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 March 31, 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)

(314) 727-3333 (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 May 14, 2015: Common stock, par value $0.01 per share – 203,758,698 shares outstanding.

INDEX

		PAGE NO.

PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements

	Balance Sheets — March 31, 2015 (unaudited) and December 31, 2014		3

	Statements of Operations (unaudited) — Three-Month Periods Ended March 31, 2015 and March 31, 2014		4

	Statement of Stockholders’ Equity (Deficit) (unaudited) — Three-Month Period Ended March 31, 2015		5

	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		15

Item 4.	Controls and Procedures		22

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings		23

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		23

Item 5.	Other Information		23

Item 6.	Exhibits		24

FUEL PERFORMANCE SOLUTIONS, INC.

(formerly known as International Fuel Technology, Inc.)

BALANCE SHEETS

	March 31,			December 31,
	2015			2014
	(Unaudited)
ASSETS

Current assets
Cash and cash equivalents	$	222,159		$	530,201
Accounts receivable		76,071			338,572
Inventory		67,256			80,247
Deferred financing cost		101,341			127,555
Prepaid expenses and other assets		21,168			38,937
Total current assets		487,995			1,115,512

Goodwill		2,211,805			2,211,805

Total assets	$	2,699,800		$	3,327,317

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities
Accounts payable	$	250,920		$	507,044
Convertible note payable, net of discount of $462,575 and $0, respectively		629,925			-
Convertible note payable – related party, net of discount of $24,346 and $0, respectively		33,154			-
Accrued interest		68,183			-
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
Total current liabilities		2,359,954			1,941,450

Convertible note payable, net of discount of $0 and $550,975, respectively		-			541,525
Convertible note payable – related party, net of discount of $0 and $28,999, respectively		-			28,501
Accrued interest		-			39,917
Accrued interest – related party		-			2,101
Deferred rent		9,303			10,028
Deferred income taxes		723,000			723,000
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 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		72,296,209			72,258,932
Accumulated deficit		(73,256,130	)		(72,785,601	)
Total stockholders' equity (deficit)		(392,457	)		40,795

Total liabilities and stockholders' equity (deficit)	$	2,699,800		$	3,327,317

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
	March 31,			March 31,
	2015			2014

Net revenues	$	134,073		$	374,426

Operating income (expenses):
Cost of operations		(101,472	)		(296,951	)
Selling, general and administrative expense		(391,480	)		(878,712	)
Gain on deferred revenue write off		-			2,998,242
Total operating income (expenses)		(492,952	)		1,822,579

Net income (loss) from operations		(358,879	)		2,197,005

Interest income (expense), net		(148,956	)		58
Gain (loss) on derivative liability		37,306			(457,000	)
Loss on conversion of debt from a related party		-			(387,500	)

Net income (loss) before income taxes		(470,529	)		1,352,563

Income tax provision		-			16,000

Net income (loss)	$	(470,529	)	$	1,336,563

Basic and diluted net loss per common share	$	(0.00	)	$	0.01

Weighted-average common shares outstanding, basic		203,758,698			178,503,124
Weighted-average common shares outstanding, diluted		203,758,698			189,237,638

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 THREE-MONTH PERIOD ENDED MARCH 31, 2015

(Unaudited)

	Common Stock Shares		Common Stock Amount		Treasury Stock			Discount on Common Stock			Additional Paid-in Capital		Accumulated Deficit			Total
Balance, December 31, 2014		205,198,698	$	2,051,987	$	(664,600	)	$	(819,923	)	$	72,258,932	$	(72,785,601	)	$	40,795
Expense relating to stock option grants		-		-		-			-			37,277		-			37,277
Net loss		-		-		-			-			-		(470,529	)		(470,529	)
Balance, March 31, 2015		205,198,698	$	2,051,987	$	(664,600	)	$	(819,923	)	$	72,296,209	$	(73,256,130	)	$	(392,457	)

See accompanying Notes to Unaudited Financial Statements.

FUEL PERFORMANCE SOLUTIONS, INC.

(formerly known as International Fuel Technology, Inc.)

STATEMENTS OF CASH FLOWS

(Unaudited)

	Three Months Ended March 31, 2015			Three Months Ended March 31, 2014
Cash flows from operating activities:
Net income (loss)	$	(470,529	)	$	1,336,563
Adjustments to reconcile net loss to net cash used in operating activities:
Non-cash option expense		37,277			572,586
Gain on deferred revenue write off		-			(2,998,242	)
(Gain) loss on derivative liability		(37,306	)		457,000
Amortization of debt discount		93,053			-
Amortization of deferred financing cost		26,214			-
Loss on conversion of debt from a related party		-			387,500
Income tax provision		-			16,000
Change in assets and liabilities:
Accounts receivable		262,501			(128,035	)
Inventory		12,991			6,125
Prepaid expenses and other assets		17,769			(39,311	)
Accounts payable		(256,124	)		24,160
Accrued compensation		(22,917	)		21,641
Accrued interest payable		29,754			-
Deferred rent		(725	)		(460	)
Net cash used in operating activities		(308,042	)		(344,473	)

Cash flows from financing activities:
Proceeds from issuance of common stock		-			601,440
Net cash provided by financing activities		-			601,440

Net increase in cash and cash equivalents		(308,042	)		256,967
Cash and cash equivalents, beginning		530,201			216,913
Cash and cash equivalents, ending	$	222,159		$	473,880

Supplemental disclosure of cash flow information:
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

See accompanying Notes to Unaudited Financial Statements.

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 “Company,” “we,” “us” or “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 annual report on Form 10-K for the year ended December 31, 2014, filed with the SEC on March 31, 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 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 the Company to continue as a going concern.

Note 3 – Significant Accounting Policies

Derivative Financial Instruments

We evaluate our 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, we use 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

We measure our financial assets and liabilities in accordance with the requirements of ASC 820, “Fair Value Measurements and Disclosures,”which 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

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 the three months ended March 31, 2015 and March 31, 2014 is as follows:

	Three Months Ended March 31, 2015		Three Months Ended March 31, 2014

Awards to employees and Directors	$	37,277	$	489,272
Awards to non-employees		-		83,314
Total non-cash stock-based compensation expense	$	37,277	$	572,586

Employee and Director Awards

During the three months ended March 31, 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.

The following table summarizes information about stock options issued to employees and Directors that were issued and outstanding during the three months ended March 31, 2015:

	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

Non-employee Awards

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

The following table summarizes information about stock options issued to non-employees that were issued and outstanding during the three months ended March 31, 2015:

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

Outstanding at December 31, 2014		5,425,000	$	0.19		2.57	$	8,700

Granted		-		NA		NA
Cancelled		-		NA		NA
Expired		-		NA		NA
Outstanding at March 31, 2015		5,425,000	$	0.19		2.32	$	7,470

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

Sales of Common Stock

We did not receive any proceeds from the sale of common stock during the three months ended March 31, 2015.

See Note 5 – Equity Commitment and Related Party Transactions for a description of other equity transactions the Company effected during the three months ended March 31, 2015.

Note 5 – Equity Commitment and Related Party Transactions

On August 22, 2014, the Company borrowed $50,000 from Jonathan Burst, the chairman of our Board of Directors (the “Board”) and Chief Executive Officer. This loan was pursuant to the convertible note payable transaction discussed in Note 6 - Convertible Note Payable below.

Effective December 11, 2007, we received an investment commitment from Rex Carr, a Director of the Company and a holder of over 5% of our common stock. Pursuant to the terms of the commitment, Mr. Carr has agreed to invest up to an aggregate of $1,000,000 in the Company, at such time or times as we may request, in the form of a purchase or purchases of our restricted common stock. We may elect to draw from the commitment 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 we elect to utilize available commitment funds, we will issue to Mr. Carr that number of our shares of restricted common stock equal to the 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 as quoted on OTC Market Group’s OTCQB marketplace on the date of the sale. There is no stipulation regarding the duration of this commitment. As of both March 31, 2015 and December 31, 2014, $500,000 remains available under this equity commitment.

Note 6 – Convertible Note Payable

On August 22, 2014 (the “Closing Date”), 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, 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”).

We 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.

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”). The Registration Statement became effective November 26, 2014.

Deferred Financing Cost

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.

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 three months ended March 31, 2015, $93,053 was recorded as amortization of debt discount. As of March 31, 2015, the convertible debt has a balance of $629,925, net of $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.

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 March 31, 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, our Board 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 both March 31, 2015 and December 31, 2014, the exercise price has been reduced to $0.15 and an additional 1,418,987 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):
December 31, 2014 measurement	192	%
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): 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

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

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

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

As of December 31, 2014, the fair value of the total convertible debt and warrant’s derivative liability is $457,380.

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

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

The following table summarizes information about warrants outstanding as of March 31, 2015:

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

Note 9 – 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 the Company 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 our 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 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.

Note 10 – Subsequent 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 5 - Equity Commitment and Related Party Transactions above will be honored by his estate.

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 “Company,” “we,” “us” or “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 annual report on Form 10-K for the year ended December 31, 2014, filed with the Securities and Exchange Commission (“SEC”) on March 31, 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 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 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

Despite the fact that our revenues decreased for the three months ended March 31, 2015, compared to the three months ended March 31, 2014, our business prospects are now stronger than they have ever been.

Since the third quarter of 2014, our commercial efforts have been focused on the development of, preparation for, and the launch of a comprehensive fuel solutions program (the “Program”) in conjunction with Unipart, our distribution partner.

Since that time period, in consultation with Unipart, we put all of our DiesoLiFT^TM 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.

We expect initial Program deployments to customers late during the second quarter and early third quarter of 2015.

The reduction in revenues during the three months ended March 31, 2015 compared to the three months ended March 31, 2014 is attributable to two factors: (1) the fact that we put sales and marketing efforts of DiesoLiFT^TM on hold, as discussed above; and (2) a decrease in orders for our PerfoLiFT^TM BD-Series bio-diesel stabilization product from distribution partner Nordmann Rassmann (“NRC”). We still expect an increase in year-to-year revenues for 2015, compared to 2014. The PerfoLiFT^TM BD-Series has provided us with a steady flow of revenues over the last two years and will continue to do so, but is not our primary business segment.

The Program is our primary business focus and will be the primary driver of our future revenues and profits.

Our distribution partners will continue to be primarily responsible for our sales and marketing efforts and the drivers of our commercial progress.

Unipart: We expanded our marketing and distribution agreement with Unipart in 2014 and additional amendments are pending. For example, Unipart and the 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 market, to address the pressing needs that end-users have with fuel quality, storage and performance.

In the United Kingdom and Europe, the mandate to incorporate bio-diesel into the diesel fuel stream has created fuel storage and equipment performance problems. The use of bio-diesel 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.

Perhaps the biggest concern caused by extended bio-diesel use relates to engine warranties. Once in-specification fuel is delivered to an end-user, the quality of that fuel and the responsibility to maintain that fuel in-specification transfers to the end-user. If the end-user fuel tank and/or fuel system is compromised due to sludge, microbial contamination, water and/or deposits, the fuel immediately becomes out-of-specification thereby nullifying the engine warranty.

The Program offered by Unipart and us mitigates all risk associated with bio-diesel fuel use and provides the end-user the ability to maximize the performance and efficiency of their equipment.

The Program consists of: fuel tank testing; fuel tank cleaning (our PerfoClean product is used); fuel additive dosing equipment; the DiesoLiFT^TM fuel additive formulation; and on-going fuel and fuel tank analysis and monitoring. The Program ensures that end-users are maintaining in-specification fuel and optimizing the performance of their equipment.

Unipart has established business partnerships with vendors who supply tank testing, tank cleaning, fuel additive dosing and on-going fuel and fuel tank testing equipment. The cornerstone of the Program is DiesoLiFT^TM, our proprietary fuel additive formulation that is proven to: restore lost fuel economy and power loss associated with bio-diesel use; maintain fuel system cleanliness; and provide fuel stability by controlling oxidation and deposit formation.

We expect Unipart to roll out our joint Program to a number of rail and road transport operators in the United Kingdom and Europe beginning in the second quarter of 2015.

Brenntag: In 2014, Brenntag commenced the ramp up of its sales and marketing efforts on our behalf. Brenntag has introduced our products to a number of its customers and made its first sale into the marine market in 2014. Brenntag also sells our products to Bardahl, Lubrichim, ETSP, Lubro and Eurol, who all repackage the products and sell to retail customers under their own brand name.

Going 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 Months Ended March 31, 2015 Compared to Three Months Ended March 31, 2014

Net Revenues

Net revenue for the three months ended March 31, 2015 was $134,073, as compared to $374,426 for the three-month period ended March 31, 2014. This decrease is primarily attributable to decreased sales of the PerfoLiFT^TM BD-Series and DiesoLiFT^TM through our distributor network.

During the three months ended March 31, 2015, 100% of our sales were concentrated between four customers. During the three months ended March 31, 2014, 96% of our sales were concentrated between two customers. Sales revenue generated during the three months ended March 31, 2015 and March 31, 2014 was primarily generated from the sale of the PerfoLiFT^TM BD-Series and DiesoLiFT^TM.

Operating Income (Expenses)

Total operating expense was $492,952 for the three months ended March 31, 2015, as compared to operating income of $1,822,579 for the three-month period ended March 31, 2014. This $2,315,531 increase in expense from the prior period was primarily attributable to a gain on deferred revenue liability of $2,998,242 recorded during the three months ended March 31, 2014 and a decrease in cost of operations primarily due to decreased sales and a decrease in non-cash stock-based compensation expense, which is more fully described below.

Cost of Operations

Cost of operations was $101,472 for the three months ended March 31, 2015, as compared to $296,951 for the three-month period ended March 31, 2014. This decrease was primarily due to decreased sales for the three months ended March 31, 2015, compared to the three months ended March 31, 2014.

Selling, General and Administrative Expense

Selling, general and administrative expense for the three months ended March 31, 2015 was $391,480 (including non-cash stock-based compensation of $37,277), as compared to $878,712 (including non-cash stock-based compensation of $572,586) for the three-month period ended March 31, 2014. This decrease of $487,232 was primarily attributable to the following activities:

·	a $535,309 decrease in stock-based compensation expense related to the cancellation of certain options previously granted to employees and Directors and new option grants to employees and Directors during the three months ended March 31, 2014;

·	an approximate $30,000 increase in employee expenses due to increased overseas travel during the three months ended March 31, 2015; and

·	an approximate $24,000 increase in accounting fees related to audit services conducted during the three months ended March 31, 2015 for our Annual Report (no such activities were conducted during the first three months of 2014).

Gain on Deferred Revenue Liability Write Off

Gain on deferred revenue liability was $0 and $2,998,242 for the three months ended March 31, 2015 and March 31, 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.

Interest Income (Expense), Net

Interest income (expense), net was $(148,956) and $58 for the three months ended March 31, 2015 and March 31, 2014, respectively. The increase in interest income (expense), net is primarily attributable to interest expense recorded relating to the third quarter 2014 convertible note financing.

Gain (Loss) on Derivative Liability

Gain (loss) on derivative liability was $37,306 and $(457,000) for the three months ended March 31, 2015 and March 31, 2014, respectively.

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 (see Note 6 – Convertible Note Payable) that are subject to dilutive adjustments for share issuances (full ratchet reset features) tied to future issuances of our equity securities. Because of these characteristics, our derivative liability must be measured at fair value and re-evaluated at the end of each reporting period. The mark-to-market of the derivative liability at March 31, 2015 and March 31, 2014 caused such gain (loss).

As of March 31, 2015 and December 31, 2014, the fair value of both components of our derivative liability is $420,074 and $457,380, respectively.

Loss on Conversion of Debt From a Related Party

Loss on conversion of debt from a related party was $0 and $387,500 for the three months ended March 31, 2015 and March 31, 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.

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 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. We recorded $16,000 of expense during the three months ended March 31, 2014 but did not record any such expense during the three months ended March 31, 2015 as we deemed the valuation allowance to be sufficient.

Net Income (Loss)

Net income (loss) for the three months ended March 31, 2015 was $(470,529), as compared to $1,336,563 for the three months ended March 31, 2014. The increase in net loss was primarily due to a decrease in gross margin from sales ($44,874), a gain on a deferred revenue liability write off ($2,998,242) recorded during the three months ended March 31, 2014 and increases in employee expenses (approximately $30,000), accounting fees (approximately $24,000) and interest income (expense), net ($149,014), partially offset by a decrease in non-cash stock-based compensation expense ($535,309), fluctuation gains related to a derivative liability ($494,306) and conversions of related party notes during the three months ended March 31, 2014 ($387,500), as described above. The basic and diluted net loss per common share for the three months ended March 31, 2015 and March 31, 2014 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

Derivative Financial Instruments

We evaluate our 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, we use 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 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.

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 March 31, 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.

While 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.

We have been funded over the last three years by private investments into the Company, primarily from existing shareholders, in the form of restricted stock and a convertible note payable (see Note 6 - Convertible Note Payable). We believe we still have access to capital from existing shareholders and in addition, 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.

Cash used in operating activities was $308,042 for the three months ended March 31, 2015, as compared to cash used in operating activities of $344,473 for the three months ended March 31, 2014. The decrease in cash flow used in operating activities was due primarily to a decrease in our accounts receivable balance ($390,536) due to timing of customer cash collections, partially offset by a decrease in our accounts payable balance ($280,284) due to timing of vendor payments and a decrease in accrued compensation ($44,558).

Cash provided by financing activities was $0 for the three months ended March 31, 2015, as compared to $601,440 for the three months ended March 31, 2014. During the three months ended March 31, 2014, we raised $601,440 upon the private placement of 26,502,983 restricted shares of our common stock to accredited investors.

Net cash decreased by $308,042 for the three months ended March 31, 2015, as compared to an increase in net cash of $256,967 for the three months ended March 31, 2014.

During the three months ended March 31, 2015 and March 31, 2014, we did not make significant investments in property and equipment and do not anticipate doing so in the immediate future.

Working capital deficit at March 31, 2015 was $(1,871,959), as compared to $(825,938) at December 31, 2014. The negative working capital balance for 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 a net $(318,733) impact of the deferred financing cost asset and the derivative liability recorded as March 31, 2015. The negative working capital balance for December 31, 2014 is negatively impacted by the net $(329,825) impact of the deferred financing cost asset and the derivative liability recorded as of December 31, 2014.

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 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 March 31, 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 March 31, 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 March 31, 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.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

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 us 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 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 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, we have made payments to TPG totaling $160,000 to reduce the recorded liability. The remaining liability balance is $190,000 at March 31, 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 Annual Report.

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

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)

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)

FUEL PERFORMANCE SOLUTIONS, INC. 10-Q