FORM 10-Q





SECURITIES AND EXCHANGE COMMISSION


WASHINGTON, DC 20549





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





For the quarterly period ended  MARCH 31, 2011





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





For the transition period from____________ to _____________





Commission file number   000-31385





GLOBAL FOOD TECHNOLOGIES, INC.


(Exact name of registrant as specified in charter)





Delaware
52-2257546(State incorporation)
(IRS EmployerIdentification No.)113 Court Street,  Hanford,  California
93230(Address of principal executive offices)
(zip code)





559-589-0100


(Issuer’s telephone number)





Indicate by check mark whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes   ̈    No  ̈





Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer,  non-accelerated filer, or a smaller reporting company.


Large accelerated filer  ̈   accelerated filer  ̈  non accelerated filer  ̈  smaller reporting company x





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





Indicate the number of shares outstanding of each issuer’s classes of common equity, as of the last practicable date:


Class

Outstanding as of March 31, 2011Common stock, par value $0.0001

30,642,701








GLOBAL FOOD TECHNOLOGIES, INC.


QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2011





TABLE OF CONTENTS





PART I – FINANCIAL INFORMATION
3ITEM 1.  FINANCIAL STATEMENTS
3ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
10ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
16ITEM 4. CONTROLS AND PROCEDURES
16PART II - OTHER INFORMATION
17ITEM 1.  LEGAL PROCEEDINGS
17ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
19ITEM 3.  DEFAULTS UPON SENIOR SECURITIES
20ITEM 4.  (REMOVED AND RESERVED)
20ITEM 5.  OTHER INFORMATION
20ITEM 6.  EXHIBITS
21


2





PART I – FINANCIAL INFORMATION





ITEM 1.
FINANCIAL STATEMENTS





GLOBAL FOOD TECHNOLOGIES, INC.


CONDENSED CONSOLIDATED BALANCE SHEETS





March 31,

2011

(Unaudited)


December 31,

2010ASSETSCurrent AssetsCash

$
747,224


$
1,004,654Accounts receivable


9,860



30,939Inventory


50,302



124,141Prepaid expenses


48,580



44,285Total Current Assets


855,966



1,204,019Fixed Assets – net


1,001,477



1,020,964Other Asset


23,189



23,189TOTAL ASSETS

$
1,880,632


$
2,248,172LIABILITIES AND STOCKHOLDERS’ DEFICITCurrent LiabilitiesAccounts payable

$
111,230


$
104,047Accrued liabilities


756,167



693,096Notes payable – related parties


640,000



640,000Note payable – others


246,000



246,000Trade finance notes payable


1,179,297



1,179,297Short term convertible note payable


1,300,000



1,300,000Total Current Liabilities


4,232,694



4,162,440Commitments and ContingenciesStockholders’ Deficit:Preferred stock, $.0001 par value, 20,000,000 shares authorized, Series A and B, none issued and outstanding, Series C,  399,613 shares issued and outstanding at March 31, 2011 and December 31, 2010.


40



40Common stock, $.0001 par value, 100,000,000 shares authorized, 30,642,701 and 30,400,014 shares issued and outstanding at March 31, 2011 and December 31, 2010, respectively.


3,064



3,040Additional paid-in capital


63,003,130



62,442,754Accumulated deficit


(65,358,296
)


(64,360,102
)Total Stockholders’ Deficit


(2,352,062
)


(1,914,268
)TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT

$
1,880,632


$
2,248,172





See accompanying notes to condensed consolidated financial statements


3





GLOBAL FOOD TECHNOLOGIES, INC.


CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


(Unaudited)





For the Three Months Ended

March 31,2011


2010Revenues

$
89,566


$
321,324Cost of goods sold


77,601



331,064Gross profit (loss)


11,965



(9,740
)Operating ExpensesMarketing


269,515



279,413General and administrative


351,428



417,500Research and development


266,786



174,920Depreciation


19,487



20,981Interest


102,943



27,836Total Operating Expenses


1,010,159



920,650NET LOSS

$
(998,194
)

$
(930,390
)Undeclared dividends on Preferred Stock


58,465



10,634Net loss available to Common Stockholders


(1,056,659
)


(941,024
)Loss per common share, basic and diluted

$
(0.03
)

$
(0.03
)Weighted average common shares outstanding, basic and diluted


30,582,029



29,769,965





See accompanying notes to condensed consolidated financial statements


4





GLOBAL FOOD TECHNOLOGIES, INC.


CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT


For the Three Months Ended March 31, 2011


(Unaudited)





Preferred Stock


Common Stock


Additional

Paid-in


Accumulated


Total

Stockholders’Shares


Amount


Shares


Amount


Capital


Deficit


DeficitBalance, December 31, 2010


399,613


$
40



30,400,014


$
3,040


$
62,442,754


$
(64,360,102
)

$
(1,914,268
)Sales of common stock for cash, net


-



-



236,509



23



546,477



-



546,500Common stock issued for services


-



-



6,178



1



13,899



-



13,900Net loss


-



-



-



-



-



(998,194
)


(998,194
)Balance, March 31, 2011


399,613


$
40



30,642,701


$
3,064


$
63,003,130


$
(65,358,296
)

$
(2,352,062
)





See accompanying notes to condensed consolidated financial statements


5





GLOBAL FOOD TECHNOLOGIES, INC.


CONDENSED STATEMENTS OF CASH FLOWS


(Unaudited)





For the Three Months Ended

March 31,2011


2010CASH FLOWS FROM OPERATING ACTIVITIESNet loss

$
(998,194
)

$
(930,390
)Adjustments to reconcile net loss to net cash used in operating activities:Depreciation


19,487



20,981Stock issued for services


13,900



102,505Changes in operating assets and liabilities:Accounts receivable


21,079



63,098Inventory


73,839



(52,667
)Prepaid expenses


(4,295
)


(28,840
)Accounts payable


7,183



117,999Accrued liabilities


63,071



102,860Cash used in operating activities


(803,930
)


(604,454
)CASH FLOWS FROM INVESTING ACTIVITIESCASH FLOWS FROM FINANCING ACTIVITIESProceeds from notes payable


-



100,000Sale of preferred stock


-



565,758Sale of common stock


546,500



54,563Net cash provided by financing activities


546,500



720,321CHANGE IN CASH


(257,430
)


115,867CASH – BEGINNING OF PERIOD


1,004,654



22,135CASH – END OF PERIOD

$
747,224


$
138,002SUPPLEMENTAL DISCLOSURES Interest paid

$
35,643


$
22,037





See accompanying notes to condensed consolidated financial statements


6





GLOBAL FOOD TECHNOLOGIES, INC.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


MARCH 31, 2011





1. Description and nature of the business, organization and basis of presentation.





Global Food Technologies, Inc. (the “Company”, “we” , “our” or “us”) is a life sciences company focused on food safety processes for the food processing industry by using its proprietary scientific processes to substantially increase the shelf life of commercially packaged seafood and to make those products safer for human consumption. The Company has developed a process using its technology called the “iPuraTMFood Processing System”. The System is installed in processor factories in foreign countries with the product currently sold in the United States. The Company’s ability to generate revenue will depend, among other things, on its ability to demonstrate the merits of the iPuraTMsystem, as well as brand development and establishing alliances with suppliers and vendors.





The Company is a registrant under rules and regulations of the Securities and Exchange Commission and has not yet obtained a listing on any stock exchange.





Going Concern





The accompanying condensed consolidated financial statements have been prepared on the basis that the Company will continue as a going concern, which assumes the realization of assets and the satisfaction of liabilities in the normal course of business. Since inception, the Company has primarily been engaged in product development and pre-operational activities.  Sales began during the quarter ended September 30, 2009. At March 31, 2011, the Company has accumulated losses totaling $65,358,296, negative working capital of $3,376,728, and negative cash flows from operations of $803,930 for the quarter ended March 31, 2011. The Company’s ability to continue as a going concern is predicated on its ability to raise additional capital, increase sales and margins, and ultimately achieve sustained profitable operations.  The uncertainty related to these conditions raises substantial doubt about the Company’s ability to continue as a going concern. The accompanying condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.




Basis of presentation





The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America for interim financial information and pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”).  Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. These financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2010, filed with the SEC on March 31, 2011.  The results of operations for interim periods are not necessarily indicative of the results expected for a full year or for any future period. The condensed consolidated balance sheet as of December 31, 2010 and any related disclosures have been derived from the December 31, 2010 audited financial statements filed in the Company’s 2010 Form 10-K.


7





Accounting policies





Revenue Recognition





The Company recognizes revenues when all of the following conditions exist:  a) persuasive evidence of an arrangement exists; b) delivery has occurred or services have been rendered; c) the Company’s price to the buyer is fixed or determinable, and d) collectability is reasonably assured.  To date, all of the orders from our customers have met these criteria and therefore, the Company recognizes revenue when product is shipped to the customer.





Use of estimates





The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.





Loss per common share





Loss per common share was computed using the weighted average number of shares of common stock outstanding during the period. Not used in the computation since their effect would be antidilutive were 399,613 shares of Preferred Stock and 9,443,958 Common Stock purchase warrants.





Income taxes





The Company has no significant income tax expense or benefit for the periods presented due to its tax net operating loss carryforwards and related 100% deferred tax asset valuation allowance.





Inventory





Inventory is stated at the lower of cost (first-in, first-out) or market.  Market is determined by comparison with recent sales or net realizable value. Management reviews the carrying value of inventory in relation to its sales history and industry trends to determine an estimated net realizable value. No reserve has been recorded as of March 31, 2011.





2. Inventory.





At March 31, 2011, inventory consists of frozen tilapia fish available for sale.  It is classified as finished goods and is recorded at delivered cost.





3. Notes Payable - Trade and Equipment





As an alternative to commercial trade financing, leasing and factoring, we previously instituted a program of issuing promissory notes, secured by inventory or iPura equipment systems, in series of maturities from one to three years with annual interest rates from 8.2% to 9.8%. In September 2010, the equipment financing program was discontinued and the remaining equipment financing debt of $97,000 was converted to trade financing debt. The funds are received and controlled by a third-party custodian to be disbursed only for third-party costs of inventory. As is typical of trade financing, the proceeds from sale of inventory by the Company upon collection will be prorated and be used to repay the financing. At March 31, 2011, the Company owed $1,179,297 in trade financing debt. Individual notes mature on their anniversaries throughout the year and based on past renewal activity, we expect that the majority will be renewed upon maturity.


8





4.  Notes Payable - Others.





In July 2009, we borrowed $126,000 from a third party. The note has a one year term, has been renewed and is due July 2011, bears interest at 5% and is convertible into common stock at the option of the lender at any time at a price of $4.50 per share. An additional $120,000 was borrowed from the same third party in 2010 in two one-year notes bearing interest of 5% and 9%, respectively.





5. Notes Payable Related Parties.





Shareholder loan





In 2006, we arranged a 30 day bridge loan in the amount of $350,000 from a non-principal shareholder. The loan bears interest at eight percent (8%) per annum and is secured by all assets, including any intellectual assets, of the Company. Additional consideration included the issuance of warrants to purchase 35,000 shares of our common stock. The warrants are exercisable at $4.50 per share for two (2) years from the date of repayment. In July 2006, $100,000 of principal was repaid. The remaining balance of $250,000 is due on demand. The loan is guaranteed by the President of the Company.





Director loan





In 2006, we arranged for three loans aggregating $290,000 from Gary Nielsen, a Director of the Company. Two of the loans aggregating $190,000 are demand loans and bear interest of 8%. The third loan for $100,000 matured July 18, 2006, and was repaid on its due date. Additional consideration for the three loans was approved by the Board in August 2006, in the form of warrants to purchase 29,000 shares of our common stock. The warrants are exercisable at $4.50 per share for two (2) years from the date of repayment. In August 2006, we arranged for a fourth loan, a six month bridge loan, for $100,000 from the Director bearing interest at 8%. The loan was renewed each subsequent maturity for an additional six months and now matures in May 2011. Such loans aggregating $290,000 are unsecured. In January 2008, the note holder was awarded 78,000 shares of common stock valued at $351,000 as additional consideration for extending the maturity of the loans.





In November 2009, for the same 12% interest rate, the Company borrowed an additional $100,000 from such director, due on demand. Such loan is unsecured.





The current indebtedness to the Director is $390,000.





6. Short Term Convertible Note Payable





On November 22, 2010, a stockholder resident in the United Kingdom loaned the Company $1,300,000 on a six month note bearing interest at 18% per year. The note may be extended for an additional six months at the lender’s sole option. Interest is payable at maturity in shares of Company common stock at the rate of $2.25 per share and is recorded as current interest expense.


9


At the sole option of the lender, the principal may also be converted into shares of Company common stock at the rate of $2.25 per share.  The Note is secured by all of the assets of the Company and is subordinate to the 2006 related party note of $250,000.  Currently, the Company does not have the ability or resources to repay such loan if a demand is made for repayment in full at scheduled maturity in May 2011.





7. Stockholders’ Deficit.





Preferred Stock Issuance.





During the three months ended March 31, 2011, there were no issuances of preferred stock.





Common Stock Issuances.





We have been selling stock to fund operations since inception and expect to continue to sell stock to fund continued operations.





In the three months ended March 31, 2011, a total of 236,509 shares of common stock were issued in private placements for total proceeds of $546,500, net of costs of $3,500.





These sales represent two sales, one for $500,000 at $2.25 per share and one for $50,000 at $3.50 per share. There were no warrants or other consideration involved.





During the three months ended March 31, 2011, a total of 6,178 shares of common stock were issued for services received from consultants totaling $13,900, valued at $2.25 per share.





Warrants.





There are 9,443,958 warrants outstanding as of March 31, 2011 exercisable from 2 to 5 years at $4.50 to $7.00, in conjunction with sales of common and preferred stock and awards for services.





The above securities were issued under exemption from Regulation under either Regulation D or S promulgated by the Securities and Exchange Commission under the Securities Act of 1933.





ITEM 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS





Company Overview





Our iPuraTM System is the physical on-site processing element of the “iPura TM Food Safety Program”, which combines various food safety elements described below. Our latest generation iPuraTM System is designed to process seafood, with certain customization required for different types of seafood and the specific requirements of a given installation site.





In 2009, we completed the installation of our iPura®System at a food processor located in China, Tongwei (Hainan) Aquatic Products Co., and began producing our first order of inventory and selling it in the United States.  Thus, in 2009, we began generating initial revenue and are no longer considered a development stage company (although we will continue to spend funds on research and development).  We completed installation of another, larger iPura®System with a processor in Vietnam in early 2010, and expect production to begin at this facility in 2011. We have a second system on site at the China processor and another system at our California shop able to be installed as capacity is required.


10





From the commencement of our research and development activities in 2001, we have raised substantial equity capital to fund the development of our iPuraTM System. At March 31, 2011, the Company has accumulated losses totaling $65,358,296, negative working capital of $3,376,728, and negative cash flows from operations of $803,930 for the quarter ended March 31, 2011.  Research on our first generation prototype was completed in 2004, and development and refinement on the commercial system design continued through 2005, especially adapting the system to processing salmon. Further development has resulted in a more efficient, less labor intensive and more easily maintained processing system.





The Company is executing its marketing strategy by promoting the iPura®brand to food processors and industry associations as the world’s first food safety label. In addition to selling to retail chains on a wholesale basis, we are promoting a private label program to large retailers to exclusively source iPura labeled products to protect their own brand. In our vision, an established leader would enthusiastically “champion” the iPura®brand by promoting the iPura® logo next to its name on their product packaging, with the iPura®seal also displayed on the individually wrapped fillets inside the package (“iPura®inside”). This would communicate to customers that the retailer is doing everything possible to improve food safety, food quality and sustainability of natural resources. Our value proposition to retailers is that sourcing iPura® products will allow the retailer to increase control & trust of foreign suppliers, protect their brand and company image, and increase sales with repeat purchases due to superior products. Our private label program is a cost plus price model, earning a gross profit per pound with full transparency on cost of raw materials, the iPura® Program, logistics ands a gross profit for the Company.




The iPuraTM seal isanchored with a descriptive and lasting slogan:“The Highest Standard in Food SafetyTM”.





·     The science and marketing connect well with world food safety issues.


·     The iPuraTM label is a tool which communicates that exceptional food safety measures have been taken to protect consumer health.


·     The label will serve to identify food products that have a higher level of safety and quality.


·     GFT has filed trade marks for its brand and slogan in every major food producing and food consuming nation.


·     Trade marks are expected to be listed on the primary registry at the USPTO and internationally, as a global trademark search by counsel found no prior marks or obstructions.





The iPuraTMFood Safety Program is the constitution of the iPuraTM food safety brand, which is anticipated to include:





·
An organic pathogenic and spoilage microorganism “kill step” prior to packaging.


·
Intelligent packaging of product.


·
Product traceability of handling and temperature.


·
An independent third party certification of standards.


11


·
A unique product insurance that follows theiPuraTM labeled product throughout the distribution chain.


·
A distribution chain and consumer “pull through” marketing program promoting iPuraTM as “The Highest Standard in Food SafetyTM.”





The iPuraTMFood Safety Program is designed to help the food distribution chain grow their margins by increasing the quality, safety, and economic value of their products by reducing or eliminating the waste and liability associated with the distribution of contaminated food, and by increasing shelf life.





Distribution and Marketing Plan





Management has determined it is commercially feasible to create recurring revenue streams through service, sales, and licensing to capitalize on the potential of our proprietary technologies, market opportunities and human resources. We have identified four price-per-pound revenue models and in each model, GFT will provide the daily on-site service to maintain control of The Highest Standard in Food Safety and Quality.




We are proceeding to validate iPura® with sales in the U.S. markets through the “importer model” of filling wholesaler orders from inventory. This has allowed the iPura® brand to gain a limited amount of market recognition which management believes will lead to important private label brand manufacturing sales.  After the private label business is proven, we intend to pursue growth by adding more food products and by licensing strategic partners to distribute iPura®-labeled products internationally, thereby creating additional streams of recurring revenue. Market entry begins with the most popular aquaculture products: tilapia, striped pangasius (swai), catfish, salmon, and shrimp. Farmed tilapia and swai are available now, guaranteed to have been processed with the iPura®Food Safety Program.





The marketing materials that target large distributors and retailers make a point that iPura®promotes their brand by differentiating their product from all others in the marketplace.  The materials point out that iPura®addresses brand protection and critical food safety and quality assurance issues at a level unmatched in the industry. Marketing materials also point out that today’s consumers expect a higher degree of food safety and most believe that not enough is being done to protect their health. The iPura® seal represents the highest standards in food safety, quality, and sustainability.





Promotion of the brand, of course, includes advertising. We advertise in trade publications such as:


Seafood Business, Seafood International, Intrafish, GAA Magazine, Progressive Grocer, Food Safety Magazine and Chef.





One of the most important direct marketing opportunities of the year is presented at the International Boston Seafood Show, held in March of 2011.  We had a large presence and were fully staffed with the sales and marketing team.  We had the opportunity to meet with top executives from our target prospect list, as well as to conduct interviews with media to promote the iPura® brand and private label business. We believe that this direct approach to large distributors and retailers, combined with media coverage and a limited amount of consumer marketing will result in the market acceptance of the iPura® brand.





Consumer marketing currently is limited to a social media presence and our contract with Global Media Fund, LLC to place articles describing iPura® food safety in various newspapers throughout the U.S. Currently, most of our retail sales, such as at grocery stores, are made to customers without any prominent iPura® branding. We hope to improve point-of-sale branding and have developed descriptive brochures and educational materials for display at various supermarkets where seafood with the iPura® seal is sold. The Social Media core tools: Facebook, Twitter, YouTube and Blogger are used to publicize iPura within industry thought leaders and directly to consumers.


12





Processor and Distribution Agreements





We have executed contracts for the installation of our iPura® Systems with three seafood processors, two in Vietnam and one in China. Two systems have been installed, one at the processor in China and with one of the processors in Vietnam. All of the current agreements are structured pursuant to our “importer” model, with our wholly-owned subsidiary, iPura Food Distribution Company (IFD), responsible for ordering and purchasing the seafood from the processors, and then importing and distributing the seafood products to retailers or other distributors.  IFD has also signed agreements with the processors outlining the exclusive purchase terms.





Under these agreements, GFT is generally responsible for the cost of manufacturing, fabricating and installing the iPura® System at the processors’ facilities, with the processors providing power and utility connections and certain other operating expenses.  In one instance, our iPura® System would typically be installed onto one or two processing lines at the processors’ facilities.  Our iPura® System will be operated and supervised by GFT personnel, at GFT’s expense.  Seafood processed through our iPura® System will then be packaged and labeled with our iPura® seal.  IFD has the exclusive rights to buy and distribute the seafood processed with our iPura® System and the processors therefore cannot sell such seafood to any other customers or distributors, or otherwise use our iPura® System for any other seafood processing. The agreements have terms that range from one to three years from the date of completion of the installation of our iPura® System at the respective processor’s facility.  IFD has obtained most favored nations pricing with respect to seafood purchased under all of the agreements. None of the agreements have any minimum purchase requirements for IFD.





GFT has completed the China installation, and begun processing seafood at this facility, although in limited quantities to date.  Sales of seafood in the U.S. from this facility accounted for all of our sales to date. There is a second iPura® System located at this same processor in China that is available for future installation if sales levels require it. We have also completed installation of a larger iPura® System with one processor in Vietnam.  This unit is not yet in production, although we expect it to be by the end of the second quarter of 2011.




We have received limited purchase orders to date for our products and continue negotiations with certain select U.S. grocery store retailers, including negotiations with regional and national retailers.  With this “importer” sales model, we will need to obtain adequate financing in order to purchase the seafood from the processor and carry the seafood inventory costs until resold to a sub-distributor or retailer. The marketing focus is now on the private label business with these same retailers and is expected to require much less inventory carrying cost and to yield an assured gross profit with a cost plus pricing model.





Liquidity and Capital Resources





Historically, our primary source of cash has been the sale of equity instruments to investors.  Although we expect to generate increasing revenue from increased sales of seafood processed with our iPura® Systems within the next 12 months, any funds generated from installing and operating our iPura® Systems during the next 12 months are not expected to cover our operating expenses.


13





Based on our cash balance as of December 31, 2010, we are in need of immediate additional financing to fund our current working capital requirements.  Furthermore, we believe that we will need approximately $3 million to manufacture iPura® Systemsand cover operating expenses during the next twelve months, in addition to a financing vehicle or a  line of credit to finance the inventory of iPura®product.  As an alternative to a traditional commercial bank line of credit, we have implemented a program, described below, to finance inventory.  The amount of capital required will vary depending on a variety of factors, many of which are beyond our control.  We cannot assure you that funds from our future operations or funds provided by our current financing activities will meet the requirements of our operations, and in that event, we will continue to seek additional sources of financing to maintain liquidity.  Any additional capital we raise may involve issuing additional shares of common stock or other equity securities, or obtaining debt financing. However, at this point, we have not specifically identified the type or sources of this funding.





As of March 31, 2011, we had trade indebtedness in the ordinary course of business as well as other debt in the form of continuing short term loans of $640,000 from a Director and a shareholder due on demand, and one-year notes from a third party in the amount of $246,000, due in 2011.





On November 22, 2010, a company in the United Kingdom loaned the Company $1,300,000 on a six month note bearing interest at 18% per year. The note may be extended for an additional six months at the lender’s sole option.  Interest is payable at maturity in shares of Company common stock at the rate of $2.25 per share and is recorded as current interest expense. At the sole option of the lender, the principal may also be converted into shares of Company common stock at the rate of $2.25 per share.  Pursuant to a security agreement, the Note is secured by all of the assets of the Company and is subordinate to the 2006 related party note of $250,000.  Currently, we do not have the ability or resources to repay such loans if a demand is made for repayment in full.  In such event, this secured lender could foreclose on all of our assets as part of its security interest.





We have implemented a trade financing program for individual accredited investors as an alternative to traditional commercial inventory financing and factoring.  This financing program consists of issuing promissory notes, secured by inventory, in series of maturities from one to three years with annual interest rates from 8.2% to 9.2%. The funds are received and controlled by a third party custodian to be disbursed only for third party costs of inventory. As is typical of trade financing, the Company’s collected sales proceeds will be allocated between trade financing debt payoff and the Company. At March 31, 2011, the Company had $1,179,297 in trade financing debt on one year notes. They mature on their anniversaries throughout the year and based on past renewal activity we expect that the majority will be renewed upon maturity.





In 2009, we also implemented an equipment financing program based on the same structure as the trade finance program using short term notes secured by the installed iPura® equipment located in China and Vietnam. At December 31, 2010, all of the equipment finance notes were paid off or converted into trade finance notes.





We are actively pursuing all potential financing options as we look to secure additional funds both to stabilize and to grow our business operations. Our management will review any financing options at their disposal, and will judge each potential source of funds on its individual merits. Since we have not located any commercial bank inventory financing, we are developing options for inventory debt financing with other private parties, as described in more detail above.  Successful inventory financing is critical to fund the distribution of our products and generate revenue.  We cannot assure you that we will be able to secure additional funds from debt or equity financing, as and when we need to, or if we can, that the terms of this financing will be favorable to us or our stockholders.





We believe that we have adequate plant capabilities and capacity and sufficient qualified personnel to achieve our planned operations over the next 12 months.  Historically, the fabrication of major components of our iPura® System have been outsourced.  We will likely continue this practice, and may also elect to outsource the integration and installation of the units depending on the number of units installed and the logistics of a particular site. We will add non-technical support personnel as required to manage the increase in administrative activity.


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Results of Operations





Sales:





We began sales in July 2009, with sales of $343,179 recorded for the year ended December 31, 2009. In the quarter ended March 31, 2011, sales were $89,566, of which 71% were to Certi-Fresh Foods, Inc., a large distributor. In the comparable quarter in 2010, sales were $321,324, of which 65% were to Safeway. The decrease of 72% is attributable to the absence of sales to Safeway and Inland Seafood. The remaining sales were to regional grocery distributors that sell to independent grocery stores, food service distributors and restaurants in many regions throughout the country. While we expect sales to Safeway and Inland to resume with the introduction of our private label program, the non-Safeway sales have continued to increase quarterly. We are emphasizing a cost plus pricing approach with the private label program that we believe will allow us to recapture warehousing and transportation costs, which previously undermined margins realized. Our gross margin for the 3 months ended March 31, 2010 was a negative $9,470 (-3%) compared to $11,965 (13%) in the comparable 2011 quarter on much reduced volume reflecting elimination of high cost low / margin sales to smaller distributors. We anticipate our margins to improve further as the private label / cost plus pricing is implemented in the larger retailers and distributors.





Expenses:





Our net loss for the quarter ended March 31, 2011 was $998,194 compared to $930,390 for the comparable quarter in 2010, an increase of 7% due to the 53% increase in Research and Development spending in 2011.





The increase in net loss between the three months comparative periods is a combination of  an approximate 16% ($66,000) decrease in General and Administrative expenses, the result a general decrease in spending especially for legal and travel but also including a reduction of  non-cash charges to expense for issuance of equity securities combined with a 53% increase in Research and Development spending on upgrading the design of the iPura hardware system as well as significant spending on the evaluation of an improved antimicrobial solution. Marketing expense remained relatively constant between the periods.





Depreciation expense remained constant between the three month periods, with only one iPura system having been installed and depreciated, but will increase as additional systems are installed. Interest expense increased approximately 270% between the three month comparative periods reflecting the new debt of $1,300,000 with an interest rate of 18%, which is payable only in common stock. This interest is $58,500 per quarter and represents 50% of the interest expense recorded.  The cash used in operations increased by approximately 33% from $604,454 to $803,930 between the three month periods ended March 31, resulting from a substantial pay-down in 2011 of accounts payable and accrued liabilities utilizing the debt financing received late in 2010.





Off Balance Sheet Arrangements





We do not have any off-balance sheet arrangements.


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Customer and Supplier Concentration





Our revenue for the three months ended March 31, 2011 was derived from a limited number of  customers, with approximately 71% of our total revenue attributable to one customer, Certi-Fresh Foods, Inc.  We expect this customer concentration with Certi-Fresh Foods as well as Inland Seafood and Safeway, Inc. to continue in the short-term as we seek to expand our sales with these major customers, but anticipate that customer concentration will eventually begin to decline if we are able to expand our customer base and effectively market and brand iPura.





All of our inventory for the quarter ended March 31, 2011 was derived from one supplier at its processing plant in China.  As described above, subject to financial resources and obtaining purchase orders, we anticipate purchasing and processing additional inventory from another supplier located in Vietnam by the second quarter of 2011.   Therefore, we anticipate continued dependence upon a very small number of suppliers.  The future loss of any major customer or supplier could have a material adverse effect on our business, financial condition and results of operations.





ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK





A smaller reporting company is not required to provide the information required by this Item.





ITEM 4. CONTROLS AND PROCEDURES





We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended, which we refer to as the Exchange Act) that are designed to ensure that information required to be disclosed in our periodic reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that this information is accumulated and communicated to our management, including our principal executive/financial officer, to allow timely decisions regarding required disclosure.





Our management, with the participation and supervision of our Chief Executive Officer and Chief Financial Officer (“Certifying Officers”), evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.





Based upon that evaluation, our Certifying Officers concluded that as of the end of the period covered by this Quarterly Report, our disclosure controls and procedures were not effective.   Our primary material weakness has been due to our limited number of personnel and, therefore, segregation of duties.





Changes in Internal Control Over Financial Reporting





There was no change in our internal control over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting


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PART II - OTHER INFORMATION





ITEM 1.  LEGAL PROCEEDINGS





We are not a party to any legal proceedings and, to our knowledge, no such proceedings are threatened or contemplated against us.





ITEM 1A.
RISK FACTORS





A smaller reporting company is not required to provide the information required by this Item. However, please note the following about forward-looking statements and the following brief description of certain risks that could have a material, adverse impact on the Company and its operations.





Cautionary Information Regarding “Forward-Looking Statements”




This Quarterly Report on Form 10-Q includes certain statements about us that may be deemed to be “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.  These forward-looking statements relate to matters such as, among other things, product development and acceptance, our anticipated financial performance, business prospects, technological developments, new products, future distribution or license rights, international expansion, possible strategic alternatives, new business concepts, capital expenditures, consumer trends and similar matters.





Forward-looking statements necessarily involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievement expressed or implied by these forward-looking statements.  In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “intend,” “expect,” “anticipate,” “assume,” “hope,” “plan,” “believe,” “seek,” “estimate,” “predict,” “approximate,” “potential,” “continue” or the negative of these terms.  Statements including these words and variations of these words, and other similar expressions, are forward-looking statements.  Although we believe that the expectations reflected in our forward-looking statements are reasonable based upon our knowledge of our business, we cannot absolutely predict or guarantee any future results, levels of activity, performance or achievements.  Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of these statements.





We note that a variety of factors could cause our actual results and future experiences to differ materially from the anticipated results or other expectations expressed in these forward-looking statements. The risks and uncertainties that may affect our operations, performance, development and results include, but are not limited to, the following:





·
whether we will be able obtain additional financing to continue or expand operations and to finance inventory costs, and the terms on which we will be able to obtain this financing, if at all;




·
whether we will be able to charge a premium for our products and generate adequate gross margins on our sales;


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·
whether our initial system installation will perform as expected in commercial applications;




·
our ability to obtain any commercial financing to allow us to purchase seafood inventory for processing in our iPuraTMSystem, and to obtain such financing in amounts required and on commercially reasonable terms;




·
our dependence on a small number of customers and suppliers;




·
our ability to negotiate contracts and purchase orders with distributors and retailers;




·
our ability to obtain brand related premium pricing to yield an acceptable sales margin;




·
risks related to inventory costs, shipping and handling and spoilage;




·
our ability to obtain one or more third-party manufacturers for our system components and other products;




·
the cost at which we will be able to have our system components and other products manufactured, if at all, and the time it will take to have our system components and other products manufactured;




·
our ability to obtain all required components for our systems on a timely basis and at the prices we anticipate;




·
whether our systems and products are viewed as providing the benefits we claim and whether these benefits are marketable by any customers we may seek to obtain;




·
our ability to enter into additional contracts with food processors, the time it takes for us to enter into any of these contracts and the licensing or pricing models we are able to implement;




·
our systems and products performing in the manner we expect in customer applications and without any material modifications;




·
our ability to obtain all necessary governmental approvals for our systems and other products, including all required import-exporter licenses and permits;




·
whether the introduction of the iPuraTM brand will succeed in creating preferences with the consuming public;




·
whether we will be able to apply our technology to products other than fish or use our technology in any other fields;




·
the pace at which we will utilize our existing working capital and whether our existing working capital will be sufficient for us to continue to develop our systems and products to the extent we anticipate;




·
our ability to protect our intellectual property and obtain and maintain patents and other protections for our intellectual property.




·
the possible impact from competing products or technologies;




·
possible reductions in consumer demand for fish and poultry, including as a result of  any outbreaks of disease, including avian flu, or negative reports regarding the health benefits of fish and poultry;




·
our ability to hire, train and retain a consistent supply of reliable and effective employees, both domestically and in any countries in which we might be able to install one of our processing system;


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·
the risk of non-payment by, and/or insolvency or bankruptcy of, our customers and others with indebtedness to us;




·
the costs of complying with applicable labor laws and requirements, including, without limitation, with respect to health care;




·
economic and political instability in foreign countries or restrictive actions by the governments of foreign countries in which we may seek to conduct our business or obtain customers;




·
changes in tax laws or the laws and regulations governing food processing and on income generated outside the United States;




·
general economic, business and social conditions in the United States and in foreign countries where we may conduct our business;




·
fluctuation in interest rates, insurance, shipping, energy, fuel and other business utilities in any countries in which we conduct business;




·
the stability of and fluctuations in currencies in which we conduct business;




·
threats or acts of terrorism or war; strikes, work stoppages or slow downs by labor organizations in any countries in which we conduct business; and




·
natural or man-made disasters that could adversely impact the industries or countries in which we conduct business.





ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS





Sales of Unregistered Securities





During the period covered by this Quarterly Report, we issued the following securities, discussed below, which were not registered under the Securities Act of 1933.  We did not employ any form of general solicitation or advertising in connection with the offer and sale of the securities described below.  In addition, we believe the purchasers of the securities are “accredited investors” for the purpose of Rule 501 of the Securities Act.  For these reasons, among others, the offer and sale of the securities listed below were made in reliance on the exemption from registration provided by Section 4(2) of the Securities Act, Regulation D and/or Regulation S promulgated by the Securities and Exchange Commission under the Securities Act.





During the three months ended March 31, 2011, a total of 6,178 shares of common stock were issued for services to consultants. Related expense of approximately $13,900 was recorded as operating expenses in the quarter ended March 31, 2011.





During the three months ended March 31, 2011, a total of 236,509 shares of common stock were issued in private placements for total proceeds of $546,500, net of costs of $3,500.





Purchases of Equity Securities





We are required by the Securities Act of 1933 to disclose, in tabular format, any repurchases of our securities during this reporting period. We did not repurchase any of our securities during this reporting period, and accordingly, we have eliminated such table.


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ITEM 3.  DEFAULTS UPON SENIOR SECURITIES





During the three month period ended March 31, 2011, there were no material defaults in the payment of principal or interest, a sinking or purchase fund installment, or any other material default not cured within 30 days or with the consent of the lender, with respect to any of our indebtedness exceeding 5% of our total assets. However, as noted above under “Liquidity and Capital Resources” in Part I, Item 2, we have certain notes that are due upon demand, and we do not currently have the resources to repay such notes if demands for immediate payment in full were made.





ITEM 4.   REMOVED AND RESERVED





ITEM 5.  OTHER INFORMATION





(a)
Information Required To Be Disclosed In A Report On Form 8-K, But Not Reported





None





(b)
Item 407(c)(3) of Regulation S-K




During our fiscal quarter covered by this Quarterly Report on Form 10-Q, there have not been any material change to the procedures by which our security holders may recommend nominees to our Board of Directors.


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ITEM 6.  EXHIBITS





Exhibit

No.

Description3.1 (1)

Certificate of Amendment to Certificate of Incorporation dated August 18, 2005.3.2 (2)

Certificate of Amendment to Certificate of Incorporation dated September 15, 2005.3.3 (3)

Restated Certificate of Incorporation dated October 18, 2005.3.4 (3)

Second Amended and Restated Bylaws as of August 31, 2005.3.5 (5)

Restated Certificate of Incorporation dated October 18, 20053.6 (5)

Second Amended and Restated Bylaws as of August 31, 200531.1*

Certification of Chief Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2*

Certification of Chief Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1‡

Certification of Chief Executive Officer and Chief Financial Officer pursuant to pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley  Act  of  2002





*
Filed herewith


‡
Furnished herewith





(1)
Filed on August 19, 2005 as an exhibit to Global Food’s Report on Form 8-K and incorporated herein by reference.


(2)
Filed on October 6, 2005 as an exhibit to Global Food’s Report on Form 8-K and incorporated herein by reference.


(3)
Filed on November 23, 2005 as an exhibit to Global Food’s Report on Form 10-QSB and incorporated herein by reference.


(4)
Filed on December 11,2009, as an exhibit to our Report on Form 8-K and incorporated herein by reference


(5)
Filed on November 23, 2005, as an exhibit to our Form 10-QSB and incorporated herein by reference


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SIGNATURES





In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.





GLOBAL FOOD TECHNOLOGIES, INC.Dated:  May 6, 2011
By:
/s/ Keith MeeksKeith Meeks, President andChief Executive Officer(PRINCIPAL EXECUTIVE OFFICER)Dated: May 6, 2011
By:
/s/ Marshall F. SparksMarshall F. Sparks, Chief Financial Officer(PRINCIPAL ACCOUNTING OFFICER)


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