ATLAS PEARLMAN, P.A.
350 East Las Olas Boulevard, Suite 1700
Fort Lauderdale, Florida 33301
August 14, 2000
Securities and Exchange Commission
Office of Small Business
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
Attention: Filing Desk
Re: Enviro Voraxial Technology, Inc. (the "Company") Form 10-Q/SB
Dear Sir/Madam:
Enclosed for electronic filing on behalf of the Company is the Form 10-Q/SB.
Should you have any questions or comments regarding the enclosed, please call
the undersigned at (954) 763-1200.
Very truly yours,
ATLAS PEARLMAN, P.A.
By: /s/ Brian Pearlman
Brian Pearlman
BAP
<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
11
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, 2000
[ ] 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 83-0266517
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
98 SE 7th Street, Deerfield Beach, Florida 33441
(Address of principal executive offices)
(954) 421-6141
(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: 7,407,118 Common Stock as of August
10, 2000.
<PAGE>
Enviro Voraxial Technology, Inc.
INDEX
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
Basis of Presentation 2
Balance Sheet - June 30, 2000 3
Statements of Operations (unaudited) for the
Three and Six Months Ended June 30, 2000 and 1999 4
Statement of Cash Flows (unaudited) for the Six
Months Ended June 30, 2000 and 1999 5
Notes to Financial Statements 6 - 7
Item 2. Management's Discussion and Analysis and Plan of 8 - 9
Operation
PART II. OTHER INFORMATION
Item 6. Exhibits and reports on Form 8-K 10 - 11
Signatures 12
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Basis of Presentation
The accompanying unaudited consolidated financial statements of Enviro Voraxial
Technology, Inc. (the "Company") have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-B. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments considered necessary for a fair presentation
(consisting of normal recurring accruals) have been included. The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates. Operating results for the six month period ended June 30,
2000 are not necessarily indicative of the results that may be expected for the
year ending December 31, 2000. For further information, refer to the
consolidated financial statements and footnotes for the year ended December 31,
1999 found in the Company's Form 10-KSB.
2
<PAGE>
ENVIRO VORAXIAL TECHNOLOGY, INC
CONSOLIDATED BALANCE SHEET
(Unaudited)
ASSETS
June 30,
2000
---------
Current Assets:
Cash and cash equivalents $ 276,000
Accounts and other receivable, net 50,000
Inventory 117,000
---------
Total current assets 443,000
Property, plant and equipment, net 1,038,000
Other assets 7,000
---------
$1,488,000
=========
LIABILITIES
Current Liabilities:
Current Portion of mortgage note payable $ 10,000
Current Portion of obligations under capital leases 51,000
Accounts payable and accrued expenses 68,000
Due to Stockholders 260,000
---------
389,000
---------
Noncurrent liabilities:
Mortgage note payable 404,000
Obligations under capital lease 110,000
---------
514,000
---------
Stockholders' Equity:
Capital stock, par value $.001 par value;
Preferred stock, voting, 8% noncumulative,
convertible, authorized 7,250,000 shares
6,000,000 shares issued and outstanding
(at liquidating value) 6,000
Common stock, authorized 42,750,000 shares,
7,407,118 shares issued and outstanding 7,000
Additional paid-in capital 1,276,000
Accumulated deficit ( 704,000)
---------
585,000
---------
$1,488,000
=========
3
<PAGE>
ENVIRO VORAXIAL TECHNOLOGY, INC
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C><C> <C><C> <C><C> <C><C>
Net sales $ 62,000 $ 47,000 $ 140,000 $ 106,000
Cost of goods sold 20,000 26,000 57,000 80,000
------ ------ ------ ------
Gross profit 42,000 21,000 83,000 26,000
------ ------ ------ ------
Other (income) and expenses:
Research and development 7,000 - 21,000 -
General and administrative 121,000 104,000 253,000 147,000
Interest expense 13,000 10,000 26,000 25,000
Other income ( 16,000) - (31,000) ( 1,000)
------- ------- ------- -------
Total costs and expenses 125,000 114,000 269,000 171,000
------- ------- ------- -------
Net Loss $( 83,000) $ (93,000) $( 186,000) $( 145,000)
========= ======== ========== ==========
Basic and diluted (loss)per common share $( 0.01) $ ( 0.01) $( .03) $( .02)
========= ======== ========== ==========
Weighted average number of common shares
Outstanding 7,407,118 6,770,546 7,358,084 6,776,518
========== ========== ========== ==========
</TABLE>
4
<PAGE>
ENVIRO VORAXIAL TECHNOLOGY, INC
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Six Months
Ended June 30
2000 1999
---- ----
<S> <C><C> <C><C>
Cash flows from operating activities:
Net Loss $ ( 186,000) $ ( 145,000)
Adjustments to Reconcile net loss to net
cash (used in) provided by operating activities:
Depreciation 58,000 40,000
Stock issued for services - 33,000
Bad debts 24,000 -
Changes in:
Accounts receivable ( 6,000) 25,000
Inventory ( 17,000) -
Accounts payable and accrued expenses 15,000 ( 20,000)
------------ ------------
Net cash used in operating activities ( 112,000) ( 67,000)
------------ ------------
Cash flows from investing activities:
Acquisition of property and equipment ( 4,000) ( 88,000)
------------ ------------
Cash Flows from Financing Activities:
Proceeds from sale of common stock 352,000 -
Proceeds from mortgage payable - 186,000
Repayment of mortgage note payable ( 4,000) ( 4,000)
Repayments of obligations under capital leases ( 24,000) -
------------ ------------
Net cash provided by financing activities 324,000 182,000
------------ ------------
Increase (decrease) in cash and
Cash equivalents 208,000 27,000
Cash and cash equivalents, beginning 68,000 69,000
------------ ------------
Cash and cash, equivalents, end $ 276,000 $ 96,000
============ ============
</TABLE>
5
<PAGE>
ENVIRO VORAXIAL TECHNOLOGY, INC
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A - ORGANIZATION AND OPERATIONS
Enviro Voraxial Technology, Inc. (the "Company") operates a high precision
engineering machine shop located in Florida, which designs, manufactures and
assembles specialized parts and components. Prior to 1999, the Company performed
contract- manufacturing services to the aerospace and automotive industries.
Since 1999, the Company has been focusing its efforts on developing and
marketing the Voraxial Separator ("VAS"). The VAS is a continuous flow turbo
machine that efficiently separates 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 VAS 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 include
ballast water exchange, oil/water separation, sewage separation, environmental
cleanup and the separation of industrial chemicals.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
[1] Principles of consolidation:
The consolidated financial statements as of June 30, 2000 include the accounts
of the parent company Enviro Voraxial Technology, Inc. and its wholly owned
subsidiary Florida Precision Aerospace, Inc. All significant intercompany
accounts and transactions have been eliminated.
[2] Cash and cash equivalents:
The Company considers all highly liquid investments with a maturity of three
months or less at the date of purchase to be cash equivalents.
[3] Property, plant and equipment:
Property, plant and equipment are stated at cost. The cost of maintenance and
repairs is charged against results of operations as incurred. Depreciation is
computed by the straight-line method over the estimated economic useful life of
the assets (5 -20 years).
[4] 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 convertible preferred stock has been excluded from the
calculation since it would be anti-dilutive.
[5] Inventory:
Inventory, which consists primarily of parts, is priced at lower of first-in,
first-out cost or market.
6
<PAGE>
ENVIRO VORAXIAL TECHNOLOGY, INC
NOTES TO FINANCIAL STATEMENTS
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
[6] Use of estimates:
The preparation of financial statements in conformity with generally accepted
accounting principles 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.
[7] Income taxes:
Deferred income taxes are recognized for the tax consequences in future years of
differences between the tax bases of assets and liabilities and their financial
reporting amounts at year end based on enacted tax laws and statutory tax rates
applicable to the periods in which the differences are expected to affect
taxable income. Valuation allowances are established when necessary, to reduce
deferred tax assets to the amount expected to be realized.
[8] Research and development expenses:
Research and development costs are expensed as incurred.
[9] Revenue recognition:
The Company recognizes revenue from product sales when the products are shipped
to customers.
[10] Fair value of financial instruments:
The carrying amounts of the Company's cash and cash equivalents, accounts
receivable, accounts payable, and amounts due to stockholders approximate fair
value due to their short maturities. Mortgage note payable and obligations under
capital leases approximate fair value as the interest rates applicable to these
debt instruments are comparable to quoted market prices for similar issues.
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Plan of
Operations
General
Management's discussion and analysis contains various forward-looking
statements. These statements consist of any statement other than a recitation of
historical fact and can be identified by the use of forward-looking terminology
such as "may," "expect," "anticipate," "estimate" or "continue" or use of
negative or other variations or comparable terminology.
We caution that these statements are further qualified by important factors that
could cause actual results to differ materially from those contained in the
forward-looking statements, that these forward-looking statements are
necessarily speculative, and there are certain risks and uncertainties that
could cause actual events or results to differ materially from those referred to
in such forward-looking statements.
Three Months ended June 30, 2000 and 1999
Net Sales. Our net sales increased by approximately 32% to $62,000 as compared
to $47,000 for the previous three months ended June 30, 1999. This sales
increase was primarily do to increased shipments to New Venture Gear in the
second quarter of 2000.
Our gross profit was $42,000 for the three months ended June 30, 2000 as
compared to $21,000 for the previous three months ended June 30, 1999. This
increase in gross profit was also primarily due to shipments to New Venture Gear
in the second quarter of 2000.
General and Administrative expenses
General and Administrative expenses increased by 16% to $121,000 for the three
months ended June 30, 2000 up from $104,000 for the previous three months ended
June 30, 1999. This increase was due to increased marketing efforts for
application sales of the Voraxial Separator.
We have rented excess space in our operating facility. Income amounted to
$15,000 in the three months ended June 30, 2000. The monthly rental income
amounts to $5,000 per month.
Six Months ended June 30, 2000 and 1999
Net Sales. Our net sales increased by approximately 32% to $140,000 as compared
to $106,000 for the previous six months ended June 30, 1999. This increase was
due to increased contract requirements for New Venture Gear and other various
contracts.
Our gross profit was $83,000 for the six months ended June 30, 2000 as compared
to $26,000 for the previous six months ended June 30, 1999. During the first six
months of 2000, new customer orders of machine work were at a higher margin. The
Company is only focusing on higher margin machine work since the concentration
and efforts of the Company are centered on marketing and developing the
foundation for future growth around the Voraxial Separator.
General and administrative expenses
General and administrative expenses increased by 72% to $253,000 for the six
months ended June 30, 2000 up from $147,000 for the previous six months ended
June 30, 1999. Increased marketing activities for the Voraxial Separator
generated additional general and administrative expenses.
We have rented excess space in our operating facility. Income amounted to
$30,000 in the six months ended June 30, 2000. The monthly rental income amounts
to $5,000 per month.
8
<PAGE>
Liquidity and capital resources
For the six months ended June 30, 2000 our working capital increased by $203,000
from December 31, 1999. This increase was represented by an increase in cash of
$208,000, decrease of accounts receivable of $18,000 inclusive of allowance for
doubtful accounts of $24,000, and an increase in inventory of $17,000 and an
increase in current liabilities of $15,000. Operating at a loss for the six
months negatively impacted our cash position, however we feel that we have
sufficient sources for needed capital.
Working capital for the next twelve months will be obtained from a number of
sources. The continuing contract for parts supplied to New Venture Gear will be
approximately $120,000. We will continue to take on machining contracts to
supplement working capital, if necessary, from our past customer. As discussed
in "Other Information" the Ballast Water Treatment System, which is centered
around the Company's patented Voraxial Separator, has received financial
contributions in the form of grants and resources from various entities, such as
NOAA, the Port Administration of Maryland and the US Maritime Administration, in
support of its Ballast Water Treatment System. Since the Voraxial Separator can
enhance the efficiency and productivity in other industries, the Company is also
pursuing the development of other systems that can benefit by incorporating the
Voraxial Separator. The Company anticipates that as interest and awareness of
the Voraxial Separator continues to increase, revenues should begin to be
realized from a variety of industries.
We believe that we have sufficient liquidity to meet all of our cash
requirements for the remainder of the fiscal year ended December 31, 2000. We
believe, however, that additional funding will eventually be necessary to expand
marketing programs and specific applications for the Voraxial Separator.
We have raised $364,800 in the first quarter of 2000 through the private
placement of our securities pursuant to Regulation D of the Securities Act.
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 1999 we have encountered
expenses in the development of our Voraxial Separators and have had limited
revenues 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.
Cautionary Statement Regarding Forward-Looking Statements:
Certain statements contained in this Section and elsewhere in this report
regarding matters that are not, historical facts are forward-looking statements.
Because such forward-looking statements include risks and uncertainties, actual
results may differ materially from those expressed or implied by such
forward-looking statements. All statements, which address operating performance,
events or developments that management expects or anticipates to incur in the
future, including statements relating to sales and earnings growth or statements
expressing general optimism about future operating results, are forward-looking
statements. The forward-looking statements are based on management's current
views and assumptions regarding future events and operating performance. Many
factors could cause actual results to differ materially from estimates contained
in management's forward-looking statements. The differences may be caused by a
variety of factors, including, but not limited to, adverse economic conditions,
competitive pressures, inadequate capital, unexpected costs, lower revenues, net
income and forecasts, the possibility of fluctuation and volatility of the
Company's operating results and financial condition, inability to carry out
marketing and sales plans and loss of key executives, among other things.
9
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 5. Other Information
The Company has recently received funding of approximately $300,000 from The
National Oceanic and Atmospheric Administration, an agency of the U.S.
Department of Commerce. This is one of the largest sea grants ever issued by
NOAA and will be used to support testing of a patent pending Ballast Water
Treatment System developed by the Company and Maritime Solutions Inc. The
Ballast Water Treatment System is a state-of-the-art, high flow rate, ballast
water purification technology, which reduces particulate sediment and treats
unwanted marine organisms for the distinct purpose of inhibiting the
introduction of non-indigenous and invasive marine organisms into local waters.
Simultaneously, the system significantly reduces the build-up of sand and
sediments in the ships ballast tanks, which can potentially save the industry
billions of dollars in cleaning expenses.
The testing is being done in cooperation with the University of Maryland and it
is scheduled to begin next month in the Chesapeake Bay area in Baltimore. The
Maryland Department of Transportation and the Maryland Port Administration have
endorsed the testing of this water treatment system in Baltimore Harbor.
In addition, the Maryland Port Administration has recently committed nearly
$363,000 to rigorously test and evaluate the Ballast Water Treatment System as
an immediate solution for the treatment of ballast water to the shipping
industry. The testing is being done in cooperation with the University of
Maryland's Chesapeake Biological Laboratory. Dr. David A. Wright and Dr. Roger
Dawson of the Chesapeake Biological Laboratory will be the co-principal
investigators for the evaluation. Dr. Wright is an expert in the field of
Environmental Toxicology, while Dr. Dawson is an analytical chemist with
extensive expertise in the areas of natural product biocides and ultraviolet
(UV) light technology.
The Company and Maritime Solutions Inc. have also received the support of the
U.S. Maritime Administration (MARAD), an agency of the U.S. Department of
Transportation, to evaluate the Ballast Water Treatment System. Testing will be
performed aboard one of MARAD's U.S. Ready Reserve Fleet ships, the Cape May.
The Cape May is an 875-foot long cargo carrier of 39,000 dead weight tons and
contains 23 ballast tanks with a combined capacity to carry 25,547 metric tons
of ballast water.
The testing program is scheduled to begin during the month of August and is
being conducted to conform to a recent testing program supported by the U.S.
Coast Guard Research and Development Center.
For the purpose of this evaluation, the EVTN Model 8000 Voraxial Separator has
been selected. The unit is capable of processing 4,500 gpm of ballast water. The
complete ballast water treatment system to be tested will include the
utilization of a single 8-inch EVTN Model 8000 Voraxial Separator, an
ultraviolet light system and, alternatively, a specific chemical biocide
pre-selected to treat marine species.
If accepted for use by the U.S. Coast Guard, Maritime Solutions Inc. will
commence selling efforts of a commercial Ballast Water Treatment System within
the shipping industry. An application will also be submitted to the
International Maritime Organization for approval of the EVTN/Maritime Solutions'
Ballast Water Treatment System to be accepted as the alternative to ballast
water exchange. Each year, ships exchange about 10 billion metric tons of
ballast water. Management believes that the potential market for approved
ballast water treatment systems may exceed $2 billion within the next 5 years.
10
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits required by Item 601 of Regulation S-B
The following exhibits are filed as part of this report:
Exhibits:
(27.1) Financial Data Schedule
(b) Reports on Form 8-K
On March 27, 2000, the Company filed a report on Form 8-K to indicate a change
in the Company's auditors.
11
<PAGE>
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 duly authorized officers of the Registrant.
Enviro Voraxial Technology, Inc.
By: /s/ Alberto DiBella
Alberto DiBella, Chairman and President
DATED: August 14, 2000
12
