10QSB/A 1 evtn-10qsba2_sep30.txt AMENDMENT NO. 2 TO QUARTERLY REPORT U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Amendment No. 2 to 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, 2007 [ ] 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 ----- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 821 NW 57th Place, Fort Lauderdale, Florida 33309 ------------------------------------------------- (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 [ ] 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, 2007, we had 22,872,235 shares of our Common Stock outstanding. Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
INDEX Page ---- PART I. CONSOLIDATED FINANCIAL INFORMATION ------- ---------------------------------- Item 1. Consolidated Financial Statements........................................................ 3 Consolidated Balance Sheet............................................................... 3 Consolidated Statements of Operations.................................................... 4 Consolidated Statement of Changes in Shareholders' Equity................................ 5 Consolidated Statements of Cash Flows ................................................... 6 Notes to Consolidated Financial Statements............................................... 7 Item 2. Management's Discussion and Analysis and Plan of Operation................................................................................ 13 Item 3. Controls and Procedures.................................................................. 15 PART II. OTHER INFORMATION -------- ----------------- Item 1. Legal Proceedings........................................................................ 16 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.............................. 16 Item 3. Default Upon Senior Securities........................................................... 16 Item 4. Submission of Matters to a Vote of Securities............................................ 16 Item 5. Other Information........................................................................ 16 Item 6. Exhibits................................................................................. 16 Signatures ...................................................................................... 17
2 PART I. CONSOLIDATED FINANCIAL INFORMATION ------------------------------------------ Item 1. Financial Statements.
ENVIRO VORAXIAL TECHNOLOGY, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEET September 30, 2007 (Unaudited) -------------------------- (Restated) ASSETS CURRENT ASSETS: Cash and cash equivalents $ 250,140 Accounts receivable, net 59,862 Inventory 417,041 -------------------------- Total current assets 727,043 FIXED ASSETS, NET 219,192 OTHER ASSETS 13,695 -------------------------- Total assets $ 959,930 ========================== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable and accrued expenses $ 618,017 -------------------------- Total current liabilities 618,017 -------------------------- LONG TERM LIABILITIES Note Payable - Equipment 180,098 -------------------------- TOTAL LIABILITIES 798,115 -------------------------- COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY: Common stock, $.001 par value, 42,750,000 shares authorized; 22,872,235 shares issued and outstanding 22,871 Additional paid-in capital 8,371,107 Accumulated deficit (8,232,163) -------------------------- Total shareholders' equity 161,815 -------------------------- Total liabilities and shareholders' equity $ 959,930 ==========================
The accompanying notes are an integral part of the consolidated financial statements. 3
ENVIRO VORAXIAL TECHNOLOGY, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS Three Months Ended September 30, Nine Months Ended September 30, ------------------------------------ ------------------------------------ 2007 2006 2007 2006 ---------------- ---------------- -------------- ------------------ (as restated) (as restated) Revenues, net $ 22,518 $ 46,261 $ 286,676 $ 208,425 Cost of goods sold 40,669 6,423 77,246 71,410 ---------------- ----------------- ---------------- ------------------ Gross profit (loss) (18,151) 39,838 209,430 137,015 Costs and operating expenses: Research and development 135,479 102,408 305,327 281,124 General and administrative 219,100 135,748 1,420,730 441,257 ---------------- ----------------- ---------------- ------------------ Total costs and operating expenses 354,579 238,156 1,726,057 722,381 ---------------- ----------------- ---------------- ------------------ Loss from operations (372,730) (198,318) (1,516,627) (585,366) Provision for income taxes - - - - ---------------- ----------------- ---------------- ------------------ NET LOSS $ (372,730) $ (198,318) $ (1,516,627) $ (585,366) ================ ================= ================ ================== Weighted average number of common shares outstanding-basic & diluted 22,872,235 20,751,262 22,008,254 20,067,888 ================ ================= ================ ================== Basic and diluted loss per common share $ (0.02) $ (0.01) $ (0.07) $ (0.03) ================ ================= ================ ==================
The accompanying notes are an integral part of the consolidated financial statements. 4
ENVIRO VORAXIAL TECHNOLOGY, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY-RESTATED Common Stock Additional ------------------------- Paid-in Deferred Accumulated Shares Amount Capital Compensation Deficit Total ------ ------ ------- ------------ ------- ----- Balance at December 31, 2004 17,676,402 $ 18,000 $ 4,953,000 $ (11,000) $ (4,791,000) $ 169,000 Issuance of common stock for consulting services 300,000 300 141,519 (56,875) - 84,944 Issuance of options for services - - 21,000 - - 21,000 Issuance of restricted common stock at $.40 per share 1,468,333 1,144 586,189 - - 587,333 Issuance of common stock for consulting services 15,000 15 7,635 - - 7,650 Amortization of deferred compensation - - - 14,438 - 14,438 Net loss - - - - (1,091,005) (1,091,005) ------------ ----------- ------------- ------------ --------------- ------------ Balance - December 31, 2005 19,459,735 $ 19,459 $ 5,709,343 $ (53,437) $ (5,882,005) $ (206,640) Issuance of common stock for investments 2,232,500 2,232 890,768 - - 893,000 Issuance of restricted common stock at $.40 per share 300,000 300 119,700 (13,333) - 106,667 Amortization of deferred compensation - - - 53,437 - 53,437 Net loss - - - - (833,531) (833,531) ------------ ----------- ------------- ------------ --------------- ------------ Balance - December 31, 2006 21,992,235 $ 21,991 $ 6,719,811 $ (13,333) $ (6,715,536) $ 12,933 Issuance of options for accrued salary - - 360,000 - - 360,000 Issunace of options for services - - 86,676 - - 86,676 Issuance of common stock for consulting services 100,000 100 39,900 (13,333) - 26,667 Extension of options issued - - 697,500 - - 697,500 Amortization of deferred compensation - - - 13,333 - 13,333 Net loss - - - - (1,127,144) (1,127,144) ------------ ----------- ------------- ------------ --------------- ------------ Balance - March 31, 2007 22,092,235 $ 22,091 $ 7,903,887 $ (13,333) $ (7,842,680) $ 69,965 Issuance of common stock 780,000 780 467,220 - - 468,000 Amortization of deferred compensation - - - 13,333 - 13,333 Net loss - - - - (16,753) (16,753) ------------ ----------- ------------- ------------ --------------- ------------ Balance - June 30, 2007 22,872,235 $ 22,871 $ 8,371,107 $ (0) $ (7,859,433) $ 534,545 Net loss - - - - (372,730) (372,730) ------------ ----------- ------------- ------------ --------------- ------------ Balance - September 30, 2007 22,872,235 $ 22,871 $ 8,371,107 $ - $ (8,232,163) $ 161,815 ============ =========== ============= ============ =============== ============
The accompanying notes are an integral part of the consolidated financial statements. 5
ENVIRO VORAXIAL TECHNOLOGY, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CHANGES IN CASH FLOWS For Nine Months Ended September 30, -------------------------------------------------- 2007 2006 ----------------------- ----------------------- (Restated) Cash Flows From Operating Activities: Net loss $ (1,516,627) $ (585,366) Adjustments to reconcile net loss to net cash used by operating activities: Depreciation 6,218 513 Common stock issued for services 40,000 60,000 Amortization of deferred compensation 13,333 33,367 Deferred compensation - 20,000 Issuance of common stock for consulting services 446,676 Extension of stock options issued 697,500 Changes in operating assets and liabilities: Accounts receivable 1,479 (41,430) Inventory (218,895) (71,098) Prepaid insurance - (8,997) Accounts payable and accrued expenses (33,685) 164,812 Deposits (3,695) - ----------------------- ----------------------- Net cash used in operating activities (567,696) (428,199) ----------------------- ----------------------- Cash Flows From Investing Activities: Purchase of equipment (220,655) - ----------------------- ----------------------- Net cash used in investing activities (220,655) - ----------------------- ----------------------- Cash Flows From Financing Activities: Equipment financing 180,098 Proceeds from sales of common stock 468,000 733,000 ----------------------- ----------------------- Net cash provided by financing activities 648,098 733,000 ----------------------- ----------------------- Net increase in cash and cash equivalents (140,253) 304,801 Cash and cash equivalents, beginning of period 390,393 76,691 ----------------------- ----------------------- Cash and cash equivalents, end of period $ 250,140 $ 381,492 ======================= ======================= Supplemental Disclosures Cash paid during the year for interest $ - $ - ======================= ======================= Cash paid during the year for taxes $ - $ - ======================= ======================= Common stock issued for deferred consulting $ - $ 20,000 ======================= ======================= Common stock issued for consulting services $ 40,000 $ 60,000 ======================= ======================= Common stock options issued for accrued salaries $ 360,000 $ - ======================= ======================= Common stock options issued for consulting services $ 86,676 $ - ======================= ======================= Extention of stock options $ 697,500 $ - ======================= =======================
The accompanying notes are an integral part of the consolidated financial statements. 6 ENVIRO VORAXIAL TECHNOLOGY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2007 NOTE A - ORGANIZATION AND OPERATIONS Organization ------------ Enviro Voraxial Technology, Inc. (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. Potential commercial applications and markets include oil exploration and production, oil and water separation, environmental cleanup and pre-treatment of wastewater at municipal wastewater (headworks) facilities. Florida Precision Aerospace, Inc. (FPA) is the wholly owned subsidiary of the Company and is used to do contract work with the aerospace, automotive and defense contracting activity. NOTE B - GOING CONCERN The Company has experienced net losses and negative cash flows from operating activities. They will need to raise capital to sustain operations. There is no assurance that the Company will ever have commercially accepted products, that their developmental and marketing efforts will be successful or that they will achieve a level of revenue sufficient to provide cash inflows to sustain operations. The Company will continue to require the infusion of capital until operations become profitable. During 2007, the Company anticipates seeking additional capital, increasing sales of the Voraxial(R) Separator and continuing to restrict expenditures. As a result of the above, the accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. NOTE C - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Interim Financial Statements ---------------------------- The interim financial statements presented herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. The interim financial statements should be read in conjunction with the Company's annual financial statements, notes and accounting policies included in the Company's annual report on Form 10-KSB for the year ended December 31, 2006 as filed with the SEC. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) which are necessary to provide a fair presentation of financial position as of September 30, 2007 and the related operating results and cash flows for the interim period presented have been made. The results of operations, for the period presented are not necessarily indicative of the results to be expected for the year. 7 ENVIRO VORAXIAL TECHNOLOGY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2007 Recent Accounting Pronouncements -------------------------------- In February 2007, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities - Including an amendment of FASB Statement No. 115" ("SFAS No. 159"). SFAS No. 159 allows companies to choose to measure many financial instruments and certain other items at fair value. SFAS No. 159 will become effective for the Company beginning in fiscal 2009. The Company is currently evaluating what effects the adoption of SFAS No. 159 will have on the Company's future results of operations and financial condition NOTE D - CAPITAL TRANSACTIONS Common stock ------------ In February 2007, the company entered into a three month consulting agreement and agreed to issue 100,000 shares of common stock for services preformed by a consultant which were valued at $40,000. During the nine months ended September 30, 2007 the Company sold 780,000 shares of common stock for $.60 per share in a private placement offering. Total proceeds from the sale were $468,000. Warrants -------- In January 2007, the Company extended the exercisable life of certain warrants issued to investors to purchase an aggregate of 243,200 shares of common stock issued in 2000 for a period of one year. The warrants now expire in February 2008. The purchase price of these warrants ranges from $6.00 - $9.00 per share. The Company calculated the fair value of the extended warrants by using the Black-Scholes option-pricing model with the following weighted average assumptions: no dividend yield for all the years; expected volatility of 25%; risk-free interest rate of 5% and an expected life of five years. No increase in fair value was noted and, therefore, no adjustment has been made to the financial statements as of September 30, 2007. In January 2007, the Company extended the exercisable life of certain warrants issued to investors to purchase an aggregate of 200,000 shares of common stock issued in 2001 for a period of one year. The warrants now expire in April 2008. The purchase price of the stock under these warrants ranges from $3.00-$4.00 per share. The Company calculated the fair value of the extended warrants by using the Black-Scholes option-pricing model with the following weighted average assumptions: no dividend yield for all the years; expected volatility of 25%; risk-free interest rate of 5% and an expected life of five years. No increase in fair value was noted and, therefore, no adjustment has been made to the financial statements as of September 30, 2007. 8 ENVIRO VORAXIAL TECHNOLOGY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2007 NOTE D - CAPITAL TRANSACTIONS (CONTINUED) Options extended ---------------- In January 2007, the Company extended the exercisable life of certain options issued to an employee and consultant to purchase an aggregate of 2,000,000 shares of common stock issued in 2002 for a period of five years. The options continue to be exercisable at $0.15 per share, fully vested and now expire on January 31, 2012. The Company calculated the fair value of the options at the extended 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 55%; risk-free interest rate of 5% and an expected life of five years. This results in fair value of approximately $687,000, which has been recorded as compensation expense for the nine months ended September 30, 2007. In January 2007, the Company extended the exercisable life of certain options issued to an employee and consultant to purchase an aggregate of 200,000 shares of common stock issued in 2002 for a period of five years. The options continue to be exercisable at $0.77 per share, fully vested and now expire on January 31, 2012. The Company calculated the fair value of the options at the extended 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 55%; risk-free interest rate of 5% and an expected life of five years. No fair value was associated with these options as a result and not adjustment has been made to the financial statements as of September 30, 2007. In January 2007, the Company extended the exercisable life of certain options issued an employee to purchase an aggregate of 45,000 shares of common stock issued in 2001 for a period of five years. The options now expire in February 2011. These options are fully vested and continue to be exercisable at $0.30 per share. The Company calculated the fair value of the options at the extended 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 55%; risk-free interest rate of 5% and an expected life of five years. This results in a fair value of approximately $10,500, which has been recorded as compensation expense for the nine months ended September 30, 2007. Options granted --------------- In January 2007, the Company granted 2,000,000 stock options to officers to reduce the amount of accrued salaries and consulting fees due to them by $300,000. The options are exercisable at $0.40 per share. These options are fully vested and expire on January 31, 2012. The Company calculated the fair value of the options 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 55%; risk-free interest rate of 5% and an expected life of five years. This results in a fair value of approximately $360,000, of which $300,000 was previously recorded as compensation expense. The 9 ENVIRO VORAXIAL TECHNOLOGY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2007 NOTE D - CAPITAL TRANSACTIONS (CONTINUED) remaining $60,000 has been recorded as compensation expense for the nine months ended September 30, 2007. In January 2007, the Company granted 606,000 stock options to employees or outside consultants, exercisable at $0.40 per share. These options vest equally over the life of the options, which range from 1 to 5 years. The Company calculated the fair value of the options 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 55%; risk-free interest rate of 5% and an expected life of 1 to 5 years, resulting in a fair value of approximately $86,000. In January 2007, the Company issued 375,000 stock options to a consultant, exercisable at $0.80 -$1.00 per share. These options are fully vested and expire on October 31, 2007. The Company calculated the fair value of the options 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 55%; risk-free interest rate of 5% and an expected life of 10 months. Based on the above, the options were not considered to have a fair value associated with them. Options-additional information ------------------------------ Information with respect to employee stock options outstanding and employee stock options exercisable at September 30, 2007 is as follows:
---------------------------------------------------------------------------------------------------------------------------- Weighted Average Options Vested Exercise Price Per Exercise Price Per Outstanding Shares Common Share Option Outstanding ---------------------------------------------------------------------------------------------------------------------------- Balance, December 31, 2006 3,729,666 3,709,666 $0.15-$1.00 $0.52 ---------------------------------------------------------------------------------------------------------------------------- Granted/vested during the period ended September 30, 2,981,000 2,981,000 $0.40 $0.40 2007 ---------------------------------------------------------------------------------------------------------------------------- Balance, September 30, 2007 6,710,666 6,690,666 $0.15-$1.00 $0.46 ----------------------------------------------------------------------------------------------------------------------------
10 ENVIRO VORAXIAL TECHNOLOGY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2007 NOTE D - CAPITAL TRANSACTIONS (CONTINUED) The following table summarizes information about the stock options outstanding at September 30, 2007:
------------------------------------------------------------------------------------------------------------------------------ Weighted Average Exercise Number Outstanding Remaining Weighted Average Number Exercisable at Weighted Average Price at September 30, 2007 Contractual Life Exercise Price September 30, 2007 Exercise Price ------------------------------------------------------------------------------------------------------------------------------ 0.30 45,000 3.25 0.30 45,000 0.30 ------------------------------------------------------------------------------------------------------------------------------ 0.77 200,000 4.25 0.77 200,000 0.77 ------------------------------------------------------------------------------------------------------------------------------ 0.15 2,000,000 4.25 0.15 2,000,000 0.15 ------------------------------------------------------------------------------------------------------------------------------ 1.00 10,000 .08 1.00 10,000 1.00 ------------------------------------------------------------------------------------------------------------------------------ 0.60 697,333 1.25 0.60 697,333 0.60 ------------------------------------------------------------------------------------------------------------------------------ 1.00 697,333 1.25 1.00 697,333 1.00 ------------------------------------------------------------------------------------------------------------------------------ 1.00 50,000 3.00 1.00 50,000 1.00 ------------------------------------------------------------------------------------------------------------------------------ 0.71 30,000 .25 0.71 30,000 0.71 0.40 2,981,000 4.25 0.40 2,981,000 0.40 --------- --------- 6,710,666 6,710,666 ========= ========= ------------------------------------------------------------------------------------------------------------------------------
11 ENVIRO VORAXIAL TECHNOLOGY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2007 NOTE D - CAPITAL TRANSACTIONS (CONTINUED) Warrants -------- Information with respect to warrants outstanding and exercisable at September 30, 2007 is as follows:
--------------------------------------------------------------------------------------------------------------- Number Range of Number Outstanding Exercise Price Exercisable --------------------------------------------------------------------------------------------------------------- Balance, December 31, 2006 5,589,367 $0.75 - $9.00 5,389,367 --------------------------------------------------------------------------------------------------------------- Issued - - --------------------------------------------------------------------------------------------------------------- Balance, September 30, 2007 5,589,367 $0.75-$9.00 5,389,367 ---------------------------------------------------------------------------------------------------------------
NOTE E - RELATED PARTY TRANSACTIONS For the nine months ended September 30, 2007, the Company incurred consulting expenses from the chief executive officer and majority stockholder of the Company of $173,750. Of these amounts, $43,000 has been paid out for the nine months ended September 30, 2007. The accumulated unpaid balance has been included in accrued expenses. NOTE F - CONCENTRATION Revenues -------- For the nine months ended September 30, 2007, the Company generated over 80% of its revenues from one customer. NOTE G - RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS The Company has amended its interim financials for the quarter ended September 30, 2007 to reflect certain adjustments for options issued as repayment for accrued salaries and the extension of previously issued options. In addition, we have included updates that were made to the supplemental disclosures contained within the Statement of Cash Flows. 12 ENVIRO VORAXIAL TECHNOLOGY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2007 NOTE G - RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS (CONTINUED) The following table reflects the effects of the restatements.
----------------------------------- --------------- ------------------- ---------------- ----------------- Three Months Three Months Nine Months Nine Months Ended Ended Ended Ended September 30, September 30, 2006 September 30, September 30, 2007 2007 2006 ----------------------------------- --------------- ------------------- ---------------- ----------------- Balance Sheet/Statement of Shareholders' Equity ----------------------------------- --------------- ------------------- ---------------- ----------------- Common Stock ----------------------------------- --------------- ------------------- ---------------- ----------------- As previously reported 22,971 - - - ----------------------------------- --------------- ------------------- ---------------- ----------------- As restated 22,871 - - - ----------------------------------- --------------- ------------------- ---------------- ----------------- Difference 100 - - - ----------------------------------- --------------- ------------------- ---------------- ----------------- APIC ----------------------------------- --------------- ------------------- ---------------- ----------------- As previously reported - - - - ----------------------------------- --------------- ------------------- ---------------- ----------------- As restated - - - - ----------------------------------- --------------- ------------------- ---------------- ----------------- Difference - - - - ----------------------------------- --------------- ------------------- ---------------- ----------------- Deferred Compensation ----------------------------------- --------------- ------------------- ---------------- ----------------- As previously reported - - - - ----------------------------------- --------------- ------------------- ---------------- ----------------- As restated - - - - ----------------------------------- --------------- ------------------- ---------------- ----------------- Difference - - - - ----------------------------------- --------------- ------------------- ---------------- ----------------- Accumulated Deficit ----------------------------------- --------------- ------------------- ---------------- ----------------- As previously reported (8,272,163) - - - ----------------------------------- --------------- ------------------- ---------------- ----------------- As restated (8,232,163) - - - ----------------------------------- --------------- ------------------- ---------------- ----------------- Difference 40,000 - - - ----------------------------------- --------------- ------------------- ---------------- ----------------- General and administrative expense ----------------------------------- --------------- ------------------- ---------------- ----------------- As previously reported 192,433 - - - ----------------------------------- --------------- ------------------- ---------------- ----------------- As restated 219,100 - - - ----------------------------------- --------------- ------------------- ---------------- ----------------- Difference (26,667) - - - ----------------------------------- --------------- ------------------- ---------------- ----------------- Loss from operations before provision for income taxes ----------------------------------- --------------- ------------------- ---------------- ----------------- As previously reported (346,063) - - - ----------------------------------- --------------- ------------------- ---------------- ----------------- As restated (372,730) - - - ----------------------------------- --------------- ------------------- ---------------- ----------------- Difference 26,667 - - - ----------------------------------- --------------- ------------------- ---------------- ----------------- Net Income (Loss) ----------------------------------- --------------- ------------------- ---------------- ----------------- As previously reported (346,063) - - - ----------------------------------- --------------- ------------------- ---------------- ----------------- As restated (372,730) - - - ----------------------------------- --------------- ------------------- ---------------- ----------------- Difference (26,667) - - - ----------------------------------- --------------- ------------------- ---------------- ----------------- Earnings per Share- Basic ----------------------------------- --------------- ------------------- ---------------- ----------------- As previously reported - - - - ----------------------------------- --------------- ------------------- ---------------- ----------------- As restated - - - - ----------------------------------- --------------- ------------------- ---------------- ----------------- Difference - - - - ----------------------------------- --------------- ------------------- ---------------- ----------------- Statement of Cash Flow- Supplemental Disclosures of Non-Cash Financing and Investing Activities ----------------------------------- --------------- ------------------- ---------------- ----------------- Common stock issued for - - - consulting services ----------------------------------- --------------- ------------------- ---------------- ----------------- As previously reported 40,000 - - - ----------------------------------- --------------- ------------------- ---------------- ----------------- As restated 40,000 - - - ----------------------------------- --------------- ------------------- ---------------- ----------------- Difference - ----------------------------------- --------------- ------------------- ---------------- ----------------- Common stock issued for accrued salaries ----------------------------------- --------------- ------------------- ---------------- ----------------- As previously reported - - - - ----------------------------------- --------------- ------------------- ---------------- ----------------- As restated 360,000 - - - ----------------------------------- --------------- ------------------- ---------------- ----------------- Difference 360,000 - - - ----------------------------------- --------------- ------------------- ---------------- ----------------- Common stock options issued for consulting services ----------------------------------- --------------- ------------------- ---------------- ----------------- As previously reported - - - - ----------------------------------- --------------- ------------------- ---------------- ----------------- As restated 86,676 - - - ----------------------------------- --------------- ------------------- ---------------- ----------------- Difference 86,676 - - - ----------------------------------- --------------- ------------------- ---------------- ----------------- Extension of stock options ----------------------------------- --------------- ------------------- ---------------- ----------------- As previously reported - - - - ----------------------------------- --------------- ------------------- ---------------- ----------------- As restated 697,500 - - - ----------------------------------- --------------- ------------------- ---------------- ----------------- Difference 697,500 - - - ----------------------------------- --------------- ------------------- ---------------- -----------------
13 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 2006 Annual Report on Form 10-KSB. The Company has not adopted any significant new policies during the quarter ended September 30, 2007. 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, 2007 and 2006: Revenue ------- Our revenues decreased to $22,518 for the three months ended September 30, 2007 as compared to $46,261 for the three months ended September 30, 2006. Revenues from both periods relate to the sales of Voraxial(R) Separator Equipment. The Company continues to focus on its sales and marketing program for the Voraxial(R) Separator, specifically in the oil exploration and production market. Management believes such efforts will result in more clients and increasing revenues in 2008. Research and Development Expenses --------------------------------- Research and Development expenses increased by 32% to $135,479 for the three months ended September 30, 2007, as compared to $102,408 for the previous three 14 months ended September 30, 2006. Although the Company has finalized the development of the Voraxial(R) Separator, we targeted expenditures for specific applications for the technology within the oil industry during the three months ended September 30, 2007. General and Administrative Expenses ----------------------------------- General and Administrative expenses increased by 61% to $219,100 for the three months ended September 30, 2007 up from $135,748 for the three months ended September 30, 2006. The increase was primarily due to the increase in sales and marketing activity in the oil exploration and production industry. We continue to focus our efforts on marketing the Voraxial(R) Separator in the oil industry. Results of Operations for the Nine Months ended September 30, 2007 and 2006: Revenue ------- Our revenues increased 38% to $286,676 for the nine months ended September 30, 2007 as compared to $208,425 for the nine months ended September 30, 2006. The increase in revenue was due to the sales of Voraxial(R) Separator equipment. The Company continues to focus on its sales and marketing program for the Voraxial(R) Separator, specifically in the oil exploration and production market. Interest in the Voraxial Separator has increased significantly in the past several quarters, as such, Management believes such efforts will continue to result in additional clients and increasing revenues in 2008. Research and Development Expenses --------------------------------- Research and Development expenses increased by 9% to $305,327 for the nine months ended September 30, 2007, as compared to $281,124 for the previous nine months ended September 30, 2006. The Company has finalized the development of the Voraxial(R) Separator and has begun the sales and marketing of the product. However, we continue to seek improvements to the product, specifically within the oil industry. General and Administrative Expenses ----------------------------------- General and Administrative expenses increased by 222% to $1,420,730 for the nine months ended September 30, 2007 up from $441,257 for the nine months ended September 30, 2006. The increase was primarily due to non cash expenses relating to the issuance and re-pricing of options to employees and consultants in the first quarter. Liquidity and Capital Resources: Cash at September 30, 2007 was $250,140. Working capital at September 30, 2007 was $109,026 as compared to a working capital deficit at December 31, 2006 of $1,822. At September 30, 2007 the Company had an accumulated deficit of $8,232,163. We anticipate generating positive cash flow from the Voraxial(R) Separator by the end of 2008. To the extent such revenues and corresponding cash flows do not materialize, we will continue to 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 15 provide any assurances that required capital will be obtained or that terms of such required capital may be acceptable to us. The Company has funded working capital requirements and 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. The Company has expanded its sales and marketing efforts for produced water separation in the oil exploration and production market. During the nine months ended September 30, 2007 the Company deployed several units of the Voraxial 4000 Separators and Voraxial 2000 Separators for the oil exploration and production industry. Although the Company is focusing its efforts in the produced water market, it has deployed units within the oil industry for Deckwater Treatment, under-balanced drilling, refinery applications and liquid/solid separation. The Company also installed a Voraxial 2000 Offshore Deck Water Drainage System on a Transocean Inc. semi-submersible rig Sedco 702. The system will be utilized to handle and separate contaminated drill floor run-off water containing solids and drilling fluids on their offshore rig. Continuing Losses ----------------- We may be unable to continue as a going concern, given our limited operations and revenues and our significant losses to date. 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. Subsequent Event ---------------- Subsequent to the period covered by this report, the Company received $150,000 from an accredited investor in consideration of 250,000 shares of restricted common stock of the Company. The issuance was exempt from registration under Section 4(2) of the Securities Act. The investor received information concerning the Company and had the opportunity to ask questions concerning the viability of the Company. The certificate representing the shares contains a legend restricting its transferability absent registration or applicable exemption. Item 3. Controls and Procedures Evaluation of disclosure controls and procedures ------------------------------------------------ As of the end of the period covered by this report, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(e). This evaluation was done under the supervision and with the participation of our Principal Executive Officer and Principal Financial Officer. Based upon that evaluation, our 16 Principal Executive Officer and Principal Financial Officer concluded that the design and operation of our disclosure controls and procedures are effective. Changes in internal controls ---------------------------- There were no changes in our internal controls or in other factors during the period covered by this report that have materially affected, or are likely to materially affect the Company's internal controls over financial reporting. PART II. OTHER INFORMATION -------------------------- Item 1. Legal Proceedings None. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds None. 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 Chief Executive Officer 31.2 Form 302 Certification of Principal Financial Officer 32.1 Form 906 Certification of Chief Executive Officer and Principal Financial Officer 17 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 ------------------- Alberto DiBella Chief Executive Officer and Principal Financial Officer DATED: October 1, 2008 18