U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2006
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
Commission File Number: 0-27445
Enviro Voraxial Technology, Inc.
--------------------------------
(Exact name of Small Business Issuer as specified in its Charter)
IDAHO 82-0266517
----- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
821 NW 57th Place, Fort Lauderdale, Florida 33309
-------------------------------------------------
(Address of principal executive offices)
(954) 958-9968
--------------
(Issuer's telephone number)
------------------------------------------
(Former Name, former address and former fiscal year,
if changed since last Report.)
Check mark whether the Issuer (1) has filed all reports required to be filed by
Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes [X] No [ ]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: March 31, 2006, we had 19,864,735
shares of our Common Stock outstanding.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
INDEX
PART I. CONSOLIDATED CONDENSED FINANCIAL INFORMATION
Item 1. Consolidated Condensed Financial Statements.............................................. 3
Condensed Consolidated Balance Sheet - March 31, 2006 (Unaudited)........................ 3
Condensed Consolidated Statements of Operations for the
Three Months Ended March 31, 2006 and 2005 (Unaudited)................................ 4
Condensed Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 2006 and 2005 (Unaudited)................................ 5
Notes to Condensed Consolidated Financial Statements (Unaudited)......................... 6
Item 2. Management's Discussion and Analysis and Plan of
Operation............................................................................. 9
Item 3. Controls and Procedures.................................................................. 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings........................................................................ 11
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.............................. 11
Item 3. Default Upon Senior Securities........................................................... 12
Item 4. Submission of Matters to a Vote of Securities............................................ 12
Item 5. Other Information........................................................................ 12
Item 6. Exhibits................................................................................. 12
Signatures ......................................................................................... 13
2
PART I. CONSOLIDATED FINANCIAL INFORMATION
------------------------------------------
Item 1. Financial Statements.
ENVIRO VORAXIAL TECHNOLOGY, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEET
March 31,
2006
----------------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 161,085
Accounts receivable 22,164
Inventory 137,022
Prepaid expenses 26,991
----------------
Total current assets 347,262
FIXED ASSETS, NET 5,191
OTHER ASSETS 10,000
----------------
Total assets $ 362,453
================
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 533,000
Customer deposits 78,750
----------------
Total current liabilities 611,750
----------------
Total liabilities 611,750
----------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' DEFICIENCY:
Common stock, $.001 par value, 42,750,000 shares authorized
19,864,735 shares issued and oustanding 19,864
Additional paid-in capital 5,870,938
Deferred compensation (41,375)
Accumulated deficit (6,098,724)
----------------
Total shareholders' deficiency (249,297)
----------------
Total liabilities and shareholders' deficiency $ 362,453
================
The accompanying notes are an integral part of the
consolidated financial statements.
3
ENVIRO VORAXIAL TECHNOLOGY, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended March 31,
--------------------------------------------------
2006 2005
--------------------- ---------------------
(Unaudited) (Unaudited)
Revenues, net $ 22,164 $ --
Cost of goods sold 4,778 --
-------------------- ---------------------
Gross Profit 17,386 --
Costs and expenses:
General and administrative 88,409 125,000
Research and development 145,696 119,000
-------------------- ---------------------
Total costs and expenses 234,105 244,000
-------------------- ---------------------
Loss from operations (216,719) (244,000)
-------------------- ---------------------
NET LOSS $ (216,719) $ (244,000)
==================== =====================
Weighted average number of common shares
outstanding-basic & diluted 19,622,797 17,676,402
==================== =====================
Basic and diluted loss per common share $ (0.01) $ (0.01)
==================== =====================
The accompanying notes are an integral part of the
consolidated financial statements.
4
ENVIRO VORAXIAL TECHNOLOGY, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31,
---------------------------------------------
2006 2005
-------------------- ----------------------
(Unaudited) (Unaudited)
Cash Flows From Operating Activities:
Net loss $ (216,719) $ (244,000)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation 147 2,000
Common stock issued for services 40,000 --
Amortization of deferred compensation -- 16,000
Deferred compensation 12,062 --
Changes in assets and liabilities:
Accounts receivable (22,164) --
Inventory (10,988) (47,000)
Prepaid insurance (26,991) (22,000)
Accounts payable and accrued expenses 108,297 73,000
Deposits from customers 78,750 48,000
-------------------- ---------------------
Net cash used in operating activities (37,606) (174,000)
-------------------- ---------------------
Cash Flows From Investing Activities:
Purchase of equipment -- (6,000)
-------------------- ---------------------
Net cash provided by investing activities -- (6,000)
-------------------- ---------------------
Cash Flows From Financing Activities:
Proceeds from sales of common stock 122,000 --
-------------------- ---------------------
Net cash provided by financing activities 122,000 --
-------------------- ---------------------
Net increase (decrease) in cash and cash equivalents 84,394 (180,000)
Cash and cash equivalents, beginning of period 76,691 221,000
-------------------- ---------------------
Cash and cash equivalents, end of period $ 161,085 $ 41,000
==================== =====================
Supplemental Disclosures
Cash paid during the year for interest $ -- $ --
==================== =====================
Cash paid during the year for taxes $ -- $ --
==================== =====================
Common stock issued for deferred consulting $ -- $ --
==================== =====================
Common stock issued for consulting services $ 40,000 $ --
==================== =====================
The accompanying notes are an integral part of the
consolidated financial statements.
5
NOTE A - ORGANIZATION AND OPERATIONS
Organization
------------
Enviro Voraxial Technology, Inc. (the "Company") is a provider of environmental
and industrial separation technology. The Company has developed and patented the
Voraxial(R) Separator, which is a technology that efficiently separates solids
and liquids with distinct specific gravities. Potential commercial applications
and markets include oil exploration and production, pre-treatment of wastewater
at municipal wastewater (headworks) facilities, oil and water separation, and
environmental cleanup.
Since 1999, the Company has been focusing its efforts on developing and
marketing the Voraxial(R) Separator. The Company currently operates within two
segments: the sales and marketing of the Voraxial(R) Separator and the
manufacture of the Voraxial(R) Separator.
Florida Precision Aerospace, Inc. (FPA) is the wholly-owned subsidiary of the
Company and is used to do contract work with the aerospace, automotive and
defense contracting activity.
In March 2006, a Voraxial(R) 4000 Separator was sold to ConocoPhillips for
produced water separation. The machine will be used to enhance the handling of
large volumes of produced water and water injection at a production facility.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
---------------------------
The consolidated financial statements include the accounts of the parent
company, Enviro Voraxial Technology, Inc., and its wholly-owned subsidiary,
Florida Precision Aerospace, Inc. All significant intercompany accounts and
transactions have been eliminated.
Interim Financial Statements
----------------------------
The interim financial statements presented herein have been prepared pursuant to
the rules and regulations of the Securities and Exchange Commission ("SEC").
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America have been condensed or omitted pursuant to such
rules and regulations. The interim financial statements should be read in
conjunction with the Company's annual financial statements, notes and accounting
policies included in the Company's annual report on Form 10-KSB for the year
ended December 31, 2005 as filed with the SEC. In the opinion of management, all
adjustments (consisting only of normal recurring adjustments) which are
necessary to provide a fair presentation of financial position as of March 31,
2006 and the related operating results and cash flows for the interim period
presented have been made. The results of operations, for the period presented
are not necessarily indicative of the results to be expected for the year.
Use of Estimates
----------------
Use of estimates and assumptions by management is required in the preparation of
financial statements in conformity with generally accepted accounting
principles. Actual results could differ from those estimates and assumptions.
Earnings Per Share
------------------
Basic earnings per share ("EPS") is computed by dividing earnings available to
common shareholders by the weighted-average number of common shares outstanding
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for the period as required by the Financial Accounting Standards Board (FASB)
under Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per
Shares". Diluted EPS reflects the potential dilution of securities that could
share in the earnings.
NOTE C - CAPITAL TRANSACTIONS
Common stock
------------
In January 2006, the Company extended the exercisable life of certain warrants
issued to investors to purchase an aggregate of 243,200 shares of common stock
issued in 2000 for a period of one year. The warrants now expire in February
2007.
In January 2006, the Company extended the exercisable life of certain warrants
issued to investors to purchase an aggregate of 200,000 shares of common stock
issued in 2001 for a period of one year. The warrants now expire in April 2007.
In January 2006, the Company issued 100,000 shares of common stock to a
consultant, valued at $40,000, which is based on the closing market price of the
Company's common stock on the date of the agreement.
During the three months ended March 31, 2006 the Company sold 305,000 shares of
common stock for $0.40 per share in a private placement offering. Total proceeds
from the sale were $122,000.
Options
-------
Information with respect to employee stock options outstanding and employee
stock options exercisable at March 31, 2006 is as follows:
Weighted Average
Options Vested Exercise Price Per Exercise Price Per
Outstanding Shares Common Share Option Outstanding
----------- ------ ------------ ------------------
Balance, December 31, 2002 2,245,000 1,115,000 $0.15-$0.77 $0.21
Granted/vested during the year 10,000 1,120,000 $1.00
Balance, December 31, 2002 2,245,000 2,235,000 $0.15-$1.00 $0.21
Granted/vested during the year 1,424,666 1,424,666 $0.15-$1.00 $0.79
Balance, December 31, 2004 3,679,666 3,659,666 $0.15-$1.00 $0.52
Granted/vested during the year 50,000 50,000 $1.00
Balance, December 31, 2005 3,729,666 3,709,666 $0.15-$1.00 $0.52
Granted/vested during the quarter
- - - -
Balance, March 31, 2006 3,729,666 3,709,666 $0.15-$1.00 $0.52
7
The following tables summarize information about the stock options and warrants
outstanding at March 31, 2006:
Options
-------
Weighted Average Weighted Number
Exercise Number Outstanding Remaining Average Exercisable at Weighted Average
Price at March 31, 2006 Contractual Life Exercise Price March 31, 2006 Exercise Price
----- ----------------- ---------------- -------------- -------------- --------------
0.30 45,000 0.87 0.30 45,000 0.30
0.77 200,000 1.13 0.77 200,000 0.77
0.15 2,000,000 1.55 0.15 2,000,000 0.15
1.00 10,000 1.00 1.00 10,000 1.00
0.60 697,333 3.13 0.60 697,333 0.60
1.00 697,333 3.13 1.00 697,333 1.00
1.00 50,000 3.00 1.00 50,000 1.00
0.71 30,000 1.17 0.71 30,000 0.71
--------- ---------
3,729,666 3,729,666
========= =========
Warrants
--------
Number Range of Exercise Number
Outstanding Price Exercisable
----------- ----- -----------
Balance - December 31, 2002 1,477,200 $1.00 - $9.00 1,477,200
Issued 1,585,002 $1.00 1,385,002
--------- ---------
Balance, December 31, 2003 3,062,202 $1.00 - $9.00 2,862,202
Issued 2,527,165 $0.75 - $1.00 2,527,165
--------- ---------
Balance, December 31, 2004 5,589,367 $0.75 - $9.00 5,389,367
Issued -- -- --
--------- ------------- ---------
Balance, December 31, 2005 5,589,367 $0.75 - $9.00 5,389,367
Issued -- -- --
--------- ------------- ---------
Balance, March 31, 2006 5,589,367 $0.75 - $9.00 5,389,367
--------- ------------- ---------
NOTE D - SUBSEQUENT EVENTS
Subsequent to March 31, 2006 the Company sold 415,000 shares of common stock for
$.40 per share in a private placement offering. Total proceeds from the sale
were $166,000.
8
Item 2. Management's Discussion and Analysis of Financial Condition and Plan of
Operations
General
Forward-Looking Statements
The following discussion of the financial condition and results of operations
should be read in conjunction with our consolidated financial statements and
related notes thereto. The following discussion contains forward-looking
statements. Enviro Voraxial(R) Technology is referred to herein as "the
Company", "we" or "our." The words or phrases "would be," "will allow," "intends
to," "will likely result," "are expected to," "will continue," "is anticipated,"
"estimate," "project," or similar expressions are intended to identify
"forward-looking statements". Such statements include those concerning our
expected financial performance, our corporate strategy and operational plans.
Actual results could differ materially from those projected in the
forward-looking statements as a result of a number of risks and uncertainties.
Statements made herein are as of the date of the filing of this Form 10-QSB with
the Securities and Exchange Commission and should not be relied upon as of any
subsequent date. Unless otherwise required by applicable law, we do not
undertake, and we specifically disclaim any obligation, to update any
forward-looking statements to reflect occurrences, developments, unanticipated
events or circumstances after the date of such statement.
Application of Critical Accounting Policies
The Company's consolidated condensed financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of
America. Certain accounting policies have a significant impact on amounts
reported in the financial statements. A summary of these significant accounting
policies can be found in Note B to the Company's financial statements in the
Company's 2005 Annual Report on Form 10-KSB. The Company has not adopted any
significant new policies during the quarter ended March 31, 2006.
Among the significant judgments made in preparation of the Company's financial
statements are the determination of the allowance for doubtful accounts and
adjustments of inventory valuations. These adjustments are made each quarter in
the ordinary course of accounting.
Results of Operations for the Three Months ended March 31, 2006 and 2005:
Revenue
Our revenues were $22,164 for the three months ended March 31, 2006 as compared
to $-0- for the three months ended March 31, 2005. The revenues were from the
sale of Voraxial equipment parts for approximately $11,000 and the lease of a
Voraxial Separator for approximately $11,000. The Company continues to focus on
its sales and marketing program for the Voraxial(R) Separator and management
believes such efforts will result in increasing revenues in 2006.
Research and Development Expenses
Research and Development expenses increased by 22% to $145,696 for the three
months ended March 31, 2006, as compared to $119,000 for the previous three
months ended March 31, 2005. Although the Company has finalized the development
of the Voraxial(R) Separator, we targeted expenditures for specific applications
for the technology within the oil industry during the three months ended March
31, 2006.
9
General and Administrative Expenses
General and Administrative expenses decreased by 29% to $88,409 for the three
months ended March 31, 2006 down from $125,000 for the three months ended March
31, 2005. The decrease was primarily due to a decreases in overall general and
administrative expenses. We continue to focus our efforts on marketing of the
Voraxial Separator.
Liquidity and Capital Resources:
Cash at March 31, 2006 was $161,085. Working capital deficit at March 31, 2006
was $264,488 as compared to a working capital deficit at December 31, 2005 of
$221,978. The increase in the working capital deficit was primarily due to an
increase in customer deposits of $78,750 and increase in accounts payable and
accrued expenses of $108,297. These amounts were partially offset by a $84,394
increase in cash. The customer deposit is from a purchase order from
ConocoPhillips for a Voraxial Separator. The Company expects to deliver the
Voraxial Separator by July 2006.
At March 31, 2006 the Company had an accumulated deficit of $6,098,724. We
anticipate generating positive cash flow from the Voraxial(R) Separator by the
end of 2006. To the extent such revenues and corresponding cash flows do not
materialize, we will require an infusion of capital to sustain our operations.
We cannot be assured that we will generate revenues or that the level of any
future revenues will be self sustaining. Furthermore, we cannot provide any
assurances that required capital will be obtained or that terms of such required
capital may be acceptable to us.
The Company has funded working capital requirements and intends to fund current
working capital requirements through third party financing, including the
private placement of securities. However, the Company cannot provide any
assurances that it will be able to obtain adequate financing. If the Company is
unable to obtain adequate financing, it may reduce its operating activities
until sufficient funding is secured or revenues are generated to support
operating activities. During the period covered by this report, the Company
received $122,000 from seven accredited investors that purchased an aggregate of
305,000 shares of the Company's restricted common stock at $0.40 per share.
Subsequent to the period covered by this report, the Company sold an aggregate
of 415,000 shares of its common stock to six investors and received proceeds of
$166,000. Such proceeds will be used to fund working capital requirements.
Continuing Losses
We may be unable to continue as a going concern, given our limited operations
and revenues and our significant losses to date. Since 2001, we have encountered
greater expenses in the development of our Voraxial(R) Separators and have had
limited sales income from this development. Consequently, our working capital
may not be sufficient and our operating costs may exceed those experienced in
our prior years. In light of these recent developments, we may be unable to
continue as a going concern. However, we believe that the exposure received in
the past year for the Voraxial Separator has positioned the Company to begin
generating sales and supply us with sufficient working capital. As a result of
the above, the accompanying condensed consolidated financial statements have
been prepared assuming that the Company will continue as a going concern. The
condensed consolidated financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
10
Item 3. Controls and Procedures
Evaluation of disclosure controls and procedures
As of the end of the period covered by this report, we carried out an evaluation
of the effectiveness of the design and operation of our disclosure controls and
procedures pursuant to Exchange Act Rule 13a-15(e). This evaluation was done
under the supervision and with the participation of our Principal Executive
Officer and Principal Financial Officer. Based upon that evaluation, our
Principal Executive Officer and Principal Financial Officer concluded that our
disclosure controls and procedures are effective in gathering, analyzing and
disclosing information needed to satisfy our disclosure obligations under the
Exchange Act.
Changes in internal controls
There were no changes in our internal controls or in other factor during the
period covered by this report that have materially affected, or is likely to
materially affect the Company's internal controls over financial reporting.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
In January 2006, the Company entered into a six month consulting
agreement and agreed to issue 100,000 shares for services performed by a
consultant, which were valued at $40,000. The shares were issued pursuant to the
exemption from registration under Section 4(2) of the Securities Act. The
consultant received information concerning the Company and had the opportunity
to ask questions concerning the Company. The shares issued contain a legend
restricting transferability absent registration or applicable exemption.
During the three month period ended March 31 2006, the Company received
$122,000 from seven accredited investors, including the Company's executive vice
president, that purchased an aggregate of 305,000 shares of the Company's
restricted common stock at $0.40 per share. The issuances were exempt from
registration under Section 4(2) of the Securities Act. The investors received
information concerning the Company and had the opportunity to ask questions
concerning the viability of the Company. The shares contain legends restricting
their transferability absent registration or applicable exemption.
In January 2006, the Company extended the exercisable life of certain
warrants issued to investors to purchase an aggregate of 243,200 shares of
common stock issued in 2000 for a period of one year. The warrants now expire in
February 2007.
In January 2006, the Company extended the exercisable life of certain
warrants issued to investors to purchase an aggregate of 200,000 shares of
common stock issued in 2001 for a period of one year. The warrants now expire in
April 2007.
Subsequent to the period covered by this report the Company received
$166,000 from six accredited investors that purchased an aggregate of 415,000
shares of the Company's restricted common stock at $0.40 per share. The
11
issuances were exempt from registration under Section 4(2) of the Securities
Act. The investors received information concerning the Company and had the
opportunity to ask questions concerning the viability of the Company. The shares
contain legends restricting their transferability absent registration or
applicable exemption.
Item 3. Default Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Securities
None.
Item 5. Other Information
None.
Item 6. Exhibits
Exhibits required by Item 601 of Regulation S-B
31.1 Form 302 Certification of Chief Executive Officer
31.2 Form 302 Certification of Principal Financial Officer
32.1 Form 906 Certification of Chief Executive Officer and
Principal Financial Officer
12
SIGNATURE
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 as a duly authorized officer of the Registrant.
Enviro Voraxial Technology, Inc.
By: /s/ Alberto DiBella
-------------------
Alberto DiBella
Chief Executive Officer and
Principal Financial Officer
DATED: May 19, 2006
13