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 June 30, 2005
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
Commission File Number: 0-27445
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
--------------
(Issuer's telephone number)
------------------------------------------------
(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 [ ]
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: June 30, 2005, we had 18,857,235
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. CONSOLIDATED CONDENSED FINANCIAL INFORMATION
------- --------------------------------------------
Item 1. Consolidated Condensed Financial Statements.............................................. 3
Condensed Consolidated Balance Sheet - June 30, 2005 (Unaudited)......................... 3
Condensed Consolidated Statements of Operations for the
Three and Six Months Ended June 30, 2005 and 2004 (Unaudited)......................... 4
Condensed Consolidated Statements of Cash Flows for the
Six Months Ended June 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
-------- -----------------
Item 1. Legal Proceedings........................................................................ 14
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.............................. 14
Item 3. Default Upon Senior Securities........................................................... 15
Item 4. Submission of Matters to a Vote of Securities............................................ 15
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
------
June 30, 2005
-------------
Current Assets:
Cash and cash equivalents $ 256,000
Inventory 126,000
Prepaid insurance 17,000
Deferred consulting expense 30,000
-----------
Total Current Assets 429,000
Fixed assets, net 6,000
Other assets 10,000
-----------
Total Assets $ 445,000
===========
LIABILITIES
-----------
Current liabilities:
Accounts payable and accrued expenses $ 321,000
-----------
Total Current Liabilities 321,000
-----------
STOCKHOLDERS' EQUITY
--------------------
Capital stock, par value $.001 par value:
Preferred stock, voting, 8% noncumulative, convertible,
authorized 7,250,000 shares, issued and outstanding - None --
Common stock, authorized 42,750,000 shares,
17,676,402 shares issued and outstanding 18,000
Common stock to be issued, (1,180,833 shares) 469,000
Additional paid-in capital 4,974,000
Deferred costs (53,000)
Accumulated deficit (5,284,000)
-----------
Total Stockholders' Equity 124,000
-----------
Total Liabilities and Stockholders' Equity $ 445,000
===========
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 Six Months
Ended June 30, Ended June 30
-------------- -------------
2005 2004 2005 2004
---- ---- ---- ----
Revenue
Product $ 120,000 $ -- $ 120,000 $ 1,000
Rental income -- 10,000 -- 11,000
------------ ------------ ------------ ------------
Total revenue 120,000 10,000 120,000 12,000
------------ ------------ ------------ ------------
Cost of goods sold
Product 34,000 -- 34,000 --
------------ ------------ ------------ ------------
Gross profit 86,000 10,000 86,000 12,000
------------ ------------ ------------ ------------
Operating expenses:
General and administrative 128,000 192,000 253,000 702,000
Research and development 209,000 160,000 328,000 303,000
------------ ------------ ------------ ------------
Total operating expenses 337,000 352,000 581,000 1,005,000
------------ ------------ ------------ ------------
Loss from operations (251,000) (342,000) (495,000) (993,000)
------------ ------------ ------------ ------------
Other expenses (income)
Gain on sale of equipment (2,000) -- (2,000) --
Interest expense -- 2,000 -- 6,000
------------ ------------ ------------ ------------
Total Other Expenses (Income) (2,000) 2,000 (2,000) 6,000
------------ ------------ ------------ ------------
Net loss $ (249,000) $ (344,000) $ (493,000) $ (999,000)
============ ============ ============ ============
Basic and diluted loss per common share $ (.01) $ (.02) $ (.03) $ (.06)
============ ============ ============ ============
Weighted average number of common
shares outstanding - basic and diluted 18,279,323 16,726,457 17,979,529 16,179,144
============ ============ ============ ============
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 Six Months
Ended June 30,
--------------
2005 2004
---- ----
Cash Flows From Operating Activities
Net loss $ (493,000) $ (999,000)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation 2,000 5,000
Gain on sale of equipment (2,000)
Additional compensation for options issued in excess
of accrued compensation -- 337,000
Amortization of deferred compensation 46,000 76,000
Stock issued for services rendered -- 6,000
Changes in operating assets and liabilities:
Inventory (47,000)
Prepaid insurance (14,000) (16,000)
Deferred costs (40,000) --
Accounts payable and accrued expenses 152,000 (71,000)
Deposits from customers (10,000) --
----------- -----------
Net cash used in operating activities (406,000) (662,000)
----------- -----------
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 412,000 1,017,000
Notes payable -- 250,000
Payments of obligations under capital leases -- (13,000)
----------- -----------
Net cash provided by financing activities 412,000 1,254,000
----------- -----------
Net increase in cash and cash equivalents 35,000 592,000
Cash and cash equivalents, beginning of period 221,000 150,000
----------- -----------
Cash and cash, equivalents, end of period $ 256,000 $ 742,000
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid for interest $ -- $ 6,000
Common stock for services $ -- $ 145,000
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 extremely high flow rates while achieving very high
levels of purity through the utilization of a strong centrifugal force or
vortex. The scalability, efficiency and effectiveness 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.
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 six months
ended June 30, 2005 the Company has a net loss of $493,000 and a negative cash
flow from operations of $406,000 and as of June 30, 2005, the company has an
accumulated deficit of $5,284,000. 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.
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
[1] Principles of Consolidation
The condensed consolidated financial statements as of June 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.
[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, and accounts payable and accrued expenses as of June 30, 2005
approximate their fair values because of their relativity short-term nature.
[4] Interim Financial Statements
Financial statements as of June 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.
[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
=========
7
ENVIRO VORAXIAL TECHNOLOGY, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS ROUNDED TO 000's, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
[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
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.
[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.
Three months ended June 30, Six months ended June 30
2005 2004 2005 2004
---- ---- ---- ----
Reported net loss $ (249,000) $ (344,000) $ (493,000) $ (999,000)
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 $ (249,000) $ (349,000) $ (493,000) $(1,049,000)
============== =========== ============== ===========
Basic and diluted loss per common share:
As reported $ (.01) $ (.02) $ (.03) $ (.06)
============== =========== ============== ===========
Pro forma $ (.01) $ (.02) $ (.03) $ (06)
============== =========== ============== ===========
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
8
ENVIRO VORAXIAL TECHNOLOGY, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS ROUNDED TO 000's, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
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 $11,000 for the
six months ended June 30, 2005. The remaining unamortized balance of $10,000 is
included in the condensed consolidated balance sheet as deferred costs, a
component of stockholders' equity.
On February 16, 2005 the Company reduced the exercise price of 4,514,997 of the
Company's outstanding common stock purchase warrants to $0.40 per share for a
period of 60-days. These warrants were issued from February 2000 through August
2004 to accredited investors in private placement transactions exempt from
registration under Section 4(2) of the Securities Act of 1933. Each warrant is
exercisable to purchase one share of the Company's restricted common stock at
exercise prices ranging from $1.00 to $4.00 per share. Subsequent to the 60-day
period, the exercise price of the warrants reverted to the original price per
share until the expiration date of the warrants. No other terms of the warrants
were modified or changed as a result of the reduction in the exercise price.
None of the warrants have been exercised.
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. In addition, the company
paid $40,000 in cash to this consultant. These amounts will be amortized over
the life of the consulting agreement of four months, resulting in consulting
expense of $25,000 for the six months ended June 30, 2005. The remaining
unamortized balance of $30,000, from the $40,000 paid in cash, is presented in
the consolidated balance sheet as deferred consulting expense, a current asset.
The remaining unamortized balance resulting from the common stock issuance of
$43,000 is presented in the consolidated balance sheet as deferred costs, a
component of stockholders' equity, and these shares are included as common stock
to be issued.
During the three months ended June 30, 2005, the Company received cash from six
accredited investors to purchase an aggregate of 1,030,883 shares of the
Company's restricted common stock at $0.40 per share for proceeds of $412,333.
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
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 June 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 Six Months ended June 30, 2005 and 2004:
Revenue
Our revenues were $120,000 for the six months ended June 30, 2005 as compared to
$10,000 for the three months ended June 30, 2004. Revenues in 2005 were from the
sale of the Voraxial Separator to a customer in the mining industry, while
revenues in 2004 were from rental income. The sale was completed after extensive
testing by the customer of the Voraxial Separator's efficiency in separating oil
from water. Management believes the decision to use the Voraxial was based on
efficiency and improved economics for the customer. 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.
10
Research and Development Expenses
Research and Development expenses increased by 31% to $209,000 for the three
months ended June 30, 2005, up from $160,000 for the previous three months ended
June 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 June 30, 2005.
General and Administrative Expenses
General and Administrative expenses decreased by 33% to $128,000 for the three
months ended June 30, 2005 down from $192,000 for the three months ended June
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 Six Months ended June 30, 2005 and 2004:
Revenue
Our revenues were $120,000 for the six months ended June 30, 2005 from sales of
the Voraxial Separator as compared to $12,000 for the six months ended June 30,
2004 of which $11,000 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 increased by 8% to $328,000 for the six months
ended June 30, 2005, up from $303,000 for the previous six months ended June 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 three
months ended June 30, 2005.
General and Administrative Expenses
General and Administrative expenses decreased by 64% to $253,000 for the six
months ended June 30, 2005 down from $702,000 for the six months ended June 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 six months ended June 30, 2005 our working capital decreased by $16,000
to a surplus of $108,000 from a December 31, 2004 working capital balance of
$124,000. This decrease was represented by an increase in cash of $35,000, an
increase in inventory of $47,000, an increase in prepaid insurance of $14,000,
an increase in deferred consulting expense of $30,000, and an increase in other
current liabilities of $142,000.
11
Operating at a loss for the six months ended June 30, 2005, negatively impacted
our cash position. During the six months ended June 30, 2005, we received an
aggregate of $412,333 from a private placement transaction. Such funds were used
for working capital purposes. We anticipate generating positive cash flow from
the Voraxial(R) Separator. To the extent such revenues and corresponding cash
flows do not materialize, we will require 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 six months ended June
30, 2005 the Company had a net loss of $493,000 and a negative cash flow from
operations of $406,000 and as of June 30, 2005, the Company has an accumulated
deficit of $5,284,000. 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
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
12
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 of 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.
On February 16, 2005, the Company reduced the exercise price of
4,514,997 of its outstanding common stock purchase warrants to $0.40 per
share for a period of 60 days. These warrants were issued from February
2000 through August 2004 to accredited investors in private placement
transactions exempt from registration under Section 4(2) of the
Securities Act of 1933. Each warrant was originally issued and
exercisable to purchase one share of the Company's restricted common
stock at exercise prices ranging from $1.00 to $4.00 per share.
Subsequent to the 60-day period, the exercise price of the warrants
reverted to the original exercise price per share. None of the warrants
have been exercised.
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
value will be 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 three months ended June 30, 2005, the Company received
subscriptions from six accredited investors to purchase an aggregate of
1,030,883 shares of the Company's restricted common stock. The Company
received proceeds of $412,333 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
14
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.
Item 3. Default Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Securities
None.
Item 5. Other Information
None.
Item 6. Exhibits
Exhibits required by Item 601 of Regulation S-B
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
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
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Alberto DiBella
Chief Executive Officer and
Principal Financial Officer
DATED: August 15, 2005
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