UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


WASHINGTON, D.C. 20549




FORM 10-Q




MARK ONE




x    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Quarterly Period ended June 30, 2012; or




o    Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from ________ to ________




COMMISSION FILE NUMBER:000-27783




VISTA INTERNATIONAL TECHNOLOGIES, INC.


(Exact name of registrant as specified in its charter)




Delaware
84-1572525(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)




5151 E 56th Ave, Commerce City, Colorado 80022


(Address of principal executive offices, including zip code)




(303) 690-8300


(Registrant’s telephone number, including area code)




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


Yes  x   No  o




Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).


Yes  x   No  o




Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.




Large accelerated filer o Accelerated filer o Non-accelerated filer o (Do not check if a smaller reporting company) Smaller reporting company x.




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


Yes  o   No  x.




As of August 14, 2012, Vista International Technologies, Inc. had outstanding 121,925,244 shares of common stock, par value $0.001 per share.










VISTA INTERNATIONAL TECHNOLOGIES, INC.




TABLE OF CONTENTS




PART I – FINANCIAL INFORMATIONItem 1.
Condensed Financial Statements - UnauditedConsolidated Balance Sheets at June 30, 2012 (unaudited) and December 31, 2011

F-1Consolidated Statements of Operations for the three and six months ended June 30, 2012 and 2011 (unaudited)

F-2Consolidated Statements of Cash Flows for the Six  months ended June 30, 2012 and 2011 (unaudited)

F-3Notes to Unaudited Interim Consolidated Financial Statements

F-4Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations

1Item 3.
Quantitative and Qualitative Disclosures About Market Risk

8Item 4.
Controls and Procedures

8PART 2 - OTHER INFORMATIONItem 1.
Legal Proceedings

9Item 2.
Unregistered Sales of Equity Securities And Use of Proceeds

9Item 3.
Defaults Upon Senior Securities

9Item 4.
Mine Safety Disclosures

9Item 5.
Other Information

9Item 6.
Exhibits

9Signatures

12









Vista International Technologies Inc.Condensed Consolidated Balance Sheets  June 30,
2012


December 31,
2011(unaudited)ASSETSCurrent assets:Cash

$
8,840


$
36,710Accounts receivable, net


27,951



1,739Other receivables


196



1,904Prepaid expenses


10,587



55,410Total current assets


47,574



95,763Environmental deposit


170,000



170,000Deposits


1,896



1,896Property and equipment, net


549,659



569,258Intangibles, net


25,798



27,766Total assets

$
794,927


$
864,683LIABILITIES AND STOCKHOLDERS’ DEFICITCurrent liabilitiesAccounts payable and accrued liabilities

$
1,917,285


$
1,900,246Accrued compensation and payroll liabilities


544,484



588,087Accrued interest


280,833



200,376Notes payables - related parties


740,043



658,901Notes payable - stockholder


1,096,931



1,096,931Notes payable and capital leases, current portion


205,673



151,484Convertible notes payable net of debt discount


19,734



3,709Derivative liability


42,069



74,192Total current liabilities


4,847,052



4,673,926Other long-term liabilities


19,866



40,068Notes payable and capital leases, less current portion


-



3,898Total liabilities


4,866,918



4,717,892Commitments and contingencies






-Stockholder’s deficit:Preferred stock, $0.001 par value; 10,000,000 shares authorized; no shares issued and outstanding at June 30, 2012 and December 31,2011


-



-Common stock, $0.001 par value; 200,000,000 shares authorized; 121,925,244 and 120,479,461  shares issued outstanding at June 30, 2012 and December 31,2011, respectively


121,926



120,480Additional paid-in capital


62,704,850



62,694,296Common stock to be issued


5,000



-Accumulated deficit


(66,903,767
)


(66,667,985
)Total stockholder’s deficit


(4,071,991
)


(3,853,209
)Total liabilities and stockholders’ deficit

$
794,927


$
864,683
  The accompanying notes are an integral part of the unaudited condensed consolidated financial statements
  F-1




Vista International Technologies Inc.


Condensed Consolidated Statements of Operations(unaudited)  For the Three Months Ended


For the Six Months EndedJune 30, 2012


June 30, 2011


June 30, 2012


June 30, 2011Revenues

$
164,955


$
123,618


$
320,778


$
225,770Cost of revenue


197,359



114,296



368,377



191,447Environmental remediation expenses


(12,677
)


124,966



(33,635
)


186,984Gross (loss) profit


(19,727
)


(115,644
)


(13,964
)


(152,661
)Operating expenses:Selling, general and administrative expenses


60,394



160,958



132,761



342,154Total operating expenses


60,394



160,958



132,761



342,154Loss from operations


(80,121
)


(276,602
)


(146,725
)


(494,815
)Other income (expense):Interest expense, net


(60,771
)


(43,620
)


(123,248
)


(75,931
)Gain on change in the fair value of derivative liability


19,483



-



32,123



-Finance charges


(822
)


-



(822
)


-Other income


1,311



5,857



2,890



5,857(40,798
)


(37,763
)


(89,057
)


(70,074
)Loss before income taxes


(120,919
)


(314,365
)


(235,782
)


(564,889
)Income tax expenses


-



-



-



-Net loss

$
(120,919
)

$
(314,365
)

$
(235,782
)

$
(564,889
)Net loss per share, basic and diluted

$
(0.00
)

$
(0.00
)

$
(0.00
)

$
(0.00
)Weighted average common shares outstanding


120,733,665



114,807,679



120,606,563



114,763,859
  The accompanying notes are an integral part of the unaudited condensed consolidated financial statements


F-2




Vista International Technologies, Inc.Condensed Consolidated Statements of Cash Flows

(unaudited)  For the Six months endedJune 30, 2012


June 30, 2011Cash flows from operating activities:Net loss

$
(235,782
)

$
(564,889
)Adjustments to reconcile net loss to netcash used in operating activities:Depreciation and amortization


46,724



24,781Operating expenses incurred by noteholder


1,042



-Common stock issued for services provided


-



79,553Environmental remediation expenses


(33,635
)


186,984Gain on sale of property and equipment


(1,100
)


(1,000
)Amortization of deferred debt discount


28,026



-Gain on change in fair value of derivative liability


(32,123
)


-Changes in operating assets and liabilities:Accounts receivable, net


(26,212
)


4,159Prepaid expenses


19,823



15,064Restricted cash and other receivables assets


1,708



48,388Accounts payable and accrued expenses


92,326



106,370Net cash used in operating activities


(139,203
)


(100,590
)Cash flows from investing activities:Proceeds from sale of fixed assets


1,100



(9,734
)Purchase of fixed assets for cash


(137
)


-Net cash provided (used in) in investing activities


963



(9,734
)Cash flows from financing activities:Repayments on debt


(13,693
)


(2,854
)Proceeds for common stock to be issued


5,000



-Proceeds from notes payable and capital lease


32,750



-Proceeds from line of credit


81,213



-Proceeds from related party notes


5,100



154,000Net cash provided by financing activities


110,370



151,146Net increase (decrease) in cash and cash equivalents


(27,870
)


40,822Cash and cash equivalents at beginning of period


36,710



4,901Cash and cash equivalents at end of period

$
8,840


$
45,723Supplemental disclosure of cash flow information:Cash paid during the period for interest

$
-


$
2,500Cash paid during the period for taxes

$
-


$
-Non cash Investing & Financing activities:Accounts payable paid by director – increase in notes payable- related party

$
-


$
13,223Issuance of  common stock in exchange for settlement of convertible notes payable

$
12,000


$
-Equipment purchases funded by capital lease arrangement

$
25,021


$
-Note payable issued for direct payment made by note holders for repayment of bank loan incurred for environmental deposit

$
76,042


$
-  The accompanying notes are an integral part of the unaudited condensed consolidated financial statements
  F-3


Vista International Technologies, Inc.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


Three and six months ended June 30, 2012 and 2011


(unaudited)




1. Significant Accounting Policies and Nature of Operations




Unaudited Interim Financial Statements




The accompanying unaudited interim financial statements, which include the wholly-owned subsidiaries of Vista International Technologies, Inc. (the “Company”, “we”, “our”), have been prepared by the Company in accordance with the instructions to Form 10-Q of the Securities and Exchange Commission. The financial information has not been audited and should not be relied upon to the same extent as audited financial statements. Certain information and footnote disclosures normally included in audited financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. Accordingly, these unaudited interim financial statements should be read in conjunction with the Company’s financial statements and related notes contained in the Form 10-K for the year ended December 31, 2011. In the opinion of management, the unaudited interim financial statements reflect all adjustments, including normal recurring adjustments, necessary for fair presentation of the interim periods presented. The results of operations for the three months ended June 30, 2012 are not necessarily indicative of the results of operations to be expected for the full year.




Description of Business




The Company is in the business of developing, commercializing and operating renewable energy and waste-to-energy (“WTE”) technologies and projects.





The Company is currently conducting its business in the following areas:


●
Tire processing operation in Hutchins, Texas, and●
Renewable energy and WTE projects utilizing the Company’s Thermal GasifierTM technology and corporate administration at the Company’s offices in Commerce City, Colorado.





Discrete financial information is not presently maintained for our WTE business as it has not yet generated any revenues.  In addition, management makes investing and resource allocation decisions based on the combined results of both the processing and WTE business.  Accordingly, we only have one reportable segment.




Going Concern and Management’s Plan




The Company reported a net loss of approximately $235,800 and used net cash in operating activities of $139,203 for the six months ended June 30, 2012, has a working capital deficiency of approximately $4.8 million and an accumulated deficit of approximately $66.9 million at June 30, 2012.  These factors raise substantial doubt about the Company’s ability to continue as a going concern. The Company’s unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The accompanying unaudited condensed consolidated financial statements do not include any adjustments related to the recovery of the recorded assets or the classification of liabilities that might be necessary should the Company be unable to continue as a going concern.




Our continuation as a going concern is dependent upon our ability to generate sufficient cash flow from operations or to obtain equity investment or additional financing to meet obligations on a timely basis and ultimately achieve profitable operations.




During the six months ended June 30, 2012, the Company received proceeds of $32,750 from an equipment financing transaction as well as proceeds from lines of credit totaling roughly $82,000 to help with working capital.  We expect that the Company will continue to rely on loans, including those  from related parties and issuances of shares in private placements to meet its working capital needs for the foreseeable future.




Management plans to focus the Company’s resources in four key areas:




●
Thermal GasifierTM engineering design and deployment




●
Maximizing value from the Hutchins, Texas tire processing and storage facility, including the installation and operation of a tire derived fuel (“TDF”) production facility.




●
Development of project based opportunities, and Attracting strategic investment




F-4




Vista International Technologies, Inc.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


Three and six months ended June 30, 2012 and 2011


(unaudited)




1. Significant Accounting Policies and Nature of Operations (Continued)




Management considers the Thermal Gasifier TM and waste-to-energy segment to be our core business. However, significant focus is also being placed on the improvement of the tire processing operation at our Hutchins, TX facility to increase production and reduce operating costs, and expand sales to include TDF to increase revenue and cash flow.  In February 2012, the Company began operation of the shredding equipment for its TDF production line.




We continue to develop our internal resources and implement business development activities to secure waste-to-energy and biomass-to-energy facility opportunities that will utilize our Thermal GasifierTM technology through build-own-operate agreements or through joint-venture relationships with strategic partners. We are looking to partner with companies that produce large hydrocarbon-based waste streams and are also in need of thermal and/or electrical energy. We are targeting opportunities where there are high disposal fees and energy rates, where we can use the Thermal GasifierTM with back end power systems to provide significant cost savings to the end user.  We are reviewing the economic viability of a number of opportunities in the northeastern United States and in Colorado and are currently working towards obtaining letters of intent from these entities. Currently, the Company does not have any Thermal Gasifiers in operation.




Management believes that current revenue levels will not be sufficient to meet our operational needs and execute the Company’s complete business plan. The Company is seeking additional funding for the activities described above. The Company is exploring various financing opportunities but does not have final agreements or commitments for funding at the present time.




Future funding may be through an equity investment, debt or convertible debt. Current market conditions present uncertainty as to the Company’s ability to secure additional funds, as well as its ability to reach full profitability. There can be no assurance that the Company will be able to secure additional financing, or obtain favorable terms on such financing if it is available.  Continued negative cash flow and lack of liquidity create significant uncertainty about the Company’s ability to fully implement its operating plan, and may result in the Company reducing the scope of its planned operations, scale back or discontinue its technology and project development programs, or obtain funds, if available, through strategic alliances that may require the Company to relinquish rights to certain of its technologies or products or to discontinue its operations entirely.




Revenue Recognition




We recognize revenue from our tire fuel processing and storage facility in three ways:




●
Disposal fees (“tipping fees”) for waste tires are fully earned when accepted at the facility



Tire Derived Fuel revenues are fully earned when the product is accepted at the purchaser’s facility.●
Sales of unprocessed whole tires are recognized when delivered to the end user




Revenue from sales of our Thermal GasifierTM will be recognized upon completion, delivery and customer acceptance, using the completed contract method of accounting.   We have recognized no revenue from the sale of our Thermal GasifierTM during the six months ended June 30, 2012 and 2011.




Concentration of Credit Risk




Our two largest customers comprised approximately 29% and 17% of revenues for the six months ended June 30, 2012, and 38% and 19% of revenues for the three months ended June 30, 2012, Our two largest customers comprised approximately 25% and 11% of revenues for the six months ended June 30, 2011, and 21% and 8% of revenues for the three months ended June 30, 2011




Use of Estimates




U.S. generally accepted accounting principles require us to make certain estimates, judgments and assumptions that we believe are reasonable, based on information available at the time they were made.  These estimates, judgments and assumptions can affect the amounts reported in our condensed consolidated financial statements.




F-5




Vista International Technologies, Inc.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


Three and six months ended June 30, 2012 and 2011


(unaudited)




Recent Accounting Pronouncements




The Company has adopted all applicable recently-issued accounting pronouncements.  The adoption of the accounting pronouncements, including any not yet effective, is not anticipated to have a material effect on the financial position or results of operations of the Company.




1. Significant Accounting Policies and Nature of Operations (Continued)




Reclassifications




Certain reclassifications to the 2011 statements of operations and cash flows have been made in order to conform it to the 2012 presentation.




2. Notes Payable and Capital Lease




At June 30, 2012 and December 31, 2011, the Company had the following promissory notes outstanding:


June 30, 2012

Unaudited


December 31,
201118% installment note, secured by equipment, due December 2013, signed personally by a related party (Note 3)

$
26,885


$
-14% installment note, secured by equipment, due July 1 2014, signed personally by a related party(Note 3)


22,371



-12% line of credit payable, secured by the assets of the company,due on demand after 6/30/13.


76,21312% line of credit payable, secured by the assets of the company,due on demand after 6/30/13.


5,00012% promissory notes payable to individual, interest due monthly, secured by the assets of the Company, due on April 22, 2011 **


50,000



50,00015% promissory note payable to individual, due on demand, in default


17,000



17,0007.5% promissory note with bank, co-signed with related party (Note 3)


-



75,00020.6% installment note, secured by equipment, due December 2012, signed personally by related party


8,204



13,382Total notes payable and capital lease


205,673



155,3828% convertible note, unsecured, due on September 7, 2012


30,500



42,500Total notes payable and capital lease including convertible note


236,173



197,882Less: Unamortized debt discount on convertible note


(10,766)



(38,791)Total notes payable and capital lease including convertible note  net of debt discount


225,407



159,091Less: current maturities, net of unamortized debt discount


(225,407)



(155,193)Notes payable and capital lease – Long-term

$
--


$
3,898




Maturities of notes payable and capital lease at June 30, 2012 are as follows:




Period ending  June 30,


Amount ($)2013

$
225,408$
225,408




F-6




Vista International Technologies, Inc.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


Three and six months ended June 30, 2012 and 2011


(unaudited)


2. Notes Payable and Capital Lease (Continued)




** The 12% promissory notes were originally due April 22, 2011 but on May 19th, 2011 the repayment of principal was postponed until 5 days after the sale of the Hutchins facility. Interest continues to accrue.




Issuance of Lines of Credit




On April 18, 2012 the company was issued a line of credit for $5,000 at a rate of 12% interest, secured by the assets of the company.  Interest on the Line began to accrue from July 1, 2012, with the balance being due on demand anytime after June 30, 2013.  The company drew $5,000 against the line of credit during the second quarter.




On April 26, 2012 the company was issued a line of credit for $80,000 at a rate of 12% interest, secured by the assets of the company.  Interest on the Line began to accrue on July 1, 2012, with the balance being due on demand anytime after June 30, 2013. The company drew $76,213 against this line of credit during the second quarter.




Issuance of Convertible Debt




On December 7, 2011, the Company entered into a loan agreement with an investor pursuant to which the Company sold and issued a convertible promissory note in the principal amount of $42,500.  The Note is convertible into shares of common stock at a conversion price equal to 58% of the current market price of the stock, as measures by the average of the 3 lowest closes of the past 10 trading days. The Note accrues interest at a rate of 8% per annum and matures on September 7, 2012. On June 14, 2012  $12,000 note converted into 1,445,783 common stock.  Current balance of $30,500 outstanding net of debt discount $10,766 as of June 30, 2012.




Embedded Derivatives




The Company identified embedded derivatives related to the Convertible Note entered into on December 7, 2011.  These embedded derivatives included certain conversion features.  The accounting treatment of derivative financial instruments requires that the Company record the fair value of the derivatives as of the inception date of the Convertible Promissory Note and to adjust the fair value as of each subsequent balance sheet date.




Current Value of Derivative




During the six months ended June 30, 2012, the Company amortized $28,026 of the debt discount to current operations as interest expense.




The fair value of the described embedded derivative of $42,069 at June 30, 2012 was determined using the Black-Scholes Model with the following assumptions:




(1) risk free interest rate of
10%;(2) dividend yield of
0%; and(3) volatility factor of
336%;





At June 30, 2012, the Company adjusted the recorded fair value of the derivative liability to market resulting in non-cash, non-operating gain of $32,123 for the six months ended June 30, 2012.




F-7




Vista International Technologies, Inc.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


Three and six  months ended June 30, 2012 and 2011


(unaudited)




3. Related Party Transactions




At June 30, 2012 and December 31, 2011 notes payable - stockholder and notes payable – related parties consisted of the following:




June 30, 2012


December 31, 2011(unaudited)9% promissory notes payable – Richard Strain – stockholder, due on demand, secured by a first priority security interest in Company assets – default waived through June 30, 2011

$
500,000


$
500,0009% line of credit - Richard Strain – stockholder, matures December 31, 2011,  principal payments of $8,000 per month, no prepayment penalty, secured by a first priority security interest in the Company’s assets – default waived through June 30, 2011


146,931



146,9319% note payable-Richard Strain- stockholder, due on demand, secured by a first priority interest in Company assets.  Due 12/31/2011 – in default


450,000



450,000Notes payable- stockholder

$
1,096,931


$
1,096,9318% promissory notes payable - Timothy Ruddy, due on demand, secured by all of the Company’s assets, security interest is subordinated to the loans extended by Mr. Strain

$
695,043


$
613,90112% promissory notes payable to Timothy Ruddy family members, cash interest of 10% and Company stock of 2%, secured by all of the Company’s assets, security interest is subordinated to the loans extended by Mr. Strain, interest due quarterly-default waived


45,000



45,000Notes payable-related parties

$
740,043


$
658,901




.Notes payable – stockholder




The line of credit provides for certain equity redemption rights to Mr. Strain, on terms and conditions to be agreed upon.  No equity redemption rights have been provided as of June 30, 2012.  The maximum amount to be drawn under the line is $375,000.   Mr. Strain indicated that no further advances will be made under the line of credit agreement. The outstanding balance as of June 30, 2012 is $146,931.




In September through December 2011, the Company received $450,000 from a promissory note extended by Mr. Strain  to be used for working capital  and to be paid directly to specified vendors for the purchase of shredding equipment to be utilized for the Company’s TDF production line. The outstanding balance as of June 30, 2012 is $450,000




All other debt of the Company is substantially subordinated to Mr. Strain.




As of June 30, 2012 and December 31, 2011, accrued interest outstanding on the loans was approximately $150,700 and $102,000, respectively.




Interest expense on the loans for the three and six months ended June 30, 2012 was approximately $24,500 and $48,900.  Interest expense on the loans for the three and six months ended June 30, 2011 was approximately $13,000 and $26,500.




Notes payable – related party




The Company has a loan agreement with Mr. Timothy D. Ruddy, a Director and Interim CEO of the Company, in which Mr. Ruddy has the option, at his discretion, to receive payment as follows:




(a)
repayment of principal and interest;(b)
conversion of outstanding amount without accrual of interest into the Company’s common stock based on the quoted market price of the stock at the dates loans were made;(c)
any combination of cash and stock as described in (a) and (b)


The outstanding balance as of June 30, 2012 is $695,043




F-8


Vista International Technologies, Inc.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


Three and six months ended June 30, 2012 and 2011


(unaudited)




3. Related Party Transactions (Continued)




The 20.6% installment note (note 2) was executed by Mr. Ruddy on behalf of the Company in July 2011.  At June 30, 2012, the remaining obligation was approximately $8200 and the net book value of the equipment financed was approximately $24,600.  Mr. Ruddy also paid $6,000 of the required down payment, which has been included in his outstanding loan balance.  The Company is responsible for future monthly payments of $1,350, continuing through December 2012.  Interest is accrued based on the outstanding balance of the obligation.




The 18% installment note (note 2) was executed by Mr. Ruddy on behalf of the Company in February 2012.  At June 30, 2012, the remaining obligation was approximately $26,900 and the net book value of the equipment financed was approximately $35,500.  The Company is responsible for future monthly payments of $1,955, continuing through December 2013.  Interest is accrued based on the outstanding balance of the obligation.




The 14% installment note (note 2) was executed by Mr. Ruddy on behalf of the Company in May 2012.  At June 30, 2012, the remaining obligation was approximately $22,800 and the net book value of the equipment financed was approximately $24,400.  The Company is responsible for future monthly payments of $1,080, continuing through July 1, 2014.  Interest is accrued based on the outstanding balance of the obligation.




As of June 30, 2012 and December 31, 2011, accrued interest outstanding on the loan with Mr Ruddy was approximately $100,300 and $73,300, respectively.




Interest expense on the loans for the three and six months ended June 30, 2012 was approximately $13,300 and $25,500.  Interest expense on the loans for the three and six months ended June 30, 2011 was approximately $9,600 and $19,500.




During the six months ended June 30, 2012, the Company received additional loans from Mr. Ruddy of approximately $76,000.





In December 2010, Mr. Ruddy provided $150,000 of personal assets as collateral for a letter of credit utilized for part of the Company’s required financial assurance to the Texas Commission of Environmental Quality (“TCEQ”).  This letter was called by the TCEQ in December 2011.  Subsequently, Mr. Ruddy provided $75,000 in additional funding to partially cover the amount due by the bank which held the letter of credit, and the Company and Mr. Ruddy jointly executed an unsecured loan for the remaining $75,000 (See Note 3).   This loan has subsequently been paid off by Mr Ruddy.




Notes payable – related party family




12% promissory note payable to Timothy Ruddy family member has an outstanding balance of $45,000 as of March 31, 2012.




As of June 30, 2012, no interest payments have been made on these notes. Default has been waived.




As of June 30, 2012 and December 31, 2011, accrued interest outstanding on the loans was approximately $11,600 and $8,950, respectively.




Interest expense on the loans for the three and six months ended June 30, 2012 was approximately $1,300 and $2,600.  Interest expense on the loans for the three and six months ended June 30, 2011 was approximately $1,300 and $2,600.




Settlement Payments




The Company was named in a suit in the Colorado District Court for the 18thDistrict (Arapahoe County) by a former employee alleging that the Company did not meet its obligation to issue shares to the employee.  On July 12, 2011 the Court granted a motion to enforce a settlement dated September 16, 2010. In accordance with the terms of the court order, the Company is obligated to make payments totaling approximately $104,700, including annual 6% interest.   An initial payment of $15,455 was made on July 22, 2011 and monthly payments of $3,000, including interest are due through November 2013.A final payment of approximately $5,200 will be due in December 2013.As of June 30, 2012, the Company has accrued the short term portion of this settlement of approximately $42,300 under accounts payable and accrued liabilities, and has listed the long term portion of this settlement of $19,866 under other long term liabilities on its balance sheet. Through June 30, 2012, $38,945 has been paid toward the settlement, with no additionalpayments havingbeen paid in the subsequent period, as of August 6th, 2012




F-9


Vista International Technologies, Inc.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


Three and six months ended June 30, 2012 and 2011


(unaudited)




4. Stockholders’ Equity




As of June 30, 2012, the Company has an obligation to issue approximately 100,000 shares of its restricted common stock to an investor.  The accompanying unaudited condensed consolidated financial statements reflect an accrual of approximately $5,000 for these unissued shares as of June 30, 2012.




As of June 30, 2012 and December 31, 2011, there were 121,925,244 and 120,479,461 shares of common stock issued and outstanding respectively.




5. Commitments and Contingencies





Encumbrance on Company Assets




On September 13, 2011 the Company entered into an agreement with the Internal Revenue Service (“IRS”) to pay a delinquent payroll tax obligation of approximately $88,700, including penalties and interest, at the rate of $5,000 per month.  The IRS has filed a tax lien against the Company in connection with this obligation.  The Company expects to use revenues from TDF production at its industrial site in Hutchins Texas to satisfy the remainder of this obligation (See Note 1).




Mechanic’s lien filed by a contractor for approximately $86,000 for services provided October, 2007 through April, 2008.  Lien expired in August 2011 under statute of limitations for such liens in Texas. The liability for this judgment is still included in accounts payable and accrued liabilities in the consolidated balance sheets




Litigation and Claims




In accordance with the terms of a court order, the Company is obligated to make payments totaling approximately $104,700, including 6% interest, to a former employee.  An initial payment of $15,455 was made in July 2011 and monthly payments of $3,000, including interest are due through December 2013.  At June 30, 2012, liabilities for approximately $42,300 and $19,900 has been included in accounts payable and accrued liabilities and other liabilities, respectively, related to this matter.




Environmental Liability




Our tire operations in Texas are subject to regulation by the TCEQ.  At June 30, 2012, the Company had approximately 14,600 tons of whole tires, partially shredded tires, tire chips and process waste stored onsite at the tire processing and storage facility. Through January 2011, we were able to dispose of this material at a municipal landfill site with minimal disposal and transportation costs. In February, 2011, the landfill transitioned to a project-based system where tire shreds are requested as needed, and the Company is now required to pay transportation and disposal costs in order to reduce its tire shred inventory. Consequently, the Company has since installed a tire derived fuel (TDF) line to create additional revenue from disposal of the tires and has been selling TDF since February 2012.    Based on these new circumstances, the Company has estimated a disposal cost of approximately $33,600 at June 30, 2012.  This amount has been included in accounts payable and accrued liabilities in the accompanying condensed consolidated balance sheets, and reflects a decrease of approximately $33,600 compared to December 31, 2011.  This amount has been recorded as environmental remediation expense in the accompanying unaudited condensed consolidated statements of operations.




The Company’s registration with the TCEQ requires the Company to provide financial assurance (approximately $170,000 at June 30, 2012) for remediation in the event the Company liquidates and the facility closes.     The Company currently has $170,000 on deposit with the TCEQ, Consisting of $20,000 in cash provided by the company, and $150,000 in cash provided by Mr. Ruddy, The Company has no other asset retirement obligations.




6. Fair Value of Financial Instruments




ASC 825-10 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance. ASC 825-10 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 825-10 establishes three levels of inputs that may be used to measure fair value:




Level 1 - Quoted prices in active markets for identical assets or liabilities.
  Level 2 - Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.
  Level 3 - Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.




F-10


Vista International Technologies, Inc.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


Three and six months ended June 30, 2012 and 2011


(unaudited)


6. Fair Value of Financial Instruments (Continued)




To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed is determined based on the lowest level input that is significant to the fair value measurement.




Items recorded or measured at fair value on a recurring basis in the accompanying unaudited condensed consolidated financial statements consisted of the following items as of June 30, 2012:




Fair Value Measurements at June 30, 2012 using:June 30,

2012


Quoted Prices

in Active

Markets for

Identical

Assets

(Level 1)


Significant

Other

Observable

Inputs (Level 2)


Significant

Unobservable

Inputs

(Level 3)Liabilities:Debt Derivative liabilities

$
42,069



-



-


$
42,069





The debt derivative liabilities are measured at fair value using quoted market prices and estimated volatility factors based on historical prices for the Company’s common stock and are classified within Level 3 of the valuation hierarchy.




The following table provides a summary of changes in fair value of the Company’s Level 3 financial liabilities as of June 30, 2012:




Debt Derivative

LiabilityBalance, January 1, 2012

$
74,192Initial fair value of debt derivatives at note issuances


-Mark-to-market at June 30, 2012:- Embedded debt derivatives


(32,123
)Balance, June 30, 2012

$
42,069Net gain for the period included in earnings relating to the liabilities held at June 30, 2012

$
32,123




7. Subsequent Events
  Management evaluated all activities of the Company through the issuance date of the Company’s interim unaudited condensed consolidated financial statements and concluded that no subsequent events have occurred that would require adjustments or disclosures into the interim unaudited condensed consolidated financial statements.




F-11




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




FORWARD LOOKING STATEMENTS




Certain information contained in this report may include “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, and is subject to the safe harbor created by that act. The safe harbor created by the Securities Litigation Reform Act will not apply to certain “forward looking statements” relating to our business or operations because we issued “penny stock” (as defined in Section 3(a)(51) of the Securities Exchange Act of 1934 and Rule 3a51-1 under the Exchange Act) during the three year period preceding the date(s) on which those forward looking statements were first made). We caution readers that certain important factors may affect our actual results and could cause such results to differ materially from any forward-looking statements which may be deemed to have been made in this report or which are otherwise made by or on behalf of us. For this purpose, any statements contained in this report that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the generality of the foregoing, words such as “may”, “will”, “expect”, “believe”, “explore”, “consider”, “anticipate”, “intend”, “could”, “estimate”, “plan”, or “continue” or “hope” or the negative variations of those words or comparable terminology are intended to identify forward-looking statements.




The Management’s Discussion and Analysis is intended to help stockholders and other readers understand the dynamics of the Company’s business and the key factors underlying its financial results. It explains trends in the Company’s financial condition and results of operations for the period ended June 30, 2012, compared with the operating results for the period ended June 30 2011.




Business Overview and Presentation




Our financial results were impacted by several significant trends, which are listed below.  We expect that these trends will continue to affect our results of operations, cash flows and financial position.




●
Inability to attract adequate debt or equity funding to implement our business plan


●
Delay in successfully demonstrating our Thermal GasifierTM technology


●
Ongoing operating losses




Description of Business





The Company is in the business of developing, commercializing and operating renewable energy and waste-to-energy (“WTE”) technologies and projects.





The Company is currently conducting its business in the following areas:


●
Tire processing operation in Hutchins, Texas, and●
Renewable energy and WTE projects utilizing the Company’s Thermal GasifierTM technology and corporate administration at the Company’s offices in Englewood, Colorado.


Discrete financial information is not presently maintained for our WTE business as it has not yet generated any revenues.  In addition, management makes investing and resource allocation decisions based on the combined results of both the processing and WTE business.  Accordingly, we only have one reportable segment.




Our mission is to provide a clean, dependable, cost-competitive alternative energy to fossil fuels.  We plan to develop projects with government, community, industry and financial partners to recover the available carbon based energy from materials previously considered “waste” and destined for disposal.  The recovery of energy from waste using our Thermal GasifierTM is expected to divert large volumes of material from landfills and other disposal sites, while providing clean alternative energy and reducing greenhouse gas emissions.  In addition to processing waste into clean energy, our technology has the capability to convert biomass into energy using various plant based materials.




Environmental Liability




Our tire processing operations are subject to regulation by the Texas Commission on Environmental Quality (TCEQ). We are registered with the TCEQ, which allows us to receive, store, transport and process waste tires.  Our registration was renewed on April 23, 2010 and our permit was granted through April 25, 2015.




1




At June 30, 2012, the Company had approximately 14,600 tons of whole tires, partially shredded tires, tire chips and process waste stored onsite at the tire processing and storage facility. Through January 2011, we were able to dispose of this material at a municipal landfill site with minimal disposal and transportation costs. In February, 2011, the landfill transitioned to a project based system where tire shreds are requested as needed and the Company is now required to pay transportation and disposal costs in order to reduce its tire shred inventory.  Consequently, the Company has since installed a tire derived fuel (TDF) line to create additional revenue from disposal of the tires and has been selling TDF since February 2012 ,  Based on these circumstances, the Company has estimated a disposal cost of approximately $368,800 at June 30, 2012.




Going Concern




The Report of our Independent Registered Public Accounting Firm on the Company’s consolidated financial statements as of and for the year ended December 31, 2011, includes a “going concern” explanatory paragraph which means that the auditors stated that conditions existed that raise substantial doubt about the Company’s ability to continue as a going concern.




The Company reported a net loss of approximately $235,800 and used net cash in operating activities of approximately $139,203  for the six months ended June 30, 2012, has a working capital deficiency of approximately $4.8 million and an accumulated deficit of approximately $66.9 million at June 30, 2012.  These factors raise substantial doubt about the Company’s ability to continue as a going concern. The Company’s condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The financial statements do not include any adjustments related to the recovery of the recorded assets or the classification of liabilities that might be necessary should the Company be unable to continue as a going concern.




Our continuation as a going concern is dependent upon our ability to generate sufficient cash flow from operations or obtain equity investment or additional financing to meet obligations on a timely basis and ultimately achieve profitable operations.




Management’s Plan




During the six months ended June 30, 2012, the Company received proceeds of approximately $32,750 from an equipment financing transaction as well as proceeds from lines of credit totaling roughly $82,000 to help with working capital.  We expect that the Company will continue to rely on loans, including those  from related parties and issuances of shares in private placements to meet its working capital needs for the foreseeable future.




Management plans to focus the Company’s resources in four key areas:




●
Thermal GasifierTM engineering design and deployment




●
Maximizing value from the Hutchins, Texas tire processing and storage facility, including the operation of a tire derived fuel (“TDF”) production facility.




●
Development of project based opportunities, and




●
Attracting strategic investment




TDF Production




Management considers the Thermal Gasifier TM and waste-to-energy segment to be our core business. However, significant focus is also being placed on the improvement of the tire processing operation at our Hutchins, TX facility to increase production and reduce operating costs, and expand sales to include TDF to increase revenue and cash flow.  In February 2012, the Company began operation of the shredding equipment for its TDF production line.  Management expects positive cash flow from production in the second quarter of 2012.




Thermal GasifierTM technology




We continue to develop our internal resources and implement business development activities to secure waste-to-energy and biomass-to-energy facility opportunities that will utilize our Thermal GasifierTM technology through build-own-operate agreements or through joint-venture relationships with strategic partners. We are looking to partner with companies that produce large hydrocarbon-based waste streams and are also in need of thermal and/or electrical energy. We are targeting opportunities where there are high disposal fees and energy rates, where we can use the Thermal GasifierTM with back end power systems to provide significant cost savings to the end user.  We are reviewing the economic viability of a number of opportunities in the northeastern United States and in Colorado and are currently working towards obtaining letters of intent from these entities. Currently, the Company does not have any Thermal Gasifiers in operation.




2




Summary




Management believes that current revenue levels will not be sufficient to meet our operational needs and execute the Company’s complete business plan. The Company is seeking additional funding for the activities described above.




Future funding may be through an equity investment, debt or convertible debt. Current market conditions present uncertainty as to the Company’s ability to secure additional funds, as well as its ability to reach full profitability. There can be no assurance that the Company will be able to secure additional financing, or obtain favorable terms on such financing if it is available.  Continued negative cash flow and lack of liquidity create significant uncertainty about the Company’s ability to fully implement its operating plan, and may result in the Company reducing the scope of its planned operations, scale back or discontinue its technology and project development programs, or obtain funds, if available, through strategic alliances that may require the Company to relinquish rights to certain of its technologies or products or to discontinue its operations entirely




3
 
  Results of Operations
  Overview:
  The following table summarizes our results of operations for  the Three and Six Months Ended June 30, 2012  and 2011
  Three Months Ended


Increase(Decrease)


Six Months Ended


Increase(Decrease)June 30, 2012


June 30, 2011


$ Chg


%Chg


June 30, 2012


June 30, 2011


$ Chg


%ChgRevenues

$
164,955


$
123,618


$
41,337



33.4
%

$
320,778


$
225,770


$
95,008



42.1
%Cost of revenue


197,359



114,296



83,063



72.7
%


368,377



191,447



176,930



92.4
%Environmental remediation expenses


(12,677
)


124,966



(137,643
)


-110.1
%


(33,635
)


186,984



(220,619
)


-118.0
%Gross (loss) profit


(19,727
)


(115,644
)


95,917



-82.9
%


(13,964
)


(152,661
)


138,697



-90.9
%Operating expenses:Selling, general and administrative expenses


60,394



160,958



(100,564
)


-62.5
%


132,761



342,154



(209,393
)


-61.2
%Total operating expenses


60,394



160,958



(100,564
)


-62.5
%


132,761



342,154



(209,393
)


-61.2
%Loss from operations


(80,121
)


(276,602
)


196,481



-71.0
%


(146,725
)


(494,815
)


348,090



-70.3
%Other income (expense):Interest expense, net


(60,771
)


(43,620
)


(17,151
)


41.2
%


(123,248
)


(75,931
)


(47,317
)


62.3
%Gain on change in the fair value of derivative liability


19,483



-



19,483



N/A



32,123



-



32,123



N/AFinance Charges


(822
)


-



(822
)






(822
)


-



(822
)


N/AOther Income


1,311



5,857



(4,546
)


-77.6
%


2,890



5,857



(2,967
)


-50.7
%(40,798
)


(37,763
)


(3,035
)


8.0
%


(89,057
)


(70,074
)


(18,983
)


27.1
%Loss before income taxes


(120,919
)


(314,365
)


193,446



-61.5
%


(235,782
)


(564,889
)


329,107



-58.3
%Income tax expenses


-



-



-



-



-Net loss

$
(120,919
)

$
(314,365
)

$
193,446



-61.5
%

$
(235,782
)

$
(564,889
)

$
329,107



-58.3
%
  Results of Operations for the Three Months Ended June 30, 2012 and 2011.
  Revenue
  Revenue, which consists primarily of tipping fees received for acceptance of whole passenger and truck tires and revenue from sales of TDF (tire derived fuel) rose 33%, or roughly $41,300 as compared with the three months ended June 30, 2011.  The majority of the increase is due to the sale of TDF, which began in February 2012 and is not reflected in the 2011 numbers.  The Company’s customer list in 2012  is consistent with its customer list in 2011.
  4
  Two customers comprised approximately 38% and 19% of revenues for the three months ended June 30, 2012 and 21% and 8% of revenues for the three months ended June 30, 2011.
  Cost of Revenue
  Cost of revenue for our tire processing operations increased roughly $83,000 from the year earlier period due mainly to an increase in equipment repair and maintenance of $48,700 due to the increased amount of tire shredding equipment to be repaired and maintained, an increase in labor costs of $21,000 and an increase of $9,000 in outside services used in production.
  Management expects the cost of revenue to remain roughly constant at this higher level due to continued operation of the TDF production line
  Environmental remediation expense
  Our tire operations in Texas are subject to regulation by the TCEQ.  At June 30, 2012, the Company had approximately 14,600 tons of whole tires, partially shredded tires, tire chips and process waste stored onsite at the tire processing and storage facility. Through January 2011, we had been able to dispose of this material at a municipal landfill site with minimal disposal and transportation costs. In February 2011, the landfill transitioned to a project based system where tire shreds were requested as needed and the Company was required to pay transportation and disposal costs in order to reduce its tire shred inventory.  Consequently, the company installed a tire derived fuel(TDF) production line, starting production in February 2012 to allow the company to generate revenue from the offtake of material from the site  Based on these new circumstances, the Company has estimated a disposal cost of approximately $368,800 at June 30, 2012, resulting in income of $12,700 for the three months ended June 30, 2012 as compared to an expense of  approximately $125,000 in the comparable prior period.  Management believes that the cost of disposal will decrease as the tire inventory is reduced over future periods due to TDF production.
  5
  The Company’s registration with the TCEQ requires the Company to provide financial assurance in the form of letters of credit (approximately $170,000 at June 30, 2011) for remediation in the event the Company liquidates and the facility closes.  The amount of assurance that would be required (computed utilizing TCEQ regulations) is approximately $235,700 as of June 30, 2012.  Accordingly, our assurance is deficient by approximately $65,700 as of June 30, 2012.
  Selling, General, and Administrative Expenses
  Selling, general, and administrative expenses decreased approximately $100,600 for the three months ended June 30, 2012 as compared to the year ago period.  The decrease was due primarily to a decrease of $54,500 in consulting services and $39,200 in legal expenses.  The significant changes were due to comparisons to costs incurred during 2011 when the company was attempting a sale/leaseback of  its Hutchins tire facility and were therefore not necessary in 2012.  Labor costs also decreased roughly $30,700 as a result of the company streamlining its corporate operations in early 2012.  These decreases were offset by an increase in outside services of roughly $7,500. Overall, this quarter reflects the continuation of a trend toward significant decreases in salaries and legal/accounting expenses due to lack of liquidity.  Management anticipates that these expenses will continue to be minimized until liquidity is sufficient to allow us to begin adding resources to manage the business.
  Interest Expense
  Interest expense increased roughly $18,000 in the three months ended June 30, 2012, due to an increase in related party borrowings during the second half of 2011 and continuing into 2012 for working capital and to fund the purchase and installation of the TDF production line.
  Gain on Change in Fair Value of Derivative Liability
  During the three months ended June 30, 2012,  the company recorded a gain of approximately $19,500 due to the change in fair value of the derivative portion of a convertible note signed in December, 2011,There was no comparable event  in June 2011.
  6
  Results of Operations for the Six Months Ended June 30, 2012 and 2011
  Revenue
  Revenue, which consists primarily of tipping fees received for acceptance of whole passenger and truck tires and revenue from the sale of tire derived fuel(TDF), increased by 42%, or roughly $95,000 during the six months ended June 30, 2012  as compared to the six months ended June 30, 2011 due to the sale of tire derived fuel in 2012.  Tipping fee revenue remained roughly constant year over year.
  Two customers comprised approximately 29% and 17% of revenues for the six months ended June 30, 2012 and approximately 25% and 11% of revenues for the six months ended June 30, 2011.
  Cost of Revenue
  Cost of revenue for our tire processing operations increased by roughly $177,000 due to added cost to operate the TDF production line.  This resulted mainly from  an increase of  $76,000 in equipment repair and maintenance from the added costs of maintaining the additional shredding machines, an increase of $48,000 in labor costs, and an increase of roughly $26,000 in depreciation expense for the added equipment.
  Management expects the cost of revenue to remain roughly constant at this higher level due to continued operation of the TDF production line
  Environmental remediation expense
  Our tire operations in Texas are subject to regulation by the TCEQ.  At June 30, 2012, the Company had approximately 14,600 tons of whole tires, partially shredded tires, tire chips and process waste stored onsite at the tire processing and storage facility. Through January 2011, we had been able to dispose of this material at a municipal landfill site with minimal disposal and transportation costs. In February, 2011, the landfill transitioned to a project based system where tire shreds were requested as needed and the Company was now required to pay transportation and disposal costs in order to reduce its tire shred inventory.   Consequently, the company installed a tire derived fuel(TDF) production line, starting production in February 2012 to allow the company to generate revenue from the offtake of material from the site    Based on these new circumstances, the Company has estimated a disposal cost of approximately $368,800 at June 30, 2012, resulting in income of $33,600 for the current period as compared to an expense of approximately $187,000  in the comparable prior period. Management believes that the cost of disposal will decrease as the tire inventory is reduced over future periods due to TDF production.
 
 The Company’s registration with the TCEQ requires the Company to provide financial assurance in the form of letters of credit (approximately $170,000 at June 30, 2011) for remediation in the event the Company liquidates and the facility closes.  The amount of assurance that would be required (computed utilizing TCEQ regulations) is approximately $235,700 as of June 30, 2011.  Accordingly, our assurance is deficient by approximately $65,700 as of June 30, 2011.
  Selling, General, and Administrative Expenses
  Selling, general, and administrative expenses decreased approximately $209,000 in the six months ended June 30, 2012.
 This was primarily due to decreases of $67,000 in Legal expenses and $62,500 in Consulting services.  These costs were directly related to the attempted sale leaseback transaction attempted in 2011.  Also contributing to the decrease in expenses was a decrease in labor costs of $52,400 due to streamlining of corporate operations in early 2012
  The results for the six month period reflect a continuation of a trend toward significant decreases in salaries and consulting expenses due to lack of liquidity.  Management anticipates that these expenses will continue to be minimized until liquidity is sufficient to allow us to begin adding resources to manage the business.
  Interest Expense
  Interest expense increased  approximately $47,300  in the period ended June 30, 2012 due to an increase in stockholder and  related party borrowings during the second half of 2011 and continuing into 2012 which were utilized for working capital and to purchase and install the TDF line.
  7
  Gain on Change in Fair Value of Derivative Liability
  During the six months ended June 30, 2012,  the company recorded a gain of approximately $32,100 due to the change in fair value of the derivative portion of a convertible note signed in December, 2011,There was no comparable event  in 2011.
  Liquidity and Capital Resources
  The Company had a cash balance of approximately $8,800 as of June 30, 2012.  Our cash balance decreased approximately $27,900 as  compared to December 31, 2011  due primarily to the timing of payment on the Company’s TDF contracts.  The TDF purchaser  generally has 30 days or longer to pay for the TDF product, so receivables increased with a corresponding decrease in the cash balance.
  We expect that our current cash on hand and expected revenues will not be sufficient to sustain our current operations.  The Company is exploring all available funding sources, including the sale of its assets, and additional debt and equity funding. In the near future we are relying on funding from principal shareholders and related parties to provide cash to fund operations in the forseeable future as described in more detail under the heading “Management’s Plans” above.  If we are unable to obtain additional funding or increase revenues, we may be required to scale back or suspend operations or revise our business plan.
  As of June 30, 2012, we had a working capital deficiency of approximately $4.8 million, which includes notes payable to a stockholder of roughly $1.096 million (notes currently in default), notes payable to a related party of approximately $740,000, a liability of approximately $368,800 for waste tire shred removal and cleanup costs at the tire processing and storage facility, and an unpaid payroll liability to former officers of the Company of approximately $482,000.
  As of June 30, 2012, we owed approximately $41,000 to the Internal Revenue Service in delinquent payroll taxes and penalties.  Monthly payments of $5,000 have been made to the Internal Revenue Service since December 28, 2010.
  During the six months ended June 30, 2012, the Company received proceeds of $32,750 from an equipment financing transaction and roughly $82,000 from lines of credit to help with working capital needs.
  Off-Balance Sheet Arrangements
  The Company has no off-balance sheet arrangements.
  Item 3. Quantitative and Qualitative Disclosures About Market Risk
  None.
  Item 4. Controls and Procedures
  Evaluation of Disclosure Controls and Procedures.
  We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including its chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.
  Limitations on the Effectiveness of Disclosure Controls. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
  Evaluation of Disclosure Controls and Procedures. As of June 30, 2012, the end of the fiscal quarter covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Interim Chief Executive Officer, who is our principal executive and principal financial and accounting officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our Interim Chief Executive Officer (principal executive officer and principal financial and accounting officer) concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were not effective as of June 30, 2012. Our disclosure controls and procedures were not effective because of certain “material weaknesses” described in the “Management’s Annual Report on Internal Control over Financial Reporting” section in Item 9A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2011. As of June 30, 2012, we had not completed the remediation of these material weaknesses.
  8
  Changes in Internal Control over Financial Reporting.
  There were no changes in our internal control over financial reporting during the quarter ended June 30, 2012  that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
  PART II: OTHER INFORMATION
  Item 1. Legal Proceedings.
  The Company was named in a suit in the Colorado District Court for the 18th District (Arapahoe County) by a former employee alleging that the Company did not meet its obligation to issue shares to the employee.  On July 12, 2011 the Court granted a motion to enforce a settlement dated September 16, 2010. In accordance with the terms of a court order, the Company is obligated to make payments totaling approximately $104,700, including 6% interest, to a former employee.  An initial payment of $15,455 was made in July 2011 and monthly payments of $3,000, including interest are due through December 2013.  At June 30, 2012, liabilities for approximately $42,300 and $19,900 has been included in accounts payable and accrued liabilities and other liabilities, respectively, related to this matter.
  Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
  As of June 30, 2012, the Company has an obligation to issue approximately 100,000 shares of its restricted common stock to an investor.  The accompanying unaudited condensed consolidated balance sheets reflect an accrual of approximately $5,000 for these unissued shares as of June 30, 2012.
  The above sales were exempt from registration under Section 4(2) of the Securities Act of 1933.  We did not use any underwriter or placement agent in these transactions and did not pay anyone commission or other compensation in connection with these issuances.  These issuances were made directly by us to persons with whom our management had direct contact and a pre-existing relationship.
  Item 3. Defaults Upon Senior Securities.
  Not Applicable.
  Item 4. Mine Safety Disclosures.
  None.
  Item 5. Other Information.
  Not Applicable.
  Item 15. Exhibits and Financial Statement Schedules
 
 2.1 Industrial Site Purchase and Sale Agreement dated February 14, 2011 by and between Vista International Technologies, Inc. and Brown-Lewisville Railroad Family First Limited Partnership Δ
  3(i).1 Certificate of Incorporation*
  3(i).2 Articles of Amendment to the Articles of Incorporation, as amended on August 6, 1999*
  3(i).3 Certificate of Amendment of Certificate of Incorporation, as amended on April 24, 2002*
  3(i).4 Certificate of Amendment of the Certificate of Incorporation, filed on October 12, 2005*
  3(i).5 Certificate of Amendment to Certificate of Incorporation, as amended on November 8, 2007**
  3(ii).1 Amended and Restated By-Laws***
  10.1 Strategic Alliance and Supply Agreement, dated December 29, 2009 by and between Vista International Technologies, Inc. and Liberty Tire Recycling, LLC ****
  10.2 Consulting Agreement dated August 3, 2009 by and between Vista International Technologies, Inc and Ing. Gianfranco Licursi*****
  9
  10.3 Vista International Technologies, Inc. Equity Participation Plan*
  10.4 Investment Agreement dated August 3, 2009 between Vista International Technologies, Inc. and Timothy Ruddy ****
  10.5 Security Agreement dated August 3, 2009 by and between Vista International Technologies, Inc. and Timothy Ruddy ****
  10.6 Promissory Note (Line of Credit) dated August 11, 2009 by and between Vista International Technologies, Inc. and Richard Strain****
  10.7 Security Agreement dated August 11, 2009 by and between Vista International Technologies, Inc. and Richard Strain Δ
  10.8 Promissory Note dated April 4, 2007 by and between Nathaniel Energy Corporation and Richard Strain Δ
  10.9 Security Agreement dated April 4, 2007 by and between Nathaniel Energy Corporation and Richard Strain Δ
  10.10 Promissory Note dated April 16, 2007 by and between Nathaniel Energy Corporation and Richard Strain Δ
  10.11 Security Agreement dated April 16, 2007 by and between Nathaniel Energy Corporation and Richard Strain Δ
  10.12 Promissory Note dated May 31, 2007 by and between Nathaniel Energy Corporation and Richard Strain Δ
  10.13 Security Agreement dated May 31, 2007 by and between Nathaniel Energy Corporation and Richard Strain Δ
  10.14 Engagement Letter dated April 15, 2010 by and between Vista International Technologies, Inc. and Colebrooke Capital, Inc. +
  10.15 Joint Development Agreement dated October 16, 2010 by and between Vista International Technologies, Inc. and Mustang Consulting, LLC ++
  10.16 Amendment to Engagement Agreement dated August 30, 2010 by and between Vista International Technologies, Inc. and Colebrooke Capital, Inc. ++
  10.17 Consulting Agreement dated October 26, 2010 by and between Vista International Technologies, Inc. and Steven R. Kowalsky and Edward L. Kowalsky. ++
  10.18 Consulting and Services Agreement dated June 11, 2009 by and between Vista International Technologies, Inc. and Mustang Consulting, LLC (“Consulting and Services Agreement”) Δ
  10.19 Continuation of Consulting and Services Agreement effective January 4, 2010 Δ
  10.20 Exclusive Listing Agreement dated July 1, 2010 by and between Vista International Technologies, Inc. and CCBN Texas Limited Partnership d/b/a Colliers International Δ
  10.21 Alternative Fuel Purchase Agreement, dated January 2nd, 2012, between Vista International Technologies, Inc, And Geocycle, LLC.++++
  10.22 Release of Contract, dated January 18, 2012, between Vista International Technologies, Inc. and Brown-Lewisville Railroad Family First Limited Partnership++++
  10.23 Alternative Fuel Purchase Agreement, dated January 1, 2012, between Vista International Technologies, Inc. and Trident Environmental Resource Consulting, LLC++++
  10.24 Convertible Note dated December 7, 2011 between Vista International Technologies, Inc. and Asher Enterprises, Inc.++++
  10.25 Lease Agreement dated March 1, 2012 between Vista International Technologies, Inc, and Electric Power Equipment Company.++++
  10.26 Equipment Financing Agreement, dated February 15, 2012, between Vista International Technologies, Inc (Timothy Ruddy) and REO Holdings.++++
  10
  * Denotes document filed as an exhibit to our Quarterly Report on Form 10-QSB for the period ended September 30, 2005 and incorporated herein by reference.
  ** Denotes document filed as an exhibit to our Current Report on Form 8-K for an event dated December 21, 2007 and incorporated herein by reference.
  *** Denotes document filed as an exhibit to our Current Report on Form 8-K for an event dated June 6, 2005.
  **** Denotes document filed as an exhibit to our Annual Report on Form 10-K for the year ended December 31, 2009 and incorporated herein by reference.
  ***** Denotes document filed as an exhibit to our Quarterly Report on Form 10-Q for the period ended September 30, 2009 and incorporated herein by reference.
  Δ Denotes document filed as an exhibit to our Annual Report on Form 10-K/A Amendment No. 1 for the year ended December 31, 2010 and incorporated herein by reference.
  + Denotes document filed as an exhibit to our Quarterly Report on Form 10-Q for the period ended June 30, 2010 and incorporated herein by reference.
  ++ Denotes document filed as an exhibit to our Quarterly Report on Form 10-Q for the period ended September 30, 2010 and incorporated herein by reference.
  +++ Denotes document filed as an exhibit to our Annual Report on Form 10-KSB for the year ended December 31, 2003 and incorporated herein by reference.
  ++++ Denotes document filed as an exhibit to our Annual Report on Form 10-K for the year ended December 31, 2011 and incorporated herein by reference.
  14.1 Code of Business Conduct and Ethics for Officers (Vice President and Senior) and Directors (effective March 8, 2004)+++
  14.2 Code of Business Conduct and Ethics for Employees and Officers (other than Vice President and Senior) (effective March 8, 2004)+++
  21 Subsidiaries****
  31. Certification of Interim Chief Executive Officer (principal executive officer and principal financial and accounting officer)pursuant to Rule 13a-14(a)or Rule 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
  32. Certification of Interim Chief Executive Officer (principal executive officer and principal financial and accounting officer)pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
  11
  SIGNATURES
  Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
  VISTA INTERNATIONAL TECHNOLOGIES, INC.Date: August 14, 2012

By:
/s/ Timothy D RuddyTimothy D RuddyInterim Chief Executive Officer  (principal executive officer and

principal financial and accounting officer)