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EX-31.1 - CERTIFICATION - NEXT FUEL, INC.f10q1213ex31i_nextfuel.htm
EX-31.2 - CERTIFICATION - NEXT FUEL, INC.f10q1213ex31ii_nextfuel.htm
EX-32.1 - CERTIFICATION - NEXT FUEL, INC.f10q1213ex32i_nextfuel.htm
EX-32.2 - CERTIFICATION - NEXT FUEL, INC.f10q1213ex32ii_nextfuel.htm
EXCEL - IDEA: XBRL DOCUMENT - NEXT FUEL, INC.Financial_Report.xls


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________
 
FORM 10-Q
_______________
 
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended December 31, 2013
 
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from ______to______.
 
Commission File Number: 333-148493
 
NEXT FUEL, INC.
(Exact name of registrant as specified in it's charter)
 
NEVADA
 
35-2305768
(State or other jurisdiction of incorporation or organization)
 
(IRS Employee Identification No.)
 
122 North Main Street, Sheridan, WY 82801
(Address of Principal Executive Offices)
_______________
 
(307) 674-2145
(Registrant's Telephone number, including area code)
_______________

Indicate by check mark whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x No o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
 Yes x No o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company filer. See definition of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act (Check one):
 
Large Accelerated Filer  o
Accelerated Filer  o
Non-Accelerated Filer  o
Smaller Reporting Company x

Indicate by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the Exchange Act.
Yes o No x
 
Indicate the number of shares issued and outstanding of each of the issuer’s classes of common stock, as of February10, 2014: 11,172,500 shares of issued common stock.
 
 
 

 
 
NEXT FUEL, INC.

FORM 10-Q
December 31, 2013
 
INDEX
 
PART I-- FINANCIAL INFORMATION
 
Item 1.
Financial Statements
 1
 
Condensed Balance Sheets as of December 31, 2013
 1
 
Condensed Statements of Operations for the Three Months Ended December 31, 2013 and 2012
2
 
Condensed Statement of Changes in Stockholders' Equity for the Period from September 30, 2013 to December 31, 2013
3
 
Condensed Statements of Cash Flows for the Three Months Ended December 31, 2013 and 2012
4
 
Notes to Condensed Financial Statements
 5
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
 18
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
 22
Item 4.
Controls and Procedures
  22
   
PART II-- OTHER INFORMATION
 
Item 1
Legal Proceedings
  23
Item 1A
Risk Factors
  23
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
  24
Item 3.
Defaults Upon Senior Securities
  24
Item 4.
Mine Safety Disclosures
  24
Item 5.
Other Information
  24
Item 6.
Exhibits
  24
     
SIGNATURE
  25
   
Exhibit List
  26
Certifications
 

 
 

 

 
Next Fuel, Inc.
 
Condensed Balance Sheets
 
             
             
ASSETS
 
             
   
December 31,
2013
   
September 30,
2013
 
   
(Unaudited)
      *  
Current Assets
             
  Cash
  $ 443,352     $ 1,021,942  
  Prepaid Expenses
    9,679       15,293  
  Security Deposit
    75,116       -  
    Total Current Assets
    528,147       1,037,235  
                 
Equipment, net
    17,977       19,402  
Deposits
    100,000       -  
Intangibles (Note 2(B))
    -       -  
Security Deposit
    -       75,069  
                 
Total Assets
  $ 646,124     $ 1,131,706  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
                 
Current Liabilities
               
  Accounts payable and accrued expenses
  $ 66,287     $ 50,819  
  Accounts payable - related party
    13,000       17,588  
Total  Liabilities
    79,287       68,407  
                 
Commitments and Contingencies (Note  5)
               
                 
Stockholders' Equity
               
  Preferred stock, $0.0001 par value; 100,000,000 shares authorized,
               
    none issued  and outstanding
    -       -  
  Common stock, $0.0001 par value; 100,000,000 shares authorized, 11,172,500 and 11,172,500
         
    issued and outstanding, respectively
    1,117       1,117  
  Additional paid-in capital
    25,847,946       25,761,421  
  Accumulated deficit
    (25,282,226 )     (24,699,239 )
Total Stockholders' Equity
    566,837       1,063,299  
                 
Total Liabilities and Stockholders' Equity
  $ 646,124     $ 1,131,706  
                 
*    Derived from audited financial statements.
               

See accompanying notes to unaudited condensed financial statements
 
-1-

 
 
Next Fuel, Inc.
 
Condensed Statements of Operations
 
(Unaudited)
 
             
             
   
For the Three Months Ended
December 31,
 
   
2013
   
2012
 
             
Contract Income
  $ -     $ 20,000  
License Fee Income
    -       25,000  
Total Revenues
    -       45,000  
                 
Cost of Goods Sold
    -       (77,932 )
                 
Gross Profit (Loss)
    -       (32,932 )
                 
Operating Expenses
               
Professional fees
  $ 193,152     $ 190,280  
Research and development costs
    766       5,444  
Salary Expense
    251,328       218,623  
General and administrative
    137,971       305,283  
Total Operating Expenses
    583,217       719,630  
                 
Loss from Operations
    (583,217 )     (752,562 )
                 
Other Expenses
               
Interest Income
    230       1,190  
Total Other Income/(Expense)
    230       1,190  
                 
                 
LOSS BEFORE INCOME TAXES
    (582,987 )     (751,372 )
                 
Provision for Income Taxes
    -       -  
                 
NET LOSS
  $ (582,987 )   $ (751,372 )
                 
Net Loss Per Share  - Basic and Diluted
  $ (0.05 )   $ (0.07 )
                 
Weighted average number of shares outstanding during the year - Basic and Diluted
    11,172,500       10,974,478  
 
See accompanying notes to unaudited condensed financial statements
 
-2-

 
 
Next Fuel, Inc.
 
Condensed Statement of Changes in Stockholders' Equity
 
For the period from September 30, 2013 to December 31, 2013
 
(Unaudited)
 
                               
                               
                               
                               
   
Common Stock
   
Additional
         
Total
 
               
paid-in
   
Accumulated
   
Stockholder's
 
   
Shares
   
Amount
   
capital
   
Deficit
   
Equity
 
                               
Balance, September 30, 2013
    11,172,500       1,117       25,761,421       (24,699,239 )     1,063,299  
                                         
      Share based compensation expense
                    86,525               86,525  
                                         
Net loss for the three months ended December 31, 2013
    -       -       -       (582,987 )     (582,987 )
                                         
Balance, December 31, 2013
    11,172,500     $ 1,117     $ 25,847,946     $ (25,282,226 )   $ 566,837  
 
See accompanying notes to unaudited condensed financial statements
 
-3-

 
 
Next Fuel, Inc.
 
Condensed Statements of Cash Flows
 
(Unaudited)
 
             
             
   
For the Three Months Ended
December 31,
 
   
2013
   
2012
 
Cash Flows Used In Operating Activities:
           
Net Loss
  $ (582,987 )   $ (751,372 )
  Adjustments to reconcile net loss to net cash used in operations
               
    Common stock issued for services
    -       44,850  
    Compensation expense on stock options
    86,525       57,183  
    Depreciation and amortization expense
    1,425       1,571  
    Changes in operating assets and liabilities:
               
     Decrease (increase) in accounts receivable
    -       40,000  
     Decrease (increase) in prepaid expenses
    5,614       (17,634 )
     Increase in inventory
    -       (43,388 )
     Increase (decrease) in accounts payable and accrued expenses
    15,468       140,581  
     (Decrease) increase in accounts payable - related parties
    (4,588 )     (4,070 )
     (Decrease) increase in deferred revenue
    -       (25,000 )
Net Cash Used In Operating Activities
    (478,543 )     (557,279 )
                 
Cash Flows Used in Investing Activities:
               
Purchase of Fixed Assets
    -       (536 )
Deposit on equipment
    (100,000 )     -  
Security deposit
    (47 )     (75,000 )
Net Cash Used In Investing Activities
    (100,047 )     (75,536 )
                 
Cash Flows From Financing Activities:
    -       -  
                 
Net Decrease in Cash
    (578,590 )     (632,815 )
                 
Cash at Beginning of Year/Period
    1,021,942       3,107,406  
                 
Cash at End of Year/Period
  $ 443,352     $ 2,474,591  
                 
Supplemental disclosure of cash flow information:
               
                 
None
               
                 
Supplemental disclosure of non-cash investing and financing activities:
               
                 
None
               
 
See accompanying notes to unaudited condensed financial statements
 
-4-

 
NEXT FUEL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2013
(UNAUDITED)

NOTE 1     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION
 
(A) Basis of Presentation

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

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

Next Fuel, Inc. (the "Company") was incorporated under the laws of the State of Nevada on August 14, 2007.  Next Fuel, Inc. is a service-based firm that has developed and will continue to develop and commercialize innovative technologies associated with renewable energy, such as unconventional natural gas production from lower grade coal, lignite, oil shale and other carbonaceous deposits.  We refer to this generally as CTG Technology.
 
We are also investigating opportunities to develop or acquire other advanced technologies with focus on clean renewable energy, such as novel systems for energy-related water treatment, and processes for carbon dioxide conversion and carbon loop closure, and biological fuel cells.  Collaborations with leading research institutes, such as University of Colorado, University of Wyoming, and Peking University will allow the Company to focus on identifying and acquiring or developing a portfolio of growth opportunities with compelling market values and clean energy and environmental stewardship.
 
We are a technology provider and service company that assist owners of natural gas production resources to increase the efficiency of their operations by providing CTG technology and technical support services utilizing our CTG technology.  We do not plan to own or develop natural gas production projects.
 
 
-5-

 
NEXT FUEL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2013
(UNAUDITED)
 
 
(B) Liquidity and Going Concern

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business.  The Company has incurred recurring net losses from operations and recognized minimal revenues since inception.  The Company has a net loss of $580,932, and net cash used in operations of $478,543 for the three months ended December 31, 2013.  Additionally, as of December 31, 2013, the Company had $443,352 in cash and cash equivalents and $74,657 in liabilities.  These conditions raise substantial doubt as to the Company’s ability to continue as a going concern.  Due to the nature of current operations, and new license agreements and business activities (as described throughout the annual report and financial statements), the Company will require substantial funding to implement its new business operations, and it will need more financing than was previously required.  These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might be different should the Company be unable to continue as a going concern.  The Company’s ability to continue as a going concern is dependent on the ability to obtain additional operating capital through equity or debt financing, and attain profitability.  There can be no assurances that the Company will be able to obtain financing or achieve profitability.

(C) Use of Estimates

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

(D) Cash and Cash Equivalents

The Company considers all highly liquid temporary cash investments with an original maturity of three months or less to be cash equivalents.  At December 31, 2013 and September 30, 2013, respectively, the Company had no cash equivalents.
 
(E) Loss Per Share

Basic earnings (loss) per share is calculated by dividing the income (loss) available to common stockholders by the weighted average number of common shares outstanding for the period.
 
 
-6-

 
NEXT FUEL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2013
(UNAUDITED)
 
Diluted earnings (loss) per share reflects the potential dilutive effects of stock options, warrants, and stock equivalents.  To the extent stock options, stock equivalents and warrants are anti-dilutive; they are excluded from the calculation of diluted loss per share.  For the three months ended December 31, 2013 and 2012 respectively, 0 and 575,000, shares issuable upon the exercise of warrants were not included in the computation of loss per share because their inclusion is anti-dilutive.  For the three months ended December 31, 2013 and 2012 respectively, 2,540,000 and 3,220,000 shares issuable upon the exercise of stock options were not included in the computation of loss per share because their inclusion is anti-dilutive. 

(F) Equipment

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

(G) Intangible Assets

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

(H) Inventory

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

(I) Stock-Based Compensation

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

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

 
-7-

 
NEXT FUEL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2013
(UNAUDITED)

(J) Income Taxes

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

The Company has no significant uncertain tax positions as of any date in the three months ended December 31, 2013 or the year ended September 30, 2013, respectively.  The Company’s policy is to recognize accrued interest related to uncertain tax positions in interest expense, and to recognize tax penalties in operating expense.  The Company made no provision for interest or penalties related to uncertain tax positions as of December 31, 2013.  The Company files income tax returns in the U.S. federal jurisdiction.  There are currently no federal or state income tax examinations underway, including all open tax years (2010 – 2013) for these jurisdictions.
 
(K) Revenue Recognition
 
Revenue is recognized only when the price is fixed and determinable, persuasive evidence of an arrangement exists, the service is performed and collectability of the resulting receivable is reasonably assured.
 
The Company's revenue transactions include the following: additives, consulting services, royalties, and intellectual property licensing.  The Company recognizes revenue when it is realized or realizable and earned.  The timing and the amount of revenue recognized from the licensing of intellectual property depend upon a variety of factors, including the specific terms of each agreement and the nature of the deliverables and obligations.  For the sale of multiple-element arrangements, including whereby additives, consulting or intellectual property is combined in a revenue generating transaction with other elements, the Company allocates to, and recognizes revenue from, the various elements based on their relative selling price. The Company allocates to, and recognizes revenue from, the various elements of multiple-element arrangements based on relative selling price of a deliverable, using: vendor-specific objective evidence, third-party evidence, and best estimated selling price in accordance with the selling price hierarchy.
 
 
-8-

 
NEXT FUEL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2013
(UNAUDITED)
 
(L) Fair Value of Financial Instruments

The carrying amounts reported in the balance sheet for prepaid expenses and accounts payable approximate fair value based on the short-term maturity of these instruments as of December 31, 2013 and September 30, 2013.

(M) Concentration of Credit Risk

Although all of the Company’s assets are in the United States of America, substantially all of the revenue for the year ended September 30, 2013 was from one related party licensee in the People’s Republic of China and two unrelated parties in Indonesia and India.

(N) Reclassifications

Certain prior year balances have been reclassified to conform to the current year’s presentation.  Such reclassification had no effect on net loss.

(O) Recent Accounting Pronouncements

There are no recent accounting pronouncements that affect the Company.
 
NOTE 2     EQUIPMENT, INTANGIBLES AND OTHER ASSETS

(A)   Equipment

At December 31, 2013 and September 30, 2013, equipment is as follows:
 
    December 31, 2013     September 30, 2013  
             
Computer Equipment   $ 15,755     $ 15,755  
Furniture & Equipment        15,153       15,153  
Website Costs      1,500       1,500  
 Less accumulated depreciation and amortization          (14,431 )        (13,006 )
    $ 17,977     $ 19,402  
 
Depreciation and amortization expense for the three months ended December 31, 2013 and 2012 was $1,425 and $1,571 respectively.
 
 
-9-

 
NEXT FUEL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2013
(UNAUDITED)
 
(B)  Intangibles

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

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

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

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

 
-10-

 
NEXT FUEL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2013
(UNAUDITED)
 
Coal-to-Gas (CTG) Technology
Next Fuel, Inc. is a technology provider and service company that assists owners of natural gas and oil production resources to increase the efficiency of their operations.  The Company continues the process of commercializing its Coal-to-Gas (CTG) technology with strategic international partners in China, India and Indonesia as it expands the range of technologies and services it offers both in the U.S. and in international markets.

Low Energy-input Pervaporation (LPV) Technology
The Company expects to launch its LPV water treatment technology after completing tests later this calendar year.  This LPV technology will provide the oil and gas industry with a new cost-effective method for treating waste water that contains the most challenging, high-salt and total dissolved solids used or produced in U.S. oil & gas operations to help the industry deal with environmental restrictions on operations.

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

On November 6, 2012, the Company purchased a two-year Certificate of Deposit in the amount of $75,000 to be held as security for the issuance of Company credit cards.  The Certificate of Deposit bears a current interest rate of .35% and a maturity date of November 6, 2014.  Interest earned and accumulated for the three months ended December 31, 2013 was $47.  As of December 31, 2013, the balance owed on the Company credit cards secured by the Certificate of Deposit was $3,104.
 
(D)  Deposits

On October 30, 2013, the Company made an initial deposit of $100,000 in connection with a non-binding letter of intent for the purchase of Integra Water Filtration Units and Technology.  The deposit is non-refundable.  As of December 31, 2013, no firm purchase agreement has been reached.

 
-11-

 
NEXT FUEL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2013
(UNAUDITED)
 
NOTE 3      STOCKHOLDERS’ EQUITY
 
(A)  Common Stock Issued for Cash

On March 31, 2013, the Company issued 185,000 shares of common stock for $55,500 ($.30/share) for exercise of stock warrants.

(B) Stock Issued for Services and Intellectual Property

On December 19, 2012, the Company agreed to issue 15,000 restricted shares of the Company’s common stock, having a fair value of $44,850 ($2.99/share) on the grant date.
 
(D)  Stock Warrants Issued for Intellectual Property

On March 28, 2011, the Company granted 1,000,000 two year warrants having an exercise price of $0.20 per share within the first year and $.30 per share within the second year. The warrants vest immediately.  The Company valued these warrants at their fair value using the Black-Scholes option pricing method.  The assumptions used were as follows:
 
         Expected life:
           1 year
         Expected volatility:
           29.1%
         Risk free interest rate:
           0.25%
         Expected dividends: 
           0%

There were 575,000 warrants as of September 30, 2012.  185,000 warrants were exercised and 390,000 warrants expired during the year ended September 30, 2013.  There were no warrants as of September 30, 2013 or December 31, 2013.
 
 
-12-

 
NEXT FUEL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2013
(UNAUDITED)
 
NOTE 4     STOCK OPTIONS

On January 23, 2013, the Company granted options to employees to purchase 475,000 shares of common stock at an exercise price of $1.71 per share.  237,500 shares were vested immediately, 118,750 shares will be vested after one year of employment, and 118,750 shares will be vested after two years of employment.

On January 23, 2013, the Company granted options to non-employees to purchase 45,000 shares of common stock at an exercise price of $1.71 per share.  22,500 shares were vested immediately, 11,250 shares will be vested after one year of service, and 11,250 shares will be vested after two years of service.
 
The Company has valued the above options at their fair value using the Black-Scholes option pricing method.  In addition to the exercise and grant date prices of the options, certain assumptions that were used to estimate the fair value of the stock option grants are listed in the following tables (no options have been granted during fiscal year 2014):
 
   
Fiscal 2013
Employee
Stock Options
 
Fiscal 2013
Non-Employee
Stock Options
Expected term (years)
 
3
 
8.8
Expected volatility
 
89.43%
 
89.43%
Risk-free interest rate
 
.37%
 
1.55%
Expected dividends
 
0
 
0
 
During the three months ended December 31, 2013 and 2012, the Company recognized compensation expense related to stock options of $86,525 and $57,183, respectively.  
 
For the three months ended December 31, 2013 and 2012, the Company recorded stock-based compensation expense of $22,319 and $7,331, respectively, related to vested employee stock options, $48,404 and $37,632, respectively, related to unvested employee stock options, $1,897 and $432, respectively, related to vested non-employee stock options, and $13,905 and $11,788, respectively, related to unvested non-employee stock options.
 
Stock options and warrants issued to consultants and other non-employees as compensation for services provided to the Company are accounted for based on the fair value of the services provided or the estimated fair market value of the option or warrant, whichever is more reliably measurable.  The related expense is recognized when the performance commitment is reached.
 
 
-13-

 
NEXT FUEL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2013
(UNAUDITED)
 
A summary of the Company’s stock option plans as of December 31, 2013, and changes during the three months then ended is presented below:
 
   
Three Months Ended December 31, 2013
 
   
Number of
   
Weighted Average
 
   
Options
   
Exercise Price
 
Options outstanding at September 30, 2013
    2,540,000     $ 3.64  
Options granted
    -       -  
Options expired
    -       -  
Options cancelled
    -       -  
Options outstanding at December 31, 2013
    2,540,000     $ 3.64  
Options exercisable at December 31, 2013
    623,330     $ 3.22  
 
Changes in the Company’s unvested options for the three months ended December 31, 2013 are summarized as follows:
 
             
   
Number of
   
Weighted Average
   
Weighted Average Grant Date
 
   
Options
   
Exercise Price
   
Fair Value
 
Non-vested options at September 30, 2013
    2,040,004     $ 3.82     $ .39  
Options granted
    -       -       -  
Options vested
    (123,334 )     4.34       1.78  
Options cancelled
    -       -       -  
Non-vested options at December 31, 2013
    1,916,670     $ 3.78     $ .30  

     
Options Outstanding
   
Options Exercisable
 
           
Remaining
                   
           
Average
   
Weighted
         
Weighted
 
Range of
         
Contractual
   
Average
         
Average
 
Exercise
   
Number
   
Life
   
Exercise
   
Number
   
Exercise
 
Price
   
Outstanding
   
(In Years)
   
Price
   
Exercisable
   
Price
 
$ 4.68       75,000       2.88     $ 4.68       50,000     $ 4.68  
  4.25       385,000       7.88       4.25       289,998       4.25  
  4.20       10,000       7.88       4.20       6,666       4.20  
  4.09       1,550,000       8.12       4.09       16,666       4.09  
  1.71       520,000       7.88       1.71       260,000       1.71  
Totals
      2,540,000       7.88     $ 3.64       623,330     $ 3.22  

 
-14-

 
NEXT FUEL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2013
(UNAUDITED)

NOTE 5      COMMITMENTS

On October 15, 2013, the Company entered into an agreement for environmental services in China.  The agreement called for a fixed monthly fee of $7,500 and terminated on December 31, 2013.

On October 7, 2013, the Company entered into an agreement for underwriting/brokerage services related to a proposed public offering.  An initial, non-refundable, advisory fee was paid upon the signing of the engagement letter.  The agreement calls for an underwriting fee of six percent (6%) of the amount raised in the public offering as well as warrants to purchase the aggregate number of shares as would be equal to three percent (3%) of the total number of shares sold pursuant to the public offering.  The agreement also calls for payment of a success-based non-accountable expense allowance in the amount of two percent (2%) of the gross proceeds of the offering and reimbursement for incurred expenses.

On October 1, 2013, the Company entered into an agreement for exclusive financial advisory services related to potential acquisitions.  The agreement calls for a placement success fee of eight percent (8%) of the gross proceeds of the placement as well as issuance of stock equal to three percent (3%) of the fully diluted shares outstanding, post-merger, including the shares from the capital raise.  The agreement expires on December 31, 2013, and will continue thereafter on a month to month basis unless cancelled by 30 days written notice.

On March 1, 2013, the Company entered into a 48 month operating lease agreement for office equipment beginning on April 1, 2013.  The agreement calls for a monthly rental fee of $234.  Lease expense related to this operating lease for the three months ended December 31, 2013 was $701.  Future minimum lease payments as of December 31, 2013 are as follows:
 
Fiscal year ending September 30      
2014
  $ 2,104  
2015
    2,805  
2016
    2,805  
2017
    1,403  
         
    $ 9,117  
 
On March 30, 2012, the Company entered into a one-year lease agreement with an unrelated party for lease of office space beginning on May 1, 2012.  The agreement calls for a monthly rental fee of $1,750.   This lease agreement has expired and the office space continues to be rented on a month to month basis.

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

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

 
-15-

 
NEXT FUEL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2013
(UNAUDITED)

NOTE 6      REVENUE AND LICENSE AGREEMENTS

The Company entered into a License Agreement effective March 31, 2012 (as amended by Amendment No. 1 effective April 1, 2012 and Amendment No. 2 effective May 12, 2013) with Future Fuel Limited, a British Virgin Islands limited liability company (“Licensee”), which is affiliated with Mr. Guangwei Guo, a member of our Board of Directors and a shareholder who has purchased a substantial number of shares of our Common Stock.

The Agreement grants the Licensee an exclusive right to use our Coal to Gas technology in the People’s Republic of China and the Republic of Mongolia (the “Licensed Territory”).  We did not grant the Licensee any rights outside the Licensed Territory.  We are currently evaluating the option of divesting the CTG Technology in an effort to monetize in some respect our efforts to date to commercialize the technology.  Although we still feel strongly that this is a viable technology, we do not feel that we have the resources to see it through to a mature commercial stage. We do plan to attempt to keep a royalty or License associated with the CTG technology if it could be negotiated in a potential sale.

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

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

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

On May 12, 2013 we amended our March 31, 2012 License Agreement.  Under the terms of that license agreement, the Licensee agreed to pay us for at least fifty Gas Generating Units for the year ended March 31, 2013, whether or not the Licensee achieved that number of Gas Generating Units.  Under the terms of the license agreement before this amendment, the Licensee was obligated to pay us an additional $1,380,000 for the year ended March 31, 2013.  This amendment delayed the Licensee’s obligation to pay us a $1,500,000 minimum until the end of the first year that our technology produces commercial volumes of gas.  If we and our Licensee do not agree that our technology has produced commercial volumes of gas by December 31, 2013, either we or our Licensee can terminate the License Agreement.  Commercial volumes of gas means 2 million cubic meters of gas per year for a Gas Generating Unit (a GGU equals approximately 40,000 square meters of gas producing material of a specified thickness).  We do not currently plan to renew the current license agreement with Future Fuel.  After the first of the year, we will work with Future Fuel to negotiate a new agreement that would include a new payment schedule in which Next Fuel will have a clearer path to revenue with respect to our China operations. As of this filing, the agreement has not been amended, terminated or renegotiated.  We have had preliminary discussions concerning selling the technology to the Licensee, but no definitive agreement has been agreed to.
 
Both we and our Licensee have the right to terminate our License Agreement for China and Mongolia, because of previously reported delays in producing commercial volumes of gas at drilling sites in China and Mongolia.  Since the end of 2013, we have discussed various alternatives with our Licensee, which have included the possibility of the Licensee purchasing all our rights to the Coal to Gas Technology.  Negotiations continue and we have reached no agreement about terminating or modifying the License Agreement or selling our Coal to Gas Technology.
 
 
-16-

 
NEXT FUEL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2013
(UNAUDITED)
 
NOTE 7     RELATED PARTY TRANSACTIONS

On November 1, 2013, the Company entered into an agreement with a related party for consulting services.  The agreement calls for a monthly retainer fee to be paid to the consultant of $5,000 and a monthly expense allowance of $500.  The agreement shall terminate upon the completion of the services of the consultant or by either party upon 30 days notice.  The total amount paid to the related party for the three months ended December 31, 2013 was $3,500.  The amount payable to the related party as of December 31, 2013 was $5,500.  This agreement has been placed on hold until our financial position improves.

On November 1, 2013, the Company entered into a month to month rental agreement with a director/shareholder for the use of a 5th Wheel Trailer by an employee for temporary lodging during field work.  The rental agreement calls for a monthly rental of $1,200.  The total amount paid to the related party for the three months ended December 31, 2013 was $2,400.  This agreement terminated on January 31, 2014.

On March 31, 2012, the Company entered into a license agreement with another company which is owned by one of its director/shareholders.  During the year ended September 30, 2013, the Company received contract fees of $60,000 in connection with that license agreement (See Note 6).  As of this filing, the agreement has not been amended, terminated or renegotiated.

On March 28, 2012, the Company entered into a one year lease agreement with a director for the lease of office space.  The lease calls for a monthly rental fee in the amount of $1,160 beginning on April 1, 2012.  Since termination at the end of March 2013, the Company has continued to lease this space on the same terms on a month to month basis.  The total paid under this agreement during the three months ended December 31, 2013 was $3,480.

NOTE 8     RETIREMENT PLANS

In January, 2012, the Company established the Next Fuel, Inc. 401(k) Plan.  On January 23, 2013, the Company approved a one time Company contribution to the 401(k) Plan totaling $100,000 for the calendar year 2012.
 
 
-17-

 
 
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
The information contained in this Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements. Actual results may materially differ from those projected in the forward-looking statements as a result of certain risks and uncertainties set forth in this discussion. Although management believes that the assumptions made and expectations reflected in the forward-looking statements are reasonable, there is no assurance that the underlying assumptions will, in fact, prove to be correct or that actual results will not be different from expectations expressed in this report.   Factors that might cause such a difference include, but are not limited to, those set forth in Item 1A. "Risk Factors" of this report and elsewhere in this report.

Recent Events

Recent events you should be aware of about our business include the following events:
 
China and Inner Mongolia Exclusive License
 
Both we and our Licensee have the right to terminate the License Agreement for China and Mongolia, because of previously reported delays in producing commercial volumes of gas at drilling sites in China and Mongolia.  Since the end of 2013 we have discussed various alternatives with our Licensee, which have included the possibility of the Licensee purchasing all our rights to the Coal to Gas Technology.  Negotiations continue and we have reached no agreement about terminating or modifying the License Agreement or selling our Coal to Gas technology.
 
Our History

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

On March 31, 2011, we purchased certain technology and intellectual property, which we used as the first step toward building a business that provides a range of technology and services  to the  oil and gas industry.  That technology, while scientifically sound, has not created a strong revenue base and we are currently looking at alternatives to monetize the CTG Technology. More importantly, with the addition of our LPV and other water treatment technologies, we believe we are on the right path to build a business targeting the multi-billion dollar water treatment industry.

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

We are a technology provider and service company with a current focus on technology and products that have immediate and future promise in the water treatment industry.  We are continuing development of our LPV technology and are evaluating several other water treatment technologies that we may have the opportunity to license or purchase to give the company a wide range of water treatment options.
 
Our technology and services are all in various stages of development or are being investigated by us as targets for acquisition.  None has generated substantial revenue for us to date and we face substantial challenges in completing development or acquisition of these technologies and services businesses.  These technology and services include:
 
 
-18-

 
 
 
Certain technology and intellectual property useful in extracting natural gas from coal (the "Coal-to-Gas Technology" or "CTG Technology").  Company is currently investigating opportunities to divest this technology as we have not been able to develop profitable revenue streams from its implementation.
 
Low Energy Input Pervaporation (LPV) Technology to clean up water used in oil and natural gas production, including Frac drilling.  This technology is still in development stage, but has shown promise as a commercial venture in the near future.
 
Carbon Dioxide to Product (CTP) Technology we acquired targets the emerging market of carbon footprint elimination.  We currently are not working on this technology, but believe it could have commercial viability at a later stage.
 
Disk filtration technology to remove suspended solids in the range of 200 microns to as small as 5  microns in size.  We are currently testing this technology prior to making a decision whether to purchase it.  Initial testing has been very positive and we expect to complete testing of the technology in several different industrial applications by May of this year.

During the period from inception to the period ended March 31, 2011 we did not conduct an active business and devoted out efforts to capital raising activities and acquisition activity, including the capital raising and Coal-to Gas Technology described elsewhere in this Report. Most of the expense we incurred during this period related to acquisition activities. Since March 31, 2011, we have focused our operations on the businesses related to agreements with natural gas developers in China, Inner Mongolia, Indonesia and India.

During the past year we have developed a greater understanding of the volumes of gas being produced in underground carbon deposits at our test site in Indonesia. In China, initial results of the testing have shown that operational issues (mainly in the initial drilling and completion of the wells) may have reduced the ability of the technology to reach its full potential.  Continued testing is ongoing by the China licensee and its operational partners.  Because our test sites with licensees for China, India and Indonesia already give us access to large project sites and very big markets, we expect to deemphasize signing transactions with new licensees until we achieve commercial production at existing drilling sites.

As discussed above, we are currently evaluating the option of divesting our CTG Technology in an effort to monetize in some respect our efforts to date to commercialize the technology.  Although our CTG technology may still prove to be a viable technology, we do not  have the resources to see it through to a mature commercial stage. If we sell the CTG technology, we would like to keep a royalty or license to maintain an interest in the upside potential of this technology.

During 2014, we expect to complete development and commercial launch of our LPV technology for cleaning waste water from oil and gas drilling operations.  Bench scale tests have been completed in the lab and testing of a larger scale prototype began recently. Efforts to build a field scale unit and have been delayed by  engineering issues related to using larger membranes.  The University of Wyoming, our research partner, is working on these engineering issues.  We expect that these technical difficulties will be mitigated this year and we will continue in our efforts to further develop this technology.  After we obtain the results generated from the larger test, we will commence negotiating with a potential licensee that would have the capability to bring this technology to a commercial level.

In 2011, our financial statements were presented as a development stage company. However, in 2012, we entered into an exclusive license agreement in China and Mongolia for the right to use our CTG technology, which resulted in the generation of revenue. Accordingly, at that time we believed that we transitioned from a development stage company to an operating stage company during the fourth quarter of 2012.  If our License Agreement for the CTG technology does not provide the revenue we thought it would and we are not otherwise able to generate substantial revenue, we will likely become a development stage company for financial reporting purposes.
 
Raising capital to implement our planned development and acquisition of new products and services will be a primary focus for us during 2014.

 
-19-

 
 
Results of Operations

Three Months ended December 31, 2013

For the three months ended December 31, 2013, we had no revenue.

Operating expenses for the three months ended December 31, 2013 totaled $583,217. During the three months ended December 31, 2013, we had $230 of net interest income.

This resulted in a net loss of $582,987 during the three months ended December 31, 2013.

Operating expenses for the three months ended December 31, 2013 included $251,328 for salary expense, $193,152 for professional fees and $137,971 for general and administrative expenses.  Most of the professional fees and expenses were for financial reporting compliance.  Travel to our field test sites also constituted a substantial expense.

Three Months ended December 31, 2012

For the three months ended December 31, 2012, we had $45,000 in revenue.
 
Operating expenses for the three months ended December 31, 2012 totaled $719,630. During the three months ended December 31, 2012, net interest income totaled $1,190

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

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

As of December 31, 2013, we had $443,352 in cash and cash equivalents and $79,287 of liabilities. Cash and cash equivalents from inception to date have been sufficient to cover expenses involved in starting our business. However, because of the business activities described elsewhere in this Report we will require substantially more funds to implement our new business during the next twelve months than we previously required.

We do not have enough cash to satisfy our expected minimum cash requirements to operate our business for the next twelve months and will be required to generate revenue through the sale of stock  or debt financing. We also expect our operating expenses to increase before our revenues increase. Therefore, we will continue to depend on sales of capital stock or debt financing until we generate sufficient revenue.

Cash flows for Three Months ended December 31, 2013 and 2012

Net cash used in operating activities during the three months ended December 31, 2013 was $478,543 compared to $557,279 used in the three months ended December 31, 2012. Net cash flow used in investing activities during the three months ended December 31, 2013 was $100,047 compared to $75,536 for the three months ended December 31, 2012. We had no financing activities during the three months ended December 31, 2013 or during the three months ended December 31, 2012. The following table summarizes our cash flows for the three months ended December 31, 2013 and 2012:

   
For the Three Months Ended
December 31,
 
   
2013
   
2012
 
Net Cash Used In Operating Activities
 
$
(478,543
)
 
$
(557,279
Net Cash Used In Investing Activities
 
$
(100,047
)
 
$
(75,536
)
Net Cash Provided by Financing Activities
 
$
0
 
  
$
0
 
Net Increase/ (Decrease) in Cash
 
$
                (578,590
)
 
$
(632,815
 
 
-20-

 
 
Critical Accounting Policies

Revenue Recognition

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

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

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

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

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

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

(4) Payments for technical support or other services - These payments will be recognized in accordance with the License Agreement and could be deferred until all work is complete.
 
(5) Payments for amendments we supply to licensees - These payments will be recognized in accordance with the License Agreement and should be recognized when we deliver the nutrients.

Cash Equivalents

The Company considers all highly liquid temporary cash investments with an original maturity of three months or less to be cash equivalents. At December 31, 2013 and December 31, 2012, the Company had no cash equivalents.

Loss Per Share

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

Diluted earnings (loss) per share reflected the potential dilutive effects of stock options, warrants, and stock equivalents. To the extent stock options, stock equivalents and warrants are anti-dilutive, they are excluded from the calculation of diluted income per share. For the three months ended December 31, 2013 and 2012, respectively, 0 and 575,000 shares issuable upon the exercise of warrants were not included in the computation of income per share because their inclusion is anti-dilutive and 2,540,000 and 3,720,000 shares issuable upon the exercise of stock options were not included in the computation of net loss per share, because their inclusion is anti-dilutive.
 
 
-21-

 
 
Stock-Based Compensation

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

Equity instruments (“instruments”) issued to persons other than employees are recorded on the basis of the fair value of the instruments. In general, the measurement date for shares issued to non-employees is (a) when a performance commitment, as defined, is reached or (b) when the earlier of (i) the non-employee performance is complete or (ii) the instruments are vested. The measured value related to the instruments is recognized over a period based on the facts and circumstances of each particular grant as defined in the ASC 505.
 
Income Taxes

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

Recent Accounting Pronouncements

There are no recent accounting pronouncements that affect the Company.
 
Off Balance Sheet Arrangements

We have no off-balance sheet arrangements.
 
Item 3.        Quantitative and Qualitative Disclosures About Market Risk
 
Not required for smaller reporting Companies.

Item 4.        Controls and Procedures
 
(a) Evaluation of disclosure controls and procedures. At the conclusion of the period ended December 31, 2013 we conducted an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)). Based on this evaluation, our Chief Executive Officer and Chief Financial Officer determined that our controls to ensure that the accounting department has adequate training and experience for public company external reporting was not adequate. On April 23, 2013, the Company formed an Audit Committee to oversee the financial reporting process, but the Audit Committee does not have a charter and not all members meet regulatory standards for independence and financial expert experience. Accordingly, based on these material weaknesses, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this Report, December 31, 2013, to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules.
 
The Company's management is addressing these weaknesses by starting the process of seeking to recruit independent Directors so that the Company's Audit Committee that meets regulatory requirements for independence and financial expert experience. The Company also started the process of retaining additional staff to assist its internal staff with compliance issues. However, budgetary constraints make it unlikely that we will increase our internal staff until after we raise additional capital.

 (b) Changes in internal control over financial reporting. During the period covered by this report, we did not make any changes  in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that have materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
 
Because of inherent limitations, a system of internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate due to change in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 
-22-

 
 
PART II OTHER INFORMATION

Item 1.        Legal Proceedings
 
We are not currently involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our companies officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect. See Item 1A "Risk Factors" of our Annual Report on Form 10-K filed with the Commission on December 23, 2013 and of this Report for a description of issues that we have identified as having the highest risks for our becoming involved in litigation or regulatory proceedings.
 
Item 1A.     Risk Factors
 
The description of our business and finances and other parts of this Report contain forward-looking statements that involve risks and uncertainties. Our actual results may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such a difference include, but are not limited to, those described below and in prior Reports filed with the Securities and Exchange Commission.

You should carefully consider the risk factors in our Annual Report on Form 10-K for the year ended September 30, 2013 filed with the Securities and Exchange Commission on December 23, 2013, together with all of the other information included in this Report, before investing in our common stock. The risks and uncertainties described below encompass many of the risks that could affect our business and the value of our stock. Not all risks and uncertainties are described. Risks that we do not know about could occur and issues we now view as minor could become more important. If any of these risks actually occur, our business, financial condition or results of operations could be materially and adversely affected. In that case, the trading price of our common stock could decline and you may lose all or part of your investment.

We refer you to our Annual Report on Form 10-K for the year ended September 30, 2013 filed with the Securities and Exchange Commission on December 23, 2013 for detailed discussion of the primary risks associated with our business and our securities.  We believe these risks have not materially changed since we filed our Form 10-K on December 23, 2013, except that we have experienced delays in producing commercial volumes of natural gas, which has delayed our receipt of substantial revenue from our licensee in China and Inner Mongolia and will cause us to need to raise additional capital before we have demonstrated the commercial viability of our technology  These developments may adversely impact our ability to enter into other license agreements, to generate revenue and raise capital at acceptable valuations, all of which increase the risks to our shareholders.

 
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FORWARD-LOOKING STATEMENTS

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

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

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

All forward-looking statements included herein attributable to us, or any person acting on our behalf, are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Except to the extent required by applicable laws, rules and regulations, we undertake no obligations to update these forward-looking statements to reflect events or circumstances after the date of this Report or to reflect the occurrence of unanticipated events.
 
Item 2.        Unregistered Sales of Equity Securities and Use of Proceeds.
 
None

Item 3.        Defaults Upon Senior Securities
 
None.
 
Item 4.        Mine Safety Disclosures
 
None.
 
Item 5.        Other Information
 
None

Item 6.        Exhibits.
 
See Exhibit Index that follows the signature page of this Report, which is incorporated by reference herein.
 
 
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SIGNATURES

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

 
NEXT FUEL, INC.
   
Date: February 14, 2014
By:
/s/ Robert H. Craig
   
Robert H. Craig
   
Chairman of the Board and Chief Executive Officer
 
 
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EXHIBITS INDEX

Exhibit No.
 
Description
     
3.1
 
Articles of Incorporation (incorporated herein by reference to Exhibit 3.1 to Company's form S-1 filed on July 28, 2008).
     
3.1.2
 
Amendment to Articles of Incorporation (incorporated by reference from Exhibit 3.1.2 of the Company's periodic report on Form 8-K filed on June 3, 2009).
     
3.2
 
Amended and Restated Bylaws (incorporated herein by reference to Exhibit 3.2 to Company's periodic report on form 8-K filed on April 1, 2011).
     
4.1
 
Warrant to Purchase Common Stock dated December 11, 2009 (incorporated by reference to Exhibit 4.2 to Company's current report filed on form 8-K filed on December 17, 2009).
     
10.1
 
Technology and Intellectual Property Purchase Agreement dated as of March 28, 2011 by and between Robert H. Craig, Song Jin, Robin Kindle, Jon Larsen and Anhui Lu; and the Company. incorporated by reference from a Current Report on Form 8-K filed with the Securities and Exchange Commission on April 1, 2011
     
10.2
 
Warrant for One Million Shares of Common Stock of the Company, dated as of March 28, 2011, issued to Robert H. Craig incorporated by reference from a Current Report on Form 8-K filed with the Securities and Exchange Commission on April 1, 2011
     
10.3
 
Lock-Up and Installment Re-Sales Restriction Agreement dated as of March 28, 2011 between and among Company and Robert H. Craig, Song Jin, Robin J. Kindle, Jon Larsen and Anhui Lu incorporated by reference from a Current Report on Form 8-K filed with the Securities and Exchange Commission on April 1, 2011.
     
10.4
 
Employment and Non-Competition Agreement dated as of April 1, 2011 between the Company and Robert H. Craig incorporated by reference from a Current Report on Form 8-K filed with the Securities and Exchange Commission on April 1, 2011.
     
10.5
 
Employment and Non-Competition Agreement dated as of April 1, 2011 between the Company and Song Jin incorporated by reference from a Current Report on Form 8-K filed with the Securities and Exchange Commission on April 1, 2011.
     
10.6
 
Employment and Non-Competition Agreement dated as of April 1, 2011 between the Company and Robin Kindle incorporated by reference from a Current Report on Form 8-K filed with the Securities and Exchange Commission on April 1, 2011.
     
10.7
 
Employment and Non-Competition Agreement dated as of April 1, 2011 between the Company and Jon Larsen incorporated by reference from a Current Report on Form 8-K filed with the Securities and Exchange Commission on April 1, 2011.
 
10.8
 
Subscription Agreement between the Company and San Ding Jiu Yuan Beijing Venture Investment Company and its General Partner Peng Min incorporated by reference from a Current Report on Form 8-K filed with the Securities and Exchange Commission on April 1, 2011.
     
10.9
 
Lock-Up And Installment Re-Sales Restriction Agreement as of March 28, 2011 between and among the Company and San Ding Jiu Yuan Beijing Venture Investment Company and its General Partner Peng Min incorporated by reference from a Current Report on Form 8-K filed with the Securities and Exchange Commission on April 1, 2011.
 
 
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10.10    Amended and Restated Bylaws (as of March 28, 2011) of the Company incorporated by reference from a Current Report on Form 8-K filed with the Securities and Exchange Commission on April 1, 2011. 
     
10.11
 
Subscription Agreement dated as of May 13, 2011 between and among the Company and Peng Min, Guangwei Guo and Zhiqiang Siu incorporated by reference from Exhibit 99.11 to the Company's Quarterly Report on Form 10-Q for the Quarter ended March 31, 2011 filed with the Securities and Exchange Commission on May 16, 2011.
     
10.12
 
Lock-Up And Installment Re-Sales Restriction Agreement dated as of May 13, 2011 between and among the Company and Peng Min, Guangwei Guo and Zhiqiang Siu incorporated by reference from Exhibit 99.12 to the Company's Quarterly Report on Form 10-Q for the Quarter ended March 31, 2011 filed with the Securities and Exchange Commission on May 16, 2011.
     
10.13
 
Registration Rights Agreement dated as of May 13, 2011 between and among the Company and Peng Min, Guangwei Guo and Zhiqiang Siu incorporated by reference from Exhibit 99.13 to the Company's Quarterly Report on Form 10-Q for the Quarter ended March 31, 2011 filed with the Securities and Exchange Commission on May 16, 2011.
     
10.14
 
2011 Equity Compensation Plan of the Company effective November 1, 2011 incorporated by reference from Exhibit 10.14 to the Company's Annual Report on Form 10-K for the Year Ended September 30, 2011 filed with the Securities and Exchange Commission on December 22, 2011.
     
10.15
 
Stock Option Award Agreement dated November 17, 2011 for Robert Craig incorporated by reference from Exhibit 10.15 to the Company's Annual Report on Form 10-K for the Year Ended September 30, 2011 filed with the Securities and Exchange Commission on December 22, 2011.
     
10.16
 
Stock Option Award Agreement dated November 17, 2011 for Song Jin incorporated by reference from Exhibit 10.16 to the Company's Annual Report on Form 10-K for the Year Ended September 30, 2011 filed with the Securities and Exchange Commission on December 22, 2011.
 
10.17
 
Stock Option Award Agreement dated November 17, 2011 for Robin Kindle incorporated by reference from Exhibit 10.17 to the Company's Annual Report on Form 10-K for the Year Ended September 30, 2011 filed with the Securities and Exchange Commission on December 22, 2011.
     
10.18
 
Stock Option Award Agreement dated November 17, 2011 for Guangwei Guo incorporated by reference from Exhibit 10.18 to the Company's Annual Report on Form 10-K for the Year Ended September 30, 2011 filed with the Securities and Exchange Commission on December 22, 2011.
     
10.19
 
Stock Option Award Agreement for 900,000 option shares dated February 12, 2011 for Robert Craig pursuant to 2012 to 2014 Performance Bonus Equity Plan incorporated by reference from Exhibit 10.19 to the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 2011 filed with the Commission on February 14, 2012.
     
10.20
 
Stock Option Award Agreement for 150,000 option shares dated February 12, 2011 for Robert Craig pursuant to 2012 Technology Acquisition Equity Plan incorporated by reference from Exhibit 10.20 to the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 2011 filed with the Commission on February 14, 2012.
     
10.21
 
Stock Option Award Agreement for 900,000 option shares dated February 12, 2011 for Song Jin pursuant to 2012 to 2014 Performance Bonus Equity Plan incorporated by reference from Exhibit 10.21 to the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 2011 filed with the Commission on February 14, 2012.
     
10.22    Stock Option Award Agreement for 150,000 option shares dated February 12, 2011 for Song Jin pursuant to 2012 Technology Acquisition Equity Plan incorporated by reference from Exhibit 10.22 to the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 2011 filed with the Commission on February 14, 2012.

 
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10.23
 
Stock Option Award Agreement for 275,000 option shares dated February 12, 2011 for Robin Kindle pursuant to 2012 to 2014 Performance Bonus Equity Plan incorporated by reference from Exhibit 10.23 to the Company's Quarterly Report in Form 10-Q for the quarter ended December 31, 2011 filed with the Commission on February 14, 2012.
     
10.24
 
License Agreement effective April 2, 2012 between Next Fuel, Inc. and PT Enviro Energy, an Indonesian limited liability company incorporated by reference from Exhibit 99.1 to the Company's Current Report on Form 8-K filed with the Commission on April 20, 2012.
     
10.25
 
License Agreement dated as of March 31, 2012 between Next Fuel, Inc. and Future Fuel Limited, British Virgin Islands limited liability company incorporated by reference from Exhibit 99.2 to the Company's Current Report on Form 8-K filed with the Commission on April 20, 2012.
 
10.26
 
Amendment No. 1 dated as of April 1, 2012 to License Agreement dated as of March 31, 2012 between Next Fuel, Inc. and Future Fuel Limited, British Virgin Islands limited liability company incorporated by reference from Exhibit 99.3 to the Company's Current Report on Form 8-K filed with the Commission on April 20, 2012.
     
10.27
 
Lock-up and Installment Re-Sale Restriction Agreements dated as of March 28, 2012 between the Company and Mr. Guangwei Guo incorporated by reference from Exhibit 99.4 to the Company's Current Report on Form 8-K filed with the Commission on April 20, 2012.
     
10.28
 
Registration Rights Agreement dated March 28, 2012 between the Company and Mr. Guangwei Guo incorporated by reference from Exhibit 99.5 to the Company's Current Report on Form 8-K filed with the Commission on April 20, 2012.
     
10.29
 
Lock-up and Installment Re-Sale Restriction Agreements dated as of May 25, 2012 between the Company and seven individuals incorporated by reference from Exhibit 99.1 to the Company's Current Report on Form 8-K filed with the Commission on June 8, 2012.
     
10.30
 
Registration Rights Agreement dated May 25, 2012 between the Company and seven individuals incorporated by reference from Exhibit 99.2 to the Company's Current Report on Form 8-K filed with the Commission on June 8, 2012.
     
10.31
 
Amendment No. 2 dated as of April 1, 2012 to License Agreement dated as of March 31, 2012 between Next Fuel, Inc. and Future Fuel Limited, British Virgin Islands limited liability company individuals incorporated by reference from Exhibit 10.31 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2013 filed with the Commission on May 15, 2012
     
31.1
 
Certification pursuant to Section 302 of Sarbanes Oxley Act of 2002 by Chief Executive Officer.
     
31.2    Certification pursuant to Section 302 of Sarbanes Oxley Act of 2002 by Chief Financial Officer.
     
32.1
 
Certification pursuant to Section 906 of Sarbanes Oxley Act of 2002 by Chief Executive Officer.
     
32.2   
Certification pursuant to Section 906 of Sarbanes Oxley Act of 2002 by Chief Financial Officer.
     
101
 
Interactive Data File*

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