NEXT FUEL, INC. - FORM 10-Q - February 14, 2013

Attached files

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EXCEL - IDEA: XBRL DOCUMENT - NEXT FUEL, INC.	Financial_Report.xls
EX-31.1 - CERTIFICATION PURSUANT TO SECTION 302 OF SARBANES OXLEY ACT OF 2002 BY CHIEF EXECUTIVE AND CHIEF FINANCIAL OFFICER. - NEXT FUEL, INC.	f10q1212ex31i_nextfuel.htm
EX-32.1 - CERTIFICATION PURSUANT TO SECTION 906 OF SARBANES OXLEY ACT OF 2002 BY CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER. - NEXT FUEL, INC.	f10q1212ex32i_nextfuel.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_______________

FORM 10-Q

_______________

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

For the quarterly period ended December 31, 2012

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

For the transition period from ______to______.

Commission File Number: 333-148493

NEXT FUEL, INC.

(Exact name of registrant as specified in it's charter)

NEVADA		32-2305768
(State or other jurisdiction of incorporation or organization)		(IRS Employee Identification No.)

122 North Main Street, Sheridan, WY 82801

(Address of Principal Executive Offices)

_______________

(307) 674-2145

(Registrant's Telephone number, including area code)

_______________

Indicate by check mark whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes x No o

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

Large Accelerated Filer o	Accelerated Filer o
Non-Accelerated Filer o	Smaller Reporting Company x

Indicate by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the Exchange Act.

Yes o No x

Indicate the number of shares issued and outstanding of each of the issuer’s classes of common stock, as of February 1, 2013: 10,987,500 shares of issued common stock.

NEXT FUEL, INC.

FORM 10-Q

December 31, 2012

INDEX

PART I-- FINANCIAL INFORMATION

Item 1.	Financial Statements	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28
Item 4.	Controls and Procedures	28
PART II-- OTHER INFORMATION
Item 1	Legal Proceedings	29
Item 1A	Risk Factors	29
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30
Item 3.	Defaults Upon Senior Securities	30
Item 4.	Mine Safety Disclosures	30
Item 5.	Other Information	30
Item 6.	Exhibits	30

SIGNATURE		31

Exhibit List
Certifications

NEXT FUEL, INC.

CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

CONTENTS

PAGE	1	CONDENSED BALANCE SHEETS AS OF DECEMBER 31, 2012 AND AS OF SEPTEMBER 30, 2012

PAGE	2	CONDENSED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED DECEMBER 31, 2012 AND 2011

PAGE	3	CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY FOR THE PERIOD FROM SEPTEMBER 30, 2012 TO DECEMBER 31, 2012

PAGE	4	CONDENSED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED DECEMBER 31, 2012 AND 2011

PAGE	5 – 22	NOTES TO CONDENSED FINANCIAL STATEMENTS

Next Fuel, Inc.

Condensed Balance Sheets

ASSETS

	December 31, 2012			September 30, 2012
	(Unaudited)			*
Current Assets
Cash	$	2,474,591		$	3,107,406
Accounts Receivable, net of allowance for doubtful accounts		56,944			96,944
Inventory, net		43,388			-
Prepaid Expenses		49,096			31,462
Total Current Assets		2,624,019			3,235,812

Equipment, net		22,169			23,204
Intangibles (Note 2(B))		-			-
Security Deposit		75,000			-

Total Assets	$	2,721,188		$	3,259,016

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities
Accounts payable and accrued expenses	$	194,169		$	53,588
Accounts payable - related party		862			4,932
Deferred Revenue		25,000			50,000
Total Liabilities		220,031			108,520

Commitments and Contingencies (Note 6)

Stockholders' Equity
Preferred stock, $0.0001 par value; 100,000,000 shares authorized,
none issued and outstanding		-			-
Common stock, $0.0001 par value; 100,000,000 shares authorized, 10,987,500 and 10,972,500
issued and outstanding, respectively		1,099			1,098
Additional paid-in capital		25,193,050			25,091,018
Accumulated deficit		(22,692,992	)		(21,941,620	)
Total Stockholders' Equity		2,501,157			3,150,496

Total Liabilities and Stockholders' Equity	$	2,721,188		$	3,259,016

Derived from audited financial statements

See accompanying notes to unaudited condensed financial statements

Next Fuel, Inc.

Condensed Statements of Operations

(Unaudited)

	For the Three Months Ended December 31,
	2012			2011

Sales	$	-		$	-
Contract Income		20,000			-
License Fee Income		25,000			-
Consulting Income		-			40,000
Total Revenues		45,000			40,000

Cost of Goods Sold		(77,932	)		-

Gross Profit		(32,932	)		40,000

Operating Expenses
Professional fees	$	190,280		$	125,128
Research and development costs		5,444			-
Salary Expense		218,623			280,421
General and administrative		305,283			119,504
Total Operating Expenses		719,630			525,053

Loss from Operations		(752,562	)		(485,053	)

Other Expenses
Interest Income		1,190			1,046
Interest Expense		-			(54	)
Total Other Income/(Expense)		1,190			992

LOSS BEFORE INCOME TAXES		(751,372	)		(484,061	)

Provision for Income Taxes		-			-

NET LOSS	$	(751,372	)	$	(484,061	)

Net Loss Per Share - Basic and Diluted	$	(0.07	)	$	(0.05	)

Weighted average number of shares outstanding during the year - Basic and Diluted		10,974,478			9,553,346

See accompanying notes to unaudited condensed financial statements

Next Fuel, Inc.

Condensed Statement of Changes in Stockholders' Equity

For the period from September 30, 2012 to December 31, 2012

(Unaudited)

					Additional					Total
	Common Stock				paid-in		Accumulated			Stockholder's
	Shares		Amount		capital		Deficit			Equity

Balance, September 30, 2012		10,972,500	$	1,098	$	25,091,018	$	(21,941,620	)	$	3,150,496

Share based compensation expense						57,183					57,183

Common stock issued for services		15,000		1		44,849					44,850

Net loss for the three months ended December 31, 2012		-		-		-		(751,372	)		(751,372	)

Balance, December 31, 2012		10,987,500	$	1,099	$	25,193,050	$	(22,692,992	)	$	2,501,157

See accompanying notes to unaudited condensed financial statements

Next Fuel, Inc.

Condensed Statements of Cash Flows

(Unaudited)

	For the Three Months Ended December 31,
	2012			2011
Cash Flows Used In Operating Activities:
Net Loss	$	(751,372	)	$	(484,061	)
Adjustments to reconcile net loss to net cash used in operations
Common stock issued for services		44,850			5,500
Compensation expense on stock options		57,183			127,995
Depreciation and amortization expense		1,571			566
Changes in operating assets and liabilities:
Decrease in accounts receivable		40,000			-
Increase in inventory		(43,388	)		-
Increase in prepaid expenses		(17,634	)		(2,602	)
Decrease in employee advances		-			4,688
Increase (decrease) in accounts payable and accrued expenses		140,581			(59,011	)
(Decrease) increase in accounts payable - related parties		(4,070	)		2,277
Decrease in deferred revenue		(25,000	)		(40,000	)
Net Cash Used In Operating Activities		(557,279	)		(444,648	)

Cash Flows Used in Investing Activities:
Purchase of fixed assets		(536	)		-
Security deposit		(75,000	)		-
Net Cash Used In Investing Activities		(75,536	)		-

Cash Flows From Financing Activities:		-			-

Net Decrease in Cash		(632,815	)		(444,648	)

Cash at Beginning of Year/Period		3,107,406			2,117,927

Cash at End of Year/Period	$	2,474,591		$	1,673,279

Supplemental disclosure of cash flow information:

Cash paid for interest	$	-		$	54

Supplemental disclosure of non-cash investing and financing activities:

None

See accompanying notes to unaudited condensed financial statements

NEXT FUEL, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2012

(UNAUDITED)

NOTE 1

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION

(A) Basis of Presentation

The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in The United States of America and the rules and regulations of the Securities and Exchange Commission for interim financial information. Accordingly, they do not include all the information necessary for a comprehensive presentation of financial position and results of operations.

It is management's opinion, however that all material adjustments (consisting of normal recurring adjustments) have been made which are necessary for a fair financial statement presentation. The results for the interim period are not necessarily indicative of the results to be expected for the year.

Next Fuel, Inc. (the "Company") was incorporated under the laws of the State of Nevada on August 14, 2007. Next Fuel, Inc. is a service-based firm that has developed and will continue to develop and commercialize innovative technologies associated with renewable energy, such as unconventional natural gas production from lower grade coal, lignite, oil shale and other carbonaceous deposits. We refer to this generally as CTG Technology.

We are also investigating opportunities to develop or acquire other advanced technologies with focus on clean renewable energy, such as novel systems for energy-related water treatment, and processes for carbon dioxide conversion and carbon loop closure, and biological fuel cells. Collaborations with leading research institutes, such as University of Colorado, University of Wyoming, and Peking University will allow the Company to focus on identifying and acquiring or developing a portfolio of growth opportunities with compelling market values and clean energy and environmental stewardship.

We are a technology provider and service company that assist owners of natural gas production resources to increase the efficiency of their operations by providing CTG technology and technical support services utilizing our CTG technology. We do not plan to own or develop natural gas production projects.

In 2011, our financial statements were presented as a development stage company. However, in 2012, we entered into an exclusive license agreement in China and Mongolia for the right to use our CTG technology, which resulted in the generation of revenue. Accordingly, we believe that we transitioned from a development stage company to an operating stage company during the fourth quarter of 2012.

NEXT FUEL, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2012

(UNAUDITED)

(B) Use of Estimates

In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported period, as well as assumptions used in our multiple element revenue arrangements. Significant estimates include the allowance for doubtful accounts, valuation of inventory, valuation of equity based compensation and valuation of deferred tax assets. Actual results could differ from those estimates.

The Company considers all highly liquid temporary cash investments with an original maturity of three months or less to be cash equivalents. At December 31, 2012 and September 30, 2012, respectively, the Company had no cash equivalents.

(D) Loss Per Share

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

Diluted earnings (loss) per share reflects the potential dilutive effects of stock options, warrants, and stock equivalents. To the extent stock options, stock equivalents and warrants are anti-dilutive; they are excluded from the calculation of diluted loss per share. For the three months ended December 31, 2012 and 2011 respectively, 575,000, and 1,000,000, shares issuable upon the exercise of warrants were not included in the computation of loss per share because their inclusion is anti-dilutive. For the three months ended December 31, 2012 and 2011 respectively, 3,220,000 and 470,000 shares issuable upon the exercise of stock options were not included in the computation of loss per share because their inclusion is anti-dilutive.

(E) Equipment

The Company values property and equipment at cost and depreciates these assets using the straight-line method over their expected useful life. The Company uses a five year life for furniture and equipment.

(F) Intangible Assets

The Company amortizes intangible assets with a finite life over their life and reviews goodwill and intangible assets for impairment annually or more frequently if impairment indicators arise. Any other intangible assets deemed to have indefinite lives are not subject to amortization (See Note 2(B)).

NEXT FUEL, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2012

(UNAUDITED)

(G) Inventory

Inventory is valued at the lower of cost or market value. Cost is determined using the first in first out (FIFO) method. Provision for potentially obsolete or slow moving inventory is made based on management analysis or inventory levels and future sales forecasts.

(H) Stock-Based Compensation

The Company measures the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognizes the costs in the financial statements over the period during which employees are required to provide services. Share-based compensation arrangements include stock options, restricted share plans, performance-based awards, share appreciation rights and employee share purchase plans. Compensation cost is measured on the date of grant at their fair value. Such compensation amounts, if any, are amortized over the respective vesting periods of the option grant.

Equity instruments (“instruments”) issued to persons other than employees are recorded on the basis of the fair value of the instruments. In general, the measurement date for shares issued to non-employees is (a) when a performance commitment, as defined, is reached or (b) when the earlier of (i) the non-employee performance is complete or (ii) the instruments are vested. The measured value related to the instruments is recognized over a period based on the facts and circumstances of each particular grant.

(I) Income Taxes

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

The Company has no significant uncertain tax positions as of any date in the three months ended December 31, 2012 or the year ending September 30, 2012, respectively. The Company’s policy is to recognize accrued interest related to uncertain tax positions in interest expense, and to recognize tax penalties in operating expense. The Company made no provision for interest or penalties related to uncertain tax positions as of December 31, 2012. The Company files income tax returns in the U.S. federal jurisdiction. There are currently no federal or state income tax examinations underway, including all open tax years (2009 – 2012) for these jurisdictions.

NEXT FUEL, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2012

(UNAUDITED)

(J) Business Segments

The Company operates in one segment and therefore segment information is not presented.

(K) Revenue Recognition

Revenue is recognized only when the price is fixed and determinable, persuasive evidence of an arrangement exists, the service is performed and collectability of the resulting receivable is reasonably assured.

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

(L) Fair Value of Financial Instruments

The carrying amounts reported in the balance sheet for prepaid expenses and accounts payable approximate fair value based on the short-term maturity of these instruments as of December 31, 2012 and September 30, 2012.

The following are the hierarchical levels of inputs to measure fair value:

	o	Level 1: Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
	o	Level 2: Inputs reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the assets or liabilities; or inputs that are derived principally from or corroborated by observable market data by correlation or other means.
	o	Level 3: Unobservable inputs reflecting the Company’s assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available.

NEXT FUEL, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2012

(UNAUDITED)

(M) Concentration of Credit Risk

Although all of the Company’s assets are in the United States of America, substantially all of the revenue for the year ended September 30, 2012 and the three months ended December 31, 2012 was from one related party licensee in the People’s Republic of China.

(N) Recent Accounting Pronouncements

There are no current pronouncements that affect the Company.

NOTE 2

EQUIPMENT, INTANGIBLES AND OTHER ASSETS

(A) Equipment

At December 31, 2012 and September 30, 2012, equipment is as follows:

	December 31, 2012			September 30, 2012
Computer Equipment	$	14,146		$	13,610
Furniture & Equipment		15,153			15,153
Website Costs		1,500			1,500
Less accumulated depreciation and amortization		( 8,630	)		( 7,059	)
	$	22,169		$	23,204

Depreciation and amortization expense for the three months ended December 31, 2012 and 2011 was $1,571 and $566 respectively.

(B) Intangibles

On April 20, 2012, Next Fuel acquired the rights to certain intellectual property, as further described below. These rights were acquired with cash (see Note 7). The intellectual property rights that were acquired were in the form of rights to new technologies and assignment of U.S. Provisional Patent Application No. 61624313 entitled “Transition Metals Enhancement of Biogenic Natural Gas Production”, filed on April 15, 2012. Due to early stage and requirement for further development of these technologies, the fact that Next Fuel was a development stage company at the time of acquisition, and the significant uncertainty of recoverability in the future; the Company has expensed the costs of these transactions to research and development at the time of the acquisitions.

NEXT FUEL, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2012

(UNAUDITED)

On February 12, 2012 and March 28, 2011, Next Fuel acquired the rights to certain intellectual property, as further described below. These rights were acquired through the issuance of stock options and minimal cash consideration in February 2012 (see Note 4) and the issuance of shares of the Company’s common stock and stock warrants in March 2011. The intellectual property rights that were acquired were in the form of the rights to new technologies. Provisional patent applications were filed for each. Due to early stage and requirement for further development of these technologies, the fact that Next Fuel was a development stage company at the time of acquisition, and the significant uncertainty of recoverability in the future; the Company has expensed the costs of these transactions to research and development at the time of the acquisitions.

Although the company has expensed these technologies, the company believes that this intellectual property and associated patent applications were instrumental in the company’s ability to raise $1,525,000 in April 2012. The company believes there is a large market for new green technology associated with clean coal initiatives and the acquired technology will position the company to take advantage and participate in this market if this market grows and we develop this technology.

In February 2012, Next Fuel acquired the rights to two new technologies from individual inventors (LPV Technology and CTP Technology described below). Both technologies are early stage and will require further development before we understand their full commercial potential. Provisional U. S. patent applications were filed for each.

Low Energy-input Pervaporation (LPV) Technology.

The LPV Technology we acquired brings an opportunity to expand our energy related technology to clean up water used in oil and natural gas production, including Frac drilling. We believe this technology will allow us to treat water that contains the most challenging, high salt- and total dissolved solids used or produced in U. S. oil & gas operations. This new technology could provide the oil and gas industry with a new cost-effective method for treating this type of waste water and dealing with environmental restrictions on their operations. If the Government continues to strengthen environmental regulations for the oil and gas industry, we believe demand for new water treatment technologies are likely to increase. Although we did not receive any revenue related to the LPV Technology during the previous fiscal year, it could begin producing revenue during this fiscal year.

NEXT FUEL, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2012

(UNAUDITED)

Carbon Dioxide to Product (CTP) Technology

The CTP Technology we acquired targets the emerging market of carbon footprint elimination. Our CTP Technology will convert carbon dioxide from sources such as power plants and other fossil fuel burning industry into value added organic compounds. This process will also close the carbon loop by returning carbon to solid form instead of releasing it into the air. We expect that our CTP Technology will have minimum energy input and the feedstock is the waste gas from stack emissions. If we bring this technology to the market, we expect to derive revenue both from the operators of power plants for cleaning the feedstock (carbon dioxide) and from selling the products the CTP Technology produces. We currently do not have a plan or schedule for commercializing this very early stage technology.

Although the company has expensed the costs of these technologies, it is the company’s belief that this intellectual property and associated patent applications may provide growth opportunities for the company in the highly competitive markets associated with oil & gas produced water and carbon dioxide sequestration. Given the early stage of the two technologies acquired, the company believes they will not make significant contributions to the company's business for several years.

On November 6, 2012, the Company purchased a two-year Certificate of Deposit in the amount of $75,000 to be held as security for the issuance of Company credit cards. The Certificate of Deposit bears a current interest rate of .05% and a maturity date of November 6, 2014. As of December 31, 2012, the balance owed on the Company credit cards secured by the Certificate of Deposit was $2,095.

NOTE 3

STOCKHOLDERS’ EQUITY

(A) Common Stock Issued for Cash

On May 28, 2012, the Company issued 480,000 shares of common stock for $1,464,000 ($3.05/share).

On March 30, 2012, the Company issued 425,000 shares of common stock for $85,000 ($.20/share) for exercise of stock warrants.

On March 26, 2012, the Company entered into a stock subscription agreement for the sale of up to 500,000 shares of common stock in two installments. On March 27, 2012, the Company sold 100,000 shares of common stock for $305,000 ($3.05/share) as the first installment of the subscription agreement. On March 30, 2012, the Company sold 400,000 shares of common stock for $1,220,000 ($3.05/share) as the second installment of the subscription agreement. These transactions closed in April, 2012 and the funds were released at that time.'

NEXT FUEL, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2012

(UNAUDITED)

The March 26, 2012 stock subscription agreement included a registration rights agreement. The registration rights agreement stipulated a clause that the Company use commercially reasonable efforts to prepare and file a registration statement with the SEC within sixty (60) days after the agreement was signed on March 26, 2012. The Company has filed such registration statement in accordance with the agreement.

(B) Stock Issued for Services and Intellectual Property

On December 19, 2012, the Company agreed to issue 15,000 restricted shares of the Company’s common stock, having a fair value of $44,850 ($2.99/share) on the grant date (See Note 5).

On August 1, 2012, the Company issued 7,000 shares of the Company’s common stock, having a fair value of $23,730 ($3.39/share) on the grant date (See Note 5).

On May 13, 2012, the Company issued 7,000 shares of the Company’s common stock, having a fair value of $28,000 ($4.00/share) on the grant date (See Note 5).

On October 15, 2011, the Company issued 1,000 shares of the Company's common stock, having a fair value of $5,500 ($5.50 per share) on the grant date (See Note 5).

During the year ended September 30, 2012, the total of 2,500,000 shares of common stock held in treasury were cancelled.

(D) Stock Warrants Issued for Intellectual Property

On March 28, 2011, the Company granted 1,000,000 two year warrants having an exercise price of $0.20 per share. The warrants vest immediately. The Company has valued these warrants at their fair value using the Black-Scholes option pricing method. The assumptions used were as follows:

	Expected life:	1 year
	Expected volatility:	29.1%
	Risk free interest rate:	0.25%
	Expected dividends:	0%

NEXT FUEL, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2012

(UNAUDITED)

The following table summarizes all warrant grants as of December 31, 2012, and the related changes during the three months then ended:

	Number of Warrants		Weighted Average Exercise Price
Stock Warrants
Balance at September 30, 2012		575,000	$	0.20
Granted		-		-
Exercised		-		-
Expired		-		-
Balance at December 31, 2012		575,000	$	0.20
Warrants Exercisable at December 31, 2012		575,000	$	0.20
Weighted Average Fair Value of Warrants Granted During 2012			$	0.20

The following tables summarize information about stock warrants for the Company as of December 31, 2012:

	December 31, 2012 Warrants Outstanding							Warrants Exercisable
	Range of Exercise Price	Number Outstanding at December 31, 2012		Weighted Average Remaining Contractual Life		Weighted Average Exercise Price		Number Exercisable at December 31, 2012	Weighted Average Exercise Price
$	0.20		575,000		.24	$	0.20	575,000	$	0.20

NOTE 4 STOCK OPTIONS

On February 12, 2012, the Company granted options to employees to purchase 2,900,000 shares of common stock at an exercise price of $4.09 per share. 500,000 shares will be vested if the Company raises an aggregate of Five Million ($5,000,000) in gross proceeds from the sales of securities after the grant date and on or before September 30, 2012. 1,200,000 shares will be vested if the Company has either (a) achieved greater than thirty (30) thousand cubic feet per day gas production from at least twenty production pumps on or before March 31, 2013, or (b) collected at least $1 million (USD) from licensees and other customers after the grant date and on or before March 31, 2013. 1,200,000 shares will be vested if the Company has both (a) achieved for any period consisting of four consecutive fiscal quarters aggregate gross revenue per share of at least Twenty ($.20) Cents, and (b) the Company’s shares shall have been listed/quoted for trading on NASDAQ’s Capital market on or before March 31, 2014. As of December 31, 2012, the first performance condition was not achieved and those options have been canceled. The Company has determined that none of the remaining performance conditions are probable of achievement as of the date of these financial statements and, therefore, no value has been recognized on these options.

NEXT FUEL, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2012

(UNAUDITED)

On February 12, 2012, the Company granted options to employees to purchase 300,000 shares of common stock at an exercise price of $4.09 per share in connection with the purchase of technology and intellectual property (See Notes 2(B) and 7). The options will be vested if, on or before January 9, 2014, the acquired technology described in U.S. Provisional Patent Application No. 61/583,531 entitled “A Pervaporation system for treating industrial produced water”, filed on January 9, 2012 and any and all foreign counterpart patent applications currently existing or filed in the future will be commercialized by the Company. The Company has determined that none of the performance conditions are probable of achievement as of the date of these financial statements and, therefore, no value has been recognized on these options.

On February 12, 2012, the Company granted options to a non-employee to purchase 50,000 shares of common stock at an exercise price of $4.09 per share. 16,666 shares were vested immediately, 16,666 shares will be vested when the Company files a Definitive Patent Application and it is determined that the non-employee has fulfilled his obligation to assist the Company in such endeavor. 16,667 shares will be vested when the Company has determined that the non-employee has fulfilled his obligation to assist the Company in obtaining patent protection for the acquired technology described in U.S. Provisional Patent Application No. 61/583,531 entitled “A Pervaporation system for treating industrial produced water”, filed on January 9, 2012 and any and all foreign counterpart patent applications currently existing or filed in the future. Vesting is not conditioned upon the Company’s patent application resulting in the issuance of the patent.

On December 22, 2011, the Company granted an option to a non-employee to purchase 10,000 shares of common stock at an exercise price of $4.20 per share. 3,333 shares will be vested after one year of service, 3,333 shares will be vested after two years of service, and 3,334 shares will be vested after three years of service.

On November 17, 2011, the Company granted options to employees to purchase 375,000 shares of common stock at an exercise price of $4.25 per share, and 75,000 to an employee at an exercise price of $4.68 per share. 100,000 shares were vested immediately, 116,664 shares will be vested after one year of employment, 116,668 shares will be vested after two years of employment, and 116,668 shares will be vested after three years of employment.

NEXT FUEL, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2012

(UNAUDITED)

On November 17, 2011, the Company granted an option to a non-employee to purchase 10,000 shares of common stock at an exercise price of $4.25 per share. 3,333 shares will be vested after one year of service, 3,333 shares will be vested after two years of service, and 3,334 shares will be vested after three years of service.

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

	Fiscal 2012	Fiscal 2012
	Employee	Non-Employee
	Stock Options	Stock Options
Expected term (years)	3.5	10
Expected volatility	57.57%	57.57% - 71.34%
Risk-free interest rate	0.40%	1.96% - 2.03%
Expected dividends	0	0

During the three months ended December 31, 2012 and 2011, the Company recognized compensation expense related to stock options of $57,183 and $127,995, respectively.

For the three months ended December 31, 2012 and 2011, the Company recorded stock-based compensation expense of $7,331 and $96,931, respectively, related to vested employee stock options, $37,632 and $29,990, respectively, related to unvested employee stock options, $432 and $0, respectively, related to vested non-employee stock options, and $11,788 and $1,074, respectively, related to unvested non-employee stock options.

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

A summary of the Company’s stock option plans as of December 31, 2012, and changes during the three months then ended is presented below:

	Three Months Ended December 31, 2012
	Number of		Weighted Average
	Options		Exercise Price
Options outstanding at September 30, 2012		3,220,000	$	4.12
Options granted		-		-
Options expired		-		-
Options cancelled		-		-
Options outstanding at December 31, 2012		3,220,000	$	4.12
Options exercisable at December 31, 2012		239,996	$	4.28

Changes in the Company’s unvested options for the three months ended December 31, 2012 are summarized as follows:

	Three Months Ended December 31, 2012
	Number of		Weighted Average
	Options		Exercise Price
Non-vested options at September 30, 2012		3,103,334	$	4.12
Options granted		-		-
Options vested		123,330		4.34
Options cancelled		-		-
Non-vested options at December 31, 2012		2,980,004	$	4.11

		Options Outstanding						Options Exercisable
				Remaining
				Average		Weighted				Weighted
	Range of			Contractual		Average				Average
	Exercise	Number		Life		Exercise		Number		Exercise
	Price	Outstanding		(In Years)		Price		Exercisable		Price
$	4.68		75,000		3.88	$	4.68		25,000	$	4.68
	4.25		385,000		8.88		4.25		194,997		4.25
	4.20		10,000		8.98		4.20		3,333		4.20
	4.09		2,750,000		9.12		4.09		16,666		4.09
	Totals		3,220,000		8.97	$	4.12		239,996	$	4.28

NEXT FUEL, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2012

(UNAUDITED)

NOTE 5 COMMITMENTS

On December 19, 2012, the Company entered into a nine-month agreement to receive financial advisory and investment banking services. The Company agreed to pay a non-refundable retainer fee in the form of 15,000 restricted shares of common stock of the Company (See Note 3(B)). In addition, the Company agreed to pay a financing fee of eight percent (8%) of the gross proceeds upon the closing of any financing with any one or more of the advisors investors. The financing fee shall be four percent (4%) in the case of non-convertible debt financing. Furthermore, upon the first closing, a transaction fee of four percent (4%) of the aggregate consideration of each transaction shall be payable in the same form as the aggregate consideration in such transaction. The agreement may be terminated by either party upon thirty days written notice. As of December 31, 2012, no finance or transactions fees have been incurred in connection with this agreement. The retainer fee was expensed in full during the quarter ended December 31, 2012.

On December 10, 2012, the Company entered into a one year consulting agreement for part-time lab work. The agreement calls for compensation at the rate of $12.50 per hour or a fixed rate of $120 per day depending on the nature of the project.

On August 29, 2012, the Company entered into a six-month consulting agreement to receive investor relations services effective September 1, 2012. The Company is required to pay $10,000 a month. On March 1, 2013, if the agreement has not been terminated, the contract for services will continue on a month-to-month basis. After February 28, 2013, either party may terminate the contract with or without cause without penalty upon 30 days’ written notice.

On April 13, 2012, the Company entered into an employment agreement with an employee, with the initial term expiring on October 31, 2012. The employment agreement provides the employee with monthly compensation of $4,170 per month, with bonus and salary increases to be determined by the Company. The employee is also entitled to participate in any employee benefit plans in which the employee is eligible to participate. If the Company terminates employment before the initial term expires, whether for cause or without cause, the Company is required to pay the employee the base salary for the one-week period following termination. Benefits are payable during the one-week period following termination if the benefit plans permit. This agreement expired and a new one year employment agreement was entered into effective November 1, 2012 with the same terms as the initial agreement.

On March 30, 2012, the Company entered into a one-year lease agreement with an unrelated party for lease of office space beginning on May 1, 2012. The agreement calls for a monthly rental fee of $1,750.

NEXT FUEL, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2012

(UNAUDITED)

On January 24, 2012, the Company entered into a one-year consulting agreement to receive investor relations services effective February 1, 2012. The Company is required to pay $3,500 a month and 28,000 shares of Company's common stock according to the following schedule:

	●	May 1, 2012 - 7,000 shares for services rendered February through April
	●	August 1, 2012 - 7,000 shares for services rendered May through July
	●	November 1, 2012 - 7,000 shares for services rendered August through October
	●	February 1, 2013 - 7,000 shares for services rendered November through January

The agreement may be terminated by either party at any time without penalty upon failure by the other party to comply, including, without limitation, failure to comply with securities laws, rules and regulations in the performance of the agreement. The Company may terminate the agreement without cause prior to February 1, 2013 and agrees to pay all required fees through February 1, 2013. On February 1, 2013, if the agreement has not been terminated, the contract for services will continue on a month-to-month basis. After February 1, 2013, either party may terminate the contract with or without cause without penalty upon 60 days’ written notice. Through December 31, 2012, the Company issued 7,000 shares of the Company’s common stock, having a fair value of $28,000 on the grant date, based on $4.00 per share and 7,000 shares of the Company’s common stock, having a fair value of $23,730 on the grant date, based on $3.39 per share (See Note 3(B)). This agreement was terminated in October, 2012, without any further obligation by either party.

On October 31, 2011, the Company entered into an initial twelve month agreement with an outside party to assist the Company in financial advisory services. The agreement required a payment of $10,000 upon execution, a payment of $6,000 upon the Company’s stock being quoted on OTCQX, and thereafter a quarterly fee of $6,000 until such time as the agreement is terminated. This agreement remains in effect as of December 31, 2012.

On June 1, 2011, the Company entered into a one-year employment agreement with an employee, with the initial term expiring on May 31, 2012. The employment agreement provides the employee with annual compensation of $70,000 per year, with annual bonus and salary increases determined by the Company. The agreement also calls for the employee to receive health benefits. If the Company terminates employment before the initial term expires, whether for cause or without cause, the Company is required to pay the employee the base salary for the two-week period following termination. Benefits are payable during the two-week period following termination if the benefit plans permit. This agreement expired and was renewed on July 1, 2012, providing for annual compensation of $72,450 per year, with annual bonus and salary increases determined by the Company. All other terms remained unchanged.

On May 1, 2011, the Company entered into a one-year employment agreement with an employee, with the initial term expiring on May 31, 2012. The employment agreement provides the employee with annual compensation of $50,000 per year, with annual bonus and salary increases determined by the Company. The agreement also calls for the employee to receive health benefits. If the Company terminates employment before the initial term expires, whether for cause or without cause, the Company is required to pay the employee the base salary for the two-week period following termination. Benefits are payable during the two-week period following termination if the benefit plans permit. The annual compensation was subsequently increased to $54,000 per year. This agreement expired and a new two year employment agreement was entered into effective May 1, 2012 which provides for annual compensation of $65,000 per year, with annual bonus and salary increases determined by the Company. All other terms remained unchanged and this new agreement expires on April 30, 2014.

NEXT FUEL, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2012

(UNAUDITED)

On April 1, 2011, the Company entered into a two-year employment agreement with an executive, with the initial term expiring on March 31, 2013. The employment agreement provides the executive with annual compensation of $120,000 per year, with annual bonus and salary increases determined by the Company. The agreement also calls for its executive to receive health benefits. If the Company terminates employment before the initial term expires, whether for cause or without cause, the Company is required to pay the executive the base salary for the one year period following termination. Benefits are payable during the one year period following termination if the benefit plans permit. The annual compensation was subsequently increased to $150,000 per year.

On April 1, 2011, the Company entered into a two-year employment agreement with an executive, with the initial term expiring on March 31, 2013. The employment agreement provides the executive with annual compensation of $70,000 per year, with annual bonus and salary increases determined by the Company. The agreement also calls for its executive to receive health benefits. If the Company terminates employment before the initial term expires, whether for cause or without cause, the Company is required to pay the executive the base salary for the one year period following termination. Benefits are payable during the one year period following termination if the benefit plans permit.

NEXT FUEL, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2012

(UNAUDITED)

NOTE 6 REVENUE AND LICENSE AGREEMENTS

The Company entered into a License Agreement effective March 31, 2012 (as amended by Amendment No. 1 effective April 1, 2012) with Future Fuel Limited, a British Virgin Islands limited liability company (“Licensee”), which is affiliated with Mr. Guangwei Guo, a member of our Board of Directors and a shareholder who has purchased a substantial number of shares of our Common Stock.

The Agreement grants the Licensee an exclusive right to use our Coal to Gas technology in the People’s Republic of China and the Republic of Mongolia (the “Licensed Territory”). We did not grant the Licensee any rights outside the Licensed Territory.

The Licensee agreed to pay a license fee of Five Hundred Thousand ($500,000) Dollars (USD), within three months, but the Licensee receives a credit for Four Hundred Thousand ($400,000) Dollars the Licensee previously invested in field tests, which results in a net upfront payment to us of One Hundred Thousand ($100,000) Dollars which was paid to us in June 2012.

In addition, the Licensee agreed to pay an annual fee of a minimum of Thirty Thousand ($30,000) Dollars (USD) per Gas Generating Unit (or GGU) for each year the GGU is capable of producing gas. Each Gas Generating Unit is approximately 40,000 square meters of coal, lignite or other carbonaceous gas producing material of specified thickness in a field where our technology is used. A field could have multiple Gas Generating Units.

One half (50%) of the first payment is due within (20) days after the first production or injection well is drilled on a Gas Generating Unit and one half (50%) is due upon the presence of biogenic methane gas from that Gas Generating Unit. We received a $60,000 payment for four GGU’s in June 2012 and $60,000 for an additional four GGU’s in December 2012.

The Company has an accounts receivable from Future Fuel Limited of $56,944 for nutrients sold.

NEXT FUEL, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2012

(UNAUDITED)

NOTE 7 RELATED PARTY TRANSACTIONS

On May 1, 2012, the Company paid $13,500 for outside consulting services to a company owned by one of its employee/shareholders.

On April 20, 2012, the Company purchased technology and intellectual property from officers/employees in the amount of $10,000 (See Note 2B).

On March 31, 2012, the Company entered into a license agreement with another company which is owned by one of its director/shareholders. During the three months ended December 31, 2012, the Company received contract fees of $60,000 in connection with that license agreement. As of December 31, 2012, the Company has an accounts receivable from the related party in the amount of $56,944 for nutrients provided to the related party. (See Note 6)

On March 28, 2012, the Company entered into a one year lease agreement with a director for the lease of office space. The lease calls for a monthly rental fee in the amount of $1,160 beginning on April 1, 2012. The total paid under this agreement during the three months ended December 31, 2012 was $3,480.

On February 13, 2012, the Company purchased technology and intellectual property from officers/employees in the amount of $15,000.

On February 8, 2012, the Company purchased technology and intellectual property from officers/employees in the amount of $15,000. In addition, as part of the agreement, the Company granted stock options to the employees for 300,000 shares of common stock at an exercise price of $4.09 (See Note 4).

Starting in June 2011, the Company rents office space on a month to month basis for approximately $1,118 per month from a related party. The total amount of rent paid to the related party for the three months ended December 31, 2012 and 2011 was $3,354 and $3,354, respectively.

NOTE 8 RETIREMENT PLANS

In January, 2012, the Company established the Next Fuel, Inc. 401(k) Plan. On January 23, 2013, the Company approved a one time Company contribution to the 401(k) Plan totaling $100,000 for the calendar year 2012.

NEXT FUEL, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2012

(UNAUDITED)

NOTE 9 CORRECTION OF PREVIOUSLY REPORTED LOSS PER SHARE

During the year ended September 30, 2012 we determined that our presentation of net loss per share (basic and diluted) and weighted average number of shares outstanding (basic and diluted) in previously issued financial statements were not reported correctly. This was due to the fact that our treasury shares were incorrectly reported as issued and outstanding. The treasury shares reported as issued and outstanding totaled 2,500,000, and were included in the denominator of our loss per share calculation and in the total reported weighted average shares outstanding. The correction of this did not result in any change to net loss, the balance sheet or to operations for the year ended September 30, 2012 or for any quarter in that year, or for the fiscal quarter ended December 31, 2012. The treasury shares were retired during the year ended September 30, 2012. The following table represents the changes in net loss per share (basic and diluted) and weighted average number of shares outstanding (basic and diluted) for the three months ended December 31, 2011.

	For the Three Months Ended December 31, 2011
	Previously Stated			Corrected
Net Loss per Share (basic and diluted)	$	(0.04	)	$	(0.05	)
Weighted Average Number of Shares Outstanding (basic and diluted)		12,053,346			9,553,346

NOTE 10 SUBSEQUENT EVENTS

On January 23, 2013, the Company granted stock options to employees and non-employees to purchase 520,000 shares of common stock at an exercise price of $1.71 per share. The options have a term of Ten (10) years. 260,000 shares were vested immediately, 130,000 shares will be vested after one year of employment or service, and 130,000 shares will be vested after two years of employment or service. The Company expects to incur a material non-cash compensation expense related to these options during the second quarter.

ITEM 2.

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

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

Recent Events

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

	China and Inner Mongolia Exclusive License We entered into an exclusive license for the People's Republic of China and Mongolia in March 2012, with a related party. In June 2012, we received our first revenue from our licensee for China. Our licensee had 8 Gas Generating Units at February 1, 2013. We will earn an additional $30,000 per year for the production life of each of these initial Gas Generating Units. We cannot predict the production life of each Gas Generating Unit or how many Gas Generating Units our licensee will drill. See Item 1 "Business - Customers and License Agreements" of our Annual Report on Form 10-K filed with the Commission on December 19, 2012 for additional information about the terms of this license agreement.
	Indonesia Non-Exclusive License We entered into a non-exclusive license for part of the island of Sumatra in Indonesia. This Agreement was entered into following completion of a pilot test on fields in southern Sumatra, Indonesia, that showed positive results from use of our Coal to Gas technology. 13 of the 16 wells included in the field test have produced new biogenic methane gas at a measurable rate from a lignite deposit that had no prior gas production or known reserves. We have not yet earned revenue from our Indonesian licensee. For additional information, see Item 1 "Business - Customers and License Agreements" of our Annual Report on Form 10-K filed with the Commission on December 19, 2012.
	India Field Test Agreement On November 8, 2012, we entered into a field test agreement with a gas development company in India. In the field test agreement, which expires on October 1, 2013, unless extended by mutual agreement, we and our licensee agreed not to work with another company to implement BCTG technology to produce biogenetic coal bed natural gas (BCBNG) in India. For additional information, see Item 1 "Business - Customers and License Agreements" of our Annual Report on Form 10-K filed with the Commission on December 19, 2012.
	Acquisitions Adviser On December 19, 2013 we retained the investment banking form, J. H. Darbie & Co. to advise us in connection with potential acquisitions and other trasactions. A summary of the economic terms of this Agreement is contained in Note 5 of Notes to Financial Statements in this Report.

Our History

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

We purchased certain technology and intellectual property useful in extracting natural gas from coal (the "Coal-to-Gas Technology" or "CTG Technology"). Four of the five individuals who developed the acquired technology and intellectual property joined the Company as officers and employees. Our current business is based on the acquired Coal-to-Gas Technology.

Our principal office and mailing address is located at 122 North Main Street, Sheridan, Wyoming 82801 and our telephone number is (307) 674-2145.

Description of Business and Plan of Operation

We develop and commercialize innovative technologies associated with renewable energy, such as unconventional natural gas production from lower grade coal, lignite, oil shale and other carbonaceous deposits. We refer to this generally as Coal-to-Gas (CTG) or Biogenic Coal-to-Gas (BCTG) Technology.

We are also investigating opportunities to develop or acquire other advanced technologies with focus on clean renewable energy. We will focus on identifying and acquiring or developing a portfolio of growth opportunities with compelling market values and clean energy and environment stewardship, including collaborations with leading research institutes in the United States and other countries.

We are a technology provider and service company that assists owners of natural gas production resources to increase the efficiency of their operations by providing CTG technology and technical support services utilizing our CTG technology. We do not plan to own or develop natural gas production projects, but our revenue stream relies on such owners and developers utilizing our technology to successfully produce and sell natural gas.

We focus on "natural gas" that is a byproduct of microorganisms interacting with dissolved bioamenable carbon compounds in coal beds. Our Coal-to-Gas Technology maximizes these natural processes to enable owners of carbonaceous deposits, like coal and lignite, to enhance and resume commercial scale natural gas production from declining and/or depleted coal bed natural gas (CBNG) wells and/or initiate and sustain biogenic methane production in coal and other carbon formations in which native microorganisms are active.

Our initial focus is to generate methane gas from lignite deposits. Lignite, which is sometimes referred to as "brown coal," generally contains BTU levels between those of peat and subbituminous coal. Lignite also produces greater pollutants than bituminous coal, when burned. We are focusing on customers with lignite deposits first, because lower BTUs and greater pollutants have discouraged development of lignite resources in many areas. The combination of lower BTU levels and greater pollutants has made lignite deposits less valuable that coal deposits. Consequently, we believe owners of lignite deposits are motivated to begin to earn a return from their lignite resources or to increase their return from such resources.

Later, we intend to seek to expand our business into existing coal fields (e.g., subbituminous and lignite) that are already being used to generate Coal Bed Natural Gas (CBNG). Gas production at such BCTG fields typically declines over time. At some point, gas production becomes economically unprofitable. Our CTG Technology can potentially enable owners of coal resources to decrease the rate of decline of their coal to gas resources, revert gas production, and extend the economic viability life of such coal to gas resources. Depleted coal reservoirs could potentially be brought back into long-term, sustainable gas production and biologically active coal seams can be engineered to produce methane.

During the period from inception to the period ended March 31, 2011 we did not conduct an active business and devoted our efforts to capital raising activities and acquisition activity, including the capital raising and Coal-to Gas Technology described elsewhere in this Report. Most of the expense we incurred during this period related to acquisition activities. Since March 31, 2011, we have focused our operations on the field tests in Inner Mongolia and Indonesia and India. See "Recent Developments."

Results of Operations

Three Months ended December 31, 2012

For the three months ended December 31, 2012, we had $45,000 in revenue.

Operating expenses for the three months ended December 31, 2012 totaled $719,630. During the three months ended December 31, 2012, net interest income totaled $1,190.

This resulted in a net loss of $751,372 during the three months ended December 31, 2012.

Operating expenses for the three months ended December 31, 2012 included $218,623 for salary expense, $190,280 for professional fees and $305,283 for general and administrative expenses. Most of the professional fees and expenses were for financial reporting compliance. Travel to our field test sites also constituted a substantial expense.

Three Months ended December 31, 2011

For the three months ended December 31, 2011, we had $40,000 in revenue.

Operating expenses for the three months ended December 31, 2011 totaled $525,053. During the three months ended December 31, 2011, net interest income totaled $1,046.

This resulted in a net loss of $484,061 during the three months ended December 31, 2011.

Operating expenses for the three months ended December 31, 2011 included $280,421 for salary expense, $125,128 for professional fees and $119,504 for general and administrative expenses. Most of the professional fees and expenses related to litigation expense for litigation that has been settled and financial reporting compliance. Travel to our field test sites also constituted a substantial expense.

Capital Resources and Liquidity

As of December, 2012, we had $2,474,591 in cash and cash equivalents and $220,031 of liabilities. Cash and cash equivalents from inception to date have been sufficient to cover expenses involved in starting our business. However, because of the new license agreements and new business activities described elsewhere in this Report we will require substantially more funds to implement our new business during the next twelve months than we previously required.

We believe we currently have enough cash to satisfy our expected minimum cash requirements to operate our business for the next twelve months. Although we began generating operating revenue from a licensee during June 2012 (See "Recent Events" above), we also expect our operating expenses to increase before our revenues increase. Therefore, we will continue to depend on sales of capital stock until we generate sufficient revenue.

Cash flows for Three months ended December 31, 2012 and 2011

Net cash used in operating activities during the three months ended December 31, 2012 was $557,279, compared to $444,648 used in the three months ended December 31, 2011. Net cash flow used in investing activities during the three months ended December 31, 2012 was $75,536, attributable to security deposite compared to $0 for the three months ended December 31, 2011. Financing activities during the three months ended December 31, 2012 provided $0 to us, compared to $0 during the three months ended December 31, 2011. The following table summarizes our cash flows for the three months ended December 31, 2012 and 2011:

	For the Three Months Ended December 31,
	2012			2011
Net Cash Used In Operating Activities	$	(557,279	)	$	(444,648	)
Net Cash Used In Investing Activities	$	(75,536	)	$	0
Net Cash Provided by Financing Activities	$	0		$	0
Net Increase/ (Decrease) in Cash	$	(632,815	)	$	(444 ,648	)

Critical Accounting Policies

Revenue Recognition

The Company recognizes revenue on arrangements only when the price is fixed and determinable, persuasive evidence of an arrangement exists, the service is performed and collectability of the resulting receivable is reasonably assured.

The Company recognizes revenue from royalty agreements as the royalties are earned. The Company recognizes revenue from the sale of additives at the time the products are delivered. The price is fixed and collection is reasonably assured. The Company recognizes revenue under service agreements when the services are complete and the Company has no remaining obligations under the agreements.

Our license agreements provide for the following different types of payments: (1) upfront license fees; (2) annual fixed payments for each Gas Generating Unit in which the licensee deploys our technology; (3) royalties calculated as a percentage of the sale price of the gas our licensee produces, (4) payments for technical support or other services; and (5) payments for amendments we supply to licensees. Each license provides for one or more of these types of payments. Not every license we enter into includes all these forms of payments.

We recognize each type of revenue as follows:

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

(2) Annual fixed payments for each Gas Generating Unit in which the licensee deploys our technology – These payments will be recognized in accordance with the License Agreement and portions may be deferred until all work is complete.

(3) Royalties calculated as a percentage of the sale price of the gas our licensee produces - These payments will be recognized in accordance with the License Agreement and should be recognized when paid as the payment will come after the sale of produced gas.

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

(5) Payments for amendments we supply to licensees - These payments will be recognized in accordance with the License Agreement and should be recognized when we deliver the nutrients.

Cash Equivalents

The Company considers all highly liquid temporary cash investments with an original maturity of three months or less to be cash equivalents. At December 31, 2012 and December 31, 2011, the Company had no cash equivalents.

Loss Per Share

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

Diluted earnings (loss) per share reflected the potential dilutive effects of stock options, warrants, and stock equivalents. To the extent stock options, stock equivalents and warrants are anti-dilutive, they are excluded from the calculation of diluted income per share. For the quarters ended December 31, 2012 and 2011, respectively, 575,000 and 1,000,000 shares issuable upon the exercise of warrants were not included in the computation of income per share because their inclusion is anti-dilutive and 3,220,000 and 470,000 shares issuable upon the exercise of stock options were not included in the computation of net loss per share, because their inclusion is anti-dilutive.

Stock-Based Compensation

The Company measures the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognizes the costs in the financial statements over the period during which employees are required to provide services. Share-based compensation arrangements include stock options, restricted share plans, performance-based awards, share appreciation rights and employee share purchase plans. As such, compensation cost is measured on the date of grant at their fair value. Such compensation amounts, if any, are amortized over the respective vesting periods of the option grant. The Company applies this statement prospectively.

Income Taxes

Deferred assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

Recent Accounting Pronouncements

There are no current pronouncements that affect the Company.

Off Balance Sheet Arrangements

We have no off-balance sheet arrangements.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Not required for smaller reporting Companies.

Item 4.

Controls and Procedures

(a) Evaluation of disclosure controls and procedures. At the conclusion of the period ended December 31, 2012 we conducted an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)). Our CEO and CFO, based on their evaluation, determined that our controls to ensure that the accounting department has adequate training and experience for public company external reporting, was not adequate. The Company also does not have an audit committee to oversee the financial reporting process. Accordingly, based on these material weaknesses, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this Report, December 31, 2012, to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules.

The Company’s management has addressed weaknesses by starting the process of retaining additional staff and reference resources to assist its internal staff with compliance issues, but the Company has not yet added additional personnel to its internal staff.

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

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

PART II OTHER INFORMATION

Item 1.

Legal Proceedings

We are not currently involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our companies officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect. See Item 1A "Risk Factors" of our Annual Report on Form 10-K filed with the Commission on December 19, 2012 and of this Report for a description of issues that we have identified as having the highest risks for our becoming involved in litigation or regulatory proceedings.

ITEM 1A.

Risk Factors

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

You should carefully consider the risk factors listed below and in our Annual Report on Form 10-K for the year ended September 30, 2012 filed with the Securities and Exchange Commission on December 19, 2012, together with all of the other information included in this Report, before investing in our common stock. The risks and uncertainties described below encompass many of the risks that could affect our business and the value of our stock. Not all risks and uncertainties are described below. Risks that we do not know about could occur and issues we now view as minor could become more important. If any of the following risks actually occur, our business, financial condition or results of operations could be materially and adversely affected. In that case, the trading price of our common stock could decline and you may lose all or part of your investment.

We have organized these risk factors into the following categories below.

	●	our financial condition;
	●	our technology and services;
	●	our market, customers and partners;
	●	our shareholders, officers, directors and employees;
	●	regulatory matters that affect our business; and
	●	our securities.

We refer you to our Annual Report on Form 10-K for the year ended September 30, 2012 filed with the Securities and Exchange Commission on December 19, 2012 for detailed discussion of the primary risks associated with our business and our securities. We believe these risks have not materially changed since we filed our Form 10-K on December 19, 2012.

FORWARD-LOOKING STATEMENTS

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

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

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

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

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

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

On January 23, 2013 the Company granted to officers, directors,employees and a vendor stock options to purchase 520,000 shares of Common Stock for an exercise price of $1.71 per share, of which options for 315,000 shares were granted to officers and directors as follows: (i) Robert Craig 80,000 shares; (ii) Song Jin 80,000 shares; (iii) Robin Kindle 75,000 shares, Jon Larson 60,000 shares (v) Guangwei Guo 20,000 shares. The options terminate ten years after the grant date. 260,000 shares granted vested on the grant date and 260,000 shares will vest in two equal annual increments on the first and second anniversaries of the grant date. Except for options for 45,000 shares granted to non-employees, the options are incentive stock options. All option award agreements are in standard form as previously filed with the Commission for earlier option grants, except for vesting provisions.

The options grants were exempt from the registration requirements of the Securities Act of 1933 by reason of Section 4 (2) of that Act.

Item 3.

Defaults Upon Senior Securities

None.

Item 4.	Mine Safety Disclosures
None.
Item 5.	Other Information

On January 23, 2013, the Company increased the compensation of all its employees by 4% including its officers and awarded stock options to employees, officers and directors as described in Item 2 above. The current annual base compensation of its chief executive officer and two other most highly compensated executive officers is as follows effective January 1, 2013:

Name and Office	Annual Base Compensation
Robert Craig chief Executive Officer	$161,460
Song Jin President	$161,460
Robin Kindle Chief Financial Officer	$129,168

Item 6.

Exhibits.

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

SIGNATURES

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

	NEXT FUEL, INC.

Date: February 14, 2013	By:	/s/ Robert H. Craig
		Robert H. Craig
		Chairman of the Board and Chief Executive Officer

EXHIBITS INDEX

Exhibit No.		Description

3.1		Articles of Incorporation (incorporated herein by reference to Exhibit 3.1 to Company's form S-1 filed on July 28, 2008).

3.1.2		Amendment to Articles of Incorporation (incorporated by reference from Exhibit 3.1.2 of the Company's periodic report on Form 8-K filed on June 3, 2009).

3.2		Amended and Restated Bylaws (incorporated herein by reference to Exhibit 3.2 to Company's periodic report on form 8-K filed on April 1, 2011).

4.1		Warrant to Purchase Common Stock dated December 11, 2009 (incorporated by reference to Exhibit 4.2 to Company's current report filed on form 8-K filed on December 17, 2009).

10.1		Technology and Intellectual Property Purchase Agreement dated as of March 28, 2011 by and between Robert H. Craig, Song Jin, Robin Kindle, Jon Larsen and Anhui Lu; and the Company. incorporated by reference from a Current Report on Form 8-K filed with the Securities and Exchange Commission on April 1, 2011

10.2		Warrant for One Million Shares of Common Stock of the Company, dated as of March 28, 2011, issued to Robert H. Craig incorporated by reference from a Current Report on Form 8-K filed with the Securities and Exchange Commission on April 1, 2011

10.3		Lock-Up and Installment Re-Sales Restriction Agreement dated as of March 28, 2011 between and among Company and Robert H. Craig, Song Jin, Robin J. Kindle, Jon Larsen and Anhui Lu incorporated by reference from a Current Report on Form 8-K filed with the Securities and Exchange Commission on April 1, 2011.

10.4		Employment and Non-Competition Agreement dated as of April 1, 2011 between the Company and Robert H. Craig incorporated by reference from a Current Report on Form 8-K filed with the Securities and Exchange Commission on April 1, 2011.

10.5		Employment and Non-Competition Agreement dated as of April 1, 2011 between the Company and Song Jin incorporated by reference from a Current Report on Form 8-K filed with the Securities and Exchange Commission on April 1, 2011.

10.6		Employment and Non-Competition Agreement dated as of April 1, 2011 between the Company and Robin Kindle incorporated by reference from a Current Report on Form 8-K filed with the Securities and Exchange Commission on April 1, 2011.

10.7		Employment and Non-Competition Agreement dated as of April 1, 2011 between the Company and Jon Larsen incorporated by reference from a Current Report on Form 8-K filed with the Securities and Exchange Commission on April 1, 2011.

10.8		Subscription Agreement between the Company and San Ding Jiu Yuan Beijing Venture Investment Company and its General Partner Peng Min incorporated by reference from a Current Report on Form 8-K filed with the Securities and Exchange Commission on April 1, 2011.

10.9		Lock-Up And Installment Re-Sales Restriction Agreement as of March 28, 2011 between and among the Company and San Ding Jiu Yuan Beijing Venture Investment Company and its General Partner Peng Min incorporated by reference from a Current Report on Form 8-K filed with the Securities and Exchange Commission on April 1, 2011.

10.10

Amended and Restated Bylaws (as of March 28, 2011) of the Company incorporated by reference from a Current Report on Form 8-K filed with the Securities and Exchange Commission on April 1, 2011.

10.11		Subscription Agreement dated as of May 13, 2011 between and among the Company and Peng Min, Guangwei Guo and Zhiqiang Siu incorporated by reference from Exhibit 99.11 to the Company's Quarterly Report on Form 10-Q for the Quarter ended March 31, 2011 filed with the Securities and Exchange Commission on May 16, 2011.

10.12		Lock-Up And Installment Re-Sales Restriction Agreement dated as of May 13, 2011 between and among the Company and Peng Min, Guangwei Guo and Zhiqiang Siu incorporated by reference from Exhibit 99.12 to the Company's Quarterly Report on Form 10-Q for the Quarter ended March 31, 2011 filed with the Securities and Exchange Commission on May 16, 2011.

10.13		Registration Rights Agreement dated as of May 13, 2011 between and among the Company and Peng Min, Guangwei Guo and Zhiqiang Siu incorporated by reference from Exhibit 99.13 to the Company's Quarterly Report on Form 10-Q for the Quarter ended March 31, 2011 filed with the Securities and Exchange Commission on May 16, 2011.

10.14		2011 Equity Compensation Plan of the Company effective November 1, 2011 incorporated by reference from Exhibit 10.14 to the Company's Annual Report on Form 10-K for the Year Ended September 30, 2011 filed with the Securities and Exchange Commission on December 22, 2011.

10.15		Stock Option Award Agreement dated November 17, 2011 for Robert Craig incorporated by reference from Exhibit 10.15 to the Company's Annual Report on Form 10-K for the Year Ended September 30, 2011 filed with the Securities and Exchange Commission on December 22, 2011.

10.16		Stock Option Award Agreement dated November 17, 2011 for Song Jin incorporated by reference from Exhibit 10.16 to the Company's Annual Report on Form 10-K for the Year Ended September 30, 2011 filed with the Securities and Exchange Commission on December 22, 2011.

10.17		Stock Option Award Agreement dated November 17, 2011 for Robin Kindle incorporated by reference from Exhibit 10.17 to the Company's Annual Report on Form 10-K for the Year Ended September 30, 2011 filed with the Securities and Exchange Commission on December 22, 2011.

10.18		Stock Option Award Agreement dated November 17, 2011 for Guangwei Guo incorporated by reference from Exhibit 10.18 to the Company's Annual Report on Form 10-K for the Year Ended September 30, 2011 filed with the Securities and Exchange Commission on December 22, 2011.

10.19		Stock Option Award Agreement for 900,000 option shares dated February 12, 2011 for Robert Craig pursuant to 2012 to 2014 Performance Bonus Equity Plan incorporated by reference from Exhibit 10.19 to the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 2011 filed with the Commission on February 14, 2012.

10.20		Stock Option Award Agreement for 150,000 option shares dated February 12, 2011 for Robert Craig pursuant to 2012 Technology Acquisition Equity Plan incorporated by reference from Exhibit 10.20 to the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 2011 filed with the Commission on February 14, 2012.

10.21		Stock Option Award Agreement for 900,000 option shares dated February 12, 2011 for Song Jin pursuant to 2012 to 2014 Performance Bonus Equity Plan incorporated by reference from Exhibit 10.21 to the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 2011 filed with the Commission on February 14, 2012.

10.22

Stock Option Award Agreement for 150,000 option shares dated February 12, 2011 for Song Jin pursuant to 2012 Technology Acquisition Equity Plan incorporated by reference from Exhibit 10.22 to the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 2011 filed with the Commission on February 14, 2012.

10.23		Stock Option Award Agreement for 275,000 option shares dated February 12, 2011 for Robin Kindle pursuant to 2012 to 2014 Performance Bonus Equity Plan incorporated by reference from Exhibit 10.23 to the Company's Quarterly Report in Form 10-Q for the quarter ended December 31, 2011 filed with the Commission on February 14, 2012.

10.24		License Agreement effective April 2, 2012 between Next Fuel, Inc. and PT Enviro Energy, an Indonesian limited liability company incorporated by reference from Exhibit 99.1 to the Company's Current Report on Form 8-K filed with the Commission on April 20, 2012.

10.25		License Agreement dated as of March 31, 2012 between Next Fuel, Inc. and Future Fuel Limited, British Virgin Islands limited liability company incorporated by reference from Exhibit 99.2 to the Company's Current Report on Form 8-K filed with the Commission on April 20, 2012.

10.26		Amendment No. 1 dated as of April 1, 2012 to License Agreement dated as of March 31, 2012 between Next Fuel, Inc. and Future Fuel Limited, British Virgin Islands limited liability company incorporated by reference from Exhibit 99.3 to the Company's Current Report on Form 8-K filed with the Commission on April 20, 2012.

10.27		Lock-up and Installment Re-Sale Restriction Agreements dated as of March 28, 2012 between the Company and Mr. Guangwei Guo incorporated by reference from Exhibit 99.4 to the Company's Current Report on Form 8-K filed with the Commission on April 20, 2012.

10.28		Registration Rights Agreement dated March 28, 2012 between the Company and Mr. Guangwei Guo incorporated by reference from Exhibit 99.5 to the Company's Current Report on Form 8-K filed with the Commission on April 20, 2012.

10.29		Lock-up and Installment Re-Sale Restriction Agreements dated as of May 25, 2012 between the Company and seven individuals incorporated by reference from Exhibit 99.1 to the Company's Current Report on Form 8-K filed with the Commission on June 8, 2012.

10.30		Registration Rights Agreement dated May 25, 2012 between the Company and seven individuals incorporated by reference from Exhibit 99.2 to the Company's Current Report on Form 8-K filed with the Commission on June 8, 2012.

31.1		Certification pursuant to Section 302 of Sarbanes Oxley Act of 2002 by Chief Executive and Chief Financial Officer.

32.1		Certification pursuant to Section 906 of Sarbanes Oxley Act of 2002 by Chief Executive Officer and Chief Financial Officer.

101		Interactive Data File

* This information is furnished in extensible Business Reporting Language (XBRL) and is not filed for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities and Exchange Act of 1934, and is not subject to liability under those sections.

NEXT FUEL, INC. - FORM 10-Q - February 14, 2013

Attached files

NEXT FUEL, INC. Reports