UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

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

For the quarterly period ended ~~September~~March 3031, ~~2014~~2015

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

For the transition period from ~~__________~~ ___________ to ~~__________~~___________

Commission File No. 000-25367

FUEL PERFORMANCE SOLUTIONS, INC. ~~(Exact name of registrant as specified in its charter)~~

Nevada		88-0357508
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
7777 Bonhomme, Suite 1920 St. Louis, Missouri		63105
(Address of principal executive offices)		(Zip Code)

(Exact name of registrant as specified in its charter)

(314) 727-3333

Nevada		88-0357508
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

7777 Bonhomme, Suite 1920 St. Louis, Missouri		63105
(Address of principal executive offices)		(Zip Code)

(314) 727-3333 (Registrant’s telephone number, including area code)

(Registrant’s telephone number, including area code)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

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

(Check one)
Large Accelerated Filer	¨	Accelerated Filer	¨
Non-Accelerated Filer	¨	Smaller Reporting Company	x
(Do not check if a smaller reporting company)

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

The number of shares outstanding of registrant's only class of stock as of ~~November~~May 14, ~~2014~~2015: Common stock, par value $0.01 per share – ~~202~~203,~~675~~758,~~382~~698 shares outstanding.

INDEX

PART I. FINANCIAL INFORMATION		PAGE NO.
		PAGE NO.
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements
	Balance Sheets — September 30, 2014 (unaudited) and December 31, 2013		3
	Balance Sheets — March 31, 2015 (unaudited) and December 31, 2014		3
	Statements of Operations (unaudited) — Three-Month and Nine-Month Periods Ended September 30, 2014 and September 30, 2013		4
	Statements of Operations (unaudited) — Three-Month Periods Ended March 31, 2015 and March 31, 2014		4
	Statement of Stockholders’ Equity (Deficit) (unaudited) — Nine-Month Period Ended September 30, 2014		5
	Statement of Stockholders’ Equity (Deficit) (unaudited) — Three-Month Period Ended March 31, 2015		5
	Statements of Cash Flows (unaudited) — Nine-Month Periods Ended September 30, 2014 and September 30, 2013		6
	Statements of Cash Flows (unaudited) — Three-Month Periods Ended March 31, 2015 and March 31, 2014		6
	Notes to Unaudited Financial Statements		7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		1715
Item 4.	Controls and Procedures		2622
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings		2723
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		2723
Item 5.	Other Information		2723
Item 6.	Exhibits		2824

FUEL PERFORMANCE SOLUTIONS, INC.

(formerly known as International Fuel Technology, Inc.)

BALANCE SHEETS

	September 30,2014			December 31,2013
	March 31,			December 31,
	2015			2014
	(Unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	~~899~~222,~~806~~159		$	~~216~~530,~~913~~201
Accounts receivable		~~313~~76,~~665~~071			10338,~~781~~572
Inventory		4467,~~205~~256			3380,~~784~~247
Deferred financing cost		~~153~~101,~~673~~341			-127,555
Prepaid expenses and other assets		~~102~~21,~~511~~168			2838,~~284~~937
Total current assets		1487,~~513,860~~995			~~289~~1,~~762~~115,512
Goodwill		2,211,805			2,211,805
Total assets	$	32,~~725~~699,~~665~~800		$	23,~~501~~327,~~567~~317
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities
Accounts payable	$	~~363~~250,~~544~~920		$	~~350~~507,~~984~~044
Accrued compensation		730,692			742,465
Convertible note payable, net of discount of $462,575 and $0, respectively		629,925			-
Note payable to a related party		-			550,000
Convertible note payable – related party, net of discount of $24,346 and $0, respectively		33,154			-
Deferred revenue		-			2,998,242
Accrued interest		68,183			-
Derivative liability		639,637			-
Accrued interest – related party		3,589			-
Accrued compensation		764,109			787,026
Derivative liability		420,074			457,380
Other accrued expenses		190,000			190,000
Other current liabilities		8,332			-
Total current liabilities		2,359,954			1,941,450
Total current liabilities		1,932,205			4,831,691
Convertible note payable, net of discount of $0 and $550,975, respectively		-			541,525
Convertible note payable, net of discount of $661,575 and $0, respectively		488,425			-
Convertible note payable – related party, net of discount of $0 and $28,999, respectively		-			28,501
Accrued interest		~~12,352~~-			-39,917
Deferred rent		10,752			12,573
Accrued interest – related party		-			2,101
Deferred income taxes		771,000			723,000
Deferred rent		9,303			10,028
Total long-term liabilities		1,282,529			735,573
Deferred income taxes		723,000			723,000
Total liabilities		3,214,734			5,567,264
Total long-term liabilities		732,303			1,345,072
Total liabilities		3,092,257			3,286,522
Commitments and contingencies
Stockholders' equity (deficit)
Common stock, $0.01 par value; 350,000,000 and 250,000,000 shares authorized; 202,675,382 and 158,280,604 (net of 1,440,000 shares held in treasury) shares issued and outstanding at September 30, 2014 and December 31, 2013, respectively		2,041,154			1,597,206
Common stock, $0.01 par value; 350,000,000 shares authorized at both March 31, 2015 and December 31, 2014; 203,758,698 (net of 1,440,000 shares held in treasury stock) shares issued and outstanding at both March 31, 2015 and December 31, 2014		2,051,987			2,051,987
Treasury stock		(664,600	)		(664,600	)
Discount on common stock		(819,923	)		(819,923	)
Additional paid-in capital		7172,~~709~~296,~~326~~209			6772,~~949~~258,~~067~~932
Accumulated deficit		(7173,~~755~~256,~~026~~130	)		(7172,~~127~~785,~~447~~601	)
Total stockholders' equity (deficit)		~~510~~(392,~~931~~457	)		(340,~~065,697~~795	)
Total liabilities and stockholders' equity (deficit)	$	32,~~725~~699,~~665~~800		$	23,~~501~~327,~~567~~317

See accompanying Notes to Unaudited Financial Statements.

FUEL PERFORMANCE SOLUTIONS, INC.

(formerly known as International Fuel Technology, Inc.)

STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended								~~Nine Months Ended~~
	September 30,2014					September 30,2013			September 30,2014			September 30,2013
	March 31,				March 31,
Net revenues	$	677,105				$	59,463		$	1,506,198		$	384,289
	2015				2014
Operating expenses:
Net revenues	$	134,073			$	374,426
Cost of operations		(440,965		)			(33,213	)		(1,073,505	)		(305,786	)
Operating income (expenses):
Selling, general and administrative expense		(434,059		)			(313,362	)		(3,561,484	)		(1,131,707	)
Cost of operations		(101,472	)			(296,951	)
Gain on accounts payable write off		59,899					-			59,899			-
Selling, general and administrative expense		(391,480	)			(878,712	)
Gain on deferred revenue write off		-				2,998,242	-			~~2,998,242~~			-
Total operating expenses		(815,125		)			(346,575	)		(1,576,848	)		(1,437,493	)
Total operating income (expenses)		(492,952	)			1,822,579
Net loss from operations		(138,020		)			(287,112	)		(70,650	)		(1,053,204	)
Net income (loss) from operations		(358,879	)			2,197,005
Interest income (expense), net		(54148,~~193~~956	)	)		58	17			~~(54,020~~	)		79
Gain (loss) on derivative liability		~~234~~37,~~591~~306				(457,000	-)			~~(67,409~~	)		-
Loss on conversion of debt from a related party		-				(387,500	-)			~~(387,500~~	)		-
Net income (loss) before income taxes		42(470,~~378~~529	)			1,352,563	~~(287,095~~	)		~~(579,579~~	)		~~(1,053,125~~	)
Income tax provision		~~16,000~~-				16,000	~~16,000~~			~~48,000~~			~~48,000~~
Net income (loss)	$	26(470,~~378~~529	)		$	$1,336,563	~~(303,095~~	)	$	~~(627,579~~	)	$	~~(1,101,125~~	)
Basic and diluted net income (loss) per common share	$	0.00				$	(0.00	)	$	(0.00	)	$	(0.01	)
Basic and diluted net loss per common share	$	(0.00	)		$	0.01
Weighted-average common shares outstanding, basic		~~202~~203,~~675~~758,~~382~~698				178,503,124	~~135,467,960~~			~~194,309,478~~			~~130,725,783~~
Weighted-average common shares outstanding, diluted		~~218~~203,~~479~~758,~~480~~698				189,237,638	~~135,467,960~~			~~194,309,478~~			~~130,725,783~~

See accompanying Notes to Unaudited Financial Statements.

FUEL PERFORMANCE SOLUTIONS, INC.

(formerly known as International Fuel Technology, Inc.)

STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)

FOR THE ~~NINE~~THREE-MONTH PERIOD ENDED ~~SEPTEMBER~~MARCH 3031, ~~2014~~2015

(Unaudited)

	Common Stock Shares		Common Stock Amount		Treasury Stock			Discount on Common Stock			Additional Paid-in Capital		Accumulated Deficit			Total
Balance, December 31, 2013		159,720,604	$	1,597,206	$	(664,600	)	$	(819,923	)	$	67,949,067	$	(71,127,447	)	$	(3,065,697	)
Balance, December 31, 2014		205,198,698	$	2,051,987	$	(664,600	)	$	(819,923	)	$	72,258,932	$	(72,785,601	)	$	40,795
Issuance of stock for cash		31,894,778		318,948		-			-			508,776		-			827,724
Expense relating to stock option grants		-		-		-			-			37,277		-			37,277
Issuance of stock for conversion of debt		12,500,000		125,000		-			-			812,500		-			937,500
Net loss		-		-		-			-			-		(470,529	)		(470,529	)
Expense relating to stock option grants		-		-		-			-			2,438,983		-			2,438,983
Balance, March 31, 2015		205,198,698	$	2,051,987	$	(664,600	)	$	(819,923	)	$	72,296,209	$	(73,256,130	)	$	(392,457	)
Net loss		-		-		-			-			-		(627,579	)		(627,579	)
Balance, September 30, 2014		204,115,382	$	2,041,154	$	(664,600	)	$	(819,923	)	$	71,709,326	$	(71,755,026	)	$	510,931

See accompanying Notes to Unaudited Financial Statements.

FUEL PERFORMANCE SOLUTIONS, INC.

(formerly known as International Fuel Technology, Inc.)

STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine Months EndedSeptember 30,2014			Nine Months EndedSeptember 30,2013
	Three Months EndedMarch 31,2015			Three Months EndedMarch 31,2014
Cash flows from operating activities:
Net loss	$	(627,579	)	$	(1,101,125	)
Net income (loss)	$	(470,529	)	$	1,336,563
Adjustments to reconcile net loss to net cash used in operating activities:
Non-cash stock-based compensation		-			16,875
Non-cash option expense		37,277			572,586
Non-cash option expense		2,438,983			-
Gain on deferred revenue write off		-			(2,998,242	)
Gain on deferred revenue write off		(2,998,242	)		-
(Gain) loss on derivative liability		(37,306	)		457,000
Loss on conversion of debt from a related party		387,500			-
Amortization of debt discount		93,053			-
Income tax provision		48,000			48,000
Amortization of deferred financing cost		26,214			-
Loss on derivative liability		67,409			-
Loss on conversion of debt from a related party		-			387,500
Gain on write off of accounts payable		(59,899	)		-
Income tax provision		-			16,000
Amortization of debt discount		31,103			-
Amortization of deferred financing cost		10,877			-
Change in assets and liabilities:
Accounts receivable		~~(302~~262,~~884~~501	)		85(128,~~043~~035	)
Inventory		~~(10~~12,~~421~~991	)		256,~~297~~125
Prepaid expenses and other assets		~~(74~~17,~~227~~769	)		4(39,~~568~~311	)
Accounts payable		72(256,~~459~~124	)		6324,~~624~~160
Accrued compensation		(1122,~~773~~917	)		~~153~~21,~~357~~641
Accrued interest payable		1229,~~352~~754			-
Deferred rent		(~~1,821~~725	)		(~~1,032~~460	)
Net cash used in operating activities		(1308,~~018,163~~042	)		(~~705~~344,~~393~~473	)
Cash flows from financing activities:
Gross proceeds from issuance of convertible note		1,000,000			-
Proceeds from issuance of common stock		-			601,440
Proceeds from issuance of note payable to a related party		-			350,000
Net cash provided by financing activities		-			601,440
Principal payments on debt due to related party		-			(100,000	)
Net increase in cash and cash equivalents		(308,042	)		256,967
Deposits received for stock purchase		8,332			-
Cash and cash equivalents, beginning		530,201			216,913
Payments made for deferred financing cost		(135,000	)		-
Cash and cash equivalents, ending	$	222,159		$	473,880
Proceeds from issuance of common stock		827,724			466,114
Net cash provided by financing activities		1,701,056			716,114
Net increase in cash and cash equivalents		682,893			10,721
Cash and cash equivalents, beginning		216,913			51,346
Cash and cash equivalents, ending	$	899,806		$	62,067
Supplemental disclosure of cash flow information:
Cash paid during the nine months ended September 30:
Cash paid during the nine months ended March 31:
Interest	$	-		$	-
Income taxes		-			-
Non-cash transactions:
Conversion of related party notes to common stock	$	~~550,000~~-		$	-550,000
Debt discount due to derivative liability		295,773			-
Debt discount due to warrant issued with convertible note		246,905			-
Convertible note original issuance cost		150,000			-
Deferred financing cost due to derivative liability for warrant		29,550			-

See accompanying Notes to Unaudited Financial Statements.

FUEL PERFORMANCE SOLUTIONS, INC.

(formerly known as International Fuel Technology, Inc.)

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

Note 1 – Basis of Presentation

The interim financial statements included herein have been prepared by Fuel Performance Solutions, Inc. (formerly known as International Fuel Technology, Inc.) (the “~~FPS~~Company,” “we,” “us” or ~~the~~ “~~Company,~~our”) without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with United States generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to such rules and regulations, although we believe that the disclosures are adequate to make the information presented not misleading.

These statements reflect all adjustments, consisting of normal recurring adjustments, which in the opinion of management are necessary for fair presentation of the information contained therein. Interim results are not necessarily indicative of results for a full year. We suggest that these financial statements be read in conjunction with the financial statements and notes thereto included in our ~~the comprehensive~~ annual report on Form 10-K for the ~~years~~year ended December 31, ~~2013 and 2012 and the quarterly periods ended March 31~~2014, ~~2013, June 30, 2013 and September 30, 2013,~~ filed with the SEC on ~~May~~March 1531, ~~2014~~2015. We follow the same accounting policies in preparation of interim reports as we do in our annual reports.

Note 2 – Substantial Doubt About Ability to Continue as a Going Concern

Our financial statements are presented on the going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. We have incurred significant losses since inception and currently have, and previously from time to time have had, limited funds with which to operate. These conditions raise substantial doubt as to the Company’s ability to continue as a going concern. Management is in the process of executing a strategy based upon marketing technologies that offer enhanced engine performance and greater fuel economy along with pollution control benefits. We have several technologies in the commercialization phase and in development. We have received necessary regulatory approvals for our products currently in the commercialization phase. We are selling our products directly to the commercial marketplace. We expect to increase our sales to the marketplace, eventually generating a level of revenues sufficient to meet our cash flow and earnings requirements. Until such time, we are dependent on external sources of capital to help fund the operations of the Company.

During the third quarter of 2014, we raised funds with the issuance of a convertible note. We have been funded since inception primarily by unregistered sales of Company restricted stock, generally to existing shareholders. We believe we still have access to capital from existing shareholders and in addition, management is in the process of executing a plan that we believe will provide us with sufficient funds to allow us to operate through the end of the third quarter of 2015. Specifically, management is currently in discussions with its investment banker and with a strategic investor regarding an equity investment that would allow us to operate for the foreseeable future. However, we can make no assurances that additional capital will be available to us from ~~either of~~ these sources. Therefore, if we are unable to secure additional capital, we will need to curtail operations.

The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of ~~FPS~~the Company to continue as a going concern.

Note 3 – Significant Accounting Policies

Derivative Financial Instruments

~~The~~We ~~Company~~evaluate ~~evaluates~~our ~~its~~ financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in our statements of operations. For stock-based derivative financial instruments, ~~the~~we ~~Company~~use ~~uses~~ a Lattice Model option pricing model, assuming maximum value, in accordance with the Financial Accounting Standards Board (the “FASB”) Accounting Standards Codification (“ASC”) ASC 815-15, “Derivatives and Hedging,” to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in our balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.

Fair Value of Financial Instruments

~~The~~We ~~Company~~measure ~~measures~~our ~~its~~ financial assets and liabilities in accordance with the requirements of ASC 820, “Fair Value Measurements and Disclosures.,”which ~~ASC 820~~ clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:

Level 1 - Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 1 primarily consists of financial instruments such as exchange-traded derivatives, marketable securities and listed equities.

Level 2 - Pricing inputs are other than quoted prices in active markets included in level 1, which are either directly or indirectly observable as of the reported date and includes those financial instruments that are valued using models or other valuation methodologies. These models are primarily industry-standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors, and current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Substantially all of these assumptions are observable in the marketplace throughout the full term of the instrument, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace. Instruments in this category generally include non-exchange-traded derivatives such as commodity swaps, interest rate swaps, options and collars.

Level 3 - Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value.

The following table sets forth by level within the fair value hierarchy the Company’s financial assets and liabilities that were accounted for at fair value as of March 31, 2015, and December 31, 2014:

Recurring Fair Value Measures	Level 1		Level 2		Level 3		Total
March 31, 2015
Derivative liability	$	-	$	-	$	420,074	$	420,074
December 31, 2014
Derivative liability	$	-	$	-	$	457,380	$	457,380

The following table sets forth by level within the fair value hierarchy the Company’s financial assets and liabilities that were accounted for at fair value as of September 30, 2014, and December 31, 2013:

	Level 1		Level 2		Level 3		Total
Recurring Fair Value Measures
September 30, 2014
Derivative liability	$	-	$	-	$	639,637	$	639,637
December 31, 2013
Derivative liability	$	-	$	-	$	-	$	-

Note 4 – Stockholders’ Equity (Deficit)

On May 22, 2014, we filed a certificate of amendment to our Articles of Incorporation increasing the number of our authorized shares from 250,000,000 to 350,000,000 shares with the Nevada Secretary of State.

Non-cash stock-based compensation expense recorded during in the three ~~and nine~~ months ended ~~September~~March 3031, ~~2014~~2015 and ~~September~~March 3031, ~~2013~~2014 is as follows:

	Three Months EndedSeptember 30,2014		Three Months EndedSeptember 30,2013		Nine MonthsEndedSeptember 30,2014		Nine MonthsEndedSeptember 30,2013
	Three Months EndedMarch 31, 2015		Three Months EndedMarch 31, 2014
Awards to employees	$	71,191	$	-	$	2,355,669	$	-
Awards to employees and Directors	$	37,277	$	489,272
Awards to non-employees		-		-83,314		~~83,314~~		~~16,875~~
Total non-cash stock-based compensation expense	$	7137,~~191~~277	$	-572,586	$	~~2,438,983~~	$	~~16,875~~

Employee and Director ~~awards~~Awards

During the three months ended ~~September~~March 3031, ~~2014~~2015, we did not issue any options to employees or Directors for Director-related services. The $37,277 of non-cash stock-based compensation expense recognized during the three months ended March 31, 2015 relates to options grants made during 2014 that have subsequent vesting terms. Some of these 2014 options grants vested during the three months ended March 31, 2015. The remaining 2014 option grants will become fully vested by January 22, 2016. $112,394 of unrecognized non-cash stock-based compensation expense remains as of March 31, 2015.

~~During~~The ~~the~~following ~~three~~table ~~months~~summarizes ~~ended~~information ~~June~~about ~~30,~~stock ~~2014,~~options we issued ~~10,000,000 options~~ to employees and ~~5,000,000~~Directors ~~options~~that towere ~~Directors~~issued ~~for~~and ~~Director-related~~outstanding during ~~services.~~the three months ended March 31, 2015:

During the three months ended March 31, 2014, we issued 12,401,200 options to employees and 2,624,800 options to Directors for Director-related services. These option grants were issued in conjunction with the cancellation of 7,070,400 options that had previously been issued to employees and Directors.

	Shares		Weighted-average exercise price		Weighted-average exercise life		Intrinsic value

Outstanding at December 31, 2014		30,474,720	$	0.10		4.23	$	404,337

Granted		-		NA		NA
Cancelled		-		NA		NA
Expired		-		NA		NA
Outstanding at March 31, 2015		30,474,720	$	0.10		3.98	$	363,772

Options exercisable at March 31, 2015		28,308,053	$	0.10		3.97
Options exercisable at December 31, 2014		27,641,386	$	0.10		4.22

No stock options were granted to employees or to Directors for Director-related services during the nine months ended September 30, 2013.

During the three months ended September 30, 2014, 100,000 options previously granted to a non-employee Director expired. During the three months ended March 31, 2014, 20,000 options previously granted to an employee expired. These options had vested before expiration.

~~The~~Non-employee ~~following tables summarize information about stock options issued to employees and Directors during the nine months ended September 30, 2014:~~Awards

	Shares			Weighted-average exercise price		Weighted-average exercise life		Intrinsic value
Outstanding at December 31, 2013		9,489,120		$	0.41		1.06	$	-
Granted		30,026,000		$	0.10		4.49
Cancelled		(7,070,400	)	$	0.39		-
Expired		(120,000	)	$	0.25		-
Outstanding at September 30, 2014		32,324,720		$	0.13		4.19	$	671,031
Options exercisable at September 30, 2014		28,991,386		$	0.13		4.16
Options exercisable at December 31, 2013		9,489,120		$	0.41		1.06

During the three months ended March 31, 2015, we did not issue any options to non-employee consultants for services.

The following table ~~provides~~summarizes ~~the~~information ~~primary~~about ~~assumptions~~stock ~~used~~options issued to ~~value employee and Director~~ non-~~cash~~employees ~~stock-based~~that ~~compensation~~were ~~for~~issued and outstanding during the ~~nine~~three months ended ~~September~~March 3031, ~~2014~~2015:

	For the Nine Months Ended September 30, 2014
	Shares			Weighted-average exercise price		Weighted-average exercise life		Intrinsic value
Weighted-average fair value of options granted	$	0.09
Outstanding at December 31, 2014		5,425,000		$	0.19		2.57	$	8,700
Weighted-average assumptions:
Granted		-			NA		NA
Risk-free interest rate		0.65	%
Cancelled		-			NA		NA
Dividend yield		-
Expired		-			NA		NA
Expected volatility		1.09
Outstanding at March 31, 2015		5,425,000		$	0.19		2.32	$	7,470
Expected option life (years)		2.58
Options exercisable at March 31, 2015		5,425,000		$	0.19		2.32
Options exercisable at December 31, 2014		5,425,000		$	0.19		2.57

~~Non-employee~~Sales ~~awards~~of Common Stock

~~During~~We ~~the~~did ~~three~~not ~~months~~receive ~~ended~~any ~~September~~proceeds ~~30,~~from ~~2014,~~the wesale ~~did~~of ~~not~~common ~~issue~~stock ~~any~~during ~~options~~the tothree ~~non-employee~~months ~~consultants~~ended ~~for~~March ~~services~~31, 2015.

~~During~~See ~~the~~Note ~~three~~5 ~~months~~– ~~ended~~Equity ~~June~~Commitment ~~30,~~and ~~2014,~~Related weParty ~~did~~Transactions ~~not~~for ~~issue~~a ~~any~~description ~~options~~of toother ~~non-employee~~equity ~~consultants~~transactions ~~for~~the ~~services~~Company effected during the three months ended March 31, 2015.

During the three months ended March 31, 2014, we issued 1,555,000 options to non-employee consultants for services. These option grants were issued in conjunction with the cancellation of 1,352,000 options that had previously been issued to a non-employee.

No stock options were granted to non-employee consultants for services during the nine months ended September 30, 2013.

During the three months ended June 30, 2014, 1,015,600 options previously granted to non-employee consultants for services expired. 1,010,400 of these options had vested before expiration.

During the three months ended March 31, 2014, 1,000,000 options previously granted to non-employee consultants for services expired. These options had vested before expiration.

Services performed by non-employees who were granted options include product/distribution consulting and investor relations related services. The weighted-average fair value for such options that have had a fair value calculation applied ($0.05 for the nine months ended September 30, 2014) was estimated at the date of grant using a Black-Scholes option pricing model. The following weighted-average assumptions were used for the first quarter of 2014 grants: risk-free interest rate of 1.08%, volatility factor of 1.03, and a weighted-average expected life of the option of approximately 3.68 years.

The following table summarizes information about stock options issued to non-employees during the nine months ended September 30, 2014:

	Shares			Weighted-average exercise price		Weighted-average exercise life		Intrinsic value
Outstanding at December 31, 2013		4,137,599		$	0.46		0.73	$	-
Granted		1,555,000		$	0.08		2.99
Cancelled		(1,352,000	)	$	0.48		-
Expired		(2,015,600	)	$	0.47		-
Outstanding at September 30, 2014		2,324,999		$	0.19		2.26	$	24,500
Options exercisable at September 30, 2014		2,324,999		$	0.19		2.26
Options exercisable at December 31, 2013		4,132,399		$	0.46		0.73

Sales of common stock

During the three months ended June 30, 2014, we received proceeds of $226,284 for the sale of 5,391,795 restricted shares of our common stock to a small group of accredited investors. We also received $8,332 in funds as deposits to be applied to the purchase of 83,316 restricted shares of common stock.

During the three months ended March 31, 2014, we received proceeds of $601,440 for the sale of 26,502,983 restricted shares of our common stock to a small group of accredited investors.

See Note 5 – Equity Commitment and Related Party Transactions for a description of other equity transactions FPS effected during the nine months ended September 30, 2014.

Note 5 – Equity Commitment and Related Party Transactions

~~Effective~~On ~~December~~August 1122, ~~2007~~2014, ~~we received an investment commitment from Rex Carr, a Director of FPS and a holder of over 5% of our common stock. Pursuant to~~ the ~~terms~~Company ofborrowed ~~the commitment, Mr. Carr has agreed to invest up to an aggregate of~~ $150,000~~,000~~ infrom ~~FPS,~~Jonathan ~~at such time or times as we may request~~Burst, in the ~~form~~chairman of aour ~~purchase~~Board ~~or purchases~~ of ~~restricted~~Directors ~~common stock of FPS. FPS may elect to draw from~~ (the ~~commitment~~“Board”) ~~at one time or from time to time; provided, however, that the aggregate of such draws may not exceed $1,000,000. If~~ and ~~when~~Chief weExecutive ~~elect to utilize available commitment funds, we will issue to Mr~~Officer. ~~Carr~~This ~~that~~loan ~~number~~was ofpursuant ~~shares of restricted common stock of FPS equal~~ to the ~~value~~convertible ofnote ~~the~~payable ~~investment~~transaction ~~then~~discussed ~~provided~~in toNote ~~FPS.~~6 ~~The~~- ~~number~~Convertible ofNote ~~shares~~Payable ~~to be issued will be calculated based on the closing price of our common stock as quoted on OTC Market Group’s OTC Pink marketplace on the date of the sale~~below. ~~There is no stipulation regarding the duration of this commitment. As of September 30, 2014, $500,000 remains available under this equity commitment.~~

AsEffective of December 3111, ~~2013~~2007, ~~the~~we ~~Company~~received ~~owed~~an ~~$500,000~~investment tocommitment ~~Mr.~~from Rex Carr., ~~The~~a ~~terms~~Director of the ~~loans~~Company ~~associated~~and ~~with~~a ~~this~~holder ~~cumulative~~of ~~loan~~over ~~balance~~5% ~~did~~of ~~not~~our ~~require~~common stock. Pursuant to the ~~payment~~terms of ~~interest~~the ~~and~~commitment, ~~did~~Mr. ~~not~~Carr ~~require~~has ~~repayment~~agreed to invest up to an aggregate of $1,000,000 in the ~~principal~~Company, byat asuch ~~certain~~time ~~date.~~or Ontimes ~~February~~as 6,we ~~2014~~may request, ~~FPS~~in ~~issued~~the ~~10,000,000~~form ~~restricted~~of ~~shares~~a purchase or purchases of ~~Company~~our restricted common stock. inWe ~~exchange~~may ~~for~~elect to draw from the ~~cancellation~~commitment ofat ~~this~~one ~~note~~time ~~payable~~or from atime ~~related~~to ~~party~~time; inprovided, however, that the aggregate ~~(face~~of ~~amount)~~such ofdraws may not exceed $~~500~~1,000,000. ~~This~~If ~~conversion~~and ofwhen ~~notes~~we ~~payable~~elect ~~from~~to autilize ~~related~~available ~~party~~commitment funds, we will issue to ~~restricted~~Mr. Carr that number of our shares of restricted common stock equal to the ~~Company’s~~value of the investment then provided to us. The number of shares to be issued will be calculated based on the closing price of our common stock ~~was~~as ~~treated~~quoted ~~separately~~on ~~from~~OTC Market Group’s OTCQB marketplace on the ~~equity~~date ~~commitment~~of inthe ~~place~~sale. ~~with~~There Mris no stipulation regarding the duration of this commitment. ~~Carr~~As of both March 31, 2015 and December 31, 2014, $500,000 remains available under this equity commitment.

1110

On February 4, 2013, David B. Norris, a Director of FPS, loaned us $50,000. The terms of this loan did not require the payment of interest and did not require repayment of the principal by a certain date. This loan was converted to 2,500,000 shares of the Company’s common stock on February 6, 2014.

In conjunction with the conversion of Mr. Carr’s and Mr. Norris’ notes payable from a related party to equity, FPS recorded a $387,500 loss on the conversion of related party notes to our income statement during the nine months ended September 30, 2014.

Note 6 – Convertible Note Payable

On August 22, 2014 (the “Closing Date”), ~~FPS~~we closed a financing transaction by entering into a Securities Purchase Agreement dated August 22, 2014 (the “Securities Purchase Agreement”) with certain funds and investors signatory to such Securities Purchase Agreement (the “Purchasers”) for an aggregate subscription amount of $1,000,000 (the “Purchase Price”) of which $50,000 is from a related party. Pursuant to the Securities Purchase Agreement, ~~FPS~~we issued the following to the Purchasers: (i) 10% Convertible Promissory Notes with an aggregate principal amount of $1,150,000 (the “Notes”), and (ii) warrants to purchase an aggregate of 6,666,667 shares of the Company’s common stock, par value $0.01 per share, for an exercise price of $0.12 per share for a period of five (5) years from the effective date of the registration statement (the “Warrants”).

~~The~~We ~~Company~~ recorded $150,000 of original issuance cost related to this transaction, which we have recorded as debt discount.

The terms of the Notes and the Warrants are as follows:

10% Convertible Promissory Notes

The total principal amount of the Notes is issued with a 115% premium to the subscription amount. The Notes accrue interest at a rate equal to 10% per annum and have a maturity date of February 22, 2016. The Notes are convertible any time after the issuance date of the Notes. The Purchasers have the right to convert the Notes into shares of the Company’s common stock at a conversion price equal to $0.10 per share, subject to standard adjustments for stock dividends, stock splits, subsequent equity sales, subsequent rights offerings and pro rata distributions. While the Notes are outstanding, in the event of a subsequent equity sale at a price lower than the conversion price of $0.10 per share, the conversion price of the Notes shall be reduced to the lower conversion price. The Notes can be redeemed under certain conditions and the Company can force the conversion of the Notes in the event certain equity conditions are met.

In the event of default, the Purchasers have the right to require the Company to repay in cash all or a portion of the Notes at a price equal to 125% of the aggregate principal amount of the Notes plus all accrued but unpaid interest.

During the three months ended March 31, 2015, we recorded $29,753 of interest expense related to the issuance of the Notes.

Warrants

The Warrants are exercisable in whole or in part, at an initial exercise price per share of $0.12, subject to adjustment. The exercise price and number of shares of the Company’s common stock issuable under the Warrants (the “Warrant Shares”) are subject to adjustments for stock dividends, splits, combinations, subsequent rights offerings, pro rata distributions and any issuance of securities below the exercise price of the Warrants. While the Warrants are outstanding, in the event of a subsequent equity sale including a warrant exercise price lower than the exercise price of $0.12 per share, the exercise price of the Warrants shall be reduced to the lower exercise price. Any adjustment to the exercise price shall similarly cause the number of Warrant Shares to be adjusted so that the total value of the Warrants may increase, provided, that in no event shall the number of Warrant Shares exceed 200% of the original number of Warrant Shares originally issued.

1211

In addition to the Warrants described above, the Company also issued 800,000 warrants to a placement agent assisting with the convertible note transaction. The terms of the placement agent warrants are the same as of the terms of the Warrants explained above.

Registration Rights Agreement

In connection with the sale of Notes and Warrants pursuant to the Securities Purchase Agreement, the Company entered into a registration rights agreement (the “Registration Rights Agreement”) with the Purchasers, pursuant to which the Company agreed to register all of the shares of common stock underlying the Notes and the shares of common stock underlying the Warrants (together, the “Registrable Securities”) on a Form S-1 registration statement (the “Registration Statement”) to be filed with the SEC within thirty (30) calendar days following the Closing Date (the “Filing Deadline”) and to use its best efforts to cause the Registration Statement to be declared effective under the Securities Act within 100 calendar days following the Closing Date (the “Effectiveness Deadline”). IfThe ~~the~~Registration ~~Company~~Statement ~~does~~became ~~not~~effective ~~meet~~November ~~the Filing Deadline or the Effectiveness Deadline~~26, ~~the Company will have to pay the Purchasers a penalty equal to 1~~2014.~~5% of the aggregate subscription amount, up to a maximum penalty of 24%.~~

~~FPS~~Deferred ~~filed~~Financing ~~the Registration Statement with the SEC on September 19, 2014 and an amendment thereto on November 6, 2014.~~Cost

~~Deferred~~In connection with the convertible note transaction explained above, the Company paid $55,000 for legal fees and $80,000 for placement agent fees. In addition, $29,550 was also recorded to deferred financing costs related to the fair value valuation of the placement agent warrants. $26,214 of deferred financing costs was amortized during the three months ended March 31, 2015. The deferred financing cost balance is $101,341 and $127,555 as of March 31, 2015 and December 31, 2014, respectively.

In connection with the convertible note transaction explained above, the Company paid $55,000 for legal fees and $80,000 for placement agent fees. In addition, $29,550 was also recorded to deferred financing costs related to the fair value valuation of the placement agent warrants. $10,877 of deferred financing costs was amortized during the third quarter of 2014. The deferred financing cost balance is $153,673 as of September 30, 2014.

Derivative

Because the above convertible debt and warrants have full reset adjustments tied to future issuances of equity securities by the Company, it is subject to derivative liability treatment under ASC 815-40-15, “Determining Whether an Instrument (or Embedded Feature) is Indexed to an Entity’s Own Stock” (“ASC 815-40-15”). ASC 815-40-15 requires as of the date the convertible debt and warrants are issued, the derivative liability to be measured at the fair value and re-evaluated at the end of each reporting period. See Note 8 –- Derivative Liability.

On issuance date, the fair value of the derivative liability for both the convertible debt and warrants was $295,773 and $246,905, respectively. Therefore a total of $692,678 (including $150,000 original issuance costs) of debt discount was recorded. During the ~~nine~~three months ended ~~September~~March 3031, ~~2014~~2015, $3193,~~103~~053 was recorded as amortization of debt discount. As of ~~September~~March 3031, ~~2014~~2015, the convertible debt has a balance of $~~488~~629,~~425~~925, net of $~~661~~462,575 of debt discount, and accrued interest of $68,183. As of December 31, 2014, the convertible debt has a balance of $541,525, net of $550,975 of debt discount, and accrued interest of $39,917.

As of March 31, 2015, the related party convertible note has a balance of $33,154, net of $24,346 of debt discount, and accrued interest of $3,589. As of December 31, 2014, the related party convertible note has a balance of $28,501, net of $28,999 of debt discount, and accrued interest of $2,101.

Note 7 – Blencathia Merger

Effective October 27, 1999, we merged with Blencathia Acquisition Corporation (“Blencathia”). Blencathia was a public shell company with immaterial assets and liabilities and 312,000 shares outstanding at the time of the merger, which it redeemed and cancelled upon the merger. In exchange, we issued 312,000 of our common shares to the prior Blencathia owner with the contractual understanding that such shares were to be sold by that owner to achieve gross cash proceeds of $500,000. Any excess proceeds were to be returned to us and any deficiency was to be made up by us issuing additional shares or paying the difference in cash. As we believed that we controlled the ultimate timing of the sale of these 312,000 shares by the prior Blencathia owner, we did not consider these shares as issued or outstanding for purposes of computing earnings per share prior to 2006.

1312

In 2006, we learned that the prior Blencathia owner had, in fact, sold the 312,000 shares for aggregate proceeds of approximately $150,000, without our consent. Accordingly, in the fourth quarter of 2006, we recorded $500,000 of general expenses (representing the cost of the 1999 merger) and the deemed issuance of approximately $150,000 of common stock. The remaining $350,000 obligation was reflected as a current accrued expense. Beginning in 2006, the 312,000 shares have been reflected as outstanding for earnings per share computations. During 2009 and 2010, we made payments totaling $160,000 to the prior Blencathia owner. We have not made any payments to the prior Blencathia owner since 2010. The related current accrued expense balance remains at $190,000 at ~~September~~March 3031, ~~2014~~2015. We are in negotiations with the prior Blencathia owner to resolve this obligation and may ultimately settle the obligation with either cash or equity securities with a lower market value.

Note 8 – Derivative Liability

During 2009, we granted a warrant to purchase 2,000,000 shares of the Company’s common stock to an accredited investor in conjunction with equity raise efforts. On April 12, 2013, ~~the~~our ~~Company’s~~ Board ~~of Directors~~ authorized and approved the extension of the expiration date and a change of exercise price for this warrant. The outstanding share purchase warrant originally had a March 23, 2014 expiration date and an exercise price of $0.25. The new modified terms extended the warrant expiration date to April 11, 2018 and reduced the exercise price to $0.226. The exercise price is also subject to dilutive adjustments for share issuances (full ratchet reset features). As of ~~September~~both 30March 31, 2015 and December 31, 2014, the exercise price has been reduced to $0.15 and an additional 1,~~321~~418,~~583~~987 warrants are to be issued to the investor due to the reset features.

On August 22, 2014, we issued 6,666,667 warrants to investors and 800,000 warrants to a placement agent. The exercise price of these warrants is also subject to dilutive adjustments for share issuance (full ratchet reset features). See Note 6 –- Convertible Note Payable.

Because these convertible debt and warrants have full reset adjustments tied to future issuances of equity securities by the Company, it is subject to derivative liability treatment under ASC 815-40-15 , which requires as of the date the convertible debt and warrants are issued, the derivative liability to be measured at fair value and re-evaluated at the end of each reporting period.

Key assumptions used to determine the fair value of the convertible note follows:

Stock price volatility (one-year measurement):
August 22, 2014 measurement	219	%
December 31, 2014 measurement	192	%
September 30, 2014 measurement	211	%
March 31, 2015 measurement	172	%
Probability of default triggering 21% interest rate, increasing 1% per month to a maximum of 10% with a 125% penalty	0	%
Probability of the Company redeeming the convertible note (with 130% penalty)	0	%
Probability of the Company redeeming the convertible note (with 130% penalty): projected initially at 0% of the time, increasing 1% monthly to a maximum of 5% (from alternative financing being available for a redemption event to occur)
Conversion behavior - holder automatically converts the convertible note at a maximum of 2 times the conversion price

1413

Key assumptions used to determine the fair value of the warrants follows:

Stock price volatility (one-year measurement):
June 30, 2014 measurement	225	%
December 31, 2014	192	%
August 22, 2014 measurement	219	%
March 31, 2015 measurement	172	%
September 30, 2014	211	%
Exercise behavior – warrant exercise at target prices 2 times the higher of the projected reset price or stock price

As of ~~December~~March 31, ~~2013~~2015, ~~we determined~~ the fair value of the total convertible debt and warrant’s derivative liability tois be$420,074 ~~nominal~~and we recognized a gain on derivative liability of $37,306 for the three months ended March 31, 2015.

As of ~~September~~December 3031, 2014, the fair value of the total convertible debt and warrant’s derivative liability is $~~639~~457,~~637 and the Company recognized a loss on derivative liability of $67,409 for the nine months ended September 30, 2014~~380. ~~The following table summarizes the derivative liability included in the balance sheet:~~

Balance at December 31, 2013	$	-
Debt discount due to convertible note		295,773
Debt discount due to warrant issued with debt		246,905
Deferred financing cost due to derivative liability for placement agent warrant		29,550
Loss on change of fair value		67,409
Balance at September 30, 2014	$	639,637

The following table summarizes the derivative liability included in the balance sheet:

Note 9 – Deferred Revenue

Balance at December 31, 2014	$	457,380
Gain on change of fair value		(37,306	)
Balance at March 31, 2015	$	420,074

OnThe ~~February~~following ~~26,~~table ~~2009,~~summarizes weinformation ~~received~~about ~~the~~warrants ~~first~~outstanding ~~purchase~~as ~~order pursuant to a Memorandum~~ of ~~Understanding~~March ~~(“MOU”) with Libya Oil Holdings Limited~~31, Tamoil, Libya Africa Investment Portfolio and Vision Oil Services Ltd (“VOS”). Pursuant to the MOU, VOS paid for the purchase of 600 metric tons of DiesoLiFTTM 10 at a price of 6,000 Euros (approximately $7,600) per metric ton from FPS. We received cash proceeds of approximately $3 million from VOS in February 2009. No such revenues had been recorded to date relating to this order because there has been no requested delivery of the product. We have had no communication with VOS in nearly five years and believe they have ceased all activities on behalf of FPS.2015:

Based upon a written legal opinion received during the first quarter of 2014, it was determined that effective February 2014, we were no longer obligated to present the nearly $3 million deferred revenue liability on our balance sheet as the statute of limitations period for our performance obligation has passed. In conjunction with this determination, we recorded a gain on deferred revenue liability write off of approximately $3 million during the nine months ended September 30, 2014.

Total # of warrants issued and outstanding	28,156,404
Weighted-average exercise price	$	0.13
Remaining life (in years)		3.02
Intrinsic value	$	-

15Note 9 – Legal Proceedings

~~Note~~We 10are –periodically ~~Income~~subject ~~Tax~~to ~~Provision~~various lawsuits and claims with respect to matters arising out of the normal course of business. While the impact on future financial results is not subject to reasonable estimation because considerable uncertainty exists, management believes, after consulting with counsel, that it is more likely than not that the ultimate liabilities resulting from such lawsuits and claims will not materially affect our financial position, results of operations or liquidity.

WeOn ~~have~~July ~~operated~~31, at2006, awe ~~net~~received ~~loss~~notice ~~since~~from ~~inception~~the ~~and~~American ~~have~~Arbitration ~~not~~Association ~~recorded~~(“AAA”) orof ~~paid~~a ~~any~~Demand ~~income~~for ~~taxes,~~Arbitration ~~other~~dated ~~than~~July ~~for~~27, ~~non-cash~~2006 ~~deferred~~received ~~tax~~by ~~expense~~the ~~related~~AAA tonaming athe ~~basis~~Company ~~difference~~as ~~between~~Respondent ~~financial reporting~~ and ~~tax~~TPG ~~reporting~~Capital ~~deductible~~Partners ~~goodwill. We have significant net operating loss~~ (“~~NOL~~TPG”), ~~carry-forwards~~the ~~that~~prior ~~would~~Blencathia beowner, ~~recognized at such time~~ as wethe ~~demonstrate~~Claimant. ~~the~~The ~~ability~~arbitration tohad ~~operate~~been onrequested aby ~~profitable~~TPG ~~basis~~to ~~for~~resolve an ~~extended~~alleged ~~period~~aggregate ofproceeds ~~time.~~shortfall ~~The deferred income tax asset resulting primarily~~ from the ~~NOL~~sale ~~carry-forwards~~of ~~has~~our ~~been~~securities ~~fully~~issued ~~reserved~~in ~~with~~the aBlencathia ~~valuation allowance~~merger. ~~Because~~TPG ~~goodwill~~has isclaimed ~~not~~they ~~depreciated~~sold ~~and~~some ~~has~~or anall ~~indefinite~~of ~~life~~the ~~for book purposes~~312,000 ~~the~~shares ~~deferred~~and ~~tax liability related to~~ the ~~book~~sales tohave ~~tax basis difference is~~ not ~~offset~~generated ~~against~~at ~~the~~least ~~deferred tax assets when establishing our valuation allowance. Accordingly~~$500,000 weof ~~record non-cash deferred income tax expense~~proceeds, ~~which~~as ~~increases~~guaranteed in the ~~deferred~~merger ~~tax liability, of approximately $16,000 each quarter~~documents.

~~Note~~In 11an –effort ~~Accounts~~to ~~Payable~~resolve this matter prior to submission to binding arbitration, both TPG and the Company participated in a non-binding mediation conference on January 30, 2007, which did not resolve the matter. Informal discussions are ongoing. It is not expected that the ultimate settlement of this matter, considering we have recorded a liability for the shortfall amount, will have an additional adverse material effect on the Company. Since 2009, the Company has made payments to TPG totaling $160,000 to reduce the recorded liability. The remaining recorded liability balance is $190,000 at March 31, 2015 and December 31, 2014, respectively.

AsNote of10 ~~September~~– ~~30,~~Subsequent 2014, we recognized a $59,899 gain on write off of accounts payable. The invoice and contracts for the total of $59,889 were dated at least five years before September 30, 2014. Based on a written legal opinion received during the third quarter of 2014, it was determined that effective September 30, 2014, we were no longer obligated to present the $59,889 of accounts payable on our balance sheet as the statute of limitation period for our payment obligation has passed. In conjunction with this determination, we recorded a gain on accounts payable write off of $59,889 during the nine months ended September 30, 2014.Event

On April 30, 2015, the Company elected Glenn Carr to its Board. Glenn Carr is the son of Rex Carr, a recently deceased Director of the Company. The Company believes that the equity commitment of Rex Carr referenced in Note 125 –- ~~Legal~~Equity ~~Proceedings~~Commitment and Related Party Transactions above will be honored by his estate.

We are subject to various lawsuits and claims with respect to matters arising out of the normal course of business. While the impact on future financial results is not subject to reasonable estimation because considerable uncertainty exists, management believes, after consulting with counsel, that it is more likely than not that the ultimate liabilities resulting from such lawsuits and claims will not materially affect our financial position, results of operations or liquidity.14

On July 31, 2006, we received notice from the American Arbitration Association ("AAA") of a Demand for Arbitration dated July 27, 2006 received by the AAA naming FPS as Respondent and TPG Capital Partners (“TPG”), the prior Blencathia owner, as the Claimant. The arbitration had been requested by TPG to resolve an alleged aggregate proceeds shortfall from the sale of FPS securities issued in the Blencathia merger. TPG has claimed it sold some or all of the 312,000 shares and the sales have not generated at least $500,000 of proceeds, as guaranteed in the merger documents.

In an effort to resolve this matter prior to submission to binding arbitration, both TPG and FPS participated in a non-binding mediation conference on January 30, 2007, which did not resolve the matter. Informal discussions are ongoing. It is not expected that the ultimate settlement of this matter, considering we have recorded a liability for the shortfall amount, will have an additional adverse material effect on FPS.

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

The following is management’s discussion and analysis of certain significant factors that have affected the financial condition, results of operations and cash flows of Fuel Performance Solutions, Inc. (formerly known as International Fuel Technology, Inc.) (the “~~FPS~~Company,” “we,” “us” or ~~the~~ “~~Company~~our”) during the periods included in the accompanying financial statements. This discussion should be read in conjunction with the financial statements and notes included in our ~~comprehensive~~ annual report on Form 10-K for the ~~years~~year ended December 31, ~~2013 and 2012 and the quarterly periods ended March 31~~2014, ~~2013, June 30, 2013 and September 30, 2013,~~ filed with the Securities and Exchange Commission (“SEC”) on ~~May~~March 1531, ~~2014~~2015 (the “Annual Report”).

Forward-looking Statements and Associated Risks

This quarterly report on Form 10-Q contains forward-looking statements that are based largely on our expectations and are subject to a number of risks, uncertainties and ~~uncertainties~~assumptions, many of which are beyond our control, including, but not limited to, economic, competitive and other factors affecting our operations, markets, products and services, expansion strategies, our ability to raise additional capital and other factors described elsewhere in this report and documents filed by us with the SEC, including in our Annual Report under the “Risk Factors” section. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “estimates,” variations of such words and similar expressions are intended to identify such forward-looking statements. Actual results could differ materially from these forward-looking statements. In light of these risks, uncertainties and ~~uncertainties~~assumptions, there can be no assurance that the forward-looking information contained in this report will, in fact, prove accurate. We do not undertake any obligation to revise these forward-looking statements to reflect future events or circumstances.

Overview

We are a fuel performance enhancement technology company transitioning to a commercial enterprise. We believe the macroeconomic environment for our technology and products is excellent now and will continue to be so for the foreseeable future. We believe ever-increasing fuel environmental regulations will likely result in increased demand for additive products to help offset adverse fuel performance and engine impacts resulting from these regulations. We believe our products and technology are uniquely positioned to benefit from this macro environment by offering fuel performance enhancement solutions that specifically address these macro developments and trends.

Commercial Update

~~FPS~~Despite ~~has emerged from~~ the ~~research~~fact ~~and~~that ~~development~~our ~~phase~~revenues ~~and~~decreased isfor in the ~~early~~three ~~stages~~months ofended ~~commercializing~~March ~~its~~31, ~~technology.~~2015, ~~Thanks~~compared ~~primarily~~ to the ~~efforts~~three ofmonths ~~our~~ended ~~distribution~~March ~~partners~~31, ~~FPS has clients that are purchasing and using DiesoLiFTTM 10~~2014, ~~the~~our ~~PerfoLiFTTM~~business ~~BD-Series,~~prospects ~~DiesoLiFTTM FEB, GasoLiFTTM, and KeroLiFTTM. FPS products~~ are ~~marketed~~now tostronger ~~end-users~~than orthey ~~under~~have ~~FPS~~ever ~~brand names or to retail distributors who repackage and rebrand FPS products~~been.

~~Total~~Since ~~revenues for~~ the ~~nine~~third ~~months~~quarter ~~ended~~of ~~September 30~~2014, ~~2014~~our ~~surpassed~~commercial ~~$1.5~~efforts ~~million,~~have ~~which~~been isfocused ~~more~~on ~~than double~~ the ~~amount~~development of, ~~revenues~~preparation ~~achieved~~ for, and the ~~entire~~launch ~~fiscal~~of ~~year~~a ~~2013.~~comprehensive ~~The~~fuel ~~following~~solutions ~~summarizes~~program ~~some~~(the of“Program”) ~~the~~in ~~important~~conjunction ~~commercial~~with ~~progress~~Unipart, ~~made~~our bydistribution ~~FPS:~~partner.

Brenntag: Brenntag is not only FPS’s exclusive manufacturing partner; they are also a distributor of FPS products. Brenntag is a global leader in the distribution of industrial and specialty chemicals and additives and lubricants. Brenntag has a global network of more than 400 locations in 70 countries, with annual revenues of $12 billion.15

17Since that time period, in consultation with Unipart, we put all of our DiesoLiFTTM sales and marketing efforts in the United Kingdom and Europe on hold pending the proper development of the Program. Equipment vendors for all aspects of the Program have now been sourced and vetted and the deliberate pace to ensure the Program was ready for proper deployment has reached the launch point.

~~Brenntag~~We ~~Europe~~expect ~~commenced~~initial ~~the~~Program ~~ramp~~deployments ~~up of its sales and marketing efforts on behalf of FPS in 2014. Brenntag has introduced FPS products~~ to acustomers ~~number~~late ofduring ~~its~~the ~~customers~~second quarter and isearly ~~also~~third ~~using~~quarter ~~DiesoLiFTTM in one~~ of ~~its captive fleets~~2015.

InThe ~~addition,~~reduction in ~~June~~revenues ~~2014~~during the three months ended March 31, ~~FPS~~2015 ~~and~~compared ~~Brenntag~~to ~~expanded~~the ~~their~~three ~~relationship~~months ~~when~~ended ~~Brenntag~~March ~~Brazil~~31, ~~agreed~~2014 is attributable to ~~manufacture~~two ~~and~~factors: ~~market~~(1) ~~FPS~~the ~~products~~fact inthat ~~Brazil.~~we ~~FPS~~put sales and ~~Brenntag~~marketing ~~Brazil~~efforts of DiesoLiFTTM on hold, ~~together~~as ~~with~~discussed ~~FPS’s~~above; ~~sales~~and ~~group~~(2) a decrease in ~~Brazil,~~orders ~~have~~for ~~sold~~our PerfoLiFTTM BD-Series bio-diesel stabilization product from distribution partner Nordmann Rassmann (“NRC”). We still expect an increase in year-to-year ~~and~~revenues ~~are~~for ~~now~~2015, ~~calling~~compared onto ~~most~~2014. The PerfoLiFTTM BD-Series has provided us with a steady flow of revenues over the ~~major~~last ~~bio-diesel~~two ~~manufacturers~~years inand ~~Brazil~~will continue to do so, ~~including~~but ~~Petrobras~~is not our primary business segment.

~~Brenntag~~The ~~also~~Program ~~sells~~is ~~FPS~~our ~~products~~primary tobusiness ~~Bardahl,~~focus ~~who~~and ~~repackages~~will be the ~~products~~primary ~~and~~driver ~~sells~~of toour ~~retail~~future ~~customers~~revenues ~~under~~and ~~its own brand name~~profits.

~~Nordmann~~Our ~~Rassmann (“NRC”): NRC is an FPS~~ distribution ~~partner~~partners ~~focusing~~will ~~its~~continue ~~efforts~~to inbe ~~Europe.~~primarily ~~NRC~~responsible isfor aour ~~leading~~sales ~~international~~and ~~distributor~~marketing ofefforts ~~specialty chemicals, lubricants~~ and ~~fuel~~the ~~additives.~~drivers ~~NRC sells its portfolio~~ of ~~high~~our ~~quality~~commercial ~~products throughout Germany, Austria, Central and Eastern Europe, Scandinavia and Switzerland~~progress. ~~NRC, founded in 1912, has annual revenues of $450 million.~~

~~NRC~~Unipart: We ~~has~~expanded ~~sold~~our ~~FPS~~marketing ~~products~~and todistribution ~~some~~agreement ofwith ~~the~~Unipart ~~largest~~in ~~bio-diesel~~2014 ~~manufacturers~~and inadditional ~~Europe~~amendments are pending. InFor ~~addition~~example, ~~NRC~~Unipart ~~has~~and athe ~~number~~Company are in the process of launching the Program in the United Kingdom within the rail and road transport markets, and in Europe within the rail ~~opportunities~~market, ~~pending~~to address the pressing needs that end-users have with fuel quality, storage and performance.

~~NRC~~In ~~also~~the ~~sells~~United ~~FPS~~Kingdom ~~products~~and Europe, the mandate to ~~Lubrichim,~~incorporate ~~who~~bio-diesel ~~repackages~~into the ~~products~~diesel fuel stream has created fuel storage and ~~sells~~equipment toperformance ~~retail~~problems. ~~under~~The ~~its~~use ~~own~~of ~~brand~~bio-diesel ~~name~~does provide emissions benefits. However, there are many drawbacks associated with bio-diesel use: it is not a stable fuel (it oxidizes and creates deposits); has a lower volumetric energy density than regular diesel (lower fuel economy and less power); naturally contains more water (fosters microbial contamination and sludge formation in tanks); causes corrosion and spray hole blockage of fuel injectors; causes seal failures; and causes fuel filter plugging.

~~Unipart~~Perhaps ~~Group: Unipart~~the isbiggest ~~FPS’s~~concern ~~exclusive~~caused ~~distribution~~by ~~partner~~extended ~~for~~bio-diesel ~~rail~~use ~~and~~relates ~~road~~to ~~transport~~engine inwarranties. ~~the~~Once ~~United~~in-specification ~~Kingdom.~~fuel ~~Unipart~~ is adelivered ~~multinational~~to ~~logistics~~an end-user, ~~supply~~the ~~chain,~~quality ~~manufacturing~~of that fuel and ~~consultancy~~the ~~company~~responsibility ~~with~~to ~~operations~~maintain that fuel in-specification ~~Europe,~~transfers ~~North~~to ~~America,~~the ~~Australia~~end-user. ~~and~~If ~~Japan~~the ~~serving~~end-user afuel ~~variety~~tank ofand/or ~~sectors~~fuel ~~that~~system ~~include~~is ~~automotive,~~compromised ~~rail,~~due ~~marine~~to ~~and~~sludge, ~~leisure.~~microbial ~~Unipart~~contamination, ~~has~~water ~~over~~and/or 10deposits,~~000~~ ~~employees~~the ~~and~~fuel ~~annual~~immediately ~~revenues~~becomes out-of-specification ~~approximately~~thereby ~~$1.7~~nullifying ~~billion~~the engine warranty.

The Program offered by Unipart ~~has~~and ~~made~~us amitigates ~~number~~all ofrisk ~~bulk~~associated ~~purchases~~with bio-diesel fuel use and provides the end-user the ability to maximize the performance and efficiency of ~~DiesoLiFTTM~~their equipment.

InThe ~~the~~Program ~~rail~~consists ~~industry, Unipart has now taken the lead with all~~ of: ~~FPS’s~~fuel ~~commercial~~tank ~~opportunities.~~testing; ~~The~~fuel ~~efficacy~~tank ofcleaning ~~DiesoliFTTM~~(our ~~has~~PerfoClean ~~been~~product ~~validated~~is inused); ~~numerous~~fuel ~~engine~~additive ~~types~~dosing ~~and~~equipment; wethe ~~expect Unipart to begin selling~~ DiesoLiFTTM tofuel aadditive ~~number~~formulation; ofand ~~passenger~~on-going ~~rail~~fuel ~~operators~~and ~~(ATOC~~fuel ~~members~~tank –analysis ~~Association~~and ofmonitoring. ~~Passenger~~The ~~Train~~Program ~~Operators~~ensures inthat ~~the~~end-users ~~United~~are ~~Kingdom)~~maintaining in-specification ~~the~~fuel ~~near future~~ and ~~commence~~optimizing ~~sales of DiesoLiFTTM to~~ the ~~freight~~performance ~~rail~~of ~~industry~~their ~~in 2015~~equipment.

InUnipart ~~the~~has ~~road~~established ~~transport~~business ~~industry~~partnerships with vendors who supply tank testing, ~~Unipart~~tank cleaning, fuel additive dosing and ~~FPS~~on-going ~~are~~fuel ~~working~~and ~~with~~fuel ~~over~~tank 40testing ~~operators,~~equipment. ~~including~~The ~~some~~cornerstone of the ~~largest~~Program ~~road~~is ~~transport~~DiesoLiFTTM, ~~companies~~our inproprietary ~~the~~fuel ~~United~~additive ~~Kingdom,~~formulation ~~which~~that ~~are~~is ~~currently~~proven ~~purchasing,~~to: orrestore ~~are~~lost ~~involved~~fuel ineconomy ~~field~~and ~~validation~~power ~~processes,~~loss associated with ~~DiesoLiFTTM.~~bio-diesel ~~Collectively,~~use; ~~these~~maintain ~~road~~fuel ~~transport~~system ~~companies~~cleanliness; ~~operate~~and ~~approximately~~provide ~~40,000~~fuel ~~vehicles~~stability by controlling oxidation and deposit formation.

~~Unipart will also commence sales and marketing activities on behalf of FPS to rail and road transport operators in Europe in 2015.~~16

~~United~~We ~~States: FPS~~expect ~~has~~Unipart ato ~~number~~roll ofout ~~road transport operators using~~ our ~~products,~~joint ~~one~~Program ~~such~~to ~~account~~a ~~for~~number ~~over~~of 7rail ~~years.~~and ~~FPS~~road istransport ~~also selling to~~ operators ofin ~~heavy~~the ~~duty~~United ~~off-road~~Kingdom ~~equipment;~~ and isEurope ~~involved~~beginning in athe ~~project~~second ~~with~~quarter ~~one~~ of ~~the largest municipal fleets in the United States~~2015.

Brenntag: In ~~addition~~2014, ~~FPS~~Brenntag ~~received~~commenced anthe ~~initial~~ramp ~~purchase~~up ~~order~~of ~~pursuant~~its tosales aand ~~product~~marketing ~~supply~~efforts ~~arrangement~~on ~~with~~our ~~a U~~behalf.~~S.-based~~ ~~retail~~Brenntag ~~fuel~~has ~~distribution~~introduced ~~company~~our ~~for~~products to a number of its ~~DiesoLiFTTM~~customers and ~~GasoLiFTTM~~made ~~fuel~~its ~~additives~~first ~~which~~sale ~~will~~into bethe ~~added~~marine tomarket ~~diesel~~in ~~and~~2014. ~~gasoline,~~Brenntag ~~respectively,~~also ~~creating~~sells ~~premium~~our ~~fuel~~products ~~blends~~to ~~for~~Bardahl, ~~both~~Lubrichim, ~~types~~ETSP, ofLubro ~~fuel~~and ~~for~~Eurol, ~~sale~~who atall repackage the products and sell to retail ~~pump~~customers inunder their ~~the~~own ~~United~~brand ~~States~~name.

18Going forward, we expect Brenntag to continue to ramp up their sales and marketing on our behalf by selling our products to: the road transport industry (fleets); refineries and fuel distributors; bio-diesel manufacturers; and the marine industry.

NRC: NRC continued to sell our products to some of the largest bio-diesel manufacturers in Europe in 2014. In addition, they have a number of road transport and rail opportunities pending.

Despite the fact that sales of our PerfoLiFT^TM BD-Series product line to NRC decreased during the three months ended March 31, 2015, compared to the three months ended March 31, 2014, we expect NRC to increase its sales of our PerfoLiFT^TM BD-Series of bio-diesel stability additives through increased sales to existing and sales to new accounts going forward. NRC has also begun to market our products to the marine industry.

United States: We have a number of road transport operators using our products, one such account for over nine years. We are also involved in a project with one of the largest municipal fleets in the United States.

Our project with a United States-based retail fuel distribution company is progressing and is expected roll out in the third quarter of 2015. This retail distribution company will be adding our DiesoLiFT^TM and GasoLiFT^TM to diesel and gasoline, respectively, to create premium blends for both types of fuel for sale at the retail pump in the United States.

Results of Operations

Three and ~~Nine~~ Months Ended ~~September~~March 3031, ~~2014~~2015 Compared to Three ~~and Nine~~ Months Ended ~~September~~March 3031, ~~2013~~2014

Net Revenues

Net ~~revenues~~revenue for the three months ended ~~September~~March 3031, ~~2014~~2015 ~~were~~was $~~677~~134,~~105~~073, as compared to $59374,~~463~~426 for the three-month period ended ~~September~~March 3031, ~~2013~~2014. This ~~increase~~decrease is primarily attributable to ~~increased~~decreased sales of the PerfoLiFTTM BD-Series and DiesoLiFTTM through our distributor network ~~($500,389 of the increase) and to end-users ($117,253 of the increase) during the three months ended September 30, 2014~~.

During the three months ended ~~September~~March 3031, ~~2014~~2015, 95100% of our sales were concentrated ~~among~~between ~~three~~four customers. During the three months ended ~~September~~March 3031, ~~2013~~2014, 9296% of our sales were concentrated ~~among~~between ~~three~~two customers. Sales revenue was split between sales to distributors (79%) and end-users (21%) for the three months ended September 30, 2014. Sales revenue was split between sales to distributors (61%) and end-users (39%) for the three months ended September 30, 2013. Sales revenue generated during the three months ended ~~September~~March 3031, ~~2014~~2015 and ~~September~~March 3031, ~~2013~~2014 was primarily generated from the sale of the PerfoLiFTTM BD-Series and DiesoLiFTTM .

~~Net~~Operating ~~revenues~~Income for the nine months ended September 30, 2014 were $1,506,198, as compared to $384,289 for the nine-month period ended September 30, 2013. This increase is primarily attributable to increased sales of the PerfoLiFTTM BD-Series and DiesoLiFTTM through our distributor network (~~$1,017,539 of the increase~~Expenses) ~~and to end-users ($104,370 of the increase) during the nine months ended September 30, 2014.~~

~~During~~Total ~~the~~operating ~~nine~~expense ~~months~~was ~~ended September 30~~$492,952 ~~2014,~~for ~~98% of our sales were concentrated among four customers. During~~ the ~~nine~~three months ended ~~September~~March 3031, ~~2013~~2015, ~~88%~~as ofcompared ~~our sales were concentrated among two customers. Sales revenue was split between sales~~ to ~~distributors~~operating ~~(88%)~~income ~~and~~of ~~end-users~~$1,822,579 ~~(12%)~~ for the ~~nine~~three-month ~~months~~period ended ~~September~~March 3031, 2014. ~~Sales~~This ~~revenue~~$2,315,531 ~~was~~increase ~~split~~in ~~between~~expense ~~sales~~from tothe ~~distributors~~prior ~~(81%)~~period ~~and~~was ~~end-users~~primarily ~~(19%)~~attributable ~~for~~to ~~the~~a ~~nine~~gain ~~months~~on ~~ended~~deferred ~~September~~revenue ~~30,~~liability ~~2013.~~of ~~Sales~~$2,998,242 ~~revenues~~recorded ~~generated~~ during the ~~nine~~three months ended ~~September~~March 3031, 2014 and ~~September~~a ~~30,~~decrease ~~2013~~in ~~were~~cost of operations primarily ~~generated~~due ~~from~~to ~~the~~decreased ~~sale~~sales ofand ~~the~~a ~~PerfoLiFTTM~~decrease BDin non-~~Series~~cash ~~and~~stock-based ~~DiesoLiFTTM~~compensation expense, which is more fully described below.

~~Operating Expenses~~ 17

Total operating expenses were $815,125 for the three months ended September 30, 2014, as compared to $346,575 for the three-month period ended September 30, 2013. This $468,550 increase from the prior period was primarily attributable to an increase in cost of operations due to increased sales and an increase in non-cash stock-based compensation expense, which is more fully described below.

Total operating expenses were $1,576,848 for the nine months ended September 30, 2014, as compared to $1,437,493 for the nine-month period ended September 30, 2013. This $139,355 increase from the prior period was primarily attributable to a gain on deferred revenue liability of $2,998,242 during the nine months ended September 30, 2014, partially offset by an increase in cost of operations due to increased sales and an increase in non-cash stock-based compensation expense, which is more fully described below.

Cost of Operations

Cost of operations was $~~440~~101,~~965~~472 for the three months ended ~~September~~March 3031, ~~2014~~2015, as compared to $33296,~~213~~951 for the three-month period ended ~~September~~March 3031, ~~2013~~2014. This ~~increase~~decrease was primarily due to ~~increased~~decreased sales for the three months ended ~~September~~March 3031, ~~2014~~2015, compared to the three months ended ~~September~~March 3031, ~~2013~~2014.

Cost of operations was $1,073,505 for the nine months ended September 30, 2014, as compared to $305,786 for the nine-month period ended September 30, 2013. This increase was due to increased sales for the nine months ended September 30, 2014, compared to the nine months ended September 30, 2013.

Selling, General and Administrative Expense

Selling, general and administrative expense for the three months ended ~~September~~March 3031, ~~2014~~2015 was $~~434~~391,~~059~~480 (including non-cash stock-based compensation of $7137,~~191~~277), as compared to $~~313~~878,~~362~~712 (including non-cash stock-based compensation of $0572,586) for the three-month period ended ~~September~~March 3031, ~~2013~~2014. This ~~increase~~decrease of $~~120~~487,~~697~~232 was primarily attributable to the following activities:

· a $71535,~~191~~309 ~~increase~~decrease in ~~non-cash~~ stock-based compensation expense ~~primarily~~ related to the ~~issuance~~cancellation of certain options previously granted to employees and Directors ~~during~~and ~~the~~new ~~three~~option ~~months~~grants ~~ended~~to ~~June~~employees ~~30, 2014; · a $35,000 increase in sales~~ and ~~marketing~~Directors ~~expenses~~during ~~related~~the tothree ~~our~~months ~~United~~ended ~~Kingdom~~March ~~sales force~~31, ~~which began during~~ 2014; · an approximate $30,000 increase in ~~travel~~employee expenses indue ~~support~~to of increased ~~marketing~~overseas ~~activities~~travel induring ~~Brazil~~ the ~~U.K.~~three ~~and~~months ~~western~~ended ~~Europe~~March 31, 2015; and · an approximate $4924,000 ~~decrease~~increase in ~~salary~~accounting ~~expense~~fees ~~(and~~ related ~~payroll~~to ~~taxes)~~audit ~~for~~services conducted during the ~~comparable~~three ~~periods~~months ~~primarily~~ended ~~due~~March to31, ~~the~~2015 ~~number~~for ofour ~~employees~~Annual onReport ~~payroll~~(no ~~decreasing~~such ~~from~~activities were conducted during the ~~prior~~first ~~comparable~~three ~~period~~months of 2014).

Selling, general and administrative expense for the nine months ended September 30, 2014 was $3,561,484 (including non-cash stock-based compensation of $2,438,983), as compared to $1,131,707 (including non-cash stock-based compensation of $16,875) for the nine-month period ended September 30, 2013. This increase of $2,429,777 was primarily attributable to the following activities:

· a $2,422,108 increase in non-cash stock-based compensation expense related to the cancellation of certain options previously granted to employees and Directors and new option grants to employees, Directors and non-employee consultants during the nine months ended September 30, 2014; · an approximate $124,000 decrease in salary expense (and related payroll taxes) for the comparable periods primarily due to the number of employees on payroll decreasing from the prior comparable period. · an approximate $89,000 increase in accounting fees related to audit services conducted during the three months ended June 30, 2014 for our Annual Report and quarterly reviews conducted by our independent registered accounting firm (such activities were not conducted during 2013); · an approximate $56,000 decrease in research and development expense primarily related to trials conducted at London Midlands during the three months ended March 31, 2013; and · an approximate $39,000 increase in sales and marketing expenses related to our United Kingdom sales force, which began during 2014.

Gain on Accounts Payable Write Off

Gain on accounts payable write off was $59,899 and $0 for the three months ended September 30, 2014 and September 30, 2013, respectively.

Gain on accounts payable write off was $59,899 and $0 for the nine months ended September 30, 2014 and September 30, 2013, respectively. This increase relates to the write off of certain outstanding payable balances that were dated at least five years before September 30, 2014. See Note 11 – Accounts Payable.

Gain on Deferred Revenue Liability Write Off

Gain on deferred revenue liability was $0 and $02,998,242 for the three months ended ~~September~~March 3031, ~~2014~~2015 and ~~September~~March 3031, ~~2013~~2014, respectively. The decrease relates to the first quarter of 2014 write off of a previously recorded obligation due to the expiration of the relevant statute of limitations. See Note 9 – Deferred Revenue.

Gain on deferred revenue liability was $2,998,242 and $0 for the nine months ended September 30, 2014 and September 30, 2013, respectively. The increase relates to the first quarter of 2014 write off of a previously recorded obligation due to the expiration of the relevant statute of limitations. See Note 9 – Deferred Revenue.

Interest Income (Expense), Net

Interest income (expense), net was $(54148,~~193~~956) and $1758 for the three months ended ~~September~~March 3031, ~~2014~~2015 and ~~September~~March 3031, ~~2013~~2014, respectively. The increase in interest income (expense), net is primarily attributable to interest expense recorded relating to the third quarter 2014 ~~debt~~convertible note financing.

Interest income (expense), net was $(54,020) and $79 for the nine months ended September 30, 2014 and September 30, 2013, respectively. The increase in interest income (expense), net is primarily attributable to interest expense recorded relating to the third quarter 2014 debt financing.

Gain (Loss) on Derivative Liability

Gain (loss) on derivative liability was $~~234~~37,~~591~~306 and $0(457,000) for the three months ended ~~September~~March 3031, ~~2014~~2015 and ~~September~~March 3031, ~~2013~~2014, respectively.

~~Gain~~The gain (loss) on derivative liability recorded during the three months ended March 31, 2015 and March 31, 2014 was $primarily attributable to certain warrants issued during 2009 and during the third quarter of 2014 (~~67,409~~see Note 6 – Convertible Note Payable) ~~and~~that $0are subject to dilutive adjustments for ~~the~~share ~~nine~~issuances ~~months~~(full ~~ended~~ratchet ~~September~~reset 30features) tied to future issuances of our equity securities. Because of these characteristics, ~~2014~~our derivative liability must be measured at fair value and ~~September~~re-evaluated 30at the end of each reporting period. The mark-to-market of the derivative liability at March 31, ~~2013~~2015 and March 31, ~~respectively~~2014 caused such gain (loss).

~~During~~As ~~2009,~~of weMarch ~~granted a warrant to purchase 2~~31,~~000,000~~ ~~shares~~2015 ofand ~~the~~December ~~Company’s common stock to an accredited investor (the “2009 Warrant”) in conjunction with equity raise efforts. On April 12~~31, ~~2013~~2014, the ~~Company’s~~fair ~~Board~~value of ~~Directors~~both ~~authorized~~components ~~and approved the extension~~ of ~~the~~our ~~expiration~~derivative ~~date~~liability ~~and~~is ~~a change of exercise price for this warrant. The outstanding share purchase warrant originally had a March 23, 2014 expiration date and an exercise price of~~ $~~0.25. The new modified terms extended the warrant expiration date to April 11~~420,074 ~~2018~~ and ~~reduced the exercise price to~~ $~~0.226. The exercise price is also subject to dilutive adjustments for share issuances (full ratchet reset features). Based upon subsequent equity issuances through September 30~~457, ~~2014~~380, ~~the exercise price of these warrants is now $0~~respectively.~~15.~~

Because the 2009 Warrant has full reset adjustments tied to future issuances of equity securities by the Company, it is subject to derivative liability treatment under the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) ASC 815-40-15, “Determining Whether an Instrument (or Embedded Feature) is Indexed to an Entity's Own Stock” (“ASC 815-40-15”). ASC 815-40-15 requires as of the date the warrant is issued, the derivative liability to be measured at fair value and re-evaluated at the end of each reporting period.18

During the third quarter of 2014, we issued a convertible note to investors that had underlying warrant coverage (the “2014 Debt Funding Warrants”) with terms subject to derivative liability treatment if certain circumstances occur.

Because the 2014 Debt Funding Warrants have full reset adjustments tied to future issuances of equity securities by the Company, it is subject to derivative liability treatment under ASC 815-40-15. ASC 815-40-15 requires as of the date the warrant is issued, the derivative liability to be measured at fair value and re-evaluated at the end of each reporting period.

As of December 31, 2013, we determined the fair value of the 2009 Warrant derivative liability to be nominal. As of September 30, 2014, the fair value of both the 2009 Warrant and the 2014 Debt Funding Warrants derivative liability is $639,637 and the Company recognized a gain (loss) on derivative liability of $234,591 for the three months ended September 30, 2014 and $(67,409) for the nine months ended September 30, 2014.

Loss on Conversion of Debt From a Related Party

Loss on conversion of debt from a related party was $0 and $0387,500 for the three months ended ~~September~~March 3031, ~~2014~~2015 and ~~September~~March 3031, ~~2013~~2014, respectively. During the three months ended March 31, 2014, we converted $550,000 of notes payable to related parties, triggering this loss. No such conversion occurred during the three months ended March 31, 2015. See Note 5 – Equity Commitment and Related Party Transactions.

Loss on conversion of debt from a related party was $387,500 and $0 for the nine months ended September 30, 2014 and September 30, 2013, respectively. During the nine months ended September 30, 2014, we converted $550,000 of notes payable to related parties, triggering this loss.

Income Tax Provision

We have operated at a net loss since inception and have not recorded or paid any income taxes, other than for non-cash deferred tax expense related to a basis difference between financial reporting and tax reporting ~~deductible~~ goodwill. We have significant net operating loss (“NOL”) carry-forwards that would be recognized at such time as we demonstrate the ability to operate on a profitable basis for an extended period of time. The deferred income tax asset resulting primarily from the NOL carry-forwards has been fully reserved with a valuation allowance. Because goodwill is not depreciated and has an indefinite life for book purposes, the deferred tax liability related to the book to tax basis difference is not offset against the deferred tax assets when establishing our valuation allowance. ~~Accordingly~~We recorded $16,000 weof ~~record~~expense ~~non-cash~~during ~~deferred~~the ~~income~~three ~~tax~~months ~~expense~~ended March 31, ~~which~~2014 ~~increases~~but did not record any such expense during the ~~deferred~~three ~~tax~~months ~~liability~~ended March 31, of2015 ~~approximately~~as ~~$16,000~~we ~~each~~deemed ~~quarter~~the valuation allowance to be sufficient.

Net Income (Loss)

Net income (loss) for the three months ended ~~September~~March 3031, ~~2014~~2015 was $26(470,~~378~~529), as compared to $~~(303~~1,~~095)~~336,563 for the three months ended ~~September~~March 3031, ~~2013~~2014. The increase in net ~~income~~loss was primarily due to ana ~~increase~~decrease in gross margin from sales ($~~209~~44,~~890~~874), ~~from~~a gain on a deferred revenue liability write off ($2,998,242) recorded during the ~~comparable~~three ~~prior~~months ~~period~~ended March 31, 2014 and increases in employee expenses (approximately $30,000), aaccounting ~~gain~~fees on(approximately ~~derivative~~$24,000) ~~liability~~and ofinterest income (expense), net ($~~234~~149,~~591~~014), partially offset by ana ~~increase~~decrease in non-cash stock-based compensation expense ($71535,~~191~~309), ~~and~~fluctuation ~~interest~~gains ~~income~~related to a derivative liability (~~expense~~$494,306) and conversions of related party notes during the three months ended March 31, ~~net~~2014 ($54387,~~176~~500), as described above. The basic and diluted net loss per common share for the three months ended ~~September~~March 3031, ~~2014~~2015 and ~~September~~March 3031, ~~2013~~2014 was $(0.00) and $(0.~~00)~~01, respectively.

Net loss for the nine months ended September 30, 2014 was $627,579, as compared to $1,101,125 for the nine months ended September 30, 2013. The decrease in net loss was primarily due an increase in gross margin from sales ($354,190), a gain on a deferred revenue liability write off ($2,998,242) and a decrease in salary expense (approximately $124,000) and research and development expense (approximately $86,000), partially offset by increases in non-cash stock-based compensation expense ($2,422,108), accounting fees (approximately $89,000), United Kingdom sales and marketing expenses (approximately $39,000), interest income (expense), net ($53,941), losses related to a derivative liability ($67,409) and conversions of related party notes ($387,500), as described above. The basic and diluted net loss per common share for the nine months ended September 30, 2014 and September 30, 2013 was $(0.00) and $(0.01), respectively.

Recently Issued Accounting Pronouncements

Management does not believe that any recently issued, but not effective, accounting standards, if currently adopted, would have a material effect on the Company's financial statements.

Critical Accounting Policies and Estimates

Revenue Recognition

We recognize revenue from the sale of our products when the price is fixed and determinable, persuasive evidence of an arrangement exists, the products are shipped, title and risk of loss has passed to the buyer and collectability of the resulting receivable is reasonably assured. The majority of our revenues is from sales to product distributors. Product distributors do not have the option to return product that is not immediately sold to an end-user. Therefore, our revenue recognition is not conditional on whether a distributor is able to sell product to an ultimate product end-user. Our sales policies for end-users are consistent with product distributor sales policies.

Beginning in May 2013, in an effort to address our outstanding payable balance with and at the request of our product manufacturer, our non-United States customers began remitting receivable payments directly to our product manufacturer in lieu of remitting payment directly to us. Under this arrangement, we still maintained the risks and benefits related to sending the product to each customer and thus recorded sales revenues (and associated cost of sales) applying the gross reporting treatment for each transaction pursuant to ASC 605-45, “Principal Agent Considerations.” During the first quarter of 2014, we once again began collecting payments directly from our non-United States customers and paying our product manufacturer separately for the corresponding cost of manufactured goods.

Derivative Financial Instruments

~~The~~We ~~Company~~evaluate ~~evaluates~~our ~~its~~ financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in ~~the~~our statements of operations. For stock-based derivative financial instruments, ~~the~~we ~~Company~~use ~~uses~~ a Lattice Model option pricing model, in accordance with the Financial Accounting Standards Board (the “FASB”) Accounting Standards Codification (“ASC”) ASC 815-15, “Derivatives and Hedging,” to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in ~~the~~our balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within ~~twelve~~12 months of the balance sheet date.

Revenue Recognition

We recognize revenue from the sale of our products when the price is fixed and determinable, persuasive evidence of an arrangement exists, the products are shipped, and title and risk of loss has passed to the buyer and collectability of the resulting receivable is reasonably assured. The majority of our revenues is from sales to product distributors. Product distributors do not have the option to return product that is not immediately sold to an end-user. Therefore, our revenue recognition is not conditional on whether a distributor is able to sell product to an ultimate product end-user. Our sales policies for end-users are consistent with product distributor sales policies.

Beginning in May 2013, as an effort to address our outstanding payable balance with and at the request of our product manufacturer, our non-United States customers began remitting receivable payments directly to our product manufacturer in lieu of remitting payment directly to us. Under this arrangement, we still maintained the risks and benefits related to sending the product to each customer and thus recorded sales revenues (and associated cost of sales) applying the gross reporting treatment for each transaction pursuant to ASC 605-45, “Principal Agent Considerations.” During the first quarter of 2014, we once again began collecting payments directly from our non-United States customers and paying our product manufacturer separately for the corresponding cost of manufactured goods.

Investor Warrant Modifications

The Company and the Board from time to time have authorized the modification to the terms of certain prior warrant issuances. We analyze such modifications under ASC 718 “Compensation-Stock Compensation” (“ASC 718”) and ASC 505, “Equity Based Payments to Non-Employees” (“ASC 505”) and have historically determined that no gain or loss is recognized upon the modification due to the warrants having been issued to an investor and investor awards not being subject to either ASC 718 or ASC 505.

Valuation of Goodwill

We account for goodwill and intangible assets in accordance with ASC 350 "Intangibles-Goodwill and Other" ("ASC 350"). ASC 350 requires that goodwill and other intangibles with indefinite lives be tested for impairment annually or on an interim basis if events or circumstances indicate that the fair value of an asset has decreased below its carrying value. In addition, ASC 350 requires that goodwill be tested for impairment at the reporting unit level (operating segment or one level below an operating segment) on an annual basis and between annual tests when circumstances indicate that the recoverability of the carrying amount of goodwill may be in doubt. Application of the goodwill impairment test requires judgment, including the identification of reporting units, assigning assets and liabilities to reporting units, assigning goodwill to reporting units, and determining the fair value. Significant judgments required to estimate the fair value of reporting units include estimating future cash flows, determining appropriate discount rates and other assumptions. Changes in these estimates and assumptions or the occurrence of one or more confirming events in future periods could cause the actual results or outcomes to materially differ from such estimates and could also affect the determination of fair value and/or goodwill impairment at future reporting dates.

We completed an evaluation of goodwill at March 31, 2015 and December 31, 2014 and determined that there was no impairment. We employed a qualitative evaluation for our March 31, 2015 and December 31, 2014 analyses.

Liquidity and Capital Resources

A critical component of our operating plan affecting our ability to execute the product commercialization process is the cash resources needed to pursue our marketing and sales objectives. Until we are able to generate positive and sustainable operating cash flow, our ability to attract additional capital resources in the future will be critical to continue the funding of our operations.

In its ~~May~~March 1431, ~~2014~~2015 report, our independent registered public accounting firm expressed substantial doubt about our ability to continue as a going concern. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty.

24While we cannot make any assurances as to the accuracy of our projections of future capital needs, based on our current cash available as of May 14, 2015 (approximately $85,000), receivable collections expected to be received within the next 30 days (approximately $70,000) and a remaining $500,000 balance from a $1,000,000 equity commitment from one of our Directors (see Note 5 - Equity Commitment and Related Party Transactions), we have adequate cash and cash equivalents balances and commitments to fund operations through the end of the third quarter of 2015. Management implemented a salary deferral program for all employees during 2011 to conserve our cash position. This salary deferral program has continued.

~~While~~We wehave ~~cannot~~been ~~make~~funded ~~any~~over ~~assurances as to~~ the ~~accuracy~~last ofthree ~~our~~years ~~projections~~by ofprivate ~~future~~investments ~~capital~~into ~~needs~~the Company, ~~based~~primarily onfrom ~~debt~~existing ~~funding~~shareholders, ~~received~~in ~~during~~ the ~~third~~form ~~quarter~~ of ~~2014,~~restricted ~~our~~stock ~~current~~and ~~cash~~a ~~available~~convertible asnote ofpayable ~~November 14, 2014~~ (~~approximately~~see ~~$665,000),~~Note ~~expected~~6 ~~receivable~~- ~~collections~~Convertible ~~and~~Note aPayable). ~~remaining~~We ~~$500,000~~believe ~~balance~~we ~~from~~still ahave ~~$1,000,000~~access ~~equity~~to ~~commitment~~capital from ~~one~~existing ofshareholders ~~our~~and ~~Directors~~in ~~(see~~addition, ~~Note~~management 5is tocurrently ~~our~~in ~~financial~~discussions ~~statements),~~with weits ~~believe~~investment webanker ~~have~~and ~~adequate~~with ~~cash~~a ~~and~~strategic ~~cash~~investor ~~equivalents~~regarding ~~balances~~an ~~and~~equity ~~commitments~~investment tothat ~~fund~~would ~~operations~~allow ~~through~~us ~~the~~to ~~end~~operate offor the ~~third~~foreseeable ~~quarter of 2015~~future. ~~In 2011~~However, ~~management~~we ~~implemented~~can amake ~~salary~~no ~~deferral~~assurances ~~program~~that ~~for~~additional ~~all~~capital ~~employees~~will be available to ~~conserve~~us ~~our~~from ~~cash~~either ~~position.~~of ~~This~~these ~~salary~~sources. ~~deferral~~Therefore, ~~program~~if ~~has~~we ~~continued~~are unable to besecure inadditional ~~effect~~capital, ~~during~~we ~~the~~will ~~first~~need ~~nine~~to ~~months~~curtail ~~of 2014~~operations.

WeCash ~~have~~used ~~been~~in ~~funded~~operating ~~since~~activities ~~inception~~was ~~primarily~~$308,042 byfor ~~unregistered~~the ~~sales~~three ofmonths ~~Company~~ended ~~restricted~~March ~~stock~~31, ~~generally to existing shareholders. During the third quarter of 2014~~2015, weas ~~completed~~compared ato ~~convertible~~cash ~~note~~used ~~funding~~in ~~that~~operating ~~netted~~activities usof ~~approximately~~ $~~887~~344,~~500~~473 ~~(after~~for ~~payment~~the ofthree ~~legal~~months ~~and~~ended ~~placement~~March ~~agent~~31, ~~fees related to the funding)~~2014. WeThe ~~believe~~decrease wein ~~still~~cash ~~have~~flow ~~access~~used ~~to capital from existing shareholders and~~ in ~~addition,~~operating ~~management~~activities iswas indue ~~the~~primarily ~~process~~to ~~of executing~~ a ~~plan~~decrease ~~that~~in weour ~~believe~~accounts ~~will~~receivable ~~provide~~balance us($390,536) ~~with~~due ~~sufficient funds~~ to ~~allow~~timing ~~us to operate through the end~~ of ~~the~~customer ~~third~~cash ~~quarter of 2015. However~~collections, wepartially ~~can~~offset ~~make~~by noa ~~assurances~~decrease ~~that~~in ~~additional~~our ~~capital~~accounts ~~will~~payable bebalance ~~available~~($280,284) due to ustiming ~~from either~~ of ~~these~~vendor ~~sources.~~payments ~~Therefore,~~and ifa wedecrease ~~are~~in ~~unable~~accrued tocompensation ~~secure additional capital~~($44, ~~we will need to curtail operations~~558).

Cash ~~used~~provided inby ~~operating~~financing activities was $~~1,018,163~~0 for the ~~nine~~three months ended ~~September~~March 3031, ~~2014~~2015, as compared to ~~cash used in operating activities of~~ $~~705~~601,~~393~~440 for the ~~nine~~three months ended ~~September~~March 3031, ~~2013~~2014. ~~The~~During ~~increase in cash used in operating activities was due primarily to timing of receivable collections in~~ the ~~current~~three ~~period versus the prior comparable period and reduced cash expenditures associated with payroll for the nine~~ months ended ~~September~~March 3031, 2014, ~~due~~we toraised a$601,440 ~~reduced~~upon ~~number~~the ofprivate ~~employees~~placement ~~and~~of ~~reduced~~26,502,983 ~~base~~restricted ~~salary~~shares ~~levels~~of ~~for~~our ~~accrued~~common ~~but~~stock ~~unpaid salary calculations in 2014, compared~~ to ~~2013~~accredited investors.

~~Cash~~Net ~~provided~~cash decreased by ~~financing activities was~~ $1308,~~701,056~~042 for the ~~nine~~three months ended ~~September~~March 3031, ~~2014~~2015, as compared to ~~$716,114~~an ~~for~~increase ~~the~~in ~~nine~~net ~~months~~cash ~~ended~~of ~~September 30~~$256,967 ~~2013.~~for ~~During~~ the ~~nine~~three months ended ~~September~~March ~~30, 2014, we raised $827,724 upon the private placement of~~ 31,~~894,778~~ ~~restricted shares of our common stock to accredited investors. In addition, during the third quarter of~~ 2014 ~~we received gross proceeds of $1,000,000 from the issuance of a note payable~~. During the nine months ended September 30, 2013, we raised $466,114 upon the private placement of 11,680,670 restricted shares of our common stock to accredited investors. During the nine months ended September 30, 2013, we also received net proceeds of $250,000 in the form of notes payable from related parties.

~~Net~~During ~~cash~~the ~~increased~~three bymonths ~~$682,893~~ended ~~for~~March ~~the~~31, ~~nine~~2015 ~~months~~and ~~ended~~March ~~September 30~~31, 2014, aswe ~~compared~~did tonot anmake ~~increase~~significant investments in ~~net~~property ~~cash~~and ofequipment ~~$10,721~~and ~~for~~do ~~the~~not ~~nine~~anticipate ~~months~~doing ~~ended~~so ~~September~~in ~~30,~~the ~~2013~~immediate future.

~~During~~Working ~~the~~capital ~~nine~~deficit ~~months~~at ~~ended~~March ~~September~~31, 302015 was $(1,871,959), ~~2014~~as ~~and~~compared ~~September~~to 30$(825,938) ~~2013~~at December 31, we2014. ~~did~~The ~~not~~negative ~~make~~working ~~significant~~capital ~~investments~~balance infor ~~property~~March 31, 2015 is negatively impacted by the reclassification of the convertible note related items from long term to current liabilities during the first quarter of 2015 and ~~equipment~~a net $(318,733) impact of the deferred financing cost asset and dothe ~~not~~derivative ~~anticipate~~liability ~~doing~~recorded soas inMarch 31, 2015. The negative working capital balance for December 31, 2014 is negatively impacted by the ~~immediate~~net ~~future~~$(329,825) impact of the deferred financing cost asset and the derivative liability recorded as of December 31, 2014.

Working capital deficit at September 30, 2014 was $(418,345), as compared to $(4,541,929) at December 31, 2013. The negative working capital balance for September 30, 2014 is negatively impacted by the net $(485,964) impact of the deferred financing cost asset and the derivative liability that was recorded during the nine months ended September 30, 2014. The negative working capital amount for December 31, 2013 is strongly impacted by the approximate $3 million deferred revenue liability that was recorded on our balance sheet, but has since been removed.21

25Effective October 27, 1999, we merged with Blencathia Acquisition Corporation ("Blencathia"). Blencathia was a public shell company with immaterial assets and liabilities and 312,000 shares outstanding at the time of the merger, which it redeemed and cancelled upon the merger. In exchange, we issued 312,000 of our common shares to the prior Blencathia owner with the contractual understanding that such shares were to be sold by that owner to achieve gross cash proceeds of $500,000. Any excess proceeds were to be returned to us and any deficiency was to be made up by us issuing additional shares or paying the difference in cash. As we believed that we controlled the ultimate timing of the sale of these 312,000 shares by the prior Blencathia owner, we did not consider these shares as issued or outstanding for purposes of computing loss per share.

In 2006, we learned that the prior Blencathia owner had, in fact, sold the 312,000 shares for aggregate proceeds of approximately $150,000, without our consent. Accordingly, in the fourth quarter of 2006, we recorded $500,000 of general expenses (representing the cost of the 1999 merger) and the deemed issuance of approximately $150,000 of common stock. Since 2009, we have made payments to the prior Blencathia owner in the aggregate of $160,000 reducing this obligation. The remaining $190,000 obligation has been reflected as a current accrued expense. We are in negotiations with the prior Blencathia owner to resolve this obligation and may ultimately settle the obligation with either cash or equity securities with a lower market value. Beginning in 2006, the 312,000 shares have been reflected as outstanding for earnings per share computations.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

Our management has evaluated, with the participation of our principal executive officer and principal financial officer, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of ~~September~~March 3031, ~~2014~~2015. Based on this evaluation, the principal executive officer and principal financial officer have identified a material weakness in our internal control over financial reporting. Because of the material weakness, the principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective at ~~September~~March 3031, ~~2014~~2015.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended ~~September~~March 3031, ~~2014~~2015, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

This quarterly report does not include an attestation report of our independent auditors regarding internal control over financial reporting. Management's report was not subject to attestation by our independent auditors pursuant to temporary rules of the SEC that permit our company to provide only management's report in this quarterly report.

2622

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

We are periodically subject to various lawsuits and claims with respect to matters arising out of the normal course of business. While the impact on future financial results is not subject to reasonable estimation because considerable uncertainty exists, management believes, after consulting with counsel, that it is more likely than not that the ultimate liabilities resulting from such lawsuits and claims will not materially affect our financial position, results of operations or liquidity.

On July 31, 2006, we received notice from the American Arbitration Association ("AAA") of a Demand for Arbitration dated July 27, 2006 received by the AAA naming ~~FPS~~us as Respondent and TPG Capital Partners (“TPG”), the prior Blencathia ~~Acquisition Corporation (“Blencathia”)~~ owner, as the Claimant. The arbitration had been requested by TPG to resolve an alleged aggregate proceeds shortfall from the sale of ~~FPS~~Company securities issued in the Blencathia merger. TPG has claimed they sold some or all of the 312,000 shares and the sales have not generated at least $500,000 of proceeds, as guaranteed in the merger documents.

In an effort to resolve this matter prior to submission to binding arbitration, both TPG and ~~FPS~~the Company participated in a non-binding mediation conference on January 30, 2007, which did not resolve the matter. Informal discussions are ongoing. It is not expected that the ultimate settlement of this matter, considering we have recorded a liability for the shortfall amount, will have an additional adverse material effect on ~~FPS~~the Company. Since 2009, ~~FPS~~we ~~has~~have made payments to TPG totaling $160,000 to reduce the recorded liability. The remaining liability balance is $190,000 at ~~September~~March 3031, ~~2014~~2015.

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

None.

Item 5. Other Information

There have been no material changes to the procedures by which security holders may recommend nominees to our Board of Directors since the filing of our ~~quarterly~~Annual ~~report on Form 10-Q for the quarter ended June 30, 2014~~Report.

2723

Item 6. Exhibits

(a) The following exhibits are filed as part of this report:

31.1		Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended.

31.2		Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended.

32.1		Certification of Chief Executive 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 Chief Financial 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

101.PRE		XBRL Taxonomy Extension Presentation Linkbase

101.LAB		XBRL Taxonomy Extension Labe Linkbase

101.CAL		XBRL Taxonomy Extension Calculation Linkbase

101.DEF		XBRL Taxonomy Extension Definition Linkbase

2824

SIGNATURES

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

	FUEL PERFORMANCE SOLUTIONS, INC.(Registrant)
	FUEL PERFORMANCE SOLUTIONS, INC. (Registrant)
Date: November 14, 2014	By:	/s/ Jonathan R. Burst
Date: May 14, 2015	By:	/s/ Jonathan R. Burst
		Jonathan R. Burst
		Chief Executive Officer
		(Principal Executive Officer)
Date: May 14, 2015	By:	/s/ Stuart D. Beath
		Stuart D. Beath
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

Date: November 14, 2014	By:	/s/ Stuart D. Beath
		Stuart D. Beath
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

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