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| FSI > SEC Filings for FSI > Form 10KSB/A on 4-Mar-2009 | All Recent SEC Filings |
4-Mar-2009
Annual Report
Results of Operations
The Company has two product lines:
The first is a chemical ("EWCP") used in swimming pools and spas. The product forms a thin, transparent layer on the water's surface. The transparent layer slows the evaporation of water, allowing the water to retain a higher temperature for a longer period of time and thereby reducing the energy required to maintain the desired temperature of the water. A modified version of the product can also be used in reservoirs, potable water storage tanks, livestock watering ponds, canals, and irrigation ditches.
The second product ("BPCA") combines biodegradable polymers and chemical additives and is used by the petroleum, chemical, utility and mining industries to prevent corrosion and scaling in water piping. This product can also be used in detergent to increase biodegradability and in agriculture to increase crop yields by enhancing fertilizer uptake.
Material changes in our Statement of Operations for the periods presented are discussed below:
Year Ended December 31, 2007
Increase (I) or
Item Decrease (D) Reason
Sales
EWCP products D Poor execution by the Ecosavr swimming
pool sales team resulted in market
share loss to competing products.
BPCA products D Maintenance shutdowns in the oil
extraction industry during 2007
reduced sales of BPCA products.
Administrative D In 2006, we granted 5 year stock
salaries and options to a few key employees. The
benefits expense for financial reporting
purposes added $369,992 to
administrative salaries in 2006 but
only $204,602 in 2007.
Professional fees D Resolution of several legal
proceedings in the year 2007 reduced
our costs.
Consulting D The expense, for financial reporting
purposes, of stock options granted in
2006 to consultants that did not
reoccur in 2007.
Commissions D Decreased sales led to a decrease in
commission costs.
Gain on sale of I One-time gain on sale of unused land
property at our plant in Illinois.
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Year Ended December 31, 2006
Increase (I) or
Item Decrease (D) Reason
Sales
EWCP products I Increased product recognition in the
market place led to increased sales.
BPCA products I High oil prices encouraged the oil
companies to increase production,
limit shutdowns and need additional
BPCA products.
Wages I In 2005 we were not required to record
the expense of stock options. The
expense, for financial reporting
purposes for employee stock options,
added $131,517 to wages in 2006.
Administrative I In 2005 we were not required to record
salaries and the expense of stock options. The
benefits expense, for financial reporting
purposes for employee stock options,
added $369,992 to administrative
salaries in 2006.
Investor relations D Upon the closing of our private
and transfer agent placements in 2005, some stock options
fee granted in 2004 vested and incurred
expenses in this category by $422,500.
Insurance I Increase is comparable to what others
are experiencing in the industry.
Consulting I The expense, for financial reporting
purposes, of stock option grants in
2006 to consultants.
Research I Increased spending on development.
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Capital Resources and Liquidity
Our material sources and <uses> of cash during the year ended December 31, 2007 were:
Cash provided by operations $ 242,451
Patent development (60,680 )
Equipment purchases (586,127 )
Sale of common stock 3,164,481
Exchange rate changes 142,990
Other (1,981 )
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Our material sources and <uses> of cash during the year ended December 31, 2006 were:
Cash provided by operations $ 17,539
Collection of loan 35,228
Patent development (29,116 )
Equipment purchases (37,160 )
Sale of common stock 15,285
Exchange rate changes (22,152 )
Other (2,147 )
Cash on hand at January 1, 2006 22,523
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We are committed to minimum rental payments for property and premises aggregating approximately $355,022 over the term of three leases, the last expiring on December 31, 2011.
Commitments in each of the next five years are approximately as follows:
2008 186,906 2009 134,192 2010 16,962 2011 16,962 |
We don't anticipate any capital requirements for the twelve months ending December 31, 2008.
See Note 2 to the financial statements included as part of this report for a description of our significant accounting policies and recent accounting pronouncements.
Critical Accounting Policies And Estimates
Allowances for Product Returns. We grant certain of our customers the right to return product which they are unable to sell. Upon sale, we evaluate the need to record a provision for product returns based on our historical experience, economic trends and changes in customer demand.
Allowances for Doubtful Accounts Receivable. We evaluate our accounts receivable to determine if they will ultimately be collected. This evaluation includes significant judgments and estimates, including an analysis of receivables aging and a review of large accounts. If, for example, the financial condition of our customers deteriorates resulting in an impairment of their ability to pay or a pattern of late payment develops, allowances may be required.
Provisions for Inventory Obsolescence. We may need to record a provision for estimated obsolescence and shrinkage of inventory. Our estimates would consider the cost of inventory, the estimated market value, the shelf life of the inventory and our historical experience. If there are changes to these estimates, provisions for inventory obsolescence may be necessary.
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