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EX-31.2 - EXHIBIT 31.2 - Vista International Technologies Incexhibit312_ex31z2.htm
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EX-32.2 - EXHIBIT 32.2 - Vista International Technologies Incexhibit322_ex32z2.htm
EX-32.1 - EXHIBIT 32.1 - Vista International Technologies Incexhibit321_ex32z1.htm



 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-K

 


(Mark one)

 

x

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


 

 

For the Fiscal Year Ended December 31, 2012

 

 

OR

 

 

o

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

 

For the transition period from ______________ to ______________


 

Commission File No. 000-27783



VISTA

INTERNATIONAL

 TECHNOLOGIES,

 INC.

(Name of small business issuer as specified in its charter)





(303) 690-8300

Issuers telephone number, including area code


Securities registered pursuant to Section 12(b) of the Act:

None

 

Securities registered pursuant to Section 12(g) of the Act:

 

Common Stock, par value $0.001 per share



 



 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes  o No x

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes  o No x

 

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.  x Yes  o  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 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. 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. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer o

Accelerated filer o

 

 

Non-accelerated filer o (do not check if a smaller reporting company)

Smaller reporting company þ

 

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

 

The aggregate market value of the voting and non-voting common stock held by non-affiliates of the registrant, computed by reference to the closing price of such common stock June 30, 2012 was $2,169,125.

 

The registrant had 19,406,376 shares of common stock issued and outstanding as of April 9, 2013.


DOCUMENTS INCORPORATED BY REFERENCE: None




 

 

VISTA INTERNATIONAL TECHNOLOGIES, INC.

 

TABLE OF CONTENTS

 

 

 

Pg

 

 

 

Forward-Looking Statements

  1

PART I

Item 1.

Business.

2

Item 1A.

Risk Factors.

  12

Item 1B.

Unresolved Staff Comments.

14

Item 2.

Properties.

14

Item 3.

Legal Proceedings.

14

Item 4.

Mine Safety Disclosures.

15

PART II

Item 5.

Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

15

Item 6.

Selected Financial Data.

16

Item 7.

Managements Discussion and Analysis of Financial Condition and Results of Operations.

17

Item 7A.

Quantitative and Qualitative Disclosures About Market Risk.

22

Item 8.

Financial Statements and Supplementary Data.

F-1

Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

22

Item 9A.

Controls and Procedures.

22

Item 9B.

Other Information.

23

PART III

Item 10.

Directors, Executive Officers and Corporate Governance.

24

Item 11.

Executive Compensation.

27

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

27

Item 13.

Certain Relationships and Related Transactions, and Director Independence.

29

Item 14.

Principal Accountant Fees and Services.

23

PART IV

Item 15.

Exhibits and Financial Statement Schedules.

30

 

 

Signatures.

33

 




 

 

 

FORWARD-LOOKING STATEMENTS

 

Certain information contained in this report may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and is subject to the safe harbor created by that act. The safe harbor created by the Securities Litigation Reform Act will not apply to certain forward looking statements relating to our business or operations because we issued penny stock (as defined in Section 3(a) (51) of the Securities Exchange Act of 1934 and Rule 3a51-1 under the Exchange Act) during the three year period preceding the date(s) on which those forward looking statements were first made. We caution readers that certain important factors may affect our actual results and could cause such results to differ materially from any forward-looking statements which may be deemed to have been made in this information statement or which are otherwise made by or on behalf of us. For this purpose, any statements contained in this report that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the generality of the foregoing, words such as may, will, expect, believe, explore, consider, anticipate, intend, could, estimate, plan, continue, or hope or the negative variations of those words or comparable terminology are intended to identify forward-looking statements.

 

 Factors that may affect our results include, but are not limited to, the risks and uncertainties associated with:

 

 

Our ability to raise capital necessary to implement our business plan.

 

 

Our ability to finance and complete planned projects and facilities upgrades.

 

 

Our ability to execute our business plan and commercialize our Thermal Gasifier technology which is undergoing redesign, including building Thermal Gasifiers that meet customers specifications and that meet local regulatory environmental and permit requirements.

 

 

Risks related to dependency on a small number of customers.

 

 

Our ability to satisfy our customers expectations.

 

 

Our ability to employ and retain qualified management and employees.

 

 

Changes in government regulations which are applicable to our business including rules related to use of tire derived fuel under the Clean Air Act as well as the Energy Independence and Security Act of 2007.

 

 

The availability of a consistent, economically viable, and sustainable waste stream supply to fuel the Thermal Gasifier operations.

 

 

Changes in the demand for our products and services, including the impact from changes in governmental regulation and funding for alternative energy.

 

 

Changes in domestic and global regulation related to greenhouse gas and carbon emissions.

 

 

The degree and nature of our competition, including the reliability and pricing of traditional energy sources, economic viability of other alternative energy sources such as wind and solar power.

 

 

Loss of competitive advantage due to the expiration of two of our U.S. patents in 2011.

 

 

The closing of the sale and leaseback of our Hutchins, Texas site where our tire processing operations are located.

 

 

Our ability to pay debt service on loans as they come due.

 

 

Our ability to generate sufficient cash to pay our creditors.

 

 

Disruption in the economic and financial conditions primarily from the impact of terrorist attacks in the United States and overseas, threats of future attacks, police and military activities and other disruptive worldwide political events.

 

We are also subject to other risks detailed from time to time in other Securities and Exchange Commission filings and elsewhere in this report. Any one or more of these uncertainties, risks and other influences could materially affect our results of operations and whether forward-looking statements made by us ultimately prove to be accurate. Our actual results, performance and achievements could differ materially from those expressed or implied in these forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether from new information, future events or otherwise.

 




1


 

 

Part I

Item 1. Business.

 

A glossary of key terms and acronyms used in the Business discussion below is contained in this report beginning on page 11.

 

Company Mission

 

Vista International Technologies, Inc.s mission is to provide a clean, dependable, cost-competitive waste-to-energy (WTE) and renewable energy alternative to fossil fuels world-wide using our proprietary technologies. We plan to develop projects with government, community, industry and financial partners to recover available hydrocarbon based energy from materials generally considered as waste and destined for disposal. The recovery of energy from waste utilizing our Thermal Gasifier will divert large volumes of material from landfills and other disposal systems while providing clean and cost effective alternative energy.

 

General

 

Vista is presently divided into two business units:

 

Renewable energy and WTE utilizing our Thermal Gasifier technology, and

 

 

Tire processing and storage.

 

Waste-to-Energy

 

At a time when world-wide demand for electricity stretches both generation and transmission capacity, and energy security threatens economic growth, we seek to provide clean, sustainable and profitable solutions to alleviate these problems. Our goal is to divert readily available waste materials from landfills or land applications and use our technology to efficiently generate clean renewable energy from this waste.  Our main technical effort is on our proprietary patented technology, the Thermal Gasifier, which is a horizontal multi-stage gasification system designed to convert residential, industrial and commercial waste, biomass, waste tires and most any other solid, hydrocarbon-based material into clean  thermal and electrical energy, while maintaining emission levels under the most stringent EPA and European Union regulations.

 

As we advance our state-of-the-art WTE technology, our business model focuses on the development of qualified joint-venture partnerships and licensed partner companies to build, own and operate WTE distributed power generation facilities using our Thermal Gasifier patented technology.  Whether through a joint-venture or licensed partner, we expect to develop efficient WTE infrastructures for industrial customers (inside the fence), or for small municipalities. These projects will reduce the environmental impact from waste disposal and reduce dependence on fossil fuels while producing efficient, clean energy from a given waste stream. Our solutions will decrease our customers waste disposal and power consumption costs, while at the same time lowering airborne emissions that would be generated by disposing of waste in landfills. We also expect to take advantage of government subsidies/credits to assist in the financing of WTE projects in select markets.

 

Historically, we marketed and sold 15 first generation Thermal Gasifiers (prior to 2000), and three second generation Thermal Gasifiers (one in 2002 and two in 2004).  We are currently redesigning and testing our third generation Thermal Gasifier. In addition, we are currently constructing a small-scale bench-top model of our Thermal Gasifier, to be used for demonstration as a Proof of Process model. We currently do not generate any revenues from our WTE business unit.

 

Tire Processing Operation

 

We operate a tire fuel processing and storage facility in Hutchins, Texas, licensed as a scrap tire transporter, processor and storage facility. We are paid a tipping fee (fee paid per tire received or per ton) for accepting waste tires. We produce the following from scrap tires: tire shreds for landfill for use as leachate material and as sanitary landfill cover, and starting in 2012, TDF (Tire Derived Fuel) for use by our customers as fuel for cement kilns, paper mills, or other heat intensive processes.

  

The facility is currently the only waste tire storage and processing facility licensed by the State of Texas to operate in the Dallas/Ft. Worth metropolitan area.

 

We ceased production of TDF during August 2007, due to equipment damage.  We considered purchasing new equipment; however, the markets for our TDF began to decline during 2008 due to the global economic downturn.  As a result of the downturn and our limited financial resources, we determined not to purchase new equipment and as a result, we were unable to resume production of TDF and the exploitation of the TDF market, at that time.




2


 

During 2012, our Board of Directors, after considering ways to maximize the value of our tire producing assets, completed the upgrade of the Tire Facility so as to enter the TDF market. Management had found that the TDF market was beginning to rebound, especially as coal prices rose, since TDF represents a high energy alternative fuel source. Following the research conducted by management, the Company decided that it would be an ideal time to re-enter the TDF market.


In late summer 2011 management began looking for ways to secure additional funding  and was able to reach terms on $450,000 of loans from our majority shareholder, Mr. Richard Strain, to purchase the necessary equipment for a TDF production operation. Management proceeded to purchase and install the necessary equipment. We have resumed the production of TDF in the first quarter of 2012.


Our tire processing and storage operation in Texas is subject to regulation by the Texas Commission on Environmental Quality (TCEQ). We are registered with the TCEQ, which allows us to receive, store, transport and process waste tires.    We have begun expanding operations with additional shredding equipment and rolling stock to increase our throughput along with commencing the production of TDF to generate additional revenues. We expect that the continued production of TDF will result in a reduction of the stored material onsite thereby reducing our financial liability exposure.

 

During the year ended December 31, 2012, our tire recycling and processing business generated 100% of our total revenue.

 

Thermal Gasifier Technology and Operations

 

Prior to 2000 we sold approximately 15 first generation Thermal Gasifiers worldwide.  We sold three second generation Thermal Gasifiers, one in Ireland in 2002, and two in Italy in 2004.  Our long term goal is to produce the majority of our revenue and cash flow from the commercialization of our third generation Thermal Gasifier technology which is currently undergoing redesign and testing.  As a result, we plan to focus the majority of our resources on this business in the future while we continue to improve operations of our tire facility to generate positive cash flow to fund these operations.  We have not sold any third generation Thermal Gasifiers and we currently do not generate any revenue from our Thermal Gasifier operations.

 

The Company is exploring various opportunities for the development of a commercially viable pilot project in the US to exploit its Thermal Gasifier patented technology. The characteristics of our ideal project are a combination of high energy demand and cost with on-site (or local) generation of large volumes of hydrocarbon based waste.

 

During 2012, we made further advances in the design of our third generation Thermal Gasifier as we continue to increase the energy efficiency and cost-effectiveness of the technology using our engineering and operating experience gained from our efforts to implement a functioning WTE facility in Cologna-Veneta Italy between 2004 and 2006. In that project, the Company hired and worked in conjunction with a team of engineers from Merrick and Company to start-up and undergo performance testing for two of our second generation Thermal Gasifiers.  During the start-up and commissioning of the Cologna-Veneta WTE plant in 2004, it was determined that the facility could not meet the contractual fuel specifications of our Thermal Gasifiers primarily because the facility did not have fuel preparation equipment to improve the quality of the available fuel feedstock.  The use of inferior grade fuel resulted in the Thermal Gasifiers producing less than  the rated output on each gasifier.  As a result these Thermal Gasifiers were not considered to be financially successful.  The Thermal Gasifiers at the Cologna-Veneta facility operated between 2004 and 2006 until the project went into receivership.  The experience from this project has provided the Company with data to implement design revisions toward more fuel flexibility and improved efficiency.  These benefits include, among others, adaptations in fuel handling, fuel preparation, tuning, airflow, emissions, and variations in the fuel feedstocks provided data to support a broader compatibility of fuel type and quality, while increasing efficiency.

 

To continue to advance the Company, it is important that we attract and gain access to new capital. To identify and facilitate necessary funding to further our business plan, we continue to work on fund raising activities in multiple areas.  We have obtained funds contributed by private investors and anticipate that we will seek further similar investment from time-to-time in the future. We also entered into an agreement with Colebrooke Capital, Inc., an investment advisory firm based in New York City, in April 2010, pursuant to which Colebrooke is to work to re-capitalize the Company, so that we can complete the deployment of the next generation Thermal Gasifier technology and initiate project development for its commercialization.  In exchange for its corporate development services, Colebrook will receive a certain percentage of the total capital raised in each transaction (subject to certain criteria), and, in exchange for its advisory services, Colebrook will receive an agreed-upon sum.  Additionally, we will seek project funding, in some cases with joint venture partners, which will be based on the size, configuration and business structure of a given project. To date, no funding opportunities have developed under the agreement with Colebrook.

 

We have also engaged Steven Kowalsky and Edward Kowalsky as consultants to facilitate introductions of the Company to selected clients for the purpose of developing projects where our Thermal Gasifier technology can be utilized.  The Kowalskys will receive shares of our common stock in exchange for their services.

 

Operations related to the engineering and developments of the Thermal Gasifier are ongoing and headquartered at our office in Commerce City, Colorado.  

 




3


 

Tire Processing Operations

 

The Company has been in the tire processing business since 1997, operating a 27 acre tire processing and storage facility in Hutchins, Texas since 1999.  It is permitted by the TCEQ as a scrap tire processing and storage facility and as a used tire processor and recycler. We accept used passenger vehicle and truck tires as a waste product from businesses, governments, communities, and individuals for a tipping fee (disposal charge).  The Hutchins facility shreds whole passenger and truck tires for disposal, and produces tire derived fuel (or TDF). From August 2007 through August 2008, the company focused on removing and land filling waste tires from the facility and making improvements necessary to comply with requirements of the TCEQ. In August 2008 the TCEQ gave our facility permission to re-commence operations. Since August 2008, we have been accepting and shredding waste passenger and truck tires for a tipping fee


During 2012 we generated approximately $683,000 in gross revenue from our tire processing operations, $440,000 of which was generated from tipping fees collected for the disposal of waste tires, and $243,000 from sales of TDF and other processed tire material. Our total cost of revenue for tire processing operations was approximately $595,700, including a decrease in the environmental liability of roughly $70,300, resulting in gross profit of $157,821

                             

 The tire processing facility provides the Company experience in securing and processing significant supplies of alternative fuel feedstocks. The tire processing operations could be used to complement the Thermal Gasifier should the market economics improve in Texas.  This would enable the tire facility to produce revenue toward funding the development and deployment of the gasification technology in that market.

 

 Description of Thermal Gasifier Technology

 

The Companys proprietary patented technology, the Thermal Gasifier, is a horizontal multi-stage gasification system designed to efficiently convert various waste materials from industrial, commercial, residential and agricultural sources into clean energy while maintaining the most stringent Environmental Protection Agency (EPA) and European Union (EU) emission standards.

 

The Companys Thermal Gasifier is a closed, continuous flow, multi-stage gasification module. The Thermal Gasifier is designed to efficiently convert hydrocarbon feedstock containing solids, such as tire-derived fuel (TDF), refuse-derived-fuel (RDF) from the municipal and industrial solid waste streams, municipal sewage sludge solids (MSS), wood waste, and agricultural waste primarily into:

 

 

a producer gas (Syngas) comprised primarily of hydrogen and carbon monoxide, and

 

 

a residual inert ash (approximately 10% by weight of the feedstock on average).

 

Most of the feedstock mentioned above requires some preparation for use as fuel, such as shredding, blending, densifying and pelletizing, to ensure proper gasification. Resultant pellets will have a BTU value of between 5,000 and 15,000 BTU/lb. The Thermal Gasifier is designed to produce a consistent energy stream output as required by the end users needs.   In order to maintain consistent energy output, the amount of fuel input is adjusted.  The higher the BTU value of the fuel, the less fuel input is required for the requisite energy output.  Feedstock pellets with a BTU value of less than approximately 4,500 BTU/lb will not meet our minimum quality requirements to be usable as fuel for the Thermal Gasifier.  Different types of fuel feedstock will provide different levels of energy content. For example TDF has a 15,000 BTU/lb value, RDF has a 7-8,000 BTU/lb value and MSW can vary with an average BTU value between 5,000 to 8,000 BTU/lb.

 

Following preparation, the fuel pellets or chips are fed into the Thermal Gasifier using a system of weight belts and air locks to ensure an accurately metered supply of fuel is introduced while limiting the introduction of atmospheric air. The fuel is distributed on a moving belt which passes through a high temperature, oxygen starved environment. It is during this stage the solids break down into a Syngas, which is then drawn off to a separate chamber to be combusted at temperatures between 1500° to 2000° Fahrenheit.  The type and quality of the waste stream feedstock will affect the BTU value of the fuel and therefore the processing efficiency, as well as the amount of fuel input needed to generate the targeted energy output.


The Thermal Gasifiers multi-stage gasification and oxidation process is designed to efficiently recover the greatest percentage of available energy possible while generating very small quantities of environmental pollutants. The Thermal Gasifiers high temperatures destroy the majority of hazardous air pollutants emitted from RDF and TDF including polychlorinated biphenyls (PCBs), dioxins, and furans. Most remaining gaseous pollutants are captured by scrubbers, catalytic reduction, or other pollution control equipment with the exhaust gas containing pollutants falling well below EPA and EU limits.

 





4


 

Marketable Products

 

Waste-to-Energy

 

Thermal Gasifier based WTE system are capable of producing two classes of usable products:

 

 

Heat/Steam - produced during gasification and oxidation/combustion of Syngas. Heat is available for use in heating and cooling of adjacent buildings, industrial processes such as cement production or for generation of steam.

 

 

Electricity - generated through addition of a steam turbine generator system or organic rankine cycle power generation system to the Thermal Gasifier. Electricity is available for use on-site or sale to the local electrical grid.

 

Marketability of each usable product depends upon local demand for the front end waste processing and the back end energy commodity output, the type and quality (pellet BTU value) of the available waste stream feedstock, and our ability to further process and distribute the products at competitive prices. We expect that these market demands will drive the configuration of the Thermal Gasifier in such a way as to maximize project profitability and will vary from location to location. As of the date of this report, no such projects are operational.

 

Tire Processing

 

Products from our tire processing operations include:

 

 

Tire derived fuel (TDF).  

 

 

Other sizes of tire shreds used in various commercial applications

 

Market Opportunity

 

Waste to energy

 

In the WTE market a significant focus has been placed on the generation of electricity by the direct combustion of solid waste. This typically results in high levels of air pollution, most notably in high carbon dioxide emissions.  Alternatively, solid waste can be gasified and the Syngas produced can then be combusted to generate electricity efficiently and in a more environmentally friendly manner, specifically, much lower carbon dioxide emissions. The key market drivers are the cost of waste disposal and the price paid for the electricity generated. In many instances, unless the cost of waste disposal and price of electricity are high, the project will not be economically viable compared to traditional fossil fuel generating capabilities. We believe the optimal projects for our Thermal Gasifier will not be large centralized power production facilities, but smaller (1 to 50 megawatt) distributed power generation facilities either co-located with the waste generator and end user of the power, or located within a municipality and interconnected to the local electricity grid.

 

Opportunities also exist for sale of commodities other than electricity, which can offer higher profitability to a project.  While production of electricity is a mainstream technology, the necessary equipment can be quite expensive, particularly on a small scale.   To maximize the projects efficiencies, combined heat and power (CHP) can be used to increase project return on investment. In addition, our Thermal Gasifier has the flexibility to handle a variety of different solid hydrocarbon based waste materials which will allow us to identify projects that could not be handled by other technologies without considerable design modification and cost.

  

We expect the demand for the Thermal Gasifier technology for creating energy infrastructures or WTE facilities to develop and increase as traditional energy costs continue to rise. In industries with high energy demands such as chemical plants or refinery operations, grid blackouts or other service interruptions also drive the need for more reliable distributed power generation facility infrastructures that we can provide utilizing our Thermal Gasifier as a dedicated energy source.  Additionally, we expect the demand for waste processing to increase as environmental regulations increase and space constraints limit municipalities ability store carbon based waste.

 

 Tire Fuel Processing and Storage

 

We believe that the demand for our tire fuel processing and storage services in Hutchins, Texas will continue to provide us opportunities to receive and process waste tires in the Dallas/Ft. Worth metropolitan area and to supply  customers with TDF.

 





5


 

According to the Rubber Manufacturers Associations Scrap Tire Markets 9th Biennial Report of May 2009, there were 303 million waste tires disposed of in the United States during 2007. Of these 303 million tires, about 53% were used as TDF, 17% were used for crumb rubber production, 13% were disposed of in landfills, 12% were used in civil engineering applications, 3% were used in reclamation projects and the remainder was used in small specialty applications.

 

Management expects new emission regulations will be enacted reducing the percentage of waste tires used to fuel cement kilns in non-attainment, historically a material portion of Vistas TDF sales. Management also expects that this will be offset by the increase in use by other industries that seek a high energy alternative fuel feedstock to that of traditional fossil fuels (i.e. oil and natural gas).  Management believes that as traditional fossil fuel costs increase the market for alternative fuels, such as TDF, will become more attractive substitutes.  Additionally, our Thermal Gasifier technology provides a viable method of utilizing waste tires, reducing landfill and stockpile accumulations while generating clean dependable energy in an environmentally friendly manner.

 

Business Development Activities

 

Waste to Energy

 

We seek to establish our presence in the renewable energy marketplace through strategic joint-venture partnerships with key business partners. Through participation in commercially viable WTE projects located on optimal sites, we expect to utilize the Syngas generated by the Thermal Gasifier to produce thermal and electrical energy. We have enetered into an agreement with a key project partner located in the Northeastern United States. This group has expressed strong interest in developing WTE facilities on their sites utilizing our Thermal Gasifier . A pilot gasification project is currently under development with  this project partner.

 

There are several distinct trends pulling our solution into the marketplace:

·

Increasing emphasis on climate change and the reduction of greenhouse gas emissions.

·

Increasing interest in alternative waste disposal options, rather than land filling and incineration.

·

The need to contain ever increasing energy costs driven by the dependence on fossil fuels.

 Based on our experience with the performance of our previous first and second generations of our Thermal Gasifiers, and the anticipated performance from the redesign improvements of our current Thermal Gasifer that we are currently implementing as discussed under the heading Research & Development below, management believes the Thermal Gasifier will be an ideal solution to the concerns listed above. We expect that use of our Thermal Gasifiers will:

 

  

divert waste from landfills,

  

mitigate increasing costs associated with waste disposal,

  

help reduce dependence on fossil fuels, and

  

reduce carbon and greenhouse gas emissions. 

 

The Company believes that a small scale pilot facility in the US could aid significantly in promoting mainstream acceptance for the technology.

 

As the market develops, we anticipate that the typical project will be a standalone project that we build, own, and operate solely or under a joint venture. We expect to take advantage of our operating flexibility as different quantities of various waste streams are processed, based on fuel availability and fluctuation of quantities in regional markets. Unlike most other gasification and pyrolysis systems on the market, the Thermal Gasifier can process virtually any hydrocarbon-based waste stream, and can switch from one feedstock to another, or mix waste streams depending upon the specifications of a project, as in if fuel needs to be disposed of or used efficiently. Given that the Thermal Gasifier processes waste and generates energy, any given project can balance the need to maximize waste input or minimize fuel usage. Waste generators could use lower BTU feedstock to maximize waste disposal, while projects requiring feedstock to be purchased could use higher energy content feedstock to minimize fuel usage: the value of a particular feedstock (waste stream) will determine the quantity (lbs) of such feedstock that is required for input into the gasifier to attain the desired energy output. For illustration purposes consider two different feedstocks: RDF (8,000 btu/lb) and TDF (15,000 btu/lb).  Due to the difference in energy content, we would need significantly fewer pounds of TDF input than either RDF input or a combination of RDF and TDF input to attain the desired energy output. Thus the Thermal Gasifiers feedstock processing flexibility will allow us to process the most economical hydrocarbon-based waste available to the specific project.. Vista will also be able to benefit from contractual flexibility in the sale of the energy commodity output, such as steam and/or electricity. Local market pricing will have an impact on individual project returns.

  




6


 

Tire Fuel Processing and Storage

 

Tires have relatively high energy content and are an ideal fuel for the Thermal Gasifier or they can be blended with other waste fuels to achieve energy content stability. At our tire fuel processing operation in Hutchins, Texas, we receive a tipping fee for accepting waste tires. In addition, we have opened our tire fuel processing facility and  re-entered the TDF market as discussed above.

 

Research & Development

 

During 2012, we incurred approximately $5,400 in research and development costs dedicated to internal product development which are included as selling general and administrative expense in our consolidated statement of  operations.  We are engaged in continuous development and improvement of our Thermal Gasifier technology through advanced engineering design. We are utilizing our experience gained during development and operation of the Thermal Gasifier project in Italy in 2004 through 2006, which utilized a second generation Thermal Gasifier, particularly in regard to low grade fuels, which is described in more detail under the heading Thermal Gasifier Technology and Operations above, to redesign the Thermal Gasifier in order to further improve energy recovery and overall efficiency. We plan to continue to invest in internal technology research and development with a goal of offering our customers the best and most efficient renewable energy opportunities to support our goal of reducing the carbon footprint one step at a time.  We will require additional funding for these efforts to sustain our research and development efforts.  We hope that the revenues from our TDF production operations will grow to the level of providing funding for these efforts but we cannot assure it will.  Alternatively, we will need to seek additional capital or debt financing.  If we are unable to obtain the needed funds, we may be forced to curtail or suspend research and development activity.    

 

Intellectual Property

 

We own one U.S. patent and one European patent and have two U.S. and one European patent pending.

 

Our two initial patents applied to the construction methodology and design of our Thermal Gasifier and were issued in 1993 and 1994. These patents both expired in 2011. One additional patent for our gasifier system and method of gasification was issued in 2006 and expires in 2018. Our patents cover the design of a fuel efficient dual gasification chamber and a unique computerized method of mixing air with combustible gas.  As we complete the advancement of our technology toward its third generation of improvements, additional patent applications will be made to piggy-back off of the original patents, thereby extending the protection on our intellectual property.

 

We also have two US patent applications pending. One, filed during 2002, relates to improvements in our gasifier system, which reduces air and water pollutants and the second, filed in 2004, relates to our oxygen-based biomass gasification system and controls. In addition, two European patent applications were pending in 2010 on our gasifier system and method of gasification and on our oxygen-based biomass gasification system. On January 5, 2011, the European patent for our Gasifier System and Method was issued.

 

Competition

 

Waste-to-Energy

 

It is very difficult to compete on large scale utility electric generation against traditional fossil fuels on a price-per-KWh basis. Therefore we expect to compete within a broad spectrum of technologies on a smaller scale as the alternative energy industry continues to expand, including traditional solid waste burners, fluidized bed boilers, wind and solar technology and various forms of gasification and pyrolysis. We recognize that to be competitive, we must continue to expand the application and utilization of the Thermal Gasifier and couple it with other synergistic technologies such as power generation, pollutant controls and Material Recovery Facilities (MRF).  Historically, through 2006, 15 of our first generation and three of our second generation Thermal Gasifiers have been used to process refuse derived fuel (RDF) from municipal solid waste on a commercial scale, and have processed  most other hydrocarbon based waste streams on either a test or smaller scale.  However, there are currently no third generation Thermal Gasifiers operational from which to collect data or which are generating revenues.

 

Based on the Companys historical sales of our first and second generation Thermal Gasifiers, we expect to compete in our target markets primarily based on the following criteria:


  

Capacity (both fuel input and energy output)

  

Operational efficiency and performance

  

Types of feedstock processed

  

Modular nature and scalability of our systems

  

Environmental compliance

  

Price

  

Operating Costs




7


 

Management believes that the modular nature of our systems will give us advantages in the configuration of plants, as well as the ability to effectively process various waste stream feedstocks as long as it meets our minimum fuel quality threshold (approximately 4500 BTU/lb), and convert the feedstocks to different end products.  The multi-fuel capabilities of the Thermal Gasifier will give it an advantage over most other systems, which we describe below, as it allows us to process the most valuable fuel in any given market and switch fuels to take advantage of price swings.  Scalability will allow us to increase a users energy output and waste reduction by adding additional Thermal Gasifiers as components to an existing waste-to-energy system, without the need for the user to add additional equipment such as extra turbines, boilers, or waste pelletizers.  Additionally, the emissions of our system meet EU and EPA standards, and in our last emission test, did so without any effluent gas treatment other than particulate removal.  We believe that installation costs for the Thermal Gasifier will be at or below industry averages, and operating costs will feature a minimum of personnel needed to run the system and a low parasitic load.  The combination of these factors give us advantages over  traditional technologies such as incinerators or mass burners, which make up the majority of current waste to energy facilities and which are falling out of favor in most developed countries due to their inefficiencies and high greenhouse gas emissions.

  

We are unable to predict if the market will determine that our Thermal Gasifiers have competitive advantages in any or all of the categories described above.  Additionally, new developments by our competitors in gasification or competing technologies could adversely affect our perceived competitive advantages and anticipated competitive position.

 

While there are numerous examples of laboratory scale and pilot plant waste to energy operations, very few successful commercial scale facilities have been constructed to extract the energy contained in solid waste materials.

 

The technologies that compete with gasification fall within a few basic categories: incinerators/mass burners, pyrolysis units, plasma gasification, retorts and fluidized-bed reactors.

 

 

Incinerators/mass burners have been widely used to reduce the volume of material going to landfills or destroying material too hazardous to landfill. These represent more than 95% of the installed base of waste-to-energy extraction facilities. Almost all of these technologies convert raw waste streams by burning it in a heated air stream. Some of the units generate power and have some level of pollution control for the exhaust gases. Heat produced by this burning may be extracted by a boiler to generate electricity or it may be released directly into the environment. Most of the installed facilities are nearing the end of their useful lives and are not considered for replacement primarily due to the emission levels of air pollution associated with this equipment as compared to competing technologies including gasification.

 

 

Plasma conversion uses electrically generated plasma to produce temperatures high enough to gasify solid fuels. The most successful version uses plasma to maintain a bath of molten iron in which the solid fuel is added. The fuel then gasifies and the produced gas is withdrawn to extract the heat energy. Plasma conversion has the potential to become a successful commercial technology and represents potential competition for our technology and gasification in general. Capital costs for plasma conversion are higher than gasification but are still competitive; however, the operating costs for this technology are significantly higher than our operating costs.

 

 

Retorts are vessels in which solid fuel is placed. The vessel is then heated until the synthesis gas is released and collected. The vessel is cooled, the remaining solid debris is removed and the process repeated. Retorts have been used in a number of industrial-scale applications, they are used as a batch process, and they are not economically, environmentally or technically competitive as free-standing or stand-alone units as compared to our Thermal Gasifier technology in the smaller scale commercial and municipal markets which we are targeting.

  

 

Fluidized bed reactors function by injecting the solid fuel into a bed of heated sand that is fluidized with air or a non-reactive gas. The heated fluidized sand and solid fuel release the synthesis gas for extraction of the heat energy. Fluidized-bed reactors are commonly used for coal-fired electric generating plants but may not be effective for many types of waste materials. Fluidized bed reactors have been used for many decades but have not gained recognition as a viable solid fuel conversion technology due to the myriad of engineering difficulties that have not been solved. We do not believe that fluidized bed reactors will play an important role in the solid fuel energy extraction field.

 

Gasification is significantly different from the competing technologies described above.  Gasification units such as the Thermal Gasifier heat solid material in an oxygen-starved environment where the gaseous components of the solid material are released. These gaseous components, or producer gases, retain the heat producing qualities of the solid material. The gas is then used to heat a boiler for steam, power an internal combustion engine or power a gas turbine. Gasifiers have become increasingly attractive as a means to cleanly convert most solid, hydrocarbon-based wastes into heat, steam, electricity and liquid transportation fuels. Fixed-bed gasification units are the most common type. Equipment selections downstream of the gasifier determine the products and co-products produced. Most of the earlier models gasified coal, wood waste and petroleum coke. Discarded tires, municipal solid waste, sludge and agricultural waste are now fuels of opportunity.

 




8


 

Gasification technology that could be considered competitive with our Thermal Gasifier technology is either:

 

 

used on larger-scale industrial level, a market on which we are not focused, by companies, such as GE Biomass Solutions, and we do not expect to compete with these companies, or

 

 

fuel specific and less efficient, such as the technology of KMW Energy and Community Power Corporation, as compared to the multi-fuel capabilities and efficiency reflected in our testing of our Thermal Gasifier.

 

Our intention is to promote the modular, scalable, fuel adaptable and clean emission attributes of our third generation Thermal Gasifier   to compete for energy-from-waste business in the smaller-scale commercial and municipal markets with competitors who use other technologies and gasification technology.  The Companys target market includes operations requiring between one megawatt to three megawatts of power and wanting to process approximately 20 to 40 tons of waste feedstock per day per megawatt of continuous power required.

  

As the Company looks to re-enter the market place we recognize that our competitors may have significant advantages. Most of our competitors are more established than us, while we are positioning ourselves to re-enter the market, and most of them have greater market recognition than we do. Most of our competitors have financial and marketing resources far greater than those available to us, and some will have greater application for large waste streams, such as municipal waste from large cities.

 

We expect that in industries with high energy demands, such as specialty gas plants, chemical manufacturing or refineries, we will compete with the local utilities, which provide traditional electrical power in addition to alternate power sources such as solar or wind power.

 

In industries with regulated waste disposal, we will compete with incinerators and waste management companies. In some cases, these solutions may provide lower cost waste disposal, but do not remove the emissions and/or pollutants from the environment. In many countries, solid waste is being stockpiled rather than placed into landfill sites. New landfill sites are extremely difficult to permit and in all situations, municipalities are looking for ways to reduce the volumes of waste going to landfill sites in order to extend their life.

 

For municipalities, we may compete against other alternative energy sources, especially if the municipality seeks to meet a specified target percentage of alternative or green energy sources. In this market, we may also compete against the local utility, incinerators or waste management companies, depending on the municipality, regulatory environment and political pressures to employ alternative energy sources.

 

During 2012, we did not have any commericial customers for our Thermal Gasifier business. We are currently seeking to enter into letters of intent with potential customers, but do not have any letters of intents or contracts to provide Thermal Gasifiers to any users, other than  the agreement with a customer in the Northeastern U.S. for the construction of a pilot gasification unit at the customers landfill.

 

In order to obtain contracts or to perform contracts for Thermal Gasifier projects which we may receive in the future, the Company will likely require significant capital infusion or project financing. In some cases, customers may provide funding; however we cannot predict the extent that they will, if at all. If customers do not provide the necessary funding, the Company will have to pursue outside capital resources on a project-by-project basis. In the recent past, the Company has only raised funds from related party sources, and we do not have any indication that any needed funding, either in the form of equity or debt financing, will be available to us from those sources or from outside sources in the future. If we need funding to enter into or perform under any contracts that may be available to us in the future and are unable to obtain it, we may be unable to enter into the contracts, or be unable to meet our performance obligations under contracts that we enter into. This would significantly impede our efforts to re-enter the market and would have a material adverse effect on our business prospects.

 

Tire Processing

 

While our tire processing operations competes with several local companies that are registered to collect and process waste tires in the Dallas/Ft. Worth market, we have a competitive advantage in that we have the only storage permit in the market area.  Being able to store waste tire material allows us to cover seasonal changes in the waste tire business and address opportunities for tire clean-ups in the State. The proximity of our facility to major highways and a large intermodal provides advantages over some of the local competitors for distribution of our off-take material (i.e. TDF).  

 

Major Customers

 

During 2012, our total revenue was derived from tipping fees from accepting waste tires from generators and tire transporters, and from the production of TDF. Our customers include numerous generators and transporters.   Our two largest customers accounted for 36% and 16% of revenue for the year ended December 31, 2012. Two customers comprised approximately 21% and 10% of revenues for the year ended December 31, 2011. 

  



9


 

Major Suppliers

 

Tire Processing Operation

 

The Company believes there is a readily available supply of waste tires for which we are paid tipping fees. We accept waste tires from many sources including distributors and transporters.

 

Thermal Gasifier Business

 

The Company believes there is a readily available supply of materials, equipment and associated vendors to fabricate construct and operate our Thermal Gasifiers in a WTE plant. Additionally, we believe the worldwide market for WTE plants continues to expand as both waste disposal costs and energy costs increase and lessening our dependency on fossil fuels becomes more critical. Increasing energy costs coupled with burgeoning waste generation and fewer landfills provides a growing market opportunity for our renewable WTE solutions. Given the fuel flexibility of our Thermal Gasifier, we do not believe we are dependent on any single source or feedstock for our supply.

 

Personnel

 

We have 3 full time employees as of December 31, 2012,    Two of which are located at our corporate offices in Commerce City, Colorado, and one of which, our Business Manager, are located at our tire processing facility in Hutchins, Texas. Additional contract personnel are utilized at the Commerce City office and at the tire processing facility as necessary based on volume of work. We anticipate that significant personnel additions will be required if we move forward on Thermal Gasifier project related contracts and obtain project funding for the energy infrastructure or the WTE business.

 

Government Approval / Environmental Laws and Regulation

 

Operation of a Thermal Gasifier and a tire processing facility are subject to a variety of federal, state, and local laws and regulations, including those relating to the discharge of material into the environment and protection of the environment. The governmental authorities primarily responsible for regulating our environmental compliance are the U.S. Environmental Protection Agency, Department of Environmental Quality and comparable regulatory agencies and departments in the states and foreign countries where we establish operations. Nationally, we are subject to the air quality programs under federal and state law.  For each project, we will be required to comply with applicable federal, state and local government approval (permitting) requirements where the project is domiciled, including, among other things, building, operating, and air quality permitting rules.

 

The rules relating to air quality permitting are generally the most onerous and it can take from 6 months to 12 months or more to obtain permits, depending on the state requirements.  Steps for obtaining air quality permits generally include:

 

 

An initial meeting with the applicable states Department of Environmental Protection (DEP) outlining the project and establishing the classifications which the project falls under, including any possible exemptions.

 

Submission of required data (typically independent emission reports and expected emission data for the prospective system, but also can include other items such as project layout,  other technologies employed, and natural resource usage).

 

Review by the state DEP with possible follow up requiring further data submission or clarification of submitted data.

 

Approval or denial of permit.

 

Building permits generally have a minimal time component, and operating permits are generally granted within a short time of completion of the air quality permit, assuming proper filing procedures have been followed.  Timelines for each of these vary from state to state as well.  The Company is currently not involved in the permitting process in any state, but have received permission from the state permitting authorities to construct and operate our pilot project in the Northeastern US.

 

Our tire processing and storage operation in Texas is subject to regulation by the Texas Commission on Environmental Quality (TCEQ). We are registered with the TCEQ, which allows us to receive, store, transport and process waste tires through April 25, 2015.  

 

We believe these laws and regulations will not have a material adverse effect on our capital expenditures or competitive position. We believe that our technology complies, in all material respects, with the various federal, state, and local regulations that apply to our current and proposed operations.  

 

Company History

 

Vista International Technologies, Inc. was incorporated in Delaware in 1996 under the name of Ajax Reinsurance Limited. The Company underwent a series of combinations and name changes until 1999 when it changed its name to Nathaniel Energy Corporation.  The Company operated under this name until November 8, 2007 when it changed its name to Vista International Technologies, Inc. The name change was to reflect a broader perspective on the renewable energy technologies that were expected to be brought into the Company.



10


 

 

From 1997 to 2002, the Companys operations were limited to its tire processing facility in Hutchins, TX which at that time sold TDF to others primarily for use as an alternative fuel. In August 2002, the Company acquired MCNIC Rodeo Gathering, Inc. which owned 18.55% of Keyes Helium Company, LLC.  Effective as of January 1, 2003, the Company acquired the remaining 81.45% interest in Keyes Helium Company, LLC from Colorado Interstate Gas (CIG) Resources Company through our subsidiary, Nathaniel Energy Oklahoma Holdings Corporation. The Company transferred all of the stock in MCNIC to NEOHC. In April 2003, NEOHC acquired the Keyes gathering system and Sturgis gas plant from CIG Field Services and the compressor station was purchased from Colorado Interstate Gas Company. The Company upgraded and operated the helium and gas processing facilities from April 3, 2003 through March 7, 2006.  On March 7, 2006, the helium and gas processing facilities and operations were sold to Midstream Energy Services, LLC.

 

Subsidiaries

 

We have one wholly-owned subsidiary, Cleanergy, Inc., which was formed as an operating company for the purposes of developing WTE projects and commercializing our Thermal Gasifier, by entering into joint venture and licensing agreements and building and operating small WTE facilities. Cleanergy, Inc. is currently dormant and has no operations.

 

Available Information

 

The SEC maintains an internet site at www.sec.gov that contains the reports, proxy and information statements, and other information regarding the company. In addition, we provide easy access to these reports free of charge via our internet website, www.vvit.us. Information on our website is not part of this report.

 

We maintain a codes and policies page on our website, www.vvit.us. This page includes, among other items, the Vista International Technologies, Inc. Code of Business Conduct and Ethics for Officers (Vice President and Senior) and Directors and the Vista International Technologies, Inc. Code of Business Conduct and Ethics for Employees and Officers (other than Vice President and Senior).

 

Glossary of Key Terms and Acronyms

 

Back end power system.  The components downstream from the gasification units which collectively generate electricity.

 

Biomass.  Any of a number of feedstock materials generated as agricultural waste or by-products.

 

BTU (British Thermal Unit). One BTU is a unit of energy defined as the amount of heat required to raise the temperature of one pound of water by one degree Fahrenheit. In North America, fuels are described using their energy content in terms of BTUs of energy per pound of material. On average, gasoline contains 20,400 BTU per pound (btu/lb) and diesel contains 19,300 btu/lb. Primary fuels for the Thermal Gasifier include TDF (15,000 btu/lb) and RDF (8,000 btu/lb).

 

Catalytic reduction.  A means of converting nitrogen oxides, also referred to as NOx, with the aid of a catalyst into diatomic nitrogen, and water in order to reduce NOx emissions.

 

Dioxin. Dioxins are among the most toxic substances known to man. Dioxins and other persistent organic pollutants (POPs) are subject to the Stockholm Convention obliging signatories to take measures to eliminate, where possible, and minimize where not possible to eliminate, all sources of dioxin. Dioxins are produced in small concentrations when organic material is burned in the presence of chlorine, whether the chlorine is present as chloride ions or as organochlorine compounds, so they are widely produced in many contexts. According to the most recent US EPA data the major sources of dioxin are:

 

 

Coal fired utilities

 

 

 Metal smelting

 

 

 Diesel trucks

 

 

 Land application of sewage sludge

 

 

 Burning treated wood

 

 

 Trash burn barrels

 





11


 

These sources together account for nearly 80% of dioxin emissions. Following incineration, dioxins can also reform in the atmosphere above the stack as the exhaust gases cool through a temperature window of 600 to 200°C. The most common method of reducing dioxins reforming or forming de novo is through rapid (30 millisecond) quenching of the exhaust gases through that 400°C window. Incinerator emissions of dioxins have been reduced by over 90% as a result of new emissions control requirements. Incineration is now a very minor contributor to dioxin emissions.

 

Distributed power generation.  The process of using multiple smaller facilities rather than a single centralized facility for power generation.

 

Exhaust gas.  A gas emitted as a result of combustion of fuels.

 

Feedstock.  The carbon based fuel source used in the Thermal Gasifier.

 

Gasification.  A process in which feedstock is thermally decomposed at high temperatures in a low oxygen environment into syngas.

 

Hydrocarbon.  Any organic compound containing only hydrogen and carbon.

  

Inside the Fence.   A scenario in which the waste generator (our client) will be able to process waste in order to get the desired end products, and should have a potentially usable ash residue all on his own site.

 

Landfill cover.  Material used to conceal the daily municipal solid waste load at a landfill.

 

Leachate.  Liquid which forms at the bottom of a landfill site.

 

Municipal Sewage Sludge Solids (MSS). The solids accumulated during treatment of wastewater. MSS contains up to 8,000 btu/lb of energy on a dried basis and may be blended as a possible fuel for the Thermal Gasifier.


Municipal Solid Waste (MSW). MSW is more commonly known as trash or garbage and consists of everyday items such as product packaging, grass clippings, furniture, clothing, bottles, food scraps, newspapers, appliances, paint, and batteries. MSW is processed into refuse derived fuel (RDF) as a fuel for the Thermal Gasifier.

 

Organic rankine cycle power generation.  A system of power generation similar to a steam turbine generator, but utilizing a liquid other than water to drive the turbine, allowing for power generation at lower operating temperatures.

 

Polychlorinated Biphenyls (PCB). PCBs are a class of organic chemical compounds which are persistent organic pollutants found in many waste streams that research has indicated are likely carcinogens. Further, improper or incomplete oxidation of PCBs may result in the formation of more toxic species such as dioxins and/or dibenzo furans.

 

Pyrolysis. A process in which a feedstock is thermally decomposed in the absence of oxygen, usually at elevated pressure.

 

Refuse Derived Fuel (RDF). A fuel produced by processing Municipal Solid Waste (MSW) to remove the inert materials, concentrating the hydrocarbon containing components, densifying and pelletizing into relatively uniform fuel pellets for ease of storage, handling and gasification and/or combustion.

 

Rolling stock.  Self propelled or pulled transportation equipment that moves on wheels.

 

Scrubbers. Apparatus for removing impurities, especially from gases.

 

Syngas (Synthesis Gas). The name given to a gas mixture containing varying amounts of carbon monoxide and hydrogen generated by the gasification of a carbon containing fuel to a gaseous product with a heating value.

 

Tire Derived Fuel (TDF).  A fuel produced by reducing or shredding whole tires to smaller strips, chips, or crumbs for use in fueling certain industrial processes including cement kilns, paper mills and EFW projects.

 




12


 

Item 1A. Risk Factors.

 

We are subject to many risk factors detailed below and elsewhere in this report and from time to time in our other Securities and Exchange Commission filings. Any one or more of these uncertainties, risks and other influences could materially affect our results of operations and prospects and whether forward-looking statements made by us ultimately prove to be accurate.  The following risk factors represent items that management desires to highlight, in addition to forward looking statements described at the beginning of this report, to help investors better understand the potential risks and rewards of the companys business.

 

We have a working capital deficit and our business model depends on obtaining significant funding.

 

The Company currently has a working capital deficit.  We expect that our current cash on hand and revenues we expect to generate at current levels will not be sufficient to sustain our operations.  We will require several million dollars in capital investments to further develop our Thermal Gasifier business and improve our tire processing operation.  Capital investments could be in the form of debt, equity, government grants or guaranteed loans to fund our business in general or a particular project.  We are also seeking other capital project financing opportunities.   There can be no assurance that we will obtain the funding needed to develop this business.  If we do, we cannot assure that any funds raised for our business in general or for a particular project will be sufficient to sustain our operations or complete the project respectively. 

 

Our ability to commercialize our Thermal Gasifier technology is dependent on fabricating and additional successful testing of our Thermal Gasifier unit.

  

Historically, before 2000 we sold approximately 15 first generation Thermal Gasifiers, and we sold three second generation Thermal Gasifiers (one in 2002 and two in 2004).  We have not sold any have not generated any revenue from our current third generation Thermal Gasifier.  We have tested our third generation Thermal Gasifier technology in more than 30 applications during various stages of its design. We will need to test the current Thermal Gasifier design to allow us to move forward with commercialization. During 2010- 2012, we have continued to redesign the Thermal Gasifier technology to further improve energy recovery and operational efficiency.  We will require significant funding in order to complete the engineering specifications, fabricate a number of Thermal Gasifier units for demonstration, and successfully test it at full operational capacity with the new design.

 

  If we fail to satisfy customer expectations, existing and continuing business could be adversely affected.

 

If we fail to satisfy customer expectations, our reputation and ability to retain existing customers and attract new customers may be damaged.  In addition, if we fail to perform adequately on projects, we could be liable to customers for breach of contract and could incur substantial cost, negative publicity, and diversion of management resources to defend a claim, and as a result, our business results could suffer.

 

We have accumulated a potential cleanup liability associated with tire-derived-fuel processing operations.

 

Should operating conditions relating to our tire processing operations substantially deteriorate, we could be required by the TCEQ to remove the existing whole tire, partially shredded tire and tire chip inventory piles from the tire processing and storage facility. The projected cost of full cleanup of the tire processing facility is estimated to be roughly $332,600.   We currently have assurance of $170,000 in the form of a deposit with the TCEQ.

 

If we fail to successfully use our technology in commercialized applications, our business may not become profitable.

 

If we fail to identify the latest alternative energy solutions or fail to successfully apply the technology to customer demand, our reputation and ability to compete for customers and the best employees could suffer.  If we cannot compete successfully for projects and project funding, revenues may not grow.

 

Because our market changes constantly, some of the most important challenges facing us are the need to:

 

 

develop equipment that meets changing customer needs;

 

 

identify and effectively market alternative solutions to a diverse set of customers;

 

 

enhance and protect the applications of our patented technology;

 

 

influence and respond to emerging industry standards and other technological changes.

 

All of these challenges must be met in a timely and cost-effective manner.  There is no assurance that we will succeed in effectively meeting these challenges.

 




13


 

The expiration of our current patents and failure to obtain patents on our patent pending technology could adversely impact our competitive advantages.  

 

We own one U.S. patents, which expires in 2018. Our first European patent was issued on January 5, 2011 for our Gasifier System and Method and expires in 2019.  We also have two U.S. and one foreign patents pending.  European patents expire 20 years after their filing date.

 

A failure to obtain patents on our pending patent applications could adversely impact the competitive edge we have in our Thermal Gasifier technology and make it more difficult for us to distinguish ourselves and compete in the WTE  market.

 

Research, experience and shifts in technology and market demand may require changes in our business model.

 

During the regular course of operating our business, we must adjust our business plan as a result of our research, experience, technology evolution and market demand.  Accepting unforeseen business opportunities may also result in a business model change.  We cannot guarantee that any business model or adjustment in business plan will become successful or be more successful than our current business model.  A shift in our business model may result in the use of other technologies.  Other technologies may in the future prove to be more efficient and/or economical to us than our current technology.  We cannot guarantee that any change in technology will become successful or be more successful than its current technology.

 

Public company legislative and regulatory requirements, such as the Sarbanes-Oxley Act of 2002, may lead to increased insurance, accounting, legal and other costs, which may cause expenses to increase.

 

We are a reporting company under the Securities Exchange Act of 1934.  We are committed to full regulatory compliance and high standards of corporate governance and we expect legal, accounting and professional fees to account for a substantial percentage of our operating expenses in the future.  The cost of regulatory compliance could strain our limited resources as well as divert attention of our relatively small management team from daily business operations.

 

Due to the nature and size of the Companys current operations and resulting lack of segregation of duties, our management has concluded that we have several material weaknesses in our internal control over financial reporting as discussed in further detail in Item 9A.

 

Two of our stockholders beneficially own more than 50% of our outstanding shares and effectively control a vote of stockholders.

 

One stockholder, Richard Strain, beneficially owns roughly 40% of outstanding shares.  An additional stockholder, Timothy Ruddy, a director of the Company, beneficially owns roughly 22.5% of outstanding shares.  This could result in a vote of shareholders being decided by these two individuals.  The rest of our shares are relatively widely held with no other shareholder owning more than 10%, as far as we are aware. 

  

Encumbrances on Company Assets may result in a delay or inability to sell the Companys Texas facility

 

The following encumbrances existed on the Companys assets as of December 31, 2012:

  

·

An IRS lien in the amount of $69,840.95 , filed 9/13/2011,  for non-payment of payroll taxes for certain periods in tax years 2007, 2008 and 2009.  The company has a payment plan in place to reduce and eventually eliminate this tax lien.  The company is paying $5,000 per month toward the unpaid balance, with penalties and interest still accruing on that balance.  The lien should be fully paid by mid-2013

·

(($800,000 Deed of Trust filed on April 23, 2002 by Alternate Power, Inc. Lien was contested by Vista management as having previously been satisfied.  The lien holder  concurred with Vista and removed the lien on June 29, 2011.

 

A delay in the closing of a land and/or facility sale may result in the Company being unable to continue in business due to lack of liquidity anticipated as the result of not closing this type of transaction.

  

Item 1B. Unresolved Staff Comments.

 

Not applicable.

 




14


 

Item 2. Properties.

 

We own approximately 27 acres of property at 1323 Fulghum Rd. in Hutchins, Texas in a semi-industrial region of southern Dallas County where we conduct our tire processing storage operations.  The facility includes a newly replaced 10,000 square foot partially enclosed production building for waste tire processing, a 5 year old 1,200 square foot stand alone business office and a 12 year old 1,800 square foot permanently placed office trailer with employee break room.


In April, 2010 our Board of Directors decided, as part of its strategy to maximize the value of its tire processing operations, to consider monetizing its tire processing facility.  After contacting and considering several real estate and appraisal firms, the Board elected to engage Colliers International, a worldwide real estate company with expertise in marketing, leasing and property management, in July, 2010 to assist the Company in the process.

 

We lease approximately 900 square feet of office and storage space for our corporate offices at 5151 E 56th Ave, Suite 101, Commerce City, Colorado. The present lease expires on February 28,  2013, but is renewable for additional 6 month terms upon the consent of both parties.

 

Our facilities are adequate for our current and foreseeable future needs.

 

Item 3. Legal Proceedings.

 .

The Company was named in a suit in the Colorado District Court for the 18th District (Arapahoe County) by a former employee alleging that the Company did not meet its obligation to issue shares to the employee.  On July 12, 2011 the Court granted a motion to enforce a settlement dated September 16, 2010. In accordance with the terms of the court order, the Company is obligated to make payments totaling approximately $104,700, including annual 6% interest.   An initial payment of $15,455 was made on July 22, 2011 and monthly payments of $3,000, including interest are due through December 2013.  A final payment of approximately $5,200 will be due in December 2013. As of December 31, 2012, the Company has accrued of this settlement of approximately $59,000 under accounts payable and accrued liabilities on its balance sheet. Through December 31, 2012, $26,500 has been paid toward the settlement, with no additional payments having been paid in the subsequent period, as of  April 9, 2013

.

 Item 4. Mine Safety Disclosures.


Not applicable.


PART II

 

Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

 

Our common stock is presently quoted on the Over-the-Counter Bulletin Board (OTCBB) under the symbol VVIT.OB. The following table sets forth, for the fiscal quarters indicated, the high and low close price quotations for our common stock as reported on the OTCBB. The quotations reflect inter-dealer quotations without retail markup, markdown or commission, and may not represent actual transactions.



 

High

Low

Fiscal Year Ended December 31, 2012

 

 

First Quarter

$

0.30

$

0.12

Second Quarter

$

0.35

$

0.15

Third Quarter

$

0.20

$

0.05

Fourth Quarter

$

0.24

$

0.03

Fiscal Year Ended December 31, 2011:



First Quarter

$

0.04

$

0.02

Second Quarter

$

0.04

$

0.02

Third Quarter

$

0.05

$

0.03

Fourth Quarter

$

0.04

$

0.01

 

Source:  http://www.investorpoint.com/stock/VVIT-Vista+International+Technologies+Inc./price-history/

 

Stockholders of Record

 

As of April 9, 2013 we had approximately 163 stockholders of record.



15


 

Dividends

 

The Company has never declared or paid any dividends on its common stock. We currently intend to retain any earnings for use in the business and therefore do not anticipate paying any dividends in the near future. Dividends on our common stock can be paid lawfully only out of current and retained earnings and surplus of the Company, when, and if, declared by the Board of Directors. We have not declared or paid any dividends on the common stock and there is no assurance dividends will be paid in the foreseeable future. The payment of dividends in the future rests within the discretion of the Board of Directors and will depend, among other things, upon our earnings, our capital requirements and our financial condition, as well as other factors, which the Board of Directors deems relevant.

 

Securities Authorized for Issuance Under Equity Compensation Plans

 

Equity Compensation Plan Information

 

Plan Category

 

Number of Securities

to be issued

upon exercise of outstanding options,

warrants and rights

 

 

Weighted- average

Exercise price of Outstanding options,

Warrants and rights

 

 

Number of securities Remaining available for Future issuance under Equity compensation plans

 

 

(a)

 

 

(b)

 

 

(c)

Equity compensation Plans approved by Security holders 1

 

 

0

 

 

 

0

2

 

20,000,000 shares of common stock 3

 

1 2005 Equity Compensation Plan

 

2 No options, warrants, restricted stock or other rights have been granted or issued under the plan.

 

3 Shares may be issued directly as a restricted stock grant or upon exercise of options which may be granted under the plan.

 

Recent Sales of Unregistered Securities

 

For the year ended December 31, 2012, the Company issued an aggregate of 680,000 restricted shares of its common stock to consultants in payment of services pursuant to agreements entered into on various dates during 2012. 

 

 The above issuances were exempt from registration under Section 4(2) of the Securities Act of 1933.  We did not use any underwriter or placement agent in these transactions and did not pay anyone commission or other compensation in connection with these issuances.  These issuances were made directly by us to persons with whom our management had direct contact and a pre-existing relationship.

 

Item 6. Selected Financial Data.

 

Not applicable.





16


 

Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations

 

Certain statements in this report constitute forward-looking statements. See BusinessSpecial Note Regarding Forward-Looking Statements in Item 1 of this report for additional factors relating to these statements, and see Risk Factors in Item 1A of this report for a discussion of certain risk factors applicable to our business, financial condition and results of operations.

 

Our analysis presented below is organized to provide the information we believe will be useful for understanding the relevant trends affecting our business. This discussion should be read in conjunction with our consolidated financial statements and the notes to the financial statements in Item 8 of this report.

 

Business Overview and Presentation

 

Our financial results were impacted by several significant trends, which are listed below.  We expect that these trends will continue to affect our results of operations, cash flows or financial position.

 

 

Inability to attract adequate debtor equity funding to implement our business plan

 

 

Ongoing operating losses

 

 

Delay in successfully demonstrating our Gasifier technology

 

While these trends are important to understanding and evaluating our financial results, the other transactions, events and trends discussed in Risk Factors in Item 1A of this report may also materially impact our business operations and financial results.

 

Description of Business

 

Vista International Technologies, Inc. is in the business of developing, commercializing and operating renewable energy and waste-to-energy (WTE) technologies and projects.

 

The Company is currently conducting its business in the following areas:

 

 

Tire processing operation in Hutchins, Texas, and

 

Renewable energy and waste to energy (WTE) projects utilizing the Companys Thermal Gasifier technology and corporate administration at the Companys offices in Commerce City, Colorado.

 

Discrete financial information is not presently maintained for our WTE business as it has not yet generated any revenues for several years.  In addition, management makes investing and resource allocation decisions based on the combined results of both the processing and WTE business.  Accordingly, we only have one reportable segment.

 

Our mission is to provide a clean, dependable, cost-competitive alternative energy to fossil fuels.  We plan to develop projects with government, community, industry and financial partners to recover the available carbon based energy from materials previously considered waste and destined for disposal.  The recovery of energy from waste using our Thermal Gasifier diverts large volumes of material from landfills and other disposal sites, while providing clean alternative energy and reducing greenhouse gas emissions.  In addition to processing waste into clean energy, our technology has the capability to convert biomass into energy using various plant based materials as fuel.   

 

Our tire processing operations are subject to regulation by the TCEQ. We are registered with the TCEQ, which allows us to receive, store, transport and process waste tires.  Our registration was renewed on April 23, 2010 and our permit was granted through April 25, 2015.

 

At December 31, 2012, the Company had approximately 12,800 tons of whole tires, partially shredded tires, tire chips and process waste stored onsite at the tire processing and storage facility

 

Going Concern

 

Our consolidated financial statements for the year ended December 31, 2012 have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business.  The Report of the Independent Registered Public Accounting Firm includes an explanatory paragraph that describes substantial doubt about our ability to continue as a going concern.  We have reported a net loss of approximately $351,200 and net cash used in operations of approximately $144,900 for the year ended December 31, 2012, a working capital deficit of approximately $4,857,000 , an accumulated deficit of approximately $67,019,000 and a total stockholders deficit of approximately $4,160,000 at December 31, 2012.

 



17


 

Our continuation as a going concern is dependent upon our ability to generate sufficient cash flow or obtain equity investment or additional financing to meet obligations on a timely basis and ultimately to achieve profitable operations.

 

Managements Plans

 

In January 2011, the company agreed to enter into a sale-leaseback transaction to sell the Hutchins property.  This transaction was cancelled by the seller according to the terms of the Purchase and Sale Agreement. The Company then secured the necessary funding to purchase the equipment needed to produce tire derived fuel (TDF), and these assets were placed into service in the first quarter of 2012.  The company was not able to secure any additional funding to pay down debt, or pay off the considerable expenses incurred by the need for a shareholder vote.


 In addition to the continued improvements and additional investment in the Hutchins, TX facility, Management intends to focus the Companys resources in the following areas:

 

Thermal Gasifier engineering design and deployment,

 

Maximizing value from the Hutchins, Texas tire processing and storage facility,

 

Development of project based opportunities, and

 

Attracting strategic investment

 

Management considers the Thermal Gasifier and waste-to-energy segment to be our core business. However, significant focus is also being placed on the improvement of the tire processing operation at our Hutchins, Texas facility to increase production and reduce operating costs, and expand sales to include used road-worthy truck and passenger tires to increase revenue and cash flow.  Management believes that improvement in all facets of Company operations will improve the Companys ability to attract investors looking to enter the waste-to-energy and renewable energy marketplace.

 

We also continue to develop our internal resources and implement business development activities to secure waste-to-energy and biomass-to-energy facility opportunities that utilize our Thermal Gasifier technology through build-own-operate agreements alone or through joint-venture relationships with strategic partners. We are looking to partner with companies producing a large hydrocarbon based waste stream, which are also in need of thermal and/or electrical energy. In our target markets, we target opportunities where there are high disposal fees and energy rates, where we can use the Thermal Gasifier with back end power systems to provide significant cost savings to the end user.  We are reviewing the economic viability of a number of opportunities in the northeastern United States and in Colorado and are currently advancing our discussions and working toward obtaining letters of intent from these entities.

 

Management believes that current revenue levels will not be sufficient to meet our operational needs and execute the Companys complete business plan. The Company is seeking additional funding for the activities described above. The Company is exploring numerous financing opportunities but has no agreements or commitments for funding at the present time.  Future funding may be through an equity investment, debt or convertible debt. Current market conditions present uncertainty as to the Companys ability to secure additional funds, as well as its ability to reach full profitability. There can be no assurances that the Company will be able to secure additional financing, or obtain favorable terms on such financing if it is available, or as to the Companys ability to achieve positive earnings and cash flows from operations. Any continued negative cash flows and lack of liquidity create significant uncertainty about the Companys ability to fully implement its operating plan, as a result of which the Company may have to reduce the scope of its planned operations.  If cash resources are insufficient to satisfy the Companys liquidity requirements, the Company will be required to scale back or discontinue its technology and project development programs, or obtain funds, if available, through strategic alliances that may require the Company to relinquish rights to certain of its technologies products or to discontinue its operations entirely.





18


 

Results of Operations

 

Overview

 

The following table summarizes our results of operations for the years ended December 31, 2012 and 2011:





Years ended December 31


Increase(Decrease)



2012


2011


2012 vs 2011


% Change

Revenues


 $     683,201


 $     466,977


 $        216,224


46.3%

Cost of revenue


595,693


547,289


           48,404


8.8%

Environmental remediation (income) expenses


        (70,312)


        220,565


       (290,877)


(131.9)%

Gross profit (loss)


        157,821


       (300,877)


         458,697


152.5%

Operating expenses:  









   Depreciation and amortization


        100,091


          47,864


           52,227


109.1%

   Selling, general and administrative expenses


242,668


616,002


       (373,334)


(60.6)%

      Total operating expenses


        342,759


        663,866


       (321,107)


(48.4)%

Loss from operations


(184,939)


(964,743)


         (779,804)


(80.8)%

Other income (expense):









   Gain on extinguishment of liability


            8,901


                    -


             8,901


100.0%

   Gain on disposal of property and equipment


                   1,100


          14,000


         (12,900)


(92.1)%

   Gain  from insurance settlement


                   -


          36,561


         (36,561)


(100.0)%

   Interest expense, net


      (224,663)


       (260,026)


           (35,363)


(13.6)%

   Gain on change in the fair value of derivative liability


74,192


65,032


             9,160


14.1%

   Other expense


1,780


(660)


             (2,440)


(369.7)%



(138,690)


(145,093)


 $        (6,403)


4.4%










Loss before income taxes


(323,629)


(1,109,835)


         786,206


(70.8)%










Income tax expenses


                   27,583


          12,239


         15,344


125.4%










Net loss


 $  (351,212)


 $ (1,122,074)


 $        (770,862)


(68.7)%






19


 

2012 COMPARED TO 2011

 

Revenue

 

Revenue, which consists primarily of tipping fees received for acceptance of whole passenger and truck tires increased by approximately $216,000 as a result of the addition of TDF shipments in 2012.

 

Cost of Revenue

 

Cost of revenue for our tire processing operations increased roughly 8.8% due to an increase in operating costs at the facility, primarily due to increased costs associated with running the TDF processing line in addition to the single pass shred equipment.   

 

Our tire operations in Texas are subject to regulation by the TCEQ. At December 31, 2012, the Company had approximately           12,800 tons of whole tires, partially shredded tires, tire chips and process waste stored onsite at the tire processing and storage facility. We maintain a reserve for removal and cleanup of material at our Texas facility. During 2012, we decreased the amount of material stored on site by approximately 3400 tons  As a result, our environmental liability decreased by approximately $290,877 in 2012 compared to a significant increase in this liability in 2011.


Depreciation and Amortization

 

Depreciation and Amortization charged increased by approximately $52,200 in 2012 as compared to 2011.  This was mainly due to the addition of the TDF production equipment, which began being depreciated in 2012


 Selling, General, and Administrative Expenses

 

Selling, general, and administrative expenses decreased approximately 61% or $373,000 in 2012  This was mainly due to reduction of corporate overhead at the companys Colorado office, and decreased use of consultants and attorneys as compared to 2011.

 

Research and Development Expense

 

Internal and external research and development expense was approximately $5,400 for the year ended December 31, 2012 and is included in selling, general and administrative expenses.  Expenditures were roughly in line with the $6,100 expensed in 2011.

 

Gain on Extinguishment of Liability


The Company recorded a gain on the settlement of liabilities of $8,901 in 2012 due to settling of disputed amounts with three of the Companys vendors.  There was no comparable gain in 2011.


Gain on Disposal of Property and Equipment


 The Company recorded a gain of $14,000 on the sale of a fully depreciated excavator in 2011 and $1,100 on sale of old furniture in 2012.


Proceeds from Insurance Settlement


The Company recorded proceeds from an insurance settlement in 2011 of roughly $36,600, as a result of a burglary at the Companys Hutchins tire processing facility.  There was no comparable event in 2012.


Interest Expense

 

Interest expense decreased approximately 14% in 2012 versus the prior year mainly due to a significant non cash interest charge on derivative liability which was charged to interest expense in 2011 .  There was no such charge in 2012.

  

Gain on change in the Fair Value of Derivative Liability


The gain on change in the fair value of derivative liability increased by roughly 14% in 2012 as compared to 2011.  This gain is a byproduct of the convertible features of the Asher convertible note, which was signed in December, 2011.  The increase is mainly due to the fact that derivatives of this nature tend to lose value at a faster rate (resulting in a gain for the company) as their expiration approaches.  The derivative liability expired when the note was repaid in September 2012

 

Income Tax Expense

 



20


 

The company recorded a 125 % increase in income tax expense in 2012 due to an increase in penalties and interest on amounts accrued toward unfiled federal and state taxes dating back to the years 2005 and 2006.  The Companys policy is to record interest and penalties as a component of income tax expense.


Liquidity and Capital Resources

 

We had a cash balance of approximately $16,000 at December 31, 2012.  We expect that our current cash on hand and our current revenue levels will not be sufficient to sustain our current operations or plans.  The Company is exploring all available funding sources, including the sale of its assets, and additional debt and equity funding.  In the near future we are relying on the successful closing of the sale of our Hutchins property to provide cash to fund operations as described in more detail under the heading Managements Plans above.  If it is unable to obtain additional funding or increase revenues, we may be required to scale back or suspend operations or revise our business plan.

 

As of December 31, 2012, we had a negative working capital of approximately $4,857,000, which includes a liability of approximately $332,600 for waste tire shred removal and cleanup costs at the tire processing and storage facility, an unpaid payroll liability to former officers of the Company of approximately $482,200, and notes payable to shareholder and related parties of approximately $1,875,000.

 

As of December 31, 2012, we owed approximately $20,400 to the Internal Revenue Service in back payroll taxes and penalties.  Monthly payments of $5,000 have been made since December 28, 2010 and continued throughout 2012.

 

The Company was in default on various secured promissory notes and a line of credit to Richard Strain, a stockholder, in the aggregate amount of approximately $1,096,900. The line of credit provides for certain equity redemption rights to Mr. Strain, on terms and conditions to be agreed upon.  No equity redemption rights have been provided as of December 31, 2012.  The maximum amount to be drawn under the line is $375,000.  However, subsequent to initial draws of approximately $100,000 in 2009, and an additional $50,000 in July 2011, Mr. Strain had declined to provide additional funding under the line. Since we are currently in default, we cannot assure Mr. Strain will advance any additional funds if we request additional advances.

 

During the year ended December 31, 2012, the Company received proceeds of $5,000 from sales of stock for cash. We expect that the Company will continue to rely on loans from related parties and issuances of shares in private placements to meet its working capital needs for the foreseeable future.

 

Critical Accounting Policies

 

Use of Estimates

 

Our consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles.  These accounting principles require us to make certain estimates, judgments and assumptions.  We made estimates, judgments and assumptions when accounting for items and matters such as, but not limited to allowance for doubtful accounts, depreciation, amortization, asset valuations, recoverability of assets, impairment assessments, accrued liabilities and other provisions and contingencies and we believe they are reasonable, based on information available at the time they were made.  These estimates, judgments and assumptions can affect the amounts reported in our consolidated financial statements.

 

For all of these and other matters, actual results could differ from our estimates.

  

Environmental Liability

 

At December 31, 2012, the Company has approximately 12,800 tons of whole tires, partially shredded tires, tire chips and process waste stored onsite at the tire processing and storage facility.  The waste material consists primarily of steel belting wire with attached tire rubber.   In the past, management has considered the piles of tires and tire shreds at the facility an asset to be reclaimed and sold to an end user.  To reclaim some of the material for resale, we would need to install additional equipment to screen the material for potential contaminants in the piles such as rocks, pieces of metal and concrete.  We currently do not have the resources to purchase the screening equipment and management has chosen to focus on producing TDF and shipping tire shreds to local landfills. The Companys registration with the TCEQ requires the Company to provide financial assurance in the form of letters of credit to ensure that the site is restored if the Company was unable to meet its obligations with the TCEQ.

 

In such a case, we would be required to restore the site beginning with transportation of the material to a disposal site, such as a landfill.  We have accrued approximately $332,600 and $403,500 at December 31, 2012 and 2011, respectively for the cost of disposing this material.  This accrual is based on standard disposal costs incurred by Vista during tire disposal operations in preparing the facility for sale, based on the weight of tires at the site.  These costs include transportation, labor, equipment and landfill fees assuming complete closure of the facility.




21


 

Stock Based Compensation to Other than Employees

 

The Company accounts for equity instruments issued in exchange for the receipt of goods or services from other than employees by measuring cost at the estimated fair value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably determinable.  The value of equity instruments issued in exchange for services by non-employees is determined on the earlier of the date that a performance commitment has been established or upon completion of performance.  The Company determined that the market value of its shares was more reliably determinable to measure compensation expense in 2012 and 2011.

 

Income Taxes

 

The provision for income taxes consists of an amount for taxes currently payable, an amount for tax consequences deferred to future periods and adjustments to our liabilities for uncertain tax positions.  The Company establishes valuation allowances when necessary to reduce deferred income tax assets to the amounts that management believes are more likely than not to be recovered.

 

The Companys policy is to record interest and penalties as a component of income tax expense.  As of December 31, 2012 the company has accrued penalties and interest of approximately $146,000   related to unfiled state and federal tax returns concerning the sale of an asset in 2005 and 2006.


Off-Balance Sheet Arrangements

 

We have no off-balance sheet arrangements that have or are reasonable likely to have a current or future effect on our financial condition, changes in financial condition, revenues, or expenses, results of operation, liquidity, capital expenditures, or capital resources that are material to investors.

 

Inflation

 

In the opinion of management, inflation has not had a material effect on the Companys financial condition or results of its operations.

 

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

 

Not applicable.

 

Item 8. Financial Statements and Supplementary Data.

 

The financial statements required by this Item 8 are included in this Annual Report on Form 10-K following Item 15.

 

Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure.

 

None

 




22


 

Item 9A. Controls and Procedures.

 

Managements Annual Report on Internal Control over Financial Reporting.

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) promulgated under the Exchange Act.  Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles.   Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisitions, use, or disposition of our assets that could have a material effect on our financial statements.

 

Because of its inherent limitations, 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 because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

A material weakness is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statement will not be prevented or detected.  As of December 31, 2012, management assessed our internal control over financial reporting in relation to criteria described in Internal Control - Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission.

 

Evaluation of Disclosure Controls and Procedures.

 

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended (the Exchange Act) is recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms, and that such information is accumulated and communicated to our management, including its chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

 

Limitations on the Effectiveness of Disclosure Controls. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

 

Evaluation of Disclosure Controls and Procedures. As of December 31, 2012, the end of the fiscal year covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Interim Chief Executive Officer, who is our principal executive officer and principal financial and accounting officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our Interim Chief Executive Officer (principal executive officer and principal financial and accounting officer) concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were not operating effectively as of December 31, 2012. Our disclosure controls and procedures were not effective because of certain material weaknesses described below.

 

Managements Conclusion

Management believes that the Companys internal control over financial reporting was not effective as of December 31, 2012 due to material weakness in internal control, which weaknesses resulted from the failure to maintain effective internal control over the financial reporting process to ensure the timely preparation of financial statements and financial data which is necessary for the preparation of the Companys financial statements in accordance with U.S. GAAP. Specifically, we noted the following:

 

While there were internal controls and procedures in place that relate to financial reporting and the prevention of material misstatements, these controls did not meet the required documentation and effectiveness requirements under the Sarbanes-Oxley Act; specifically, we did not maintain adequate documentation of our internal control assessment, including risk matrices, internal control narratives and flowcharts, test results, etc.  We may not be able to fully remediate this material weakness unless we hire more staff.  We will continue to monitor and assess the costs and benefits of additional staffing.

 




23


 

Due to the nature and size of the Companys current operations, there is lack of segregation of duties in financial reporting.  This weakness was due to our lack of working capital to hire additional staff.  Our size has prevented us from being able to employ sufficient resources to enable us to have an adequate level of supervision and segregation of duties within our internal control system. There is one person involved in the processing of a significant portion of the Companys accounting and banking transactions and a single person with responsibility for processing cash disbursements and recording journal entries.  A single person is responsible for reviewing sales and cash receipts entry. Therefore, while there are some compensating controls in place, it is difficult to ensure effective segregation of accounting duties. While we strive to segregate duties as much as practicable, there is an insufficient volume of transactions to justify additional full time staff.  We may not be able to fully remediate this material weakness unless we hire more staff.  We will continue to monitor and assess the costs and benefits of additional staffing.

 

However, management believes that these material weaknesses did not materially impact the reliability of our financial statements.


This Annual Report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Our report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission. 


Changes in Internal Control over Financial Reporting.

 

There were no changes in our internal control over financial reporting during the year ended December 31, 2012 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.


Item 9B. Other Information

 

None.

 





24


 

PART III

 

Item 10. Directors, Executive Officers and Corporate Governance

 

The names, ages and terms of office of our directors and executive officers as of April 9, 2013 are set forth in the following table:


Name

Age

Positions with Vista International Technologies

 Bradley A Ripps

37

Former Interim Chief Executive Officer, Former Chief Financial Officer

Thomas P. Pfisterer*

51

Director and Chief Financial Officer (former Chief Executive Officer) 2

Timothy D. Ruddy

40

Interim Chief Executive Officer

 

 

* Mr. Pfisterer is also a named executive officer for purposes of Section 16(a)

  

2 Mr. Pfisterer was the Interim Chief Executive Officer (principal executive officer and principal accounting officer) of the Company from October 1, 2009 through April 19, 2010 and the Chief Executive Officer of the Company from April 20, 2010 through January 17, 2011.


Mr. Ripps was Chief Executive Officer and Chief Financial Officer from January 18, 2011 through February 3, 2012


Mr. Ruddy began serving as Interim Chief Executive Officer and Chief Financial Officer on February 4, 2012  and currently serves in both capacities.

 

Directors are elected by holders of the common stock to serve until the earlier of the next annual meeting of the Company at which their successors are elected or their resignations.  Officers serve at the will of the Board.  Under our certificate of incorporation and Delaware law, our directors will not be liable to the Company or our stockholders for damages for a breach of fiduciary duty unless the breach involves:

  

a breach of duty or loyalty,

 

acts, or omissions or bad faith, intentional misconduct or knowing violation of law

 

unlawful dividend payments or stock purchase by the Company

 

a transaction in which the director derives improper personal benefit.

 

Additionally, we will indemnify directors and officers against damages which qualify, for indemnification under Delaware law and our Bylaws except in relation to matters where he or she is adjudged in a legal proceeding to be liable for negligence or misconduct in the performance of duty.  Insofar as indemnification for liabilities arising under the federal securities laws may be permitted to directors, officers or persons controlling us pursuant to Delaware law and its Bylaws, we have been informed that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the laws and is therefore unenforceable.

 

Management Biographies

 

Bradley Ripps. Bradley Ripps became our Interim Chief Executive Officer on January 17, 2011. Mr. Ripps brings a strong, diverse business background having owned, operated, analyzed and/or advised more than 50 businesses, across many industries. Mr. Ripps was integral to the success of major initiatives at multiple companies. He was responsible for leading 60 employees, located in 10 different facilities, in the successful re-structuring of a managed care company. Mr. Ripps also successfully deployed a multi-million dollar network for a large communication and information company in the southeastern U.S. As a testament to Mr. Ripps negotiation skills and tenacity, he was instrumental in the collection of several million-plus dollar receivables for a major telecommunication provider. Prior to joining Vista, Mr. Ripps served as Vice President of IBG Business Services, Inc., one of the leading merger and acquisition advisory firms in the United States, from April 2006 to January 2011. At IBG, Mr. Ripps handled both domestic and international clients across a broad range of industries, from physical fitness and advertising to transportation and manufacturing. Concurrently, since 2001, he has held various senior management positions in Community Care, Inc. a private, family owned, managed care business. Mr. Ripps completed his undergraduate studies at Syracuse University, earning a Bachelor of Arts Degree in Economics (Magna Cum Laude). He completed his graduate studies at The University of Texas, earning a Masterr of Arts in Business Administration.




25


 

Thomas Pfisterer.  Thomas Pfisterer served as our Interim Chief Executive Officer from October 1, 2009 through April 19, 2011 and as our Chief Executive Officer from April 20, 2010 through January 17, 2011, and has served as a Director since October 2009.  He is a co-founder and the President and Chief Executive Officer of Aquarius Energy Systems, Inc. located in New Hartford, New York.  Aquarius Energy Systems (incorporated in 2008) is a development stage alternative green energy company in central New York State. Mr. Pfisterer also currently holds the position of Director of School Food Services for the Oneida County B.O.C.E.S. (Board of Cooperative Educational Services) in New Hartford, New York where he has served for the past 20 years. His operating budget for the district has grown from $88,000 in 1989 to over $5.1 million in 2010. The total number of program employees has grown from 11 to 189 during this period.  Mr. Pfisterer completed his undergraduate studies at the University of Cincinnati (attending on a Division I Baseball scholarship), earning a Bachelor of Science Degree in Dietetics (Magna Cum Laude) in 1983.  He completed his graduate studies at Empire State College in Saratoga Springs, New York, earning a Masters Degree in Business Administration in 2003.  The Company believes that Mr. Pfisterers organizational and leadership expertise, including his experienced background in growing and managing organizations and his involvement in the green energy market, gives him the qualification and skills to serve as a Director.

 

Timothy Ruddy.  Timothy Ruddy was appointed CEO of Vista on February 4, 2012 and has been a Director of Vista International Technologies, Inc. since October 2007.  For the past 18 years Mr. Ruddy has been active in the financial services industry, evaluating promising technologies and companies with regard to their formation, funding and development.  He has experience in startup and turnaround situations, as well as business development.  Mr. Ruddy holds series 7 and 65 licenses from FINRA and most recently served as Vice President-Investments at 1st Financial Services, a financial advisory firm.   Mr. Ruddy has been active as an angel investor in the venture capital industry for the past ten years, working with companies in the medical devices field as well as emerging energy-related technologies. In addition to his position with Vista, Mr. Ruddy is a co-founder, and serves as an officer of Ambien Dynamics, a medical device company specializing in pulsed electromagnetic field therapies, a position he has held since 2002. Mr. Ruddy graduated Summa Cum Laude from the University of Notre Dame with a Bachelors Degree in Mechanical Engineering, and played center for the NFLs Miami Dolphins from 1994-2003.  The Company believes that Mr. Ruddys development-stage and growth-stage business expertise, including his diverse background evaluating and funding start-up, development stage and growth-stage technology and energy-related companies, gives him the qualifications and skills to be an officer and director of the company.

 

Family Relationships

 

There are no family relationships among any of our executive officers and directors.

 

Committees

 

We do not have an audit committee, and accordingly we do not have an audit committee financial expert.  Currently we have two members of the Board of Directors, none of whom are independent. The Board of Directors plans to seek qualified candidates for election as independent board and audit committee members.   We cannot anticipate when we will have other independent board members elected or will establish an audit committee.  The Company does not have a nominating committee.

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

Section 16 of the Exchange Act requires that reports of beneficial ownership of common shares and changes in such ownership be filed with the Securities and Exchange Commission by Section 16 reporting persons, including directors, certain officers and holders of more than 10% of the outstanding common shares.  We are required to disclose in this Annual Report each reporting person whom we know to have failed to file any required reports under Section 16 on a timely basis during the fiscal year ended December 31, 2012.  To our knowledge, based solely on a review of copies of Forms 3, 4 and 5 filed with the Securities and Exchange Commission, and written representations from certain reporting persons, during the fiscal year ended December 31, 2011, our officers, directors and 10% stockholders complied with all Section 16(a) filing requirements applicable to them.

 

Code of Ethics

 

The Company has adopted the Vista International Technologies Inc. Code of Business Conduct and Ethics for Officers (Vice President and Senior Management) and Directors that applies to the Companys Chief Executive Officer and Chief Financial Officer (Principal Accounting Officer), among others.  The Company has also adopted the Vista International Technologies Inc. Code of Business Conduct and Ethics for Employees and Officers (other than Vice President and Senior Management).

 

The Companys Code of Business Conduct and Ethics for Officers (Vice President and Senior Management) is posted on the Companys website at: www.vvit.us.

  

The Company will provide to any person, without charge, a copy of its Code of Business Conduct and Ethics for Officers (Vice President and Senior Management) upon written request to: Vista International Technologies Inc., 5151 E 56th Ave, Suite 101, Commerce City, CO 80022

 




26


 

Item 11. Executive Compensation.

 

The following table sets forth the compensation paid during the past two years to our chief executive officer (our principal executive officer and principal financial and accounting officer).  No executive officers remuneration exceeded $100,000 per year.  We did not pay any non-cash current compensation or long term compensation to our officers during the listed years.

 

Summary Compensation Table


Name and Principal

 

 

 

All Other

 

Position

Year

Salary

Bonus

Compensation

Total

Thomas P. Pfisterer 1

 

 

 

 

 

Director and Chief Financial Officer (Former Chief Executive Officer)

2011

---

---

---

---

 

2012

---

---

---

---

Timothy D Ruddy

 

 

 

 

 

Interim Chief Executive Officer

2011

---

---

---

---

 

2012

---

---

---

---

Bradley Ripps

 

 

 

 

 

Former Chief Executive Officer

2011

$81,731

N/A

N/A

$81,731

 

2012

$9,972

N/A

N/A

$9,972


 

 

1 Thomas Pfisterer became our Interim Chief Executive Officer on October 1, 2009, was later appointed the Chief Executive Officer on April 20, 2010 and resigned as Chief Executive Officer effective January 17, 2011.  He received no compensation for officer or director duties.

 

No executive officer named in the table above has any unexercised or unearned options, unvested stock amounts or equity incentive plan awards.

 

Employment Contracts, Termination of Employment, and Change-in-Control Arrangements

 

Thomas P. Pfisterer.   Mr. Pfisterer assumed the role of Interim Chief Executive Office on October 1, 2009 and was later appointed the Chief Executive Offer.  Mr. Pfisterer resigned as Chief Executive Officer of the Company on January 17, 2011.  Mr. Pfisterer continues as a Director of the Company.  Mr. Pfisterer served as our Chief Executive Officer at-will and we did not have an employment agreement with him.


Bradley Ripps.  Mr. Ripps succeeded Mr. Pfisterer on January 17, 2011 and served as Interim Chief Executive Officer from that date until he tendered his resignation on February 4, 2012.  He was compensated at an annual salary of $85,000 per year.  He did not receive any bonus pay, and was not granted any stock or options on stock in the company.


Timothy D Ruddy.  Mr. Ruddy Succeeded Mr. Ripps on February 4, 2012 as Interim Chief Executive Officer and currently holds the title as of April 9, 2013.  Mr. Ruddy serves as our Chief Executive Officer at-will and the company does not have an employment agreement with him.


The Company did not pay any compensation to its directors for serving as such in 2011 or 2012.

 

We do not have any compensation arrangements with our directors.  In the future the Company may institute director compensation arrangements; however, none are currently contemplated.




27


 

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

 

The following table sets forth, to the Companys knowledge, based solely upon records available to it, certain information as of April 9, 2013 regarding the beneficial ownership of the Companys shares of common stock by:

 

each person who we believe to be the beneficial owner of more than five percent (5%) of our outstanding shares of common stock,

 

each of the current directors,

 

each of the named executive officers listed in the summary compensation table, and

 

all of our current executive officers and directors of the group.



Name and Address of Beneficial Owner

Number of Shares


Percentage of Class

(4)

Richard Strain




15 Loockerman Ave




Poughkeepsie, New York 12601

7,764,456

1

40.0%

 




Timothy D. Ruddy




3885 Vale View Lane

 

 

 

Mead, CO 80542

4,372,041

2

22.5%

 




Thomas Pfisterer




12 Croft Road, New

 

 

 

Hartford, NY 13413

29,400

2

*

 




Brad Ripps




88 Inverness Circle East, Suite N-103

 

 

 

Englewood, CO 80112

2

 

 

 

 

All directors and executive officers as a group (4 persons)

4,401,441

3

22.7%

 

 

 

1

Information based upon a Schedule 13D/A filed by Mr. Strain with the Securities and Exchange Commission, the records of the Companys transfer agent, and information provided to the Company by Mr. Strain.

 

2

Information based upon the records of the Companys transfer agent and information provided by the beneficial owner.

 

3

See Notes (1) and (2) above.

 

4

Based on 19,406,376 common shares issued and outstanding as of April 9, 2013.



*

Less than one percent.

 

Securities Authorized for Issuance under Equity Compensation Plans

 

Vista International Technologies Inc. has adopted its 2005 Equity Participation Plan, which was approved by its stockholders.  There are 20,000,000 shares of common stock available for issuance under this plan.  No shares of common stock, or securities, options or rights exercisable in the common stock have been granted or issued under this plan. See Part I Item 5 for further disclosure about this plan.

 




28


 

Item 13. Certain Relationships and Related Transactions, and Director Independence.

 

Transactions with related persons, promoters and certain control persons.

 

 On August 3, 2009, the Company entered into a loan agreement with Mr. Timothy D. Ruddy, a Director of the Company.  The loan agreement formalized the terms related to working capital funding provided by Mr. Ruddy beginning in the fourth quarter of 2008.  Mr. Ruddy has the option, at his discretion, to receive payment as follows:

 

repayment of principal and interest in cash;

 

conversion of outstanding amount without accrual of interest into the Companys common stock based on the quoted market price of the stock at the dates loans were made; or

 

any combination of cash and stock as described in (a) and (b).

 

As of December 31, 2012, that total was approximately $727,900 and accrued interest at December 31, 2012 was approximately $127,600.  The loan bears interest at 8% per annum, is secured by the Companys assets, is due on demand, and is convertible into the Companys common stock as described above.   Through April 9, 2013 Mr. Ruddy has not loaned the Company any  additional  amounts under this agreement.


On March 29, 2013, the Board of the Directors of the Company approved an agreement with Timothy D Ruddy, Interim CEO and Director, to convert $137,148.88 of accrued interest on the loan agreement between Mr. Ruddy and the company, dated August 3, 2009, into 3,054,541 shares of common stock. The conversion ratio was the average closing trading price for the ten days prior to the date of the agreement.

In December 2011, Mr. Ruddy provided $150,000 of personal assets as collateral for a letter of credit utilized for part of Vistas required financial assurance in connection with its registration with the Texas Commission on Environmental Quality (TCEQ). This registration is required to enable us to operate our tire processing facility in Hutchins, Texas, and would be used for remediation in the event the Company liquidates and its facility closes.  Mr. Ruddy was not compensated for providing this collateral. This letter was called by the TCEQ in December 2011.  Subsequently, Mr. Ruddy provided $75,000 in additional funding to partially cover the amount due by the bank which held the letter of credit, and the Company and Mr. Ruddy jointly executed an unsecured loan for the remaining $75,000.  Mr. Ruddy paid off this loan on behalf of the company in May 2012

 

On August 11, 2009, the Company entered into a $375,000 line of credit agreement with Mr. Richard Strain, a 40% shareholder of the Company.  The line of credit bears interest at 9% per annum, and is payable in $8,000 monthly increments commencing on October 1, 2009.  Full repayment of the line of credit was required by December 31, 2011.  The line is currently in default.


The line of credit is secured by a first priority security interest in the Companys assets and provides for certain equity redemption rights to Mr. Strain, on terms and conditions to be agreed upon.  During 2010, an aggregate of approximately $138,000 of accrued interest under the line of credit and other Notes was converted into 276,549 shares of Vista common stock. During 2011, Mr. Strain provided an additional $50,000 under the agreement. Approximately, $147,000 in principal is outstanding under the line of credit and Mr. Strain has declined to provide any further advances under the line of credit. 


During 2011 Mr. Strain also provided $450,000 in the form of a promissory note for equipment purchases and working capital to allow the company to install a tire derived fuel production line. This note was due November 14, 2011 and is currently in default.


As of December 31, 2012 and 2011, the Notes and the line of credit in the principal amount of approximately $1,097,000 were in default due to missed principal payments.   


On March 29, 2013, the Board of the Directors of the Company approved an agreement with Richard Strain, the Company largest shareholder,  to convert $222,940.68 of accrued interest on his various loans and line of credit to 2,229,407 shares of common stock.  The conversion ratio was the closing trading price of the Companys stock on the date of the agreement. This agreement also contained an additional $15,000 loan from Mr Strain to the Company, and consolidated all of Mr. Strains loans and lines of credit into a single consolidated note and mortgage.

CEO Compensation

 

Bradley A. Ripps began serving as the Companys Interim Chief Executive Officer (principal executive officer and principal financial and accounting officer) effective January 17, 2011.  Mr. Ripps will receive annual compensation of $85,000. Mr. Ripps resigned as Interim Chief executive Officer on February 4, 2012.

 





29


 

Director independence

 

The Companys common stock is quoted on the Over-the-Counter Bulletin Board.  The Company uses the independent director definition in Rule 4200 of the NASDAQ Stock Market, Inc. and Rule 10A-3 of the Securities Exchange Act of 1934 to determine whether the directors of the Company are independent or not.

 

Applying the NASDAQ standards, the Board of Directors has determined that none of our directors are independent.  The Company does not have an audit committee, compensation committee or nominating committee.

 

Item 14. Principal Accountant Fees and Services

 

Audit Fees

 

The aggregate fees billed for our fiscal year ended December 31, 2012 by RBSM, LLP were $31,000.   The aggregate fees billed for our fiscal year ended December 31, 2011 by GHP Horwath, P.C. were $63,544 


Audit Related Fees

 

Our principal accountants did not bill us any fees during our fiscal years ended December 31, 2012 and 2011 for any audit related services.

 

Tax Fees

 

Our principal accountants did not bill us any fees for tax compliance, tax advice and tax planning for our fiscal years ended December 31, 2012 and 2011.

 

Other Fees

 

Our principal accountants did not bill us for any services other than as reported above in this Item 14 during our fiscal years ended December 31, 2012 and 2011, respectively.

  

PART IV

 

Item 15. Exhibits and Financial Statement Schedules

 

2.1

Industrial Site Purchase and Sale Agreement dated February 14, 2011 by and between Vista International Technologies, Inc. and Brown-Lewisville Railroad Family First Limited Partnership

 

 

3(i).1

Certificate of Incorporation*

 

 

3(i).2

Articles of Amendment to the Articles of Incorporation, as amended on August 6, 1999*

 

 

3(i).3

Certificate of Amendment of Certificate of Incorporation, as amended on April 24, 2002*

 

 

3(i).4

Certificate of Amendment of the Certificate of Incorporation, filed on October 12, 2005*

 

 

3(i).5

Certificate of Amendment to Certificate of Incorporation, as amended on November 8, 2007**

 

 

3(ii).1

Amended and Restated By-Laws***

 

 

10.1

Strategic Alliance and Supply Agreement, dated December 29, 2009 by and between Vista International Technologies, Inc. and Liberty Tire Recycling, LLC ****

 

 

10.2

Consulting Agreement dated August 3, 2009 by and between Vista International Technologies, Inc and Ing. Gianfranco Licursi*****

 

 

10.3

Vista International Technologies, Inc. Equity Participation Plan*

 

 

10.4

Investment Agreement dated August 3, 2009 between Vista International Technologies, Inc. and  Timothy Ruddy ****

 

 

10.5

Security Agreement dated August 3, 2009 by and between Vista International Technologies, Inc. and Timothy Ruddy ****

 

 

 

 



30


 

10.6

Promissory Note (Line of Credit) dated August 11, 2009 by and between Vista International Technologies, Inc. and Richard Strain ****

 

 

10.7

Security Agreement dated August 11, 2009 by and between Vista International Technologies, Inc. and Richard Strain

 

 

10.8

Promissory Note dated April 4, 2007 by and between Nathaniel Energy Corporation and Richard Strain

 

 

10.9

Security Agreement dated April 4, 2007 by and between Nathaniel Energy Corporation and Richard Strain

 

 

10.10

Promissory Note dated April 16, 2007 by and between Nathaniel Energy Corporation and Richard Strain

 

 

10.11

Security Agreement dated April 16, 2007 by and between Nathaniel Energy Corporation and Richard Strain



10.12

Promissory Note dated May 31, 2007 by and between Nathaniel Energy Corporation and Richard Strain

 

 

10.13

Security Agreement dated May 31, 2007 by and between Nathaniel Energy Corporation and Richard Strain

 

 

10.14

Engagement Letter dated April 15, 2010 by and between Vista International Technologies, Inc. and Colebrooke Capital, Inc. +

     

10.15

Joint Development Agreement dated October 16, 2010 by and between Vista International Technologies, Inc. and Mustang Consulting, LLC ++

 

 

10.16

Amendment to Engagement Agreement dated August 30, 2010 by and between Vista International Technologies, Inc. and Colebrooke Capital, Inc. ++

 

 

10.17

Consulting Agreement dated October 26, 2010 by and between Vista International Technologies, Inc. and Steven R. Kowalsky and Edward L. Kowalsky. ++

 

 

10.18

Consulting and Services Agreement dated June 11, 2009 by and between Vista International Technologies, Inc. and Mustang Consulting, LLC (Consulting and Services Agreement)

 

 

10.19

Continuation of Consulting and Services Agreement effective January 4, 2010

 

 

10.20


10.21

Exclusive Listing Agreement dated July 1, 2010 by and between Vista International Technologies, Inc. and CCBN Texas Limited Partnership d/b/a Colliers International


Alternative Fuel Purchase Agreement, dated January 2nd, 2012, between Vista International Technologies, Inc, And Geocycle, LLC.

10.22



10.23



10.24


10.25



10.26


 Release of Contract, dated January 18, 2012, between Vista International Technologies, Inc. and Brown-Lewisville Railroad Family First Limited Partnership


Alternative Fuel Purchase Agreement, dated January 1, 2012, between Vista International Technologies, Inc. and Trident Environmental Resource Consulting, LLC


Convertible Note dated December 7, 2011 between Vista International Technologies, Inc. and Asher Enterprises, Inc.


Lease Agreement dated March 1, 2012 between Vista International Technologies, Inc, and Electric Power Equipment Company.


Equipment Financing Agreement, dated February 15, 2012, between Vista International Technologies, Inc (Timothy Ruddy) and REO Holdings.


14.1

Code of Business Conduct and Ethics for Officers (Vice President and Senior) and Directors (effective March 8, 2004)+++

 

 

14.2

Code of Business Conduct and Ethics for Employees and Officers(other than Vice President and Senior) (effective March 8, 2004)+++

 

 

21

Subsidiaries****



 

 



31


 

31.1

Certification of Interim Chief Executive Officer (principal executive officer and principal financial and accounting officer) pursuant to Rule 13a-14(a)or Rule 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

Certification of Interim Chief Financial Officer (principal executive officer and principal financial and accounting officer) pursuant to Rule 13a-14(a)or Rule 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1

Certification of Interim Chief Executive Officer (principal executive officer and principal financial and accounting officer) pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2

Certification of Interim Chief Financial Officer (principal executive officer and principal financial and accounting officer) pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 101.   

INS       XBRL Instance Document


 101.

SCH      XBRL Taxonomy Extension Schema Document

 

101.

CAL      XBRL Taxonomy Extension Calculation Linkbase Document

 

101.

LAB      XBRL Taxonomy Extension Label Linkbase Document

 

101.

PRE      XBRL Taxonomy Extension Presentation Linkbase Document

 

101.

DEF      XBRL Taxonomy Extension Definition Linkbase Document

_________________


_

* Denotes document filed as an exhibit to our Quarterly Report on Form 10-QSB for the period ended September 30, 2005 and incorporated herein by reference.

 

** Denotes document filed as an exhibit to our Current Report on Form 8-K for an event dated December 21, 2007 and incorporated herein by reference.

 

*** Denotes document filed as an exhibit to our Current Report on Form 8-K for an event dated June 6, 2005.

 

**** Denotes document filed as an exhibit to our Annual Report on Form 10-K for the year ended December 31, 2009 and incorporated herein by reference.

 

***** Denotes document filed as an exhibit to our Quarterly Report on Form 10-Q for the period ended September 30, 2009 and incorporated herein by reference.

 

Denotes document filed as an exhibit to our Annual Report on Form 10-K/A Amendment No. 1 for the year ended December 31, 2010 and incorporated herein by reference.

 

+ Denotes document filed as an exhibit to our Quarterly Report on Form 10-Q for the period ended June 30, 2010 and incorporated herein by reference.

 

++ Denotes document filed as an exhibit to our Quarterly Report on Form 10-Q for the period ended September 30, 2010 and incorporated herein by reference.

 

+++ Denotes document filed as an exhibit to our Annual Report on Form 10-KSB for the year ended December 31, 2003 and incorporated herein by reference.

 





32


 

 

VISTA INTERNATIONAL TECHNOLOGIES INC. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011

 

INDEX



 

Page

Report of Independent Registered Public Accounting Firm

F-2

Consolidated Balance Sheets

F-3

Consolidated Statements of Operations

F-4

Consolidated Statements of Stockholders Deficit

F-5

Consolidated Statements of Cash Flows

F-6

Notes to Consolidated Financial Statements

F-8






 






F-1


 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and Stockholders of

Vista International Technologies, Inc.



We have audited the accompanying consolidated balance sheets of Vista International Technologies, Inc. and its subsidiaries (the Company), as of December 31, 2012 and 2011, and the related consolidated statements of operations, deficiency in stockholders equity and cash flows for each of the two years in the period ended December 31, 2012. These consolidated financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.


 

We have conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Companys internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Vista International Technologies, Inc. and its subsidiaries as of December 31, 2012 and 2011, and the consolidated results of its operations and its cash flows for each of the two years in the period ended December 31, 2012, in conformity with accounting principles generally accepted in the United States of America.


The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the accompanying consolidated financial statements, the Company has suffered recurring losses from operations, generated negative cash flows from operating activities, and has an accumulated deficit as of December 31, 2012, which raises substantial doubt about its ability to continue as a going concern. Management's plans in regard to this matter are described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

 


/s/ RBSM LLP

 

New York, New York

April 11, 2013














F-2


 

Vista International Technologies Inc.

Consolidated Balance Sheets

As of December 31, 2012 and 2011

 

2012

2011

ASSETS

 

 

Current assets:

 

 

Cash

$ 16,040 

$ 36,710 

Accounts receivable, net

27,452 

1,739 

Other receivables

1,904 

Prepaid expenses

1,499 

55,410 

      Total current assets

44,991 

95,763 

Environmental deposit

170,000 

170,000 

Deposits

1,896 

1,896 

Property and equipment, net

507,404 

569,258 

Intangibles, net

23,830 

27,766 

Total assets

$ 748,121 

$ 864,683 

 

 

 

LIABILITIES AND STOCKHOLDERS' DEFICIT

 

 

Current liabilities

 

 

   Accounts payable and accrued liabilities

$ 1,918,740 

$ 1,900,246 

   Accrued compensation and payroll liabilities

522,607 

588,087 

   Accrued interest

227,591 

118,129 

   Accrued interest- related parties

141,882 

82,247 

   Notes payables - related parties

777,893 

658,901 

   Notes payable - stockholder

1,096,931 

1,096,931 

   Notes payable and capital leases, current portion

216,475 

151,484 

   Convertible notes payable, net of debt discount

3,709 

   Derivative liability

74,192 

      Total current liabilities

4,902,119 

4,673,926 

   Other long-term liabilities

40,068 

   Notes payable and capital leases, less current portion

6,223 

3,898 

Total liabilities

4,908,342 

4,717,892 

Commitments and contingencies



Stockholder's deficit:

 

Preferred stock, $0.001 par value; 10,000,000 shares authorized; no shares issued and outstanding at December 31, 2012 and 2011

Common stock, $0.001 par value; 200,000,000 shares authorized;  12,872,428 and 12,047,946 shares issued outstanding at December 31, 2012 and 2011, respectively

12,873 

12,048 

   Additional paid-in capital

62,841,103 

62,802,728 

  Common stock subscription

5,000 

   Accumulated deficit

    (67,019,197)

    (66,667,985)

      Total stockholder's deficit

      (4,160,221)

      (3,853,209)

Total liabilities and stockholders' deficit

$ 748,121 

$ 864,683 


The accompanying notes are an integral part of the consolidated financial statements





F-3


 

Vista International Technologies Inc.

Consolidated Statements of Operations

For the Years ended December 31, 2012 and 2011





2012

2011




Revenues

$

683,201 

$

466,977 




Cost of revenue

595,693 

547,289 




Environmental remediation (income) expenses

(70,312)

220,565 




Gross profit (loss)

157,820 

(300,877)




Operating expenses:  



   Depreciation and amortization

100,091 

47,864 

   Selling, general and administrative expenses

242,668 

616,002 

      Total operating expenses

342,759 

663,866 




Loss from operations

(184,939)

(964,743)




Other income (expense):



   Gain on extinguishment of liability

8,901 

   Gain on disposal of property and equipment

1,100 

14,000 

   Gain from insurance settlement

36,561 

   Interest expense, net

(224,663)

(260,026)

   Gain on change in the fair value of derivative liability

74,192 

65,032 

   Other expense

1,780 

(660)


(138,690)

(145,093)




Loss before income taxes

(323,629)

(1,109,835)




Income tax expenses

27,583 

12,239 




Net loss

$

(351,212)

$

(1,122,075)




Net loss per share, basic and diluted

$

(0.03)

$

(0.10)




Weighted average common shares outstanding, basic & diluted

12,180,115 

11,630,303 



The accompanying notes are an integral part of the consolidated financial statements







F-4


 

Vista International Technologies Inc.

Consolidated Statement of Changes in Stockholders' Deficit

For the Years ended December 31, 2012 and 2011










Common stock

Additional Paid-in

Common Stock Subscription

Accumulated

Stockholders


Shares

Amount

Capital

Shares

Amount

deficit

deficit

Balances, January 1, 2011

11,471,955 

$

11,472

$

62,618,719

18,000 

$

10,800 

$

(65,545,910)

$

(2,904,919)

Issuance of common stock for services

307,991 

308

123,477

123,785 

Issuance of common stock for cash

268,000 

268

60,532

(18,000)

(10,800)

50,000 

Net loss for the year

-

-

(1,122,075)

(1,122,075)









Balances, December 31, 2011

12,047,946 

12,048

62,802,728

(66,667,985)

(3,853,209)









Issuance of common stock for cash

-

-

10,000 

5,000 

5,000 

Issuance common stock for note conversion

144,578 

145

11,855

12,000 

Issuance common stock for services

680,000 

680

26,520

27,200 

Fractional share adjustment

(96)

-

-

Net loss for the year

-

-

(351,212)

(351,212)









Balances, December 31, 2012

12,872,428 

$

12,873

$

62,841,103

10,000 

$

5,000 

$

(67,019,197)

$

(4,160,221)


The accompanying notes are an integral part of the consolidated financial statements




F-5


 

Vista International Technologies Inc.

Consolidated Statement of Cash Flows

For the Years ended December 31, 2012 and 2011



2012

2011

Cash flows from operating activities:



Net loss

$

(351,212)

$

(1,122,075)

Adjustments to reconcile net loss to net



cash used in operating activities:



Depreciation and amortization

100,091 

47,864 

Operating expenses incurred by related party / note holder on behalf of the company

3,392 

31,906 

Common stock issued for services provided

27,200 

123,785 

Environmental remediation expenses

(70,312)

220,565 

Gain on disposal of assets and insurance claim received

(1,100)

(50,561)

Gain on extinguishment of liabilities

(8,901)

Non-cash interest

96,724 

Amortization of deferred debt discount

38,791 

3,709 

Gain on change in fair value of derivative liability

(74,192)

(65,032)

Changes in operating assets and liabilities:



Accounts receivable, net

(25,713)

4,044 

Prepaid expenses

53,911 

(12,549)

Other current assets

1,904 


Other receivables, deposits and restricted cash


(41,606)

Accounts payable and accrued expenses

161,254 

262,924 

Net cash used in operating activities

(144,887)

(500,302)




Cash flows from investing activities:



Proceeds from sale of fixed assets

1,100 

Proceeds from purchase of fixed assets

(1,528)

Property and equipment and intangible asset purchases

(33,152)

Construction in progress

(19,743)

Proceeds from insurance and sale of equipment

42,881 

Net cash used in investing activities

(428)

(10,014)




Cash flows from financing activities:



Repayments on note payable and capital lease

(35,446)

(10,887)

Proceeds for common stock to be issued

5,000 

Proceeds from bridge loan

30,000 

40,000 

Proceeds from line of credit and bank loan

82,241 

75,000 

Proceeds from issuance of common stock

50,000 

Proceeds from notes payable- stockholder

223,957 

Proceeds from notes payable and capital lease

32,750 

10,055 

Proceeds from related party notes

10,100 

154,000 

Net cash provided by financing activities

124,645 

542,125 




Net (decrease) increase in cash and cash equivalents

(20,670)

31,809 




Cash and cash equivalents at beginning of year

$

36,710 

$

4,901 




Cash and cash equivalents at end of year

$

16,040 

$

36,710 





The accompanying notes are an integral part of the consolidated financial statements




F-6


 

Supplemental disclosure of cash flow information:


Cash paid during the period for interest

$

-

$

-

Cash paid during the period for taxes

$

-

$

-

 



Non-cash investing and financing activities



Equipment purchases funded by capital lease arrangements

$

32,771

$

-

Issuance of common stock for in exchange



     for settlement of convertible notes payable

$

12,000

$

-

Note payable issued for direct payment made by related



     party for repayment of bank loan for environmental deposit

$

75,000

$

-

Note payable issued for direct payment made by



     related party for repayment of Convertible notes

$

30,500

$

-

Beneficial conversion feature on convertible notes payable

$

-

$

42,500

Common stock to be issued, issued during the year

$

-

$

10,800

Accrued liability reclassified to other long term liability

$

-

$

40,068

Notes payable issued for the direct payment made



         by the note holders for environmental deposit

$

-

$

75,000

Reclassification from short-term notes payable to long term

$

-

$

3,898

Payment made by the note holder for expenses and to settle accounts payable

$

-

$

31,906



The accompanying notes are an integral part of the consolidated financial statements




F-7


 

Vista International Technologies, Inc.

Notes to Consolidated Financial Statements

For the years ended December 31, 2012 and 2011

 

1. Organization, Nature of Operations, Going Concern and Managements Plans

 

Organization

 

Vista International Technologies, Inc. (the Company, we, our) is in the business of developing, commercializing and operating renewable energy and waste-to-energy (WTE) technologies and projects.


Subsidiaries

 

We have one wholly-owned subsidiary, Cleanergy, Inc., which was formed as an operating company for the purposes of developing WTE projects and commercializing our Thermal Gasifier, by entering into joint venture and licensing agreements and building and operating small WTE facilities. Cleanergy, Inc. is currently dormant and has no operations.

 

Nature of Operations

 

The Company is currently conducting its business in the following areas:

 

Tire processing operation in Hutchins, Texas, and

 

Renewable energy and waste-to-energy (WTE) projects utilizing the Companys Thermal Gasifier technology and corporate administration at the Companys offices in Commerce City, Colorado.

 

The Companys only business operations were in the WTE marketplace until the Hutchins tire facility was purchased in 2000.  The original purpose of the tire facility was to serve as a site for a WTE system. For this reason, rather than operate the business as a separate segment, the two business lines were integrated for the purposes of financial reporting. In addition, management makes investing and resource allocation decisions based on the combined results of both the tire processing and WTE business.  Accordingly, we only have one reportable segment.

 

Description of Business

 

We are in the business of developing, commercializing and operating renewable energy and waste-to-energy technologies and projects.  Our mission is to provide a clean, dependable, cost-competitive alternative energy to fossil fuels.  We plan to develop projects with government, community, industry and financial partners to recover the available carbon based energy from materials previously considered waste and destined for disposal.  The recovery of energy from waste using our Thermal Gasifier diverts large volumes of material from landfills and other disposal sites, while providing clean alternative energy and reducing greenhouse gas emissions.  In addition to processing waste into clean energy, we also convert biomass into energy using various plant based materials.   

 

Going Concern and Managements Plan

 

The Companys consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company reported a net loss of $351,212 and used net cash in operating activities of $144,886 for the year ended December 31, 2012, has a working capital deficit of $4,857,128 and an accumulated deficit of $6,7019,197 at December 31, 2012.   These factors raise substantial doubt about the Companys ability to continue as a going concern. The consolidated financial statements do not include any adjustments related to the recovery of the recorded assets or the classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

Our continuation as a going concern is dependent upon our ability to generate sufficient cash flow from operations or obtain equity investment or additional financing to meet obligations on a timely basis and ultimately to achieve profitable operations.  

 





F-8


 

Vista International Technologies, Inc.

Notes to Consolidated Financial Statements

For the years ended December 31, 2012 and 2011

 

In February 2011, the Company entered into a Purchase and Sale Agreement to sell all of its interest in the approximately 27 acre industrial site it owns at 1323 Fulghum Rd. in Hutchins, Texas.  The sale was subject to a variety of conditions, including shareholder approval (See note 9).  The buyer elected not to pursue this transaction further in January of 2012.


Although the sale leaseback transaction did not get closed, the company was able to find alternate funding and was able to purchase additional tire shredding equipment. The company successfully installed a tire derived fuel processing line in early 2012, and has been using the additional revenue from this processing line to stabilize the company and pay down the balances of its creditors.  The company plans to ramp up the hours of operation of the facility to generate greater cash flow and continue to look at its options to best utilize the facility.

Corporate Focus

 

Management intends to focus the Companys resources in the following areas:

 

Thermal Gasifier engineering design and deployment,

 

Maximizing value from the Hutchins, Texas tire processing and storage facility,

 

Development of project based opportunities, and

 

Attracting strategic investment.

 

Management considers the Thermal Gasifier and waste-to-energy segment to be our core business. However, significant focus is also being placed on the improvement of the tire processing operation at our Hutchins, TX facility to increase production and reduce operating costs, and expand sales to include used whole truck and passenger tires to increase revenue and cash flow.  Management believes that improvement in all facets of Company operations will improve the Companys ability to attract investors looking to enter the waste-to-energy and renewable energy marketplace.

 

We continue to develop our internal resources and implement business development activities to secure waste-to-energy and biomass-to-energy facility opportunities that utilize our Thermal Gasifier technology.  A number of these opportunities have been discovered, and management is endeavoring to secure the rights to these projects or formulate strategic alliances with project development partners.  

 

In the year ended December 31, 2012 the Company entered into loan agreements including related parties and received net proceeds of $124,645 and through April 9, 2013 has received $15,000 in additional loan proceeds from related parties.

 

 Management believes that current revenue levels will not be sufficient to meet our operational needs and execute the Companys complete business plan. The Company is seeking additional funding for the activities described above. The Company is exploring numerous financing opportunities but has no agreements or commitments for funding at the present time.  Future funding may be through an equity investment, debt or convertible debt.  Current market conditions present uncertainty as to the Companys ability to secure additional funds, as well as its ability to reach full profitability.  There can be no assurances that the Company will be able to secure additional financing, or obtain favorable terms on such financing if it is available, or as to the Companys ability to achieve positive earnings and cash flows from operations.

 

Any continued negative cash flows and lack of liquidity create significant uncertainty about the Companys ability to fully implement its operating plan, as a result of which the Company may have to reduce the scope of its planned operations.  If cash resources are insufficient to satisfy the Companys liquidity requirements, the Company will be required to scale back or discontinue its technology and project development programs, or obtain funds, if available, through strategic alliances that may require the Company to relinquish rights to certain of its technologies products or to discontinue its operations entirely.

 




F-9


 

Vista International Technologies, Inc.

Notes to Consolidated Financial Statements

For the years ended December 31, 2012 and 2011


2. Significant Accounting Policies:

 

Basis of Presentation

 

The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries. All material intercompany accounts, amounts and transactions have been eliminated in consolidation.

 

Use of Estimates

 

Our consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles.  These accounting principles require us to make certain estimates, judgments and assumptions. We made estimates, judgments and assumptions when accounting for items and matters such as, but not limited to allowance for doubtful accounts, depreciation, amortization, asset valuations, recoverability of assets, impairment assessments, accrued liabilities and other provisions and contingencies and we believe they are reasonable, based on information available at the time they were made.  These estimates, judgments and assumptions can affect the amounts reported in our consolidated financial statements.

 

For all of these and other matters, actual results could differ from our estimates.


Cash and Cash Equivalents


For purposes of the Statements of Cash Flows, the Company considers all highly liquid debt instruments purchased with a maturity date of three months or less to be cash equivalents. 


Reclassifications

 

We have reclassified certain prior period amounts to conform to the current period presentation.


Environmental Remediation Accounting


As a result of the companys ownership of its tire processing and storage facility in Hutchins Texas, the company is under the jurisdiction of the Texas Commission on Environmental Quality (TCEQ).  As such, the company is required to post financial assurance with the TCEQ  to cover costs associated with a cleanup of the facility in the case of insolvency of the operating firm.

The amount of the financial assurance that the TCEQ  requires  is calculated upon permit renewal, which occurs once every five years.


In order to maintain proper accounting of the Companys liabilities, management calculates the environmental remediation liability involved with owning the facility at the time of each quarterly or annual report and compares this value to the financial assurance on file with the TCEQ.  Any additional liability for a given period is categorized under environmental remediation expense and is shown on the firms consolidated statement of operations.





F-10


 

Vista International Technologies, Inc.

Notes to Consolidated Financial Statements

For the years ended December 31, 2012 and 2011


This expense can be calculated in a number of ways.  Management believes strongly that the best way to calculate the environmental remediation expense is to determine the amount of material on site (tonnage), then to use current hauling, landfill and equipment operation costs to calculate a per-ton disposal rate.  This per- ton disposal rate is then multiplied by the tonnage on site to arrive at the basic cost of disposal number.  An additional amount is then added for grading and general site cleanup operations to arrive at a final environmental remediation expense.


Accounts Receivable and Concentration of Credit Risk

 

 Accounts receivable are recognized based upon the amount due from customers for the services provided less an allowance for doubtful accounts. The allowance for doubtful accounts receivable reflects our best estimate of probable losses determined on the basis of historical experience, specific allowances for known troubled accounts and other currently available evidence. We generally consider our accounts past due if they are outstanding over 30 days. Our collection process varies by the customer type, amount of the receivable, and our evaluation of the customers credit risk. Our past due accounts are written off against our allowance for doubtful accounts when collection is considered to be not probable. Any recoveries of accounts previously written off are generally recognized as a reduction in bad debt expense in the period received.


The allowance for doubtful accounts receivable was approximately $5,700 and $5,700 at December 31, 2012 and 2011, respectively.


One customer comprised approximately 95% & 31% of the accounts receivable balance at December 31, 2012 and 2011.


Our two largest customers accounted for 36% and 16% of revenue for the year ended December 31, 2012. Two customers comprised approximately 21% and 10% of revenues for the year ended December 31, 2011. 


The Companys financial instruments that are exposed to concentration of credit risk consist primarily of uninsured cash and certificates of deposit held at commercial banks in the United States in excess of federally insured limits and trade receivables from the Companys customers.  The Company has not experienced a loss in its cash accounts.


 Accounts Payable and Accrued Expenses.

 Accounts payable and accrued expenses at December 31, 2012 and 2011 consisted of the following:

 




 

2012

2011

 

 

 

Accounts payable

 $        846,294

 $        784,644

Accrued liabilities

        1,072,446

        1,115,602

Accrued interest- other

             27,406

             16,292

Accrued interest-related party

           141,882

             82,247

Accrued interest- stockholder

           200,185

           101,837

Accrued compensation and payroll liabilities

           522,607

           588,087

 Total

 $     2,810,820

 $     2,688,709





F-11


 

Vista International Technologies, Inc.

Notes to Consolidated Financial Statements

For the years ended December 31, 2012 and 2011


The company recorded $59,635 in accrued interest in 2012, and $47,269 in accrued interest in 2011 on the related party debt extended through the agreement with Timothy Ruddy & family.  In addition, the company recorded interest expense of $98,348 in 2012 and $63,835 in 2011 on the shareholder notes and line of credit extended by Richard Strain.

The company disputes the amount of $482,209 of accrued compensation due to prior officer compensation.  It is the position of the company that the officers in question had no formal contracts in place, and further, were negligent in their fiduciary responsibility to the company, causing additional problems with creditors and the Internal Revenue Service.

$332,584  of accrued liabilities relate to environmental remediation expense at the Hutchins tire facility.  The company believes that as  tire derived fuel (TDF) operations continue, this amount will decrease as tires on site will be shredded and sold as TDF

Approximately $561,600 of accrued liabilities in 2012 and  $534,000 of accrued liabilities in 2011 relate to amounts accrued to state and federal revenue agencies, due to unfiled tax returns relating to the sale of company assets in 2005 and 2006.  

The company plans to use revenues from its tire derived fuel operations to begin to pay down these expenses, but significant repayment of such  will more than likely not  occur until  one of the following occurs:

·

Sale of the Hutchins tire facility

·

Full scale deployment of multiple projects in the Waste to Energy division.


Property and Equipment

 

Property and equipment purchased or constructed is recorded at cost. Direct costs, such as labor and materials, and indirect costs, such as overhead used during construction are capitalized.  Major units of property replacements or improvements are capitalized and minor items are expensed.  Gain or loss is recorded in income for the difference between the net book value relative to proceeds received, if any, when the asset is sold or retired.  Depreciation is provided for using the straight-line method.  Estimated useful lives of the assets used in the computation of depreciation are as follows:

 



Machinery and equipment 

2-5 years

Buildings and improvements 

3-30 years

Vehicles 

5 years




F-12


 

Vista International Technologies, Inc.

Notes to Consolidated Financial Statements

For the years ended December 31, 2012 and 2011

 

Long-Lived Assets

 

The Company follows Accounting Standards Codification subtopic 360-10, Property, Plant and Equipment (ASC 360-10). ASC 360-10 requires those long-lived assets and certain identifiable intangibles held and used by the Company be reviewed for impairment whenever facts and circumstances indicate that the carrying amounts of the assets may not be recoverable.  An impairment loss is recognized only if the carrying amount of an asset group is not recoverable and exceeds its fair value.  Recoverability of the asset group to be held and used is measured by comparing the carrying amount of the asset group to the estimated undiscounted future net cash flows expected to be generated by the asset group.  If the asset groups carrying value is not recoverable, an impairment charge is recognized for the amount by which the carrying amount of the asset group exceeds its fair value.  The Company determines fair values by using a combination of comparable market values and discounted cash flows, which requires the use of significant judgment.

  

There were no impairment losses during the year ended December 31, 2012 and 2011.

 

Intangible Assets

 

Intangible assets consist of United States and European patents for our Thermal Gasifier technology.  The Company reports intangible assets at cost, net of accumulated amortization.  The Company amortizes intangible assets over the estimated useful lives of ten years for U.S patents.  European patents expire 20 years after the filing date.  Approved European patents are amortized from the grant date to the end of the 20 year period.

 

Revenue Recognition

 

Our tire fuel processing and storage facility recognizes revenue as follows:

 

·

Disposal fees (tipping fees) for waste tires are fully earned when accepted at the facility


·

Sales of unprocessed whole tires are recognized when company receives proof of delivery to end user  


·

Sales of processed tires are recognized when company receives proof of delivery to end user.

 

Revenue from sales of our Thermal Gasifier will be recognized upon completion, delivery and customer acceptance, using the completed contract method of accounting.  We have recognized no revenue from the sale of our Thermal Gasifier during the years ended December 31, 2012 and 2011.

 




F-13


 

Vista International Technologies, Inc.

Notes to Consolidated Financial Statements

For the years ended December 31, 2012 and 2011


Research and Development

 

The Company accounts for research and development cost in accordance with Accounting Standards Codification subtopic 730-10, Research and Development (ASC 730-10). ASC 730-10, requires research and development costs to be charged to expense as incurred. Accordingly, internal research and development costs are expensed as incurred. Third-party research and developments costs are expensed when the contracted work has been performed or as milestone results have been achieved. Third party research and development expenses, all of which relate directly to the design and development of our Thermal Gasifier technology, are expensed as incurred.  For the years ended December 31, 2012 and 2011, we incurred approximately $5,400 and $6,100 respectively for third party research and development expense which are included in selling, general and administrative expenses in the consolidated statements of operations.

 

Stock Based Compensation to Other than Employees

 

In accordance with ASC 505-50, Equity-Based Payments to Non-Employees, the Company accounts for equity instruments issued in exchange for the receipt of goods or services from other than employees by measuring cost at the estimated fair value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably determinable. The value of equity instruments issued in exchange for services by non-employees is determined on the earlier of the date that a performance commitment has been established or upon completion of performance. The Company determined that the market value of its shares was more reliably determinable to measure compensation expense in 2012 and 2011.

 

Fair Value Measurement

 

ASC 825-10 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance. ASC 825-10 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 825-10 establishes three levels of inputs that may be used to measure fair value:

 

Level 1, defined as observable inputs, such as quoted prices in active markets.

 

Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable.

 

Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.




F-14


 

 Vista International Technologies, Inc.

Notes to Consolidated Financial Statements

For the years ended December 31, 2012 and 2011

 

The fair values of the Companys financial instruments, which include cash, restricted cash, accounts receivable, notes and accounts payable approximate carrying value because of their immediate or short-term maturity. The fair value of payables to related parties is not practicable to estimate, due to the related party nature of the underlying transactions. Certificates of deposit are valued utilizing Level 2 inputs and derivative liability is valued utilizing Level 3 inputs.

   

Income Taxes

 

The provision for income taxes consists of an amount for taxes currently payable, an amount for tax consequences deferred to future periods and adjustments to our liabilities for uncertain tax positions.  The Company records deferred income tax assets and liabilities reflecting future tax consequences attributable to tax net operating loss carryforwards (NOLs), tax credit carryforwards and differences between the financial statement carrying value of assets and liabilities and the tax bases of those assets and liabilities.  Deferred taxes are computed using enacted tax rates expected to apply in the year in which the differences are expected to affect taxable income.  The effect on deferred income tax assets and liabilities of a change in tax rate is recognized in earnings in the period that includes the enactment date.

 

The Company establishes valuation allowances when necessary to reduce deferred income tax assets to the amounts that management believes are more likely than not to be recovered.  A significant portion of the Companys net deferred tax assets relate to tax benefits attributable to NOLs.  Each quarter we evaluate the need to retain all or a portion of the valuation allowance on the Companys deferred tax assets.  Future adjustments to the valuation allowance would be charged to operations in the period such determination was made.

 

The Company uses a two-step approach for recognizing and measuring tax benefits taken or expected to be taken in a tax return and disclosures regarding uncertainties in income tax positions.

 

The Company files income tax returns in the U.S. federal jurisdiction as well as state jurisdictions for which nexus has been determined and is subject to income tax examinations by federal and state tax authorities for the year 2005 and thereafter.

 

The Companys policy is to record interest and penalties as a component of income tax expense.  As of December 31, 2012 and 2011, accrued interest and penalties on unpaid taxes outstanding was approximately $146,000 and $119,000, respectively


Net Loss per Share

 

Basic and diluted loss per common share is based upon the weighted average number of common shares outstanding during the fiscal year computed under the provisions of Accounting Standards Codification subtopic 260-10, Earnings per Share (ASC 260-10).The computation of basic earnings per share (EPS) is computed by dividing loss available to common stockholders by the weighted average number of outstanding common shares during the period.  Diluted loss per share gives effect to all dilutive potential common shares outstanding during the period.  The computation of diluted EPS does not assume conversion, exercise or contingent exercise of securities that would have an anti-dilutive effect on earnings.






F-15


 

Vista International Technologies, Inc

Notes to Consolidated Financial Statements

For the years ended December 31, 2012 and 2011


Derivative Liability

 

The Company accounts for its embedded conversion features in its convertible debentures in accordance with ASC 815-10, "Derivatives and Hedging", which requires a periodic valuation of their fair value and a corresponding recognition of liabilities associated with such derivatives, and ASC 815-40, Contracts in Entitys Own Equity. The recognition of derivative liabilities related to the issuance of convertible debt is applied first to the proceeds of such issuance as a debt discount, at the date of issuance, and the excess of derivative liabilities over the proceeds is recognized as non-cash interest and included in interest expense in the accompanying consolidated financial statements. Any subsequent increase or decrease in the fair value of the derivative liabilities is recognized as Other expense or Other income, respectively.

Recent Accounting Pronouncements

 

There were various updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on the Companys financial position, results of operations or cash flows.


3. Property and Equipment

 

Following is a summary of property and equipment at December 31, 2012 and 2011:


 

2012

2011

Machinery and equipment (a)

$

764,735 

$

450,812 

Construction in Progress

280,151 

Buildings

95,578 

95,439 

Vehicles

18,985 

18,985 

Land

51,085 

51,085 

Furniture, fixtures and equipment

55,312 

64,921 

Land Improvements

232,269 

232,269 

 Totals

1,217,964 

1,193,662 

Less accumulated depreciation

(710,560)

(624,404)

Property and equipment, net

$

507,404 

$

569,258 


  

Depreciation expense was $96,155 and $42,702 and for the years ended December 31, 2012 and 2011, respectively.


(a)

Includes the machinery under capital leases of $24,051 and $13,382 at December 31, 2012 and 2011, respectively.


Construction in Progress


The Company has elected to use Construction in Progress accounting to handle the acquisition and installation of the equipment needed for our tire derived fuel (TDF) production line.  Construction in Progress accounting refers to the temporary classification of assets that are being built/assembled before being placed into service. Companies must track these expenses in a special construction in progress general ledger account until the asset is complete. Once completed, the asset is placed into service, and begins to be depreciated as any other fixed asset, according to the proper schedules. The company recorded $280,151 in its Construction in Progress account for 2011, with no similar value for 2012.  The TDF production assets were placed into service in January of 2012.

 



F-16


 

Vista International Technologies, Inc

Notes to Consolidated Financial Statements

For the years ended December 31, 2012 and 2011


 Gain on Sale


During 2011 the company sold a fully depreciated Link-Belt excavator which was no longer operational and realized a gain of $14,000.   During the year 2012, the Company sold old furniture and recorded as gain of $1,100.


Burglary


In early July 2011, a burglary occurred at the Hutchins, TX tire processing facility.   The perpetrators broke through a perimeter fence on the property and stole a significant amount of equipment, mainly consisting of shop tools, welding equipment, and a skid steer.  The facility and equipment were insured and thus the company received compensation for the stolen material.  The company recognized gain on the insurance settlement of $36,561, which is shown in the consolidated statement of operations.  There was no comparable event in 2012

 

4. Intangible Assets

 

The Company owns one U.S. patent and one European patent and has two pending U.S. patent applications and one pending European patent application which cover its Thermal Gasifier technology.  These patents and patent applications are for utility patents directed to devices and methods of uses. The US patent expires on August 21, 2018.  The European patent was granted January 5, 2011 expires in August 2019.

 

At December 31, 2012 and 2011 intangible assets are as follows:


 

2012

2011

Patents

$

63,720 

$

63,720 

Less accumulated amortization

(39,890)

(39,594)

Intangible assets, net

$

23,830 

$

27,766 



 Amortization expense for each of the years ended December 31, 2012 and 2011 was $3,936 and $5,162 respectively.


Estimated Future Amortization Expense as of December 31, 2012:

Years Ended December 31,

Amount

2013

 $           3,936

2014

              3,936

2015

              3,936

2016

              3,936

2017

              3,936

There after

              4,150

Total

 $         23,830





F-17


 

Vista International Technologies, Inc

Notes to Consolidated Financial Statements

For the years ended December 31, 2012 and 2011

 

5. Notes Payable, Capital Lease and Convertible Notes Payable:

 

At December 31, 2012 and 2011, the Company had the following promissory notes outstanding:


 

2012

2011

12% promissory notes payable to individual, interest due monthly, secured by the assets of the Company, due on April 22, 2011 **

$

50,000 

$

50,000 

15% promissory note payable to individual, due on demand, in default

17,000 

17,000 

7.5% promissory note with bank, co-signed with related party


75,000 

15% promissory note payable to individual, Due April 2013

30,000 


20.6% installment note, secured by equipment, due December 2012, signed personally by related party, is in default

1,062 

13,382 

12% Line of credit payable, secured by assets of the Company, due on demand after June 30, 2012

77,241 

12% Line of credit payable, secured by assets of the Company, due on demand after June 30, 2012

5,000 

21% installment note, secured by equipment, due November 2013, signed personally by related party

19,407 

14% installment note, secured by equipment, due June 2014, signed personally by related party

17,321 

8.95% installment note, secured by equipment, due October 2013, signed personally by related party

5,667 

8% convertible note, unsecured, due on September 7, 2012

42,500 

Total notes payable, capital lease and convertible note payable

222,698 

197,882 

Less: Unamortized debt discount on convertible note

(38,791)

Total notes payable and capital lease net of debt discount

222,698 

159,091 

Less: current maturities, net of unamortized debt discount

(216,475)

(155,193)

Notes payable and capital lease Long-term

$

6,223 

$

3,898 


Maturities of notes payable and capital lease at December 31, 2012 are as follows:


Year ending December 31,

 

2013

 $     216,475

2014

            6,223

 

 $     222,698

 

** The 12% promissory notes were originally due April 22, 2011 but on May 19, 2011 the repayment of principal was postponed until 5 days after the sale of the Hutchins facility.  Interest continues to accrue. 


Issuance of Convertible Debt


On December 7, 2011, the Company entered into a loan agreement with an investor pursuant to which the Company sold and issued a convertible promissory note in the principal amount of $42,500.  The Note is convertible into shares of common stock at a conversion price equal to 58% of the current market price of the stock, as measures by the average of the 3 lowest closes of the past 10 trading days. The Note accrued interest at a rate of 8% per annum and matured on September 7, 2012. 

The investor converted $12,000 worth of principal in June 2012 into 144,578 shares.  The remainder of the note principal plus interest, amounting to approximately $32,850, was paid off by a related party in September 2012.





F-18


 

Vista International Technologies, Inc

Notes to Consolidated Financial Statements

For the years ended December 31, 2012 and 2011

Embedded Derivatives

The Company identified embedded derivatives related to the Convertible Note entered into on December 7, 2011.  These embedded derivatives included certain conversion features.  The accounting treatment of derivative financial instruments requires that the Company record the fair value of the derivatives as of the inception date of the Convertible Promissory Note and to adjust the fair value as of each subsequent balance sheet date.  At the inception of the Convertible Note, the Company determined a fair value of $139,224 of the embedded derivative. The fair value of the embedded derivative was determined using the Black-Scholes Model based on the following assumptions:  

 (1) Dividend yield of

0%;

(2) Expected volatility of

377%; and

 (3) risk-free interest rate of

10%;

 The initial fair value of the embedded debt derivative of $139,224 was allocated as a debt discount up to the proceeds of the note with the remainder $96,724 charged to current period operations as interest expenses.

Current Value of Derivative

The Company amortized $38,791 and $3,709 of the debt discount as interest expenses for the year ended December 31, 2012 and 2011, respectively.


At September 8, 2012, note is matured and Company adjusted the recorded fair value of the derivative liability to, market resulting in non-cash, non-operating gain of $74,192 for the year ended December 31, 2012. During the year ended December 31 2011, the Company recorded $65,032 as change in derivative liability.

6. Related Party Transactions

 

At December 31, 2012 and 2011, notes payable - stockholder and notes payable related party consisted of the following:


 

2012

2011

9% promissory notes payable Richard Strain stockholder, due on demand, secured by a first priority security interest in Company assets default waived through June 30, 2011

$

500,000

$

500,000

9% line of credit - Richard Strain stockholder, matures December 31, 2011,  principal payments of $8,000 per month, no prepayment penalty, secured by a first priority security interest in the Companys assets default waived through June 30, 2011 in default

146,931

146,931

9% note payable-Richard Strain- stockholder, due on demand, secured by a first priority interest in Company assets.  Due on December 31, 2011 in default

450,000

450,000

              Notes payable- stockholder

$

1,096,931

$

1,096,931

 



8% promissory notes payable - Timothy Ruddy, due on demand, secured by all of the Companys assets, security interest is subordinated to the loans extended by Mr. Strain

727,893

613,901

10% promissory notes payable to Timothy Ruddy Family member, cash interest of 10%

5,000

-

12% promissory notes payable to Timothy Ruddy family members, cash interest of 10% and Company stock of 2%, secured by all of the Companys assets, security interest is subordinated to the loans extended by Mr. Strain, interest due quarterly-default waived

45,000

45,000

              Notes payable-related parties

$

777,893

$

658,901


 

 







F-19


 

Vista International Technologies, Inc.

Notes to Consolidated Financial Statements

For the years ended December 31, 2012 and 2011

 

Notes payable stockholder

 

The line of credit provides for certain equity redemption rights to Mr. Strain, on terms and conditions to be agreed upon.  No equity redemption rights have been provided as of December 31, 2012.  The maximum amount to be drawn under the line is $375,000.  Subsequent to initial draws of approximately $100,000 in 2009, Mr. Strain has provided an additional $50,000 under this line in 2011.  Notes are currently in default.

  

On April 15, 2010, the Company issued 276,549 shares of its restricted common stock in exchange for accrued interest on the notes and line of credit of $138,274 (See Note 8).  


During 2011 Mr. Strain also provided $450,000 in the form of a promissory note for equipment purchases and working capital to allow the company to install a tire derived fuel production line. This note was due November 14, 2011 and is currently in default


As of December 31, 2012 and 2011, accrued interest outstanding on the notes and line of credit was approximately $200,000 and $102,000, respectively.

 

Interest expense on the stockholder notes and line of credit for the years ended December 31, 2012 and 2011 was approximately $98,300 and $64,300, respectively.

 

Notes payable related parties

 

On August 3, 2009, the Company entered into a loan agreement with Mr. Timothy D. Ruddy, a Director of the Company.

 

The agreement formalized the terms related to working capital funding provided by Mr. Ruddy beginning in the fourth quarter of 2008.  Mr. Ruddy has the option, at his discretion, to receive payment as follows:

 

(a)

repayment of principal and interest;

 

(b)

conversion of outstanding amount without accrual of interest into the Companys common stock based on the quoted market price of the stock at the dates loans were made; or

 

(c)

any combination of cash and stock as described in (a) and (b).

 

The 8.56% installment loan was executed by Mr. Ruddy on behalf of the Company.  At December 31, 2010, the net book value of the equipment financed under the installment note was approximately $18,700 and the remaining lease obligation was approximately $16,700.  The equipment was stolen in a burglary at the Hutchins facility in July 2011, and insurance proceeds were used to pay off the remaining balance of the loan.

 

As of December 31, 2012 and 2011, accrued interest outstanding on the loans was approximately $127,600 and $73,300, respectively.

 

Interest expense on the loans for the years ended December 31, 2012 and 2011 was approximately $54,300 and $41,900, respectively.

 

Subsequent to December 31, 2012 and through April 9, 2013, Mr. Ruddy has not loaned the Company additional funds under this agreement.

 

In December 2009, Mr. Ruddy provided $150,000 of personal assets as collateral for a letter of credit utilized for part of the Companys required financial assurance to the Texas Commission of Environmental Quality (TCEQ).  This letter was called by the TCEQ in December 2011.  Subsequently, Mr. Ruddy provided $75,000 in additional funding to partially cover the amount due by the bank which held the letter of credit, and the Company and Mr. Ruddy jointly executed an unsecured loan for the remaining $75,000 (See Note 9). This unsecured loan was paid off by Mr. Ruddy in May of 2012.

 




F-20


 

 

Vista International Technologies, Inc.

Notes to Consolidated Financial Statements

For the years ended December 31, 2012 and 2011

 

Notes payable related party family

 

As of December 31, 2012, no interest payments had been made on these notes.  


As of December 31, 2012 accrued interest, including accrued shares of the Company and late payment penalties was approximately $14,400.

 

Settlement Payments


The Company was named in a suit in the Colorado District Court for the 18th District (Arapahoe County) by a former employee alleging that the Company did not meet its obligation to issue shares to the employee.  On July 12, 2011 the Court granted a motion to enforce a settlement dated September 16, 2010. In accordance with the terms of the court order, the Company is obligated to make payments totaling approximately $104,700, including annual 6% interest.   An initial payment of $15,455 was made on July 22, 2011 and monthly payments of $3,000, including interest are due through November 2013.  A final payment of approximately $5,200 will be due in December 2013. The Company has accrued this settlement. Through December 31, 2012, $41,945 has been paid toward the settlement, with no  additional amount  having been paid in this year, as of April 9, 2013


7. Income Taxes

 

A reconciliation between the actual income tax expense and income taxes computed by applying the statutory Federal and state income tax rates to income from continuing operations before income taxes is as follows:


 

December

December

 

31, 2012 

31, 2011 

Computed expected income tax (benefit) at approximately 37%

$

(129,948)

$

(415,168)

Permanent differences

6,824 

4,826 

Adjustments to net operating loss carryforwards

136,379 

69,279 

Other adjustments



Change in valuation allowances of deferred income taxes

(13,255)

341,063 

Penalties and interest on federal and state income tax returns

27,583 

12,329 

Income tax expense

$

27,583 

$

12,329 


 During the year ended December 31, 2012, the Company recorded approximately $27,583 of penalties and interest on prior year unpaid federal and state income tax returns


During the year ended December 31, 2011, the Company recorded approximately $12,329 of penalties and interest on prior year unpaid federal and state income tax returns


Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of our deferred tax assets and liabilities as of December 31, 2012 and 2011 are as follows:


 

December

December

 

31, 2012

31, 2011

Deferred tax assets:

 

 

Net operating loss

$

8,131,235 

$

8,153,391 

Property and equipment

46,507 

27,183 

Expense accruals and other

190,387 

149,331 

Accrued Payroll

186,303 

215,029 

Total gross deferred tax assets

8,554,432 

8,544,934 

Less: Valuation allowance

(8,554,432)

(8,544,934)

Net deferred tax assets

$

$




F-21


 

Vista International Technologies, Inc.

Notes to Consolidated Financial Statements

For the years ended December 31, 2012 and 2011


In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized.  Included in deferred tax assets is a federal net operating loss carryforward available to offset future taxable income of approximately $22,236,000 which expires between 2020 and 2030.  Approximately $12,950,000 of these losses is limited under the change in control provisions of Internal Revenue Code Section 382.  The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.  Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment.  Based upon our cumulative losses through December 31, 2011, we have provided a valuation allowance reducing the net realizable benefits of these deductible differences to $-0- at December 31, 2012.  The amount of the deferred tax asset considered realizable could change in the near term if projected future taxable income is realized.

   

8. Stockholders Equity

 

Preferred Stock

 

The Company has 10,000,000 shares of preferred stock, $0.001 par value, authorized for issuance. Our board of directors is vested with the authority to provide for the issuance of and terms of the preferred shares. No preferred shares have been issued and no terms have been provided at December 31, 2012.

 

Common Stock

 

The Company has 200,000,000 shares of common stock, $0.001 par value, authorized for issuance. As of December 31, 2012 and 2011, there were 12,872,428 and 12,047,946 shares of common stock issued and outstanding.



Private Offerings

  

During the year ended December 31, 2011, the Company received $50,000 cash in a private placement for 250,000 shares of common stock.


Issuance of Common Stock for notes conversion


During the year ended December 31, 2012 the Company converted $12,000 of the Asher Note (see Note 5) into 144,578 shares of common stock


 Issuance of Common Stock for Services



 During the year ended December 31, 2011, the Company issued 307,991 shares of restricted common stock valued at $123,785 based on the market price of the Companys common stock for legal expenses incurred during the year ended December 31, 2011.


During the year ended December 31, 2012, the Company issued 680,000 shares of restricted common stock valued at $27,200 based on the market price of the Companys common stock for services provided by the consultants for the year ended December 31, 2012.


Reverse Stock Split


On September 27, 2012 the Companys Board of Directors approved 1:10 reverse stock split of the Companys common shares. The split was declared effective November 21, 2012. All references in the accompanying consolidated financial statements and notes thereto have been retroactively adjusted to reflect the stock split.






F-22


 

Vista International Technologies, Inc.

Notes to Consolidated Financial Statements

For the years ended December 31, 2012 and 2011


9. Commitments and Contingencies

 

Litigation and Claims

 

Settlement Payments


The Company was named in a suit in the Colorado District Court for the 18th District (Arapahoe County) by a former employee alleging that the Company did not meet its obligation to issue shares to the employee.  On July 12, 2011 the Court granted a motion to enforce a settlement dated September 16, 2010. In accordance with the terms of the court order, the Company is obligated to make payments totaling approximately $104,700, including annual 6% interest.   An initial payment of $15,455 was made on July 22, 2011 and monthly payments of $3,000, including interest are due through December 2013.  A final payment of approximately $5,200 will be due in December 2013. As of December 31, 2012, the Company has accrued of this settlement of approximately $59,000 under accounts payable and accrued liabilities on its balance sheet. Through December 31, 2012, $26,500 has been paid toward the settlement, with no additional payments having been paid in the subsequent period, as of date.


Encumbrances on Company Assets

 

The following encumbrances exist on the Companys assets as of December 31, 2012:

  

Mechanics lien filed by a contractor for approximately $86,000 for services provided October, 2007 through April, 2008.  Lien expired in August 2011 under statute of limitations for such liens in Texas. The liability for this judgment is still included in accounts payable and accrued liabilities in the consolidated balance sheets

 

Environmental Liability

 

The Company tire operations in Texas are subject to regulation by the Texas Commission of Environmental Quality (TCEQ).  At December 31, 2011, the Company has approximately 12,800 tons of whole tires, partially shredded tires, tire chips and process waste stored onsite at the tire processing and storage facility. Through July, 2010, we had been able to dispose of this material at a municipal landfill site that used the material as filter and bedding material. However, the landfill has recently transitioned to a project based system where they will request tires as needed, rather than storing tires in anticipation of future needs. As a result, tire inventory had increased until the beginning of operation of the Companys TDF line in early 2012.


The Companys registration with the TCEQ requires the Company to provide financial assurance in the form of cash, surety bond, or letters of credit (approximately $170,000 at December 31, 2012 and 2011) for remediation in the event the Company liquidates and the facility closes.  These letters of credit expired on November 27, 2011 and December 10, 2011, respectively.   A certificate of deposit in the Companys name for $20,000 and personal assets of approximately $150,000 owned by Mr. Timothy Ruddy, a Director of the Company (See Note 6), respectively were held as collateral for these letters of credit. Just prior to the expiration of the letters of credit, the TCEQ called the letters of credit, requiring the cash to be held by the TCEQ until new financial assurance could be put in place.  


The Company has no other asset retirement obligations. 


We have accrued approximately $332,600 and $403,500 at December 31, 2012 and 2011, respectively for the cost of disposing of this material under account payable and accrued liabilities.





F-23


 

 

Vista International Technologies, Inc.

Notes to Consolidated Financial Statements

For the years ended December 31, 2012 and 2011

 

10. Lease Commitments

 

On March 1, 2012 the company moved its corporate offices to 5151 E 56th Ave, Suite 101, Commerce City, CO 80022. The lease had a term of 12 months, which began on March 1, 2012 and expires on February 28, 2013.  The Company will pay rent and related costs of $350 per month.  The lease is renewable for 6 month intervals, upon agreement of both parties.

 

Rent expense for operating leases, including month-to-month rentals, was approximately $7,522 and $24,100 for the years ended December 31, 2012 and 2011 respectively.

 

11. Fair Value of Financial Instruments


ASC 825-10 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance. ASC 825-10 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 825-10 establishes three levels of inputs that may be used to measure fair value:


Level 1 - Quoted prices in active markets for identical assets or liabilities.


Level 2 - Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.


Level 3 - Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.


To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed is determined based on the lowest level input that is significant to the fair value measurement.


Items recorded or measured at fair value on a recurring basis in the accompanying consolidated financial statements consisted of the following items as of December 31, 2012:


Assets

Level I

Level II

Level III

Total

Environmental deposit

 $            -   

 $     170,000

 $            -   

 $     170,000

Total Assets

 $            -   

 $     170,000

 $            -   

 $     170,000

Liabilities





Derivative liabilities

 $            -   

 $               -   

 $            -   

 $               -   

Total Liabilities

 $            -   

 $               -   

 $            -   

 $               -   








F-24


 

Vista International Technologies, Inc.

Notes to Consolidated Financial Statements

For the years ended December 31, 2012 and 2011


The following table provides a summary of changes in fair value of the accompanying consolidated financial statements December 31, 2012:


 

Debt Derivative Liability

Balance, January 1, 2011

$

Initial fair value of debt derivatives at note issuances

139,224 

Mark-to-market at December 31, 2011:


- Embedded debt derivatives

(65,032)

Balance, December 31, 2011

$

74,192 

 


Net gain for the year included in earnings relating to the liabilities held at December 31, 2011

$

65,032 

 


 


Balance January 1, 2012

$

74,192 

 


Mark-to-market at December 31, 2012:


- Embedded debt derivatives expired with Note in September, 2012                                         

(74,192)

Balance December 31, 2012

   $               -

 


 


Net gain for the year included in earnings relating to the liabilities held at December 31, 2012

$

74,192 


12. Subsequent Events


On January 11, 2013, the Company issued 1,250,000 shares of common stock against a debt of $57,500. The debt represents the principal and interest due on the 12% promissory note issued by the Company to an individual on October 22, 2010, and originally due April 22, 2011(See Note 5).

On March 29, 2013, the Board of the Directors of the Company approved an agreement with Richard Strain, the Company largest shareholder,  to convert $222,940 of accrued interest on his various loans and line of credit to 2,229,407 shares of common stock.  The conversion rate was the closing trading price of the Companys stock on the date of the agreement. This agreement also contained an additional $15,000 loan from Mr. Strain to the Company, and consolidated all of Mr. Strains loans and lines of credit into a single consolidated note and mortgage.

On March 29, 2013, the Board of the Directors of the Company approved an agreement with Timothy D Ruddy, Interim CEO and Director, to convert $137,148 of accrued interest on the loan agreement between Mr. Ruddy and the company, dated August 3, 2009, into 3,054,541 shares of common stock. The conversion rate was the average closing trading price for the ten days prior to the date of the agreement.






F-25


 

 Signatures  

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.


 VISTA INTERNATIONAL TECHNOLOGIES, INC.


Signature

 

Capacity

 

Date

 

 

 

 

 

 

 

 

 

 

/s/ Thomas P. Pfisterer

Thomas P. Pfisterer

 

Director

 Chief Financial Officer

 

April 15, 2013

 

 

 

 

 

/s/ Timothy D. Ruddy

Timothy D. Ruddy

 

Director

Interim Chief Executive Officer

 

April 15, 2013

 

 

 

 

 

 

 

 

 

 

 





33