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UVFT > SEC Filings for UVFT > Form 10-K on 13-Jan-2014All Recent SEC Filings

Show all filings for UV FLU TECHNOLOGIES INC | Request a Trial to NEW EDGAR Online Pro

Form 10-K for UV FLU TECHNOLOGIES INC


13-Jan-2014

Annual Report


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our consolidated financial statements and notes thereto included elsewhere in this Report. Forward looking statements are statements not based on historical information and which relate to future operations, strategies, financial results or other developments. Forward-looking statements are based upon estimates, forecasts, and assumptions that are inherently subject to significant business, economic, and competitive uncertainties and contingencies, many of which are beyond our control and many of which, with respect to future business decisions, are subject to change. These uncertainties and contingencies can affect actual results and could cause actual results to differ materially from those expressed in any forward-looking statements made by us, or on our behalf. We disclaim any obligation to update forward-looking statements.

The discussion and financial statements contained herein are for our fiscal year ended September 30, 2013 and September 30, 2012. The following discussion regarding our financial statements should be read in conjunction with our financial statements included herewith.

Financial Condition as of September 30, 2013

We reported total current assets of $281,948 at September 30, 2013, consisting of cash, accounts receivable, inventory and prepaids. Total current liabilities reported of $174,234 consisted of $91,249 in accounts payable and accrued liabilities and $82,985 in current notes payable. We had a working capital $107,714 at September 30, 2013.

Net Loss increased from $821,681 for the year ended September 30, 2012 to $946,660 for the year ended September 30, 2013.

We are currently a company focused in the air purification industry, and evaluating opportunities for expansion within that industry through acquisition or other strategic relationships.

Plan of Operation

Background

We were organized under the laws of the State of Nevada on April 4, 2006 under the name "Northwest Chariots, Inc." and were engaged in the business of renting and selling electrically powered human transporters, like electric bicycles, chariots and quads. Subsequent to our fiscal year ended September 30, 2009, we decided to change our product mix to air purification products and to focus on the research, development, manufacturing and sales of air purification systems and products.

In furtherance of our business objectives, on November 12, 2009, we effected a 32-for-1 forward stock split of all our issued and outstanding shares of common stock, and we merged with our wholly-owned subsidiary, UV Flu Technologies, Inc., for the purposes of effecting a name change to "UV Flu Technologies, Inc."

Effective November 15, 2009, we acquired AmAirapure Inc.'s air purification technology, product, inventory, and certain equipment pursuant to an Asset Purchase Agreement with AmAirapure, Inc. We issued 15,000,000 shares of our common stock to shareholders of AmAirapure in connection with the asset acquisition. Additionally, on November 25, 2009, we entered into a Distribution Agreement with Puravair Distributors LLC ("Puravair") where we appointed Puravair as our exclusive master distributor for our Viratech UV-400 product and our other products for the professional, medical, and commercial markets in the U.S. and Canada. On September 30, 2010, we terminated our Distribution Agreement with Puravair and began adding new distributors, which totaled five as of year end.

The latest production runs of our Viratech UV-400 product incorporate our patented UV bacteria killing technology, which has been cleared by the FDA for use as a medical device. In June 2010, we expanded our market reach by introducing the latest generation of our Viratech UV-400 product into the residential and hospitality markets.

On October 28, 2010, we entered into a binding letter of intent with The Red Oak Trust ("Red Oak") (the "LOI") in connection with our proposed acquisition of one hundred percent (100%) of the issued and outstanding units of RxAir Industries, LLC, a Nevada limited liability company ("RxAir"), which is wholly owned by Red Oak (the "Acquisition"). At the closing of the Acquisition, Rx Air became a wholly-owned subsidiary of the Company. The acquisition was consummated January 24, 2011.

We currently have growing, but limited revenues from operations. In order to meet our business objectives, we will need to raise additional funds through equity or convertible debt financing. There can be no assurance that we will be successful in raising additional funds and, if unsuccessful, our plans for expanding operations and business activities may have to be curtailed. Any attempt to raise funds, through debt or equity financing, would likely result in dilution to existing shareholders.

Cash and Cash Equivalents

As of September 30, 2013, we had cash of $7,857. As such, we anticipate that we will have to raise additional capital through equity financings to fund our operations and execute our business plan during the next 6 to 12 months.

Critical Accounting Policies

The preparation of financial statements in conformity with United States generally accepted accounting principles requires management of our company to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.

Our management routinely makes judgments and estimates about the effects of matters that are inherently uncertain. As the number of variables and assumptions affecting the probable future resolution of the uncertainties increase, these judgments become even more subjective and complex. Our significant accounting policies are discussed in Note 3 to our financial statements for the fiscal year ended September 30, 2013 included in the Form 10-K. We have identified the following accounting policies, described below, as the most important to an understanding of our current financial condition and results of operations.

This summary of significant accounting policies is presented to assist in understanding our financial statements. Our financial statements and notes are representations of our management who is responsible for their integrity and objectivity. These accounting policies conform to generally accepted accounting principles in the United States of America ("GAAP") and have been consistently applied in the preparation of the financial statements. The financial statements are stated in United States of America dollars.

a) Available-for-sale securities The Company classifies its marketable equity securities as available-for-sale and they are carried at fair market value, with the unrealized gains and losses included in the determination of comprehensive income and reported in stockholders' equity.

b) Income Taxes We have adopted the ASC subtopic 740-10. ASC 740-10 requires the use of the asset and liability method of accounting of income taxes. Under the asset and liability method of ASC 740-10, deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. We provide deferred taxes for the estimated future tax effects attributable to temporary differences and carry forwards when realization is more likely than not.

c) Inventories Inventories are stated at the lower of cost or market, with cost being determined using the first-in first-out method.

d) Property and Equipment Property and equipment are recorded at cost. Expenditures for major additions and improvements are capitalized and minor replacements, maintenance, and repairs are charged to expense as incurred. When property and equipment are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the results of operations for the respective period. Depreciation is provided over the estimated useful lives of the related assets using the straight-line method for financial statement purposes. The estimated useful lives for significant property and equipment categories are as follows:

Equipment 5 years
Furniture 7 years

The Company reviews the carrying value of property, plant, and equipment for impairment whenever events and circumstances indicate that the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. In cases where undiscounted expected future cash flows are less than the carrying value, an impairment loss is recognized equal to an amount by which the carrying value exceeds the fair value of assets. The factors considered by management in performing this assessment include current operating results, trends and prospects, the manner in which the property is used, and the effects of obsolescence, demand, competition, and other economic factors.

e) Advertising Advertising costs are expensed as in accordance with ASC subtopic 720-35 (formerly SOP 93-7). These costs were included in general and administrative costs.

f) Basic and Diluted Loss Per Share In accordance with ASC subtopic 260-10, the basic loss per common share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding. Diluted loss per common share is computed similar to basic loss per common share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. At September 30, 2013 and 2012, we had no stock equivalents that were anti-dilutive and excluded in the earnings per share computation, therefore basic loss per share and diluted loss per share are the same.

g) Estimated Fair Value of Financial Instruments The carrying value of our financial instruments, consisting of cash, accounts receivable, and accounts payable and accrued expenses approximate their fair value as of September 30, 2013 and 2012 due to the short-term maturity of such instruments. It is management's opinion that we are not exposed to significant interest, currency, or credit risks arising from these financial statements.

h) Revenue Recognition It is our policy that revenues will be recognized in accordance with ASC subtopic 605-10. Revenues are recognized only when the Company has transferred to the customer the significant risk and rewards of ownership of the goods, title to the products transfers, the amount is fixed and determinable, evidence of an agreement exists, there is reasonable assurance of collection of the sales proceeds, the Company has no future obligations, and the customer bears the risk of loss. This occurs at the time of shipment (FOB shipping point) of the products from the Company's warehouse and an invoice is prepared. There are no rights of return and exchange is allowed only on defective products. Recognition of revenue is not affected as the right of exchange results in new units being shipped to the customer once defective units have been received by the company and verified as defective.

i) Currency Our functional currency is the United States Dollar.

j) Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.

k) Cash and Cash Equivalents Cash is comprised of cash on hand and demand deposits. Cash equivalents include short-term highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value. The Company has no cash equivalents as of September 30, 2013 or 2012.

l) Impairment of long-lived assets The Company reviews its long-lived assets and intangibles periodically to determine potential impairment by comparing the carrying value of the long-lived assets with the estimated future cash flows expected to result from the use of the assets, including cash flows from disposition. Should the sum of the expected future cash flows be less than the carrying value, the Company would recognize an impairment loss. An impairment loss would be measured by comparing the amount by which the carrying value exceeds the fair value of the long-lived assets and intangibles.

Results of Operations

The following is Management's discussion and analysis of certain significant factors which have affected our financial condition and results of operations during the periods included in the accompanying financial statements.

Results of Operations for the Year Ended September 30, 2013 as Compared to the Year Ended September 30, 2012

Sales and Rental Revenue

During the fiscal year ended September 30, 2013, we received gross revenue of $213,797 as compared to $155,871 for the year ended September 30, 2012. The increase is primarily related to the increase in sales from our new product line, reflecting higher market penetration of our product in the residential market.

Net Income (Loss)

During the fiscal year ended September 30, 2013, our net loss was $946,660 as compared to $821,681 for the year ended September 30, 2012. The increase in net loss is due to an increase in our total expenses of $1,008,508 for the year ended September 30, 2013 as compared to $849,691 for the year ended September 30, 2012.

General and Administrative Expenses

During the fiscal year ended September 30, 2013, we incurred total expenses of
$1,008,508 as compared to $849,191 for the year ended September 30, 2012. The
decrease is primarily related to expenses for marketing, office and
administration, professional fees, consulting and investor relation costs
increased due to an increase business activity associated with development of
the new product line and impairment expense. The expenses are as follows:

                                  September 30, 2013     September 30, 2012
Bad debt                        $                  0   $              2,262
Depreciation and amortization                  1,464                  1,464
Marketing                                      3,622                 43,494
Office and administration                    334,613                250,129
Professional fees                            295,362                323,946
Consulting                                   373,447                227,896
Total                           $          1,008,508   $            849,191

Bad debts decreased from $2,262 for the year ended September 30, 2012 to $ 0 for the year ended September 30, 2013.

Depreciation and amortization expense $1,464 for the year ended September 30, 2013 and for the year ended September 30, 2012.

Marketing expenses decreased from $43,494 to $3,622, as many of the marketing materials were developed in the prior periods. Office and Administration, and Consulting Fees rose, as the Company added personnel to address the International markets, as well as the Sleep and Furniture Store/Mattress markets. Marketing and Professional fees declined, as many of the costs were absorbed by the consultants themselves.

Liquidity and Capital Resources

As of September 30, 2013, we had cash of $7,857 and working capital of $107,714. During the period ended September 30, 2013, we funded our operations from receipts of sales revenues, proceeds from stock sales, and proceeds from loans payable. In order to survive, we are dependent on increasing our sales volume. Additionally, we plan to continue to raise additional equity capital, and believe that this will provide sufficient working capital to fund our operations for at least the next 12 months. Changes in our operating plans, increased expenses, additional acquisitions, or other events may cause us to seek additional equity or debt financing in the future.

For the period ended September 30, 2013, we used $299,420 in cash flows to fund operating activities as compared to $524,027 for the period ended September 30, 2012.

For the period ended September 30, 2013, cash flows used in investing activities was $68.

For the period ended September 30, 2013, cash flows provided from financing activities was $287,404 from proceeds of loans payable and sale of common shares as compared to $448,262 for the period ended September 30, 2012.

We anticipate that our cash flow will improve as our product shipments ramp up in our second quarter, 2014. Any additional funding will be equity, or order based, in order to fund the ramp up of existing production, along with the tooling for our new model.

Off-Balance Sheet Arrangements

We presently do not have any off-balance sheet arrangements.

Capital Expenditures

We spent $68 for the purchase of equipment for the fiscal year ended September 30, 2013 and $457 in the fiscal year ended September 30, 2012.

Contractual Obligations

The following table outlines payments due under our significant contractual
obligations over the periods shown, exclusive of interest:

                                                Payments Due by
                                                     Period
Contract Obligations                 Less than                                More than
At September 30, 2013     Total       1 Year      1-3 years     3-5 years      5 years
Total Debt              $ 217,985   $    82,985   $  135,000   $         -   $         -
Lease Obligations       $  11,220   $    11,220   $        -             -             -

The above table outlines our obligations as of September 30, 2013 and does not reflect any changes in our obligations that have occurred after that date.

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