U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 2005
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[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from _______ to _______.
Commission File Number: 0-27445
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Enviro Voraxial Technology, Inc.
--------------------------------
(Exact name of Small Business Issuer as specified in its Charter)
IDAHO 82-0266517
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
821 NW 57th Place, Fort Lauderdale, Florida 33309
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(Address of principal executive offices)
(954) 958-9968
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(Issuer's telephone number)
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(Former Name, former address and former fiscal year,
if changed since last Report.)
Check mark whether the Issuer (1) has filed all reports required to be filed by
Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes [X] No [ ]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: September 30, 2005, we had 19,059,735
shares of our Common Stock outstanding.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
INDEX
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Page
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PART I. CONDENSED CONSOLIDATED FINANCIAL INFORMATION
------ --------------------------------------------
Item 1. Condensed Consolidated Financial Statements.............................................. 3
Condensed Consolidated Balance Sheet - September 30, 2005 (Unaudited).................... 3
Condensed Consolidated Statements of Operations for the
Three and Nine Months Ended September 30, 2005 and 2004 (Unaudited)................... 4
Condensed Consolidated Statements of Cash Flows for the
Nine Months Ended September 30, 2005 and 2004 (Unaudited)............................. 5
Notes to Condensed Consolidated Financial Statements (Unaudited)......................... 6-9
Item 2. Management's Discussion and Analysis and Plan of
Operation................................................................................ 10
Item 3. Controls and Procedures.................................................................. 12
PART II. OTHER INFORMATION
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Item 1. Legal Proceedings........................................................................ 14
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.............................. 14
Item 3. Default Upon Senior Securities........................................................... 14
Item 4. Submission of Matters to a Vote of Securities............................................ 14
Item 5. Other Information........................................................................ 15
Item 6. Exhibits................................................................................. 15
Signatures ......................................................................................... 16
2
PART I. CONSOLIDATED FINANCIAL INFORMATION
----------------------------------
Item 1. Consolidated Financial Statements (Unaudited)
---------------------------------
ENVIRO VORAXIAL TECHNOLOGY, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEET
(DOLLARS ROUNDED TO 000's, EXCEPT PER SHARE AMOUNTS)
(Unaudited)
ASSETS
------
September 30, 2005
------------------
Current Assets:
Cash and cash equivalents $ 126,000
Accounts receivable 8,000
Inventory 126,000
Prepaid insurance 8,000
-----------
Total Current Assets 268,000
Fixed assets, net 5,000
Other assets 10,000
-----------
Total Assets $ 283,000
===========
LIABILITIES
-----------
Current liabilities:
Accounts payable and accrued expenses $ 387,000
-----------
Total Current Liabilities 387,000
-----------
STOCKHOLDERS' DEFICIENCY
------------------------
Capital stock, par value $.001:
Preferred stock, voting, 8% noncumulative, convertible,
authorized 7,250,000 shares, issued and outstanding - None --
Common stock, authorized 42,750,000 shares,
18,707,235 shares issued and outstanding 19,000
Common stock to be issued, (352,500 shares) 140,000
Additional paid-in capital 5,384,000
Deferred costs (5,000)
Accumulated deficit (5,642,000)
-----------
Total Stockholders' Deficiency (104,000)
-----------
Total Liabilities and Stockholders' Deficiency $ 283,000
===========
See accompanying notes to condensed consolidated financial statements
3
ENVIRO VORAXIAL TECHNOLOGY, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS ROUNDED TO 000's, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
2005 2004 2005 2004
---- ---- ---- ----
Revenue
Product $ 8,000 $ -- $ 128,000 $ 1,000
Rental income -- 2,000 -- 13,000
------------ ------------ ------------ ------------
Total revenue 8,000 2,000 128,000 14,000
------------ ------------ ------------ ------------
Cost of goods sold
Product -- -- 34,000 --
------------ ------------ ------------ ------------
Gross profit 8,000 2,000 94,000 14,000
------------ ------------ ------------ ------------
Operating expenses:
General and administrative 106,000 179,000 359,000 482,000
Research and development 260,000 175,000 588,000 877,000
------------ ------------ ------------ ------------
Total operating expenses 366,000 354,000 947,000 1,359,000
------------ ------------ ------------ ------------
Loss from operations (358,000) (352,000) (853,000) (1,345,000)
------------ ------------ ------------ ------------
Other expenses (income)
Gain on sale of equipment -- -- (2,000) --
Interest expense -- 5,000 -- 11,000
------------ ------------ ------------ ------------
Total Other Expenses (Income) -- 5,000 (2,000) 11,000
------------ ------------ ------------ ------------
Net loss $ (358,000) $ (357,000) $ (851,000) $ (1,356,000)
============ ============ ============ ============
Basic and diluted loss per common share $ (.02) $ (.02) $ (.05) $ (.08)
============ ============ ============ ============
Weighted average number of common
shares outstanding - basic and diluted 18,904,844 17,662,815 18,291,356 16,640,367
============ ============ ============ ============
See accompanying notes to condensed consolidated financial statements
4
ENVIRO VORAXIAL TECHNOLOGY, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS ROUNDED TO 000's, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
For the Nine Months
Ended September 30,
2005 2004
---- ----
Cash Flows From Operating Activities
Net loss $ (851,000) $(1,356,000)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation 3,000 8,000
Gain on sale of equipment (2,000) --
Additional compensation for options issued in excess
of accrued compensation -- 337,000
Amortization of deferred compensation 84,000 110,000
Stock issued for services rendered 7,000 6,000
Changes in operating assets and liabilities:
Accounts receivable (8,000) --
Inventory (47,000) --
Prepaid insurance (5,000) (8,000)
Accounts payable and accrued expenses 215,000 (120,000)
Deposits from customers (7,000) 5,000
----------- -----------
Net cash used in operating activities (611,000) (1,018,000)
----------- -----------
Cash Flows From Investing Activities
Additions to fixed assets (6,000) --
Proceeds from sale of equipment, net 35,000 --
----------- -----------
Net cash provided by investing activities 29,000 --
----------- -----------
Cash Flows From Financing Activities
Net proceeds from issuance of common stock 487,000 1,071,000
Notes payable -- 250,000
Payments of obligations under capital leases -- (13,000)
----------- -----------
Net cash provided by financing activities 487,000 1,308,000
----------- -----------
Net (decrease) increase in cash and cash equivalents (95,000) 290,000
Cash and cash equivalents, beginning of period 221,000 150,000
----------- -----------
Cash and cash, equivalents, end of period $ 126,000 $ 440,000
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid for interest $ -- $ 11,000
Common stock for services $ 57,000 $ 145,000
Warrants issued for services $ 21,000 $ --
Options issued in settlement of accrued expenses $ -- $ 370,000
Conversion of notes payable to common stock $ -- $ 250,000
See accompanying notes to condensed consolidated financial statements
5
ENVIRO VORAXIAL TECHNOLOGY, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS ROUNDED TO 000's, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
NOTE A - ORGANIZATION AND OPERATIONS
Enviro Voraxial Technology, Inc. and subsidiary (the "Company") is a provider of
environmental and industrial separation technology. The Company has developed
and patented the Voraxial(R) Separator, which is a technology that efficiently
separates solids and liquids with distinct specific gravities. The Voraxial(R)
Separator is a continuous flow turbo machine that separates a mixture of fluids
or fluids and solids at high flow rates while achieving high levels of purity
through the utilization of a strong centrifugal force or vortex.
Prior to 1999, the Company performed contract-manufacturing services to the
aerospace and automotive industries through the operation of its high precision
engineering machine shop, which designed, manufactured and assembled specialized
parts and components. Since 1999, the Company has been focusing its efforts on
developing and marketing the Voraxial(R) Separator. The Company is focusing its
efforts on a few key opportunities, including wastewater, grit/sand separation,
oil-water separation, exploration and production, marine/oil-spill clean up,
bilge and ballast treatment and manufacturing and food processing waste
treatment markets.
The Company may be unable to continue as a going concern, given its limited
operations and revenues and its significant losses to date. For the nine months
ended September 30, 2005 the Company has a net loss of $851,000 and a negative
cash flow from operations of $611,000 and as of September 30, 2005, the Company
has an accumulated deficit of $5,642,000 and a working capital deficit of
$119,000. Since 2001, the Company has encountered greater expenses attributed to
the development of the Voraxial(R) Separator and has had limited sales revenues
from this development. Consequently, the Company's working capital may be
insufficient and its operating costs may exceed those experienced in prior
years. In light of these recent developments, the Company may be unable to
continue as a going concern. However, the Company believes that the exposure
received in the past year for the Voraxial(R) Separator has positioned the
Company to generate sales and that will provide it with sufficient working
capital. The Company intends to fund current working capital requirements
through third party financing, including the private placement of securities.
However, the Company cannot provide any assurances that it will be able to
obtain adequate financing. 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. 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.
[1] Principles of Consolidation
The condensed consolidated financial statements as of September 30, 2005 include
the accounts of the parent company, Enviro Voraxial Technology, Inc., and its
wholly owned inactive subsidiary, Florida Precision Aerospace, Inc. All
significant intercompany accounts and transactions have been eliminated.
6
ENVIRO VORAXIAL TECHNOLOGY, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS ROUNDED TO 000's, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
[2] Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the amount of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ. A significant estimate involves
the value of the Company's inventory.
[3] Fair Value of Financial Instruments
The carrying amounts of the Company's financial instruments, including cash and
cash equivalents, accounts receivable and accounts payable and accrued expenses
as of September 30, 2005 approximate their fair values because of their
relativity short-term nature.
[4] Interim Financial Statements
Financial statements as of September 30, 2005 are unaudited but in the opinion
of management the financial statements include all adjustments consisting of
normal recurring accruals necessary for a fair presentation of financial
position and the comparative results of operation. Results of operations for
interim periods are not necessarily indicative of those to be achieved or
expected for the entire year. These interim financial statements should be read
in conjunction with the Company's Annual Report on Form 10-KSB.
[5] Net Loss Per Share
Basic and diluted loss per share has been computed by dividing the net loss
available to common stockholders by the weighted average number of common shares
outstanding. The warrants and options have been excluded from the calculation
since it would be anti-dilutive. Such equity instruments may have a dilutive
effect in the future and include the following potential common shares:
Warrants 5,648,695
Stock options 4,054,666
---------
9,703,361
=========
[6] Research and Development Expenses
Research and development costs, which consist of travel expenses, consulting
fees, subcontractors and salaries are expensed as incurred.
[7] Stock-based Compensation
The Company accounts for stock-based employee compensation under Accounting
Principles Board ("APB" Opinion No. 25, "Accounting for Stock Issued to
Employees," and related interpretations. The Company has adopted the
7
ENVIRO VORAXIAL TECHNOLOGY, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS ROUNDED TO 000's, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
disclosure-only provisions of Statement of Financial Accounting Standards
("SFAS") No. 123, "Accounting for Stock-Based Compensation" and SFAS No. 148,
"Accounting for Stock-Based Compensation - Transition and Disclosure," which was
released in December 2002 as an amendment to SFAS No. 123. The following table
illustrates the effect on net loss and loss per share if the fair value based
method had been applied to all awards.
Three months ended Nine months ended
September 30, September 30,
------------ -------------
2005 2004 2005 2004
---- ---- ---- ----
Reported net loss $ (358,000) $ (357,000) $ (851,000) $(1,356,000)
Stock-based employee compensation expense included
in reported net loss -- -- -- 146,000
Stock-based employee compensation determined under
the fair value based method -- (5,000) -- (196,000)
-------------- ----------- -------------- -----------
Pro forma net loss $ 358,000) $ (362,000) $ (851,000) $(1,406,000)
============== =========== ============== ===========
Basic and diluted loss per common share:
As reported $ (.02) $ (.02) $ (.05) $ (.08)
============== =========== ============== ===========
Pro forma $ (.02) $ (.02) $ (.05) $ (08)
============== =========== ============== ===========
[8] Inventory
Inventory consists of components for the Voraxial(R) Separator and is priced at
lower of first-in, first-out cost or market. Inventory includes components held
by third parties in connection with pilot programs as part of the continuing
evaluation by such third parties as to the effectiveness and usefulness of the
service to be incorporated into their respective operations.
[9] Revenue Recognition
The Company recognizes equipment rental revenue and contract revenue when
earned. Shipments of the Voraxial(R) Separator to third parties are recognized
as revenue upon customer acceptance. Shipments to third parties in connection
with pilot programs are not recognized as revenue and such components are
included in inventory as of September 30, 2005.
During the nine months ended September 30, 2005 the Company has recorded
revenues of $128,000, which consists of the sale of one Voraxial(R) Separator
for $120,000 and the sale of machined items for $8,000. These machined items had
been previously written-off as obsolete inventory as of December 31, 2004.
8
ENVIRO VORAXIAL TECHNOLOGY, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS ROUNDED TO 000's, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
NOTE C - EQUITY TRANSACTIONS
In January 2005 the Company entered into a one-year consulting agreement with
its former Chief Operating Officer for engineering design, marketing and sales
of Company products and services. Pursuant to this agreement, the Company
granted 50,000 warrants to this individual. These warrants vest equally in 12
traunches over a period of one year commencing in January, 2005 and expire in
January 2008. The Company estimated the fair value of the warrants at the grant
date by using the Black-Scholes option-pricing model with the following weighted
average assumptions: no dividend yield for all the years; expected volatility of
133%; risk-free interest rate of 3% and an expected life of 3 years, resulting
in a fair value of approximately $21,000. The amount is being amortized over the
life of the agreement resulting in an expense of approximately $16,000 for the
nine months ended September 30, 2005. The remaining unamortized balance of
$5,000 is included in the condensed consolidated balance sheet as deferred
costs, a component of stockholders' deficiency.
In May 2005, the Company authorized the issuance of 150,000 shares of common
stock to a consultant valued at $57,000 based on the closing market price of the
Company's common stock on the date of the agreement. These shares are included
in the consolidated balance sheet as common stock to be issued. In addition, the
Company paid $40,000 in cash to this consultant. These amounts are amortized
over the life of the consulting agreement of four months, resulting in
consulting expense of $97,000 for the nine months ended September 30, 2005.
During the nine months ended September 30, 2005, the Company received cash from
eight accredited investors to purchase an aggregate of 1,218,333 shares of the
Company's restricted common stock at $0.40 per share for proceeds of $487,333.
At September 30, 2005 there were 187,500 of these shares included in the
consolidated balance sheet as common stock to be issued.
On July 1, 2005, the Company entered into a consulting agreement and agreed to
issue 15,000 shares for services performed, which were valued at $7,650. These
shares are included in the consolidated balance sheet as common stock to be
issued.
9
Item 2. Management's Discussion and Analysis of Financial Condition and Plan of
Operations
General
Enviro Voraxial Technology, Inc. and subsidiary (the "Company") is a provider of
environmental and industrial separation technology. The Company has developed
and patented the Voraxial(R) Separator, which is a technology that efficiently
separates solids and liquids with distinct specific gravities. The Voraxial(R)
Separator is a continuous flow turbo machine that separates a mixture of fluids
or fluids and solids at high flow rates while achieving high levels of purity
through the utilization of a strong centrifugal force or vortex. Management of
the Company believes the scalability and efficiency of the Voraxial(R) Separator
make the technology universal to any industry requiring the separation of
liquids and/or liquids and solids, regardless of the quantity needed to be
processed. Potential commercial applications and markets include pre-treatment
of wastewater (headworks) at municipal wastewater facilities, exploration and
production, oil/water separation, and environmental cleanup.
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(R) Technology 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-QSB 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 B to the Company's financial statements in the
Company's 2004 Annual Report on Form 10-KSB. The Company has not adopted any
significant new policies during the quarter ended September 30, 2005.
Among the significant judgments made in preparation of the Company's financial
statements are the determination of the allowance for doubtful accounts and
adjustments of inventory valuations. These adjustments are made each quarter in
the ordinary course of accounting.
Results of Operations for the three Months ended September 30, 2005 and 2004:
Revenue
Our revenues were $8,000 for the three months ended September 30, 2005 as
compared to $2,000 for the three months ended September 30, 2004. Revenues in
10
2005 were from the sale of machined items, while revenues in 2004 were from
rental income. The Company continues to focus on its sales and marketing program
for the Voraxial(R) Separator and management believes such efforts will result
in increasing opportunities and revenues in 2005.
Research and Development Expenses
Research and Development expenses increased by 49% to $260,000 for the three
months ended September 30, 2005, up from $175,000 for the previous three months
ended September 30, 2004. Although the Company has finalized the development of
the Voraxial(R) Separator, we targeted expenditures for specific industry
applications for the technology, including produced water applications
(separation of oil from water) for offshore oil platforms. The Company built and
tested units for these applications during the three months ended September 30,
2005.
General and Administrative Expenses
General and Administrative expenses decreased by 41% to $106,000 for the three
months ended September 30, 2005 down from $179,000 for the three months ended
September 30, 2004. The decrease is principally due to a decrease in salary
expense. In an effort to reduce cost, the Company terminated its employment
contract and entered into a consulting agreement with its former COO. We are
focusing our efforts on marketing of the Voraxial(R) Separator in specific areas
and consolidating our expenses.
Results of Operations for the Nine Months ended September 30, 2005 and 2004:
Revenue
Our revenues were $128,000 for the nine months ended September 30, 2005 from
sales of the Voraxial Separator as compared to $14,000 for the nine months ended
September 30, 2004 of which $13,000 was for rental income. The Company continues
to focus on its sales and marketing program for the Voraxial(R) Separator and
management believes such efforts will result in increasing revenues in 2005.
Research and Development Expenses
Research and Development expenses decreased by 33% to $588,000 for the nine
months ended September 30, 2005, down from $877,000 for the previous nine months
ended September 30, 2004. Although the Company has finalized the development of
the Voraxial(R) Separator, we targeted expenditures for specific industry
applications for the technology and were building test units for these
applications during the nine months ended September 30, 2005.
General and Administrative Expenses
General and Administrative expenses decreased by 26% to $359,000 for the nine
months ended September 30, 2005 down from $482,000 for the nine months ended
September 30, 2004. In the quarter ended March 31, 2004 certain non-cash equity
transactions resulted in $350,000 of charges for services provided. The increase
was partially offset by the decrease in general and administrative expenses
disclosed above. We are presently focusing our efforts on marketing of the
Voraxial(R) Separator in specific areas and consolidating our expenses.
Liquidity and Capital Resources:
For the nine months ended September 30, 2005 our working capital decreased by
$243,000 to a deficit of $119,000 from a December 31, 2004 working capital
balance of $124,000. This decrease was represented by a decrease in cash of
11
$95,000, and an increase in other current liabilities of $208,000, offset by an
increase in inventory of $47,000, an increase in prepaid insurance of $5,000 and
an increase in accounts receivable of $8,000.
Operating at a loss for the nine months ended September 30, 2005, negatively
impacted our cash position. During the nine months ended September 30, 2005, we
received an aggregate of $487,333 from a private placement transaction. Such
funds were used for working capital purposes. We anticipate generating positive
cash flow from the Voraxial(R) Separator in 2006. To the extent such revenues
and corresponding cash flows do not materialize, we will require an infusion of
capital to sustain our operations. We cannot be assured that we will generate
revenues or that the level of any future revenues will be self-sustaining.
Furthermore, we cannot provide any assurances that required capital will be
obtained or that terms of such required capital may be acceptable to us.
The Company intends to fund current working capital requirements through third
party financing, including the private placement of securities. However, the
Company cannot provide any assurances that it will be able to obtain adequate
financing. 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. For the nine months ended
September 30, 2005 the Company had a net loss of $851,000 and a negative cash
flow from operations of $611,000 and as of September 30, 2005, the Company has
an accumulated deficit of $5,642,000. Since 2001, we have encountered greater
expenses in the development of our Voraxial(R) 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. In light of these recent developments, we may be unable to continue as a
going concern. 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.
Item 3. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Company's management, with the participation of the Company's principal
executive officer and principal financial officer, evaluated the effectiveness
of the Company's disclosure controls and procedures as of the end of the period
covered by this report. The term "disclosure controls and procedures," as
defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls
and other procedures of a company that are designed to ensure that information
required to be disclosed by a company in the reports that it files or submits
under the Exchange Act is recorded, processed, summarized and reported, within
the time periods specified in the Securities and Exchange Commission's rules and
forms. Disclosure controls and procedures include, without limitation, controls
and procedures designed to ensure that information required to be disclosed by a
company in the reports that it files or submits under the Exchange Act is
accumulated and communicated to the Company's management, including its
principal executive and principal financial officers, as appropriate to allow
timely decisions regarding required disclosure. Management recognizes that any
12
controls and procedures, no matter how well designed and operated, can provide
only reasonable assurance of achieving their objectives and management
necessarily applies its judgment in evaluating the cost-benefit relationship of
possible controls and procedures. Based on the evaluation of the Company's
disclosure controls and procedures as of the end of the period covered by this
report, the Company's principal executive officer and principal financial
officer concluded that, as of such date, the Company's disclosure controls and
procedures were effective.
Changes in Internal Controls
No change in the Company's internal control over financial reporting occurred
during the last fiscal quarter of the period covered by this report that has
materially affected, or is reasonably likely to materially affect, the Company's
internal control over financial reporting.
13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
In January 2005, the Company entered into a one-year consultant contract
agreement with its former chief operating officer, who was terminated by
mutual agreement on December 31, 2004. Pursuant to this agreement, the
former officer will provide marketing and consulting services for a
period of one year. Under the agreement the Company issued 50,000
cashless warrants to purchase common stock at an exercise price of $1.00
per share. The warrants were issued under the exemption from
registration provided by Section 4(2) of the Securities Act. The
warrants contain a legend restricting their transferability absent
registration or applicable exemption. The former officer had access to
current information concerning the Company at the time the warrants were
issued.
In May 2005, the Company issued 150,000 shares of common stock to a
consultant resulting in those shares having a value of $57,000. This
amount was amortized over the life of the consulting agreement, four
months. The shares were issued pursuant to the exemption from
registration provided by Section 4(2) of the Securities Act. The shares
issued to the consultant contained a legend restricting their
transferability absent a registration or exemption. The consultant had
access to current information about the Company and had the ability to
ask questions about the Company at the time of the execution of the
consulting agreement.
For the nine months ended September 30, 2005, the Company received
subscriptions from eight accredited investors to purchase an aggregate
of 1,218,333 shares of the Company's restricted common stock. The
Company received proceeds of $487,333 from the sales of stock to these
individuals. The securities were sold pursuant to the exemption from
registration provided by Section 4(2) of the Securities Act. The shares
contained a legend restricting their transferability absent registration
or applicable exemption. The investors had access to current information
about the Company and had the ability to ask questions about the Company
at the time of their investment.
On July 1, 2005, the Company entered into a consulting agreement and
agreed to issue 15,000 shares for services performed, which were valued
at $7,650. These shares are included in the consolidated balance sheet
as common stock to be issued.
Item 3. Default Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Securities
None.
14
Item 5. Other Information
In September, the Company entered into a sales agreement with China
Offshore Oil Bohai Corporation to deploy a Voraxial(R) Separator on an
offshore oil production platform for a produced water (oil/water)
separation application. China Offshore Oil Bohai Corporation is a
wholly-owned subsidiary of CNOOC (NYSE: CEO - News), China's third
largest oil company. The Company believes the Voraxial(R) Separator can
be used by China Offshore Oil Bohai Corporation to enhance the handling
of large volumes of produced water and re-injection water on one of
their offshore production platforms. The Company believes the
Voraxial(R) Separator will provide China Offshore Oil Bohai Corporation
with superior separation while decreasing the amount of space, energy
and weight to conduct the separation - all of which are precious
commodities on the offshore platform. The Voraxial(R) Separator has been
specifically designed to accommodate the offshore equipment
requirements. To date there have been no sales to China Offshore Oil
Bohai Corporation.
In October, the Company signed a contract to deploy a Voraxial(R) 2000
Separator to a New Mexico oil production facility for a produced water
(oil/water) separation application.
The Company believes the need for effective produced water (oil/water)
separation is a major issue for both offshore and land-based oil
production facilities. Oil reservoirs frequently contain large volumes
of water and as oil wells mature (the oil field becomes depleted), the
amount of produced water increases. In the continental US, it is
estimated that more than 10 barrels of water is produced for every
barrel of oil. The produced water must be purified or treated for
removal of oil and solids prior to discharge or re-injection into
underground formations.
Item 6. Exhibits
31.1 Form 302 Certification of CEO
31.2 Form 302 Certification of Principal Financial Officer
32.1 Form 906 Certification of CEO
32.2 Form 906 Certification of Principal Financial Officer
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SIGNATURE
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned as a duly authorized officer of the Registrant.
Enviro Voraxial Technology, Inc.
By: /s/ Alberto DiBella
-------------------
Alberto DiBella
Chief Executive Officer and
Principal Financial Officer
DATED: November 11, 2005
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