<PAGE>

                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                                 FORM 10-Q/A2

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

      For the Quarterly Period ended March 31, 2000
                                     --------------

[_]   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                 (IRS Employer Identification No.)
of incorporation or organization)

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

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

 Blencathia Acquisition Corporation, 1504 R Street, N.W., Washington, D.C.,
 --------------------------------------------------------------------------
                                    20009.
                                    -----
                (Former name and former address of Registrant)

       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 April 30, 2000, as reported on the OTC Bulletin Board,
was $30,680,070.

     Number of shares of common stock outstanding as of April 30, 2000:
17,792,698
<PAGE>

                      INTERNATIONAL FUEL TECHNOLOGY, INC.
                         (A DEVELOPMENT STAGE COMPANY)
                        FOR THE QUARTERLY PERIOD ENDED
                                MARCH 31, 2000

                           Index to Quarterly Report
                                on Form 10-Q/A2

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

                Balance Sheets - March 31, 2000 and December 31, 1999                        3

                Statements of Operations - Three Month Periods Ended March
                  31, 2000 and 1999, and From Inception (April 9, 1996) to March 31, 2000    4

                Statement of Stockholders' Deficit - Three Months Ended March
                  31, 2000                                                                   5

                Statements of Cash Flows - Three Months Ended March 31,
                  2000 and 1999, and From Inception (April 9, 1996) to March 31, 2000        6

                Notes to Financial Statements                                             7-11

       Item 2-  Management's Discussion and Analysis of Financial Condition
                 and Results of Operations                                               12-15

Part II - OTHER INFORMATION

       Item 3-  Quantitative and Qualitative Disclosures About Market Risk                  15

       Item 6-  Exhibits and Reports on Form 8-K                                         15-16
</TABLE>

                                       2

<PAGE>

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

BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                   March 31,     December 31,
ASSETS (Note 2)                                                      2000           1999
-------------------------------------------------------------------------------------------------
                                                                 (Unaudited,
                                                                 as restated)
<S>                                                              <C>             <C>
Current Assets
  Cash                                                           $     19,990    $     26,846
  Employee receivable                                                     468             468
  Note receivable, stockholder                                         15,000          15,000
  Prepaid expenses                                                     30,088          12,719
                                                                 ------------    ------------
                         Total current assets                          65,546          55,033
                                                                 ------------    ------------

Property and Equipment
  Machinery and equipment                                              15,505          15,505
  Accumulated depreciation                                             (3,179)         (2,374)
                                                                 ------------    ------------
                     Total property and equipment                      12,326          13,131
                                                                 ------------    ------------

                                                                 $     77,872    $     68,164
                                                                 ============    ============

LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------

Current Liabilities
  Accounts payable                                               $    156,572    $    110,691
  Accounts payable - stockholders                                     110,367         187,095
  Accrued expenses                                                     15,549           3,406
  Accrued interest expense                                              1,449              --
  Note payable (Note 3)                                                50,000              --
  Notes payable to stockholders                                        62,500          62,500
                                                                 ------------    ------------
                       Total current liabilities                      396,437         363,692
                                                                 ------------    ------------

Commitments and Contingencies

Stockholders' Deficit (Notes 2 and 4)
  Common stock, $.01 par value; authorized, 150,000,000,
    17,792,698 and 16,818,339 shares issued and outstanding at
      March 31, 2000 and December 31, 1999, respectively              177,927         168,184
  Discount on common stock                                           (816,923)       (816,923)
  Additional paid-in capital                                       17,145,264      14,760,243
  Deficit accumulated during the development stage                (16,824,833)    (14,407,032)
                                                                 ------------    ------------
                                                                     (318,565)       (295,528)
                                                                 ------------    ------------
                                                                 $     77,872    $     68,164
                                                                 ============    ============
</TABLE>

See Notes to Financial Statements.

                                       3
<PAGE>

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

<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
(Unaudited)                                                                                           From Inception
                                                                                  Three Months        (April 9, 1996)
                                                                                     Ended                Through
                                                                                   March 31,             March 31,
                                                                        --------------------------
                                                                           2000             1999           2000
----------------------------------------------------------------------------------------------------------------------
                                                                    (as restated)                      (as restated)
<S>                                                                 <C>                  <C>          <C>
Revenues                                                            $         --       $        --     $        --
Cost of Revenues                                                              --                --              --
                                                                    ------------       -----------     -----------
Gross Profit                                                                  --                --              --
                                                                    ------------       -----------     -----------
Operating Expenses:
  Advertising and marketing                                               10,728             5,671          34,747
  Board meeting expense (Note 4)                                         117,216                --         117,216
  Consulting (Note 4)                                                    175,249             1,500       7,533,513
  Insurance                                                                8,747                --           8,747
  Investment advisory fee (Note 4)                                     1,141,725                --       1,141,725
  Office                                                                   3,185               126          58,339
  Other                                                                    7,037               989         114,536
  Payroll (Note 4)                                                       769,511            63,654       1,337,069
  Professional services                                                  161,282             3,198       3,953,816
  Research and development costs                                              --           328,559       1,543,077
  Rent                                                                     5,000            28,367         280,961
  Stock transfer fees                                                        640             1,086          24,267
  Telephone                                                                1,790             1,772          45,486
  Travel                                                                  14,242               844         129,117
                                                                    ------------       -----------     -----------
                     Total operating expenses                          2,416,352           435,766      16,322,616
                                                                    ------------       -----------     -----------
            Net loss from operations                                   2,416,352           435,766      16,322,616
            Interest expense                                               1,449            19,337         502,217
                                                                    ------------       -----------     -----------
            Net loss before income taxes                               2,417,801           455,103      16,824,833
            Provision for income taxes                                        --                --              --
                                                                    ------------       -----------     -----------
            Net loss                                                $  2,417,801       $   455,103     $16,824,833
                                                                    ============       ===========     ===========

                       Basic and dilutive net loss
                        per common share                            $        .14       $       .04

Weighted average common shares outstanding                            17,096,481        12,897,559
</TABLE>

See Notes to Financial Statements.

                                       4
<PAGE>

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

<TABLE>
<CAPTION>

STATEMENT OF STOCKHOLDERS' DEFICIT                                                                        Deficit
                                                                                                        Accumulated
                                                           Common     Common  Discount on   Additional    During
(Unaudited)                                                 Stock     Stock     Common       Paid-In    Development
                                                           Shares     Amount     Stock       Capital       Stage          Total
----------------------------------------------------------------------------------------------------------------------------------
<S>                                                      <C>         <C>       <C>         <C>          <C>           <C>
Balance, January 1, 2000                                 16,818,339  $168,184  $(816,923)  $14,760,243  $(14,407,032) $  (295,528)
Issuances of common stock for cash and services (Note 4)    101,800     1,018       -          330,682         -          331,700
Issuances of common stock for compensation (Note 4)          90,000       900       -           29,388         -           30,288
Issuance of common stock (Note 4)                           100,000     1,000       -           (1,000)        -                0
Issuances of common stock for services (Note 4)              92,559       925       -          277,726         -          278,651
Issuances of common stock for compensation (Note 4)         200,000     2,000       -          548,000         -          550,000
Issuances of common stock for services and cash (Note 4)    390,000     3,900       -        1,141,725         -        1,146,625
Accrued stock based compensation (Note 4)                      -         -          -           58,500         -           58,500
Net loss (as restated)                                         -         -          -            -        (2,417,801)  (2,417,801)
----------------------------------------------------------------------------------------------------------------------------------
Balance, March 31, 2000 (as restated)                    17,792,698  $177,927  $(816,923)  $17,145,264  $(16,824,833) $  (318,565)
==================================================================================================================================
</TABLE>

See Notes to Financial Statements

                                       5
<PAGE>

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

<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
(Unaudited)                                                                                           From
                                                              Three Months       Three Months       Inception
                                                                  Ended             Ended        (April 9, 1996)
                                                                March 31,         March 31,       to March 31,
                                                                  2000               1999             2000
------------------------------------------------------------------------------------------------------------------
                                                             (as restated)                        (as restated)
<S>                                                           <C>                <C>             <C>
Cash Flows from Operating Activities
Net loss                                                     $ (2,417,801)       $  (455,103)    $  (16,824,833)
Adjustments to reconcile net loss to net cash
  used in operating activities:
  Depreciation                                                        804                325              3,178
  Stock issued and additional paid in capital
    recognized for services and compensation                    2,103,320                 --         12,053,796
  Interest expense recognized on conversion of debt                    --                 --            355,771
  Change in assets and liabilities:
    Increase in prepaid expenses                                  (17,369)            (6,250)           (30,088)
    Increase in accounts payable                                   45,881            233,208            156,572
    Increase in accrued expenses                                   13,592             87,420            159,818
                                                              -------------------------------------------------
Net cash used in operating
                 activities                                      (261,206)          (140,400)        (3,928,324)
                                                              -------------------------------------------------
Cash Flows from Investing Activities
  Acquisition of machinery and equipment                               --                 --            (13,861)
  Increase in employee and stockholder receivables                     --                 --            (15,468)
  Cash acquired in connection with the purchase of
    United States Fuel Technology, Inc.                                --                 --                358
                                                              -------------------------------------------------
Net cash used investing
                 activities                                            --                 --            (28,971)
                                                              -------------------------------------------------
Cash Flows from Financing Activities
  Increase in amount due to related party                              --                 --             26,500
  Increase in due to United States Fuel Technology, Inc.               --                 --            372,503
  Proceeds from common stock issued                               204,350                 --          2,788,028
  Proceeds from notes payable                                      50,000             72,153          1,339,425
  Payment on notes payable                                             --                 --           (549,171)
                                                              -------------------------------------------------
Net cash provided by financing
                 activities                                       254,350             72,153          3,977,285
                                                              -------------------------------------------------
             Net increase (decrease) in cash                       (6,856)           (68,247)            19,990
Cash, beginning                                                    26,846             68,735                 --
                                                              -------------------------------------------------
Cash, ending                                                  $    19,990        $       488     $       19,990
                                                              =================================================

Supplemental Cash Flow Information
  Interest paid                                               $        --        $        --     $        2,100
                                                              =================================================
  Taxes paid                                                  $        --        $        --     $           --
                                                              =================================================
</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.

IFT is filing this amended Form 10-Q/A2 to reflect the fair value of the equity
instruments issued in connection with a future debt offering as investment
advisory fees expensed in the period of issuance and to present revised December
31, 1999 financial statement information due to the filing of a Form 10-K/A2
for the nine month period ended December 31, 1999.

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 transitional report on Form 10-K/A2 for the
nine month period ended December 31, 1999. 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 limited funds with which to operate. Management anticipates
receiving diploma certification in 2000 from the California Air Resources Board
that its PEERDIESEL(R) product reduces polluting emissions from internal
combustion engines. Shortly thereafter, IFT expects to begin licensing its
product which management believes will generate sufficient revenue to continue
the IFT's operations. However, there is no assurance that IFT will receive
diploma certification or be able to generate sufficient revenue through the
licensing of its product to provide sufficient working capital. Management
believes approximately $1.5 million of additional capital will be required over
the next year. Management does not have an estimate of the amount of revenue
necessary to attain positive cash flow. In February 2000, IFT entered into a
convertible debenture purchase agreement to raise $3,000,000 through the sale of
convertible debentures. This agreement was amended in June 2000 to raise
$1,500,000 through the sale of convertible debentures. In connection with the
convertible debenture purchase agreement IFT issued a warrant to purchase
390,000 shares of common stock. (See Footnote 4) IFT is additionally required to
issue 195,000 shares of common stock to place in escrow pending the sale of the
convertible debentures. (See Footnote 4) The 195,000 shares of common stock were
released to the purchasers of the convertible debenture purchase agreement in
conjunction with an amendment to the convertible debenture purchase agreement
dated June 16, 2000. Such financing is contingent upon IFT's ability to register
the shares of common stock underlying the warrants and debentures with the
Securities and Exchange Commission ("SEC").

There can be no assurance that the registration will be granted effectiveness by
the SEC, in which case IFT would be required to seek alternative sources of
financing. IFT's continued existence is dependent upon its ability to resolve
its liquidity shortfall principally by obtaining this additional financing or
raising equity capital. IFT must continue to operate on limited cash flow based
upon the cash it has on its balance sheet and its ability to generate limited
funding on a short-term basis. 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.

                                       7
<PAGE>

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

NOTES TO FINANCIAL STATEMENTS
(Unaudited)

Note 3 - Note Payable

During March 2000 IFT received an advance of $50,000 from ONKAR
Corporation, Ltd., a stockholder of IFT. This advance has a due date of March
23, 2001 with a 12% interest rate.

Note 4 - Stockholders' Deficit

On April 26, 1999 IFT offered all stockholders of record on March 31, 1999 the
right to purchase 900 common shares at $.50 per share. During January 2000 IFT
issued 1,800 shares and received proceeds of $450 as a result of this offering
which expired May 28, 1999. The $450 for the other 900 shares was received
during the nine month period ended December 31, 1999.

During January 2000 IFT issued 100,000 shares of common stock in a private
placement for $200,000 to a company whose sole owner is a director of IFT. The
market value of the shares on the date of issuance was $331,250. The $131,250 of
market value in excess of the cash amount received has been recorded as
consulting expense during the three month period ended March 31, 2000.

On July 13, 1999 IFT entered into employment agreements with its Chief Executive
Officer and Chief Operating Officer which expire January 31, 2000 with options
to extend until July 31, 2000. Under the terms of these agreements, these
officers will each receive base pay of $1,000 per month plus up to a total of
60,000 and 30,000 shares of IFT's stock, respectively, payable at the end of the
initial term of the agreements. The shares are earned ratably on a monthly
basis. The 90,000 shares earned under these employment agreements were issued on
January 31, 2000.

At December 31, 1999, IFT owed one of its stockholders approximately $87,000 for
legal services performed. In February 2000, the stockholder agreed to accept
27,559 shares of IFT's stock in lieu of cash for the amounts due to him. The
value of the shares issued, $99,901, was based upon the market value price of
the common shares on February 9, 2000.

Effective January 14, 2000 IFT adopted a Consultant and Employee Stock
Compensation Plan. This plan provides that the Board of Directors may award
shares of IFT's stock to officers, directors, consultants and employees as
compensation for services. The maximum number of shares of common stock, which
may be awarded under this plan, is 500,000 shares. During March 2000 IFT issued
a total of 65,000 shares of common stock to five directors as reimbursement for
directors' expenses. The value of these shares, reflected in these financial
statements as payroll expenses for Jonathan Burst and William J. Lindenmayer in
the amount of $55,000 and as board meeting and travel expenses in the amount of
$117,216 and $6,534, respectively, for the remaining directors, has been
calculated based on the trading price of IFT's stock at February 23, 2000.

                                       8
<PAGE>

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

NOTES TO FINANCIAL STATEMENTS
(Unaudited)

On February 23, 2000 the Board of Directors granted Jonathan Burst 100,000
shares of IFT's common stock for his appointment as Chief Executive Officer. The
value of these shares, reflected in these financial statements as payroll
expense, has been calculated based on the trading price of IFT's stock at
February 23, 2000. On February 23, 2000 the Board of Directors awarded an
initial grant of 100,000 shares of IFT's common stock to William Lindenmayer for
his appointment as President and Chief Operating Officer. The value of these
shares, reflected in these financial statements as payroll expense, has been
calculated based on the trading price of IFT's stock at February 23, 2000. The
total charged to payroll expense for these transactions was $550,000.

On February 9, 2000 IFT issued 100,000 common shares related to a consulting
agreement in effect at that time. Subsequent to March 31, 2000 the consulting
agreement has been amended and the 100,000 common shares were recalled and
canceled. The 100,000 common shares are outstanding as of March 31, 2000 and the
par value of these shares is reflected in these financial statements as a
deduction from additional paid in capital.

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 these financial statements 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 January 2000, IFT entered into an employment agreement with Jonathan R.
Burst to serve as Chief Executive Officer of IFT until December 31, 2000 at a
base annual salary of $180,000. In addition, Mr. Burst is to receive 6,000
shares of common stock each month. During January 2000, IFT entered into an
employment agreement with William J. Lindenmayer to serve as President and Chief
Operating Officer of IFT until December 31, 2000 at a base annual salary of
$180,000. In addition, Mr. Lindenmayer is to receive 3,000 shares of common
stock each month. The shares are earned ratably on a monthly basis. The stock
based compensation earned through March 31, 2000, reflected in these financial
statements as payroll expense and as additional paid in capital, has been
calculated based on the trading price of IFT's stock at February 1, 2000 in the
amount of $58,500.

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 shares are 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 are not included in the statement
of stockholders' deficit for the three months ended March 31, 2000 or included
in earnings per share and weighted average share calculations for the three
months ended March 31, 2000. The 195,000 shares of common stock were released to
the purchasers of the convertible debenture purchase agreement in conjunction
with an amendment to the convertible debenture purchase agreement dated June 16,
2000.

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 will issue 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. Based on the March 31, 2000 market price,
$2.50, of IFT's common stock 200,000 shares would need to be issued.

Note 5 - Related Party Transactions

At March 31, 2000, IFT was owed $15,000 by one of its stockholders for a short
term advance with interest at 6%. The amount was due December 31, 1999. The
amount has not been paid pending resolution of amounts included in accounts
payable to this stockholder. In addition, the $10,000 rent for the months of
February and March has not been recorded or paid pending resolution of these
amounts. The total amount due to this stockholder included in accounts payable-
stockholders at March 31, 2000 was $110,367. As of May 5, 2000 IFT is no longer
occupying the office space previously rented from this stockholder.

Note 6 - Supplemental Disclosures of Cash Flow Information

Supplemental non-cash investing and financing activities were as follows:

Three months ended March 31, 2000
---------------------------------

During the three month period ended March 31, 2000, IFT issued 27,559 shares of
common stock as an $87,095 payment on accounts payable-stockholders.

Three months ended March 31, 1999
---------------------------------

None.

                                       9
<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/A2 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 was incorporated under the laws of the State of Nevada in April 1996, to
develop and commercialize a proprietary scientific process, "Performance
Enhanced Emissions Reduced" ("PEER"), that reformulates various refined fuels,
including #2 diesel fuel, home heating oil, #6 (Bunker) fuel, jet engine fuel
and gasoline to improve combustion efficiency and reduce the amounts of harmful
exhaust emissions from internal combustion engines. The resulting reprocessed
fuels are known as PEERFUEL. IFT is a development stage company, has had no
revenues to date and has raised capital for initial development through the
issuance of its securities and promissory notes.

Three Months Ended March 31, 2000 Compared to the Three Months Ended March 31,
1999

Total operating expenses from development stage operations were $2,416,352 for
the three months ended March 31, 2000, as compared to the development stage
operating expenses of $435,766 for the three month period ended March 31, 1999.
This represents a $1,980,586 increase from the prior period. Increased
development stage operating expenses in the current period compared to the prior
period are a result of increased payroll expenses of $705,857, consulting fees
of $173,749, board meeting expenses of $117,216, investment advisory fees of
$1,141,725, and professional services of $158,084 partially offset by decreased
research and development costs of $328,559.

Board meeting expense for the three months ended March 31, 2000 were $117,216
representing an increase of $117,216 over the corresponding period of 1999. 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. During March 2000,
45,000 shares of IFT's common stock were issued to three, non-employee, Board
members, calculated based on the trading price of IFT's stock at February 23,
2000 which was $2.75 per share, and are reflected in these financial statements
as Board meeting expense of $117,216 and travel expense of $6,534.

Consulting expenses during the three months ended March 31, 2000 were $175,249
representing an increase of $173,749 from the corresponding period for 1999.
IFT sold 100,000 common shares to a company whose sole director is a director of
IFT for $200,000. The market value on the day of issuance for these 100,000
common shares was $331,250. 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. The remaining amount of the increase is due to
consultants used in the operations of IFT and in the development of a market for
IFT's common stock.

                                       10
<PAGE>

Investment advisory fee expense for the three months ended March 31, 2000 was
$1,141,725 representing an $1,141,725 increase over the corresponding period for
1999. 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 these financial statements 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.

Payroll expenses during the three months ended March 31, 2000 were $769,511
representing an increase of $705,857 from the corresponding period of 1999. The
increase was primarily due to the Board of Director's granting a bonus of
100,000 shares of IFT's common stock paid to each of IFT's President/COO and to
its Chief Executive Officer on February 23, 2000, and these shares have been
reflected in these financial statements as payroll expense of $550,000.
Additionally, on February 23, 2000 the Board of Directors adopted the Director's
Stock Compensation Plan, which provided for an annual award of 10,000 shares of
IFT's common stock to Board members as reimbursement for their attendance at the
Board meetings. The President/COO and the Chief Executive Officer were awarded
10,000 shares of IFT's common stock as Board members, and these shares have been
reflected in these financial statements as payroll expense of $55,000. The
stock-award shares value was calculated based on the trading price of IFT's
stock at February 23, 2000 which was $2.75 per share. Additionally, on January
31, 2000 IFT extended the employment agreements with its President/COO and Chief
Executive Officer through December 31, 2000. Under these agreements, the
President/COO will receive an annual base salary of $180,000, 3,000 shares of
IFT's common stock per month and a bonus award as deemed appropriate by the
Board of Directors of IFT. The Chief Executive Officer will receive an annual
base salary of $180,000, 6,000 shares of IFT's common stock per month and a
bonus award as deemed appropriate by the Board of Directors of IFT. The
employment agreement shares in the amount of 18,000 are reflected in these
financial statements as payroll expense and additional paid in capital, and the
shares value was calculated based on the trading price of IFT's stock at
February 1, 2000 which was $3.25 per share. During the three month period ended
March 31, 2000, payroll expense from common stock issued totaled $341,500 for
the Chief Executive Officer and $322,000 for the President/COO.

Professional services during the three months ended March 31, 2000 were $161,282
representing an increase of $158,084 over the corresponding period for 1999. The
increase is primarily due to the increased expenses for legal, accounting, SEC
Edgar filings, research professionals, and the use of a temporary employment
service.

Research and development costs during the three months ended March 31, 2000 were
$0 representing a decrease of $328,559 from the corresponding period for 1999.
The decrease is primarily due to the reduction of the purchase of testing
supplies, rental equipment and decreased testing and laboratory fees.

Interest expense for the three months ended March 31, 2000 was $1,449
representing a decrease of $17,888 over the corresponding period for 1999. This
represents a decrease of 92.5% from the prior period. The decrease is primarily
due to IFT's agreement entered into with certain promissory note holders on
November 1, 1999 to issue 423,537 shares of its common stock by December 31,
1999 in exchange for the balance of the promissory notes due in the amount of
$704,254 and interest on the notes due in the amount of $142,820 at $2.00 per
share. The exchange shares were issued on December 31, 1999 that reduced
interest expense for the three months period ending March 31, 2000.

The net loss for the three months ended March 31, 2000 was $2,417,801 as
compared to the net loss of $455,103 for the three months ended March 31, 1999.
This represents a $1,962,698 increase from the prior period. The net loss per
common share for the three months ended March 31, 2000 was $.14 as compared to
the net loss per common share of $.04 for the three months ended March 31, 1999.

New Accounting Pronouncements

In June 1998, the FASB issued SFAS No. 133 "Accounting for Derivatives and
Hedging Activities," which establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts, (collectively referred to as derivatives) and for

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<PAGE>

hedging activities. SFAS No. 133 is effective for years beginning after June 15,
2000 and requires comparative information for all fiscal quarters of fiscal
years beginning after June 15, 2000. IFT does not expect the adoption of this
statement to have significant impact on its results of operations, financial
position or cash flows.

Year 2000 Matters

The "Year 2000" problem refers to the potential for computational errors or
system malfunctions by computer hardware or software that fail to properly
recognize dates beginning with January 1, 2000, or which fail to recognize 2000
as a leap year. In anticipation of this problem, we implemented a Year 2000
readiness program intended to identify, evaluate and address our Year 2000
exposure.

At the time that this report was prepared, we had not experienced any material
Year 2000 problems with our internal systems and were not aware of any such
problems experienced by our vendors and other service providers. As a result, no
material adverse impact of the Year 2000 problem on our business and operations
was expected at the time of this report, based upon the information available to
us. Although we believe that it is unlikely at the time of this report, there
can be no assurance that any Year 2000 problems will not result in material cost
to us or have a material, adverse impact on our business, financial condition or
results of operations.

Liquidity and Capital Resources

A critical component of IFT's operating plan impacting the continued existence
of IFT is the ability to obtain additional capital through additional debt
and/or equity financing. We do not anticipate IFT will generate a positive
internal cash flow until such time as IFT can generate revenues from license
fees from its PEERFUEL process and/or direct sales of its PEERFUEL products,
either or both of which may take the next few years to realize. In the event we
cannot obtain the necessary capital to pursue our strategic plan, IFT may have
to cease or significantly curtail its operations. This would materially impact
our ability to continue as a going concern.

We have met our capital needs since inception primarily through the issuance of
common stock as compensation for services rendered, which have totaled
$12,053,796 since inception in April 1996, and for the three month period ended
March 31, 2000, totaled $2,103,320. In addition to these amounts, we have raised
$2,788,028 in cash from the issuance of common stock since the IFT's inception,
with $204,350 of this total raised during the three month period ended March 31,
2000. Most of these funds have been raised through private placement
transactions. Finally, since IFT's inception, financing totaling $1,339,425 was
raised privately through notes payable to various sources, of which $549,171 was
repaid, $677,754 was converted to common stock, and $112,500 is recorded as a
liability on the March 31, 2000, balance sheet. For the three months ended March
31, 2000 proceeds from notes payable totaled $50,000.

The cash used in operating activities for the three months ended March 31, 2000
was $261,206 as compared to $140,400 used in operating activities for the three
months ended March 31, 1999. The primary use of the additional cash in
operations compared to the prior year was for accounts payable. The cash
provided by financing activities was $254,350 for the three months ended March
31, 2000 as compared to $72,153 provided by financing activities for the three
months ended March 31, 1999. The primary increase in cash provided by financing
activities compared to the prior year was from the sale of 100,000 shares of
common stock for $200,000. Net cash decreased by $6,856 for the three months
ended March 31, 2000 as compared to net cash decreasing by $68,247 for the three
months ended March 31, 1999.

Working capital at March 31, 2000 was ($330,891) as compared to ($308,659) at
December 31, 1999. The primary decrease in working capital is due to the
increase of a note payable of $50,000 which was used for operations.

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<PAGE>

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 will issue Blencathia shares of its restricted common shares.
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.
Based on the March 31, 2000 market price of IFT's common stock, $2.50, a total
of 200,000 shares would need to be issued.

While management can not make any assurance as to the accuracy of our
projections of future capital needs, it is anticipated that a total of
approximately $1.5 million over the next year will be necessary in order to
enable us to meet our capital needs. We believe the $1.5 million will be used as
follows: $600,000 for specific testing as part of required regulatory procedures
as set by the Air Resources Board of California ("CARB"), $150,000 for
commercial fleet testing programs, $188,000 for initial sales and marketing
efforts, and $562,000 for salary and related administrative expenses (rent,
telephone, etc.). The budget includes officers deferring a portion of their
salary for over the next twelve months. In February 2000, IFT entered into a
convertible debenture purchase agreement to raise $3,000,000 through the sale of
convertible debentures. During June 2000 this agreement was amended to raise
$1,500,000 through the sale of convertible debentures. In connection with the
convertible debenture purchase agreement IFT issued a warrant for the purchase
390,000 shares of common stock at $.01 per common share. This warrant was
exercised on March 28,2000. IFT is additionally required to issue 195,000 shares
of common stock to place in escrow pending the closing on the sale of the
convertible debentures. The 195,000 shares of common stock were released to the
purchasers of the convertible debenture purchase agreement in conjunction with
an amendment to the convertible debenture purchase agreement dated June 16,
2000. Such financing is contingent upon IFT's ability to register the shares of
common stock underlying the warrants and debentures with the Securities and
Exchange Commission ("SEC"). There can be no assurance that the registration
will be granted effectiveness by the SEC, in which case IFT would be required to
seek alternative sources of financing. IFT's continued existence is dependent
upon its ability to resolve its liquidity shortfall principally by obtaining
this additional financing or raising equity capital. IFT must continue to
operate on a limited cash flow based upon the cash it has on its balance sheet
and its ability to generate limited funding on a short-term basis.

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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. Because the Company had minimum
debt there is no material impact on earnings of fluctuations in interest.

Item 6. Exhibits and Reports of Form 8-K

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

Exhibit
Number                     Description
------                     -----------
  27                       Financial Data Schedule

(b)  Reports on Form 8-K

     .  IFT filed a report on Form 8-K dated January 12, 2000 filing IFT audited
        financial statements for March 31, 1999, unaudited financial statements
        as of September 30, 1999 and Pro forma condensed financial statements
        for the six months ended September 30, 1999 and 1998 as exhibits to the
        Blencathia merger agreement
     .  IFT filed a report on Form 8-K dated February 10, 2000 reporting that
        their client-auditor relationship with McGladrey & Pullen, LLP had
        ceased
     .  IFT filed a report on Form 8-K dated March 9, 2000 reporting that they
        had engaged the services of BDO Seidman, LLP as their new independent
        auditors

All other items of this report are inapplicable.

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<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/ William J. Lindenmayer                Date:   December 22, 2000
   --------------------------------------          -----------------------
   William J. Lindenmayer
   President

By: /s/ Steven D. Walters                     Date    December 22, 2000
   --------------------------------------         ------------------------
   Steven D. Walters
   Chief Financial Officer

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