<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q
         [X]            QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

               For the Quarterly Period ended  September 30, 2001
                                              -------------------
                                       OR

         [_]            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)

<TABLE>
<S>                                                               <C>
                       Nevada                                                88-0357508
                       ------                                                ----------
 (State or other jurisdiction of incorporation or                (IRS Employer Identification No.)
                    organization)

  7777 Bonhomme, Suite 1920, St. Louis, Missouri                               63105
  -------------------------------------------------------------------------------------
     (Address of principal executive offices)                                (Zip Code)
</TABLE>

                                 (314) 727-3333
                                ----------------
                         (Registrant's telephone number)

        Securities registered pursuant to Section 12(b) of the Act: None

     Securities registered pursuant to Section 12(g) of the Act: Common Stock,
$.01 Par Value

     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

     Yes  X  No___
         ---

     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 September 30, 2001, as reported on the OTC Bulletin
Board, was $26,853,394.

     Number of shares of common stock outstanding as of October 31, 2001:
53,522,934

                                        1

<PAGE>

                                    FORM 10-Q

                For The Quarterly Period Ended September 30, 2001

                                      INDEX
<TABLE>
<CAPTION>
Part I - FINANCIAL INFORMATION                                                                       Page
<S>                                                                                              <C>
       Item 1-  Financial Statements

                Balance Sheets - September 30, 2001 and December 31, 2000                              3

                Statements of Operations - Three Month and Nine Month Periods
                Ended September 30, 2001 and 2000, and From Inception (April 9,
                1996) to September 30, 2001                                                            4

                Statement of Stockholders' Equity (Deficit) - Nine Months
                  Ended September 30, 2001                                                             5

                Statements of Cash Flows - Nine Months Ended September 30, 2001
                  and 2000, and From Inception (April 9, 1996) to September 30,
                  2001                                                                                 6

                Notes to Financial Statements                                                     7 - 10

       Item 2-  Management's Discussion and Analysis of Financial Condition
                  and Results of Operations                                                      11 - 17

Part II - OTHER INFORMATION

       Item 3-  Quantitative and Qualitative Disclosures About Market Risk                            18

       Item 4-  Submissions of Matters to a Vote of Security Holders                                  18

       Item 5-  Exhibits and Reports on Form 8-K                                                      18
</TABLE>

                                        2

<PAGE>

INTERNATIONAL FUEL TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)

  BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                 September 30,    December 31,
  ASSETS (Note 2)                                                    2001             2000
  --------------------------------------------------------------------------------------------
                                                                  (Unaudited)
<S>                                                              <C>             <C>
  Current Assets
    Cash                                                         $     49,348    $    128,204
    Prepaid Expenses                                                   24,400          29,107
    Note Receivable - Stockholders                                     35,000              --
                                                                 ------------    ------------
               Total current assets                                   108,748         157,311
                                                                 ------------    ------------

  Property and Equipment
    Machinery and equipment                                            14,382          23,703
    Accumulated depreciation                                           (4,610)         (5,592)
                                                                 ------------    ------------
               Total property and equipment                             9,772          18,111
                                                                 ------------    ------------

  Purchased Patents & Technology, net (Note 3)                      4,204,444              --
  Goodwill, net (Note 3)                                            2,395,556              --
                                                                 ------------    ------------

               Total assets                                      $  6,718,520    $    175,422
                                                                 ============    ============

  LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) (Note 2)
  -------------------------------------------------------
  Current Liabilities
    Accounts payable                                             $    451,885    $    227,748
    Accrued expenses                                                  240,827         204,325
    Accrued interest                                                   15,313           8,948
    Notes payable to stockholders                                          --          32,500
                                                                 ------------    ------------
               Total current liabilities                              708,025         473,521
                                                                 ------------    ------------

  Long-Term Liabilities
    Notes payable to stockholder                                      162,500         162,500
    Convertible debentures (net of discount) (Note 4)                  62,115              --
                                                                 ------------    ------------
               Total liabilities                                      932,640         636,021
                                                                 ------------    ------------

  Commitments and Contingencies

  Stockholders' Equity (Deficit) (Notes 4 and 5)
    Common stock, $.01 par value; authorized, 150,000,000,
    52,654,789 and 24,560,453 shares issued and outstanding at
    September 30, 2001 and December 31, 2000, respectively            526,547         245,604
    Discount on common stock                                         (904,923)       (819,923)
    Additional paid-in capital                                     31,428,378      21,208,288
    Deficit accumulated during the development stage              (25,264,122)    (21,094,568)
                                                                 ------------    ------------
               Total stockholders' equity (deficit)                 5,785,880        (460,599)
                                                                 ------------    ------------
                                                                 $  6,718,520    $    175,422
                                                                 ============    ============
</TABLE>

See Notes to Financial Statements.

                                        3

<PAGE>

INTERNATIONAL FUEL TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)

STATEMENTS OF OPERATIONS
(UNAUDITED)

<TABLE>
<CAPTION>
                                                                                                                     From Inception
                                                       Three Months                        Nine Months               (April 9, 1996)
                                                           Ended                              Ended                      Through
                                                       September 30,                      September 30,               September 30,
                                                  2001               2000             2001            2000                2001
------------------------------------------------------------------------------------------------------------------------------------
<S>                                            <C>               <C>              <C>              <C>              <C>
Revenues                                       $         -       $         -      $         -     $         -       $              -
Cost of Revenues                                         -                 -                -               -                      -
                                               -------------------------------------------------------------------------------------
Gross Profit                                             -                 -                -               -                      -
                                               -------------------------------------------------------------------------------------

Operating Expenses:
  Advertising and marketing                         14,500             1,555           14,500          15,368                 59,041
  Amortization & Depreciation                      113,194                 -          152,054               -                152,054
  Board meeting expense                                  -                 -                -         117,216                117,216
  Consulting                                       176,098                 -          935,493         278,632              8,578,889
  Insurance                                          9,671             8,612           39,356          25,183                 91,616
  Investment advisory fee                                -                 -                -       1,251,413              1,251,413
  Office and Other                                  18,032            22,661           59,916          77,233                788,640
  Payroll                                          186,663           204,702        1,619,498       1,219,680              4,356,405
  Professional services                            174,626           193,499          527,499         538,309              5,004,400
  Research and development costs                    95,425                 -          192,473           1,736              1,737,332
                                               -------------------------------------------------------------------------------------
           Total operating expenses                788,209           431,029        3,540,789       3,524,770             22,137,006
                                               -------------------------------------------------------------------------------------
           Net loss from operations                788,209           431,029        3,540,789       3,524,770             22,137,006
              Interest expense                     308,758           769,749          628,765         894,166              3,127,116
                                               -------------------------------------------------------------------------------------
           Net loss before income taxes          1,096,967         1,200,778        4,169,554       4,418,936             25,264,122
              Provision for income taxes                 -                 -                -               -                      -
                                               -------------------------------------------------------------------------------------
           Net loss                            $ 1,096,967       $ 1,200,778      $ 4,169,554     $ 4,418,936       $     25,264,122
                                               =====================================================================================


Basic and diluted net loss
      Per common share                         $       .04       $       .06      $       .14     $       .25

Weighted average common shares
     outstanding                                41,984,052        18,716,339       28,853,413      17,894,524
</TABLE>


See Notes to Financial Statements

                                        4

<PAGE>

<TABLE>
<CAPTION>
INTERNATIONAL FUEL TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)

   STATEMENT OF STOCKHOLDERS'
   EQUITY (DEFICIT)
   FOR THE NINE MONTHS ENDED
   SEPTEMBER 30, 2001
   (Unaudited)
                                                                                                         Deficit
                                                                                                       Accumulated
                                           Common Stock                                Additional        During
                                              Shares        Common     Discount on      Paid-In        Development
                                                         Stock Amount  Common Stock     Capital           Stage         Total
   ------------------------------------------------------------------------------------------------------------------------------
<S>                                          <C>          <C>          <C>           <C>            <C>              <C>
   Balance, January 1, 2001                  24,560,453   $   245,604  $   (819,923) $  21,208,288  $   (21,094,568) $  (460,599)

   Conversion of debt and interest               33,333           333             -         16,708                -       17,041
   Issuances of common stock for
   compensation                               2,579,000        25,790             -      1,059,773                -    1,085,563
   Issuances of common stock for
   convertible debentures                     2,769,390        27,694             -        847,306                -      875,000
   Issuances of common stock for debt
   interest                                     406,523         4,065             -        139,137                -      143,202
   Issuances of common stock for
   accounts payable                              10,000           100             -          3,400                -        3,500
   Issuances of common stock for services     1,296,087        12,961             -        669,597                -      682,558
   Issuances of common stock for
   Interfacial acquisition                   12,500,001       125,000             -      6,625,001                -    6,750,001
   Issuances of common stock for
   Interfacial escrow                         8,500,002        85,000       (85,000)             -                -            -
   Discount on issuances of convertible
   debt                                               -             -             -        484,916                -      484,916
   Issuances of common stock warrants                 -             -             -         42,750                -       42,750
   Accrued stock based compensation                   -             -             -        150,004                -      150,004
   Accrued stock based services                       -             -             -        181,500                -      181,500
   Net loss                                           -             -             -              -       (4,169,554)  (4,169,554)

   ------------------------------------------------------------------------------------------------------------------------------
   Balance, September 30, 2001               52,654,789   $   526,547  $   (904,923) $  31,428,378  $   (25,264,122)   5,785,880
   ==============================================================================================================================
</TABLE>

See Notes to Financial Statements


                                        5

<PAGE>

INTERNATIONAL FUEL TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)

<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
(Unaudited)                                                                                                     From
                                                                      Nine Months        Nine Months          Inception
                                                                         Ended              Ended           (April 9, 1996)
                                                                                                            to September
                                                                      September 30,     September 30,           30,
                                                                         2001                2000               2001
---------------------------------------------------------------------------------------------------------------------------
<S>                                                             <C>                     <C>                 <C>
Cash Flows from Operating Activities:
Net loss                                                        $         (4,169,554)    $    (4,418,936)    $ (25,264,122)
Adjustments to reconcile net loss to net cash used in
  operating activities:
  Depreciation                                                                 2,055               2,414             7,647
  Amortization                                                               150,000                   -           150,000
  Stock issued and additional paid in capital
  Interest expense recognized due to discount on debt                         25,753             887,887         1,254,177
  Interest expense recognized upon conversion of debt                        563,897                   -         1,677,348
  Loss on disposal of machinery and equipment                                  5,527                   -             5,527
  Change in assets and liabilities:
    Increase in prepaid expenses                                               4,707             (10,447)          (24,400)
    Increase in accounts payable                                             227,637             134,291           470,853
    Increase in accounts payable-stockholders                                      -            (100,000)           87,095
    Increase in accrued expenses                                              36,502             197,512           240,827
    Increase in accrued interest                                               6,739                   -           158,507
                                                                -----------------------------------------------------------
Net cash used in operating activities:                                   (1,047,114)            (700,022)       (5,691,826)
                                                                -----------------------------------------------------------

Cash Flows from Investing Activities
  Acquisition of machinery and equipment                                      (1,642)                  -           (23,701)
  Increase in employee and stockholder receivables                           (35,000)                  -           (50,468)
  Proceeds from the sale of property and equipment                             2,400                   -             2,400
  Cash acquired in connection with the purchase of
  United States Fuel Technology, Inc.                                              -                   -               358
                                                                -----------------------------------------------------------
Net cash used for investing activities:                                      (34,242)                              (71,411)
                                                                -----------------------------------------------------------
                                                                                                       -
Cash Flows from Financing Activities
  Increase in amount due to related party                                    151,000                   -           177,500
  Increase in due to United States Fuel Technology, Inc.                           -                   -           372,503
  Proceeds from common stock issued                                                -             218,150         2,808,328
  Proceeds from convertible debentures                                       874,000                   -           874,000
  Proceeds from notes payable                                                      -             516,000         2,179,425
  Payment on notes payable                                                   (22,500)                  -          (599,171)
                                                                -----------------------------------------------------------
Net cash provided by financing activities:                                 1,002,500             734,150         5,812,585
                                                                -----------------------------------------------------------

Net increase (decrease) in cash                                              (78,856)             34,128            49,348
  Cash, beginning                                                            128,204              26,846                 -
                                                                -----------------------------------------------------------
  Cash, ending                                                  $             49,348     $        60,974     $      49,348
                                                                ===========================================================
</TABLE>

See Notes to Financial Statements

                                        6

<PAGE>

INTERNATIONAL FUEL TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)

     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. 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, 2000. IFT follows the same
     accounting policies in preparation of interim reports.

     Results of operations for the interim periods are not indicative of annual
     results.

     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 already has several
     technologies in development, and may seek to add other technologies through
     acquisitions. Management anticipates receiving necessary regulatory and
     commercial acceptance for its acquired technologies within the next twelve
     months. Immediately thereafter, IFT expects to begin licensing its products
     and/or selling them directly to the commercial 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 approximately $750,000 over the remainder of the current fiscal
     year will be necessary in order to enable us to meet our current capital
     needs. Management believes the proceeds from financing will be used as
     follows: $200,000 for commercial fleet testing programs, $150,000 for
     professional fees, $200,000 for salary expenses and $200,000 working
     capital for administrative and other capital needs, including investigation
     of future acquisitions, if any.

     On January 3, 2001 IFT entered into a Securities Purchase Agreement with
     IIG Equity Opportunities Fund Ltd. ("IIG Fund"), which has a one-year
     commitment amount of $3 million, with an option at our control for an
     additional $3 million in financing after the completion of the one-year
     commitment. On March 1, 2001, IFT completed registration of the common
     shares required by the January 3, 2001 Securities Purchase Agreement (the
     "Agreement"). The Agreement provides for IFT to sell up to $250,000 in
     convertible debentures to the IIG Fund every thirty days. On March 2, 2001
     IFT initiated the first convertible debenture purchase and on March 7, 2001
     received $200,000 and on March 22, 2001 received $50,000. On April 6, 2001,
     IFT initiated the second convertible debenture purchase and on April 24,
     2001 received $225,000. During May 2001 IFT received notification that due
     to regulatory issues relating to the structure of the transactions
     contemplated by the Securities Purchase Agreement, 18,163,872 shares
     issuable upon possible future conversion of debentures not yet issued and
     750,000 shares issuable upon possible future exercise of not yet issued
     warrants will never be issued. Due to the inability to sell additional
     convertible debentures after April 2001, IFT entered into a new Securities
     Purchase Agreement with IIG on July 10, 2001 that provides for the sale of
     common stock and has a one-year commitment amount of $3 million, with

                                        7

<PAGE>

INTERNATIONAL FUEL TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)

     NOTES TO FINANCIAL STATEMENTS
     (Unaudited)

     an option at our control for an additional $3 million in financing after
     the completion of the one-year commitment. A registration statement for the
     common stock to be issued in connection with this agreement was filed on
     July 12, 2001 and declared effective by the SEC on July 23, 2001. As of
     November 7th, 2001, IFT has borrowed a total of $1,025,000 under the
     financing agreement.

     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 - Acquisition

     On May 25, 2001 IFT issued 21,000,003 common shares to the shareholders of
     Interfacial Technologies (UK) Ltd. ("Interfacial"), to acquire all of
     Interfacial's outstanding common stock. The purchase price of approximately
     $6,750,001 was determined based on the market price of IFT's common stock
     on the date the acquisition was announced. Stock certificates totaling
     12,500,001 common shares were delivered to the Interfacial shareholders on
     May 25, 2001. Stock certificates for the remaining 8,500,002 common shares
     were placed in an escrow account subject to a performance escrow agreement
     that provides for the release of the stock certificates to the Interfacial
     shareholders based on the achievement of certain revenue levels by IFT
     within two years following May 25, 2001. Revenues equal to, or more than,
     $3,500,000 for the one year period ending May 24, 2002, or revenues equal
     to, or more than, $10,000,000 for the two year period ending May 24, 2003
     will result in all of the stock certificates for the 8,500,002 common
     shares being released to the Interfacial shareholders. Revenues more than
     $5,000,000 but less than $10,000,000 for the two year period ending May 24,
     2003 will result in a portion, as determined by a formula in the
     performance escrow agreement, of the stock certificates for the 8,500,002
     common shares being released to the Interfacial shareholders. In connection
     with the closing of this transaction three of the Interfacial shareholders
     have been appointed to IFT's board of directors. In addition, IFT entered
     into an employment agreement with one of the Interfacial shareholders and
     into a consulting agreement with three of the Interfacial shareholders on
     May 25, 2001.

     This transaction has been accounted for as a purchase, and accordingly, the
     assets have been recorded at fair market value. Results of operations have
     been included as of the effective date of the transaction. The purchase
     price exceeded fair market value of the assets acquired by approximately
     $2,450,000 and is being amortized straight line over 15 years. Amortization
     expense during the nine month period ended September 30, 2001 was $150,000.
     The 8,500,002 common shares placed in the escrow account will be valued as
     an addition to the purchase price if and when the shares are released to
     the Interfacial shareholders in accordance with the performance escrow
     agreement at the appropriate market price of IFT's common stock at that
     date. The 8,500,002 common shares are currently recorded at par value, or
     $85,000, as common stock and a discount on common stock.

     The summarized unaudited pro forma results of operations set forth below
     for the nine month periods ended September 30, 2001 and 2000 assume the
     acquisition occurred as of the beginning of 2001 and the beginning of
     Interfacial's 2000 year.

     The unaudited pro forma results of operations are not necessarily
     indicative of what actually would have occurred if the acquisition had been
     completed at the beginning of each of the periods presented, nor are the
     results of operations necessarily indicative of the results that will be
     attained in the future.

                                        8

<PAGE>

INTERNATIONAL FUEL TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)

     NOTES TO FINANCIAL STATEMENTS
     (Unaudited)

                                                    Nine Months Ended
                                                      September 30,
                                                    2001         2000
                                                 -----------------------
     Revenues                                    $        0   $        0
     Net loss                                    $4,310,882   $4,618,507
     Net loss per common share:
     Basic and diluted                           $      .11   $      .12

     Note 4 - Convertible Debentures

     On September 30, 2001, IFT had outstanding convertible debentures of
     $150,000 less the related discount for the beneficial conversion feature of
     the debenture of $87,884. The debentures bear interest at a rate of 6% per
     annum commencing on the date of issuance, are convertible upon issuance,
     and will mature on December 31, 2003.

     The convertible debentures are immediately convertible at the option of the
     holder into the number of shares of our common stock equal to the principal
     amount of the debentures to be converted, including all accrued interest,
     divided by the conversion price in effect on the conversion date. The
     conversion price is calculated at 80% of the average of the three lowest
     closing bid prices for the ten trading days immediately prior to the
     conversion date, but in no event more than 110% of the average of the three
     lowest closing bid prices for the ten trading days immediately preceding
     the convertible debenture issuance date.

     Note 5 - Stockholders' Equity (Deficit)

     On January 31, 2001, IFT issued 33,333 shares in repayment of a $10,000
     note payable to a stockholder. In connection with the issuance of the
     shares, IFT recognized $6,666 in interest expense due to the fair value of
     the stock on the date of extinguishment exceeding the carrying value of the
     debt.

     On January 31, 2001, IFT issued 99,000 shares earned by the Chief Executive
     Officer and Chief Operating Officer under employment agreements, which
     expired on December 31, 2000.

     On February 23, 2001 the Board of Directors of IFT authorized the issuance
     of 2,475,000 shares of common stock to employees and non-employee directors
     IFT. The value of the common shares, $1,082,812, has been included in
     payroll expense for the nine months ended September 30, 2001, and was
     calculated based on the closing stock price of $.4375 on February 23, 2001.
     The 2,475,000 shares of restricted common stock were issued to the
     employees and non-employee directors of IFT on April 10, 2001.

     On April 6, 2001 IFT issued 10,000 restricted common shares as payment for
     $4,375 in consulting services and 10,000 restricted common shares as a
     payment on a $4,125 account payable.

     On April 11, 2001 IFT issued 406,523 common shares to a total of four
     individuals as a recalculation of the beneficial conversion rate used for
     the payment of notes payable in November 2000. The recalculation was
     required due to the 1,626,086 common shares issued in November 2000 not
     being registered with the United States Securities and Exchange Commission
     by March 31, 2001, as the notes payable specified.

                                        9

<PAGE>

INTERNATIONAL FUEL TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)

     NOTES TO FINANCIAL STATEMENTS
     (Unaudited)

     During January 2001, IFT entered into an employment agreement with Jonathan
     R. Burst to serve as Chief Executive Officer and William J. Lindenmayer to
     serve as President and Chief Operating Officer until December 31, 2003. The
     agreements provide for a stock grant of 20,834 shares of common stock at
     the end of each month to each employee.

     The shares are earned ratably on a monthly basis. The stock based
     compensation earned through September 30, 2001, reflected in these
     financial statements as payroll expense and as additional paid in capital
     of $127,504, has been calculated based on the trading price of IFT's stock
     on January 1, 2001. No shares have been issued under these agreements.

     On May 25, 2001 IFT entered into consulting agreements with four
     Interfacial shareholders. Common stock totaling 960,000 shares valued at
     $518,400, or $.54 per share, was issued and recorded as a consulting
     expense. The consulting agreements provide for the total issuance of
     960,000 shares of common stock on May 25, 2002 and 1,180,000 shares of
     common stock on May 25, 2003. Based on the common stock price of $.51 on
     September 29, 2001, IFT has recorded $363,783 to consulting expense for the
     nine months ended September 30, 2001.

     On July 18, 2001, IFT issued 326,087 shares of common stock as payment for
     $159,783, or $.49 per share, for consulting services to a director of IFT.
     The stock price was based on the stock price for the period during which
     the services were performed.

     On August 16, 2001, IFT issued 5,000 shares of common stock valued at
     $2,750, or $.55 per share, to an employee. The stock price was based on the
     closing stock price on the date of the grant.

     During the nine months ended September 30, 2001, IFT has issued 2,769,390
     of stock upon the conversion of $875,000 worth of convertible debentures
     owned by IIG. An additional $527,666 was charged to interest expense and
     added to additional paid-in capital, relating to the beneficial conversion
     feature and value of warrants related to the convertible debentures.

     Effective October 27, 1999, IFT merged with and into Blencathia Acquisition
     Corporation ("Blencathia"). Blencathia had 300,000 shares outstanding at
     the time of the merger, which it redeemed and canceled. In exchange for
     300,000 shares of Blencathia's common stock, IFT issued 300,000 shares of
     its restricted common stock. These shares are expected to be sold in an
     amount sufficient to provide the former shareholders of Blencathia with
     proceeds of $500,000, the negotiated cost of the acquisition.

     On May 8, 2000 IFT issued 300,000 common shares that were contingently
     issued per the Blencathia merger agreement. The 300,000 shares of common
     stock are included in the statement of stockholders' deficit for the three
     months ended March 31, 2001 but are not included in earnings per share and
     weighted average share calculations for the three months ended March 31,
     2001. They will be included when the shares are sold to provide payment to
     the shareholders of Blencathia. The shareholders of Blencathia have
     represented to the management of IFT that the 300,000 shares will be sold
     only with IFT's approval. If the shares are sold and $500,000 is not
     generated additional shares may need to be issued to the shareholders of
     Blencathia. Based on the September 29, 2001 market price, $.54, of IFT's
     common stock, a total of 925,926 shares would need to be issued to generate
     the $500,000 proceeds.

     Note 6 - Subsequent Events

     During October 2001, IFT issued 868,145 common shares to the IIG Fund as
     payment on a $250,000 subsequent closing of a common stock put sale as
     provided for in the July 10, 2001 Securities Purchase Agreement.

                                       10

<PAGE>

     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

     International Fuel Technology and its subsidiary is comprised largely of
     the operations and assets that were previously the business of Interfacial
     Technologies, Ltd., a company located in Manchester, England and is now a
     wholly-owned subsidiary of the Company. IFT completed the acquisition of
     Interfacial on May 23, 2001.

     IFT, through the Interfacial subsidiary, has developed a family of fuel
     blends which 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 a
     urea/water solution. The Company 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, OEM's, and other companies.

     Three Months Ended September 30, 2001 and Nine Months Ended September 30,
     2001 Compared to the Three Months Ended September 30, 2000 and Nine Months
     Ended September 30, 2000

     Operating expenses

     Total operating expenses from development stage operations were $788,209
     for the three months ended September 30, 2001, as compared to the
     development stage operating expenses of $431,029 for the three month period
     ended September 30, 2000. This represents an increase of $357,180, or 82%,
     from the prior period. The increase relates primarily to the increase in
     amortization and depreciation, and consulting partially offset by a
     decrease in interest expense.

     Total operating expenses from development stage operations were $3,540,789
     for the nine months ended September 30, 2001, as compared to the
     development stage operating expenses of $3,524,770 for the nine month
     period ended September 30, 2000. This represents an increase of $16,019
     from the prior period. The increase is a result of increased consulting
     fees, payroll expenses, and increased amortization and depreciation
     expenses partially offset by reduced investment advisory fees, reduced
     board meeting expense and interest.

     Advertising and marketing

     The Company's advertising and marketing expenses relate primarily to the
     development of marketing material to assist us in the marketing of our
     products and our Company. Total advertising and marketing expenses were
     $14,500 for the three months ended September 30, 2001, as compared to the
     advertising and marketing expenses of $1,500 for the three month period
     ended September 30, 2000. Total advertising and marketing expenses were
     $14,500 for the nine months ended September 30, 2001, as compared to the
     advertising and marketing expenses of $15,368 for the nine month period
     ended September 30, 2000. Marketing expenses for the three and nine months
     ended September 30, 2001 were consistent with the corresponding periods.

     Amortization and depreciation

     Amortization and depreciation expenses for the three months ended September
     30, 2001 were $113,194 as compared to $0 for the same period in 2000.
     Amortization and depreciation expenses for the nine months ended September
     30, 2001 were $152,054 compared to zero for the same period in

                                       11

<PAGE>

     2000. The increase was primarily due to amortization of goodwill and
     purchased patents and technology associated with the purchase of
     Interfacial Technologies, Ltd.

     Board Meeting Expense

     There were no board meeting expenses for the nine months ended September
     30, 2001, representing a decrease of $117,216 from the corresponding period
     of 2000. The decrease is due to no common shares being authorized or issued
     for Director's expenses in 2001. In the prior year, board meeting expense
     recognized the value of 45,000 shares of common stock issued to members of
     the Board of Directors as reimbursement for expenses incurred. The shares
     were issued on March 6, 2000 and $6,534 of the total value was allocated to
     travel expense. On February 23, 2000 the Board of Directors adopted the
     Director's Stock Compensation Plan, which provides for an annual award of
     10,000 shares of IFT's common stock to IFT's Board members as reimbursement
     for their attendance at the Board meetings and an additional 1,000 shares
     of IFT's common stock for any three telephone conference call Board
     meetings attended. As of September 30, 2001 IFT's Board of Directors has
     not authorized the issuance of common stock under the Director's Stock
     Compensation Plan for the year 2001.

     Consulting Expenses

     Consulting expenses during the three months ended September 30, 2001 were
     $176,098 as compared to $0 for the same period in 2000. Consulting expenses
     during the nine months ended September 30, 2001 were $935,493 as compared
     to $278,632 for the same period in 2000. This represents an increase of
     $656,861 from the corresponding period in 2000. The increase in the
     consulting expenses in the three month and nine month period is due to
     consulting agreements signed with four shareholders of Interfacial. The
     consulting agreements consist of both cash and stock payments through June
     2003.

     Prior year includes $131,250 that resulted from the sale of 100,000 common
     shares to a Director of IFT for $2.00 per share when the market value was
     $3.3125 per share. The $131,250 in market value in excess of the cash
     amount received is reflected in these financial statements as consulting
     expense and additional paid in capital for the nine month period ended
     September 30, 2000. Prior year also includes the issuance of 250,000 shares
     of restricted common stock to a company whose sole director is a director
     of IFT. The market value of the stock on the day of the issuance was
     $218,750. The $218,750 in market value is reflected in these financial
     statements as consulting expense and additional paid in capital. In
     addition, consulting expenses in 2000 were reduced by $110,367 due to the
     elimination of a related party account payable that had previously been
     recorded to consulting expenses.

     Insurance

     The Company's insurance expense relates primarily to the director and
     officer insurance in place for the benefit of the Company's executives and
     health insurance benefits for our employees. Insurance expense for the
     three and nine months ended September 30, 2001 was consistent with the
     corresponding periods.

     Investment Advisory Fee

     There was no investment advisory fee expense for the nine months ended
     September 30, 2001, representing a $1,251,413 decrease from the
     corresponding period for 2000. On March 28, 2000 a warrant for 390,000
     shares of common stock was exercised by GEM Global Yield Fund Limited at a
     cost of $.01 per share. The value over par value of these shares, reflected
     in the financial statements for the three month period ended March 31,
     2000, as an investment advisory fee, has been calculated based on the
     trading price of IFT's stock at March 28, 2000 in the amount of $1,141,725.
     During February 2000 IFT issued 195,000 shares of common stock and placed
     them in escrow in accordance with the convertible debenture purchase
     agreement entered into in February 2000. The

                                       12

<PAGE>

     shares were to be released from escrow and issued to the purchasers of the
     convertible debenture in the event of an uncured default by IFT prior to
     the closing of the convertible debenture purchase agreement. The 195,000
     shares of common stock were released to the purchasers of the convertible
     debenture in conjunction with an amendment to the convertible debenture
     purchase agreement dated September 16, 2000, and were recorded as an
     investment advisory fee of $109,688 based upon IFT's closing stock price on
     September 16, 2000.

     Office and Other

     Office and other expenses include those expenses associated with
     maintaining our corporate headquarters and other miscellaneous income or
     expense items that occur during the normal course of operating a business.
     Total office and other expenses were $18,032 for the three months ended
     September 30, 2001, as compared to the office and other expenses of $22,661
     for the three month period ended September 30, 2000. Total office and other
     expenses were $69,916 for the nine months ended September 30, 2001, as
     compared to the office and other expenses of $77,233 for the nine month
     period ended September 30, 2000. Office and other expenses for the three
     and nine months ended September 30, 2001 were consistent with the
     corresponding periods.

     Payroll

     Payroll expenses during the three months ended September 30, 2001 were
     $186,663 as compared to $204,702 for the same period in 2000. This
     represents an decrease of $18,039 from the corresponding period of 2000.
     Payroll expenses during the nine months ended September 30, 2001 were
     $1,619,498 compared to $1,219,680 for the same period in 2000. This
     represents an increase of $399,818 from the corresponding of 2000. The
     increase was primarily due to increased compensation to our executives and
     compensation paid to certain member of our Board of Directors.

     On January 1, 2001 IFT entered into employment agreements with its
     President/COO and Chief Executive Officer through December 31, 2003. Under
     these agreements, the Chief Executive Officer and the President/COO will
     each receive an annual base salary of $200,000, a stock award of 20,834
     each month and a bonus award as deemed appropriate by the Board of
     Directors. The Board of Director's granted a bonus of 1,000,000 shares of
     our common stock payable to our President/COO and our Chief Executive
     Officer on February 23, 2001. These shares have been reflected in the
     financial statements for the nine-month period ended September 30, 2001, as
     payroll expense of $875,000.

     The Board of Director's granted stock awards totaling 425,000 restricted
     shares of the Company's common stock to three non-employee directors of
     IFT. The 475,000 restricted shares have been reflected in the statement of
     operations as payroll expense of $185,937 for the nine months ended
     September 30, 2001.

     Professional Services

     Professional service expense consists primarily of fees charged by the
     Company's attorneys, accountants and investor relations firm. The fees
     relate primarily to the registration of the Company's securities and
     required filings with the Securities and Exchange Commission, legal
     assistance in connection with the Interfacial acquisition, and legal
     assistance in connection with our patent registration. Total professional
     services expenses were $174,626 for the three months ended September 30,
     2001, as compared to the professional services expenses of $193,499 for the
     three month period ended September 30, 2000. Total professional services
     expenses were $527,499 for the nine months ended September 30, 2001, as
     compared to the professional services expenses of $538,309 for the nine
     month period ended September 30, 2000. Professional service expenses for
     the three and nine months ended September 30, 2001 was consistent with the
     corresponding periods.

     Research and development

     Research and development expense consists mainly of fees paid to outside
     laboratories to test and certify the performance of our products and
     products under consideration for possible acquisition. The increase in
     research and development expense is consistent with the Company's current
     stage of operations where we are beginning to actively market our product
     to potential customers, which requires an extensive amount of independent
     outside verification. Research and development activities performed by the
     Company's employees or contracted consultants are classified as applicable
     and not under research and development.

                                       13

<PAGE>

     Interest

     Interest expense for the three months ended September 30, 2001 was $308,758
     as compared to $769,749 for the same period in 2000. This represents a
     decrease of $460,991 over the corresponding period for 2000. Interest
     expense for the nine months ended September 30, 2001 was $628,765 as
     compared to $894,166 for the same period in 2000. This represents a
     decrease of $265,401 over the corresponding period for 2000. Interest
     expense for the three and nine month period ending September 30, 2001
     consisted almost entirely of interest expense recognized in conjunction
     with the issuance and conversion of the IIG convertible debentures.

     Provision for Income Taxes

     The Company has operated at a net loss since inception and has not recorded
     or paid any income taxes. The Company has a significant net operating loss
     carryforward that would be recognized at such time as the Company
     demonstrates the ability to operate on a profitable basis for an extended
     period of time.

     New Accounting Pronouncements

     In June 2001, the Financial Accounting Standards Board finalized FASB
     Statements No. 141, Business Combinations (SFAS 141), and No. 142, Goodwill
     and Other Intangible Assets (SFAS 142). SFAS 141 requires the use of the
     purchase method of accounting and prohibits the use of the
     pooling-of-interest method of accounting for business combinations
     initiated after June 30, 2001. SFAS 141 also requires that IFT recognize
     acquired intangible assets apart from goodwill if the acquired intangible
     assets meet certain criteria. SFAS 141 applies to all business combinations
     initiated after June 30, 2001 and for purchase business combinations
     completed on or after July 1, 2001. It also requires, upon adoption of SFAS
     142, that IFT reclassify the carrying amounts of intangible assets and
     goodwill based on the criteria in SFAS 141.

     SFAS 142 requires, among other things, that companies no longer amortize
     goodwill, but instead test goodwill for impairment at least annually. In
     addition, SFAS 142 requires that IFT identify reporting units for the
     purposes of assessing potential future impairments of goodwill, reassess
     the useful lives of other existing recognized intangible assets, and cease
     amortization of intangible assets with an indefinite useful life. An
     intangible asset with an indefinite useful life should be tested for
     impairment in accordance with the guidance in SFAS 142. SFAS 142 is
     required to be applied in fiscal years beginning after December 15, 2001 to
     all goodwill and other intangible assets recognized at that date,
     regardless of when those assets were initially recognized. SFAS 142
     requires IFT to complete a transitional goodwill impairment test six months
     from the date of adoption. IFT is also required to reassess the useful
     lives of other intangible assets within the first interim quarter after
     adoption of SFAS 142.

     Previous business combinations were accounted for using the purchase
     method. As of September 30, 2001, the net carrying amount of goodwill is
     $2,395,556 and other intangible assets is $4,204,444. Amortization expense
     during the nine month period ended September 30, 2001 was $150,000.
     Currently, IFT is assessing but has not yet determined how the adoption of
     SFAS 141 and SFAS 142 will impact its financial position and results of
     operations.

     In October 2001, the Financial Accounting Standards Board issued SFAS 144
     "Accounting for the Impairment or Disposal of Long-Lived Assets" ("FAS
     144"). This statement addresses financial accounting and reporting for the
     impairment and disposal of long-lived assets. This Statement supercedes
     FASB Statement 121,"Accounting for the Impairment of Long-Lived Assets and
     for Long-Lived Assets to be Disposed Of", and the accounting and reporting
     provisions of APB Opinion No. 30,"Reporting the Results of Operations -
     Reporting the Effect of Disposal of a Segment of a Business, and
     Extraordinary, Unusual and Infrequently Occurring Events and Transactions",
     for the disposal of a segment of a business. The provisions of FAS 144 will
     be effective for fiscal years

                                       14

<PAGE>

beginning after December 15, 2001. The Company is currently evaluating the
implications of adoption of FAS 144 and anticipates adopting its provisions in
fiscal year 2002.

Liquidity and Capital Resources

A critical component of our operating plan impacting the continued existence of
our company is the ability to obtain additional capital through additional debt
and/or equity financing. We do not anticipate generating positive operating cash
flow until such time as we can generate revenues from license fees from our
products, which may take the next few years to realize. If we cannot obtain the
necessary capital to pursue our business plan, we may have to cease or
significantly curtail our operations. This would materially impact our ability
to continue as a going concern.

A significant portion of the Company's operating loss relate to charges for
non-cash operating expenses such as amortization and depreciation, employee
compensation, consulting services fees paid in the Company's common stock and
interest expense related to conversion features of the Company debt. We have
offset our capital needs since inception primarily through the issuance of
common stock to our employees and consultants as compensation for services
rendered, which have totaled $15,544,715. In addition, $1,931,525 of interest
expense resulted from non-cash charges related to the convertible feature of our
debt instruments.

The Company has not made significant cash investments in property and equipment
or in the acquisition of companies or technologies. During the period ended
September 30, 2001, the Company acquired Interfacial Technologies, Ltd. a UK
company in exchange for 12,500,001 shares of the common stock. A more detailed
description of the transaction is included below.

Since inception, the Company's financing activities consist mainly of cash from
the issuance of common stock $2,808,328 and proceeds from the issuance of debt
instruments $3,053,425. For the nine months ended September 30, 2001, $874,000
was raised through the issuance of convertible debentures and $151,000 was
raised through the issuance of notes payable of which $150,000 was an advance
that was later converted into a convertible debenture. At the end of the period,
all but $150,000 of convertible debentures had been converted into equity.

Working capital deficit at September 30, 2001 was $599,277 as compared to
$316,210 at December 31, 2000. The increase in the working capital deficit at
September 30, 2001 is primarily due to an increase in accounts payable.

Effective October 27, 1999, IFT merged with and into Blencathia Acquisition
Corporation. Blencathia had 300,000 shares outstanding at the time of merger,
which it redeemed and canceled. In exchange for 300,000 shares of Blencathia's
common stock, IFT issued Blencathia 300,000 shares of its restricted common
stock. These restricted common shares are expected to be sold in an amount
sufficient to provide the former shareholders of Blencathia with proceeds of
$500,000.

On May 8, 2000, IFT issued 300,000 common shares that were contingently issued
per the Blencathia merger agreement. The 300,000 shares of common stock are
included in the statement of stockholders' deficit for the twelve months ended
December 31, 2000 but are not included in earnings per share and weighted
average share calculations for the twelve month period ended December 31, 2000.
They will be included when the shares are sold to provide payment to the
shareholders of Blencathia. The shareholders of Blencathia have represented to
the management of IFT that the 300,000 shares will be sold only with IFT's
approval. If the shares are sold and $500,000 is not generated additional shares
may need to be issued to the shareholders of Blencathia. Based on the September
28, 2001 closing market price, $.53, of IFT's common stock, a total of 925,926
shares would need to be issued to generate the $500,000 proceeds.

On May 25, 2001 IFT issued 21,000,003 common shares to the shareholders of
Interfacial to acquire all of Interfacial's outstanding common stock. The
purchase price of approximately $6,750,000 was

                                       15

<PAGE>

determined based on the market price of IFT's common stock on the date the
acquisition was announced. Stock certificates totaling 12,500,001 common shares
were delivered to the Interfacial shareholders on May 25, 2001. Stock
certificates for the remaining 8,500,002 common shares were placed in an escrow
account subject to a performance escrow agreement that provides for the release
of the stock certificates to the Interfacial shareholders based on the
achievement of certain revenue levels by IFT within two years following May 25,
2001. Revenues equal to, or more than, $3,500,000 for the one year period ending
May 24, 2002, or revenues equal to, or more than, $10,000,000 for the two year
period ending May 24, 2003 will result in all of the stock certificates for the
8,500,002 common shares being released to the Interfacial shareholders. Revenues
more than $5,000,000 but less than $10,000,000 for the two year period ending
May 24, 2003 will result in a portion, as determined by a formula in the
performance escrow agreement, of the stock certificates for the 8,500,002 common
shares being released to the Interfacial shareholders. In connection with the
closing of this transaction three of the Interfacial shareholders have been
appointed to IFT's board of directors. In addition, IFT entered into consulting
agreements with four of the Interfacial shareholders on May 25, 2001.

The acquisition was accounted for using the purchase method of accounting, with
the $6,750,000 purchase price being allocated to intangible assets, which are
subject to amortization. The intangible assets consist primarily of patents,
technology and goodwill. The 8,500,002 common shares placed in the escrow
account will be valued as an addition to the purchase price if and when the
shares are released to the Interfacial shareholders in accordance with the
performance escrow agreement at the appropriate market price of IFT's common
stock at that date.

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 $
750,000 over the remainder of the current fiscal year will be necessary in order
to enable us to meet our current capital needs. Management believes the proceeds
from financing will be used as follows: $200,000 for commercial fleet testing
programs, $150,000 for professional fees, $200,000 for salary expenses and
$200,000 working capital for administrative and other capital needs, including
investigation of future acquisitions, if any.

The Company has in place a Securities Purchase Agreement with IIG Equity
Opportunities Fund Ltd. ("IIG Fund"), which has a one-year commitment amount of
$3 million, with an option at our control for an additional $3 million in
financing after the completion of the one-year commitment. Through November 7,
2001 the Company had issued debentures totaling $1,025,000.

Subsequent Events

During October 2001, IFT issued 868,145 common shares to the IIG Fund upon
conversion of $250,000 in convertible debentures as provided for in the July 10,
2001 Securities Purchase Agreement.

                                       16

<PAGE>

Part II - Other Information

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

In the normal course of business, operations of IFT may be exposed to
fluctuations in interest rates. These fluctuations can vary the costs of
financing, investing and operating transactions. At September 30, 2001 IFT has
debt totaling 19.0% of total liabilities at fixed interest rates and
fluctuations in the interest rate could have a material impact on the underlying
fair value of those debt instruments.

Item 4.  Submission of Matters to a Vote of Security Holders

None

Item 5.  Exhibits and Reports of Form 8-K

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

         None

    (b)  Reports on Form 8-K

         None

    All other items of this report are inapplicable.

                                       17

<PAGE>

                                   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:  November 14, 2001
    ------------------------------------                       -----------------
    Jonathan R. Burst
    Chief Executive Officer

By: /s/ William J. Lindenmayer                          Date  November 14, 2001
    ------------------------------------                      -----------------
    William J. Lindenmayer
    Chief Operating Officer

By: /s/ Michael F. Obertop                              Date  November 14, 2001
    ------------------------------------                      -----------------
    Michael F. Obertop
    Chief Financial Officer

                                       18