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EVTN > SEC Filings for EVTN > Form 10-Q on 15-May-2013All 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


15-May-2013

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 2012 Annual Report on Form 10-K. The Company has not adopted any significant new policies during the quarter ended March 31, 2013.

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.

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 March 31, 2013 and 2012:

Revenue

Our revenues decreased by $27,574 or approximately 9% to $296,789 for the three months ended March 31, 2013, as compared to $324,363 for the three months ended March 31, 2012. 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. 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 than in 2012. 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, bio-fuel, 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, oil spill and produced water, frac water and oil spill applications. We believe some of these opportunities will result in purchase orders in fiscal year 2013 and 2014. 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 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 such efforts will result in increasing revenues in 2013.

Cost of Goods

Our cost of goods increased by $72,924 or approximately 80% to $164,531 for the three months ended March 31, 2013 as compared to $91,607 for the three months ended March 31, 2012. This increase is primarily due to the different models sold during the three months ended March 31, 2013. 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 $53,433 or 100% to $0 for the three months ended March 31, 2013, as compared to $53,433 for the previous three months ended March 31, 2012. 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 increased by $14,735 or approximately 13% to $126,383 for the three months ended March 31, 2013, from $111,648 for the three months ended March 31, 2012. Our G&A expenses primarily increased in 2013 due to additional expenses incurred for promotion and marketing expenses during the quarter.

Consulting Expenses

Consulting expenses decreased by $747,082 or approximately 96% for the three months ended March 31, 2013, from $777,568 for the three months ended March 31, 2012. Our consulting expenses decreased primarily due to a one time non-cash expense of $479,019 incurred during the three months ended March 31, 2012 associated with the reduction of exercise prices and extension of exercise terms of previously issued options held by executive officers and consultants and less use of consulting services in the current year.

Payroll Expenses
Payrol expenses decreased by $5,042 or 4% to $109,687 for the three month period ended March 31, 2013 from $114,729 for the three month ended March 31, 2013. Payroll expense decrease was due to normal fluctuations in staffing needs and employee turnover.

Liquidity and Capital Resources:

Cash at March 31, 2013 was $505,566. Working capital deficit at March 31, 2013 was $581,440 as compared to working capital deficit at December 31, 2012 of $469,978.

At March 31, 2013, the Company had an accumulated deficit of $15,292,069. We experienced positive cash flow in the first quarter and anticipate continuing generating positive cash flow from the Voraxial Separator in 2013. 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 or increase its revenues within the next 12 months, it may reduce its operating activities until sufficient funding is secured or revenues are generated to support operating activities.

Continuing Losses

We have limited operations and revenues and 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, there is substantial doubt about our ability 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.

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.

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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