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EVTN > SEC Filings for EVTN > Form 10-Q on 14-Nov-2012All Recent SEC Filings

Show all filings for ENVIRO VORAXIAL TECHNOLOGY INC | Request a Trial to NEW EDGAR Online Pro

Form 10-Q for ENVIRO VORAXIAL TECHNOLOGY INC


14-Nov-2012

Quarterly Report


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

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 Technology, Inc. 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-Q 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 C to the Company's financial statements in the Company's 2011 Annual Report on Form 10-K. The Company has not adopted any significant new policies during the quarter ended September 30, 2012.

Among the significant judgments made in preparation of the Company's financial statements are the determination of the allowance for doubtful accounts, value of equity instruments and adjustments of inventory valuations. These adjustments are made each quarter in the ordinary course of accounting.

Off Balance Sheet Arrangements

None.

Overview

Enviro Voraxial Technology, Inc. (the "Company") was incorporated in Idaho on October 19, 1964, under the name Idaho Silver, Inc. In May of 1996, we entered into an agreement and plan of reorganization with Florida Precision Aerospace, Inc., a privately held Florida corporation ("FPA"), and its shareholders. FPA was incorporated on February 26, 1993. We believe we are emerging as a potential leader in the rapidly growing environmental and industrial separation industries. The Company has developed, manufactures and sells its patented Voraxial® Separator ("Voraxial® Separator" or "Voraxial®"), a proprietary technology that efficiently separates large volumes of liquid/liquid, liquid/solids or liquid/liquid/solids fluid mixtures with distinct specific gravities. Management believes this superior separation quality is achieved in real-time, and in much greater volumes, with a more compact, cost effective and energy efficient machine than any


comparable product on the market today. Management believes the Voraxial fills a void in the market; specifically a real-time separation device that separates a large volume of liquids with a small footprints and without the need of a pressure drop. We believe the need for such a separation device overlaps many markets.

The Voraxial is capable of processing volumes as low as 3 gallons per minute as well as volumes over 5,000 gallons per minute with only one moving part. The Company believes that the Voraxial® technology can help protect the environment and its natural resources while simultaneously making numerous industries more productive and cost effective.

Results of Operations for the Three Months ended September 30, 2012 and 2011:

Revenue

Our revenues decreased by $51,170 or approximately 21% to $194,280 for the three months ended September 30, 2012 as compared to $245,450 for the three months ended September 30, 2011. The Company believes the decrease in revenues reflects fluctuation in orders processed and does not represent a decrease in demand, as the Company continues to negotiate with potential customers and is in late stage contract discussions with some of the customers. We believe there is a continued demand for our Voraxial Separators in the oil exploration and production markets and the Company anticipates achieving greater revenue growth in 2013. We continue to believe the markets for the Voraxial® Separator are developing as companies with high volume water separation problems are becoming aware of the Voraxial. Interest and request for proposals for applications in other markets are also increasing, specifically from the oil spill, frac water and mining. This may result in more revenue generating opportunities for the Company from various market segments.

The Company is currently working on numerous opportunities with customers for refinery, produced water, frac water, tar sands and oil spill applications. We believe some of these opportunities will result in purchase orders in the latter part of 2012 and 2013. The projects include the Voraxial 2000 Separator, Voraxial 4000 Separator, Voraxial 8000 and multiple versions of the Voraxial Separator Skid. We are in discussions to sign representative agreements with representatives and oil service companies to promote the Voraxial. The Company continues to focus on its sales and marketing program for the Voraxial Separator and management believes, although no assurances are made, that such efforts will result in increasing revenues in the latter part of 2012 and 2013.

Cost of Goods

Our cost of goods decreased $22,662 or approximately 33% to $46,983 for the three months ended September 30, 2012 as compared to $69,645 for the three months ended September 30, 2011. This decrease is primarily due to the decrease in sales during the three months ended September 30, 2012. Our cost of goods continues to be reviewed by management in an effort to obtain the best available pricing while maintaining high quality standards.

Research and Development Expenses

Research and Development expenses decreased by $127,155 or approximately 80% to $31,437 for the three months ended


September 30, 2012, as compared to $158,592 for the previous three months ended September 30, 2011. As the Company has finalized the development of the Voraxial Separator, research and development expenses have decreased.

General and Administrative Expenses

General and Administrative ("G&A") expenses in combination with consulting expense decreased by $308,337 or approximately 54% to $263,963 for the three months ended September 30, 2012 from $572,300 for the three months ended September 30, 2011. The decrease was primarily due to the one-time non-cash consulting expense that occurred in 2011 and the reorganization of staff and accompanying salaries.

Results of Operations for the Nine Months ended September 30, 2012 and 2011:

Revenue

Our revenues decreased by 64% to $605,250 for the nine months ended September 30, 2012 as compared to $1,688,720 for the nine months ended September 30, 2011. The Company believes the decrease in revenues reflects fluctuation in orders processed and does not represent a decrease in demand, as the Company continues to negotiate with potential customers and is in late stage contract discussions with some of the customers. We believe there is a continued demand for our Voraxial Separators in the oil exploration and production markets and the Company anticipates achieving greater revenue growth in the latter part of 2012 and 2013. We continue to believe the markets for the Voraxial Separator are developing as companies with high volume water separation problems are becoming aware of the Voraxial. Interest and request for proposals for applications in other markets are also increasing, specifically from the oil spill, frac water and mining. This may result in more revenue generating opportunities for the Company from various market segments.

The Company is currently working on numerous opportunities with customers for refinery, produced water, frac water, tar sands and oil spill applications. We believe some of these opportunities will result in purchase orders in the latter part of 2012 and 2013. The projects include the Voraxial 2000 Separator, Voraxial 4000 Separator, Voraxial 8000 and multiple versions of the Voraxial Separator Skid. We are in discussions to sign representative agreements with representatives and oil service companies to promote the Voraxial. The Company continues to focus on its sales and marketing program for the Voraxial Separator and management believes, although no assurances are made, that such efforts will result in increasing revenues in the latter part of 2012 and 2013.

Cost of Goods

Our cost of goods decreased by $407,160 or 73% to $147,455 for the nine months ended September 30, 2012, as compared to $554,615 for the nine months ended September 30, 2011. This decrease is due to the decrease in sales during the nine months ended September 30, 2012. Our cost of goods continues to be reviewed by management to guarantee the best available pricing while maintaining high quality standards.


Research and Development Expenses

Research and development expenses decreased by $214,942 or approximately 60% to $141,083 for the nine months ended September 30, 2012, as compared to $356,025 for the nine months ended September 30, 2011. As the Company has finalized the development of the Voraxial Separator, research and development expenses have decreased.

General and Administrative Expenses

General and administrative expenses, in combination with stock based compensation, increased by $274,081 or approximately 22% to $1,540,410 for the nine months ended September 30, 2012 from $1,266,329 for the nine months ended September 30, 2011.

Our G&A expenses increased due to non-cash consulting expenses of $841,568 during the nine months ended September 30, 2012, an increase of $525,224 or 166%, related to stock compensation. The increase was partially offset by a $251,143 decrease in general and administrative expenses primarily due to a one time non cash stock compensation and marketing expenses incurred during 2011.

Liquidity and Capital Resources:

Cash at September 30, 2012 was $346,740. While we had a working capital deficiency at September 30, 2012 of $226,291 as compared to working capital at December 31, 2011 of $362,622, we remained cash flow positive for the first nine months of 2012.

At September 30, 2012, the Company had an accumulated deficit of $14,890,297. We experienced positive cash flow for the first nine months and anticipate continuing generating positive cash flow from the Voraxial Separator in 2012. To the extent such revenues and corresponding cash flows do not continue, we will require infusion of capital to sustain our operations. We cannot be assured that we will generate revenues that will be self-sustaining. The Company has funded working capital requirements and intends, if necessary, to fund current working capital requirements through third party financing, including the private placement of securities. We cannot provide any assurances that required capital will be obtained or that terms of such required capital may be acceptable to us. 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.

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 expenses in the development of our Voraxial 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. Therefore, we may be unable to continue as a going concern. The Company has experienced net losses, has a working capital deficit and sustained cash outflows from operating activities and had to raise capital to sustain operations. There is no assurance that the Company's developmental and marketing efforts will be successful, that the Company will ever have commercially accepted products, or that the Company will achieve significant revenues. 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. We experienced positive cash flow in the nine months ended September 30, 2012 and while our net loss for the nine months ended September 30, 2012 was $1,230,467, the majority of our net loss was contributed to one-time, non-cash expenses associated with amendments and adjustments to outstanding options held by executives and employees. Our net loss for the nine months ended September 30, 2012, excluding non cash expenses associated with modifications of existing options to consultants and employees of the Company and issuance of options was approximately $394,899.

As a result of the above, the accompanying unaudited 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.

Recent Accounting Pronouncements

For a discussion of new accounting pronouncements affecting the Company, refer to Note C to the Consolidated Financial Statements.

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