marketable securities		3,448			3,425
Accounts receivable, net of allowance for doubtful accounts		41,323			19,918
Inventory		19,767			14,788
Prepaid expenses and other current assets		4,733			4,707
Deferred income taxes		1,118			392
Total Current Assets		74,326			55,165

Property, plant and equipment, net		16,097			15,952
Intangible assets
Goodwill		6,578			6,509
Other intangible assets		69			104
Other assets		711			773
Total Assets	$	97,782		$	78,503


LIABILITIES AND STOCKHOLDERS' EQUITY	Periods Ended
	September 30, 2011			December 31, 2010
	(Unaudited)			(Audited)
Current Liabilities	(in USD thousand)
Accounts payable and accrued expenses	$	27,385		$	26,911
Taxes payable		3,198			3,195
Current portion of:
Unearned revenue		99			-
Advances received from customers		12,550			2,535
Financial debt		24,673			13,105
Other liabilities		3,270			2,784
Total Current Liabilities		71,176			48,531

Financial debt, net of current portion		15,648			20,395
Other liabilities		123			682
Post-employment benefits obligation		1,392			1,418
Total Liabilities		88,339			71,026

Equity
Capital stock		36			34
Additional paid-in capital		7,229			7,292
Accumulated other comprehensive income		(70	)		(119	)
Retained earnings		2,247			271
Total Equity		9,443			7,477

Total Liabilities and Stockholders' Equity	$	97,782		$	78,503

See Notes to Consolidated Condensed Financial Statements

Consolidated Condensed Statements of Income and Comprehensive Income

Three-month period ended September 30, 2011 and 2010

	Three months periods ended
	September 30, 2011			September 30, 2010
	(Unaudited)			(Unaudited)
	(in USD thousand)

Total Sales	$	15,167		$	15,759

Costs of Sales		10,811			12,040

Gross Profit		4,356			3,720

Selling, general and administrative expenses		2,598			2,095
Provision for doubtful accounts		-			230
Other operating costs		110			422
Total Operating Expenses		2,708			2,746

Operating Income		1,647			973

Interest expense		(252	)		(377	)
Income before Income Taxes		1,395			596

Income tax		(652	)		(218	)

Net Income		743			378

Currency translation adjustment (Net of tax of $159, (134), thousand for three months ended September 30, 2011, 2010)		(501	)		411
Unrealized gain (AFS Securities)		-			1

Comprehensive income	$	242		$	790

Basic earnings per share	$	0.00001		$	0.00003
Weighted average number of shares outstanding		36,107,500			28,067,769

See Notes to Consolidated Condensed Financial Statements

Consolidated Condensed Statements of Income and Comprehensive Income

Nine-month period ended September 30, 2011 and 2010

		Nine-months period ended
		September 30, 2011			September 30, 2010
		(Unaudited)			(Unaudited)
		(in USD thousand)

Total Sales	$	46,027		$	41,940

Costs of Sales		33,101			31,954

Gross Profit		12,925			9,986

Selling, general and administrative expenses		8,029			6,159
Provision for doubtful accounts		-			891
Other operating costs		409			989
Total Operating Expenses		8,438			8,038

Operating Income		4,488			1,948

Interest expense		(1,753	)		(753	)
Income before Income Taxes		2,735			1,194

Income tax expense		(758	)		(436	)

Net Income of the period		1,977			758

Currency translation adjustment (Net of tax of $(10), (15), thousand as of September 30, 2011, 2010)		40			32
Unrealized gain (AFS Securities) (Net of tax of $(3), (3), thousand as of September 30, 2011, 2010)		9			9

Comprehensive income	$	2,026		$	799

Basic earnings per share	$	0.0001		$	0.00003
Weighted average number of shares outstanding		35,193,217			27,586,029

See Notes to Consolidated Condensed Financial Statements

Consolidated Condensed Statements of Cash Flows

Nine-month period ended September 30, 2011 and 2010

			Nine months period ended
			September 30, 2011			September 30, 2010
			(Unaudited)			(Unaudited)
			(in USD thousand)

Net income of the period			$	1,977		$	758

Adjustments to reconcile net income to net cash provided by Operating Activities
	-	Depreciation and amortization		1,081			694
	-	Provision for doubtful accounts		-			891

Change in assets and liabilities:
	-	(Increase) in inventory		(5,023	)		(5,992	)
	-	(Increase) in accounts receivables		(11,540	)		(4,118	)
	-	(Increase) in other assets		(471	)		(383	)
	-	Increase in accounts payable and accrued expenses		198			5,763
	-	Increase (decrease) in other liabilities		(140	)		308
	-	(Decrease) in deferred tax liability		(183	)		(768	)
	-	Increase (decrease) in post-employment benefit obligations		(42	)		448
	-	Increase (decrease) in income tax payable		(33	)		353
	-	(Decrease) in other non current liabilities		-			(72	)

Net Cash (used in) provided by Operating Activities (A)			$	(14,175	)	$	(2,117	)

Investing Activities
	-	Capital expenditures		(1,021	)		(12,361	)
	-	Investment in markatable securities		-			(452	)

Net Cash used in Investing Activities (B)			$	(1,021	)	$	(12,813	)

Financing Activities
	-	Principal payment of long-term debt		(3,270	)		(3,023	)
	-	Proceeds from issuance of long-term debt		10,006			25,635
	-	Cash absorbed by noncontrolling interests		-			(1,571	)

Net Cash provided by Financing Activities (C)			$	6,736		$	21,041

Effect of change in foreign currency on cash and cash equivalents (D)			$	463		$	562

Net increase (decrease) in cash and cash equivalents (A+B+C+D)				(7,996	)		6,674

Cash and cash equivalents at the beginning of the period (E)				11,934			2,893

Cash and cash equivalents at the end of the period (A+B+C+D+E)			$	3,938		$	9,567

Supplemental disclosures of cash flow information

Cash paid during the period
Interest				1,332			647
Income taxes				818			938

See Notes to Consolidated Condensed Financial Statements

ITP ENERGY CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

1. Basis of Presentation

Description of Business

ITP Energy Corporation and its subsidiaries (collectively the “Company” or “Group”), is a manufacturer and supplier of equipment to the Oil & Gas Industry.

The Group is involved in the production of items (i.e. mainly ball valves) and equipment (i.e. mainly pressure vessels), in the engineering and construction of skid packages and in the construction of small plants for the separation and treatment of Oil & Gas.

The Group has three production plants in Italy (Moscazzano, Ravenna and Cassina De’ Pecchi), one in the U.S. (Kilgore – Texas) and one in Brno (Czech Republic).

2. Summary of Significant Accounting Policies

General

The Company’s Consolidated Financial Statements are prepared in U.S. Dollars and in accordance with generally accepted accounting principles in the United States of America (“GAAP or US GAAP”) issued by the Financial Accounting Standards Board (FASB).

The interim operating results are not necessarily indicative of results to be expected for the entire year. For the period ended September 30, 2011, the Company has used the same significant accounting policies and estimates for the year ended December 31, 2010.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the 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. These estimates are based on management's best knowledge of current events and actions the Company may undertake in the future. Due to the very nature of the Company’s operations and the many countries it operates in, the Company is undeniably subject to changing economic, regulatory and political conditions. Actual results may ultimately differ from the estimates.

The significant estimates made by management relate to the useful lives of assets, realization of deferred tax assets, valuation of goodwill, assumptions related to asset retirement obligations. Changes in estimates are reported in earnings in the period in which they become known.

Unless otherwise indicated, any reference herein to “Consolidated Condensed Financial Statements” is to the Consolidated Condensed Financial Statements of the Group (including the Notes thereto).

Basis of Consolidation

The Consolidated Financial Statements include the accounts of subsidiaries more than 50% owned and variable-interest entities in which the Company is the primary beneficiary.

The principles of Accounting Standards Codification (“ASC”) No. 810, Consolidation are considered when determining whether an entity is subject to consolidation.

Intercompany balances and transactions are eliminated in consolidation.

The following table contains the list of the Company’s subsidiaries, consolidated in 2011 and 2010:

Subsidiary	Country of Incorporation	Company’s controlling interests (%)	Functional Currency

ITP Benelli S.p.A.	Italy	100%	Euro
ITP Chartering S.r.l.	Italy	99%	Euro
ITP Group Brno s.r.o.	Czech Republic	100%	CZK
ITP Real Estate LLC	USA	100%	USD
ITP Surface Equipment PTE Ltd	Singapore	100%	USD
Vignati Fitting S.r.l.	Italy	100%	Euro
Surface Equipment Corporation (“SEC”)	USA	100%	USD

Notes to the table above:

· ITP Benelli S.p.A.

On April 29, 2011 ITP Energy Corporation, formerly Netfone Inc., completed a share exchange transaction whereby it acquired 100% of ITP Benelli S.p.A., together with its subsidiaries and then transferred 94% of its stock to ITP Oil & Gas International S.A. (“ITP Lux”), a corporation existing under the laws of Luxembourg. The share exchange transaction was accounted for as a reverse acquisition and, as a result, ITP Energy Corporation’s (the legal acquirer) consolidated financial statements are those of ITP Benelli S.p.A. (the accounting acquirer), with the assets and liabilities, and revenues and expenses of ITP Energy Corporation being included from the date of the closing of the share exchange transaction.

· ITP Group Brno S.r.o.

ITP Group Brno S.r.o. was acquired on January 20, 2010 and consolidated starting from this date.

· ITP Surface Equipment PTE Ltd.

The subsidiary ITP Surface Equipment PTE Ltd., is a dormant company which is held in order to undertake future strategic commercial plans in Asia.

The following table sets forth, for the periods indicated, the information regarding the U.S. $/EUR exchange rate, rounded to the second decimal:

Period ended,	Average		At period end

December 31, 2009		1.38		1.44
June 30, 2010		1.23		1.33
September 30, 2010		1,32		1,36
December 31, 2010		1.34		1.33
June 30, 2011		1.40		1.45
September 30, 2011		1,41		1,35

Fair Value of Financial Instruments

Due to the short-term nature of cash and equivalents, accounts receivable and accounts payable, the carrying value of these instruments approximates their fair value.

Short-Term Investments

All short-term investments are classified as available for sale and are in highly liquid debt securities. The balance of the short-term investments is reported as “Marketable securities” and is marked-to-market, with any unrealized gains or losses included in “Other comprehensive income.”

Inventories

Inventories are valued at the lower of cost or market, with cost being determined using the weighted average cost method. Production inventory costs include material, labor and factory overhead. The Company records inventory allowances based on excess and obsolete inventories.

With regards to work in progress, earnings are recorded on a percentage-of-completion basis, except for the subsidiary SEC, which accounts for the long term agreements using the completed contract method.

Work in progress recognized includes direct and indirect costs associated to the construction contracts.

Under the percentage-of-completion method, contract revenues and total cost estimates are reviewed and revised periodically as work progresses. Revenues are computed by multiplying total estimated contract revenue by the percentage of completion (as determined by the cost-to-cost method). The excess of the amount over the earned revenue reported in prior periods is the earned revenue that is recognized in the income statement for the current period.

The subsidiary SEC uses the completed contract method because SEC has primarily short-term contracts for which reasonable dependable estimates cannot be made. Moreover, since SEC has primarily short-term contracts, the financial position and results of operations would not vary materially from those resulting from use of the percentage-of-completion method.

Provisions for losses are recognized when the estimated cost for the contract exceeds estimated revenue and are recognized in the period in which they become evident. The provisions for losses are recognized in the income statement as additional contract costs rather than as a reduction of contract revenue.

Property, plant and equipment

Property, plant and equipment are carried at cost and are depreciated using the straight-line method over estimated lives which range from 2 to 30 years. Expenditures for maintenance (including those for planned major maintenance projects), repairs and minor renewals to maintain facilities in operating condition are generally expensed as incurred. Major replacements and renewals are capitalized.

Upon sale or disposal, the cost and related accumulated depreciation are eliminated from the respective accounts and any resulting gain or loss is reported as income or expense, respectively.

Impairment of Long-Lived Assets

The Company records impairment losses on long-lived assets when events and circumstances indicate that the assets might be impaired and their estimated undiscounted cash flows are less than their carrying amount. In this case, the Company records an impairment loss equal to the difference between the fair value of the long-lived assets and their carrying amount. No impairment was recorded in the first three quarters of 2011 and during 2010.

Goodwill and Intangible Assets

Goodwill is not depreciated, but is instead reviewed for impairment and written down and charged to results of operations only in the periods in which the recorded value of goodwill is more than its fair value. The Company records impairment losses on goodwill and other intangible assets based on an annual review of the value of the assets, or when events and circumstances indicate that the asset might be impaired and when the recorded value of the asset is more than its fair value. The Company’s estimates of fair value are based on its current operating forecast, which the Company believes to be reasonable. Significant assumptions that underline the fair value estimates include future growth rates and weighted average cost of capital rates. However, different assumptions regarding the current operating forecast could materially affect results.

Intangible assets include long-term patents, brands and software and are amortized on a straight-line basis over the estimated economic useful lives of the assets.

Foreign Currency Translation

The U.S. dollar is the reporting currency of the consolidated financial statements.

The Euro is the group functional currency. The consolidated financial statements have been prepared and translated according to ASC 830-30. Financial statements of companies having a functional currency other than the Euro are translated into the group functional currency, subsequently the consolidated financial statement have been translated into the reporting currency. Assets and liabilities have been translated at the currency exchange rates as of the related year and, the equity at the historical exchange rates the profit and loss account at the average rates for the period.

Revenue Recognition

Revenue is recognized when it is realized or realizable and earned. The Company recognizes revenues when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable, and collectability is reasonably assured. Revenues are recognized from product sales when title and risk of loss has passed to the customer consistent with the related shipping terms, generally at the time products are shipped. Shipping costs and handling fees are included in net revenues and cost of sales.

Refer to the description in the “Inventories” for the accounting of long-term contracts.

Warranty Expenses

The Company currently provides for the estimated costs that may be incurred under product warranties. Warranty provisions are recorded at the time of sale based upon the Company’s historical experience and anticipated future claims. The Company assesses the adequacy of its pre-existing warranty liabilities and adjusts the amounts as necessary based on actual experience and changes in future estimates.

Income Taxes

The Company recognizes deferred tax assets and liabilities based on differences between financial statement and tax bases of assets and liabilities using presently enacted tax rates. At each period-end, the Company assesses the recoverability of its deferred tax assets by reviewing a number of factors including operating trends, future projections, and taxable income to determine whether a valuation allowance is required to reduce such deferred tax assets to an amount that is more likely than not to be realized.

Employee Benefit Plan

Employee Benefit Plans are accrued in accordance with Accounting Standard Codification (“ASC”) No. 715, Retirement Benefits.

The employee leaving indemnity in Italy is called “Trattamento di Fine Rapporto” (“TFR”) and represents deferred compensation for employees. Under Italian law, an entity is required to accrue for TFR on an individual employee basis payable to each individual upon termination of employment (including both voluntary and involuntary dismissal). The annual accrual is 7.41% of total pay, with no cap, it is revalued each year by applying a pre-established rate of return of 1.50%, plus 75% of the Consumer Price Index.

The subsidiaries’ employees in the U.S., Singapore and Czech Republic do not have any benefit or retirement plans.

Cash and Cash Equivalents

All highly liquid instruments purchased with maturities of three months or less are considered to be cash equivalents.

Derivative Instruments and Hedging Activities

The Company accounts for derivative financial instruments in accordance with ASC 815 Derivatives and Hedging. ASC 815 established accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging contracts. All derivatives, whether designated in hedging relationships or not, are recorded on the balance sheet at fair value. If the derivative is designated as a cash flow hedge, the effective portions of changes in the fair value of the derivative are recorded in other comprehensive income and are recognized in the consolidated statement of income when the hedged item affects earnings. Changes in the fair value of derivatives that qualify as fair value hedges, along with the change in the fair value of the hedged risk, are recognized in other expense — net, as they occur. Changes in the fair value of derivatives that do not qualify for hedge treatment, as well as the ineffective portion of qualifying hedges, are recognized in income as they occur. The Company has only one derivative instrument consisting of a swap on interest rates.

Comprehensive (Loss) Income

The Company’s comprehensive (loss) income is comprised of net income, foreign currency translation gains and losses, and changes in unrealized gains and losses on investments. The Company does not accrue tax on its foreign currency translation gains and losses, as any undistributed earnings of foreign subsidiaries are deemed to be permanently reinvested in the applicable foreign subsidiary. Comprehensive (loss) income is reflected in the consolidated statement of stockholders’ equity.

Research and Development

The Group has not incurred any research and development expenses during the nine-month period ended September 30, 2011 and in the year ended December 31, 2010.

3. Significant subsequent events

After September 30, 2011, the Group has subscribed an agreement in Azerbaijan to develop projects in the Caspian area. In October 2011 the Group has also invested in the Singapore area, acquiring a land in Batam for an amount of approximately $ 600 thousand.

In October the Company has entered into a cooperation commercial agreement with Akkord Industry Construction Corporation in Baku and according to this agreement two new letters of intent are in process of being formalized. One related to design and supply of equipment for carpentry and pressure vessels in Baku (total amount of approximately Euro 25 million) and another for the completion of a cement plant in Gazic (total amount of approximately Euro 60 million). Study and planning activities have been already started on October 17 and the customer is requiring that both operations are completed by 2012.

The subsequent events have been evaluated up to the date these condensed financial statements were issued (November 15th, 2011).

4. Segment information

The Company has only one operating segment as none of the conditions listed in ASC 280-10 are met to identify more than one operating segment.

The chief operating decision maker (“CODM”) views, treats and takes decisions considering the Company as a single operating entity as its activities have common target clients, plants, basic characteristics, engaged employees. As a result no disaggregated or discrete financial information and operating results are available. Furthermore there is no concentration of customers.

Below is an analysis of revenue for the periods ended as of September 30, 2011 and September 30, 2010 by product and by geographic area.

Revenues (USD Thousand)	Three-month period ended September 30,				Nine-month period ended September 30,
Operating segment	2011		2010		2011		2010
Equipments	$	912	$	5,518	$	2,796	$	14,686
Skid & Packages		9,342		10,241		28,165		27,254
Small O&G plants		4,913		-		15,066		-
Total	$	15,167	$	15,759	$	46,027	$	41,940

Revenues (USD Thousand)	Three-month period ended September 30,				Nine-month period ended September 30,
Country	2011		2010		2011		2010
Italy	$	2,625	$	4,190	$	5,906	$	11,151
Belarus & Kasakhstan		3,137		-		13,290		-
Rest of Europe		4,020		1,580		7,683		4,205
Egypt & Middle East		3,756		4,577		6,168		7,197
USA		358		2,454		9,308		11,515
Far east		620		2,847		2,566		7,577
Other		651		111		1,106		295
Total	$	15,167	$	15,759	$	46,027	$	41,940

As of September 30, 2011 the Group has one major customer that accounted for 10% or more of consolidated revenues, which was JSC Grodno Azot (Belarus) that accounted respectively for 11% of consolidate revenues. As of September 30, 2010 there were no customers that accounted for more than 10% of consolidated revenues.

In relation to property, plants and equipment, the only significant change compared to December 31, 2010 is related to the purchase of a property in Rome, Italy for an amount of $ 827 thousand.

5. Recent Accounting Pronouncements

· Intangibles, Goodwill and other (Topic 350), Testing Goodwill for Impairment (ASU 2011-08): The FASB issued ASU 2011-08 in September 2011. The amendments apply to all entities that have goodwill reported in their financial statements. The amendments are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted, including for annual and interim goodwill impairment tests performed as of a date before September 15, 2011, if an entity’s financial statements for the most recent annual or interim period have not yet been issued or, for nonpublic entities, have not yet been made available for issuance. The Company is currently evaluating the impact of this amendment on the Company’s consolidated financial statements.

· Comprehensive Income (Topic 220), Presentation of Comprehensive Income (ASU 2011-05): The FASB issued ASU 2011-05 in June 2011. The ASU affects all entities that report items or other comprehensive income in any period presented. The amendments should be applied retrospectively. For public entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. Early adoption is permitted and no transition disclosure is required. The Company is currently evaluating the impact of this accounting standard on the Company’s consolidated financial statements.

· Fair Value Measurement (Topic 820), Amendments to Achieve Common Fair Value Measurement and Disclosure in U.S.GAAP and IFRSs (ASU 2011-04): The FASB issued ASU 2011-04 in May 2011. The ASU affects reporting entities that are required or permitted to measure or disclose the fair value of an asset, a liability, or an instrument classified in a reporting entity’s shareholders’ equity in the financial statements. The ASU is effective prospectively during interim and annual periods beginning after December 15, 2011 for public entities. Early application is not permitted. The Company is currently evaluating the impact of this accounting standard on the Company’s consolidated financial statements.

6. Statement of Cash Flows

The Consolidated Condensed Statement of Cash Flows is prepared according to the indirect method and considers only bank deposits as cash and cash equivalents. It excludes changes to the Consolidated Balance Sheets that did not affect cash.

7. Goodwill

As of September 30, 2011 Goodwill shows a balance of $ 6,578 thousand. The variation comparing September 30, 2011 and December 31, 2010 is only due to the currency translation effect, for an amount of $ 69 thousand.

The Company evaluates all goodwill for impairment on an annual basis, or more often if impairment indicators are present. As of September 30, 2011 and December 31, 2010, the Company has not recognized any goodwill impairment charges.

8. Property, Plant and Equipment

Property, plant and equipment as of September 30, 2011 and December 31, 2010 amounts to $ 16,097 thousand and $ 15,952 thousand respectively.

The increase comparing September 30, 2011 to December 31, 2010 is related to the combined effect of the purchase of the headquarter office, located in Rome (Italy), Via Federico Zuccari, for an amount of $ 827 thousand and the depreciation process.

The headquarter, previously owned by the President, CEO, CFO of ITP Benelli and ITP founder, Mr. Mazziotti di Celso, has been purchased for an amount determined using the fair value of comparable properties in Rome.

In the three-months period ended September 30, 2011 the Group has recognized a total depreciation of $ 305 thousand, while the depreciation recognized in the nine-month period ended September 30, 2011, was $ 1,081 thousand.

In accordance with US GAAP, the Group separated the land included in the value of properties from the related asset. Land, considered to have an indefinite useful life, is not subject to depreciation.

The plants located in Moscazzano (Cremona – Italy) and Cassina De’ Pecchi and the land in Monte Cremasco are subject to a mortgage and the plant located in Milano, “Via Stefini”, is subject to a pledge. They guarantee the bank loans received.

9. Inventories

Inventories as of September 30, 2011 and December 31, 2010 are the following:

Inventory	Periods ended
USD thousand	September 30, 2011		December 31, 2010
Finished goods	$	401	$	-
Work in progress		17,622		12,768
Raw materials		1,743		2,020
Total inventory	$	19,767	$	14,788

Work in progress duration is not standard, but generally is from 6 months to 2 years. Construction contracts included in work in progress as of September 30, 2011 and December 31, 2010 have starting dates after 2009 and ending dates no later than 2012.

The work in progress balance presentation is net of prepayments received.

Prepayments are cash payments made by the customers as indicated in our contracts upon achievement of specific contract milestones. Contracts specify the right to offset such prepayments with work in progress after approval by our clients.

The amount of prepayments as of September 30, 2011 and December 31, 2010 is not material.

Raw materials include the minimum equipment stock to ensure an efficient execution of construction contract operations without delays.

10. Accounts receivable

Accounts receivable as of September 30, 2011 and December 31, 2010 amount respectively to $ 41,323 thousand and $ 19,918 thousand.

A provision is applied against the full (or partial) amount of the foregoing receivables deemed uncollectable. The Group has not recognized any provision during the nine-month period ended September 30, 2011, while the provision for doubtful accounts recognized during the nine-month period ended September 30, 2010 was $ 891 thousand. The provision recognized during the three-months ended September 30, 2010 was $ 230 thousand.

The variation of the allowance for doubtful accounts is the following:

Allowance for doubtful accounts
USD thousand

Balance as of December 31, 2009	$	1,664
Charged to costs and expenses		876
Deductions
Currency traslation effect		9
Balance as of December 31, 2010	$	2,549
Charged to costs and expenses		-
Deductions
Currency traslation effect		72
Balance as of September 30, 2011	$	2,621

11. Marketable Securities

The Group calculates fair value for its marketable securities based on quoted market prices for assets and liabilities. As of September 30, 2011 and December 31, 2010 the fair value was respectively, $ 3,448 thousand and $ 3,425 thousand.

12. Derivatives

The Company has entered into an agreement referred to as an interest rate swap, in order to reduce the impact of changes in interest on variable rates debt. The interest rate swap agreement outstanding as of September 30, 2011, which was for an aggregate notional amount of $ 1,202 thousand, has expiration date on April, 2013.

At September 30, 2011, the fair value of the interest rate swap was a liability for the Group of approximately $ 1 thousand.

The swap has been designated as hedging instrument and, accordingly, the changes in fair value have been recorded in Other Comprehensive Income.

13. Cash and cash equivalents

Cash and cash equivalents as of September 30, 2011 and December 31, 2010, are summarized below:

Cash and cash equivalents	Periods ended
USD thousand	September 30, 2011		December 31, 2010
Cash	$	114	$	117
Banks deposits		3,823		11,817
Total cash and cash equivalents	$	3,938	$	11,934

In relation to the successful execution clause (called “performance bond”) included in most of project contract engagements, the Company has issued warranty letters to the customers concerned. The total amount of guarantees as of September 30, 2011 and December 31, 2010, amounts to $ 7,720 thousand and $ 7,917 thousand respectively. The Company does not expect to incur any losses in relation to these guarantees.

There are no cash or deposits subject to restrictions.

14. Prepaid expenses and deferred taxes

The balances of prepaid expenses and deferred taxes as of September 30, 2011 and December 31, 2010, are the following:

Prepaid expenses and other current assets	Periods ended
USD thousand	September 30, 2011		December 31, 2010
Deferred income taxes	$	1,118	$	392
Prepaid expenses		4,733		4,707
Total prepaid expenses and other current assets	$	5,851	$	5,099

Tax credits are mainly related to deferred taxes and account receivables for VAT.

Prepaid expenses include mainly deferred charges which are expenses or revenues which are accounted for in a later accounting period than the payment for an anticipated future benefit, or to comply with the requirement of matching costs with revenues. As of September 30, 2011 and December 31, 2010, there are no prepaid expenses with a life in excess of one year.

Prepaid expenses primarily include cash advances to contractors paid up-front, as part of the contracted price, in order to quickly start the projects, to employees to advance business travel expenses and to payments for insurance with a cost of competence of the subsequent fiscal year. The prepaid expenses above are not included in work in progress as they are not specifically related to the projects in progress.

15. Financial debt

Financial debt amounts to $ 40,321 thousand as of September 30, 2011 and $ 33,500 thousand as of December 31, 2010.

The Group’s debt obligation due within one year as of September 30, 2011 consists of the following:

Current portion of financial debt	Periods ended
USD thousand	September 30, 2011		December 31, 2010
Bank Loans	$	5,346	$	2,149
Advances from Banks on invoices and on contracts		18,483		10,777
Bank Overdrafts		182		-
Other financial liabilities		662		179
Total current portion of financial debt	$	24,673	$	13,105

Principal payments of bank loans, for the next 5 years are as follows:

Period ended,	Amount
USD thousand
September 30, 2012 (Current)	$	5,346
September 30, 2013		4,979
September 30, 2014		4,512
September 30, 2015		2,365
September 30, 2016		1,730
Thereafter		2,062
Total Bank loans	$	20,994

16. Current liabilities

Current liabilities as of September 30, 2011 and December 31, 2010 include the following:

Current Liabilities	Periods ended
USD thousand	September 30, 2011		December 31, 2010
Accounts payable and accrued expenses	$	27,385	$	26,911
Taxes payable		3,198		3,195
Current portion of:
Unearned revenues		99		-
Advances received from customers		12,550		2,535
Financial debt		24,673		13,105
Other liabilities		3,270		2,784
Total Current Liabilities	$	71,176	$	48,531

Accounts payable are accounted for net of commercial discounts. Cash discounts are recognized when the payment is made.

Tax payable is related to liabilities calculated on income before tax using the effective tax rate estimated for year end, after the offset of prepayments made during the period.

Advances received from customers are amounts received in advance from project contracts’ customers.

The current portion of long term debt is included above.

Other liabilities are mainly accruals for employee compensation (vacation accruals, salaries for the nine-month period ended September 30, 2011, social security liabilities and other minor payables).

17. Long-term liabilities

The non-current portion of financial debt due to banks amounts to $ 15,648 thousand at September 30, 2011, as disclosed above in note 15.

Post-employment benefits, which liability amounts to $ 1,392 thousand as of September 30, 2011, relates to amounts due to employees (“TFR”), as of the period end, after the offset of any advance payments made.

18. Shareholders’ Equity

Shareholders’ Equity as of September 30, 2011 and December 31, 2010, consists of the following:

Equity	Periods ended
USD thousand	September 30, 2011			December 31, 2010
Capital stock	$	36		$	34
Additional paid in capital		7,229			7,292
Accumulated other comprehensive income		(70	)		(119	)
Retained earnings		2,247			271
Total Equity	$	9,443		$	7,477

As discussed in paragraph 2 of note 2, “Basis of consolidation”, on April 29, 2011 ITP Energy Corporation, completed a share exchange transaction (the “Agreement”) whereby it acquired 100% of ITP Benelli S.p.A. together with its subsidiaries and then transferred 94% of its stock to ITP Lux.

The transaction was accounted for as a reverse acquisition. As stated in ASC 805 “Business Combination”, in a reverse acquisition the legal acquirer is treated as the accounting acquiree and the legal acquiree is treated as the accounting acquirer. For this reason, the consolidated condensed financial statements presented herein is the continuation of the accounting acquirer (ITP Benelli S.p.A.), adjusted to reflect the legal capital of the accounting acquiree.

The legal capital of ITP Energy Corporation at the date of the consummation of the agreement was constituted of 36.107.500 common shares of a par value of $ 0.001 each, for a value of capital stock of $ 36 thousand. The item “additional paid in capital”, in equity, reflects the difference between the capital stock of the accounting acquirer and that of the accounting acquiree, plus the fair value of the consideration transferred by the accounting acquiree.

The pre-combination comparative period presented, December 31, 2010, is also adjusted, for comparison purposes, to reflect number and value of the issued shares attributed to ITP Lux, equal to 34.000.000 of common stock for a total value of $ 34 thousand. As of December 31, 2010, the item “additional paid in capital” reflects the difference between the capital stock of the ITP Benelli S.p.A. and the value of the issued shares attributed to ITP Lux.

In May 2011, the Company issued unregistered common share purchase warrants (the “Warrants”) that assigns to the holders the right to purchase from ITP Energy Corporation a number of common shares of the Company at a fixed price. The Warrants will be exercisable starting May 20th, 2012 and will expire on April 29th, 2015. There are 1.083.226 common shares issuable under these Warrants.

19. Total sales

The majority of sales are generated by construction contracts engagements. Total revenues for the quarter ended September 30, 2011, compared to the same quarter of the preceding year, show a decrease of $ 592 thousand, or (4)%, ($ 15,167 thousand as of September 30, 2011 and $ 15,759 thousand as of September 30, 2010), while total revenues for the nine-month period ended September 30, 2011 and 2010 are $ 46,027 thousand and $ 41,940 thousand respectively, with an increase of 10%.

20. Cost of sales

Costs of sales (“COS”) for the three months period ended September 30, 2011 are equal to $ 10,811 thousand. Compared to the same quarter of the preceding year, cost of sales decreased by $ 1,228 thousand. For the nine-month period ended September 30, 2011 and 2010 COS are equal to $ 33,101 thousand and $ 31,954 thousand respectively, with an increase of 4%.

COS includes the depreciation and amortization that for the three-months period ended September 30, 2011 and 2010 were for an amount of $ 305 thousand and $ 256 thousand respectively and for the nine-month periods ended September 30, 2011 and 2010 were for an amount of $ 1,081 thousand and $ 694 thousand, respectively.

21. Operating expenses

Operating expenses for the three-month period ended September 30, 2011 and 2010 amount to $ 2,708 thousand and $ 2,746 thousand respectively, and include the following:

Operating Expenses	Three-months periods ended
USD thousand	September 30, 2011		September 30, 2010
Selling, general and administrative expenses	$	2,598	$	2,095
Provision for doubtful accounts		-		230
Other operating costs		110		422
Total Operating Expenses	$	2,708	$	2,746

For the nine-month period ended September 30, 2011 and 2010 operating expenses are equal to $ 8,438 thousand and 8,038 thousand respectively:

Operating Expenses	Nine-month periods ended
USD thousand	September 30, 2011		September 30, 2010
Selling, general and administrative expenses	$	8,029	$	6,159
Provision for doubtful accounts		-		891
Other operating costs		409		989
Total Operating Expenses	$	8,438	$	8,038

Selling, general and administrative expenses are mainly administrative personnel salaries including bonuses, promotions and the value of unclaimed holidays and other deferred benefits.

The provision for doubtful accounts has been determined as a result of an analysis of the collectability of accounts receivable and in accordance with the Group accounting policy. For the nine-month period ended September 30, 2011 the Group has not recognized any provision for doubtful accounts, while in the same period of the preceding year, the Company recognized a provision of $ 891 thousand. The provision recognized for the three-month period ended September 30, 2010 was $ 230 thousand.

Other operating costs are expenses related to business development, commercial activities, travel, and other nonrecurring general expenses.

22. Income taxes

The Company and its subsidiaries are subject to income taxes on an entity basis, on income arising in, or derived from, the tax jurisdiction in which they operate. Taxes on income for the nine-month period ended September 30, 2011 amount to $ 359 thousand and registered a decrease compared to the preceding year of $ 321 thousand.

The Company has revised some accounting estimates related to the year 2010. The change in accounting estimates has determined a higher level of costs in 2011 and a corresponding lower level of income taxes. This change has also determined an estimated effective tax rate for 2011 year-end of about 28%.

Income before provision for income taxes	Nine-month periods ended
USD thousand	September 30, 2011			September 30, 2010
Italian companies	$	2,880		$	2,129
US companies		(229	)		(782	)
Other foreign companies		85			(153	)
Total income before provision for income taxes	$	2,735		$	1,194

	Nine-month periods ended
USD thousand	September 30, 2011		September 30, 2010
Current
Italian companies	$	758	$	1,233
US companies		-		-
Other foreign companies		-		-
Total provision for current income taxes	$	758	$	1,233
Deferred
Italian companies		-		(532	)
US companies		-		(265	)
Other foreign companies		-		-
Total receivables for deferred income taxes	$	-	$	(797	)
Total provision for income taxes	$	758	$	436

For the three-month period ended September 30, 2011 and 2010, it follows the detail of the income before provision of income taxes and the related estimated amount:

Income before provision for income taxes	Three-month periods ended
USD thousand	September 30, 2011			September 30, 2010
Italian companies	$	1,399		$	277
US companies		155			392
Other foreign companies		(159	)		(73	)
Total income before provision for income taxes	$	1,395		$	596

	Three-month periods ended
USD thousand	September 30, 2011		September 30, 2010
Current
Italian companies	$	652	$	227
US companies		-		-
Other foreign companies		-		-
Total provision for current income taxes	$	652	$	227
Deferred
Italian companies		-		(7	)
US companies		-		(2	)
Other foreign companies		-		-
Total receivables for deferred income taxes	$	-	$	(9	)
Total provision for income taxes	$	652	$	218

The Company recognizes deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between the financial statements and the tax bases of assets and liabilities. This is done by using enacted tax rates which are expected to be applicable to the taxable income in the periods in which the differences are expected to arise. In assessing the recoverability of deferred tax assets, management considers whether it is more likely than not that some or all of tax assets may not be realized. In performing this evaluation, management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies.

The Italian statutory tax rate is comprehensive of two components: national (“IRES”) and regional (“IRAP”). IRES tax rate amounts to 27.5%. IRAP amounts to 4.97%. The taxes are computed on different bases and by the application of different adjustments that may also vary from one year to another.

Furthermore the basis of application of income taxes is the Italian statutory net income adjusted accordingly to national and regional taxes requirements; as a consequence the translation under US GAAP may have effects on the effective tax rate determined on the consolidated financial statements prepared accordingly to US GAAP.

For the periods ended as of September 30, 2011 and 2010 the non-Italian subsidiaries income taxes did not have any impact since they were not material.

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

The following is management’s discussion and analysis of certain significant factors that have affected our financial condition and results of operations for the periods indicated below. This discussion and analysis, as well as other sections in this Report, should be read in conjunction with the unaudited interim consolidated financial statements and related notes to the unaudited interim consolidated financial statements included elsewhere herein.

As used in this Report, unless otherwise stated, all references to the “Company”, “we,” “our”, “us” and words of similar import, refer to ITP Energy Corporation.

Background

On December 22, 2010, we entered into the Share Exchange Agreement (the “Share Exchange Agreement”), with ITP Lux and Orange Capital Corp. (or “Orange”), pursuant to which on the closing of such transaction, we agreed to acquire 100% of the issued and outstanding capital stock of ITP Benelli S.p.A., formerly known as ITP Impianti e Tecnologie di Processo S.p.A., an Italian corporation (or “ITP”), together with its subsidiaries, operating companies and commercial offices based in Italy, the United States, the Czech Republic, Azerbaijan and Singapore (or the “ITP Group”), in exchange for our issuance and delivery of 34,000,000 shares of our Common Stock to ITP Lux, such Common Stock to represent 94% of our issued and outstanding capital stock as of and immediately after the consummation of the transactions contemplated by the Share Exchange Agreement (the “Share Exchange”). In addition, pursuant to the Share Exchange Agreement, we agreed to issue to Orange an aggregate of 1,083,226 warrants to purchase an equal number of shares of our Common Stock, expiring on April 29, 2015, at an average exercise price of $2.43 per share of Common Stock.

In addition, the terms of the Share Exchange Agreement, as amended, among other matters, also required us to:

Effectuate a reverse stock split of the Company’s issued and outstanding shares at a ratio of 1 for 2.4, decrease the number of authorized shares of Common Stock by the same proportion from 100,000,000 to 41,666,667 shares of Common Stock, and decrease the number of authorized shares of Preferred Stock by the same proportion from 20,000,000 shares to 8,333,333 shares of Preferred Stock. The reverse stock split became effective on March 21, 2011 and on such date every 2.4 shares of the Company’s Common Stock issued and outstanding immediately prior to the effective time for the stock split was combined and reclassified into one share of Common Stock. Fractional shares of Common Stock resulting from the reverse stock split were rounded up to the next whole share;

Cancel 3,166,667 (on a post reverse stock split basis) shares of restricted Common Stock issued by the Company to Charles El-Moussa, our former president; and

Change our corporate name to “ITP Energy Corporation”.

On April 29, 2011, we consummated the Share Exchange, resulting in our acquisition of 100% of the issued and outstanding capital stock of ITP. In accordance with ASC 805-40 and Topic 12 of the Financial Reporting Manual of the Division of Corporation Finance of the Securities and Exchange Commission (the “SEC”), in the case of this Share Exchange, our acquisition of the business of ITP has resulted in ITP Lux and its management acquiring actual voting and operating control of the combined company. The SEC’s staff considers a public shell reverse acquisition to be a capital transaction in substance, rather than a business combination. That is, the transaction has been considered a reverse recapitalization, equivalent to the issuance of stock by ITP for our net monetary assets, accompanied by a recapitalization.

On May 5, 2011 we filed with the SEC a current report on Form 8-K reporting the consummation of the Share Exchange, as such report was later amended by amendments number 1 and 2 also filed with the SEC on June 24, 2011 and July 8, 2011, respectively. As a result of the Share Exchange, we are no longer a shell company and we are currently engaged in active business operations. You are advised, to consult any additional disclosures we make in reports we file with the SEC on Form 10-K, Form 10-Q and Form 8-K, including the reports on Form 10-K and on Form 10-Q we filed on May 20, 2011 and the report on Form 10-KT we filed on July 28, 2011.

Overview

All of our business is carried out by our wholly-owned subsidiary ITP directly and through its subsidiaries forming part of the ITP Group. Through the ITP Group, we are an engineering, procurement and construction contractor that provides design, fabrication and installation of specialized equipment, sets of specialized equipment known as “packages” or “skids” and production plants, for the oil and gas industry and top engineering companies. We design, manufacture and market oil and gas production equipment and systems, mainly for the oil and gas production separation process. Our products and services are used for the separation of unprocessed hydrocarbon fluids into sellable oil and gas.

Separation and decontamination of a production stream is needed at almost every producing well in order to meet the specifications and environmental requirements of transporters and end users. We provide equipment, systems and services used in the production of crude oil and natural gas to separate oil, gas and water within a production stream and to remove contaminants. ITP products are installed both on onshore facilities and in offshore floating production, storage and offloading vessels. ITP products and services are also deployed in downstream operations, mainly refineries. In the upstream phase (as it is generally referred to production activities more closely associated with the reservoir and the wellhead), our products and services have been deployed in wellhead completion, collection center, the first treatment unit and the process treatment unit. In the downstream phase (as it is generally referred to production activities more closely associated with oil and gas after they have left the wellhead), our product and services have been deployed in refining units, pipeline, LNG liquefaction and electric generation.

Demand for our products and services is cyclical and substantially dependent upon activity levels in the oil and gas industries, particularly our customers’ willingness to spend capital on the exploration for and development of oil and natural gas. Our customers’ spending plans are generally based on their outlook for near-term and long-term commodity prices. As a result, demand for our products and services is highly sensitive to current and expected commodity prices. The activity of our production facilities and product offering is primarily tied to the long-term outlook for crude oil and natural gas. In contrast, activity for our services responds more rapidly to shorter-term movements in oil and natural gas. Other factors that can affect our business and financial results include the general global economic environment and regulatory changes in the several jurisdictions in which we operate.

Demand for oil and gas production equipment and services is driven primarily by:

•

levels of production of oil and gas in response to worldwide demand;

•

the discovery of new oil and gas fields;

•

the changing production profiles of existing fields (meaning the mix of oil, gas and water in the hydrocarbon stream and the level of contaminants); and

•

the quality of new hydrocarbon production.

The extent to which the revenues of our industry increase depends upon the success of the exploration efforts. In general, these revenue increases lag expansion of exploration and development capital budgets in times of recovery in the oil and gas industry. These lag times can be up to several years in offshore operations but are generally shorter for onshore operations.

Changing production profiles in existing fields also increase the demand for products and services in our industry. As existing fields are reworked or enhanced recovery methods are employed, additional and more complex equipment may be required to produce oil and gas from these fields. This can result from:

•

changes in the mix of oil and gas produced by the field; or

•

an increase in water, carbon dioxide or other naturally occurring contaminants or as the result of enhanced recovery techniques.

In addition, many new oil and gas fields contain lower quality hydrocarbon streams that require more complex production equipment. Examples include carbon dioxide rich formations in West Texas and Southeast Asia and heavy crude in Western Canada and in the Orinoco Delta in Venezuela.

According to the International Energy Agency, oil and gas consumption is expected to grow worldwide, with consumption of natural gas gaining share as a source of electricity generation, mainly because of environmental sustainability issues. Gas has lower total costs and burns cleaner than other fossil fuels used in electricity generation. Also, as a consequence of more stringent regulations, governments and companies have reduced flared gas emissions and significant investments have been undertaken to keep on reducing flared gas.

Among upstream operations, capital expenditure in deepwater activities is expected to be the fastest growing segment because existing onshore and shallow water oil and gas reserves have largely been depleted. By region, the Middle East (Saudi Arabia, Kuwait and the United Arab Emirates), South East Asia (Australia and India), Africa (Ghana, Egypt, Angola and Nigeria) and Brazil, should emerge as the primary drivers of capital expenditure. However, crude oil prices have decreased to levels generally around $80 on September 30, 2011 compared to an average of approximately $102 per barrel experienced during the second quarter of 2011. Crude oil prices declined during the third calendar quarter of 2011, but remained at high levels, averaging $90 per barrel versus $102 per barrel during the second calendar quarter of 2011. With the recovery in demand for energy in several key growing markets, specifically China and India, long-term forecasts for oil demand and prices continues to be strong.

In the projects we may become involved, typically there is an approximately eight to twelve months period between the starting date of an engineering procurement and construction project and the time when our services become relevant. Therefore, the increase in the volume of new orders experienced in the second semester of 2010 and increases registered in the first semester 2011 will be reflected in engineering procurement and construction activity during the second semester of 2011 and throughout 2012. Total revenues during December 31, 2010 amounted to $63.6 million. During the first semester 2011 we entered into twenty new orders for our products and services, having an aggregate value in excess of $40 million not including our entering into two new and significant contracts for our products and services jointly valued in excess of $200 million. These new contracts require adequate financing in order for us to be able to comply with the required contractual guarantees that we must provide as part of our obligations to our customers under such agreements.

Another factor that has influenced the financial results is the exchange rate mostly between the U.S. dollar and the Euro. Our operations are conducted around the world in a number of different countries. Accordingly, our earnings and cash flow are exposed to changes in foreign currency exchange rates. The majority of our foreign currency transactions relate to operations in Italy, Middle East and North Africa, Russia and Byelorussia, Asia and the other countries we conduct business. In Italy, North Africa, the Middle East and Russia, most contracts are denominated in Euros, and most of the costs incurred are in Euros, which mitigates risks associated with currency fluctuations. Similarly, in the United States, most of our contracts are denominated in U.S. dollars, and most of our costs are incurred in U.S. dollars, which mitigates the risks associated with currency fluctuations. In any case, all the non-U.S. dollar revenues and profits are translated into U.S. dollars for U.S. GAAP financial reporting purposes. The strengthening or weakening of the Euro (and other non-U.S. dollar currencies) can have a significant positive or negative impact on the translation of earnings generated from our subsidiaries and, therefore, the financial results of our business. On September 30, 2011, the value of the Euro against the U.S. dollar published by the Bank of Italy (Banca d’Italia) was $1.3503 ($ 1.4453 on June 30, 2011).

Steel and steel input prices influence the pricing decisions of our suppliers, thereby influencing the pricing and margins of some of our operations. Steel prices on a global basis declined precipitously during the recession in 2009 which in turn caused a reduction in the costs of our raw materials and allowed us to reduce the prices of certain of our products. However, by the end of 2009 steel prices commenced rising and this price increase has continued during 2010 and 2011.

While global demand for oil and natural gas are significant factors influencing our business generally, certain other factors such as the recent global economic recession and credit crisis and risks associated with operating in several markets also influence our business. In that sense, we operate our business and market our products and services throughout the world. We are, therefore, subject to the risks customarily attendant to international operations and investments in foreign countries. Moreover, oil and gas producing regions in which we conduct business include many countries in the Middle East, Southeast Asia, West Africa, South America and other parts of the world where risks to operations remain high. We cannot accurately predict whether these risks will increase or abate, but to mitigate the country risk most of our production is made at our plants and shipped at the end of the project. These risks include: nationalization; expropriation; war, terrorism and civil disturbances; restrictive actions by local governments; limitations on repatriation of earnings; changes in foreign tax laws; changes in banking regulations; travel limitations or operational problems caused by public health and/or safety threats; and changes in currency exchange rates.

Our acquisitions have diversified our operating capabilities. We offer a comprehensive range of services ancillary to our products, including maintenance and safety requirements. These services are complementary because our products consist of high-end technology and complex machineries, with potentially a severe impact on safety and the environment, which need to be monitored, maintained and operated appropriately. As a result, a portion of our business strategy also focuses on entering into contracts to provide a full range of these services on an integrated basis for a particular project. The recent contract in Azerbiajan is an example of this diversification and it has been awarded through a business agreement with the Akkord as part of a strategy to enter into the oil and gas sector in Azerbaijan. We believe this approach gives our customers greater accountability and a more seamless transition between phases of the work. It also enhances utilization of our assets and gives us greater control over operational and commercial risks that we would otherwise possess if we subcontracted a significant portion of the scope of work to third parties.

Recent Developments

During the last two months, in addition to our continuing business activity, the following significant contracts have been awarded to ITP, our wholly-owned subsidiary:

The Group has subscribed an agreement with Akkord corporation in Azerbaijan to develop projects in the Caspian area. The cooperation agreement is mainly intended to facilitate ITP access to the oil and gas sector where Akkord enjoys favorable business terms with Socar, the Azerbaijan state company for oil and gas. As a first step of the cooperation agreement, two letters of intent are in process of being executed by Akkord and ITP.

One letter of intent is relating to the design and supply of the new technological equipment for the steel work manufacturing plant, which will be built by Akkord in Baku representing a total amount of approximately Euro 25 million for ITP. The second letter of intent is for the completion of a cement plant in Gazic, representing a total amount of approximately Euro 60 million for ITP. Study and planning activities have been already started on October 17 and the customer is requiring that both operations be completed by 2012.

Additionally, during October 2011, the Group invested in the Singapore area, acquiring a land in Batam for an amount of approximately $ 600 thousand. ITP is planning to develop an industrial facility for the production of modules for offshore oil and gas platforms.

Results of Operations

Three-Month and Nine-Month Periods Ended September 30, 2011 and 2010

During the first nine months and third quarter of 2011 our gross profit was $12,925 thousand and $4,356 thousand, respectively, representing increases of 29% and 17%, respectively when compared with the corresponding nine months period and three month period ending September 30, 2010, respectively.

Net Income

Net Income for the quarter ended September 30, 2011 was $743 thousand, or $0.00001 per share (based on a weighted average number of shares outstanding during the period of 36,107,500). These results compare to a Net Income of $378 thousand, or $0.00003 per share (based on a weighted average number of shares outstanding during the comparable 2010 quarter of 28,067,769), reported for the quarter ended September 30, 2010, which represents an increase of 97%. This increase with respect to the 2010 third quarter consolidated balance sheets was primarily due to the considerable number of orders awarded in the second half of 2010 and in the first semester of 2011 which generated a substantial increase in revenues.

Net Income for the nine-months ended September 30, 2011 was $1,977 thousand, or $0.0001 per share (based on a weighted average number of shares outstanding during the period of 35,193,217). These results compare to a Net Income of $758 thousand, or $0.00003 per share (based on a weighted average number of shares outstanding during the comparable 2010 period of 27,586,029), reported for the nine-month period ended September 30, 2010, which represents an increase of 161%. This increase with respect to the consolidated balance sheets for the similar nine-month period during 2010 was primarily due to the considerable number of orders awarded in the second half of 2010 and in the first semester of 2011 which generated a substantial increase in revenues.

Net Income Attributable to ITP

The $743 thousand Net Income of the three-month period ending September 30, 2011 attributable to ITP, is made up of operating income ($1,647 thousand) less financial expenses relating to bank loans ($252 thousand) and income tax expense of 652 thousand. The $378 thousand Net Income attributable to ITP during the comparable three-month period ending September 30, 2010, is the result of the $973 thousand in operating income less financial expenses related to bank loans in the amount of $377 thousand and income tax expense in the amount of $218 thousand.

The $1,977 Net Income of the nine-month period ending September 30, 2011 attributable to ITP, is made up of $4,488 thousand in operating income less financial expenses relating to bank loans in the amount of $1,753 and income tax expense amounting to $758 thousand. In comparison, the $758 thousand Net Income attributable to ITP during the comparable nine-month period of 2010, was made up of $1,948 thousand in operating income less $753 thousand in financial expenses relating to bank loans and income tax expense in the amount of $436 thousand.

For the nine-month period ending September 30, 2011, the non-cash component of the income statement ($1,081 thousand) is solely related to depreciation and amortization charge during the period, compared to a non-financial component of the income statement of $1,585 for the similar nine-month period in 2010 which included $694 related to the depreciation and amortization charge and a provision for doubtful accounts in the amount of $891 thousand.

Comprehensive (Loss) Income

Comprehensive (loss) income is comprised of net income, foreign currency translation gains and losses, and changes in unrealized gains and losses on investments. The Company does not accrue tax on its foreign currency translation gains and losses, as any undistributed earnings of foreign subsidiaries are deemed to be permanently reinvested in the applicable foreign subsidiary. Comprehensive (loss) income is reflected in the consolidated statement of stockholders’ equity.

Comprehensive Income for the three-month period ended September 30, 2011 decreased 69% to $242 thousand from $790 thousand reported for the three-month period ended September 30, 2010. This decrease in Comprehensive Net Income with respect to the 2010 third quarter consolidated balance sheets was primarily due to the currency translation adjustment.

Comprehensive Income for the nine-month period ended September 30, 2011 increased to $2,026 thousand from $799 thousand reported for the nine-month period ended September 30, 2010. This significant increase is explained by the considerable number of orders awarded in the second half of 2010 and in the first semester of 2011 that generated a substantial increase in revenues.

Revenues

Consolidated revenues for the quarter ended September 30, 2011 decreased by $592 thousands or 4% to $15,167 thousand, from $15,759 thousand during the similar quarter of 2010. Revenues are generated by construction contracts engagements. Consolidated revenues for the nine-month period ended September 30, 2011 increased by approximately $4.1 million or 10% to $46,027 thousand from $41,940 thousand during the similar nine-month period of 2010. The decrease experienced during the third quarter of 2011 when compared with the similar period of 2010 is due to different timing of working progress and invoicing trend. In this period there is an increase of advances received from customers treated as deferred revenues, while the increase evidenced during the nine-months period ending September 30, 2011 with respect to the similar period of 2010 reflects the considerable number of orders awarded in the second half of 2010 and in the first semester of 2011 that generated a substantial increase in revenues during 2011.

In terms of revenues by country, during the quarter ended September 30, 2011, the results were consistent with those of the similar quarter in 2010 with an increase in Belaurus & Kasakhstan and in the Rest of Europe which were offset by a decrease in Italy and in other remaining area. A comparison of revenues by country during the nine-month periods ended September 30, 2011 and 2010 is highlighted by a decrease in Italy of $5,245 thousand or 47% from $11,151 thousand to $5,906 thousand offset by the increase of $13,290 thousand in new revenues from Belarus. The decrease in revenues from Italy and the United States is explained by the slow down of investment in Italy and the United States, whereas the Belarus revenues are tied to the new contract with JSC Grodno Azot for the cycloexanone unit in the Grodno Azot industrial complex.The increase in the “Rest of Europe” is mainly due to new orders awarded in the second half of 2010. JSC Grodno Azot is a mayor customer that accounted for 11% of our revenues during the nine-month period ended September 30, 2011.

The table below includes the revenues for the three-month period and the nine-month period ended September 30, 2011 and 2010:

	Three-month period ended September 30,				Nine-month period ended September 30,
	2011		2010		2011		2010
Revenues by Country	(in thousands of $)				(in thousands of $)
Italy	$	2,625	$	4,190	$	5,906	$	11,151
Belarus & Kasakhstan		3,137		-		13,290		-
Rest of Europe		4,020		1,580		7,683		4,205
Egypt and the Middle East		3,756		4,577		6,168		7,197
The United States		358		2,454		9,308		11,515
The Far East		620		2,847		2,566		7,577
Other		651		111		1,106		295
	$	15,167	$	15,759	$	46,027	$	41,940

Cost of Sales

During the three-month period ended September 30, 2011, our consolidated costs of sales decreased by $1,229 thousand, or 10%, to $10,811 thousand from $12,040 thousand during the similar period in 2010. The decrease is directly related to the comparatively low level of goods purchased in the second half of 2010 and in the first half of 2011 notwithstanding the considerable high value of invoices issued relating to goods completed and shipped during this period. During the nine-month period ended September 30, 2011, our consolidated costs of sales increased by $1,147 thousand, or 4%, to $33,101 thousand from $31,954 thousand during the similar nine-month period ended September 30, 2010, such increase being directly related to the significant increase in production compared to 2010.

Our consolidated gross margin as a percentage of revenues was 29% and 24% during the three-month periods ended September 30, 2011 and 2010, respectively, and was 28% and 24% during the nine-month periods ended September 30, 2011 and 2010, respectively.

Selling, General and Administrative Expenses

Selling, general and administrative (“SG&A”) expenses increased by $503 thousand, or 24%, during the three-month period ending September 30, 2011 compared to the similar period in 2010. SG&A expenses during the quarter are mainly administrative personnel salaries including bonuses, promotions and the value of unclaimed holidays and other deferred benefits. The increase is due to the growth of the business, and primarily to increased salaries, wages and benefits and a general increase in our SG&A expenses as a result of increased accounting and legal costs directly related to our consummation of the Share Exchange and becoming a SEC reporting company. SG&A expenses represented 17% of revenues for the three-month period ending September 30, 2011 compared to representing 13% of revenues during the similar three-month period in 2010. One of the major factors in the increase of the SG&A expenses was the increase in the numbers of business entities which form part of the ITP Group, some of them operating in different countries which required a substantial increase in the amount of personnel dedicated to administration and finance.

SG&A expense increased by $1,870 thousand, or 30%, during the nine-month period ending September 30, 2011 compared to the similar period in 2010. SG&A expenses during the nine-month period are mainly administrative personnel salaries including bonuses, promotions and the value of unclaimed holidays and other deferred benefits. The increase is due to the growth of the business, and primarily to increased salaries, wages and benefits and a general increase in our SG&A expenses as a result of the increase in the number of business entities as well as accounting, auditing and legal costs associated with our consummation of the Share Exchange and becoming a SEC reporting company. SG&A expenses represented 17% of revenues for the nine-month period ending September 30, 2011 compared to representing 15% of revenues during the similar nine-month period in 2010, mainly due to the impact of additional accounting, auditing and legal costs directly relating to our consummation of the Share Exchange and becoming a SEC reporting company.

Depreciation and Amortization

Depreciation and amortization expense increased by $387 thousand, or 56%, during the nine-month period ending September 30, 2011 compared to the similar period in 2010, primarily due to the increase of tangible assets in 2010. Depreciation of tangible and intangible assets is calculated on the basis of the residual useful life of the asset.

Provision for Doubtful Accounts

Provision for doubtful accounts is determined as a result of an analysis of the collectability of accounts receivable and in accordance with ITP’s accounting policy. During the nine-month period ended September 30, 2011, we did not accrue any reserves for the provision for doubtful accounts, while the provision for doubtful accounts during the similar period in 2010 was $891 thousand. This was mainly due to ITP having already written off in 2010 all doubtful accounts.

Other Operating Costs

Other Operating Costs decreased by $312 thousand, or 74% during the three-month period ended September 30, 2011 compared to the similar period in 2010. Similarly, Other Operating Costs decreased by $580 thousand, or 59% during the nine-month period ended September 30, 2011 compared to the similar period in 2010. Other operating costs are expenses related to business development, commercial activities, travel, and other nonrecurring general expenses. In each case, the decrease was due primarily to improved organization and cost control initiatives.

Operating Income

Consolidated Operating Income increased by $674 thousand, or 69%, during the three-month period ended September 30, 2011 compared to the similar period in 2010, primarily as a result of increased business activity and the increase in revenues. Similarly, Consolidated Operating Income increased by $2,540 thousand, or 130%, during the nine-month period ended September 30, 2011 compared to the similar period in 2010, because of the increase in business activity and in revenues.

Interest Expense

Interest Expense decreased by $125 thousand, or 33%, during the three-month period ended September 30, 2011 compared to the similar period in 2010. Conversely, Interest Expense increased by $1,000 thousand, or 57% during the nine-month period ended September 30, 2011 compared to the similar period in 2010. In the first case, the decrease was due to timing amortization schedule and variance in interest rate, while the increase for the comparable nine-month periods is explained by the higher long and short terms debts balances. The weighted average interest rate on our credit facilities during the nine-month period ended September 30, 2011, was 3.24% compared to 4.38% during the similar period of 2010.

Liquidity and Working Capital

Cash and cash equivalents

As of September 30, 2011, we had cash and cash equivalents of $3,938 thousand, a decrease of $5,629 thousand during the nine-month period ending September 30, 2011. Cash and cash equivalents primarily consist of cash on hand and marketable securities. To date, we have financed our operations primarily through cash flows from operations, bank financing and capital increases. The following table sets forth a summary of our cash flows for the periods indicated:

	Nine-Month periods ended
	September 30, 2011			September 30, 2010
	(in $ thousands)
Net cash provided by (used in) operating activities	$	(14,175	)	$	(2,117	)
Net cash provided by (used in) investing activities		(1,021	)		(12,813	)
Net cash provided by (used in) financing activities		6,736			21,041
Net increase (decrease) in cash and cash equivalents		(6,509	)		6,819

Currency translation adjustment		463			562
Cash and cash equivalents at the beginning of the period		11,934			2,893
Cash and cash equivalents at the end of the period		3,938			9,567

Cash Flow

Operating Activities

Net cash used by operating activities was $14,175 million for the nine-month period ending September 30, 2011, as compared to $2,117 million of net cash used during the similar period in 2010. The net change is mainly attributable to the $7,422 million increase in account receivables and a $5,565 thousand decrease in accounts payables for the period and a decrease of $969 thousand in inventory.

Investing Activities

Net cash used in investing activities for the nine-month period ending September 30, 2011 was $1,021 thousand, as compared to $12,813 thousand net cash used in investing activities during the similar nine-month period of 2010. The change is mainly attributable to the acquisition of ITP Benelli S.p.A. and Nicola & Albia during the first quarter of 2010.

Financing Activities

Net cash provided by financing activities for the nine-month period ending September 30, 2011 was $6,736 thousand, as compared to net cash provided by financing activities of $21,041 thousand during the similar nine-month period of 2010. The net change is attributable to the subscription of bank loans relating to the finance of the acquisition of ITP Benelli S.p.A. and Nicola & Albia made during 2010 and to support our expansion plans, advances on contracts and on receivables received from banks to finance the new projects and for the payment of other maturing loans and for general working capital, partially offset by currency exchange variations resulting in an increase of the total debt by 20% because such debt is predominantly denominated in Euros.

Working Capital

Historically, our cash flow from operations has been sufficient to finance our operations. We believe that our cash on hand and cash flow from operations will meet our present cash needs unless we expand our current scale of production to another level in a short period of time, in which case we may require additional cash resources to fund our additional capital expenditures and working capital requirements related to such growth. However, the increase in our backlog due to our entering into significantly more valuable contracts for our services and products may, in the future, require additional cash resources to finance the production of a new higher backlog and due to or as a consequence of changed business conditions, implementation of our strategy to ramp up our production facilities and increase machinery and equipment, or acquisitions we may decide to pursue. If our own financial resources are insufficient to satisfy our capital requirements, we may seek to sell additional equity or debt securities or obtain additional credit facilities. The sale of additional equity securities could result in dilution to our stockholders. The incurrence of indebtedness would result in increased debt service obligations and could require us to agree to operating and financial covenants that would restrict our operations. Financing may not be available in amounts or on terms acceptable to us, if at all. Any failure by us to raise additional funds on terms favorable to us, or at all, could limit our ability to expand our business operations and could harm our overall business prospects.

The table below reflects the principal payments of bank loans, for the next 5 years as follows:

Quarter ending	Amount
	(in $ thousands)
September 30, 2012 (Current)	$	5,346
September 30, 2013		4,979
September 30, 2014		4,512
September 30, 2015		2,365
September 30, 2016		1,730
Thereafter		2,062
	$	20,994

Out of the total amounts of accounts receivables and inventory for work in progress reflected in our Consolidated Condensed Financial Statements as of September 30, 2011 of $ 41,323 thousand and $19,767 thousand, respectively, as of November 18, 2011, we have collected a total of approximately $3.9 million in accounts receivable and a total of $5.3 million of our inventory as of September 30, 2011 has now been invoiced to clients and are expected to be collected in the ordinary course of business within the end of the year.

It is customary in the industries in which we operate to provide bank guarantees or performance bonds in favor of clients to secure obligations under contracts. We believe that we will have sufficient credit capacity from existing facilities throughout the next 12 months.

Off-balance sheet arrangements

We do not have any off balance sheet arrangements.

Significant Accounting Policies

The accompanying financial statements are presented in United States dollars and are prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”). Management and the Audit Committee of our Board of Directors approve the critical accounting policies. A full discussion of our critical accounting policies and estimates is included in our Current Report on Form 8-K filed with the Securities and Exchange Commission on May 5, 2011. We did not have a significant change to the application of our critical accounting policies and estimates during the first nine-months of 2011.

Development Stage Company

During the period being reported, the Company ceased to be considered a development stage company.

Accounting Developments

In September 2011, the Financial Accounting Standards Board issued Accounting Standards Update No. (“ASU”) 2011-08, “Testing Goodwill for Impairment.” ASU 2011-08 applies to all entities that have goodwill reported in their financial statements. The amendments are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted, including for annual and interim goodwill impairment tests performed as of a date before September 15, 2011, if an entity’s financial statements for the most recent annual or interim period have not yet been issued or, for nonpublic entities, have not yet been made available for issuance. The Company is currently evaluating the impact of this amendment on the Company’s consolidated financial statements.

In June 2011, the Financial Accounting Standards Board issued ASU 2011-05, “Comprehensive Income.” ASU 2011-05 amends existing guidance in order to increase the prominence of items reported in other comprehensive income and eliminates the option to present components of other comprehensive income as part of the statement of changes in equity, the presentation format that we currently employ. Under ASU 2011-05, all non-owner changes in equity are required to be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. For public companies, ASU 2011-05 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2011. Early adoption is permitted and no transition disclosure is required. We are currently evaluating the impact of this accounting standard on the Company’s consolidated financial statements.

In May 2011, the Financial Accounting Standards Board issued ASU 2011-04, “Fair Value Measurement”. ASU 2011-04 introduces amendments to achieve common fair value measurement and disclosure in U.S.GAAP and IFRSs (ASU 2011-04). This ASU affects reporting entities that are required or permitted to measure or disclose the fair value of an asset, a liability, or an instrument classified in a reporting entity’s shareholders’ equity in the financial statements. This ASU is effective prospectively during interim and annual periods beginning after December 15, 2011 for public entities. Early application is not permitted. The Company is currently evaluating the impact of this accounting standard on the Company’s consolidated financial statements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

We are exposed to market risks in our normal business activities. Market risk is the potential loss that may result from market changes associated with existing or forecasted financial transactions. The types of market risks to which we are exposed are credit risk, interest rate risk and foreign currency exchange rate risk.

Credit Risk

Our financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash equivalents and accounts receivable. Cash equivalents such as deposits and temporary cash investments are held by major banks. Our trade receivables are with a variety of U.S., international and foreign-country national oil and natural gas companies. Management considers this credit risk to be limited due to the financial resources of these companies. We perform ongoing credit evaluations of our customers and we generally do not require material collateral to support contractual payment obligations. We maintain reserves for potential credit losses.

Exchange Rate

Our operations are conducted around the world in a number of different countries. Accordingly, our earnings and cash flow are exposed to changes in foreign currency exchange rates. The majority of our foreign currency transactions relate to operations in Italy, Middle East and North Africa, Russia and Byelorussia, Asia and the other countries we conduct business in. In Italy and in North Africa, Middle East and Russia, most contracts are denominated in Euros, and most of the costs incurred are in Euros, which mitigates risks associated with currency fluctuations. Similarly, in the United States, most of our contracts are denominated in U.S. Dollars, and most of our costs are incurred in U.S. Dollars, which mitigates the risks associated with currency fluctuations. Generally, many of our material purchases are denominated in a currency other than local currency, primarily U.S. Dollars and Euros, whereas our engineering and overhead costs are principally denominated in Euros. For sales to our clients based in Russia and Byelorussia, Middle East and North Africa, and Asia our contracts are, respectively, denominated in Euro, and most costs incurred are in Euro. Therefore, because we generally balance our expenses with income in the same currency as the related expenses, fluctuations in exchange rates are not expected to significantly affect financial stability, or gross and net profit margins. We attempt to minimize our exposure to foreign currency exchange rate risk by requiring settlement in our functional currencies, when possible. We do not currently enter into forward contracts or other currency-related derivative hedge arrangements.

A hypothetical 10% increase or decrease in the Euro/U.S. dollar exchange rate is not expected to have a material impact on our earnings, loss or cash flows.

Interest Rate

Our financial instruments are subject to changes in interest rates, including our revolving credit facilities, export sales credit facility and short-term investments. We invest our excess cash in short-term highly liquid investments and our investment objective is to preserve principal and maintain liquidity. As of September 30, 2011, we had $40.3 million outstanding under our credit facilities, all of which are variable-rate debt obligations. Changes based on the floating interest rates under these facilities could result in an increase or decrease in our annual interest expense and related cash outlay.

We seek to minimize the effects of a potential interest rate increase affecting our variable-rate debt obligations by entering into an interest rate swap agreements. As of September 30, 2011, we were a party to an interest rate swap agreement with Unicredit having a notional amount of $1,465 thousand expiring in April, 2013. At September 30, 2011, this interest rate swap agreement represented an asset for the Company in the amount of $1 thousand.

Based on past market movements and possible near-term market movements, we do not believe that potential near-term losses in future earnings, fair values or cash flows from changes in interest rates are likely to be material. A hypothetical 10% increase or decrease in applicable interest rates is not expected to have a material impact on our earnings, loss or cash flows.

ITEM 4. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

Our management maintains disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are designed to provide reasonable assurance that the material information required to be disclosed by us in our periodic reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer (our principal financial and accounting officer), to allow timely decisions regarding required disclosure.

As of September 30, 2011, our management, under the supervision of and with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as required by Rules 13a-15(b) and 15d- 15(b) under the Exchange Act and using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission. Based upon this evaluation (with the participation of our Chief Executive Officer and our Chief Financial Officer (Principal Accounting Officer)), as of the end of the period covered by this Report, our Chief Executive Officer and our Principal Accounting Officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)), are effective as of the end of the period covered by this Report to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and is accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Our management has recently undertaken various measures to remediate material weaknesses identified in our prior evaluations of our internal disclosure controls and procedures. We will continue to monitor and evaluate the effectiveness of our disclosure controls and procedures, as well as our internal control over financial reporting, on an ongoing basis, and our management is committed to taking action and implementing improvements, as necessary and as funds allow. However, while our management presently believes that the measures taken have remediated the material weaknesses identified, we cannot guarantee that any additional material weaknesses or significant deficiencies will not arise in the future due to a failure to implement and maintain adequate internal control over financial reporting.

Changes In Internal Control Over Financial Reporting

We have employed new resources for the internal management of our accounting cycle, including the preparation of annual and quarterly financial reports, while continuing to retain the services of ITP’s external independent accountants, including for the purpose of assuring compliance with legal and tax requirements under local law and the preparation of tax returns.

As a result of our actions taken to resolve material weaknesses previously identified by our management in our internal control over financial reporting, on July 20, 2011 we entered into an employment agreement with Mr. Giovanni Barbieri, pursuant to which Mr. Barbieri commenced his employment with the Company on September 1, 2011 in the capacity of senior financial executive based in the Company’s principal executive offices located in Rome, Italy. Subsequently, on October 17, 2011, our Board of Directors appointed Mr. Barbieri as a member of our Board of Directors and to the position of Chief Financial Officer (“CFO”), effective as of the same date.

Prior to commencing his employment with ITP, Mr. Barbieri, age 43, worked with Deloitte & Touche S.p.A. (a member firm of Deloitte Touche Tohmatsu Limited), independent accountants for over 15 years, where he most recently served as Audit Senior Manager, and was responsible for the financial statement, reporting packages and internal controls audits of various Italian companies and of Italian subsidiaries of U.S. multinational corporations. From 2000-2002, Mr. Barbieri was assigned to the New York office of Deloitte & Touche where he performed audit services to various U.S. corporations. Mr. Barbieri is a certified public accountant and chartered accountant in Italy and received a business degree from the University of Rome—La Sapienza.

There were no other material changes in our internal control over financial reporting (as defined in Rules 13a-13(f) and 15d- 15(f) under the Exchange Act) that occurred during our three-month period ended September 30, 2011, 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.

From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that we believe will have a material adverse affect on our business, financial condition or operating results.

Our projects generally involve complex design and engineering, significant procurement of equipment and supplies and construction management. We may encounter difficulties in the design or engineering, equipment and supply delivery, schedule changes and other factors, some of which are beyond our control, that affects our ability to complete the project in accordance with the original delivery schedule or to meet the contractual performance obligations. In addition, we generally rely on third-party partners, equipment manufacturers and subcontractors to assist us with the completion of our contracts. As such, claims involving project owners, suppliers and subcontractors may be brought against us and by us in connection with our project contracts. Claims brought against us include back charges for alleged defective or incomplete work, breaches of warranty and/or late completion of the project work and claims for cancelled projects. The claims and back charges can involve actual damages, as well as contractually agreed upon liquidated sums. Claims brought by us against project owners include claims for additional costs incurred in excess of current contract provisions arising out of project delays and changes in the previously agreed scope of work. Claims between us and our suppliers, subcontractors and vendors include claims like any of those described above. These project claims, if not resolved through negotiation, are often subject to lengthy and expensive litigation or arbitration proceedings. Charges associated with claims could materially adversely affect our business, financial condition, results of operations and cash flows.

ITEM 1A. RISK FACTORS.

We are a smaller reporting company and are not required to provide the information required by this item. Notwithstanding, we have in the past provided this information. You should carefully consider the risk factors described in our most recent annual report on Form 10-K filed with the SEC on January 12, 2011 describing the risks factors affecting our business prior to the Share Exchange and also consider the risk factors described in our Report on Form 8-K filed with the SEC on May 5, 2011, as amended by amendments number 1 and 2 also filed with the SEC on June 24, 2011 and July 8, 2011, respectively, relating to our reverse recapitalization and Share Exchange with ITP Lux and as such risk factors were updated by our quarterly report on Form 10-Q filed with the SEC on August 19, 2011.

In addition to the risk factors described in the reports referenced to above, we may also be affected in the future by additional risks and uncertainties not presently known to us or that we currently believe are immaterial. If any of the events described in such risk factors occur, our business, financial condition and results of operations could be materially and adversely affected. In addition, the trading price of our Common Stock could decline due to any of the events described in these risk factors.

There are no material changes from the risk factors previously disclosed in our current report on Form 8-K filed with the SEC on May 5, 2011, as amended by amendments number 1 and 2 also filed with the SEC on June 24, 2011 and July 8, 2011, and as further as amended by our quarterly report on Form 10-Q filed with the SEC on August 19, 2011.

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

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. (REMOVED AND RESERVED).

ITEM 5. OTHER INFORMATION.

None.

ITEM 6. EXHIBITS

Exhibit No.		Description
3.1		Articles of Incorporation (3)
3.2		Amended and Restated Bylaws (6)
3.3		Articles of Merger between Netfone Inc. and ITP Energy Corporation, dated effective March 21, 2011 (4)
3.4		Certificate of Change dated effective March 21, 2011 (4)
4.1		Form of Common Stock (5)
4.2		Form of Common Stock Warrant (5)
10.1		Share Exchange Agreement, dated December 22, 2010, by and among Netfone Inc., Orange Capital Corp., and ITP Oil & Gas International S.A. (1)
10.2		First Amendment to Share Exchange Agreement, dated December 22, 2010, by and among Netfone Inc., Orange Capital Corp., and ITP Oil & Gas International S.A., dated March 25, 2011. (2)
10.3		Cariparma Senior Syndicated Loan Agreement, dated May 21, 2010. (5)
10.4		Deutsche Bank Loan Agreement, dated February 26, 2010. (5)
10.5		UniCredit Corporate Banking Loan Agreement, dated April 7, 2010. (5)
10.6		Banco di Credito Cooperativo Laudense Loan and Mortgage Agreement, dated December 27, 2007. (5)
10.7		Employment agreement between ITP and Mr. Giovanni Barbieri, dated July 20, 2011. (6)
21.1		Subsidiaries (5)
31.1		Certifications of Manfredi Mazziotti di Celso Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
31.2		Certifications of Giovanni Barbieri Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
32.1		Certifications of Manfredi Mazziotti di Celso and Giovanni Barbieri Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*

*	Filed herewith.

(1)	Incorporated by reference to the Company’s current report on Form 8-K filed on December 30, 2010.

(2)	Incorporated by reference to the Company’s current report on Form 8-K filed on March 31, 2011.

(3)	Incorporated by reference to the Company’s Registration Statement on Form SB-2 filed December 1, 2004.

(4)	Incorporated by reference to the Company’s current report on Form 8-K filed on March 23, 2011.

(5)	Incorporated by reference to the Company’s current report on Form 8-K filed on May 5, 2011.

(6)	Incorporated by reference to the Company’s current report on Form 8-K filed on October 19, 2011.

SIGNATURES

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

	ITP ENERGY CORPORATION


By:	/s/ Manfredi Mazziotti di Celso
	Manfredi Mazziotti di Celso
	Chief Executive Officer

Date: November 21, 2011

NETFONE INC - FORM 10-Q - November 21, 2011

Attached files

NETFONE INC Reports