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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-Q

|x  | QUARTERLY REPORT PURSUANT  TO SECTION 13 OR 15(d) OF THE SECURITIES
  EXCHANGE ACT OF 1934
|-- | ------------------------------------------------------------------------------------------
|   |                                                                                           
|   | For
  the Quarterly Period ended March 31, 2004                                           
|   |                                                                                           
|OR
|   |                                                                                           
|o  | TRANSITION
  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|   |                                                                                           
|   | For
  the transition period from_____________ to _____________________                    
|   |                                                                                           
|   | Commission file number: 000-25367                                                         
|   |                                                                                           

International Fuel Technology, Inc.
(Exact name of registrant as specified in its charter)

|Nevada                                                          |  | 88-0357508                         
|--------------------------------------------------------------- |  | -----------------------------------
|(State or other
  jurisdiction of incorporation ororganization) |  | (IRS 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)                              

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
xNo
o

Indicate
by check mark whether the registrant is an accelerated filer (as defined by
Rule 12b-2 of the Exchange Act).

Yes
oNo
x

The
aggregate market value of the voting and non-voting common stock held by
non-affiliates of the Registrant, based upon the average bid and asked price of
the common stock on April 26, 2004, as reported on the OTC Bulletin Board, was
$50,273,806.

Number
of shares of common stock outstanding as of April 26, 2004: 73,932,067

1

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FORM 10-Q

For The Quarterly Period Ended March
31, 2004

INDEX

|                                 |          |                                                                                             | Page   
|-------------------------------- | -------- | ------------------------------------------------------------------------------------------- | -------
|                                 |         
|Part I
   FINANCIAL INFORMATION |         
|                                 |          |                                                                                             |        
|                                 | Item 1-  | Financial Statements                                                                        |        
|                                 |          |                                                                                             |        
|                                 |          | Balance Sheets  March 31, 2004 and December 31,
  2003                                     | 3      
|                                 |          |                                                                                             |        
|                                 |          | Statements of Operations  Three Month Period Ended
    March 31, 2004 and 2003             | 4      
|                                 |          |                                                                                             |        
|                                 |          | Statement of Stockholders Equity  Three Months
    Ended March 31, 2004                   | 5      
|                                 |          |                                                                                             |        
|                                 |          | Statements of Cash Flows  Three Months Ended March
  31,
    2004 and 2003                 | 6      
|                                 |          |                                                                                             |        
|                                 |          | Notes to Financial Statements                                                               | 7 - 8  
|                                 |          |                                                                                             |        
|                                 | Item 2-  | Managements Discussion and Analysis of Financial
  Condition
    and Results of Operations | 9  11 
|                                 |          |                                                                                             |        
|                                 | Item 3  | Quantitative and Qualitative Disclosures about
  Market Risk                                | 11     
|                                 |          |                                                                                             |        
|                                 | Item 4  | Controls and Procedures                                                                     | 11     
|                                 |         
|Part II  OTHER INFORMATION      |         
|                                 |          |                                                                                             |        
|                                 | Item 1  | Legal Proceedings                                                                           | 11     
|                                 |          |                                                                                             |        
|                                 | Item 2  | Change in Securities, Use of Proceeds and Issuer
  Purchase of Equity
  Securities          | 11  12
|                                 |          |                                                                                             |        
|                                 | Item 6  | Exhibits and Reports on Form 8-K                                                            | 12     

2

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INTERNATIONAL
FUEL TECHNOLOGY, INC.

BALANCE
SHEETS

|ASSETS                                                                                                                                                                                      |  | March 31,
  2004 |             | December 31,
  2003 |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------- | ----------- | ------------------- | -
|                                                                                                                                                                                            |  |                  |             |                     |  
|                                                                                                                                                                                            |  | (Unaudited)      |             |                     |  
|Current Assets                                                                                                                                                                              |  |                  |             |                     |  
|Cash                                                                                                                                                                                        |  | $                | 252,657     |                     | $
|Accounts Receivable                                                                                                                                                                         |  |                  | 6,366       |                     |  
|Inventory                                                                                                                                                                                   |  |                  | 106,018     |                     |  
|Prepaid Expenses                                                                                                                                                                            |  |                  | 13,137      |                     |  
|                                                                                                                                                                                            |  |                  |             |                     |  
|Total
  current assets                                                                                                                                                                      |  |                  | 378,178     |                     |  
|                                                                                                                                                                                            |  |                  |             |                     |  
|                                                                                                                                                                                            |  |                  |             |                     |  
|Property and Equipment                                                                                                                                                                      |  |                  |             |                     |  
|Machinery and equipment                                                                                                                                                                     |  |                  | 27,621      |                     |  
|Accumulated depreciation                                                                                                                                                                    |  |                  | (21,388     | )                   |  
|                                                                                                                                                                                            |  |                  |             |                     |  
|Total
  property and equipment                                                                                                                                                              |  |                  | 6,233       |                     |  
|                                                                                                                                                                                            |  |                  |             |                     |  
|                                                                                                                                                                                            |  |                  |             |                     |  
|Purchased Technology, Net of accumulated
  amortization of 
  $1,133,333 and $1,033,333 at March 31, 2004 and December 
  31, 2003, respectively                                            |  |                  | 1,266,668   |                     |  
|Goodwill                                                                                                                                                                                    |  |                  | 2,211,805   |                     |  
|                                                                                                                                                                                            |  |                  |             |                     |  
|                                                                                                                                                                                            |  |                  |             |                     |  
|Total
  assets                                                                                                                                                                              |  | $                | 3,862,884   |                     | $
|                                                                                                                                                                                            |  |                  |             |                     |  
|                                                                                                                                                                                            |  |                  |             |                     |  
|LIABILITIES AND STOCKHOLDERS
  EQUITY                                                                                                                                                      |  |                  |             |                     |  
|Current Liabilities                                                                                                                                                                         |  |                  |             |                     |  
|Accounts payable                                                                                                                                                                            |  | $                | 198,543     |                     | $
|Accrued compensation                                                                                                                                                                        |  |                  | 225,997     |                     |  
|Other accrued expenses                                                                                                                                                                      |  |                  | 50,000      |                     |  
|                                                                                                                                                                                            |  |                  |             |                     |  
|Total
  current liabilities                                                                                                                                                                 |  |                  | 474,540     |                     |  
|                                                                                                                                                                                            |  |                  |             |                     |  
|                                                                                                                                                                                            |  |                  |             |                     |  
|Commitments and Contingencies                                                                                                                                                               |  |                  |             |                     |  
|Stockholders Equity                                                                                                                                                                        |  |                  |             |                     |  
|Common stock, $.01 par
  value; authorized, 150,000,000,
        73,932,067 and 72,461,829 shares issued
  and outstanding 
        at March 31, 2004 and December 31, 2003,
  respectively |  |                  | 739,320     |                     |  
|Discount on common stock                                                                                                                                                                    |  |                  | (819,923    | )                   |  
|Additional paid-in capital                                                                                                                                                                  |  |                  | 38,838,203  |                     |  
|Accumulated deficit                                                                                                                                                                         |  |                  | (35,369,256 | )                   |  
|                                                                                                                                                                                            |  |                  |             |                     |  
|Total
  stockholders equity                                                                                                                                                                |  |                  | 3,388,344   |                     |  
|                                                                                                                                                                                            |  |                  |             |                     |  
|                                                                                                                                                                                            |  |                  |             |                     |  
|Total Liabilities and Stockholders
  equity                                                                                                                                                |  | $                | 3,862,884   |                     | $
|                                                                                                                                                                                            |  |                  |             |                     |  

See Notes to Financial
Statements

3

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INTERNATIONAL
FUEL TECHNOLOGY, INC.

STATEMENTS OF OPERATIONS

|                                                                              |  | Three Months
  Ended March 31,
  2004 |   | Three Months
  Ended March 31,
  2003 |  
|----------------------------------------------------------------------------- |  | ------------------------------------- | - | ------------------------------------- | -
|                                                                              |  |                                       |   |                                       |  
|                                                                              |  | (Unaudited)                           |   |                                       |  
|Revenues                                                                      |  |                                       | $ | 3,614                                 |  
|Cost of Goods Sold                                                            |  |                                       |   | 1,566                                 |  
|                                                                              |  |                                       |   |                                       |  
|Gross Profit                                                                  |  |                                       |   | 2,048                                 |  
|                                                                              |  |                                       |   |                                       |  
|                                                                              |  |                                       |   |                                       |  
|Operating Expenses                                                            |  |                                       |   |                                       |  
|Selling,
  general and administrative expenses                                |  |                                       |   | 502,811                               |  
|Amortization
  and depreciation                                               |  |                                       |   | 101,777                               |  
|                                                                              |  |                                       |   |                                       |  
|Total
  operating expenses                                                    |  |                                       |   | 604,588                               |  
|                                                                              |  |                                       |   |                                       |  
|                                                                              |  |                                       |   |                                       |  
|Net
  loss from operations                                                    |  |                                       |   | (602,540                              | )
|                                                                              |  |                                       |   |                                       |  
|Interest
  expense                                                            |  |                                       |   | -                                     |  
|                                                                              |  |                                       |   |                                       |  
|                                                                              |  |                                       |   |                                       |  
|Net
  loss                                                                    |  |                                       | $ | (602,540                              | )
|                                                                              |  |                                       |   |                                       |  
|                                                                              |  |                                       |   |                                       |  
|Basic
  and diluted net loss
                              per
  common share |  |                                       | $ | (0.01                                 | )
|                                                                              |  |                                       |   |                                       |  
|                                                                              |  |                                       |   |                                       |  
|Weighted
  average common shares outstanding                                  |  |                                       |   | 72,720,699                            |  

See
Notes to Financial Statements

4

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INTERNATIONAL
FUEL TECHNOLOGY, INC.

STATEMENTS OF STOCKHOLDERS EQUITY

FOR THE THREE MONTHS ENDED MARCH 
31, 2004
(Unaudited)

|                                          |  | Common
  Stock
  Shares |  | Common
  Stock
  Amount |         | Discount on
  Common
  Stock |   | Additional
  Paid-In Capital |   | Accumulated
  Deficit |   | Total      |  
|----------------------------------------- |  | ----------------------- |  | ----------------------- | ------- | ---------------------------- | - | ---------------------------- | - | --------------------- | - | ---------- | -
|                                          |  |                         |  |                         |         |                              |   |                              |   |                       |   |            |  
|Balance,
  January 1, 2004                |  | 72,461,829              |  | $                       | 724,618 |                              | $ | (819,923                     | ) |                       | $ | 38,405,926 |  
|Proceeds
  from issuance of common stock  |  | 1,470,238               |  |                         | 14,702  |                              |   | -                            |   |                       |   | 435,298    |  
|Expense
  relating to stock option grants |  | -                       |  |                         | -       |                              |   | -                            |   |                       |   | (3,021     | )
|Net
  loss                                |  | -                       |  |                         | -       |                              |   | -                            |   |                       |   | -          |  
|                                          |  |                         |  |                         |         |                              |   |                              |   |                       |   |            |  
|Balance,
  March 31, 2004                 |  | 73,932,067              |  | $                       | 739,320 |                              | $ | (819,923                     | ) |                       | $ | 38,838,203 |  
|                                          |  |                         |  |                         |         |                              |   |                              |   |                       |   |            |  

See Notes to Financial Statements

5

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INTERNATIONAL
FUEL TECHNOLOGY, INC.

STATEMENTS OF CASH FLOWS
(Unaudited)

|                                                                                    |  | Three Months
  Ended
  March 31,
  2004 |   | Three Months
  Ended
  March 31,
  2003 |  
|----------------------------------------------------------------------------------- |  | --------------------------------------- | - | --------------------------------------- | -
|                                                                                    |  |                                         |   |                                         |  
|Cash Flows from Operating
  Activities:                                             |  |                                         |   |                                         |  
|Net loss                                                                            |  |                                         | $ | (602,540                                | )
|Adjustments to reconcile
  net loss to net cash used in
      operating activities: |  |                                         |   |                                         |  
|Amortization
  and Depreciation                                                     |  |                                         |   | 101,777                                 |  
|Non-cash
  stock compensation                                                       |  |                                         |   | (3,021                                  | )
|Interest
  expense recognized - discount and conversion of debt                     |  |                                         |   |                                         |  
|Change
  in assets and liabilities:                                                 |  |                                         |   |                                         |  
|Increase
  in prepaid expenses                                                      |  |                                         |   | -                                       |  
|Increase
  in accrued compensation                                                  |  |                                         |   | -                                       |  
|Increase
  in accounts receivable                                                   |  |                                         |   | (266                                    | )
|Increase
  in inventory                                                             |  |                                         |   | (43,708                                 | )
|(Decrease)/Increase
  in accounts payable                                           |  |                                         |   | (13,110                                 | )
|Increase
  in other accrued expenses                                                |  |                                         |   | 4,571                                   |  
|Increase
  in accrued interest                                                      |  |                                         |   | -                                       |  
|                                                                                    |  |                                         |   |                                         |  
|Net cash used in operating activities                                               |  |                                         |   | (556,297                                | )
|                                                                                    |  |                                         |   |                                         |  
|                                                                                    |  |                                         |   |                                         |  
|Cash Flows from Investing
  Activities:                                             |  |                                         |   |                                         |  
|Proceeds
  from repayments of notes receivable                                      |  |                                         |   | -                                       |  
|                                                                                    |  |                                         |   |                                         |  
|Net cash provided by investing activities                                           |  |                                         |   | 0                                       |  
|                                                                                    |  |                                         |   |                                         |  
|                                                                                    |  |                                         |   |                                         |  
|Cash Flows from Financing
  Activities:                                             |  |                                         |   |                                         |  
|Proceeds
  from common stock issued                                                 |  |                                         |   | 450,000                                 |  
|Proceeds
  from note receivable - stockholder                                       |  |                                         |   |                                         |  
|                                                                                    |  |                                         |   |                                         |  
|Net cash provided by financing activities                                           |  |                                         |   | 450,000                                 |  
|                                                                                    |  |                                         |   |                                         |  
|                                                                                    |  |                                         |   |                                         |  
|Net increase in cash                                                                |  |                                         |   | (106,297                                | )
|Cash,
  beginning                                                                   |  |                                         |   | 358,954                                 |  
|                                                                                    |  |                                         |   |                                         |  
|Cash,
  ending                                                                      |  |                                         | $ | 252,657                                 |  
|                                                                                    |  |                                         |   |                                         |  

See Notes to Financial
Statements

6

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INTERNATIONAL
FUEL TECHNOLOGY, INC.

| | NOTES TO FINANCIAL STATEMENTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (Unaudited)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | Note 1  Basis of Presentation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | The interim financial statements included herein
  have been prepared by International Fuel Technology, Inc. (IFT), without
  audit, pursuant to the rules and regulations of the Securities and Exchange
  Commission.  Certain information and
  footnote disclosures normally included in financial statements prepared in
  accordance with generally accepted accounting principles have been condensed
  or omitted pursuant to such rules and regulations, although IFT believes 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. It is
  suggested that these financial statements be read in conjunction with the
  financial statements and notes thereto included in IFTs annual report on
  Form 10-K for the twelve month period ended December 31, 2003.  IFT follows the same accounting policies
  in preparation of interim reports.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | Note 2 -- Ability to Continue as a
  Going Concern                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | IFTs 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.  IFT has incurred significant losses since
  inception and has previously had limited funds with which to operate.  Management is in the process of executing
  a strategy based upon developing pollution emission control technologies that
  also offer enhanced engine performance with respect to greater fuel economy.  IFT has several technologies in the
  commercialization phase and in development, and may seek to add other
  technologies through acquisitions. 
  IFT has received necessary regulatory and commercial acceptance for
  its products currently in the commercialization phase. During the first
  quarter of 2002, IFT began selling its products directly to the commercial
  marketplace. IFT expects to begin licensing its products and increasing its
  direct sales to the marketplace, with IFT eventually generating a level of
  revenues sufficient to meet IFTs working capital requirements. While
  management cannot make any assurance as to the accuracy of our projections of
  future capital needs, it is anticipated that a total of $1 million over the
  remainder of the 2004 fiscal year will be necessary in order to enable us to
  meet our capital needs. IFT has secured $1,050,000 in funding for the
  remainder of 2004 with a significant shareholder and director.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | 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 IFT to continue as a going
  concern.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | Note 3  Accounting for Stock-Based
  Compensation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | IFT applies the intrinsic value method under APB
  Opinion 25 and related interpretations in accounting for employee stock
  options, which expenses the excess of market price of the stock over the
  exercise price on the measurement date.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | IFT has elected to continue to utilize the
  accounting provisions of APB25 for stock options and is required to provide
  pro forma disclosures of net loss and loss per share had IFT adopted the fair
  value method under SFAS No. 123.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | The weighted-average, grant date fair value of stock
  options granted to employees during the period and the weighted-average
  significant assumptions used to determine those fair values, using a modified
  Black-Scholes option pricing model, and the pro forma effect on earnings of
  the fair value accounting for stock options under Statement of Financial
  Accounting Standards No. 123, are as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

7

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INTERNATIONAL
FUEL TECHNOLOGY, INC.

NOTES TO FINANCIAL
STATEMENTS
(Unaudited)

| |                                                                                                                  |  | Three Months Ended March 31, |  
| | ---------------------------------------------------------------------------------------------------------------- |  | ---------------------------- | -
| |                                                                                                                  |  | 2004                         |  
| |                                                                                                                  |  |                              |  
| | Significant assumptions
  (weighted average)                                                                     |  |                              |  
| | Weighted
  average fair value per options granted                                                                |  |                              | $
| | Risk-free
  interest rate at grant date                                                                          |  |                              |  
| | Expected
  stock price volatility                                                                                |  |                              |  
| | Expected
  dividend payout                                                                                       |  |                              |  
| | Expected
  option life (years)                                                                                   |  |                              |  
| |                                                                                                                  |  |                              |  
| | Net loss                                                                                                         |  |                              |  
| | As
  Reported                                                                                                    |  |                              | $
| | Add
  expense recognized for variable-based awards                                                               |  |                              | $
| | Deduct
  total stock-based employee compensation expense
         determined under the fair value
  based method |  |                              | $
| |                                                                                                                  |  |                              |  
| | Proforma                                                                                                         |  |                              | $
| |                                                                                                                  |  |                              |  
| |                                                                                                                  |  |                              |  
| | Net loss per share                                                                                               |  |                              |  
| | As
  Reported                                                                                                    |  |                              | $
| | Proforma                                                                                                         |  |                              | $

8

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

Forward Looking Statements and Associated Risks

This Quarterly Report on
Form 10-Q contains forward-looking statements made pursuant to the safe harbor
provisions of the Securities Litigation Reform Act of 1995.  These forward looking statements are based
largely on IFTs expectations and are subject to a number of risks and
uncertainties, many of which are beyond IFTs control, including, but not
limited to, economic, competitive and other factors affecting IFTs operations,
markets, products and services, expansion strategies and other factors
discussed elsewhere in this report and the documents filed by IFT with the
Securities and Exchange Commission. 
Actual results could differ materially from these forward-looking
statements.  In light of these risks and
uncertainties, there can be no assurance that the forward-looking information
contained in this report will in fact prove accurate.  IFT does not undertake any obligation to revise these
forward-looking statements to reflect future events or circumstances.

Overview

IFT has developed a
family of fuel blends that have been created through the use of proprietary
fuel additives. IFT is now in the process of patenting the fuel additives and
resulting fuel blends as part of its efforts to commercialize these fuel
blends. The individual fuel blends incorporating the IFT additive formulations
include base fuel with additive only, base fuel with kerosene, base fuel with biodiesel,
base fuel with ethanol, and base fuel with an urea/water solution. IFT seeks to
commercialize these fuel blends on a global basis through the use of strategic
partnerships with a variety of targeted companies including fuel refiners,
distributors of fuel additives, original equipment manufacturers, and other
companies.

Three
Months Ended March 31, 2004 compared to the Three Months Ended March 31, 2003

Results
of Operations

IFTs revenues of $3,614,
in the first quarter of 2004, were generated from the sales of its DiesolIFT,
GasolIFT, and Kerolift products.

Total operating expenses
were $604,588 for the three months ended March 31, 2004, as compared to the
operating expenses of $781,279 for the three month period ended March 31,
2003.  This represents a $176,691
decrease from the prior period. 
Decreased operating expenses in the current period compared to the prior
period are a result of a decrease of selling, general and administrative
expenses in 2003, as described below.

Selling, general and
administrative expenses for the three months ended March 31, 2004 were
$502,811, as compared to the selling, general and administrative expenses of
$679,564 for the three month period ended March 31, 2003. This represents a
decrease of $176,753 from the prior period. This decrease can be attributed to
the reduction of consulting and legal fees.

Amortization and
depreciation expenses for the three months ended March 31, 2004 were $101,777,
as compared to $101,715 for the corresponding period in 2003.

Interest expense was $0
for the three months ended March 31, 2004, as compared to the interest expense
of $2,438 for the three month period ended March 31, 2003.  Interest expense is zero because of the
extinguishment of the long-term liability during the fourth quarter of 2003.

The net loss for the
three months ended March 31, 2004 was $602,540 as compared to the net loss of
$783,206 for the three months ended March 31, 2003.  This represents a $180,666 decrease from the prior period, primarily
due to a reduction in consulting and legal fees. The basic and dilutive net

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loss per common share for
the three months ended March 31, 2004 was $.01 and remain unchanged from the
three months ended March 31, 2003.

Critical
Accounting Policies

| | Significant underperformance relative to expected
  historical or projected future operating results;              
|- | -------------------------------------------------------------------------------------------------------------------
| | Significant changes in the manner of IFTs use of
  the acquired assets or the strategy for IFTs overall business;
| | Significant negative industry or economic trends;                                                                  
| | Significant decline in IFTs stock price for a
  sustained period; and                                             
| | IFTs market capitalization relative to net book
  value.                                                          

As of March 31, 2004, there has been no impairment of
long-lived intangible assets.

Valuation of goodwill.IFT tests goodwill for impairment at least annually in
the fourth quarter.  IFT will         also review goodwill for impairment
throughout the year if any events or changes in circumstances that indicate the
carrying value may not be recoverable are identified (such triggers for
impairment review are described above in the section Valuation of Long-Lived Intangible
Assets).

For the test of
impairment, IFT is using the market approach in determining the fair value of
the    Company.  Following this approach, the fair value of
the business exceeded the carrying value of the business.  As a result, no impairment of goodwill was
recorded.

Deferred Income Taxes. Deferred income
taxes are recognized for the tax consequences of temporary  differences by applying enacted statutory
rates applicable to future years to differences between the financial statement
carrying amounts and the tax basis of existing assets and liabilities. At March
31, 2004, IFTs deferred income tax assets consisted principally of net
operating loss carryforwards, and have been fully offset with a valuation
allowance due to the uncertainty that a tax benefit will be realized from the
assets in the future.

Liquidity
and Capital Resources

A critical component of
managements operating plan impacting the continued existence of IFT is the
ability to obtain additional capital through additional debt and/or equity
financing.   Management does not
anticipate that IFT will generate a positive internal cash flow until such time
as IFT can generate revenues from license fees from its products, which may
take the next few years to realize. If IFT cannot obtain the necessary capital
to pursue its business plan, IFT may have to cease or significantly curtail its
operations.  This would materially
impact its ability to continue as a going concern.  The independent auditors reports included with the financial
statements filed in IFTs 2003 Annual Report on Form 10-K, filed with the
Securities and Exchange Commission on March 19, 2004 indicates that there is a
substantial doubt that IFT can continue as a going concern.

A portion of IFTs
operating loss relates to charges for non-cash operating expenses such as
amortization and depreciation. For the three months ended March 31, 2004, IFT
has raised $450,000 in cash from to the issuance of restricted common stock in
a private placement to a significant shareholder and director.

IFT has not made
significant cash investments in property and equipment or in the acquisition of
companies or technologies since 2001.

The cash used in
operating activities was $556,297 for the three months ended March 31, 2004 as
compared to cash used in operating activities of $518,217 for the three months
ended March 31, 2003.

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Cash used in operations
for the three months ended March 31, 2004 increased primarily because less
stock was issued for services and compensation in the first quarter of 2004. In
addition, more cash was paid for inventory. The cash provided by financing
activities was $450,000 for the three months ended March 31, 2004 as compared
to $566,667 provided by financing activities for the three months ended March
31, 2003.  Cash provided by financing
activities for the three months ended March 31, 2004 related to proceeds from the
sale of restricted common stock to a significant shareholder and director.  Net cash decreased by $106,297 for the three
months ended March 31, 2004 as compared to net cash increasing by $48,450 for
the three months ended March 31, 2003.

Working capital at March
31, 2004 was ($96,359) as compared to ($42,578) at December 31, 2003.

While management cannot
make any assurance as to the accuracy of our projections of future capital
needs, it is anticipated that a total of approximately $1 million over the remainder
of the 2004 fiscal year will be necessary in order to enable us to meet our
current capital needs. IFT has secured $1,050,000 in funding for the remainder
of 2004 with a significant shareholder and director.

Subsequent
Events

In April of 2004, IFT secured
$1,050,000 in funding for the remainder of 2004 with a significant shareholder
and director.

Item
3.  Quantitative and Qualitative
Disclosures About Market Risk

N/A

Item 4.
Controls and Procedures

| | (a) | Evaluation of disclosure controls and procedures.
  Based on their evaluations as of a March 31, 2004, our principal executive
  officer and principal financial officer, with the participation of our full
  management team, have concluded that our disclosure controls and procedures
  (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange
  Act) are (i) designed to ensure that material information relating to us is
  made known to our chief executive officer and chief financial officer by
  others particularly during the period in which this report was being
  prepared, and (ii) effective to ensure that information required to be
  disclosed by us in reports that we file or submit under the Securities
  Exchange Act is recorded, processed, summarized and reported within the time
  periods specified in the rules and forms of the SEC.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | (b) | Changes in controls. 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
  fiscal quarter ended March 31, 2004, that has materially affected, or is
  reasonably likely to materially affect, our internal control over financial
  reporting.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

PART II.
OTHER INFORMATION

Item 1.
Legal Proceedings

The Company is party to
legal proceedings in the normal course of business. Based on evaluation of
these matters and discussions with counsel, management believes that
liabilities arising from these matters will not have a material adverse effect
on the results of operations or financial position of the Company.

Item 2.
Change in Securities, Use of Proceeds and Issuer Purchase of Equity Securities.

For the three months
ended March 31, 2004, IFT has raised $450,000 in cash from to the issuance of
restricted common stock in a private placement to a significant shareholder and
director.

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Item
6.  Exhibits and Reports on Form 8-K

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

| | 31.1 | Certification of Chief Executive Officer pursuant to
  Rule 13(a)-14(a) under the Securities Exchange Act of 1934, as amended.                           
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------
| | 31.2 | Certification of Chief Financial Officer pursuant to
  Rule 13(a)-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
  to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
  Sarbanes-Oxley Act of 2002.

(b)  Reports
on Form 8-K

None

All
other items of this report are inapplicable.

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SIGNATURES

Pursuant to the
requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

INTERNATIONAL FUEL
TECHNOLOGY, INC.
(Registrant)

|By: | /s/ Jonathan R. Burst   |  | Date: | April 30, 2004
|--- | ----------------------- |  | ----- | --------------
|    |                         |  |       |               
|    | Jonathan R. Burst       |  |       |               
|    | Chief Executive Officer |  |       |               
|    |                         |  |       |               
|By: | /s/ Michael F. Obertop  |  | Date  | April 30, 2004
|    |                         |  |       |               
|    | Michael F. Obertop      |  |       |               
|    | Chief Financial Officer |  |       |               

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