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


14-Nov-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 nine month period ended September 30, 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 footprint 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, 2013 and 2012:

Revenue

Our revenues decreased by $44,442 or approximately 22% to $149,838 for the three months ended September 30, 2013 as compared to $194,280 for the three months ended September 30, 2012. The Company believes the decrease in revenues reflects a fluctuation in orders. The Company believes there is an increasing demand for our Voraxial Separators in the oil exploration and production markets as we are working with a growing number of potential customers both domestically and abroad. Our Voraxial Separators are being evaluated and/or installed for various niche markets within the oil industry including production facilities, offshore platforms, tar sands and hydraulic fracturing (frac). We are achieving greater revenue growth in 2013 than in 2012 and believe this growth will continue into 2014. 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, 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 and oil spill applications. We are in different stages of the project process with our customers and believe some of these opportunities will result in purchase orders in fiscal year 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 its sales and marketing program on the Voraxial Separator and believes such efforts will result in increasing revenues in 2014.

Cost of Goods

Our cost of goods decreased by $30,258 or approximately 64% to $16,725 for the three months ended September 30, 2013 as compared to $46,983 for the three months ended September 30, 2012. This decrease is primarily due to a decrease in sales and the different models shipped and the higher percentage of leases versus sales during the three months ended September 30, 2013. Majority of revenues this quarter were a result of leases as compared to 2012 resulting in a lower cost of goods. Our cost of goods continues to be reviewed by management in an effort to obtain the best available pricing while maintaining high quality standards.

Expenses

As discussed below expenses for the three month period ended September 30, 2013 as compared to the three month period ended September 30, 2012, decreased approximately $19,423 or 6.6% primarily due to decreases in consulting expenses and research and development expenses, as partially offset by increases in general and administrative and payroll expense.

General and Administrative Expenses

General and Administrative ("G&A") expenses increased by $58,084 or approximately 60% to $154,660 for the three months ended September 30, 2013 from $96,576 for the three months ended September 30, 2012. The increase in G&A expenses was primarily due to an increase in expenses associated with sales and marketing activities. The Company continues to focus on its sales and marketing program for the Voraxial Separator.


Consulting Expense

Consulting expense for the three month period ended September 30, 2013 decreased to zero from $53,500 for the three month period ended September 30, 2012. The consulting expense during 2012 was related to non cash expenses of common stock issued for investor relations and consulting services.

Payroll Expense

Payroll expense for the three month period ended September 30, 2013 was $121,317, as compared to $113,887 for the three months ended September 30, 2012. The increase of approximately 6% for the nine months ended September 30, 2013 was due to an increase in overtime for certain employees.

Research and Development Expenses

Research and Development expenses decreased by $31,437 or 100% to zero for the three months ended September 30, 2013. As the Company has finalized the development of the Voraxial Separator, research and development expenses have decreased.

Results of Operations for the Nine Months ended September 30, 2013 and 2012:

Revenue

Our revenues increased by 87% or $525,190 to $1,130,440 for the nine months ended September 30, 2013, as compared to $605,250 for the nine months ended September 30, 2012. The Company believes the increase in revenues reflects a continued growing market for the Voraxial Separator. The Company believes there is an increasing demand for our Voraxial Separators in the oil exploration and production markets as we are working with a growing number of potential customers both domestically and abroad. Our Voraxial Separators are being evaluated and/or installed for various niche markets within the oil industry including production facilities, offshore platforms, tar sands and hydraulic fracturing (frac). We anticipate achieving greater revenue growth in 2014 than 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, and mining. This may result in more revenue generating opportunities for the Company from various market segments.

Cost of Goods

Our cost of goods increased to $422,549 for the nine months ended September 30, 2013 as compared to $147,455 for the nine months ended September 30, 2012. This increase is primarily due to the increase in sales and the different models sold during the nine months ended September 30, 2013. The majority of revenues this period were a result of sales as compared to higher percentage of leases during 2012, resulting in a higher cost of goods for this period. Our cost of goods continues to be reviewed by management to guarantee the best available pricing while maintaining high quality standards.


Expenses

As discussed below expenses for the nine month period ended September 30, 2013 as compared to the nine month period ended September 30, 2012, decreased approximately $877,293 or 52.2% primarily due to decreases in consulting and research and development expense, as partially offset by increases in G&A.

General and Administrative Expenses

G&A expense increased by $64,945 or approximately 18% to $423,552 for the nine months ended September 30, 2013 from $358,607 for the nine months ended September 30, 2012. The increase was primarily due to an increase in expenses associated with sales and marketing.

Consulting Expense

Consulting expense decreased by $801,502 or 95% to $39,986 for the nine month period ended September 30, 2013 as compared to $841,568 for the nine month period ended September 30, 2012. The expense during 2012 is attributed to a one time non cash expense related to the extension of exercise terms of previously issued options held by consultants.

Payroll Expense

Payroll expense for the nine month period ended September 30, 2013 as compared to the nine month period ended September 30, 2012 remained fairly consistent.

Research and Development Expenses

Research and development expenses decreased by $141,083 or 100% to zero for the nine months ended September 30, 2013, as compared to $141,083 for the nine months ended September 30, 2012. As the Company has finalized the development of the Voraxial Separator, research and development expenses have decreased.

Liquidity and Capital Resources:

Cash at September 30, 2013 was $233,650. Working capital deficit at September 30, 2013 was $537,067 as compared to working capital deficit at December 31, 2012 of $469,978.

At September 30, 2013, the Company had an accumulated deficit of $15,259,005. We may 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. We have encountered expenses in the development and commercialization 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.

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.

Risk Factors

Investing in our common stock involves a high degree of risk. You should carefully consider the risk factors contained in our most recent annual report filed on Form 10-K with the Securities and Exchange Commission before deciding whether to invest in the Company. Additional risks and uncertainties not presently known to us, or that we currently deem immaterial, may also impair our business operations or our financial condition.

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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